Greene County Bancshares, Inc.
The
information in this joint proxy statement/prospectus is not
complete and may be changed. These securities may not be sold
until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary joint proxy
statement/prospectus is not an offer to sell these securities,
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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PRELIMINARY
SUBJECT TO COMPLETION DATED MARCH 16,
2007
MERGER
PROPOSAL YOUR VOTE IS VERY IMPORTANT
The board of directors of Greene County Bancshares, Inc, or
Greene County, and the board of directors of Civitas BankGroup,
Inc., or Civitas, have agreed to a strategic combination of the
two companies under the terms of the Agreement and Plan of
Merger, dated January 25, 2007 and referred to in this
document as the merger agreement by and between Greene County
and Civitas. If the merger is approved, Greene County
shareholders will own approximately 76.2% of the combined
company on a fully diluted basis, and Civitas shareholders will
own approximately 23.8% of the combined company on a fully
diluted basis.
If you are a Civitas shareholder:
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In the merger, subject to the allocation procedures described in
this document, you may elect to receive for each Civitas share
that you own either (1) $10.25 in cash; (2) Greene
County common stock based on a formula in which 1.0 share
of Greene County common stock is multiplied by an exchange ratio
(currently 0.2674, subject to adjustment as described in this
document but in no event to a ratio greater than 0.2968 or less
than 0.2380); or (3) a combination of cash and Greene
County common stock.
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Although you may elect whether to receive cash, stock or a
combination of cash and stock for your Civitas shares, elections
will be limited by the requirement that 70% of the total merger
consideration will be in the form of Greene County common stock.
As a result, the allocation of cash and Greene County common
stock that you will receive will depend upon the elections of
other Civitas shareholders. Also, because the market price of
Greene County common stock may fluctuate between the date of
this joint proxy statement/prospectus and the date that the
merger is completed, we cannot predict the number of shares of
Greene County common stock that a Civitas shareholder would
receive upon election of the all stock or mixed consideration
alternatives.
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We expect the merger to be tax-free with respect to Greene
County common shares you receive. If you receive cash in the
merger you may have to recognize income or gain for tax purposes.
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If you are a Greene County shareholder:
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Your Greene County shares will be unaffected by the merger and
the merger will be tax-free to you.
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Whether you are a Civitas or a Greene County shareholder, we
need your vote to complete the merger. Civitas
will hold a special shareholders meeting to vote on the merger
on April 26, 2007. Greene County will hold its annual
shareholders meeting April 25, 2007, and the merger will be
one of the matters that Greene County shareholders will be asked
to vote on.
We look forward to the successful combination of Greene County
and Civitas.
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Stan Puckett
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Richard Herrington
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Chairman and Chief Executive
Officer
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President and Chief Executive
Officer
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Greene County Bancshares,
Inc.
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Civitas BankGroup,
Inc.
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You are
encouraged to carefully consider the risks described on
pages [8]
through [11] of this document.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The securities Greene County is offering through this joint
proxy statement/prospectus are not savings or deposit accounts
or other obligations of any bank or savings association, and
they are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
This joint proxy statement/prospectus is dated March
[ ], 2007, and is first
being mailed to the shareholders of Greene County and Civitas on
or about March [ ], 2007.
100 North Main Street, Greeneville, TN
37743-4992
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 25,
2007
To our shareholders:
The Annual Meeting of Shareholders of Greene County Bancshares,
Inc. (Greene County) will be held at the General
Morgan Inn, 100 North Main Street, Greeneville, Tennessee 37743,
at 11:00 a.m. local time on April 25, 2007, to:
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consider and vote upon a proposal to approve the merger
agreement, dated as of January 25, 2007, between Greene
County and Civitas BankGroup, Inc. (Civitas), a copy
of which is attached as Appendix A to the joint
proxy statement/prospectus accompanying this notice, pursuant to
which Civitas will merge with Greene County, and to approve the
issuance of Greene County common stock in connection with the
merger;
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elect five persons to serve as directors of Greene County, each
for a three-year term and until their respective successors are
elected and qualified;
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consider and vote upon a proposal to ratify the appointment of
Dixon Hughes PLLC as Greene Countys independent registered
public accounting firm for 2007;
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consider and vote upon a proposal to amend the Greene County
Amended and Restated Charter to increase the number of
authorized shares from 15 million to 20 million shares
of common stock;
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consider and vote upon a proposal to amend the Greene County
Amended and Restated Charter to change the corporate name of
Greene County to Green Bankshares, Inc.;
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consider and vote upon a proposal to approve the adjournment of
the annual meeting, including, if necessary, to solicit
additional proxies if there are not sufficient votes at the time
of the annual meeting for any of the foregoing
proposals; and
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transact any other business that may properly come before the
Greene County annual meeting or any adjournment or postponement
thereof.
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The Greene County board of directors has fixed the close of
business on March 16, 2007 as the record date for
determining those Greene County shareholders entitled to receive
this notice of and to vote their shares at the annual meeting,
including any adjournment or postponement of the annual meeting.
The Greene County board of directors recommends that you
vote FOR each of the proposals listed above.
BY ORDER OF THE BOARD OF DIRECTORS
Phil M. Bachman
Secretary
Greeneville, Tennessee
March [ ], 2007
YOUR VOTE IS IMPORTANT
Your vote is important. Whether or not you plan to attend the
annual meeting, please complete, sign, date and return the
enclosed proxy card as promptly as possible in the enclosed
postage-paid envelope. Remember, your vote is important, so
please act today! This will not prevent you from voting in
person but will help to secure a quorum and avoid added
solicitation costs. Your proxy may be revoked at any time.
4
Corporate Centre, 810 Crescent Centre Drive, Suite 320,
Franklin, Tennessee 37067
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 26, 2007
To our shareholders:
A special meeting of shareholders of Civitas BankGroup, Inc.
(Civitas) will be held at the Embassy Suites Hotel
located at 820 Crescent Centre Drive, Franklin, Tennessee 37067,
at 3:00 p.m. local time on April 26, 2007, for the
following purposes:
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to consider and vote upon a proposal to approve the merger
agreement, dated as of January 25, 2007, between Greene
County Bancshares, Inc. (Greene County) and Civitas,
a copy of which is attached as Appendix A to the
joint proxy statement/prospectus accompanying this notice,
pursuant to which Civitas will merge with Greene County;
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to consider and vote upon a proposal to approve the adjournment
of the special meeting, including, if necessary, to solicit
additional proxies if there are not sufficient votes at the time
of the special meeting for the foregoing proposal; and
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to transact any other business that may properly come before the
Civitas special meeting or any adjournment or postponement
thereof.
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The Civitas board of directors has fixed the close of business
on March 16, 2007 as the record date for determining those
Civitas shareholders entitled to receive this notice of and to
vote their shares at the special meeting, including any
adjournment or postponement of the special meeting.
The Civitas board of directors, by a majority vote, has
approved the merger and recommends that you vote FOR each
of the proposals listed above.
BY ORDER OF THE BOARD OF DIRECTORS
Danny Herron
Secretary
Franklin, Tennessee
March [ ], 2007
YOUR VOTE IS IMPORTANT
Your vote is important. Whether or not you plan to attend the
special meeting, please complete, sign, date and return the
enclosed proxy card as promptly as possible in the enclosed
postage-paid envelope. Remember, your vote is important, so
please act today! This will not prevent you from voting in
person but will help to secure a quorum and avoid added
solicitation costs. Your proxy may be revoked at any time.
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus serves two purposes: it is
a proxy statement being used both by the Greene County
Bancshares, Inc. board of directors and the Civitas BankGroup,
Inc. board of directors to solicit proxies for use at their
respective annual or special meetings; it is also the prospectus
of Greene County regarding the issuance of Greene County common
stock to Civitas shareholders if the merger is completed. This
joint proxy statement/prospectus provides you with detailed
information about the proposed merger of Civitas into Greene
County. We encourage you to read this entire joint proxy
statement/prospectus carefully. Greene County has filed with the
United States Securities and Exchange Commission a registration
statement on
Form S-4
under the Securities Act of 1933, as amended, and this joint
proxy statement/prospectus is the prospectus filed as part of
that registration statement. This joint proxy
statement/prospectus does not contain all of the information in
the registration statement nor does it include the exhibits to
the registration statement. Please see WHERE YOU CAN FIND
MORE INFORMATION beginning on page 102.
When used in this joint proxy statement/prospectus, the terms
Greene County and Civitas refer to
Greene County Bancshares, Inc. and Civitas BankGroup, Inc.,
respectively, and, when the context requires, to Greene County
Bancshares, Inc. and Civitas BankGroup, Inc. and their
respective predecessors and subsidiaries. We or
us, unless the context requires otherwise, refers to
both Greene County and Civitas.
This joint proxy statement/prospectus incorporates by reference
important business and financial information about Greene County
and Civitas that is not included in or delivered with this
document. You should refer to WHERE YOU CAN FIND MORE
INFORMATION beginning on page 102 for a description
of the documents incorporated by reference into this joint proxy
statement/prospectus. You can obtain documents related to Greene
County and Civitas that are incorporated by reference into this
document through the SECs web site at www.sec.gov. You may
also obtain copies of these documents, other than exhibits,
unless such exhibits are specifically incorporated by reference
into the information that this joint proxy statement/prospectus
incorporates, without charge by requesting them in writing or by
telephone from the appropriate company:
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If you are a Greene County
shareholder:
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If you are a Civitas shareholder:
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Greene County Bancshares, Inc.
100 North Main Street
Greeneville, TN
37743-4992
Attention: Chief Financial Officer
(423) 639-5111
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Civitas BankGroup, Inc.
4 Corporate Centre
810 Crescent Centre Drive, Suite 320
Franklin, TN 37067
Attention: Investor Relations
(615) 263-9500
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TO OBTAIN TIMELY DELIVERY OF
GREENE COUNTY DOCUMENTS, YOU MUST MAKE YOUR REQUEST ON OR BEFORE
APRIL 16, 2007.
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TO OBTAIN TIMELY DELIVERY OF
CIVITAS DOCUMENTS, YOU MUST MAKE YOUR REQUEST ON OR BEFORE
APRIL 16,
2007.
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Greene County maintains a website at
www.mybankconnection.com and Civitas maintains a website
at www.civitasbankgroup.com. The information contained on
these websites is not incorporated by reference into this joint
proxy statement/prospectus, and you should not consider it a
part of this joint proxy statement/prospectus.
You should rely only on the information incorporated by
reference into or provided in or with this joint proxy
statement/prospectus to vote at your annual or special meeting.
We have not authorized anyone to give you different information.
You should not assume that the information in this joint proxy
statement/prospectus, or in any documents delivered with this
joint proxy statement/prospectus, or any supplement, is accurate
as of any date other than the date on the front of such
documents, and neither the mailing of the joint proxy
statement/prospectus to you nor the issuance of Greene County
common stock in connection with the merger shall create any
implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any state in
which or from any person to whom it is not lawful to make any
such offer or solicitation.
TABLE OF
CONTENTS
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QUESTIONS AND ANSWERS ABOUT VOTING
AND THE MERGER
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iv
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SUMMARY
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1
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Information about Greene County
and Civitas
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1
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Civitas Will Merge With and Into
Greene County
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2
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Our Reasons for the Merger
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2
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What Civitas Shareholders Will
Receive In the Merger
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2
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What Greene County Shareholders
Will Receive
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3
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No Dissenters and Appraisal
Rights
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3
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Our Recommendations
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3
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Opinions of Financial Advisors
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4
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Accounting Treatment
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4
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Certain Federal Income Tax
Consequences
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4
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The Shareholder Meetings
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5
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Record Dates; Votes Required
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5
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Conditions to Completion of the
Merger
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6
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Regulatory Approvals
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6
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Termination of the Merger
Agreement; Fees Payable
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6
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We May Amend the Terms of the
Merger and Waive Rights Under the Merger Agreement
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7
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Interests of Certain Directors and
Officers in the Merger That Differ From Your Interests
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7
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Treatment of Civitas Stock Options
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7
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Comparison of the Rights of
Civitas Shareholders and Greene County Shareholders
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7
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RISK FACTORS RELATING TO THE MERGER
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8
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The Combined Company Will Incur
Significant Transaction and Merger-Related Costs in Connection
With the Merger
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8
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Greene County May Not Be Able To
Successfully Integrate Civitas or To Realize the Anticipated
Benefits of the Merger
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8
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Civitas Shareholders Are Not
Guaranteed to Receive The Mix of Consideration That They Request
on Their Election Form
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9
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Persons Who Receive All Cash In
The Merger Will Not Participate in Future Growth
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9
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The Market Value of The Greene
County Common Stock Received by Civitas Shareholders in The
Merger May Change Based Upon The Average Closing Price of Greene
County Common Stock; Accordingly, Civitas Shareholders Cannot be
Sure of The Value of The Merger Consideration They Will Receive
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9
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Fluctuations in The Trading Price
of Greene County Common Stock That Either Do Not Result In An
Adjustment of The Exchange Ratio or That Occur After The
Exchange Ratio Has Been Set Will Change The Value Of The Shares
of Greene County Common Stock You Receive in The Merger
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10
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If Fluctuations in The Average
Closing Price of Greene County Common Stock Would Otherwise
Cause The Exchange Rate to Fall Outside the Agreed Upon Range,
Neither Party Has a Right to Terminate the Agreement And, as a
Result, the Implied Value of The Merger to Civitas Shareholders
Will Either Increase or Decrease Depending Upon The Trading
Price of Greene Countys Stock
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10
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Civitas Shareholders Will Have
Less Influence as a Shareholder of Greene County Than as a
Shareholder of Civitas
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10
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Failure to Complete The Merger
Could Cause Greene Countys or Civitas Stock Price to
Decline
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11
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Directors and Officers of Civitas
Have Interests in the Merger That Differ From The Interests of
Non-directors
or Non-management Shareholders
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11
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
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12
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i
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INFORMATION ABOUT THE COMPANIES
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14
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Greene County Bancshares,
Inc.
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14
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Civitas BankGroup, Inc.
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14
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Additional Information about
Greene County and Civitas
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15
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SELECTED FINANCIAL DATA
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16
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COMPARATIVE MARKET PRICES
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23
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Greene County Shares
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24
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Civitas Shares
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24
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THE PROPOSED MERGER
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25
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General
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25
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Transaction Structure
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25
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Background of the Merger
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26
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Greene Countys Reasons for
the Merger; Recommendation of the Greene County Board of
Directors
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28
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Civitas Reasons for the
Merger; Recommendation of the Civitas Board of Directors
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29
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Dissenters and Appraisal
Rights
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30
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Opinion of Greene Countys
Financial Advisor
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31
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Opinion of Civitas Financial
Advisor
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37
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Accounting Treatment
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43
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Material United States Federal
Income Tax Consequences of the Merger
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44
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Interests of Certain Civitas
Executive Officers and Directors in the Merger
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47
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Regulatory Approvals
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47
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Election Procedures; Surrender and
Exchange of Stock Certificates
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50
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Restrictions on Resales of Greene
County Stock by Affiliates
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51
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THE MERGER AGREEMENT
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53
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General
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53
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Merger Consideration
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53
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Adjustment to Conversion Ratio for
Changes in Greene County Stock Price
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53
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Proration Procedures
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54
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Dividends and Distributions
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55
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Withholding
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56
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Effective Time
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56
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Conditions to the Completion of
the Merger
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56
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Representations and Warranties
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57
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Conduct of Business Pending the
Merger
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58
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Reasonable Best Effort to Obtain
Required Shareholder Vote
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59
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No Solicitation of Alternative
Transactions
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60
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Termination of the Merger Agreement
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61
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Extension, Waiver and Amendment of
the Merger Agreement
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62
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Employee Benefit Plans and
Existing Agreements
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63
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Stock Exchange Listing; Delisting
of Civitas Common Stock
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63
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Expenses
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63
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THE GREENE COUNTY ANNUAL MEETING
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64
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THE CIVITAS SPECIAL MEETING
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67
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DESCRIPTION OF GREENE COUNTY
CAPITAL STOCK
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70
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ii
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COMPARISON OF THE RIGHTS OF
SHAREHOLDERS
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70
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OTHER MATTERS TO BE CONSIDERED AT
GREENE COUNTYS ANNUAL MEETING
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78
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LEGAL MATTERS
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100
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EXPERTS
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100
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FUTURE SHAREHOLDER PROPOSALS
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100
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OTHER MATTERS
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101
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WHERE YOU CAN FIND MORE INFORMATION
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102
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APPENDIX A
Agreement and Plan of Merger
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APPENDIX B
Scott & Stringfellow Opinion
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APPENDIX C Keefe,
Bruyette & Woods Opinion
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iii
QUESTIONS
AND ANSWERS ABOUT VOTING AND THE MERGER
The following are some questions that you, as a shareholder
of Greene County or Civitas, may have regarding the merger and
the other matters being considered at the shareholders
meetings and the answers to those questions. Greene County and
Civitas recommend that you read carefully the remainder of this
document because the information in this section does not
provide all the information that might be important to you with
respect to the merger and the other matters being considered at
the shareholders meetings. Additional important
information is also contained in the appendices to, and the
documents incorporated by reference, into this document.
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Q: |
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Why are you receiving this document? |
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A: |
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You are receiving this document because you were a shareholder
of record of either or both Greene County or Civitas on
March 16, 2007. Greene County and Civitas have agreed to
the combination of Civitas with Greene County under the terms of
a merger agreement that is described in this document. A copy of
the merger agreement is attached to this document as
Appendix A. |
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In order to complete the merger, both Greene County and Civitas
shareholders must vote to approve these respective proposals: |
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Greene County shareholders must approve the merger
agreement and the related issuance of shares of Greene County
common stock in connection with the merger. Pursuant to the
Marketplace Rules of the Nasdaq Stock Market, shareholder
approval is required where the issuance may exceed 20% of the
outstanding shares of Greene County common stock prior to the
merger.
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Civitas shareholders must approve the merger
agreement.
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Greene County and Civitas will hold separate shareholders
meetings to obtain these approvals. Greene County shareholders
will consider other proposals in addition to the merger-related
proposals as more fully described below under Other
Matters To Be Considered at Greene Countys Annual
Meeting. |
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This document contains important information about the merger
and the meetings of the respective shareholders of Greene County
and Civitas, and you should read it carefully. The enclosed
voting materials allow you to vote your shares without attending
your respective shareholders meeting. |
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Your vote is important. We encourage you to vote as soon as
possible. |
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Why is your vote important? |
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A: |
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First, both Greene County and Civitas, in order to conduct a
lawful meeting, must obtain a quorum the presence in
person or proxy of a majority of their outstanding shares. Also,
under the Tennessee Business Corporation Act, or TBCA, which
applies to both Greene County and Civitas, the merger agreement
must be approved by the holders of a majority of the outstanding
shares of both Greene County and Civitas common stock entitled
to vote. Accordingly, if a Greene County or Civitas shareholder
fails to vote, or if a Greene County or Civitas shareholder
abstains, that will make it more difficult for Greene County and
Civitas to obtain the approval of the merger agreement. |
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Because approval of the merger of Greene County and Civitas
requires the approval of a majority of the outstanding shares of
both Greene County and Civitas, your failure to vote or your
abstention on the merger will have the same effect as a vote
against the approval of the merger. |
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Q: |
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When and where will the shareholders meetings be
held? |
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A: |
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The Greene County annual meeting will be held the General Morgan
Inn, 100 North Main Street, Greeneville, Tennessee 37743, at
11:00 a.m. local time on April 25, 2007. |
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The Civitas special meeting will be held at the Embassy Suites
Hotel located at 820 Crescent Centre Drive, Franklin, Tennessee
37067, at 3:00 p.m. local time on April 26, 2007. |
iv
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A: |
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If you are a shareholder of record of Greene County as of the
record date for the Greene County annual meeting or a
shareholder of record of Civitas as of the record date for the
Civitas special meeting, you may vote in person by attending
your shareholders meeting or, to ensure your shares are
represented at the meeting, you may vote by: |
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accessing the Internet website specified on your
proxy card;
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calling the toll-free number specified on your proxy
card; or
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signing and returning the enclosed proxy card in the
postage-paid envelope provided.
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If you hold either Greene County or Civitas shares in the name
of a bank or broker, please see the discussion below. |
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If you are a participant in the Civitas Employee Stock Purchase
Plan, you will receive a proxy card to vote your shares. |
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Q: |
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What happens if you fail to vote or you abstain from
voting? |
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A: |
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If you are either a Greene County or Civitas shareholder and
fail to vote or vote to abstain with respect to the proposed
merger of Greene County and Civitas, it will have the same
effect as a vote Against the proposal to approve and
adopt the merger agreement. Otherwise, your failure to vote or
your vote to abstain as to any other proposal at either of the
meetings will have no effect on those proposals, assuming a
quorum is present. |
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Q: |
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Your shares are held in your brokers (also known as
street) name. How do you vote those shares? |
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A: |
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Copies of this joint proxy statement/prospectus were sent to you
by your broker. The broker will request instructions from you as
to how you want your shares to be voted, and the broker will
vote your shares according to your instructions. |
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If your shares are held in street name by a
broker, wont your broker vote those shares for you? |
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Not unless you provide your broker with instructions on how to
vote your street name shares. Without instructions
from you, your broker will not be permitted to vote them, in the
case of Civitas shareholders, on the approval of the merger
agreement by Civitas shareholders, or, in the case of Greene
County shareholders, on the approval of the merger agreement and
the issuance of Greene County common stock in connection with
the merger. You should therefore be sure to provide your broker
with instructions on how to vote your shares. Please check the
voting form used by your broker to see if it offers telephone or
Internet submission of proxies. |
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What if you fail to instruct your broker? |
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If you hold your shares in street name and fail to
instruct your broker to vote your shares and the broker submits
an unvoted proxy, the resulting broker non-vote will
be counted toward a quorum at the respective annual or special
meeting, but it will otherwise have the consequences of a vote
Against approval of the merger agreement, and, for
Greene County shareholders, it also will have the consequences
of a vote Against the issuance of Greene County
common stock in connection with the merger. See
What happens if you fail to vote or you
abstain from voting? |
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What happens if you return your proxy card without indicating
how to vote? |
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If you return your signed proxy card without indicating how to
vote on any particular proposal, the Greene County or Civitas
stock represented by your proxy will be voted on each proposal
presented at your shareholders meeting in accordance with
the boards recommendation on that proposal. |
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Can you change your vote after you have delivered your proxy
card? |
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Yes. You may change your vote at any time before your proxy is
voted at your meeting. You can do this in any of the three
following ways: |
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by sending a written notice to the corporate
secretary of Greene County or Civitas, as appropriate, in time
to be received before your shareholders meeting stating
that you would like to revoke your proxy;
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by completing, signing and dating another proxy card
bearing a later date and returning it by mail in time to be
received before your annual or special meeting or, if you
submitted your proxy through the Internet or by telephone, you
can change your vote by submitting a proxy card at a later date,
in which case your later-submitted proxy will be recorded and
your earlier proxy revoked; or
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if you are a holder of record, by attending the
annual or special meeting, as the case may be, and voting in
person.
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If your shares are held in an account at a broker or bank, you
should contact your broker or bank to change your vote. |
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Why are Greene County and Civitas proposing to merge? |
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Greene County and Civitas believe that, among other things, the
merger will provide the resulting company with expanded
opportunities for profitable growth. In addition, they believe
that by combining the resources of the two companies, the
resulting company will have an improved ability to compete in
the changing and competitive financial services industry. An
additional factor in the case of Civitas is that its
shareholders are receiving a premium of approximately 22.6%
based upon the trading price of Civitas shares immediately prior
to announcement of the proposed merger with Greene County. |
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What will Civitas shareholders receive as a result of the
merger? |
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It depends. Civitas shareholders will be able to elect to
receive all cash, all Greene County common stock, or a
combination of cash and stock for their Civitas shares, subject
to the prorationing mechanism described in this document. At
your election, for each share of Civitas common stock you own
you will receive either (i) $10.25 in cash, without
interest, (ii) 1.0 share of Greene County common stock
multiplied by the exchange ratio (described in detail in the
next question) or (iii) a combination of cash and Greene
County common stock designated by you. |
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Although you will be able to elect to receive either cash,
Greene County common stock or the combination of cash and Greene
County common stock described above in exchange for your shares
of Civitas common stock, elections will be limited by the
requirement that of the total merger consideration, 70% must be
in the form of Greene County common stock and 30% must be in
cash. As a result, the form of consideration that you receive
will depend in part on the elections of other Civitas
shareholders. For example, if you elect cash for all or a
portion of your Civitas shares and more than 30% of
Civitas shareholder elect to receive cash, your election
will be prorated and you will receive a combination of cash and
stock. A similar result would occur if you elected to receive
all Greene County stock and more than 70% of Civitas
shareholders elected Greene County common stock in
that case, you also would receive a combination of cash and
stock. Also, if you elect a combination of cash and stock, the
elections of other Civitas shareholders could result in your
receiving cash and stock in different proportions that you
request. |
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Civitas shareholders will not receive any fractional shares of
Greene County common stock. Instead, they will receive cash,
without interest, for any fractional share of Greene County
common stock they might otherwise have been entitled to receive
based on fractional share interest multiplied by $10.25. |
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Please see page 50 of this joint proxy
statement/prospectus for a full description of the all cash, all
stock and mixed consideration options and shareholder election
procedures. |
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How do you determine the value of the consideration received
by Civitas shareholders? |
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The value of the consideration Civitas shareholders may elect to
receive in exchange for their Civitas common stock is dependent
on the exchange ratio. The exchange ratio initially
is set at 0.2674, |
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meaning that, unless adjusted, for every one share of Civitas
owned by you, you would receive 0.2674 shares of Greene
County common stock. The exchange ratio, however, is adjusted if
the average closing price of Greene County common
stock changes by more than 10% of the change in the |
NASDAQ bank stock index since November 14, 2006. The
average closing price means the average of the daily
closing sales price of Greene County common stock during the
twenty (20) trading day period ending ten (10) trading
days prior to the closing date of the merger. As a result, the
number of Greene County shares that a Civitas shareholder may
elect to receive may fluctuate depending on the average closing
price of Greene County common stock. Civitas shareholders should
read the section entitled The Merger Agreement
Merger Consideration, which shows examples of the
consideration a Civitas shareholder could receive in the merger.
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In addition, the exchange rate is subject to a cap
of 0.2968 (it can be no higher even if the change in the actual
average closing price relative to the change in the
NASDAQ bank stock index otherwise would result in a higher
exchange ratio) and to a floor of 0.2380 (it can be
no lower even if the change in the actual average closing
price relative to the change in the NASDAQ bank stock
index otherwise would result in a lower exchange ratio). As a
result, if the price of Greene County common stock were to
decline below that which would cause the exchange ratio but for
the cap to exceed 0.2968, the implied offer value to Civitas
shareholders will decline. Correspondingly, if the price of
Greene County common stock were to increase above that which
would cause the exchange ratio but for the floor to decrease
below 0.2380, the implied offer value to Civitas shareholders
will increase. |
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For purposes of illustration only, if the merger had closed on
March 23, 2007, the exchange ratio for each share of
Civitas would have been 0.2674 shares of Greene County,
having a value of $ based on the
change in the value of Greene County common stock relative to
the NASDAQ bank stock index during the applicable measurement
periods. |
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We recommend that you get current quotes for both Greene County
and Civitas common stock. |
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What must Civitas shareholders do to elect to receive cash,
stock or a combination of both? |
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A form for making an election will be sent to you separately
after the effective time of the merger. For your election to be
effective, your properly completed election form, along with
your Civitas stock certificates or an appropriate guarantee of
delivery, must be sent to and received by the exchange agent no
later than the election deadline specified in the election form
(which will not in any event be less than twenty
(20) business days after the form is mailed to Civitas
shareholders). Do not send your stock certificates to Civitas,
Greene County or Greene Countys exchange agent until you
receive the transmittal materials with instructions from the
exchange agent. If you do not make a timely election you will be
deemed to have elected to receive the mixed consideration of
cash and stock. |
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Will shareholders have dissenters or appraisal
rights? |
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Neither Civitas nor Greene County shareholders will have any
right to dissent from the merger and demand an appraisal of
their shares of either Civitas or Greene County common stock. |
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What are the federal income tax consequences of the merger to
Civitas shareholders? |
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For federal income tax purposes, Civitas shareholders who
exchange their shares solely for Greene County common stock will
generally not recognize gain or loss on the exchange, except
with respect to any cash paid for fractional shares. You will
recognize gain or loss if you exchange your Civitas common stock
solely for cash in the merger in an amount equal to the
difference between the amount of cash you receive and your tax
basis in your shares of Civitas common stock. You will recognize
gain (but not loss) if you exchange your Civitas common stock
for a combination of stock and cash, subject to certain
conditions. |
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Please see page 44 of this document for a description of
the material United States federal income tax consequences of
the merger. |
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When do we expect the merger to be completed? |
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We anticipate that the merger will be completed in the second
quarter of 2007. In addition to shareholder approvals, we must
also obtain certain regulatory approvals. Any delay in obtaining
any of these approvals may delay the consummation of the merger. |
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If youve lost your Civitas stock certificate, can you
receive consideration in the merger? |
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Yes. However, you will have to provide an affidavit attesting to
the fact that you lost your Civitas stock certificate.
Additionally, you may have to give Greene County or the exchange
agent a bond to indemnify Greene County against a loss in the
event someone finds or has your lost certificate and is able to
transfer it. To avoid these measures, you should do everything
you can to find your lost certificate before the time comes to
send it in. |
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If you are a Civitas shareholder, will you be able to sell
the Greene County shares that you receive in the merger? |
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Generally, yes. Shares of Greene County common stock that you
receive in the merger will be freely transferable, unless you
are an affiliate of Civitas (or become an
affiliate of Greene County) under applicable federal
securities laws. Affiliates generally include directors, certain
executive officers or holders of 10% or more of a companys
common stock. Generally, all shares of Greene County common
stock received by affiliates of Civitas (including shares they
beneficially own for others) may only be sold by them only upon
compliance with certain requirements of the Securities Act of
1933, as amended (the Securities Act). For more
detail regarding this subject, see page 51. |
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Where will your shares be listed after the merger? |
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Shares of Greene Countys common stock issued in the
transaction will be listed on the Nasdaq Global Select Market
and will trade under the symbol GCBS. However, if
the Greene County shareholders approve the proposal to change
Greene Countys corporate name to Green Bankshares, Inc.,
it is expected that the trading symbol will change to
GRNB. |
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What else other than the merger are you being asked to vote
upon and how does your board recommend you vote? |
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The Greene County board of directors unanimously recommends
that you vote in favor of each of the proposals on which you
will be voting at the Greene County annual meeting. At that
meeting, along with the proposal to approve the merger with
Civitas and the related issuance of Greene County shares, Greene
Countys shareholders are also being asked to: |
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elect five persons to serve as directors of Greene
County;
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consider and vote upon a proposal to ratify the
appointment of Greene Countys independent registered
public accounting firm for 2007;
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consider and vote upon a proposal to amend Greene
Countys charter to increase the number of authorized
shares from 15 million to 20 million shares of common
stock;
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consider and vote upon a proposal to amend Greene
Countys charter to change the corporate name of Greene
County to Green Bankshares, Inc.;
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consider and vote upon a proposal to approve the
adjournment of the annual meeting, including, if necessary, to
solicit additional proxies if there are not sufficient votes at
the time of the annual meeting for any of the foregoing
proposals; and
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transact any other business that may properly come
before the Greene County annual meeting or any adjournment or
postponement thereof.
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The only other matter that Civitas shareholders are being asked
to vote upon is a proposal to adjourn the Civitas special
meeting in the event additional time is necessary to solicit
additional proxies, either to obtain a quorum or to attempt to
obtain the requisite votes to approve the merger with Greene
County. Although two members of the Civitas board of directors
voted against the proposed merger with Greene |
viii
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County, the remaining members of the board are fully supportive
of the proposed merger and determined it to be in the best
interests of Civitas and it shareholders. Additionally, one of
the Civitas board members who voted against the proposed merger
was the Civitas Chief Executive Officer, who has since indicated
to Civitas that he intends to vote his shares in favor of the
Greene County merger. Accordingly, the required majority of
the Civitas board of directors recommends that you vote in favor
of each of the proposed merger with Greene County. |
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Neither Greene County nor Civitas is aware of any other business
to be considered at their respective meetings. |
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What do you need to do now? |
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After you carefully read and consider the information contained
in and incorporated by reference into this document, please
respond as soon as possible by completing, signing and dating
your proxy card and returning it in the enclosed postage-paid
return envelope, or, by submitting your proxy or voting
instruction by telephone or through the Internet so that your
shares will be represented and voted at your shareholders
meeting. This will not prevent you from attending and voting in
person; however in order to assist us in tabulating the votes at
your shareholders meeting, we encourage you to vote by
proxy even if you do plan to attend your meeting in person. |
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Should you send in your Civitas stock certificates now? |
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No. After the merger is completed, the combined company
will send Civitas shareholders written instructions for
exchanging their stock certificates for merger consideration.
You should not send in your stock certificates until you receive
these instructions. If you are a Greene County shareholder, you
are not required to take any action with respect to your Greene
County stock certificates. |
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If the merger is completed, what will happen to my options to
acquire Civitas common stock? |
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Upon completion of the merger, each outstanding Civitas stock
option will be terminated in exchange for a cash payment by to
each holder in an amount equal to $10.25 per share minus
the applicable exercise price per share for Civitas common stock
covered by the applicable stock option. |
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Who can help answer any other questions that you might
have? |
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If you want additional copies of this document, or if you want
to ask any questions about the merger, you should contact: |
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If you are a Greene County
shareholder:
Chief Financial
Officer
Greene County Bancshares, Inc.
100 North Main Street
Greeneville, TN
37743-4992
(423) 639-5111
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or
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If you are a Civitas
shareholder:
Investor Relations
Civitas BankGroup, Inc.
4 Corporate Centre
810 Crescent Centre Drive, Suite 320
Franklin, TN 37067
(615) 263-9500
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ix
SUMMARY
This following summary highlights selected information from
this joint proxy statement/prospectus. Because this is a
summary, it may not contain all of the information that may be
important to you and, therefore, is qualified in its entirety
by, and should be read in conjunction with, the more detailed
information included elsewhere or incorporated by reference in
this joint proxy statement/ prospectus. You should read
carefully this entire document and the other documents to which
this joint proxy statement/prospectus refers to before making a
decision on whether to vote for the merger of Greene County and
Civitas or to vote for the other matters that will be considered
at the Greene County annual meeting. Each item in this summary
refers to the page where that subject is discussed in more
detail.
Information
about Greene County and Civitas (Page 14)
Greene
County Bancshares, Inc.
100 North Main Street
Greeneville, TN
37743-4992
(423) 639-5111
Greene County was formed in 1985 and serves as the bank holding
company for Greene County Bank (which will be changing its name
to GreenBank effective April 2, 2007), which is a
Tennessee-chartered commercial bank established in 1890 that
conducts the principal business of Greene County. At
December 31, 2006, and based on Federal Reserve Board data
as of September 30, 2006, Greene County believes it was the
third largest bank holding company headquartered in the state of
Tennessee. Greene Countys assets consist primarily of its
investment in Greene County Bank and liquid investments.
The principal business of Greene County Bank, which has its
principal executive offices in Greeneville, Tennessee, consists
of attracting deposits from the general public and investing
those funds, together with funds generated from operations and
from principal and interest payments on loans, primarily in
commercial loans, commercial and residential real estate loans,
and installment consumer loans. Greene County Bank has
49 full-service banking offices located in 17 counties
in East and Middle Tennessee as well as two other full service
branches outside Tennessee one in Madison County,
North Carolina and the other in Bristol, Virginia. Greene County
Bank also operates a wealth management office in Sumner County,
Tennessee, a mortgage banking operation in Knox County,
Tennessee, and also offers other financial services through
three wholly-owned subsidiaries.
At December 31, 2006, Greene Countys consolidated
total assets were $1.77 billion, its consolidated net loans
were $1.54 billion, its total deposits were
$1.33 billion and its total shareholders equity was
$184.47 million.
Civitas
Bancorp, Inc
4 Corporate Centre
810 Crescent Centre Drive, Suite 320
Franklin, Tennessee 37067
(615) 263-9500
Civitas is a Tennessee registered bank holding company
headquartered in Franklin, Tennessee that resulted from the 1997
merger of a multi-thrift holding company with a bank holding
company. Civitas serves as the bank holding company for
Cumberland Bank, which provides banking and other financial
services through twelve (12) branches located in five
(5) markets throughout Middle Tennessee. Civitas focuses
its efforts on the Nashville metropolitan market generally, with
particular attention on the Williamson and Sumner County
markets. As of June 30, 2006, Cumberland Bank was the fifth
largest bank and largest independent bank in Williamson County.
Civitas principal operations include traditional banking
services incorporating commercial and residential real estate
lending, commercial business lending, consumer lending,
construction lending and other financial services, including
depository services. Civitas serves both metropolitan and rural
areas, targeting local
1
consumers, professionals and small businesses. Net interest
income, which is the principal source of earnings for Civitas,
is the difference between the interest income earned on its
loans, investment assets and other interest-earning assets and
the interest paid on deposits and other interest-bearing
liabilities. To a lesser extent, Civitas net income also
is affected by its noninterest income derived principally from
service charges and fees as well as the level of noninterest
expenses such as salaries and employee benefits.
At December 31, 2006, Civitas consolidated total
assets were $898.2 million, its consolidated net loans were
$607.7 million, its total deposits were $732.5 million
and its total shareholders equity was $53.9 million.
Civitas
Will Merge With and Into Greene County (Page 25)
We propose a merger of Civitas with and into Greene County.
Greene County will survive the merger. We have attached the
merger agreement to this document as
Appendix A. Please read the merger
agreement carefully. It is the legal document that governs the
merger. See also THE MERGER AGREEMENT at
page 53.
Our
Reasons for the Merger (Page 28)
Greene County Bancshares Board of
Directors. Greene Countys board of
directors is proposing the merger because, among other reasons:
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it provides accelerated entry in the Davidson County and
Williamson County markets;
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increased size and scale the combined company is
expected to have pro forma assets of approximately
$2.8 billion, a pro forma market capitalization of
approximately $288 million and offices in some of the
fastest growing areas in the Nashville MSA;
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enhanced geographic market;
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the board believes that the merger may result in synergies and
cost savings through the centralization of operations and
corporate functions;
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the anticipated effect of the merger on the earnings per share
of Greene County following the merger; and
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increased float pro forma shares outstanding of the
combined company would increase from approximately
9.8 million shares to approximately 12.9 million
shares.
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Civitas Board of
Directors. Civitas board of directors is
proposing the merger because, among other reasons:
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the consideration to be received by Civitas shareholders, as
indicated by the opinion of Keefe, Bruyette & Woods, is
fair, from a financial point of view;
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the per share value of the merger consideration to Civitas
shareholders and the fact that up to 30% of the merger
consideration can be in cash;
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the alternatives to the merger, including Civitas remaining an
independent financial institution;
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the merger allows Civitas shareholders who elect to become
shareholder of Greene county to be part owner of a larger, more
diversified financial services institution; and
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the anticipated positive impact of the merger on Civitas
employees and customers.
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What
Civitas Shareholders Will Receive In the Merger
(Page 53)
Civitas shareholders will be able to elect to receive all cash,
all Greene County common stock, or a combination of cash and
stock for their Civitas shares, subject to the prorationing
mechanism described in this document. At your election, for each
share of Civitas common stock you own you will receive, subject
to the requirement that 70% of the aggregate merger
consideration consist of Greene County common stock, either
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$10.25 in cash, without interest;
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1.0 share of Greene County common stock multiplied by the
0.2674 (the exchange ratio); or
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a combination of cash and Greene County common stock designated
by you.
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Other aspects of the merger consideration include:
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Greene County common stock component being fixed at 70% of
aggregate merger consideration likely will result in the form
and relative allocation of merger consideration to Civitas
shareholders being different from that requested.
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Possibility of adjustment in exchange ratio based upon changes
in Greene County stock price relative to the NASDAQ bank stock
index results in possibility of fluctuation of number of shares
of Greene County shares received by Civitas shareholders;
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Cap (0.2968) and floor (0.2380) on exchange ratio results in
possibility of implied value to Civitas shareholders,
respectively, decreasing or increasing if Greene Countys
stock trades at such a level as would otherwise require an
adjustment to the exchange ratio but for the cap and the
floor; and
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Civitas shareholders will not receive any fractional shares of
Greene County common stock. Instead, they will receive cash,
without interest, for any fractional share of Greene County
common stock they might otherwise have been entitled to receive
based on fractional share interest multiplied by $10.25.
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See The Merger Agreement Merger
Consideration; on page 53 which shows examples of the
consideration a Civitas shareholder could receive in the merger.
For purposes of illustration only, if the merger had closed on
March 23, 2007, the exchange ratio for each share of
Civitas would have been .0.2674 shares of Greene County,
having a value of $[ ] based on the
change in the value of Greene County common stock relative to
the NASDAQ bank stock index during the applicable measurement
periods.
You should obtain current stock price quotations for Greene
County common stock and Civitas common stock. You
can obtain these quotations from a newspaper, on the Internet or
by calling your broker.
What
Greene County Shareholders Will Receive (page 25)
Each share of Greene County common stock will remain issued and
outstanding and will not be affected by the merger. Greene
County shareholders will not need to surrender their Greene
County stock certificates or exchange them for new ones.
No
Dissenters and Appraisal Rights (Page 30)
Under Tennessee law, neither Greene Countys nor
Civitas shareholders are entitled to dissenters or
appraisal rights in connection with the merger.
Our
Recommendations (Page 28)
Greene County shareholders. The Greene County
board of directors believes that the merger is fair to Greene
Countys shareholders and in their best interests.
Accordingly, it is recommended that Greene County shareholders
vote FOR approval of the merger of
Civitas and Greene County and the related issuance of Greene
County common stock pursuant to the merger and
FOR each of the other matters to be
considered at the Greene County annual meeting.
Civitas shareholders. A majority (nine out of
twelve, with one director absent) of the Civitas board of
directors determined that the merger is fair to Civitas
shareholders and in their best interests. Accordingly, it is
recommended that Civitas shareholders vote
FOR the proposal to approve the merger
with Greene County. The only other matter that Civitas
shareholders are being asked to vote upon is a proposal to
adjourn the Civitas special meeting in the event additional time
is necessary to solicit additional proxies, either to obtain a
quorum or to attempt to obtain the requisite votes to approve
the merger with Greene County. As
3
indicated, although not unanimous, the required majority of
the Civitas board of directors recommends that you vote in favor
of each proposal, including the proposal to merge with Greene
County. See THE PROPOSED
MERGER Background of the Merger at
page 26.
Opinions
of Financial Advisors (Page 31)
Greene County shareholders. In connection with
the merger, the Greene County board of directors considered the
opinion of Scott & Stringfellow, Inc. (Scott
& Stringfellow), Greene Countys financial advisor.
Scott & Stringfellow rendered a written opinion to the
Greene County board of directors that, as of January 25,
2007, and based upon and subject to the factors and assumptions
set forth therein, the exchange ratio and the aggregate merger
consideration to be paid by Greene County pursuant to the merger
agreement was fair from a financial point of view to Greene
County and Greene Countys shareholders. This opinion,
which is attached to this document as Appendix B,
sets forth the procedures followed assumptions made and
limitation on the review undertaken by Scott &
Stringfellow in providing its opinion. Please read this opinion
carefully and in its entirety.
The Scott & Stringfellow opinion is addressed to the
Greene County board of directors and is not a recommendation as
to how any shareholder of either Greene County or Civitas should
vote with respect to the merger agreement and the issuance of
Greene County common stock in connection with the merger.
Civitas shareholders. In connection with the
merger, the Civitas board of directors considered the opinion of
Keefe, Bruyette & Woods, Civitas financial
advisor. Keefe, Bruyette & Woods rendered a written
opinion to the Greene County board of directors that, as of
January 25, 2007, and based upon and subject to the factors
and assumptions set forth therein, the merger consideration to
be paid by Greene County pursuant to the merger agreement was
fair from a financial point of view to Civitas and Civitas
shareholders. This opinion, which is attached to this document
as Appendix C, sets forth the procedures followed
assumptions made and limitation on the review undertaken by
Keefe, Bruyette & Woods in providing its opinion.
Please read this opinion carefully and in its entirety.
The Keefe, Bruyette & Woods opinion is addressed to
the Civitas board of directors and is not a recommendation as to
how any shareholder of either Civitas or Greene County should
vote with respect to the merger agreement.
Accounting
Treatment (Page 43)
The merger will be accounted for under the purchase method of
accounting.
Certain
Federal Income Tax Consequences (Page 44)
You generally will not recognize any gain or loss for
U.S. federal income tax purposes as a result of your
exchange of Civitas common stock for shares of Greene County
common stock. Civitas shareholders may, however, have to
recognize income or gain in connection with the receipt of any
cash received in the merger. This tax treatment may not apply to
all Civitas shareholders. You should consult your own tax
advisor for a full understanding of the mergers tax
consequences that are particular to you. You will not be
obligated to exchange your shares of Civitas common stock unless
we receive a legal opinion that the merger will be treated for
federal income tax purposes as a reorganization within the
meaning of Section 368 of the Internal Revenue Code. This
opinion, however, will not bind the Internal Revenue Service,
which could take a different view.
Civitas shareholders will also be required to file certain
information with their federal income tax returns and to retain
certain records with regard to the merger.
There will be no United States federal income tax consequences
to a holder of Greene County common stock as a result of the
merger.
The discussion of United States federal income tax
consequences set forth above is for general information only and
does not purport to be a complete analysis or listing of all
potential tax effects that
4
may apply to a holder of Civitas common stock. Civitas
shareholders are strongly encouraged to consult their tax
advisors to determine the particular tax consequences to them
of the merger, including the application and effect of federal,
state, local, foreign and other tax laws.
The
Shareholder Meetings (Pages 64 and 67)
Greene County shareholders. The Greene County
annual meeting will be held at the General Morgan Inn, 111 North
Main Street, Greeneville, Tennessee 37743 on April 25, 2007
at 11:00 a.m., local time. At the annual meeting, Greene
County shareholders will be asked:
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to consider and vote upon a proposal to approve the merger
between Greene County and Civitas, and the issuance of Greene
County common stock in connection with the merger;
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to elect five directors;
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to consider and vote upon a proposal to ratify the appointment
of Greene Countys independent registered public accounting
firm for 2007;
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to consider and vote upon a proposal to amend Greene
Countys charter to increase the number of authorized
shares from 15 million to 20 million shares of common
stock;
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to consider and vote upon a proposal to amend Greene
Countys charter to change the corporate name of Greene
County to Green Bankshares, Inc.;
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to consider and vote upon a proposal to approve the adjournment
of the meeting, if necessary; and
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to transact any other business that may properly come before the
meeting.
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Civitas shareholders. The Civitas special
meeting will be held at the Embassy Suites Hotel,
820 Crescent Centre Drive, Franklin, Tennessee 37067, at
3:00 p.m., on April 26, 2007, local time. At the
special meeting, Civitas shareholders will be asked:
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to consider and vote upon a proposal to approve the merger
between Greene County and Civitas;
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to consider and vote upon a proposal to approve the adjournment
of the meeting, if necessary; and
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to transact any other business that may properly come before the
meeting.
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Record
Dates; Votes Required (Pages 64 and 67)
Greene County shareholders. You may vote at
the Greene County annual meeting if you owned Greene County
common stock at the close of business on March 16, 2007. On
that date, there were 9,818,312 shares of Greene County
common stock outstanding and entitled to vote, approximately 12%
of which were owned and entitled to be voted by Greene County
directors and executive officers and their affiliates. You may
cast one vote for each share of Greene County common stock you
owned on that date. Approval of the merger between Greene County
and Civitas and the issuance of Greene County common stock in
connection with the merger requires the holders of a majority of
Greene Countys outstanding shares vote in favor of
(i.e., FOR) the merger. Directors are
elected by a plurality. Approval of the remaining proposals
requires, in each case, that the number of votes in favor of the
proposal exceed the number of votes against the proposal.
Civitas shareholders. You may vote at the
Civitas special meeting if you owned Civitas common stock at the
close of business on March 16, 2007. On that date, there
were 15,932,173 shares of Civitas common stock outstanding
and entitled to vote, approximately 24.8% of which were owned
and entitled to be voted by Civitas directors and executive
officers and their affiliates. You may cast one vote for each
share of Civitas common stock you owned on that date. Approval
of the merger between Greene County and Civitas requires the
holders of a majority of Civitas outstanding shares vote
in favor of (i.e., FOR) the merger.
Approval of a proposal to adjourn or postpone the meeting, if
necessary, requires that the number of votes in favor of the
proposal exceed the number of votes against the proposal.
5
Conditions
to Completion of the Merger (Page 56)
Our obligations to complete the merger depend on a number of
conditions being met. These include:
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Greene Countys shareholders approval of the merger
agreement and the issuance of shares in the merger;
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Civitas shareholders approval of the merger
agreement;
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approval of the merger by the necessary federal and state
regulatory authorities;
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the absence of any burdensome condition, requirement or
restriction imposed in connection with regulatory approval of
the merger;
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the absence of any order, injunction, decree, law or regulation
that would prohibit the merger or make it illegal; and
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receipt by Greene County and Civitas of the opinion of Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC that, for
United States federal income tax purposes, the merger will
constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
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Where the law permits, either of us could choose to waive a
condition to our obligation to complete the merger, even if that
condition has not been satisfied. We cannot be certain when (or
if) the conditions to the merger will be satisfied or waived or
that the merger will be completed.
Regulatory
Approvals (Page 47)
We cannot complete the merger unless we receive the prior
approval of the Federal Reserve Board and the Tennessee
Department of Financial Institutions. In addition, we need to
obtain approvals or consents from, or make filings with, a
number of federal and state bank, insurance and other regulatory
authorities. Once the Federal Reserve Board approves the merger,
we have to wait from 15 to 30 days before we can complete
it. During that time, the United States Department of Justice
could challenge the merger.
As of the date of this document, we have not yet received the
required approvals. While we do not know of any reason why we
would not be able to obtain the necessary approvals in a timely
manner, we cannot be certain when or if we will receive them.
Termination
of the Merger Agreement; Fees Payable (Page 61)
We may jointly agree to terminate the merger agreement at any
time without completing the merger, even if our respective
shareholders have approved it. Also, either of us can decide,
without the consent of the other, to terminate the merger
agreement in a number of other situations, including:
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a governmental authority that must grant a regulatory approval
denies approval of the merger (although this termination right
is not available to a party whose failure to comply with the
merger agreement resulted in those actions by a governmental
authority);
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a governmental entity of competent jurisdiction issues a final
nonappealable order enjoining or otherwise prohibiting the
merger;
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the merger is not completed on or before June 30, 2007
(although this termination right is not available to a party
whose failure to comply with the merger agreement resulted in
the failure to complete the merger by that date);
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the other partys board of directors adversely changes its
recommendation that its shareholders vote FOR
approval of the merger agreement (in the case of Civitas) or the
approval of the merger agreement and the issuance of Greene
County common stock in connection with the merger (in the case
of Greene County), or the other party breaches its obligation to
hold its shareholders meeting to approve the transactions
contemplated by the merger agreement;
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the other party is in breach of its representations, warranties,
covenants or agreements set forth in the merger agreement and
the breach rises to a level that would excuse the terminating
partys obligation to complete the merger and is either
incurable or is not cured within 10 days;
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the shareholders of Civitas do not approve the merger agreement
at the Civitas shareholders meeting; or
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the shareholders of Greene County do not approve the merger
agreement and the issuance of Greene County common stock in
connection with the merger at the Greene County
shareholders meeting.
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The merger agreement provides that in limited circumstances,
described more fully beginning on page 61, involving a
change in the recommendation of Civitas board that
Civitas shareholders approve the merger agreement,
Civitas failure to hold a shareholders meeting to
vote on the merger agreement, Civitas authorization,
recommendation or proposal of a third party acquisition proposal
or if the merger agreement is otherwise terminated (other than
by Civitas for Greene Countys material breach) after
Civitas shall have received a third party acquisition proposal,
Civitas may be required to pay termination fees to Greene County
of $5 million.
We May
Amend the Terms of the Merger and Waive Rights Under the Merger
Agreement (Page 62)
We may jointly amend the terms of the merger agreement, and
either party may waive its right to require the other party to
adhere to any of those terms, to the extent legally permissible.
However, after the approval of the merger agreement by the
respective shareholders of Greene County or Civitas, no
amendment or waiver that reduces or changes the form of the
consideration that will be received by Civitas shareholders may
be accomplished without the further approval of such
shareholders.
Interests
of Certain Directors and Officers in the Merger That Differ From
Your Interests (Page 47)
Some of the directors and of Civitas have financial and other
interests in the merger that differ from, or are in addition to,
their interests as shareholders of Civitas. These interests
include:
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Certain officers of Civitas and Cumberland Bank will enter into
new employment, consulting or change of control agreements with
Greene County or Greene County Bank, which become effective as
of the closing of the merger. These agreements provide for the
payment of additional payments and benefits to these officers
and contain covenants not to compete;
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Greene County has agreed that it will maintain a policy of
directors and officers liability insurance coverage
for the benefit of Civitas directors and officers serving
at the effective time of the merger for three years following
completion of the merger.
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The Civitas board of directors knew about these additional
interests, and considered them, when it adopted the merger
agreement.
Treatment
of Civitas Stock Options (Page 53)
Each outstanding option to acquire Civitas common stock granted
under Civitas stock option and incentive plans will be
purchased at the effective time of the merger for a cash
purchase price equal to the number of Civitas shares subject to
the option multiplied by the excess, if any, of $10.25 over the
exercise price per share of the share subject to the option.
Comparison
of the Rights of Civitas Shareholders and Greene County
Shareholders (Page 70)
Both Greene County and Civitas are incorporated under Tennessee
law. Civitas shareholders, upon completion of the merger will
become Greene County shareholders, and their rights as such will
be governed by Greene Countys charter and bylaws. See
COMPARISON OF THE RIGHTS OF SHAREHOLDERS beginning
on page 70 for the material differences between the rights
of Civitas shareholders and Greene County shareholders.
7
RISK
FACTORS RELATING TO THE MERGER
In addition to the other information contained in or
incorporated by reference into this joint proxy
statement/prospectus, including without limitation, Greene
Countys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and
Civitas Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, you should
carefully consider the following risk factors in deciding
whether to vote to approve the merger agreement and, in the case
of the Greene County shareholders, the stock issuance in
connection with the merger.
The
Combined Company Will Incur Significant Transaction and
Merger-Related Costs in Connection With the Merger
Greene County and Civitas expect to incur costs associated with
combining the operations of the two companies. Greene County and
Civitas have just recently begun collecting information in order
to formulate detailed integration plans to deliver planned
synergies. Additional unanticipated costs may be incurred in the
integration of the businesses of Greene County and Civitas.
Although Greene County and Civitas expect that the elimination
of duplicative costs, as well as the realization of other
efficiencies related to the integration of the businesses may
offset incremental transaction and merger-related costs over
time, this net benefit may not be achieved in the near term, or
at all.
Whether or not the merger is consummated, Greene County and
Civitas will incur substantial expenses, such as legal,
accounting, printing and financial advisory fees, in pursuing
the merger. Completion of the merger is conditioned upon the
receipt of all material governmental authorizations, consents,
orders and approvals, including approval by federal and state
banking regulators. Greene County and Civitas intend to pursue
all required approvals in accordance with the merger agreement.
See THE MERGER AGREEMENT Conditions to the
Completion of the Merger beginning on page 56 for a
discussion of the conditions to the completion of the merger and
THE PROPOSED MERGER Regulatory Approvals
beginning on page 47 for a description of the regulatory
approvals necessary in connection with the merger.
Greene
County May Not Be Able To Successfully Integrate Civitas or To
Realize the Anticipated Benefits of the Merger
The merger involves the combination of two bank holding
companies that previously have operated independently. A
successful combination of the operations of the two entities
will depend substantially on Greene Countys ability to
consolidate operations, systems and procedures and to eliminate
redundancies and costs. Greene County may not be able to combine
the operations of Civitas and Greene County without encountering
difficulties, such as:
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the loss of key employees and customers;
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the disruption of operations and business;
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inability to maintain and increase competitive presence;
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deposit attrition, customer loss and revenue loss;
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possible inconsistencies in standards, control procedures and
policies;
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unexpected problems with costs, operations, personnel,
technology and credit; and/or
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problems with the assimilation of new operations, sites or
personnel, which could divert resources from regular banking
operations.
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Additionally, general market and economic conditions or
governmental actions affecting the financial industry generally
may inhibit the successful integration of Civitas and Greene
County.
Further, Greene County and Civitas entered into the merger
agreement with the expectation that the merger will result in
various benefits including, among other things, benefits
relating to enhanced revenues, a strengthened market position
for the combined company, cross selling opportunities,
technology, cost savings
8
and operating efficiencies. Achieving the anticipated benefits
of the merger is subject to a number of uncertainties, including
whether Greene County integrates Civitas in an efficient and
effective manner, and general competitive factors in the
marketplace. Failure to achieve these anticipated benefits could
result in increased costs, decreases in the amount of expected
revenues and diversion of managements time and energy and
could materially impact Greene Countys business, financial
condition and operating results. Finally, any cost savings that
are realized may be offset by losses in revenues or other
charges to earnings.
Civitas
Shareholders Are Not Guaranteed To Receive the Mix of
Consideration That They Request On Their Election
Form.
Although Civitas shareholders will be able to elect to receive
either cash, Greene County common stock or the combination of
cash and Greene County common stock in exchange for their
Civitas common stock, elections will be limited by the
requirement that of the total merger consideration, 70% must be
in the form of Greene County common stock and 30% must be in
cash. As a result, the form and relative mix of consideration
that a shareholder receives will depend in part on the elections
of other Civitas shareholders.
Persons
Who Receive All Cash in the Merger Will Not Participate in
Future Growth.
Civitas shareholders who elect and receive all cash in the
merger will not own any interest in Greene County, which will
not afford them the opportunity to participate in future growth,
if any, in the value of Greene County.
The
Market Value of the Greene County Common Stock Received by
Civitas Shareholders in the Merger May Change Based Upon the
Average Closing Price of Greene County Common Stock;
Accordingly, Civitas Shareholders Cannot be Sure of the Value of
the Merger Consideration That They Will Receive.
The value of the consideration Civitas shareholders may elect to
receive in exchange for their Civitas common stock is dependent
on the exchange ratio. The exchange ratio initially
is set at 0.2674, meaning that, unless adjusted, for every one
share of Civitas owned by you, you would receive
0.2674 shares of Greene County common stock. Fluctuations
in the trading price of Greene County common stock therefore
results in the value received by Civitas shareholders changing
to the extent it is paid in Greene County stock. Also, the
exchange ratio is adjusted if the average closing
price of Greene County common stock changes by more than
10% of the change in the NASDAQ bank stock index since
November 14, 2006. The average closing price
means the average of the daily closing sales price of Greene
County common stock during the twenty (20) trading day
period ending ten (10) trading days prior to the closing
date of the merger. As a result, the number of Greene County
shares that a Civitas shareholder may elect to receive may
fluctuate depending on the average closing price of Greene
County common stock. Civitas shareholders should read the
section entitled THE MERGER AGREEMENT Merger
Consideration on page 53, which shows examples of the
consideration a Civitas shareholder could receive in the merger.
During the
12-month
period ending on March 23, 2007, the most recent practical
date prior to the mailing of this joint proxy
statement/prospectus, Greene County common stock traded in a
range from a low of $27.90 to a high of $40.50 and ended that
period at $34.21, and Civitas common stock traded in a range
from a low of $[ ] to
a high of $[ ] and
ended that period at
$[ ]. See
COMPARATIVE MARKET PRICES beginning on page 23
for more detailed share price information.
These variations may be the result of various factors, many of
which are beyond the control of Civitas and Greene County,
including:
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changes in the business, operations or prospects of Greene
County, Civitas or the combined company;
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governmental
and/or
litigation developments
and/or
regulatory considerations;
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market assessments as to whether and when the merger will be
consummated and the anticipated benefits of the merger;
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governmental action affecting the banking and financial industry
generally;
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market assessments of the potential integration or other costs;
and
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general market and economic conditions.
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The merger may not be completed until a significant period of
time has passed after the Greene County and Civitas annual or
special meetings. At the time of their respective shareholder
meetings, Greene County and Civitas shareholders will not know
the exact value of the Greene County common stock that will be
issued in connection with the merger.
We recommend that Greene County and Civitas shareholders obtain
current market quotations for Greene County and Civitas common
stock, and they may obtain such quotations from a newspaper, the
Internet or by calling their broker. The price of Greene County
common stock and Civitas common stock at the effective time of
the merger may vary from their prices on the date of this
document. The historical prices of Greene County common stock
and Civitas common stock included in this document may not be
indicative of their prices on the date the merger becomes
effective. The future market prices of Greene County common
stock and Civitas common stock cannot be guaranteed or predicted.
Fluctuations
in the Trading Price of Greene County Common Stock That Either
Do Not Result in an Adjustment of the Exchange Ratio or That
Occur After the Exchange Ratio Has Been Set Will Change the
Value of the Shares of Greene County Common Stock You Receive in
the Merger.
The exchange ratio, absent significant fluctuations in the price
of Greene County Stock, will essentially be fixed and, as a
result, the market value of Greene County common stock issued in
the merger may be higher or lower than the value of such shares
on earlier dates. If the price of Greene County common stock
declines prior to completion of the merger, the value of the
merger consideration to be received by Civitas
shareholders will decrease. Once the average closing price of
Greene County common stock is determined and the exchange ratio
is set, the market value of the Greene County common stock that
you receive in the merger will increase or decrease depending on
the direction of the price movement of the Greene County common
stock. Also, after the merger, the market value of Greene County
common stock may decrease and be lower than the Greene County
average closing price used in calculating the exchange ratio in
the merger.
If
Fluctuations in the Average Closing Price of Greene County
Common Stock Would Otherwise Cause the Exchange Rate to Fall
Outside the Agreed Upon Range, Neither Party Has a Right to
Terminate the Agreement and, As a Result, the Implied Value of
the Merger to Civitas Shareholders Will Either Increase or
Decrease, Depending Upon the Trading Price of Greene
Countys Stock.
The exchange rate is subject to a cap of 0.2968 (it
can be no higher even if the change in the actual average
closing price relative to the change in the NASDAQ bank
stock index otherwise would result in a higher exchange ratio)
and to a floor of 0.2380 (it can be no lower even if
the change in the actual average closing price
relative to the change in the NASDAQ bank stock index otherwise
would result in a lower exchange ratio). As a result, if the
price of Greene County common stock were to decline below that
which would cause the exchange ratio but for the cap to exceed
0.2968, the implied offer value to Civitas shareholders will
decline. Correspondingly, if the price of Greene County common
stock were to increase above that which would cause the exchange
ratio but for the floor to decrease below 0.2380, the implied
offer value to Civitas shareholders will increase.
Civitas
Shareholders Will Have Less Influence As a Shareholder of Greene
County Than As a Shareholder of Civitas.
Civitas shareholders currently have the right to vote in the
election of the board of directors of Civitas and on other
matters affecting Civitas. Based upon the amount of cash
selected to be received by Civitas shareholders in the merger,
the shareholders of Civitas as a group will own approximately
23.8% of the combined organization. When the merger occurs, each
Civitas shareholder that receives Greene County stock will
become a shareholder of Greene County with a percentage
ownership of the combined organization much
10
smaller than such shareholders percentage ownership of
Civitas. Because of this, Civitas shareholders will have less
influence on the management and policies of Greene County than
they now have on the management and policies of Civitas.
Failure
To Complete the Merger Could Cause Greene Countys or
Civitas Stock Price To Decline
If the merger is not completed for any reason, Greene
Countys or Civitas stock price may decline because
costs related to the merger, such as legal, accounting and
financial advisory fees, must be paid even if the merger is not
completed. In addition, if the merger is not completed, Greene
Countys or Civitas stock price may decline to the
extent that the current market price reflects a market
assumption that the merger will be completed.
Directors
and Officers of Civitas Have Interests in the Merger That Differ
from the Interests of
Non-Directors
or Non-Management Shareholders.
Some of the directors and officers of Civitas have interests in
the merger that differ from, or are in addition to, their
interests as shareholders of Civitas generally. These interests
exist because of, among other things, employment agreements that
the officers entered into with Civitas, rights that Civitas
officers and directors have under Civitas benefit plans
(including the treatment of their stock options following the
merger) and rights to indemnification and directors and officers
insurance following the merger. Although the members of each of
Greene County and Civitas board of directors knew
about these additional interests and considered them when they
approved the merger agreement and the merger, you should
understand that some of the directors and officers of Civitas
will receive benefits in connection with the merger that you
will not receive. See THE PROPOSED MERGER
Interests of Certain Civitas Executive Officers and Directors in
the Merger beginning on page 47.
11
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document including the Appendices hereto contains
forward-looking statements about Greene County and
Civitas and the combined company following the merger.
Forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), are statements that represent our
judgment concerning the future and are subject to risks and
uncertainties that could cause our actual operating results and
financial position to differ materially from the forward-looking
statements. Such forward-looking statements can generally be
identified by the use of forward-looking terminology such as
may, will, expect,
anticipate, estimate,
believe, or continue, or the negative
thereof or other variations thereof or comparable terminology.
You should note that the discussion of Greene Countys and
Civitas reasons for the merger and the description of the
opinion of Civitas financial advisor contain many
forward-looking statements that describe beliefs, assumptions
and estimates of the management of each of Civitas and Greene
County and public sources as of the indicated dates and those
forward-looking expectations may have changed as of the date of
this joint proxy statement/prospectus. In addition, any
statements that refer to expectations, projections or other
characterizations of future events or circumstances, including
any underlying assumptions, are forward-looking statements.
Those statements are not guarantees and are subject to risks,
uncertainties and assumptions that are difficult to predict.
Therefore, actual results could differ materially and adversely
from these forward-looking statements.
The ability of Greene County and Civitas to predict results or
the actual effects of the combined companys plans and
strategies is inherently uncertain. Accordingly, actual results
may differ materially from anticipated results. Some of the
factors that may cause actual results to differ materially from
those contemplated by the forward-looking statements include,
but are not limited the risk factors that are described in
information that is incorporated by reference into this
document, those described in RISK FACTORS RELATING TO THE
MERGER discussed above as well as the following:
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difficulties in obtaining required shareholder and regulatory
approvals for the merger and related transactions;
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the level and timeliness of realization, if any, of expected
cost savings from the merger;
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difficulties related to the consummation of the merger and the
integration of the businesses of Greene County and Civitas;
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a materially adverse change in the financial condition of Greene
County or Civitas;
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greater than expected deposit attrition, customer loss, or
revenue loss following the merger;
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loan losses that exceed the level of allowance for loan losses
of the combined company;
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lower than expected revenue following the merger;
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management of the combined companys growth;
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the risks inherent or associated with possible or completed
acquisitions;
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increases in competitive pressure in the banking industry;
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changes in the interest rate environment that reduce margins;
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changes in deposit flows, loan demand or real estate values;
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changes in accounting principles, policies or guidelines;
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legislative or regulatory changes;
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general economic conditions, either nationally or in our
markets, that are less favorable than expected resulting in,
among other things, a deterioration of the quality of the
combined companys loan portfolio and the demand for its
products and services;
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dependence on key personnel;
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changes in business conditions and inflation; and
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changes in the securities markets.
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Additional factors are discussed in the reports filed with the
Securities and Exchange Commission (SEC) by Greene
County and Civitas. See WHERE YOU CAN FIND MORE
INFORMATION beginning on page 102.
The above list is not intended to be exhaustive and there may be
other factors that would preclude us from realizing the
predictions made in the forward-looking statements. Because
forward-looking statements are subject to assumptions and
uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. Greene
County shareholders and Civitas shareholders are cautioned not
to place undue reliance on such statements, which speak only as
of the date of this joint proxy statement/prospectus or the date
of any document incorporated by reference.
All subsequent written and oral forward-looking statements
concerning the merger or other matters addressed in this
document and attributable to Greene County or Civitas or any
person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to
in this section. Except to the extent required by applicable law
or regulation, Greene County and Civitas undertake no obligation
to update such forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the
occurrence of unanticipated events.
13
INFORMATION
ABOUT THE COMPANIES
Greene
County Bancshares, Inc.
Greene County was formed in 1985 and serves as the bank holding
company for Greene County Bank (which will be changing its name
to GreenBank effective April 2, 2007), which is a
Tennessee-chartered commercial bank that conducts the principal
business of Greene County. At December 31, 2006, and based
on Federal Reserve Board data as of September 30, 2006,
Greene County believes it was the third largest bank holding
company headquartered in the state of Tennessee. At
December 31, 2006, Greene County maintained a main office
in Greeneville, Tennessee and 49 full-service bank branches (of
which eleven are in leased operating premises) and nine separate
locations operated by Greene County Banks subsidiaries.
Greene Countys assets consist primarily of its investment
in Greene County Bank and liquid investments. Its primary
activities are conducted through Greene County Bank, which is a
chartered commercial bank established in 1890 that has its
principal executive offices in Greeneville, Tennessee. The
principal business of Greene County Bank consists of attracting
deposits from the general public and investing those funds,
together with funds generated from operations and from principal
and interest payments on loans, primarily in commercial loans,
commercial and residential real estate loans, and installment
consumer loans. At December 31, 2006, Greene County Bank
had 48 full-service banking offices located in Greene,
Washington, Blount, Knox, Hamblen, McMinn, Loudon, Hawkins,
Sullivan, Cocke and Monroe Counties in East Tennessee and in
Sumner, Rutherford, Davidson, Lawrence, Montgomery and
Williamson Counties in Middle Tennessee. Greene County Bank also
operates two other full service branches one located
in nearby Madison County, North Carolina and the other in nearby
Bristol, Virginia. Further, Greene County Bank operates a wealth
management office in Wilson County, Tennessee, and a mortgage
banking operation in Knox County, Tennessee.
Greene County Bank also offers other financial services through
three wholly-owned subsidiaries. Through Superior Financial
Services, Inc., Greene County Bank operates eight consumer
finance company offices located in Greene, Blount, Hamblen,
Washington, Sullivan, Sevier, Knox and Bradley Counties,
Tennessee. Through GCB Acceptance Corporation, Greene County
Bank operates a
sub-prime
automobile lending company with a sole office in Johnson City,
Tennessee. Through Fairway Title Co., Greene County Bank
operates a title company headquartered in Knox County, Tennessee.
At December 31, 2006, Greene Countys consolidated
total assets were $1.77 billion, its consolidated net loans
were $1.54 billion, its total deposits were
$1.33 billion and its total shareholders equity was
$184.47 million.
Civitas
BankGroup, Inc.
Civitas is a Tennessee registered bank holding company
headquartered in Franklin, Tennessee. Civitas serves as the bank
holding company for Cumberland Bank, which provides banking and
other financial services through twelve (12) branches
located in five (5) markets throughout Middle Tennessee.
Civitas focuses its efforts on the Nashville metropolitan market
generally, with particular attention on the Williamson and
Sumner County markets. As of June 30, 2006 Cumberland Bank
was the fifth largest bank and largest independent bank in
Williamson County.
In July of 1997, Civitas resulted from a merger of equals
between the two parent holding companies of a Tennessee
multi-thrift holding company with a Tennessee bank holding
company, forming Cumberland Bancorp, Inc. In 2004, Cumberland
Bancorp changed its name to Civitas BankGroup, Inc.
Cumberland Bank was chartered in 1976 as The Savings &
Loan Association of Smith County, Tennessee. Cumberland
Bank was later converted to a state commercial bank. Cumberland
Bank South was founded as First Southern Savings & Loan
in 1975. First Southern was acquired by First Federal in 1992.
Cumberland Bank and Cumberland Bank South merged in 2004.
Civitas principal operations include traditional banking
services incorporating commercial and residential real estate
lending, commercial business lending, consumer lending,
construction lending and other financial services, including
depository services. Civitas serves both metropolitan and rural
areas, targeting local
14
consumers, professionals and small businesses. Net interest
income, which is the principal source of earnings for Civitas,
is the difference between the interest income earned on its
loans, investment assets and other interest-earning assets and
the interest paid on deposits and other interest-bearing
liabilities. To a lesser extent, Civitas net income also
is affected by its noninterest income derived principally from
service charges and fees as well as the level of noninterest
expenses such as salaries and employee benefits.
At December 31, 2006 Civitas also owned a 50% interest in
Insurors Bank of Tennessee (IBOT), headquartered in
Nashville, Tennessee. IBOT opened in November 2000 and had
$83.3 million in assets at December 31, 2006. The
remaining 50% interest in IBOT was owned by InsCorp, a Tennessee
corporation owned predominately by Tennessee insurance agents.
In February 2007, Civitas divested itself of its 50% interest in
IBOT by selling it to InsCorp.
At December 31, 2006, Civitas consolidated total
assets were $898.2 million, its consolidated net loans were
$607.7 million, its total deposits were $732.5 million
and its total shareholders equity was $53.9 million.
Additional
Information about Greene County and Civitas
Information concerning:
|
|
|
|
|
directors and executive officers,
|
|
|
|
executive compensation,
|
|
|
|
principal shareholders,
|
|
|
|
certain relationships and related transactions, and
|
|
|
|
other related matters concerning Greene County and Civitas
|
is included or incorporated by reference in the companies
Annual Reports on
Form 10-K
for the year ended December 31, 2006. Additionally,
financial statements and information as well as
managements discussion and analysis of financial condition
and results of operation are included in those reports. Each of
Greene Countys and Civitas Annual Report on
Form 10-K
for the year ended December 31, 2006 is incorporated by
reference into this document. See WHERE YOU CAN FIND MORE
INFORMATION beginning on page 102.
15
SELECTED
FINANCIAL DATA
Greene
County Bancshares, Inc. Selected Historical Financial
Data
Set forth below is selected consolidated financial data for
Greene County as of December 31, 2006, 2005, 2004, 2003 and
2002. Except for the data under Selected Ratios, the
summary historical consolidated financial data as of
December 31, 2006, 2005 and 2004 is derived from the
audited financial statements, which were audited by Dixon Hughes
PLLC, an independent registered public accounting firm. The data
for December 31, 2003 and 2002 is derived from the audited
financial statements, which were audited by Crowe Chizek and
Company LLC, an independent registered public accounting firm.
This information should be read together with Greene
Countys consolidated financial statements and related
notes and Managements Discussion and Analysis of Financial
Condition and Results of Operations included in Greene
Countys Annual Report on
Form 10-K
for the year ended December 31, 2006, which is incorporated
by reference into this joint proxy statement/prospectus.
Selected
Historical Condensed Financial Data of Greene County Bancshares,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except ratios and share data)
|
|
|
Total interest income
|
|
$
|
117,357
|
|
|
$
|
87,191
|
|
|
$
|
65,076
|
|
|
$
|
56,737
|
|
|
$
|
59,929
|
|
Total interest expense
|
|
|
45,400
|
|
|
|
28,405
|
|
|
|
16,058
|
|
|
|
15,914
|
|
|
|
18,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
71,957
|
|
|
|
58,786
|
|
|
|
49,018
|
|
|
|
40,823
|
|
|
|
41,249
|
|
Provision for loan losses
|
|
|
(5,507
|
)
|
|
|
(6,365
|
)
|
|
|
(5,836
|
)
|
|
|
(5,775
|
)
|
|
|
(7,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision
for loan losses
|
|
|
66,450
|
|
|
|
52,421
|
|
|
|
43,182
|
|
|
|
35,048
|
|
|
|
34,184
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
Other income
|
|
|
20,778
|
|
|
|
14,756
|
|
|
|
13,028
|
|
|
|
11,588
|
|
|
|
10,484
|
|
Noninterest expense
|
|
|
(52,776
|
)
|
|
|
(44,340
|
)
|
|
|
(36,983
|
)
|
|
|
(30,618
|
)
|
|
|
(29,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
34,452
|
|
|
|
22,837
|
|
|
|
19,227
|
|
|
|
16,018
|
|
|
|
15,515
|
|
Income tax expense
|
|
|
(13,190
|
)
|
|
|
(8,674
|
)
|
|
|
(7,219
|
)
|
|
|
(5,781
|
)
|
|
|
(5,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
21,262
|
|
|
$
|
14,163
|
|
|
$
|
12,008
|
|
|
$
|
10,237
|
|
|
$
|
9,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, basic
|
|
$
|
2.17
|
|
|
$
|
1.73
|
|
|
$
|
1.57
|
|
|
$
|
1.48
|
|
|
$
|
1.44
|
|
Net income, assuming dilution
|
|
$
|
2.14
|
|
|
$
|
1.71
|
|
|
$
|
1.55
|
|
|
$
|
1.47
|
|
|
$
|
1.43
|
|
Dividends declared
|
|
$
|
.64
|
|
|
$
|
.62
|
|
|
$
|
0.61
|
|
|
$
|
.59
|
|
|
$
|
.58
|
|
Book value
|
|
$
|
18.80
|
|
|
$
|
17.20
|
|
|
$
|
14.22
|
|
|
$
|
13.31
|
|
|
$
|
10.94
|
|
Tangible book value(1)
|
|
$
|
14.87
|
|
|
$
|
13.15
|
|
|
$
|
11.12
|
|
|
$
|
10.57
|
|
|
$
|
10.53
|
|
Financial Condition
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,772,654
|
|
|
$
|
1,619,989
|
|
|
$
|
1,233,403
|
|
|
$
|
1,108,522
|
|
|
$
|
899,396
|
|
Loans, net of unearned interest
|
|
$
|
1,539,629
|
|
|
$
|
1,378,642
|
|
|
$
|
1,046,867
|
|
|
$
|
952,225
|
|
|
$
|
750,257
|
|
Cash and investments
|
|
$
|
91,997
|
|
|
$
|
104,872
|
|
|
$
|
76,637
|
|
|
$
|
80,910
|
|
|
$
|
61,980
|
|
Federal funds sold
|
|
$
|
25,983
|
|
|
$
|
28,387
|
|
|
$
|
39,921
|
|
|
$
|
5,254
|
|
|
$
|
39,493
|
|
Deposits
|
|
$
|
1,332,505
|
|
|
$
|
1,295,879
|
|
|
$
|
988,022
|
|
|
$
|
907,115
|
|
|
$
|
719,323
|
|
FHLB advances and notes payable
|
|
$
|
177,571
|
|
|
$
|
105,146
|
|
|
$
|
85,222
|
|
|
$
|
63,030
|
|
|
$
|
82,359
|
|
Subordinated debentures
|
|
$
|
13,403
|
|
|
$
|
13,403
|
|
|
$
|
10,310
|
|
|
$
|
10,310
|
|
|
$
|
|
|
Federal funds purchased and
repurchase agreements
|
|
$
|
42,165
|
|
|
$
|
17,498
|
|
|
$
|
13,868
|
|
|
$
|
12,896
|
|
|
$
|
10,038
|
|
Shareholders equity
|
|
$
|
184,471
|
|
|
$
|
168,021
|
|
|
$
|
108,718
|
|
|
$
|
101,935
|
|
|
$
|
74,595
|
|
Tangible shareholders
equity(1)
|
|
$
|
145,930
|
|
|
$
|
128,399
|
|
|
$
|
85,023
|
|
|
$
|
80,965
|
|
|
$
|
71,799
|
|
Selected Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
4.32
|
%
|
|
|
4.30
|
%
|
|
|
4.53
|
%
|
|
|
4.59
|
%
|
|
|
4.99
|
%
|
Net interest margin(2)
|
|
|
4.77
|
%
|
|
|
4.61
|
%
|
|
|
4.75
|
%
|
|
|
4.83
|
%
|
|
|
5.29
|
%
|
Return on average assets
|
|
|
1.28
|
%
|
|
|
1.02
|
%
|
|
|
1.06
|
%
|
|
|
1.12
|
%
|
|
|
1.17
|
%
|
Return on average equity
|
|
|
11.91
|
%
|
|
|
11.09
|
%
|
|
|
11.23
|
%
|
|
|
12.59
|
%
|
|
|
13.40
|
%
|
Return on average tangible equity(1)
|
|
|
15.25
|
%
|
|
|
14.04
|
%
|
|
|
13.95
|
%
|
|
|
13.38
|
%
|
|
|
13.93
|
%
|
Average equity to average assets
|
|
|
10.78
|
%
|
|
|
9.20
|
%
|
|
|
9.47
|
%
|
|
|
8.87
|
%
|
|
|
8.72
|
%
|
Dividend payout ratio
|
|
|
29.49
|
%
|
|
|
35.84
|
%
|
|
|
38.85
|
%
|
|
|
39.86
|
%
|
|
|
40.28
|
%
|
Ratio of nonperforming assets to
total assets
|
|
|
0.29
|
%
|
|
|
0.65
|
%
|
|
|
0.69
|
%
|
|
|
0.79
|
%
|
|
|
1.48
|
%
|
Ratio of allowance for loan losses
to nonperforming loans
|
|
|
635.93
|
%
|
|
|
293.56
|
%
|
|
|
227.64
|
%
|
|
|
321.57
|
%
|
|
|
161.73
|
%
|
Ratio of allowance for loan losses
to total loans, net of unearned income
|
|
|
1.45
|
%
|
|
|
1.43
|
%
|
|
|
1.50
|
%
|
|
|
1.53
|
%
|
|
|
1.68
|
%
|
|
|
|
(1) |
|
Tangible shareholders equity is shareholders equity
less goodwill and intangible assets. |
|
(2) |
|
Net interest margin is the net yield on interest earning assets
and is the difference between the interest yield earned on
interest-earning assets less the interest rate paid on interest
bearing liabilities. |
16
Civitas
BankGroup, Inc. Selected Historical Financial Data
Set forth below is selected consolidated financial data for
Civitas as of December 31, 2006, 2005, 2004, 2003 and 2002.
Except for the data under Selected Operating Ratios,
the summary historical consolidated financial data as of
December 31, 2006, 2005, 2004, 2003 and 2002 is derived
from our audited consolidated financial statements, which were
audited by Crowe Chizek and Company LLC, an independent
registered public accounting firm. This information should be
read together with Civitas consolidated financial
statements and related notes and Managements Discussion
and Analysis of Financial Condition and Results of Operations
included in Civitas Annual Report on
Form 10-K
for the year ended December 31, 2006, which is incorporated
by reference into this joint proxy statement/prospectus.
Selected
Historical Condensed Financial Data of Civitas BankGroup,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands, except ratios and share data)
|
|
|
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
53,456
|
|
|
$
|
40,357
|
|
|
$
|
32,940
|
|
|
$
|
31,622
|
|
|
$
|
31,761
|
|
Interest expense
|
|
|
29,309
|
|
|
|
19,107
|
|
|
|
13,123
|
|
|
|
12,162
|
|
|
|
13,505
|
|
Net interest income
|
|
|
24,147
|
|
|
|
21,250
|
|
|
|
19,817
|
|
|
|
19,460
|
|
|
|
18,256
|
|
Provision for loan losses
|
|
|
2,375
|
|
|
|
993
|
|
|
|
1,446
|
|
|
|
3,083
|
|
|
|
4,663
|
|
Noninterest income
|
|
|
10,352
|
|
|
|
7,571
|
|
|
|
7,793
|
|
|
|
6,261
|
|
|
|
6,830
|
|
Noninterest expense
|
|
|
21,882
|
|
|
|
22,209
|
|
|
|
22,917
|
|
|
|
20,382
|
|
|
|
18,690
|
|
Income before income taxes
|
|
|
10,242
|
|
|
|
5,619
|
|
|
|
3,247
|
|
|
|
2,256
|
|
|
|
1,733
|
|
Income tax expense
|
|
|
3,557
|
|
|
|
1,715
|
|
|
|
941
|
|
|
|
823
|
|
|
|
596
|
|
Income from continuing operations
|
|
|
6,685
|
|
|
|
3,904
|
|
|
|
2,306
|
|
|
|
1,433
|
|
|
|
1,137
|
|
Basic earnings per share
continuing operations
|
|
|
0.42
|
|
|
|
0.24
|
|
|
|
0.13
|
|
|
|
0.09
|
|
|
|
0.08
|
|
Diluted earnings per share
continuing operations
|
|
|
0.42
|
|
|
|
0.24
|
|
|
|
0.13
|
|
|
|
0.09
|
|
|
|
0.08
|
|
Cash dividends per common share
|
|
|
0.06
|
|
|
|
0.00
|
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
0.06
|
|
Book value per common share
|
|
|
3.39
|
|
|
|
2.98
|
|
|
|
3.28
|
|
|
|
3.19
|
|
|
|
2.96
|
|
Selected Period-End
Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets of continuing
operations
|
|
$
|
898,166
|
|
|
$
|
749,516
|
|
|
$
|
703,678
|
|
|
$
|
643,543
|
|
|
$
|
534,183
|
|
Loans, net of unearned income
|
|
|
614,037
|
|
|
|
476,421
|
|
|
|
430,617
|
|
|
|
412,609
|
|
|
|
391,934
|
|
Allowance for loan losses
|
|
|
6,298
|
|
|
|
4,765
|
|
|
|
4,427
|
|
|
|
5,688
|
|
|
|
5,761
|
|
Total deposits
|
|
|
732,520
|
|
|
|
600,766
|
|
|
|
566,873
|
|
|
|
520,505
|
|
|
|
437,607
|
|
Other borrowings and subordinated
debt
|
|
|
105,906
|
|
|
|
97,452
|
|
|
|
90,451
|
|
|
|
79,565
|
|
|
|
60,688
|
|
Shareholders equity
|
|
|
53,945
|
|
|
|
47,225
|
|
|
|
57,736
|
|
|
|
54,741
|
|
|
|
45,473
|
|
Selected Operating
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual %
change in loans
|
|
|
28.89
|
%
|
|
|
10.64
|
%
|
|
|
4.36
|
%
|
|
|
5.28
|
%
|
|
|
6.50
|
%
|
Annual %
change in assets
|
|
|
19.83
|
%
|
|
|
6.51
|
%
|
|
|
9.34
|
%
|
|
|
20.47
|
%
|
|
|
13.64
|
%
|
Return on assets from continuing
operations
|
|
|
0.74
|
%
|
|
|
0.52
|
%
|
|
|
0.33
|
%
|
|
|
0.22
|
%
|
|
|
0.21
|
%
|
Return on equity from continuing
operations
|
|
|
12.39
|
%
|
|
|
8.27
|
%
|
|
|
3.99
|
%
|
|
|
2.62
|
%
|
|
|
2.50
|
%
|
Per share amounts are adjusted to reflect the effect of stock
splits and stock dividends.
Selected
Consolidated Unaudited Pro Forma Financial Data
The following unaudited pro forma condensed consolidated
statement of financial condition as of December 31, 2006,
and the unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2006, have been
prepared to reflect the proposed merger of Greene County and
Civitas. The unaudited pro forma condensed consolidated
statement of financial condition and the unaudited pro forma
condensed consolidated statements of operations are presented as
if the merger occurred on January 1, 2006. The unaudited
pro forma acquisition adjustments, including those to adjust
Civitas net assets to fair value, are preliminary and
subject to change as additional analyses are performed and as
additional information becomes available.
17
The unaudited pro forma financial data set forth below is not
necessarily indicative of results that would have actually been
achieved if the merger transaction had been consummated as of
the date indicated, or that may be achieved in the future. This
information should be read in conjunction with the historical
consolidated financial statements of each of Greene County and
Civitas (and the notes to them), which are incorporated by
reference into this joint proxy statement/prospectus. See
WHERE YOU CAN FIND MORE INFORMATION beginning on
page 102.
Selected
Consolidated Unaudited Pro Forma Financial Data
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greene County
|
|
|
Civitas
|
|
|
Pro Forma
|
|
|
|
|
|
|
Bancshares,
|
|
|
Bank-Group,
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Inc.
|
|
|
Inc.
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except share amounts)
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
70,640
|
|
|
$
|
38,608
|
(a)
|
|
$
|
(50,517
|
)
|
|
$
|
109,679
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
(5,052
|
)
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity
|
|
|
2,545
|
|
|
|
110,758
|
(f)
|
|
|
(110,758
|
)
|
|
|
2,545
|
|
Available for sale
|
|
|
37,740
|
|
|
|
99,098
|
(f)
|
|
|
110,758
|
|
|
|
246,587
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
(1,009
|
)
|
|
|
|
|
Loans held for sale
|
|
|
1,772
|
|
|
|
4,246
|
|
|
|
|
|
|
|
6,018
|
|
Loans, net of unearned income
|
|
|
1,539,629
|
|
|
|
614,037
|
(e)
|
|
|
(1,020
|
)
|
|
|
2,152,646
|
|
Allowance for loan losses
|
|
|
(22,302
|
)
|
|
|
(6,298
|
)
|
|
|
|
|
|
|
(28,600
|
)
|
Goodwill
|
|
|
31,327
|
|
|
|
|
(a)
|
|
|
114,446
|
|
|
|
145,553
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
(6,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
5,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
3,160
|
|
|
|
|
|
Other intangibles
|
|
|
7,213
|
|
|
|
508
|
(b)
|
|
|
10,503
|
|
|
|
18,224
|
|
Premises and equipment, net
|
|
|
57,258
|
|
|
|
14,875
|
|
|
|
|
|
|
|
72,133
|
|
Other assets
|
|
|
46,832
|
|
|
|
22,334
|
|
|
|
|
|
|
|
69,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,772,654
|
|
|
$
|
898,166
|
|
|
$
|
123,131
|
|
|
$
|
2,793,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,332,505
|
|
|
$
|
732,520
|
(e)
|
|
$
|
2,681
|
|
|
$
|
2,067,706
|
|
Federal funds purchased and
repurchase agreements
|
|
|
42,165
|
|
|
|
58,406
|
|
|
|
|
|
|
|
100,571
|
|
FHLB advances and notes payable
|
|
|
177,571
|
|
|
|
30,500
|
(e)
|
|
|
75
|
|
|
|
208,146
|
|
Subordinated debentures
|
|
|
13,403
|
|
|
|
17,000
|
(c)
|
|
|
56,000
|
|
|
|
86,715
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
312
|
|
|
|
|
|
Other liabilities
|
|
|
22,539
|
|
|
|
5,795
|
(b)
|
|
|
3,991
|
|
|
|
28,468
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
(1,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,588,183
|
|
|
|
844,221
|
|
|
|
59,202
|
|
|
|
2,491,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
19,622
|
|
|
|
7,956
|
(a)
|
|
|
(7,956
|
)
|
|
|
25,772
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
6,150
|
|
|
|
|
|
Additional paid-in capital
|
|
|
71,828
|
|
|
|
24,666
|
(a)
|
|
|
(24,666
|
)
|
|
|
183,552
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
111,724
|
|
|
|
|
|
Retained earnings
|
|
|
93,150
|
|
|
|
22,390
|
(a)
|
|
|
(22,390
|
)
|
|
|
93,150
|
|
Accumulated other comprehensive
loss
|
|
|
(129
|
)
|
|
|
(1,067
|
)(a)
|
|
|
1,067
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
184,471
|
|
|
|
53,945
|
|
|
|
63,929
|
|
|
|
302,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
1,772,654
|
|
|
$
|
898,166
|
|
|
$
|
123,131
|
|
|
$
|
2,793,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Notes to
Selected Consolidated Unaudited Pro Forma Financial
Data:
(in thousands except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation
|
|
|
(a)
|
|
To reflect the impact of the
issuance of Greene County common stock for outstanding Civitas
common stock. Values are as of January 25, 2007, the
announcement date of the acquisition
|
|
|
|
|
|
|
|
|
|
|
Goodwill before Fair Value
Adjustments and Deal Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Civitas shares
outstanding
|
|
|
|
|
|
|
15,911,750
|
|
|
|
Purchase price per Civitas share
|
|
|
|
|
|
$
|
10.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deal value for Civitas shares
outstanding
|
|
|
|
|
|
$
|
163,095
|
|
|
|
Cash paid for Civitas
options:
|
|
|
|
|
|
|
|
|
|
|
Number of options outstanding
|
|
|
1,811,235
|
|
|
|
|
|
|
|
Dollar amount per option ($10.25
less average exercise price $7.326)
|
|
$
|
2.924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash to be paid for
options
|
|
|
|
|
|
|
5,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate acquisition cost
|
|
|
|
|
|
|
168,391
|
|
|
|
Less: Civitas stockholders
equity
|
|
|
|
|
|
|
(53,945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill before Fair Value
Adjustments and Deal Cost
|
|
|
|
|
|
$
|
114,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greene County Bancshares
shares to be issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Civitas shares
outstanding
|
|
|
15,911,750
|
|
|
|
|
|
|
|
(less) Shares that will be
purchased with cash
|
|
|
(4,411,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares exchanged for Greene County
common stock
|
|
|
11,499,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange ratio
|
|
|
0.2674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued
|
|
|
3,075,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate consideration
|
|
|
168,391
|
|
|
|
|
|
|
|
30% cash consideration
|
|
|
30.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash paid
|
|
$
|
50,517
|
|
|
|
|
|
|
|
(less) cash paid for options
|
|
|
(5,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash available to purchase
shares
|
|
$
|
45,221
|
|
|
|
|
|
|
|
Purchase price
|
|
$
|
10.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares that can be purchased
with cash
|
|
|
4,411,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries/Account
|
|
Debit
|
|
|
Credit
|
|
|
|
|
|
|
Goodwill
|
|
|
114,446
|
|
|
|
|
|
|
|
|
|
Common Stock of Civitas
|
|
|
7,956
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital Civitas
|
|
|
24,666
|
|
|
|
|
|
|
|
|
|
Retained earnings Civitas
|
|
|
22,390
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
1,067
|
|
|
|
|
|
Common stock (3,075,085 @
$2 par)
|
|
|
|
|
|
|
6,150
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
111,724
|
|
|
|
|
|
Cash for 30%
consideration
|
|
|
|
|
|
|
50,517
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries/Account
|
|
Debit
|
|
|
Credit
|
|
|
(b)
|
|
|
|
Core deposit intangible
|
|
|
10,503
|
|
|
|
|
|
|
|
|
|
Other liabilities (deferred income
taxes)
|
|
|
|
|
|
|
3,991
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
6,512
|
|
|
|
To reflect the estimated value of
core deposit intangible asset associated with the core deposits
of Civitas. For purpose of the pro forma condensed financial
statements, such intangible will amortized using the straight
line method over nine (9) years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
Cash
|
|
|
56,000
|
|
|
|
|
|
|
|
|
|
Subordinated debentures
|
|
|
|
|
|
|
56,000
|
|
|
|
Issuance of Trust Preferred
Securities to handle the cash consideration paid to Civitas
shareholders and merger related cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
|
Goodwill
|
|
|
5,052
|
|
|
|
|
|
|
|
|
|
Other liabilities (Taxes Payable)
|
|
|
1,920
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
1,920
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
5,052
|
|
|
|
Merger related cost 3%
of total deal cost using effective tax rate of 38%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
|
Goodwill
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
Investment securities: available
for sale to mark to FMV reclassified HTM securities
|
|
|
|
|
|
|
1,009
|
|
|
|
Estimated purchase accounting
entries to adjust Civitas financial information to their fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
1,020
|
|
|
|
|
|
Bank premises &
Equipment N/A at this time
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
|
|
|
|
2,681
|
|
|
|
|
|
FHLB Advances
|
|
|
|
|
|
|
75
|
|
|
|
|
|
Subordinated Debentures
|
|
|
|
|
|
|
312
|
|
|
|
|
|
Other liabilities (deferred income
taxes)
|
|
|
1,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
|
|
|
Investment securities: Available
for sale
|
|
|
110,758
|
|
|
|
|
|
|
|
|
|
Investment securities: Held to
maturity
|
|
|
|
|
|
|
110,758
|
|
|
|
Upon acquisition all investments
held to maturity will be reclassified to available for sale
|
|
|
|
|
|
|
|
|
|
|
20
Unaudited
Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greene County
|
|
|
Civitas
|
|
|
Pro Forma
|
|
|
|
|
|
|
Bancshares,
|
|
|
Bank-Group,
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Inc.
|
|
|
Inc.
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(Dollars in thousands, except per share data)
|
|
|
Interest income
|
|
$
|
117,357
|
|
|
$
|
53,456
|
(a)
|
|
$
|
204
|
|
|
$
|
171,017
|
|
Interest expense
|
|
|
45,400
|
|
|
|
29,309
|
(a)
|
|
|
(1,341
|
)
|
|
|
77,096
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
3,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
71,957
|
|
|
|
24,147
|
|
|
|
(2,183
|
)
|
|
|
93,921
|
|
Provision for loan losses
|
|
|
5,507
|
|
|
|
2,375
|
|
|
|
|
|
|
|
7,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
66,450
|
|
|
|
21,772
|
|
|
|
(2,183
|
)
|
|
|
86,039
|
|
Noninterest income
|
|
|
20,778
|
|
|
|
10,352
|
|
|
|
|
|
|
|
31,130
|
|
Noninterest expense
|
|
|
51,694
|
|
|
|
21,737
|
(d)
|
|
|
(5,689
|
)
|
|
|
67,742
|
|
Amortization of intangible assets
|
|
|
1,082
|
|
|
|
145
|
(b)
|
|
|
1,167
|
|
|
|
2,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
34,452
|
|
|
|
10,242
|
|
|
|
2,339
|
|
|
|
47,033
|
|
Income taxes
|
|
|
13,190
|
|
|
|
3,557
|
(e)
|
|
|
889
|
|
|
|
17,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
21,262
|
|
|
$
|
6,685
|
|
|
$
|
1,450
|
|
|
$
|
29,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Amortization of fair value
adjustments for the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in interest
income Accretion of discount
|
|
|
204
|
|
|
|
Decrease in interest
expense Amortization of deposit premium
|
|
|
1,341
|
|
|
|
Decrease in interest
expense Amortization of FHLB Advance premium
|
|
|
30
|
|
|
|
Decrease in interest
expense Amortization of subordinated debentures
premium
|
|
|
78
|
|
|
|
Increase in noninterest
expense Depreciation related to premise &
equipment
write-up.
(N/A at this time)
|
|
|
|
|
(b)
|
|
Increase in amortization of
intangible assets Amortization of core deposit
intangible over nine years using a straight-line method
|
|
|
1,167
|
|
(c)
|
|
Interest expense for subordinated
debentures
|
|
|
3,836
|
|
(d)
|
|
The projected cost savings for the
acquisition is 26% of total non-interest expense for Civitas
|
|
|
5,689
|
|
(e)
|
|
Increase in tax expense due to tax
impact of above items
|
|
|
889
|
|
21
Unaudited
Historical and Pro Forma Comparative Share Data
The following table shows comparative per share data about our
historical and pro forma net income, cash dividends and book
value. The comparative per share data below provides Greene
County and Civitas shareholders with information about the value
of their shares prior to the merger as opposed to the value of
their shares after the merger and once the two companies are
combined.
You should not rely on the pro forma information as necessarily
indicative of historical results we would have experienced had
we been combined or of future results we will have after the
merger.
This information should be read in conjunction with the
unaudited pro forma financial data (and the notes thereto)
included elsewhere in this joint proxy statement/prospectus, and
the historical consolidated financial statements (and the notes
thereto), of Greene County and Civitas, which are incorporated
by reference into this joint proxy statement/prospectus. See
Selected Unaudited Pro Forma Financial
Data above, and WHERE YOU CAN FIND MORE
INFORMATION beginning on page 102.
The pro forma data in the tables assume that the merger is
accounted for using the purchase method of accounting and
represents a current estimate based on available information of
the combined companys results of operations. The pro forma
financial adjustments record the assets and liabilities of
Civitas at their estimated fair values and are subject to
adjustment as additional information becomes available and as
additional analyses are performed. The significant pro forma
assumptions include (i) that the exchange ratio of Greene
County Bancshares common stock for Civitas common stock is
0.2674 (ii) the issuance of 3,075,085 shares of Greene
County Bancshares common stock valued at $38.33 per share,
and (iii) a nine-year straight-line amortization relating
to core deposit intangible of approximately $10.5 million
to be recorded in accordance with the purchase method of
accounting. Assumptions also include no amortization or
impairment of the goodwill resulting from the transaction in the
amount of approximately $114.2 million.
The pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set
of assumptions, does not reflect the impact of possible revenue
enhancements, expense efficiencies, asset dispositions and share
repurchases, among other factors, that may result as a
consequence of the merger and, accordingly, does not attempt to
predict or suggest future results. It also does not necessarily
reflect what the historical results of the combined company
would have been had the companies been combined during these
periods. Upon completion of the merger, the operating results of
Civitas will be reflected in the consolidated financial
statements of Greene County on a prospective basis.
Unaudited
Historical and Pro Forma Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Civitas
|
|
|
|
Greene County
|
|
|
Civitas
|
|
|
Combined Pro
|
|
|
Equivalent
|
|
|
|
Bancshares, Inc.
|
|
|
Bancorp, Inc.
|
|
|
Forma Per
|
|
|
Pro Forma Per
|
|
|
|
Common Stock
|
|
|
Common Stock
|
|
|
Share Data
|
|
|
Share Data(1)
|
|
|
Year ended December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, basic
|
|
$
|
2.17
|
|
|
$
|
0.42
|
(2)
|
|
$
|
2.29
|
|
|
$
|
0.61
|
|
Net income, diluted
|
|
|
2.14
|
|
|
|
0.42
|
(2)
|
|
|
2.26
|
|
|
|
0.60
|
|
Cash Dividends
|
|
|
0.64
|
|
|
|
0.06
|
|
|
|
0.64
|
|
|
|
0.17
|
|
Book value
|
|
|
18.80
|
|
|
|
3.39
|
|
|
|
23.46
|
|
|
|
6.27
|
|
Weighted average shares, basic
|
|
|
9,788,004
|
|
|
|
15,888,219
|
|
|
|
12,863,089
|
|
|
|
|
|
Weighted average shares, diluted
|
|
|
9,933,278
|
|
|
|
15,959,011
|
|
|
|
13,008,363
|
|
|
|
|
|
Actual shares outstanding
|
|
|
9,810,867
|
|
|
|
15,911,750
|
|
|
|
12,885,952
|
|
|
|
|
|
Shares to be issued in conjunction
with the Civitas acquisition
|
|
|
3,075,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Equivalent pro forma per share data represents the pro forma per
share amounts attributed to one share of Civitas common stock
that has been exchanged for stock consideration. Equivalent pro
forma per share amounts are calculated by multiplying the pro
forma combined amounts by the exchange ratio of 0.2674. |
|
(2) |
|
From continuing operations. |
22
COMPARATIVE
MARKET PRICES
Shares of Greene County common stock are traded on the Nasdaq
Global Select Market under the symbol GCBS. Shares
of Civitas common stock are traded on the Nasdaq Global Market
under the symbol CVBG.
The following table shows, for the periods indicated, the
reported closing sale prices per share for Civitas common stock
and Greene County common stock on (i) January 25,
2007, the last trading day before the public announcement of the
execution of the merger agreement, and (ii) March 23,
2007, the latest practicable date prior to the date this
document was printed. This table also shows in the column
entitled Equivalent Price Per Civitas Share the
closing price of a share of Greene County common stock on that
date, multiplied by an exchange ratio of 0.2674.
We can give no assurances as to what the market price of the
Greene County common stock will be when the merger is completed
or anytime thereafter. Because the market value of Greene County
common stock will fluctuate after the date of this document, we
cannot assure you what value a share of Greene County common
stock will have when received by a Civitas shareholder. Civitas
shareholders should obtain current stock price quotations for
Greene County and Civitas common stock. Such quotations may be
obtained from a newspaper, the Internet or a broker.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greene County
|
|
|
|
|
|
Equivalent Price Per
|
|
|
|
Bancshares, Inc.
|
|
|
Civitas BankGroup, Inc.
|
|
|
Civitas BankGroup,
|
|
Date
|
|
Common Stock
|
|
|
Common Stock
|
|
|
Inc. Share
|
|
|
January 25, 2007
|
|
$
|
36.67
|
|
|
$
|
8.00
|
|
|
$
|
9.81
|
|
March 23, 2007
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
Greene
County Shares
The following table shows, for the periods indicated, the high
and low sales prices for Greene County common stock as reported
by the Nasdaq Global Select Market, and the cash dividends
declared per share of Greene County common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
28.50
|
|
|
$
|
25.88
|
|
|
$
|
0.12
|
|
Second Quarter
|
|
|
29.75
|
|
|
|
23.75
|
|
|
|
0.12
|
|
Third Quarter
|
|
|
29.50
|
|
|
|
25.09
|
|
|
|
0.12
|
|
Fourth Quarter
|
|
|
28.32
|
|
|
|
25.65
|
|
|
|
0.26
|
|
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
29.93
|
|
|
$
|
27.01
|
|
|
$
|
0.12
|
|
Second Quarter
|
|
|
32.20
|
|
|
|
27.90
|
|
|
|
0.12
|
|
Third quarter
|
|
|
37.77
|
|
|
|
29.28
|
|
|
|
0.12
|
|
Fourth Quarter
|
|
|
39.73
|
|
|
|
35.06
|
|
|
|
0.28
|
|
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter (through
March 23, 2007)
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
0.13
|
|
As of March 16, 2007, Greene County had approximately
2,000 shareholders of record and, additionally,
approximately 2,200 beneficial owners.
Holders of Greene County common stock are entitled to receive
dividends when, as and if declared by the Greene Countys
board of directors out of funds legally available for dividends.
Historically, Greene County has paid quarterly cash dividends on
its common stock, and its board of directors presently intends
to continue to pay regular quarterly cash dividends. Greene
Countys ability to pay dividends to its shareholders in
the future will depend on its earnings and financial condition,
liquidity and capital requirements, the general
23
economic and regulatory climate, its ability to service any
equity or debt obligations senior to its common stock, including
its outstanding trust preferred securities and accompanying
junior subordinated debentures, and other factors deemed
relevant by its board of directors. In order to pay dividends to
shareholders, Greene County must receive cash dividends from
Greene County Bank. As a result, Greene Countys ability to
pay future dividends will depend upon the earnings of Greene
County Bank, its financial condition and its need for funds. A
discussion of the restrictions on Greene Countys dividend
payments is included in Greene Countys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. See
WHERE YOU CAN FIND MORE INFORMATION beginning on
page 102 of this document.
Civitas
Shares
The following table shows, for the periods indicated, the high
and low sales prices for Civitas common stock as reported by the
Nasdaq Global Market, and the cash dividends declared per share
of Civitas common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.50
|
|
|
$
|
7.32
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
|
7.75
|
|
|
|
6.50
|
|
|
|
0.00
|
|
Third Quarter
|
|
|
8.40
|
|
|
|
7.05
|
|
|
|
0.00
|
|
Fourth Quarter
|
|
|
8.15
|
|
|
|
7.50
|
|
|
|
0.00
|
|
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
7.65
|
|
|
$
|
6.90
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
|
7.75
|
|
|
|
6.95
|
|
|
|
0.02
|
|
Third quarter
|
|
|
8.00
|
|
|
|
7.40
|
|
|
|
0.02
|
|
Fourth Quarter
|
|
|
8.24
|
|
|
|
7.11
|
|
|
|
0.02
|
|
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter (through
March 23, 2007
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
|
$
|
[ ]
|
|
As of March 16, 2007, Civitas had
approximately shareholders of
record and, additionally,
approximately beneficial owners.
Holders of Civitas common stock are entitled to receive
dividends when, as and if declared by the Civitas board of
directors out of funds legally available for dividends. A
discussion of the restrictions on Civitas dividend
payments is included in Civitas Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. See
WHERE YOU CAN FIND MORE INFORMATION beginning on
page 102 of this joint proxy statement/prospectus.
24
THE
PROPOSED MERGER
General
Greene Countys board of directors is using this joint
proxy statement/prospectus to solicit proxies from the holders
of Greene County common stock for use at the Greene County
annual meeting. Civitas board of directors is also using
this document to solicit proxies from the holders of Civitas
common stock for use at the Civitas special meeting. At the
Greene County annual meeting, holders of Greene County common
stock will be asked to vote upon, among other things, the
approval of the merger agreement and the issuance of Greene
County common stock in connection with the merger. At the
Civitas special meeting, holders of Civitas common stock will be
asked to vote upon, among other things, the approval of the
merger agreement.
The merger will not be completed unless Greene Countys
shareholders approve the merger agreement and the issuance of
Greene County common stock in connection with the merger and
Civitas shareholders approve the merger agreement.
This section of this joint proxy statement/prospectus describes
certain aspects of the merger, including the background of the
merger and the parties reasons for the merger.
Transaction
Structure
The Greene County board of directors and the Civitas board of
directors each has adopted the merger agreement, which provides
for the merger of Civitas with and into Greene County and the
Greene County board also has approved the issuance by Greene
County of shares of Greene County common stock to Civitas
shareholders in connection with the merger. Greene County will
be the surviving corporation subsequent to the merger. We expect
to complete the merger in the second quarter of 2007. Each share
of Greene County common stock issued and outstanding at the
effective time of the merger will remain issued and outstanding
as one share of common stock of Greene County, and each share of
Civitas common stock issued and outstanding at the effective
time of the merger will be converted, at the election of each
Civitas shareholder, into the right to receive all cash, all
Greene County common stock, or a combination of cash and stock
for their Civitas shares, subject to the prorationing mechanism
described in this document.
At each Civitas shareholders election, for each share of
Civitas common stock owned, the shareholder will receive either
(i) $10.25 in cash, without interest,
(ii) 1.0 share of Greene County common stock
multiplied by the exchange ratio (initially set in the agreement
at 0.2674 but subject to adjustment if the market price of the
Greene County common stock changes by more than 10% of the
change in the NASDAQ bank stock index, but not greater than
0.2968 or less than 0.2380)) or (iii) a combination of cash
and Greene County common stock designated each shareholder.
Civitas shareholders will not receive any fractional shares of
Greene County common stock. Instead, they will receive cash,
without interest, for any fractional share of Greene County
common stock they might otherwise have been entitled to receive
based on fractional share interest multiplied by $10.25. Each
outstanding option to purchase Civitas common stock will be
converted into a cash payment equal to the number of Civitas
shares subject to the option multiplied by the excess, if any,
of $10.25 over the exercise price per share of the share subject
to the option. See THE MERGER AGREEMENT Merger
Consideration on page 53.
The Greene County charter and bylaws will be the charter and
bylaws of the combined company after the completion of the
merger.
The merger agreement provides that the parties can amend the
merger agreement, to the extent legally permissible. However,
after any approval of the merger agreement by Civitas and Greene
County shareholders, no amendment can alter the kind or amount
of consideration to be provided to Civitas shareholders without
further approval by Civitas and Greene County shareholders.
25
Background
of the Merger
On August 11, 2006, management of Greene County presented
to its board of directors for consideration and approval Greene
Countys five year strategic plan. One of the key
initiatives re-affirmed and identified in the strategic plan was
the continued geographic expansion of the franchise within the
Nashville market as well as other identified attractive markets.
From time to time, the board of directors of Civitas has
considered Civitas strategic alternatives, including
whether it was in the long term interests of shareholders,
customers and the Middle Tennessee communities served by
Cumberland Bank to remain an independent institution, or to sell
or merge with another financial institution. On
September 20, 2006, the board of directors of Civitas held
a strategic planning retreat during which the board received an
informational presentation from Keefe, Bruyette &
Woods, Inc. (KBW) concerning strategic alternatives
including the potential impact of such alternatives. The
presentation included a summary review of possible valuations
that might be received in the event of future merger or sales
transactions. At the strategic planning retreat, the board
decided to engage KBW to explore potential merger or sale
transactions.
In October 2006, the Civitas board determined that KBW should
initially contact certain bank holding companies which were
identified as potential purchasers because of their size, stock
liquidity and perceived interest in the Middle Tennessee area
market, and if such companies were willing to sign
confidentiality agreements, to provide preliminary information
concerning Civitas and its operations to such potential
purchasers. Greene County was one of those bank holding
companies.
During October and November 2006, three bank holding companies,
including Greene County, executed confidentiality agreements and
were provided information concerning Civitas and its operations.
On November 3, 2006, Greene County received the evaluation
material, and, accordingly, upon completion of preliminary due
diligence Greene County management recommended to its board of
directors, at a meeting held on November 13, 2006, the
approval to submit a non-binding indication of interest letter.
On November 16, 2006, the board of directors of Civitas
held a special meeting during which KBW reviewed with the board
the results of this process. KBW reported that a formal
indication of interest had been received from Greene County and
that the other two bank holding companies failed to submit an
indication. One of such companies indicated to KBW that Civitas
was not of a size that met their criteria. The other company
indicated that while it had internal timing issues in submitting
an indication by the requested date and did not believe it would
be able to bid at a significant premium to Civitas then
market price, but that it might be able to develop a proposal
after further limited due diligence discussions with Civitas
management. In addition, the chief executive officer advised the
directors that he had received very tentative expressions of
interest from another community bank holding company concerning
a possible merger of equals transaction, but that no
specific terms had been proposed. After extensive discussion of
Greene Countys indication of interest, the other
partys request for further due diligence and the potential
merger of equals transaction, the board of directors of Civitas
authorized KBW to negotiate further with Greene County, for
management to have the requested limited due diligence
discussions with the other party to determine if a proposal
would be forthcoming, and for the Chairman of the Executive
Committee to explore the merger of equals with the party
expressing that interest. Civitas outside counsel advised
the Board that because it had served as counsel to Greene County
in the past, it would be unable to represent Civitas or Greene
County in any transaction between the two.
Subsequently, Greene County and Civitas retained Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC and
Miller & Martin PLLC, respectively as counsel. Based
upon the results of Greene Countys due diligence, as
reviewed with the board of Greene County on December 11,
2006, Greene County submitted a written proposal to acquire
Civitas on December 12, 2006. Under this proposal, the
merger consideration would consist of 75% stock and 25% cash,
with the cash value of $10.10 per share of Civitas stock.
Civitas shareholders would be able to elect to receive either
all stock, all cash or a combination of both. All stock options
would be cashed out.
26
On December 14, 2006, the Civitas Board met in a special
meeting to consider the Greene County proposal. At this meeting
KBW presented an extensive analysis of the Greene County
proposal in light of the current merger and acquisition
environment in the financial services industry and recent
similar transactions. Following extensive discussion, the
Civitas board authorized a counteroffer to be made to Greene
County. This counteroffer was communicated to Greene County
through KBW.
On December 21, 2006, the Civitas Board met in a special
meeting to consider a second merger proposal made by Greene
County, and to follow up on strategic options. At this meeting,
KBW reported that following the December 14, 2006 board
meeting, Civitas counter-proposal had been communicated to
Stan Puckett, the CEO of Greene County, and that
Mr. Puckett had requested additional time for Greene County
to consider the counter-proposal. KBW also reported that Greene
Countys response had been to increase its offer to $10.25
per share, of which 30% would be payable in cash and 70% would
be payable in Greene County common stock. At this meeting, KBW
updated the Civitas board on the analysis of the financial
impact on the Civitas shareholders of the proposed Greene County
transaction, taking into account recent industry transactions.
It was also reported that a potential all-cash purchaser that
had not been previously contacted by KBW had expressed interest
in pursuing a possible purchase transaction. By majority vote,
the Civitas board invited Mr. Puckett to make a
presentation to the full board regarding Greene County, its
future plans and prospects and the proposed transaction, and to
allow the potential all-cash purchaser time to consider a
potential transaction. Nine directors voted in favor of this
course of action and two directors, including the chief
executive officer, voting against it. Director William Wallace
was absent.
On January 3, 2007, the Civitas board met in a special
meeting to follow up on the boards invitation to Stan
Puckett, CEO of Greene County, to address the Board as to his
vision for the future of the Greene County. At this meeting, it
was announced that the potential all-cash purchaser previously
discussed with the board had decided not to pursue a transaction
with Civitas and that discussions with this potential purchaser
had been terminated. Following Mr. Pucketts
presentation to the board, the board of directors voted to
conduct a due diligence investigation of Greene County and to
allow Mr. Puckett sufficient time to satisfy himself as to
the future intentions of key Civitas employees. Nine directors
voted in favor of this course of action and two directors,
including the chief executive officer, voting against it.
Director William Wallace was absent.
From January 4, 2007 to January 25, 2007, members of
Greene Countys and Civitas senior management, along
with their financial and legal advisors, met to conduct due
diligence and to discuss the compatibility of the
companies operational systems and other potential
synergies as well as employment-related matters and to negotiate
the terms of the definitive merger agreement.
On January 10, 2007, the Civitas board met in a special
telephonic meeting during which the board was updated on the
preliminary results of due diligence and the resolution of
employment-related matters. Civitas Chief Executive Officer,
Richard Herrington, reported that Stan Puckett, the CEO of
Greene County, was expected to report back on his efforts to
secure the support of certain key Civitas employees by
January 12, 2007. Another special meeting of the Civitas
board was called for January 15, 2007.
On January 15, 2007, a special meeting of the Civitas board
was held telephonically to update the board on the status of the
resolution of employment-related matters and the negotiation of
a definitive agreement. It was reported that according to KBW,
Stan Puckett had been unable to satisfy himself as to the
commitment of certain key employees to Greene County and had
requested more time in which to do so before proceeding any
further with the proposed transaction. The Civitas board
requested that Director Joel Porter, Chairman of the Executive
Committee of the Civitas Board, contact Mr. Puckett
directly and report back to the board.
On January 16, 2007, a special meeting of the Civitas board
was held telephonically to update the board on the status of the
resolution of employment-related matters and the negotiation of
a definitive agreement. It was reported that Stan Puckett had
been unable to satisfy himself as to the commitment of certain
key employees to Greene County. As a result, due diligence
efforts and negotiation of a definitive agreement had been
suspended. The Civitas board requested that Director Joel Porter
meet with Mr. Puckett and the employees in question in
order to attempt to resolve the matter. This meeting was held on
January 19, 2007, and Mr. Puckett was able to satisfy
himself as to the intentions of these employees, and due
diligence and negotiations of a definitive agreement resumed.
27
The Civitas board met in a special meeting on January 25,
2007 to review the results of due diligence and the terms of the
proposed merger with Greene County. At this meeting, KBW
presented its written opinion that the transaction was fair to
the Civitas shareholders from a financial point of view. After
consultation with its legal and financial advisers, a majority
(nine out of twelve, with one director absent) of the Civitas
board of directors determined that the merger is fair to
Civitas shareholders and in their best interests and,
accordingly, approved the merger agreement and recommended its
approval to the Civitas shareholders. The two dissenting
directors, which included Civitas Chief Executive Officer,
indicated that they had voted against the merger because they
believed that it would be more advantageous for Civitas to
remain an independent public company. Director William Wallace
was absent. Since the announcement of the proposed merger,
Civitas Chief Executive Officer has informed Civitas that
he intends to vote his shares in favor of the proposed merger
with Greene County.
The Greene County board met at a special meeting on
January 25, 2007 to review and approve the merger
agreement. At this meeting, Scott & Stringfellow
presented an opinion that the transaction was fair from a
financial point of view to Greene County and its shareholders.
After consultation with its legal and financial advisers, the
board of directors of Greene County approved the merger
agreement and the issuance of Greene County common stock in
connection with the merger and recommended the approval of the
merger agreement and the issuance of Greene County common stock
in connection with the merger by Greene County shareholders.
The merger agreement between Civitas and Greene County was
executed by both parties on January 25, 2007. The
transaction was announced on that date by a press release
jointly issued by Greene County and Civitas.
Greene
Countys Reasons for the Merger; Recommendation of the
Greene County Board of Directors
The Greene County board of directors has determined that the
merger is advisable, fair to and in the best interests of Greene
County and its shareholders. In adopting the merger agreement,
the Greene County board consulted with its financial advisor
with respect to the financial aspects of the merger and fairness
to Greene County, from a financial point of view, of the
aggregate consideration to be paid to Civitas shareholders
in the merger and with its legal counsel as to its legal duties
and the terms of the merger agreement. In arriving at its
determination, the Greene County board of directors also
considered a number of factors, including the following material
factors:
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the merger is fair to Greene County and the Greene County
shareholders;
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the two institutions have potential synergies Greene
County will be utilizing Civitas current work force to
help with Greene Countys growth and Greene County will be
taking planned expenses that it was to incur in 2007 and
Civitas current work force to help with the synergy;
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the merger enables Greene County to significantly accelerate its
penetration of the targeted market, specifically Davidson and
Williamson County;
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the merger will enable Greene County to increase its size and
scale;
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the merger is anticipated to enhance the franchise value of
Greene County, both in the short-run and in the long-run;
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the merger is expected to enhance Greene Countys
geographic market coverage;
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the merger is expected to be accretive to Greene Countys
earnings;
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the merger enables Greene County to diversify its revenue mix in
a meaningful way;
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the merger brings to Greene Countys team a number of
outstanding bankers;
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the merger valuation multiples are similar to those of recent
business combinations involving southeastern financial
institutions, either announced or completed, during the past few
years;
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the merger will generally be a tax-free transaction for Greene
County and its new shareholders to the extent such shareholders
receive solely shares of Greene County common stock; and
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the merger will result in Greene County and its bank subsidiary
being well-capitalized institutions, the financial positions of
which would be in excess of all applicable regulatory capital
requirements.
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The foregoing discussion of the information and factors
considered by the Greene County board of directors is not
exhaustive, but includes all material factors considered by the
Greene County board of directors. In view of the wide variety of
factors considered by the Greene County board of directors in
connection with its evaluation of the merger and the complexity
of such matters, the Greene County board of directors did not
consider it practical to, nor did it attempt to, quantify, rank
or otherwise assign relative weights to the specific factors
that it considered in reaching its decision. The Greene County
board of directors discussed the factors described above, asked
questions of Greene Countys management and Greene
Countys legal and financial advisors, and reached general
consensus that the merger was in the best interests of Greene
County and Greene County shareholders.
In considering the factors described above, individual members
of the Greene County board of directors may have given different
weights to different factors. It should be noted that this
explanation of the Greene County boards reasoning and all
other information presented in this section is forward-looking
in nature and, therefore, should be read in light of the factors
discussed under the heading CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS above on page 12.
The Greene County board of directors determined that the merger,
the merger agreement and the issuance of Greene County common
stock in connection with the merger are in the best interests of
Greene County and its shareholders.
For the reasons set forth above, the Greene County board of
directors has adopted the merger agreement and approved the
issuance of Greene County common stock in connection with the
merger and believes that it is in the best interests of Greene
County and its shareholders and recommends that its shareholders
vote FOR this proposal.
Civitas
Reasons for the Merger; Recommendation of the Civitas Board of
Directors
In reaching its decision by majority vote to adopt the merger
agreement and recommend the merger to its shareholders, the
Civitas board of directors consulted with Civitas
management, as well as its legal and financial advisors, and
considered a number of factors, including:
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its analysis of the business, operations, financial condition,
earnings and prospects of the combined company, taking into
account the results of its due diligence review;
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the strategic nature of the business combination, the
complimentary businesses of Greene County and Civitas, the
potential prospects of the combined company, including
anticipated savings derived from potential synergies;
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the financial analyses presented by KBW to the Civitas board of
directors and the oral opinion delivered by KBW, to the effect
that, as of January 25, 2007 (which opinion was confirmed
in a written opinion dated January 25, 2007), and based
upon and subject to the assumptions made, matters considered and
limitations set forth in the opinion, the merger consideration
specified in the merger agreement was fair from a financial
point of view to the holders of shares of Civitas common stock;
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the value of the consideration to be received by Civitas
shareholders in the merger, including the historical market
prices and trading information for the shares of Greene
Countys common stock and that the exchange ratio
represents a premium of approximately 22.6% over the closing
sales price for Civitas common stock on January 25, 2007,
the day the Civitas board approved the merger agreement;
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the fact that Civitas shareholders would own approximately 23.8%
of the combined company;
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its belief that a majority of Civitas existing employees
would be offered employment with the combined company and become
eligible to participate in the combined companys equity
incentive plan;
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the expected treatment of the merger as a tax-free transaction
for United States federal income tax purposes which would
generally allow Civitas shareholders receiving solely Greene
County common stock in the merger to avoid recognizing gain or
loss upon conversion of shares of Civitas common stock into
shares of Greene County common stock;
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the risks described under the section of this joint proxy
statement/prospectus above entitled RISK FACTORS RELATING
TO THE MERGER, including the risk that the proposed
transaction would not be completed;
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the limitations imposed in the merger agreement on Civitas
business and the selection by Civitas of alternative business
combinations prior to the completion of the merger;
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the fact that the merger agreement provides for a fixed exchange
ratio and that the value of the consideration to be received in
the merger by the Civitas shareholders depends on the value of
the Greene County common stock at the effective time of the
merger and that there can be no assurances that future results,
including results expected or considered in the factors listed
above would be achieved;
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the possibility that the merger might not be completed and the
effect of the resulting public announcement of termination of
the merger agreement on Civitas stock price, its operating
results, particularly in light of the expenses related to the
transaction, and its continued ability to attract and retain key
personnel; and
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its belief that a combination with Greene County would allow
Civitas shareholders to participate in a combined company that
would have better future prospects than Civitas could achieve
either on a stand-alone basis or through a combination with
other potential merger partners, with greater market penetration
and more diversified customer bases and revenue sources.
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The foregoing discussion of the factors considered by the
Civitas board of directors is not intended to be exhaustive,
but, rather, includes some of the material factors considered by
the Civitas board of directors. In reaching its decision by
majority vote to adopt the merger agreement and approve the
other transactions contemplated by the merger agreement, the
Civitas board of directors did not quantify or assign any
relative weights to the factors considered, and individual
directors may have given different weights to different factors.
The Civitas board of directors considered all these factors as a
whole, and overall and a majority considered them to be
favorable to, and to support, its determination. In considering
the factors described above, individual members of the Civitas
board of directors may have given different weights to different
factors. It should be noted that this explanation of the Civitas
board of directors reasoning and all other information
presented in this section is forward-looking in nature and,
therefore, should be read in light of the factors discussed
under the heading CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS above on page 12.
The Civitas board of directors determined by majority vote that
the merger, the merger agreement and the transactions
contemplated by the merger agreement are in the best interests
of Civitas and its shareholders. Two directors, including the
Chief Executive Officer of Civitas, voted against the merger
agreement. Director William Wallace was absent.
For the reasons set forth above, the Civitas board of
directors has adopted the merger agreement by majority vote and
a majority of the board believes that it is in the best
interests of Civitas and Civitas shareholders and recommends
that its shareholders vote FOR this proposal.
Dissenters
and Appraisal Rights
Under Tennessee law, neither Greene Countys nor
Civitas shareholders are entitled to dissenters or
appraisal rights in connection with the merger.
30
Opinion
of Greene Countys Financial Advisor
Scott & Stringfellow, Inc. (Scott &
Stringfellow) acted as financial advisor to Greene County
in connection with the merger. Greene County selected
Scott & Stringfellow because Scott &
Stringfellow is a recognized investment banking firm with
substantial experience in transactions similar to the merger and
is familiar with Greene County and its business. As part of its
investment banking business, Scott & Stringfellow is
continually engaged in the valuation of financial businesses and
their securities in connection with mergers and acquisitions.
On January 25, 2007, Greene Countys board of
directors held a special meeting to approve the merger
agreement. At that meeting Scott & Stringfellow
rendered an oral opinion, followed by a written opinion of the
same date, that as of that date and based upon and subject to
the factors and assumptions set forth in its fairness opinion
presentation, the consideration to be paid by Greene County in
the merger was fair to Greene County from a financial point of
view. That opinion was confirmed in a written opinion as of the
date of this proxy statement/prospectus.
The full text of Scott & Stringfellows written
opinion is attached as Appendix B to this document
and is incorporated herein by reference. The opinion outlines
matters considered and qualifications and limitations on the
review undertaken by Scott & Stringfellow in rendering
its opinion. The description of the opinion set forth below is
qualified in its entirety by reference to the full text of the
opinion. We recommend that shareholders of Greene County read
the entire opinion carefully in connection with their
consideration of the proposed merger.
Scott & Stringfellows opinion is directed to
the Greene County board and addresses only the fairness, from a
financial point of view, of the merger consideration paid by
Greene County. It does not address the underlying business
decision to proceed with the merger and does not constitute a
recommendation to any Greene County stockholder as to how the
stockholder should vote at the Greene County annual meeting on
the merger agreement or any related matter.
In rendering its opinion, Scott & Stringfellow:
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reviewed, among other things:
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the merger agreement;
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annual reports to stockholders and annual reports on
Form 10-K
of Greene County for the three years ended December 31,
2005;
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annual reports to stockholders and annual reports on
Form 10-K
of Civitas for the three years ended December 31, 2005;
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recent quarterly reports on
Form 10-Q
of Greene County;
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recent quarterly reports on
Form 10-Q
of Civitas;
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other recent communications from Greene County and Civitas;
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other financial information concerning the businesses and
operations of Greene County and Civitas furnished to
Scott & Stringfellow by Greene County and Civitas for
the purposes of Scott & Stringfellows analysis;
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certain publicly available information concerning the trading
of, and the trading market for, the common stock of Greene
County and Civitas; and
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certain publicly available information with respect to publicly
traded companies and the nature and terms of certain other
transactions that Scott & Stringfellow considered
relevant to its inquiry;
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reviewed the market prices, valuation multiples, publicly
reported financial conditions and results of operations for
Greene County and for Civitas and compared them with those of
certain publicly traded companies that Scott &
Stringfellow deemed to be relevant;
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compared the proposed financial terms of the merger with the
financial terms of certain other transactions that
Scott & Stringfellow deemed to be relevant; and
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performed such other analyses that it considered appropriate.
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In conducting its review and arriving at its opinion,
Scott & Stringfellow relied upon and assumed the
accuracy and completeness of all of the financial and other
information provided to or otherwise made available to
Scott & Stringfellow or that was discussed with, or
reviewed by or for Scott & Stringfellow, or that was
publicly available. Scott & Stringfellow did not assume
any responsibility to verify such information independently.
Scott & Stringfellow assumed that the financial and
operating forecasts for Greene County and Civitas provided by
the management of Greene County have been reasonably prepared
and reflect the best currently available estimates and judgments
of senior management of Greene County as to the future financial
and operating performance of Greene County and Civitas.
Scott & Stringfellow assumed, without independent
verification, that the aggregate allowances for loan and lease
losses for Greene County and Civitas are adequate to cover those
losses. Scott & Stringfellow did not make or obtain any
evaluations or appraisals of any assets or liabilities of Greene
County or Civitas, and Scott & Stringfellow did not
examine any books and records or review individual credit files.
For purposes of rendering its opinion, Scott &
Stringfellow assumed that, in all respects material to its
analyses:
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the merger will be completed substantially in accordance with
the terms set forth in the merger agreement;
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the representations and warranties of each party in the merger
agreement and in all related documents and instruments referred
to in the merger agreement are true and correct;
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each party to the merger agreement and all related documents
will perform all of the covenants and agreements required to be
performed by such party under such documents;
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all conditions to the completion of the merger will be satisfied
without any waivers; and
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in the course of obtaining the necessary regulatory,
contractual, or other consents or approvals for the merger, no
restrictions, including any divestiture requirements or
amendments or modifications will be imposed that will have a
material adverse effect on the future results of operations or
financial condition of Greene County, Civitas or the combined
entity, as the case may be, or the contemplated benefits of the
merger.
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Scott & Stringfellow further assumed that the merger
will be accounted for as a purchase under accounting
principles (GAAP) generally accepted in the United
States. Scott & Stringfellows opinion is not an
expression of an opinion as to the prices at which shares of
Greene County common stock or Civitas common stock will trade
following the announcement of the merger or the actual value of
Greene County common stock when issued pursuant to the merger,
or the prices at which Greene County common stock will trade
following the completion of the merger.
In performing its analyses, Scott & Stringfellow made
numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and
other matters, many of which are beyond the control of
Scott & Stringfellow, Greene County and Civitas. Any
estimates contained in the analyses performed by
Scott & Stringfellow are not necessarily indicative of
actual values or future results, which may be significantly more
or less favorable than suggested by these analyses.
Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at
which such businesses or securities might actually be sold.
Accordingly, these analyses and estimates are inherently subject
to substantial uncertainty. In addition, the Scott &
Stringfellow opinion was among several factors taken into
consideration by the Greene County Board of Directors in making
its determination to approve the merger agreement and the
merger. Consequently, the analyses described below should not be
viewed as solely determinative of the decision of the Greene
County board or management of Greene County with respect to the
fairness of the merger consideration.
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The following is a summary of the material analyses presented by
Scott & Stringfellow to the Greene County Board of
Directors on January 25, 2007, in connection with its
written opinion. The summary is not a complete description of
the analyses underlying the Scott & Stringfellow
opinion or the presentation made by Scott &
Stringfellow to the Greene County Board, but summarizes the
material analyses performed and presented in connection with
such opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances.
Therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its
opinion, Scott & Stringfellow did not attribute any
particular weight to any analysis or factor that it considered,
but rather made qualitative judgments as to the significance and
relevance of each analysis and factor. The financial analyses
summarized below include information presented in tabular
format. Accordingly, Scott & Stringfellow believes that
its analyses and the summary of its analyses must be considered
as a whole and that selecting portions of its analyses and
factors or focusing on the information presented below in
tabular format, without considering all analyses and factors or
the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the
process underlying its analyses and opinion. The tables alone
are not a complete description of the financial analyses.
Transaction Overview. Scott &
Stringfellow reviewed the financial terms of the merger
agreement, including a fixed exchange ratio of
0.2674 shares of Greene County common stock for each share
of Civitas common stock and a fixed cash consideration of
$10.25 per Civitas share. Stockholders of Civitas will have
the option to receive $10.25 per share in cash,
0.2674 shares of Greene County common stock, or a
combination of cash and stock subject to an aggregate
consideration mix of 70% stock and 30% cash and subject to
adjustment as fully described in the merger agreement. Civitas
stock option holders will receive a cash consideration amount
equal to the difference of $10.25 per share less the value
of their options. Based on the closing price of Greene
Countys common stock on January 23, 2007 of $36.51,
Scott & Stringfellow calculated an aggregate value
(Implied Aggregate Value) of approximately
$163 million, or $9.91 per share for Civitas common
stock. Completion of the transaction is subject to Greene County
and Civitas stockholder approvals, required regulatory approvals
and other conditions.
Transaction Pricing Multiples. Scott &
Stringfellow calculated the following multiples:
|
|
|
|
|
Transaction Multiples (Civitas
data as of
1/23/06)
|
|
|
|
|
Premium to Market Price ($7.99)
|
|
|
24.0
|
%
|
Price/Last 12 Months
Reported Earnings per Share ($0.40)
|
|
|
24.5
|
x
|
Price/FY 2007 Managements
Projected Earnings per Share ($0.44)
|
|
|
22.4
|
x
|
Price/Book Value per Share ($3.31)
|
|
|
299.2
|
%
|
Price/Tangible Book Value per
Share ($3.31)
|
|
|
299.2
|
%
|
Price/Total Assets
|
|
|
18.2
|
%
|
Price/Total Deposits
|
|
|
22.8
|
%
|
Tangible Premium/Core Deposits
|
|
|
31.4
|
%
|
Selected Peer Group Analysis. Scott &
Stringfellow reviewed and compared publicly available financial
data, market information and trading multiples for Civitas with
other selected publicly traded companies that Scott &
Stringfellow deemed relevant to Civitas. The peer group selected
consisted of publicly traded commercial banks headquartered in
the Southeast and Mid-West with assets between $500 and
$1,500 million (20 companies). The peer group excluded
commercial banks identified as the target of a publicly
announced merger as of January 23, 2007.
33
|
|
|
Name (Ticker)
|
|
Name (Ticker)
|
|
American National Bankshares Inc.
(AMNB)
|
|
First South Bancorp, Inc. (FSBK)
|
Appalachian Bancshares, Inc. (APAB)
|
|
First Security Group, Inc. (FSGI)
|
Auburn National Bancorporation,
Inc. (AUBN)
|
|
National Bankshares, Inc. (NKSH)
|
BNC Bancorp (BNCN)
|
|
Nexity Financial Corporation (NXTY)
|
Cooperative Bankshares, Inc. (COOP)
|
|
Old Point Financial Corporation
(OPOF)
|
Crescent Financial Corporation
(CRFN)
|
|
Porter Bancorp, Inc. (PBIB)
|
Crescent Banking Company (CSNT)
|
|
People Bancorp of North Carolina,
Inc. (PEBK)
|
Eastern Virginia Bankshares, Inc.
(EVBS)
|
|
Peoples Financial Corporation
(PFBX)
|
First Community Corporation (FCCO)
|
|
Premier Community Bankshares, Inc.
(PREM)
|
First Financial Service
Corporation (FFKY)
|
|
Tennessee Commerce Bancorp, Inc.
(TNCC)
|
For the selected publicly traded companies, Scott &
Stringfellow analyzed, among other things, stock price as a
multiple of last twelve months earnings, estimated 2006 and 2007
earnings, book value per share and tangible book value per
share. All multiples were based on closing stock prices as of
January 23, 2007. Projected earnings per share for the
comparable companies were based on SNL Financial consensus
estimates. SNL Financial is an information provider that
publishes, among other things, a compilation of estimates of
projected financial performance for publicly traded commercial
banks produced by equity research analysts at leading investment
banking firms. Estimated 2007 earnings per share for Civitas was
based on data received from Greene Countys management. The
following table sets forth the median multiples and market
capitalization indicated by the market analysis of selected
publicly traded companies compared to Civitas multiples and
market capitalization based on its closing stock price on
January 23, 2007 of $7.99 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
|
|
|
|
|
|
|
Companies
|
|
|
|
Civitas
|
|
|
Median
|
|
|
Price to:
|
|
|
|
|
|
|
|
|
Book value per share
|
|
|
241.4
|
%
|
|
|
157.3
|
%
|
Tangible book value per share
|
|
|
241.4
|
%
|
|
|
199.6
|
%
|
LTM earnings per share
|
|
|
19.0
|
x
|
|
|
16.2
|
x
|
2007E earnings per share
|
|
|
18.1
|
x
|
|
|
14.0
|
x
|
Market capitalization
(January 23, 2007)
|
|
$
|
127.0 million
|
|
|
$
|
121.2 million
|
|
No company used in the analysis described above is identical to
Civitas or the pro forma combined company. Accordingly, an
analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect
the merger, public trading, or other values of the companies to
which they are being compared. In addition, mathematical
analyses, such as determining the median, are not of themselves
meaningful methods of using comparable company data.
Selected Transaction
Analysis. Scott & Stringfellow reviewed
and analyzed certain financial data related to fifteen completed
and pending mergers and acquisitions announced between
January 1, 2003 and January 23, 2007. These
transactions involved Southeastern commercial bank sellers with
the following characteristics (Tennessee Region Bank
Transactions):
|
|
|
|
|
Total assets of $500 million to $1.5 billion, and
|
|
|
|
Prior year return on average assets greater than or equal to
0.50%.
|
34
Those transactions were as follows:
|
|
|
Acquiror
|
|
Acquiree
|
|
Park National Corp.
|
|
Vision Bancshares Inc.
|
IBERIA BANK Corp.
|
|
Pulaski Investment Corp.
|
Alabama National BanCorp.
|
|
PB Financial Services Corp.
|
Mercantile Bankshares Corp.
|
|
James Monroe Bancorp Inc.
|
BB&T Corp.
|
|
First Citizens Bancorp
|
Pinnacle Financial Partners
|
|
Cavalry Bancorp Inc.
|
Synovus Financial Corp.
|
|
Riverside Bancshares Inc.
|
FLAG Financial Corp.
|
|
First Capital Bancorp, Inc.
|
Mercantile Bankshares Corp.
|
|
Community Bank of N. Virginia
|
South Financial Group Inc.
|
|
Florida Banks Inc.
|
South Financial Group Inc.
|
|
CNB Florida Bancshares Inc.
|
Synovus Financial Corp.
|
|
Trust One Bank
|
Fulton Financial Corp.
|
|
Resources Bankshares Corp.
|
South Financial Group Inc.
|
|
MountainBank Financial Corp.
|
SunTrust Banks Inc.
|
|
Lighthouse Financial Services
|
For the purpose of this analysis, transaction multiples from the
merger were derived from the $9.91 per share Implied
Aggregate Value at January 23, 2007 and financial data as
of September 30, 2006 for Civitas. Scott &
Stringfellow compared these results with the multiples implied
by the selected transactions listed above. The results of
Scott & Stringfellows calculations and the
analysis are set forth in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee
|
|
|
|
Greene County/
|
|
|
Region Bank
|
|
|
|
Civitas
|
|
|
Transactions
|
|
|
|
Transaction
|
|
|
Median
|
|
|
Deal Price/Book Value
|
|
|
299.2
|
%
|
|
|
330.8
|
%
|
Deal Price/Tangible Book Value
|
|
|
299.2
|
%
|
|
|
332.5
|
%
|
Deal Price/Last 12 Months
Reported EPS
|
|
|
24.5
|
x
|
|
|
23.0
|
x
|
Premium to Market Price
|
|
|
24.0
|
%
|
|
|
24.2
|
%
|
Deal Premium/Core Deposits
|
|
|
31.4
|
%
|
|
|
26.4
|
%
|
No company or transaction used as a comparison in the above
analysis is identical to Greene County, Civitas or the merger.
Accordingly, an analysis of these results is not mathematical.
Rather, it involves complex considerations and judgments
concerning differences in financial and operating
characteristics of the companies.
Discounted Dividend Stream and Terminal Value Analysis of
Civitas. Scott & Stringfellow performed
an analysis that estimated the future stream of dividend flows
of Civitas through December 31, 2010 under various
circumstances, assuming Civitas projected dividend stream
and assuming that Civitas performed in accordance with the
earnings projections provided by Greene Countys
management. For 2007 and 2008, Scott & Stringfellow
used the earnings projections provided by Greene Countys
management. For periods after 2008, Scott &
Stringfellow assumed an annual earnings per share growth rate of
20% while maintaining an adequate capital level to support this
growth. To approximate the terminal value of Civitas common
stock at December 31, 2010, Scott & Stringfellow
applied a 22.0x to 25.0x price / LTM earnings multiple range.
The dividend income streams and terminal values were then
discounted to present values using different discount rates
ranging from 10.0% to 13.0%, chosen to reflect different
assumptions regarding required rates of return to the holders of
Civitas common stock. As illustrated in the following table,
this analysis indicated
35
an imputed range of values per share of Civitas common stock of
$9.23 to $11.88 when applying the price/LTM earnings multiples.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
22.0x
|
|
|
23.0x
|
|
|
24.0x
|
|
|
25.0x
|
|
|
10.0%
|
|
$
|
10.53
|
|
|
$
|
10.98
|
|
|
$
|
11.43
|
|
|
$
|
11.88
|
|
11.0%
|
|
$
|
10.07
|
|
|
$
|
10.50
|
|
|
$
|
10.94
|
|
|
$
|
11.37
|
|
12.0%
|
|
$
|
9.64
|
|
|
$
|
10.05
|
|
|
$
|
10.46
|
|
|
$
|
10.88
|
|
13.0%
|
|
$
|
9.23
|
|
|
$
|
9.62
|
|
|
$
|
10.02
|
|
|
$
|
10.41
|
|
Contribution analysis. Scott &
Stringfellow analyzed the relative contribution of each of
Greene County and Civitas to certain pro forma balance sheet and
income statement items of the combined entity. Scott &
Stringfellow compared the relative contribution of market,
balance sheet and income statement items with the estimated pro
forma ownership percentage Civitas stockholders would represent
in Greene County pro forma. The results of Scott &
Stringfellows analysis are set forth in the following
table.
|
|
|
|
|
|
|
|
|
|
|
Greene
|
|
|
|
|
Category
|
|
County
|
|
|
Civitas
|
|
|
2005A Core Net Income
|
|
|
78.4
|
%
|
|
|
21.6
|
%
|
2006E Core Net Income
|
|
|
85.0
|
%
|
|
|
15.0
|
%
|
2007E Core Net Income
|
|
|
77.3
|
%
|
|
|
22.7
|
%
|
Total Assets
|
|
|
66.6
|
%
|
|
|
33.4
|
%
|
Gross Loans
|
|
|
71.4
|
%
|
|
|
28.6
|
%
|
Deposits
|
|
|
64.3
|
%
|
|
|
35.7
|
%
|
Shareholders Equity
|
|
|
77.5
|
%
|
|
|
22.5
|
%
|
Tangible Equity
|
|
|
73.1
|
%
|
|
|
26.9
|
%
|
Market Value as of
1/23/07
|
|
|
73.8
|
%
|
|
|
26.2
|
%
|
Average Contribution
|
|
|
73.8
|
%
|
|
|
27.2
|
%
|
Implied Stock Ownership (70% stock)
|
|
|
76.1
|
%
|
|
|
23.9
|
%
|
Implied Stock Ownership (100%
stock)
|
|
|
69.7
|
%
|
|
|
30.3
|
%
|
Financial Impact Analysis. Scott &
Stringfellow performed pro forma merger analyses that combined
projected income statement and balance sheet information.
Assumptions regarding the accounting treatment, acquisition
adjustments and cost savings were used to calculate the
financial impact that the merger would have on certain projected
financial results of the pro forma company. This analysis
indicated that the merger is expected to be accretive to Greene
Countys estimated 2008 earnings per share and book value
per share, and dilutive to 2007 estimated tangible book value
per share. This analysis was based on financial projections and
merger assumptions (including estimated cost savings and
one-time charges) provided by Greene Countys management
team. For all of the above analyses, the actual results achieved
by the pro forma company following the merger will vary from the
projected results, and the variations may be material.
Other Analyses. Scott & Stringfellow
compared the relative financial and market performance of Greene
County to a variety of relevant industry peer groups and indices.
As part of its investment banking business, Scott &
Stringfellow is continually engaged in the valuation of banking
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities,
private placements and corporate valuations. As specialists in
the securities of banking companies, Scott &
Stringfellow has experience in, and knowledge of, the valuation
of banking enterprises. In the ordinary course of its business
as a broker-dealer, Scott & Stringfellow may, from time
to time, purchase securities from, and sell securities to,
Greene County and Civitas. As a market maker in securities,
Scott & Stringfellow may from time to time have a long
or short position in, and buy or sell, debt or equity securities
of Greene County and Civitas for Scott &
Stringfellows own account and for the accounts of its
customers.
36
Greene County and Scott & Stringfellow have entered
into an engagement relating to the services to be provided by
Scott & Stringfellow in connection with the merger.
Greene County paid to Scott & Stringfellow at the time
of the delivery of the fairness opinion a cash fee equal to
$150,000 less the $25,000 that had already been paid to
Scott & Stringfellow in the form of a retainer.
Pursuant to the Scott & Stringfellow engagement
agreement, Greene County also agreed to reimburse
Scott & Stringfellow for reasonable
out-of-pocket
expenses and disbursements incurred in connection with its
retention.
Opinion
of Civitas Financial Advisor
Civitas engaged KBW to act as its exclusive financial advisor in
connection with the merger. KBW agreed to assist Civitas in
analyzing and effecting a transaction with Greene County.
Civitas selected KBW because KBW is a nationally recognized
investment banking firm with substantial experience in
transactions similar to the merger and is familiar with Civitas
and its business. As part of its investment banking business,
KBW is continually engaged in the valuation of financial
businesses and their securities in connection with mergers and
acquisitions.
On December 1, 2006, Civitas Board held a meeting to
evaluate the proposed merger with Greene County. At this
meeting, KBW reviewed the financial aspects of the proposed
merger and rendered an opinion that, as of that date, the merger
consideration in the merger was fair to the shareholders of
Civitas from a financial point of view.
The full text of KBWs written opinion is attached as
Appendix C to this document and is incorporated herein by
reference. Civitas shareholders are urged to read the
opinion in its entirety for a description of the procedures
followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by KBW.
KBWs opinion is directed to the Board and addresses
only the fairness, from a financial point of view, of the merger
consideration to the Civitas shareholders. It does not address
the underlying business decision to proceed with the merger and
does not constitute a recommendation to any Civitas shareholder
as to how the shareholder should vote at the Civitas special
meeting on the merger or any related matter.
In rendering its opinion, KBW:
|
|
|
|
|
reviewed, among other things,
|
|
|
|
|
|
the merger agreement,
|
|
|
|
Annual Reports on
Form 10-K
for the three years ended December 31, 2005, 2004 and 2003
of Civitas,
|
|
|
|
Annual Reports to Shareholders and Annual Reports on
Form 10-K
for the three years ended December 31, 2005, 2004 and 2003
of Greene County,
|
|
|
|
certain interim reports to shareholders and Quarterly Reports on
Forms 10-Q
of Civitas for the fiscal quarters ended March 31, 2006,
June 30, 2006 and September 30, 2006 and certain other
communications from Civitas to its respective shareholders,
|
|
|
|
certain interim reports to shareholders and Quarterly Reports on
Form 10-Q
of Greene County for the fiscal quarters ended March 31,
2006, June 30, 2006 and September 30, 2006 and certain
other communications from Greene County to its respective
shareholders, and
|
|
|
|
other financial information concerning the businesses and
operations of Civitas and Greene County furnished to KBW by
Civitas and Greene County for purposes of KBWs analysis;
|
|
|
|
|
|
held discussions with members of senior management of Civitas
and Greene County regarding
|
|
|
|
|
|
past and current business operations,
|
|
|
|
regulatory relationships,
|
37
|
|
|
|
|
financial condition, and
|
|
|
|
future prospects of the respective companies;
|
|
|
|
|
|
reviewed the market prices, valuation multiples, publicly
reported financial condition and results of operations for
Greene County and compared them with those of certain publicly
traded companies that KBW deemed to be relevant;
|
|
|
|
reviewed the publicly reported financial condition and results
of operations for Civitas and compared them with those of
certain companies that KBW deemed to be relevant;
|
|
|
|
compared the proposed financial terms of the merger with the
financial terms of certain other transactions that KBW deemed to
be relevant; and
|
|
|
|
performed other studies and analyses that it considered
appropriate.
|
In conducting its review and arriving at its opinion, KBW relied
upon and assumed the accuracy and completeness of all of the
financial and other information provided to or otherwise made
available to KBW or that was discussed with, or reviewed by or
for KBW, or that was publicly available. KBW did not attempt or
assume any responsibility to verify such information
independently. KBW relied upon the management of Civitas as to
the reasonableness and achievability of the financial and
operating forecasts and projections (and assumptions and bases
therefor) provided to KBW. KBW assumed, without independent
verification, that the aggregate allowances for loan and lease
losses for Greene County and Civitas are adequate to cover those
losses. KBW did not make or obtain any evaluations or appraisals
of any assets or liabilities of Greene County or Civitas, and
KBW did not examine any books and records or review individual
credit files.
The projections furnished to KBW and used by it in certain of
its analyses were prepared by Civitas senior management.
Civitas does not publicly disclose internal management
projections of the type provided to KBW in connection with its
review of the merger. As a result, such projections were not
prepared with a view towards public disclosure. The projections
were based on numerous variables and assumptions which are
inherently uncertain, including factors related to general
economic and competitive conditions. Accordingly, actual results
could vary significantly from those set forth in the projections.
For purposes of rendering its opinion, KBW assumed that, in all
respects material to its analyses:
|
|
|
|
|
the merger will be completed substantially in accordance with
the terms set forth in the merger agreement;
|
|
|
|
the representations and warranties of each party in the merger
agreement and in all related documents and instruments referred
to in the merger agreement are true and correct;
|
|
|
|
each party to the merger agreement and all related documents
will perform all of the covenants and agreements required to be
performed by such party under such documents;
|
|
|
|
all conditions to the completion of the merger will be satisfied
without any waivers; and
|
|
|
|
in the course of obtaining the necessary regulatory,
contractual, or other consents or approvals for the merger, no
restrictions, including any divestiture requirements,
termination or other payments or amendments or modifications,
will be imposed that will have a material adverse effect on the
future results of operations or financial condition of the
combined entity or the contemplated benefits of the merger,
including the cost savings, revenue enhancements and related
expenses expected to result from the merger.
|
KBW further assumed that the merger will be accounted for as a
purchase transaction under GAAP. KBWs opinion is not an
expression of an opinion as to the prices at which shares of
Civitas common stock or shares of Greene County common stock
will trade following the announcement of the merger or the
actual value of the shares of common stock of the combined
company when issued pursuant to the merger, or the prices at
which the shares of common stock of the combined company will
trade following the completion of the merger.
38
In performing its analyses, KBW made numerous assumptions with
respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which
are beyond the control of KBW, Civitas and Greene County. Any
estimates contained in the analyses performed by KBW are not
necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by
these analyses. Additionally, estimates of the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which such businesses or securities might
actually be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty. In addition, the
KBW opinion was among several factors taken into consideration
by the Civitas Board in making its determination to approve the
merger agreement and the merger. Consequently, the analyses
described below should not be viewed as determinative of the
decision of the Civitas Board or management of Civitas with
respect to the fairness of the merger consideration.
The following is a summary of the material analyses performed by
KBW in connection with its January 25, 2007 opinion. The
summary is not a complete description of the analyses underlying
the KBW opinion or the presentation made by KBW to the Civitas
Board, but summarizes the material analyses performed and
presented in connection with such opinion. The preparation of a
fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to
the particular circumstances. Therefore, a fairness opinion is
not readily susceptible to partial analysis or summary
description. In arriving at its opinion, KBW did not attribute
any particular weight to any analysis or factor that it
considered, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. The
financial analyses summarized below include information
presented in tabular format. Accordingly, KBW believes that its
analyses and the summary of its analyses must be considered as a
whole and that selecting portions of its analyses and factors or
focusing on the information presented below in tabular format,
without considering all analyses and factors or the full
narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the process underlying
its analyses and opinion. The tables alone do not constitute a
complete description of the financial analyses.
Transaction Summary. KBW calculated the
merger consideration to be paid as a multiple of Civitas
book value per share, tangible book value per share and latest
twelve months earnings per share. KBW also calculated the
merger consideration to be paid as a Core Deposit
Premium. Core Deposit Premium equals the difference
between the aggregate merger consideration and Civitas
tangible equity divided by core deposits. Additionally, KBW has
adjusted throughout its analyses the financial data to exclude
any non-recurring income and expenses and any extraordinary
items. The merger consideration was based on $10.25 in cash or a
fixed exchange ratio of 0.2674 shares of Greene County for
each share of Civitas, subject to 70% of the aggregate merger
consideration being in Greene County common stock and the
remaining 30% being in cash. These computations were based on
Civitas stated book value per share of $3.31, tangible
book value per share of $3.31 as of September 30, 2006,
Civitas latest twelve months core earnings per share
of $0.26 as of September 30, 2006 and core deposits of
$413.5 million as of September 30, 2006. Based on
those assumptions and Greene Countys closing price of
$37.00 on January 24, 2007, this analysis indicated Civitas
shareholders would receive stock worth $9.89 for each share of
Civitas common stock held or $10.25 in cash. Assuming a 72%
stock, 28% cash consideration to common shareholders, the
blended deal value per share of $9.99 would represent 302% of
book value per share, 302% of tangible book value per share,
38.4 times latest twelve months core earnings per share
and a Core Deposit Premium of 27.0%.
Selected Transaction Analysis. KBW reviewed
certain financial data related to a set of comparable
Southeastern bank transactions announced since December 31,
2004 with deal values between $100 million and
$500 million, excluding mergers of equals and transactions
where the Seller was located in Miami-Dade, Broward or Palm
Beach Counties, Florida (19 transactions).
39
KBW compared multiples of price to various factors for the
Greene County-Civitas merger to the same multiples for the
comparable groups mergers at the time those mergers were
announced. The results were as follows:
Comparable
Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greene County/
|
|
|
|
Median
|
|
|
Low
|
|
|
High
|
|
|
Civitas Merger
|
|
|
Price/Stated Book Value
|
|
|
304
|
%
|
|
|
167
|
%
|
|
|
448
|
%
|
|
|
302
|
%
|
Price/Tangible Book Value
|
|
|
328
|
%
|
|
|
167
|
%
|
|
|
448
|
%
|
|
|
302
|
%
|
Price/Latest Twelve Months
Earnings Per Share
|
|
|
23.0
|
x
|
|
|
14.3
|
x
|
|
|
38.1
|
x
|
|
|
38.4
|
x
|
Core Deposit Premium
|
|
|
28.3
|
%
|
|
|
20.4
|
%
|
|
|
39.7
|
%
|
|
|
27.0
|
%
|
KBW also analyzed the financial data for the period ended
September 30, 2006, for Civitas and reporting periods prior
to the announcement of each transaction for each target in the
Selected Transactions Analysis. The results were as follows:
Comparable
Targets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Low
|
|
|
High
|
|
|
Civitas
|
|
|
Equity/Assets
|
|
|
8.23
|
%
|
|
|
6.20
|
%
|
|
|
17.37
|
%
|
|
|
6.08
|
%
|
Non-Performing Assets/Assets
|
|
|
0.29
|
|
|
|
0.00
|
|
|
|
0.86
|
|
|
|
0.27
|
|
Return on Average Assets
(Year-to-Date
Annualized)
|
|
|
1.18
|
|
|
|
0.78
|
|
|
|
1.57
|
|
|
|
0.56
|
|
Return on Average Equity
(Year-to-Date
Annualized)
|
|
|
13.26
|
|
|
|
5.26
|
|
|
|
21.07
|
|
|
|
9.02
|
|
Efficiency Ratio (Last Twelve
Months)
|
|
|
57
|
|
|
|
43
|
|
|
|
66
|
|
|
|
71
|
|
No company or transaction used as a comparison in the above
analysis is identical to Greene County, Civitas or the merger.
Accordingly, an analysis of these results is not purely
mathematical. Rather, it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and other factors that could
affect the value of the companies to which they are being
compared.
Discounted Cash Flow Analysis. Using
discounted dividends analysis, KBW estimated the present value
of the future stream of dividends that Civitas could produce
over the next five years, under various circumstances, assuming
Civitas performed in accordance with Civitas
managements earnings forecasts for 2007 and 2008, earnings
are grown 12.0% annually in
2009-2012,
and Civitas maintains a dividend payout ratio of 15.0% annually
in all years. KBW then estimated the terminal values for Civitas
stock at the end of the period by applying multiples ranging
from 14.0x to 16.0x projected earnings in year six. The terminal
values were then discounted to present values using different
discount rates (ranging from 13.0% to 17.0%) chosen to reflect
different assumptions regarding the required rates of return to
holders or prospective buyers of Civitas common stock. This
discounted dividend analysis indicated reference ranges of
between $7.55 and $9.92 per share of Civitas common stock. These
values compare to the consideration offered by Greene County to
Civitas in the merger of $9.99 per share of Civitas common stock.
Relative Stock Price Performance. KBW
also analyzed the price performance of Greene County common
stock from December 31, 2005 to January 24, 2007, and
compared that performance to the performance of the Philadelphia
Exchange/Keefe, Bruyette & Woods Bank Index
(Keefe Bank Index) over the same period. The Keefe
Bank Index is a market cap weighted price index composed of
24 major commercial and savings banks stocks. The Keefe
Bank Index is traded on the Philadelphia Exchange under the
symbol BKX. This analysis indicated the following
cumulative changes in price over the period:
|
|
|
|
|
Greene County
|
|
|
35.2
|
%
|
Keefe Bank Index
|
|
|
13.6
|
|
40
Selected Peer Group Analysis. KBW compared the
financial performance and market performance of Greene County to
those of a group of comparable holding companies. The
comparisons were based on:
|
|
|
|
|
various financial measures including:
|
|
|
|
earnings performance
|
|
|
|
operating efficiency
|
|
|
|
capital
|
|
|
|
asset quality
|
|
|
|
various measures of market performance including:
|
|
|
|
price to book value
|
|
|
|
price to earnings
|
|
|
|
dividend yield
|
To perform this analysis, KBW used the financial information as
of and for the quarter ended as of the most recent quarter
available per SNL Financial and market price information as of
January 24, 2007. The 12 companies in the peer group
included publicly traded banks in Alabama, Georgia, Mississippi
and Tennessee with assets between $1.0 billion and
$10.0 billion. This peer group includes Alabama National
BanCorporation; Ameris Bancorp; BancTrust Financial Group, Inc.;
First Security Group, Inc.; GB&T Bancshares, Inc.; Hancock
Holding Company; Integrity Bancshares, Inc.; Pinnacle Financial
Partners, Inc.; Renasant Corporation; Security Bank Corporation;
Trustmark Corporation and United Community Banks, Inc. KBW has
adjusted throughout its analysis the financial data to exclude
certain non-recurring income and expenses and any extraordinary
items.
KBWs analysis showed the following concerning Greene
Countys financial performance:
Selected
Peer Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Low
|
|
|
High
|
|
|
Greene County
|
|
|
Return on Average Equity (GAAP)
|
|
|
10.31
|
%
|
|
|
7.27
|
%
|
|
|
27.81
|
%
|
|
|
11.16
|
%
|
Return on Average Assets (GAAP)
|
|
|
1.09
|
|
|
|
0.68
|
|
|
|
2.38
|
|
|
|
1.20
|
|
Return on Average Tangible Equity
(Cash)
|
|
|
18.58
|
|
|
|
9.21
|
|
|
|
32.38
|
|
|
|
14.57
|
|
Return on Average Tangible Assets
(Cash)
|
|
|
1.20
|
|
|
|
0.68
|
|
|
|
2.43
|
|
|
|
1.27
|
|
Net Interest Margin
|
|
|
4.24
|
|
|
|
3.70
|
|
|
|
5.09
|
|
|
|
4.66
|
|
Efficiency Ratio
|
|
|
59
|
|
|
|
52
|
|
|
|
64
|
|
|
|
59
|
|
Leverage Ratio
|
|
|
8.71
|
|
|
|
7.33
|
|
|
|
10.63
|
|
|
|
9.56
|
|
Tangible Equity/Assets
|
|
|
7.13
|
|
|
|
5.72
|
|
|
|
10.19
|
|
|
|
8.42
|
|
Loans/Deposits
|
|
|
94
|
|
|
|
63
|
|
|
|
101
|
|
|
|
116
|
|
Non-Performing Assets/Assets
|
|
|
0.46
|
|
|
|
0.10
|
|
|
|
1.24
|
|
|
|
0.29
|
|
Loan Loss Reserve/Non-Performing
Assets
|
|
|
196
|
|
|
|
71
|
|
|
|
786
|
|
|
|
432
|
|
Loan Loss Reserve/Total Loans
|
|
|
1.19
|
|
|
|
1.04
|
|
|
|
1.72
|
|
|
|
1.45
|
|
41
KBWs analysis showed the following concerning Greene
Countys market performance:
Selected
Peer Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Low
|
|
|
High
|
|
|
Greene County
|
|
|
Price/Stated Book Value Per Share
|
|
|
181
|
%
|
|
|
128
|
%
|
|
|
300
|
%
|
|
|
197
|
%
|
Price/Tangible Book Value Per Share
|
|
|
277
|
|
|
|
196
|
|
|
|
367
|
|
|
|
249
|
|
Price/2006 GAAP Estimated
Earnings Per Share
|
|
|
17.3
|
x
|
|
|
14.2
|
x
|
|
|
26.3
|
x
|
|
|
17.3
|
x
|
Price/2006 Cash Estimated Earnings
Per Share
|
|
|
17.0
|
|
|
|
13.9
|
|
|
|
24.5
|
|
|
|
16.7
|
|
Price/2007 GAAP Estimated
Earnings Per Share
|
|
|
15.7
|
|
|
|
14.1
|
|
|
|
20.3
|
|
|
|
15.4
|
|
Price/2007 Cash Estimated Earnings
Per Share
|
|
|
15.2
|
|
|
|
13.8
|
|
|
|
19.2
|
|
|
|
14.9
|
|
Dividend Yield
|
|
|
1.8
|
%
|
|
|
0.0
|
%
|
|
|
3.0
|
%
|
|
|
1.7
|
%
|
KBW also compared the financial performance of Civitas to those
of a group of comparable banks. The comparisons were based on
various financial measures including:
|
|
|
|
|
earnings performance
|
|
|
|
operating efficiency
|
|
|
|
capital
|
|
|
|
asset quality
|
To perform this analysis, KBW used the financial information as
of and for the quarter ended most recent quarter available per
SNL Financial. The 10 companies in the peer group included
publicly traded banks in Alabama, Georgia, North Carolina, South
Carolina and Tennessee with assets between $1.0 billion and
$1.5 billion. This peer group includes BancTrust Financial
Group, Inc.; Bank of Granite Corporation; Capital Bank
Corporation; Colony Bankcorp, Inc.; First Security Group, Inc.;
FNB Financial Services Corporation; Integrity Bancshares, Inc.;
PAB Bankshares, Inc.; Southern Community Financial Corporation
and Yadkin Valley Financial Corporation. KBW has adjusted
throughout its analysis the financial data to exclude certain
non-recurring income and expenses and any extraordinary items.
KBWs analysis showed the following concerning
Civitas financial performance:
Selected
Peer Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
Low
|
|
|
High
|
|
|
Civitas
|
|
|
Return on Average Equity (GAAP)
|
|
|
11.07
|
%
|
|
|
6.20
|
%
|
|
|
15.39
|
%
|
|
|
9.24
|
%
|
Return on Average Assets (GAAP)
|
|
|
1.00
|
|
|
|
0.61
|
|
|
|
1.53
|
|
|
|
0.55
|
|
Return on Average Tangible Equity
(Cash)
|
|
|
13.88
|
|
|
|
9.21
|
|
|
|
18.37
|
|
|
|
9.24
|
|
Return on Average Tangible Assets
(Cash)
|
|
|
1.10
|
|
|
|
0.65
|
|
|
|
1.55
|
|
|
|
0.55
|
|
Net Interest Margin
|
|
|
4.31
|
|
|
|
3.32
|
|
|
|
5.09
|
|
|
|
3.10
|
|
Efficiency Ratio
|
|
|
60
|
|
|
|
47
|
|
|
|
69
|
|
|
|
65
|
|
Leverage Ratio
|
|
|
9.38
|
|
|
|
8.18
|
|
|
|
12.08
|
|
|
|
8.97
|
|
Tangible Equity/Assets
|
|
|
7.26
|
|
|
|
6.09
|
|
|
|
11.56
|
|
|
|
6.08
|
|
Loans/Deposits
|
|
|
94
|
|
|
|
87
|
|
|
|
101
|
|
|
|
87
|
|
Non-Performing Assets/Assets
|
|
|
0.53
|
|
|
|
0.25
|
|
|
|
1.64
|
|
|
|
0.27
|
|
Loan Loss Reserve/Total Loans
|
|
|
1.31
|
|
|
|
1.04
|
|
|
|
2.17
|
|
|
|
1.00
|
|
Contribution Analysis. KBW analyzed the
relative contribution of each of Civitas and Greene County to
the pro forma balance sheet and income statement items of the
combined entity, including assets, gross loans, deposits,
equity, tangible equity and latest twelve months earnings.
This analysis excluded any purchase accounting adjustments. The
pro forma ownership analysis assumed the aggregate deal value
was in the form of 70% Greene County stock and 30% cash and was
based on a fixed exchange ratio of 0.2674 Greene County
42
shares for each share of Civitas electing stock consideration.
The results of KBWs analysis are set forth in the
following table:
|
|
|
|
|
|
|
|
|
Category
|
|
Greene County
|
|
|
Civitas
|
|
|
Assets
|
|
|
67.2
|
%
|
|
|
32.8
|
%
|
Gross Loans
|
|
|
72.0
|
|
|
|
28.0
|
|
Deposits
|
|
|
65.8
|
|
|
|
34.2
|
|
Equity
|
|
|
77.8
|
|
|
|
22.2
|
|
Tangible Equity
|
|
|
73.5
|
|
|
|
26.5
|
|
Latest Twelve Months
Earnings (GAAP)
|
|
|
83.0
|
|
|
|
17.0
|
|
Latest Twelve Months
Earnings (Cash)
|
|
|
83.4
|
|
|
|
16.6
|
|
Estimated Pro Forma Ownership
|
|
|
76.2
|
|
|
|
23.8
|
|
Financial Impact Analysis. KBW performed pro
forma merger analyses that combined projected income statement
and balance sheet information. Assumptions regarding the
accounting treatment, acquisition adjustments and cost savings
were used to calculate the financial impact that the merger
would have on certain projected financial results of the pro
forma company. This analysis indicated that the merger is
expected to be dilutive to Greene Countys estimated 2007
GAAP and cash earnings per share and accretive to Greene
Countys estimated 2008 GAAP and cash earnings per share.
This analysis was based on First Calls 2007 and 2008
published earnings estimate for Greene County and Civitas
2007 and 2008 earnings projections provided by Greene
Countys management. First Call is a data
service that monitors and publishes a compilation of earnings
estimates produced by selected research analysts regarding
companies of interest to institutional investors. KBW estimated
cost savings equal to 25.0% of Civitas projected
non-interest expenses. For all of the above analyses, the actual
results achieved by pro forma company following the merger will
vary from the projected results and the variations may be
material.
Other Analyses. KBW reviewed the
relative financial and market performance of Greene County and
Civitas to a variety of relevant industry peer groups and
indices. KBW also reviewed earnings estimates, historical stock
performance, stock liquidity and research coverage for Greene
County.
The Civitas Board has retained KBW as an independent contractor
to act as financial adviser to Civitas regarding the merger. As
part of its investment banking business, KBW is continually
engaged in the valuation of banking 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. As specialists in the securities of banking companies,
KBW has experience in, and knowledge of, the valuation of
banking enterprises. In the ordinary course of its business as a
broker-dealer, KBW may, from time to time, purchase securities
from, and sell securities to Greene County. As a market maker in
securities, KBW may from time to time have a long or short
position in, and buy or sell, debt or equity securities of
Greene County for KBWs own account and for the accounts of
its customers.
Civitas and KBW have entered into an agreement relating to the
services to be provided by KBW in connection with the merger.
Civitas has agreed to pay KBW at the time of closing a cash fee
equal to 0.90% of the market value of the aggregate
consideration offered in exchange for the outstanding shares of
common stock of Civitas in the transaction. Pursuant to the KBW
engagement agreement, Civitas also agreed to reimburse KBW for
reasonable
out-of-pocket
expenses and disbursements incurred in connection with its
retention and to indemnify against certain liabilities,
including liabilities under the federal securities laws.
Accounting
Treatment
The merger will be accounted for as a purchase, as
that term is used under GAAP for accounting and financial
reporting purposes. Civitas will be treated as the acquired
corporation for accounting and financial reporting purposes.
Civitas assets and liabilities will be adjusted to their
estimated fair value on the closing date of the merger and
combined with the historical book values of the assets and
liabilities of Greene County. Applicable income tax effects of
these adjustments will be included as a component of the
combined
43
companys deferred tax assets or liabilities. The
difference between the estimated fair value of the assets
(including separately identifiable intangible assets, such as
core deposit intangibles) and liabilities and the purchase price
will be recorded as goodwill.
Material
United States Federal Income Tax Consequences of the
Merger
General. The following discussion sets forth
the material United States federal income tax consequences of
the merger to U.S. holders (as defined below) of Civitas common
stock. This discussion does not address any tax consequences
arising under the laws of any state, locality or foreign
jurisdiction. This discussion is based upon the Internal Revenue
Code, the regulations of the United States Department of the
Treasury and court and administrative rulings and decisions in
effect on the date of this document. These laws may change,
possibly retroactively, and any change could affect the
continuing validity of this discussion.
For purposes of this discussion, the term U.S.
holder means:
|
|
|
|
|
an individual who is a citizen or resident of the United States;
|
|
|
|
a corporation created or organized under the laws of the United
States or any of its political subdivisions;
|
|
|
|
a trust that (1) is subject to the supervision of a court
within the United States and the control of one or more United
States persons or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person; or
|
|
|
|
an estate that is subject to United States federal income tax on
its income regardless of its source.
|
This discussion assumes that you hold your shares of Civitas
common stock as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code. Further, the
discussion does not address all aspects of United States federal
income taxation that may be relevant to you in light of your
particular circumstances or that may be applicable to you if you
are subject to special treatment under the United States federal
income tax laws, including if you are:
|
|
|
|
|
a financial institution;
|
|
|
|
a tax-exempt organization;
|
|
|
|
an S corporation or other pass-through entity;
|
|
|
|
an insurance company;
|
|
|
|
a mutual fund;
|
|
|
|
a dealer in securities or foreign currencies;
|
|
|
|
a trader in securities who elects the
mark-to-market
method of accounting for your securities;
|
|
|
|
a Civitas shareholder whose shares are qualified small business
stock for purposes of Section 1202 of the Internal Revenue
Code or who may otherwise be subject to the alternative minimum
tax provisions of the Internal Revenue Code;
|
|
|
|
a Civitas shareholder who received Civitas common stock through
the exercise of employee stock options or otherwise as
compensation or through a tax-qualified retirement plan;
|
|
|
|
a person who has a functional currency other than the U.S.
dollar; or
|
|
|
|
a Civitas shareholder who holds Civitas common stock as part of
a hedge, straddle or a constructive sale or conversion
transaction.
|
If a partnership (including an entity treated as a partnership
for United States federal income tax purposes) holds Civitas
common stock, the tax treatment of a partner in the partnership
will generally depend on the status of such partner and the
activities of the partnership.
44
Recognition of Gain or Loss. Based on
representations contained in letters provided by Greene County
and Civitas and on certain customary factual assumptions, all of
which must continue to be true and accurate in all material
respects as of the effective time of the merger, it is the
opinion of Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, counsel to Greene County, and Miller &
Martin, PLLC, counsel to Civitas, that the material United
States federal income tax consequences of the merger are as
follows:
|
|
|
|
|
the merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code;
|
|
|
|
no gain or loss will be recognized by Greene County or Civitas
by reason of the merger;
|
|
|
|
you will not recognize gain or loss if you exchange your Civitas
common stock solely for Greene County common stock, except to
the extent of any cash received in lieu of a fractional share of
Greene County common stock.
|
You should note the following in connection with the proposed
merger:
|
|
|
|
|
you will recognize gain or loss if you exchange your Civitas
common stock solely for cash in the merger (or receive cash in
lieu of fractional shares) in an amount equal to the difference
between the amount of cash you receive and your tax basis in
your shares of Civitas common stock;
|
|
|
|
subject to the following paragraph, if you exchange your Civitas
common stock for a combination of Greene County common stock and
cash you will recognize gain (but not loss) in an amount
equal to the lesser of: (i) the excess, if any, of:
(a) the sum of the cash (excluding any cash received in
lieu of a fractional share of Greene County common stock) and
the fair market value of the Greene County common stock you
receive (including any fractional share of Greene County common
stock you are deemed to receive and exchange for cash)
(b) over your tax basis in the Civitas common stock
surrendered in the merger or (ii) the cash that you receive
in the merger (other than cash received in lieu of fractional
shares).
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your tax basis in the Greene County common stock that you
receive in the merger (including any fractional share interest
you are deemed to receive and exchange for cash), will equal
your tax basis in the Civitas common stock you surrendered,
increased by the amount of taxable gain, if any, you recognize
on the exchange and decreased by the amount of any cash received
by you in the merger; and
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your holding period for the Greene County common stock that you
receive in the merger will include your holding period for the
shares of Civitas common stock that you exchange in the merger.
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If you acquired different blocks of Civitas common stock at
different times and at different prices, any gain or loss you
recognize will be determined separately with respect to each
block of Civitas common stock, and the cash and Greene County
common stock you receive will be allocated pro rata to each such
block of common stock. In addition, your basis and holding
period in your Greene County common stock may be determined with
reference to each block of Civitas common stock exchanged.
Taxation of Capital Gain. Any gain or
loss that you recognize in connection with the merger will
generally constitute capital gain or loss and will constitute
long-term capital gain or loss if your holding period in your
Civitas common stock is greater than one year as of the date of
the merger. For the rate of tax on capital gains, see below
under Tax Rate. The deductibility of
capital losses is subject to limitations.
Additional Considerations Re-characterization of
Gain as a Dividend. All or part of the gain you
recognize could be treated as ordinary dividend income rather
than capital gain if (i) you are a significant shareholder
of Greene County or (ii) if taking into account
constructive ownership rules, your percentage ownership in
Greene County after the merger is not less than 80% of what your
percentage ownership would have been if you had received Greene
County common stock rather than cash in the merger. This could
happen, for example, because of your purchase of additional
Greene County common stock, a purchase of Greene County common
stock by a person related to you or a share repurchase by Greene
County from other Greene County shareholders. The test for
dividend treatment is made as though you received solely Greene
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County common stock in the exchange, and subsequently had a
portion of such stock redeemed for cash. If this redemption
(i) does not result in a meaningful reduction
in your interest in the company (which should not be the case as
long as you are a minority shareholder, taking into account the
attribution rules under Section 318 of the Internal Revenue
Code) or (ii) decreases your stock ownership in Greene
County by 20% or less, dividend treatment could apply. Because
the possibility of dividend treatment depends upon your
particular circumstances, including the application of certain
constructive ownership rules, you should consult your own tax
advisor regarding the potential tax consequences of the merger
to you.
Cash in Lieu of Fractional Shares. You
will generally recognize capital gain or loss on any cash
received in lieu of a fractional share of Greene County common
stock equal to the difference between the amount of cash
received and the basis allocated to such fractional share.
Holding Greene County Common Stock. The
following discussion describes the U.S. federal income tax
consequences to a holder of Greene County common stock after the
merger. Any cash distribution paid by Greene County out of
earnings and profits, as determined under U.S. federal income
tax law, will be subject to tax as ordinary dividend income and
will be includible in your gross income in accordance with your
method of accounting. See below under Tax
Rate for information regarding the rate of tax on
dividends. Cash distributions paid by Greene County in excess of
its earnings and profits will be treated as (i) a tax-free
return of capital to the extent of your adjusted basis in your
Greene County common stock (reducing such adjusted basis, but
not below zero), and (ii) thereafter as gain from the sale
or exchange of a capital asset.
Upon the sale, exchange or other disposition of Greene County
common stock, you will generally recognize gain or loss equal to
the difference between the amount realized upon the disposition
and your adjusted tax basis in the shares of Greene County
common stock surrendered. Any such gain or loss generally will
be long-term capital gain or loss if your holding period with
respect to the Greene County common stock surrendered is more
than one year at the time of the disposition. For the rate of
tax on capital gains, see below under Tax
Rate.
Tax Rate. The top individual rate for
long-term capital gains from sales or exchanges through
December 31, 2010 is 15%. The top individual rate for
qualified dividend income received through
December 31, 2010 is also 15%. To be considered
qualified dividend income to a particular holder,
the holder must have held the common stock for more than
60 days during the 121 day period beginning
60 days before the ex-dividend period as measured under
section 246(c) of the Internal Revenue Code. Dividend
income that is not qualified dividend income will be taxed at
ordinary income rates. You are urged to consult your tax advisor
to determine whether a dividend, if any, would be treated as
qualified dividend income.
Information Reporting and Backup
Withholding. Unless an exemption applies, the
exchange agent will be required to withhold, and will withhold,
28% of any cash payments to which a holder of Civitas common
stock or other payee is entitled pursuant to the merger, unless
the shareholder or other payee provides his or her tax
identification number (social security number or employer
identification number) and certifies that the number is correct.
Each Civitas shareholder and, if applicable, each other payee,
is required to complete and sign the
Form W-9
that will be included as part of the election form transmittal
letter to avoid being subject to backup withholding, unless an
applicable exemption exists and is proved in a manner
satisfactory to Greene County and the exchange agent.
Limitations on Tax Opinion and Discussion. As
noted earlier, the tax opinion is subject to certain
assumptions, relating to, among other things, the truth and
accuracy of certain representations made by Greene County and
Civitas, and the consummation of the merger in accordance with
the terms of the merger agreement and applicable state law.
Furthermore, the tax opinion will not bind the Internal Revenue
Service and, therefore, the Internal Revenue Service is not
precluded from asserting a contrary position. The tax opinion
and this discussion are based on currently existing provisions
of the Internal Revenue Code, existing and proposed Treasury
regulations, and current administrative rulings and court
decisions. There can be no assurance that future legislative,
judicial or administrative changes or interpretations will not
adversely affect the accuracy of the tax opinion or of the
statements and conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect
the tax consequences of the merger.
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The preceding discussion is intended only as a summary of
material United States federal income tax consequences of the
merger. It is not a complete analysis or discussion of all
potential tax effects that may be important to you. Thus, we
encourage you to consult your own tax advisors as to the
specific tax consequences to you resulting from the merger,
including tax return reporting requirements, the applicability
and effect of federal, state, local, and other applicable tax
laws and the effect of any proposed changes in the tax laws.
Interests
of Certain Civitas Executive Officers and Directors in the
Merger
Some of the members of Civitas management and the Civitas
board of directors have financial and other interests in the
merger that are in addition to, or different from, their
interests as Civitas shareholders generally. Civitas board
of directors was aware of these interests and considered them,
among other matters, in approving and adopting the merger
agreement.
Agreements with Respect to Continued
Employment. Greene County has entered into
written employment and non-compete agreements with 14 employees
of Cumberland Bank, none of whom are either executive officers
of Civitas or will be executive officers of Greene County,
regarding their continued employment with Cumberland Bank after
the merger. The employment agreements range in term from
6 months to one year following completion of the merger and
the non-compete range in length from one to three years after a
voluntary termination of employment. The non-competes will not
apply if the employee is involuntarily terminated by Greene
County. The aggregate of all payments associated with these
agreement is approximately $1 million. In addition, Greene
County has had discussion with Danny Herron, President of
Cumberland Bank, and an executive officer of Civitas about a
potential agreement whereby he would continue in the employment
of Cumberland Bank after the merger. Although Greene County
expects to ultimately enter into an agreement with
Mr. Herron, there is no definitive agreement as to terms at
this time.
Security Ownership of Civitas Directors and Executive
Officers. As of March 16, 2007, the record
date for determining those Civitas shareholders entitled to vote
their shares at the special meeting, there were
15,932,173 shares of Civitas common stock outstanding and
entitled to vote, approximately 24.8% of which were owned and
entitled to be voted by Civitas directors and executive officers
and their affiliates.
Indemnification; Directors and Officers
Insurance. Greene County has agreed that it will
maintain a policy of directors and officers
liability insurance coverage for the benefit of Civitas
directors and officers serving at the effective time of the
merger for three years following completion of the merger.
Regulatory
Approvals
Greene County is registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended, and supervised and
regulated by the FRB. Civitas is a bank holding company, also
registered under the Bank Holding Company Act, and supervised
and regulated by the FRB. Both Greene Countys and
Civitas banking subsidiaries are supervised and regulated
by various federal and state banking authorities, including the
Federal Deposit Insurance Corporation (FDIC). Set
forth below is a brief summary of certain regulatory issues.
Additional information relating to the supervision and
regulation of Greene County is included in Greene Countys
Annual Report on
Form 10-K
for the year ended December 31, 2006, which is incorporated
by reference into this joint proxy statement/prospectus.
Additional information relating to the supervision and
regulation of Civitas is included in Civitas Annual Report
on
Form 10-K
for the year ended December 31, 2006, which is incorporated
by reference into this joint proxy statement/prospectus. See
WHERE YOU CAN FIND MORE INFORMATION beginning on
page 102.
Federal Reserve and FDIC Regulatory
Approval. The merger is subject to prior approval
by the FRB pursuant to Section 3 of the Bank Holding
Company Act. Greene County and Civitas have filed the required
applications and notification with the FRB for approval of the
merger. Since the subsidiary banks of each holding company are
intended to be merged simultaneously with the holding company
merger, the FRB may grant an exemption from the holding company
merger approval, but only on the assumption that the FDIC also
will be approving the
bank-to-bank
merger to become effective simultaneously. Assuming FRB and FDIC
approval of either or both mergers, the parties may not
consummate the merger until after the termination of a
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waiting period. The waiting period starts the day the FRB and/or
FDIC approve the merger and notify the United States Department
of Justice and ends 30 days later, except the waiting
period may be reduced to 15 days upon consent of the United
States Attorney General. During that time, the United States
Department of Justice may challenge the merger on antitrust
grounds. The FRB and FDIC are prohibited from approving any
transaction under the applicable statutes that:
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would result in a monopoly;
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would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in
any part of the United States; or
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may have the effect in any part of the United States of
substantially lessening competition, tending to create a
monopoly or otherwise resulting in a restraint of trade, unless
the FRB finds that the public interest created by the probable
effect of the transaction in meeting the convenience and needs
of the communities to be served clearly outweighs the
anticompetitive effects of the proposed merger.
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In addition, the FRB and FDIC will consider the financial and
managerial resources of the companies and their subsidiary banks
and the convenience and needs of the communities to be served.
Consideration of financial resources generally focuses on
capital adequacy, which is discussed below, and consideration of
managerial resources includes consideration of the competence,
experience and integrity of the officers, directors and
principal shareholders of the companies and their subsidiary
banks.
The analysis of convenience and needs issues includes the
parties performance under the Community Reinvestment Act
of 1977, as amended. Under the Community Reinvestment Act, the
FRB and FDIC must take into account the record of performance of
each of Greene County and Civitas and their respective
subsidiaries in meeting the credit needs of the entire
community, including the low- and moderate-income neighborhoods
in which they operate. Furthermore, applicable federal law
provides for the publication of notice and public comment on
applications filed with the FRB and FDIC. The FRB and FDIC
frequently receive comments and protests from community groups
and others and may, in their discretion, choose to hold public
hearings on the application. Such comments and hearings could
delay the regulatory approvals required for consummation of the
merger. Greene Countys subsidiary bank has a
satisfactory rating under the Community Reinvestment
Act. Civitas subsidiary bank also has a
satisfactory rating under the Community Reinvestment
Act.
State Regulatory Approval. The Tennessee
Banking Act requires submission of an application to and
approval from the Tennessee Department of Financial Institutions
(TDFI) for certain acquisitions of state banks by
Tennessee bank holding companies. The TDFI also must take into
consideration the financial and managerial resources and future
prospects of the company or companies and the banks concerned.
Because the subsidiaries of both holding companies will be
merged simultaneously with the merger of Civitas into Greene
County, approval of the bank merger by the TDFI also will be
required. The TDFI will apply similar standards to its review of
the bank merger as are applied by the FRB and TDFI to the merger
of the holding companies. Obtaining this approval is a condition
to the closing of the merger of Greene County and Civitas.
Additional Federal and State Regulatory
Considerations. Greene County and Civitas and
their banking subsidiaries are subject to other federal and
state laws and regulations relating to the following areas as
summarized below:
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Restrictions on the Payment of Dividends: Greene County and
Civitas are legal entities separate and distinct from their
banking and other subsidiaries, but depend principally on
dividends from their subsidiary depository institutions for cash
flow to pay any dividends to their respective shareholders.
There are statutory and regulatory limitations on the payment of
dividends by these subsidiary depository institutions to Greene
County and Civitas, as the case may be, as well as by Greene
County and Civitas to their respective shareholders. The
subsidiary banks of Greene County and Civitas are subject to
dividend restrictions imposed by the applicable state and
federal regulators. The payment of dividends by Greene County
and Civitas also may be affected or limited by other factors,
such as the requirement to maintain adequate capital above state
or federal regulatory guidelines.
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Capital Adequacy: Greene County and Civitas and their
banking subsidiaries are required by state and federal
regulators to comply with certain capital adequacy standards
related to risk exposure and the leverage position of financial
institutions. Any bank or savings institution that fails to meet
its capital guidelines may be subject to a variety of
enforcement remedies and certain other restrictions on its
business. As of January 25, 2007, Greene County, Civitas
and their banking subsidiaries were in compliance with all such
capital adequacy standards.
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Support of Subsidiary Institutions: Under FRB policy,
Greene County and Civitas are expected to act as sources of
financial strength for, and commit their resources to support,
Greene County Bank and Cumberland Bank, respectively, and any
other banking subsidiaries, even in times when Greene County or
Civitas might not be inclined to provide such support.
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Prompt Corrective Action: Federal banking regulators
are required to audit Greene County, Civitas, Greene County Bank
and Cumberland Bank to determine whether they are adequately
capitalized. If a banking institution is deemed by regulators to
be insufficiently capitalized, the regulators are required to
take certain actions designed to improve the capitalization of
the financial institution.
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Non-Banking Activities: The Bank Holding Company Act
also prohibits, subject to certain exceptions, a bank holding
company from engaging in or acquiring direct or indirect control
of more than 5% of the voting stock of any company engaged in
non-banking activities. An exception to this prohibition is for
activities expressly found by the FRB to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto or financial in nature.
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Out-of-State
Acquisitions: A bank holding company and its
subsidiaries also are prohibited from acquiring any voting
shares of, or interest in, any banks located outside of the
state in which the operations of the bank holding companys
subsidiaries are located, unless the acquisition is specifically
authorized by the statutes of the state in which the target is
located.
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Anti-Tying: A bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with the extension of credit or
provision of any property or service. Thus, an affiliate of a
bank holding company may not extend credit, lease, sell
property, or furnish any services or fix or vary the
consideration for these on the condition that (i) the
customer must obtain or provide some additional credit, property
or services from or to its bank holding company or subsidiaries
thereof or (ii) the customer may not obtain some other
credit, property, or services from a competitor, except to the
extent reasonable conditions are imposed to assure the soundness
of the credit extended.
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Other Requirements: Banks also are required to file
annual reports and such additional information as the banking
regulations require. Banks are subject to certain restrictions
on loan amounts, interest rates, insider loans to
officers, directors and principal shareholders, transactions
with affiliates and many other matters. Strict compliance at all
times with state and federal banking laws will be required.
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Future Regulatory Considerations. In 1999, the
Gramm-Leach-Bliley Act was enacted. This statute contains
several provisions that may affect how Greene County and Civitas
do business and the nature of the competition that they face.
The act permits banks, insurance companies and securities firms
to affiliate within a single corporate structure, now known as a
financial holding company. Using the financial holding company
structure, insurance companies and securities firms may acquire
other financial holding companies and bank holding companies,
such as Greene County and Civitas, and bank holding companies
may acquire insurance companies and securities firms. A bank
holding company that wishes to become a financial holding
company must satisfy a number of conditions, including that all
of the insured depository institution subsidiaries of the bank
holding company have at least a satisfactory
Community Reinvestment Act rating. In addition, a financial
holding company may not commence a new financial activity or
acquire control of a company engaged in such activities without
satisfying this Community Reinvestment Act requirement. As a
result of this new act, Greene County and Civitas may face
increased competition from more and larger financial
institutions. Neither Greene County nor Civitas have elected to
become a financial holding company, so they remain under
essentially the same regulatory framework as they did before the
enactment of the act. The financial holding company structure
created by the act allows insurance companies or securities
firms
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operating under the financial holding company structure to
acquire Greene County or Civitas. The act also includes
requirements regarding the privacy and protection of customer
information held by financial institutions, as well as many
other providers of financial services.
Federal legislation, including proposals to revise the bank
regulatory system and to limit or expand the investments that a
depository institution may make with insured funds, is from time
to time introduced in Congress. The bank examiners will examine
banks periodically for compliance with various regulatory
requirements. Such examinations, however, are for the protection
of the federal deposit insurance funds and for depositors and
generally not for the protection of investors and shareholders.
We cannot guarantee you that the regulatory approvals described
above will be given without undue delay or the imposition by a
regulatory authority of a condition that would materially and
adversely impact the financial or economic benefits of the
merger on Greene County, Civitas or any of their banking or
nonbanking subsidiaries.
Election
Procedures; Surrender and Exchange of Stock
Certificates
Election Procedures. Greene County has
appointed Illinois Stock Transfer Company as its exchange agent
in connection with the merger. Greene County will deposit with
the exchange agent, for the benefit of Civitas shareholders,
certificates representing shares of Greene County common stock
and cash to be issued or paid as consideration in the merger,
subject to the allocation and proration procedures described
below THE MERGER AGREEMENT Proration
Procedures on page 54. In accordance with the
allocation and proration procedures, Civitas shareholders as of
the date of the completion of the merger will be entitled to
elect to receive cash, stock or a combination of cash and stock
in exchange for their shares of Civitas common stock.
Holders of shares of Civitas common stock may indicate a
preference to receive the mixed consideration, the all stock
consideration, or the all cash consideration in the merger by
completing the election form sent to them upon completion of the
merger. The election form will provide that a Civitas
shareholder will receive the mixed consideration of stock and
cash unless the shareholder elects to receive all stock or all
cash. If a shareholder does not make an election within a time
period specified on the election form (which will not in any
event be less than twenty (20) business days after the form
is mailed to Civitas shareholders), Greene County will allocate
such shareholder the mixed consideration of stock and cash.
All shareholder elections must be made on the election form that
will be provided to the holders of Civitas common stock after
the effective time of the merger. To be effective, an election
form must be received, properly completed and accompanied by the
stock certificate(s) in respect of which the election is being
made, by the exchange agent no later than the election deadline
specified in the election form (which will not in any event be
less than twenty (20) business days after the form is
mailed to Civitas shareholders). A record holder that fails to
submit an effective election form prior to the election deadline
will be deemed to have elected to receive the mixed
consideration of stock and cash.
In the event any Civitas common stock certificate has been lost,
stolen, destroyed or is otherwise missing, the person claiming
the missing certificate must give the exchange agent an
affidavit attesting to the missing nature of the certificate.
Also, the person claiming the missing certificate may have to
comply with additional conditions, imposed by the exchange agent
or Greene County pursuant to the provisions of applicable
Tennessee law, including a requirement that the shareholder
provide a lost instrument indemnity or surety bond in form,
substance and amount satisfactory to the exchange agent and
Greene County. Once the person claiming the missing certificate
has satisfied the conditions, and the allocation of cash and
stock has been completed, the exchange agent will issue in
exchange for such missing certificate the cash and/or stock to
which he or she is entitled.
Elections may be revoked or changed upon written notice to the
exchange agent prior to the election deadline. If a shareholder
revokes the election form and does not properly make a new
election by the election deadline, the shareholder will be
deemed to have elected to receive the mixed consideration of
stock and cash. The exchange agent may use reasonable discretion
to determine whether any election, revocation or change
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has been properly or timely made, and any good faith
determination of the exchange agent shall be binding and
conclusive. Neither Greene County nor the exchange agent is
under any obligation to notify any person of any defect in an
election form.
Neither Civitas nor Greene County (or their respective boards of
directors) nor Civitas financial advisor makes any
recommendation as to whether any Civitas shareholder should
choose the mixed consideration, the all stock consideration or
the all cash consideration for their shares of Civitas common
stock. Civitas shareholders should consult with their own
financial advisors about this decision.
Surrender and Exchange of Stock
Certificates. Promptly after the merger is
completed, Civitas shareholders will receive transmittal
materials from Greene Countys exchange agent with
instructions on how to surrender their Civitas stock
certificates.
Civitas shareholders should carefully review and complete such
materials and return them as instructed, together with their
stock certificates for Civitas common stock. CIVITAS
SHAREHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES TO
CIVITAS, GREENE COUNTY OR GREENE COUNTYS EXCHANGE AGENT
UNTIL THEY RECEIVE THE TRANSMITTAL MATERIALS WITH
INSTRUCTIONS FROM THE EXCHANGE AGENT.
Shares of Civitas common stock held in book-entry form or in a
brokerage account will be exchanged without the submission of
any Civitas stock certificate.
Civitas shareholders who surrender their stock certificates and
properly complete transmittal and election forms prior to the
election deadline date, or any extension of such time period,
will automatically receive the merger consideration allocated to
them as the result of the merger promptly following completion
of the allocation procedures and after the closing of the
merger. Other shareholders will receive the merger consideration
allocated to them as soon as practicable after their stock
certificates have been surrendered with appropriate
documentation to the exchange agent or other steps have been
taken to surrender the evidence of their stock interest in
Civitas in accordance with the instructions accompanying the
letter of transmittal. Greene County is not obligated to deliver
the stock certificates or other consideration to any former
Civitas shareholder until such shareholder has properly
surrendered his or her Civitas stock certificates (unless such
certificates are held in book-entry form or street
name, in which case they automatically will be exchanged
without being surrendered). Whenever a dividend or other
distribution with a record date after the date on which the
merger is completed is declared by Greene County on its common
stock, the declaration will include dividends or other
distributions on all shares of Greene County common stock that
may be issued in connection with the merger. Greene County,
however, will not pay any dividend or other distribution that is
payable to any former Civitas shareholder who has not properly
surrendered his or her Civitas stock certificates.
If certificates representing shares of Civitas common stock are
presented for transfer after the merger becomes effective, they
will be cancelled and exchanged, as applicable, for shares of
Greene County common stock and a check for any undelivered
dividends or distributions on the Greene County common stock
after the merger. At the time the merger becomes effective, the
stock transfer books of Civitas will be closed, and no transfer
of shares of Civitas common stock by any shareholder will be
made or recognized.
Restrictions
on Resales of Greene County Stock by Affiliates
Shares of Greene County common stock to be issued to Civitas
shareholders in the merger have been registered under the
Securities Act and may be traded freely and without restriction
by those shareholders not deemed to be affiliates (as that term
is defined under the Securities Act) of Civitas. Any subsequent
transfer of shares, however, by any person who is an affiliate
of Civitas at the time the merger is submitted for a vote of the
Civitas shareholders will, under existing law, require either:
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the further registration under the Securities Act of the Greene
County common stock to be transferred;
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compliance with Rule 145 promulgated under the Securities
Act, which permits limited sales under certain circumstances; or
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the availability of another exemption from registration.
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An affiliate of Civitas is a person who directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, Civitas. These
restrictions are expected to apply to the directors and
executive officers of Civitas and the holders of 10% or more of
the outstanding Civitas common stock. The same restrictions
apply to the spouses and certain relatives of those persons and
any trusts, estates, corporations or other entities in which
those persons have a 10% or greater beneficial or equity
interest. Greene County will give stop transfer instructions to
the transfer agent with respect to the shares of Greene County
common stock to be received by persons subject to these
restrictions, and the certificates for their shares will be
appropriately legended.
Each person who is an affiliate of Civitas for purposes of
Rule 145 under the Securities Act has delivered to Greene
County a written agreement intended to ensure compliance with
the Securities Act. The agreement also contains a restriction
limiting sales of Civitas common stock only to transfers with
affiliates or gifts without consideration.
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THE
MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement. This summary does not purport to describe all
the terms of the merger agreement and is qualified by reference
to the complete merger agreement which is attached as
Appendix A to this joint proxy statement/prospectus
and incorporated herein by reference. All shareholders of Greene
County and Civitas are urged to read the merger agreement
carefully and in its entirety.
General
Under the merger agreement, Civitas will merge with and into
Greene County with Greene County continuing as the surviving
company.
Merger
Consideration
The merger agreement provides that, at the effective time of the
merger, each share of Civitas common stock issued and
outstanding immediately prior to the effective time of the
merger, but excluding shares of Civitas common stock owned by
Greene County or Civitas (other than those shares held in a
fiduciary or representative capacity), will be converted, at
each Civitas shareholders election, for each share of
Civitas common stock owned, into the right to receive either
(i) $10.25 in cash, without interest, (ii) 1.0 share
of Greene County common stock multiplied by the exchange ratio
(initially set in the agreement at 0.2674 but subject to
adjustment if the market price of the Greene County common stock
changes by more than 10% of the change in the NASDAQ bank stock
index, but not greater than 0.2968 or less than 0.2380) or
(iii) a combination of cash and Greene County common stock
designated each shareholder.
The merger agreement requires that the aggregate merger
consideration consist of 70% in the form of Greene County common
stock and the remaining 30% of cash. All shareholders of Civitas
common stock who own 200 or less shares only will be paid $10.25
per share in cash.
Civitas shareholders will not receive any fractional shares of
Greene County common stock. Instead, they will receive cash,
without interest, for any fractional share of Greene County
common stock they might otherwise have been entitled to receive
based on fractional share interest multiplied by $10.25. Each
outstanding option to purchase Civitas common stock will be
converted into a cash payment equal to the number of Civitas
shares subject to the option multiplied by the excess, if any,
of $10.25 over the exercise price per share of the share subject
to the option.
Based upon the 15,911,750 shares of Civitas common stock
outstanding as of [more recent date], 2007, before taking into
account possible adjustments described further below, Greene
County, assuming that 70% of the merger consideration consists
of Greene County shares and 30% consists of cash, would issue
approximately 3,075,085 shares of Greene County common
stock and pay approximately $50,517,447 in cash for the
outstanding shares of Civitas common stock and options to
purchase shares of Civitas common stock. This would include an
estimated payment of $5,296,000 to retire options to purchase
1,811,235 shares of Civitas common stock outstanding as of
January 25, 2007, which have an average exercise price of
$7.326 per option.
As a result of the above, the aggregate consideration is
expected to be in the form of 3,075,085 shares of Greene
County common stock and $50,517,447 in cash. Based on the
closing price of Greene County common stock on March 23,
2007, the total transaction is valued at approximately
$ million or $ per diluted
share of Civitas common stock.
Adjustment
to Conversion Ratio for Changes in Greene County Stock
Price
The exchange ratio of 0.2674 which is being used to convert
shares of Civitas common stock into shares of Greene County
common stock (see Merger Consideration
above) may be adjusted if the market price of the shares of
Greene County common stock increases or decreases by more than
10% of the change in the NASDAQ bank stock index. This may
result in the shareholders of Civitas who receive shares of
Greene County to receive more shares or fewer shares if these
circumstances exist.
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More specifically, if the average closing price (the
average closing price) of the Greene County common
stock as reported on the Nasdaq Global Select Market for the 20
business days immediately preceding, and inclusive of, the date
that is ten trading days prior to the closing of the merger (the
measurement date) is more than $41.778 and the
relative change percentage (defined as the
Greene County price change percentage (defined as
the percentage change between $38.33 (the starting
price) and the average closing price) less the index
change percentage (defined as percentage change in the
NASDAQ Bank Index from November 14, 2006, to the
measurement date)) is greater than +10%, then the exchange ratio
will be recalculated as follows:
$10.25/($38.33 times (1 plus (relative change percentage
minus/plus 10%)))
Example: Assume Greene County average closing price is
$45.42 (this is an 18.5% price increase from the starting price
of $38.33)
Assume an index change percentage of +3%
Subtract 3% from 18.5% (result is 15.5%) (relative change
percentage)
Subtract 10% from 15.5% and add that to 1.0 (result is 1.055)
Multiply $38.33 times 1.055 to arrive at denominator (result =
$40.43815)
New exchange ratio = $10.25/$40.43815 = 0.2535
Example: Assume Greene County average closing price is
$30.28 (this is a 21% price decrease from the starting price of
$38.33)
Assume an index change percentage of −5%
Subtract −5% from −21% (result is −16%)
(relative change percentage)
Add 10% to −16% and add that to 1.0 (result is 0.94)
Multiply $38.33 times 0.94 to arrive at denominator (result =
$36.0302)
New exchange ratio = $10.25/$36.0302 = 0.2845
Notwithstanding any fluctuations in the price of Greene County
common stock, in no event shall the exchange ratio be greater
than 0.2968 nor less than 0.2380.
The exchange ratio also may be subject to appropriate
adjustments in the event that, subsequent to the date of the
merger agreement but prior to the closing of the merger, the
outstanding shares of Greene County common stock shall have been
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other like changes in Greene
Countys capitalization.
We cannot assure you that the current fair market value of
Greene County or Civitas common stock will be equivalent to the
fair market value of Greene County or Civitas common stock on
the effective date of the merger.
Proration
Procedures
Oversubscription of the Cash Consideration. If
the total amount of cash that would be payable to Civitas
shareholders who make all cash elections or combination cash
elections would be greater than the maximum amount of cash to be
paid by Greene County pursuant to the merger agreement, the
following allocation mechanism will be used:
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all stock election shares and the combination stock election
shares will be converted into the right to receive Greene County
common stock;
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the exchange agent will then prorate shares for which no
election has been made (no-election shares) to
receive the Greene County common stock as shall be necessary to
ensure that the number of shares
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of Greene County common stock to be received by those holders,
when combined with the number of shares of Greene County common
stock for which a stock election or a combination stock election
has been made, equals as closely as possible the aggregate
Greene County share amount;
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to the extent the shares of Greene County common stock to be
received by all holders of no-election shares, plus
the number of shares of Greene County common stock for which
stock elections and combination stock elections have been made
are still less than the aggregate Greene County share amount,
then the exchange agent will make up the difference by prorating
the amount of cash to be delivered to the cash election shares
and the combination cash election shares based on their
respective numbers of cash election shares; and
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each of the remaining shares of Civitas common stock held by
shareholders making cash elections or combination cash elections
will be exchanged for $10.25 in cash.
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Oversubscription of the Stock
Consideration. If the total shares of Greene
County common stock that would be issued to Civitas shareholders
who make all stock elections and combination stock elections
would be greater than the aggregate Greene County share amount,
the following allocation mechanism will be used:
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all cash election shares and combination cash election shares
will be converted into the right to receive cash;
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the exchange agent will then prorate no-election
shares to receive the cash as is necessary to ensure that
the amount of cash to be received by those holders, when
combined with the amount of cash for which a cash election or a
combination cash election has been made, equals as closely as
possible the aggregate cash value;
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to the extent the amount of cash to be received by all holders
of no-election shares plus the amount of cash for
which cash elections and combination cash elections have been
made are still less than the aggregate cash value, then the
exchange agent will make up the difference by prorating the
amount of stock to be delivered to the stock election shares and
the combination stock election shares based on their respective
numbers of stock election shares; and
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each of the remaining shares of Civitas common stock held by
shareholders making stock elections or combination stock
elections will be exchanged for .2674 shares of Greene
County common stock (subject to adjustment).
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Because the federal income tax consequences of receiving cash,
Greene County common stock, or both cash and Greene County
common stock will differ, Civitas shareholders are urged to read
carefully the information set forth under the caption THE
PROPOSED MERGER AGREEMENT Material United States
Federal Income Tax Consequences of the Merger at
page 44 and to consult their own tax advisors for a full
understanding of the mergers tax consequences to them. In
addition, because the stock consideration can fluctuate in
value, the economic value per share received by Civitas
shareholders who receive the stock consideration may, as of the
date of receipt by them, be more or less than the amount of cash
consideration per share received by Civitas shareholders who
receive cash consideration.
If a certificate for Civitas common stock or option to purchase
Civitas common stock has been lost, stolen or destroyed, the
exchange agent will issue the consideration properly payable
under the merger agreement upon receipt of appropriate evidence
as to that loss, theft or destruction, appropriate evidence as
to the ownership of that certificate by the claimant, and
appropriate and customary indemnification.
Greene County shareholders do not need to exchange their stock
certificates.
Dividends
and Distributions
Until Civitas common stock certificates are surrendered for
exchange, any dividends or other distributions declared after
the effective time with respect to Greene County common stock
into which shares of Civitas common stock may have been
converted will accrue but will not be paid. Greene County will
pay to former Civitas shareholders any unpaid dividends or other
distributions without interest only after they have duly
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surrendered their Civitas stock certificates. After the
effective time of the merger, there will be no transfers on the
stock transfer books of Civitas of any shares of Civitas common
stock. Civitas stock at that time will cease to be listed or
traded on the Nasdaq Global Select Market and will be
deregistered under the Exchange Act. If certificates
representing shares of Civitas common stock are presented for
transfer after the completion of the merger, they will be
cancelled and exchanged for the merger consideration into which
the shares of Civitas common stock represented by that
certificate have been converted.
Withholding
The exchange agent will be entitled to deduct and withhold from
the merger consideration payable to any Civitas shareholder the
amounts it is required to deduct and withhold under any federal,
state, local or foreign tax law. If the exchange agent withholds
any amounts, these amounts will be treated for all purposes of
the merger as having been paid to the shareholders from whom
they were withheld.
Effective
Time
The merger will be completed when we file articles of merger
with the Secretary of State of the State of Tennessee. However,
we may agree to a later time for completion of the merger and
specify that time in the articles of merger. While we anticipate
that the merger will be completed during the second quarter of
2007, completion of the merger could be delayed if there is a
delay in obtaining the required regulatory approvals or in
satisfying any other conditions to the merger. There can be no
assurances as to whether, or when, Greene County and Civitas
will obtain the required approvals or complete the merger. If
the merger is not completed on or before June 30, 2007,
either Greene County or Civitas may terminate the merger
agreement, unless the failure to complete the merger by that
date is due to the failure of the party seeking to terminate the
merger agreement to perform its covenants and agreements in the
merger agreement or is due to a regulatory or court delay
outside the control of the parties. See
Conditions to the Completion of the Merger immediately
below.
Conditions
to the Completion of the Merger
Completion of the merger is subject to various conditions. While
it is anticipated that all of these conditions will be
satisfied, there can be no assurance as to whether or when all
of the conditions will be satisfied or, where permissible,
waived.
The respective obligations of Greene County and Civitas to
complete the merger are subject to the following conditions:
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approval of the merger agreement by both the Civitas
shareholders and Greene Countys shareholders;
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approval by the Nasdaq Global Select Market of listing of the
shares of Greene County common stock to be issued in the merger,
subject to official notice of issuance;
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receipt of all required regulatory approvals and expiration of
all related statutory waiting periods;
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effectiveness of the registration statement, of which this joint
proxy statement/prospectus constitutes a part, for the Greene
County shares to be issued in the merger;
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absence of any order, injunction or decree of a court or agency
of competent jurisdiction which prohibits completion of the
merger;
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absence of any statute, rule, regulation, order, injunction or
decree which prohibits or makes illegal completion of the merger;
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the receipt by each party of an opinion of counsel, dated the
closing date of the merger, substantially to the effect that the
merger will be treated as a reorganization under
Section 368(a) of the Code and that no tax gain or loss
will be recognized by Greene County, Civitas or Civitas
shareholders who exchange their Civitas common stock solely for
Greene County common stock;
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accuracy of the other partys representations and
warranties contained in the merger agreement, except, in the
case of most of such representations and warranties, where the
failure to be accurate would not be reasonably likely to have a
material adverse effect on the party making the representations
and warranties (see Representations and
Warranties immediately below), and the performance by the
other party of its obligations contained in the merger agreement
in all material respects;
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Greene County Bank and Cumberland Bank shall have received all
required regulatory approvals and shareholder and other
approvals necessary to be merged;
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there are no Civitas regulatory agreements in effect that would
have a material adverse effect on Greene County after the
merger; and
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Civitas will have given to GCBS access to their premises and
books and records during normal business hours for any
reasonable purpose related to the merger.
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Representations
and Warranties
Each of Civitas and Greene County has made representations and
warranties to the other in the merger agreement as to:
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corporate existence, good standing and qualification to conduct
business;
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capital structure;
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due authorization, execution, delivery and enforceability of the
merger agreement;
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absence of any violation of agreements or law or regulation as a
result of the merger;
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governmental and third party consents necessary to complete the
merger;
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SEC, banking and other regulatory filings;
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financial statements;
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fees payable to financial advisors in connection with the merger;
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absence of material adverse changes;
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legal proceedings and regulatory actions;
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tax matters;
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employee matters;
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compliance with laws;
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contracts;
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agreements with regulatory agencies;
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interest rate risk management instruments;
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undisclosed liabilities;
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insurance coverage;
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environmental matters;
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state takeover laws;
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tax treatment as a reorganization;
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accuracy of information to be included in SEC filings and proxy
statements;
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disclosure of internal controls and procedures; and
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receipt of fairness opinions.
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Most of the representations and warranties of the parties will
be deemed to be true and correct unless the totality of facts,
circumstances or events inconsistent with the representations or
warranties has had or is reasonably likely to have a material
adverse effect on (i) the business, results of operations
or financial condition of the party making the representations
and warranties taken as a whole, or (ii) on the ability of
the party to timely complete the transactions contemplated by
the merger agreement. In determining whether a material adverse
effect has occurred or is reasonably likely, the parties will
disregard any effects resulting from (1) events, conditions
or trends in economic, business or financial conditions
affecting banks or their holding companies generally (including
variations in interest rates); (2) changes in generally
accepted accounting principles, regulatory accounting principles
or interpretations of those principles, in each case which
affects banks or their holding companies generally;
(3) changes in banking or similar laws, rules or
regulations of general applicability or their interpretations by
courts or governmental authorities; (4) changes that arise
out of the merger agreement (including the announcement of the
merger) or in compliance with the terms and conditions of the
merger agreement; (5) any outbreak of major hostilities in
which the United States is involved or any act of terrorism
within the United States or directed against its facilities or
citizens wherever located; (6) the termination of
employment of key employees of Civitas or failure of key
employees of Civitas to execute employment agreements with
Greene County to become effective after the merger; or
(7) change in the stock price or trading volume of the
party.
Conduct
of Business Pending the Merger
Each of Greene County and Civitas has agreed, during the period
from the date of the merger agreement to the completion of the
merger, to use its reasonable best efforts to:
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conduct its business in the ordinary course;
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preserve its business organization, employees, and business
relationships;
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retain the services of its key officers and key employees; and
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take no action to adversely affect or delay obtaining regulatory
approval of the merger, performing the covenants under the
merger agreement, or consummating the merger.
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In addition, Civitas has agreed that it will not, and will not
permit any of its subsidiaries to, without the prior written
consent of Greene County,
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other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual,
corporation or other entity;
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(i) adjust, split, combine or reclassify any shares of
Civitas capital stock; (ii) make, declare or pay any
dividend, or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of
Civitas capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock, except (1) for regular quarterly cash dividends
declared and payable in 2007 at a rate not in excess of $0.02
per share, (2) dividends paid by or to any of the
subsidiaries of Civitas, (3) the acceptance of shares of
Civitas common stock as payment of the exercise price of
stock options, and (4) the acceptance of shares of Civitas
common stock upon forfeiture of any restricted shares pursuant
to an award of restricted shares under any stock option plan;
(iii) grant any stock appreciation rights or grant any
individual, corporation or other entity any right to acquire any
shares of Civitas capital stock; or (iv) issue any
additional shares of capital stock except pursuant to the
exercise of stock options outstanding as of the date of the
merger agreement or issued thereafter if permitted and the ESPP;
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except for normal increases made in the ordinary course of
business consistent with past practice, or as required by
applicable law or an existing agreement, increase the wages,
salaries, compensation, pension, or other fringe benefits or
perquisites payable to any officer, employee, or director of
Civitas;
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pay any pension or retirement allowance not required by any
existing plan or agreement or by applicable law;
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pay any bonus approved as exception;
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become a party to, amend or commit itself to, any pension,
retirement, profit-sharing or welfare benefit plan or agreement
or employment agreement with or for the benefit of any employee,
other than as required by applicable law or an existing
agreement;
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sell, transfer, mortgage, encumber or otherwise dispose of any
of its properties or assets that are material to Civitas and its
subsidiaries, taken as a whole, to any individual, corporation
or other entity other than a subsidiary or cancel, release or
assign any indebtedness that is material to Civitas and its
subsidiaries, taken as a whole, to any such person or any claims
held by any such person that are material to Civitas and its
subsidiaries, taken as a whole, in each case other than in the
ordinary course of business consistent with past practice or
pursuant to contracts in force at the date of the merger
agreement;
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enter into any material new line of business or make any
material change in its lending, investment, underwriting, risk
and asset liability management or other banking and operating
policies, except as required by applicable law, regulation or
policies imposed by any governmental entity;
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make capital expenditures other than in the ordinary course of
business consistent with past practice, which individually
exceed $10,000 or in the aggregate $50,000, except for certain
approved expenses for two new branch facilities;
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knowingly take any action, or knowingly fail to take any action,
which action or failure to act is reasonably likely to prevent
the merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code;
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amend its charter or bylaws, or otherwise take any action to
exempt any person or entity (other than Greene County) or any
action taken by any such person or entity from any takeover
statute or similarly restrictive provisions of its
organizational documents, or terminate, amend or waive any
provisions of any confidentiality or standstill agreements in
place with any third parties;
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restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or
reported;
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settle any material claim, action or proceeding, except in the
ordinary course of business consistent with past practice;
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take any action or fail to take any action that is intended or
may reasonably be expected to result in any of the Civitas
representations and warranties being or becoming untrue in any
material respect, or in any conditions to the merger not being
satisfied;
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change its methods of tax and financial accounting, subject to
limited exceptions;
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take any action that would materially impede or delay the
ability of the parties to obtain any necessary approvals of any
regulatory agency or governmental entity required for the
transactions contemplated by the merger agreement; or
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agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the
actions prohibited by the preceding bullet points.
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Reasonable
Best Effort to Obtain Required Shareholder Vote
Each of Civitas and Greene County will take all steps necessary
to duly call, give notice of, convene and hold a meeting of its
respective shareholders to be held as soon as is reasonably
practicable after the date on which the registration statement
of which this joint proxy statement/prospectus is part becomes
effective for the purpose of voting upon, in the case of Civitas
shareholders, the approval of the merger agreement and, in the
case of Greene County shareholders, the approval of the merger
agreement and the issuance of Greene County common stock in
connection with the merger. Each of Civitas and Greene County
will, through its respective board of directors, use its
reasonable best efforts to obtain the approval of its respective
shareholders
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in respect of the foregoing. Nothing in the merger agreement is
intended to relieve the parties of their respective obligations
to hold a meeting of their shareholders to obtain the approval
required to complete the merger.
No
Solicitation of Alternative Transactions
The merger agreement provides, subject to limited exceptions
described below, that Civitas and its subsidiaries will not
authorize its officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to
(1) solicit, initiate or encourage (including by way of
furnishing information or assistance), or take any other action
designed to facilitate or encourage any inquiries or the making
of any proposal that constitutes, or is reasonably likely to
lead to, any acquisition proposal, (2) participate in any
discussions or negotiations regarding any acquisition proposal
or (3) make or authorize any statement, recommendation or
solicitation in support of any acquisition proposal.
For purposes of the merger agreement, the term acquisition
proposal means any inquiry, proposal or offer, filing of
any regulatory application or notice or disclosure of an
intention to do any of the foregoing from any person relating to
any (1) direct or indirect acquisition or purchase of a
business that constitutes a substantial portion of the net
revenues, net income or assets of Civitas or any of its
significant subsidiaries, (2) direct or indirect
acquisition or purchase of any class of equity securities
representing 10% or more of the voting power of Civitas or any
of its significant subsidiaries, (3) tender offer or
exchange offer that if completed would result in any person
beneficially owning 10% or more of the voting power of Civitas,
or (4) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving Civitas or any of its subsidiaries, other
than transactions contemplated by the merger agreement.
The merger agreement permits Civitas to comply with
Rule 14d-9
and
Rule 14e-2
under the Exchange Act with regard to an acquisition proposal
that Civitas may receive. In addition, if Civitas receives an
unsolicited bona fide written acquisition proposal, Civitas may
engage in discussions and negotiations with or provide nonpublic
information to the person making that acquisition proposal only
if:
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the board of directors of Civitas receives the acquisition
proposal prior to Civitas shareholders meeting;
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the board of directors of Civitas, after consultation with
outside legal counsel, reasonably determines in good faith that
the failure to engage in those discussions or provide
information would cause it to violate its fiduciary duties under
applicable law;
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the board of directors of Civitas concludes in good faith that
the acquisition proposal constitutes or is reasonably likely to
result in a superior proposal (as described below); and
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Civitas notifies Greene County promptly, and in any event within
24 hours of Civitas receipt of any acquisition proposal or
any request for nonpublic information relating to Civitas by any
third party considering making, or that has made, an acquisition
proposal, of the identity of the third party, the material terms
and conditions of any inquiries, proposals or offers, and
updates on the status of the terms of any proposals, offers,
discussions or negotiations on a current basis.
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For purposes of the merger agreement, the term superior
proposal refers to a bona fide written acquisition
proposal which the board of directors of Civitas concludes in
good faith, after consultation with its financial advisors and
legal advisors, taking into account all legal, financial,
regulatory and other aspects of the proposal and the person
making the proposal (including any
break-up
fees, expense reimbursement provisions and conditions to
consummation), (1) is more favorable to the shareholders of
Civitas from a financial point of view, than the transactions
contemplated by the merger agreement with Greene County and
(2) is fully financed or reasonably capable of being fully
financed, reasonably likely to receive all required governmental
approvals on a timely basis and otherwise reasonably capable of
being completed on the terms proposed. For purposes of the
definition of superior proposal, all reference to
10% or more in the definition of acquisition
proposal will be deemed to be a reference to a
majority and acquisition proposal will only be
deemed to refer to a transaction involving Civitas.
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Termination
of the Merger Agreement
General. The merger agreement may be
terminated at any time prior to completion of the merger,
whether before or after the approval of the merger agreement by
Civitas shareholders and approval of the merger agreement and
the issuance of Greene County common stock in connection with
the merger by Greene County shareholders, in any of the
following ways:
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by mutual consent of Greene County and Civitas;
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by either Greene County or Civitas, if any request or
application for a required regulatory approval is denied by the
governmental entity which must grant such approval and such
denial has become final and non-appealable, or a governmental
entity has issued an order decree, or ruling to permanently
prohibit the merger and such prohibition has become final and
non-appealable, except that no party may so terminate the merger
agreement if the denial is a result of the failure of such party
to the merger agreement;
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by either Greene County or Civitas, if the merger is not
completed on or before June 30, 2007, subject to extension
for regulatory or court delay, unless the failure of the closing
to occur by this date is due to the failure of the party seeking
to terminate the merger agreement to comply with the merger
agreement;
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by either Greene County or Civitas, if any approval of the
shareholders of Greene County or Civitas required for completion
of the merger has not been obtained upon a vote taken at a duly
held meeting of shareholders or at any adjournment or
postponement thereof provided the party seeking to terminate the
merger agreement has complied with the requirements in the
merger agreement to call a meeting of shareholders and recommend
approval of the merger agreement;
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by either Greene County or Civitas, if (1) the terminating
party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the merger
agreement and (2) there has been a breach of any of the
covenants, agreements, representations or warranties of the
other party in the merger agreement, which breach is not cured
within 10 days following written notice to the party
committing the breach, or which breach, by its nature, cannot be
cured prior to the closing date of the merger, and which breach,
individually or together with all other breaches, would, if
occurring or continuing on the closing date, result in the
failure of the condition relating to the performance of
obligations or breaches of representations or warranties
described under Conditions to the Completion
of the Merger above;
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by either Greene County or Civitas, if (1) the board of
directors of the other does not publicly recommend that its
shareholders either approve the merger agreement, (2) after
recommending that such shareholders approve the merger
agreement, such board of directors has withdrawn, modified or
amended such recommendation in any manner adverse to the other
party, or (3) the other party materially breaches its
obligations under the merger by reason of a failure to call a
meeting of its shareholders or a failure to prepare and mail to
its shareholders this document; or
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by Greene County, if the board of directors of Civitas
authorizes, recommends, proposes or publicly announces its
intention to authorize, recommend or propose an acquisition
proposal with any person other than Greene County.
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Effect of Termination. If the merger agreement
is terminated, it will become void and there will be no
liability on the part of Greene County or Civitas or their
respective officers or directors, except that:
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either party may seek all legal and equitable remedies to which
such party may be entitled, including specific performance of
the provisions of the merger agreement in the event of a
termination resulting from a breach of a representation,
warranty, covenant, or agreement, the failure to recommend,
call, or support the shareholders vote at a
shareholders meeting, or the pursuit by Civitas of another
acquisition proposal; and
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designated provisions of the merger agreement, including the
payment of fees and expenses, the confidential treatment of
information. Publicity concerning the merger, and, if
applicable, the termination fee described below, will survive
the termination.
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Termination Fees. The merger agreement
provides that Civitas may be required to pay a termination fee
to Greene County of $5.0 million in the following
circumstances:
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If Greene County terminates the merger agreement because Civitas
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose an Acquisition
Transaction (as defined below) with any person other than Greene
County;
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If (1) the merger agreement is terminated by either party
because the required shareholder vote of Civitas was not
obtained at Civitas shareholders meeting and (2) a
bona fide acquisition transaction with respect to Civitas was
publicly announced or otherwise communicated to the board of
directors of Civitas before its shareholders meeting that has
not been withdrawn; or
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If (1) the merger agreement is terminated by either party
because the merger has not been completed by June 30, 2007,
or by Greene County because of a material breach by Civitas that
causes a condition to the merger to not be satisfied, (2) a
public proposal with respect to an acquisition transaction
involving Civitas was made and not withdrawn before the merger
agreement was terminated and (3) after the announcement of
the public proposal, Civitas intentionally breached any of its
representations, warranties, covenants or agreements and the
breach materially contributed to the failure of the merger to
become effective.
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Acquisition Transaction means:
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the direct or indirect acquisition, purchase or assumption of
all or a substantial portion of the assets or deposits of
Civitas;
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the acquisition by any person of direct or indirect beneficial
ownership of 10% or more of the outstanding shares of voting
stock of Civitas; or
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a merger, consolidation, business combination, liquidation,
dissolution or similar transaction involving Civitas, other than
a merger, business combination or similar transaction of Civitas
if (1) the shareholders of Civitas immediately before the
transaction own at least 90% of the voting stock of the entity
surviving the transaction (or the parent of the surviving
entity) immediately following the transaction and (2) as a
result of the transaction no person or group owns or controls
10% or more of the voting stock of the surviving entity (or
parent of the surviving entity) immediately following the
transaction.
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The purpose of the termination fee is to encourage the
commitment of Civitas to the merger, and to compensate Greene
County if Civitas engages in certain conduct which would make
the merger less likely to occur.
The effect of the termination fee could be to discourage other
companies from seeking to acquire or merge with Civitas prior to
completion of the merger, and could cause Civitas to reject any
acquisition proposal from a third party which does not take into
account the termination fee.
Extension,
Waiver and Amendment of the Merger Agreement
Extension and Waiver. At any time prior to the
completion of the merger, each of Greene County and Civitas may,
to the extent legally allowed:
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extend the time for the performance of any of the obligations or
other acts of the other party under the merger agreement;
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waive any inaccuracies in the other partys representations
and warranties contained in the merger agreement; and
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waive the other partys compliance with any of its
agreements contained in the merger agreement, or waive
compliance with any conditions to its obligations to complete
the merger.
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Amendment. Subject to compliance with
applicable law, Greene County and Civitas may amend the merger
agreement at any time before or after approval of the merger
agreement by Civitas and Greene County shareholders. However,
after any approval of the merger agreement by Civitas and Greene
County shareholders, there may not be, without their further
approval, any amendment of the merger agreement that reduces the
amount or changes the form of the consideration to be delivered
to the Civitas shareholders.
Employee
Benefit Plans and Existing Agreements
Employee Benefit Plans. The merger agreement
provides that following the effective time of the merger, to the
extent permissible under the terms of the Greene County employee
benefit plans, the employees of Civitas and its subsidiaries
generally shall be eligible to participate in Greene
Countys employee benefit plans in which similarly situated
employees of Greene County or its subsidiaries participate, to
the same extent as similarly situated employees of Greene County
or its subsidiaries. For purposes of determining an
employees eligibility to participate in certain plans and
entitlement to benefits thereunder, Greene County will give full
credit for the service a continuing employee had with Civitas
prior to the merger, except that such service shall not be
recognized to the extent that such recognition would result in a
duplication or increase of benefits. Such service also shall
apply for purposes of satisfying any waiting periods, evidence
of insurability requirements, or the application of any
preexisting condition limitations. Each Greene County employee
benefit plan shall waive pre-existing condition limitations to
the same extent waived under the applicable Civitas employee
benefit plan. Civitas employees shall be given credit for
amounts paid under a corresponding benefit plan during the same
period for purposes of applying deductibles, co-payments and
out-of-pocket
maximums as though such amounts had been paid in accordance with
the terms and conditions of the Greene County employee benefit
plans.
Greene County is obligated under the merger agreement to honor
all Civitas employee benefit plans, employment, severance,
change of control and other compensation agreements and
arrangements between Civitas and its employees, and all accrued
and vested benefit obligations existing prior to the execution
of the merger agreement which are between Civitas or any of its
subsidiaries and any current or former director, officer,
employee or consultant of Civitas. In addition, any employee of
Civitas or its subsidiaries whose position is eliminated as a
direct result of the merger shall be eligible to receive the
standard severance package of Civitas, rather than any standard
severance package of Greene County, unless specifically
negotiated between the employee and Greene County or Civitas.
From and after the effective date of the merger, Greene County
will, and will cause any applicable subsidiary thereof or
employee benefit plan, to provide or pay when due to
Civitas employees as of the effective date of the merger
all benefits and compensation pursuant to Civitas employee
benefit plans, programs and arrangements in effect on the date
of the merger agreement earned or accrued through, and to which
such individuals are entitled as of the effective date of the
merger (or such later time as such employee benefit plans as in
effect at the effective date of the merger are terminated or
canceled by Greene County) subject to compliance with the terms
of the merger agreement.
Stock
Exchange Listing; Delisting of Civitas Common Stock
Greene County common stock is quoted on the Nasdaq Global Select
Market. Greene County has agreed to use its reasonable best
efforts to cause the shares of Greene County common stock to be
issued in the merger to be quoted on the Nasdaq Global Select
Market. If the merger is completed, Civitas common stock will
cease to be quoted on the Nasdaq Global Market and its shares
will be deregistered under the Exchange Act.
Expenses
The merger agreement provides that each of Greene County and
Civitas will pay its own expenses in connection with the
transactions contemplated by the merger agreement, except that
Greene County and Civitas will share equally the costs and
expenses of printing and mailing this joint proxy
statement/prospectus to the shareholders of Civitas and Greene
County, and all filing and other fees paid to the SEC in
connection with the merger and the other transactions
contemplated by the merger agreement.
63
THE
GREENE COUNTY ANNUAL MEETING
General
This document is being furnished to Greene County shareholders
in connection with the solicitation of proxies by the Greene
County board of directors to be used at the annual meeting of
Greene County shareholders to be held on April 25, 2007, at
11:00 a.m., local time, at General Morgan Inn, 111 North
Main Street, Greeneville, Tennessee 37743, and at any
adjournment or postponement of that meeting.
The Greene County board of directors has fixed the close of
business on March 16, 2007 as the record date for
determining the holders of shares of Greene County common stock
entitled to receive notice of and to vote at the annual meeting.
Only holders of record of shares of Greene County common stock
at the close of business on that date will be entitled to vote
at the annual meeting and at any adjournment or postponement of
that meeting. At the close of business on the record date, there
were 9,818,312 shares of Greene County common stock
outstanding, held by approximately 2,000 holders of record. Each
Greene County shareholder will be entitled to one vote for each
share held of record upon each matter properly submitted at the
annual meeting and at any adjournment or postponement of that
meeting.
Matters
to be Considered
At this annual meeting, holders of Greene County common stock
will be asked to:
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consider and vote upon a proposal to approve the merger
agreement between Greene County and Civitas, a copy of which is
attached as Appendix A to this document, pursuant to
which Civitas will merge with Greene County, and to approve the
issuance of Greene County common stock in connection with the
merger;
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elect five persons to serve as directors of Greene County, each
for a three-year term, those persons to serve until the end of
their respective terms and until their respective successors are
elected and qualified;
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consider and vote upon a proposal to ratify the appointment of
Dixon Hughes PLLC as Greene Countys independent registered
public accounting firm for 2007;
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consider and vote upon a proposal to amend the Greene County
Amended and Restated Charter to increase the number of
authorized shares from 15 million to 20 million shares
of common stock;
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consider and vote upon a proposal to amend the Greene County
Amended and Restated Charter to change the corporate name of
Greene County to Green Bankshares, Inc.;
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consider and vote upon a proposal to approve the adjournment of
the annual meeting, including, if necessary, to solicit
additional proxies if there are not sufficient votes at the time
of the annual meeting for any of the foregoing proposals; and
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transact any other business that may properly come before the
Greene County annual meeting or any adjournment or postponement
thereof.
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Proxies
Each copy of this document mailed to Greene County shareholders
is accompanied by a form of proxy with instructions for voting
by mail, by telephone or through the Internet. If voting by
mail, you should complete and return the proxy card accompanying
this document to ensure that your vote is counted at the Greene
County annual meeting, or at any adjournment or postponement of
the Greene County annual meeting, regardless of whether you plan
to attend the Greene County annual meeting. You may also vote
your shares by telephone or through the Internet. Information
and applicable deadlines for voting by telephone or through the
Internet are set forth in the enclosed proxy card instructions.
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The presence of a shareholder at the annual meeting will not
automatically revoke that shareholders proxy. However, a
shareholder may revoke a proxy at any time prior to its exercise
by:
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submitting a written revocation prior to the meeting to Phil M.
Bachman, Corporate Secretary, Greene County Bancshares, Inc.,
100 North Main Street, Greeneville, Tennessee
37743-4992;
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submitting another proxy by mail that is dated later than the
original proxy; or
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attending the annual meeting and voting in person.
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If your shares are held by a broker or bank, you must follow the
instructions on the form you receive from your broker or bank
with respect to changing or revoking your proxy.
The shares represented by any proxy card that is properly
executed and received by Greene County in time to be voted at
the annual meeting will be voted in accordance with the
instructions that are marked on the proxy card. If you execute
your proxy but do not provide Greene County with any
instructions, your shares will be voted FOR the
approval of the merger agreement and the issuance of Greene
County common stock in connection with the merger and
FOR all other matters described in the notice of the
annual meeting, including the proposal to adjourn the annual
meeting, including, if necessary, to solicit additional proxies
in the event that there are not sufficient votes at the time of
the special meeting to approve the merger agreement.
If shares are held in street name by a broker or
bank and the shareholder does not provide the broker or bank
with instructions on how to vote the shares, the broker or bank
will not be permitted to vote the shares, which will have the
same effect as a vote against approval of the merger agreement.
Vote
Required
In order to have a lawful meeting, a quorum of shareholders must
be present at the annual meeting. The presence, in person or by
proxy, of the holders of a majority of the outstanding shares of
Greene County will constitute a quorum at the meeting. A
shareholder will be deemed to be present if the shareholder
either attends the meeting or submits a properly executed proxy
card that is received at or prior to the meeting (and not
revoked). Under the law of Tennessee, Greene Countys state
of incorporation, abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum,
but are not counted as votes cast at the meeting. Broker
non-votes occur when brokers who hold their customers
shares in street name submit proxies for such shares on some
matters, but not others. Generally, this would occur when
brokers have not received any instructions from their customers.
In these cases, the brokers, as the holders of record, are
permitted to vote on routine matters, which
typically include the election of directors, but not on
non-routine matters such as approval of a merger agreement.
Approval of the merger agreement between Greene County and
Civitas and the related issuance of common stock by Greene
County requires the affirmative vote of the holders of a
majority of the outstanding shares of Greene County common stock
entitled to vote on such proposal at a meeting at which a quorum
is present. The required vote of Greene County shareholders
on the merger agreement and issuance of Greene County common
stock in connection with the merger is based upon the number of
outstanding shares of Greene County common stock, and not the
number of shares that are actually voted. Accordingly, the
failure to submit a proxy card or to vote in person at the
annual meeting or the abstention from voting by Greene County
shareholders will have the same effect as an AGAINST
vote with respect to this matter.
If a quorum exists, approval of each of the remaining proposals
(including the proposal to adjourn the meeting if necessary to
solicit additional proxies) requires that the number of votes
cast, in person or by proxy, at the Greene County annual meeting
in favor of the proposal exceed the number of votes cast, in
person or by proxy, against the proposal. If a quorum does not
exist, adjournment of the annual meeting requires the
affirmative vote of a majority of the votes cast, in person or
by proxy, at the annual meeting. Abstentions and broker
non-votes are not counted as votes cast and thus have no impact
on the proposals other than approval of the merger agreement
because the vote required to approve any of the other proposals
is not based upon Greene Countys outstanding shares, but
only on those shares present and voting.
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As of the record date, Greene County directors, executive
officers and their affiliates owned and were entitled to vote
approximately 1,137,695 shares of Greene County common
stock, representing approximately 12% of the outstanding shares
of Greene County common stock.
We currently expect that Greene Countys directors and
executive officers will vote their shares FOR
approval of the merger agreement and the issuance of Greene
County common stock in connection with the merger, and
FOR each of the remaining proposals although none of
them has entered into any agreement obligating them to do so.
Solicitation
of Proxies
In addition to solicitation by mail, directors, officers and
employees of Greene County may solicit proxies for the annual
meeting from Greene County shareholders personally or by
telephone and other electronic means without additional
remuneration for soliciting such proxies. We also will provide
persons, firms, banks and corporations holding shares in their
names or in the names of nominees, which in either case are
beneficially owned by others, proxy material for transmittal to
such beneficial owners and will reimburse such record owners for
their expenses in taking such actions.
The merger agreement provides that each of Greene County and
Civitas will pay its own expenses in connection with the
transactions contemplated by the merger agreement, except that
Greene County and Civitas will share equally the costs and
expenses of printing and mailing this document to the
shareholders of Civitas and Greene County, and all filing and
other fees paid to the SEC and other regulatory authorities in
connection with the merger and the other transactions
contemplated by the merger agreement.
Dissenters
and Appraisal Rights
Greene County shareholders will not have dissenters and
appraisal rights in connection with any matters being submitted
for their consideration at the Greene County annual meeting,
including the merger agreement and the issuance of Greene County
common stock in connection with the merger.
Adjournment
In the event that there are insufficient votes, in person or
proxy, to (i) constitute a quorum, or (ii) approve the
merger agreement and the issuance of Greene County common stock
in connection with the merger at the time of the Greene County
annual meeting, the merger could not be approved unless the
meeting was adjourned to a later date or dates in order to
permit Greene County to solicit additional proxies. In order to
allow proxies that have been received by Greene County at the
time of the annual meeting to be voted for an adjournment, if
necessary, Greene County has submitted the question of
adjournment to its shareholders as a separate matter for their
consideration. If a quorum does not exist, adjournment of the
annual meeting requires the affirmative vote of a majority of
the votes cast, in person or by proxy, at the annual meeting. If
a quorum exists, but there are not enough affirmative votes to
approve the merger agreement and the issuance of Greene County
common stock in connection with the merger, the annual meeting
may be adjourned if the votes cast, in person or by proxy, at
the Greene County annual meeting favoring the proposal to
adjourn exceed the votes cast, in person or by proxy, opposing
the proposal to adjourn.
Recommendations
by Greene Countys Board of Directors
The Greene County board of directors has unanimously approved
the merger agreement and the transactions it contemplates. The
Greene County board of directors has determined that the merger
agreement and the transactions it contemplates are advisable and
in the best interests of Greene County and its shareholders and
unanimously recommends that the Greene County shareholders vote
FOR the proposal to approve the merger of Greene
County and Civitas and the related issuance of shares of Greene
County common stock in the merger and FOR each of
the other proposals. See THE PROPOSED MERGER
Greene Countys Reasons for the Merger; Recommendation of
the Greene County Board of Directors on page 28 for a
more detailed discussion of the Greene County board of
directors recommendation of the merger.
66
THE
CIVITAS SPECIAL MEETING
General
This document is being furnished to Civitas shareholders in
connection with the solicitation of proxies by the Civitas board
of directors to be used at the special meeting of Civitas
shareholders to be held Embassy Suites Hotel located at 820
Crescent Centre Drive, Franklin, Tennessee 37067, at
3:00 p.m. local time on April 26, 2007, and at any
adjournment or postponement of that meeting.
The Civitas board of directors has fixed the close of business
on March 16, 2007 as the record date for determining the
holders of shares of Civitas common stock entitled to receive
notice of and to vote at the special meeting. Only holders of
record of shares of Civitas common stock at the close of
business on that date will be entitled to vote at the special
meeting and at any adjournment or postponement of that meeting.
At the close of business on the record date, there were
15,932,173 shares of Civitas common stock outstanding, held
by approximately 2,000 holders of record. Each Civitas
shareholder will be entitled to one vote for each share held of
record upon each matter properly submitted at the special
meeting and at any adjournment or postponement of that meeting.
Matters
to be Considered
At this special meeting, holders of Civitas common stock will be
asked to:
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consider and vote upon a proposal to approve the merger
agreement between Greene County and Civitas, a copy of which is
attached as Appendix A to this document, pursuant to
which Civitas will merge with Greene County;
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consider and vote upon a proposal to approve the adjournment of
the special meeting, including, if necessary, to solicit
additional proxies if there are not sufficient votes at the time
of the special meeting for any of the foregoing proposals; and
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transact any other business that may properly come before the
Civitas special meeting or any adjournment or postponement
thereof.
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Proxies
Each copy of this document mailed to Civitas shareholders is
accompanied by a form of proxy with instructions for voting by
mail, by telephone or through the Internet. If voting by mail,
you should complete and return the proxy card accompanying this
document to ensure that your vote is counted at the Civitas
special meeting, or at any adjournment or postponement of the
Civitas special meeting, regardless of whether you plan to
attend the Civitas special meeting. You may also vote your
shares by telephone or through the Internet. Information and
applicable deadlines for voting by telephone or through the
Internet are set forth in the enclosed proxy card instructions.
The presence of a shareholder at the special meeting will not
automatically revoke that shareholders proxy. However, a
shareholder may revoke a proxy at any time prior to its exercise
by:
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submitting a written revocation prior to the meeting to Danny
Herron, Corporate Secretary, Civitas BankGroup, Inc., 810
Crescent Centre Drive, Suite 230, Franklin, Tennessee 37067;
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submitting another proxy by mail that is dated later than the
original proxy; or
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attending the special meeting and voting in person.
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If your shares are held by a broker or bank, you must follow the
instructions on the form you receive from your broker or bank
with respect to changing or revoking your proxy.
The share represented by any proxy card that is properly
executed and received by Civitas in time to be voted at the
special meeting will be voted in accordance with the
instructions that are marked on the proxy card. If you execute
your proxy but do not provide Civitas with any instructions,
your shares will be voted
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FOR the approval of the merger agreement and
FOR the proposal to adjourn the special meeting,
including, if necessary, to solicit additional proxies in the
event that there are not sufficient votes at the time of the
special meeting to approve the merger agreement.
If shares are held in street name by a broker or
bank and the shareholder does not provide the broker or bank
with instructions on how to vote the shares, the broker or bank
will not be permitted to vote the shares, which will have the
same effect as a vote against approval of the merger agreement.
Participants
in Civitas ESPP
Anyone who holds Civitas shares through the ESPP will receive a
proxy card to vote those shares.
Election
Form; Letter of Transmittal
A form for making an election will be sent to you separately
after the effective time of the merger. For your election to be
effective, your properly completed election form, along with
your Civitas stock certificates or an appropriate guarantee of
delivery, must be sent to and received by the exchange agent no
later than the election deadline specified in the election form
(which will not in any event be less than twenty
(20) business days after the form is mailed to Civitas
shareholders). Do not send your stock certificates to Civitas,
Greene County or Greene Countys exchange agent until you
receive the transmittal materials with instructions from the
exchange agent. If you do not make a timely election you will be
deemed to have elected to receive the mixed consideration of
cash and stock. All elections must be made on the election form
furnished to you or on a facsimile of the election form. See
THE PROPOSED MERGER Election Procedures;
Surrender and Exchange of Stock Certificates beginning on
page 50 for the procedure to be followed to make a cash
election.
Vote
Required
In order to have a lawful meeting, a quorum of shareholders must
be present at the special meeting. The presence, in person or by
proxy, of the holders of a majority of the outstanding shares of
Civitas will constitute a quorum at the meeting. A shareholder
will be deemed to be present if the shareholder either attends
the meeting or submits a properly executed proxy card that is
received at or prior to the meeting (and not revoked). Under the
law of Tennessee, Civitas state of incorporation,
abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum, but are not
counted as votes cast at the meeting. Broker non-votes occur
when brokers who hold their customers shares in street
name submit proxies for such shares on some matters, but not
others. Generally, this would occur when brokers have not
received any instructions from their customers. In these cases,
the brokers, as the holders of record, are permitted to vote on
routine matters, which typically include the
election of directors, but not on non-routine matters such as
approval of a merger agreement.
Approval of the merger agreement between Greene County and
Civitas requires the affirmative vote of the holders of a
majority of the outstanding shares of Civitas common stock
entitled to vote on such proposal at a meeting at which a quorum
is present. The required vote of Civitas shareholders on the
merger agreement is based upon the number of outstanding shares
of Civitas common stock, and not the number of shares that are
actually voted. Accordingly, the failure to submit a proxy card
or to vote in person at the special meeting or the abstention
from voting by Civitas shareholders will have the same effect as
an AGAINST vote with respect to this matter.
If a quorum exists, approval of the remaining proposal to
adjourn the meeting requires that the number of votes cast, in
person or by proxy, at the Civitas special meeting in favor of
the proposal exceed the number of votes cast, in person or by
proxy, against the proposal. If a quorum does not exist,
adjournment of the special meeting requires the affirmative vote
of a majority of the votes cast, in person or by proxy, at the
special meeting. Abstentions and broker non-votes are not
counted as votes cast and thus have no impact on the proposals
other than approval of the merger agreement because the vote
required to approve the adjournment proposal is not based upon
Civitas outstanding shares, but only on those shares
present and voting.
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As of the record date, Civitas directors, executive officers and
their affiliates owned and were entitled to vote approximately
3,945,684 shares of Civitas common stock, representing
approximately 24.8% of the outstanding shares of Civitas common
stock.
We currently expect that, with on exception, all Civitas
directors and executive officers will vote their shares
FOR approval of the merger agreement and
FOR the adjournment proposal although none of them
has entered into any agreement obligating them to do so.
Solicitation
of Proxies
In addition to solicitation by mail, directors, officers and
employees of Civitas may solicit proxies for the special meeting
from Civitas shareholders personally or by telephone and other
electronic means without additional remuneration for soliciting
such proxies. Civitas also will provide persons, firms, banks
and corporations holding shares in their names or in the names
of nominees, which in either case are beneficially owned by
others, proxy material for transmittal to such beneficial owners
and will reimburse such record owners for their expenses in
taking such actions.
The merger agreement provides that each of Greene County and
Civitas will pay its own expenses in connection with the
transactions contemplated by the merger agreement, except that
Greene County and Civitas will share equally the costs and
expenses of printing and mailing this document to the
shareholders of Civitas and Greene County, and all filing and
other fees paid to the SEC and other regulatory authorities in
connection with the merger and the other transactions
contemplated by the merger agreement.
Dissenters
and Appraisal Rights
Civitas shareholders will not have dissenters and
appraisal rights in connection with any matters being submitted
for their consideration at the Civitas special meeting,
including the merger agreement and the issuance of Greene County
common stock in connection with the merger.
Adjournment
In the event that there are insufficient votes, in person or
proxy, to (i) constitute a quorum, or (ii) approve the
merger agreement at the time of the Civitas special meeting, the
merger could not be approved unless the meeting was adjourned to
a later date or dates in order to permit Civitas to solicit
additional proxies. In order to allow proxies that have been
received by Civitas at the time of the special meeting to be
voted for an adjournment, if necessary, Civitas has submitted
the question of adjournment to its shareholders as a separate
matter for their consideration. If a quorum does not exist,
adjournment of the special meeting requires the affirmative vote
of a majority of the votes cast, in person or by proxy, at the
special meeting. If a quorum exists, but there are not enough
affirmative votes to approve the merger agreement, the special
meeting may be adjourned if the votes cast, in person or by
proxy, at the Civitas special meeting favoring the proposal to
adjourn exceed the votes cast, in person or by proxy, opposing
the proposal to adjourn.
Recommendation
by Civitas Board of Directors
As previously indicated, a majority (nine out of twelve, with
one director absent) of the Civitas board of directors
determined that the merger is fair to Civitas shareholders
and in their best interests and, accordingly, approved the
merger agreement and recommended its approval to the Civitas
shareholders.. The two dissenting directors, which included the
Civitas Chief Executive Officer, indicated that they had voted
against the merger because they believed that it would be more
advantageous for Civitas to remain an independent public
company. Director William Wallace was absent. Following the
announcement of the proposed merger, Civitas Chief
Executive Officer has informed Civitas that he intends to vote
his shares in favor of the proposed merger with Greene County.
Therefore, although not unanimous, the required majority of
the Civitas board of directors recommends that you vote
FOR each proposal, including the proposal to merge
with Greene County. See THE PROPOSED
MERGER Civitas Reasons for the Merger;
Recommendation of the Civitas Board of Directors on page
29 for a more detailed discussion of the Civitas board of
directors recommendation of the merger.
69
DESCRIPTION
OF GREENE COUNTY CAPITAL STOCK
General
The authorized capital stock of Greene County consists of
15 million shares of common stock, par value $2.00 per
share and 130 shares of Organizational Stock, par value
$10.00 per share. As of the record date, 9,818,312 shares
of Greene County common stock were outstanding and no shares of
Organizational Stock were outstanding. As of the date hereof,
3,075,085 shares of Greene County common stock were
reserved for issuance to Civitas shareholders in accordance with
the merger agreement and 471,659 shares of Greene County
common stock were reserved for issuance upon the exercise of
outstanding stock options under various employee stock option
plans.
The following summary of the terms of the capital stock of
Greene County is not intended to be complete and is subject in
all respects to the applicable provisions of the Tennessee
Business Corporation Act, or TBCA, and is qualified by reference
to the charter and bylaws of Greene County. To obtain copies of
these documents, see WHERE YOU CAN FIND MORE
INFORMATION beginning on page 102.
Common
Stock
The outstanding shares of Greene County common stock are fully
paid and nonassessable. Holders of Greene County common stock
are entitled to one vote for each share held of record on all
matters submitted to a vote of the shareholders. Holders of
Greene County common stock do not have pre-emptive rights and
are not entitled to cumulative voting rights with respect to the
election of directors. The Greene County common stock is neither
redeemable nor convertible into other securities.
Subject to the preferences applicable to any shares of Greene
County preferred stock outstanding at the time, holders of
Greene County common stock are entitled to dividends when and as
declared by the Greene County board of directors from legally
available funds and are entitled, in the event of liquidation,
to share ratably in all assets remaining after payment of
liabilities.
Preferred
Stock
No shares of preferred stock are authorized or outstanding.
Anti-Takeover
Provisions
Greene Countys charter and bylaws provide that the Greene
County board of directors is to be divided into three classes as
nearly equal in number as possible. Directors are elected by
classes to three-year terms, so that approximately one-third of
the directors of Greene County are elected at each annual
meeting of the shareholders. In addition, Greene Countys
bylaws provide that the power to fill vacancies is vested in the
Greene County board of directors unless such director is removed
by the vote of the shareholders. The overall effect of these
provisions may be to prevent a person or entity from seeking to
acquire control of Greene County through an increase in the
number of directors on the Greene County board of directors and
the election of designated nominees to fill newly created
vacancies.
COMPARISON
OF THE RIGHTS OF SHAREHOLDERS
Both Greene County and Civitas are incorporated under the laws
of the State of Tennessee. The holders of shares of Civitas
common stock whose rights as shareholders are currently governed
by Tennessee law, the charter of Civitas and the bylaws of
Civitas, will, upon the exchange of their shares of Civitas
common stock for shares of Greene County common stock at the
effective time pursuant to the merger, become holders of Greene
County common stock and their rights as such will be governed by
Tennessee law, the Greene County charter and the Greene County
bylaws. The material differences between the rights of holders
of shares of Civitas common stock and Greene County common
stock, which result from differences in their governing
corporate documents, are summarized below.
70
The following summary is not intended to be complete and is
qualified in its entirety by reference to the TBCA, the Greene
County charter, the Greene County bylaws, the Civitas charter
and the Civitas bylaws, as appropriate. The identification of
specific differences is not meant to indicate that other equally
or more significant differences do not exist. Copies of the
Greene County charter, the Greene County bylaws, the Civitas
charter and the Civitas bylaws are available upon request. To
obtain copies of these documents, see WHERE YOU CAN FIND
MORE INFORMATION beginning on page 102.
Summary
of Material Differences Between the
Rights of Greene County Shareholders and the Rights of Civitas
Shareholders
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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Description of
Common Stock:
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Greene County is authorized to
issue 15,000,000 shares of common stock, par value $2.00
per share, and 130 shares of Organizational Stock, par
value $10.00 per share.
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Civitas is authorized to issue
40,000,000 shares of common stock, with $0.50 par value.
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Description of
Preferred Stock:
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No shares of preferred stock are
authorized or outstanding.
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No shares of preferred stock are
authorized or outstanding.
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Special Meeting
of Shareholders:
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Under the TBCA, the board of
directors, any person authorized by the charter or bylaws, or
(unless the charter provides otherwise) the holders of at least
ten percent (10%) of the votes entitled to be cast may call a
special meeting of shareholders.
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Under the TBCA, the board of
directors, any person authorized by the charter or bylaws, or
(unless the charter provides otherwise) the holders of at least
ten percent (10%) of the votes entitled to be cast may call a
special meeting of shareholders.
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Greene Countys bylaws
provide that only the board of directors or a committee duly
authorized by the board may call a special meeting of the
shareholders. Written notice must be delivered not less than ten
(10) days nor more than two (2) months before the
meeting.
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Civitas bylaws also provide that the President, Secretary or any officer instructed by the board to call the meeting may do so. Written notice must state the purpose of the meeting and be delivered not less than ten (10) days nor more than sixty (60) days before the meeting.
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Shareholder
Rights Plan:
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Greene County does not have a
shareholder rights plan as a part of its charter, bylaws, or by
separate agreement.
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Same as Greene County.
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Control Share
Acquisitions:
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The Tennessee Control Share
Acquisition Act generally provides that, except as stated below,
control shares will not have any voting rights.
Control shares are shares acquired by a person under certain
circumstances which, when added to other shares owned, would
give such person effective control over one-fifth or more, or a
majority of all voting power (to the extent such acquired shares
cause such person to exceed one-fifth or one-third of all voting
power) in the election of Greene Countys directors.
However, voting rights will be restored to control shares by
resolution approved by the affirmative vote of the holders of a
majority of Greene Countys voting stock, other than shares
held by the owner of the control shares. If voting
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The Tennessee Control Share
Acquisition Act generally provides that, except as stated below,
control shares will not have any voting rights.
Control shares are shares acquired by a person under certain
circumstances which, when added to other shares owned, would
give such person effective control over one-fifth or more, or a
majority of all voting power (to the extent such acquired shares
cause such person to exceed one-fifth or one-third of all voting
power) in the election of Civitas directors. However,
voting rights will be restored to control shares by resolution
approved by the affirmative vote of the holders of a majority of
Civitas voting stock, other than shares held by the owner
of the control shares. If voting rights are granted to control
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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rights are granted to control
shares which give the holder a majority of all voting power in
the election of Greene Countys directors, then Greene
Countys other shareholders may require Greene County to
redeem their shares at fair value.
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shares which give the holder a
majority of all voting power in the election of Civitas
directors, then Civitas other shareholders may require
Civitas to redeem their shares at fair value.
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The Tennessee Control Share
Acquisition Act is applicable to Greene County because the
Greene County charter contains a specific provision opting
in to the Control Share Acquisition Act.
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The Tennessee Control Share
Acquisition Act does not apply to Civitas because the Civitas
charter does not contain a specific provision opting
in to the Control Share Acquisition Act.
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Investor
Protection Act:
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The Tennessee Investor Protection
Act (TIPA) provides that unless a Tennessee
corporations board of directors has recommended a takeover
offer to shareholders, no offeror beneficially owning five
percent (5%) or more of any class of equity securities of the
offeree company, any of which was purchased within the preceding
year, may make a takeover offer for any class of equity security
of the offeree company if after completion the offeror would be
a beneficial owner of more than ten percent (10%) of any class
of outstanding equity securities of the company unless the
offeror, before making such purchase: (i) makes a public
announcement of his or her intention with respect to changing or
influencing the management or control of the offeree company;
(ii) makes a full, fair and effective disclosure of such
intention to the person from whom he or she intends to acquire
such securities; and (iii) files with the Tennessee
Commissioner of Commerce and Insurance (the
Commissioner) and the offeree company a statement
signifying such intentions and containing such additional
information as may be prescribed by the Commissioner.
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Same as Greene County.
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The offeror must provide that any
equity securities of an offeree company deposited or tendered
pursuant to a takeover offer may be withdrawn by an offeree at
any time within seven days from the date the offer has become
effective following filing with the Commissioner and the offeree
company and public announcement of the terms or after sixty
(60) days from the date the offer has become effective. If
the takeover offer is for less than all the outstanding equity
securities of any class, such an offer must also provide for
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72
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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acceptance of securities pro rata
if the number of securities tendered is greater than the number
the offeror has offered to accept and pay for. If such an
offeror varies the terms of the takeover offer before its
expiration date by increasing the consideration offered to
offerees, the offeror must pay the increased consideration for
all equity securities accepted, whether accepted before or after
the variation in the terms of the offer.
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The TIPA does not apply to Greene
County, as it does not apply to bank holding companies subject
to regulation by a federal agency and does not apply to any
offer involving a vote by holders of equity securities of the
offeree company.
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Business Combinations
Involving Interested
Shareholders:
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The Tennessee Business Combination
Act generally prohibits a business combination by
Greene County or a subsidiary with an interested
shareholder within five (5) years after the
shareholder becomes an interested shareholder. Greene County or
a subsidiary can, however, enter into a business combination
within that period if, before the interested shareholder became
such, Greene Countys board of directors approved the
business combination or the transaction in which the interested
shareholder became an interested shareholder. After that five
(5) year moratorium, the business combination with the
interested shareholder can be consummated only if it satisfies
certain fair price criteria or is approved by two-thirds (2/3)
of the other shareholders.
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Civitas is also subject to the
Tennessee Business Combination Act, but its charter and bylaws
do not contain any specific provisions dealing with these
transactions.
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For purposes of the Tennessee
Business Combination Act, a business combination
includes mergers, share exchanges, sales and leases of assets,
issuances of securities, and similar transactions. An
interested shareholder is generally any person or
entity that beneficially owns ten percent 10% or more of the
voting power of any outstanding class or series of Greene County
stock.
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Greene Countys charter has
several provisions involving these transactions. The transaction
must either be approved by a majority of the
disinterested
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73
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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directors as defined in the
charter or it must meet several qualifications including
(i) a fair price as determined by various metrics,
(ii) the form of consideration must be cash or whatever
other consideration the Interested Shareholder receives,
(iii) there may not be a failure to pay dividends to
preferred members nor may there a reduction in the periodic rate
of dividends to common stock holders, (iv) there may not be
any loans to the Interested Shareholder, and (v) there can
be no material change in the business of the company.
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Greenmail Act:
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The Tennessee Greenmail Act
applies to a Tennessee corporation that has a class of voting
stock registered or traded on a national securities exchange or
registered with the SEC pursuant to Section 12(g) of the
Exchange Act. Under the Tennessee Greenmail Act, Greene County
may not purchase any of its shares at a price above the market
value of such shares from any person who holds more than three
percent (3%) of the class of securities to be purchased if such
person has held such shares for less than two years, unless the
purchase has been approved by the affirmative vote of a majority
of the outstanding shares of each class of voting stock issued
by Greene County or Greene County makes an offer, of at least
equal value per share, to all shareholders of such class.
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Same as Greene County.
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Election and Size of
Board of Directors:
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The election of board members will
generally take place at the annual meeting.
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The election of board members will
generally take place at the annual meeting.
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The board of directors must not
consist of less than three (3) nor more than fifteen
(15) members, unless all of the companys common stock
is owned by less than 3 holders of record, then there may be
less than three (3) members. The number of directors may be
fixed or changed from time to time, by the affirmative vote of
two-thirds (2/3) of the issued and outstanding shares of the
corporation entitled to vote in an election of directors, or by
the affirmative vote of two-thirds (2/3) of all directors then
in office.
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The board of directors must consist of no fewer than three (3) or more that seventeen (17) members. The number of directors may by changed by amendment of the bylaws or by the directors or the shareholders, but in no case will a change in this number shorten the term of any director. Each director elected at an annual meeting or in the interim will serve until the
next successive annual meeting or until his successor had been appointed.
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The board of directors is divided
into three (3) classes, Class I, Class II and
Class III, which are nearly equal in number as possible.
Each Class of
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74
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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director serves a three
(3) year term. No person over the age of seventy
(70) is eligible for election.
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Presently, Greene Countys
board of directors consists of 14 members. After the merger,
Greene Countys board of directors will have fourteen
(14) members.
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Vacancies on the Board
of Directors:
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The TBCA provides that vacancies
on the board of directors may be filled by the shareholders or
directors, unless the charter provides otherwise.
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The TBCA provides that vacancies
on the board of directors may be filled by the shareholders or
directors, unless the charter provides otherwise.
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Greene Countys bylaws
provide that directors shall fill all vacancies unless the
vacancy was caused by removal by the shareholders in which case
the vacancy must be filled by the shareholders.
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Civitas bylaws provide that
any director vacancy may be filled by an affirmative vote of the
remaining directors even if a quorum does not exist.
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Removal of Directors:
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The TBCA provides that
shareholders may remove directors with or without cause unless
the charter provides that directors may be removed only for
cause. However, if a director is elected by a particular voting
group, that director may only be removed by the requisite vote
of that voting group.
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The TBCA provides that
shareholders may remove directors with or without cause unless
the charter provides that directors may be removed only for
cause. However, if a director is elected by a particular voting
group, that director may only be removed by the requisite vote
of that voting group.
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Greene Countys bylaws
provide that a director may be removed with or without cause by
a majority of the shares entitled to vote or with cause by a
majority of the directors.
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At a meeting of the shareholders
called expressly for the purpose of director removal, one or all
of the directors may be removed with or without cause.
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Indemnification:
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The Greene County charter provides
that Greene County shall have the power to indemnify any
director or officer of the corporation to the fullest extent
permitted by the TBCA. Greene County may also indemnify and
advance expenses to any employee or agent of Greene County who
is not a director or officer to the same extent as a director or
officer, if the board of directors determines that to do so is
in the best interests of Greene County.
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The Civitas charter provide that
Civitas shall have the power to indemnify any director, officer,
employee or agent of Civitas or any other person who is serving
in a similar capacity in another corporate entity at the request
of Civitas, to the fullest extent permitted by the TBCA. This
indemnification shall continue to any person who has ceased to
serve Civitas in any of the above fashions.
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Personal Liability
of Directors:
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Greene Countys charter
provides that, to the fullest extent permitted by the TBCA, a
director of Greene County shall not be liable to the corporation
or its shareholders for monetary damages for breach of fiduciary
duty as a director.
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Same as Greene County.
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The TBCA provides that a
corporation may not indemnify a director for liability
1) for any breach of the directors duty of loyalty to
the corporation or its shareholders; 2) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of
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75
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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law; or 3) under Sec.
48-18-304 of
the TBCA (with respect to the unlawful payment of dividends), as
the same exists or hereafter may be amended.
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Dissenters Rights:
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The TBCA provides that a
shareholder of a corporation is generally entitled to receive
payment of the fair value of his or her stock if the shareholder
dissents from transactions including a proposed merger, share
exchange or a sale of substantially all of the assets of the
corporation. However, dissenters rights generally are not
available to holders of shares, such as shares of Greene County
common stock, that are registered on a national securities
exchange or quoted on a national market security system.
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Same as Greene County.
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Votes on Extraordinary
Corporate Transactions:
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Under the TBCA, a sale or other
disposition of all or substantially all of the
corporations assets, a merger of the corporation with and
into another corporation, or a share exchange involving one or
more classes or series of the corporations shares or a
dissolution of the corporation must be approved by the board of
directors (except in certain limited circumstances) plus, with
certain exceptions, the affirmative vote of the holders of a
majority of all shares of stock entitled to vote thereon.
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Under the TBCA, a sale or other
disposition of all or substantially all of the
corporations assets, a merger of the corporation with and
into another corporation, or a share exchange involving one or
more classes or series of the corporations shares or a
dissolution of the corporation must be approved by the board of
directors (except in certain limited circumstances) plus, with
certain exceptions, the affirmative vote of the holders of a
majority of all shares of stock entitled to vote thereon.
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Neither Greene Countys
charter nor bylaws have any provisions dealing with
extraordinary corporate transactions.
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Neither Civitas charter nor
bylaws have any provisions dealing with extraordinary corporate
transactions.
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Consideration of Other
Constituencies:
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The TBCA provides that no
corporation (nor its officers or directors) registered or traded
on a national securities exchange or registered with the SEC
shall be held liable for either having failed to approve the
acquisition of shares by an interested shareholder on or before
such interested shareholders share acquisition date, or
for opposing any proposed merger, exchange, tender offer or
significant disposition of the assets of the corporation or any
of its subsidiaries because of a good faith belief that such
merger, exchange, tender offer or significant disposition of
assets would adversely affect the corporations employees,
customers, suppliers, the communities in which such corporation
or its subsidiaries operate or are located or any other relevant
factor if such factors are permitted to be considered by the
board of directors under the charter
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Same as Greene County.
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76
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Greene County Shareholder Rights
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Civitas Shareholder Rights
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for such corporation in
connection with a merger, exchange, tender offer or significant
disposition of assets.
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Greene Countys charter does
not contain an opt- out provision, and therefore,
the Tennessee Business Combination Act will apply.
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Amendment of Charter:
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The TBCA provides that certain
relatively technical amendments to a corporations charter
may be adopted by the directors without shareholder action.
Generally, the TBCA provides that a corporations charter
may be amended by a majority of votes entitled to be cast on an
amendment, subject to any condition the board of directors may
place on its submission of the amendment to the shareholders.
Greene Countys charter provides that any amendment or
repeal of any part of Section 9 of the charter discussing
transactions with Interested Shareholders shall require an
affirmative vote of eighty percent (80%) of all voting stock
voting as a class.
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The TBCA provides that certain relatively technical amendments to a corporations charter may be adopted by the directors without shareholder action. Generally, the TBCA provides that a corporations charter may be amended by a majority of votes entitled to be cast on an amendment, subject to any condition the board of directors may place on its submission of
the amendment to the shareholders. The Civitas charter does not have any provisions dealing with amendments thereto.
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Amendment of Bylaws:
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Under the TBCA, shareholder action
is generally not necessary to amend the bylaws, unless the
charter provides otherwise or the shareholders in amending or
repealing a particular bylaw provide expressly that the board of
directors may not amend or repeal that bylaw. The shareholders
may amend or repeal Greene Countys bylaws even though the
bylaws may also be amended or repealed by its board of
directors.
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Under the TBCA, shareholder action
is generally not necessary to amend the bylaws, unless the
charter provides otherwise or the shareholders in amending or
repealing a particular bylaw provide expressly that the board of
directors may not amend or repeal that bylaw. The shareholders
may amend or repeal Civitas bylaws even though the bylaws
may also be amended or repealed by its board of directors.
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Greene Countys bylaws may be
altered or amended, and new bylaws may be adopted by the
shareholders at any annual or special meeting of the
shareholders by a majority of the stock represented at that
meeting or by the board of directors at any regular or special
meeting of the board of directors by a majority of the board
present. However, any amendment changing the number of directors
requires an affirmative vote of a majority of all the directors
currently serving.
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The board of directors and the shareholders may adopt, alter, amend or repeal any bylaw. Shareholders may stipulate that any bylaw adopted by them may not be altered, amended or repealed by the board.
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77
OTHER
MATTERS TO BE CONSIDERED AT GREENE COUNTYS ANNUAL
MEETING
Election
of Directors
Greene Countys Board of Directors is currently composed of
14 members, all of whom are listed in the table below. Greene
Countys Amended and Restated Charter requires that
directors be divided into three classes, as nearly equal in
number as possible, and that the members of each class serve for
a term of three years and until their successors are elected and
qualified, with one-third of the directors elected each year.
Greene Countys nominating committee has nominated for
election as directors Phil M. Bachman, Robert K. Leonard, Terry
Leonard, Ronald E. Mayberry and Kenneth R. Vaught, each of who
are currently members of the Board of Directors, to serve for a
term of three years and until his respective successor is
elected and qualified. Under Tennessee law, directors are
elected by a plurality of the votes cast at an election. Each of
Messrs. Bachman, Robert Leonard, Terry Leonard, Mayberry
and Vaught has consented to serve as a director if elected.
It is intended that the persons named in the proxies solicited
by the Board of Directors will vote for the election of each of
the nominees. If any nominee is unable to serve or for good
cause will not serve, the shares represented by all properly
executed proxies which have not been revoked will be voted for
the election of a substitute nominee as the Board of Directors
may recommend. In the alternative, the Board of Directors may,
in its discretion, reduce its size to eliminate the vacancy. At
this time, the Board of Directors knows of no reason why any
nominee might be unable or unwilling to serve.
Greene Countys Board of Directors has determined that each
of the following directors is an independent
director within the meaning of Marketplace
Rule 4200(a)(15) of the National Association of Securities
Dealers, Inc. (the NASD):
Martha M. Bachman;
Phil M. Bachman;
Charles S. Brooks;
Bruce Campbell;
W.T. Daniels;
Robin Haynes;
Jerald K. Jaynes;
Robert K. Leonard;
Terry Leonard;
John Tolsma; and
Charles H. Whitfield, Jr.
Greene Countys Board of Directors has established
procedures for its shareholders to communicate with members of
the Board of Directors. Shareholders can communicate with any of
Greene Countys directors, including the chairperson of any
of the committees of the Board of Directors, by writing to a
director c/o Greene County Bancshares, Inc., 100 North Main
Street, P.O. Box 1120, Greeneville, Tennessee 37744.
Greene County encourages the members of its Board of Directors
to its annual meeting of shareholders. All of Greene
Countys directors attended the 2006 Greene County annual
meeting of shareholders.
The Board of Directors recommends a vote FOR
election as directors of all the nominees listed below.
78
The following table sets forth certain information with respect
to each of Greene Countys current directors whose term of
office as a director will or, assuming re-election, is expected
to continue after the annual meeting. Each of Greene
Countys directors also currently serves as a director of
Greene County Bank (the Bank), Greene Countys
wholly owned subsidiary. There are no arrangements or
understandings between Greene County and any director pursuant
to which such person has been selected as a director or nominee
for director of Greene County, and no director or nominee is
related to any other director, nominee or executive officer by
blood, marriage or adoption other than Ms. Bachman, who is
Phil Bachmans wife, and Mr. Robert Leonard, who is
Terry Leonards son.
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Current
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Director
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Term
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Name
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Age
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Since (a)
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Expires
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Previous Five-Years Business Experience
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BOARD NOMINEES FOR TERM TO
EXPIRE IN 2010
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Phil M. Bachman
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69
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1968
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2007
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President, Bachman-Bernard Motors
(automobile dealership), Secretary of Greene County and the Bank
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Robert K. Leonard
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39
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2005
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2007
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President, LMR Plastics
(manufacturing)
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Terry Leonard
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69
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1975
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2007
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Chairman/Owner, Leonard &
Associates (manufacturing)
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Ronald E. Mayberry
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53
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2003
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2007
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Regional President, Sumner,
Rutherford and Lawrence Counties; previously, President and CEO
of Independent Bankshares, Inc. headquartered in Gallatin,
Tennessee, which was acquired by Greene County in November 2003
|
Kenneth R. Vaught
|
|
42
|
|
2002
|
|
2007
|
|
President and Chief Operating
Officer of Greene County and the Bank; previously, Senior
Vice-President and Regional Executive for the Banks Blount
and Knox County, Tennessee offices.
|
|
DIRECTORS CONTINUING IN
OFFICE
|
Martha M. Bachman
|
|
52
|
|
2005
|
|
2009
|
|
Co-Owner, Lancasters
Jewelers, Inc. (retail)
|
Charles S. Brooks
|
|
69
|
|
1990
|
|
2009
|
|
Chairman of the Board, McInturff,
Milligan & Brooks (insurance agency)
|
W.T. Daniels
|
|
62
|
|
1987
|
|
2009
|
|
Property management
|
Robin Haynes
|
|
45
|
|
2004
|
|
2009
|
|
Comptroller & Corporate
Secretary, Delmar Haynes Pontiac GMC (automobile dealership)
|
Charles H. Whitfield, Jr.
|
|
48
|
|
2000
|
|
2009
|
|
President and Chief Executive
Officer, Laughlin Memorial Hospital (hospital management)
|
Bruce Campbell
|
|
55
|
|
2000
|
|
2008
|
|
Director, President and Chief
|
Jerald K. Jaynes
|
|
69
|
|
1992
|
|
2008
|
|
Executive Officer, Forward Air
Corporation, from October, 2003 to date; previously, Director,
President and Chief Operating Officer, Forward Air Corporation
(transportation) Retired; former President & CEO, Unaka Co.,
Inc. (manufacturing)
|
R. Stan Puckett
|
|
51
|
|
1989
|
|
2008
|
|
Chairman of the Board and Chief
Executive Officer of Greene County and the Bank
|
John Tolsma
|
|
33
|
|
2004
|
|
2008
|
|
Chief Executive Officer, Knowledge
Launch (educational multimedia)
|
|
|
|
(a) |
|
Indicates year that director first served as a director of
either Greene County or the Bank. |
Corporate
Governance
Meetings
and Committees of the Board of Directors
Greene County conducts its business through meetings of the
Board of Directors, which met 18 times during 2006. Directors of
Greene County also are directors of the Bank. Each member of the
Board of Directors of Greene County and of the Bank attended at
least 75% or more of the aggregate of (a) the total number
of meetings of the boards of directors and (b) the total
number of meetings held by all committees on which they served,
with the exception of Mr. Campbell, who attended 50% of the
aggregate of such meetings.
79
The Nominating Committee of Greene County, consisting of
Messrs. Terry Leonard, Bachman and Campbell, with
Mr. Leonard serving as Chairman, is responsible selecting
nominees for election as directors. Nominations may also be made
by shareholders, provided such nominations are made in writing
and submitted to the Secretary or the President of Greene County
in accordance with Greene Countys Amended and Restated
Charter as described below. The Nominating Committee has a
written charter which sets out the duties and responsibilities
of the committee, a copy of which is available on the
Investor Relations section of Greene Countys
website at www.mybankconnection.com. Each of the directors who
serve on the Nominating Committee is independent as
that term is defined under Rule 4200(a)(15) of the listing
standards of the NASD. During 2006, the Nominating Committee did
not meet.
Under the terms of Greene Countys Amended and Restated
Charter, shareholders of record of Greene County both at the
time of giving of notice and at the time of the annual meeting,
may nominate persons for election to Greene Countys Board
of Directors. For such nominations to be properly brought before
an annual meeting, the shareholder must have given timely notice
thereof in writing to the secretary of Greene County. To be
timely, a shareholders notice shall be delivered to the
secretary at Greene Countys principal executive office no
less than 40 days nor more than 60 days prior to the
scheduled date of such meeting; except that if notice of public
disclosure of the meeting is given fewer than 50 days prior
to the meeting, such shareholders notice must be delivered
to the secretary of Greene County not later than the close of
business on the 10th day following the day such notice was first
mailed to Greene County shareholders. In addition, each notice
submitted by a Company shareholder shall set forth as to such
nominee all information relating to that person that is required
to be disclosed in solicitations of proxies for election of
directors, or as otherwise required, in each case pursuant to
Regulation 14A of the Exchange Act, including that
nominees written consent to be named in the proxy
statement as a nominee and to serving as a director if elected.
Also, the shareholder giving such notice and the beneficial
owner, if any, on whose behalf the nomination is submitted,
shall include the name and address of such shareholder as they
appear on Greene Countys books and of such beneficial
owner, and the number of shares of each class of Greene
Countys stock which are owned beneficially and of record
by such shareholder and such beneficial owner.
In the event that the number of directors to be elected to the
Board of Directors at an annual meeting is increased and there
is no public announcement by Greene County naming all of the
nominees for director or specifying the size of the increased
Board of Directors at least 70 days prior to the first
anniversary of the prior years annual meeting, a
shareholders notice required by Greene Countys
Amended and Restated Charter shall also be considered timely
with respect to nominees for any such new positions, if it shall
be delivered to the Secretary of Greene County at Greene
Countys principal executive offices not later than the
close of business on the 10th day following the day on which
public announcement of such increase is first made by Greene
County.
Greene Countys Nominating Committee is responsible for
(i) annually reviewing with the Board of Directors the
appropriate skills and characteristics required of members of
the Board of Directors, which, at a minimum, include
professional integrity, sound judgment, and sufficient time to
devote to Board activities; (ii) annually reviewing and
determining any specific qualities or skills that one or more
directors must possess; (iii) identifying individuals
qualified to become directors consistent with the criteria
approved by the Board of Directors; (iv) evaluating and
considering director candidates proposed by management, any
director or any shareholder; and (v) recommending for
selection by the Board of Directors director nominees for the
next annual meeting of shareholders. The Board of Directors will
then review and approve director nominees for the annual meeting
of shareholders.
Each potential director nominee is evaluated on the same basis
regardless of whether he or she is recommended by management, by
a director or by a shareholder. The Board of Directors has not
adopted a policy with respect to minimum qualifications for
directors. Rather, the Nominating Committee annually reviews and
determines the specific qualifications and skills that one or
more directors must possess. Each of the nominees for director
to be elected at the Annual Meeting was nominated and
recommended by the Nominating Committee and approved by the
Board of Directors.
80
Greene County has not received director nominee recommendations
from any shareholders for the terms commencing in 2007 and
expiring in 2010. The Board of Directors will consider nominees
recommended by shareholders, provided that such recommendations
comply with the notice, timing and other requirements provided
for in Greene Countys Amended and Restated Charter.
The Audit Committee of the Bank also serves as the audit
committee for Greene County and is a separately-designated
standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The Audit
Committee of the Bank consists of Messrs. Jaynes, Robert
Leonard, Terry Leonard, Tolsma and Whitfield, Jr. Each of the
directors who serve on the Audit Committee is
independent of Greene County, as the term
independent is defined under Rule 4200(a)(15)
of the listing standards of the NASD and the standards
promulgated under the Sarbanes-Oxley Act of 2002. During 2006,
Mr. Jaynes served as the Chairman of the Audit Committee
and Greene Countys Board of Directors has determined that
he qualifies as an audit committee financial expert
as such term is defined by the SECs rules and regulations,
and is independent, as defined by the NASDs
listing standards and the SECs rules and regulations.
Effective January 1, 2007 Mr. Robert Leonard became
the Chairman of the Audit Committee. Greene Countys Board
of Directors has determined that Mr. Leonard qualifies as
an audit committee financial expert as such term is
defined by the SECs rules and regulations, and is
independent, as defined by the NASDs listing
standards and the SECs rules and regulations. This
committee meets at least quarterly to (1) monitor the
accounting and financial reporting practices of Greene County,
and (2) determine whether Greene County has adequate
administrative, operating and internal accounting control over
financial reporting. This committee met four times during 2006
in its capacity as the Audit Committee for Greene County. A copy
of the Audit Committee Report is set forth below. The Audit
Committee has a written charter which sets out the duties and
responsibilities of the Audit Committee, a copy of which is
available on the Investor Relations section of
Greene Countys website at www.mybankconnection.com.
The Banks Compensation Committee also serves as the
compensation committee for Greene County. The Compensation
Committee consists of Phil Bachman, Martha Bachman, Terry
Leonard, W.T. Daniels, Charles Brooks, Bruce Campbell and John
Tolsma, with Mr. Terry Leonard serving as Chairman. Each
member of the Compensation Committee is independent
within the meaning of the NASDs listing standards. The
Compensation Committee meets periodically to evaluate the
compensation and fringe benefits of the directors, officers and
employees of the Bank and Greene County and recommend
compensation changes to the respective Boards of Directors. The
Compensation Committee met three times during 2006. The
Compensation Committee has a written charter which sets out the
duties and responsibilities of the Compensation Committee, a
copy of which is available on the Investor Relations
section of Greene Countys website at
www.mybankconnection.com.
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation Committee during 2006 consisted
of Messrs. Terry Leonard, Bachman, Brooks, Daniels,
Campbell, Tolsma and Ms. Bachman.
Except for Mr. Bachman, who serves as the Secretary of
Greene County and the Bank, for which he receives no
compensation, no member of the Compensation Committee of the
Board of Directors of Greene County was either (i) an
officer or employee of Greene County or any of its subsidiaries
during the fiscal year ended December 31, 2006, (ii) a
former officer of Greene County or any of its subsidiaries, or
(iii) an insider (i.e., director, officer, director or
officer nominee, greater than 5% shareholder, or immediate
family member of the foregoing) of Greene County or any of its
subsidiaries that engaged, or is currently engaging, in
transactions with Greene County or any subsidiary of Greene
County that must be disclosed in this proxy statement under the
rules and regulations of the SEC.
Except as set forth above, there are no relationships among
Greene Countys executive officers, members of its
Compensation Committee or entities whose executives serve on the
Board of Directors or the Compensation Committee that require
disclosure under applicable SEC rules or regulations.
81
Certain
Transactions
Greene County and its subsidiaries have had, and expect to have
in the future, transactions in the ordinary course of business
with directors and executive officers and members of their
immediate families, as well as with principal shareholders. All
loans and deposits included in such transactions were made in
the ordinary course of business on substantially the same terms,
including interest rates and collateral, in the case of loans,
as those prevailing for comparable transactions with
non-affiliated persons. It is the belief of management that such
loans neither involved more than the normal risk of
collectability nor presented other unfavorable features.
Greene County offers insurance products (accident and health,
term life, and credit life) to its loan customers through
Mountain Life Insurance Company, a subsidiary of Mountain
Services Corporation, of which Mr. Bachman has a 12.46%
ownership interest and also sits on the Board of Directors.
During 2006, Greene County forwarded $307,441 in premiums to
Mountain Life Insurance Company. These premiums are net of
Greene Countys customary rebate incurred in the normal
course of business. Management believes these insurance products
offered to its customers are competitive with similar products
offered by other insurance companies.
Review,
Approval or Ratification of Transactions with Related
Persons
Greene County has followed the practice of having the full board
of directors or a committee of disinterested directors review
and approve transactions in which a director has a material
interest. Greene County has adopted a written Related Party
Transactions Review and Approval Policy, which is administered
by the Board of Directors. The Policy covers related party
transactions, including any financial transaction,
arrangement or relationship or any series of similar
transactions, arrangements or relationships, either currently
proposed or since the beginning of the last fiscal year in which
Greene County was or is to be a participant, involves an amount
exceeding $120,000 and in which a director, nominee for
director, executive officer or immediate family member of such
person has or will have a direct or indirect material interest.
The Board of Directors determines whether or not related
party transactions are fair and reasonable to Greene
County. The Board of Directors also determines whether any
related party transaction in which a director has an
interest impairs the directors independence. Approved
related party transactions are subject to on-going
review by Greene Countys management on at least an annual
basis. Loans to directors and executive officers and their
related interests made and approved pursuant to the terms of
Federal Reserve Board Regulation O are deemed approved
under this policy. Any such loans that become subject to
specific disclosure in Greene Countys annual proxy
statement will be reviewed by the Audit Committee at that time.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires Greene Countys officers and directors, and
persons who own more than 10% of a registered class of Greene
Countys equity securities, to file reports of ownership
and changes in ownership with the SEC. Officers, directors and
greater-than-10% shareholders are required to furnish Greene
County with copies of all such reports. Based solely on its
review of copies of such reports received by it, or written
representations from certain reporting persons that no annual
report of change in beneficial ownership is required, Greene
County believes that, during and with respect to the year ended
December 31, 2006 all such filing requirements were timely
satisfied.
Audit
Committee Report
The following Audit Committee Report shall not be deemed
filed or incorporated by reference into any other document,
including Greene Countys filings under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the
extent Greene County specifically incorporates this Report into
any such filing by reference.
The Board of Directors of Greene County has appointed an Audit
Committee, consisting of five independent directors, which
assists the Board of Directors in fulfilling its responsibility
for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of Greene County.
82
In discharging its oversight responsibility as to the audit
process, the Audit Committee obtained from Greene Countys
independent registered public accounting firm a formal written
statement describing all relationships between the independent
registered public accounting firm and Greene County that might
bear on the independent registered public accounting firms
independence consistent with Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, as amended, and those independent standards
promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act of 2002, and has discussed with the
independent registered public accounting firm any relationships
that may impact their objectivity and independence and satisfied
itself as to the independent registered public accounting
firms independence. The Audit Committee also discussed
with management, the internal auditors and the independent
registered public accounting firm the quality and adequacy of
Greene Countys internal control over financial reporting
and the internal audit functions organization,
responsibilities, budget and staffing. The Audit Committee
reviewed with both the independent registered public accounting
firm and the internal auditors their audit plans, audit scope,
and identification of audit risks.
The Audit Committee reviewed and discussed with the independent
registered public accounting firm all matters required by
generally accepted auditing standards, including those matters
described in Statement on Auditing Standards No. 61, as
amended, Communication with Audit Committees, and, with
and without management present, discussed and reviewed the
results of the independent registered public accounting
firms examination of the financial statements. The Audit
Committee also discussed the results of the internal audit
examinations.
The Audit Committee reviewed and discussed the audited financial
statements of Greene County as of and for the fiscal year ended
December 31, 2006, with management and the independent
registered public accounting firm. Management has the
responsibility for the preparation of Greene Countys
financial statements, and the independent registered public
accounting firm has the responsibility for the examination of
those statements and expressing an opinion on the conformity of
those audited financial statements with accounting principles
generally accepted in the United States of America. The Audit
Committee held four meetings during 2006.
Based on the above-mentioned review and discussions with
management and the registered public accounting firm, the Audit
Committee recommended to the Board of Directors that Greene
Countys audited financial statements be included in Greene
Countys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, for filing
with the Securities and Exchange Commission.
Jerald K. Jaynes, Chairman 2006
Robert K. Leonard, Chairman 2007
Terry Leonard
Charles H. Whitfield, Jr.
John Tolsma
Code
of Conduct
Greene County maintains a code of conduct that is applicable to
all of Greene Countys directors and employees, including
its principal executive officer and its senior financial
officers. This code, which requires continued observance of high
ethical standards such as honesty, integrity and compliance with
law in the conduct of Greene Countys business, is
available for public access under the Investor
Relations section of Greene Countys website at
www.mybankconnection.com. Greene County intends to make any
legally required disclosure of any amendments to, or waivers
from, the code of conduct with respect to its directors and
executive officers in accordance with the rules and regulations
of the SEC and the NASD. If such disclosure is made on Greene
Countys website, it will be located on the Investor
Relations section of the website at
www.mybankconnection.com.
83
Compensation
Committee Report
The following Compensation Committee Report shall not be
deemed filed or incorporated by reference into any other
document, including Greene Countys filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent Greene County specifically incorporates
this Report into any such filing by reference.
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis contained in this Proxy
Statement with management. Based on this review and discussion,
the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in
Greene Countys Proxy Statement for its 2007 Annual Meeting
of Shareholders.
Submitted by the Compensation Committee of Greene Countys
Board of Directors
Terry Leonard, Chairman
Martha Bachman
Philip M. Bachman, Jr.
Charles Brooks
Bruce Campbell
W.T. Daniels
John Tolsma
84
Compensation
of Executive Officers and Directors
SUMMARY
COMPENSATION TABLE
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Change in Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
|
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|
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|
Stock
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|
Option
|
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|
Incentive Plan
|
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|
Compensation
|
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All Other
|
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Name and
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|
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|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
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Earnings
|
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Compensation
|
|
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Total
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(1)($)
|
|
|
(2)($)
|
|
|
(3)($)
|
|
|
(4)($)
|
|
|
($)
|
|
|
R. Stan Puckett,
|
|
|
2006
|
|
|
$
|
265,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
184,000
|
|
|
$
|
7,589
|
|
|
$
|
127,451
|
|
|
$
|
584,040
|
|
Chairman of the
Board and Chief Executive Officer of Greene County and the Bank
(CEO)
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|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth R. Vaught,
|
|
|
2006
|
|
|
$
|
225,000
|
|
|
|
|
|
|
|
|
|
|
$
|
27,333
|
|
|
$
|
155,000
|
|
|
$
|
1,537
|
|
|
$
|
94,174
|
|
|
$
|
503,044
|
|
Director, President
and Chief Operating Officer of Greene County and the Bank
(COO)
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|
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|
|
|
|
|
|
|
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|
James E. Adams,
|
|
|
2006
|
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
80,000
|
|
|
|
|
|
|
$
|
11,809
|
|
|
$
|
266,809
|
|
Senior Vice President, Chief
Financial Office and Assistant Secretary of Greene County and
the Bank (CFO)
|
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|
|
|
|
|
|
|
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|
Steve L. Droke,
|
|
|
2006
|
|
|
$
|
155,000
|
|
|
|
|
|
|
|
|
|
|
$
|
11,556
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|
|
$
|
52,000
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|
|
|
|
|
|
$
|
16,651
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|
|
$
|
235,207
|
|
Senior Vice
President and Chief Credit Officer of the Bank (CCO)
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|
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|
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|
|
|
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|
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|
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|
|
|
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William C. Adams, Jr.,
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|
|
2006
|
|
|
$
|
146,000
|
|
|
|
|
|
|
|
|
|
|
$
|
9,921
|
|
|
$
|
40,500
|
|
|
|
|
|
|
$
|
11,459
|
|
|
$
|
207,880
|
|
Senior Vice
President and Chief Information Officer of the Bank
(CIO)
|
|
|
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(1)
|
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The amounts in column captioned
Option Awards reflect the dollar amount recognized
for financial statement reporting purposes for the fiscal year
ended December 31, 2006, in accordance with FAS 123(R)
of awards pursuant to Greene Countys equity incentive
plans and thus may include amounts from awards granted in and
prior to 2006. For a description of the assumptions used by
Greene County in valuing these awards please see
Note 12 Stock Options to Greene
Countys consolidated financial statements included in
Greene Countys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 filed with the
Securities and Exchange Commission on February 28, 2007.
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(2)
|
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Payment for 2006 performance paid
in January and February 2007.
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(3)
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|
The amount in the column captioned
Change in Pension Value and Nonqualified Deferred
Compensation Earnings is the deemed above-market interest
earned on deferred compensation (8.93% 6.02% =
2.91%) based upon 120% of the Long Term Annual Applicable
Federal Rate (AFR) published by the Internal Revenue
Service in May 2006. Greene Countys interest rate for 2006
was 8.93%, please see Note 8 Benefit
Plans to Greene Countys consolidated financial
statements included in Greene Countys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 filed with the
Securities and Exchange Commission on February 28, 2007.
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(4)
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The amounts shown as All
Other Compensation include the following:
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Health and Life
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Directors Fees
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Non-Compete
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Company 401(k)
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Company Car
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Insurance Paid by
|
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|
Country Club
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Name
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Paid and Earned
|
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|
Agreement
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Contribution
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Allowance
|
|
|
Greene County
|
|
|
Dues
|
|
|
R. Stan Puckett CEO
|
|
$
|
19,600
|
|
|
$
|
83,397
|
|
|
$
|
13,200
|
|
|
|
|
|
|
$
|
2,925
|
|
|
$
|
8,329
|
|
Kenneth R. Vaught COO
|
|
$
|
19,600
|
|
|
|
58,463
|
|
|
$
|
13,200
|
|
|
|
|
|
|
|
|
|
|
$
|
2,911
|
|
James E. Adams CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,000
|
|
|
|
|
|
|
$
|
2,809
|
|
Steve L. Droke CCO
|
|
|
|
|
|
|
|
|
|
$
|
9,170
|
|
|
|
|
|
|
$
|
4,672
|
|
|
$
|
2,809
|
|
William C. Adams CIO
|
|
|
|
|
|
|
|
|
|
$
|
8,650
|
|
|
|
|
|
|
|
|
|
|
$
|
2,809
|
|
85
GRANTS OF
PLAN-BASED AWARDS
The following table summarizes certain information regarding
grants of plan based awards to the named executive officers
during fiscal year 2006. No stock appreciation rights
(SARs) have been granted by Greene County.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
Stock Awards:
|
|
|
Number of
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Under Equity
|
|
|
Number of
|
|
|
Securities
|
|
|
Exercise or
|
|
|
Fair Value of
|
|
|
|
|
|
|
Incentive Plan Awards
|
|
|
Incentive Plan Awards
|
|
|
Shares of
|
|
|
Underlying
|
|
|
Base Price of
|
|
|
Stock and
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Stock or Units
|
|
|
Options(1)
|
|
|
Option Awards
|
|
|
Option Awards
|
|
Name
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)
|
|
|
R. Stan Puckett CEO
|
|
|
2/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
$
|
28.90
|
|
|
$
|
81,100
|
|
Kenneth R. Vaught COO
|
|
|
2/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
$
|
28.90
|
|
|
$
|
89,000
|
|
James E. Adams CFO
|
|
|
2/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
$
|
28.90
|
|
|
$
|
26,700
|
|
Steve L. Droke CCO
|
|
|
2/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,302
|
|
|
$
|
28.90
|
|
|
$
|
29,388
|
|
William C. Adams CIO
|
|
|
2/21/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,139
|
|
|
$
|
28.90
|
|
|
$
|
27,937
|
|
|
|
|
(1) |
|
Reflects options awarded to the named executive officer. The
term of the options provide for vesting in five equal annual
installments commencing one year from the grant date. The
options have a life of ten years from the grant date. |
86
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth certain information with respect
to outstanding equity awards at December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Plan Awards:
|
|
|
|
Number
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Unearned
|
|
|
Market or
|
|
|
|
of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Shares,
|
|
|
Payout Value of
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Units or
|
|
|
Unearned
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Other
|
|
|
Shares, Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Option Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That Have Not
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
(#)
|
|
|
(#)(1)
|
|
|
(#)
|
|
|
($)
|
|
|
Date(2)
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
R. Stan Puckett CEO
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
11.10
|
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
12.24
|
|
|
|
12/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.41
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.86
|
|
|
|
12/31/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
15.09
|
|
|
|
12/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
16.41
|
|
|
|
01/13/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
19.97
|
|
|
|
01/09/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
$
|
26.89
|
|
|
|
01/25/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
$
|
28.90
|
|
|
|
02/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth R. Vaught COO
|
|
|
670
|
|
|
|
|
|
|
|
|
|
|
$
|
23.00
|
|
|
|
12/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,455
|
|
|
|
|
|
|
|
|
|
|
$
|
30.00
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,455
|
|
|
|
|
|
|
|
|
|
|
$
|
32.00
|
|
|
|
12/31/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,531
|
|
|
|
|
|
|
|
|
|
|
$
|
16.00
|
|
|
|
12/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
6,000
|
|
|
|
|
|
|
$
|
23.99
|
|
|
|
02/17/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
8,000
|
|
|
|
|
|
|
$
|
26.89
|
|
|
|
01/25/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
$
|
28.90
|
|
|
|
02/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Adams CFO
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
$
|
28.90
|
|
|
|
2/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steve L. Droke CCO
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
$
|
20.00
|
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,785
|
|
|
|
|
|
|
|
|
|
|
$
|
23.00
|
|
|
|
12/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
$
|
30.00
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
$
|
32.00
|
|
|
|
12/31/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
$
|
16.00
|
|
|
|
12/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179
|
|
|
|
|
|
|
$
|
19.00
|
|
|
|
01/10/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179
|
|
|
|
1,768
|
|
|
|
|
|
|
$
|
23.21
|
|
|
|
01/09/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
552
|
|
|
|
2,208
|
|
|
|
|
|
|
$
|
26.89
|
|
|
|
01/25/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,302
|
|
|
|
|
|
|
$
|
28.90
|
|
|
|
02/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Adams CIO
|
|
|
1,860
|
|
|
|
|
|
|
|
|
|
|
$
|
20.00
|
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,285
|
|
|
|
|
|
|
|
|
|
|
$
|
23.00
|
|
|
|
12/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
$
|
30.00
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
$
|
32.00
|
|
|
|
12/31/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,579
|
|
|
|
|
|
|
|
|
|
|
$
|
16.00
|
|
|
|
12/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,547
|
|
|
|
1,032
|
|
|
|
|
|
|
$
|
19.00
|
|
|
|
01/10/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,032
|
|
|
|
1,547
|
|
|
|
|
|
|
$
|
23.21
|
|
|
|
01/09/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
453
|
|
|
|
1,812
|
|
|
|
|
|
|
$
|
26.89
|
|
|
|
01/25/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,139
|
|
|
|
|
|
|
$
|
28.90
|
|
|
|
02/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Options become exercisable in five equal annual installments
beginning on the first anniversary date of grant. |
|
(2) |
|
The expiration date of each option occurs ten years after the
date of grant for each option. |
87
OPTIONS
EXERCISED AND STOCK VESTED TABLE
The following table sets forth certain information with respect
to options exercised by the named executive officers in fiscal
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
|
on Exercise
|
|
|
on Exercise
|
|
|
on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
(#)
|
|
|
($)
|
|
|
R. Stan Puckett CEO
|
|
|
9,000
|
|
|
$
|
199,458
|
|
|
|
|
|
|
|
|
|
Steve L. Droke CCO
|
|
|
4,125
|
|
|
$
|
56,571
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the difference between the exercise price and the
fair market value of the common stock on the date of exercise. |
PENSION
BENEFITS
We do not provide pension arrangements or post-retirement health
coverage for our executives or employees. Our executives are
eligible to participate in our 401(k) contributory defined
contribution plan.
NONQUALIFIED
DEFERRED COMPENSATION TABLE
The following table sets forth certain information with respect
to deferrals made by Greene County named executive officers
pursuant to Greene Countys nonqualified deferred
compensation plan, the earnings thereon and the aggregate
balance at December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate Balance
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Aggregate Earnings
|
|
|
Withdrawals/
|
|
|
at Last
|
|
|
|
Last FY(1)
|
|
|
Last FY (1)
|
|
|
in Last FY (1)
|
|
|
Distributions
|
|
|
FYE
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
R. Stan Puckett CEO
Deferred Compensation
|
|
$
|
13,800
|
|
|
$
|
|
|
|
$
|
23,286
|
|
|
$
|
|
|
|
$
|
331,436
|
|
Non-Compete Agreement
|
|
|
|
|
|
|
71,100
|
|
|
|
12,297
|
|
|
|
|
|
|
|
234,817
|
|
Kenneth R. Vaught COO
Deferred Compensation
|
|
|
14,800
|
|
|
|
|
|
|
|
4,715
|
|
|
|
|
|
|
|
84,118
|
|
Non-Compete Agreement
|
|
|
|
|
|
|
53,184
|
|
|
|
5,279
|
|
|
|
|
|
|
|
113,256
|
|
James E. Adams CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steve L. Droke CCO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Adams CIO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All amounts reported in the columns titled Executive
Contributions in Last FY, Registrants Contributions in Last FY
and Aggregate Earnings in Last FY are also reported as
compensation to such named executive officer in the Summary
Compensation Table on page 85. |
88
DIRECTOR
COMPENSATION TABLE
The table below summarizes the compensation paid by Greene
County to directors for the fiscal year ended December 31,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Stock Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Martha M. Bachman
|
|
$
|
23,800
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
258
|
|
|
|
|
|
|
$
|
28,558
|
|
Phil M. Bachman
|
|
|
39,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,250
|
|
|
|
|
|
|
|
101,800
|
|
Charles S. Brooks
|
|
|
30,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,869
|
|
|
|
|
|
|
|
37,969
|
|
Bruce Campbell
|
|
|
18,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,400
|
|
W.T. Daniels
|
|
|
36,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,667
|
|
|
|
|
|
|
|
51,767
|
|
Robin Haynes
|
|
|
23,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,800
|
|
Jerald K. Jaynes
|
|
|
30,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,953
|
|
|
|
|
|
|
|
51,353
|
|
Robert K. Leonard
|
|
|
25,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,900
|
|
Terry Leonard
|
|
|
25,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,442
|
|
|
|
|
|
|
|
48,892
|
|
Ronald E. Mayberry
|
|
|
19,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,626
|
|
|
$
|
182,492
|
(a)
|
|
|
203,718
|
|
John Tolsma
|
|
|
26,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,923
|
|
|
|
|
|
|
|
28,873
|
|
Charles H. Whitfield, Jr.
|
|
|
27,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,523
|
|
|
|
|
|
|
|
32,423
|
|
|
|
|
(a) |
|
Includes his salary of $172,000 and his 2006 bonus of $10,492,
which was paid in February 2007. |
Directors of Greene County meet as a Board on a monthly basis,
or more often as needed, to address matters relating to the
operation and direction of the Company. Greene County does not
compensate members of its Board of Directors for any meetings of
the Board, except for certain special meetings held on dates
other than a regularly scheduled meeting of the Banks
Board of Directors. During 2006, the Board of Directors of
Greene County met 18 times, of which six of the meetings were
special meetings as to which the directors were each paid $600
for their attendance by the Bank.
Directors of Greene County are also directors of the Bank. The
Bank compensates members of its Board of Directors for all
regular and special meetings. Directors of the Bank received
$600 for each regular monthly and specially-called Board meeting
attended in 2006, plus payment of such fee for up to two
absences during a year. The Banks Board of Directors met
17 times in 2006. Each Bank director also received an annual
retainer fee of $10,000, paid in equal quarterly amounts.
Members of the Executive Committee of the Banks Board of
Directors also received $450 for each twice-monthly meeting of
the Executive Committee attended, and Messrs. Bachman and
Daniels, the two permanent members of the Committee, received an
annual retainer of $1,500. During 2006, members of the
Banks Audit Committee received $450 per each
quarterly meeting and specially called meetings, as well as an
annual retainer fee of $1,500 paid in equal quarterly amounts.
In addition, the Chairman of the Audit Committee received an
annual retainer of $3,000. Compensation for all other committee
meetings was $300 per meeting during 2006.
During 2006, the Bank maintained a deferred compensation plan
(the Original Plan) pursuant to which all directors
could elect to defer receipt of a portion of their fees by
entering into deferred fee agreements with the Bank. In addition
to the fee deferral, the agreements also provided for payment of
benefits under certain events of disability, early retirement,
termination of employment or death. The Bank is the beneficiary
of life insurance acquired with respect to directors
participating in the Original Plan. During 2006, Greene County
began using a formula which provides an annual earnings
crediting rate based upon 75% of Greene Countys return on
average stockholders equity on balances in the plan, until
the Director is separated from service, and, thereafter at an
earnings crediting rate of 56.25% of Greene Countys return
on average stockholders equity for the year ending.
89
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table describes the potential payments and
benefits under Greene Countys compensation and benefit
plans and arrangements to which the named executive officers
would be entitled upon termination of employment as of
December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
of Medical
|
|
|
(Intrinsic
|
|
|
|
|
|
Total
|
|
|
|
Severance
|
|
|
and Welfare
|
|
|
Value at
|
|
|
Non-Compete
|
|
|
Termination
|
|
Name
|
|
Payment
|
|
|
Benefits
|
|
|
12/31/06)
|
|
|
Agreement
|
|
|
Benefits
|
|
|
R. Stan Puckett CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary termination
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Involuntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or good
reason termination after change in control (CIC)
|
|
|
556,400
|
|
|
|
12,654
|
|
|
|
97,470
|
|
|
|
361,592
|
|
|
|
1,028,116
|
|
Kenneth R. Vaught COO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
|
|
|
368,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368,900
|
|
Involuntary or good
reason termination after change in control (CIC)
|
|
|
1,140,000
|
|
|
|
12,654
|
|
|
|
305,460
|
|
|
|
283,090
|
|
|
|
1,741,204
|
|
James E. Adams CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or good
reason termination after change in control (CIC)
|
|
|
348,250
|
|
|
|
12,654
|
|
|
|
32,490
|
|
|
|
|
|
|
|
393,394
|
|
Steve L. Droke CCO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or good
reason termination after change in control (CIC)
|
|
|
318,700
|
|
|
|
9,828
|
|
|
|
117,759
|
|
|
|
|
|
|
|
446,287
|
|
William C. Adams CIO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary or good
reason termination after change in control (CIC)
|
|
|
289,600
|
|
|
|
12,654
|
|
|
|
104,211
|
|
|
|
|
|
|
|
406,465
|
|
90
Ownership
of Voting Stock
Security
Ownership of Certain Beneficial Owners and Management
Persons and groups beneficially owning more than 5% of Greene
Countys common stock are required under federal securities
laws to file certain reports with the SEC detailing their
ownership. The following table sets forth the amount and
percentage of the common stock beneficially owned by any person
or group of persons known to the Company to be a beneficial
owner of more than 5% of the common stock as of the record date.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
Percent of
|
|
|
|
Nature of
|
|
|
Common
|
|
Name and Address of
|
|
Beneficial
|
|
|
Stock
|
|
Beneficial Owner
|
|
Ownership(a)
|
|
|
Outstanding
|
|
|
Phil M. Bachman
Martha Bachman
100 N. Main Street
P.O. Box 1120
Greeneville, Tennessee 37743
|
|
|
879,155
|
(b)
|
|
|
8.99
|
%
|
Columbia Wanger Asset Management,
L.P.
227 West Monroe Street
Suite 3000
Chicago, IL 60606
|
|
|
538,300
|
(c)
|
|
|
5.49
|
%
|
Wellington Management Company,
LLP
75 State Street
Boston, MA 02109
|
|
|
513,325
|
(d)
|
|
|
5.23
|
%
|
|
|
|
(a) |
|
For purposes of this table, an individual or entity is
considered to beneficially own any share of common
stock which he, she or it directly or indirectly, through any
contract, arrangement, understanding, relationship, or
otherwise, has or shares: (1) voting power, which includes
the power to vote, or to direct the voting of, such security;
and/or
(2) investment power, which includes the power to dispose,
or to direct the disposition of, such security. In addition, an
individual or entity is deemed to be the beneficial owner of any
share of common stock of which he, she or it has the right to
acquire voting or investment power within 60 days of the
record date. |
|
(b) |
|
Phil Bachman and Martha Bachman are husband and wife. Includes
196,195 shares of common stock held directly or indirectly
by Martha Bachman as to which Phil Bachman disclaims beneficial
ownership, 664,960 shares owned by Phil Bachman
individually and 18,000 shares owned by Mr. and
Mrs. Bachman jointly. |
|
(c) |
|
Based solely on information contained in a Schedule 13G
filed by Columbia Wanger Asset Management, L.P. with the
Securities and Exchange Commission on January 12, 2007. |
|
(d) |
|
Based solely on information contained in a Schedule 13G
filed by Wellington Management Company, LLP with the Securities
and Exchange Commission on February 14, 2007. |
91
The following table sets forth, as of the Record Date, certain
information known to Greene County as to common stock
beneficially owned by each director and named executive officer
of Greene County and by all directors and executive officers of
Greene County as a group. The address for each of our directors
and executive officers listed below is c/o Greene County
Bancshares, Inc., 100 North Main Street, P.O. Box 1120,
Greeneville, Tennessee 37744.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
Percent of
|
|
|
|
Beneficial
|
|
|
Common
|
|
|
|
Ownership
|
|
|
Stock
|
|
Name, Position and Address
|
|
(a)(b)
|
|
|
Outstanding
|
|
|
R. Stan Puckett, Chairman of the
Board and Chief Executive Officer
|
|
|
139,802
|
(c)
|
|
|
1.43
|
%
|
Phil M. Bachman, Secretary and
Director
|
|
|
879,155
|
(d)
|
|
|
8.96
|
%
|
Martha Bachman, Director
|
|
|
879,155
|
(d)
|
|
|
8.96
|
%
|
Charles S. Brooks, Director
|
|
|
476
|
|
|
|
*
|
|
Bruce Campbell, Director
|
|
|
5,127
|
|
|
|
*
|
|
W.T. Daniels, Director
|
|
|
8,500
|
|
|
|
*
|
|
Robin Haynes, Director
|
|
|
10,360
|
|
|
|
*
|
|
Jerald K. Jaynes, Director
|
|
|
15,000
|
|
|
|
*
|
|
Bobby Leonard, Director
|
|
|
8,664
|
|
|
|
*
|
|
Terry Leonard, Director
|
|
|
46,330
|
|
|
|
*
|
|
John Tolsma, Director
|
|
|
750
|
|
|
|
*
|
|
Charles H. Whitfield, Jr.,
Director
|
|
|
6,281
|
|
|
|
*
|
|
Ronald E. Mayberry, Director,
Regional President, Sumner and Lawrence Counties
|
|
|
76,798
|
|
|
|
*
|
|
Kenneth R. Vaught, Director,
President and Chief Operating Officer
|
|
|
22,111
|
|
|
|
*
|
|
Bill Adams, Senior Vice President
and Chief Information Officer
|
|
|
30,358
|
|
|
|
*
|
|
Steve L. Droke, Senior Vice
President and Chief Credit Officer
|
|
|
26,096
|
|
|
|
*
|
|
James E. Adams, Senior Vice
President, Chief Financial Officer and Assistant Secretary
|
|
|
2,050
|
|
|
|
*
|
|
All directors and executive
officers as a group (17) persons)
|
|
|
1,277,858
|
|
|
|
13.03
|
%
|
|
|
|
* |
|
Less than 1% of the outstanding common stock. |
|
(a) |
|
For the definition of beneficial ownership, see Note
(a) to the preceding table. |
|
(b) |
|
Includes, as indicated below, shares owned directly by directors
and executive officers of Greene County as well as shares held
by their spouses and children, trusts of which certain directors
are trustees and corporations in which certain directors own a
controlling interest. Also includes, as indicated below, shares
of common stock subject to outstanding options which are
exercisable within 60 days of the Record Date as follows:
Mr. Mayberry (15,987), Mr. Vaught (17,111),
Mr. Bill Adams (16,768), Mr. Droke (15,597),
Mr. James Adams (600), all directors and officers as a
group (139,863). |
|
(c) |
|
Includes options to acquire 63,000 shares of common stock
currently exercisable by Mr. Puckett at an exercise price
equal to 150% of the book value of the common stock at the date
of grant (a weighted average price of approximately
$14.58 per share) and 10,800 shares of common stock
currently exercisable by Mr. Puckett at an exercise price
equal to the fair market value at the date of grant (a weighted
average price of approximately $27.23 per share). |
|
(d) |
|
Phil Bachman and Martha Bachman are husband and wife. Includes
196,195 shares of common stock held directly or indirectly
by Martha Bachman as to which Phil Bachman disclaims beneficial
ownership, 664,960 shares owned by Phil Bachman
individually and 18,000 shares owned by Mr. and
Mrs. Bachman jointly. |
92
Compensation
Discussion and Analysis
Introduction
The Compensation Committee of the Board, which also serves as
the Compensation Committee of the bank, is comprised of seven
members of the Board of Directors and is responsible for
developing and making recommendations to the full Board of
Directors concerning compensation paid to the Chief Executive
Officer and the President and Chief Operating Officer.
Additionally, after considering the recommendations of the Chief
Executive Officer, the Compensation Committee will recommend to
the full Board of Directors compensation for other named
executive officers. The Compensation Committee is further
responsible for administering all aspects of the Companys
executive compensation program. The Compensation Committee
utilizes the services of a nationally recognized consulting firm
in the development and design of the overall executive
compensation program. Each member of the Compensation Committee
is independent within the meaning of NASDs listing
standard and is appointed annually. Members of the Compensation
Committee include Terry Leonard (Chairman), Martha Bachman,
Philip Bachman, Jr., Charles Brooks, Bruce Campbell, W.T.
Daniels and John Tolsma. The Compensation Committee meets
periodically to evaluate the compensation and fringe benefits of
the directors, officers and employees of the Bank and the
Company and recommend compensation changes to the respective
Boards of Directors. The Compensation Committee met three times
during 2006. The Compensation Committee has a written charter
which sets out the duties and responsibilities of the
Compensation Committee, a copy of which is available on the
Investor Relations section of the Companys
website at www.mybankconnection.com.
Executive
Compensation Philosophy
Greene County seeks to provide an executive compensation package
that is driven by overall financial performance, increase in
shareholder value, success of the business unit directly
impacted by the executives performance and the performance
of the individual executive. Executive compensation is intended
to be set at levels that the Compensation Committee, based upon
information provided by the consultant, believes is consistent
with a peer group of banks independently selected by the
Committee.
Objectives
of Executive Compensation
The objectives of Greene Countys executive compensation
program are to attract and retain quality executive leadership
and to enhance the individual executives performance. This
is accomplished through the alignment of incentives with each
business unit most directly impacted by the executives
leadership and performance with the key objectives to increase
shareholder value and improve overall performance.
The compensation committee bases its executive compensation
program on the same objectives that guide Greene County in
establishing all of its compensation programs. Compensation is
based upon the level of job responsibility, individual
performance and company performance. As employees progress to
higher levels of responsibility in the organization, an
increasing proportion of their pay should be linked to company
performance and shareholder returns, because they are more able
to affect company results. Additionally, compensation should
reflect the value of the job in the marketplace. To attract and
retain a highly skilled workforce Greene County must remain
competitive with the pay of other employers who compete with us
for talent. Compensation programs must deliver top-tier
compensation given top-tier individual and company performance.
Where individual performance falls short of expectations
and/or
company performance lags the industry, the programs should
deliver lower-tier compensation. In addition, the objectives of
pay for performance and retention must be balanced. Even in
periods of temporary downturns in company performance, the
programs should continue to ensure that successful,
high-achieving employees will remain motivated and committed to
Greene County.
The committee strives to meet these objectives while maintaining
market competitive pay levels and ensuring that we make
efficient use of shares and have predictable expense recognition.
93
Competitive
Positioning
In conjunction with the outside consultant, a customized peer
group of Banks was developed in order to benchmark both director
and the top two executive officer compensation packages. The
peer group was based upon a number of factors including company
focus, growth and earnings, asset size and outside investment
analyst reviews. A proxy analysis was performed comparing
directors and the top two executive officers overall
compensation to the peer group. Based upon the review of market
data by the consultants, Greene County set annual incentive and
equity award levels for the Chief Executive Officer and the
President and Chief Operating Officer which would ensure market
competitive pay at the 50th percentile when performance
goals are met and at the 75th percentile when performance
goals are exceeded. Additionally the Compensation Committee
established benchmarks associated with the Bank maintaining a
top rating from its primary Bank Regulator.
Base salaries for other named executive officers are determined
initially by evaluating the responsibilities of the positions
held, and by reference to the competitive marketplace for
talent, including a comparison of base salaries for comparable
positions at comparable companies within the financial services
industry. Annual salary adjustments are determined by evaluating
the competitive marketplace, the performance of Greene County
and the performance of the other named executive officers.
Composition
of Total Compensation
Greene County provides a competitive mix of pay elements that
align executive incentives with shareholder value. The executive
compensation includes both short and long term compensation,
with an emphasis on long-term compensation that is tied to
corporate and stock price performance. We choose to use stock
options in the long-term component of total compensation for
named executive officers as it makes stock price appreciation
fundamental in realizing a compensation benefit. Incentive
performance measures promote shareholder return and earnings
growth, and the plan design assures clear linkages between
performance measures, participants ability to influence
such measures and award levels. By emphasizing longer
performance measurement periods by using long-term incentives,
we align our executives interests with our shareholders
and create a strong retention tool.
Base salaries are designed to provide competitive levels of
compensation to executives based upon their experience, duties
and scope of responsibility. Base salaries are provided to
ensure a basic level of compensation and necessary to recruit
and retain executives. An important aspect of base salaries is
the committees ability to use annual base salary
adjustments to reflect an individuals performance or
change in responsibilities. The Committee places a greater
emphasis targeting the total amount of direct compensation to
peer practices and emphasizes a mix of compensation weighted
towards variable compensation for the Chief Executive Officer
and the President and Chief Operating Officer. At lower
executive levels, base salaries represent a larger proportion of
total compensation but at the other named executive levels are
progressively replaced with larger variable compensation
opportunities.
Annual bonus incentives are used as a short-term incentive to
drive achievement of annual performance goals including the
support of strategic business objectives, financial goals,
specific performance goals and to encourage team work.
The benefits component of total compensation includes Greene
Countys 401(k) Plan and a non-qualified deferred
compensation plan. Under the terms of the qualified 401(k) Plan,
all employees may defer between 1% and 20% of their eligible pay
up to the maximum contribution permitted by law. Each year the
Board of Directors, at its discretion, will also determine an
amount expressed as a percentage of eligible pay that Greene
County will match. For the calendar year 2006, the Board
approved a matching contribution of 5% of eligible pay for all
eligible employees.
Greene County has entered into Change in Control Agreements and
Employment Agreements with both the Chief Executive Officer and
the President and Chief Operating Officer. The agreements were
initially for a three year period with an automatic renewal
unless either party notifies the other of a termination at least
90 days prior to the end of the then current term. Both
agreements have been automatically renewed.
94
Additionally, Greene County has entered into Change in Control
Agreements with selected members of senior management, including
each of the named executive officers. The Change in Control
agreements were entered into as a function of the consolidation
occurring in the financial services industry and to not have our
executives distracted by a rumored, or actual, change in
control. If a change in control were to occur, we want our
executives to be focused on the business and the interests of
the shareholders. We believe that it is important that our
executives react neutrally to a potential change in control and
not be influenced by personal financial concerns. Our change in
control agreements are consistent with market practices and
assist us in retaining our executive talent. The level of
benefits have been set at either 1.99 times or 3 times the
participating executives base amount within the meaning of
Section 280G of the Tax Code, payable in a lump sum. This
structure is common and deemed necessary to remain competitive
with the banking industry as a whole and, more specifically,
with our peer group.
Both the Chief Executive Officer and the President and Chief
Operating Officer have entered into Non-compete Agreements with
Greene County. In consideration for entering into these
agreements, Greene County has provided certain deferred
compensation benefits which have been funded by individual
insurance policies. The benefits payable to both individuals
range from 7 to 10 years based upon certain events
occurring such as age, retirement, disability or death. If
either of these individuals are terminated for cause, then
Greene County will be released from its obligation.
Tax
Considerations
It has been the Committees intent that all incentive
payments be deductible unless maintaining such deductibility
would undermine our ability to meet our primary compensation
objectives or is otherwise not in our best interest.
Sections 280G and 4999. We provide our
named executive officers with change in control agreements.
Certain of these agreements provide for tax protection in the
form of a
gross-up
payment to reimburse the executive for any excise tax under
Internal Revenue Code Section 4999 as well as any
additional income and employment taxes resulting from such
reimbursement. Code Section 4999 imposes a 20%
non-deductible excise tax on the recipient of an excess
parachute payment and Code Section 280G disallows the
tax deduction to the payor of any amount of excess parachute
payment that is contingent upon a change in control. A payment
as a result of a change in control must exceed 3 times the
executives base amount in order to be considered an excess
parachute payment, and then the excise tax is imposed on the
parachute payments that exceed the executives base amount.
The intent of the tax
gross-up is
to provide a benefit without tax penalty to certain executives
who are displaced in the event of a change in control. We
believe that the provision of tax protection for certain of our
executive officers is consistent with market practice, is a
valuable executive talent retention provision, and is consistent
with the objectives of our overall executive compensation
program.
Section 409A. Amounts that are deferred
or which become vested under our nonqualified deferred
compensation programs after December 31, 2004 are subject
to Internal Revenue Code Section 409A, which governs when
elections for deferrals of compensation may be made, the form
and timing permitted for payment of such deferred amounts, and
the ability to change the form and timing of payments initially
established. Section 409A imposes sanctions for failure to
comply, including accelerated income inclusion, a 20% penalty
and an interest penalty. We currently operate our plans in good
faith compliance with Section 409A as permitted by the
proposed regulations issued by the Internal Revenue Service.
When final 409A regulations are issued, we will amend our plans
as necessary to fully comply with Code Section 409A
requirements.
Summary
In summary, we believe the mix of salary, potentially
significant variable cash incentives for both short-term and
long-term performance, and the potential for equity ownership in
Greene County motivates our management team to produce strong
results for shareholders. We further believe that this program
strikes an appropriate balance in operating our business and
appropriate employee rewards based on shareholder value creation.
95
Proposal
to Ratify the Appointment of Independent Registered Public
Accounting Firm
The Audit Committee of Greene Countys board of directors
has appointed Dixon Hughes PLLC (Dixon Hughes) as
Greene Countys independent auditors for 2007, subject to
ratification by a majority of the shares represented at the
annual meeting. The decision of the Audit Committee was based on
a review of the qualifications, independence, past performance
and quality controls of the auditor. The decision took into
account the proposed audit scope, staffing and approach,
including coordination of the external auditors efforts
with Greene Countys outsourced internal audit function, as
well as audit fees for the coming year. Dixon Hughes is
considered to be well qualified.
In view of the difficulty and expense involved in changing
auditors on short notice, should the shareholders not ratify the
selection of Dixon Hughes, it is contemplated that the
appointment of Dixon Hughes for the fiscal year ending
December 31, 2007 will be permitted to stand unless the
Board of Directors finds compelling reasons for making a change.
Disapproval by the shareholders will be considered a
recommendation that the Board select other auditors for the
following year. In order for the proposal to ratify the
appointment of Dixon Hughes as Greene Countys independent
registered public accounting firm, the number of shares voted in
favor of the proposal must exceed the number of shares voted
against the proposal.
Representatives of Dixon Hughes are expected to be present at
the annual meeting and will be given the opportunity to make a
statement, if they desire, and to respond to appropriate
questions.
During the years ended December 31, 2006 and
December 31, 2005, Greene County incurred (including these
billed or expected to be billed) the following principal
independent auditor fees from Dixon Hughes:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit Fees(a):
|
|
$
|
238,120
|
|
|
$
|
311,380
|
|
Audit-Related Fees(b):
|
|
|
37,300
|
|
|
|
39,000
|
|
Tax Fees(c)
|
|
|
21,465
|
|
|
|
10,500
|
|
All Other Fees(d):
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes fees related to the annual independent audit of the
Companys consolidated financial statements and reviews of
the Companys annual report on
Form 10-K,
review of the Companys interim financial statements,
issuance of consents, Federal Deposit Insurance Corporation
Improvement Act (FDICIA) attest services,
Sarbanes-Oxley Section 404 attest services, review of
registration statements and quarterly reports on Form
10-Q, report
on managements assertion regarding internal control over
financial reporting, services provided in connection with the
Companys filing of a Registration Statement on
Form S-3
and services rendered in connection with the Companys
common stock offering in 2005. |
|
(b) |
|
Fees incurred were for (a) general accounting matters and
related consultations, (b) certain procedures related to
the Companys collateral position for its borrowings from
the Federal Home Loan Bank of Cincinnati, and (c) an
employee benefit plan audit. The Audit Committee has considered
whether the provision of these services is compatible with
maintaining the independence of Dixon Hughes. |
|
(c) |
|
Fees incurred were for income tax return preparation and
compliance services. The Audit Committee has considered whether
the provision of these services is compatible with maintaining
the independence of Dixon Hughes. |
|
(d) |
|
There were no additional fees billed to the Company by Dixon
Hughes for 2006 and 2005. |
The Audit Committee has adopted a formal policy concerning
approval of audit and non-audit services to be provided by
Greene Countys independent auditor. The policy requires
that all services provided by the independent auditor, including
audit services and permitted audit-related and non-audit
services, be pre-approved by the Audit Committee. The Audit
Committee approved all audit and non-audit services provided by
Greene Countys independent auditor during 2006.
THE GREENE COUNTY BOARD OF DIRECTORS BELIEVES THAT THE
PROPOSED APPOINTMENT OF DIXON HUGHES AS GREENE COUNTYS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS,
96
HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
Executive
Officers of Greene County
The following sets forth information regarding the executive
officers of the Company.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Title
|
|
R. Stan Puckett
|
|
|
51
|
|
|
Chairman of the Board and Chief
Executive Officer
|
Kenneth R. Vaught
|
|
|
42
|
|
|
President and Chief Operating
Officer
|
James E. Adams
|
|
|
62
|
|
|
Senior Vice President, Chief
Financial Officer and Assistant Secretary
|
Steve L. Droke
|
|
|
57
|
|
|
Senior Vice President and Chief
Credit Officer
|
William C. Adams, Jr.
|
|
|
50
|
|
|
Senior Vice President and Chief
Information Officer
|
Steve D. Ottinger
|
|
|
57
|
|
|
Senior Vice President and Chief
Human Resources Officer
|
G. Frank Snyder
|
|
|
47
|
|
|
Senior Vice President and Retail
Banking Manager
|
R. Stan Puckett currently serves as Chief Executive
Officer of Greene County and GreenBank and has held that
position since 1990. He also is currently Chairman of the Board
of Directors. He has served as Chief Executive Officer of
GreenBank since February 1989. He is a graduate of Bristol
University with a degree in business administration. He served
as President of First American National Bank of Johnson City,
Tennessee from December 1987 to February 1989 and as its Vice
President from June 1986 to December 1987. He was Assistant Vice
President of First Union National Bank in Asheville, North
Carolina from September 1983 to June 1986 and served as
commercial loan officer of Signet Bank in Bristol, Virginia from
September 1977 to June 1983.
Kenneth R. Vaught currently serves as President and Chief
Operating Officer of Greene County and GreenBank and has held
these positions since June 2002. He also was elected to Greene
Countys Board of Directors on that date. Previously, he
served as Senior Vice-President and Regional Executive for
GreenBanks Blount and Knox County, Tennessee offices.
Prior to joining Greene County, Mr. Vaught began his
banking career in 1987 as a Management Trainee with Hamilton
Bank (SunTrust affiliate) in Johnson City, Tennessee. He later
joined First Tennessee Bank in 1989 as a Commercial Loan
Officer. In 1991, he was promoted to Vice President and
transferred to First Tennessee Bank, Maryville, Tennessee. He
left First Tennessee Bank in 1998 as Senior Vice President and
Commercial Banking Manager to join what was then Greene County
Bank. He is a graduate of East Tennessee State University with a
degree in Finance.
James E. Adams joined Greene County in December 2005 and
assumed the role of Senior Vice President, Chief Financial
Officer and Assistant Secretary upon Mr. William F.
Richmonds retirement on January 1, 2006. Prior to
joining Greene County, Mr. Adams served as Executive Vice
President and Chief Financial Officer of Rurban Financial
Corporation from 2003 to 2005. Prior to that, he was retired
after having served as Executive Vice President and Chief
Financial Officer of Integra Bank Corporation from 1999 through
2002; and Executive Vice President and Chief Financial Officer
of MainStreet Financial Corporation from 1994 to 1999. He has
held executive management positions at several multi-billion
dollar bank holding companies, which have subsequently been
acquired, since 1978. Mr. Adams began his career in 1970 as
a Certified Public Accountant upon graduation from Michigan
State University. He has co-authored two books used throughout
the financial services industry and was appointed to serve a
three year term on the Finance and Accounting Commission of the
Bank Administration Institute in the mid 80s.
Steve L. Droke has served as Senior Vice President and
Chief Credit Officer of GreenBank since July 1997, with
responsibilities for risk management including Credit Policy
development and implementation and oversight of Compliance and
Loan Operations. Prior to joining GreenBank, he was Senior Vice
President and Senior Credit Officer with First American
Corporation. His
32-year
banking career includes a varied background in bank management,
risk management, and lending. Mr. Droke is a graduate of
East Tennessee State University with a B.S. in Finance, the
Graduate School of Retail Bank Management at the University of
Virginia, and the Graduate School of Commercial Bank Lending at
the University of Oklahoma. He is a member of The Risk
Management Association and Tennessee Bankers Association.
97
William C. Adams, Jr. has served as Senior Vice
President and Chief Information Officer of GreenBank since 1998,
with responsibilities for oversight of the information
technology and operations functions. Prior to joining the
GreenBank he served as CEO of Premier Bank of East Tennessee
from 1991 to 1998. Prior to that he was Senior Regional Lender
for First Amercan Bank (subsequently Regions Bank) in Maryville,
Tennessee and Commercial Lender for Third National Bank
(subsequently SunTrust) in Nashville, Tennessee. Early in his
28 year banking career he served as Installations
Coordinator for a major national financial services software
provider, where he oversaw or participated in over 50 community
bank software installations and conversions nationwide. He is a
graduate of the University of Tennessee.
Steve D. Ottinger joined the Greene County Bank in
October of 1975. He currently serves as Senior Vice President
and Chief Human Resources Officer, with responsibilities for
training, certain areas of risk management and compliance,
customer privacy, and customer information security. Prior to
joining the bank, Mr. Ottinger spent five years in city
government as Director of Parks and Recreation for the town of
Greeneville, Tennessee. His experience includes both retail
banking and operations. Throughout his career he has been very
involved in community activities having served in leadership
capacities in many non-profit organizations and that continues.
He is a member of the Society for Human Resource Management, a
graduate of The Tennessee School of Banking, and holds a
Bachelors of Business Administration with an emphasis in
Human Resources from East Tennessee State University.
G. Frank Snyder joined Greene County Bank in 1995
and currently serves as Senior Vice President and Retail Banking
Manager. Prior to be appointed to his current position, he had
served in various capacities of increasing responsibility
including loan officer, branch manager, electronic banking
manager and regional executive. Before entering the financial
services industry, Frank served for 10 years in the
not-for-profit
industry in leadership capacities with the United Way and the
YMCA organizations. He is a graduate of the University of
Tennessee with a degree in education.
Proposal
to Amend Greene County Charter to Increase Authorized
Capitalization
Greene Countys Amended and Restated Charter currently
authorizes the issuance of 130 shares of organizational
common stock with a par value of $10 per share, callable at par
value and 15,000,000 shares of common stock with a par
value of $2.00 per share. See DESCRIPTION OF
GREENE COUNTY CAPITAL STOCK beginning at page 70 of
this document. None of the organizational shares is outstanding.
As of March 16, 2007, the record date for the annual
meeting, the following is a summary of the number of shares of
common stock outstanding and the number of shares currently
reserved for issuance:
|
|
|
|
|
Total issued and outstanding(*)
|
|
|
9,818,312
|
|
Reserved for issuance under equity
compensation plans
|
|
|
291,259
|
|
Greene Countys board of directors has unanimously approved
and adopted, subject to shareholder approval, a proposed
amendment to Greene Countys Amended and Restated Charter,
providing for an increase in the authorized number of shares of
common stock from 15,000,000 to 20,000,000. In order for the
proposed charter amendment to be approved, the number of shares
voted in favor of the amendment must exceed the number of shares
voted against the amendment.
If this proposal is approved by Greene Countys
shareholders at the annual meeting, the amendment to the Amended
and Restated Charter will become effective upon the filing of
Articles of Amendment with the Secretary of State of Tennessee,
which filing would be expected to take place immediately
following the annual.
98
Except as described below, the relative rights of the holders of
Greene Countys common stock under the Amended and Restated
Charter would remain unchanged. Paragraph 6 of the Amended
and Restated Charter, as amended by the proposed amendment,
would read as follows:
6. The maximum number of shares which the Corporation shall
have the authority to issue is
a) One Hundred Thirty (130) shares of Organizational
Common Stock with a par value of Ten Dollars ($10.00) per share,
which stock shall be callable by the Corporation at any time at
the par value thereof by action of a majority of the Board of
Directors
b) Twenty Million (20,000,000) shares of Common Stock, with
a par value of Two Dollars ($2.00) per share.
The Greene County board believes that with the current level of
authorized capital stock; taking into account the expected
issuance of 3,075,085 shares of common stock in connection
with its merger with Civitas, Greene County could be constrained
in its ability to pursue strategies intended to support its
planned growth and to enhance shareholder value. The Greene
County board considers the proposed increase in the number of
authorized shares of common stock desirable because it would
give Greene County the necessary flexibility to issue common
stock in connection with stock dividends and splits, equity
financings and for other general corporate purposes. Greene
County currently has no oral or written plans, arrangements or
understandings for the issuance of the additional shares of
common stock to be authorized pursuant to this proposal.
The amendment to Greene Countys Amended and Restated
Charter will ensure that Greene County will continue to have an
adequate number of authorized and unissued shares of common
stock available for future use. As is the case with the shares
of common stock that currently are authorized but unissued, if
this amendment to the Greene County Amended and Restated Charter
is adopted by the shareholders, the Greene County board will
have authority to issue the additional shares of common stock
from time to time without further action on the part of
shareholders except as may be required by applicable law or by
the rules of any stock exchange or market on which Greene
Countys securities may then be listed or authorized for
quotation. For example, the NASDAQ Global Market, on which the
common stock is authorized for quotation, currently requires
shareholder approval as a prerequisite to listing shares in
several instances, including in connection with acquisitions
when the present or potential issuance of shares could result in
an increase in the number of shares of common stock outstanding
by 20% or more.
The additional number of authorized shares could have the effect
of making it more difficult for a third party to take over
Greene County in a transaction not approved by the its board of
directors. Greene County shareholders do not have any preemptive
or other rights to subscribe for any shares of common stock that
Greene County might issue in the future.
THE GREENE COUNTY BOARD OF DIRECTORS BELIEVES THAT THE
PROPOSED AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
Proposal
to Amend Greene County Charter to Change the Name of the
Corporation
In mid 2006, as part of Greene Countys Strategic Planning
Process, the use of 18 distinct bank names was identified as an
issue potentially affecting customer service, loyalty and brand
identity. Focus group studies by an independent consulting firm
were completed in October 2006. Based upon the recommendations
of the consulting firm, with which management concurred,
management recommended and Greene County board of directors
approved changing the names of each of Greene Countys
banking units to GreenBank. On January 23, 2007 Greene
County announced that this change will be effective
April 2, 2007. Greene County believes that this change will
help bolster Greene Countys brand identity and convey the
fundamental conveniences offered by its 51 geographically
dispersed bank offices.
In keeping with this common theme, Greene Countys
management and board of directors also recommended that the name
of the holding company be changed from Greene County Bancshares,
Inc. to
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Green Bankshares, Inc. In order for the proposed charter
amendment be approved, the number of shares voted in favor of
the amendment must exceed the number of shares voted against the
amendment.
If this proposal is approved by Greene Countys
shareholders at the annual meeting, the amendment to the Amended
and Restated Charter will become effective upon the filing of
Articles of Amendment with the Secretary of State of Tennessee,
which filing would be expected to take place immediately
following the annual meeting.
Paragraph 1 of the Amended and Restated Charter, as amended
by the proposed amendment, would read as follows:
1. The name of the Corporation is Green Bankshares, Inc.
THE GREENE COUNTY BOARD OF DIRECTORS BELIEVES THAT THE
PROPOSED AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
LEGAL
MATTERS
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC,
Nashville, Tennessee, will pass upon the legality of the shares
of Greene County common stock to be issued in the merger and
certain tax consequences of the merger. Certain legal matters
and certain tax consequences of the merger, as they relate to
Civitas, will be passed upon for Civitas by Miller &
Martin PLLC, Nashville, Tennessee.
EXPERTS
The consolidated financial statements of Greene County
Bancshares, Inc. appearing in Greene County Bancshares,
Inc.s Annual Report on
Form 10-K
for the year ended December 31, 2006 (including schedules
appearing therein), and Greene Countys managements
assessment of the effectiveness of internal control over
financial reporting as of December 31, 2006 included
therein, have been audited by Dixon Hughes PLLC, an independent
registered public accounting firm, as set forth in there reports
thereon, included therein, and incorporated herein by reference.
Such consolidated financial statements and managements
assessment are incorporated herein by reference in reliance upon
such reports given on the authority of Dixon Hughes PLLC as
experts in accounting and auditing.
The consolidated financial statements of Civitas BankGroup, Inc.
appearing in Civitas BankGroup, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 2006 (including schedules
appearing therein), and Civitas managements
assessment of the effectiveness of internal control over
financial reporting as of December 31, 2006 included
therein, have been audited by Crowe Chizek and Company LLC, an
independent registered public accounting firm, as set forth in
there reports thereon, included therein, and incorporated herein
by reference. Such consolidated financial statements and
managements assessment are incorporated herein by
reference in reliance upon such reports given on the authority
of Crowe Chizek and Company LLC as experts in accounting and
auditing.
FUTURE
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal included in Greene
Countys proxy statement for Greene Countys 2008
Annual Meeting of Shareholders, that proposal must be received
by Greene County at its executive offices in Greeneville,
Tennessee by November 28, 2007. If a shareholder wishes to
present a proposal at Greene Countys 2008 annual meeting
of shareholders and the proposal is not intended to be included
in Greene Countys proxy statement relating to that
meeting, the shareholder must give advance notice to Greene
County prior to the deadline for such meeting determined in
accordance with Greene Countys Amended and Restated
Charter (the Charter Deadline). Under Greene
Countys Amended and Restated Charter, in order to be
deemed properly presented, notice must be delivered to Greene
Countys
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Secretary at Greene Countys principal executive offices no
less than forty (40) nor more than sixty (60) days
prior to the scheduled date of the meeting at which such matter
is to be acted upon; provided, however, that if notice or public
disclosure of such meeting is given fewer than fifty
(50) days before the meeting, notice by the shareholder
must be delivered to Greene County not later than the close of
business on the tenth (10th) day following the day on which
notice of the meeting was mailed to shareholders. If a
shareholder gives notice of such a proposal after the Charter
Deadline, the shareholder will not be permitted to present the
proposal to the shareholders for a vote at the meeting.
The SEC rules also establish a different deadline for submission
of shareholder proposals that are not intended to be included in
Greene Countys proxy statement with respect to
discretionary voting (the Discretionary Voting
Deadline). This deadline for the 2008 annual meeting of
shareholders is February , 2008. If a
shareholder gives notice of a proposal after this deadline, the
persons named as proxies in the proxy statement for the 2008
annual meeting will be allowed to use their discretionary voting
authority to vote against the shareholder proposal when, and if,
the proposal is raised at the 2008 annual meeting. Because the
Charter Deadline is not capable of being determined until Greene
County gives notice of, or publicly announces, the date for the
2008 annual meeting of shareholders, it is possible that the
Charter Deadline may occur after the Discretionary Voting
Deadline, in which case a proposal received after the
Discretionary Voting Deadline but before the Charter Deadline
would be eligible to be presented at the 2008 annual meeting of
shareholders and Greene County believes that the persons named
as proxies in the proxy statement would be allowed to use the
discretionary authority granted by the proxy card to vote
against the proposal at the meeting without including any
disclosures of the proposal in the proxy statement relating to
the meeting.
Greene County has not been notified by any shareholder of his or
her intent to present a shareholder proposal from the floor at
the Annual Meeting. The enclosed proxy card grants proxy holders
discretionary authority to vote on any matter properly brought
before the Annual Meeting, including any shareholder proposals
received between the date of this proxy statement and the
Charter Deadline for the Annual Meeting, which is
April , 2007.
Shareholder proposals should be addressed to Secretary, Greene
County Bancshares, Inc., 100 North Main Street, P.O.
Box 1120, Greeneville, Tennessee 37743 and must comply with
the provisions of Greene Countys Amended and Restated
Charter. Nothing in this paragraph shall be deemed to require
Greene County to include in its proxy statement and form of
proxy relating to Greene Countys 2008 Annual Meeting of
Shareholders any shareholder proposal that does not satisfy the
requirements for inclusion as established by the SEC at the time
of receipt.
Civitas held its 2006 annual meeting of shareholders on
April 26, 2006. In light of the expected timing of the
effectiveness of the merger, Civitas does not currently expect
to hold an annual meeting of its shareholders in 2007. If
Civitas holds an annual meeting of shareholders in 2007, any
shareholder who wishes to propose a matter for inclusion in
Civitas proxy materials for such a meeting must submit the
proposal in writing to the Secretary of Civitas at Civitas
principal executive offices no later than April 15, 2007.
If next years annual meeting is held on a date more than
30 calendar days from April 26, 2007, a shareholder
proposal must be received not less than one hundred and twenty
days from the date of the 2007 annual meeting or the tenth day
following the date on which public announcement of the 2007
annual meeting is first made. Shareholder proposals should be
submitted to the Secretary of Civitas BankGroup, Inc. at 4
Corporate Centre, 810 Crescent Centre Drive, Suite 320,
Franklin, Tennessee 37067. Any such proposals must comply with
Civitas bylaws and applicable SEC regulations.
OTHER
MATTERS
As of the date of this document, neither the Greene County board
of directors nor the Civitas board of directors knows of any
matters that will be presented for consideration at either the
Greene County annual meeting or the Civitas special meeting
other than as described in this document. If any other matters
come before either of the meetings or any adjournments or
postponements of the meetings and are voted upon, the enclosed
proxies will confer discretionary authority on the individuals
named as proxies to vote the shares represented by the proxies
as to any other matters. The individuals named as proxies intend
to vote in accordance with their best judgment as to any other
matters.
101
WHERE YOU
CAN FIND MORE INFORMATION
Greene County and Civitas are required to file annual, quarterly
and current reports, proxy statements, any amendments to those
reports and other information with the SEC. You may read and
copy this information at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at
1-800-SEC-0330
for further information on the public reference room. Our
filings with the SEC are also available to the public through
the SECs Internet site at http://www.sec.gov.
Greene County has filed a registration statement on
Form S-4
(File
No. 333-[ ])
with the SEC under the Securities Act that registers the shares
of Greene County common stock offered to Civitas shareholders
pursuant to the merger. This document is a part of the
registration statement and does not contain all of the
information in the registration statement. Whenever a reference
is made in this document to a contract or other document of
either Greene County or Civitas, please be aware that the
reference is only a summary and that you should refer to the
exhibits that are a part of the registration statement for a
copy of the contract or other document. The registration
statement, including the exhibits and schedules filed with the
registration statement, contains additional information about
Greene County and Greene County common stock. You may review a
copy of the registration statement at the SECs public
reference room in Washington, D.C., as well as through the
SECs website.
SEC rules allow Greene County and Civitas to incorporate
by reference in this document certain information that
each company files with the SEC. This means that important
information is disclosed to you by referring you to other
documents. Any information referred to in this way is considered
part of this document from the date we file that information
except for information superseded by information in, or
incorporated by reference into, this document. Any statements
made in this document or in another document incorporated or
deemed to be incorporated by reference into this document will
be deemed to be modified or superseded for purposes of this
document to the extent that a statement contained in this
document or in any other subsequently filed document that is
also incorporated or deemed to be incorporated by reference into
this document modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this
document. Any reports filed by either Greene County or Civitas
with the SEC after the date of this document and before the date
that the offering of the securities by means of this document is
terminated will automatically update and, where applicable,
supersede any information contained in this prospectus or
incorporated by reference in this prospectus.
We incorporate by reference into this prospectus the following
documents or information filed with the SEC (other than, in each
case, documents or information deemed to have been furnished and
not filed in accordance with SEC rules):
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Greene Countys Annual Report on
Form 10-K
for the year ended December 31, 2006 filed with the SEC on
February 28, 2007;
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Civitas Annual Report on
Form 10-K
for the year ended December 31, 2006 filed with the SEC on
March 9, 2007;
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Greene Countys Current Reports on
Form 8-K
filed with the SEC on January 23, 2007 and January 26,
2007;
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Civitas Current Reports on
Form 8-K
filed with the SEC on January 26, 2007, January 31,
2007, February 1, 2007 and February 5, 2007;
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The description of our Greene Countys common stock
contained in its
Form 8-K12G3
filed with the SEC on February 20, 1986, as amended and
supplemented by Greene Countys Current Report on form
8-K/A dated
and filed with the SEC on May 25, 2004, and all amendments
or reports filed for the purpose of updating such
description; and
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All documents filed by either Greene County or Civitas under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on
or after the date of this document and before the later of:
(1) the date of the Greene County annual meeting; and
(2) the date of the Civitas special meeting.
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102
Notwithstanding the references to the documents listed above, we
specifically are not incorporating by reference any documents or
portions thereof, whether specifically listed above or filed in
the future, that are not deemed filed with the SEC,
including without limitation any information furnished pursuant
to Items 2.02 or 7.01 of any Current Report on
Form 8-K
or certain exhibits furnished pursuant to Item 9.01 of any
Current Report on
Form 8-K.
Greene County has supplied all information contained or
incorporated by reference in this document relating to Greene
County, as well as all pro forma financial information, and
Civitas has supplied all information contained or incorporated
by reference into this document relating to Civitas. Documents
incorporated by reference are available from Greene County and
Civitas, without charge, excluding exhibits unless the exhibit
is specifically incorporated by reference into this document.
You can obtain documents incorporated by reference into this
document by requesting them in writing or by telephone from the
appropriate company at the addresses set forth below. If you
request any incorporated documents from Greene County or
Civitas, Greene County or Civitas will mail them to you by first
class mail, or another equally prompt means, within one business
day after it receives your request.
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If you are a Greene County
shareholder:
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If you are a Civitas shareholder:
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Greene County Bancshares, Inc.
100 North Main Street
Greeneville, TN
37743-4992
Attention: Chief Financial Officer
(423)
639-5111
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Civitas BankGroup, Inc.
4 Corporate Centre
810 Crescent Centre Drive, Suite 320
Franklin, TN 37067
Attention: Investor Relations
(615) 263-9500
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TO OBTAIN TIMELY DELIVERY OF
GREENE COUNTY DOCUMENTS, YOU MUST MAKE YOUR REQUEST ON OR BEFORE
APRIL 16, 2007.
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TO OBTAIN TIMELY DELIVERY OF
CIVITAS DOCUMENTS, YOU MUST MAKE YOUR REQUEST ON OR BEFORE APRIL
16,
2007.
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Neither Greene County nor Civitas has authorized anyone to
give any information or make any representation about the merger
or our companies that is different from, or in addition to, that
contained in this document or in any of the materials that have
been incorporated in this document. Therefore, if anyone does
give you information of this sort, you should not rely on it. If
you are in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this document or the solicitation of proxies is
unlawful, or if you are a person to whom it is unlawful to
direct these types of activities, then the offer presented in
this document does not extend to you. The information contained
in this document speaks only as of the date of this document
unless the information specifically indicates that another date
applies.
103
APPENDIX
A
AGREEMENT
AND PLAN OF MERGER
by and
between
GREENE
COUNTY BANCSHARES, INC.
and
CIVITAS
BANKGROUP, INC.
Dated as
of January 25, 2007
TABLE
OF CONTENTS
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Page
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ARTICLE I. THE MERGER
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1
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1.1
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The Merger
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1
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1.2
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Effective Time
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2
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1.3
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Effects of the Merger
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2
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1.4
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Conversion of CVBG Common Stock
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2
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1.5
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Election and Allocation Procedures
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4
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1.6
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No Fractional Shares
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5
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1.7
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Conversion of Stock Options
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5
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1.8
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GCBS Capital Stock
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6
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1.9
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Charter
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6
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1.10
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Bylaws
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6
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1.11
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Tax Consequences
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6
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1.12
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Certain Post-Closing Matters
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6
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1.13
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Headquarters of Surviving
Corporation
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6
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ARTICLE II. DELIVERY OF
MERGER CONSIDERATION
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6
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2.1
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Deposit of Merger Consideration
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6
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2.2
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Delivery of Merger Consideration
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7
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ARTICLE III. REPRESENTATIONS
AND WARRANTIES OF GCBS
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8
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3.1
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Corporate Organization
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8
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3.2
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Capitalization
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9
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3.3
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Authority; No Violation
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9
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3.4
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Consents and Approvals
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10
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3.5
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Reports
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11
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3.6
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Financial Statements
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11
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3.7
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Brokers Fees
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11
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3.8
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Absence of Certain Changes or
Events
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11
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3.9
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Legal Proceedings
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12
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3.10
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Taxes and Tax Returns
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12
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3.11
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Employees
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12
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3.12
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SEC Reports
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13
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3.13
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Compliance with Applicable
Law.
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14
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3.14
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Certain Contracts.
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14
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3.15
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Agreements with Regulatory Agencies
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14
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3.16
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Interest Rate Risk Management
Instruments
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15
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3.17
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Undisclosed Liabilities
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15
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3.18
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Insurance
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15
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3.19
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Environmental Liability
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15
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3.20
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State Takeover Laws
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15
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3.21
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Reorganization
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15
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3.22
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Information Supplied
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15
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3.23
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Internal Controls
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16
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3.24
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Opinion of GCBS Financial Advisor
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16
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(i)
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ARTICLE IV. REPRESENTATIONS
AND WARRANTIES OF CVBG
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16
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4.1
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Corporate Organization
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16
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4.2
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Capitalization
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17
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4.3
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Authority; No Violation
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4.4
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Consents and Approvals
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18
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4.5
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Reports
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18
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4.6
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Financial Statements
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19
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4.7
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Brokers Fees
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19
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4.8
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Absence of Certain Changes or
Events
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19
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4.9
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Legal Proceedings
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19
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4.10
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Taxes and Tax Returns
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20
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4.11
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Employees
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20
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4.12
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SEC Reports
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21
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4.13
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Compliance with Applicable Law
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21
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4.14
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Certain Contracts
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22
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4.15
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Agreements with Regulatory Agencies
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22
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4.16
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Interest Rate Risk Management
Instruments
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22
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4.17
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Undisclosed Liabilities
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23
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4.18
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Insurance
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23
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4.19
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Environmental Liability
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23
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4.20
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State Takeover Laws
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23
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4.21
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Reorganization
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23
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4.22
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Information Supplied
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23
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4.23
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Internal Controls
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23
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4.24
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Opinion of CVBG Financial Advisor
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24
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ARTICLE V. COVENANTS RELATING
TO CONDUCT OF BUSINESS
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24
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5.1
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Conduct of Businesses Prior to the
Effective Time
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24
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5.2
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CVBG Forbearances
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24
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ARTICLE VI. ADDITIONAL
AGREEMENTS
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26
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6.1
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Regulatory Matters
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26
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6.2
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Access to Information
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27
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6.3
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Shareholders Approvals
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27
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6.4
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Legal Conditions to Merger
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28
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6.5
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Affiliates
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28
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6.6
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Stock Quotation or Listing
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28
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6.7
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Employee Benefit Plans; Existing
Agreements
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28
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6.8
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Directors and Officers
Insurance
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29
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6.9
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Advice of Changes
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29
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6.10
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Acquisition Proposals
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29
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6.11
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Bank Merger
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31
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(ii)
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Page
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ARTICLE VII. CONDITIONS
PRECEDENT
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31
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7.1
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Conditions to Each Partys
Obligation To Effect the Merger
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31
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7.2
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Conditions to Obligations of CVBG
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32
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7.3
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Conditions to Obligations of GCBS
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32
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ARTICLE VIII. TERMINATION AND
AMENDMENT
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33
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8.1
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Termination
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33
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8.2
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Effect of Termination
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34
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8.3
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Termination Fee
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34
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8.4
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Amendment
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35
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8.5
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Extension; Waiver
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35
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ARTICLE IX. GENERAL PROVISIONS
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35
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9.1
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Closing
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35
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9.2
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Standard
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35
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9.3
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Nonsurvival of Representations,
Warranties and Agreements
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36
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9.4
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Expenses
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36
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9.5
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Notices
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36
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9.6
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Interpretation
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36
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9.7
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Counterparts
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37
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9.8
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Entire Agreement
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37
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9.9
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Governing Law
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37
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9.10
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Publicity
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37
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9.11
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Assignment; Third Party
Beneficiaries
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37
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(iii)
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 25, 2007
(this Agreement), by and between Greene County
Bancshares, Inc., a Tennessee corporation (GCBS) and
CIVITAS BankGroup, Inc., a Tennessee corporation
(CVBG), and.
RECITALS:
WHEREAS, the Boards of Directors of GCBS and CVBG have approved,
and deem it advisable and in the best interests of their
respective corporations and shareholders to consummate the
strategic business combination transaction provided for herein
in which CVBG will, subject to the terms and conditions set
forth herein, merge with and into GCBS (the Merger),
so that GCBS is the surviving corporation (hereinafter sometimes
referred to in such capacity as the Surviving
Corporation) in the Merger;
WHEREAS, the Boards of Directors of GCBS and CVBG have each
determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of,
their respective business strategies and goals;
WHEREAS, as a result of the Merger, in accordance with the terms
of this Agreement, CVBG will cease to have a separate corporate
existence, and shareholders of CVBG will receive from GCBS in
exchange for each common share, par value $0.50 per share,
of CVBS (the CVBG Common Stock), (a) $10.25 in
cash, or (b) 0.2674 common shares, $2.00 par value, of
GCBS (GCBS Common Stock), subject, in each case, to
any adjustments pursuant to this Agreement;
WHEREAS, in connection with the Merger, each shareholder of CVBG
will be entitled to elect to receive, in exchange for such
shareholders shares of CVBG Common Stock, either
(a) cash, (b) shares of GCBS Common Stock or
(c) a combination of cash and shares of GCBS Common Stock,
as determined in accordance with the terms of this Agreement;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the
Merger; and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the Code), and the parties intend, by
executing this Agreement, to adopt a plan of reorganization
within the meaning of Treasury
Regulation Section 1.368-2(g)
and 1.368-3(a).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties, agreements, and
conditions contained herein, and intending to be legally bound
hereby, GCBS and CVBG agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to conditions set forth in
this Agreement, in accordance with the Tennessee Business
Corporation Act (the TBCA), at the Effective Time
(as defined in Section 1.2), CVBG shall merge with and
into GCBS. GCBS shall be the Surviving Corporation in the
Merger, and shall continue its corporate existence under the
laws of the State of Tennessee. Upon consummation of the Merger,
the separate corporate existence of CVBG shall terminate. As a
result of the Merger, the outstanding shares of CVBG Common
Stock and any shares of CVBG Common Stock held in treasury by
CVBG shall be cancelled or converted in the manner provided in
this Article.
(b) The parties may by mutual agreement at any time change
the method of effecting the combination of GCBS and CVBG
including without limitation the provisions of this
Article I, if and to the extent they deem such change to be
desirable, including without limitation to provide for a merger
of CVBG with and into a
1
wholly-owned subsidiary of GCBS; provided, however, that
no such change shall (i) alter or change the amount of
Merger Consideration (as defined below) to be provided to
holders of CVBG Common Stock (as defined below) as provided for
in this Agreement, (ii) adversely affect the tax treatment
of holders of CVBG Common Stock as a result of receiving the
Merger Consideration or (iii) materially impede or delay
consummation of the transactions contemplated by this Agreement.
1.2 Effective Time. The Merger
shall become effective as set forth in the articles of merger
that shall be filed with the Secretary of State of the State of
Tennessee (the Tennessee Secretary), or such time
thereafter as is agreed to in writing by GCBS and CVBG and so
provided in the certificate of merger filed with the Tennessee
Secretary. The term Effective Time shall be the date
and time when the Merger becomes effective, as set forth in the
Articles of Merger.
1.3 Effects of the Merger. At and
after the Effective Time, the Merger shall have the effects set
forth in
Section 48-21-108
of the TBCA and further as set forth in this Article below.
1.4 Conversion of CVBG Common
Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Subject to this Section 1.4 and Sections 1.5
and 1.6, each share of CVBG Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of
CVBG Common Stock to be cancelled or converted to treasury
shares of the Surviving Corporation in accordance with
Section 1.4(d)) shall be converted into the right to
receive, at the election of the holder thereof:
(i) the number of shares of GCBS Common Stock that is equal
to the Exchange Ratio, as defined in Section 1.4(b) (the
Per Share Stock Consideration); or
(ii) a cash amount equal to $10.25 (the Per Share Cash
Consideration);
provided however, that any shares of CVBG Common Stock
with respect to which the holder owns two hundred (200) or
fewer shares of record as of the Election Deadline, as defined
in Section 1.5(a)(ii), shall be converted into the right to
receive Per Share Cash Consideration, and no such shares of CVBG
Common Stock shall be converted into the right to receive the
Per Share Stock Consideration. Any such shares of CVBG Common
Stock are hereinafter referred to as Mandatory Cash
Shares. The foregoing consideration, collectively and in
the aggregate, along with the Per Option Consideration defined
below, shall be referred to herein as the Merger
Consideration. All of the shares of CVBG Common Stock
converted into the right to receive the Merger Consideration
shall no longer be outstanding and shall automatically be
canceled and shall cease to exist as of the Effective Time, and
each certificate previously representing any such shares of CVBG
Common Stock (each, a Certificate) shall thereafter
represent only the right to receive the Merger Consideration.
(b) Unless adjusted pursuant to the terms of this
Agreement, the Exchange Ratio shall be 0.2674. The
Exchange Ratio shall be subject to adjustment pursuant to
Section 1.4(e) or Section 1.4(f).
(c) Subject to the allocation provisions of
Section 1.5 below, each holder of a share of CVBG Common
Stock may elect to receive the Per Share Stock Consideration or
the Per Share Cash Consideration for each such share of CVBG
Common Stock; provided, however, that the aggregate amount of
cash consideration with respect to which the Per Share Cash
Consideration shall be paid as the Merger Consideration,
including payments to holders of fractional shares under
Section 1.6, option holders under Section 1.7, and
holders of Mandatory Cash Shares, shall be:
30% times ((the number of shares of CVBG Common Stock
outstanding at the Effective Time times the Per Share Cash
Consideration) plus (the Total Option Consideration defined in
Section 1.7))
Such amount of cash paid as Merger Consideration shall be
referred to as the Total Cash Merger Consideration.
The remaining Merger Consideration paid in the form of shares of
GCBS Common Stock shall be referred to in this Agreement as the
Total Stock Merger Consideration.
2
(d) All shares of CVBG Common Stock held by CVBG as
treasury shares shall be cancelled and retired and shall cease
to exist, and no shares of GCBS Common Stock or other
consideration shall be delivered in exchange thereof. All shares
of CVBG Common Stock, if any, that are beneficially owned by
GCBS (excluding shares in trust accounts, managed accounts and
the like or shares held in satisfaction of a debt previously
contracted), upon conversion into shares of GCBS Common Stock,
shall become treasury shares of the Surviving Corporation.
(e) Revision of Exchange Ratio.
(i) For the purposes of this Section 1.4(e), the
following terms shall have the meanings indicated:
1. Average Closing Price shall mean
average closing price of the GCBS Common Stock as reported on
the NASDAQ Global Select Market for the 20 Business Days
immediately preceding, and inclusive of, the Measurement Date.
2. Relative Change Percentage shall mean
the GCBS Price Change Percentage less the Index Change
Percentage.
3. GCBS Price Change Percentage shall
mean the percentage change between the Starting Share Price and
the Average Closing Price.
4. Index shall mean the NASDAQ Bank
Index.
5. Index Change Percentage shall mean
the percentage change in the Index from November 14, 2006,
to the Measurement Date.
6. Measurement Date shall mean the date
that is ten trading days prior to the Closing.
7. Starting Share Price shall mean $38.33
(ii) If the Average Closing Price is more than $41.778 and
the Relative Change Percentage is greater than +10%, then the
Exchange Ratio will be recalculated as follows:
10.25/(Starting
Share Price times (1 plus (Relative Change Percentage minus
10%))) However, in no event shall the Exchange Ratio be less
than .2380.
|
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Example:
|
Average Closing Price is $45.42 (+18.5% GCBS Price Change
Percentage)
Index Change Percentage is +3% (resulting in Relative Change
Percentage of 15.5%)
New Exchange Ratio =
10.25/(38.33
times (1 plus .055)) = 0.2535
|
(iii) If the Average Closing Price is less than $34.182 and
the Relative Change Percentage is less than −10%, then the
Exchange Ratio will be recalculated as follows:
10.25/(Starting
Share Price times (1 plus (Relative Change Percentage plus
10%))) However, in no event shall the Exchange Ratio be greater
than .2968.
|
|
|
|
Example:
|
Average Closing Price is $30.28 (−21% GCBS Price Change
Percentage)
Index Change Percentage is −5% (resulting in Relative
Change Percentage of −16%)
New Exchange Ratio =
10.25/(38.33
times (1 minus .06)) = 0.2845
|
(f) The Exchange Ratio set forth above shall be subject to
appropriate adjustments in the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the
outstanding GCBS Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or
kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other like changes in GCBSs
capitalization.
3
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1.5
|
Election and Allocation Procedures.
|
(a) Election Procedures.
(i) An election form (Election Form), together
with the other transmittal materials described in
Section 2.2(a), shall be mailed as soon as reasonably
practicable after the Effective Time (provided that it need not
be sent until the Requisite Regulatory Approvals (as defined in
Section 7.1(c)) have been obtained) to each holder of CVBG
Common Stock of record at the Effective Time. Such date of
mailing shall be referred to hereinafter as the Mailing
Date. Illinois Stock Transfer Company will act as agent
(the Exchange Agent) for purposes of conducting the
election procedure and the exchange and payment procedures as
described in this Section 1.5. Each Election Form shall
permit a holder (or the beneficial owner through appropriate and
customary documentation and instruction) of CVBG Common Stock to
elect to receive the Per Share Cash Consideration with respect
to all or any of such holders CVBG Common Stock (shares as
to which the election is made, Cash Election
Shares). The Cash Election Amount shall be
equal to the Per Share Cash Consideration multiplied by the
total number of Cash Election Shares. All shares of CVBG Common
Stock other than the Cash Election Shares and the No Election
Shares (as defined below) shall be referred to herein as the
Stock Election Shares.
(ii) Any share of CVBG Common Stock with respect to which
the holder (or the beneficial owner, as the case may be) shall
not have submitted to the Exchange Agent an effective, properly
completed Election Form on or before a date after the Closing
Date to be agreed upon by the parties hereto (which date will be
set forth on the Election Form), but in any event not earlier
than 15 days after the Mailing Date (such deadline, the
Election Deadline), shall be converted either into
the Per Share Stock Consideration or the Per Share Cash
Consideration as set forth in Section 1.5(b).
(iii) Any such election shall have been properly made only
if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election
Form shall be deemed properly completed only if accompanied by
one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates)
representing all CVBG Common Stock covered by such Election
Form, together with duly executed transmittal materials included
with the Election Form. Any Election Form may be revoked or
changed by the person submitting such Election Form (or the
beneficial owner of the shares covered by such Election Form
through appropriate and customary documentation and instruction)
at or prior to the Election Deadline. In the event an Election
Form is revoked prior to the Election Deadline and no other
valid election is made, the shares of CVBG Common Stock
represented by such Election Form shall be No Election Shares.
Subject to the terms of this Agreement and of the Election Form,
the Exchange Agent shall have reasonable discretion to determine
whether any election, revocation or change has been properly or
timely made and to disregard immaterial defects in the Election
Forms, and any good faith decisions of the Exchange Agent
regarding such matters shall be binding and conclusive. Neither
GCBS nor the Exchange Agent shall be under any obligation to
notify any person of any defect in an Election Form.
(b) Allocation Procedures. As soon as
reasonably practicable after the Effective Time, GCBS shall
cause the Exchange Agent to allocate the Total Cash Merger
Consideration and Total Stock Merger Consideration among the
holders of CVBG Common Stock and CVBG Stock Options, which shall
be effected by the Exchange Agent as follows:
(i) Mandatory Cash Shares and CVBG Stock Options shall be
paid their appropriate portion of the Total Cash Merger
Consideration.
(ii) If the remaining Total Cash Merger Consideration is
greater than the Cash Election Amount, then:
1. each Cash Election Share shall be converted into the
right to receive an amount of cash equal to the Per Share Cash
Consideration;
4
2. the Exchange Agent will select, on a pro rata basis,
first from among the holders of No Election Shares and then, if
necessary, from among the holders of Stock Election Shares, a
sufficient number of such shares (Cash Designee
Shares) such that the sum of Cash Designee Shares and Cash
Election Shares multiplied by the Per Share Cash Consideration
equals as closely as practicable the Total Cash Merger
Consideration. Each Cash Designee Share shall be converted into
the right to receive the Per Share Cash Consideration; and
3. each remaining unconverted share of CVBG Common Stock
(after application of subsections (1) and (2) above)
shall be converted into the right to receive the Per Share Stock
Consideration.
(iii) If the remaining Total Cash Merger Consideration is
less than the Cash Election Amount then:
1. each Stock Election Share and each No Election Share
shall be converted into the right to receive the Per Share Stock
Consideration;
2. the Exchange Agent will select, on a pro rata basis from
among the holders of Cash Election Shares, a sufficient number
of such shares (Stock Designee Shares) such that the
number of such Stock Designee Shares multiplied by the Per Share
Cash Consideration equals as closely as practicable the
difference between the Cash Election Amount and the Total Cash
Merger Consideration. The Stock Designee Shares shall be
converted into the right to receive the Per Share Stock
Consideration; and
3. each remaining unconverted share of CVBG Common Stock
(after application of subsections (1) and (2) above)
shall be converted into the right to receive an amount of cash
equal to the Per Share Cash Consideration.
(iv) In the event the Exchange Agent is required pursuant
to this Section 1.5 to designate from among all holders of
Cash Election Shares the Stock Designee Shares to receive the
Per Share Stock Consideration, each holder of Cash Election
Shares shall be allocated a pro rata portion of the total Stock
Designee Shares. Such pro ration shall reflect the proportion
that the number of Cash Election Shares of each holder of Cash
Election Shares bears to the total number of Cash Election
Shares. Adjustments may be made for rounding purposes.
1.6 No Fractional
Shares. Notwithstanding any other provision of
this Agreement, neither certificates nor scrip for fractional
shares of GCBS Common Stock shall be issued in the Merger. Each
holder who otherwise would have been entitled to a fraction of a
share of GCBS Common Stock shall receive in lieu thereof cash
(without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise
be entitled (after taking into account all shares of CVBG Common
Stock owned by such holder at the Effective Time) by $10.25. No
such holder shall be entitled to dividends, voting rights or any
other rights in respect of any fractional share.
1.7 Conversion of Stock Options.
(a) At the Effective Time, each stock option granted or
heretofore assumed by CVBG to purchase shares of CVBG Common
Stock (each a CVBG Stock Option) as disclosed in
Schedule 4.2(a) of the CVBG Disclosure Schedule, which is
outstanding, unexercised, and vested as of the Effective Time
(even to the extent such vesting is caused by change of control
provisions triggered by the consummation of the Merger) shall
cease to represent a right to acquire shares of CVBG Common
Stock and shall be exchanged for an amount of cash consideration
equal to the in the money amount of such CVBG Stock
Option; provided that, the in the money amount of an
CVBG Stock Option shall be the excess of the Per Share Cash
Consideration over the exercise price of such option (referred
to per CVBG Stock Option as the Per Option
Consideration or in the aggregate as the Total
Option Consideration, which for purposes of this Agreement
shall be included in the definition of Merger
Consideration).
(b) Except as provided herein or as otherwise agreed to by
the parties, the 1998 Stock Option Plan and any other plan,
program or arrangement providing for the issuance or grant of
any other interest in respect of
5
the capital stock of CVBG or any Subsidiary thereof shall have
been suspended as of December 12, 2006, and CVBG shall
ensure that following the aforementioned Date that no additional
CVBG Stock Options have been granted and that other than the
options disclosed in Schedule 4.2(a) of the CVBG Disclosure
Schedule no other options have been granted and that no other
persons shall have any right to acquire equity securities of
CVBG or the Surviving Corporation.
1.8 GCBS Capital Stock. At and
after the Effective Time, each share of GCBS Capital Stock (as
defined below) issued and outstanding immediately prior to the
Closing Date shall remain issued and outstanding and shall not
be affected by the Merger.
1.9 Charter. Subject to the terms
and conditions of this Agreement, at the Effective Time, the
Charter of GCBS, as amended (the GCBS Articles),
shall be the Charter of the Surviving Corporation until
thereafter amended in accordance with applicable law.
1.10 Bylaws. Subject to the terms
and conditions of this Agreement, at the Effective Time, the
Bylaws of GCBS shall be the Bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
1.11 Tax Consequences. It is
intended that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Code, that this Agreement shall
constitute a plan of reorganization for the purposes
of Sections 354 and 361 of the Code.
1.12 Certain Post-Closing Matters.
(a) Board Composition. The current
members of the Board of Directors of GCBS shall continue as the
directors of the Surviving Corporation at the Effective Time.
After the Effective Time, the GCBS Nominating Committee of its
Board of Directors will review individuals from the Middle
Tennessee area as director candidates for GCBS.
(b) Officers of Surviving
Corporation. The current officers of GCBS shall
continue as the officers of the Surviving Corporation. Executive
management positions of CVBG will be evaluated separately for
redundancy
and/or a
re-allocation of resources. Severance and outplacement
assistance will be provided in accordance with GCBSs Human
Resource Policies for dislocated employees remaining through the
Effective Time. Retention bonuses will be negotiated on a facts
and circumstances basis with certain key employees to assure an
effective transition and assimilation.
(c) Operations. The regulations and
policies of GCBS in effect immediately prior to the effective
time shall be the regulations and policies of the Surviving
Corporation. Management of both parties would work to achieve
appropriate operating efficiencies and to conform CVBGs
accounting policies with GCBSs accounting policies and to
make appropriate accruals for loan loss reserves and expenses
and, when indicated, charge-offs prior to consummation of the
Acquisition.
1.13 Headquarters of Surviving
Corporation. From and after the Effective Time,
the location of the headquarters and principal executive offices
of the Surviving Corporation shall be that of the headquarters
and principal executive offices of GCBS as of the date of this
Agreement.
ARTICLE II.
DELIVERY OF
MERGER CONSIDERATION
2.1 Deposit of Merger
Consideration. Prior to the Effective Time, GCBS
shall deposit, or shall cause to be deposited, with the Exchange
Agent, for the benefit of the holders of Certificates and
Civitas Stock Options, for exchange in accordance with this
Article II, certificates representing the shares of GCBS
Common Stock and cash (such cash and certificates for shares of
GCBS Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the
Exchange Fund), to be issued pursuant to
Section 1.4 and paid pursuant to Section 1.4,
Section 1.6, and Section 1.7 in exchange for
outstanding shares of CVBG Common Stock.
6
2.2 Delivery of Merger Consideration.
(a) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of one or
more Certificates a letter of transmittal in customary form as
reasonably agreed by the parties (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates
representing the shares of GCBS Common Stock and any cash into
which the shares of CVBG Common Stock represented by such
Certificate or Certificates shall have been converted pursuant
to this Agreement. Upon proper surrender to the Exchange Agent
of a Certificate or Certificates for exchange and cancellation,
together with such properly completed and duly executed letter
of transmittal as the Exchange Agent may reasonable require, the
holder of such Certificate or Certificates shall be entitled to
receive in exchange therefore, as applicable, (i) a
certificate representing that number of whole shares of GCBS
Common Stock to which such holder of CVBG Common Stock shall
have become entitled pursuant to the provisions of
Article I and (ii) a check representing the amount of
any cash which such holder has the right to receive in respect
of the Certificate or Certificates surrendered pursuant to the
provisions of Article I, and the Certificate or
Certificates so surrendered shall forthwith be canceled. No
interest will be paid or accrued on any cash or on any unpaid
dividends and distributions payable to holders of Certificates.
(b) No dividends or other distributions declared with
respect to GCBS Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall
surrender such Certificate in accordance with this
Article II. After the surrender of a Certificate in
accordance with this Article II, the record holder thereof
shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore
had become payable with respect to shares of GCBS Common Stock
represented by such Certificate.
(c) If any certificate representing shares of GCBS Common
Stock is to be issued in a name other than that in which the
Certificate or Certificates surrendered in exchange therefor is
or are registered, it shall be a condition of the issuance
thereof that the Certificate or Certificates so surrendered
shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay
to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing
shares of GCBS Common Stock in any name other than that of the
registered holder of the Certificate or Certificates
surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers
on the stock transfer books of CVBG of the shares of CVBG Common
Stock that were issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates
representing such shares are presented for transfer to the
Exchange Agent, they shall be canceled and exchanged for
certificates representing shares of GCBS Common Stock and cash
as provided in Article I.
(e) Any portion of the Exchange Fund that remains unclaimed
by the shareholders of CVBG as of the first anniversary of the
Effective Time shall be paid to GCBS. Any former shareholders of
CVBG who have not theretofore complied with this Article II
shall thereafter look only to GCBS for payment of the shares of
GCBS Common Stock and cash and any unpaid dividends and
distributions on the GCBS Common Stock deliverable in respect of
each share of CVBG Common Stock such shareholder holds as
determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of CVBG,
GCBS, the Exchange Agent or any other person shall be liable to
any former holder of shares of CVBG Common Stock for any amount
delivered in good faith to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen
or destroyed and, if reasonably required by GCBS, the posting by
such person of a bond in such amount as GCBS may determine is
reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of GCBS Common Stock, and any cash
deliverable in respect thereof pursuant to this Agreement.
7
ARTICLE III.
REPRESENTATIONS
AND WARRANTIES OF GCBS
Except as disclosed in (a) the GCBS Reports (defined below)
filed prior to the date hereof or (b) the disclosure
schedule (the GCBS Disclosure Schedule) delivered by
GCBS to CVBG prior to the execution of this Agreement (which
schedule sets forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof
or as an exception to one or more representations or warranties
contained in this Article III or to one or more of
GCBSs covenants contained in Article V, provided,
however, that, notwithstanding anything in this Agreement to the
contrary, (i) no such item is required to be set forth in
such schedule as an exception to a representation or warranty if
its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard
established by Section 9.2, and (ii) the mere
inclusion of an item in such schedule as an exception to a
representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact,
event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect (as defined
below) on GCBS), GCBS hereby represents and warrants to CVBG as
follows:
3.1 Corporate Organization.
(a) GCBS is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee.
GCBS has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed or qualified would not, either individually or in the
aggregate, have a Material Adverse Effect on GCBS. As used in
this Agreement, the term Material Adverse Effect
means, with respect to CVBG, GCBS or the Surviving Corporation,
as the case may be, a material adverse impact on (i) the
business, operations, results of operations or financial
condition of such party and its Subsidiaries taken as a whole,
or (ii) the ability of such party to timely consummate the
transactions contemplated hereby; provided, however, that
with respect to clause (i), the following shall not be
deemed to have a Material Adverse Effect: any change or event
caused by or resulting from (A) changes in prevailing
interest rates, currency exchange rates or other economic or
monetary conditions in the United States or elsewhere,
(B) changes in United States or foreign securities markets,
including changes in price levels or trading volumes,
(C) changes or events, after the date hereof, affecting the
financial services industry generally and not specifically
relating to GCBS or CVBG or their respective Subsidiaries, as
the case may be, (D) changes, after the date hereof, in
generally accepted accounting principles or regulatory
accounting requirements applicable to banks or savings
associations and their holding companies generally,
(E) changes, after the date hereof, in laws, rules or
regulations of general applicability or interpretations thereof
by any Governmental Entity (as defined below), (F) actions
or omissions of GCBS or CVBG taken with the prior written
consent of the other or required hereunder, (G) the
execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby or the announcement
thereof, (H) any outbreak of major hostilities in which the
United States is involved or any act of terrorism within the
United States or directed against its facilities or citizens
wherever located, or (I) the termination of employment of
key employees of CVBG or failure of key employees of CVBG to
execute employment agreements with GCBS to become effective
after the Effective Time; and provided, further, that in no
event shall a change in the trading prices of a partys
capital stock, by itself, be considered material or constitute a
Material Adverse Effect.
(b) GCBS is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the BHC
Act). True and complete copies of the GCBS Charter and
Bylaws, as in effect as of the date of this Agreement, have
previously been made available by GCBS to CVBG.
(c) Each GCBS Subsidiary (i) is duly organized and
validly existing under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and
in which the failure to be so qualified would have a Material
Adverse Effect on GCBS and
8
(iii) has all requisite corporate or other power and
authority to own or lease its properties and assets and to carry
on its business as now conducted, except to the extent that the
failure to have such power or authority will not result in a
Material Adverse Effect on GCBS. As used in this Agreement, the
word Subsidiary when used with respect to any party
means any bank, savings bank, corporation, partnership, limited
liability company, or other organization, whether incorporated
or unincorporated, which is consolidated with such party for
financial reporting purposes under GAAP.
3.2 Capitalization.
(a) The authorized capital stock of GCBS consists of
fifteen million (15,000,000) shares of GCBS Common Stock, of
which, as of December 31, 2006, 9,796,349 shares were
issued and outstanding, and one hundred thirty (130) shares
of Organizational Common Stock, $10.00 par value per share
(together with the GCBS Common Stock, the GCBS Capital
Stock), of which, as of December 31, 2006, no shares
were issued and outstanding. As of the date hereof, no shares of
GCBS Capital Stock were reserved for issuance except for
500,000 shares of GCBS Common Stock reserved for issuance
upon the exercise of options to purchase shares of GCBS Common
Stock (each a GCBS Stock Option) pursuant to the
equity-based compensation plans of GCBS (the GCBS Stock
Plans) as identified in Section 3.2(a) of the GCBS
Disclosure Schedule. All of the issued and outstanding shares of
GCBS Capital Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
(b) No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which shareholders
may vote (Voting Debt) of GCBS are issued or
outstanding. Since September 30, 2006, GCBS has not issued
any shares of GCBS Capital Stock or any securities convertible
into or exercisable for any shares of GCBS Capital Stock, other
than shares issued upon exercise of a GCBS Stock Option.
(c) Except for (i) this Agreement, (ii) the
rights under the GCBS Stock Plans which represented, as of
September 30, 2006, the right to acquire up to an aggregate
of 255,525 shares of GCBS Common Stock, and
(iii) agreements entered into and securities and other
instruments issued after the date of this Agreement, there are
no options, subscriptions, warrants, calls, rights, commitments
or agreements of any character to which GCBS or any its
Subsidiaries is a party or by which it or any its Subsidiaries
is bound obligating GCBS or any its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of GCBS Capital Stock or any Voting Debt or
stock appreciation rights of GCBS or any its Subsidiaries or
obligating GCBS or any its Subsidiaries to extend or enter into
any such option, subscription, warrant, call, right, commitment
or agreement. There are no outstanding contractual obligations
of GCBS or any its Subsidiaries (A) to repurchase, redeem
or otherwise acquire any shares of capital stock of GCBS or any
its Subsidiaries or (B) pursuant to which GCBS or any of
its Subsidiaries is or could be required to register shares of
GCBS Capital Stock or other securities under the Securities Act
of 1933, as amended (the Securities Act).
(d) GCBS owns, directly or indirectly, all of the issued
and outstanding shares of capital stock or other equity
ownership interests of each of its Subsidiaries, free and clear
of any liens, pledges, charges, encumbrances and security
interests whatsoever (Liens), and all of such shares
or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable (subject to
12 U.S.C. § 55) and free of preemptive
rights, with no personal liability attaching to the ownership
thereof. No Subsidiary of GCBS has or is bound by any
outstanding subscription, option, warrant, call, commitment or
agreement of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary. Section 3.2(d) of
the GCBS Disclosure Schedule sets forth a list of the material
investments of GCBS in Non-Subsidiary Affiliates. As used in
this Agreement, the term Non-Subsidiary Affiliate
when used with respect to any party means any corporation,
partnership, limited liability company, joint venture or other
entity other than such partys Subsidiaries.
3.3 Authority; No Violation.
(a) GCBS has full corporate power and authority to execute
and deliver this Agreement and, subject in the case of the
consummation of the Merger to the adoption of this Agreement by
the requisite vote of the
9
holders of GCBS Common Stock, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Board of
Directors of GCBS. The Board of Directors of GCBS determined
that the Merger is advisable and in the best interest of GCBS
and its shareholders and has directed that this Agreement and
the transactions contemplated hereby be submitted to GCBSs
shareholders for adoption at a meeting of such shareholders and,
except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of
GCBS Common Stock, no other corporate proceedings on the part of
GCBS are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by GCBS and (assuming
due authorization, execution and delivery by CVBG) constitutes
valid and binding obligations of GCBS, enforceable against GCBS
in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies).
(b) Neither the execution and delivery by GCBS of this
Agreement nor the consummation by GCBS of the transactions
contemplated hereby, nor compliance by GCBS with any of the
terms or provisions hereof, will (i) violate any provision
of the GCBS Articles or Bylaws of GCBS or (ii) assuming
that the consents and approvals referred to in Section 3.4
are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to GCBS, any of its Subsidiaries or
Non-Subsidiary Affiliates or any of their respective properties
or assets or (y) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute
a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or
assets of GCBS, any of its Subsidiaries or its Non-Subsidiary
Affiliates under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
GCBS, any of its Subsidiaries or its Non-Subsidiary Affiliates
is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the
case of clause (ii) above) for such violations, conflicts,
breaches or defaults which, either individually or in the
aggregate, will not have a Material Adverse Effect on GCBS.
3.4 Consents and Approvals. Except
for (i) the filing of applications and notices, as
applicable, with the Board of Governors of the Federal Reserve
System (the Federal Reserve Board) under the BHC Act
and the Federal Reserve Act, as amended, and approval of such
applications and notices, (ii) the filing of any required
applications or notices with any other federal, state or foreign
agencies or regulatory authorities and approval of such
applications and notices (the Other Regulatory
Approvals), (iii) the filing with the Securities and
Exchange Commission (the SEC) of a Joint Proxy
Statement/Prospectus in definitive form relating to the meeting
of CVBGs and GCBSs shareholders to be held in
connection with this Agreement and the transactions contemplated
hereby (the Joint Proxy Statement), and of the
registration statement on
Form S-4
(the
Form S-4)
in which the Joint Proxy Statement will be included as a
prospectus, and declaration of effectiveness of the
Form S-4,
(iv) the filing of the Articles of Merger with the
Tennessee Secretary pursuant to the TBCA, (v) any notice or
filings under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR Act), (vi) any consents, authorizations,
approvals, filings or exemptions in connection with compliance
with the applicable provisions of federal and state securities
laws relating to the regulation of broker-dealers, investment
advisers or transfer agents, and the rules of NASDAQ, or which
are required under insurance, mortgage banking and other similar
laws, (vii) such filings and approvals as are required to
be made or obtained under the securities or Blue Sky
laws of various states in connection with the issuance of the
shares of GCBS Common Stock pursuant to this Agreement and
(viii) the approval of this Agreement by the requisite vote
of the shareholders of GCBS and CVBG, no consents or approvals
of or filings or registrations with any court, administrative
agency or commission or other governmental authority or
instrumentality (each a Governmental Entity) are
necessary in connection with (A) the execution and delivery
by GCBS of this Agreement and (B) the consummation by GCBS
of the Merger and the other transactions contemplated hereby.
Except for any consents, authorizations, or approvals of any
other material contracts to which GCBS is a party and which are
listed in Section 3.4 of the GCBS Disclosure Schedule, no
consents, authorizations, or approvals of any other person are
necessary in connection with (A) the execution
10
and delivery by GCBS of this Agreement and (B) the
consummation by GCBS of the Merger and the other transactions
contemplated hereby.
3.5 Reports. GCBS and each of its
Subsidiaries have timely filed all reports, registrations and
statements, together with any amendments required to be made
with respect thereto with (i) the Federal Reserve Board,
(ii) the Federal Deposit Insurance Corporation,
(iii) any state regulatory authority (each a State
Regulator), (iv) the SEC, (v) any State
Regulator (collectively Regulatory Agencies), and
all other reports and statements required to be filed by them,
including, without limitation, any report or statement required
to be filed pursuant to the laws, rules or regulations of the
United States, any state, or any Regulatory Agency, and have
paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report,
registration or statement or to pay such fees and assessments,
either individually or in the aggregate, will not have a
Material Adverse Effect on GCBS. Except for normal examinations
conducted by a Regulatory Agency in the ordinary course of the
business of GCBS and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of GCBS,
investigation into the business or operations of GCBS or any of
its Subsidiaries, except where such proceedings or investigation
will not, either individually or in the aggregate, have a
Material Adverse Effect on GCBS. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations
of GCBS or any of its Subsidiaries which, in the reasonable
judgment of GCBS, will, either individually or in the aggregate,
have a Material Adverse Effect on GCBS.
3.6 Financial Statements. GCBS has
previously made available to CVBG true and correct copies of
(i) the consolidated balance sheets of GCBS and its
Subsidiaries as of December 31, 2003, 2004 and 2005 and the
related consolidated statements of income and changes in
shareholders equity and cash flows for the fiscal years
ended December 31, 2003 through 2005, inclusive as reported
in GCBSs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
SEC under the Exchange Act and accompanied by the audit report
of Dixon Hughes, PLLC, independent public accountants with
respect to GCBS, and (ii) the unaudited consolidated
balance sheet of GCBS and its Subsidiaries as of
September 30, 2005 and 2006, and the related consolidated
statements of income, changes in shareholders equity and
cash flows for the nine-month period then ended, as reported in
GCBSs Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006. The
financial statements referred to in this Section 3.6
(including the related notes, where applicable) fairly present
in all material respects the consolidated results of operations,
changes in shareholders equity, cash flows and financial
position of GCBS and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth, subject
to normal year-end audit adjustments in the case of unaudited
statements; each of such statements (including the related
notes, where applicable) complies in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable)
has been prepared in all material respects in accordance with
accounting principles generally accepted in the United States
(GAAP) consistently applied during the periods
involved, except, in each case, as indicated in such statements
or in the notes thereto. The books and records of GCBS and its
Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions.
3.7 Brokers Fees. Except for
Scott & Stringfellow, Inc., neither GCBS nor any GCBS
Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any
brokers fees, commissions or finders fees in
connection with the Merger or related transactions contemplated
by this Agreement.
3.8 Absence of Certain Changes or Events.
(a) Since September 30, 2006, no event or events have
occurred that have had, either individually or in the aggregate,
a Material Adverse Effect on GCBS.
(b) Since September 30, 2006, through and including
the date of this Agreement, GCBS and its Subsidiaries have
carried on their respective businesses in all material respects
in the ordinary course.
11
3.9 Legal Proceedings.
(a) Except as disclosed in Section 3.9(a) of the GCBS
Disclosure Schedule, neither GCBS nor any of its Subsidiaries is
a party to any, and there are no pending or, to the best of
GCBSs knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against GCBS or any
of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which, in
any such case, there is a reasonable probability of an adverse
determination and which, if adversely determined, will be
reasonably likely to, either individually or in the aggregate,
have a Material Adverse Effect on GCBS.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction (other than those that apply to similarly
situated bank holding companies or banks) imposed upon GCBS, any
of its Subsidiaries or the assets of GCBS or any of its
Subsidiaries that has had, or will have, either individually or
in the aggregate, a Material Adverse Effect on GCBS.
3.10 Taxes and Tax Returns.
(a) Each of GCBS and its Subsidiaries has duly filed all
federal, state, foreign and local information returns and Tax
returns required to be filed by it on or prior to the date of
this Agreement (all such returns being accurate and complete in
all material respects) and has duly paid or made provision for
the payment of all Taxes that have been incurred or are due or
claimed to be due from it by federal, state, foreign or local
taxing authorities other than (i) Taxes or other
governmental charges that are not yet delinquent or are being
contested in good faith or have not been finally determined and
have been adequately reserved against under GAAP, or
(ii) information returns, Tax returns or Taxes as to which
the failure to file, pay or make provision for is not reasonably
likely to have, either individually or in the aggregate, a
Material Adverse Effect on GCBS. The federal income Tax returns
of GCBS and its Subsidiaries to the knowledge of GCBS have not
been examined by the IRS. There are no material disputes
pending, or to the knowledge of GCBS, claims asserted, for Taxes
or assessments upon GCBS or any of its Subsidiaries for which
GCBS does not have reserves that are adequate under GAAP.
Neither GCBS nor any of its Subsidiaries is a party to or is
bound by any Tax sharing, allocation or indemnification
agreement or arrangement (other than such an agreement or
arrangement exclusively between or among GCBS and its
Subsidiaries). Within the past five years, neither GCBS nor any
of its Subsidiaries has been a distributing
corporation or a controlled corporation in a
distribution intended to qualify under Section 355(a) of
the Code.
(b) As used in this Agreement, the term Tax or
Taxes means (i) all federal, state, local, and
foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales, transfer,
use, payroll, employment, severance, withholding, duties,
intangibles, franchise, backup withholding, and other taxes,
charges, levies or like assessments together with all penalties
and additions to tax and interest thereon and (ii) any
liability for Taxes described in clause (i) under Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law).
3.11 Employees.
(a) Section 3.11(a) of the GCBS Disclosure Schedule
sets forth a true and complete list of each material benefit or
compensation plan, arrangement or agreement, and any material
bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control
or fringe benefit plan, program or agreement that is maintained,
or contributed to, for the benefit of current or former
directors or employees of GCBS and its Subsidiaries or with
respect to which GCBS or its Subsidiaries may, directly or
indirectly, have any liability to such directors or employees,
as of the date of this Agreement (the GCBS Benefit
Plans).
(b) GCBS has heretofore made available to CVBG true and
complete copies of each of the GCBS Benefit Plans and certain
related documents, including, but not limited to, (i) the
actuarial report for such GCBS Benefit Plan (if applicable) for
each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such GCBS
Benefit Plan.
(c) Except as would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse
Effect on GCBS, (i) each of the GCBS Benefit Plans has been
operated and administered in all material respects in compliance
with the Employee Retirement Income Security Act of 1974, as
amended (ERISA) and the Code, (ii) each of the
GCBS Benefit Plans intended to be qualified within
the meaning
12
of Section 401(a) of the Code and has received a favorable
determination from the IRS that such GCBS Benefit Plan is so
qualified, and to the knowledge of GCBS, there are no existing
circumstances or any events that have occurred that will
adversely affect the qualified status of any such GCBS Benefit
Plan, (iii) with respect to each GCBS Benefit Plan which is
subject to Title IV of ERISA, the present value of accrued
benefits under such GCBS Benefit Plan, based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared by such GCBS Benefit Plans
actuary with respect to such GCBS Benefit Plan, did not, as of
its latest valuation date, exceed the then current value of the
assets of such GCBS Benefit Plan allocable to such accrued
benefits, (iv) no GCBS Benefit Plan provides benefits,
including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former
employees or directors of GCBS or its Subsidiaries beyond their
retirement or other termination of service, other than
(A) coverage mandated by applicable law, (B) death
benefits or retirement benefits under any employee pension
plan (as such term is defined in Section 3(2) of
ERISA), (C) deferred compensation benefits accrued as
liabilities on the books of GCBS or its Subsidiaries or
(D) benefits the full cost of which is borne by the current
or former employee or director (or his beneficiary), (v) no
material liability under Title IV of ERISA has been
incurred by GCBS, its Subsidiaries or any trade or business,
whether or not incorporated, all of which together with GCBS,
would be deemed a single employer under
Section 4001 of ERISA (a GCBS ERISA Affiliate)
that has not been satisfied in full, and no condition exists
that presents a material risk to GCBS, its Subsidiaries or any
GCBS ERISA Affiliate of incurring a material liability
thereunder, (vi) no GCBS Benefit Plan is a
multiemployer pension plan (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions
payable by GCBS or its Subsidiaries as of the Effective Time
with respect to each GCBS Benefit Plan in respect of current or
prior plan years have been paid or accrued in accordance with
GAAP, (viii) none of GCBS, its Subsidiaries or any other
person, including any fiduciary, has engaged in a transaction in
connection with which GCBS, its Subsidiaries or any GCBS Benefit
Plan will be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material
Tax imposed pursuant to Section 4975 or 4976 of the Code,
and (ix) to the knowledge of GCBS there are no pending,
threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the GCBS Benefit
Plans or any trusts related thereto.
(d) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will (either alone or in conjunction with any other event)
(i) result (either alone or upon the occurrence of any
additional acts or events) in any payment (including, without
limitation, severance, unemployment compensation, excess
parachute payment (within the meaning of Section 280G
of the Code), forgiveness of indebtedness or otherwise) becoming
due to any director or any employee of GCBS or any of its
affiliates from GCBS or any of its affiliates under any GCBS
Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any GCBS Benefit Plan or
(iii) result in any acceleration of the time of payment or
vesting of any such benefits that will, either individually or
in the aggregate, have a Material Adverse Effect on GCBS.
3.12 SEC Reports. GCBS has
previously made available to CVBG an accurate and complete copy
of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since
January 1, 2003, by GCBS with the SEC pursuant to the
Securities Act or the Securities Exchange Act of 1934, as
amended (the Exchange Act), and prior to the date
hereof and (b) communication mailed by GCBS to its
shareholders since January 1, 2003. GCBS has filed all
required reports, schedules, registration statements and other
documents with the SEC since January 1, 2003 (the
GCBS Reports). As of their respective dates of
filing with the SEC (or, if amended or superseded by a filing
prior to the date hereof, as of the date of such filing), the
GCBS Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder
applicable to such GCBS Reports, and none of the GCBS Reports
when filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.13 Compliance with Applicable Law.
(a) GCBS and each of its Subsidiaries hold all material
licenses, franchises, permits, patents, trademarks and
authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each,
13
and have complied in all material respects with and are not in
default in any material respect under any, applicable law,
statute, order, rule, regulation, policy, agreement
and/or
guideline of any Governmental Entity relating to GCBS or any of
its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or
default will not, either individually or in the aggregate, have
a Material Adverse Effect on GCBS.
(b) Except as will not have, either individually or in the
aggregate, a Material Adverse Effect on GCBS, GCBS and each of
its Subsidiaries have properly administered all accounts for
which it acts as a fiduciary, including accounts for which it
serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with
the terms of the governing documents, applicable state and
federal law and regulation and common law. None of GCBS, any of
its Subsidiaries, or any director, officer or employee of GCBS
or of any of its Subsidiaries, has committed any breach of trust
with respect to any such fiduciary account that will have a
Material Adverse Effect on GCBS, and the accountings for each
such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary
account.
3.14 Certain Contracts.
(a) Except as disclosed in Section 3.11(a) or 3.14(a)
of the GCBS Disclosure Schedule, neither GCBS nor any of its
Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of
business consistent with past practice, (ii) which, upon
the consummation or shareholder approval of the transactions
contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due
from GCBS, the Surviving Corporation, or any of their respective
Subsidiaries to any officer or employee thereof,
(iii) which is a material contract (as such
term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the GCBS
Reports, (iv) which materially restricts the conduct of any
line of business by GCBS or upon consummation of the Merger will
materially restrict the ability of the Surviving Corporation to
engage in any line of business in which a bank holding company
may lawfully engage, (v) with or to a labor union or guild
(including any collective bargaining agreement) or
(vi) (including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan) any
of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of
any shareholder approval or the consummation of any of the
transactions contemplated by this Agreement, or the value of any
of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. Each
contract, arrangement, commitment or understanding of the type
described in this Section 3.14(a), whether or not set forth
in the GCBS Disclosure Schedule, is referred to herein as a
GCBS Contract, and neither GCBS nor any of its
Subsidiaries knows of, or has received notice of, any violation
of the above by any of the other parties thereto which will
have, individually or in the aggregate, a Material Adverse
Effect on GCBS.
(b) (i) Each GCBS Contract is valid and binding on
GCBS or any of its Subsidiaries, as applicable, and in full
force and effect, (ii) GCBS and each of its Subsidiaries
has in all material respects performed all obligations required
to be performed by it to date under each GCBS Contract, except
where such noncompliance, either individually or in the
aggregate, will not have a Material Adverse Effect on GCBS, and
(iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, will constitute, a
material default on the part of GCBS or any of its Subsidiaries
under any such GCBS Contract, except where such default which
will, either individually or in the aggregate, have a Material
Adverse Effect on GCBS.
3.15 Agreements with Regulatory
Agencies. Neither GCBS nor any of its
Subsidiaries is subject to any
cease-and-desist
or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or
has been since January 1, 2003, a recipient of any
supervisory letter from, or since January 1, 2003, has
adopted any board resolutions at the request of, any Regulatory
Agency or other Governmental Entity that currently restricts in
any material respect the conduct of its business, would restrict
the consummation of the transactions contemplated by this
Agreement, or that in any material manner
14
relates to its capital adequacy, its credit policies, its
management or its business (each, whether or not set forth in
the GCBS Disclosure Schedule, a GCBS Regulatory
Agreement), nor to the knowledge of GCBS has GCBS or any
of its Subsidiaries been advised since January 1, 2003, by
any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any such GCBS Regulatory
Agreement.
3.16 Interest Rate Risk Management
Instruments. GCBS does not engage in interest
rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements, whether entered into
for the account of GCBS or for the account of a customer of GCBS
or one of its Subsidiaries.
3.17 Undisclosed
Liabilities. Except for those liabilities that
are fully reflected or reserved against on the consolidated
balance sheet of GCBS included in the GCBS
Form 10-Q
and for liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 2006,
neither GCBS nor any of its Subsidiaries has incurred any
liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that,
either individually or in the aggregate, has had or will have, a
Material Adverse Effect on GCBS.
3.18 Insurance. GCBS and its
Subsidiaries have in effect insurance coverage with reputable
insurers or are self-insured, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably
adequate coverage against all risks insured against by bank
holding companies comparable in size and operations to GCBS and
its Subsidiaries.
3.19 Environmental Liability. There
are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental
investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could
reasonably result in the imposition, on GCBS of any liability or
obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(CERCLA), pending or, to the knowledge of GCBS,
threatened against GCBS, which liability or obligation will,
either individually or in the aggregate, have a Material Adverse
Effect on GCBS. To the knowledge of GCBS, there is no reasonable
basis for any such proceeding, claim, action or governmental
investigation that would impose any liability or obligation that
will, individually or in the aggregate, have a Material Adverse
Effect on GCBS. GCBS is not subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party
imposing any liability or obligation with respect to the
foregoing that will have, either individually or in the
aggregate, a Material Adverse Effect on GCBS.
3.20 State Takeover Laws. The Board
of Directors of GCBS has approved the transactions contemplated
by this Agreement for purposes of
Sections 48-103-101
through
48-103-505
of the TBCA, if applicable to GCBS, such that the provisions of
such sections of the TBCA will not apply to this Agreement or
any of the transactions contemplated hereby or thereby.
3.21 Reorganization. As of the date
of this Agreement, GCBS is not aware of any fact or circumstance
that would reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
3.22 Information Supplied. None of
the information supplied or to be supplied by GCBS for inclusion
or incorporation by reference in (i) the
Form S-4
will, at the time the
Form S-4
is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (ii) the Joint Proxy Statement will, at the
date of mailing to shareholders and at the times of the meetings
of shareholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state
any 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. The
Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the SEC thereunder, except that no
representation or warranty is made by GCBS with respect to
statements made or incorporated by reference therein based on
information supplied by CVBG for inclusion or incorporation by
reference in the Joint Proxy Statement.
15
3.23 Internal Controls. The
records, systems, controls, data and information of GCBS and its
Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic
process, whether computerized or not) that are under the
exclusive ownership and direct control of GCBS or its
Subsidiaries or accountants (including all means of access
thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to
have a Materially Adverse Effect on the system of internal
accounting controls described in the following sentence. As and
to the extent described in the GCBS Reports filed with the SEC
prior to the date hereof, GCBS and its Subsidiaries have devised
and maintain a system of internal accounting controls sufficient
to provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements
in accordance with GAAP. GCBS (i) has designed disclosure
controls and procedures to ensure that material information
relating to GCBS, including its consolidated Subsidiaries, is
made known to the management of GCBS by others within those
entities, and (ii) has disclosed, based on its most recent
evaluation prior to the date hereof, to GCBSs independent
registered public accounting firm and the audit committee of
GCBSs Board of Directors (x) any significant
deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are
reasonably likely to adversely affect GCBSs ability to
record, process, summarize and report financial information and
(y) any fraud, whether or not material, that involves
management or other employees who have a significant role in
GCBSs internal control over financial reporting. GCBS has
made available to CVBG a summary of any such disclosure made by
management to GCBSs auditors and audit committee since
January 1, 2002. GCBS is in full compliance with
Section 404 of the Sarbanes-Oxley Act of 2002.
3.24 Opinion of GCBS Financial
Advisor. GCBS has received the opinion of its
financial advisor, Scott & Stringfellow, Inc., dated
the date of this Agreement, to the effect that the Merger
Consideration is fair, from a financial point of view, to GCBS
and the holders of GCBS Common Stock.
ARTICLE IV.
REPRESENTATIONS
AND WARRANTIES OF CVBG
Except as disclosed in (a) the CVBG Reports (defined below)
filed prior to the date hereof or (b) the disclosure
schedule (the CVBG Disclosure Schedule) delivered by
CVBG to GCBS prior to the execution of this Agreement (which
schedule sets forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof
or as an exception to one or more representations or warranties
contained in this Article IV or to one or more of
CVBGs covenants contained in Article V, provided,
however, that, notwithstanding anything in this Agreement to the
contrary, (i) no such item is required to be set forth in
such schedule as an exception to a representation or warranty if
its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard
established by Section 9.2, and (ii) the mere
inclusion of an item in such schedule as an exception to a
representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact,
event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect on CVBG),
CVBG hereby represents and warrants to GCBS as follows:
4.1 Corporate Organization.
(a) CVBG is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee.
CVBG has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed or qualified would not, either individually or in the
aggregate, have a Material Adverse Effect on CVBG.
16
(b) CVBG is a bank holding company registered under the BHC
Act. True and complete copies of Charter (the CVBG
Charter), and Bylaws of CVBG, as in effect as of the date
of this Agreement, have previously been made available by CVBG
to GCBS.
(c) Each CVBG Subsidiary (i) is duly organized and
validly existing under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and
in which the failure to be so qualified would have a Material
Adverse Effect on CVBG, and (iii) has all requisite
corporate or other power and authority to own or lease its
properties and assets and to carry on its business as now
conducted except to the extent that the failure to have such
power or authority will not result in a Material Adverse Effect
on CVBG.
4.2 Capitalization.
(a) The authorized capital stock of CVBG consists of Forty
Million (40,000,000) shares of CVBG Common Stock, of which, as
of December 31, 2006, 15,911,750 shares were issued
and outstanding (also referred to as the CVBG Capital
Stock). As of the date hereof, no shares of CVBG Capital
Stock were reserved for issuance except for
4,000,000 shares of CVBG Common Stock reserved for issuance
upon the exercise of CVBG Stock Options issued pursuant to CVBG
Stock Plans. All of the issued and outstanding shares of CVBG
Capital Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
(b) No Voting Debt of CVBG is issued or outstanding. Since
September 30, 2006, CVBG has not issued any shares of CVBG
Capital Stock or any securities convertible into or exercisable
for any shares of CVBG Capital Stock, other than as would be
permitted by Section 5.2(b) hereof.
(c) Except for (i) this Agreement, (ii) the
rights under the CVBG Stock Plans which represented, as of
January 25, 2007, the right to acquire up to an aggregate
of 1,811,235 shares of CVBG Common Stock, and
(iii) agreements entered into and securities and other
instruments issued after the date of this Agreement as permitted
by Section 5.2(b), there are no options, subscriptions,
warrants, calls, rights, commitments or agreements of any
character to which CVBG or any of its Subsidiaries is a party or
by which it any of its Subsidiaries is bound obligating CVBG any
of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of CVBG Capital
Stock or any Voting Debt or stock appreciation rights of CVBG or
any of its Subsidiaries or obligating CVBG or any of its
Subsidiaries to extend or enter into any such option,
subscription, warrant, call, right, commitment or agreement.
There are no outstanding contractual obligations of CVBG or any
of its Subsidiaries (A) to repurchase, redeem or otherwise
acquire any shares of capital stock of CVBG or any of its
Subsidiaries or (B) pursuant to which CVBG or any of its
Subsidiaries is or could be required to register shares of CVBG
Capital Stock or other securities under the Securities Act,
except any such contractual obligations entered into after the
date hereof as permitted by Section 5.2(b).
(d) CVBG owns, directly or indirectly, all of the issued
and outstanding shares of capital stock or other equity
ownership interests of each of its Subsidiaries, free and clear
of any Liens, and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable (subject to 12 U.S.C.
§ 55) and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No
Subsidiary of CVBG has or is bound by any outstanding
subscription, option, warrant, call, commitment or agreement of
any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Section 4.2(d) of the
CVBG Disclosure Schedule sets forth a list of the material
investments of CVBG in Non-Subsidiary Affiliates.
4.3 Authority; No Violation.
(a) CVBG has full corporate power and authority to execute
and deliver this Agreement and, subject in the case of the
consummation of the Merger to the adoption of this Agreement by
the requisite vote of the holders of CVBG Common Stock, to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of CVBG. The Board of
Directors of CVBG determined that the
17
Merger is advisable and in the best interest of CVBG and its
shareholders and has directed that this Agreement and the
transactions contemplated hereby be submitted to CVBGs
shareholders for adoption at a meeting of such shareholders and,
except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of
CVBG Common Stock, no other corporate proceedings on the part of
CVBG are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by CVBG and (assuming
due authorization, execution and delivery by GCBS) constitutes
valid and binding obligations of CVBG, enforceable against CVBG
in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by
CVBG, nor the consummation by CVBG of the transactions
contemplated hereby, nor compliance by CVBG with any of the
terms or provisions hereof, will (i) violate any provision
of the CVBG Charter or the Bylaws of CVBG, or (ii) assuming
that the consents and approvals referred to in Section 4.4
are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to CVBG, any of its Subsidiaries or
Non-Subsidiary Affiliates or any of their respective properties
or assets or (y) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute
a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or
assets of CVBG, any of its Subsidiaries or its Non-Subsidiary
Affiliates under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
CVBG, any of its Subsidiaries or its Non-Subsidiary Affiliates
is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the
case of clause (ii) above) for such violations, conflicts,
breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on CVBG.
4.4 Consents and Approvals. Except
for (i) the filing of applications and notices, as
applicable, with the Federal Reserve Board under the BHC Act and
the Federal Reserve Act, as amended, and approval of such
applications and notices, (ii) the Other Regulatory
Approvals, (iii) the filing with the SEC of the Joint Proxy
Statement and the
Form S-4
and declaration of effectiveness of the
Form S-4,
(iv) the filing of the Articles of Merger with the
Tennessee Secretary pursuant to the TBCA, (v) any notice or
filings under the HSR Act, (vi) any consents,
authorizations, approvals, filings or exemptions in connection
with compliance with the applicable provisions of federal and
state securities laws relating to the regulation of
broker-dealers, investment advisers or transfer agents, and the
rules of NASD, or which are required under consumer finance,
mortgage banking and other similar laws, and (vii) the
approval of this Agreement by the requisite vote of the
shareholders of GCBS and CVBG, no consents or approvals of or
filings or registrations with any Governmental Entity are
necessary in connection with (A) the execution and delivery
by CVBG of this Agreement and (B) the consummation by CVBG
of the Merger and the other transactions contemplated hereby.
Except for any consents, authorizations, or approvals of any
other material contracts to which CVBG is a party and which are
listed in Section 4.4 of the CVBG Disclosure Schedule, no
consents, authorizations, or approvals of any other person are
necessary in connection with (A) the execution and delivery
by CVBG of this Agreement and (B) the consummation by CVBG
of the Merger and the other transactions contemplated hereby.
4.5 Reports. CVBG and each of its
Subsidiaries have timely filed all reports, registrations and
statements, together with any amendments required to be made
with respect thereto, with the Regulatory Agencies, and all
other reports and statements required to be filed by them,
including, without limitation, any report or statement required
to be filed pursuant to the laws, rules or regulations of the
United States, any state, or any Regulatory Agency, and have
paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report,
registration or statement or to pay such fees and assessments,
either individually or in the aggregate, will not have a
Material Adverse Effect on CVBG. Except for normal examinations
conducted by a Regulatory Agency in the ordinary course of the
business of CVBG and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of CVBG,
investigation into the business or operations of CVBG or any of
its Subsidiaries, except where such
18
proceedings or investigation will not, either individually or in
the aggregate, have a Material Adverse Effect on CVBG. There is
no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement
relating to any examinations of CVBG or any of its Subsidiaries
which, in the reasonable judgment of CVBG, will, either
individually or in the aggregate, have a Material Adverse Effect
on CVBG.
4.6 Financial Statements. CVBG has
previously made available to GCBS true and correct copies of
(i) the consolidated balance sheets of CVBG and its
Subsidiaries as of December 31, 2003, 2004 and 2005 and the
related consolidated statements of income and changes in
shareholders equity and cash flows for the fiscal years
ended December 31, 2003 through 2005, inclusive as reported
in CVBGs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
SEC under the Exchange Act and accompanied by the audit report
of Crowe, Chizek and Company LLP, independent public accountants
with respect to CVBG, and (ii) the unaudited consolidated
balance sheet of CVBG and its Subsidiaries as of
September 30, 2005 and 2006, and the related consolidated
statements of income, changes in shareholders equity and
cash flows for the nine-month periods then ended, as reported in
CVBGs Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006. The
financial statements referred to in this Section 4.6
(including the related notes, where applicable) fairly present
in all material respects the consolidated results of operations,
changes in shareholders equity, cash flows and financial
position of CVBG and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth, subject
to normal year-end audit adjustments in the case of unaudited
statements; each of such statements (including the related
notes, where applicable) complies in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable)
has been prepared in all material respects in accordance with
GAAP consistently applied during the periods involved, except in
each case as indicated in such statements or in the notes
thereto. The books and records of CVBG and its Subsidiaries have
been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
4.7 Brokers Fees. Except for
Keefe, Bruyette & Woods, neither CVBG nor any CVBG
Subsidiary nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any
brokers fees, commissions or finders fees in
connection with the Merger or related transactions contemplated
by this Agreement.
4.8 Absence of Certain Changes or Events.
(a) Since September 30, 2006, no event or events have
occurred that have had, either individually or in the aggregate,
a Material Adverse Effect on CVBG.
(b) Since September 30, 2006 through and including the
date of this Agreement, CVBG and its Subsidiaries have carried
on their respective businesses in all material respects in the
ordinary course except for certain actions to effect a sale of
CVBG.
4.9 Legal Proceedings.
(a) Except as disclosed in Section 4.9(a) of the CVBG
Disclosure Schedule, neither CVBG nor any of its Subsidiaries is
a party to any, and there are no pending or, to the best of
CVBGs knowledge, threatened legal, administrative,
arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against CVBG or any
of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which, in
any such case, there is a reasonable probability of an adverse
determination and which, if adversely determined, will be
reasonably likely to, either individually or in the aggregate,
have a Material Adverse Effect on CVBG.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction (other than those that apply to similarly
situated bank holding companies or banks) imposed upon CVBG, any
of its Subsidiaries or the assets of CVBG or any of its
Subsidiaries that has had or will have, either individually or
in the aggregate, a Material Adverse Effect on CVBG.
19
4.10 Taxes and Tax Returns. Each of
CVBG and its Subsidiaries has duly filed all federal, state,
foreign and local information returns and Tax returns required
to be filed by it on or prior to the date of this Agreement (all
such returns being accurate and complete in all material
respects) and has duly paid or made provision for the payment of
all Taxes that have been incurred or are due or claimed to be
due from it by federal, state, foreign or local taxing
authorities other than (i) Taxes or other governmental
charges that are not yet delinquent or are being contested in
good faith or have not been finally determined and have been
adequately reserved against under GAAP, or (ii) information
returns, Tax returns or Taxes as to which the failure to file,
pay or make provision for is not reasonably likely to have,
either individually or in the aggregate, a Material Adverse
Effect on CVBG. Other than such ongoing examination, the federal
income Tax returns of CVBG and its Subsidiaries, to the
knowledge of CVBG, have not been examined by the IRS. There are
no material disputes pending, or to the knowledge of CVBG,
claims asserted, for Taxes or assessments upon CVBG or any of
its Subsidiaries for which CVBG does not have adequate reserves.
Neither CVBG nor any of its Subsidiaries is a party to or is
bound by any Tax sharing, allocation or indemnification
agreement or arrangement (other than such an agreement or
arrangement exclusively between or among CVBG and its
Subsidiaries).
4.11 Employees.
(a) Section 4.11(a) of the CVBG Disclosure Schedule
sets forth a true and complete list of each material benefit or
compensation plan, arrangement or agreement, and any material
bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control
or fringe benefit plan, program or agreement that is maintained,
or contributed to, for the benefit of current or former
directors or employees of CVBG and its Subsidiaries or with
respect to which CVBG or its Subsidiaries may, directly or
indirectly, have any liability to such directors or employees,
as of the date of this Agreement (the CVBG Benefit
Plans).
(b) CVBG has heretofore made available to GCBS true and
complete copies of each of the CVBG Benefit Plans and certain
related documents, including, but not limited to, (i) the
actuarial report for such CVBG Benefit Plan (if applicable) for
each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such CVBG
Benefit Plan.
(c) Except as identified in Section 4.11(a) of the
CVBG Disclosure Schedule referenced above or as would not
reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on CVBG, (i) each of
the CVBG Benefit Plans has been operated and administered in all
material respects in compliance with ERISA and the Code,
(ii) each of the CVBG Benefit Plans intended to be
qualified within the meaning of Section 401(a)
of the Code and has received a favorable determination from the
IRS that such CVBG Benefit Plan is so qualified, and to the
knowledge of CVBG, there are no existing circumstances or any
events that have occurred that will adversely affect the
qualified status of any such CVBG Benefit Plan, (iii) with
respect to each CVBG Benefit Plan which is subject to
Title IV of ERISA, the present value of accrued benefits
under such CVBG Benefit Plan, based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared by such CVBG Benefit Plans
actuary with respect to such CVBG Benefit Plan, did not, as of
its latest valuation date, exceed the then current value of the
assets of such CVBG Benefit Plan allocable to such accrued
benefits, (iv) no CVBG Benefit Plan provides benefits,
including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former
employees or directors of CVBG or its Subsidiaries beyond their
retirement or other termination of service, other than
(A) coverage mandated by applicable law, (B) death
benefits or retirement benefits under any employee pension
plan (as such term is defined in Section 3(2) of
ERISA), (C) deferred compensation benefits accrued as
liabilities on the books of CVBG or its Subsidiaries or
(D) benefits the full cost of which is borne by the current
or former employee or director (or his beneficiary), (v) no
material liability under Title IV of ERISA has been
incurred by CVBG, its Subsidiaries or any trade or business,
whether or not incorporated, all of which together with CVBG,
would be deemed a single employer under
Section 4001 of ERISA (a CVBG ERISA Affiliate)
that has not been satisfied in full, and no condition exists
that presents a material risk to CVBG, its Subsidiaries or any
CVBG ERISA Affiliate of incurring a material liability
thereunder, (vi) no CVBG Benefit Plan is a
multiemployer pension plan (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions
payable by CVBG or its Subsidiaries as of the Effective Time
20
with respect to each CVBG Benefit Plan in respect of current or
prior plan years have been paid or accrued in accordance with
GAAP, (viii) none of CVBG, its Subsidiaries or any other
person, including any fiduciary, has engaged in a transaction in
connection with which CVBG, its Subsidiaries or any CVBG Benefit
Plan will be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material
Tax imposed pursuant to Section 4975 or 4976 of the Code,
and (ix) to the knowledge of CVBG there are no pending,
threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the CVBG Benefit
Plans or any trusts related thereto.
(d) Except as set forth in Schedule 4.11(d) of the
CVBG Disclosure Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with
any other event) (i) result (either alone or upon the
occurrence of any additional acts or events) in any payment
(including, without limitation, severance, unemployment
compensation, excess parachute payment (within the
meaning of Section 280G of the Code), forgiveness of
indebtedness or otherwise) becoming due to any director or any
employee of CVBG or any of its affiliates from CVBG or any of
its affiliates under any CVBG Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any CVBG
Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefits that will,
either individually or in the aggregate, have a Material Adverse
Effect on CVBG.
4.12 SEC Reports. CVBG has
previously made available to GCBS an accurate and complete copy
of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since
January 1, 2003, by CVBG with the SEC pursuant to the
Securities Act or the Exchange Act and prior to the date hereof
and (b) communication mailed by CVBG to its shareholders
since January 1, 2003. CVBG has filed all required reports,
schedules, registration statements and other documents with the
SEC since January 1, 2003 (the CVBG Reports).
As of their respective dates of filing with the SEC (or, if
amended or superseded by a filing prior to the date hereof, as
of the date of such filing), the CVBG Reports complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such CVBG
Reports, and none of the CVBG Reports when filed contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading.
4.13 Compliance with Applicable Law.
(a) CVBG and each of its Subsidiaries hold all material
licenses, franchises, permits, patents, trademarks and
authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each, and have
complied in all material respects with, and are not in default
in any material respect under, any applicable law, statute,
order, rule, regulation, policy, agreement
and/or
guideline of any Governmental Entity relating to CVBG or any of
its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or
default will not, either individually or in the aggregate, have
a Material Adverse Effect on CVBG.
(b) Except as will not have, either individually or in the
aggregate, a Material Adverse Effect on CVBG, CVBG and each of
its Subsidiaries have properly administered all accounts for
which it acts as a fiduciary, including accounts for which it
serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with
the terms of the governing documents, applicable state and
federal law and regulation and common law. None of CVBG, any of
its Subsidiaries, or any director, officer or employee of CVBG
or of any of its Subsidiaries, has committed any breach of trust
with respect to any such fiduciary account that will have a
Material Adverse Effect on CVBG, and the accountings for each
such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary
account.
4.14 Certain Contracts.
(a) Except as disclosed in Section 4.11(a) of the CVBG
Disclosure Schedule, neither CVBG nor any of its Subsidiaries is
a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to
the employment of any directors, officers or employees other
than in the
21
ordinary course of business consistent with past practice,
(ii) which, upon the consummation or shareholder approval
of the transactions contemplated by this Agreement will (either
alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise)
becoming due from CVBG, GCBS, the Surviving Corporation, or any
of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a material contract (as
such term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the CVBG
Reports, (iv) which materially restricts the conduct of any
line of business by CVBG or upon consummation of the Merger will
materially restrict the ability of the Surviving Corporation to
engage in any line of business in which a bank holding company
may lawfully engage, (v) with or to a labor union or guild
(including any collective bargaining agreement) or
(vi) (including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan) any
of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of
any shareholder approval or the consummation of any of the
transactions contemplated by this Agreement, or the value of any
of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. CVBG has
previously made available to GCBS true and correct copies of all
employment and deferred compensation agreements which are in
writing and to which CVBG is a party. Each contract,
arrangement, commitment or understanding of the type described
in this Section 4.14(a), whether or not set forth in the
CVBG Disclosure Schedule, is referred to herein as a CVBG
Contract, and neither CVBG nor any of its Subsidiaries
knows of, or has received notice of, any violation of the above
by any of the other parties thereto which will have,
individually or in the aggregate, a Material Adverse Effect on
CVBG.
(b) (i) Each CVBG Contract is valid and binding on
CVBG or any of its Subsidiaries, as applicable, and in full
force and effect, (ii) CVBG and each of its Subsidiaries
has in all material respects performed all obligations required
to be performed by it to date under each CVBG Contract, except
where such noncompliance, either individually or in the
aggregate, will not have a Material Adverse Effect on CVBG, and
(iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, will constitute, a
material default on the part of CVBG or any of its Subsidiaries
under any such CVBG Contract, except where such default which
will, either individually or in the aggregate, have a Material
Adverse Effect on CVBG.
4.15 Agreements with Regulatory
Agencies. Neither CVBG nor any of its
Subsidiaries is subject to any
cease-and-desist
or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or,
except as disclosed in Section 4.15 of the Civitas
Disclosure Schedule, has been since January 1, 2003, a
recipient of any supervisory letter from, or since
January 1, 2003, has adopted any board resolutions at the
request of any Regulatory Agency or other Governmental Entity
that currently restricts in any material respect the conduct of
its business, would restrict the consummation of the
transactions contemplated by this Agreement or that in any
material manner relates to its capital adequacy, its credit
policies, its management or its business (each, whether or not
set forth in the CVBG Disclosure Schedule, a CVBG
Regulatory Agreement), nor, to the knowledge of CVBG, has
CVBG or any of its Subsidiaries been advised since
January 1, 2003, by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting
any such CVBG Regulatory Agreement.
4.16 Interest Rate Risk Management
Instruments. Except as would not be reasonably
likely to have, either individually or in the aggregate, a
Material Adverse Effect on CVBG, (a) all interest rate
swaps, caps, floors and option agreements and other interest
rate risk management arrangements, whether entered into for the
account of CVBG, one of its Subsidiaries, or for the account of
a customer of CVBG or one of its Subsidiaries, were entered into
in the ordinary course of business and, to CVBGs
knowledge, in accordance with prudent banking practice and
applicable rules, regulations and policies of any Regulatory
Authority and with counterparties believed to be financially
responsible at the time, and are legal, valid and binding
obligations of CVBG or one of its Subsidiaries enforceable in
accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies), and are in full force and
effect; (b) CVBG and each of its Subsidiaries have duly
performed in all material respects all of their material
obligations thereunder to the
22
extent that such obligations to perform have accrued; and
(c) to CVBGs knowledge, there are no material
breaches, violations or defaults or allegations or assertions of
such by any party thereunder.
4.17 Undisclosed
Liabilities. Except for those liabilities that
are fully reflected or reserved against on the consolidated
balance sheet of CVBG included in the CVBG
Form 10-Q
and for liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 2006,
neither CVBG nor any of its Subsidiaries has incurred any
liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that,
either individually or in the aggregate, has had or will have, a
Material Adverse Effect on CVBG.
4.18 Insurance. CVBG and its
Subsidiaries have in effect insurance coverage with reputable
insurers or are self-insured, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably
adequate coverage against all risks customarily insured against
by bank holding companies and their subsidiaries comparable in
size and operations to CVBG and its Subsidiaries.
4.19 Environmental Liability. There
are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental
investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could
reasonably result in the imposition, on CVBG of any liability or
obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance
including, without limitation, CERCLA, pending or, to the
knowledge of CVBG, threatened against CVBG, which liability or
obligation will, either individually or in the aggregate, have a
Material Adverse Effect on CVBG. To the knowledge of CVBG, there
is no reasonable basis for any such proceeding, claim, action or
governmental investigation that would impose any liability or
obligation that will, either individually or in the aggregate,
have a Material Adverse Effect on CVBG. CVBG is not subject to
any agreement, order, judgment, decree, letter or memorandum by
or with any court, governmental authority, regulatory agency or
third party imposing any liability or obligation with respect to
the foregoing that will have, either individually or in the
aggregate, a Material Adverse Effect on CVBG.
4.20 State Takeover Laws. The Board
of Directors of CVBG has approved the transactions contemplated
by this Agreement for purposes of
Sections 48-103-101
through
48-103-505
of the TBCA, if applicable to CVBG, such that the provisions of
such sections of the TBCA will not apply to this Agreement or
any of the transactions contemplated hereby or thereby.
4.21 Reorganization. As of the date
of this Agreement, CVBG is not aware of any fact or circumstance
that would reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
4.22 Information Supplied. None of
the information supplied or to be supplied by CVBG for inclusion
or incorporation by reference in (i) the
Form S-4
will, at the time the
Form S-4
is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (ii) the Joint Proxy Statement will, at the
date of mailing to shareholders and at the times of the meetings
of shareholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state
any 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. The
Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the SEC thereunder, except that no
representation or warranty is made by CVBG with respect to
statements made or incorporated by reference therein based on
information supplied by GCBS for inclusion or incorporation by
reference in the Joint Proxy Statement.
4.23 Internal Controls. The
records, systems, controls, data and information of CVBG and its
Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic
process, whether computerized or not) that are under the
exclusive ownership and direct control of CVBG or its
Subsidiaries or accountants (including all means of access
thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to
have a Materially Adverse Effect on the system of internal
accounting controls described in the following sentence.
23
As and to the extent described in the CVBG Reports filed with
the SEC prior to the date hereof, CVBG and its Subsidiaries have
devised and maintain a system of internal accounting controls
sufficient to provide reasonable assurances regarding the
reliability of financial reporting and the preparation of
financial statements in accordance with GAAP. CVBG (i) has
designed disclosure controls and procedures to ensure that
material information relating to CVBG, including its
consolidated Subsidiaries, is made known to the management of
CVBG by others within those entities, and (ii) has
disclosed, based on its most recent evaluation prior to the date
hereof, to CVBGs independent registered public accounting
firm and the audit committee of CVBGs Board of Directors
(x) any significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
CVBGs ability to record, process, summarize and report
financial information and (y) any fraud, whether or not
material, that involves management or other employees who have a
significant role in CVBGs internal control over financial
reporting.. CVBG has made available to GCBS a summary of any
such disclosure made by management to GCBSs auditors and
audit committee since January 1, 2002. CVBG has initiated
its process of compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 and expects to be in full compliance
therewith by the mandated compliance date.
4.24 Opinion of CVBG Financial
Advisor. CVBG has received the opinion of its
financial advisor, Keefe, Bruyette & Woods dated the
date of this Agreement, to the effect that the consideration
received by the holders of CVBG Common Stock is fair, from a
financial point of view, to CVBG and the holders of CVBG Common
Stock.
ARTICLE V.
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective
Time. During the period from the date of this
Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement (including the GCBS
Disclosure Schedule and the CVBG Disclosure Schedule), each of
GCBS and CVBG shall, and shall cause each of their respective
Subsidiaries to, (a) conduct its business in the ordinary
course in all material respects, (b) use reasonable best
efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships
and retain the services of its key officers and key employees
and (c) take no action which would adversely affect or
delay the ability of either GCBS or CVBG to obtain any necessary
approvals of any Regulatory Agency or other governmental
authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement or
to consummate the transactions contemplated hereby.
5.2 CVBG Forbearances. During the
period from the date of this Agreement to the Effective Time,
except as set forth in the CVBG Disclosure Schedule and except
as expressly contemplated or permitted by this Agreement, CVBG
shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of GCBS (which consent shall
not be unreasonably withheld):
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money (other than short-term indebtedness incurred to
refinance short-term indebtedness and indebtedness of CVBG or
any of its wholly-owned Subsidiaries to CVBG or any of its
Subsidiaries), or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any
other individual, corporation or other entity (it being
understood and agreed that incurrence of indebtedness in the
ordinary course of business consistent with past practice shall
include the creation of deposit liabilities, purchases of
Federal funds, sales of certificates of deposit and entering
into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any
shares of its capital stock; (ii) make, declare or pay any
dividend, or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible
(whether currently convertible or convertible only after the
passage of time or the occurrence of certain events) into or
exchangeable for any shares of its capital stock except
(A) for regular quarterly cash dividends declared
24
in 2007 at a rate not in excess of $0.02 per share of CVBG
Common Stock and payable in 2007, (B) dividends paid by any
of the Subsidiaries of CVBG to CVBG or to any of its
wholly-owned Subsidiaries, (C) the acceptance of shares of
CVBGs Common Stock as payment of the exercise price of
stock options, in accordance with past practice and the terms of
the applicable award agreements, or (D) the acceptance of
shares of CVBG Common Stock upon forfeiture of any restricted
shares pursuant to an award of restricted shares under any CVBG
Stock Plan; (iii) grant any stock appreciation rights or
grant any individual, corporation or other entity any right to
acquire any shares of its capital stock; or (iv) issue any
additional shares of capital stock except pursuant to the
exercise of CVBG Stock Options outstanding as of the date of
this Agreement;
(c) (i) except for normal increases made in the
ordinary course of business consistent with past practice, or as
required by applicable law or an existing agreement, increase
the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any officer, employee, or
director of CVBG, (ii) pay any pension or retirement
allowance not required by any existing plan or agreement or by
applicable law, (iii) pay any bonus, or (iv) become a
party to, amend or commit itself to, any pension, retirement,
profit-sharing or welfare benefit plan or agreement or
employment agreement with or for the benefit of any employee,
other than in the ordinary course of business consistent with
past practice or as required by applicable law or any existing
agreement;
(d) sell, transfer, mortgage, encumber or otherwise dispose
of any of its properties or assets that are material to CVBG and
its Subsidiaries, taken as a whole, to any individual,
corporation or other entity other than a Subsidiary or cancel,
release or assign any indebtedness that is material to CVBG and
its Subsidiaries, taken as a whole, to any such person or any
claims held by any such person that are material to CVBG and its
Subsidiaries, taken as a whole, in each case other than in the
ordinary course of business consistent with past practice or
pursuant to contracts in force at the date of this Agreement;
(e) enter into any new line of business that is material to
CVBG and its Subsidiaries, taken as a whole, or change its
lending, investment, underwriting, risk and asset liability
management and other banking and operating policies that are
material to CVBG and its Subsidiaries, taken as a whole, except
as required by applicable law, regulation or policies imposed by
any Governmental Entity;
(f) except for transactions made in the ordinary course of
business consistent with past practice, make any material
capital expenditure or capital additions or improvements which
individually exceed $10,000 or in the aggregate exceed $50,000
either by purchase or sale of fixed assets, property transfers,
or purchase or sale of any property or assets of any other
individual, corporation or other entity;
(g) knowingly take any action, or knowingly fail to take
any action, which action or failure to act is reasonably likely
to prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code;
(h) amend its charter or bylaws, or otherwise take any
action to exempt any person or entity (other than GCBS or its
Subsidiaries) or any action taken by any person or entity from
any takeover statute or similarly restrictive provisions of its
organizational documents or terminate, amend or waive any
provisions of any confidentiality or standstill agreements in
place with any third parties;
(i) other than in prior consultation with GCBS, restructure
or materially change its investment securities portfolio or its
gap position, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
(j) settle any material claim, action or proceeding, except
in the ordinary course of business consistent with past practice;
(k) take any action that is intended or is reasonably
likely to result in any of its representations or warranties set
forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of
the conditions to the Merger set forth in Article VII not
being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by
applicable law;
25
(l) implement or adopt any change in its tax accounting or
financial accounting principles, practices or methods, other
than as may be required by applicable law or regulation, GAAP or
regulatory guidelines;
(m) take any action that would materially impede or delay
the ability of the parties to obtain any necessary approvals of
any Regulatory Agency or Governmental Entity required for the
transactions contemplated by this Agreement; or
(n) agree to take, make any commitment to take, or adopt
any resolutions of its board of directors in support of, any of
the actions prohibited by this Section 5.2.
ARTICLE VI.
ADDITIONAL
AGREEMENTS
6.1 Regulatory Matters.
(a) GCBS and CVBG shall promptly prepare and file with the
SEC the Joint Proxy Statement and GCBS shall promptly prepare
and file with the SEC the
Form S-4,
in which the Joint Proxy Statement will be included as a
prospectus. Each of GCBS and CVBG shall use their reasonable
best efforts in consultation with their respective legal counsel
to have the
Form S-4
declared effective under the Securities Act as promptly as
practicable after such filing, and GCBS and CVBG shall
thereafter mail or deliver the Joint Proxy Statement to their
respective shareholders. GCBS shall also use its reasonable best
efforts to obtain all necessary state securities law or
Blue Sky permits and approvals required to carry out
the transactions contemplated by this Agreement, and CVBG shall
furnish all information concerning CVBG and the holders of CVBG
Capital Stock as may be reasonably requested in connection with
any such action. If at any time prior to or after the Effective
Time any information relating to either of the parties, or their
respective affiliates, officers or directors, should be
discovered by either party which should be set forth in an
amendment or supplement to any of the
Form S-4
or the Joint Proxy Statement/Prospectus so that such documents
would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information
shall promptly notify the other party hereto and, to the extent
required by law, rules or regulations, an appropriate amendment
or supplement describing such information shall be promptly
filed with the SEC and disseminated to the shareholders of GCBS
and CVBG.
(b) The parties hereto shall cooperate with each other and
use their reasonable best efforts to promptly prepare and file
all necessary documentation to effect all applications, notices,
petitions and filings, to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or
advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger), and to
comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental
Entities. GCBS and CVBG shall have the right to review in
advance, and, to the extent practicable, each will consult the
other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to
GCBS or CVBG, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) Each of GCBS and CVBG shall, upon request, furnish to
the other all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as
may be reasonably necessary or advisable in connection with the
Joint Proxy Statement, the
Form S-4
or any other statement, filing, notice or
26
application made by or on behalf of CVBG, GCBS or any of their
respective Subsidiaries to any Governmental Entity in connection
with the Merger and the other transactions contemplated by this
Agreement.
(d) Each of GCBS and CVBG shall promptly advise the other
upon receiving any communication from any Governmental Entity
whose consent or approval is required for consummation of the
transactions contemplated by this Agreement that causes such
party to believe that there is a reasonable likelihood that any
Requisite Regulatory Approval (as defined below) will not be
obtained or that the receipt of any such approval will be
materially delayed.
(e) GCBS and CVBG shall promptly furnish each other with
copies of written communications received by GCBS and CVBG, as
the case may be, or any of their respective Subsidiaries from,
or delivered by any of the foregoing to, any Governmental Entity
in respect of the transactions contemplated by this Agreement.
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, each of GCBS and CVBG,
for the purposes of verifying the representations and warranties
of the other and preparing for the Merger and the other matters
contemplated by this Agreement, shall, and shall cause each of
their respective Subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the
period prior to the Effective Time, to all its properties,
books, contracts, commitments and records and, during such
period, GCBS and CVBG shall, and shall cause their respective
Subsidiaries to, make available to the other party (i) a
copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to
the requirements of federal securities laws or federal or state
banking laws (other than reports or documents which CVBG or
GCBS, as the case may be, is not permitted to disclose under
applicable law) and (ii) all other information concerning
its business, properties and personnel as such party may
reasonably request. Neither CVBG nor GCBS 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 CVBGs or GCBSs,
as the case may be, customers, jeopardize the attorney-client
privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding
sentence apply.
(b) Each of GCBS and CVBG agrees that it will not, and will
cause its representatives not to, use any information obtained
pursuant to this Section 6.2 (as well as any other
information obtained prior to the date hereof in connection with
entering into this Agreement) for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
Subject to the requirements of law, each party will keep
confidential, and will cause its representative to keep
confidential, all information and documents obtained pursuant to
this Section 6.2 (as well as any other information obtained
prior to the date hereof in connection with the entering into of
this Agreement) unless such information (i) was already
known to such party, (ii) becomes available to such party
from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the
prior written approval of the providing party or (iv) is or
becomes readily ascertainable from publicly available sources.
If this Agreement is terminated or the transactions contemplated
by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts
thereof containing information and data as to the other party to
be returned to the other party.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and
warranties of the other set forth herein.
6.3 Shareholders
Approvals. Each of GCBS and CVBG shall call a
meeting of its shareholders to be held as soon as reasonably
practicable for the purpose of voting upon proposals to adopt
this Agreement and approve the Merger Agreement and the Merger,
and each shall use its reasonable best efforts, to cause such
meetings to occur as soon as reasonably practicable. The Board
of Directors of each of GCBS and CVBG shall use its reasonable
best efforts (and subject to its fiduciary duty) to obtain from
the shareholders of GCBS and CVBG, as the case may be, the vote
in favor of the adoption of this Agreement required by the TBCA
27
and GCBSs and CVBGs charter and bylaws, as the case
may be to consummate the transactions contemplated hereby.
Notwithstanding anything to the contrary herein, unless this
Agreement has been terminated, this Agreement shall be submitted
to the shareholders of GCBS and CVBG at such meeting for the
purpose of obtaining the CVBG Shareholder Approval or GCBS
Shareholder Approval, as the case may be, and voting on the
approval and adoption of this Agreement and nothing contained
herein shall be deemed to relieve GCBS and CVBG of such
obligations.
6.4 Legal Conditions to
Merger. Each of GCBS and CVBG shall, and shall
cause its Subsidiaries to, use their reasonable best efforts
(a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal
requirements that may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the
conditions set forth in Article VII hereof, to consummate
the transactions contemplated by this Agreement, and (b) to
obtain (and to cooperate with the other party to obtain) any
material consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party
that is required to be obtained by GCBS or CVBG or any of their
respective Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement.
6.5 Affiliates. CVBG shall cause
each director, executive officer and other person who is an
affiliate (for purposes of Rule 145 under the
Securities Act) of CVBG to deliver to GCBS, as soon as
practicable after the date of this Agreement, and prior to the
date of the shareholders meetings called by CVBG to be
held pursuant to Section 6.3, a written agreement, in the
form of Exhibit 6.5. In addition, affiliates
who are also directors of CVBG and who represent 75% of the
members of the Board of Directors of CVBG and whose ownership of
CVBG Common Stock represents 75% of the CVBG Common Stock owned
by all members of Board of Directors of CVBG shall have voted as
directors in favor of this Agreement.
6.6 Stock Quotation or
Listing. GCBS shall cause the shares of GCBS
Common Stock to be issued in the Merger to be qualified for
quotation or listing on the NASDAQ Global Select Market, subject
to official notice of issuance, prior to the Effective Time.
GCBS shall cause the shares of CVBG Common Stock to be de-listed
with the NASDAQ Global Select Market and the SEC after the
Effective Time.
6.7 Employee Benefit Plans; Existing
Agreements.
(a) As of the Effective Time, to the extent permissible
under the terms of the GCBS employee benefit Plans, the
employees of CVBG and its Subsidiaries (the CVBG
Employees) shall be eligible to participate in GCBSs
employee benefit plans, including but not limited to bonus and
option plans, in which similarly situated employees of GCBS or
its Subsidiaries participate, to the same extent as similarly
situated employees of GCBS or its Subsidiaries (it being
understood that inclusion of CVBG Employees in GCBSs
employee benefit plans may occur at different times with respect
to different plans) except as provided below.
(b) With respect to each GCBS Plan that is an
employee benefit plan, as defined in
section 3(3) of ERISA, for purposes of determining
eligibility to participate, and entitlement to benefits,
including for severance benefits and vacation entitlement,
service with CVBG shall be treated as service with GCBS;
provided, however, that such service shall not be recognized to
the extent that such recognition would result in a duplication
or increase of benefits. Such service also shall apply for
purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting
condition limitations. Each GCBS employee benefit plan shall
waive pre-existing condition limitations to the same extent
waived under the applicable CVBG employee benefit plan. CVBG
Employees shall be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes
of applying deductibles, copayments and
out-of-pocket
maximums as though such amounts had been paid in accordance with
the terms and conditions of the GCBS employee benefit plans.
(c) From and after the Effective Time, GCBS or the
Surviving Corporation, as applicable, will assume and honor and
shall cause the appropriate Subsidiaries of GCBS to assume and
to honor in accordance with their terms all employment,
severance, change of control and other compensation agreements
and arrangements between CVBG or its Subsidiaries and any
employee thereof, and all accrued and vested benefit
obligations, existing prior to the execution of this Agreement
which are between CVBG or any of its Subsidiaries and any
current or former director, officer, employee or consultant
thereof. In addition, any employee of CVBG or its
28
Subsidiaries whose position is eliminated as a direct result of
the Merger shall be eligible to receive the Standard Severance
Package of CVBG as described by CVBG to GCBS previously, rather
than any standard severance package of GCBS, unless specifically
negotiated between the employee and GCBS or CVBG.
(d) From and after the Effective Time, GCBS or the
Surviving Corporation, as applicable, will, and will cause any
applicable Subsidiary thereof or Employee Benefit Plan, to
provide or pay when due to CVBGs employees as of the
Effective Time all benefits and compensation pursuant to
CVBGs Employee Plans, programs and arrangements in effect
on the date hereof earned and accrued through, and to which such
individuals are entitled as of the Effective Time (or such later
time as such Employee Benefit Plans as in effect at the
Effective Time are terminated or canceled by GCBS or the
Surviving Corporation) subject to compliance with the terms of
this Agreement.
6.8 Directors and Officers
Insurance.
(a) GCBS shall use its reasonable best efforts to cause the
individuals serving as officers and directors of CVBG, its
Subsidiaries or any entity specified in the CVBG Disclosure
Schedule immediately prior to the Effective Time to be covered
for a period of three (3) years from the Effective Time (or
the period of the applicable statute of limitations, if longer)
by the directors and officers liability insurance
policy maintained by CVBG (provided that GCBS may substitute
therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous
than such policy) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such
officers and directors in their capacity as such.
(b) The provisions of this Section 6.8 shall survive
the Effective Time and are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.9 Advice of Changes. GCBS and
CVBG shall each promptly advise the other party of any change or
event (i) having a Material Adverse Effect on it or
(ii) which it believes would or would be reasonably likely
to cause or constitute a material breach of any of its
representations, warranties, covenants or agreements contained
herein; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements
of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this
Agreement; provided further that a failure to comply with this
Section 6.9 shall not constitute the failure of any
condition set forth in Article VII to be satisfied unless
the underlying Material Adverse Effect or material breach would
independently result in the failure of a condition set forth in
Article VII to be satisfied.
6.10 Acquisition Proposals.
(a) CVBG and its Subsidiaries and each of their respective
affiliates, directors, officers, employees, agents and
representatives (including any investment banker, financial
advisor, attorney, accountant or other representative retained
by CVBG or any of its Subsidiaries) shall immediately cease any
discussions or negotiations with any other parties that may be
ongoing with respect to the possibility or consideration of any
Acquisition Proposal, as defined below, and they will not
release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which they are a
party with respect to any Acquisition Proposal. From the
acceptance of the offer letter dated December 20, 2006,
through the Effective Time, CVBG shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any
of its or its Subsidiaries directors, officers or
employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of
furnishing information or assistance), or take any other action
designed to facilitate or encourage any inquiries or the making
of any proposal that constitutes, or is reasonably likely to
lead to, any Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal
or (iii) make or authorize any statement, recommendation or
solicitation in support of any Acquisition Proposal. Any
violation of the foregoing restrictions by any representative of
CVBG, whether or not such representative is so authorized and
whether or not such representative is purporting to act on
behalf of such party or otherwise, shall be deemed to be a
breach of this Agreement by CVBG.
29
(b) (i) Notwithstanding the foregoing, the Board of
Directors of CVBG shall be permitted, prior to its meeting of
shareholders to be held pursuant to Section 6.3, to engage
in discussions and negotiations with, or provide any nonpublic
information or data to, any person in response to an unsolicited
bona fide written Acquisition Proposal by such person made after
the date of this Agreement which its Board of Directors, upon
written advice from outside legal counsel to CVBG that failure
to consider such deemed Superior Proposal could reasonably be
expected to constitute a breach of fiduciary duties to CVBG
shareholders under Tennessee law and subject to compliance with
the other terms of this Section 6.10.
(ii) CVBG shall notify GCBS promptly (but in no event later
than 24 hours) after receipt of any Acquisition Proposal,
or any request for nonpublic information relating to CVBG or any
of its Subsidiaries by any person that informs CVBG or any of
its Subsidiaries that it is considering making, or has made, an
Acquisition Proposal, or any inquiry from any person seeking to
have discussions or negotiations with such party relating to a
possible Acquisition Proposal. Such notice shall be made orally
and confirmed in writing, and shall indicate the identity of the
person making the Acquisition Proposal, inquiry or request and
the material terms and conditions of any inquiries, proposals or
offers (including a copy thereof if in writing and any related
documentation or correspondence). CVBG shall also promptly, and
in any event within 24 hours, notify GCBS, orally and in
writing, if it enters into discussions or negotiations
concerning any Acquisition Proposal or provides nonpublic
information or data to any person in accordance with this
Section 6.10(b) and keep GCBS informed of the status and
terms of any such proposals, offers, discussions or negotiations
on a current basis, including by providing a copy of all
material documentation or correspondence relating thereto.
(iii) Nothing contained in this Section 6.10 shall
prohibit CVBG or its Subsidiaries from taking and disclosing to
its shareholders a position required by
Rule 14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act; provided, however, that
compliance with such rules shall not in any way limit or modify
the effect that any action taken pursuant to such rules has
under any other provision of this Agreement.
(c) Nothing in this Section 6.10 shall (x) permit
CVBG to terminate this Agreement or (y) affect any other
obligation of CVBG under this Agreement. CVBG shall not submit
to the vote of its shareholders any Acquisition Proposal other
than the Merger.
(d) For purposes of this Agreement, the term
Acquisition Proposal means any inquiry, proposal or
offer, filing of any regulatory application or notice (whether
in draft or final form) or disclosure of an intention to do any
of the foregoing from any person relating to any (w) direct
or indirect acquisition or purchase of a business that
constitutes a substantial portion of the net revenues, net
income or assets of CVBG or any of its significant subsidiaries
(as defined under
Regulation S-X
of the SEC), (x) direct or indirect acquisition or purchase
of any class of equity securities representing 10% or more of
the voting power of CVBG or its significant subsidiaries,
(y) tender offer or exchange offer that if consummated
would result in any person beneficially owning 10% or more of
the voting power of CVBG, or (z) merger, consolidation,
business combination, recapitalization, liquidation, dissolution
or similar transaction involving CVBG or any of its
Subsidiaries, in each case other than the transactions
contemplated by this Agreement.
(e) For purposes of this Agreement, Superior
Proposal means a bona fide written Acquisition Proposal
which the Board of Directors of CVBG concludes in good faith,
upon the written advice of its financial advisors and legal
advisors, taking into account all legal, financial, regulatory
and other aspects of the proposal and the person making the
proposal (including any
break-up
fees, expense reimbursement provisions and conditions to
consummation), (i) is more favorable to the shareholders of
CVBG from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is fully financed
or reasonably capable of being fully financed, reasonably likely
to receive all required governmental approvals on a timely basis
and otherwise reasonably capable of being completed on the terms
proposed; provided that, for purposes of this definition of
Superior Proposal, the term Acquisition Proposal
shall have the meaning assigned to such term in
Section 6.10(d) except that the reference to 10% or
more in the definition of Acquisition Proposal
shall be deemed to be a reference to a majority and
Acquisition Proposal shall only be deemed to refer
to a transaction involving CVBG.
6.11 Bank Merger. At or immediately
prior to the Effective Time, if requested by GCBS, CVBG shall
cause Cumberland Bank to enter into an Agreement and Plan of
Merger (the Bank Merger Agreement) with
30
Greene County Bank pursuant to which Cumberland Bank shall merge
with and into Greene County Bank after the Merger. Promptly
following execution of such Bank Merger Agreement, CVBG shall
approve such agreement as the sole shareholder of Cumberland
Bank. The Bank Merger Agreement shall contain such terms and
conditions as are reasonable, normal and customary in light of
the transactions contemplated hereby including a covenant that
consummation of the merger of Cumberland Bank with and into
Greene County Bank would not occur earlier than simultaneous
with consummation of the Merger and a provision for termination
of the Bank Merger Agreement upon termination of this Agreement.
ARTICLE VII.
CONDITIONS PRECEDENT
7.1 Conditions to Each Partys Obligation To
Effect the Merger. The respective obligations of
the parties to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. This Agreement
shall have been adopted by the respective requisite affirmative
votes of the holders of GCBS Common Stock and CVBG Common Stock
entitled to vote thereon.
(b) Listing or Quotation. The shares of
GCBS Common Stock which shall be issued to the shareholders of
CVBG upon consummation of the Merger shall have been qualified
for quotation on the NASDAQ Global Select Market, subject to
official notice of issuance.
(c) Regulatory Approvals. All regulatory
approvals set forth in Section 3.4 and Section 4.4
required to consummate the transactions contemplated by this
Agreement, including the Merger, shall have been obtained and
shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being
referred to herein as the Requisite Regulatory
Approvals).
(d) Form S-4. The
Form S-4
shall have become effective under the Securities Act and no stop
order suspending the effectiveness of the
Form S-4
shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints;
Illegality. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the
Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which
prohibits, materially restricts or makes illegal consummation of
the Merger.
(f) Federal Tax Opinion. The parties
hereto shall have received the opinion of counsel, in form and
substance reasonably satisfactory to GCBS and CVBG and their
respective counsel, dated the Closing Date, substantially to the
effect that, on the basis of facts, representations and
assumptions set forth in each such opinion which are consistent
with the state of facts existing at the Effective Time:
(i) The Merger will constitute a reorganization under
Section 368(a) of the Code, and GCBS and CVBG will each be
a party to the reorganization;
(ii) No taxable gain or loss will be recognized by GCBS or
CVBG as a result of the Merger; and
(iii) No taxable gain or loss will be recognized by
shareholders of CVBG who exchange their CVBG Common Stock solely
for GCBS Common Stock pursuant to the Merger (except with
respect to cash received as part of the total consideration
including cash received in lieu of a fractional share interest
in GCBS Common Stock).
31
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of GCBS,
CVBG and others.
7.2 Conditions to Obligations of
CVBG. The obligation of CVBG to effect the Merger
is also subject to the satisfaction, or waiver by CVBG, at or
prior to the Effective Time, of the following conditions:
(a) Representations and
Warranties. Subject to the standard set forth in
Section 9.2, the representations and warranties of GCBS set
forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Effective Time (except that representations and warranties that
by their terms speak specifically as of the date of this
Agreement or another date shall be true and correct as of such
date); and CVBG shall have received a certificate signed on
behalf of GCBS by the Chief Executive Officer and the Chief
Financial Officer of GCBS to the foregoing effect.
(b) Performance of Obligations of
GCBS. GCBS shall have performed in all material
respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and CVBG shall
have received a certificate signed on behalf of GCBS by the
Chief Executive Officer and the Chief Financial Officer of GCBS
to such effect.
7.3 Conditions to Obligations of
GCBS. The obligation of GCBS to effect the Merger
is also subject to the satisfaction or waiver by GCBS at or
prior to the Effective Time of the following conditions:
(a) Representations and
Warranties. Subject to the standard set forth in
Section 9.2., the representations and warranties of CVBG
set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
Effective Time (except that representations and warranties that
by their terms speak specifically as of the date of this
Agreement or another date shall be true and correct as of such
date); and GCBS shall have received a certificate signed on
behalf of CVBG by the Chief Executive Officer and the Chief
Financial Officer of CVBG to the foregoing effect.
(b) Performance of Obligations of
CVBG. CVBG shall have performed in all material
respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and GCBS shall
have received a certificate signed on behalf of CVBG by the
Chief Executive Officer and the Chief Financial Officer of CVBG
to such effect.
(c) Bank Merger. The bank Subsidiaries of
GCBS and CVBG shall have received all Requisite Regulatory
Approval and shareholder and other approvals necessary to be
merged together.
(d) Regulatory Agreement. There are no
CVBG Regulatory Agreements in effect that would have a Material
Adverse Effect on GCBS after the Effective Time.
(e) Continuing Review. From and
subsequent to the date hereof, CVBG will have: (1) given to
GCBS and its counsel and accountants access to their premises
and books and records during normal business hours for any
reasonable purpose related to the transactions contemplated
hereby; and (2) cooperate and instruct CVBGs counsel
and accountants to cooperate with GCBS and with GCBSs
counsel and accountants with regard to the formulation and
production of all necessary information, disclosures, financial
statements, registration statements, and regulatory filings with
respect to the transactions encompassed by this Agreement.
ARTICLE VIII.
TERMINATION
AND AMENDMENT
8.1 Termination. This Agreement may
be terminated at any time prior to the Effective Time, whether
before or after approval of the Merger by the shareholders of
CVBG or GCBS:
(a) by mutual consent of GCBS and CVBG in a written
instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its respective entire Board
of Directors;
(b) by either the Board of Directors of GCBS or the Board
of Directors of CVBG, upon written notice to the other party, if
a Governmental Entity that must provide GCBS or CVBG with a
Requisite
32
Regulatory Approval has denied approval of the Merger and such
denial has become final and non-appealable; or any Governmental
Entity of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger, and
such order, decree, ruling or other action has become final and
non-appealable; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to comply with any
provision of this Agreement has been the cause of, or resulted
in, such action;
(c) by either the Board of Directors of GCBS or the Board
of Directors of CVBG, upon written notice to the other party, if
the Merger shall not have been consummated on or before the time
specified in Section 9.1; provided, however, that the right
to terminate this Agreement under this Section 8.1(c) shall
not be available to any party whose failure to comply with any
provision of this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such
date;
(d) by either CVBG or GCBS (provided that the party
terminating shall not be in material breach of any of its
obligations under Section 6.3) if any approval of the
shareholders of CVBG or GCBS required for the consummation of
the Merger shall not have been obtained upon a vote taken
thereon at a duly held meeting of such shareholders or at any
adjournment or postponement thereof;
(e) by either GCBS or CVBG (provided that the terminating
party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there
shall have been a breach of any of the representations or
warranties set forth in this Agreement by the other party, which
breach is not cured within ten days following written notice to
the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however,
that neither party shall have the right to terminate this
Agreement pursuant to this Section 8.1(e) unless the breach
of representation or warranty, together with all other such
breaches, would entitle the party receiving such representation
not to consummate the transactions contemplated hereby under
Section 7.2(a) (in the case of a breach of a representation
or warranty by GCBS) or Section 7.3(a) (in the case of a
breach of a representation or warranty by CVBG);
(f) by either GCBS or CVBG (provided that the terminating
party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there
shall have been a breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party,
which breach shall not have been cured within ten days following
receipt by the breaching party of written notice of such breach
from the other party hereto, or which breach, by its nature,
cannot be cured prior to the Closing; provided, however, that
neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(f) unless the breach of
covenant, together with all other such breaches, would entitle
the party entitled to the benefit of such covenant not to
consummate the transactions contemplated hereby under
Section 7.2(b) (in the case of a breach of covenant by
GCBS) or Section 7.3(b) (in the case of a breach of
covenant by CVBG); or
(g) by either GCBS or CVBG, if (i) the Board of
Directors of the other does not publicly recommend in the Joint
Proxy Statement that its shareholders approve and adopt this
Agreement, (ii) after recommending in the Joint Proxy
Statement that such shareholders approve and adopt this
Agreement, such Board of Directors shall have withdrawn,
modified or amended such recommendation in any manner adverse to
the other party, or (iii) the other party materially
breaches its obligations under this Agreement by reason of a
failure to call a meeting of its shareholders or a failure to
prepare and mail to its shareholders the Joint Proxy
Statement/Prospectus in accordance with Sections 6.1 and
6.3.
(h) by GCBS, if the Board of Directors of CVBG has
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose any Acquisition
Proposal, as defined below, with any person other than GCBS.
33
8.2 Effect of Termination. In the
event of termination of this Agreement by either CVBG or GCBS:
(a) As provided in Sections 8.1(a), (b), (c), or (d),
this Agreement shall forthwith become void, and there shall be
no liability or obligation on the part of GCBS or CVBG or their
respective officers or directors; or
(b) As provided in Sections 8.1 (e), (f), (g), or (h),
either party may seek all legal and equitable remedies to which
such party may be entitled, including specific performance of
the provisions hereof. If any party willfully causes a material
breach of any representation, warranty, covenant or agreement
hereunder and fails promptly to correct same as soon as
reasonably practicable after receipt of written notice thereof,
such party shall pay the other partys expenses arising
from the negotiation and preparation of, or preparation for,
filings and solicitations with respect to, this Agreement,
including accounting fees, legal fees, filing fees, travel
expenses, together with other damages recoverable at law or in
equity; and
(c) In any event of any termination, any liability or
obligation on the part of GCBS or CVBG or their respective
officers or directors with respect to Sections 6.2(b)
(which may be enforced by injunction restraining the breaching
party from violation of this provision, the parties hereby
consenting to such injunction), 8.3, 9.4, and 9.10 shall survive
such termination.
8.3 Termination Fee.
(a) CVBG shall promptly pay to GCBS a termination fee equal
to $5.0 million (the Termination Fee) in immediately
available federal funds if this Agreement is terminated as
follows:
(i) if GCBS shall terminate this Agreement pursuant to
Section 8.1(h), then CVBG shall pay the Termination Fee on
the business day following such termination;
(ii) if (A) either party shall terminate this
Agreement pursuant to Section 8.1(d) because the required
CVBG shareholder approval shall not have been received and
(B) at any time after the date of this Agreement and at or
before the date of the CVBG Shareholders Meeting a bona fide
Acquisition Transaction, as defined below, shall have been
publicly announced or otherwise communicated to the Board of
Directors of CVBG (a Public Proposal) that has not
been withdrawn prior to such date.
(iii) if (A) either party shall terminate this
Agreement pursuant to Section 8.1(c) or GCBS shall
terminate this Agreement pursuant to Section 8.1(e) or (f),
(B) at any time after the date of this Agreement and before
such termination there shall have been a Public Proposal with
respect to CVBG that has not been withdrawn prior to such
termination, and (C) following the occurrence of
such Public Proposal, CVBG shall have intentionally breached
(and not cured after notice thereof) any of its representations,
warranties, covenants or agreements set forth in this Agreement,
which breach shall have materially contributed to the failure of
the Effective Time to occur prior to the termination of this
Agreement.
(b) If CVBG fails to pay all amounts due to GCBS under
Section 8.3 on the dates specified, then CVBG shall pay all
costs and expenses (including legal fees and expenses) incurred
by GCBS in connection with any action or proceeding (including
the filing of any lawsuit) taken by it to collect such unpaid
amounts, together with interest on such unpaid amounts at the
prime lending rate prevailing at such time, as published in the
Wall Street Journal, from the date such amounts were required to
be paid until the date actually received by GCBS.
(c) The parties acknowledge that the agreements contained
in Section 8.3 are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages
and not a penalty, and that, without these agreements, the
parties would not have entered into this Agreement.
(d) For purposes of this Agreement, the term
Acquisition Transaction shall mean (i) the
direct or indirect acquisition, purchase or assumption of all or
a substantial portion of the assets or deposits of CVBG,
(ii) the acquisition by any person of direct or indirect
beneficial ownership (including by way of merger, consolidation,
share exchange or otherwise) of 10% or more of the outstanding
shares of voting stock of CVBG, or (iii) a merger,
consolidation, business combination, liquidation, dissolution or
similar transaction of
34
or involving CVBG, other than a merger, business combination or
similar transaction pursuant to which persons who are
shareholders of CIVITAS immediately prior to such transaction
own 60% or more of the voting stock of the surviving entity (or
parent thereof) immediately after consummation of such
transaction and, as a result of such transaction, no person or
group (within the meaning of Section 13(d)(3) of the
Exchange Act) holds 20% or more of the voting stock of the
surviving entity (or parent thereof) immediately following
consummation of such transaction.
8.4 Amendment. Subject to
compliance with applicable law and Section 1.1(b), this
Agreement may be amended by the parties hereto, by action taken
or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in
connection with the Merger by the shareholders of GCBS and CVBG;
provided, however, that after any approval of the
transactions contemplated by this Agreement by the respective
shareholders of CVBG or GCBS, there may not be, without further
approval of such shareholders, any amendment of this Agreement
that changes the amount or the form of the consideration to be
delivered hereunder to the holders of CVBG Common Stock, other
than as contemplated by this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.5 Extension; Waiver. At any time
prior to the Effective Time, the parties hereto, by action taken
or authorized by their respective Board of Directors, may, to
the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein;
provided, however, that after any approval of the transactions
contemplated by this Agreement by the respective shareholders of
CVBG or GCBS, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of
the consideration to be delivered to the holders of CVBG Common
Stock hereunder, other than as contemplated by this Agreement.
Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX.
GENERAL
PROVISIONS
9.1 Closing. Subject to the terms
and conditions of this Agreement, the closing of the Merger (the
Closing) will take place at 10:00 a.m. on a
date and at a place to be specified by the parties, which shall
be no later than the later of June 30, 2007 (or such later
date caused by regulatory or court delays outside of the control
of the parties or unless extended by mutual agreement of the
parties), but no earlier than after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof (other than
those conditions that by their nature or terms are to be
satisfied or waived at Closing) (the Closing Date).
9.2 Standard. No representation or
warranty of CVBG contained in Article IV or of GCBS
contained in Article III shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party
hereto shall be deemed to have breached a representation or
warranty for any purpose under this Agreement, in any case as a
consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or
warranties contained in Article III, in the case of GCBS,
or Article IV, in the case of CVBG, has had or would be
reasonably likely to have a Material Adverse Effect with respect
to GCBS or CVBG, respectively (disregarding for purposes of this
Section 9.2 any materiality or Material Adverse Effect
qualification contained in any representations or warranties).
Notwithstanding the immediately preceding sentence, the
representations and warranties contained in Section 3.2(a),
in the case of GCBS , and Section 4.2(a), in the case of
CVBG, shall be deemed untrue and incorrect if not true and
correct in all material respects.
35
9.3 Nonsurvival of Representations, Warranties and
Agreements. None of the representations,
warranties, covenants and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement (other than any
confidentiality agreement executed in connection with this
Agreement, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for Section 1.12
and Section 6.8 and for those other covenants and
agreements contained herein and therein which by their terms
apply in whole or in part after the Effective Time.
9.4 Expenses. All costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expense; provided, however, that the costs
and expenses of printing and mailing the Proxy Statement, and
all filing and other fees paid to the SEC in connection with the
Merger, shall be borne equally by GCBS and CVBG.
9.5 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (with confirmation),
mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
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(a
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if to CVBG, to:
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with a copy to:
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Richard E. Herrington
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Mary Neil Price, Esq.
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President/CEO
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Miller & Martin PLLC
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Civitas BankGroup, Inc.
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1200 One Nashville Place
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810 Crescent Centre Drive,
Suite 320
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150 4th Ave. North
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Franklin, TN 37067
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Nashville, TN 37219
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Fax: (615) 263-9510
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Fax: (615) 256-8197
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and
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(b
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if to GCBS, to:
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with a copy to:
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James E. Adams
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Steven J. Eisen, Esq.
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Chief Financial Officer
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Baker, Donelson, Bearman,
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Greene County Bancshares, Inc.
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Caldwell & Berkowitz, PC
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100 North Main Street
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211 Commerce St., Ste. 1000
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Greeneville, TN 37743
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Nashville, TN 37201
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Fax: (423) 278-3090
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Fax: (615) 744-5718
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9.6 Interpretation. When a
reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement, unless otherwise indicated. The
Disclosure Schedules and each other Exhibit and Schedule shall
be deemed part of this Agreement and included in any reference
to this Agreement. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. Whenever the singular or plural
forms of any word is used in this Agreement, such word shall
encompass both the singular and plural form of such word.
9.7 Counterparts. This Agreement
may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.8 Entire Agreement. This
Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
9.9 Governing Law. This Agreement
shall be governed and construed in accordance with the laws of
the State of Tennessee, without regard to any applicable
conflicts of law principles, except to the extent mandatory
provisions of federal law apply. Any legal action or proceeding
with respect to this Agreement
36
against any party shall be brought only in a court of record of,
or in any federal court located in, Davidson County in the State
of Tennessee, which shall have exclusive jurisdiction and venue
for such purpose. By execution and delivery of this Agreement,
the parties hereby accept for themselves, and in respect of
their property, generally and unconditionally, the jurisdiction
and venue of the aforesaid courts sitting in Davidson County,
Tennessee, and waive any objection to the laying of venue on the
grounds of forum non convenience which they may now or hereafter
have to the bringing or maintaining of any such action or
proceeding in such jurisdiction.
9.10 Publicity. Except as otherwise
required by applicable law or the rules of the NASDAQ, neither
CVBG nor GCBS shall, or shall permit any of its Subsidiaries to,
issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by
this Agreement without the prior consent of GCBS, in the case of
a proposed announcement or statement by CVBG, or CVBG, in the
case of a proposed announcement or statement by GCBS, which
consents shall not be unreasonably withheld.
9.11 Assignment; Third Party
Beneficiaries. Neither this Agreement nor any of
the rights, interests or obligations shall be assigned by any of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. 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. Except as otherwise
specifically provided in Section 6.8, this Agreement
(including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
37
IN WITNESS WHEREOF, the parties have caused this
instrument to be executed and delivered as of the day and year
first above written, such execution having been duly authorized
by the respective Board of Directors of GCBS and CVBG.
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Attest:
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GREENE COUNTY BANCSHARES, INC.:
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By: _
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Secretary
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Title:
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Attest:
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CIVITAS BANKGROUP, INC.:
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By: _
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Secretary
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Title:
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38
EXHIBIT 6.5
AFFILIATE AGREEMENT
This Affiliate Agreement (the Affiliate Agreement)
is made and entered into as of January 25, 2007 (the
Effective Date) among Civitas BankGroup, Inc., a
Tennessee corporation (CVBG), Greene County
Bancshares, Inc., a Tennessee corporation (GCBS) and
the undersigned stockholder of CVBG (Stockholder).
RECITALS
A. This Affiliate Agreement is entered into pursuant to
that certain Agreement and Plan of Merger dated as of
January 25, 2007, between GCBS and CVBG (as such may be
amended, the Merger Agreement) which provides
(subject to the conditions set forth therein) for the merger of
CVBG with and into GCBS, with GCBS to be the surviving
corporation of the Merger, all pursuant to the terms and
conditions of the Merger Agreement. Capitalized terms used but
not otherwise defined in this Affiliate Agreement have the
meanings ascribed to such terms in the Merger Agreement.
B. The Merger Agreement provides that, in the Merger, the
shares, and options to purchase shares, of CVBG Common Stock
that are issued and outstanding at the Effective Time of the
Merger will be converted into shares of GCBS Common Stock or
cash, all as more particularly set forth in the Merger Agreement.
C. Stockholder understands that Stockholder may be deemed
an affiliate of CVBG as the term affiliate is
defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Securities Act of 1933, as amended (the
1933 Act),
and/or is
used in and for the purposes of Accounting Series Releases
130 and 135, as amended, and, as such, any shares of GCBS Common
Stock acquired by the Stockholder in the Merger may be disposed
of only in conformity with the limitations described herein.
A G R E E
M E N T
1. Representations, Warranties and Covenants of
Stockholder. Stockholder represents, warrants
and covenants as follows:
(a) Authority; Affiliate
Status. Stockholder has all requisite right,
power, legal capacity and authority to execute and deliver this
Affiliate Agreement and to perform its obligations hereunder.
This Affiliate Agreement has been duly executed and delivered by
Stockholder and constitutes the legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in
accordance with its terms. Stockholder further understands and
agrees that Stockholder may be deemed to be an
affiliate of CVBG within the meaning of the
1933 Act and, in particular, Rule 145 promulgated
under the 1933 Act (Rule 145).
(b) CVBG Securities Owned. The
last page hereto sets forth all shares of CVBG capital stock and
any other securities of CVBG owned by Stockholder, including all
securities of CVBG as to which Stockholder has sole or shared
voting or investment power, and all rights, options and warrants
to acquire shares of capital stock or other securities of CVBG
granted to or held by Stockholder (such shares of CVBG capital
stock, other securities of CVBG and rights, options and warrants
to acquire shares of CVBG capital stock and other securities of
CVBG are hereinafter collectively referred to as CVBG
Securities). As used herein, the term Expiration
Date means the earliest to occur of (i) the closing,
consummation and effectiveness of the Merger, or (ii) such
time as the Merger Agreement may be terminated in accordance
with its terms.
(c) New CVBG Securities. As used
herein, the term New CVBG Securities means,
collectively, any and all shares of CVBG Capital Stock, other
securities of CVBG, and rights, options and warrants to acquire
shares of CVBG Capital Stock and other securities of CVBG that
Stockholder may purchase or otherwise acquire any interest in
(whether of record or beneficially), on and after the Effective
Date of this Affiliate Agreement and prior to the Expiration
Date. All New CVBG Securities will be subject to
Confidential-1
the terms of this Affiliate Agreement to the same extent and in
the same manner as if they were CVBG Securities.
(d) Further
Assurances. Stockholder agrees to execute and
deliver any additional documents reasonably necessary or
desirable, in the opinion of GCBS or CVBG, to carry out the
purposes and intent of this Affiliate Agreement.
(e) Voting. Provided the
Stockholder is also a director of CVBG and has voted as a
director in favor of the Merger Agreement, Stockholder agrees to
vote all of his CVBG Securities and New CVBG Securities in favor
of the Merger when presented to a vote of the shareholders of
CVBG.
(f) Merger Securities. As used
herein, the term Merger Securities means,
collectively, all shares of GCBS Common Stock that are or may be
issued by GCBS in connection with the Merger or the transactions
contemplated by the Merger Agreement, or to any former holder of
CVBG options, warrants or rights to acquire shares of CVBG
Common Stock, and any securities that may be paid as a dividend
or otherwise distributed thereon or with respect thereto or
issued or delivered in exchange or substitution therefore or
upon conversion thereof.
(g) Transfer Restrictions on Merger
Securities. Stockholder has been advised that
the issuance of the shares of GCBS Common Stock in connection
with the Merger is expected to be effected pursuant to a
Registration Statement of
Form S-4
under the 1933 Act, and that the provisions of
Rule 145 will limit Stockholders resales of such
Merger Securities. Stockholder accordingly agrees not to sell,
transfer, exchange, pledge, or otherwise dispose of, or make any
offer or agreement relating to, any of the Merger Securities
and/or any
option, right or other interest with respect to any Merger
Securities that Stockholder may acquire, unless: (i) such
transaction is permitted pursuant to Rule 145(d) under the
1933 Act; or (ii) legal counsel representing
Stockholder, which counsel is reasonably satisfactory to GCBS,
shall have advised GCBS in a written opinion letter reasonably
satisfactory to GCBS and GCBSs legal counsel, and upon
which GCBS and its legal counsel may rely, that no registration
under the 1933 Act would be required in connection with the
proposed sale, transfer, exchange, pledge or other disposition
of Merger Securities by Stockholder; or (iii) a
registration statement under the 1933 Act covering the
Merger Securities proposed to be sold, transferred, exchanged,
pledged or otherwise disposed of, describing the manner and
terms of the proposed sale, transfer, exchange, pledge or other
disposition, and containing a current prospectus, shall have
been filed with the Securities and Exchange Commission
(SEC) and been declared effective by the SEC under
the 1933 Act; or (iv) an authorized representative of
the SEC shall have rendered written advice to Stockholder
(sought by Stockholder or counsel to Stockholder, with a copy
thereof and all other related communications delivered to GCBS
and its legal counsel) to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that
the SEC take action, with respect to the proposed disposition of
Merger Securities if consummated. Nothing herein imposes upon
GCBS any obligation to register any Merger Securities under the
1933 Act.
(h) No Sale; Intent. Stockholder
is not aware of, nor is Stockholder participating in, any
present plan or intention to engage in a sale, exchange,
transfer, distribution, pledge, disposition or any other
transaction which would result in a direct or indirect
disposition of any of the shares of GCBS Common Stock (or other
Merger Securities) that Stockholder may acquire in connection
with the Merger, or any securities that may be paid as a
dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution
therefore or upon conversion thereof. Stockholder agrees not
to sell any CVBG Securities or New CVBG Securities prior to the
Expiration Date, except for transfers to affiliated parties or
gifts without consideration.
2. Representations, Warranties and Covenants of
GCBS. GCBS represents, warrants and covenants
that it will remain current in its 1934 Act filings for the
appropriate period of time to which the restrictions of this
Agreement shall apply to the Stockholder. GCBS currently is in
compliance with Rule 144(c) promulgated under the
1933 Act.
3. Legends. Stockholder also
understands and agrees that stop transfer instructions will be
given to GCBSs transfer agent with respect to certificates
evidencing the Merger Securities to enforce Stockholders
Confidential-2
compliance with Stockholders representations in
Section 1 and Stockholders compliance with applicable
securities laws regarding the Merger Securities, and that there
will be placed on the certificates evidencing such Merger
Securities such legends as GCBS or its counsel may reasonably
require, including without limitation, a legend providing
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES AND MAY ONLY BE
TRANSFERRED IN CONFORMITY WITH RULE 145(d) UNDER SUCH ACT
OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
GCBS agrees to instruct the transfer agent to remove the stop
transfer order with respect to the Merger Securities at such
time as the applicable securities laws will allow.
4. Notices. Any notice or
other communication required or permitted to be given under this
Affiliate Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid,
return receipt requested, and will be deemed given upon actual
delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as
follows:
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(a)
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if to CVBG, to:
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with a copy to:
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Richard E. Herrington
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Mary Neil Price, Esq.
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President/CEO
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Miller & Martin PLLC
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Civitas BankGroup, Inc.
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1200 One Nashville Place
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810 Crescent Centre Drive,
Suite 320
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150 4th Ave. North
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Franklin, TN 37067
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Nashville, TN 37219
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Fax: (615) 263-9510
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Fax: (615) 256-8197
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and
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(b)
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if to GCBS, to:
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with a copy to:
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James E. Adams
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Steven J. Eisen, Esq.
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Chief Financial Officer
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Baker, Donelson, Bearman,
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Greene County Bancshares, Inc.
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Caldwell & Berkowitz, PC
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100 North Main Street
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211 Commerce St., Ste. 1000
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Greeneville, TN 37743
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Nashville, TN 37201
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Fax: (423) 278-3090
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Fax: (615) 744-5718
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at the address for notice to such Stockholder set forth on the
last page hereof. or to such other address as the party in
question may have furnished to the other party by written notice
given in accordance with this Section 4.
5. Survival; Termination. All
representations, warranties and agreements made by Stockholder
and GCBS in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be
terminated and shall be of no further force and effect upon any
termination of the Merger Agreement pursuant to its terms.
6. Expenses. All costs and
expenses incurred in connection with the transactions
contemplated by this Affiliate Agreement shall be paid by the
party incurring such costs and expenses.
7. Counterparts. This Affiliate
Agreement may be executed in counterparts, each of which will be
an original as regards any party whose name appears thereon and
all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one
or more counterparts hereof, individually or taken together,
bear the signatures of all parties reflected hereon as
signatories.
Confidential-3
8. Assignment, Binding
Effect. Except as provided herein, neither
this Affiliate Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto. Subject to
the preceding sentence, this Affiliate Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
9. Amendment and Waivers. Any term or
provision of this Affiliate Agreement may be amended, and the
observance of any term of this Affiliate Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the
parties to be bound thereby. The waiver by a party of any breach
hereof or default in the performance hereof will not be deemed
to constitute a waiver of any other default or any succeeding
breach or default.
10. Entire Agreement. This
Affiliate Agreement and any documents delivered by the parties
in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and understandings
between the parties with respect thereto.
11. Severability. Any term or
provision of this Affiliate 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 Affiliate Agreement or
affecting the validity or enforceability of any of the terms or
provisions of this Affiliate Agreement in any other
jurisdiction. If any provision of this Affiliate Agreement is so
broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
12. Governing Law. The internal
laws of the State of Tennessee (irrespective of its choice of
law principles) will govern the validity of this Affiliate
Agreement, the construction of its terms, and the interpretation
and enforcement of the rights and duties of the parties hereto.
13. Construction. The language
hereof will not be construed for or against either party. A
reference to a section will mean a section in this Affiliate
Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes
only and will not in any manner limit the construction of this
Affiliate Agreement. For the purposes of such construction, this
Affiliate Agreement will be considered as a whole.
Confidential-4
IN WITNESS WHEREOF, the parties hereto have caused this
Affiliate Agreement to be executed as of the date first written
above.
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Greene County Bancshares,
Inc.
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Civitas BankGroup, Inc.
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By: _
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Title: _
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Title: _
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Stockholder
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(Signature)
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Name: _
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(Printed)
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Address: _
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Phone: _
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Number of Shares of CVBG Common
Stock owned as of the date of this Affiliate Agreement:
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Number of CVBG Options or Warrants
for Common Stock owned as of the date of this Affiliate
Agreement:
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Confidential-5
APPENDIX B
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Member
NYSE/SIPC
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P.O. Box 1575
Richmond, Virginia 23218-1575
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Tel (804) 782-8721
Toll Free (800) 552-7757
FAX (804) 649-0990
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January 25,2007
Board of Directors
Greene County Bancshares, Inc.
100 North Main Street
Greeneville, TN 37743
Members of the Board of Directors:
CIVITAS BankGroup, Inc. (CIVITAS), Cumberland Bank,
a wholly owned subsidiary of CIVITAS (Cumberland
Bank), Greene County Bancshares, Inc. (Greene
County) and Greene County Bank, a wholly owned subsidiary
of Greene County (Parent Bank), have entered into an
Agreement and Plan of Merger, dated as of January 25, 2007,
pursuant to which CIVITAS will merge with and into Greene County
(the Merger), and Cumberland Bank and Parent Bank
plan to enter into a related Plan of Merger (collectively, the
Agreement) pursuant to which Cumberland Bank will be
merged with and into Parent Bank (the Bank Merger)
(collectively, the Transaction). Under the terms of
the Agreement, upon consummation of the Merger, each outstanding
share of CIVITAS common stock, par value $2.00 per share
(CIVITAS Shares), issued and outstanding immediately
prior to the Merger, will be converted into the right to
receive, at the election of a CIVITAS shareholder,
(a) 0.2674 shares of Greene County common stock, par
value $0.50 per share (Greene County Shares)
(the Stock Consideration), (b) cash in the
amount of $10.25 per share, without interest (the
Cash Consideration), or (c) any combination of
the Stock Consideration and the Cash Consideration
(collectively, the Merger Consideration), subject to
the election and allocation procedures set forth in the
Agreement. The terms and conditions of the Transaction are more
fully set forth in the Agreement. You have requested our opinion
as to the fairness, from a financial point of view, of the
Merger Consideration to be paid by Greene County.
Scott & Stringfellow, Inc., as a customary part of its
investment banking business, is regularly engaged in the
valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate
transactions. In the ordinary course of our business as a
broker-dealer, we may, from time to time purchase securities
from, and sell securities to, CIVITAS and Greene County, and as
a market maker in securities, we may from time to time have a
long or short position in, and buy or sell, equity securities of
CIVITAS and Greene County for our own account and for the
accounts of our customers.
In connection with this opinion, we have reviewed, among other
things:
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i.
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The Agreement;
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ii.
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Certain publicly available financial statements and other
historical financial information of CIVITAS that we deemed
relevant;
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iii.
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Certain publicly available financial statements and other
historical financial information of Greene County that we deemed
relevant;
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iv.
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Internal financial projections for CIVITAS for the year ending
December 31, 2007 and December 31, 2008 prepared by
and reviewed with senior management of Greene County;
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Board of Directors
Greene County Bancshares, Inc.
January 25,2007
Page 2 of 4
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v.
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Median earnings per share estimates for Greene County for the
year ending December 31, 2007 published by I/B/E/S and
reviewed with the senior management of Greene County; and
estimates of long-term earnings per share growth rates published
by I/B/E/S;
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vi.
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The estimated pro forma financial impact of the Transaction on
Greene County, based on assumptions relating to transaction
expenses, purchase accounting adjustments, cost savings, and
certain synergies determined by and reviewed with the senior
management of Greene County;
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vii.
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The historical market prices and trading activity for CIVITAS
Shares and Greene County Shares and a comparison of certain
financial and stock market information for CIVITAS and Greene
County with similar publicly-traded companies which we deemed to
be relevant;
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viii.
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The proposed financial terms of the Transaction and a comparison
of such terms with the financial terms, to the extent publicly
available, of certain recent business combinations in the
commercial banking industry;
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ix.
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The current market environment generally and the banking
environment in particular; and,
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Such other information, financial studies, analyses and
investigations, and financial, economic, and market criteria as
we deemed appropriate.
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We also held discussions with members of senior management of
Greene County regarding historical and current business
operations, financial condition, results of operations,
regulatory relationships and future prospects (including, with
respect to senior management of Greene County, synergies
anticipated to result from the Transaction) of their respective
companies and such other matters as we have deemed relevant to
our inquiry.
In conducting our review and arriving at our opinion, we have
relied upon and assumed the accuracy and completeness of all of
the financial and other information that was available to us
from public sources, that was provided to us by CIVITAS or
Greene County or CIVITAS representatives or that was
otherwise reviewed by us, and we assumed such accuracy and
completeness in rendering this opinion. We have further relied
on the assurances of management of Greene County that they are
not aware of any facts or circumstances that would make any of
such information inaccurate or misleading. We have not been
asked nor have we attempted independently to verify such
information, and we assume no responsibility or liability for
independently verifying the accuracy and completeness of such
information. We did not make an independent evaluation or
appraisal of any specific assets, any collateral securing assets
or the liabilities, including any contingent, off-balance sheet
assets or liabilities, of CIVITAS or Greene County or any of
their subsidiaries. We did not make an independent evaluation of
the adequacy of the allowance for loan losses of CIVITAS or
Greene County nor have we reviewed any individual credit files
relating to CIVITAS or Greene County. We assumed, with your
consent, the respective allowances for loan losses for both
CIVITAS and Greene County are adequate to cover such losses and
will be adequate for the combined entity on a pro forma basis
after all accounting adjustments for the Transaction. We also
assumed that all governmental, regulatory or other consents and
approvals necessary for the consummation of the Transaction will
be obtained without any adverse effect on CIVITAS and Greene
County or on the expected benefits of the Transaction.
With respect to the financial projections and earnings estimates
for CIVITAS and Greene County and all projections of transaction
costs, purchase and other accounting adjustments and expected
cost savings or other synergies prepared by
and/or
reviewed with the management of Greene County and used by
Scott & Stringfellow in its analyses, Greene
Countys senior management confirmed to us that they have
been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the respective
management of CIVITAS and Greene County as to the future
financial performance of CIVITAS and we assumed that such
financial performance would be achieved. We express no opinion
as to such financial projections or the assumptions on which
they are based. We have assumed that there has been no material
change in the assets, financial conditions, results of
operations, business or prospects of CIVITAS and Greene
Board of Directors
Greene County Bancshares, Inc.
January 25,2007
Page 3 of 4
County since the date of the most recent financial statements
made available to us. We have further assumed, with your
consent, that the synergies referenced above will be realized
substantially in accordance with the expectations of CIVITAS and
Greene County. Moreover, we have assumed that the Transaction
will be consummated upon the terms set forth in the Agreement
without material alteration or waiver thereof. Finally, with
your consent, we have relied upon the advice Greene County has
received from its legal, accounting and tax advisors as to all
legal, accounting and tax matters related to the Merger and
other transactions contemplated by the Agreement.
Our opinion is necessarily based on financial, economic, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. Events occurring after
the date hereof could materially affect this opinion. We have no
obligation to update, revise, reaffirm or withdraw this opinion
or otherwise comment upon events occurring after the date
hereof. We are expressing no opinion herein as to what the value
of Greene County Shares will be when issued to CIVITAS
shareholders at the closing of the Merger pursuant to the
Agreement or the prices at which CIVITAS Shares or Greene County
Shares may trade at any time.
We have acted exclusively for the Board of Directors of Greene
County in a financial advisory capacity in connection with the
Transaction and will receive a fee for our services, including
the rendering of this opinion, none of which is contingent upon
consummation of the Transaction. In addition, Greene County has
agreed to indemnify us for certain liabilities that may arise
out of the rendering of this opinion. As you are aware, we have
not performed investment banking services for Greene County in
the past and have not received compensation for any services,
but we may provide additional services, and receive compensation
for such services, prior to the closing of the Merger.
Our opinion is directed to the Board of Directors of Greene
County in connection with its consideration of the Transaction
and our opinion does not constitute a recommendation to any
holder of Greene County Shares as to how such holder should vote
at any meeting of shareholders called to consider and vote upon
the Agreement. Our opinion is directed only to the fairness,
from a financial point of view, of the Merger Consideration to
be paid by Greene County in connection with the Merger and does
not address the underlying business decision by Greene County to
engage in the Transaction, the relative merits of the
Transaction as compared to any other alternative business
strategies that might exist for Greene County or the effect of
any other transaction in which Greene County might engage. Our
opinion is not to be quoted or referred to, in whole or part, in
a registration statement, prospectus, proxy statement or in any
other document, nor shall this opinion be used for any other
purposes, without Scott & Stringfellows prior
written consent. Notwithstanding the foregoing, Scott &
Stringfellow hereby consents to the inclusion of this opinion as
an exhibit to the proxy statement to be distributed to Greene
Countys shareholders to solicit their approval of the
Transaction. S&S further consents to the inclusion of a
summary of this opinion in such proxy statement.
Based upon and subject to the foregoing, it is our opinion, as
of the date hereof, that the Merger Consideration to be paid by
Greene County is fair, from a financial point of view, to Greene
County.
Very truly yours,
Scott & Stringfellow, Inc.
APPENDIX C
CONSENT
OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the use of our opinion letter to the Board
of Directors of Civitas BankGroup, Inc. included as
Appendix C to the Joint Proxy Statement-Prospectus which
forms part of the Registration Statement on
Form S-4
relating to the proposed merger of Greene County Bancshares,
Inc. and Civitas BankGroup, Inc. and to the references to such
opinion therein.
In giving such consent, we do not admit that we come within the
category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission
thereunder, nor do we hereby admit that we are experts with
respect to any part of such Registration Statement within the
meaning of the term experts as used in the
Securities Act of 1933, as amended, or the rules and regulations
of the Securities and Exchange Commission thereunder.
KEEFE, BRUYETTE & WOODS, INC.
Dated: March 16, 2007
Keefe, Bruyette & Woods
Three James Center 1051 East Cary
Street Suite 1415 Richmond,
Virginia 23219
Telephone 804.643.4250 Facsimile 804.643.4253