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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE

SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

x	Preliminary Proxy Statement

 

¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

¨	Definitive Proxy Statement

 

¨	Definitive Additional Materials

 

¨	Soliciting Material Pursuant to §240.14a-12

Cadence Financial Corporation

 

(Name of Registrant as Specified In Its Charter)

  

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

¨	No fee required.

 

x	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

Common stock, par value $1.00 per share of Cadence Financial Corporation (the “Common Stock”)

 

 

(2)

Aggregate number of securities to which transaction applies:

11,909,127 shares of Common Stock, 299,142 options to purchase Common Stock and 11,246 phantom stock units

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

The maximum aggregate value was determined based on the sum of (A) 11,909,127 shares of Common Stock (the number of issued and outstanding shares of Common Stock as of October 15, 2010, plus the aggregate number of shares of Common Stock issuable upon exercise of all outstanding options multiplied by $2.50 plus (B) 11,246 phantom stock units outstanding as of October 15, 2010 multiplied by $2.50. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.0000713 by the sum reflected in the preceding sentence.

 

 

(4)

Proposed maximum aggregate value of transaction:

29,800,933

 

 

(5)

Total fee paid:

$2,124.80

 

 

¨	Fee paid previously with preliminary materials.

 

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

  

 

(2)

Form, Schedule or Registration Statement No.:

  

 

(3)

Filing Party:

  

 

(4)

Date Filed:

  

 

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MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Cadence Shareholders:

You are cordially invited to attend the special meeting of shareholders of Cadence Financial Corporation (“Cadence”) to be held on [—], [—], 2010 at [—] a.m. at 301 East Main Street, Starkville, Mississippi 39759.

At this special meeting, you will be asked to consider and vote on the approval of the Agreement and Plan of Merger entered into on October 6, 2010 by Cadence and Community Bancorp LLC (“CBC”), pursuant to which a wholly-owned subsidiary of CBC will be merged with and into Cadence, with Cadence continuing thereafter as a wholly-owned subsidiary of CBC. If the merger is completed, each outstanding share of Cadence common stock will be converted into the right to receive $2.50 in cash, without interest and less any applicable withholding taxes (other than shares of Cadence common stock held by Cadence or CBC, which will be cancelled without payment). In addition, CBC has offered to purchase the $44.0 million of Cadence preferred stock and the associated warrant issued to the U.S. Department of the Treasury (“Treasury”) under the Capital Purchase Program for approximately $38.0 million in cash plus accrued dividends through the signing of the definitive purchase agreement with the Treasury. Treasury has indicated its willingness to agree to sell its Cadence preferred stock and warrant for such cash consideration subject to entry into definitive documentation acceptable to Treasury in its sole discretion.

Upon completion of the merger, shares of Cadence common stock will no longer be listed on any stock exchange or quotation system, and you will not participate in our future earnings or growth.

We cannot complete the merger unless we obtain the necessary regulatory approvals and unless our shareholders approve the merger agreement. We are asking our shareholders to consider and vote on this merger proposal at a special meeting of shareholders. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card to Cadence or submit your proxy by telephone or over the Internet following instructions on the proxy card. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote “FOR” the merger agreement.

The board of directors of Cadence enthusiastically supports the merger and recommends that you vote “FOR” the merger agreement.

This proxy statement contains a more complete description of the special meeting and the terms of the merger. We urge you to carefully review this entire proxy statement and the documents included with this proxy statement.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger, passed upon the merits or fairness of the merger or determined if this proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

Proxy statement dated [—], 2010 and first mailed to shareholders of Cadence on or about [—], 2010.

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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [—], 2010

TO THE SHAREHOLDERS OF CADENCE FINANCIAL CORPORATION:

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of Cadence Financial Corporation (“Cadence”) will be held at 301 East Main Street, Starkville, Mississippi 39759, on [—], 2010, at [—] a.m., local time, for the following purposes:

 

1.

To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger dated as of October 6, 2010, by and among Cadence, Community Bancorp LLC (“CBC”) and Maroon Acquisition Corp., a wholly-owned subsidiary of CBC (“Merger Sub”), pursuant to which Merger Sub will be merged with and into Cadence, with Cadence continuing thereafter as a wholly-owned subsidiary of CBC on and subject to the terms and conditions contained therein.

 

2.

To consider and vote upon a proposal to adjourn the meeting to a later date or dates to permit further solicitation of proxies in the event that there are not sufficient votes at the time of the meeting to approve the matters to be considered by the shareholders at the meeting.

These proposals are described in detail in the attached proxy statement. Only shareholders of record at the close of business on [—], 2010 are entitled to notice of and to vote at the special meeting.

The board of directors of Cadence unanimously recommends that you vote “FOR” the approval of the merger agreement and “FOR” adjustment of the meeting to a later date or dates to permit further solicitation of proxies, if necessary.

Your vote is important regardless of the number of shares you own. We cannot complete the merger unless the merger agreement is approved and adopted by the affirmative vote of the holders of at least a majority of the shares of Cadence common stock present or represented by proxy at the special meeting and entitled to vote at the special meeting. Whether or not you plan to attend the meeting, please complete, sign, date and return the enclosed proxy in the accompanying pre-addressed postage-paid envelope or submit your proxy by telephone or over the Internet following instructions on the proxy card. You may revoke your proxy card in the manner described in the proxy statement at any time before it is exercised. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

 

Starkville, Mississippi

[—], 2010

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SUMMARY TERM SHEET			1
The Parties to the Merger			1
The Merger			1
The Special Meeting			1
Background of the Merger			3
Reasons for the Merger			3
Recommendation of Cadence’s Board of Directors			3
Opinion of Cadence’s Financial Advisor			3
Merger Financing			4
Effect of the Merger on Options, Restricted Stock and Phantom Stock			4
Material U.S. Federal Income Tax Consequences of the Merger			4
Interest of Cadence’s Directors and Executive Officers in the Merger			4
Security Ownership of Certain Beneficial Owners and Management			5
Dissenter’s Rights of Appraisal			5
Regulatory Approvals			5
Other Conditions to the Merger			5
Modifications or Waiver			6
Payment of Trustmark Termination Fee			6
Termination of the Merger Agreement			6
No Solicitations			7
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING			8
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS			13
THE SPECIAL MEETING			15
Date, Time, Place and Purpose of the Special Meeting			15
Record Date and Quorum			15
Vote Required for Approval			15
Proxies and Revocation			15
Adjournments and Postponements			17
Solicitation of Proxies			17
Questions and Additional Information			17
Availability of Documents			17
Recommendation of the Cadence Board of Directors			17
THE MERGER			18
The Parties to the Merger			18
Background of the Merger			18
Reasons for the Merger and Recommendation of the Board of Cadence			24
Opinion of Cadence’s Financial Advisor			26
Interest of Cadence’s Directors and Executive Officers in the Merger			32
Effects on Cadence if the Merger is Not Completed			33
Material U.S. Federal Income Tax Consequences of the Merger			34
Regulatory Approvals			35
THE MERGER AGREEMENT			36
General			36
Merger Consideration			36
Effect of the Merger on Cadence Stock Options, Restricted Shares and Phantom Shares			36

 

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Merger Financing			36
Exchange of Cadence Stock Certificates			37
Effective Date and Time of the Merger			37
Conduct of Business Pending Effective Time			37
No Solicitation			39
Conditions to Completion of the Merger			40
Covenants			41
Representations and Warranties of Cadence and CBC			42
Modifications or Waiver			44
Payment of Trustmark Termination Fee			44
Termination of the Merger Agreement			44
DISSENTERS’ RIGHTS OF APPRAISAL			46
IMPORTANT INFORMATION ABOUT CADENCE FINANCIAL CORPORATION			47
Description of Business			47
Description of Property			47
Legal Proceedings			47
Financial Statements and Supplementary Data			47
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations			47
Selected Historical Financial Data of Cadence			47
Book Value Per Share			51
Quantitative And Qualitative Disclosures About Market Risk			51
MARKET DATA AND DIVIDEND DATA			52
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			53
ADJOURNMENT OF THE SPECIAL MEETING			55
OTHER BUSINESS			56
FUTURE SHAREHOLDER PROPOSALS			56
HOUSEHOLDING OF SPECIAL MEETING MATERIALS			56
WHERE YOU CAN FIND MORE INFORMATION			56

 

APPENDICES

Appendix A    Agreement and Plan of Merger

Appendix B    Opinion of Keefe, Bruyette & Woods, Inc.

Appendix C    Cadence’s Annual Report on Form 10-K for year ended December 31, 2009

Appendix D    Cadence’s Annual Report on Form 10-Q for the quarter ended June 30, 2010

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following are some questions that Cadence shareholders may have regarding the merger and the special meeting, and brief answers to those questions. You are encouraged to read carefully this entire proxy statement, including the Appendices, and the other documents to which this proxy statement refers or incorporates by reference because the information in this section does not provide all the information that might be important to you. Unless stated otherwise, all references in this proxy statement to CBC are to Community Bancorp LLC, a Delaware limited liability company; all references to Merger Sub are to Maroon Acquisition Corp., a Delaware corporation; all references to Cadence are to Cadence Financial Corporation, a Mississippi corporation, and its subsidiaries; all references to Cadence Bank are to Cadence Bank, N.A.; and all references to the merger agreement are to the Agreement and Plan of Merger, dated October 6, 2010, by and between CBC, Merger Sub and Cadence, a copy of which is attached as Appendix A to this proxy statement and is incorporated herein by reference.

 

Q:	Why am I receiving this document?

 

A:

CBC and Cadence have agreed to a merger, pursuant to which Merger Sub will merge with and into Cadence and Cadence will continue as the surviving corporation as a direct, wholly-owned subsidiary of CBC and will cease to be a publicly held corporation. To complete the merger, Cadence shareholders must vote to approve and adopt the merger agreement, and Cadence is holding a special meeting of shareholders to obtain such shareholder approval.

This document is the proxy statement by which the Cadence board of directors is soliciting proxies from you to vote on the approval and adoption of the merger agreement, as it may be amended from time to time, at the special meeting or at any adjournment or postponement of the special meeting.

 

Q:	Does Cadence’s board of directors recommend that shareholders approve and adopt the merger agreement?

 

A:

Yes. The Cadence board of directors has approved the merger agreement and the transactions contemplated thereby, including the merger, and determined that these transactions are advisable and in the best interests of Cadence and its shareholders. Therefore, the Cadence board of directors unanimously recommends that you vote “FOR” the proposal to approve and adopt the merger agreement at the special meeting. See “The Merger—Reasons for the Merger and Recommendations of the Board of Cadence.”

In considering the recommendation of Cadence’s board of directors, shareholders of Cadence should be aware that members of Cadence’s board of directors and its executive officers have agreements and arrangements that provide them with interests in the merger that may be different from, or in addition to, those of Cadence shareholders. See “The Merger—Interest of Cadence’s Directors and Executive Officers of Cadence in the Merger.”

 

Q:	What will happen in the merger?

 

A:	In the merger, Merger Sub will merge with and into Cadence and Cadence will continue as the surviving corporation as a direct, wholly-owned subsidiary of CBC and will cease to be a publicly held corporation.

 

Q:	What will I receive in the merger?

 

A:

If the merger is completed, each share of our common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of Cadence common stock held by Cadence or CBC, which will be cancelled without payment) will be converted into the right to receive $2.50 in cash (the “Merger Consideration”), without interest and less any applicable withholding tax. The closing sale price of our

 

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common stock as quoted on the NASDAQ Global Market on October 5, 2010, the last trading day prior to announcement of the execution of the merger agreement, was $2.08 per share. The $2.50 per share to be paid for each share of common stock in the merger represents a premium of approximately 20% to the closing sale price on October 5, 2010 and a premium of approximately 45% to the closing sale price on September 22, 2010 (the day prior to the announcement of the agreement with Trustmark).

 

Q:	What happens if the merger is not completed?

 

A:

If the merger agreement is not approved by our shareholders or if the merger is not completed for any other reason, shareholders will not receive any payment for their shares in connection with the merger. Instead, we will remain an independent public company and the value of shares of our common stock will continue to be subject to the risks and uncertainties identified in our Annual Report on Form 10-K for the year ended December 31, 2009, included as Appendix C to this proxy statement and any updates to those risks and uncertainties set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 included as Appendix D to this proxy statement. Under specified circumstances, we may be required to pay CBC a termination fee and expenses as described under the caption “The Merger Agreement—Termination of Merger Agreement.”

 

Q:	What am I being asked to vote on?

 

A:	Cadence shareholders are being asked to vote on the following proposals:

 

•

to approve and adopt the merger agreement, as it may be amended from time to time; and

 

•

to approve the adjournment of the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve and adopt the merger agreement at the time of the special meeting.

The approval by Cadence shareholders of the proposal to approve and adopt the merger agreement is a condition to the obligations of CBC and Cadence to complete the merger.

 

Q:	What shareholder vote is required for the approval of each proposal?

 

A:	The following are the vote requirements for the proposals:

 

•

Approval and Adoption of the Merger Agreement. The affirmative vote of holders of at least a majority of the shares of Cadence common stock present or represented by proxy at the special meeting and entitled to vote at the special meeting. If you abstain, it will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement.

 

•

Adjournment. The affirmative vote of holders of a majority of the shares of Cadence common stock present in person or represented by proxy at the special meeting and entitled to vote at the special meeting. Abstentions and broker “non-votes” will have the same effect as a vote “AGAINST” the proposal.

Your vote is very important. You are encouraged to submit a proxy as soon as possible.

 

Q:	What constitutes a quorum for the special meeting?

 

A:

The presence in person or by proxy of the holders of a majority of the outstanding shares of Cadence common stock is necessary to constitute a quorum at the special meeting. If a shareholder is not present in person or represented by proxy at the special meeting, such shareholder’s shares will not be counted for purposes of calculating a quorum. Abstentions and broker “non-votes” count as present for establishing a quorum.

 

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Q:	If my shares are held in “street name” by my bank, broker or other nominee, will they automatically vote my shares for me?

 

A:

No. If you hold shares of Cadence common stock in an account at a bank, broker or other nominee and do not chose to attend the special meeting in person, you must provide your bank, broker or other nominee with instructions as to how to vote your shares of Cadence common stock. You may also vote in person at the special meeting; however, if you wish to do so, you must bring a proxy from the bank, broker or other nominee identifying you as the beneficial owner of such shares of Cadence common stock and authorizing you to vote. Brokers will NOT vote shares of Cadence common stock held in “street name” unless you have instructed your broker how to vote.

 

Q:	If my Cadence stock is certificated, should I send in my stock certificates with my proxy card?

 

A:	No. Please do not send your Cadence stock certificates with your proxy card. Rather, promptly after the merger becomes effective, we will deliver or mail to you a form of letter of transmittal and instructions for the surrender of your Cadence stock certificates.

 

Q:	Will the proceeds I receive for my shares in the merger be taxable to me?

 

A:

In general, the merger will be a taxable transaction for U.S. holders of Cadence common stock (as defined under “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”). For U.S. federal income tax purposes, a U.S. holder will generally realize and recognize a gain or loss measured by the difference, if any, between the cash received and the U.S. holder’s tax basis in the shares exchanged in the merger. Generally, the tax basis is the amount paid if the stock was purchased, the value of the stock on the date of the original owner’s death if inherited, or the amount that was originally paid for the investment if received as a gift, unless the market value of the investment on the date the gift was given was lower. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). Please review carefully the information under the caption “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” for a description of material U.S. federal income tax consequences of the merger. The tax consequences to you will depend on your own situation. You are strongly encouraged to consult your own tax advisor for a full understanding of the tax consequences of the merger to you.

 

Q:	When do CBC and Cadence expect to complete the merger?

 

A:

CBC and Cadence are working to complete the merger as quickly as practicable. We currently expect the merger to be completed during the first quarter of 2011, subject to the approval and adoption of the merger agreement by Cadence shareholders, governmental and regulatory approvals and other usual and customary closing conditions. However, no assurance can be given as to when, or if, the merger will occur. See “The Merger—Conditions to the Completion of the Merger.”

 

Q:	Am I entitled to dissent from the merger?

 

A:	No. You do not have the right under Mississippi law to dissent from the merger.

 

Q:	When and where is the special meeting?

 

A:	The special meeting will be held on [—], 2010 at [—], local time, at Cadence’s principal executive offices located at 301 East Main Street, Starkville, Mississippi 39759.

 

Q:	Who can vote at the special meeting?

 

A:	All holders of Cadence common stock who held shares at the close of business on the record date for the special meeting ([—], 2010) are entitled to receive notice of and to vote at the special meeting, provided that

 

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such shares remain outstanding on the date of the special meeting or any adjournment or postponement thereof. As of the close of business on [—], 2010, there were [—] shares of Cadence common stock outstanding and entitled to vote, held by approximately [—] holders of record. Each share of Cadence common stock is entitled to one vote.

 

Q:	Is my vote important?

 

A:

Yes, your vote is very important. If you do not submit a proxy or vote in person at the special meeting, it will be more difficult for Cadence to obtain the necessary quorum to hold the special meeting. In addition, if you abstain, that will have the same effect as a vote “AGAINST” the approval and adoption of the merger agreement, and if you fail to vote, it will have no effect on the outcome of the proposal. If you hold your shares through a bank, broker or other nominee, your bank, broker or other nominee will not be able to cast a vote on the approval and adoption of the merger agreement without instructions from you. The Cadence board of directors unanimously recommends that you vote “FOR” the approval and adoption of the merger agreement.

 

Q:	What happens if I sell my shares after the record date but before the special meeting?

 

A:

The record date for the special meeting is earlier than the date of the special meeting and the date that the merger is expected to be completed. If you sell or otherwise transfer your Cadence shares after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting. However, you will not have the right to receive the merger consideration to be received by Cadence’s shareholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

Q:	What do I need to do now?

 

A:

After you have carefully read this proxy statement, please respond by completing, signing and dating your proxy card and returning it in the enclosed postage-paid envelope or, if available, by submitting your proxy by telephone or through the Internet as soon as possible so that your shares of Cadence common stock will be represented and voted at the special meeting.

Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which voting options are available to you.

The Internet and telephone proxy submission procedures are designed to verify your stock holdings and to allow you to confirm that your instructions have been properly recorded.

The method by which you submit a proxy will in no way limit your right to vote at the special meeting if you later decide to attend the meeting in person. If your shares of Cadence common stock are held in the name of a bank, broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote in person at the special meeting.

 

Q:	How will my proxy be voted?

 

A:

All shares of Cadence common stock entitled to vote and represented by properly completed proxies received prior to the special meeting, and not revoked, will be voted at the special meeting as instructed on the proxies. If you properly complete, sign and return a proxy card, but do not indicate how your shares of Cadence common stock should be voted, the shares of Cadence common stock represented by your proxy will be voted as the Cadence board of directors recommends and therefore “FOR” the approval and adoption of the merger agreement and “FOR” any proposal to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve and adopt the merger agreement at the time of the special meeting.

 

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Q:	Can I revoke my proxy or change my vote after I have delivered my proxy?

 

A:	Yes. You may revoke or change your proxy at any time before your proxy is voted by any of the following actions:

 

•

delivering to Cadence’s Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

•

attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person at the meeting);

 

•

signing and delivering a new proxy, relating to the same shares of Cadence common stock and bearing a later date; or

 

•

submitting another proxy by telephone or on the Internet before 4:00 p.m. central time on the date prior to the date of the special meeting (the latest telephone or Internet voting instructions will be followed).

If you are a “street name” holder of Cadence common stock, you may change your vote by submitting new voting instructions to your broker, bank, trust or other nominee. You must contact your nominee to obtain instructions as to how to change or revoke your proxy.

 

Q:	Who can answer my questions?

 

A:	Cadence shareholders, banks and brokers should call Corporate Communications Inc. toll-free at 800-270-2677 with any questions about the merger or the special meeting, or to obtain additional copies of this proxy statement or proxy cards.

 

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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This proxy statement contains statements that are not historical facts and are considered “forward-looking.” You can identify these statements by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue”, “predicts”, “potential”, “ongoing”, or “pursue,” or the negative or other words or expressions of similar meaning, may identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement. These forward-looking statements, including without limitation, those relating to future actions, effects on us if the merger is not completed, strategies, future performance, the outcome of contingencies such as legal proceedings and future financial results, wherever they occur in this proxy statement, are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors set forth from time to time in our filings with the SEC. In addition to other factors and matters contained in this document, these statements are subject to risks, uncertainties and other factors, including, among others:

 

•

we may be unable to obtain the required shareholder approval for the merger at the special meeting;

 

•

the conditions to the closing of the merger may not be satisfied, or the merger agreement may be terminated prior to closing, which would, in some cases, require us to pay up to a $4.5 million termination fee, plus up to $1.0 million for expenses to CBC and to reimburse CBC for the $2.0 million advanced to pay the Trustmark Termination fee;

 

•

the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule;

 

•

disruptions and uncertainty, including diversion of management attention, resulting from our proposed merger may make it more difficult for us to maintain relationships with other customers, employees or suppliers, and as a result our business may suffer;

 

•

the restrictions on our conduct prior to closing contained in the merger agreement may have a negative effect on our flexibility and our business operations;

 

•

we have and will continue to incur significant expenses related to the merger prior to its closing and the merger may involve unexpected costs or unexpected liabilities;

 

•

the impact of compensation and other restrictions imposed under the Troubled Asset Relief Program (“TARP”) until Cadence’s outstanding preferred stock issued under TARP is repaid;

 

•

legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, changes in the scope and cost of FDIC insurance and other coverages, increases in regulatory capital requirements, and changes in the U.S. Treasury’s Capital Purchase Program;

 

•

Cadence’s ability to comply with any requirements imposed on us and Cadence Bank, including the consent order entered into on May 19, 2010, by our respective regulators, and the potential negative consequences that may result;

 

•

the outcome of any legal proceedings that may be instituted against Cadence or CBC and others related to the merger agreement;

 

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•

changes in accounting principles, policies, and guidelines applicable to bank holding companies and banking;

 

•

changes in the general economic business conditions;

 

•

inability to attract and retain deposits;

 

•

changes in the level of non-performing assets and charge-offs;

 

•

changes in the financial performance and/or condition of borrowers;

 

•

inflation, interest rate, cost of funds, securities market and monetary fluctuations;

 

•

changes in the competitive environment in which we operate; and

 

•

additional factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 included as Appendix C to this proxy statement, under the headings “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” and as such factors were updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 included as Appendix D to this proxy statement.

See “Where You Can Find More Information.” You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement.

THE FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT SPEAK ONLY AS OF THE DATE HEREOF. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE.

 

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THE SPECIAL MEETING

Date, Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to Cadence’s shareholders as part of the solicitation of proxies by the Cadence board of directors for use at the special meeting to be held on [—], starting at [—], at 301 East Main Street, Starkville, Mississippi 39759, or at any adjournment or postponement thereof. The purpose of the special meeting is for Cadence’s shareholders to consider and vote on adoption of the merger agreement and to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies. Cadence’s shareholders must adopt the merger agreement in order for the merger to occur. If Cadence’s shareholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this proxy statement as Appendix A. You are urged to read the merger agreement in its entirety.

Record Date and Quorum

We have fixed the close of business on [—], 2010 as the record date for the special meeting, and only holders of record of Cadence common stock on the record date are entitled to vote at the special meeting. As of the record date, there were [—] shares of Cadence common stock outstanding and entitled to vote. Each share of Cadence common stock entitles its holder to one vote on all matters properly coming before the special meeting.

A majority of the shares of Cadence common stock issued, outstanding and entitled to vote at the special meeting constitutes a quorum for the purpose of considering the proposals. Shares of Cadence common stock present in person or represented at the special meeting but not voted, including shares of Cadence common stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum is not present at the special meeting, the special meeting may be adjourned or postponed to solicit additional proxies.

Vote Required for Approval

You may vote “FOR” or “AGAINST”, or you may “ABSTAIN” from voting on, the proposal to adopt the merger agreement. Consummation of the merger requires the adoption of the merger agreement by the affirmative vote of holders of at least a majority of the shares of Cadence common stock present or represented by proxy at the special meeting and entitled to vote at the special meeting. A majority of Cadence common stock issued, outstanding and entitled to vote at the special meeting constitutes a quorum for the purpose of the special meeting. Therefore, if you abstain, it will have the same effect as a vote “AGAINST” the adoption of the merger agreement.

The adoption of the proposal to adjourn or postpone the special meeting to a later time, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of a majority of the shares of Cadence common stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Therefore, if you abstain, it will have the same effect as a vote “AGAINST” the adoption of the proposal to adjourn or postpone the special meeting and if you fail to vote, it will have no effect on the outcome of the proposal.

Proxies and Revocation

If you are a shareholder of record of your shares of Cadence common stock and you submit a proxy by telephone or the Internet or by returning a signed and dated proxy card by mail that is received by Cadence at any time prior to 4:00 p.m. central time on the date prior to the date of the special meeting, your shares will be voted at the special meeting as you indicate. If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the adoption of the merger agreement and “FOR” the adjournment or postponement of the

 

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special meeting, if necessary or appropriate, to solicit additional proxies, and in accordance with the recommendations of the Cadence board of directors on any other matters properly brought before the special meeting, or at any adjournment or postponement thereof.

If your shares of Cadence common stock are held in “street name,” you will receive instructions from your broker, bank, trust or other nominee that you must follow in order to have your shares voted. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker, bank, trust or other nominee. Brokers, banks, trusts or other nominees who hold shares of Cadence common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, such nominees are not allowed to exercise their voting discretion with respect to the approval of matters that are “non-routine,” such as adoption of the merger agreement, without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker, bank, trust or other nominee that are present in person or represented at the meeting, but with respect to which the broker, bank, trust or other nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. If your broker, bank, trust or other nominee holds your shares of Cadence common stock in “street name,” your broker, bank, trust or other nominee will vote your shares only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker with this proxy statement. Because it is expected that brokers, banks, trusts and other nominees will not have discretionary authority to vote on either proposal, Cadence anticipates that there will not be any broker non-votes in connection with either proposal.

Proxies received by Cadence at any time before the vote being taken at the special meeting, which have not been revoked or superseded before being voted, will be voted at the special meeting. If you are a shareholder of record of shares of Cadence common stock, you have the right to change or revoke your proxy at any time, unless noted below, before the vote is taken at the special meeting:

 

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by delivering to Cadence’s Corporate Secretary a signed written notice of revocation bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

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by attending the special meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person at the meeting);

 

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by signing and delivering a new proxy, relating to the same shares of Cadence common stock and bearing a later date; or

 

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submitting another proxy by telephone or on the Internet before 4:00 p.m. central time on the date prior to the date of the special meeting (the latest telephone or Internet voting instructions will be followed).

If you are a “street name” holder of Cadence common stock, you may change your vote by submitting new voting instructions to your broker, bank, trust or other nominee. You must contact your nominee to obtain instructions as to how to change or revoke your proxy.

Written notices of revocation and other communications with respect to the revocation of any proxies should be addressed to:

Cadence Financial Corporation

P.O. Box 1187

301 East Main Street

Starkville, Mississippi 39760

Attn: Corporate Secretary

 

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Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice if announced at the meeting at which the adjournment is taken and if the adjournment is to a date that is not greater than 30 days after the original date fixed for the special meeting and no new record date is fixed for the adjourned meeting. Any signed proxies received by Cadence prior to 4:00 p.m. central time on the date prior to the date of the special meeting in which no voting instructions are provided on such matter will be voted “FOR” an adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies. Whether or not a quorum exists, holders of a majority of Cadence shares of common stock present in person or represented by proxy and entitled to vote at the special meeting may adjourn the special meeting. Because a majority of the votes present in person or represented at the meeting, whether or not a quorum exists, is required to approve the proposal to adjourn the meeting, abstentions will have the same effect on such proposal as a vote “AGAINST” the proposal. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Cadence’s shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

Solicitation of Proxies

Cadence will pay all of the costs of this proxy solicitation. In addition to soliciting proxies by mail, directors, officers and other employees of Cadence or its subsidiaries may solicit proxies personally, by telephone, by facsimile or otherwise. None of these people will receive any special compensation for soliciting proxies. Cadence will arrange with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of shares held of record by such brokerage firms and other custodians, nominees and fiduciaries, and Cadence will, upon request, reimburse these record holders for their reasonable out-of-pocket expenses.

Questions and Additional Information

If you have questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, Cadence shareholders, banks and brokers should call Corporate Communications Inc. toll-free at 800-270-2677.

Availability of Documents

Documents incorporated by reference (excluding exhibits to those documents unless the exhibit is specifically incorporated by reference into those documents) will be provided by first class mail without charge to each person to whom this proxy statement is delivered upon written or oral request of such person. In addition, our list of shareholders entitled to vote at the special meeting will be available for inspection at our principal executive offices at least 10 days prior to the date of the special meeting and continuing through the special meeting for any purpose germane to the meeting; the list will also be available at the meeting for inspection by any shareholder present at the meeting. See the section entitled “Where You Can Find Additional Information” for more information regarding where you request any of the documents incorporated by reference in this proxy statement or other information concerning Cadence.

Recommendation of the Cadence Board of Directors

Cadence’s board of directors has unanimously approved the merger agreement and believes that the merger is in the best interests of Cadence and its shareholders. Cadence’s board of directors unanimously recommends that Cadence’s shareholders vote “FOR” approval of the merger agreement and “FOR” adjournment of the meeting to a later date or dates to permit further solicitations of proxies, if necessary. See “The Merger—Reasons for the Merger and Recommendations of the Board of Cadence.”

 

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THE MERGER

The following information describes the material aspects of the merger. This description does not purport to be complete, and is qualified in its entirety by reference to the merger agreement which is attached to this proxy statement as Appendix  A. All shareholders are urged to read the merger agreement in its entirety.

The Parties to the Merger

Cadence Financial Corporation

Cadence Financial Corporation is a Mississippi corporation and a bank holding company. Through its wholly-owned subsidiary, Cadence Bank, N.A. (“Cadence Bank”), Cadence operates in the states of Mississippi, Alabama, Tennessee, Florida and Georgia. Cadence’s primary business is providing traditional commercial and retail banking services to customers. Cadence also provides other financial services, including trust services, mortgage services and investment products.

Cadence Financial Corporation

301 East Main Street

Starkville, Mississippi, 39759

Telephone: (662) 323-1341

Community Bancorp LLC

Community Bancorp LLC, a Delaware limited liability company formed on November 18, 2009, is a bank holding company headquartered in Houston, Texas. CBC has raised equity capital commitments in excess of $900 million for the purpose of making investments in the U.S. banking sector, with a particular focus on community banks that are well positioned to benefit from the equity capital and industry expertise CBC can provide.

Community Bancorp LLC

5151 San Felipe Street

Houston, Texas, 77056

Telephone: (713) 235-8803

Maroon Acquisition Corp.

Maroon Acquisition Corp., a wholly-owned subsidiary of CBC, is a Mississippi corporation formed on September 20, 2010 for the purpose of effecting the merger. At the effective time of the merger, Maroon Acquisition Corp. will be merged with and into Cadence and the name of the resulting company will be Cadence Financial Corporation. Maroon Acquisition Corp. has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement.

Maroon Acquisition Corp.,

c/o Community Bancorp LLC

5151 San Felipe Street

Houston, Texas, 77056

Telephone: (713) 235-8803

Background of the Merger

As part of our board of directors’ general oversight of our business and strategy, the board of directors and executive officers have periodically discussed and reviewed our business, performance and prospects, including various strategic alternatives, to maximize value for our shareholders. The strategic alternatives considered by the

 

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board have included, among other things, continuing our on-going operation as an independent institution, possible business combination opportunities, securities offerings and the potential sale or recapitalization of the company.

In recent periods, the board also considered the effects on our operating results of the significant operating restrictions imposed on us by virtue of the formal agreement that we entered into with the Office of the Comptroller of the Currency (the “OCC”) on April 17, 2009 and, subsequently, the consent order that we entered into with the OCC on May 19, 2010. Additionally, the board considered the effects and restrictions imposed on us as a result of our participation in the Capital Purchase Program under the TARP operated by the U.S. Department of the Treasury, pursuant to which we issued $44 million of preferred stock (the “TARP Preferred”) to the U.S. Treasury, as well as a warrant that permits the U.S. Treasury to purchase up to 1,145,833 shares of our common stock.

The board of directors and management have also been aware in recent years of changes in the financial services industry and the regulatory environments as well as the competitive challenges facing a financial institution such as ours. These challenges have included increasing government regulations, increasing expense burdens and commitments for technology and training, an interest rate environment which has resulted in significant compression in the interest rate spread and margin, a deep and long recession which has created issues with respect to our asset quality, and increasing competition in the delivery of financial products and services combined with increased customer expectations for the availability of sophisticated financial products from financial institutions.

As a result of the formal agreement and consent order, we needed to raise additional Tier 1 capital in order to meet and maintain minimum Tier 1 leverage and risk-based capital ratios to achieve those mandated by the formal agreement and consent order. In 2009, we retained FBR Capital Markets Corporation, as our financial advisor to raise capital for Cadence. FBR was unable to consummate the offering due to unstable market conditions. Following several discussions during the early part of 2010 with Keefe, Bruyette & Woods (“KBW”), concerning our strategic alternatives, we decided to work with KBW to pursue a public offering of our common stock, which would allow us to exceed the capital ratios mandated by the OCC. On May 19, 2010, the same day we announced our consent order with the OCC, we filed a Registration Statement on Form S-1 in connection with an offering of approximately $80 million of our common stock. Over the next few weeks, as we worked with the SEC to clear our registration statement for the offering, market conditions continued to worsen. As a result, KBW advised us that the market would not currently support the offering of our common stock and that the offering would have to be delayed until such time as the market would be more receptive to a capital raise by us.

In the event conditions for a public offering did not improve, we directed KBW in July 2010 to approach private investors that might be interested in providing capital to us or acquiring us. As a result of such inquiries, in July and early August of 2010, we entered into non-disclosure agreements with eight interested parties, one of whom was CBC which signed the non-disclosure agreement on July 23, 2010. Over the next several weeks, we provided these parties with confidential information and allowed such parties to access a data room for the purpose of conducting a confidential preliminary due diligence review of us. Of the eight parties that signed non-disclosure agreements, only CBC expressed interest in writing in pursuing a transaction as outlined below.

During this period, Cadence also directed KBW to contact financial institutions that may have an interest in acquiring Cadence. One of the financial institutions was Trustmark Corporation (“Trustmark”) which signed the non-disclosure agreement on August 17, 2010. At that time, our board of directors had not made a definitive determination whether or not to remain independent, undertake a merger or acquisition transaction, or attempt a further capital raise when market conditions permitted.

To facilitate the diligence process, we invited interested parties to conduct a limited on-site due diligence review of our operations, including our loan portfolio. During August, on-site due diligence of our operations was conducted by interested parties, including CBC and Trustmark.

 

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On August 5, 2010, CBC requested the exclusive right to negotiate an acquisition transaction with Cadence, but did not indicate a price or a price range for such a transaction. Cadence declined that request.

On August 17, CBC and Cadence held a conference call regarding the structure of a possible transaction and the necessity of CBC to do additional due diligence regarding our loan portfolio and CBC’s desire to have a third party to conduct such diligence.

On August 18, 2010, CBC proposed that we retain a third party to perform valuation work on our loan portfolio and that we reconsider CBC’s request for the exclusive right to negotiate an acquisition transaction with Cadence, but did not indicate a price or a price range for such a transaction. Cadence declined that request.

On August 24, 2010, CBC indicated that it desired to conduct further due diligence regarding certain aspects of our loan portfolio and again requested that we pay for an independent third party to conduct such a review. In addition, CBC indicated that although an estimate of value was difficult to project because the loan review work and other confirmatory diligence was critical to understanding the value of the Company, CBC estimated a price range of $.50 to $1.50 per share of our common stock. We agreed on August 24, 2010 to pay for such third party review.

On August 25, 2010, our senior management held a meeting with Richard Hickson, Chief Executive Officer of Trustmark. Following this meeting, Trustmark indicated a willingness to enter into a stock for stock transaction with Cadence at a price equal to approximately $3.00 per share of our common stock, calculated based upon a exchange ratio using a Trustmark common stock price of $19.60, subject to its continued due diligence and provided that the U.S. Treasury would discount the TARP Preferred by 60% as they had previously verbally agreed to do in connection with a proposed public offering of our common stock.

On August 27, 2010, our board of directors met to discuss the Trustmark proposal and the CBC indication of interest. After a lengthy discussion our board of directors authorized management to negotiate and execute a letter of intent with Trustmark at a price of $3.00 per common share payable in Trustmark common stock.

On a conference call with CBC held on August 27, 2010, Cadence advised CBC to cease their efforts with respect to their due diligence evaluation of Cadence. On that same day CBC sent us a letter expressing disappointment that it had been requested to stop diligence and urging us to continue to engage with them regarding a possible transaction.

On August 30, 2010, we received a letter from CBC repeating its interest in a transaction and requesting that it be able to conduct an on on-site review of our loan portfolio.

On August 31, 2010, we entered into a non-binding letter of intent with Trustmark providing for, among other things, an exchange of Trustmark common stock for our common stock with a value at the time of approximately $3.00 per share of our common stock, for an aggregate value of approximately $36 million. The letter of intent contemplated that the number of shares of Trustmark issued in the exchange would be fixed and as a result the value of the transaction to the holders of our common stock would change as the market value of the Trustmark common stock changed. Additionally, the letter of intent provided for the purchase by Trustmark of the TARP Preferred for approximately $17.6 million, an approximately 60% discount to the $44 million face value of the TARP Preferred, conditioned on obtaining U.S. Treasury approval of such discount. Under the terms of the letter of intent, Trustmark was granted exclusivity until September 15 to negotiate a definitive agreement. During the exclusivity period, we suspended all meetings and discussions with CBC.

On September 3, 2010, we executed an engagement letter with KBW for the purpose of rendering financial advisory and investment banking services in connection with our possible sale.

 

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On September 7, 2010, we received a letter from CBC pursuant to which CBC expressed its continued interest in a transaction with us at a price range of $2.00 to $3.50 per share of common stock, conditioned on satisfactory due diligence and approval of the U.S. Treasury. We notified Trustmark of another party’s continued interest.

On September 13, 2010, Cadence expressed to Trustmark Cadence’s desire to participate in any discussions Trustmark was to have with U.S. Treasury regarding the Cadence TARP Preferred, and Trustmark agreed to allow us to participate in any such conversations.

Based on Trustmark’s discussion with the U.S Treasury, that occurred without Cadence participating, with respect to the purchase by Trustmark of the Treasury’s TARP Preferred investment in Cadence, in particular the unwillingness of Treasury to sell the preferred stock to Trustmark for an aggregate amount less than common shareholders were receiving, on September 13, 2010, Trustmark’s financial advisor indicated to us that Trustmark had reduced its proposed price per share of our common stock from $3.00 per share to $2.00 per share and unilaterally adjusted the exchange ratio based upon the closing price of the Trustmark common stock price of $20.64 on September 14, 2010.

On September 13, 2010, CBC repeated its interest in conducting additional due diligence at Cadence’s offices on September 15, 2010.

On September 15, 2010, our board discussed the reduction of the price offered by Trustmark and the board’s disappointment that the Cadence team had not been offered the chance to be involved with Trustmark’s discussions with U.S. Treasury and that Trustmark had changed the exchange ratio. Later that day, we contacted Trustmark reiterating our desire to be involved with future conversations with U.S. Treasury and requested that Trustmark reconsider its $2.00 price which was based upon a higher price to be paid to U.S. Treasury. Trustmark responded that its price was not negotiable and requested Cadence to sign the current draft of the definitive agreement without further negotiation. We informed Trustmark at this time we would not extend the exclusivity period that expired on September 15, 2010 under the letter of intent.

On September 16, 2010, we sent CBC a draft merger agreement for its consideration and encouraged CBC to submit a proposal to us by September 20, 2010. Also on September 16, 2010, CBC’s executive team and CBC’s independent loan portfolio evaluator visited Cadences’ offices to conduct due diligence and hold meetings with Cadence’s executives. CBC spent the next three days reviewing Cadence’s diligence material. On September 16, 2010 and over the next several days, we continued to negotiate a merger agreement with Trustmark and to respond to their due diligence requests.

On September 17, 2010, CBC presented us with a proposal for $2.50 in cash per share of our common stock as well as payments to the U.S. Treasury for the TARP Preferred in excess of $38 million, conditioned on satisfactory due diligence and reaching an acceptable agreement with the U.S. Treasury regarding the TARP Preferred.

On September 17, 2010, Trustmark indicated to us that a definitive agreement must be entered into between us and Trustmark by September 20, 2010 or Trustmark would terminate discussions with us.

On September 19, 2010, CBC furnished substantial comments to the form of merger agreement and expressed their willingness to continue negotiations on an agreement.

Cadence continued to negotiate with both CBC and Trustmark. On September 20, 2010, we reached agreement on all terms of a definitive merger agreement with Trustmark. Also on September 20, 2010, CBC sent us an indication of interest that reiterated its $2.50 cash price.

 

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On September 20, 2010, our board of directors met to evaluate the proposals of both Trustmark and CBC. The board of directors was updated on the status of the proposed agreements and legal and financial due diligence. In addition, outside legal counsel advised the board regarding their fiduciary duties and KBW delivered its fairness opinion regarding the Trustmark transaction. The board of directors considered all information available to them, including the fact that the CBC proposal potentially offered higher value than the current Trustmark proposal. However, CBC had not completed its discussions with the U.S. Treasury, negotiation of a definitive agreement with CBC was expected to take a additional time, Cadence had not completed its due diligence with respect to CBC (including that our board was concerned about and had not confirmed that CBC had received approval of a shelf charter (which they subsequently received) and our board had not received financial information from CBC), and Cadence was not in a position to request a fairness opinion from KBW regarding a transaction with CBC. Considering the status of the negotiations with CBC, Trustmark’s threat to terminate discussions, the uncertainty as to whether a satisfactory merger agreement could be reached with CBC and the uncertainty as to, among other things, how long it would take to reach such agreement, the board of directors determined that the proposal from Trustmark was in the best interests of the shareholders and that we should move forward and execute a definitive agreement with Trustmark. In connection with this decision, the board of directors considered that the Trustmark merger agreement could be terminated by Cadence upon payment of a $2 million termination fee if Cadence were to receive a bona fide “Acquisition Proposal” (as defined in the Trustmark merger agreement) that the board determined was a Superior Proposal (as defined in the Trustmark merger agreement).

Following approval by our board of directors, on September 21, 2010, we and Trustmark signed a merger agreement. The transaction with Trustmark was publicly announced after the close of the market on September 22, 2010.

On September 21, 2010, CBC sent a letter to our board of directors indicating CBC’s continued interest in a transaction with us and a second letter stating that CBC was interested in discussing structural alternatives.

On September 24, 2010, CBC sent a letter to our board of directors stating its belief that the definitive agreement entered into between us and Trustmark was inferior in several respects to CBC’s September 17 all cash proposal.

On September 28, 2010, the board of directors with advice from outside legal counsel considered whether the September 24 letter from CBC constituted an “Acquisition Proposal” under the terms of the agreement with Trustmark. Given the letter only expressed CBC’s disappointment and did not reflect their continued interest in pursuing a transaction or affirmatively state that it was reaffirming its offer, our board with advice of counsel determined that the September 24 letter from CBC did not qualify as an “Acquisition Proposal” as defined in the Trustmark merger agreement.

On September 29, 2010, CBC sent a another letter to our board of directors indicating that CBC’s September 17, 2010 offer of $2.50 in cash per share of our common stock remained open and that CBC was ready, willing and able to execute and complete the proposed transaction. CBC indicated that it was its belief that its September 17, 2010 offer constituted a “Superior Proposal” under the terms of the merger agreement between us and Trustmark. On September 29, 2010, the board of directors with advice from outside legal counsel determined that CBC’s third letter constituted a valid “Acquisition Proposal” as defined in the merger agreement and that the failure to furnish information to CBC or participate in negotiations or discussions with CBC would or could reasonably be expected to constitute a potential breach of fiduciary obligations of the board of directors. The board of directors authorized counsel to provide information to and commence discussions with CBC in light of their fiduciary duties.

On September 30, 2010, we notified Trustmark that we had received an “Acquisition Proposal.”

 

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On October 1, 2010, Trustmark sent a letter to our board of directors indicating that Trustmark was aware of our receipt of an “Acquisition Proposal” and that it was their expectation that we would abide by our agreement with Trustmark.

On October 2, 2010, CBC submitted to us a proposed merger agreement and Cadence’s legal counsel met with CBC’s management and its legal counsel to discuss and negotiate the CBC merger agreement. On October 3, CBC sent us a revised merger agreement.

On October 3, 2010, we advised Trustmark and CBC that on October 5, 1010, they would each be given an opportunity to meet with our board of directors and that Trustmark and CBC should provide any additional information with respect to their respective proposals they would like the board to consider to KBW by 8:00 a.m. on October 5, 2010.

On October 4, 2010, Trustmark indicated in a letter that there was no additional information that it desired to provide to our board of directors regarding the Trustmark offer.

On October 5, 2010, our board of directors listened to presentations from KBW with respect to the financial terms of the proposals as well as from outside legal counsel regarding the fiduciary duties of the board of directors and factors they may consider in evaluating the two transactions, as well as the issues associated with terminating the Trustmark merger agreement. Presentations from both CBC and Trustmark were also made to our board of directors. During its presentation, Trustmark indicated that it would be open to a “collar” arrangement to limit the potential downside risk and upside opportunity of Cadence shareholder arising from changes in the value of the Trustmark common stock prior to closing. Later that day, while the board of directors was still convened to evaluate the Trustmark and CBC proposals, Trustmark called us and indicated that it would be willing to raise its price by $.25 and enhance certain provisions of the Trustmark merger agreement. Trustmark stated that this was its best and final offer.

Following the presentations of each of CBC and Trustmark, the board considered both the Trustmark and CBC proposals including their terms, the effects of each proposal on our shareholders and other constituencies, the risks of closing and other factors. Although Trustmark did not submit a revised offer in writing, nonetheless, the board of directors evaluated the additional consideration and other changes offered by Trustmark and determined that the revised Trustmark proposal was still inferior to the CBC proposal both as to price and other factors. Thereafter, our board of directors’ instructed our outside legal counsel to finalize and obtain certain enhancements to the merger agreement with CBC. Following the completion of such negotiations, our outside legal counsel advised the board of directors of the final proposed terms of the CBC proposal and the existing agreement with and the verbal offer from Trustmark. In addition, KBW delivered its fairness opinion regarding the CBC transaction to the board.

After further consideration of the CBC proposal and the existing agreement with and the verbal offer from Trustmark, our board of directors determined that the proposal by CBC was superior to the Trustmark agreement and consistent with the proper exercise of the board of directors’ fiduciary duties. Following such determination, our board of directors agreed to authorize the execution of the agreement and plan of merger with CBC, subject to the prior termination of the agreement with Trustmark and receipt of the applicable termination fee by Trustmark. CBC advanced to us the $2 million termination fee payable under the Trustmark merger agreement.

On October 6, 2010, we delivered a notice of termination and the applicable termination fee of $2 million to Trustmark. Following such termination, we executed the agreement and plan of merger with CBC. The termination of the agreement with Trustmark and the entry into the agreement with CBC was publicly announced prior to the opening of the market on October 6, 2010.

 

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Reasons for the Merger and Recommendation of the Board of Cadence

The Cadence board of directors believes that the merger is in the best interests of Cadence and its shareholders. Accordingly, the Cadence board has unanimously approved the merger agreement and unanimously recommends that Cadence shareholders vote “FOR” the proposal to approve the merger agreement.

In approving the merger agreement, the Cadence board consulted with its financial advisor with respect to the financial aspects and fairness of the proposed acquisition from a financial point of view and with its legal counsel as to its legal duties and the terms of the merger agreement and related agreements. The terms of the merger agreement, including the consideration to be paid to Cadence shareholders, were the result of arm’s length negotiations between representatives of CBC and Cadence. In evaluating whether to merge with CBC, Cadence’s board of directors considered a number of factors, including, without limitation, the following:

 

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the current financial services industry environment, including increased competition and consolidation trends;

 

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the effects of increased regulatory requirements on the financial services industry generally and on our income and expenses;

 

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the fact that we were required to meet and maintain minimum Tier 1 leverage and risk-based capital ratios to achieve those mandated by the consent orders on or before September 19, 2010 or be subject to possible additional regulatory action;

 

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the additional capital, liquidity and resources needed for Cadence’s operations to continue to grow;

 

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the process conducted by Cadence’s management with the assistance of KBW to identify potential merger partners and to solicit proposals as to the financial terms, structure and other aspects of a potential transaction from potential merger partners;

 

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the opinion of KBW dated October 5, 2010 delivered to our board as to the fairness, from a financial point of view as of the date of the opinion, of the $2.50 per share cash Merger Consideration to be received by holders of our common stock pursuant to the merger. See Appendix B to this proxy statement and “—Opinion of Cadence’s Financial Advisor” for more information on the analyses and opinion, including the assumptions made, matters considered and limitations stated;

 

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the current and historical prices of our common stock and the fact that the merger consideration of $2.50 in cash per share of our common stock represented a premium of approximately 20% over the market price of our common stock on October 5, 2010, the date immediately prior to the announcement of the merger Agreement, and a premium of approximately 45% to the closing sale price on September 21, 2010 (the day prior to the announcement of the agreement with Trustmark) ;

 

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the limited strategic alternatives available to Cadence, notwithstanding the extensive search and evaluation of alternatives conducted by management with the assistance of legal and financial advisors;

 

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the concerns about the ability of Cadence to raise sufficient capital in a common stock offering to meet the requirements of the Consent Order imposed by the OCC;

 

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CBC’s ability to negotiate and execute a definitive agreement and to close the merger on an expedited basis;

 

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subject to certain conditions, including the payment of a termination fee under certain circumstances, the terms of the merger agreement allow our board to exercise its fiduciary duties to consider potential alternative transactions and to withdraw its recommendation to our shareholders to adopt the merger agreement and to terminate the merger agreement to accept a superior proposal;

 

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the proposed merger is for all cash, which provides a specific value to our shareholders compared to a transaction pursuant to which shareholders receive stock or other non-cash consideration that could fluctuate in value;

 

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the non-economic terms of the transaction, including the impact on existing customers and employees;

 

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the financial condition and resources of CBC;

 

•

the terms of the merger agreement generally;

 

•

the fact that Trustmark indicated its proposal to increase its offer by $.25 was its best and final offer;

 

•

the fact that the terms of the CBC agreement were generally more favorable to Cadence than the terms of the Trustmark merger agreement;

 

•

the likelihood of consummating the transaction generally; and

 

•

the likelihood that the transaction will be approved by regulatory authorities.

Our board also considered a number of countervailing risks and factors concerning the proposed merger. These countervailing risks and factors included the following:

 

•

the fact that we will no longer exist as an independent company and our shareholders will be unable to participate in any future earnings, if any, or receive any benefit from any future increase in value of Cadence;

 

•

the fact that an all cash transaction would be taxable to shareholders of Cadence for U.S. federal income tax purposes;

 

•

the low price per share of common stock reflected by the merger consideration compared to the historical prices of our common stock;

 

•

employee attrition and the potential effect on business and customer relationships;

the interest of our officers and directors in the merger as described in “The Merger—Interest of Cadence’s Directors and Executive Officers of Cadence in the Merger;”

 

•

the fact that our officers and employees will have to focus extensively on actions required to complete the merger, as well as the substantial transaction costs that we will incur for the merger, even if it is not consummated;

 

•

the fact that, pursuant to the merger agreement, we must generally conduct our business in the ordinary course and are subject to certain restrictions on the conduct of our business prior to the closing of the merger or termination of the merger agreement, which may delay or prevent us from pursuing business opportunities that may arise or preclude actions that would be advisable if we were to remain an independent company; and

 

•

the restrictions on Cadence’s ability to solicit or engage in discussions or negotiations with a third party regarding specific transactions involving Cadence, and the up to $4,500,000 termination fee and the up to $1,000,000 in expenses payable to CBC upon the occurrence of certain events, and the possible deterrent effect that paying such fee might have on the desire of other potential acquirers to propose an alternative transaction that may be more advantageous to our shareholders.

 

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The discussion of the information, risks and factors that our board considered in arriving at its decision to approve the merger agreement and recommend that our shareholders vote to adopt the merger agreement is not intended to be exhaustive, but includes all material factors considered by our board. In view of the wide variety of factors and risks considered in connection with its evaluation of the merger, our board did not and did not believe it necessary to, and did not attempt to, rank or quantify the risks and factors, although individual members of the board may have assigned different weights to the factors and risks in their individual assessments of the merger. The overall analysis of the factors described above included multiple discussions with and questioning of our management, financial advisors and legal counsel. Our board carefully considered the risks and uncertainties associated with our remaining an independent publicly-traded company. Many of those risks and uncertainties are described in our Annual Report on Form 10-K for the year ended December 31, 2009 included as Appendix C to this proxy statement, any updates to those risks and uncertainties set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 included as Appendix D to this proxy statement and the factors described below under “—Effects on Cadence if the Merger is Not Completed.”

BASED ON THE REASONS STATED, CADENCE’S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF CADENCE AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS OF CADENCE THEREFORE UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE CADENCE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.

Opinion of Cadence’s Financial Advisor

The fairness opinion of KBW is described below. The description contains projections, estimates and/or other forward-looking statements about the future earnings or other measures of the future performance of Cadence. You should not rely on any of these statements as having been made or adopted by Cadence.

Cadence engaged KBW to render financial advisory and investment banking services. KBW assisted Cadence in analyzing, structuring, negotiating and reviewing the financial aspects of the merger. KBW is a nationally-recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with Cadence 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 October 5, 2010, the Cadence board held a meeting to evaluate the proposed merger with CBC. At this meeting, KBW rendered an oral opinion, subsequently confirmed in writing, that the consideration to be received by Cadence shareholders in the merger was fair to those shareholders from a financial point of view. The Cadence board approved the merger agreement at this meeting.

The full text of KBW’s opinion, dated October 5, 2010, is attached as Appendix B to this proxy statement. Cadence shareholders are encouraged to read KBW’s opinion carefully in its entirety for a discussion of the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by KBW in connection with the rendering of its opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion is directed to the Cadence board and addresses only the fairness, from a financial point of view, of the consideration offered to the Cadence shareholders. It does not address the underlying business decision to proceed with the merger and does not constitute a recommendation to any Cadence shareholder as to how the shareholder should vote at the Cadence special meeting on the merger or any related matter.

In rendering its opinion, KBW:

 

•

reviewed, among other things,

 

•

the merger agreement;

 

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•

Annual Reports to shareholders and Annual Reports on Form 10-K for the three years ended December 31, 2009 of Cadence;

 

•

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Cadence and certain other communications from Cadence to its stockholders; and

 

•

other financial information concerning the businesses and operations of Cadence and CBC furnished to KBW by Cadence and CBC, respectively, for purposes of KBW’s analysis.

 

•

held discussions with members of senior management of Cadence and CBC regarding

 

•

past and current business operations;

 

•

regulatory relations;

 

•

financial condition; and

 

•

future prospects of their respective companies.

 

•

reviewed the market prices, valuation multiples, publicly reported financial condition and results of operations for Cadence and compared them with those of certain publicly traded 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 KBW, or that was publicly available. KBW did not attempt to, or assume any responsibility to, verify such information independently. KBW relied upon the management of Cadence and CBC as to the reasonableness and achievability of the financial and operating forecasts and projections (and assumptions and bases therefor) provided to KBW. KBW assumed that the aggregate allowance for loan and lease losses for Cadence is adequate to cover those losses. KBW did not make or obtain any evaluations or appraisals of any property, assets or liabilities of CBC or Cadence, nor did it examine or review any individual credit files.

The projections furnished to KBW and used by it in certain of its analyses were prepared by Cadence’s and CBC’s senior management teams. Cadence and CBC do 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 with no adjustments to the per share common stock consideration;

 

•

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;

 

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•

all conditions to the completion of the merger will be satisfied, including the purchase of the TARP Preferred, without any waivers or modifications of the merger agreement;

 

•

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 generally accepted accounting principles. KBW’s opinion is not an expression of an opinion as to the prices at which shares of Cadence common stock will trade since the announcement of the proposed merger.

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, Cadence and CBC. 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 Cadence 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 Cadence board with respect to the fairness of the consideration.

The following is a summary of the material analyses presented by KBW to the Cadence board on October 5, 2010, in connection with its fairness opinion. The summary is not a complete description of the analyses underlying the KBW opinion or the presentation made by KBW to the Cadence 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.

Summary of Proposal. Pursuant to the terms of the Agreement, each outstanding share of common stock, par value $1.00 per share, of Cadence will be converted into and represent the right to receive an amount in cash, without interest, equal to $2.50 per share. The terms and conditions of the merger are more fully described in the merger agreement.

Selected Peer Group Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of Cadence to the following groups of depository institutions that KBW considered comparable to Cadence.

 

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Companies included in Cadence’s peer group were:

 

Ameris Bancorp		First M&F Corporation
BancTrust Financial Group, Inc.		First Security Group, Inc.
Capital City Bank Group, Inc.		Green Bankshares, Inc.
CenterState Banks, Inc.		Renasant Corporation

To perform this analysis, KBW used financial information as of the three month period ended June 30, 2010 except for the comparison of net charge-offs to average loans, for which the twelve month period ended June 30, 2010 was used. Market price information was as of October 4, 2010. Certain financial data prepared by KBW, and as referenced in the tables presented below may not correspond to the data presented in Cadence’s and CBC’s historical financial statements as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning Cadence’s financial performance:

 

		Cadence				Peer Group Minimum				Peer Group Maximum
Net Interest Margin			2.30	%			2.93	%			4.43	%
Net Interest Margin Change(1)			(11) bps				(24) bps				51 bps
Yield on Loans			5.13	%			5.17	%			6.71	%
Cost of Interest Bearing Liabilities			1.79	%			0.74	%			2.04	%
Provision / Net Charge-Offs			32	%			46	%			157	%
Non-Interest Income / Average Assets			0.83	%			0.76	%			2.31	%
Non-Interest Expense / Average Assets			3.04	%			2.90	%			5.17	%
Efficiency Ratio			83	%			61	%			84	%
Return on Average Assets			(0.35	%)			(1.45	%)			0.44	%
Return on Average Equity			(5.47	%)			(13.30	%)			4.83	%

 

(1)	Measures change over linked quarters

KBW’s analysis showed the following concerning Cadence’s financial condition:

 

		Cadence				Peer Group Minimum				Peer Group Maximum
Tangible Equity / Tangible Assets			6.27	%			6.52	%			11.23	%
Tangible Common Equity / Tangible Assets			4.02	%			4.70	%			11.06	%
Leverage Ratio			5.70	%			7.70	%			12.65	%
Tier 1 Ratio			10.02	%			10.32	%			18.68	%
Total Capital Ratio			11.30	%			11.57	%			19.94	%
Loans / Deposits			65	%			66	%			97	%
Nonperforming Assets / Assets			5.79	%			4.34	%			9.04	%
Nonperforming Assets / Loans + OREO			10.57	%			6.76	%			12.46	%
Last Twelve Months Net Charge-Offs / Average Loans			3.54	%			0.70	%			3.81	%
Loan Loss Reserve / Nonperforming Loans			50	%			28	%			61	%
Loan Loss Reserve / Loans			3.56	%			1.76	%			3.44	%

 

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KBW’s analysis showed the following concerning Cadence’s market performance (pricing as of October 4, 2010):

 

		Cadence				Peer Group Minimum				Peer Group Maximum
Market Capitalization ($ Million)		$	24			$	19			$	324
1-Year Stock Price Change			11	%			(70	%)			38	%
Change from 52-Week High			(59	%)			(70	%)			(15	%)
Stock Price / Book Value per Share			31	%			18	%			94	%
Stock Price / Tangible Book Value per Share			31	%			18	%			146	%
Stock Price / 2010 Estimated EPS(1)			NM				19.9x				19.9x
Stock Price / 2011 Estimated EPS(1)			NM				13.5x				24.3x
Dividend Yield			0.0	%			0.0	%			4.4	%
Common Dividend Payout Ratio			NM				0.0	%			250	%
Insider Ownership			12.0	%			5.5	%			30.3	%
Institutional Ownership			9.2	%			4.0	%			52.0	%
3 Month Average Daily Trading Volume ($ Thousand)		$	36			$	16			$	1,279

 

(1)	Earnings estimates are consensus of Wall Street analysts’ estimates as compiled by First Call; Cadence estimates per Management

Comparable Transaction Analysis. KBW reviewed publicly available information related to select acquisitions of nationwide banks and bank holding companies announced in the 18 months prior to the announcement date, with Target Assets greater than $1.0 billion and Nonperforming Assets / Assets greater than 4.00%. The transaction criteria resulted in 2 transactions:

 

Acquiror		Target
People’s United Financial, Inc.		Smithtown Bancorp, Inc.
Toronto-Dominion Bank		South Financial Group, Inc.

Transaction multiples for the merger were derived from an offer price of $2.50 per share for Cadence. For each precedent transaction, KBW derived and compared, among other things, the implied ratio of price per common share paid for the acquired company to:

 

•

book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition

 

•

tangible book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition

 

•

tangible equity premium to core deposits (total deposits less time deposits greater than $100,000) based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition

 

•

market premium based on the latest closing price 1-day prior to the announcement of the acquisition

 

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The results of the analysis are set forth in the following table:

 

Transaction Price to:		CBC / Cadence Merger				Comparable Bank Transactions Minimum				Comparable Bank Transactions Maximum
Book Value			39	%			10	%			49	%
Tangible Book Value			39	%			17	%			51	%
Core Deposit Premium			(4.1	%)			(4.2	%)			(1.0	%)
Market Premium(1)			25.6	%			(58.2	%)			3.7	%

 

(1)	Based on Cadence closing price of $1.99 on October 4, 2010

No company or transaction used as a comparison in the above analysis is identical to Cadence, CBC 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 Cash Flow Analysis. KBW performed a discounted cash flow analysis to estimate a range of the present values of after-tax cash flows that Cadence could provide to equity holders through 2015, assuming a $90.0 million common equity offering in the third quarter of 2010 at $1.00 per share. The analysis assumed a 6.00% underwriting discount and $300,000 of additional offering expenses. In performing this analysis, KBW used earnings and asset growth estimates for Cadence for 2010 through 2015 from Company management and assumed discount rates ranging from 12.0% to 16.0%. The range of values was determined by adding (1) the present value of projected cash dividends to Cadence shareholders from 2010 to 2015, assuming excess capital is paid out to Cadence shareholders and (2) the present value of the terminal value of Cadence’s common stock. In calculating the terminal value of Cadence, KBW applied multiples ranging from 10.0x to 14.0x 2015 forecasted earnings. In determining cash flows available to shareholders, KBW assumed that Cadence would maintain a tangible common equity / tangible assets ratio of 7.00% and any excess capital would be paid out to Cadence shareholders. This resulted in a range of values of Cadence from $0.93 to $1.32 per share.

KBW also considered and discussed with the Cadence board how this analysis would be affected by changes in the underlying assumptions of the capital raise, including variations with respect to the amount raised and offer price per share. To illustrate this impact, KBW performed a similar discounted cash flow analysis assuming capital raises ranging from $80.0 million to $100.0 million at offer prices from $0.50 per share to $1.50 per share. The analysis assumes a 12.0x terminal multiple on 2015 earnings and a 14.0% discount rate. This resulted in a range of values of Cadence from $0.57 to $1.64.

KBW stated that the discounted cash flow present value analysis is a widely used valuation methodology but noted that it relies on numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of Cadence.

Other Analyses. KBW reviewed the relative financial and market performance of Cadence to a variety of relevant industry peer groups and indices.

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, Cadence and CBC. 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 Cadence for KBW’s own account and for the accounts of its customers.

 

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Cadence paid KBW a cash fee of $500,000 concurrently with the rendering of the fairness opinion relating to the merger. Additionally, the Company will pay to KBW at the time of closing of the merger a cash fee equal to $1,000,000. Pursuant to the KBW engagement agreement, Cadence 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.

Interest of Cadence’s Directors and Executive Officers in the Merger

Some of the directors and officers of Cadence have interests in the merger that differ from, or are in addition to, their interests as shareholders of Cadence. The independent members of Cadence’s board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the shareholders that the merger agreement be approved.

Treatment of Outstanding Equity Awards. The merger agreement provides that all of Cadence’s outstanding vested options not exercised as of the effective time of the merger will be cancelled and converted into the right to receive $0.20 per option, subject to the execution of a release and termination of such option by the optionholder prior to the consummation of the merger and all Cadence common stock granted subject to time lapse restrictions will become free of such restrictions. The merger agreement also provides that each phantom stock unit with respect to shares of Cadence common stock granted under Cadence’s executive retirement benefit agreements will be converted into the right to receive $2.50 per phantom stock unit plus all accumulated dividends as of the effective time of the merger.

Assuming a closing date of January 31, 2011, the estimated aggregate number and value of equity awards held by executive officers and directors is as follows:

 

		Value of Unvested Equity Awards that will Accelerate Upon a Change in Control												Value of Vested Options				Aggregate Value of Equity Awards Payable Upon Consummation of Merger (Total Value of Equity Awards)
Name		Options				Restricted Stock				Phantom Stock
Mark A. Abernathy		$	0			$	0			$	0			$	8,000			$	43,623
David C. Byars		$	0			$	0			$	0			$	0			$	0
Robert S. Caldwell, Jr.		$	0			$	0			$	0			$	0			$	0
Robert L. Calvert, Jr.		$	0			$	0			$	0			$	0			$	0
Robert A. Cunningham		$	0			$	0			$	0			$	0			$	0
John R. Davis		$	0			$	0			$	0			$	2,800			$	2,800
J. Nutie Dowdle		$	0			$	0			$	0			$	0			$	0
James C. Galloway, Jr.		$	0			$	0			$	0			$	0			$	0
Richard T. Haston		$	0			$	0			$	0			$	5,200			$	5,200
Clifton S. Hunt		$	0			$	0			$	0			$	1,487			$	1,487
Lewis F. Mallory, Jr.		$	0			$	0			$	0			$	20,000			$	135,878
Allen B. Puckett, III		$	0			$	0			$	0			$	0			$	0
H. Stokes Smith		$	0			$	0			$	0			$	0			$	0
Sammy J. Smith		$	0			$	0			$	0			$	0			$	0

Change of Control Arrangements. Cadence has entered into agreements with a number of employees that provide for certain benefits in connection with a change of control of Cadence. The merger will constitute a “change of control” of Cadence that will trigger certain obligations that Cadence owes to certain executive officers, Lewis F. Mallory, Jr., Mark A. Abernathy and Richard T. Haston, under their respective employment agreements and to John Davis pursuant to a change of control agreement. In the event the employment of any of Messrs. Mallory, Abernathy or Haston is terminated by Cadence without cause (as defined in the applicable employment agreement) within one year following the merger or if his responsibilities and compensation are materially diminished as a result of the merger, Messrs. Mallory and Abernathy will be entitled to a lump sum

 

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payment equal to 2.99 times the executive’s base salary and Mr. Haston will be entitled to a lump sum payment equal to 2 times his base salary. In addition, each of such executives will receive an amount equal to his monthly medical insurance premium times 12. In the event Mr. Davis’ employment is terminated by Cadence without cause (as defined in the change of control agreement) or by Mr. Davis with good reason (as defined in the change of control agreement) within one year following the merger, Mr. Davis will be entitled to receive a payment in the amount of one time his base salary and an amount equal to his monthly medical insurance premium times 12.

Pursuant to the merger agreement, CBC will assume the obligations under the employment agreements and change of control agreement described above. The merger agreement provides that upon the closing of the merger, the above-described change of control payments will be payable by CBC. However, if any bank regulatory condition, ruling or limitation prohibits the payment of such amounts, CBC will offer continued employment to Messrs. Mallory, Abernathy Haston and Davis and enter into an employment agreement, consulting agreement or similar arrangement with each such person that provides for payments equal to the amount of the change of control payments they would otherwise receive.

Assuming that the merger was completed and the executive officers were terminated on February 1, 2011 and that the executive officers were entitled to full benefits available under their respective employment agreements or change of control agreements and such payments are not prohibited by any bank regulatory authority, the executive officers would receive the approximate amounts set forth in the table below (in addition to the equity values in the table above). You should note that the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. Some of these assumptions are based on information currently available and will need to be updated. As a result, the actual amounts, if any, to be received by an executive officer may differ in material respects from the amounts set forth below.

 

Name		Severance Pay				Benefits
Lewis F. Mallory, Jr.		$	897,000			$	10,997
Mark A. Abernathy		$	726,570			$	11,748
Richard T. Haston		$	391,800			$	14,165
John Davis		$	139,517			$	14,165

Indemnification of Directors and Officers; Directors’ and Officers’ Insurance. Under the merger agreement, current and former officers and directors of Cadence are entitled to indemnification under Cadence’s articles of incorporation, bylaws or indemnification contracts or undertakings for a period of six years from the effective time of the merger. In addition, CBC is obligated to maintain Cadence’s existing director’s and officer’s liability insurance for a period of six years or purchase a tail policy providing coverage no less favorable than Cadence’s existing policy, but in no event will CBC be required to pay more than 300% of the annual premiums currently paid by Cadence for such insurance.

Effects on Cadence if the Merger is Not Completed

If the merger is not consummated for any reason, our shareholders will not receive the merger consideration, our current management, under the direction of our board, will continue to manage us as a stand-alone, independent business, and the value of shares of our common stock will continue to be subject to the risks and uncertainties identified in our Annual Report on Form 10-K for the year ended December 31, 2009 included as Appendix C to this proxy statement and any updates to those risks and uncertainties set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 included as Appendix D to this proxy statement. See also “Where You Can Find More Information.”

 

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Material U.S. Federal Income Tax Consequences of the Merger

The following are the material U.S. federal income tax consequences to “U.S. holders” (as defined below) of Cadence common stock whose shares are converted to cash in the merger. This discussion does not address the consequences of the merger arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or the tax laws of any state, local or non-U.S. jurisdiction and does not address tax considerations applicable to holders of stock options, restricted stock or restricted stock units or to holders who receive cash pursuant to the exercise of appraisal rights. In addition, this discussion does not describe all of the tax consequences that may be relevant to particular classes of taxpayers, including persons who acquired their shares of Cadence common stock through the exercise of an employee stock option or otherwise as compensation, who hold their shares as part of a hedge, straddle or conversion transaction, whose shares are not held as a capital asset for U.S. federal income tax purposes or who are otherwise subject to special tax treatment under the Internal Revenue Code of 1986, as amended, or the Code.

As used herein, the term “U.S. holder” means a beneficial owner of Cadence common stock that is, for U.S. federal income tax purposes:

 

•

an individual citizen or resident of the United States;

 

•

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

•

a trust if (x) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust or (y) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

•

an estate the income of which is subject to U.S. federal income taxation regardless of its source.

The United States federal income tax consequences to a partner in an entity or arrangement treated as a partnership, for U.S. federal income tax purposes, that holds Cadence common stock generally will depend on the status of the partner and the activities of the partnership. Partners in a partnership holding Cadence common stock should consult their own tax advisors.

This discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as currently in effect as of the date of this document. These laws are subject to change, possibly on a retroactive basis. Any such change could alter the tax consequences to you as described herein.

In general, the receipt of cash for Cadence common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. If you receive cash in exchange for your shares of Cadence common stock pursuant to the merger, you will generally realize and recognize capital gain or loss equal to the difference, if any, between the cash received and your tax basis in the shares exchanged in the merger. Generally, the tax basis is the amount paid if the stock was purchased, the value of the stock on the date of the original owner’s death if inherited, or the amount that was originally paid for the investment if received as a gift, unless the market value of the investment on the date the gift was given was lower. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will be long-term capital gain or loss if your holding period for such shares is more than one year at the time of the consummation of the merger. Long-term capital gains recognized by non-corporate U.S. holders will be subject to reduced tax rates. The deductibility of capital losses may be subject to limitations.

You may be subject to backup withholding on the receipt of cash pursuant to the merger. In general, backup withholding will only apply if you fail to furnish a correct taxpayer identification number, or otherwise fail to

 

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comply with applicable backup withholding rules and certification requirements. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will generally be allowable as a refund or credit against your U.S. federal income tax liability provided you timely furnish the required information to the Internal Revenue Service.

The U.S. federal income tax discussion set forth above is included for general information only and is based upon present law. Due to the individual nature of tax consequences, you are urged to consult your tax advisor as to the tax consequences of the merger to you, including the effects of applicable foreign, state, local and other tax laws.

Regulatory Approvals

The merger is subject to approval by the Board of Governors of the Federal Reserve System (“Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). In considering the approval of the merger, the BHC Act requires the Federal Reserve to review the financial conditions and future prospects of CBC and Cadence and our subsidiary bank, the managerial resources, the convenience and needs of the communities to be served, and the parties’ effectiveness in combating money laundering activities.

The Federal Reserve is also required to evaluate whether the merger would result in a monopoly or would be in furtherance of any combination or conspiracy or attempt to monopolize the business of banking in any part of the United States or otherwise would substantially lessen competition or tend to create a monopoly which in any manner would be in restraint of trade. If the Federal Reserve determines that an acquisition would substantially lessen competition, it will not approve the transaction unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served.

Although CBC does not know of any reason why it will not obtain approval in a timely manner, CBC cannot be certain when it will obtain such approval or that it will obtain it at all.

A period of 15 to 30 days must expire following approval by the Federal Reserve during which time the U.S. Department of Justice may file objections to the merger under the federal antitrust laws. While Cadence and CBC do not know of any reason that the Department of Justice would challenge regulatory approval by the Federal Reserve and believe that the likelihood of such action is remote, there can be no assurance that the Department of Justice will not initiate such a proceeding, or if such a proceeding is initiated, as to the result of any such challenge.

The approval of any notice or application merely implies satisfaction of regulatory criteria for approval, and does not include review of the merger from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed merger.

 

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THE MERGER AGREEMENT

General

The merger will result in Merger Sub merging with and into Cadence, with Cadence surviving the merger as a wholly-owned subsidiary of CBC. If the shareholders of Cadence approve the merger agreement at the special meeting, and if the required regulatory approvals are obtained and the other conditions to the parties’ obligations to effect the merger are met or waived by the party entitled to do so, we anticipate that the merger will be completed in the first quarter of 2011, however, we cannot predict the exact timing of the consummation of the merger and whether the merger will be consummated.

Merger Consideration

Upon completion of the merger, shares of Cadence common stock will be converted into the right to receive $2.50 in cash, without interest and less any applicable withholding taxes (other than shares of Cadence common stock held by Cadence or CBC, which will be cancelled without payment). As a result of the merger, certificates for Cadence common stock will only represent the right to receive the merger consideration pursuant to the merger agreement, and otherwise will be null and void after completion of the merger.

In addition, the $44.0 million of Cadence preferred stock and the associated warrant issued to the U.S. Department of the Treasury (“Treasury”) under the Capital Purchase Program will be converted into the right to receive approximately $38.0 million in cash in the aggregate plus accrued dividends through the signing of the definitive purchase agreement with the Treasury.

Effect of the Merger on Cadence Stock Options, Restricted Shares and Phantom Shares

On October 15, 2010, Cadence had outstanding options to purchase 299,142 shares of Cadence common stock held by approximately 20 Cadence officers and one Cadence director. All of these options are currently vested. Owners of vested options must exercise them prior to consummation of the merger to be entitled to receive any part of the merger consideration. Options that are not exercised will be cancelled and converted into the right to receive $0.20 per option upon the execution of a release and termination of such option by the optionholder prior to the closing of the merger.

On October 15, 2010, Cadence had outstanding 12,917 shares of common stock subject to time lapse restrictions held by approximately 7 Cadence officers. Pursuant to the merger agreement, all such shares will become free of restrictions as of the effective time of the merger and holders of such shares will be entitled to receive the merger consideration.

In addition, on [—], 2010, Cadence had outstanding [—] phantom stock units with respect to shares of Cadence common stock held by approximately [—] Cadence officers and [—] Cadence directors. At the effective time of the merger, such phantom stock units will be converted in to the right to receive a cash payment equal to $2.50 per phantom stock unit plus accumulated dividends on such phantom stock units.

Merger Financing

The total amount of funds necessary to complete the merger and the related transactions is anticipated to be approximately $75 million, which includes approximately $38 million to pay for the TARP Preferred and $30 million to pay Cadence’s shareholders, option holders and holders of restricted and phantom units the amounts due to them under the merger agreement at the closing of the merger, with the remaining funds to be used to pay customary fees and expenses in connection with the merger, the financing arrangements and the related transactions. The merger is not subject to a financing condition. These payments are expected to be funded by CBC from cash on hand.

 

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Under the merger agreement, CBC has informed us that it will contribute additional capital to Cadence Bank of such amount as may be required under Cadence’s existing consent order dated May 19, 2010.

Exchange of Cadence Stock Certificates

When the merger is completed, shares of Cadence common will be converted into the right to receive, upon surrender of the certificate representing such shares as described below, the cash merger consideration. Prior to the effective time of the merger, we will appoint an exchange agent. Promptly after the merger becomes effective, such exchange agent will deliver or mail to you a form of letter of transmittal and instructions for the surrender of your Cadence stock certificates. When you properly surrender your certificates, or provide other satisfactory evidence of ownership, and return the letter of transmittal duly executed and completed in accordance with its instructions and any other documents as may be reasonably requested, the exchange agent will promptly deliver to you the merger consideration to which you are entitled.

You should not send in your stock certificates until you receive the letter of transmittal and instructions.

With respect to any Cadence stock certificate that has been lost or destroyed, CBC will pay the merger consideration attributable to the shares represented by such certificate upon receipt of an affidavit certifying such loss or destruction and an indemnity reasonably satisfactory to CBC. After the merger is completed, there can be no transfers of Cadence shares.

Effective Date and Time of the Merger

The merger agreement provides that the merger will be completed on a mutually agreeable date that is no later than the 10^th business day following the satisfaction or waiver of the latest to occur of the conditions to closing. The merger will become effective at the time and date specified in the articles of merger and certificate approving the merger to be issued by the Mississippi Secretary of State. It is currently anticipated that the merger will become effective in the first quarter of 2011, assuming all conditions to the respective obligations of CBC and Cadence to complete the merger have been satisfied, although delays could occur.

We cannot assure you that we can obtain the necessary shareholder and regulatory approvals or that the other conditions to completion of the merger can or will be satisfied.

Conduct of Business Pending Effective Time

From the date of the merger agreement to and including the closing date, Cadence will:

 

•

conduct its business in the usual regular ordinary course consistent with past practices;

 

•

use its reasonable efforts to preserve intact its present business organizations, keep available the services of its present officers, directors, key employees and agents, and preserve relationships and goodwill with customers and regulators and advantageous business relationships; and

 

•

except as required by law or regulation or required by its duties to its shareholders and other constituents, take no action which would adversely affect or delay the ability of Cadence or CBC to obtain any required regulatory or other approvals.

From the date of the merger agreement to and including the closing date, except as required by law or regulation or unless permitted by the merger agreement or reflected in a disclosure, or CBC otherwise consents in writing, Cadence will not and shall cause its subsidiaries not to:

 

•

make or agree to make or renew any loans or other extensions of credit to any borrower in excess of $500,000 (except pursuant to commitments made prior to the date of the merger agreement and

 

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disclosed to CBC, loans fully secured by a certificate of deposit at Cadence, or renewals, extensions and consolidations of any loans other than those previously disclosed);

 

•

adjust, split, combine, reclassify issue or sell or obligate itself to issue or sell any shares of its capital stock (other than issuances for Cadence options) or any warrants, rights, options or warrants to acquire, or any securities convertible into, any shares of its capital stock, or declare or pay any dividend in respect of its capital stock;

 

•

grant any stock appreciation rights, restricted stock units or stock options;

 

•

enter into any agreements with respect to the sale of voting of its capital stock;

 

•

open or close any branch office, or acquire or sell or agree to acquire or sell any branch office or any deposit liabilities;

 

•

enter into, amend or terminate certain agreements specified in the merger agreement or any other material agreement, or acquire or dispose of any material amount of assets or liabilities, except in the ordinary course of business consistent with prudent banking practices or make any investment in any other entity, or make any other investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation, limited partnership or other entity;

 

•

increase the compensation payable or to become payable or the benefits provided to any employees except in the ordinary course of business consistent with past practice subject to certain caps on pay or grant any severance or termination pay (other than pursuant to Cadence’s policies in effect as of the date of the merger agreement), or enter into or amend any employment, consulting, noncompetition, retirement, parachute, severance or indemnification agreement with, any officer, director, employee or agent of Cadence (other than as required or contemplated by the merger agreement);

 

•

establish, amend, or terminate any stock-based compensation plan or other employee benefit plan or any collective bargaining agreement or accelerate the vesting or payment under such plans;

 

•

hire or terminate any employee with annual compensation of $75,000 or more;

 

•

change any actuarial or other assumptions used to calculate funding obligations with respect to any Cadence benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by generally accepted accounting practices;

 

•

take any action or fail to take any action that is intended or would be reasonably likely to result in any condition to the closing of the merger not being satisfied or prevent or materially delay the consummation of the merger;

 

•

sell, transfer, convey, mortgage, encumber or otherwise dispose of any real property (including “other real estate owned”) or interest therein with a value in excess of $500,000;

 

•

foreclose upon or otherwise acquire any commercial real property in excess of $500,00 prior to receipt and authorization by CBC of a Phase I environmental review thereof;

 

•

increase or decrease the rate of interest paid on deposit accounts, except in a manner and pursuant to policies consistent with Cadence’s past practices;

 

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•

establish any new subsidiary;

 

•

voluntarily make any material change in the interest rate risk profile of Cadence from that as of June 30, 2010;

 

•

materially deviate from or modify any policies and procedures existing as of the date of the merger agreement with respect to (1) classification of assets, (2) the allowance for loan losses, (3) accrual of interest on assets or (4) the extension of credit and collateral eligibility, except as otherwise required by the provisions of the merger agreement or by regulatory authorities;

 

•

amend or otherwise change any provision of Cadence’s or its subsidiaries’ articles of incorporation or bylaws or other organizational documents;

 

•

make any capital expenditure which would exceed an aggregate of $250,000;

 

•

excluding deposits (other than brokered deposits), certificates of deposit, FHLB advances and borrowings consistent with past practices and permitted by Cadence’s bank regulatory authorities, undertake any additional borrowings;

 

•

modify any outstanding loan or acquire any loan participation, except, in the ordinary course of business and consistent with past practice;

 

•

settle any claim, action or proceeding other than the ordinary course of business consistent with past practice involving solely money damages not in excess of $75,000 individually or $100,000 in the aggregate, or waive or release any material rights or claims other than in the ordinary course of business consistent with past practice;

 

•

make, change or revoke any tax election, change an annual tax accounting period, adopt or change any tax accounting method, file any amended tax return, enter into any closing agreement with respect to taxes, settle any tax claim, audit, assessment or dispute or surrender any right to claim a refund of taxes;

 

•

commence a voluntary procedure for reorganization, arrangement, adjustment, relief or composition of indebtedness or bankruptcy, receivership or similar proceeding, or consent to an entry of an order for relief in an involuntary procedure for reorganization, arrangement, adjustment, relief or composition of indebtedness or bankruptcy, receivership or a similar proceeding or consent to the appointment of a receiver, liquidator, custodian or trustee, in each case, with respect to Cadence and its subsidiaries, or any other liquidation or dissolution of Cadence or its subsidiaries; or

 

•

fail to use commercially reasonable efforts to take any action that is required by any agreement with the Federal Reserve Board or any other regulatory authority having jurisdiction over Cadence and its subsidiaries.

We refer you to the merger agreement, which is attached as Appendix A to this proxy statement for additional restrictions on the conduct of the business of Cadence pending the merger.

No Solicitation

In addition to the restrictions on Cadence outlined above, so long as the merger agreement is in effect, Cadence and its subsidiaries have agreed not to directly take any of the following actions:

 

•

solicit, facilitate, initiate or encourage the making of any acquisition proposal; or

 

•

enter into any negotiations concerning, furnish any information relating to Cadence in connection with, or agree to any acquisition proposal.

 

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However, Cadence may furnish information or participate in negotiations or discussions after the board of directors of Cadence has determined, based on the advice of outside counsel, that the failure to furnish any information to or participate in such negotiations or discussions would or could reasonably be expected to result in a potential breach of any of the fiduciary obligations of Cadence’s board of directors. Cadence has agreed to notify CBC of any acquisition proposal received.

Cadence may terminate the merger agreement if it has received an acquisition proposal from a third party which it determines, in good faith and in the exercise of its fiduciary duties after consultation with its legal and financial advisors, to be superior to the terms of the merger agreement and the failure to terminate the merger agreement and accept such superior proposal would be inconsistent with the proper exercise of its fiduciary duties under applicable law. See the heading “The Merger—Termination.”

Conditions to Completion of the Merger

CBC’s obligation to consummate the merger is conditioned upon:

 

•

the representations and warranties made by Cadence regarding organization, capitalization, corporate approval and authority, absence of certain changes brokers and the fairness opinion must have been true in all respects and the remaining representations and warranties made by Cadence must be true and correct when made and as of the closing date, except where such failure would not reasonably be expected to have a material adverse effect on the condition of Cadence;

 

•

Cadence shall have performed or complied in all material respects with all covenants and conditions required by the merger agreement to be conformed and complied with by it;

 

•

there shall have been no change from the date of the merger agreement in the business or financial condition of Cadence which had or may have a “material adverse effect” on Cadence; and

 

•

the aggregate amount of loans charged off between the date of the merger agreement and the second business day prior to the closing must not exceed $100 million.

Cadence’s obligation to consummate the merger is conditioned upon:

 

•

the representations and warranties made by CBC in the merger agreement must have been true when made and shall be true as of the closing date except where such failure would not reasonably be expected to have a material adverse effect on the condition of CBC; and

 

•

CBC shall have performed and complied in all material respects with all covenants and conditions required by the merger agreement to be conformed or complied with by it.

Both parties’ obligations to consummate the merger are conditioned upon:

 

•

CBC and Cadence shall have received the final approval of the merger from all necessary governmental agencies and authorities;

 

•

approval of the merger agreement by holders of at least a majority of the shares of Cadence common stock present or represented and entitled to vote at the special meeting at which a quorum is present; and

 

•

no order injunction or decree shall prevent consummation of the merger and no statute order or injunction shall have been enacted that prohibits or makes illegal the consummation of the merger.

 

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Any condition to the consummation of the merger, except the required shareholder and regulatory approvals, and the absence of an order or ruling prohibiting the merger, may be waived in writing by the party to the merger agreement entitled to the benefit of such condition.

Covenants

In the merger agreement, Cadence undertook various covenants relating to Cadence’s conduct of business pending completion of the merger. For a description of such covenants, see “The Merger—Conduct of Business Pending Effective Time.” In addition to such covenants:

 

•

Cadence agreed to file this proxy statement within 20 days from the date of the merger agreement, mail this proxy statement within 7 days after it is cleared by the SEC, and, as soon as practicable after the proxy statement is cleared by the SEC, call and hold a special meeting of shareholders but within 35 days after such proxy statement is mailed;

 

•

Cadence agreed to use its best efforts to obtain the necessary approvals by its shareholders of the merger agreement and the transactions contemplated thereby;

 

•

Cadence agreed, under certain circumstances, to give CBC access to all of its personnel, properties, representatives, books and records and to provide additional financial and operating data and other information about its business and properties;

 

•

Cadence agreed, to the extent permitted by law, to provide CBC all information concerning Cadence required for inclusion in any application, filing, statement or document to be made or filed in connection with the merger and the other transactions contemplated by the merger agreement;

 

•

Cadence agreed to use its reasonable best efforts to take all actions necessary to consummate the merger, including in connection with filing applications and registration statements with, or obtaining approvals from, governmental entities and to obtain shareholder approval;

 

•

Cadence agreed to execute and deliver such instruments and take such actions as CBC may reasonably require to cause the amendment or termination of any of Cadence’s employee benefit plans;

 

•

Cadence agreed to notify the trustee of the subsidiary trust formed to issue trust preferred securities of the execution of the merger agreement; and

 

•

Cadence agreed to call a special meeting of its shareholders following the clearance by the SEC of this proxy statement for the purpose of approving the merger agreement.

In the merger agreement, CBC also undertook various covenants. Those covenants include:

 

•

CBC agreed to use its reasonable best efforts to consummate the merger agreement and preserve its business organization, commitments from investors and assets;

 

•

CBC agreed to confer with Cadence regarding the status of matters relating to the completion of the matters contemplated by the merger agreement and, to the extent permitted by law, to notify Cadence of any governmental complaints which would adversely affect the ability of the parties to consummate the merger;

 

•

CBC agreed to be reasonably responsive to requests by Cadence for access to such information and personnel regarding CBC as may be reasonably necessary for Cadence to confirm that the representations and warranties of CBC are true and correct and that the covenants of CBC have been performed in all material respects;

 

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•

Employees of Cadence who continue their employment after the closing of the merger will be entitled to participate in existing employee benefit plans of Cadence for 12 months following the closing and will be entitled to credit for prior service with Cadence under such plans;

 

•

CBC agreed to reinstate the Cadence matching contribution for its 401(K) plan within 12 months of the closing;

 

•

Any Cadence employee terminated prior to or at the consummation of the merger will be provided COBRA coverage from Cadence, CBC will be responsible for administering such obligations after the closing date;

 

•

CBC will assume the obligations under any employment agreement in connection with the merger and will pay any severance or change of control payment thereunder unless such payment is restricted or prohibited by any bank regulatory condition applicable to Cadence, in which case CBC will enter into a new employment agreement with such persons providing for payments equal to the amount of the severance or change of control payment;

 

•

CBC agreed to file all necessary regulatory documents, notices and applications not later than the 30th day after the execution of the merger agreement;

 

•

CBC agreed that the rights to indemnification of current and former officers and directors of Cadence under Cadence’s articles of incorporation, bylaws or indemnification contracts or undertakings will be observed for a period of six years from the effective time of the merger. In addition, CBC will maintain Cadence’s existing director’s and officer’s liability insurance for a period of six years or purchase a tail policy providing coverage no less favorable than Cadence’s exiting policy;

 

•

CBC agreed that it an its affiliates will vote all shares of Cadence common stock held by them in favor of the adoption of the merger agreement;

 

•

Cadence agreed to lift contractual restrictions on the ability of CBC to purchase shares of Cadence common stock; and

 

•

CBC agreed to establish an Advisory Board of Directors for Cadence Bank and invite each of the current members of the Cadence Board of Directors to serve on such Advisory Board.

Representations and Warranties of Cadence and CBC

In the merger agreement, Cadence has made representations and warranties to CBC, and CBC has made representations and warranties to Cadence. The more significant of these made by both parties relate to (among other things):

 

•

corporate organization and existence;

 

•

capitalization;

 

•

authority and power to execute the merger agreement and to complete the transactions contemplated by the merger agreement;

 

•

the absence of conflicts between the execution of the merger agreement and completion of the transactions contemplated by the merger agreement and certain other agreements; and

 

•

brokers or finders fees.

 

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Cadence also has made additional representations and warranties to CBC with respect to (among other things):

 

•

its compliance with its Securities and Exchange Commission reporting obligations and the accuracy of such reports;

 

•

the accuracy of their respective financial statements and absence of undisclosed liabilities;

 

•

compliance with environmental laws;

 

•

pending or threatened litigation and other proceedings;

 

•

compliance with applicable laws and regulatory filings;

 

•

employee benefit plans;

 

•

the payment of taxes and filing of tax returns;

 

•

compliance with the Community Reinvestment Act;

 

•

the absence of certain changes and events;

 

•

insurance coverage;

 

•

its investments;

 

•

its real property and leases;

 

•

its personal property;

 

•

its loan portfolio and allowance for loan losses;

 

•

the existence of certain loan agreements and related matters;

 

•

the existence of certain contracts and commitments;

 

•

the absence of derivative contracts;

 

•

its deposit accounts;

 

•

its intellectual property rights;

 

•

its compliance with the Bank Secrecy Act and the USA PATRIOT Act;

 

•

employment relations;

 

•

its receipt of a fairness opinion;

 

•

the accuracy of information to be supplied for inclusion in state and federal reports and filings;

 

•

its outstanding trust preferred securities;

 

•

agreements with regulatory agencies;

 

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•

the applicability of anti-takeover provisions; and

 

•

transactions with affiliates.

CBC also has made additional representations and warranties to Cadence with respect to (among other things):

 

•

the availability of financing to pay the merger consideration;

 

•

accuracy of information supplied for inclusion in this proxy statement;

 

•

its preliminary approval of a bank charter;

 

•

its capital commitments; and

 

•

its business plan.

Modifications or Waiver

No termination, cancellation, modification, amendment, deletion, addition or other change in the merger agreement, or any provision thereof, or waiver of any right or remedy therein provided, will be effective for any purpose unless specifically set forth in a writing signed by the party or parties to be bound thereby. The waiver of any right or remedy in respect to any occurrence or event on one occasion shall not be deemed a waiver of such right or remedy in respect to such occurrence or event on any other occasion.

Payment of Trustmark Termination Fee

Upon execution of the merger agreement with Trustmark, CBC advanced to Cadence $2.0 million to be used by Cadence to pay the termination fee due upon termination of the Trustmark merger agreement. If the merger agreement is terminated by CBC for any reason or by Cadence due to receipt of a superior acquisition proposal, failure to obtain shareholder approval or mutual written consent with CBC to terminate the agreement, then Cadence must reimburse CBC for the $2.0 million advance. Cadence is not required to reimburse CBC for the advanced $2.0 million, if the merger agreement is terminated by Cadence for any reason other than for receipt of a superior acquisition proposal, failure to obtain shareholder approval or mutual written consent with CBC to terminate the agreement and Cadence is not in material breach of any of its representations, warranties and covenants.

Termination of the Merger Agreement

The merger agreement may be terminated and the merger abandoned at any time upon the mutual consents of CBC and Cadence.

The merger agreement may be terminated and the merger abandoned at any time prior to the effective date by either CBC or Cadence if:

 

•

any court of competent jurisdiction in the United States or other United States governmental body issues an order, decree or ruling or takes any other action restraining, enjoining or otherwise prohibiting the merger and such order, decree, ruling or other action is final and non-appealable;

 

•

any of the transactions contemplated by the merger agreement are disapproved by any regulatory authority or other person whose approval is required to consummate any of such transactions;

 

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•

the merger has not been completed on or before March 30, 2011 and the party exercising its termination right did not fail to perform a material obligation under the merger agreement which has been the cause of or resulted in the failure to complete the merger by that deadline;

 

•

the approval of the merger agreement by the shareholders of Cadence is not obtained;

 

•

the other party fails to comply in any material respect with any covenant or agreement contained in the merger agreement or breaches any of the representations or warranties and such breach would, individually or in the aggregate, cause the conditions for the merger not to be satisfied, and such breach has not been cured by the earlier of 15 days after the terminating party gives written notice of such breach to the breaching party or March 30, 2011.

Cadence may terminate the merger agreement if:

 

•

it has received an acquisition proposal from a third party and the Cadence board of directors determines, in good faith and in the exercise of its fiduciary duties after consultation with its legal and financial advisors, that such acquisition proposal is superior to the terms of the merger agreement and the failure to terminate the merger agreement and accept such superior proposal would be inconsistent with the proper exercise of its fiduciary duties.

CBC may terminate the merger agreement if Cadence’s board of directors resolves to:

 

•

withdraw or modify, in any manner that is adverse to CBC, its recommendation or approval of the merger agreement or recommends to Cadence shareholders acceptance or approval of any alternative acquisition proposal or has resolved to do so.

In the event of the termination of the merger agreement without breach by any party, the merger agreement will be void and have no effect, without liability on the part of any party or the directors, officers or shareholders of any party, except as specifically contemplated in the merger agreement or as set forth below.

If the merger agreement is terminated by Cadence in connection with the receipt of an alternative acquisition proposal or by CBC upon the withdrawal or modification of Cadence’s recommendation or approval of the merger agreement or recommendation of the approval of an alternative acquisition proposal, Cadence must reimburse CBC for up to $1.0 million for expenses incurred in connection with the merger agreement and pay CBC a termination fee calculated as follows:

 

•

$2.5 million if the merger agreement is terminated on or before the date that is 10 days from the date of execution of the merger agreement;

 

•

$3.5 million if the merger agreement is terminated after 10 days from the date of the execution of the merger agreement and on or before the date that is 30 days from the date of execution of the merger agreement; and

 

•

$4.5 million if the merger agreement is terminated after that date that is 30 days from the date of execution of the merger agreement.

In addition, if the merger agreement was terminated by either party because shareholder approval was not received and prior to such time a third party proposed or publicly announced an acquisition proposal, then Cadence shall pay CBC the expense reimbursement, and if an acquisition proposal (i) is signed within 12 months of such termination and later consummated or (ii) consummated within 12 months of such termination, then in each case Cadence shall on consummation of the acquisition proposal also pay CBC the termination fee (in addition to the expense reimbursement).

 

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DISSENTERS’ RIGHTS OF APPRAISAL

As a shareholder of Cadence, you do not have any dissenter’s or appraisal rights under Mississippi law in connection with the merger or the other matters described in this proxy statement. Section 79-4-13.02 of the Mississippi Code of 1972, as amended, provides that no dissenters’ rights are available to shareholders who hold shares that are traded on a national exchange.

 

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IMPORTANT INFORMATION ABOUT CADENCE FINANCIAL CORPORATION

Description of Business

For a description of our business, see Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2009 (the “Form 10-K”), which is attached as Appendix C to this proxy statement. The Form 10-K that is attached to this proxy statement does not include the exhibits originally filed with such report.

Description of Property

For a description of our properties, see Item 2 of the Form 10-K, which is attached as Appendix C to this proxy statement.

Legal Proceedings

For a description of our legal proceedings, see Item 3 of the Form 10-K, which is attached as Appendix C to this proxy statement.

Financial Statements and Supplementary Data

For our audited financial statements as of December 31, 2009 and 2008, and for the years ended December 31, 2009, 2008, and 2007, and the notes thereto, see Item 8 of the Form 10-K, which is attached as Appendix C to this proxy statement. For our unaudited financial statements as of June 30, 2009, and for the six month periods ended June 30, 2010 and 2009, and the notes thereto, see Item 1 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (the “Form 10-Q”), which is attached as Appendix D to this proxy statement.

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

For our management’s discussion and analysis of financial condition and results of operation, see Items 7 and 2 of the Form 10-K and Form 10-Q, respectively, which are attached as Appendix C and D, respectively, to this proxy statement.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None.

Selected Historical Financial Data of Cadence

The following table provides summary selected historical consolidated financial data for Cadence for the periods and as of the dates indicated. Except for the data under “Selected Financial Ratios,” “Selected Performance Ratios,” “Asset Quality Ratios” and “Capital Ratios,” the summary historical consolidated financial data for the years ended December 31, 2009, December 31, 2008 and December 31, 2007 are derived from Cadence’s audited consolidated financial statements which are included in our Form 10-K attached as Appendix C to this proxy statement. The summary historical consolidated financial data for the years ended December 31, 2006 and December 31, 2005, and the selected financial data as of December 31, 2007, December 31, 2006 and December 31, 2005, are derived from audited consolidated financial statements not included with this proxy statement.

 

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The summary historical consolidated financial data as of and for the six months ended June 30, 2010 and June 30, 2009 are derived from Cadence’s unaudited interim consolidated financial statements, which are included in our Form 10-Q attached as Appendix D to this proxy statement. Cadence has prepared its unaudited consolidated financial statements on the same basis as our audited financial statements and have included all adjustments, consisting of normal and recurring adjustments that Cadence considers necessary for a fair presentation of its financial position and operating results for the unaudited periods. The financial information presented in the table below is not necessarily indicative of Cadence’s financial condition, results of operations or cash flows of any other period.

 

		As of and for the Six Months Ended June 30,								As of and for the Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(unaudited)
		(Dollars in thousands, except ratios and per share data)
Summary of Operations:
Total interest income		$	34,569			$	42,076			$	80,479			$	102,723			$	121,952			$	96,834			$	73,092
Total interest expense			14,326				19,106				35,047				47,330				64,845				46,512				27,970
Net interest income			20,243				22,970				45,432				55,393				57,107				50,322				45,122
Provision for loan losses			4,822				55,756				79,328				28,599				8,130				1,656				2,128
Net interest (loss) income after provision for loan losses			15,421				(32,786	)			(33,896	)			26,794				48,977				48,666				42,994
Securities gains (losses), net			833				139				3,173				385				(17	)			66				159
Total other income			8,260				8,627				20,703				17,962				12,485				15,561				15,380
Noninterest expense			28,544				95,475				126,928				53,841				49,721				45,820				40,970
(Loss) income before income tax			(4,863	)			(119,634	)			(140,121	)			(9,085	)			11,741				18,407				17,404
Income tax (benefit) expense			(2,020	)			(21,578	)			(30,130	)			(5,303	)			2,458				4,719				4,176
Net (loss) income from continuing operations			(2,843	)			(98,056	)			(109,991	)			(3,782	)			9,283				13,688				13,228
Per Share Data:
Net (loss) income from continuing operations—basic		$	(0.24	)		$	(8.23	)		$	(9.23	)		$	(0.32	)		$	0.78			$	1.33			$	1.62
Net (loss) income from continuing operations—diluted			(0.24	)			(8.23	)			(9.23	)			(0.32	)			0.78				1.33				1.62
Net (loss) income per share applicable to common shareholders—basic			(0.35	)			(8.32	)			(9.42	)			(0.28	)			0.82				1.37				1.68
Net (loss) income per share applicable to common shareholders—diluted			(0.35	)			(8.32	)			(9.42	)			(0.28	)			0.82				1.37				1.68
Dividends			—				0.05				0.05				0.60				1.00				1.00				0.98
Book value per common share			6.46				7.35				6.52				15.57				16.33				16.09				12.17
Tangible book value per common share			6.37				7.21				6.40				9.80				10.47				10.09				8.04

 

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		As of and for the Six Months Ended June 30,								As of and for the Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(unaudited)
		(Dollars in thousands, except for ratios)
Financial Condition Data:
Total assets(1)		$	1,886,445			$	1,980,172			$	1,844,455			$	1,979,269			$	1,984,155			$	1,899,948			$	1,446,117
Net loans			962,847				1,197,505				1,048,055				1,307,599				1,322,921				1,210,710				851,332
Total deposits			1,546,435				1,545,268				1,499,810				1,461,159				1,425,566				1,460,523				1,121,684
Long-term obligations(2)			75,928				192,844				115,928				181,431				94,284				110,832				126,779
Total shareholders’ equity			119,279				129,493				119,754				185,565				194,370				191,265				116,984
Tangible shareholders’ equity			118,1390				127,826				118,370				116,716				124,632				119,923				77,330
Selected Financial Ratios:
Net interest margin(3)			2.35				2.42	%			2.49	%			3.07	%			3.28	%			3.46	%			3.55	%
Selected Performance Ratios:
Return on average assets			N/A	(4)			N/A	(4)%			N/A	(4)%			N/A	(4)%			0.50	%			0.90	%			1.00	%
Return on average equity			N/A	(4)			N/A	(4)			N/A	(4)			N/A	(4)			5.10				9.00				11.80
Return on average tangible equity			N/A	(4)			N/A	(4)			N/A	(4)			N/A	(4)			8.01				13.30				18.00
Dividend payout ratio			—				—				—				—				122.00				73.00				58.30
Average equity to average asset ratio			6.37				7.64				7.27				9.60				9.90				9.60				8.20
Efficiency ratio(5)			100.14				302.16				191.92				73.40				71.45				69.55				67.72
Asset Quality Ratios(6):
Ratio of nonperforming assets to total assets			5.55	%			4.52	%			5.66	%			2.54	%			1.00	%			0.38	%			0.53	%
Ratio of nonperforming loans to total loans			6.94				5.85				6.43				2.38				0.68				0.22				0.30
Ratio of allowance for loan losses to nonperforming loans			51.38				64.22				61.87				65.51				163.36				447.88				356.24
Ratio of allowance for loan losses to total loans			3.56				3.76				3.98				1.56				1.12				1.00				1.08
Capital Ratios(7)(8):
Tier 1 leverage ratio			5.70	%			6.77	%			6.33	%			7.70	%			8.00	%			9.20	%			8.70	%
Tier 1 risk-based capital			10.02				10.45				9.64				10.10				10.20				11.70				12.50
Total risk-based capital			11.30				11.72				10.92				11.40				11.20				12.50				13.40

 

(1)	Cadence recognized a $66.5 million impairment loss on goodwill for the first quarter of 2009, eliminating all goodwill from our balance sheet.

 

(2)

Long-term obligations are defined as those obligations with maturities in excess of one year. Cadence’s long-term obligations consist of certain term repurchase agreements (included in the “Federal funds purchased and securities sold under agreements to repurchase” on Cadence’s consolidated balance sheets), subordinated debentures, and certain FHLB borrowings (included in the “Other borrowed funds” on Cadence’s consolidated balance sheets).

 

(3)	Net interest margin is net interest income divided by average earning assets.

 

(4)	These percentages are negative and therefore not meaningful.

 

(5)	Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income (excluding taxes and the provision for loan losses).

 

(6)	Nonperforming loans include loans 90 or more days past due, nonaccrual loans and restructured loans.

 

(7)	Tier 1 leverage ratio is defined as Tier 1 capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets.

 

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(8)	The following are the capital ratios of Cadence Bank:

 

		As of and for the Six Months Ended June 30,								As of and for the Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
Tier 1 leverage ratio(7)(8)			5.40	%			5.86	%			5.97	%			7.04	%			7.37	%			8.07	%			8.28	%
Tier 1 risk-based capital			9.39				9.00				8.91				9.30				9.34				10.15				11.91
Total risk-based capital			10.67				10.14				10.19				10.42				10.22				10.94				12.73

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial data included in Cadence’s summary consolidated financial data are not measures of financial performance recognized by generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures are “tangible book value per share,” “tangible shareholders’ equity,” and “return on average tangible equity.” Cadence’s management uses these non-GAAP measures in its analysis of Cadence’s performance.

 

•

“Tangible book value per share” is defined as total equity reduced by recorded goodwill and other intangible assets divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of a company. For companies such as ours that have engaged in business combinations, purchase accounting can result in the recording of significant amounts of goodwill related to those transactions.

 

•

“Tangible shareholders’ equity” is shareholders’ equity less goodwill and other intangible assets.

 

•

“Return on average tangible equity” is defined as annualized net income for the period divided by average equity reduced by average goodwill and other intangible assets.

Cadence uses these non-GAAP financial measures because it believes they are useful for evaluating its financial condition, operations and performance over periods of time, as well as managing and evaluating our business and in discussions about our operations and performance. Cadence also believes these non-GAAP financial measures provide users of its financial information with a meaningful measure for assessing its financial condition, financial results and credit trends, as well as comparison to financial results for prior periods.

You should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP performance measures that other companies use. The following reconciliation table provides a more detailed analysis of these non-GAAP performance measures:

 

		As of June 30,								As of December 31,
		2010				2009				2009				2008				2007				2006				2005
Book value per common share		$	6.46			$	7.35			$	6.52			$	15.57			$	16.33			$	16.09			$	12.17
Effect of intangible assets per share			(.10	)			(.14	)			(0.12	)			(5.77	)			(5.86	)			(6.00	)			(4.13	)
Tangible book value per share			6.37				7.21				6.40				9.80				10.47				10.09				8.04
Return on average equity			N/A	(1)%			N/A	(1)%			N/A	(1)%			N/A	(1)%			5.1	%			9.0	%			11.8	%
Effect of intangible assets			N/A	(1)			N/A	(1)			N/A	(1)			N/A	(1)			3.0				4.3				6.2
Return on average tangible equity			N/A	(1)			N/A	(1)			N/A	(1)			N/A	(1)			8.1				13.3				18.0

 

(1)	These percentages are negative and therefore not meaningful

 

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Book Value Per Share

Our book value per share as of December 31, 2009 was $6.52.

Quantitative And Qualitative Disclosures About Market Risk

For our quantitative and qualitative disclosures about market risk, see Items 8 and 3 of the Form 10-K and Form 10-Q, respectively, which are attached as Appendix C and D, respectively, to this proxy statement.

 

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MARKET DATA AND DIVIDEND DATA

Cadence common stock is traded on the NASDAQ Global Select Market under the ticker symbol of “CADE.” The following table sets forth for the high and low sale prices for our common stock as reported by the NASDAQ Global Select Market:

 

Quarter Ended		High				Low				Cash Dividend
September 30, 2010		$	2.10			$	1.08			$	—
June 30, 2010			4.80				1.01				—
March 31, 2010			1.99				1.44				—
December 31, 2009			2.15				1.29				—
September 30, 2009			2.53				1.48				—
June 30, 2009			5.29				1.94				—
March 31, 2009			5.56				3.05				0.05
December 31, 2008			10.39				4.10				0.05
September 30, 2008			11.63				8.27				0.05
June 30, 2008			16.87				10.50				0.25
March 31, 2008			16.99				13.88				0.25

The closing sale price of our common stock on the NASDAQ Global Select Market on October 5, 2010, the last trading day prior to the announcement of the merger, was $2.08. On October 15, 2010, the most recent practicable date before this proxy statement was printed, the closing price for our common stock on the NASDAQ Global Select Market was $2.45 per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares. Following the merger, there will be no market for our common stock.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below shows, as of September 30, 2010, the number of shares of Cadence common stock beneficially owned by each person or entity known by Cadence to be the beneficial owner of more than 5% of the outstanding shares of common stock, each director, all executive officers named in our summary compensation table, and all directors and executive officers as a group. Unless otherwise noted, (i) the address for the named person is c/o Cadence Financial Corporation, 301 East Main Street, Starkville, Mississippi 39760 and (ii) the named persons have sole voting and investment power with respect to the shares indicated.

 

Name		Number of Shares Beneficially Owned(1)				Options Exercisable Within 60 Days(2)				Percentage Ownership(3)
Mark A. Abernathy(4)			33,395				39,999				*
David C. Byars(5)			30,295								*
Robert S. Caldwell, Jr.			57,000								*
Robert L. Calvert, Jr.(6)			181,414								1.5	%
Robert A. Cunningham(7)			117,229								*
J. Nutie Dowdle			249,437								2.1	%
James C. Galloway, Jr.			107,654								*
Clifton S. Hunt(8)			45,300				11,154				*
Lewis F. Mallory, Jr.(9)			176,526				99,999				1.9	%
Allen B. Puckett, III(10)			187,500								1.6	%
H. Stokes Smith(11)			40,185								*
Sammy J. Smith			9,968								*
Richard T. Haston(12)			16,744				26,001				*
John R. Davis(13)			8,190				14,001				*
Directors and Executive Officers as a Group (14 persons)			1,260,837				191,154				12.2	%

 

*	Less than one percent

 

(1)	Includes shares as to which such person, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares voting power and/or investment power as these terms are defined in Rule 13d-3(a) under the Securities Exchange Act of 1934, as amended.

 

(2)	Options to acquire Cadence common stock were granted in 2001, 2002 and 2004. All options shown in this column are vested and exercisable within 60 days.

 

(3)	Based upon 11,909,127 shares of common stock outstanding, and includes, where applicable, the shares that may be acquired upon the exercise of stock options.

 

(4)

Includes 783 shares held by Cadence’s employee stock ownership plan with respect to which Mr. Abernathy has voting power and 12,876 shares held by Cadence’s Salary Reduction Thrift Plan with respect to which Mr. Abernathy has investment authority. Also includes 4,725 shares held in trust for the benefit of his wife, as to which he disclaims beneficial ownership.

 

(5)

Includes 3,582 shares owned by Mr. Byars’ wife, 11,133 shares held through a 401(k) plan, 966 shares held in a business investment account, 778 shares held by a family exempt trust, 1,333 shares held by a marital income trust, 600 shares held in trust for the children of a friend, and 700 shares held for the benefit of his wife, over all of which Mr. Byars exercised investment and voting control. Also includes 5,337 shares held in trust for his mother, over which Mr. Byars serves as trustee and exercises investment and voting control.

 

(6)	Includes 52,712 shares held by two companies over which Mr. Calvert has sole investment and voting control and 1,561 shares owned by Mr. Calvert’s wife, as to which he disclaims beneficial ownership.

 

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(7)	Includes 18,577 shares held in a trust with respect to which Mr. Cunningham has shared voting and investment power and 72,730 shares owned by a partnership, as to which Mr. Cunningham has sole voting and investment power.

 

(8)	Includes 17,000 shares owned by a company as to which Mr. Hunt has sole voting and investment power. Also includes 6,100 shares held in an IRA for Mr. Hunt’s wife, as to which he disclaims beneficial ownership.

 

(9)	Includes 70,221 shares held by Cadence’s employee stock ownership plan with respect to which Mr. Mallory has voting power and 3,116 shares held by Cadence’s Salary Reduction Thrift Plan with respect to which Mr. Mallory has investment authority.

 

(10)	Includes 16,000 shares owned by a corporation, over which Mr. Puckett has sole voting and investment authority. Also includes 6,000 shares owned by Mr. Puckett’s wife, as to which he disclaims beneficial ownership.

 

(11)	Includes 12,490 shares owned by Mr. Smith’s wife, as to which he disclaims beneficial ownership.

 

(12)

Includes 265 shares held by Cadence’s employee stock ownership plan with respect to which Mr. Haston has voting power and 7,835 shares held by Cadence’s Salary Reduction Thrift Plan with respect to which Mr. Haston has investment authority. Also includes 367 shares held in an IRA for Mr. Haston’s wife, as to which he disclaims beneficial ownership.

 

(13)

Includes 2,369 shares held by Cadence’s employee stock ownership plan with respect to which Mr. Davis has voting power and 4,023 shares held by Cadence’s Salary Reduction Thrift Plan with respect to which Mr. Davis has investment authority. Also includes 133 shares held in an IRA for Mr. Davis’s wife and 666 shares held in his wife’s name, to both of which he disclaims beneficial ownership.

 

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ADJOURNMENT OF THE SPECIAL MEETING

In the event that we do not have sufficient votes for a quorum or to approve the matters to be considered by our shareholders at the special meeting of shareholders, Cadence intends to adjourn the meeting to permit further solicitation of proxies. We can only use proxies we receives at the time of its meeting to vote for adjournment, if necessary, by submitting the question of adjournment to its shareholders as a separate matter for consideration.

The board of directors of Cadence recommend that the shareholders vote “FOR” the proposal to adjourn the meeting to a later date or dates to permit further solicitation of proxies in the event that there are not sufficient votes at the time of the meeting to approve the matters to be considered by the shareholders at the meeting.

If shareholders properly execute their proxy, Cadence will consider that those shareholders voted in favor of the adjournment proposal unless their proxy indicates otherwise. If Cadence adjourns its special meeting, we will not give notice of the time and place of the adjourned meeting other than by an announcement of such time and place at the meeting.

Approval of the adjournment of the meeting requires the affirmative vote of a majority of the shares present at the meeting, in person or by proxy, whether or not a quorum is present.

 

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OTHER BUSINESS

As of the date of this proxy statement, our board of directors is not aware of any business to come before the special meeting other than those matters described in this proxy statement. However, if any other matters should properly come before the special meeting or an adjournment or postponement thereof, shares represented by proxies will be voted in accordance with the judgment of the persons voting the proxies.

FUTURE SHAREHOLDER PROPOSALS

If the merger is completed, we will have no public shareholders and no public participation in any of our future shareholder meetings. We intend to hold an annual meeting of shareholders in 2011 only if the merger is not completed (the “2011 Annual Meeting”). Proposals of shareholders intended to be presented at the 2011 annual meeting of shareholders must be received by Lewis F. Mallory, Jr., our Chairman of the Board and Chief Executive Officer, at 301 East Main Street, Starkville, Mississippi 39759, no later than Friday, December 10, 2010, in order for such proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 2011 annual meeting. Nominees to be proposed for election as directors must be delivered in accordance with our bylaws and received by the Corporate Secretary, at 301 East Main Street, Starkville, Mississippi 39759, no later than Monday, January 10, 2011, in order for such nominations to be considered duly nominated. Nominations received after business reopens on Tuesday, January 11, 2011 will be untimely.

HOUSEHOLDING OF SPECIAL MEETING MATERIALS

Shareholders who share a single address will receive only one proxy statement at that address unless Cadence has received instructions to the contrary from any shareholder at that address. This practice, known as “householding,” is designed to reduce Cadence’s printing and postage costs. However, if a shareholder of record residing at such an address wishes to receive a separate copy of this proxy statement or of future proxy statements (if applicable), he or she may contact Cadence Financial Corporation, 301 East Main Street, Starkville, Mississippi 39759, Attention: Corporate Secretary. Cadence will deliver separate copies of this proxy statement promptly upon written or oral request. If you are a shareholder of record receiving multiple copies of this proxy statement, you can request householding by contacting Cadence in the same manner. If you own your shares of Cadence common stock through a bank, broker or other shareholder of record, you can request additional copies of this proxy statement or request householding by contacting the shareholder of record.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Exchange Act. We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference room located 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 SEC filings are also available to the public at the SEC’s website at www.sec.gov. You also may obtain free copies of the documents we file with the SEC by going to the “SEC Filings” section of our website at www.cadencebanking.com. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference.

Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements and any of the documents incorporated by reference in this document or other information concerning us, without charge, by written or telephonic request directed to Cadence Financial Corporation, 301 East Main Street, Starkville, Mississippi 39759, Attention: Corporate Secretary, on our website at www.cadencebanking.com or from the SEC through the SEC’s website at http://www.sec.gov.

 

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CBC has supplied all information pertaining to CBC and Merger Sub, and we have supplied all information pertaining to us.

THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT.

THIS PROXY STATEMENT IS DATED [—], 2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

 

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Appendix A

AGREEMENT AND PLAN OF MERGER

by and between

COMMUNITY BANCORP LLC

and

CADENCE FINANCIAL CORPORATION

Dated as of October 6, 2010

 

 

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TABLE OF CONTENTS

 

I.		THE MERGERS				5
		Section 1.1.		Mergers		5
		Section 1.2.		Articles of Incorporation, Bylaws and Facilities of Continuing Corporation		5
		Section 1.3.		Effect of Merger		6
		Section 1.4.		Liabilities of Continuing Corporation		6
		Section 1.5.		Effect on Cadence Stock; Merger Consideration		6
		Section 1.6.		Cadence Options and Cadence Restricted Shares		7
		Section 1.7.		Surrender and Payment		7
		Section 1.8.		Calculations and Adjustments		9
		Section 1.9.		Lost or Destroyed Certificates		9
		Section 1.10.		Ratification by Shareholders		9
		Section 1.11.		Withholding Rights		9
II.		REPRESENTATIONS AND WARRANTIES OF CADENCE				10
		Section 2.1.		Organization		10
		Section 2.2.		Capitalization		10
		Section 2.3.		Corporate Approval and Authority		11
		Section 2.4.		Investments		11
		Section 2.5.		SEC Documents; Other Reports; Internal Controls		11
		Section 2.6.		Financial Statements; Undisclosed Liabilities		12
		Section 2.7.		Allowance for Loan Losses		13
		Section 2.8.		Certain Loans and Related Matters		13
		Section 2.9.		Allowance for Loan Losses		14
		Section 2.10.		Environmental Laws		14
		Section 2.11.		Title to Property		14
		Section 2.12.		Litigation and Other Proceedings		15
		Section 2.13.		Taxes		15
		Section 2.14.		Contracts and Commitments		16
		Section 2.15.		Insurance		17
		Section 2.16.		No Conflict With Other Instruments		17
		Section 2.17.		Compliance with Laws and Regulatory Filings		17
		Section 2.18.		Absence of Certain Changes		17
		Section 2.19.		Employment Relations		17
		Section 2.20.		Employee Benefit Plans		18
		Section 2.21.		Brokers, Finders and Financial Advisors		19
		Section 2.22.		Trust Preferred Securities		19
		Section 2.23.		Derivative Contracts		20
		Section 2.24.		Deposits		20
		Section 2.25.		Community Reinvestment Act		20
		Section 2.26.		Intellectual Property Rights		20
		Section 2.27.		Bank Secrecy Act; USA PATRIOT Act		20
		Section 2.28.		Fairness Opinion		21
		Section 2.29.		Transactions with Affiliates		21
		Section 2.30.		Disclosure Documents		21
		Section 2.31.		Agreements with Regulatory Agencies		21
		Section 2.32.		Anti-takeover Provisions Not Applicable		21
III.		REPRESENTATIONS AND WARRANTIES OF CBC				21
		Section 3.1.		Organization		21
		Section 3.2.		Capitalization		22

 

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		Section 3.3.		Corporate Approval and Authority		22
		Section 3.4.		No Conflict With Other Instruments		22
		Section 3.5.		Brokers, Finders and Financial Advisors		22
		Section 3.6.		Financing		22
		Section 3.7.		Disclosure Documents		22
		Section 3.8.		Bank Charter		23
		Section 3.9.		Capital Commitments		23
		Section 3.10.		Business Plan		23
IV.		COVENANTS OF CADENCE				23
		Section 4.1.		Approvals; Regulatory Filings; Restructuring Efforts		23
		Section 4.2.		Activities of Cadence Pending Closing		24
		Section 4.3.		Access to Properties and Records		26
		Section 4.4.		Information for Regulatory Applications		26
		Section 4.5.		Standstill Provision		27
		Section 4.6.		Trust Preferred Issue		27
		Section 4.7.		Employee Benefit Plans		27
		Section 4.8.		Cadence Stockholder Meeting		27
V.		COVENANTS OF CBC				28
		Section 5.1.		Activities of CBC Pending Closing		28
		Section 5.2.		Regulatory Filings; Efforts		28
		Section 5.3.		Employee Benefit Plans		28
		Section 5.4.		Regulatory Approvals		30
		Section 5.5.		Indemnification and Insurance		30
		Section 5.6.		Voting of Shares		30
VI.		MUTUAL COVENANTS OF CBC AND CADENCE				31
		Section 6.1.		Notification		31
		Section 6.2.		Publicity		31
		Section 6.3.		Purchase of Cadence Common Stock		31
		Section 6.4.		Advisory Board		31
VII.		CLOSING				31
		Section 7.1.		Closing		31
		Section 7.2.		Effective Time		32
VIII.		TERMINATION				32
		Section 8.1.		Termination		32
		Section 8.2.		Effect of Termination		33
		Section 8.3.		Termination Fee		33
IX.		CONDITIONS TO OBLIGATIONS OF CBC				34
		Section 9.1.		Compliance with Representations and Covenants		34
		Section 9.2.		Absence of Material Adverse Effect		34
		Section 9.3.		Absence of Credit Events		34
X.		CONDITIONS TO OBLIGATIONS OF CADENCE				35
		Section 10.1		Compliance with Representations and Covenants		35
XI.		CONDITIONS TO RESPECTIVE OBLIGATIONS OF CBC				35
		Section 11.1		Government Approvals		35

 

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		Section 11.2.		Shareholder Approval		35
XII.		MISCELLANEOUS				35
		Section 12.1.		Definitions		35
		Section 12.2.		Non-Survival of Representations and Warranties		37
		Section 12.3.		Amendments		37
		Section 12.4.		Expenses		37
		Section 12.5.		Notices		38
		Section 12.6.		Controlling Law		39
		Section 12.7.		Headings		39
		Section 12.8.		Modifications or Waiver		39
		Section 12.9.		Severability		39
		Section 12.10.		Assignment		39
		Section 12.11.		Consolidation of Agreements		39
		Section 12.12.		Counterparts		39
		Section 12.13.		Binding on Successors		39
		Section 12.14.		Gender		39
		Section 12.15.		Disclosures		39
		Section 12.16.		Interpretation		39

 

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AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (“Agreement”) dated as of October 6, 2010 is by and between Community Bancorp LLC, a Delaware limited liability company (“CBC”), Maroon Acquisition Corp., a Mississippi corporation (“Merger Sub”) and Cadence Financial Corporation, a Mississippi corporation (“Cadence”).

WHEREAS, Cadence entered into an Agreement and Plan of Reorganization with Trustmark Corporation dated as of September 21, 2010 (the “Trustmark Agreement”).

WHEREAS, immediately prior to the execution and delivery of this Agreement, Cadence terminated the Trustmark Agreement in accordance with its terms;

WHEREAS, Cadence desires to enter into a business combination transaction (“Merger Transaction”) with CBC and CBC desires to enter into the Merger Transaction in the manner provided in this Agreement; and

WHEREAS, the respective Boards of Directors of CBC and Cadence believe that the Merger Transaction in the manner provided by, and subject to the terms and conditions set forth in, this Agreement is desirable and in the best interests of their respective companies, shareholders and members; and

WHEREAS, the respective Boards of Directors of CBC and Cadence have approved the execution of this Agreement and the transactions proposed herein on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of such premises and the mutual representations, warranties, covenants and agreements contained herein, the parties agree as set forth below.

INTRODUCTION

This Agreement provides for the merger of Merger Sub with and into Cadence, with Cadence as the survivor (the “Merger”), all pursuant to the terms and conditions set forth in this Agreement. In connection with the Merger, all of the issued and outstanding shares of (i) common stock, $1.00 par value, of Cadence (“Cadence Common Stock”) and (ii) Series A Preferred Stock, $10.00 par value, of Cadence (“Cadence Preferred Stock”) (collectively, the Cadence Common Stock and the Cadence Preferred Stock are sometimes referred to herein as the “Cadence Stock”) will receive cash on the terms, and subject to the conditions, set forth in this Agreement.

I. THE MERGERS

Section 1.1. Mergers. Upon the terms and subject to the conditions set forth in this Agreement and the Articles of Merger in the form attached hereto as Exhibit A, at the Effective Time (as defined in Section 7.2 of this Agreement), Merger Sub shall be merged with and into Cadence (which, as the surviving corporation, is hereinafter referred to as “Continuing Corporation” whenever reference is made to it at or after the Effective Time) under the Articles of Incorporation of Cadence and pursuant to the provisions of, and with the effect provided in the Mississippi Business Corporation Act.

Section 1.2. Articles of Incorporation, Bylaws and Facilities of Continuing Corporation. At the Effective Time and until thereafter amended in accordance with applicable law, the Articles of Incorporation and Bylaws of Continuing Corporation shall be the Articles of Incorporation and Bylaws of Cadence as in effect at the Effective Time. The main office of Continuing Corporation shall be the main office of Cadence as of the Effective Time. The established offices and facilities of Cadence immediately prior to the Merger shall become

 

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established offices and facilities of Continuing Corporation. The Board of Directors of the Merger Sub shall be the Board of Directors of the Continuing Corporation at the Effective Time, each of whom shall serve until duly elected and qualified. The executive officers of the Continuing Corporation shall be the executive officers of Merger Sub at the Effective Time. Until thereafter changed in accordance with law or the Articles of Incorporation or Bylaws of Continuing Corporation, all corporate acts, plans, policies, contracts, approvals and authorizations of Cadence and Merger Sub and their respective shareholders, Boards of Directors, committees elected or appointed thereby, officers and agents, which were valid and effective immediately prior to the Effective Time, shall be taken for all purposes as the acts, plans, policies, contracts, approvals and authorizations of Continuing Corporation and shall be as effective and binding thereon as the same were with respect to Cadence and CBC, respectively, as of the Effective Time. The Continuing Corporation shall continue to be subject to the Consent order dated May 19, 2010.

Section 1.3. Effect of Merger. At the Effective Time, the corporate existence of Cadence and Merger Sub shall, as provided in the provisions of law heretofore mentioned, be consolidated and continued in Continuing Corporation, and Continuing Corporation shall be deemed to be a continuation in entity and identity of Cadence and Merger Sub. All rights, franchises and interests of Cadence and Merger Sub, respectively, in and to any type of property and choses in action shall be transferred to and vested in Continuing Corporation by virtue of the Merger without any deed or other transfer. Continuing Corporation, without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interest, including appointments, designations and nominations, and all other rights and interests as trustee, executor, administrator, transfer agent or registrar of stocks and bonds, guardian of estates, assignee, receiver and committee of estates of lunatics, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by Cadence and CBC, respectively, as of the Effective Time. At the Effective Time, the directors and executive officers of Merger Sub shall become the directors and executive officers of Continuing Corporation.

Section 1.4. Liabilities of Continuing Corporation. At the Effective Time of the Merger, Continuing Corporation shall be liable for all liabilities of Cadence and Merger Sub. All deposits, debts, liabilities, obligations and contracts of Cadence and of Merger Sub, respectively, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account, or records of Cadence or Merger Sub, as the case may be, shall be those of Continuing Corporation and shall not be released or impaired by the Merger. All rights of creditors and other obligees and all liens on property of either Cadence or Merger Sub shall be preserved unimpaired subsequent to the Merger.

Section 1.5. Effect on Cadence Stock; Merger Consideration.

(a) As a result of and as part of the Merger and subject to the adjustments and limitations provided for in this Agreement, shares of Cadence Common Stock issued and outstanding immediately prior to the Effective Time (other than any Cancelled Shares) shall, by virtue of the Merger and without any action on the part of CBC, Cadence, Merger Sub or the holder thereof, be converted into and represent the right to receive an amount in cash, without interest, equal to $2.50 per share (the “Per Share Common Stock Consideration”) (subject to any applicable withholding Tax).

(b) Each share of Cadence Preferred Stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of CBC, Cadence, Merger Sub or the holder thereof, be converted into and represent the right to receive the Per Share Preferred Stock Consideration (subject to any applicable withholding Tax). The Per Share Common Stock Consideration together with the Per Share Preferred Stock Consideration is sometimes referred to herein as the “Merger Consideration.” The aggregate amount paid for the Preferred Stock and warrant held by the U.S. Treasury shall not exceed approximately $38 million plus accrued dividends through the signing of the definitive purchase agreement with the U.S. Treasury with respect to such preferred stock and warrant and the Per Share Preferred Stock Consideration shall be such amount expressed on a per share of Preferred Stock basis.

 

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(c) All shares of Cadence Common Stock or Cadence Preferred Stock held in the treasury of Cadence or owned by CBC or any CBC Subsidiary (collectively, “Cancelled Shares”) shall, at the Effective Time, cease to exist, and the certificates for such shares shall be canceled as promptly as practicable thereafter, and no payment or distribution shall be made in consideration thereof, provided that any shares of Cadence Common Stock or Cadence Preferred Stock owned by a Subsidiary of Cadence shall not be cancelled at the Effective Time but shall be converted into a number of shares of the Continuing Corporation that represents the same proportional ownership of the Continuing Corporation as such Subsidiary held of Cadence immediately prior to the Effective Time.

Section 1.6. Cadence Options and Cadence Restricted Shares.

(a) Cadence shall take all actions necessary to accelerate vesting of all the outstanding options to purchase Cadence Common Stock (“Cadence Options”) held by employees or former employees of Cadence that are outstanding on the date of this Agreement (which Cadence Options are listed in Disclosure Schedule 2.2). Holders of vested Cadence Options who exercise them prior to the Effective Time in accordance with the terms of the applicable employee benefit plan and option agreement shall be entitled to payment of the Per Share Common Stock Consideration in accordance with this Article I. Any Cadence Options which have not been exercised as of the Effective Time shall be cancelled and converted into the right to receive $0.20 per share of Cadence Options and shall no longer be exercisable following the Effective Time, such consideration to be delivered upon execution of a release and termination of such Cadence Option of each holder to be delivered at the Effective Time.

(b) Each share of Cadence Common Stock granted to employees or former employees of Cadence subject to vesting or other lapse restrictions (“Cadence Restricted Shares”) that is outstanding on the date of this Agreement (which Cadence Restricted Shares are listed in Disclosure Schedule 2.2) shall vest and become free of such restrictions as of the Effective Time to the extent provided by the terms thereof and, at the Effective Time, such Cadence Restricted Shares shall be treated in the same manner as all other shares of Cadence Common Stock under this Agreement.

(c) As of the Effective Time, each phantom stock unit with respect to shares of Cadence Common Stock granted under the Executive Retirement Benefit Agreements that is outstanding immediately prior to the Effective Time (collectively, the “Cadence Phantom Units”) shall be converted into the right to receive, as such time as the plan or agreements governing such Cadence Phantom Units provide, a cash payment equal to Per Share Common Stock Consideration plus accumulated dividends as accrued immediately prior to the Effective Time of the Merger.

(d) Prior to the Effective Time, Cadence, the Board of Directors of Cadence and the Compensation Committee of the Board of Directors of Cadence, as applicable, shall adopt resolutions and take all other actions necessary to effectuate the provisions of this Section 1.6 and to ensure that, notwithstanding anything to the contrary, following the Effective Time, no service provider of Cadence and its Subsidiaries shall have any right to acquire any securities of Cadence, the Continuing Corporation or any Subsidiary thereof or to receive any payment, right or benefit with respect to any award or right previously granted under the stock option, equity incentive or deferred compensation plans of Cadence (and any predecessor entities) or otherwise, except the right to receive the consideration as provided in this Section 1.6

Section 1.7. Surrender and Payment.

(a) Prior to the Effective Time, CBC shall appoint an agent reasonably acceptable to Cadence (the “Exchange Agent”) for the purpose of: (i) exchanging the Per Share Common Stock Consideration for certificates representing shares of Cadence Common Stock or uncertificated shares of Cadence Common Stock; and (ii) exchanging the Per Share Preferred Stock Consideration for certificates representing shares of Cadence

 

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Preferred Stock or uncertificated shares of Cadence Preferred Stock. At or as needed promptly following the Effective Time, CBC shall or shall cause the Continuing Corporation to make available to the Exchange Agent funds equal to the aggregate of the Per Share Common Stock Consideration and the Per Share Preferred Stock Consideration.

(b) As soon as reasonably practicable after the Effective Time (but not later than two Business Days thereafter), the Continuing Corporation shall cause the Exchange Agent to mail to each record holder of shares of Cadence Stock at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title to the shares of Cadence Common Stock and Cadence Preferred Stock shall pass, only upon proper delivery of stock certificates or transfer of the uncertificated shares to the Exchange Agent) for use in such exchange. Each record holder of shares of Cadence Stock that have been converted into the right to receive the Per Share Common Stock Consideration or the Per Share Preferred Stock Consideration, as applicable, shall be entitled to receive, upon (i) surrender to the Exchange Agent (or, subsequent to the first anniversary of the Effective Time, the Continuing Corporation) of the applicable share certificate, together with a properly completed and executed letter of transmittal, or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, the Per Share Common Stock Consideration or the Per Share Preferred Stock Consideration, as applicable (subject to any applicable withholding Tax) in respect of the Cadence Common Stock or Cadence Preferred Stock represented by a certificate or uncertificated share. Until so surrendered or transferred, as the case may be, any certificate, or uncertificated share, of Cadence Common Stock or Cadence Preferred Stock shall represent after the Effective Time for all purposes only the right to receive, in accordance with the terms hereof and without interest, the applicable Per Share Common Stock Consideration or the Per Share Preferred Stock Consideration. If any portion of applicable consideration is to be paid to a person other than the person in whose name a surrendered certificate or uncertificated share is registered, it shall be a condition to such payment that (i) either such certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such uncertificated share shall be properly transferred, in each case, as determined by the Exchange Agent and as set forth in the letter of transmittal and related instructions and (ii) the person requesting such payment shall pay to the Exchange Agent any Taxes required as a result of such payment to a person other than the registered holder of such certificate or uncertificated share or establish to the satisfaction of the Exchange Agent and the Continuing Corporation that such Tax has been paid or is not payable.

(c) After the Effective Time, shares of Cadence Common Stock shall be no longer outstanding and shall be automatically canceled and shall cease to exist and shall thereafter by operation of this Agreement represent only the right to receive, in the case of the Cadence Common Stock, the Per Share Common Stock Consideration, and, in the case of the Cadence Preferred Stock, the Per Share Preferred Stock Consideration, all as provided for in Section 1.5, and the stock transfer ledger of Cadence shall be closed and there shall be no transfers on the stock transfer books of Cadence of the shares of Cadence Stock which were outstanding immediately prior to such time (other than to settle transfers of Cadence Stock that occurred prior to the Effective Time). If, after the Effective Time, certificates representing Cadence Common Stock are presented to CBC, they shall be promptly canceled and exchanged for the applicable consideration as provided in this Section 1.7.

(d) Any portion of the Per Share Common Stock Consideration or Per Share Preferred Stock Consideration made available to the Exchange Agent pursuant to Section 1.7(a) (including any proceeds of any investments thereof) that remains unclaimed by the holders of Cadence Stock twelve months after the Effective Time shall be returned to CBC, upon demand, and any such holder who has not exchanged shares of Cadence Common Stock or Cadence Preferred Stock for the Per Share Common Stock Consideration or Per Share Preferred Stock Consideration, as applicable, in accordance with this Section 1.7 prior to that time shall thereafter look only to the Continuing Corporation (subject to abandoned property, escheat or other similar applicable laws) for payment of the Merger Consideration in respect of such shares without any interest thereon. Notwithstanding the foregoing, neither CBC, Cadence, or any other person shall be liable to any former holder of shares of Cadence Stock for any cash properly delivered to a governmental official pursuant to applicable abandoned property, escheat or similar laws.

 

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Section 1.8. Calculations and Adjustments. If, between the date of this Agreement and the Effective Time, the number of shares of Cadence Common Stock issued shall change, the Per Share Common Stock Consideration and any other relevant provision of this Agreement shall be appropriately adjusted to reflect all of the issued and outstanding shares of Cadence Common Stock at the Effective Time; provided in no event shall the aggregate of the Per Share Common Stock Consideration exceed approximately $29,775,000.

Section 1.9. Lost or Destroyed Certificates. Any person whose certificates representing shares of Cadence Common Stock or Cadence Preferred Stock shall have been lost or destroyed may nevertheless obtain from the Exchange Agent the Per Share Common Stock Consideration or the Per Share Preferred Stock Consideration, as applicable, to which such holder is entitled as a result of the Merger if such holder provides CBC with an affidavit certifying such loss or destruction and an indemnity reasonably satisfactory to CBC sufficient to indemnify CBC against any loss or expense that may occur as a result of such lost or destroyed certificate being thereafter presented to CBC.

Section 1.10. Ratification by Shareholders. This Agreement shall be submitted to the shareholders of Cadence, and Cadence and CBC shall proceed expeditiously and cooperate in the procurement of consents and approvals and satisfaction of all other requirements necessary for consummation of the Merger in accordance with Section 4.1.

Section 1.11. Withholding Rights. Notwithstanding any provision contained herein to the contrary, each of the Exchange Agent, CBC and the Continuing Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Article I such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of applicable law. If the Exchange Agent, CBC or the Continuing Corporation, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Cadence Common Stock or Cadence Preferred Stock in respect of which the Exchange Agent, CBC, or the Continuing Corporation, as the case may be, made such deduction and withholding.

Section 1.12. Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, if appraisal rights are available under Mississippi law, shares of Cadence Common Stock issued and outstanding immediately prior to the Effective Time that are held by any record holder who is entitled to demand and properly demands appraisal of such shares (the “Appraisal Shares”) pursuant to, and who complies in all respects with, the provisions of Sections 79-4-13.02 et seq of the Mississippi Business Corporation Act (“MBCA”), shall not be converted into the right to receive the Per Share Common Stock Consideration payable pursuant to Section 1.5, but instead at the Effective Time shall become the right to payment of the fair value of such shares in accordance with the provisions of the MBCA and, at the Effective Time, all Appraisal Shares shall no longer be outstanding and shall automatically be canceled and cease to exist. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under the MBCA or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by the MBCA, then the right of such holder to be paid the fair value of such holder’s Appraisal Shares under the MBCA shall be forfeited and cease and shall have become, the right to receive, without interest thereon, the Per Share Common Stock Consideration pursuant to Section 1.5. Cadence shall deliver prompt notice to CBC of any demands for appraisal of any shares of Cadence Common Stock and provide CBC with the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the MBCA. Prior to the Effective Time, Cadence shall not, without the prior written consent of CBC, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing.

 

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II. REPRESENTATIONS AND WARRANTIES OF CADENCE

Except (a) as described in the required reports, forms, schedules, registration statements and other documents filed with the Securities and Exchange Commission (the “SEC”) since December 31, 2007 (the “Cadence Reports”) (excluding, in each case, any disclosures set forth in any risk factor section and any forward looking statements) or (b) as set forth in the Cadence Disclosure Schedule, Cadence represents and warrants as follows:

Section 2.1. Organization.

(a) Cadence is a Mississippi corporation duly organized, validly existing and in good standing under the laws of the State of Mississippi. Cadence Bank, N.A. (“Cadence Bank”) is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. Except as set forth in the Cadence Reports or Disclosure Schedule 2.1(a), each of Cadence and Cadence Bank has full power and authority (including all licenses, franchises, permits and other governmental authorizations which are legally required) to own, lease and operate its properties, to engage in the business and activities now conducted by it, except where the failure to be so licensed or qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence.

(b) Cadence is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (“BHC Act”). Cadence Bank is duly authorized to conduct a general banking business, embracing all usual deposit functions of commercial banks as well as commercial, industrial and real estate loans, installment credits, collections and safe deposit facilities subject to the supervision of the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”). True and complete copies of the Articles of Incorporation and Bylaws of Cadence and the Articles of Association and Bylaws of Cadence Bank, each as amended to date, have been delivered or made available to CBC.

(c) Other than as set forth in Disclosure Schedule 2.1(c), (i) Cadence does not have any Subsidiaries or Affiliates, (ii) Cadence is not a general partner or material owner in any joint venture, general partnership, limited partnership, trust or other non-corporate entity, and (iii) to Cadence’s Knowledge there is no arrangement pursuant to which the stock of any corporation is or has been held in trust (whether express, constructive, resulting or otherwise) for the benefit of all shareholders of Cadence.

(d) The deposit accounts of Cadence Bank are insured by the FDIC through the Bank Insurance Fund to the fullest extent permitted by law, and all premiums and assessments due and owning as of the date hereof required in connection therewith have been paid by Cadence Bank. Other than as set forth in Cadence Reports or Regulatory Reports made available to CBC, no proceedings for the revocation or termination of such deposit insurance are pending or, to the Knowledge of Cadence, threatened.

Section 2.2. Capitalization. The authorized capital stock of Cadence consists of 140,000,000 shares of Cadence Common Stock, of which 11,909,127 are issued and outstanding, and 10,000,000 shares of Cadence Preferred Stock, $10.00 par value, of which 44,000 are issued and outstanding. The authorized capital stock of Cadence Bank consists of 1,250,000 shares of Cadence Bank common stock, $1.00 par value, 1,200,000 of which are issued and outstanding and owned by Cadence. No other shares of Cadence Stock are issued as of the date of this Agreement. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary are owned by Cadence, directly or indirectly, free and clear of any liens, pledges, charges and security interests and similar encumbrances (“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. No such Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements 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. All of the issued and

 

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outstanding shares of Cadence Stock are validly issued, fully paid and nonassessable, and have not been issued in violation of the preemptive rights of any person or in violation of any applicable federal or state laws. Disclosure Schedule 2.2 sets forth for each Cadence Option, the name of the grantee, the date of the grant, the type of grant, the status of the option grant as qualified or non-qualified under Section 422 of the Code, the number of shares of Cadence Common Stock subject to each Cadence Option, and the number of shares of Cadence Common Stock that are currently exercisable and the exercise price per share. Other than as set forth in Disclosure Schedule 2.2, there are no existing options, warrants, calls, convertible securities or commitments of any kind obligating Cadence to issue any authorized and unissued Cadence Common Stock nor does Cadence have any outstanding commitment or obligation to repurchase, reacquire or redeem any of its outstanding capital stock. Disclosure Schedule 2.2 sets forth for each Cadence Restricted Share award and Cadence Phantom Unit, the name of the grantee, the date of the grant, the type of grant and the number of shares of Cadence Common Stock granted pursuant to each Cadence Restricted Share award or underlying such Cadence Phantom Unit. There are no voting trusts, voting agreements, buy-sell agreements or other similar arrangements affecting the Cadence Common Stock.

Section 2.3. Corporate Approval and Authority.

(a) Cadence has full corporate power and authority to execute and deliver this Agreement (and any related documents), and Cadence has full legal capacity, power and authority to perform its obligations hereunder and thereunder and to consummate the contemplated transactions, subject to the receipt of any required regulatory approvals and the required approval of this Agreement by the shareholders of Cadence.

(b) The Board of Directors of Cadence has approved this Agreement and the transactions contemplated herein subject to the approval thereof by the shareholders of Cadence as required by law, and, other than shareholder and regulatory approvals, no further corporate proceedings of Cadence are needed to execute and deliver this Agreement and consummate the Merger. This Agreement has been duly and validly executed and delivered by Cadence and, subject to receipt of any required regulatory approvals and the required approval of this Agreement by the shareholders of Cadence and the due and valid execution and delivery of this Agreement by CBC, constitutes the legally binding agreement of Cadence enforceable against Cadence in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights generally and general equitable principles.

(c) The affirmative vote of the holders of a majority of the shares of Cadence Common Stock present and voting at a shareholder meeting held for such purpose is the only vote required of the holders of Cadence Common Stock necessary to approve the Merger and the related transactions contemplated thereby (the required approval of the Cadence Common Stock is referred to as the “Required Shareholder Approval”).

Section 2.4. Investments. Cadence has furnished to CBC a complete list, as of June 30, 2010, of all securities, including municipal bonds, owned by Cadence (the “Securities Portfolio”). Except as set forth in Disclosure Schedule 2.4, all such securities are owned by Cadence (a) of record, except those held in bearer form, and (b) beneficially, free and clear of all material liens, licenses, pledges, charges, encumbrances, adverse rights or claims and security interests (“Liens”). Disclosure Schedule 2.4 also discloses any entities in which the ownership interest of Cadence equals 5% or more of the issued and outstanding voting securities of the issuer thereof. There are no voting trusts or other agreements or understandings with respect to the voting of any of the securities in the Securities Portfolio.

Section 2.5. SEC Documents; Other Reports; Internal Controls.

(a) Cadence has filed all Cadence Reports and all reports, forms, correspondence, registrations and statements, together with any amendments required to be made with respect thereto (collectively, the “Required Reports”), that they were required to file since January 1, 2007 with (i) any industry self-regulatory organization (“SRO”), (ii) the Board of Governors of the Federal Reserve System (“Federal Reserve Board”), (iii) the FDIC,

 

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and (iv) any other federal, state or foreign governmental or regulatory agency or authority, and all other Required Reports required to be filed by them since January 1, 2007 and has paid all fees and assessments due and payable in connection therewith. Any such Required Report regarding Cadence or any of its Subsidiaries made in any Required Report filed with or otherwise submitted to any regulatory agency complied in all material respects with relevant legal requirements, including as to content. As of their respective dates of filing with the SEC (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of such subsequent filing), Cadence Reports complied in all material respects with the requirements of the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Cadence Reports, and none of the Cadence Reports when filed with the SEC, or, if amended prior to the date hereof, as of the date of such amendment, 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. There are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Cadence Reports. None of Cadence’s Subsidiaries is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.

(b) Cadence has disclosed, based on its most recent evaluation prior to the date hereof, to Cadence’s auditors and the audit committee of Cadence’s board of directors and on Disclosure Schedule 2.5(b) (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect Cadence’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Cadence’s internal controls over financial reporting.

(c) Except as set forth on Disclosure Schedule 2.5(c), the records, systems, controls, data and information of Cadence 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 Cadence 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 material adverse effect on the system of internal accounting controls described in the following sentence. Cadence 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 for external purposes in accordance with generally accepted accounting principles (“GAAP”).

(d) Cadence has designed and implemented disclosure controls and procedures (within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information relating to Cadence and its Subsidiaries is made known to the management of Cadence by others within those entities as appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act with respect to Cadence Reports.

Section 2.6. Financial Statements; Undisclosed Liabilities.

(a) The financial statements of Cadence (including any related notes and schedules thereto) included in Cadence Reports complied as to form, as of their respective dates of filing with the SEC (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of such subsequent filing), in all material respects, with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be disclosed therein), and fairly present, in all material respects, the consolidated financial position of Cadence and its Subsidiaries and the consolidated results of operations, changes in shareholders’ equity and cash flows of such companies as of the dates and for the periods shown (subject, in the case of unaudited statements, to normal

 

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year-end audit adjustments, none of which is expected to be material, and to any other adjustments described therein, including the notes thereto). The books and records of Cadence 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.

(b) Except as set forth in Disclosure Schedule 2.6(b) and for (i) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Cadence included in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010, as filed with the SEC, (ii) this Agreement or actions emanating from the consent order dated May 19, 2010 by regulatory authorities or any Regulatory Reports made available to CBC, (iii) liabilities incurred since June 30, 2010 in the ordinary course of business consistent with past practice, neither Cadence nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued or contingent or otherwise and whether due or to become due), that either alone or when combined with all other liabilities of a type not described in clause (i), (ii) or (iii), has had, or would reasonably be expected to have, a Material Adverse Effect on the Condition of Cadence.

Section 2.7. Allowance for Loan Losses. The allowance for loan losses shown on the Cadence Reports as of and for the period ended June 30, 2010, was, and the allowance for loan losses to be shown on the Cadence Reports as of any date subsequent to the execution of this Agreement will be, as of such dates, in the reasonable judgment of management of Cadence, adequate to provide for possible losses, net of recoveries relating to loans previously charged off, in respect of loans outstanding (including accrued interest receivable) of Cadence and other extensions of credit (including letters of credit or commitments to make loans or extend credit). The allowance for loan losses described in the preceding sentence has been established in accordance with GAAP as applied to banking institutions and all applicable rules and regulations; provided, however, that Cadence makes no representation or warranty as to the sufficiency of collateral securing or the collectibility of loans outstanding.

Section 2.8. Certain Loans and Related Matters.

(a) All loans and other extensions of credit (including commitments to extend credit) (each a “Loan”) as of the date hereof by Cadence and its Subsidiaries to any directors, executive officers and principal shareholders (as such terms are defined in Regulation O of the Federal Reserve Board (12 C.F.R. Part 215)) of Cadence or any of its Subsidiaries, are and were originated in compliance in all material respects with all applicable laws.

(b) Each outstanding Loan (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, Cadence’s written underwriting standards (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable requirements of laws, except for such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence.

(c) None of the agreements pursuant to which Cadence or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.

(d) Disclosure Schedule 2.8(d) identifies (A) each Loan that as of August 31, 2010 had an outstanding balance and/or unfunded commitment of $250,000.00 or more and that as of such date (i) was contractually past due sixty (60) days or more in the payment of principal and/or interest, (ii) was on non-accrual status, (iii) was classified as “substandard,” “doubtful,” “loss,” “classified,” “criticized,” “credit risk assets,” “concerned loans,” “watch list” or “special mention” (or words of similar import) by Cadence, any of its Subsidiaries or the rules of any applicable regulatory authority, (iv) where the interest rate terms had been reduced and/or the maturity dates

 

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had been extended subsequent to the agreement under which the Loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, (v) where a specific reserve allocation existed in connection therewith, or (vi) which was required to be accounted for as a troubled debt restructuring in accordance with Statement of Financial Accounting Standards No. 15 and (B) each asset of Cadence or any of its Subsidiaries that as of August 31, 2010 had a book value of over $250,000.00 and that was classified as other real estate owned or as an asset to satisfy Loans, including repossessed equipment, and the book value thereof as of such date. For each Loan identified in response to clause (A) above, Disclosure Schedule 2.8(d) sets forth the outstanding balance, including accrued and unpaid interest, on each such Loan and the identity of the borrower thereunder as of August 31, 2010.

(e) Each outstanding Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected, and (iii) to Cadence’s Knowledge, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, except where the failure to do so would not have a Material Adverse Effect on the Condition of Cadence. The notes or other credit or security documents with respect to each such outstanding Loan were in compliance in all material respects with all applicable Laws at the time of origination or purchase by Cadence and are complete and correct in all material respects.

Section 2.9. Allowance for Loan Losses. The allowance for loan losses shown on the Cadence Reports as of and for the period ended June 30, 2010, was, in the reasonable judgment of management of Cadence, adequate to provide for possible losses, net of recoveries relating to loans previously charged off, in respect of loans outstanding (including accrued interest receivable) of Cadence and other extensions of credit (including letters of credit or commitments to make loans or extend credit). The allowance for loan losses described in the preceding sentence has been established in accordance with GAAP as applied to banking institutions and all applicable rules and regulations; provided, however, that Cadence makes no representation or warranty as to the sufficiency of collateral securing or the collectability of loans outstanding.

Section 2.10. Environmental Laws. To the Knowledge of Cadence, and except as would not otherwise reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence, Cadence and any properties or business owned or operated by Cadence, whether or not held in a fiduciary or representative capacity, are in material compliance with all terms and conditions of all applicable federal and state Environmental Laws (as defined below) and permits thereunder and Cadence has not received notice of any violation of any Environmental Laws. CBC and its consultants, agents and representatives shall have the right to inspect Cadence’s assets for the purpose of conducting asbestos and other environmental surveys, provided that such inspection shall be at the expense of CBC and at such time as may be mutually agreed upon between Cadence and CBC.

Section 2.11. Title to Property.

(a) Other than real property acquired through foreclosure or deed in lieu of foreclosure, Disclosure Schedule 2.11(a) contains a list that is true, correct and will be complete in all material respects of all real property owned or leased by Cadence. True and complete copies of all deeds, leases and title insurance policies for, or other documentation evidencing ownership of, the properties referred to in Disclosure Schedule 2.11(a) and all mortgages, deeds of trust and security agreements to which such property is subject have been furnished or made available to CBC upon their request.

(b) Except as would not reasonably be expected to have a Material Adverse Effect on the Condition of Cadence, Cadence has good, valid and defeasible title to, or valid leasehold interests in, all property and assets reflected in the most recent balance sheet included in the Cadence Reports, except for properties that have been disposed of in the ordinary course of business since the date of such balance sheet, free and clear of all Liens,

 

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except for (x) Liens for current Taxes not yet due and payable and, with respect to real property, other standard exceptions commonly found in title policies in the jurisdiction where any real property is located, (y) such encumbrances and imperfections of title, if any, as do not materially detract from the value of the properties and do not materially interfere with the present or proposed use of such properties or otherwise materially impair such operations.

(c) All leases of real property and all other leases material to Cadence under which Cadence leases personal property are valid and binding in accordance with their respective terms, and there is not under any such lease any material existing default by Cadence or, to the Knowledge of Cadence, any other party thereto, or any event which with notice or lapse of time or both would constitute such a default, and, in the case of leased premises, Cadence quietly enjoys the use of the premises provided for in such lease, except in any such cases as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence.

Section 2.12. Litigation and Other Proceedings. Except as set forth in Disclosure Schedule 2.12, there are no legal, quasi-judicial, regulatory or administrative proceedings of any kind or nature now pending or, to the Knowledge of Cadence, threatened before any court or administrative body in any manner against Cadence, or any of its properties or capital stock, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Condition of Cadence or the transactions proposed by this Agreement. To the Knowledge of Cadence, there is no basis on which any litigation or proceeding could be brought which could reasonably be expected to have a Material Adverse Effect on the Condition of Cadence or which could question the validity of any action taken or to be taken in connection with this Agreement and the transactions contemplated hereby. Except as set forth in Cadence Reports, Regulatory Reports made available to CBC or Disclosure Schedule 2.12, Cadence is not in default with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator or governmental agency or instrumentality.

Section 2.13. Taxes.

(a) Except as set forth in Disclosure Schedule 2.13, Cadence has filed with the appropriate federal, state and local governmental agencies all Tax Returns and reports required to be filed, and has paid all Taxes and assessments required to be paid (whether or not shown or claimed to be due thereon). The Tax Returns as filed were correct in all material respects. Cadence has not executed or filed with any governmental authority any agreement extending the period for assessment and collection of any Tax. Cadence is not a party to any action or proceeding by any governmental authority for assessment or collection of Taxes, nor has any claim for assessment or collection of Taxes been asserted against Cadence. Cadence has not waived any statute of limitations with respect to any Tax or other assessment or levy, and all such Taxes and other assessments and levies which Cadence is required by law to withhold or to collect have been duly withheld and collected and have been paid over to the proper governmental authorities to the extent due and payable, or segregated and set aside for such payment and, if so segregated and set aside will be so paid by Cadence, as required by law.

(b) True and complete copies of the income tax returns of Cadence as filed with the Internal Revenue Service (“IRS”) or state or local authorities for the years ended December 31, 2009, 2008 and 2007 have been delivered or made available to CBC.

(c) Neither Cadence nor any of its Subsidiaries (i) is or has ever been a member of an affiliated group (other than a group the common parent of which is Cadence) filing a consolidated Tax Return or (ii) has any material liability for Taxes of any person (other than Cadence and any of its Subsidiaries arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign law, or as a transferee or successor, by contract, or otherwise.

(d) None of Cadence or any of its Subsidiaries is a party to, is bound by or has any obligation under any Tax shares, Tax indemnity or Tax allocation agreement or similar contract or arrangement.

 

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(e) None of Cadence or any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a distribution occurring during the last five (5) years in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

(f) Cadence has disclosed on its federal income Tax Return all positions therein, which, if not disclosed, could reasonably be expected to give rise to accuracy related penalties under Section 6662 of the Code, and has not taken positions that could reasonably be expected to give rise to accuracy related penalties under Section 6662(d)(2)(C) of the Code. Neither Cadence nor any of its Subsidiaries have participated in a “reportable transaction” within the meaning of Section 6011 of the Code and the Treasury Regulations promulgated thereunder.

Section 2.14. Contracts and Commitments.

(a) Except as set forth in Cadence Reports, Regulatory Reports made available to CBC or Disclosure Schedule 2.14, neither Cadence nor any of its Subsidiaries is a party to or is bound by any contract, arrangement, commitment or understanding (whether written or oral):

(i) that is a “material contract” (as defined in Item 601(b)(10) of Regulation S-K of the SEC or required to be disclosed by Cadence on a Current Report on Form 8-K) to be performed in whole or in part after the date of this Agreement that has not been filed or incorporated by reference in the Cadence Reports filed prior to the date hereof;

(ii) the termination or breach of which would reasonably be expected to have a Material Adverse Effect on the Condition of Cadence;

(iii) that contains a non-compete or client or customer non-solicit requirement or any other provision that materially restricts the conduct of, or the manner of conducting, any line of business of Cadence or any of its affiliates;

(iv) that obligates Cadence or any of its affiliates to conduct business with any third party on an exclusive or preferential basis,

(v) that requires referrals of business or requires Cadence or any of its affiliates to make available investment opportunities to any person on a priority or exclusive basis; or

(vi) which is not of the type described in clauses (i) through (v) above and which involved payments by, or to, Cadence or any of its Subsidiaries in fiscal year ended December 31, 2009, or which could reasonably be expected to involve such payments during fiscal year ending December 31, 2010, of more than $250,000 (other than pursuant to loans originated or purchased by Cadence and its Subsidiaries in the ordinary course of business consistent with past practice).

Each contract, arrangement, commitment or understanding of the type described in this Section 2.14(a), whether or not publicly disclosed in Cadence Reports or set forth on Disclosure Schedule 2.14, is referred to herein as a “Cadence Contract.”

(b) (i) Each Cadence Contract is valid and binding on Cadence or its applicable Subsidiary and in full force and effect, and, to the Knowledge of Cadence, is valid and binding on the other parties thereto, (ii) Cadence and each of its Subsidiaries and, to the Knowledge of Cadence, each of the other parties thereto, has performed all obligations required to be performed by it to date under each Cadence Contract and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default on the part of Cadence or any of its Subsidiaries or, to the Knowledge of Cadence, any other party thereto, under any such Cadence Contract.

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the payments due under each Compensation Agreement and the date when such payments are due, including any payments arising as a result of the Merger, and any payments arising from the termination of employment prior to or after the Effective Time (upon request from CBC, in the event it is unclear to CBC, Cadence will provide a good faith estimate of any amounts not subject to precise quantification as of the date of this Agreement, such as excise taxes or tax indemnification payments in respect of income or excise taxes).

Section 2.15. Insurance. A true and complete list of all material insurance policies owned or held by or on behalf of Cadence (other than credit-life policies), including policy numbers, retention levels, insurance carriers, and effective and termination dates has been provided to CBC. Such policies are in full force and effect and contain only standard cancellation or termination clauses.

Section 2.16. No Conflict With Other Instruments. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (a) conflict with or violate any provision of Cadence’s Articles of Incorporation or Bylaws, or (b) assuming all required shareholder and regulatory approvals and consents are duly obtained, will not (i) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Cadence or any of its properties or assets, or (ii) violate, conflict with, result in a breach of any provision of or constitute a default (or an event which, with or without notice or lapse of time, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, cause CBC or Cadence to become subject to or liable for the payment of any Tax, or result in the creation of any lien, charge or encumbrance upon any of the properties or assets of Cadence under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease agreement, instrument or obligation to which Cadence is a party, or by which any of its properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults which either individually or in the aggregate will not have a Material Adverse Effect on the Condition of Cadence.

Section 2.17. Compliance with Laws and Regulatory Filings. Except as disclosed in the Cadence Reports, Regulatory Reports made available to CBC or Disclosure Schedule 2.17, Cadence is in compliance with all applicable federal, state and local laws, rules, regulations and orders applicable to it except for failures to comply or violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence. Except for approvals by the Federal Reserve Board, the OCC and the SEC, no prior consent, approval or authorization of, or declaration, filing or registration with, any regulatory authority is required of Cadence in connection with the execution, delivery and performance by Cadence of this Agreement and the transactions contemplated hereby, or the resulting change of control of Cadence except for the filing of certain instruments with the Mississippi Secretary of State, as necessary to consummate the Merger contemplated hereby. Cadence has filed all reports, registrations and statements, together with any amendments required to be made thereto, that are required to be filed with the Federal Reserve Board or any other regulatory authority having jurisdiction over Cadence and its Subsidiaries, and such reports, registrations and statements are, to the Knowledge of Cadence, true and correct in all material respects.

Section 2.18. Absence of Certain Changes. Except as disclosed in the Cadence Reports, Regulatory Reports made available to CBC, since June 30, 2009, (a) Cadence and its Subsidiaries have conducted their respective businesses in the ordinary and usual course consistent with prudent banking practices (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby), and (b) no event has occurred or circumstance arisen that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Condition of Cadence.

Section 2.19. Employment Relations. The relations of Cadence with its employees are satisfactory. Cadence has not received any complaints or any notice of any controversies with, or organizational efforts or other pending actions by, its employees or representatives or its employees, except any such complaints or notices which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on

 

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the Condition of Cadence. Neither Cadence nor any of its Subsidiaries are a party to any collective bargaining or other labor contract with respect to their employees.

Section 2.20. Employee Benefit Plans.

(a) Disclosure Schedule 2.20(a) contains a true and complete list of each Plan. “Plan” shall mean each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including multiemployer plans within the meaning of Section 3(37) of ERISA), stock purchase, equity-based compensation, stock option, severance, employment, loan, change-in-control, pension, profit sharing, retirement, fringe benefit, vacation, paid time off, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, programs, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, oral or written, legally binding or not under which any current or former employee, officer, director, consultant or independent contractor of Cadence or any of its Subsidiaries (“Cadence Employees”) has had or has any present or future vested or contingent right to benefits and which are contributed to, sponsored by, maintained by, or for which there is or may be any liability of Cadence or any of its Subsidiaries or ERISA Affiliates. “ERISA Affiliate” shall mean any person or entity that, together with Cadence, is treated as a single employer under Section 414(b), (c), (m), or (o) of the Code.

(b) With respect to each Plan, Cadence has delivered or made available to CBC a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust, insurance or group annuity agreement or other funding instrument; (ii) the most recent Internal Revenue Service determination letter; (iii) any summary plan description and other material written communications by Cadence or any of its Subsidiaries or ERISA Affiliates concerning the extent of the benefits provided under a Plan; (iv) a summary of any proposed amendments or changes anticipated to be made to the Plans (other than amendments or changes required by applicable law) at any time within the twelve months immediately following the date hereof that could reasonably be expected to result in an increase in benefits provided under the Plan or the expense of maintaining the Plan; (v) for the three most recent years (A) the Form 5500 and attached schedules, (B) most recent audited financial statements, if any, and (C) most recent actuarial valuation reports, if any, and (vi) with respect to any employee stock ownership plan, all fiduciary administrative minutes and similar records for the prior three year period.

(c) Each Plan has been established and administered in all material respects in accordance with its terms and the applicable provisions of ERISA, the Code and other applicable laws.

(d) Each Plan (and the related trust) which is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and has received a favorable determination or opinion letter as to its qualification, and nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification. Except as set forth on the Disclosure Schedule 2.20(d) or would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence or on the Condition of CBC following the Merger, (i) no event has occurred and no condition exists that would subject Cadence or any of its Subsidiaries or ERISA Affiliates to any tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws; (ii) for each Plan with respect to which a Form 5500 has been filed, no change has occurred with respect to the matters covered by the most recent Form 5500 since the date thereof; (iii) no non-exempt “prohibited transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code) has occurred with respect to any Plan; (iv) neither Cadence nor any Subsidiary or ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, or will engage in, a transaction described in Section 4069 or 4212(c) (i.e., certain transactions to evade liability) of ERISA; (v) each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been operated in compliance with Section 409A of the Code and the regulations thereunder; and (vi) there does not now exist, nor do any circumstances exist that would reasonably be expected to result in, any

 

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Controlled Group Liability that would be a liability of Cadence or any of its Subsidiaries or ERISA Affiliates, or of CBC following the Merger. As of December 31, 2009, the tax-qualified defined benefit retirement Plan had a fair market value less than the projected benefit obligation of approximately $600,000 according to actuarial calculations at that time by Towers Watson.

(e) None of the Plans is a multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) or a multiple employer plan (within the meaning of Section 4063 of ERISA) and none of Cadence, its Subsidiaries or any ERISA Affiliate has at any time sponsored or contributed to, or has or had any liability or obligation with respect to a multiemployer plan or a multiple employer plan within the preceding six (6) years that remains unsatisfied. Except as set forth in the Disclosure Schedule 2.20(e), no Plan provides post-employment welfare (including but not limited to health, medical or life insurance) benefits and neither Cadence nor any of its Subsidiaries or ERISA Affiliates has any obligation to provide any such post-employment welfare benefits now or in the future, other than as required by Section 4980B of the Code. No trust funding any Plan is intended to meet the requirements of Code Section 501(c)(9).

(f) With respect to any Plan, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of Cadence or on the Condition of CBC following the Merger contemplated by this Agreement, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of Cadence, threatened, (ii) no facts or circumstances exist that would give rise to any such actions, suits or claims and (iii) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Department of Treasury, the Internal Revenue Service or other governmental agencies are pending or, to the Knowledge of Cadence, threatened.

(g) Except as set forth in Disclosure Schedule 2.20(g), neither the execution and delivery of this Agreement, nor the consummation of (or any other event associated with) the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any current or former employee, officer or director of Cadence or any of its Subsidiaries under any Plan or any other agreement with any employee, including, for the avoidance of doubt, change of control agreements, (ii) increase any benefits otherwise payable under any Plan, (iii) result in any acceleration of the time of payment or vesting of any such benefits, (iv) require the funding or increase in the funding of any such benefits or (v) result in any limitation on the right of CBC or Cadence or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Plan or related trust. Disclosure Schedule 2.20(g) sets forth a formula to calculate the maximum amount of severance, non-qualified retirement, deferred compensation or other payments or benefits that could become payable by the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (or a termination of employment thereafter). Except as set forth in the Disclosure Schedule 2.20, there is no Plan that, individually or collectively, would give, or which has given, rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code in connection with the transactions contemplated under this Agreement, including as a result of any termination of employment on or following the Closing, and no Plan provides for a gross-up for the tax imposed under Section 4999 or Section 409A of the Code.

Section 2.21. Brokers, Finders and Financial Advisors. Except for amounts payable to Keefe, Bruyette and Woods, Inc. which has been disclosed to CBC, neither Cadence nor any of its officers, directors or employees have employed any broker, finder or financial advisor or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with this Agreement and the transactions contemplated herein.

Section 2.22. Trust Preferred Securities.

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Indenture dated as of December 30, 2003 between Cadence and U.S. Bank National Association, as Trustee (the “Trustee”). Trust I has issued and outstanding $30,000,000 in aggregate principal amount of trust preferred securities pursuant to the terms of the Amended and Restated Declaration of Trust dated as of December 30, 2003 among Cadence, the Trustee, and the administrators named therein (the “Trust Preferred Securities”). The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate, conflict with, result in a breach of any provision of or constitute a default (or an event which, with or without notice or lapse of time, would constitute a default under any of the agreements relating to the Trust Preferred Securities), and at the Effective Time CBC will have all of the rights presently held by Cadence under such agreements as Cadence’s successor in interest. Cadence has deferred interest payments on the Floating Junior Subordinated Debentures due 2033 as of September 2010.

(b) All representations and warranties made by Cadence in the documents related to the issuance of the Trust Preferred Securities were true in all material respects when made. Disclosure Schedule 2.22(b) sets forth the commencement and termination dates (if any) of any Extended Interest Payment Period election and any amounts owed as of the date of this Agreement arising from such elections.

Section 2.23. Derivative Contracts. Cadence is not a party to nor has it agreed to enter into an exchange-traded or over-the-counter swap, forward, future, option, cap, floor or collar financial contract or agreement, or any other contract or agreement not included in the Cadence Reports which is a financial derivative contract (including various combinations thereof) (“Derivative Contracts”).

Section 2.24. Deposits. Except as set forth on Disclosure Schedule 2.24, to the Knowledge of Cadence, none of the deposits of Cadence is a “brokered” deposit (as such term is defined in 12 CFR 337.6(a)(2)) or is subject to any encumbrance, legal restraint or other legal process (other than garnishments, pledges, set off rights, escrow limitations and similar actions taken in the ordinary course of business).

Section 2.25. Community Reinvestment Act. Cadence is in material compliance with the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) (“CRA”) and all regulations promulgated thereunder, and Cadence has supplied CBC with copies of Cadence’s current CRA Statement, all support papers therefor, all letters and written comments received by Cadence since January 1, 2007 pertaining thereto and any responses by Cadence to such comments, and Cadence has a rating of “satisfactory” as of its most recent CRA compliance examination.

Section 2.26. Intellectual Property Rights. Disclosure Schedule 2.26 contains a correct and complete list of all registered trademarks, registered service marks, trademark and service mark applications, trade names and registered copyrights presently owned or held by Cadence or any Subsidiary or used under license by them in the conduct of their business (the “Intellectual Property”). Cadence and its Subsidiaries own or have the right to use and continue to use the Intellectual Property in the operation of their business. Neither Cadence nor any Subsidiary is, to their Knowledge, infringing or violating any patent, copyright, trademark, service mark, label filing or trade name owned or otherwise held by any other party, nor has Cadence or any Subsidiary, to their Knowledge, used any confidential information or any trade secrets owned or otherwise held by any other party, without holding a valid license for such use.

Section 2.27. Bank Secrecy Act; USA PATRIOT Act. Other than as set forth in Disclosure Schedule 2.27, Cadence has had no incidents of fraud or defalcation during the last two years. Cadence is in material compliance with the Bank Secrecy Act and all regulations promulgated thereunder and has timely and properly filed and maintained all requisite Currency Transaction Reports and Suspicious Activity Reports and has properly monitored transaction activity (including, but not limited to, wire transfers). In addition, Cadence is in material compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act, GLB Act Privacy Provisions, Office of Foreign Assets Control Regulation (OFAC), Bank Protection Act, and all applicable Financial Crimes Enforcement Network (FinCEN) requirements and all other related laws.

 

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Section 2.28. Fairness Opinion. Prior to the execution of this Agreement, Cadence has received an opinion from Keefe, Bruyette & Woods, Inc., to the effect that, subject to the terms, conditions and qualifications set forth therein, as of the date hereof, the Merger Consideration to be received by the holders of Cadence Common Stock pursuant to this Agreement is fair to such shareholders from a financial point of view. Such opinion has not been amended or rescinded.

Section 2.29. Transactions with Affiliates. Except as disclosed in the Cadence Reports or Regulatory Reports made available to CBC, there are no agreements, contracts, plans, arrangements or other transactions between Cadence or any of its Subsidiaries, on the one hand, and any (i) officer or director of Cadence or any of its Subsidiaries, (ii) record or beneficial owner of five percent (5%) or more of the voting securities of Cadence, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Cadence, on the other hand.

Section 2.30. Disclosure Documents. With respect to information supplied or to be supplied by Cadence for inclusion in the proxy statement of Cadence to be filed with the SEC in connection with the Merger (such proxy statement, including any amendments or supplements thereto, the “Proxy Statement”), at the time of the mailing thereof to shareholders of Cadence and at the time of the special meeting of Cadence’s shareholders, will not 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 are made, not misleading.

Section 2.31. Agreements with Regulatory Agencies. Except as set forth in the Disclosure Schedule 2.31, neither Cadence nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action 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 ordered to pay any civil penalty by, or is a recipient of any supervisory letter from, or has adopted any board resolutions at the request or suggestion of any regulatory agency or other governmental entity that restricts the conduct of its business or that relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business (each, whether or not set forth in the Disclosure Schedule 2.31, a “Company Regulatory Agreement”), nor does Cadence have Knowledge of any pending or threatened regulatory investigation or other action by any regulatory agency or other governmental entity that could reasonably be expected to lead to the issuance of any such Company Regulatory Agreement.

Section 2.32. Anti-takeover Provisions Not Applicable. Cadence has taken all action required to be taken by it in order, and plan to present and recommend this Agreement for the approval of the Cadence Shareholders, so as to exempt this Agreement and the transactions contemplated hereby and thereby from, and this Agreement and the transactions contemplated hereby and thereby are exempt from, any anti-takeover or similar provisions of the Articles of Incorporation, and Bylaws of Cadence and the requirements of any “moratorium,” “control share,” “fair price,” “affiliate transaction,” “business combination” or other antitakeover laws and regulations of any state, including the Mississippi Business Corporation Act, Mississippi Shareholder Protection Act, and the Mississippi Control Share Act.

III. REPRESENTATIONS AND WARRANTIES OF CBC

CBC, for itself and Merger Sub, makes the following representations and warranties to Cadence:

Section 3.1. Organization. CBC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. CBC owns 100% of the issued and outstanding capital stock of Merger Sub. CBC and Merger Sub have full power and authority (including all licenses, franchises, permits and other governmental authorizations which are legally required) to own their properties, to engage in the business

 

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and activities now conducted by them and to enter into this Agreement, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect on the Condition of CBC.

Section 3.2. Capitalization. CBC is authorized to issue limited liability company interests as Class A Common Units and Class B Non-Voting Common Units. The authorized capital stock of Merger Sub will consist of 1,000 shares of common stock, $0.01 par value per share. All of the issued and outstanding limited liability company interests of CBC are validly issued, fully paid and nonassessable, and have not been issued in violation of the preemptive rights of any person or in violation of any applicable federal or state laws.

Section 3.3. Corporate Approval and Authority.

(a) CBC has full limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, subject to the receipt of any required regulatory approvals.

(b) The Board of Directors of CBC has approved this Agreement and the transactions contemplated herein are not subject to any approval thereof by the members of CBC under applicable law, and no further limited liability company proceeding of CBC is needed to execute and deliver this Agreement and consummate the Merger. This Agreement has been duly and validly executed and delivered by CBC and, subject to receipt of any required regulatory approvals and the due and valid execution and delivery of this Agreement by Cadence, constitutes the legally binding agreement of CBC enforceable against CBC in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights generally and general equitable principles.

Section 3.4. No Conflict With Other Instruments. The execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby will not (a) violate any provision of the respective Articles of Organization or Operating Agreement of CBC, or (b) assuming all required shareholder and regulatory consents and approvals are duly obtained, (i) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to CBC or any of its properties or assets, or (ii) violate, conflict with, result in a breach of any provision of or constitute a default (or an event which, with or without notice or lapse of time, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, cause CBC to become subject to or liable for the payment of any Tax, or result in the creation of any lien, charge or encumbrance upon any of the properties or assets of CBC under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease agreement, instrument or obligation to which CBC is a party, or by which any of its properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults which either individually or in the aggregate will not have a Material Adverse Effect on the Condition of CBC.

Section 3.5. Brokers, Finders and Financial Advisors. Except for Goldman, Sachs & Co., neither CBC nor any of its officers, directors, members, managers or employees have employed any broker, finder or financial advisor or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with this Agreement and the transactions contemplated herein.

Section 3.6. Financing. CBC has, and will have at the Effective Time, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to consummate the Merger pursuant to the terms of this Agreement, including to pay in full all amounts, including any fees and expenses, due and payable by CBC pursuant to the terms of this Agreement.

Section 3.7. Disclosure Documents. With respect to any information supplied or to be supplied by CBC for inclusion in the Proxy Statement, the Proxy Statement, at the time of the mailing thereof to shareholders of Cadence and at the time of the special meeting of Cadence’s shareholders, will not contain any untrue statement

 

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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 are made, not misleading.

Section 3.8. Bank Charter. CBC has obtained preliminary approval from the OCC to establish CBC National Bank and such approval has not been withdrawn or terminated.

Section 3.9. Capital Commitments. CBC has obtained subscriptions and capital commitments in the aggregate of approximately $900 million in the forms of such subscriptions and commitments made available to Cadence and its advisors. Such commitments are in full force and effect. CBC has the unconditional right to call such capital pursuant to such commitments.

Section 3.10. Business Plan. CBC’s business plan has been reviewed by the applicable federal regulators and permits CBC to acquire Cadence.

Section 3.11. Balance Sheet. As of the date hereof, CBC has cash and cash equivalents in excess of $40 million.

Section 3.12. Federal Reserve Board.

(a) CBC has discussed with the Federal Reserve Board its management, ownership, financial condition and structure, and has not been advised by the Federal Reserve Board of any issues relating to such matters that would preclude its becoming a bank holding company with respect to Cadence.

(b) To the Knowledge of CBC, no holder of the equity interests of CBC will require approval from the Federal Reserve Board under the Bank Holding Company Act in connection with the Merger.

IV. COVENANTS OF CADENCE

Cadence covenants and agrees with CBC as follows and to the extent applicable, CBC covenants and agrees with Cadence as follows:

Section 4.1. Approvals; Regulatory Filings; Restructuring Efforts.

(a) Shareholder Approval. Cadence will within twenty (20) days of the date hereof file the Proxy Statement with the SEC and, as soon as practicable after the Proxy Statement is cleared by the SEC, take all steps under applicable law to call, give notice of, convene and hold a meeting of its shareholders (the “Cadence Shareholder Meeting”) as promptly as practicable but within 35 days after such proxy statement is mailed for the purpose of approving this Agreement and the transactions contemplated hereby and for such other purposes consistent with the complete performance of this Agreement as may be necessary and desirable. Cadence will use its best efforts to obtain the necessary approvals by its shareholders of this Agreement and the transactions contemplated hereby. In connection with the Cadence Shareholder Meeting, Cadence shall mail the Proxy Statement and all other proxy materials for such meeting by first class mail to its shareholders within seven (7) days after the Proxy Statement is cleared by the SEC. Cadence agrees to submit this Agreement to the shareholders of Cadence.

(b) Regulatory Filings and Consents; Efforts. Cadence will, and will cause its Subsidiaries to, use their respective reasonable best efforts to take or cause to be taken all actions necessary, proper or advisable to consummate the transactions, including the Merger, contemplated by this Agreement, including such actions as CBC reasonably considers necessary, proper or advisable in connection with filing applications and registration statements with, or obtaining approvals from, all governmental entities having jurisdiction over the transactions

 

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contemplated by this Agreement. CBC and Cadence 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 Cadence or CBC, 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, including, without limitation, the preparation and submission of all necessary filings, requests for waivers and certificates with the Federal Reserve Board and the OCC.

Section 4.2. Activities of Cadence Pending Closing.

(a) From the date hereof to and including the Closing Date, as long as this Agreement remains in effect, except with the written consent of CBC, Cadence shall, and shall cause its Subsidiaries to, (i) conduct its business in the usual, regular ordinary course consistent with past practices; (ii) use its reasonable efforts to preserve intact its present business organizations, keep available the services of its present officers, directors, key employees and agents and preserve relationships and goodwill with customers and regulators and advantageous business relationships; and (iii) except as required by law or regulation or required by its duties to its shareholders and other constituents, take no action which would adversely affect or delay the ability of Cadence or CBC to obtain any approvals from any regulatory agencies or other approvals required for consummation of the transactions contemplated hereby or to perform its obligations and agreements under this Agreement.

(b) From the date hereof to and including the Closing Date, except in the usual, regular or ordinary course of business or as required by law or regulation, as long as this Agreement remains in effect or unless CBC otherwise consents in writing, Cadence shall not, and shall cause its Subsidiaries not to:

(i) make or agree to make or renew any loans or other extensions of credit to any borrower in excess of $500,000 (except (A) pursuant to commitments made prior to the date of this Agreement and disclosed to CBC, (B) loans fully secured by a certificate of deposit at Cadence, and (C) renewals, extensions and consolidations of any loans other than those loans listed in Disclosure Schedule 2.6(c); provided, however, that in the event that Cadence desires to make or renew any such loan in excess of $500,000, Cadence shall so advise CBC in writing. CBC shall notify Cadence in writing within one (1) business day of receipt of such notice whether CBC consents to such loan or extension of credit, provided that if CBC fails to notify Cadence with such time frame, CBC shall be deemed to have consented to such loan or extension of credit;

(ii) (A) adjust, split, combine or reclassify any capital stock, (B) issue or sell or obligate itself to issue or sell any shares of its capital stock (other than issuances for the Cadence Options) or any warrants, rights or options to acquire, or any securities convertible into, any shares of its capital stock, or declare or pay any dividend or make any distribution in respect of its capital stock, (C) grant any stock appreciation rights, restricted stock units or other equity-based compensation or grant to any individual, corporation or other entity any right to acquire any shares of its capital stock or (D) enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock;

(iii) open or close any branch office (or file any application to do so), or acquire or sell or agree to acquire or sell, any branch office or any deposit liabilities, and shall otherwise consult with and seek the advice of CBC with respect to basic policies relating to branching, site location and relocation;

(iv) enter into, amend or terminate any agreement of the type that is, or would be required to be, disclosed in Disclosure Schedule 2.12, or any other material agreement, (B) acquire or dispose of any material amount of assets or liabilities, except in the ordinary course of business consistent with prudent banking practices or as contemplated by this Agreement or (C) make any other investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation, limited partnership or other entity;

 

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(v) except as required under applicable law or the terms of any Cadence benefit plan existing as of the date hereof, (A) increase in any manner the compensation or benefits of any of the current or former directors, officers or employees of Company or its Subsidiaries, other than increases in annual base salary at times and in amounts in the ordinary course of business consistent with past practice, which shall not exceed 3% in the aggregate or 5% for any individual to employees at a level below senior vice president (in each case, on an annualized basis), (B) pay or grant any severance or termination pay (other than pursuant to Cadence’s policies in effect on the date hereof which have been disclosed to CBC) to, or enter into or amend any employment, consulting, noncompetition, retirement, parachute, severance or indemnification agreement with, any officer, director, employee or agent of Cadence, either individually or as part of a class of similarly situated persons (other than as required or contemplated by this Agreement), (C) become a party to, establish, amend, commence participation in, terminate or commit itself to the adoption of any stock option plan or other stock-based compensation plan, compensation, severance, pension, retirement, profit-sharing, welfare benefit, or other employee benefit plan or agreement or employment agreement with or for the benefit of any of the current or former directors, officers or employees of Cadence or its Subsidiaries (or newly hired employees), (D) accelerate the vesting or payment or cause to be funded or otherwise secure the payment of any compensation and/or benefits, (E) amend, extend, renew or enter into any collective bargaining agreement or Cadence benefit plan or make any material determinations not in the ordinary course of business consistent with past practice under any Cadence benefit plan, (F) hire or terminate the employment of any employee who has (in the case of employees to be terminated) or would have (in the case of employees to be hired) target total compensation (cash and target equity) of $75,000 or more, or (G) change any actuarial or other assumptions used to calculate funding obligations with respect to any Cadence benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP;

(vi) take any action or fail to take any action that is intended or would be reasonably likely to result in any of the conditions set forth in Articles IX, X or XI not being satisfied or prevent or materially delay the consummation of the transactions contemplated hereby, except, in every case, as may be required by applicable law or as contemplated herein;

(vii) sell, transfer, convey, mortgage, encumber or otherwise dispose of any real property (including “other real estate owned”) or interest therein with a value in excess of $500,000;

(viii) foreclose upon or otherwise acquire any commercial real property in excess of $500,000 prior to receipt and authorization by CBC of a Phase I environmental review thereof;

(ix) increase or decrease the rate of interest paid on deposit accounts, except in a manner and pursuant to policies consistent with Cadence’s past practices;

(x) establish any new Subsidiary;

(xi) voluntarily make any material change in the interest rate risk profile of Cadence from that as of June 30, 2010;

(xii) materially deviate from or modify any policies and procedures existing as of the date of this Agreement with respect to (A) classification of assets, (B) the allowance for loan losses, (C) accrual of interest on assets, (D) the extension of credit and collateral eligibility, in each case except as otherwise required by the provisions of this Agreement or by regulatory authorities;

(xiii) amend or otherwise change any provision of Cadence’s or its Subsidiaries’ Articles of Incorporation, Bylaws or other organizational documents;

(xiv) make any capital expenditure which would exceed an aggregate of $250,000;

 

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(xv) excluding deposits (other than brokered deposits), certificates of deposit, FHLB advances and borrowings consistent with past practices and permitted by Cadence’s bank regulatory authorities, undertake any additional borrowings;

(xvi) modify any outstanding loan or acquire any loan participation, not in the ordinary course of business and consistent with past practice;

(xvii) settle any claim, action or proceeding other than claims, actions or proceedings in the ordinary course of business consistent with past practice involving solely money damages not in excess of $75,000 individually or $100,000 in the aggregate, or waive or release any material rights or claims other than in the ordinary course of business consistent with past practice;

(xviii) make, change or revoke any Tax election, change an annual Tax accounting period, adopt or change any Tax accounting method, file any amended Tax Return, enter into any closing agreement with respect to Taxes, settle any Tax claim, audit, assessment or dispute or surrender any right to claim a refund of Taxes; or

(xix) commence a voluntary procedure for reorganization, arrangement, adjustment, relief or composition of indebtedness or bankruptcy, receivership or similar proceeding, or consent to an entry of an order for relief in an involuntary procedure for reorganization, arrangement, adjustment, relief or composition of indebtedness or bankruptcy, receivership or a similar proceeding or consent to the appointment of a receiver, liquidator, custodian or trustee, in each case, with respect to Cadence and its Subsidiaries, or any other liquidation or dissolution of Cadence or its Subsidiaries.

(xx) fail to use commercially reasonable efforts to take any action that is required by any agreement with the Federal Reserve Board or any other regulatory authority having jurisdiction over Cadence and its Subsidiaries.

Section 4.3. Access to Properties and Records. To the extent permitted by applicable law and under a confidentiality arrangement, Cadence shall (a) afford the executive officers and authorized representatives (including legal counsel, accountants and consultants) of CBC reasonable access during normal hours and upon reasonable notice to the personnel, properties, representatives (including legal counsel, accountants and consultants), books and records of Cadence; provided, however, that Cadence shall not be required to take any action that would provide access to or disclose information where such access or discharge would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel, provided that Cadence shall provide such access to the maximum extent possible in a manner that does not violate or prejudice such rights, interests or confidence or waiver of privilege, and (b) furnish CBC with such additional financial and operating data and other information as to the business and properties of Cadence as CBC shall, from time to time, request. All financial statements shall be prepared in accordance with GAAP applied on a consistent basis with previous accounting periods. In the event of the termination of this Agreement, CBC will return to Cadence all documents and other information obtained pursuant hereto and will keep confidential any information obtained pursuant to this Agreement.

Section 4.4. Information for Regulatory Applications. To the extent permitted by law, Cadence will furnish CBC with all information concerning Cadence required for inclusion in any application, filing, registration statement or document to be made or filed by CBC or Cadence with any federal or state regulatory or supervisory authority in connection with the transactions contemplated by this Agreement during the pendency of this Agreement. Cadence represents and warrants that all information so furnished for such applications and filings shall, to the best of its Knowledge, be true and correct in all material respects without omission of any material fact required to be stated therein to make the information not misleading. Cadence agrees at any time, upon the

 

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request of CBC, to furnish to CBC a written letter or statement confirming the accuracy of the information with respect to Cadence contained in any report or other application or statement referred to in this Agreement, and confirming that the information with respect to Cadence contained in such document or draft was furnished by Cadence expressly for use therein or, if such is not the case, indicating the inaccuracies contained in such document or indicating the information not furnished by Cadence expressly for use therein.

Section 4.5. Standstill Provision. So long as this Agreement is in effect, neither Cadence nor any of its Subsidiaries shall, and Cadence agrees and will use its best efforts to cause its directors, officers, employees, agents and representatives not to directly take any action to solicit, facilitate, initiate, or encourage the making of any Acquisition Proposal (as hereinafter defined); nor will they enter into any negotiations concerning, furnish any information relating to Cadence in connection with, or agree to any Acquisition Proposal; except where the Board of Directors of Cadence determines, based on the advice of outside counsel, that the failure to furnish any information, or participate in such negotiations or discussions, would or could reasonably be expected to constitute a potential breach of the any of the fiduciary obligations of the Board of Directors, Cadence may furnish such information to and participate in discussions and negotiations with the relevant party. Cadence agrees to notify CBC promptly of any Acquisition Proposal received.

Section 4.6. Trust Preferred Issue. As soon as practicable following the execution of this Agreement, Cadence shall notify the Trustee with respect to its issue of trust preferred securities of the execution of this Agreement and shall obtain from the Trustee confirmation that (a) no Default or Event of Default (as those terms are defined in the Indenture and related Guarantee Agreement) exists or is continuing; (b) no Default or Event of Default will occur as a result of the execution, delivery and performance by Cadence of its obligations under the terms of this Agreement; and (c) other than the amounts reflected on Disclosure Schedule 2.20(b) relating to any Extended Interest Payment Period, no other amounts are due as of the date of this Agreement under the terms of the Indenture.

Section 4.7. Employee Benefit Plans. Cadence shall execute and deliver such instruments and take such other actions as CBC may reasonably request in order to cause the amendment or termination of any of its employee defined benefit plans on terms satisfactory to CBC and Cadence in accordance with applicable law, provided that no such amendment or termination shall adversely affect any rights to any benefits or payments that may now exist or that may arise under such plans or as a result of the transactions contemplated by this Agreement, including without limitation COBRA, change in control, employment agreements, severance, retirement and other similar rights. CBC agrees that nothing in this Section will require Cadence to cause the final dissolution and liquidation of any employee benefit plan prior to the Closing Date and that this Section may be satisfied by delivery by Cadence to CBC of an executed Board resolution or other similar instrument providing for the termination of the employee benefit plan, which may be contingent on the Closing Date, immediately prior to the Closing Date. CBC agrees that CBC will not object to any amendment that Cadence may make before the Closing Date to the Cadence Financial Corporation Employees’ Pension Plan in connection with the termination of that plan to allocate any residual assets to participants and beneficiaries of that plan in a manner that complies with the Code and ERISA and that CBC will cause the termination of that plan to be administered in accordance with such amendment after the Closing Date.

Section 4.8. Cadence Stockholder Meeting. Cadence shall, in accordance with Section 4.1, duly call, give notice of, convene and hold a meeting of its stockholders (the “Cadence Stockholder Meeting”) following the clearance by the SEC of the Proxy Statement for the purpose of obtaining the approval of this Agreement by the shareholders of Cadence.

 

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V. COVENANTS OF CBC

CBC covenants and agrees with Cadence as follows:

Section 5.1. Activities of CBC Pending Closing.

(a) During the period from the date of this Agreement to the Effective Time, CBC shall use its reasonable best efforts to take all actions necessary to consummate the Merger Transaction and other transactions contemplated hereby, including the satisfaction of all conditions contained herein, and receive all regulatory approvals as soon as reasonably practicable and except with the written consent of Cadence, which consent will not be unreasonably withheld, CBC will, and it will cause each Subsidiary to use reasonable efforts to preserve intact its business organization, its commitments from its investors, and assets and maintain its rights and franchises; and voluntarily take no action or fail to use reasonable best efforts to take any action that would, or would be reasonably likely to individually or in the aggregate: (i) prevent, materially delay or materially impede the ability of CBC and Merger Sub to consummate the Merger Transaction and other transactions contemplated herein; (ii) adversely affect the ability of the parties to obtain all necessary regulatory approvals required for the transaction contemplated hereby, or increase the period of time necessary to obtain such approvals; (iii) adversely affect its ability to perform its covenants and agreements under this Agreement; or (iv) result in the representations and warranties contained in Article III of this Agreement not being true and correct in all material respects on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set forth in Articles IX or XI hereof not being satisfied.

(b) During the period from the date of this Agreement to the Effective Time, CBC will cause one or more of its representatives to confer with representatives of Cadence and report the general status of matters relating to the completion of the transactions contemplated hereby, at such times as Cadence may reasonably request. CBC will promptly notify Cadence, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), which would adversely affect the ability of the parties to obtain any necessary regulatory approvals or increase the period of time necessary to obtain such approvals; or the institution of material litigation involving CBC. CBC shall be reasonably responsive to requests by Cadence for access to such information and personnel regarding CBC and its Subsidiaries as may be reasonably necessary for Cadence to confirm that the representations and warranties of CBC contained herein are true and correct in all material respects and that the covenants of CBC contained herein have been performed in all material respects; provided, however, that CBC shall not be required to take any action that would provide access to or to disclose information where such access or disclosure, in CBC’s reasonable judgment, would interfere with the normal conduct of CBC’s business or would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel.

(c) During the period from the Date of this Agreement to the Effective Time, CBC shall take all action necessary to cause the Merger Sub to perform its obligations under this Agreement and to consummate the Merger Transaction and other transactions contemplated hereby.

Section 5.2. Regulatory Filings; Efforts. CBC will, and will cause its Subsidiaries to, use their respective reasonable best efforts to take or cause to be taken all actions and to do our cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions, including the Merger, contemplated by this Agreement in the most expeditious manner practicable, including such actions which are necessary, proper or advisable in connection with filing applications with, or obtaining approvals from, all regulatory authorities having jurisdiction over the transactions contemplated by this Agreement, including adding additional capital to Cadence Bank of such amount as may be required under Cadence’s existing consent order dated May 19, 2010.

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of Cadence and will be entitled to participate in existing employee benefit plans and programs of Cadence for the 12 months following the Effective Time, and thereafter, at CBC’s discretion, employee benefit plans and programs on terms substantially comparable in the aggregate to those maintained for similarly situated employees of CBC on the Closing Date, in accordance with the respective terms of such plans and programs, it being understood that the continued participation by the Continuing Employees in Plans sponsored or maintained by Cadence immediately prior to the Effective Time at CBC’s election shall be deemed to satisfy the foregoing. CBC shall reinstate the Cadence matching contribution for the 401(K) plan within 12 months of the Effective Time, and CBC shall take all actions necessary or appropriate and permissible under applicable law to facilitate immediate coverage of the Continuing Employees in such plans and programs from and after the Closing Date, including the following:

(a) Each Continuing Employee will be entitled to credit for prior service with Cadence for all purposes under any CBC employee benefit plans on the same basis as and to the extent Cadence recognized such service for this purpose, except as provided in clauses (ii) through (iv) of Section 5.3(b) below. Any eligibility waiting period and pre-existing condition exclusion applicable to such CBC plans and programs shall be waived with respect to each Continuing Employee and their eligible dependents unless such conditions would not have been waived under the comparable Plan in which such employee participated immediately prior to the Closing. CBC shall assume and honor any earned and unused vacation time accrued as of the Effective Time by the Continuing Employees, to the extent not paid by Cadence prior to the Effective Time. After the Closing, CBC will provide vacation time to the Continuing Employees based on their prior service credit with Cadence (on the same basis as and to the extent Cadence recognized such service for this purpose). To the extent commercially practicable and subject to the provision of such information in a form reasonably acceptable to CBC and its benefit plan administrator and insurer, CBC further agrees to credit the Continuing Employees and their eligible dependents for the year during which coverage under CBC’s group health plan begins, with any deductibles already incurred during such year, under Cadence’s group health plan. CBC further agrees that so long as it is permitted under the terms of the Plans sponsored or maintained by Cadence and applicable law (but not beyond the plan year in which the Closing Date occurs), CBC shall recognize all unexpended spending account amounts in any flexible spending account or health reimbursement account of Cadence immediately prior to the Closing Date.

(b) The Continuing Employees shall be entitled to credit for past service with Cadence for the purpose of satisfying any eligibility, vesting and service based contribution periods applicable to CBC’s employee benefit plans which are subject to Sections 401(a) and 501(a) of the Code (including, without limitation, CBC’s 401(k) Profit Sharing Plan), in each case on the same basis as and to the extent Cadence recognized such service for any such purpose; provided, however, that the foregoing shall not apply (i) with respect to benefit accrual under any defined benefit pension plan, (ii) for purposes of any new plan under which similarly-situated employees of CBC do not receive credit for prior service, (iii) for purposes of any plan that is grandfathered or frozen, either with respect to level of benefits or participation or (iv) to the extent that its application would result in a duplication of benefits with respect to the same period of service.

(c) Any Continuing Employee who is terminated by CBC other than for cause and other than due to death or disability during the six month period following the Closing Date shall be entitled to receive severance under the terms of the Cadence Severance Pay Plan and Change in Control Agreement as in effect on the date hereof from CBC, subject to the execution and effectiveness of a general release of claims in favor of Cadence and CBC. With respect to qualifying severance terminations occurring after such six month period, Continuing Employees shall participate in the CBC severance plan and be given credit for their years of service with Cadence on the same basis as and to the extent Cadence recognized service for this purpose.

(d) Any Continuing Employee terminated immediately prior to the Effective Time shall be eligible to elect to receive continuation coverage under Section 4980B of the Code on the same basis as such Continuing Employee would have been eligible to elect to receive such coverage if the Merger had not occurred, and CBC shall be responsible for administering such obligations after the Effective Time of the Merger.

 

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(e) CBC shall assume the obligations under any employment agreement, change of control agreement or other agreement listed in Disclosure Schedule 5.3(e) (the “Severance Agreements”) by operation of law in connection with the Merger, in accordance with the terms and conditions of such agreements. CBC and Cadence agree that after the Closing Date, any severance, change of control or other payments under the Severance Agreements, as applicable, as a result of the transactions contemplated by this Agreement shall be payable by CBC in accordance with the terms of the applicable Severance Agreement (each such payment, a “Change of Control Payment”); provided, however, that in the event that any bank regulatory condition or ruling or limitation applicable to or imposed on Cadence by a bank regulatory authority restricts or prohibits the payment of any such Change of Control Payment by CBC to an intended recipient in the amounts and on the terms established by the instrument establishing such payment obligations, CBC shall offer continued employment to each such intended recipient and shall enter into an employment agreement, consulting agreement or similar arrangement on terms mutually agreeable to CBC and each intended recipient of such Change of Control Payment, which agreement shall provide for payments equal to the amount of the Change of Control Payment for each such recipient (subject to the terms and conditions of any such Severance Agreement), as well as other terms and conditions reasonable and customary in such agreements and as are mutually agreed upon by CBC and each such other party.

Section 5.4. Regulatory Approvals. CBC will file all necessary regulatory documents, notices and applications not later than the 30th day after the execution of this Agreement and will provide Cadence with a copy of the non-confidential portions of notices, applications, statements or correspondence submitted to or received from regulatory authorities in connection with the Merger. CBC and Cadence will each use their reasonable best efforts to consummate the transaction at the last day of the month following 60 days of the execution of this Agreement.

Section 5.5. Indemnification and Insurance.

(a) All rights to indemnification under Cadence’s articles of incorporation, bylaws or indemnification contracts or undertakings existing in favor of those persons who are, or were, directors and officers of the Company at or prior to the date of this Agreement shall survive the Merger and CBC shall cause such rights to be observed by the Continuing Corporation to the fullest extent permitted by law for a period of six (6) years from the Effective Time.

(b) For a period of six (6) years following the Effective Time, CBC will provide the director’s and officer’s liability insurance maintained on the date of this Agreement, which policies (i) serve to reimburse the current and former officers and directors of Cadence or any of its Subsidiaries with respect to claims against such directors and officers arising from facts or events occurring before the Effective Time (including the transactions contemplated by this Agreement) and (ii) shall contain coverage that is no less favorable than Cadence’s existing policy, provided that if the coverage described above cannot be obtained or can only be obtained by paying aggregate annual premiums in excess of 300% of the aggregate annual amount currently paid by Cadence for such coverage, CBC shall only be required to provide as much coverage as is available on commercially reasonable terms by paying aggregate annual premiums equal to 300% of the current annual premium paid by Cadence; provided further that in lieu of the foregoing CBC may satisfy its obligations pursuant to this Section by purchasing a tail policy providing for coverage that is no less favorable than Cadence’s existing policy.

Section 5.6. Voting of Shares. Each of CBC and its Affiliates shall vote all shares of Cadence Common Stock beneficially owned by it or its Affiliates in favor of the adoption of this Agreement at the Cadence Shareholder Meeting.

 

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VI. MUTUAL COVENANTS OF CBC AND CADENCE

Section 6.1. Notification. Cadence shall give prompt notice to CBC, and CBC shall give prompt notice to Cadence, of (a) any change or event which, individually or in the aggregate with other such changes or events, has or would reasonably be expected to have a Material Adverse Effect on the Condition of Cadence or on the Condition of CBC, as applicable, (including, without limitation, any adverse changes or events arising from a party’s failure to comply with the requirements of any regulatory authority having jurisdiction over it, other than the consent order dated May 19, 2010), (b) any representation or warranty made by it in this Agreement becoming untrue or inaccurate in any respect, including, without limitation, as a result of any change in a Disclosure Schedule, or (c) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement.

Section 6.2. Publicity. Except as otherwise required by applicable law, the rules of the Nasdaq Stock Market or in connection with the regulatory application process, as long as this Agreement is in effect, neither CBC nor Cadence shall, nor shall they permit any of their officers, directors or representatives to, issue or cause the publication of any press release or public announcement with respect to, or otherwise make any public announcement concerning, the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld or delayed.

Section 6.3. Purchase of Cadence Common Stock. Prior to any termination of this Agreement, the parties hereto agree that, notwithstanding anything contained in the agreement between CBC and Keefe, Bruyette & Woods, Inc. dated July 23, 2010 (the “Confidentiality Agreement”) and other than compliance with applicable law, there shall be no restrictions imposed by this Agreement on CBC’s ability to purchase shares of Cadence Common Stock, including pursuant to open-market transactions or private purchases.

Section 6.4. Advisory Board. Effective as of the Closing, CBC will establish an Advisory Board of Directors for Cadence Bank and invite each of the current members of the Cadence Board of Directors to serve on such Advisory Board.

Section 6.5. Trustmark Fee. CBC shall, concurrently with the execution of this Agreement and the termination of the Trustmark Agreement, advance to Cadence $2,000,000 (the “Advance”). Cadence shall pay such funds to Trustmark and secure the termination of the Trustmark Agreement without any further obligation to Cadence or CBC. The Advance shall be forfeited and CBC shall have no further claim thereto, if this Agreement is terminated by Cadence pursuant to Section 8.1(b) or by Cadence pursuant to Sections 8.1(a)(i), (ii) or (iii) (and, in each case, at the time of such termination Cadence is not in material breach of any of its representations, warranties and covenants), otherwise Cadence shall reimburse CBC for the amount of the Advance by wire transfer of immediately available funds on the day of any termination of the merger agreement and in the case of any termination by Cadence as a condition to such termination.

Section 6.6. Offer to U.S. Treasury. CBC agrees to offer to purchase the preferred stock and warrant held by the U.S. Treasury for approximately $38 million, plus accrued dividends through the signing of the definitive purchase agreement with the U.S. Treasury with respect to such preferred stock and warrant.

VII. CLOSING

Section 7.1. Closing. On the terms and subject to the conditions set forth in this Agreement, the closing of the Merger (the “Closing”) shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52^nd Street, New York, New York, on a mutually acceptable date no later than ten business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Articles IX, X or XI (other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by mutual agreement of the parties (the “Closing Date”).

 

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Section 7.2. Effective Time. Subject to the terms and upon satisfaction of all requirements of law and the conditions specified in this Agreement, on the Closing Date, Merger Sub and Cadence shall cause the Merger to be consummated by filing with the Mississippi Secretary of State the articles of merger in accordance with the Mississippi Business Corporation Act, and the Merger shall become effective, and the effective time of the Merger shall occur, at the date and time specified in such articles of merger and the certificate approving the Merger to be issued by the Mississippi Secretary of State (“Effective Time”).

VIII. TERMINATION

Section 8.1. Termination.

(a) This Agreement may be terminated by action of CBC or Cadence at any time prior to the Effective Time if:

(i) any court of competent jurisdiction in the United States or other United States (federal or state) governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have been final and non-appealable;

(ii) any of the transactions contemplated by this Agreement are disapproved (and such disapproval has become final and non-appealable) by any regulatory authority or other person whose approval is required to consummate any of such transactions; or

(iii) the Merger shall not have become effective on or before March 30, 2011, or such later date as shall have been approved in writing by the Boards of Directors of CBC and Cadence (the “Outside Date”); provided, however, that the right to terminate under this Section 8.1(a)(iii) shall not be available to any party whose failure to fulfill any material obligation under this Agreement has been the cause of, or has resulted in, the failure of the Merger to become effective on or before such date.

(b) This Agreement may be terminated at any time prior to the Closing by Cadence if CBC shall fail to comply with any of its covenants or agreements contained in this Agreement, or breach any of the representations or warranties of CBC contained herein and such failure or breach would, individually or together with all such other then uncured breaches by CBC, constitute grounds for the conditions set forth in Articles X or XI not to be satisfied on the Closing Date. In the event Cadence desires to terminate this Agreement because of an alleged failure or breach described above, Cadence must notify CBC in writing of its intent to terminate stating the reason therefor. CBC shall have until the earlier of (i) fifteen (15) days from the receipt of such notice or (ii) the Outside Date to cure the alleged failure or breach, subject to the approval of Cadence (which approval shall not be unreasonably withheld) and if such failure or breach is so cured, Cadence shall not be entitled to terminate this Agreement pursuant to this section in respect of such failure or breach.

(c) This Agreement may be terminated at any time prior to the Closing by CBC if Cadence shall fail to comply in any material respect with any of its covenants or agreements contained in this Agreement, or breach any of the representations or warranties of Cadence contained herein and such failure or breach would, individually or together with all such other then uncured breaches by Cadence, constitute grounds for the conditions set forth in Articles IX or XI not to be satisfied on the Closing Date. In the event CBC desires to terminate this Agreement because of an alleged failure or breach described above, CBC must notify Cadence in writing of its intent to terminate stating the cause therefor. Cadence shall have until the earlier of (i) fifteen (15) days from the receipt of such notice or (ii) the Outside Date to cure the alleged failure or breach, subject to the approval of CBC (which approval shall not be unreasonably withheld) and if such failure or breach is so cured, CBC shall not be entitled to terminate this Agreement pursuant to this section in respect of such failure or breach.

 

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(d) This Agreement may be terminated at any time prior to the Closing with the mutual written consent of CBC and Cadence and the approval of such action by their respective Boards of Directors.

(e) This Agreement may be terminated by Cadence at any time prior to the date of Closing, if subsequent to the date hereof and prior to such date, Cadence shall have received an Acquisition Proposal and Cadence’s Board of Directors determines in its good faith judgment and in the exercise of its fiduciary duties, based as to legal matters on the advice of independent legal counsel and as to financial matters on the advice of Keefe, Bruyette & Woods, Inc. or an investment banking firm of national reputation, that such alternative Acquisition Proposal (if consummated pursuant to its terms) is a Superior Proposal, and that the failure to terminate this Agreement and accept such Superior Proposal would be inconsistent with the proper exercise of such fiduciary duties; provided, however, that termination under this clause (e) shall not be deemed effective until payment of the Termination Fee required by Section 8.3 is tendered to CBC.

(f) This Agreement may be terminated at any time prior to the Closing by CBC if Cadence’s Board of Directors shall have withdrawn or modified, in any manner that is adverse to CBC, its recommendation or approval of this Agreement or the Merger or recommended to Cadence shareholders acceptance or approval of any alternative Acquisition Proposal, or shall have resolved to do the foregoing.

(g) This Agreement may be terminated at any time prior to Closing by CBC or Cadence, if the shareholders of Cadence fail to approve the Merger at any meeting of shareholders called for such purpose (or any adjournment thereof).

Section 8.2. Effect of Termination. In the event of termination of this Agreement by either CBC or Cadence as provided in Section 8.1 or the abandonment of the Merger without breach by any party hereto, this Agreement (other than Sections 6.2, 6.5, 8.2, 8.3, 12.4, 12.6, 12.7, 12.14, 12.16 and 12.17 and any other section which by its terms relates to post-termination rights or obligations) shall become void and have no effect, without any liability on the part of any party or its directors, officers or shareholders. Nothing contained in this Section 8.2 shall relieve any party hereto of any liability (which the parties acknowledge and agree shall not be limited to reimbursement of expenses or out-of-pocket costs, and may include to the extent proven the benefit of the bargain lost by a party’s shareholders (taking into consideration relevant matters, including other combination opportunities and the time value of money), which shall be deemed in such event to be damages of such party) for fraud or an intentional and material breach of this Agreement.

Section 8.3. Termination Fee. To compensate CBC for entering into this Agreement, taking actions to consummate the transactions contemplated hereunder and incurring the costs and expenses related thereto and other losses and expenses, including foregoing the pursuit of other opportunities by CBC, Cadence and CBC agree as follows:

(a) if this Agreement is terminated by Cadence pursuant to Section 8.1(e) or by CBC pursuant to Section 8.1(f), then immediately prior to such termination, Cadence shall pay to CBC, by wire transfer of immediately available funds, the Termination Fee and the Expense Reimbursement.

(b) if this Agreement is terminated by either party pursuant to Section 8.1(g) and prior to such termination any person shall have proposed or publicly announced an Acquisition Proposal, then in the case of any such termination, Cadence shall on such termination pay CBC, by wire transfer of immediately available funds, the Expense Reimbursement and if an Acquisition Proposal (i) is signed within twelve months of the termination of this Agreement pursuant to Section 8.1(g) and is thereafter consummated or (ii) is consummated within twelve months of the termination of this Agreement pursuant to Section 8.1(g), then in either case Cadence shall on the consummation of such transaction pay to CBC, by wire transfer of immediately available funds, the Termination Fee.

 

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(c) The payment of the Termination Fee and Expense Reimbursement shall be CBC’s sole and exclusive remedy with respect to termination of this Agreement as set forth in this Section 8.3(a) and Section 8.3(b).

(d) For purposes of this Agreement, the Expense Reimbursement shall mean the amount of CBC’s actual, reasonable and documented out-of-pocket expenses incurred in connection with due diligence, the negotiation and preparation of this Agreement and undertaking of the transactions contemplated pursuant to this Agreement (including all Taxes, filing fees, fees and expenses of attorneys, consultants and accounting and financial advisers incurred by or on behalf of CBC in connection with the transactions contemplated pursuant to this Agreement) less any expenses previously paid by Cadence or expense allowances provided by Cadence to CBC or Contractors on CBC’s behalf; provided in no event shall the Expense Reimbursement exceed $1,000,000.

(e) For purposes of this Agreement, the Termination Fee shall mean:

(i) $2,500,000 if this Agreement is terminated on or after the date hereof and on or before the date that is 10 days from the date hereof;

(ii) $3,500,000 if this Agreement is terminated after the date that is 10 days from the date hereof and on or before the date that is 30 days from the date hereof;

(iii) $4,5000,000 if this Agreement is terminated after the date that is 30 days from the date hereof;

IX. CONDITIONS TO OBLIGATIONS OF CBC

The obligations of CBC under this Agreement are subject to the satisfaction, at or prior to the Closing Date of the following conditions, which may be waived by CBC in its sole discretion:

Section 9.1. Compliance with Representations and Covenants. (a) The representations and warranties made by Cadence in Section 2.1 (Organization), Section 2.2 (Capitalization), Section 2.3 (Corporate Approval and Authority), Section 2.18 (Absence of Certain Changes), Section 2.21 (Brokers) and Section 2.28 (Fairness Opinion) of this Agreement must have been true except in any de minimis respects and (b) the remaining representations and warranties made by Cadence in this Agreement (disregarding all Materiality and Materially Adverse Effect qualifications contained therein) shall be true and correct except where the failure to be true and correct has not and would not reasonably be expected to have individually and in the aggregate a Material Adverse Effect on the Condition of Cadence, in each case of clauses (a) and (b) above, when made and as of the Closing Date with the same force and effect as if such representations and warranties were made at and as of the Closing Date (except that all representations and warranties made as of a specific date shall be true and correct as of such date), and Cadence shall have performed or complied with all covenants and conditions required by this Agreement to be performed and complied in all material respects with prior to or at the Closing. CBC shall have been furnished with a certificate, executed by an appropriate representative of Cadence and dated as of the Closing Date, to the foregoing effect.

Section 9.2. Absence of Material Adverse Effect. There shall have been no change after the date hereof in the business or financial condition of Cadence which have a Material Adverse Effect on the Condition of Cadence.

Section 9.3. Absence of Credit Events. As measured on the second business day prior to the Closing Date, the aggregate Charge-Offs between the date of this Agreement and such second business day prior to the Closing Date shall not exceed $100 million.

 

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X. CONDITIONS TO OBLIGATIONS OF CADENCE

The obligations of Cadence under this Agreement are subject to the satisfaction, at or prior to the Closing Date, of the following conditions, which may be waived by Cadence in its sole discretion:

Section 10.1. Compliance with Representations and Covenants. The representations and warranties made by CBC in this Agreement (disregarding all Materiality and Material Adverse Effect qualifications contained therein) when made and as of the Closing Date with the same force and effect as if such representations and warranties were made at and as of the Closing Date (except that all representations and warranties made as of a specific date shall be true and correct as of such date), except where the failure of such representations to be true and correct has not had and would not reasonably be expected to have, individually and in the aggregate a Material Adverse Effect on the Condition of CBC and CBC shall have performed and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by CBC prior to or at the Closing. Cadence shall be furnished with a certificate, executed by appropriate representatives of CBC and dated as of the Closing Date, to the foregoing effect.

XI. CONDITIONS TO RESPECTIVE OBLIGATIONS OF CBC, AND CADENCE

The respective obligations of CBC and Cadence under this Agreement are subject to the satisfaction of the following conditions which may be waived by CBC and Cadence, respectively:

Section 11.1. Government Approvals. The parties to this Agreement shall have received the approval, or waiver of approval, of the transactions contemplated by this Agreement from all necessary governmental agencies and authorities, including the Federal Reserve Board and any other regulatory agency whose approval must be received in order to consummate the Merger.

Section 11.2. Shareholder Approval. This Agreement and the transactions contemplated by this Agreement shall have received the Required Shareholder Approval.

Section 11.3. 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 that prohibits or makes illegal consummation of the Merger or the other transactions contemplated hereby.

XII. MISCELLANEOUS

Section 12.1. Definitions. Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings:

(a) “Acquisition Proposal” means any written proposal (other than the transactions contemplated by this Agreement) regarding: (i) any merger, reorganization, consolidation, share exchange, recapitalization, business combination, liquidation, dissolution, or other similar transaction involving at least 51% of the assets or deposits of Cadence or any Cadence Subsidiary or equity securities representing 51% or more of the voting power of Cadence or any Subsidiary, in a single transaction or series of related transactions; (ii) any tender offer or exchange offer for all or substantially all shares of the capital stock of Cadence or the filing of a registration statement under the Securities Act in connection therewith; or (iii) any public announcement of a proposal, plan, or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

 

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(b) “Affiliate” means any natural person, corporation, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or governmental authority that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the person specified.

(c) “Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412, 430 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and (v) under corresponding or similar provisions of foreign laws or regulations.

(d) “Environmental Laws,” as used in this Agreement, means any applicable federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now in effect and in each case as amended to date, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree, or judgment, relating to the environment, human health or safety, or Hazardous Materials, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601, et seq. ; The Hazardous Materials Transportation Authorization Act, as amended, 49 U.S.C. § 5101, et seq. ; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. § 6901, et seq. ; the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1201, et seq. ; the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq. ; the Clean Air Act, 42 U.S.C. § 7401, et seq. ; and the Safe Drinking Water Act, 42 U.S.C. § 300f, et seq.

(e) “Knowledge” means the actual knowledge of the senior executive officers of the respective parties.

(f) “Material Adverse Effect” means, (i) with respect to Cadence, any effect that, in the context of difficult and possibly deteriorating market conditions, is material and adverse to the business, financial condition or results of operations of Cadence and the Cadence Subsidiaries taken as a whole other than those items set forth on Disclosure Schedule 12.1 (the “Condition of Cadence”), (ii) with respect to CBC, in the context of difficult and possibly deteriorating market conditions, any effect that is material and adverse to the business, financial condition or results of operations of CBC and the CBC Subsidiaries taken as a whole (the “Condition of CBC”), or (iii) with respect to CBC or Cadence, any effect that materially threatens or materially impedes the consummation of the transactions contemplated by this Agreement; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (a) other than with respect to changes in laws and regulations that would reasonably be expected to have the effect of making illegal or commercially impracticable the carrying on of the business of the parties hereto and their respective subsidiaries, changes in laws and regulations affecting banks or thrift institutions or their holding companies generally, or interpretations thereof by courts or governmental entities, (b) changes in GAAP or regulatory accounting principles generally applicable to financial institutions and their holding companies, (c) changes after the date hereof in general economic and market conditions, whether global, national or regional in nature (including prevailing interest rates, currency exchange rates, securities markets or other economic or monetary conditions) affecting banks or bank holding companies generally, (d) actions and omissions of a party hereto (or any of its Subsidiaries) taken with the prior written consent of the other party, (e) the announcement of this Agreement on the business, financial condition or results of operations of the parties and their respective subsidiaries, including acts of competitors and losses of employees to the extent resulting therefrom, the expenses incurred by the parties hereto in consummating the transactions contemplated by this Agreement and, in the case of CBC, the payment of the Merger Consideration or Termination Fee, (f) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, unless it uniquely affects either or both of the parties or any of their Subsidiaries, (g) any failure by Cadence or its Subsidiaries to meet any internal or published industry analyst projections or forecasts or estimates of revenues or earnings

 

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for any period (but not including any underlying causes thereof), or (h) changes in the trading price of a party’s common stock, in and of itself (but not including any underlying causes thereof), except, in the cases of clauses (a), (b), (c) or (f), to the extent such effect has a disproportionate effect on Cadence and its Subsidiaries, taken as a whole, when compared to other companies operating in the same industries in which Cadence and its Subsidiaries operate. Any determination as to whether any condition or other matter has a Material Adverse Effect shall be made only after taking into account all proceeds or amounts that are expected to be received with respect to such condition or matter from insurance policies.

(g) “Regulatory Reports” means those reports of examination or compliance by regulatory authorities.

(h) “Subsidiary” or “Subsidiaries” shall mean, when used with reference to an entity, any corporation, association or other entity in which 50% of the issued and outstanding voting securities are owned directly or indirectly by any such entity, or any partnership, joint venture, limited liability company or other enterprise in which any entity has, directly or indirectly, any equity interest.

(i) “Superior Proposal” means a written Acquisition Proposal made by a person that the Board of Directors of Cadence determines in its good faith judgment to be more favorable to Cadence’s shareholders than the Merger (taking into account, in good faith, the advice of Cadence’s independent counsel and financial advisor).

(j) “Tax” or “Taxes” shall mean any and all taxes, charges, fees, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, excise, stamp, real or personal property, ad valorem, withholding, social security (or similar), unemployment, occupation, use, production, service, service use, license, net worth, payroll, franchise, severance, transfer, recording, employment, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, profits, disability, sales, registration, value added, alternative or add-on minimum, estimated or other taxes, assessments or charges imposed by any federal, state, local or foreign governmental entity and any interest, penalties, or additions to tax attributable thereto.

(k) “Tax Return” shall mean any return, declaration, report, form or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

Section 12.2. Non-Survival of Representations and Warranties. The representations, warranties, covenants and agreements of CBC and Cadence contained in this Agreement shall terminate at the Closing.

Section 12.3. Amendments. This Agreement may be amended only by a written instrument signed by CBC and Cadence at any time prior to the Effective Time with respect to any of the terms contained herein; provided, however, that the Merger Consideration to be received by the shareholders of Cadence pursuant to this Agreement shall not be decreased subsequent to the approval of the transactions contemplated by the Agreement without the further approval by such shareholders.

Section 12.4. Expenses. Subject to the obligations of Cadence set forth in Section 8.3 hereto, whether or not the transactions provided for herein are consummated, each party to this Agreement will pay its respective expenses incurred in connection with the preparation and performance of its obligations under this Agreement. Similarly, each party agrees to indemnify the other parties against any cost, expense or liability (including reasonable attorneys’ fees) in respect of any claim made by any party for a broker’s or finder’s fee in connection with this transaction other than one based on communications between the party and the claimant seeking indemnification. Except as disclosed herein, CBC and Cadence represent and warrant to each other that neither of them, nor any of their agents, employees or representatives, has incurred any liability for any commissions or brokerage fees in connection with this transaction.

 

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Section 12.5. Notices. Except as explicitly provided herein, any notice given hereunder shall be in writing and shall be delivered in person or mailed by first class mail, postage prepaid or sent by facsimile, courier or personal delivery to the parties at the following addresses unless by such notice a different address shall have been designated:

If to CBC or Merger Sub:

Community Bancorp LLC

Sage Plaza

5151 San Felipe, Suite 425

Houston, Texas 77056

Attention: Paul B. Murphy, Jr.

With a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention:   Edward D. Herlihy

                    David E. Shapiro

If to Cadence:

Cadence Financial Corporation

PO Box 1187

Starkville, Mississippi 39760

Attention: Lewis F. Mallory, Jr.

With a copy to:

Jackson Walker L.L.P.

1401 McKinney Street, Suite 1900

Houston, Texas 77010

Attention: Mark L. Jones

and to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention: William L. Taylor

All notices sent by mail as provided above shall be deemed delivered three (3) days after deposit in the mail. All notices sent by courier as provided above shall be deemed delivered on the date set forth on the courier’s delivery receipt and all notices sent by facsimile shall be deemed delivered upon confirmation of receipt. All other notices shall be deemed delivered when actually received. Any party to this Agreement may change its address for the giving of notice specified above by giving notice as herein provided.

 

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Section 12.6. Controlling Law. All questions concerning the validity, operation and interpretation of this Agreement and the performance of the obligations imposed upon the parties hereunder shall be governed by the laws of the State of Mississippi and, to the extent applicable, by the laws of the United States of America in any action or proceeding between the parties arising out of or related to this Agreement and transactions contemplated hereby, the parties hereby consent and submit to the exclusive jurisdiction and venue of the Mississippi State Court in Jackson, Mississippi.

Section 12.7. Headings. The headings and titles to the sections of this Agreement are inserted for convenience only and shall not be deemed a part hereof or affect the construction or interpretation of any provision hereof.

Section 12.8. Modifications or Waiver. No termination, cancellation, modification, amendment, deletion, addition or other change in this Agreement, or any provision hereof, or waiver of any right or remedy herein provided, shall be effective for any purpose unless specifically set forth in a writing signed by the party or parties to be bound thereby. The waiver of any right or remedy in respect to any occurrence or event on one occasion shall not be deemed a waiver of such right or remedy in respect to such occurrence or event on any other occasion.

Section 12.9. Severability. Any provision hereof prohibited by or unlawful or unenforceable under any applicable law or any jurisdiction shall as to such jurisdiction be ineffective, without affecting any other provision of this Agreement, or shall be deemed to be severed or modified to conform with such law, and the remaining provisions of this Agreement shall remain in force, provided that the purpose of the Agreement can be effected. To the fullest extent, however, that the provisions of such applicable law may be waived, they are hereby waived, to the end that this Agreement be deemed to be a valid and binding agreement enforceable in accordance with its terms.

Section 12.10. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, but shall not be assigned by any party without the prior written consent of the other parties.

Section 12.11. Consolidation of Agreements. All understandings and agreements heretofore made between the parties hereto are merged in this Agreement which (together with the Confidentiality Agreement (except as modified herein) and any agreements executed by the parties hereto contemporaneously with or subsequent to the execution of this Agreement) shall be the sole expression of the agreement of the parties respecting the Merger.

Section 12.12. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall be deemed to constitute one and the same instrument.

Section 12.13. Binding on Successors. Except as otherwise provided herein, this Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective heirs, executors, trustees, administrators, guardians, successors and assigns.

Section 12.14. Gender. Any pronoun used herein shall refer to any gender, either masculine, feminine or neuter, as the context requires.

Section 12.15. Disclosures. Any disclosure made in any document delivered pursuant to this Agreement or referred to or described in writing in any section of this Agreement or any schedule attached hereto shall be deemed to be disclosure for purposes of any other section or subsection to which the relevance of such item is reasonably apparent.

Section 12.16. Interpretation. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless

 

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otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The Disclosure Schedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. This Agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law. The parties hereto acknowledge that each party hereto has reviewed, and has had an opportunity to have its counsel review, this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party, or any similar rule operating against the drafter of an agreement, shall not be applicable to the construction or interpretation of this Agreement.

Section 12.17. No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto, any benefit, right or remedies, except that the provisions of Section 5.5 shall inure to the benefit of the persons referred to in such Section.

Section 12.18. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including to cause CBC to call the subscriptions and capital commitments referred to in Section 3.9 to the extent necessary to pay any amounts due and payable by CBC pursuant to the terms of this Agreement) in any court having jurisdiction pursuant to Section 12.6, in addition to any other remedy to which they are entitled at law or in equity.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

 

[Signature Page to Agreement and Plan of Merger]

 

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APPENDIX B

October 5, 2010

The Board of Directors

Cadence Financial Corporation

301 East Main Street

Starkville, Mississippi 39759

Members of the Board:

You have requested our opinion as investment bankers as to the fairness, from a financial point of view, to the shareholders of Cadence Financial Corporation (“CADE”) of the Per Share Common Stock Consideration, as defined below, in the proposed merger (the “Merger”) of CADE with and into Maroon Acquisition Corp., a wholly-owned subsidiary of Community Bancorp LLC (“CBC”), pursuant to the Agreement and Plan of Merger, dated as of October 5, 2010 (the most recent draft made available to us) between CADE and CBC (the “Agreement”). Pursuant to the terms of the Agreement, each outstanding share of CADE common stock (“CADE Common Stock”), par value $1.00 per share, will receive $2.50 per share in cash (the “Per Share Common Stock Consideration”). We further understand that, in connection with the Merger, CBC will purchase from the United States Department of the Treasury all of the outstanding shares of Series A Variable Rate Cumulative Perpetual Senior Preferred Stock of CADE and the associated warrant to purchase common stock issued by CADE (together the “TARP Purchase”). The terms and conditions of the Merger are more fully set forth in the Agreement.

Keefe, Bruyette & Woods, Inc., has acted as financial advisor to CADE. As part of our investment banking business, we are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of the banking enterprises. In the ordinary course of our business as a broker-dealer, we may, from time to time, purchase securities from, and sell securities to, CADE and CBC, and as a market maker in securities, we may from time to time have a long or short position in, and buy or sell, debt or equity securities of CADE for our own account and for the accounts of our customers. To the extent we have any such positions as of the date of this opinion it has been disclosed to CADE. We have acted exclusively for the Board of Directors of CADE in rendering this fairness opinion and will receive a fee from CADE for our services. A portion of our fee is contingent upon the successful completion of the Merger. During the past two years we acted as financial advisor to CADE and received a fee for our services.

In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of CADE and CBC and the Merger, including among other things, the following: (i) the Agreement; (ii) the Annual report to stockholders and Annual Report on Form 10-K for the three years ended December 31, 2009 of CADE; (iii) certain interim reports to stockholders and Quarterly Reports on Form 10-Q of CADE and certain other communications from CADE to its stockholders; and (iv) other financial information concerning the businesses and operations of CADE and CBC furnished to us by CADE and CBC for purposes of our analysis. We have also held discussions with senior management of CADE and CBC regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as we have deemed relevant to our inquiry. In addition, we have compared certain financial and stock market information for CADE with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the banking industry and performed such other studies and analyses as we considered appropriate.

In conducting our review and arriving at our opinion, we have relied upon the accuracy and completeness of all of the financial and other information provided to us or publicly available and we have not independently

 

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verified the accuracy or completeness of any such information or assumed any responsibility for such verification or accuracy. We have relied upon the management of CADE and CBC as to the reasonableness and achievability of the financial and operating forecasts and projections (and the assumptions and bases therefor) provided to us, and we have assumed that such forecasts and projections reflect the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated by such managements. We are not experts in the independent verification of the adequacy of allowances for loan and lease losses and we have assumed that the aggregate allowance for loan and lease losses for CADE is adequate to cover such losses. In rendering our opinion, we have not made or obtained any evaluations or appraisals of the property, assets or liabilities of CADE, nor have we examined any individual credit files.

We have assumed that, in all respects material to our analyses, the following: (i) the Merger will be completed substantially in accordance with the terms set forth in the Agreement with no adjustments to the Per Share Common Stock Consideration; (ii) the representations and warranties of each party in the Agreement and in all related documents and instruments referred to in the Agreement are true and correct; (iii) each party to the Agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents; (iv) all conditions to the completion of the Merger will be satisfied, including the TARP Purchase, without any waivers or modifications of the Merger Agreement; and (v) 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.

We have considered such financial and other factors as we have deemed appropriate under the circumstances, including, among others, the following: (i) the historical and current financial position and results of operations of CADE; (ii) the assets and liabilities of CADE; and (iii) the nature and terms of certain other merger transactions involving banks and bank holding companies. We have also taken into account our assessment of general economic, market and financial conditions and our experience in other similar transactions, as well as our experience in securities valuation and knowledge of the banking industry generally. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof. Our opinion does not address the underlying business decision of CADE to engage in the Merger, or the relative merits of the Merger as compared to any strategic alternatives that may be available to CADE.

We are not expressing any opinion about the fairness of the amount or nature of the compensation to any of the CADE or CBC’s officers, directors or employees, or any class of such persons, relative to the compensation to the public shareholders of CADE in connection with the transaction. Additionally, we were not requested to, nor are we expressing any opinion with respect to the TARP Purchase to be effected by CBC.

This opinion has been reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the requirements of Rule 2290 of the NASD Rules of the Financial Institutions Regulatory Authority.

Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Per Share Common Stock Consideration in the Merger is fair, from a financial point of view, to holders of CADE Common Stock.

Very truly yours,

Keefe, Bruyette & Woods, Inc.

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 10-K

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-15773

Cadence Financial Corporation

(Exact name of registrant as specified in its charter)

 

Mississippi		64-0694775
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
301 East Main Street, Starkville, Mississippi		39759
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:

(662) 323-1341

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Common stock, $1 par value		The NASDAQ Global Select Market
(Title of Class)		(Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ¨		Accelerated filer  ¨		Non-accelerated filer  x		Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

Aggregate market value of the voting stock held by nonaffiliates as of June 30, 2009, was approximately $23,611,093, based on most recent sale.

The number of shares outstanding of the registrant’s common stock as of February 28, 2010 is 11,912,564 shares.

Documents incorporated by reference

Portions of the Corporation’s proxy statement for the 2010 annual meeting of shareholders expected to be filed on or before March 29, 2010 are incorporated by reference into Part III and portions of the Corporation’s annual report to shareholders are incorporated by reference into Part IV.

 

 

 

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FORM 10-K

INDEX

 

Part I
Item 1		Business		C-3
Item 1A		Risk Factors		C-13
Item 1B		Unresolved Staff Comments		C-22
Item 2		Properties		C-22
Item 3		Legal Proceedings		C-22
Item 4		Reserved		C-23
Part II
Item 5		Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		C-23
Item 6		Selected Financial Data		C-25
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations		C-35
Item 7A		Quantitative and Qualitative Disclosures about Market Risk		C-56
Item 8		Financial Statements and Supplementary Data