Joint Venture Agreement Dated As of 8-26-99

EXHIBIT 10.3


JOINT VENTURE AGREEMENT


This JOINT VENTURE AGREEMENT (the "Agreement") is made as of August 26, 1999 by and between CUMBERLAND BANCORP, INC., a corporation organized and existing under the laws of the State of Tennessee, with offices at 4205 Hillsboro Road, Suite 212, Nashville, Tennessee 37215, and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended ("Cumberland") and INSCORP, a corporation organized and existing under the laws of the State of Tennessee with offices at 2500 Hillsboro Rd., Suite 200, Tennessee 37212 (hereinafter referred to as "INSCORP").


WITNESSETH:


WHEREAS, Insurors Bank of Tennessee (In Organization) will be formed via a branch incorporation pursuant to Tennessee banking law by Cumberland Bank, a bank subsidiary of Cumberland Bancorp and shall be state-chartered and a member of the Federal Reserve.


WHEREAS, Insurors Bank of Tennessee (In Organization) intends to become Insurors Bank of Tennessee ("IBT") by successful application to the Tennessee Commissioner of Financial Institutions for a bank charter under T.C.A. Section 45-2-614(c), but does not intend to transact any banking business unless and until additional successful applications are made to various bank regulatory agencies to obtain deposit insurance, Federal Reserve membership and approval to offer 50% ownership of IBT for sale to INSCORP;


WHEREAS, INSCORP is a new Tennessee corporation formed by a group of Tennessee residents who desire to operate INSCORP as a holding company of IBT and to undertake an offering among other Tennessee residents of INSCORP common stock for the purpose of purchasing 50% ownership of IBT; and


WHEREAS, Cumberland and INSCORP desire to enter into a joint venture agreement to promote the successful formation and mutual ownership of such state member bank with its main office to be located in Nashville, Davidson County, Tennessee, in accordance with the terms and conditions set forth herein.


NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants contained herein, Cumberland and INSCORP hereby agree as follows:


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ARTICLE 1.


DEFINITIONS


In addition to terms defined elsewhere herein, the following terms shall have the following meanings when used herein (any term defined in the singular shall have the same meaning when used in the plural and vice versa):


1.1 "AFFILIATE" of Cumberland or INSCORP shall mean any corporation, company, partnership, joint venture, association, organization or other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Party.


1.2 "BENEFICIAL OWNERSHIP" by a person of a security, or a security "beneficially owned" by a person, shall be determined for the purposes of this Agreement in the same manner as provided in Rule 13d-3 of the Securities Exchange Act of 1934, as amended.


1.3 "BOARD OF DIRECTORS" OR "BOARD" shall mean the Board of Directors of IBT.


1.4 "BYLAWS" shall mean the bylaws of the IBT.


1.5 "CHARTER" shall mean the charter of the IBT.


1.6 "CLOSING" shall mean the closing described in Article 7 herein to consummate the transactions contemplated hereby.


1.7 "COMMON STOCK" shall mean the common stock of the IBT, no par value.


1.8 "DIRECTOR" shall mean a member of the Board of Directors of the IBT.


1.9 "EQUITY SECURITIES" shall mean any securities having voting rights with respect to the election of the Board.


1.10 "FAIR MARKET VALUE" of the Common Stock shall mean the value as determined by an annual evaluation of the Common Stock of the IBT, without taking into consideration an acquisition or control premium for such shares. Fair market value shall be determined by agreement of the parties at each annual meeting of shareholders or, in the event such agreement can not be reached by the parties, then the parties shall select an appraiser/evaluator to determine the value of applicable stock. In the event the parties can not agree upon one such appraiser/evaluator, then each party shall select an appraiser/evaluator to determine the value of applicable stock and, if necessary, the two appraisers/evaluators will select a third appraiser/evaluator and two of the three agreeing to the value for stock will set and determine its value.


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1.11 "FEDERAL BANK REGULATORY AUTHORITIES" shall mean the Federal Deposit Insurance Corporation ("FDIC") and the Board of Governors of the Federal Reserve System ("FRB"), as the context requires.


1.12 "GOVERNMENTAL APPROVAL" shall mean any consent, approval, authorization, permit, exemption, license or other action of or by, ro any notice to or filing or registration with, any governmental authority or agency or regulatory or administrative body, including Federal Bank Regulatory Authorities and the State Bank Regulatory Authority and the expiration of any required stays to such approval.


1.13 "IBT" shall mean the state member bank which will be formed by Cumberland through a branch incorporation pursuant to Tennessee state law.


1.14 "INITIAL BUSINESS PLAN" shall mean the initial three (3) year business plan of the IBT submitted to Federal and State Bank Regulatory Authorities.


1.15 "INITIAL CAPITAL" shall mean the initial capital of the IBT agreed to by the Parties.


1.16 "OPERATING AND SERVICES AGREEMENT" shall have the meaning set forth in Section 7.4.4 herein.


1.17 "PARTIES" shall mean Cumberland and INSCORP.


1.18 "PRO RATA SHARE" shall mean a holder's pro-rata share of outstanding Equity Securities which shall be a fraction calculated by dividing (i) the number of shares of Common Stock beneficially owned by the holder as of the applicable date, by (ii) the total number of shares of Common Stock outstanding as of such date.


1.19 "REPRESENTATIVES" shall have the meaning set forth in Section 4.2.1 herein.


1.20 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.


1.21 "SHARES" shall have the meaning set forth in Section 3.1.1 herein.


1.22 "STATE BANK REGULATORY AUTHORITY" shall mean the Tennessee Department of Financial Institutions.


1.23 "SUBSIDIARY" of Cumberland shall mean any corporation, company or other entity more than fifty percent (50%) of whose securities having voting rights with respect to the election of directors or other ownership interests representing the right to make decisions for such entity are owned or controlled, directly or indirectly, by such Party, but such corporation or other entity shall be deemed to be a "Subsidiary" only for so long as such ownership or control exists.


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1.24 "TRANSFER" shall mean any actual or proposed sale or other disposition of all or a portion of any Party's interest in such Party's Equity Securities (legal or equitable) by any means, direct or indirect.


ARTICLE 2.


FORMATION OF THE STATE MEMBER BANK


2.1 FORMATION OF THE STATE MEMBER BANK. Prior to the Closing, Cumberland shall form IBT as a state member bank pursuant to Tenn. Code Ann. Section 45-2-614(c) and CFR _______ of the Federal Reserve System, as amended, for the purposes set forth below. Upon approval of IBT's charter by the Commissioner of Financial Institutions, IBT shall be owned by Cumberland, who shall transfer fifty percent (50%) of the ownership of IBT to INSCORP at the Closing by issuance of Common Stock at a price of $10 per share in the manner described in Section 3.1 below.


2.2 PROPOSED NAME. The proposed name of the IBT shall be ("Insurors Bank of Tennessee.")


2.3 RESPONSIBILITY AND COSTS OF FORMATION.


(a) Cumberland and INSCORP shall share equally all costs incurred with the formation of IBT. Cumberland shall be responsible for preparing and filing all regulatory applications necessary to form the IBT. All costs incurred in connection with the formation of INSCORP, as a holding company of the IBT, shall be paid for by the organizers of INSCORP.


(b) INSCORP and its organizers shall be responsible for preparing and filing the offering circular and all regulatory applications necessary for INSCORP to become a bank holding company. Cumberland will provide personnel and resources to assist in this endeavor at no additional cost to INSCORP.


(c) Cumberland and INSCORP have each contributed $180,000 into an escrow account pursuant to an escrow agreement attached hereto as Exhibit A and incorporated hereby into this Agreement. Upon execution of this Agreement, all funds in the escrow account shall be released from the escrow account pursuant to the escrow agreement and deposited into an organizational expense fund checking account for the purpose of payment of all costs incurred in the formation of IBT as set forth above and pursuant to a joint resolution of Cumberland and the organizers of INSCORP attached hereto as Exhibit B and incorporated hereby into this Agreement. At the Closing, contributions by Cumberland and INSCORP to the expense fund will be converted into stock ownership in IBT at the common price of $10 per share.


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ARTICLE 3.


CAPITALIZATION OF THE IBT


3.1 INITIAL CAPITALIZATION OF THE IBT.


3.1.1 SUBSCRIPTIONS FOR STOCK.


At the Closing, the IBT shall issue to Cumberland, and Cumberland shall subscribe for, 225,000 shares of Common Stock at a price of $10 per share that shall be paid for from its cash assets and from funds it initially contributed into the escrow account described in Section 2.3 above. At the Closing, the IBT shall issue to INSCORP, and INSCORP shall subscribe for, 225,000 shares of Common Stock at a price of $10 per share, which shall be paid for from funds INSCORP initially contributed into the escrow account, as well as from the proceeds of its stock offering. The IBT shall deliver to each Party at the Closing a certificate or certificates registered in the name of such Party evidencing the shares of Common Stock subscribed for by such Party.


3.1.2 INITIAL CAPITAL CONTRIBUTIONS. In consideration for their respective equity interests in the IBT, at the Closing, each of Cumberland and INSCORP shall make the following contributions to the capital of the IBT:


(a) Cumberland shall contribute cash in an amount equal to
fifty percent (50%) of the Initial Capital; and


(b) INSCORP shall contribute cash in an amount equal to
fifty percent (50%) of the Initial Capital.


3.2 ADDITIONAL CAPITAL. In the event that the shareholders of the IBT agree to provide, or are required by State or Federal Bank Regulatory Authorities to provide, additional capital to the IBT, Cumberland and INSCORP each shall be required to make capital contributions in proportion to its respective Pro Rata Share of the outstanding Equity Securities of the IBT and, if any such capital contribution is not made by any Party, then that Party's Pro Rata Share shall be diluted accordingly.


ARTICLE 4.


MANAGEMENT OF THE IBT


4.1 SPECIAL SHAREHOLDER APPROVALS. In addition to such approval requirements specified in the Charter or Bylaws of the IBT or under law, each of the following actions shall require authorization by resolution of the shareholders of the IBT which is approved by each of the Cumberland and INSCORP for so long as each Party beneficially owns at least fifty percent (50%) of the outstanding Equity Securities of the IBT:


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(a) The amendment of the Charter;


(b) The increase or decrease in the authorized capital stock of
the IBT;


(c) The creation by the IBT of any new classes or series of Equity
Securities or any other form of Equity Securities;


(d) The increase or decrease in the number of Directors; the
election of any additional directors required by Federal
Bank Regulatory Authorities, as contemplated under Section
4.2.1(a) below; and the election of any odd number Director;


(e) The sale, lease, transfer or other disposition of all or
substantially all of the assets of the IBT;


(f) The merger or consolidation of the IBT with or into any
other entity or a share exchange involving the Equity
Securities of the IBT and those of another entity;


(g) The issuance by the IBT to any third party of any shares of
stock or other Equity Securities of the IBT;


(h) The dissolution or liquidation of the IBT; and


(i) The amendment of this Agreement.


4.2 BOARD OF DIRECTORS


4.2.1 MEMBERSHIP.


(a) The Board of Directors of the IBT shall originally consist of a maximum of fourteen (14) Directors, a maximum of eleven (11) of whom shall be designated by INSCORP for so long as INSCORP beneficially owns at least fifty percent (50%) of the outstanding Equity Securities of the IBT (the "INSCORP Representatives"), and a maximum of three (3) of whom shall be designated by Cumberland for so long as Cumberland beneficially owns at least fifty percent (50%) of the outstanding Equity Securities of the IBT (the "Cumberland Representatives"). If required by State or Federal Bank Regulatory Authorities, the Board shall consist of an additional number of Directors who are not officers, directors or employees of either INSCORP or Cumberland with half of such outside Directors to be nominated by INSCORP and reasonably acceptable to Cumberland and the other half of such outside Directors to be nominated be Cumberland and reasonably acceptable to INSCORP. INSCORP will have a minimum of one representative on the board of directors of Cumberland.


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(b) Each of INSCORP and Cumberland shall take all actions necessary to cause the nomination, election and/or appointment to the Board of the INSCORP Representatives and the Cumberland Representatives, including voting all of its shares of Equity Securities to cause the election of the INSCORP Representatives and the Cumberland Representatives. If an INSCORP Representative or a Cumberland Representative shall cease to be a Director for any reason, then INSCORP and Cumberland shall promptly cause a successor nominated by INSCORP or Cumberland, as the case may be, to be elected or appointed to the Board.


(c) Should either of INSCORP or Cumberland cease to beneficially own at least fifty percent (50%) of the Equity Securities of the IBT, the provisions of Section 4.2.1 above regarding the number of the INSCORP Representatives and Cumberland Representatives on the Board of Directors shall no longer apply and, unless INSCORP and Cumberland agree otherwise, each Party's representation on the Board shall be in proportion to such Party's Pro Rata Share of Equity Securities.


ARTICLE 5.


REPRESENTATIONS, WARRANTIES AND COVENANTS
OF INSCORP


INSCORP hereby represents, warrants and covenants to Cumberland as follows:


5.1 AUTHORITY AND BINDING AGREEMENT.


(a) INSCORP is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. INSCORP has the full power and authority to execute, deliver and, subject to receipt of any required Governmental Approvals from Federal Bank Regulatory Authorities, perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by INSCORP of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on the part of INSCORP by all necessary action, organizational or otherwise.


(b) This Agreement has been duly executed and delivered by an authorized officer of INSCORP, and is a legal, valid and binding obligation of INSCORP enforceable against it in accordance with its terms, except as enforcement thereof may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and the effect of applicable bankruptcy, insolvency, moratorium and other similar laws of general application relating to or affecting creditors' fights generally, including, without limitation, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers.


5.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any of the terms or provisions of, or constitute a default under, or


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conflict with (a) the certificate of incorporation and bylaws or similar constitutive documents of INSCORP, (b) any material agreement, indenture or other instrument to which INSCORP is a party or by which it is bound, (c) any judgment, decree, order, writ, award or injunction of any court, governmental body or arbitrator, or (d) any law, rule or regulation applicable to INSCORP, except, in the case of subclause (d), for violations, breaches, defaults or conflicts that are not, singly or in the aggregate, material to INSCORP's ability to consummate the transactions contemplated hereby.


5.3 CONSENTS AND APPROVALS. Except for the Governmental Approvals listed on Schedule 5.3 and 6.3 attached hereto, no consent, approval or authorization of or from any governmental entity or any other person not a party to this Agreement, whether prescribed by law, rule, regulation, contract or agreement, is required for the execution, delivery and performance of this Agreement by INSCORP, or the consummation by INSCORP of the transactions contemplated hereby.


ARTICLE 6.


REPRESENTATIONS, WARRANTIES AND COVENANTS
OF CUMBERLAND


Cumberland hereby represents, warrants and covenants to INSCORP as follows:


6.1 AUTHORITY AND BINDING AGREEMENT.


(a) Cumberland is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Cumberland has the full power and authority to execute, deliver and, subject to receipt of all required Governmental Approvals from Federal Bank Regulatory Authorities, perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Cumberland of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on the part of Cumberland by all necessary action, organizational or otherwise. ...