Exhibit 99(b)
AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
By AND AMONG
YADKIN VALLEY BANK and TRUST COMPANY
AND
HIGH COUNTRY FINANCIAL CORPORATION
AND
HIGH COUNTRY BANK
August 27, 2003
TABLE OF CONTENTS
ARTICLE I THE MERGER..........................................................................................1
1.01. Names of Merging Corporations.......................................................................1
1.02. Nature of Transaction; Plan of Merger...............................................................1
1.03. Effect of Merger; Surviving Corporation.............................................................2
1.04. Assets and Liabilities of HC Financial..............................................................2
1.05. Conversion and Exchange of Stock....................................................................2
(a) Merger Consideration................................................................................2
(b) Stock Consideration Exchange Ratio..................................................................2
(c) Election of Form of Consideration...................................................................2
(d) Required Ratio of Consideration; Allocations of Consideration.......................................3
(e) Notification and Payment Procedures; Book Entry Ownership...........................................4
(f) HC Financial Certificates...........................................................................4
(g) Voting Rights and Dividends.........................................................................4
(h) Antidilutive Adjustments............................................................................4
(i) Dissenters..........................................................................................5
1.06. Bank Merger.........................................................................................5
1.07. Effect of Bank Merger; Surviving Corporation........................................................5
1.08 Articles of Incorporation, Bylaws and Management....................................................5
1.09. Closing; Effective Time.............................................................................5
1.10 Outstanding Yadkin Stock............................................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF HC FINANCIAL AND HIGH COUNTRY....................................6
2.01. Organization; Standing; Power.......................................................................6
2.02 Capital Stock.......................................................................................6
2.03. Principal Shareholders..............................................................................6
2.04. Subsidiaries........................................................................................7
2.05. Convertible Securities, Options, Etc................................................................7
2.06. Authorization and Validity of Agreement.............................................................7
2.07. Validity of Transactions; Absence of Required Consents or Waivers...................................7
2.08. Books and Records of HC Financial and High Country..................................................8
2.09. Reports of HC Financial and High Country............................................................8
2.10. HC Financial Financial Statements...................................................................8
2.11. Tax Returns and Other Tax Matters...................................................................8
2.12. Absence of Material Adverse Changes or Certain Other Events.........................................9
2.13. Absence of Undisclosed Liabilities..................................................................9
2.14. Compliance with Existing Obligations................................................................9
2.15. Litigation and Compliance with Law..................................................................9
2.16. Real Properties...................................................................................10
2.17. Loans, Accounts, Notes and Other Receivables.......................................................11
2.18. Securities Portfolio and Investments...............................................................11
2.19. Personal Property and Other Assets.................................................................12
2.20. Patents and Trademarks.............................................................................12
2.21. Environmental Matters..............................................................................12
2.22. Absence of Brokerage or Finder's Commissions.......................................................14
2.23. Material Contracts.................................................................................14
2.24. Employment Matters; Employee Relations.............................................................14
2.25. Employment Agreements; Employee Benefit Plans......................................................15
2.26. Insurance..........................................................................................16
2.27. Insurance of Deposits..............................................................................17
2.28. Obstacles to Regulatory Approval...................................................................17
2.29. Disclosure.........................................................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF YADKIN.........................................................17
3.01. Organization; Standing; Power......................................................................17
3.02. Capital Stock......................................................................................18
3.03. Principal Shareholders.............................................................................18
3.04. Subsidiaries.......................................................................................18
3.05. Convertible Securities, Options, Etc...............................................................18
3.06. Authorization and Validity of Agreement............................................................18
3.07. Validity of Transactions; Absence of Required Consents or Waivers..................................18
3.08. Yadkin Books and Records...........................................................................19
3.09. Yadkin Reports.....................................................................................19
3.10. Yadkin Financial Statements........................................................................19
3.11. Absence of Material Adverse Changes or Certain Other Events........................................19
3.12. Litigation and Compliance with Law.................................................................20
3.13. Patents and Trademarks.............................................................................20
3.14. Absence of Brokerage or Finders Commissions........................................................20
3.15. Insurance..........................................................................................21
3.16. Insurance of Deposits..............................................................................21
3.17. Obstacles to Regulatory Approval...................................................................21
3.18. Tax Returns and Other Tax Matters..................................................................21
3.19. Real Properties....................................................................................21
3.20. Loans, Accounts, Notes and Other Receivables.......................................................22
3.21. Securities Portfolio and Investments...............................................................22
3.22. Personal Property and Other Assets.................................................................23
3.23. Environmental Matters..............................................................................23
3.24. Employment Matters; Employee Relations.............................................................24
3.25. Compliance with Existing Obligations...............................................................25
3.26. Disclosure.........................................................................................25
3.27. Absence of Undisclosed Liabilities.................................................................25
ARTICLE IV COVENANTS OF HC FINANCIAL AND HIGH COUNTRY........................................................25
4.01. Affirmative Covenants of HC Financial and High Country.............................................25
(a) High Country Shareholders' Meeting.................................................................25
(b) Conduct of Business Prior to Effective Time........................................................25
(c) Periodic Financial and Other Information...........................................................26
(d) Notice of Certain Changes or Events................................................................27
(e) Accruals for Loan Loss Reserve and Expenses........................................................27
(f) Consents to Assignment of Leases...................................................................27
(g) Access.............................................................................................27
(h) Deposit Liabilities................................................................................28
(i) Further Action; Instruments of Transfer............................................................28
4.02. Negative Covenants of HC Financial and High Country................................................28
(a) Amendments to Articles of Incorporation or Bylaws..................................................28
(b) Change in Capital Stock............................................................................28
(c) Options, Warrants and Rights.......................................................................28
(d) Dividends..........................................................................................28
(e) Employment, Benefit or Retirement Agreements or Plans..............................................28
(f) Increase in Compensation; Bonuses..................................................................29
(g) Accounting Practices...............................................................................29
(h) Acquisitions; Additional Branch Offices............................................................29
(i) Changes in Business Practices......................................................................29
(j) Exclusive Merger Agreement.........................................................................29
(k) Acquisition or Disposition of Assets...............................................................29
(l) Debt; Liabilities..................................................................................30
(m) Liens; Encumbrances................................................................................30
(n) Waiver of Rights...................................................................................30
(o) Other Contracts....................................................................................30
(p) Aggregate Deposit Liabilities......................................................................30
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(q) Foreclosures.......................................................................................31
ARTICLE V COVENANTS OF YADKIN................................................................................31
5.01. Affirmative Covenants of Yadkin....................................................................31
(a) Yadkin Shareholders' Meeting.......................................................................31
(b) Access.............................................................................................31
(c) Further Action; Instruments of Transfer............................................................31
(d) Employment of Other HC Financial and High Country Employees........................................31
(e) Employee Benefits..................................................................................32
(f) Directors..........................................................................................32
(g) Blue Sky Approvals.................................................................................33
(h) Available Funds....................................................................................33
(i) NASDAQ Notification................................................................................33
5.02. Negative Covenants of Yadkin.......................................................................33
(a) Amendments to Articles of Incorporation or Bylaws..................................................33
(b) Change in Capital Stock............................................................................33
(c) Options, Warrants and Rights.......................................................................33
(d) Dividends..........................................................................................33
(e) Accounting Practices...............................................................................33
(f) Changes in Business Practices......................................................................34
ARTICLE VI ADDITIONAL AGREEMENTS.............................................................................34
6.01. Preparation and Distribution of Proxy Statement/Offering Circular..................................34
6.02. Regulatory Approvals...............................................................................34
6.03. Information for Proxy Statement/Offering Circular and Applications for Regulatory Approvals........34
6.04. Expenses...........................................................................................35
6.05. Announcements......................................................................................35
6.06. Real Property Matters..............................................................................35
6.07. Treatment of High Country Options and Warrants.....................................................36
6.08. Treatment of 401(k) Plan...........................................................................36
6.09. Officer Employment Agreements......................................................................37
6.10. Directors' and Officers' Liability Insurance.......................................................37
6.11 Tax Opinion........................................................................................37
ARTICLE VII CONDITIONS PRECEDENT TO MERGER...................................................................37
7.01. Conditions to all Parties' Obligations.............................................................37
(a) Approval by Regulatory Authorities; Disadvantageous Conditions.....................................37
(b) Adverse Proceedings, Injunction, Etc...............................................................38
(c) Approval by Boards of Directors and Shareholders...................................................38
(d) Fairness Opinions..................................................................................38
(e) Tax Opinion........................................................................................38
(f) No Termination or Abandonment......................................................................38
(g) Articles of Merger; Other Actions..................................................................38
7.02. Additional Conditions to Yadkin's Obligations......................................................38
(a) Material Adverse Change............................................................................39
(b) Compliance with Laws...............................................................................39
(c) HC Financial's and High Country's Representations and Warranties and Performance of Agreements;
Officers' Certificate......................................................................................39
(d) Legal Opinion of HC Financial's and High Country's Counsel.........................................39
(e) Other Documents and Information....................................................................39
(f) Acceptance by Yadkin's Counsel.....................................................................39
(g) Option Plan Matters................................................................................39
(h) Consents to Assignment of Property Leases..........................................................39
(i) Officer Agreements.................................................................................40
7.03. Additional Conditions to HC Financial's and High Country's Obligations.............................40
(a) Material Adverse Change............................................................................40
(b) Compliance with Laws...............................................................................40
(c) Yadkin's Representations and Warranties and Performance of Agreements; Officers' Certificate.......40
(d) Legal Opinion of Yadkin's Counsel..................................................................40
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(e) Other Documents and Information....................................................................40
(f) Acceptance by HC Financial's Counsel...............................................................40
(g) Merger Expenses....................................................................................40
ARTICLE VIII TERMINATION; BREACH; REMEDIES...................................................................41
8.01. Mutual Termination.................................................................................41
8.02. Unilateral Termination.............................................................................41
(a) Termination by HC Financial and High Country.......................................................41
(b) Termination by Yadkin..............................................................................42
8.03. Breach; Remedies...................................................................................43
ARTICLE IX INDEMNIFICATION...................................................................................44
9.01. Indemnification Following Termination of Agreement.................................................44
9.02. Procedure for Claiming Indemnification.............................................................45
ARTICLE X MISCELLANEOUS PROVISIONS...........................................................................45
10.01. Survival of Representations, Warranties, Indemnification and Other Agreements......................45
(a) Representations, Warranties and Other Agreements...................................................45
(b) Indemnification....................................................................................45
10.02. Waiver.............................................................................................45
10.03. Amendment..........................................................................................46
10.04. Notices............................................................................................46
10.05. Further Assurance..................................................................................46
10.06. Headings and Captions..............................................................................46
10.07. Gender and Number..................................................................................46
10.08. Entire Agreement...................................................................................46
10.09. Severability of Provisions.........................................................................47
10.10. Assignment.........................................................................................47
10.11. Counterparts.......................................................................................47
10.12. Governing Law......................................................................................47
10.13. Previously Disclosed Information...................................................................47
10.14 Best Knowledge.....................................................................................47
10.15. Inspection.........................................................................................47
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
YADKIN VALLEY BANK AND TRUST COMPANY,
HIGH COUNTRY FINANCIAL CORPORATION
AND HIGH COUNTRY BANK
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement")
is entered into as of the 27th day of August 2003, by and among YADKIN VALLEY
BANK AND TRUST COMPANY ("Yadkin"), HIGH COUNTRY FINANCIAL CORPORATION ("HC
Financial") and HIGH COUNTRY BANK ("High Country").
WHEREAS, Yadkin is a North Carolina banking corporation with its
principal office and place of business located in Elkin, North Carolina; and,
WHEREAS, HC Financial is a North Carolina business corporation with
its principal office and place of business located in Boone, North Carolina, and
a bank holding company registered as such with the Board of Governors of the
Federal Reserve System by virtue of its being the owner of all the issued and
outstanding shares of common stock of High Country; and,
WHEREAS, High Country is a North Carolina banking corporation with its
principal office and place of business located in Boone, North Carolina; and,
WHEREAS, Yadkin, High Country and HC Financial have agreed that it is
in their mutual best interests and in the best interests of their respective
shareholders for HC Financial and High Country to be merged with and into Yadkin
in the manner and upon the terms and conditions contained in this Agreement;
and,
WHEREAS, to effectuate the foregoing, Yadkin, High Country and HC
Financial desire to adopt this Agreement as a plan of reorganization in
accordance with the provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended; and,
WHEREAS, Yadkin's Board of Directors has adopted this Agreement and
will recommend to Yadkin's shareholders that they approve this Agreement and the
transactions described herein; and,
WHEREAS, High Country's and HC Financial's respective Boards of
Directors have each adopted this Agreement and HC Financial's Board of
Directors, by virtue of the fact that it is the sole shareholder of High
Country, desires to approve this Agreement as sole shareholder by authorizing
the execution hereof, and HC Financial's Board of Directors will recommend to HC
Financial's shareholders that they approve this Agreement and the transactions
described herein.
NOW, THEREFORE, in consideration of the premises, the mutual benefits
to be derived from this Agreement, and the representations, warranties,
conditions, covenants and promises herein contained, and subject to the terms
and conditions hereof, Yadkin, High Country and HC Financial hereby adopt and
make this Agreement and mutually agree as follows:
ARTICLE I
THE MERGER
1.01. Names of Merging Corporations. The names of the corporations proposed
-----------------------------
to be merged are Yadkin Valley Bank and Trust Company ("Yadkin") and High
Country Financial Corporation ("HC Financial").
1.02. Nature of Transaction; Plan of Merger. Subject to the provisions of
---------------------
this Agreement, at the "Effective Time" (as defined in Paragraph 1.09 below), HC
Financial will be merged into and with Yadkin (the "Merger") as provided in the
plan of merger attached as Exhibit A to this Agreement (the "Plan of Merger").
---------
1
1.03. Effect of Merger; Surviving Corporation. At the Effective Time, and
---------------------------------------
by reason of the Merger, the separate corporate existence of HC Financial shall
cease while the corporate existence of Yadkin as the surviving corporation in
the Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. Following the Merger, Yadkin shall continue to operate as a North
Carolina banking corporation and will conduct its business at the then legally
established branch and main offices of Yadkin, and shall conduct business under
the name "Yadkin Valley Bank and Trust Company." The duration of the corporate
existence of Yadkin, as the surviving corporation, shall be perpetual and
unlimited.
1.04. Assets and Liabilities of HC Financial. At the Effective Time, and by
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reason of the Merger, and in accordance with applicable law, all of the
property, assets and rights of every kind and character of HC Financial
(including without limitation all real, personal or mixed property, all debts
due on whatever account, all other choses in action and every other interest of
or belonging to or due to HC Financial, whether tangible or intangible) shall be
transferred to and vest in Yadkin, and Yadkin shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private
nature of HC Financial, all without any conveyance, assignment or further act or
deed; and, Yadkin shall become responsible for all of the liabilities, duties
and obligations of every kind, nature and description of HC Financial as of the
Effective Time. By virtue of the Merger, HC Financial's interest in and
ownership of the outstanding shares of common stock of its wholly-owned
subsidiary, High Country Bank ("High Country"), shall be transferred to and vest
in Yadkin, and High Country shall become a wholly-owned subsidiary of Yadkin,
whereupon, High Country will immediately be merged into and with Yadkin as
provided in Paragraph 1.06 hereof.
1.05. Conversion and Exchange of Stock.
--------------------------------
(a) Merger Consideration. Except as otherwise provided in this
--------------------
Agreement, at the Effective Time all rights of HC Financial's shareholders with
respect to all outstanding shares of HC Financial Common Stock (as such term is
defined in Paragraph 2.02(a) hereof) shall cease to exist and, as consideration
for and to effect the Merger, each such outstanding share shall be converted,
without any action by Yadkin, HC Financial or any HC Financial shareholder, into
the right to receive either: (i) cash in the amount of $24.02 (the "Cash
Consideration"); or (ii) a number of shares of Yadkin Common Stock (as defined
in Paragraph 3.02) equal to the Exchange Ratio as defined in Paragraph 1.05(b)
(the "Stock Consideration"). The Cash and the Stock Consideration, collectively
and in the aggregate, shall be referred to herein as the "Merger Consideration."
No share of HC Financial Common Stock, other than shares as to which the holders
have validly exercised Dissenters' Rights (as defined in Paragraph 1.05(i)),
shall be deemed to be outstanding or have any rights other than those set forth
in this Paragraph 1.05(a) after the Effective Time.
(b) Stock Consideration Exchange Ratio. Should the Yadkin Average
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Price (as defined below) be equal to or greater than $15.84 or equal to or less
than $20.16, then the Exchange Ratio will be 1.3345 shares of Yadkin Common
Stock for each share of HC Financial Common Stock. However, should the Yadkin
Average Price be less than $15.84 but equal to or greater than $13.50, the
Exchange Ratio will be adjusted so that the value of the Stock Consideration
will be $21.14 (1. 3345 times $15.84) per share of HC Financial Common Stock.
For example, if the Yadkin Average Price is $13.50, the Exchange Ratio will be
1.5658 which is $21.14 divided by $13.50. However, should the Yadkin Average
Price be greater than $20.16 but less than or equal to $22.50, then the Exchange
Ratio will be adjusted so that the value of the Stock Consideration will be
$26.90 (1.3345 times $20.16) per share of HC Financial Common Stock. For
example, if the Yadkin Average Price is $22.50, the Exchange Ratio will be
1.1957 which is $26.90 divided by $22.50. For purposes of this Paragraph
1.05(b), "Yadkin Average Price" shall mean the average of the closing price per
share of Yadkin Common Stock as reported on the Nasdaq National Market for the
fifteen (15) consecutive trading days preceding the day prior to the date of the
approval order of the Merger by the Federal Deposit Insurance Corporation or the
North Carolina Banking Commission, whichever is later.
(c) Election of Form of Consideration. Subject to the limitations
---------------------------------
described in this Agreement, each HC Financial shareholder shall have the right
to elect the following forms of Merger Consideration into which his or her
shares of HC Financial Common Stock will be converted: (i) all Cash
Consideration, (ii) all Stock Consideration, or (iii) a combination of 10% Cash
Consideration and 90% Stock Consideration. Each
2
shareholder's election must be made in writing in a form prescribed by Yadkin
(an "Election of Consideration"). Yadkin shall forward the Election of
Consideration to all shareholders of HC Financial at a reasonable date prior to
the High Country Shareholders Meeting (as such term is defined in Paragraph
4.01(a) hereof). To be valid, an Election of Consideration must be signed by the
shareholder and delivered to Yadkin within 10 business days following the High
Country Shareholders Meeting. Shareholders of HC Financial who do not return a
properly completed Election of Consideration, or whose Elections of
Consideration are received by Yadkin after the time prescribed, will be deemed
to have made no election. Yadkin shall have the discretion, which it may
delegate in whole or in part to an exchange agent appointed by Yadkin ("Exchange
Agent"), to determine whether the Elections of Consideration have been properly
completed, signed and submitted or changed or revoked and to disregard
immaterial defects in Elections of Consideration. The decision of Yadkin (or the
Exchange Agent) in such matters shall be conclusive and binding and without any
liability whatsoever to HC Financial. Neither Yadkin nor its Exchange Agent will
be under any obligation to notify any person of any defect in Elections of
Consideration submitted to the Exchange Agent.
(d) Required Ratio of Consideration; Allocations of Consideration.
-------------------------------------------------------------
Notwithstanding the right of HC Financial's shareholders to elect the form of
Merger Consideration into which their shares of HC Financial Common Stock are
converted, the Merger Consideration (not including consideration delivered to HC
Financial's shareholders who exercise their "Dissenters' Rights") must consist
of shares of Yadkin Common Stock and cash, such that 90% of the outstanding
shares of HC Financial Common Stock are converted into shares of Yadkin Common
Stock and such that 10% of the outstanding shares of HC Financial Common Stock
are converted into cash. An election of Cash Consideration is herein referred to
as a "Cash Election," and shares as to which a Cash Election has been made are
herein referred to as "Cash Election Shares." An election of Stock Consideration
is herein referred to as a "Stock Election," and shares as to which a Stock
Election has been made are herein referred to as "Stock Election Shares." An
election of 90% Stock Consideration and 10% Cash Consideration is herein
referred to as a "Mixed Election," and shares as to which a Mixed Election has
been made are herein referred to as "Mixed Election Shares." A failure to
indicate an election is herein referred to as a "Non-Election," and shares as to
which there is a Non-Election are herein referred to as "Non-Electing Shares."
The aggregate number of shares of HC Financial Common Stock that are to be
converted into the Cash Consideration (the Cash Election Shares plus 10% of the
number of Mixed Election Shares) is referred to herein as the "Cash Election
Number." In the event that the elections of Merger Consideration by HC
Financial's shareholders call for an aggregate number of shares of HC Financial
Common Stock to be converted into Yadkin Common Stock (not including shares for
which cash is issued to shareholders who exercise "Dissenters' Rights" as
defined in Paragraph 1.05(i) below), which is equal to, more than, or less than
the percentage specified above, then the Merger Consideration shall be allocated
among part or all of HC Financial's shareholders as follows:
(i) In any event, with respect to Mixed Election Shares, ten percent
(10%) shall be converted into Cash Consideration and ninety percent (90%)
shall be converted into the Stock Consideration.
(ii) If the Cash Election Number is equal to 10.0% of the number of
outstanding shares of HC Financial Common Stock, then: (A) there shall be
no adjustment to the Cash Election Shares or Stock Election Shares; and (B)
Non-Electing Shares shall be treated as Stock Election Shares.
(iii) If the Cash Election Number is in excess of 10.0% of the number
of outstanding shares of HC Financial Common Stock, then: (A) Non-Electing
Shares shall first be deemed to be Stock Election Shares; (B) Cash Election
Shares shall be reduced pro rata by multiplying the number of Cash Election
Shares of each HC Financial shareholder by a fraction, the numerator of
which is the number of Cash Election Shares minus the difference between
the Cash Election Number and 10% of the number of outstanding shares of HC
Financial Common Stock, and the denominator of which is the number of Cash
Election Shares; and (C) the shares of each such shareholder representing
the difference between the shareholder's initial Cash Election and the
shareholder's reduced Cash Election pursuant to clause (d)(iii)(B) shall be
converted into and be deemed to be Stock Election Shares.
(iv) If the Cash Election Number is less than 10.0% of the number of
outstanding shares of HC Financial Common Stock, then: (A) Non-Electing
Shares shall first be deemed to be Stock Election Shares and such number of
Non-Electing Shares shall be included in the number of Stock Election
3
Shares ("Stock Election Number"); (B) Stock Election Shares of each HC
Financial shareholder shall be reduced pro rata by multiplying the number
of Stock Election Shares by a fraction, the numerator of which is 90% of
the number of outstanding shares of HC Financial Common Stock minus the
number of Mixed Election Shares converted to Stock Consideration, and the
denominator of which is the Stock Election Number; and (C) the shares of
each such shareholder representing the difference between the shareholder's
initial Stock Election and the shareholder's reduced Stock Election
pursuant to clause (d)(iv)(B) shall be converted into and be deemed to be
Cash Election Shares.
Any questions regarding such allocations shall be resolved in such manner as
Yadkin, in its sole discretion, shall consider reasonable and appropriate.
Yadkin's decision regarding any such allocations shall be final and binding on
HC Financial's shareholders and all parties to this Agreement.
(e) Notification and Payment Procedures; Book Entry Ownership. After
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the total Stock Consideration has been allocated pursuant to the provisions of
this Paragraph 1.05 (which shall be as soon as practicable following the
Effective Time), Yadkin shall send or cause to be sent to each former HC
Financial shareholder of record immediately prior to the Effective Time written
notice ("Transmittal Letter") confirming the Merger Consideration to which such
shareholder is entitled in exchange for his or her HC Financial Common Stock and
an amount of cash to which such shareholder is entitled in exchange for his or
her HC Financial Common Stock. The Transmittal Letter will request that each
former HC Financial shareholder dispose of the certificates evidencing HC
Financial Common Stock (each a "HC Financial Certificate"). Yadkin or its
Exchange Agent will maintain a book entry list of the Yadkin Common Stock to
which each former HC Financial shareholder is entitled. Certificates evidencing
the Yadkin Common Stock into which the shareholder's HC Financial Common Stock
has been converted will not be issued.
(f) HC Financial Certificates. At the Effective Time, and without any
-------------------------
action by Yadkin, HC Financial, High Country or any HC Financial shareholder, HC
Financial's stock transfer books shall be closed and there shall be no further
transfers of HC Financial Common Stock on its stock transfer books or the
registration of any transfer of a HC Financial Certificate by any holder
thereof, and the holders of HC Financial Certificates shall cease to be, and
shall have no further rights as, stockholders of HC Financial other than as
provided in this Agreement. Following the Effective Time, HC Financial
Certificates shall evidence only the right of the registered holder thereof to
receive the Merger Consideration into which his or her HC Financial Common Stock
was converted at the Effective Time or, in the case of HC Financial Common Stock
held by shareholders who properly shall have exercised Dissenters' Rights (as
defined in Paragraph 1.05(i)), cash as provided in Article 13 of the North
Carolina Business Corporation Act.
(g) Voting Rights and Dividends. Following the Effective Time, former
---------------------------
shareholders of record of HC Financial shall be entitled to vote at any meeting
of Yadkin shareholders the number of whole shares into which their respective HC
Financial Common Stock are converted pursuant to the Merger. Any dividend or
other distribution payable by Yadkin with respect to that Yadkin Common Stock as
of any date subsequent to the Effective Time shall be paid or delivered to the
former HC Financial shareholder.
(h) Antidilutive Adjustments. If, prior to the Effective Time, HC
-------------------------
Financial or Yadkin shall declare any dividend payable in shares of HC Financial
Common Stock or Yadkin Common Stock or shall subdivide, split, reclassify or
combine the presently outstanding shares of HC Financial Common Stock or Yadkin
Common Stock, then an appropriate and proportionate adjustment shall be made in
the Merger Consideration to be issued in exchange for each of the shares of HC
Financial Common Stock.
4
(i) Dissenters. Any shareholder of HC Financial who properly exercises
----------
the right of dissent and appraisal with respect to the Merger as provided in
Section 55-13-02 of the North Carolina General Statutes ("Dissenters' Rights")
shall be entitled to receive payment of the fair value of his or her shares of
HC Financial Common Stock in the manner and pursuant to the procedures provided
therein. Shares of HC Financial Common Stock held by persons who exercise
Dissenters' Rights shall not be converted as described in Paragraph 1.05(a).
However, if any shareholder of HC Financial who exercises Dissenters' Rights
shall fail to perfect those rights, or effectively shall waive or lose such
rights, then each of his or her shares of HC Financial Common Stock, at Yadkin's
sole option, shall be deemed to have been converted into Non-Electing Shares and
have the right to receive Merger Consideration as of the Effective Time as
provided in Paragraph 1.05(a) hereof.
1.06. Bank Merger. As soon as practicable following the Effective Time,
-----------
High Country will be merged with and into Yadkin (the "Bank Merger") as provided
in the plan of merger attached as Exhibit B to this Agreement (the "Plan of Bank
Merger").
1.07. Effect of Bank Merger; Surviving Corporation. At the Effective Time,
--------------------------------------------
and by reason of the Bank Merger, the separate corporate existence of High
Country shall cease while the corporate existence of Yadkin as the surviving
corporation in the Bank Merger shall continue with all of its purposes, objects,
rights, privileges, powers and franchises, all of which shall be unaffected and
unimpaired by the Bank Merger. Following the Bank Merger, Yadkin shall continue
to operate as a North Carolina banking corporation and will conduct its business
at the then legally established branch and main offices of Yadkin and High
Country, and shall conduct business under the name "Yadkin Valley Bank and Trust
Company" except in: (i) Watauga County, North Carolina; and (ii) such other
market areas as determined by Yadkin, where Yadkin shall conduct business under
the name "High Country Bank." The duration of the corporate existence of Yadkin,
as the surviving corporation, shall be perpetual and unlimited.
1.08 Articles of Incorporation, Bylaws and Management. The Articles of
------------------------------------------------
Incorporation and Bylaws of Yadkin in effect at the Effective Time shall be the
Articles of Incorporation and Bylaws of Yadkin as the surviving corporation in
each of the Merger and the Bank Merger. The directors of HC Financial and High
Country named in Paragraph 5.01(f), who remain in office at the Effective Time
shall be appointed to the Board of Directors of Yadkin, to hold such office
until removed as provided by law or until the election or appointment of their
respective successors. The President and Chief Executive Officer of HC Financial
as of the date of this Agreement, provided he remains in office at the Effective
Time, shall be named a Regional President of Yadkin to hold such office until
removed as provided by law or until the election or appointment of his
successor. The directors and officers of Yadkin in office at the Effective Time
shall continue to hold such offices until removed as provided by law or until
the election or appointment of their respective successors.
1.09. Closing; Effective Time. The closing of the Merger, the Bank Merger,
-----------------------
and other transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Yadkin in Elkin, North Carolina, or at such other place
as Yadkin and HC Financial may agree, on a date mutually agreeable to Yadkin and
HC Financial (the "Closing Date") after the expiration of any and all required
waiting periods following the effective date of required approvals of the Merger
and the Bank Merger by Regulatory Authorities (as defined in Paragraph 2.06)
(but in no event more than sixty (60) days following the expiration of all such
required waiting periods). At the Closing, Yadkin, HC Financial and High Country
shall each take such actions (including without limitation the delivery of
certain closing documents and the execution of Articles of Merger and Articles
of Bank Merger under North Carolina law) as are required by this Agreement and
as otherwise shall be required by law to consummate the Merger and the Bank
Merger and cause each to become effective.
Subject to the terms and conditions set forth in this Agreement, the Merger
shall become effective on the date and at the time (the "Effective Time")
specified in the Articles of Merger, executed by Yadkin, and filed by it with
the North Carolina Secretary of State in accordance with applicable law;
provided, however, that the Effective Time shall in no event be more than ten
(10) days following the Closing Date. The Bank Merger shall become effective on
the date and at the time specified in the Articles of Bank Merger containing the
appropriate certificate of approval of the North Carolina Commissioner of Banks,
executed by Yadkin and filed by it with the North Carolina
5
Secretary of State in accordance with applicable law; provided, however, that
Yadkin shall use its best efforts to cause the Bank Merger to become effective
as soon as practicable following the Effective Time.
1.10 Outstanding Yadkin Stock. The status of the shares of Yadkin Common
------------------------
Stock that are outstanding immediately prior to the Effective Time shall not be
affected by the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
HC Financial AND HIGH COUNTRY
Except as otherwise specifically described in this Agreement or as
"Previously Disclosed" (as such term is defined in Paragraph 10.13 hereof) by HC
Financial and High Country to Yadkin, HC Financial and High Country hereby make
the following representations and warranties to Yadkin:
2.01. Organization; Standing; Power. HC Financial is duly organized and
-----------------------------
incorporated, validly existing and in good standing as a corporation under the
laws of the State of North Carolina and High Country is duly organized and
incorporated, validly existing and in good standing as a banking corporation
under the laws of the State of North Carolina. HC Financial and High Country
each (i) has all requisite power and authority (corporate and other) to own,
lease and operate its properties and to carry on its business as it now is being
conducted; (ii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned, leased or operated
by it therein, or in which the transaction of its business, makes such
qualification necessary, except where failure so to qualify would not have a
material adverse effect on HC Financial and High Country considered as one
enterprise; and (iii) is not transacting business or operating any properties
owned or leased by it in violation of any provision of federal, state or local
law or any rule or regulation promulgated thereunder, except where such
violation would not have a material adverse effect on HC Financial and High
Country considered as one enterprise. High Country is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. High Country is a member of the Federal Home Loan Bank
("FHLB") of Atlanta.
2.02 Capital Stock.
--------------
(a) HC Financial's authorized capital stock consists of 5,000,000
shares of preferred stock, no par value ("HC Financial Preferred Stock") and
20,000,000 shares of common stock, no par value, one vote per share (the "HC
Financial Common Stock") of which no more than 1,419,809 shares are issued and
outstanding as of the date of this Agreement.
Each outstanding share of HC Financial Common Stock: (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable; and (ii) has not been issued in violation of the preemptive
rights of any shareholder. The HC Financial Common Stock has been registered
with the Securities and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and HC Financial is subject
to the registration and reporting requirements of the 1934 Act.
(b) High Country's authorized capital stock consists of 20,000,000
shares of common stock, $5.00 par value, one vote per share (the "High Country
Common Stock"), of which 1,416,822 shares are issued and outstanding as of the
date of this Agreement.
Each outstanding share of High Country Common Stock: (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable (except to the extent provided in Section 53-42 of the North
Carolina General Statutes); and (ii) has not been issued in violation of the
preemptive rights of any shareholder.
2.03. Principal Shareholders. HC Financial owns 100% of the
----------------------
outstanding High Country Common Stock. There are no outstanding shares of HC
Financial Preferred Stock. No person or entity is known to
6
management of HC Financial to beneficially own, directly or indirectly, more
than 5% of the outstanding shares of HC Financial Common Stock.
2.04. Subsidiaries. Except for High Country Securities, Inc., High Country
------------
has no subsidiaries, direct or indirect, and, except for equity securities
included in its investment portfolio at June 30, 2003, does not own any stock or
other equity interest in any other corporation, service corporation, joint
venture, partnership or other entity. High Country is the only subsidiary of HC
Financial.
2.05. Convertible Securities, Options, Etc. Except for 206,250 outstanding
-------------------------------------
options and 276,322 outstanding warrants to purchase shares of HC Financial
Common Stock, HC Financial does not have any outstanding (i) securities or other
obligations (including debentures or other debt instruments) which are
convertible into shares of HC Financial Common Stock or any other securities of
HC Financial; (ii) options, warrants, rights, calls or other commitments of any
nature which entitle any person or entity to receive or acquire any shares of HC
Financial Common Stock or any other securities of HC Financial; or (iii) plans,
agreements or other arrangements pursuant to which shares of HC Financial Common
Stock or any other securities of HC Financial, or options, warrants, rights,
calls or other commitments of any nature pertaining to any securities of HC
Financial, have been or may be issued.
2.06. Authorization and Validity of Agreement. This Agreement has been duly
---------------------------------------
and validly adopted by the respective Boards of Directors of HC Financial and
High Country. Subject only to approval of the shareholders of HC Financial in
the manner required by law and receipt of all required approvals of governmental
or regulatory authorities having statutory jurisdiction over Yadkin, HC
Financial or High Country (collectively, the "Regulatory Authorities" or
individually, a "Regulatory Authority") of the transactions described herein,
(i) HC Financial and High Country each has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations and agreements
and carry out the transactions described in this Agreement; (ii) all corporate
proceedings and approvals required to authorize HC Financial and High Country to
enter into this Agreement and to perform their obligations and agreements and
carry out the transactions described herein have been duly and properly
completed or obtained; and (iii) this Agreement constitutes the valid and
binding agreement of HC Financial and High Country enforceable in accordance
with its terms, except to the extent enforceability may be limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect which affect creditors' rights generally; (B) legal
and equitable limitations on the availability of injunctive relief, specific
performance and other equitable remedies; (C) general principles of equity and
applicable laws or court decisions limiting the enforceability of
indemnification provisions; and (D) the rights of the United States under the
Federal Tax Lien Act of 1966, as amended.
2.07. Validity of Transactions; Absence of Required Consents or Waivers.
-----------------------------------------------------------------
Except where the same would not have a material adverse effect on HC Financial
or High Country, considered as one enterprise, and subject to approval of this
Agreement by the shareholders of HC Financial in the manner required by law and
receipt of required approvals of Regulatory Authorities, neither the execution
and delivery of this Agreement, nor the consummation of the transactions
described herein, nor compliance by HC Financial or High Country with any of the
obligations or agreements contained herein, nor any action or inaction by HC
Financial or High Country required herein, will: (i) conflict with or result in
a breach of the terms and conditions of, or constitute a default or violation
under any provision of, the Articles of Incorporation or Bylaws of either HC
Financial or High Country, or any material contract, agreement, lease, mortgage,
note, bond, indenture, license, or obligation or understanding (oral or written)
to which HC Financial or High Country is bound or by which they or their
business, capital stock or any of their properties or assets may be affected;
(ii) result in the creation or imposition of any material lien, claim, interest,
charge, restriction or encumbrance upon any of the properties or assets of HC
Financial or High Country; (iii) violate any applicable federal or state
statute, law, rule or regulation, or any judgment, order, writ, injunction or
decree of any court, administrative or regulatory agency or governmental body,
which violation will or may have a material adverse effect on HC Financial or
High Country, their financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or operations, or on
HC Financial's or High Country's ability to consummate the transactions
described herein or to carry on the business of HC Financial or High Country as
presently conducted; (iv) result in the acceleration of any material obligation
or indebtedness of HC Financial or
7
High Country; or (v) materially interfere with or otherwise materially adversely
affect HC Financial's or High Country's respective abilities to carry on their
respective businesses as presently conducted.
No consents, approvals or waivers are required to be obtained from any
person or entity in connection with HC Financial's or High Country's execution
and delivery of this Agreement, or the performance of their obligations or
agreements or the consummation of the transactions described herein, except for
required approvals of Regulatory Authorities and HC Financial's shareholders.
2.08. Books and Records of HC Financial and High Country. HC Financial's
--------------------------------------------------
and High Country's books of account and business records have been maintained in
all material respects in compliance with all applicable legal and accounting
requirements, and such books and records are complete and reflect accurately in
all material respects HC Financial's and High Country's items of income and
expense and all of their assets, liabilities and stockholders' equity. The
minute books of HC Financial and High Country are complete and accurately
reflect in all material respects all corporate actions which their shareholders
and boards of directors, and all committees thereof, have taken during the time
periods covered by such minute books, and, all such minute books have been or
will be made available to Yadkin and its representatives.
2.09. Reports of HC Financial and High Country. HC Financial and High
Country have filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with (i) the North Carolina Commissioner of Banks (the "Commissioner"),
(ii) the Federal Deposit Insurance Corporation (the "FDIC"), (iii) the
Securities and Exchange Commission (the "SEC"), (iv) the Board of Governors of
the Federal Reserve System (the "FRB") and (v) any other Regulatory Authorities,
except where the failure to file has not had and would not have a material
adverse effect on HC Financial and High Country, taken as a whole. All such
reports, registrations and statements filed by HC Financial and High Country
with the Commissioner, the FDIC, the SEC or any other Regulatory Authorities are
collectively referred to in this Agreement as the "High Country Reports." To the
Best Knowledge (as such term is defined in Paragraph 10.14 hereof) of management
of HC Financial and High Country, the High Country Reports complied in all
material respects with all the statutes, rules and regulations enforced or
promulgated by the Regulatory Authorities with which they were filed and did not
contain any untrue statement of a material fact or omit 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. HC
Financial and High Country have not been notified that any such High Country
Reports were deficient in any material respect as to form or content.
2.10. HC Financial Financial Statements. HC Financial and High Country have
---------------------------------
Previously Disclosed to Yadkin a copy of HC Financial's and High Country's
audited consolidated statements of financial condition as of December 31, 2002
and 2001, and its audited statements of income, stockholders' equity and cash
flows for the years ended December 31, 2002 and 2001, together with notes
thereto (collectively, the "High Country Audited Financial Statements"),
together with copies of High Country's unaudited consolidated statements of
financial condition as of June 30, 2003, and unaudited statements of income and
cash flows for the six-month periods ended June 30, 2003 and 2002 (collectively,
the "High Country Interim Financial Statements"). Following the date of this
Agreement, HC Financial promptly will deliver to Yadkin all other annual or
interim financial statements prepared by or for HC Financial or High Country.
The High Country Audited Financial Statements and the High Country Interim
Financial Statements (i) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated; (ii) are in accordance with HC Financial's and High Country's
books and records; and (iii) present fairly in all material respects HC
Financial's and High Country's consolidated financial condition, assets and
liabilities, results of operations, changes in stockholders' equity and changes
in cash flows as of the dates indicated and for the periods specified therein.
The High Country Audited Financial Statements have been audited by Xxxxxxx &
Company PLC, which currently serves as both HC Financial's and High Country's
independent certified public accountants.
2.11. Tax Returns and Other Tax Matters. (i) HC Financial and High Country
---------------------------------
have timely filed or caused to be filed all federal, state and local income tax
returns and reports which are required by law to have been filed, and all such
returns and reports were true, correct and complete and contained all material
information required to be contained therein; (ii) all federal, state and local
income, profits, franchise, sales, use, occupation,
8
property, excise, withholding, employment and other taxes (including interest
and penalties), charges and assessments which have become due from or been
assessed or levied against HC Financial and High Country or their respective
properties have been fully paid or, if not yet due, a reserve or accrual, which
is adequate in all material respects for the payment of all such taxes to be
paid and the obligation for such unpaid taxes, is reflected on the High Country
Interim Financial Statements; (iii) the income, profits, franchise, sales, use,
occupation, property, excise, withholding, employment and other tax returns and
reports of HC Financial and High Country have not been subjected to audit by the
Internal Revenue Service (the "IRS") or the North Carolina Department Revenue,
and HC Financial and High Country have not received any indication of the
pendency of any audit or examination in connection with any such tax return or
report and, to the Best Knowledge of management of HC Financial and High
Country, no such return or report is subject to adjustment; and (iv) HC
Financial and High Country have not executed any waiver or extended the statute
of limitations (or been asked to execute a waiver or extend a statute of
limitations) with respect to any tax year, the audit of any such tax return or
report, or the assessment or collection of any tax.
2.12. Absence of Material Adverse Changes or Certain Other Events.
-----------------------------------------------------------
(a) Since June 30, 2003, HC Financial and High Country each has
conducted its business only in the ordinary course, and there has been no
material adverse change, and there has occurred no event or development, and, to
the Best Knowledge of the management of HC Financial and High Country, there
currently exists no condition or circumstance particular to HC Financial and
High Country, which, with the lapse of time or otherwise, is likely to cause,
create or result in a material adverse change in or affecting the financial
condition of HC Financial and High Country considered as one enterprise or on
their respective results of operations, prospects, business, assets, loan
portfolio, investments, properties or operations considered as one enterprise.
(b) Since June 30, 2003, and other than in the ordinary course of its
business, neither HC Financial nor High Country have incurred any material
liability, engaged in any material transaction, entered into any material
agreement, increased the salaries, compensation or general benefits payable or
provided to its employees, suffered any material loss, destruction or damage to
any of its properties or assets, or made a material acquisition or disposition
of any assets or entered into any material contract or lease.
2.13. Absence of Undisclosed Liabilities. HC Financial and High Country do
-----------------------------------
not have any material liabilities or obligations, whether known or unknown,
matured or unmatured, accrued, absolute, contingent or otherwise, whether due or
to become due (including without limitation tax liabilities or unfunded
liabilities under employee benefit plans or arrangements), other than (i) those
reflected in the High Country Audited Financial Statements or High Country
Interim Financial Statements, (ii) increases in deposit accounts in the ordinary
course of business since June 30, 2003, or (iii) loan commitments in the
ordinary course of business since June 30, 2003.
2.14. Compliance with Existing Obligations. HC Financial and High Country
------------------------------------
each has performed in all material respects all obligations required to be
performed under, and are not in default in any material respect under, or in
violation in any material respect of, the terms and conditions of its respective
Articles of Incorporation, Bylaws, material contracts, agreements, leases,
mortgages, notes, bonds, indentures, licenses, obligations, understandings or
other undertakings (whether oral or written) to which each is bound or by which
its business, operations, capital stock or any property or assets may be
affected.
2.15. Litigation and Compliance with Law.
----------------------------------
(a) There are no material actions, suits, arbitrations, controversies
or other proceedings or investigations (or, to the Best Knowledge of management
of HC Financial and High Country, any facts or circumstances which reasonably
could result in such), including without limitation any such action by any
Regulatory Authority, which currently exist or are ongoing, pending or, to the
Best Knowledge of management of HC Financial and High Country, are threatened,
contemplated or probable of assertion, against, relating to or otherwise
affecting HC Financial or High Country or any of their properties, assets or
employees.
9
(b) HC Financial and High Country have all licenses, permits, orders,
authorizations or approvals ("Permits") of all federal, state, local or foreign
governmental or regulatory agencies that are material to or necessary for the
conduct of their business or to own, lease and operate their properties; all
such Permits are in full force and effect; no violations have occurred with
respect to any such Permits; and no proceeding is pending or, to the Best
Knowledge of management of HC Financial and High Country, threatened or probable
of assertion to suspend, cancel, revoke or limit any Permit.
(c) Neither HC Financial nor High Country is subject to any
supervisory agreement, enforcement order, writ, injunction, capital directive,
supervisory directive, memorandum of understanding, cease and desist order, or
other similar agreement, order, directive, memorandum or consent of, with or
issued by any Regulatory Authority relating to financial condition, directors or
officers, employees, operations, capital, regulatory compliance or any other
matter; there are no judgments, orders, stipulations, injunctions, decrees or
awards against HC Financial or High Country which limit, restrict, regulate,
enjoin or prohibit in any material respect any present or past business or
practice of HC Financial or High Country; and, HC Financial and High Country
have not been advised and have no reason to believe that any Regulatory
Authority or any court is contemplating, threatening or requesting the issuance
of any such agreement, order, writ, injunction, directive, memorandum, judgment,
stipulation, decree or award.
(d) HC Financial and High Country are not in violation or default in
any material respect under, and have complied in all material respects with, all
laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or
decrees of any court or federal, state, municipal or other Regulatory Authority
having jurisdiction or authority over it or its business operations, properties
or assets (including without limitation all provisions of North Carolina law
relating to usury, the Consumer Credit Protection Act, and all other federal and
state laws and regulations applicable to extensions of credit by HC Financial or
High Country). To the Best Knowledge of management of HC Financial and High
Country, there is no basis for any material claim by any person or authority for
compensation, reimbursement, damages or other penalties or relief for any
violations described in this subparagraph (d).
2.16. Real Properties.
---------------
(a) HC Financial and High Country have Previously Disclosed to Yadkin
a listing of all real property owned by HC Financial or High Country (including
High Country's banking facilities and all other real estate or foreclosed
properties, including improvements thereon, owned by HC Financial and/or High
Country) (collectively, the "High Country Real Property") and all leases
pertaining to any such Real Property to which HC Financial or High Country is a
party (the "Real Property Leases"). With respect to each parcel of the High
Country Real Property, HC Financial and High Country have good and marketable
fee simple title to the High Country Real Property and own the same free and
clear of all mortgages, liens, leases, encumbrances, title defects and
exceptions to title other than (i) the lien of current taxes not yet due and
payable, and (ii) such imperfections of title and restrictions, covenants and
easements (including utility easements) which do not materially affect the value
of the High Country Real Property or which do not and will not materially
detract from, interfere with or restrict the present use of the High Country
Real Property or any future use consistent therewith. With respect to each Real
Property Lease (A) such lease is valid and enforceable in accordance with its
terms, (B) there currently exists no circumstance or condition which constitutes
an event of default by HC Financial or High Country (as lessor or lessee) or its
respective lessor or which, with the passage of time or the giving of required
notices will or could constitute such an event of default, and (C) subject to
any required consent of HC Financial's or High Country's lessor, each such Real
Property Lease may be assigned to Yadkin and the execution and delivery of this
Agreement does not constitute an event of default thereunder.
(b) The High Country Real Property complies in all material respects
with all applicable federal, state and local laws, regulations, ordinances or
orders of any governmental agency or regulatory authority (excluding
Environmental Laws which are addressed by Paragraph 2.21 below), including those
relating to zoning, building and use permits, and the parcels of the High
Country Real Property upon which HC Financial's offices or High Country's
banking or other offices are situated, or which are used by HC Financial or High
Country in conjunction with their banking or other offices or for other
purposes, may, under applicable zoning ordinances, be
10
used for the purposes for which they currently are used as a matter of right
rather than as a conditional or nonconforming use.
(c) All improvements and fixtures included in or on the High Country
Real Property are in good condition and repair, ordinary wear and tear excepted,
and there does not exist any condition which in any material respect interferes
with HC Financial's or High Country's respective use (or will interfere with
Yadkin's future use consistent therewith after the Merger and the Bank Merger)
or affects the economic value thereof.
2.17. Loans, Accounts, Notes and Other Receivables.
--------------------------------------------
(a) HC Financial has no loans, accounts, notes and other receivables
reflected as assets on its books and records. All loans, accounts, notes and
other receivables reflected as assets on High Country's books and records (i)
have resulted from bona fide business transactions in the ordinary course of
operations; (ii) in all material respects were made in accordance with High
Country's standard practices and procedures; and (iii) are owned by High Country
free and clear of all liens, encumbrances, assignments, participation or
repurchase agreements or other exceptions to title or to the ownership or
collection rights of any other person or entity.
(b) All records of High Country regarding all outstanding loans,
accounts, notes and other receivables, and all other real estate owned, are
accurate in all material respects, and, each loan which High Country's loan
documentation indicates is secured by any real or personal property or property
rights ("Loan Collateral") is secured by valid, perfected and enforceable liens
on all such Loan Collateral having the priority described in High Country's
records of such loan.
(c) Each loan reflected as an asset on High Country's books, and each
guarantee therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon, and no defense, offset or counterclaim has been asserted with
respect to any such loan or guarantee.
(d) HC Financial and High Country have Previously Disclosed to Yadkin
(i) a written listing of each loan, extension of credit or other asset of High
Country which, as of June 30, 2003, was classified by the Commissioner or the
FDIC or by High Country as "Loss," "Doubtful," "Substandard" or "Special
Mention" (or otherwise by words of similar import), or which High Country
otherwise has designated as a special asset or for special handling or placed on
any "watch list" because of concerns regarding the ultimate collectibility or
deteriorating condition of such asset or any obligor or Loan Collateral
therefor; and (ii) a written listing of each loan or extension of credit of High
Country which, as of June 30, 2003, was past due more than 30 days as to the
payment of principal or interest, or as to which any obligor thereon (including
the borrower or any guarantor) otherwise was in default, was the subject of a
proceeding in bankruptcy or has indicated any inability or intention not to
repay such loan or extension of credit.
(e) To the Best Knowledge of management of HC Financial and High
Country, each of the loans and other extensions of credit of High Country (with
the exception of those loans and extensions of credit specified in the written
listings described in Paragraph 2.17(d) above) is collectible in the ordinary
course of business in an amount which is not less than the amount at which it is
carried on High Country's books and records.
(f) High Country's reserve for possible loan losses (the "Loan Loss
Reserve") has been established in conformity with GAAP, sound banking practices
and all applicable requirements, rules and policies of the Commissioner and the
FDIC and, in the best judgment of management of High Country, is reasonable in
view of the size and character of High Country's loan portfolio, current
economic conditions and other relevant factors, and is adequate to provide for
losses relating to or the risk of loss inherent in High Country's loan
portfolios and other real estate owned.
2.18. Securities Portfolio and Investments. HC Financial and High Country
------------------------------------
have Previously Disclosed to Yadkin a listing of all securities owned, of record
or beneficially, by HC Financial and High Country as of June 30, 2003. All
securities owned, of record or beneficially, by HC Financial and High Country
are held free and clear of all mortgages, liens, pledges, encumbrances or any
other restriction or rights of any other person or
11
entity, whether contractual or statutory (other than customary pledges in the
ordinary course of their business to secure public funds deposits), which would
materially impair the ability of HC Financial or High Country to dispose freely
of any such security or otherwise to realize the benefits of ownership thereof
at any time. There are no voting trusts or other agreements or undertakings to
which HC Financial or High Country is a party with respect to the voting of any
such securities. With respect to all "repurchase agreements" under which HC
Financial or High Country has "purchased" securities under agreement to resell,
HC Financial or High Country has a valid, perfected first lien or security
interest in the government securities or other collateral securing the
repurchase agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt owed to HC
Financial or High Country, as the case may be, which is secured by such
collateral.
Since June 30, 2003, there has been no material deterioration or adverse
change in the quality, or any material decrease in the value, of the securities
portfolio of HC Financial or that of High Country considered as one enterprise.
2.19. Personal Property and Other Assets. All banking equipment, data
-----------------------------------
processing equipment, vehicles, and other personal property used by HC Financial
or High Country and material to the operation of the business of either are
owned by HC Financial or High Country free and clear of all liens, encumbrances,
leases, title defects or exceptions to title. All personal property of HC
Financial and High Country material to their business is in good operating
condition and repair, ordinary wear and tear excepted.
2.20. Patents and Trademarks. HC Financial and High Country each owns,
-----------------------
possesses or has the right to use any and all patents, licenses, trademarks,
trade names, copyrights, trade secrets and proprietary and other confidential
information necessary to conduct its business as now conducted. HC Financial and
High Country have not violated, and currently are not in conflict with, any
patent, license, trademark, trade name, copyright or proprietary right of any
other person or entity.
2.21. Environmental Matters.
---------------------
(a) As used in this Agreement, "Environmental Laws" shall mean,
without limitation:
(i) all federal, state and local statutes, regulations, ordinances,
orders, decrees, and similar provisions having the force or effect of law for
the protection of human health, natural resources, or the environment (including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act; the Superfund Amendment and Reauthorization Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Oil Pollution Act;
the Coastal Zone Management Act; any "Superfund" or "Superlien" law; the North
Carolina Oil Pollution and Hazardous Substances Control Act; the North Carolina
Water and Air Resources Act; and the North Carolina Occupational Safety and
Health Act, including any amendments thereto from time to time); and,
(ii) all common law concerning public health and safety, worker health
and safety, and pollution or protection of the environment, including without
limitation all standards of conduct and bases of obligations relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
discharge, release, threatened release, control, or clean-up of any "Hazardous
Substances" (as defined below).
As used in this Agreement, "Hazardous Substance" shall mean any materials,
substances, wastes, chemical substances, or mixtures presently listed, defined,
designated, or classified as hazardous, toxic, or dangerous, or otherwise
regulated, under any Environmental Laws, whether by type, quantity or
concentration, including without limitation pesticides, pollutants,
contaminants, toxic chemicals, oil, or other petroleum products, byproducts or
additives, asbestos or materials containing (or presumed to contain) asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon,
methyl tertiary butyl ether ("MTBE") or radioactive material.
12
(b) HC Financial and High Country have Previously Disclosed to Yadkin
copies of all written reports, correspondence, notices or other information or
materials, if any, in their possession pertaining to environmental surveys or
assessments of the High Country Real Property, and any improvements thereon, or
pertaining to any violation or alleged violation of Environmental Laws on,
affecting or otherwise involving the High Country Real Property or involving HC
Financial or High Country.
(c) To the Best Knowledge of management of HC Financial and High
Country after reasonable inquiry, there has been no presence, use, production,
generation, handling, transportation, treatment, storage, disposal, emission,
discharge, release, or threatened release of any Hazardous Substances by any
person on, from or relating to the High Country Real Property which constitutes
a violation of any Environmental Laws, or would require any removal, clean-up or
remediation of any Hazardous Substances from, on or relating to the High Country
Real Property under any Environmental Laws.
(d) Neither HC Financial nor High Country has violated any
Environmental Laws which violation would have a material adverse effect on HC
Financial or High Country considered as one enterprise, and, to the Best
Knowledge of management of HC Financial and High Country after reasonable
inquiry, there has been no violation of any Environmental Laws by any other
person or entity for whose liability or obligation with respect to any
particular matter or violation HC Financial or High Country is or may be
responsible or liable which would have a material adverse effect on HC Financial
or High Country considered as one enterprise.
(e) Neither HC Financial nor High Country is subject to any claims,
demands, causes of action, suits, proceedings, losses, damages, penalties,
liabilities, obligations, costs or expenses of any kind and nature which arise
out of, under or in connection with, or which result from or are based upon the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control, removal, clean-up or
remediation of any Hazardous Substances on, from or relating to the High Country
Real Property or by any person or entity.
(f) To the Best Knowledge of management of HC Financial and High
Country after reasonable inquiry, no facts, events or conditions relating to the
High Country Real Property or the operations of HC Financial or High Country at
any of its office locations, will prevent, hinder or limit continued substantial
compliance with Environmental Laws, or give rise to any investigatory, emergency
removal, remedial or corrective actions, obligations or liabilities pursuant to
Environmental Laws.
(g) To the Best Knowledge of management of HC Financial and High
Country (it being understood by Yadkin that, for purposes of this
representation, management of HC Financial and High Country has not undertaken a
review of each of HC Financial's or High Country's loan files with respect to
all Loan Collateral), (i) there has been no violation of any Environmental Laws
by any person or entity (including any violation with respect to any Loan
Collateral) for whose liability or obligation with respect to any particular
matter or violation HC Financial or High Country is or may be responsible or
liable; (ii) HC Financial and High Country are not subject to any claims,
demands, causes of action, suits, proceedings, losses, damages, penalties,
liabilities, obligations, costs or expenses of any kind and nature which arise
out of, under or in connection with, or which result from or are based upon, the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control, removal, clean-up or
remediation of any Hazardous Substances on, from or relating to any Loan
Collateral, by any person or entity; and (iii) there are no facts, events or
conditions relating to any Loan Collateral that will give rise to any
investigatory, emergency removal, remedial or corrective actions, obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental Laws.
13
2.22. Absence of Brokerage or Finder's Commissions. Except for the
--------------------------------------------
engagement of Xxxxx Capital by HC Financial: (i) no person or firm has been
retained by or has acted on behalf of, pursuant to any agreement, arrangement or
understanding with, or under the authority of, HC Financial or High Country or
their respective Boards of Directors, as a broker, finder or agent or has
performed similar functions or otherwise is or may be entitled to receive or
claim a brokerage fee or other commission in connection with or as a result of
the transactions described herein; and, (ii) neither HC Financial nor High
Country has agreed, or has any obligation, to pay any brokerage fee or other
commission to any person or entity in connection with or as a result of the
transactions described herein.
2.23. Material Contracts. Other than a benefit plan or employment agreement
------------------
Previously Disclosed to Yadkin pursuant to Paragraph 2.25 hereof, neither HC
Financial nor High Country is party to or bound by any agreement (i) involving
money or other property in an amount or with a value in excess of $25,000; (ii)
which is not to be performed in full within the twelve month period following
the date of this Agreement; (iii) which calls for the provision of goods or
services to HC Financial or High Country and cannot be terminated without
material penalty upon written notice to the other party thereto; (iv) which is
material to HC Financial or High Country and was not entered into in the
ordinary course of business; (v) which involves hedging, options or any similar
trading activity, or interest rate exchanges or swaps; (vi) which commits HC
Financial or High Country to extend any loan or credit (with the exception of
letters of credit, lines of credit and loan commitments extended in the ordinary
course of High Country's business); (vii) which involves the sale of any assets
of HC Financial or High Country which are used in and material to the operation
of their business; (viii) which involves any purchase of real property, or which
involves the purchase of any other assets in the amount of $10,000 or more in
the case of any single transaction or $25,000 or more in the case of all such
transactions; (ix) which involves the purchase, sale, issuance, redemption or
transfer of any capital stock or other securities of HC Financial or High
Country; or (x) with any director, officer or principal shareholder of HC
Financial or High Country (including without limitation any consulting
agreement, but not including any agreements relating to loans or other banking
services which were made in the ordinary course of High Country's business and
on substantially the same terms and conditions as were prevailing at that time
for similar agreements with unrelated persons).
Neither HC Financial nor High Country is in default in any material
respect, and there has not occurred any event which with the lapse of time or
giving of notice or both would constitute such a default, under any contract,
lease, insurance policy, commitment or arrangement to which either HC Financial
or High Country is a party or by which either HC Financial or High Country or
property of HC Financial or High Country is or may be bound or affected or under
which either HC Financial or High Country or property of HC Financial or High
Country receives benefits, where the consequences of such default would have a
material adverse effect on the financial condition, results of operations,
prospects, business, assets, loan portfolio, investments, properties or
operations of HC Financial or High Country considered as one enterprise.
2.24. Employment Matters; Employee Relations. HC Financial and High Country
--------------------------------------
have Previously Disclosed to Yadkin a listing of the names, years of credited
service and current base salary or wage rates of all of their employees as of
June 30, 2003. HC Financial and High Country (i) each have in all material
respects paid in full to or accrued on behalf of all their respective directors,
officers and employees all wages, salaries, commissions, bonuses, fees and other
direct compensation for all labor or services performed by them to the date of
this Agreement, and all vacation pay, sick pay, severance pay, overtime pay and
other amounts for which it is obligated under applicable law or HC Financial's
or High Country's existing agreements, benefit plans, policies or practices; and
(ii) are each in compliance with all applicable federal, state and local laws,
statutes, rules and regulations with regard to employment and employment
practices, terms and conditions, and wages and hours and other compensation
matters. No person has asserted that HC Financial or High Country is liable in
any amount for any arrearage in wages or employment taxes or for any penalties
for failure to comply with any of the foregoing.
There is no action, suit or proceeding by any person pending or, to the
Best Knowledge of management of HC Financial or High Country, threatened,
against HC Financial or High Country (or any employees of HC Financial or High
Country), involving employment discrimination, sexual harassment, wrongful
discharge or similar claims.
14
Neither HC Financial nor High Country is party to or bound by any
collective bargaining agreement with any of its employees, any labor union or
any other collective bargaining unit or organization. There is no pending or, to
the Best Knowledge of management of HC Financial and High Country, threatened
labor dispute, work stoppage or strike involving HC Financial or High Country
and any of their employees, or any pending or, to the Best Knowledge of
management of HC Financial and High Country, threatened proceeding in which it
is asserted that HC Financial or High Country has committed an unfair labor
practice; and, to the Best Knowledge of management of HC Financial and High
Country, there is no activity involving HC Financial, High Country, or any of
their employees seeking to certify a collective bargaining unit or engaging in
any other labor organization activity.
2.25. Employment Agreements; Employee Benefit Plans.
---------------------------------------------
(a) HC Financial and High Country have Previously Disclosed to Yadkin
a true and complete list of all bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans; all employment
and severance contracts; all medical, dental, health, and life insurance plans;
all vacation, sickness and other leave plans, disability and death benefit
plans; and all other employee benefit plans, contracts, or arrangements
maintained or contributed to by HC Financial or High Country for the benefit of
any employees, former employees, directors, former directors or any of their
beneficiaries (collectively, the "High Country Plans"). True and complete copies
of all High Country Plans, including, but not limited to, any trust instruments
or insurance contracts, if any, forming a part thereof or applicable to the
administration of any such High Country Plans or the assets thereof, and all
amendments thereto, previously have been supplied to Yadkin. Except as
Previously Disclosed, HC Financial and High Country do not maintain, sponsor,
contribute to or otherwise participate in any "Employee Benefit Plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), any "Multi-employer Plan" within the meaning of Section
3(37) of ERISA, or any "Multiple Employer Welfare Arrangement" within the
meaning of Section 3(40) of ERISA. Each High Country Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and which is
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") has received or applied for a favorable
determination letter from the IRS to the effect that they are so qualified (or
is entitled to rely upon the favorable determination letter issued to the
prototype or volume submitter plan sponsor, if the plan utilizes a prototype or
volume submitter document), and neither HC Financial nor High Country is aware
of any circumstances reasonably likely to result in the revocation or denial of
any such favorable determination letter. All reports and returns with respect to
the High Country Plans (and any High Country Plans previously maintained by HC
Financial or High Country) required to be filed with any governmental
department, agency, service or other authority, including without limitation IRS
Form 5500 (Annual Report), have been properly and timely filed.
(b) All "Employee Benefit Plans" maintained by or otherwise covering
employees or former employees of HC Financial or High Country, to the extent
each is subject to ERISA, currently are, and at all times have been, in
substantial compliance with all material provisions and requirements of ERISA,
the noncompliance with which will not have a material adverse effect on HC
Financial and High Country, considered as one enterprise. There is no pending
or, to the Best Knowledge of management of HC Financial and High Country,
threatened litigation relating to any High Country Plan or any employee benefit
plan, contract or arrangement previously maintained by HC Financial or High
Country. Neither HC Financial nor High Country has engaged in a transaction with
respect to any High Country Plan that could subject HC Financial or High Country
to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA.
(c) HC Financial and High Country have delivered to Yadkin a true,
correct and complete copy (including copies of all amendments thereto) of each
retirement plan maintained by either which is intended to be a plan qualified
under Section 401(a) of the Code (collectively, the "High Country Retirement
Plans"), together with true, correct and complete copies of the summary plan
descriptions relating to the High Country Retirement Plans, the most recent
determination letters received from the IRS regarding the High Country
Retirement Plans, and the most recent Annual Reports (Form 5500 series) and
related schedules, if any, for the High Country Retirement Plans.
15
The High Country Retirement Plans are qualified under the provisions of
Section 401(a) of the Code, the trusts under the High Country Retirement Plans
are exempt trusts under Section 501(a) of the Code, and determination letters
have been issued or applied for with respect to the High Country Retirement
Plans to said effect, including determination letters covering the current terms
and provisions of the High Country Retirement Plans unless the plan utilizes a
prototype or volume submitter document, in which case the plan is entitled to
rely upon the favorable determination letter issued to the prototype or volume
submitter plan sponsor. There are no issues relating to said qualification or
exemption of the High Country Retirement Plans currently pending before the IRS,
the United States Department of Labor, the Pension Benefit Guarantee Corporation
or any court. The High Country Retirement Plans and the administration thereof
are (and have been since the establishment of the High Country Retirement Plans)
in compliance in all material respects with all of the applicable requirements
of ERISA, the Code and all other laws, rules and regulations applicable to the
High Country Retirement Plans, the noncompliance with which will not have a
material adverse effect on HC Financial and High Country considered as one
enterprise. Without limiting the generality of the foregoing, all reports and
returns with respect to the High Country Retirement Plans required to be filed
with any governmental department, agency, service or other authority have been
properly and timely filed. There are no issues or disputes with respect to the
High Country Retirement Plans or the administration thereof currently existing
between HC Financial, High Country, or any trustee or other fiduciary
thereunder, and any governmental agency, any current or former employee of High
Country or beneficiary of any such employee, or any other person or entity. No
"reportable event" within the meaning of Section 4043 of ERISA has occurred at
any time with respect to the High Country Retirement Plans.
(d) No liability under subtitle C or D of Title IV of ERISA has been
or, to the Best Knowledge of management of HC Financial and High Country, is
expected to be incurred by HC Financial or High Country with respect to the High
Country Retirement Plans or with respect to any other ongoing, frozen or
terminated defined benefit pension plan currently or formerly maintained by HC
Financial or High Country. HC Financial and High Country do not presently
contribute, and have not contributed, to a "Multi-employer Plan." All
contributions required to be made pursuant to the terms of each of the High
Country Plans (including without limitation the High Country Retirement Plans
and any other "pension plan" (as defined in Section 3(2) of ERISA, provided such
plan is intended to qualify under the provisions of Section 401(a) of the Code)
maintained by HC Financial or High Country have been timely made. Neither the
High Country Retirement Plans nor any other "pension plan" maintained by HC
Financial or High Country have an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. HC Financial and High Country have not provided, and are not required to
provide, security to any "pension plan" or to any "Single Employer Plan"
pursuant to Section 401(a)(29) of the Code. Under the High Country Retirement
Plans and any other "pension plan" maintained by HC Financial or High Country as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the plan's most recent actuarial valuation)
did not exceed the then current value of the assets of such plan, and there has
been no material change in the financial condition of any such plan since the
last day of the most recent plan year.
(e) Except as provided in the terms of the High Country Retirement
Plans themselves, there are no restrictions on the rights of HC Financial or
High Country to amend or terminate any High Country Retirement Plan without
incurring any liability thereunder. Neither the execution and delivery of this
Agreement nor the consummation of the transactions described herein will, except
as otherwise specifically provided in this Agreement, (i) result in any payment
to any person (including without limitation any severance compensation or
payment, unemployment compensation, "golden parachute" or "change in control"
payment, or otherwise) becoming due under any plan or agreement to any director,
officer, employee or consultant, (ii) increase any benefits otherwise payable
under any plan or agreement, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
2.26. Insurance. HC Financial and High Country have Previously Disclosed to
---------
Yadkin a listing of each blanket bond, liability insurance, life insurance or
other insurance policy in effect on June 30, 2003, and in which it was an
insured party or beneficiary (each a "High Country Policy" and collectively the
"High Country Policies"). The High Country Policies provide coverage in such
amounts and against such liabilities, casualties, losses or risks as is
customary or reasonable for entities engaged in the businesses of HC Financial
and High Country or as is
16
required by applicable law or regulation; and, in the reasonable opinion of
management of HC Financial and High Country, the insurance coverage provided
under the High Country Policies is reasonable and adequate in all material
respects for HC Financial and High Country. Each of the High Country Policies is
in full force and effect and is valid and enforceable in accordance with its
terms, and is underwritten by an insurer of recognized financial responsibility
and which is qualified to issue those policies in North Carolina; and, HC
Financial and High Country have complied in all material respects with
requirements (including the giving of required notices) under each such High
Country Policy in order to preserve all rights thereunder with respect to all
material matters. HC Financial and High Country are not in default under the
provisions of, have not received notice of cancellation or nonrenewal of or any
premium increase on, and have not failed to pay any premium on, any High Country
Policy, and, to the Best Knowledge of management of HC Financial and High
Country, there has not been any inaccuracy in any application for any High
Country Policy. There are no pending claims with respect to any High Country
Policy, and, to the Best Knowledge of management of HC Financial and High
Country, there currently is no condition, and no event has occurred, that is
reasonably likely to form the basis for any such claim.
2.27. Insurance of Deposits. All deposits of High Country are insured by
---------------------
the Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from High Country to the FDIC have been paid in
full in a timely fashion, and no proceedings have been commenced or, to the Best
Knowledge of management of High Country, are contemplated by the FDIC or
otherwise to terminate such insurance.
2.28. Obstacles to Regulatory Approval. To the Best Knowledge of management
---------------------------------
of HC Financial and High Country, there exists no fact or condition (including
High Country's record of compliance with the Community Reinvestment Act)
relating to HC Financial or High Country that may reasonably be expected to
prevent or materially impede or delay Yadkin, HC Financial or High Country from
obtaining the regulatory approvals required in order to consummate the
transactions described in this Agreement; and, if any such fact or condition
becomes known to HC Financial or High Country, HC Financial or High Country
shall promptly (and in any event within three (3) days after obtaining such
knowledge) give notice of such fact or condition to Yadkin in the manner
provided herein.
2.29. Disclosure. To the Best Knowledge of management of HC Financial and
----------
High Country, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of HC Financial or High Country to Yadkin
in connection with this Agreement and the transactions described herein, when
considered as a whole, contains or has contained any untrue statement of a
material fact or omits or omitted to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF YADKIN
Except as otherwise specifically provided in this Agreement or as
"Previously Disclosed" (as defined in Paragraph 10.13 hereof) by Yadkin to HC
Financial and High Country, Yadkin hereby makes the following representations
and warranties to HC Financial and High Country.
3.01. Organization; Standing; Power. Yadkin (i) is duly organized and
-----------------------------
incorporated, validly existing and in good standing as a banking corporation
under the laws of the State of North Carolina; (ii) has all requisite power and
authority (corporate and other) to own, lease and operate its properties and to
carry on its business as it now is being conducted; (iii) is duly qualified to
do business and is in good standing in each jurisdiction in which the character
of the properties owned, leased or operated by it therein, or in which the
transaction of its business, makes such qualification necessary, except where
failure so to qualify would not have a material adverse effect on Yadkin; and
(iv) is not transacting business or operating any properties owned or leased by
it in violation of any provision of federal, state or local law or any rule or
regulation promulgated thereunder, except where such violation would not have a
material adverse effect on Yadkin. Yadkin is an "insured depository institution"
as defined in the Federal Deposit Insurance Act and applicable regulations
thereunder. Yadkin is a member of the FHLB of Atlanta.
17
3.02. Capital Stock. Yadkin's authorized capital stock consists of
-------------
20,000,000 shares of common stock, $1.00 par value (the "Yadkin Common Stock"),
of which 8,727,454 shares are issued and outstanding as of the date of this
Agreement.
Each outstanding share of Yadkin Common Stock (i) has been duly
authorized and is validly issued and outstanding, and is fully paid and
nonassessable (except to the extent provided in Section 53-42 of the North
Carolina General Statutes); and (ii) has not been issued in violation of the
preemptive rights of any shareholder. The Yadkin Common Stock has been
registered with the FDIC under the 1934 Act and Yadkin is subject to the
registration and reporting requirements of the 1934 Act.
3.03. Principal Shareholders. No person or entity is known to management of
-----------------------
Yadkin to beneficially own, directly or indirectly, more than 5% of the
outstanding shares of Yadkin Common Stock.
3.04. Subsidiaries. Except for PBRE, Inc., Piedmont National Financial
------------
Services, Inc. and Yadkin Valley Investment Services, Inc., Yadkin has no
subsidiaries, direct or indirect, and, except for equity securities included in
its investment portfolio at June 30, 2003, does not own any stock or other
equity interest in any other corporation, service corporation, joint venture,
partnership or other entity.
3.05. Convertible Securities, Options, Etc. Yadkin does not have any
------------------------------------
outstanding (i) securities or other obligations (including debentures or other
debt instruments) which are convertible into shares of Yadkin Common Stock or
any other securities of Yadkin; (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person or entity to receive or
acquire any shares of Yadkin Common Stock or any other securities of Yadkin; or
(iii) plan, agreement or other arrangement pursuant to which shares of Yadkin
Common Stock or any other securities of Yadkin, or options, warrants, rights,
calls or other commitments of any nature pertaining to any securities of Yadkin,
have been or may be issued.
3.06. Authorization and Validity of Agreement. This Agreement has been duly
---------------------------------------
and validly adopted by Yadkin's Board of Directors. Subject only to approval of
this Agreement by the shareholders of Yadkin in the manner required by law and
required approvals of Regulatory Authorities of the transactions described
herein; (i) Yadkin has the corporate power and authority to execute and deliver
this Agreement and to perform its obligations and agreements and carry out the
transactions described in this Agreement; (ii) all corporate proceedings and
approvals required to authorize Yadkin to enter into this Agreement and to
perform its obligations and agreements and carry out the transactions described
herein have been duly and properly completed or obtained; and (iii) this
Agreement constitutes the valid and binding agreement of Yadkin enforceable in
accordance with its terms, except to the extent enforceability may be limited by
(A) applicable bankruptcy, insolvency, reorganization; moratorium or similar
laws from time to time in effect which affect creditors' rights generally, (B)
legal and equitable limitations on the availability of injunctive relief,
specific performance and other equitable remedies; (C) general principles of
equity and applicable laws or court decisions limiting the enforceability of
indemnification provisions; and (D) the rights of the United States under the
Federal Tax Lien Act of 1966, as amended.
3.07. Validity of Transactions; Absence of Required Consents or Waivers.
-----------------------------------------------------------------
Except where the same would not have a material adverse effect on Yadkin and
subject to approval of this Agreement by the shareholders of Yadkin in the
manner required by law and receipt of required approvals of Regulatory
Authorities, neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by Yadkin with
any of its obligations or agreements contained herein, nor any action or
inaction by Yadkin required herein, will (i) conflict with or result in a breach
of the terms and conditions of, or constitute a default or violation under any
provision of, the Articles of Incorporation or Bylaws of Yadkin, or any material
contract, agreement, lease, mortgage, note, bond, indenture, license, or
obligation or understanding (oral or written) to which Yadkin is bound or by
which it or its business, capital stock or any of its properties or assets may
be affected; (ii) result in the creation or imposition of any material lien,
claim, interest, charge, restriction or encumbrance upon any of the properties
or assets of Yadkin; (iii) violate any applicable federal or state statute, law,
rule or regulation, or any judgment, order, writ, injunction or decree of any
court, administrative or regulatory agency or governmental body, which violation
will or may have a material adverse effect on Yadkin, its financial
18
condition, results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations, or on Yadkin's ability to consummate the
transactions described herein or to carry on the business of Yadkin as presently
conducted; (iv) result in the acceleration of any material obligation or
indebtedness of Yadkin; or (v) materially interfere with or otherwise materially
adversely affect Yadkin's ability to carry on its businesses as presently
conducted.
No consents, approvals or waivers are required to be obtained from any
person or entity in connection with Yadkin's execution and delivery of this
Agreement, or the performance of its obligations or agreements or the
consummation of the transactions described herein, except for required approvals
of Yadkin's shareholders and of Regulatory Authorities.
3.08. Yadkin Books and Records. Yadkin's books of account and business
------------------------
records have been maintained in all material respects in compliance with all
applicable legal and accounting requirements, and such books and records are
complete and reflect accurately in all material respects Yadkin's items of
income and expense and all of its assets, liabilities and stockholders' equity.
The minute books of Yadkin are complete and accurately reflect in all material
respects all corporate actions which its shareholders and board of directors,
and all committees thereof, have taken during the time periods covered by such
minute books, and, all such minute books have been or will be made available to
HC Financial and its representatives.
3.09. Yadkin Reports. To the Best Knowledge of management of Yadkin, Yadkin
--------------
has filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with (i) the Commissioner, (ii) the FDIC, or (iii) any other Regulatory
Authorities. All such reports, registrations and statements filed by Yadkin with
the Commissioner, the FDIC or any other Regulatory Authorities are collectively
referred to in this Agreement as the "Yadkin Reports." To the Best Knowledge of
management of Yadkin, the Yadkin Reports complied in all material respects with
all the statutes, rules and regulations enforced or promulgated by the
Regulatory Authorities with which they were filed and did not contain any untrue
statement of a material fact or omit 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. Yadkin has not been
notified that any such Yadkin Reports were deficient in any material respect as
to form or content.
3.10. Yadkin Financial Statements. Yadkin has Previously Disclosed to HC
---------------------------
Financial a copy of its audited statements of financial condition as of December
31, 2002 and 2001, and its audited statements of income, stockholders' equity
and cash flows for the years ended December 31, 2002 and 2001, together with
notes thereto (collectively, the "Yadkin Audited Financial Statements"),
together with copies of Yadkin's unaudited statements of financial condition as
of June 30, 2003, and unaudited statements of income and cash flows for the
six-months months periods ended June 30, 2003 and 2002 (collectively, the
"Yadkin Interim Financial Statements"). Following the date of this Agreement,
Yadkin promptly will deliver to HC Financial all other annual or interim
financial statements prepared by or for Yadkin. The Yadkin Audited Financial
Statements and the Yadkin Interim Financial Statements (i) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated; (ii) are in accordance with Yadkin's books and records; and (iii)
fairly present Yadkin's financial condition, assets and liabilities, results of
operations, changes in stockholders' equity and changes in cash flows as of the
dates indicated and for the periods specified therein. The Yadkin Audited
Financial Statements were audited by Deloitte & Touche, LLP.
3.11. Absence of Material Adverse Changes or Certain Other Events.
-----------------------------------------------------------
(a) Since June 30, 2003, Yadkin has conducted its businesses only in the
ordinary course, and there has been no material adverse change, and there has
occurred no event or development, and there currently exists no condition or
circumstance, which, with the lapse of time or otherwise, is likely to cause,
create or result in a material adverse change in or affecting the financial
condition of Yadkin or its results of operations, prospects, business, assets,
loan portfolio, investments, properties or operations.
19
(b) Since June 30, 2003, and other than in the ordinary course of its
business, Yadkin has not incurred any material liability, engaged in any
material transaction, entered into any material agreement, increased the
salaries, compensation or general benefits payable or provided to its employees,
suffered any material loss, destruction or damage to any of its properties or
assets, or made a material acquisition or disposition of any assets or entered
into any material contract or lease.
3.12. Litigation and Compliance with Law.
----------------------------------
(a) There are no material actions, suits, arbitrations, controversies or
other proceedings or investigations (or, to the Best Knowledge of management of
Yadkin, any facts or circumstances which reasonably could result in such),
including without limitation any such action by any Regulatory Authority, which
currently exist or are ongoing, pending or, to the Best Knowledge of management
of Yadkin, threatened, contemplated or probable of assertion, against, relating
to or otherwise affecting Yadkin or any of its properties, assets or employees.
(b) Yadkin has all Permits (as defined in Paragraph 2.15(b) hereof) of all
federal, state, local or foreign governmental or regulatory agencies that are
material to or necessary for the conduct of its business or to own, lease and
operate its properties; all such Permits are in full force and effect; no
violations have occurred with respect to any such Permits; and no proceeding is
pending or, to the Best Knowledge of management of Yadkin, threatened or
probable of assertion to suspend, cancel, revoke or limit any Permit.
(c) Yadkin is not subject to any supervisory agreement, enforcement order,
writ, injunction, capital directive, supervisory directive, memorandum of
understanding or other similar agreement, order, directive, memorandum or
consent of, with or issued by any Regulatory Authority relating to its financial
condition, directors or officers, employees, operations, capital, regulatory
compliance or any other matter; there are no judgments, orders, stipulations,
injunctions, decrees or awards against Yadkin which limit, restrict, regulate,
enjoin or prohibit in any material respect any present or past business or
practice of Yadkin; and, Yadkin has not been advised nor has any reason to
believe that any Regulatory Authority or any court is contemplating, threatening
or requesting the issuance of any such agreement, order, writ, injunction,
directive, memorandum, judgment, stipulation, decree or award.
(d) To the Best Knowledge of management of Yadkin, Yadkin is not in
violation or default in any material respect under, and it has complied in all
material respects with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions or decrees of any court or federal, state, municipal
or other Regulatory Authority having jurisdiction or authority over it or its
business operations, properties or assets (including without limitation all
provisions of North Carolina law relating to usury, the Consumer Credit
Protection Act, and all other federal and state laws and regulations applicable
to extensions of credit by Yadkin). To the Best Knowledge of management of
Yadkin, there is no basis for any material claim by any person or authority for
compensation, reimbursement, damages or other penalties or relief for any
violations described in this subparagraph (d).
3.13. Patents and Trademarks. To the Best Knowledge of management of
----------------------
Yadkin, Yadkin owns, possesses or has the right to use any and all patents,
licenses, trademarks, trade names, copyrights, trade secrets and proprietary and
other confidential information necessary to conduct its business as now
conducted. Yadkin has not violated, and currently is not in conflict with, any
patent, license, trademark, trade name, copyright or proprietary right of any
other person or entity.
3.14. Absence of Brokerage or Finders Commissions. Except for the
-------------------------------------------
engagement of The Xxxxxx Xxxxxx Company by Yadkin: (i) no person or firm has
been retained by or has acted on behalf of, pursuant to any agreement,
arrangement or understanding with, or under the authority of, Yadkin or its
Board of Directors, as a broker, finder or agent or has performed similar
functions or otherwise is or may be entitled to receive or claim a brokerage fee
or other commission in connection with or as a result of the transactions
described herein; and, (ii) Yadkin has not agreed, and has no obligation, to pay
any brokerage fee or other commission to any person or entity in connection with
or as a result of the transactions described herein.
20
3.15. Insurance. Yadkin currently maintains a blanket bond and policies of
---------
liability insurance and other insurance (the "Yadkin Policies"), which provide
coverage in such amounts and against such liabilities, casualties, losses or
risks as is customary or reasonable for entities engaged in the businesses of
Yadkin or as is required by applicable law or regulation; and, in the reasonable
opinion of management of Yadkin, the insurance coverage provided under the
Yadkin Policies is reasonable and adequate in all material respects for Yadkin.
Each of the Yadkin Policies is in full force and effect and is valid and
enforceable in accordance with its terms, and is underwritten by an insurer of
recognized financial responsibility and which is qualified to issue those
policies in North Carolina; and, Yadkin has complied in all material respects
with requirements (including the giving of required notices) under each of their
Yadkin Policies in order to preserve all rights thereunder with respect to all
material matters. Yadkin is not in default under the provisions of, has not
received notice of cancellation or nonrenewal of or any premium increase on, and
has not failed to pay any premium on any of the Yadkin Policies, and, to the
Best Knowledge of management of Yadkin, there has not been any inaccuracy in any
application for any of the Yadkin Policies. There are no pending claims with
respect to any of the Yadkin Policies, and, to the Best Knowledge of management
of Yadkin, there currently are no conditions, and there has occurred no event,
that is reasonably likely to form the basis for any such claim.
3.16. Insurance of Deposits. All deposits of Yadkin are insured by the Bank
---------------------
Insurance Fund of the FDIC to the maximum extent permitted by law, all deposit
insurance premiums due from Yadkin to the FDIC have been paid in full in a
timely fashion, and no proceedings have been commenced or, to the Best Knowledge
of management of Yadkin, are contemplated, by the FDIC or otherwise, to
terminate such insurance.
3.17. Obstacles to Regulatory Approval. To the Best Knowledge of management
--------------------------------
of Yadkin, there exists no fact or condition (including Yadkin's record of
compliance with the Community Reinvestment Act) relating to Yadkin that may
reasonably be expected to prevent or materially impede or xxxxx XX Financial,
High Country or Yadkin from obtaining the regulatory approvals required in order
to consummate the transactions described in this Agreement; and, if any such
fact or condition becomes known to Yadkin, Yadkin shall promptly (and in any
event within three days after obtaining such Knowledge) give notice of such fact
or condition to HC Financial in the manner provided herein.
3.18. Tax Returns and Other Tax Matters. (i) Yadkin has timely filed or
---------------------------------
caused to be filed all federal, state and local income tax returns and reports
which are required by law to have been filed, and all such returns and reports
were true, correct and complete and contained all material information required
to be contained therein; (ii) all federal, state and local income, profits,
franchise, sales, use, occupation, property, excise, withholding, employment and
other taxes (including interest and penalties), charges and assessments which
have become due from or been assessed or levied against Yadkin or its properties
have been fully paid or, if not yet due, a reserve or accrual, which is adequate
in all material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes, is reflected on the Yadkin Interim Financial
Statements; (iii) the income, profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other tax returns and reports of
Yadkin have not been subjected to audit by the Internal Revenue Service (the
"IRS") or the North Carolina Department of Revenue, and Yadkin has not received
any indication of the pendency of any audit or examination in connection with
any such tax return or report and, to the Best Knowledge of management of
Yadkin, no such return or report is subject to adjustment; and (iv) Yadkin has
not executed any waiver or extended the statute of limitations (or been asked to
execute a waiver or extend a statute of limitations) with respect to any tax
year, the audit of any such tax return or report, or the assessment or
collection of any tax.
3.19. Real Properties.
---------------
(a) With respect to each parcel of real property owned by Yadkin
(including Yadkin's banking facilities and all other real estate or foreclosed
properties, including improvements thereon, owned by Yadkin) (collectively, the
"Yadkin Real Property"), Yadkin has good and marketable fee simple title to the
Yadkin Real Property and owns the same free and clear of all mortgages, liens,
leases, encumbrances, title defects and exceptions to title other than: (i) the
lien of current taxes not yet due and payable; and (ii) such imperfections of
title and restrictions, covenants and easements (including utility easements)
which do not materially affect the value of the Yadkin Real Property or which do
not and will not materially detract from, interfere with or restrict the present
21
use of the Yadkin Real Property or any future use consistent therewith. With
respect to each lease pertaining to any such Real Property to which Yadkin is a
party (the "Real Property Leases): (A) such lease is valid and enforceable in
accordance with its terms; (B) there currently exists no circumstance or
condition which constitutes an event of default by Yadkin (as lessor or lessee)
or its respective lessor or which, with the passage of time or the giving of
required notices will or could constitute such an event of default; and (C) the
execution and delivery of this Agreement does not constitute an event of default
thereunder.
(b) The Yadkin Real Property complies in all material respects with
all applicable federal, state and local laws, regulations, ordinances or orders
of any governmental agency or regulatory authority (excluding Environmental Laws
which are addressed by Paragraph 3.23 below), including those relating to
zoning, building and use permits, and the parcels of the Yadkin Real Property
upon which Yadkin's banking or other offices are situated, or which are used by
Yadkin in conjunction with their banking or other offices or for other purposes,
may, under applicable zoning ordinances, be used for the purposes for which they
currently are used as a matter of right rather than as a conditional or
nonconforming use.
(c) All improvements and fixtures included in or on the Yadkin Real
Property are in good condition and repair, ordinary wear and tear excepted, and
there does not exist any condition which in any material respect interferes with
Yadkin's respective use or affects the economic value thereof.
3.20. Loans, Accounts, Notes and Other Receivables.
--------------------------------------------
(a) All loans, accounts, notes and other receivables reflected as
assets on Yadkin's books and records (i) have resulted from bona fide business
transactions in the ordinary course of operations; (ii) in all material respects
were made in accordance with Yadkin's standard practices and procedures; and
(iii) are owned by Yadkin free and clear of all liens, encumbrances,
assignments, participation or repurchase agreements or other exceptions to title
or to the ownership or collection rights of any other person or entity.
(b) All records of Yadkin regarding all outstanding loans, accounts,
notes and other receivables, and all other real estate owned, are accurate in
all material respects, and each loan which Yadkin's loan documentation indicates
is secured by any real or personal property or property rights ("Loan
Collateral") is secured by valid, perfected and enforceable liens on all such
Loan Collateral having the priority described in Yadkin's records of such loan.
(c) Each loan reflected as an asset on Yadkin's books, and each
guarantee therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon, and no defense, offset or counterclaim has been asserted with
respect to any such loan or guarantee.
(d) To the Best Knowledge of management of Yadkin, each of the loans
and other extensions of credit of Yadkin (with the exception of those loans and
extensions of credit which Yadkin has designated as a special asset or for
special handling or placed on any "watch list" because of concerns regarding the
ultimate collectibility or deteriorating condition of such asset or any obligor
or Loan Collateral therefor) is collectible in the ordinary course of business
in an amount which is not less than the amount at which it is carried on
Yadkin's books and records.
(e) Yadkin's reserve for possible loan losses (the "Loan Loss
Reserve") has been established in conformity with GAAP, sound banking practices
and all applicable requirements, rules and policies of the Commissioner and the
FDIC and, in the best judgment of management of Yadkin, is reasonable in view of
the size and character of Yadkin's loan portfolio, current economic conditions
and other relevant factors, and is adequate to provide for losses relating to or
the risk of loss inherent in Yadkin's loan portfolios and other real estate
owned.
3.21. Securities Portfolio and Investments. All securities owned, of record
------------------------------------
or beneficially, by Yadkin are held free and clear of all mortgages, liens,
pledges, encumbrances or any other restriction or rights of any other person or
entity, whether contractual or statutory (other than customary pledges in the
ordinary course of their business to secure public funds deposits), which would
materially impair the ability of Yadkin to dispose freely of
22
any such security or otherwise to realize the benefits of ownership thereof at
any time. There are no voting trusts or other agreements or undertakings to
which Yadkin is a party with respect to the voting of any such securities. With
respect to all "repurchase agreements" under which Yadkin has "purchased"
securities under agreement to resell, Yadkin has a valid, perfected first lien
or security interest in the government securities or other collateral securing
the repurchase agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt owed to Yadkin, as
the case may be, which is secured by such collateral.
Since June 30, 2003, there has been no material deterioration or
adverse change in the quality, or any material decrease in the value, of the
securities portfolio of Yadkin considered as one enterprise.
3.22. Personal Property and Other Assets. All banking equipment, data
----------------------------------
processing equipment, vehicles, and other personal property used by Yadkin and
material to the operation of the business of Yadkin are owned by Yadkin free and
clear of all liens, encumbrances, leases, title defects or exceptions to title.
All personal property of Yadkin material to their business is in good operating
condition and repair, ordinary wear and tear excepted.
3.23. Environmental Matters.
---------------------
(a) As used in this Agreement, "Environmental Laws" shall mean,
without limitation:
(i) all federal, state and local statutes, regulations,
ordinances, orders, decrees, and similar provisions having the force or effect
of law for the protection of human health, natural resources, or the environment
(including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act; the Superfund Amendment and Reauthorization Act;
the Federal Insecticide, Fungicide and Rodenticide Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Oil Pollution Act;
the Coastal Zone Management Act; any "Superfund" or "Superlien" law; the North
Carolina Oil Pollution and Hazardous Substances Control Act; the North Carolina
Water and Air Resources Act; and the North Carolina Occupational Safety and
Health Act, including any amendments thereto from time to time); and,
(ii) all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all standards of conduct and bases of obligations relating to
the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
discharge, release, threatened release, control, or clean-up of any "Hazardous
Substances" (as defined below).
As used in this Agreement, "Hazardous Substance" shall mean any
materials, substances, wastes, chemical substances, or mixtures presently
listed, defined, designated, or classified as hazardous, toxic, or dangerous, or
otherwise regulated, under any Environmental Laws, whether by type, quantity or
concentration, including without limitation pesticides, pollutants,
contaminants, toxic chemicals, oil, or other petroleum products, byproducts or
additives, asbestos or materials containing (or presumed to contain) asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon,
methyl tertiary butyl ether ("MTBE") or radioactive material.
(b) Yadkin has Previously Disclosed to HC Financial and High Country
copies of all written reports, correspondence, notices or other information or
materials, if any, in their possession pertaining to environmental surveys or
assessments of the Yadkin Real Property, and any improvements thereon, or
pertaining to any violation or alleged violation of Environmental Laws on,
affecting or otherwise involving the Yadkin Real Property or involving Yadkin.
(c) To the Best Knowledge of management of Yadkin after reasonable
inquiry, there has been no presence, use, production, generation, handling,
transportation, treatment, storage, disposal, emission, discharge, release, or
threatened release of any Hazardous Substances by any person on, from or
relating to the Yadkin Real Property which constitutes a violation of any
Environmental Laws, or would require any removal,
23
clean-up or remediation of any Hazardous Substances from, on or relating to the
Yadkin Real Property under any Environmental Laws.
(d) Yadkin has not violated any Environmental Laws which violation
would have a material adverse effect on Yadkin, and, to the Best Knowledge of
management of Yadkin after reasonable inquiry, there has been no violation of
any Environmental Laws by any other person or entity for whose liability or
obligation with respect to any particular matter or violation Yadkin is or may
be responsible or liable which would have a material adverse effect on Yadkin
considered as one enterprise.
(e) Yadkin is not is subject to any claims, demands, causes of action,
suits, proceedings, losses, damages, penalties, liabilities, obligations, costs
or expenses of any kind and nature which arise out of, under or in connection
with, or which result from or are based upon the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission, discharge,
release, threatened release, control, removal, clean-up or remediation of any
Hazardous Substances on, from or relating to the Yadkin Real Property or by any
person or entity.
(f) To the Best Knowledge of management of Yadkin after reasonable
inquiry, no facts, events or conditions relating to the Yadkin Real Property or
the operations of Yadkin at any of its office locations, will prevent, hinder or
limit continued substantial compliance with Environmental Laws, or give rise to
any investigatory, emergency removal, remedial or corrective actions,
obligations or liabilities pursuant to Environmental Laws.
(g) To the Best Knowledge of management of Yadkin (it being understood
by Yadkin that, for purposes of this representation, management of Yadkin has
not undertaken a review of each of Yadkin's loan files with respect to all Loan
Collateral), (i) there has been no violation of any Environmental Laws by any
person or entity (including any violation with respect to any Loan Collateral)
for whose liability or obligation with respect to any particular matter or
violation Yadkin is or may be responsible or liable; (ii) Yadkin is not subject
to any claims, demands, causes of action, suits, proceedings, losses, damages,
penalties, liabilities, obligations, costs or expenses of any kind and nature
which arise out of, under or in connection with, or which result from or are
based upon, the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, reporting, testing,
processing, emission, discharge, release, threatened release, control, removal,
clean-up or remediation of any Hazardous Substances on, from or relating to any
Loan Collateral, by any person or entity; and (iii) there are no facts, events
or conditions relating to any Loan Collateral that will give rise to any
investigatory, emergency removal, remedial or corrective actions, obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental Laws.
3.24. Employment Matters; Employee Relations. Yadkin (i) has in all
--------------------------------------
material respects paid in full to or accrued on behalf of all its directors,
officers and employees all wages, salaries, commissions, bonuses, fees and other
direct compensation for all labor or services performed by them to the date of
this Agreement, and all vacation pay, sick pay, severance pay, overtime pay and
other amounts for which it is obligated under applicable law or Yadkin's
existing agreements, benefit plans, policies or practices; and (ii) is in
compliance with all applicable federal, state and local laws, statutes, rules
and regulations with regard to employment and employment practices, terms and
conditions, and wages and hours and other compensation matters; and, no person
has asserted that Yadkin is liable in any amount for any arrearage in wages or
employment taxes or for any penalties for failure to comply with any of the
foregoing.
There is no action, suit or proceeding by any person pending or, to
the Best Knowledge of management of Yadkin, threatened, against Yadkin (or any
employees of Yadkin), involving employment discrimination, sexual harassment,
wrongful discharge or similar claims.
24
Yadkin is not party to or bound by any collective bargaining agreement
with any of its employees, any labor union or any other collective bargaining
unit or organization. There is no pending or, to the Best Knowledge of
management of Yadkin, threatened labor dispute, work stoppage or strike
involving Yadkin and any of its employees, or any pending or, to the Best
Knowledge of management of Yadkin, threatened proceeding in which it is asserted
that Yadkin has committed an unfair labor practice; and, to the Best Knowledge
of management of Yadkin, there is no activity involving Yadkin, or its employees
seeking to certify a collective bargaining unit or engaging in any other labor
organization activity.
3.25. Compliance with Existing Obligations. Yadkin has performed in all
------------------------------------
material respects all obligations required to be performed by it under, and it
is not in default in any material respect under, or in violation in any material
respect of, the terms and conditions of its Articles of Incorporation, Bylaws,
material contracts, agreements, leases, mortgages, notes, bonds, indentures,
licenses, obligations, understandings or other undertakings (whether oral or
written) to which it is bound or by which its business, operations, capital
stock or any property or asset may be affected.
3.26. Disclosure. To the Best Knowledge of management of Yadkin, no written
----------
statement, certificate, schedule, list or other written information furnished by
or on behalf of Yadkin to HC Financial or High Country in connection with this
Agreement and the transactions described herein, when considered as a whole,
contains or has contained any untrue statement of a material fact or omits or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.27. Absence of Undisclosed Liabilities. Yadkin does not have any material
----------------------------------
liabilities or obligations, whether known or unknown, matured or unmatured,
accrued, absolute, contingent or otherwise, whether due or to become due
(including without limitation tax liabilities or unfunded liabilities under
employee benefit plans or arrangements), other than (i) those reflected in the
Yadkin Audited Financial Statements or Yadkin Interim Financial Statements, (ii)
increases in deposit accounts in the ordinary course of business since June 30,
2003, or (iii) loan commitments in the ordinary course of business since June
30, 2003.
ARTICLE IV
COVENANTS OF HC Financial AND HIGH COUNTRY
4.01. Affirmative Covenants of HC Financial and High Country. HC Financial
------------------------------------------------------
and High Country hereby covenant and agree as follows with Yadkin:
(a) High Country Shareholders' Meeting. HC Financial agrees to cause a
----------------------------------
meeting of its shareholders (the "High Country Shareholders Meeting") to be duly
called and held as soon as practicable after the date of this Agreement for the
purpose of voting by HC Financial's shareholders on the approval of this
Agreement and the Merger. In connection with the call and conduct of, and all
other matters relating to the High Country Shareholders Meeting (including the
solicitation of proxies), HC Financial will comply in all material respects with
all provisions of applicable law and regulations and with its Articles of
Incorporation and Bylaws.
Unless, due to a material change in circumstances after the date
hereof, HC Financial's Board of Directors reasonably believes in good faith,
based on the written opinion of its legal counsel, that such a recommendation
would violate the directors' duties or obligations as such to HC Financial or to
its shareholders, HC Financial covenants that its Board of Directors will
recommend and actively encourage HC Financial's shareholders to vote their
shares of HC Financial Common Stock at the High Country Shareholders Meeting in
favor of approval of this Agreement, the Merger, and the Proxy Statement will so
indicate and state that HC Financial's Board of Directors considers the Merger
to be advisable and in the best interests of HC Financial and its shareholders.
In furtherance of such covenant, each director of HC Financial will execute this
Agreement as an inducement to Yadkin to enter into this Agreement and by the
execution hereof, each HC Financial director agrees, absent the aforesaid
opinion of counsel, to vote his or her shares to approve this Agreement and the
Merger.
(b) Conduct of Business Prior to Effective Time. While the parties
-------------------------------------------
recognize that the operation of HC Financial until the Effective Time is the
responsibility of HC Financial's Board of Directors and officers and
25
that the operation of High Country until the Effective Time is the
responsibility of High Country's Board of Directors and officers, HC Financial
and High Country agree that, between the date of this Agreement and the
Effective Time, and except as otherwise provided herein or expressly agreed to
in writing by Yadkin's President, HC Financial and High Country will carry on
their business in and only in the regular and usual course in substantially the
same manner as such business heretofore was conducted, and, to the extent
consistent with such business and within its ability to do so, HC Financial and
High Country each agrees that it will:
(i) preserve intact its present business organization, keep
available its present officers and employees, and preserve its relationships
with customers, depositors, creditors, correspondents, suppliers, and others
having business relationships with it;
(ii) maintain all of its properties and equipment in customary
repair, order and condition, ordinary wear and tear excepted;
(iii) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with sound business practices applied
on a consistent basis;
(iv) comply in all material respects with all laws, rules and
regulations applicable to it, its properties, assets or employees and to the
conduct of its business;
(v) not change its policies or procedures, including existing loan
underwriting guidelines, in any material respect except as may be required by
law;
(vi) continue to maintain in force insurance such as is described
in Paragraph 2.26 hereof; not modify any bonds or policies of insurance in
effect as of the date hereof unless the same, as modified, provides
substantially equivalent coverage; and, not cancel, allow to be terminated or,
to the extent available, fail to renew, any such bond or policy of insurance
unless the same is replaced with a bond or policy providing substantially
equivalent coverage; and,
(vii) promptly provide to Yadkin such information about its
financial condition, results of operations, prospects, businesses, assets, loan
portfolio, investments, properties, employees or operations, as Yadkin
reasonably shall request.
(c) Periodic Financial and Other Information. Following the date of
----------------------------------------
this Agreement and until the Effective Time, HC Financial and High Country will
deliver to Yadkin, promptly after each is available:
(i) an income statement and a statement of condition after each
month end;
(ii) a copy of all interim financial statements after each
quarter end;
(iii) a copy of each report, registration, statement, or other
communication or regulatory filing made with or to any Regulatory Authority
simultaneous with the filing or making thereof;
(iv) information regarding each new extension of credit in excess
of $250,000 (other than a loan secured by a first lien on a one-to-four family
principal residence which is being made for the purchase or refinancing of that
residence) after issuance of a commitment on such loan;
(v) an analysis of the Loan Loss Reserve and management's
assessment of the adequacy of the Loan Loss Reserve, which analysis and
assessment shall include a list of all classified or "watch list" loans, along
with the outstanding balance and amount specifically allocated to the Loan Loss
Reserve for each such classified or "watch list" Loan, all within ten business
days after each calendar month end; and,
(vi) the following information with respect to loans and other
extensions of credit (such assets being referred to in this Agreement as
"Loans") as of, and within ten business days following, each calendar month end:
26
(A) a list of Loans past due for 30 days or more as to principal or
interest;
(B) a list of Loans in nonaccrual status;
(C) a list of all Loans without principal reduction for a period of
longer than one year;
(D) a list of all foreclosed real property or other real estate owned
and all repossessed personal property;
(E) a list of each reworked or restructured Loan still outstanding,
including original terms, restructured terms and status; and
(F) a list of any actual or threatened litigation by or against HC
Financial or High Country pertaining to any Loan or credit, which list shall
contain a description of circumstances surrounding such litigation, its present
status and management's evaluation of such litigation.
(d) Notice of Certain Changes or Events. Following the execution of
-----------------------------------
this Agreement and up to the Effective Time, HC Financial or High Country
promptly will notify Yadkin in writing of and provide to it such information as
it shall request regarding (i) any material adverse change in HC Financial's or
High Country's financial condition, results of operations, prospects, business,
assets, loan portfolio, investments, properties or operations, or of the actual
or prospective occurrence of any condition or event which, with the lapse of
time or otherwise, is likely to cause, create or result in any such material
adverse change; or of (ii) the actual or prospective existence or occurrence of
any condition or event which, with the lapse of time or otherwise, has caused or
is likely to cause any statement, representation or warranty of HC Financial or
High Country herein to be or become inaccurate, misleading or incomplete in any
material respect, or which has resulted or is likely to cause, create or result
in the breach or violation in any material respect of any of HC Financial's or
High Country's covenants or agreements contained herein or in the failure of any
of the conditions described in Paragraphs 7.01 or 7.02 hereof.
(e) Accruals for Loan Loss Reserve and Expenses. HC Financial and High
-------------------------------------------
Country will cooperate with Yadkin and will make such appropriate accounting
entries in their books and records and take such other actions as HC Financial
and High Country shall, in their sole discretion, deem to be necessary or
desirable in anticipation of the Merger, including without limitation additional
provisions to High Country's Loan Loss Reserve or accruals or the creation of
reserves for employee benefits and expenses related to the transactions
described in this Agreement; provided, however, that notwithstanding any
provision of this Agreement to the contrary, and except as otherwise agreed to
by HC Financial and Yadkin, HC Financial and High Country shall not be required
to make any such accounting entries until immediately prior to the Effective
Time.
(f) Consents to Assignment of Leases. HC Financial and High Country
--------------------------------
will use its best efforts to obtain all required consents of their lessors to
the assignment to Yadkin of HC Financial's and High Country's rights and
obligations under any personal property leases, each of which consents shall be
in such form as shall be specified by Yadkin.
(g) Access. HC Financial and High Country each agrees that, following
------
the date of this Agreement and to and including the Effective Time, it will
provide Yadkin and its employees, accountants, legal counsel, environmental
consultants or other representatives access to all its books, records, files and
other information (whether maintained electronically or otherwise), to all its
properties and facilities, and to all its employees, accountants, legal counsel
and consultants, as Yadkin shall, in its sole discretion, consider to be
necessary or appropriate; provided, however, that any investigation or reviews
conducted by or on behalf of Yadkin shall be performed in such a manner as will
not interfere unreasonably with HC Financial's or High Country's normal
operations or with their relationships with their customers or employees, and
shall be conducted in accordance with procedures established by the parties.
27
(h) Deposit Liabilities. Following the date of this Agreement and up
-------------------
to the Effective Time, High Country will make pricing decisions with respect to
its deposit accounts in a manner consistent with its past practices based on
competition and prevailing market rates in its banking markets and will give
Yadkin three days notice after any changes in the pricing of its deposit
accounts.
(i) Further Action; Instruments of Transfer. HC Financial and High
---------------------------------------
Country each covenants and agrees with Yadkin that it: (i) will use its best
efforts in good faith to take or cause to be taken all action required of it
under this Agreement as promptly as practicable so as to permit the consummation
of the transactions described herein at the earliest possible date; (ii) shall
perform all acts and execute and deliver to Yadkin all documents or instruments
required herein, or as otherwise shall be reasonably necessary or useful to or
requested by Yadkin, in consummating such transactions; and, (iii) will
cooperate with Yadkin in every way in carrying out, and will pursue diligently
the expeditious completion of, such transactions.
4.02. Negative Covenants of HC Financial and High Country. Except as
---------------------------------------------------
Previously Disclosed or as may otherwise be required by governmental or
regulatory authority or law, HC Financial and High Country hereby covenant and
agree that, between the date hereof and the Effective Time, neither will do any
of the following things or take any of the following actions without the prior
written consent and authorization of Yadkin's President.
(a) Amendments to Articles of Incorporation or Bylaws. Neither HC
-------------------------------------------------
Financial nor High Country will amend its Articles of Incorporation or Bylaws.
(b) Change in Capital Stock. Neither HC Financial nor High Country
-----------------------
will (i) make any change in its authorized capital stock, or create any other or
additional authorized capital stock or other securities; or (ii) issue
(including any issuance of shares pursuant to a stock dividend or any issuance
of any securities convertible into capital stock), sell, purchase, redeem,
retire, reclassify, combine or split any shares of its capital stock or other
securities, or enter into any agreement or understanding with respect to any
such action. However, notwithstanding anything contained herein to the contrary,
HC Financial shall be permitted to issue shares of HC Financial Common Stock in
conjunction with the exercise of outstanding options and warrants referred to in
Paragraph 2.05 hereof.
(c) Options, Warrants and Rights. HC Financial will not grant or issue
----------------------------
any options, warrants, calls, puts or other rights of any kind relating to the
purchase, redemption or conversion of shares of its capital stock or any other
securities (including securities convertible into capital stock) or enter into
any agreement or understanding with respect to any such action.
(d) Dividends. HC Financial will not declare or pay any dividends on
---------
its outstanding shares of capital stock or make any other distributions on or in
respect of any shares of its capital stock or otherwise to its shareholders.
(e) Employment, Benefit or Retirement Agreements or Plans. Except as
-----------------------------------------------------
required by law, neither HC Financial nor High Country will: (i) enter into or
become bound by any oral or written contract, agreement or commitment for the
employment or compensation of any director, officer, employee or consultant
which is not immediately terminable by HC Financial or High Country without cost
or other liability on no more than 30 days' notice; (ii) adopt, enter into or
become bound by any new or additional profit-sharing, bonus, incentive, change
in control or "golden parachute," stock option, stock purchase, pension,
retirement, insurance (hospitalization, life or other), paid leave (sick leave,
vacation leave or other) or similar contract, agreement, commitment,
understanding, plan or arrangement (whether formal or informal) with respect to
or which provides for benefits for any of its current or former directors,
officers, employees or consultants; or (iii) enter into or become bound by any
contract with or commitment to any labor or trade union or association or any
collective bargaining group.
28
(f) Increase in Compensation; Bonuses. Neither HC Financial nor High
----------------------------------
Country will increase the compensation or benefits of, or pay any bonus or other
special or additional compensation to, any of its directors, officers, employees
or consultants. However, notwithstanding anything contained herein to the
contrary, prior to the Effective Time HC Financial and High Country may make
routine increases in the salaries of their employees at such times and in such
amounts as shall be consistent with their customary salary administration and
review policies and procedures.
(g) Accounting Practices. Neither HC Financial nor High Country will
--------------------
make any changes in its accounting methods, practices or procedures or in
depreciation or amortization policies, schedules or rates heretofore applied
(except as required by GAAP or governmental regulations).
(h) Acquisitions; Additional Branch Offices. Neither HC Financial nor
---------------------------------------
High Country will directly or indirectly (i) acquire or merge with, or acquire
any branch or all or any significant part of the assets of, any other person or
entity; (ii) open any new branch office; or (iii) enter into or become bound by
any contract, agreement, commitment or letter of intent relating to, or
otherwise take or agree to take any action in furtherance of, any such
transaction or the opening of a new branch office.
(i) Changes in Business Practices. Except as may be required by
-----------------------------
Regulatory Authorities or any other governmental or regulatory agency, or as
shall be required by applicable law, regulation or this Agreement, HC Financial
and High Country will not (i) change in any material respect the nature of their
business or the manner in which they conduct their business; (ii) discontinue
any material portion or line of their business; or (iii) change in any material
respect their lending, investment, asset-liability management or other material
banking or business policies.
(j) Exclusive Merger Agreement. Unless, due to a material change in
--------------------------
circumstances after the date hereof, HC Financial's Board of Directors
reasonably believes in good faith, based on the written opinion of its legal
counsel, that any such action or inaction would violate the directors' duties or
obligations as such to HC Financial or to its shareholders, HC Financial will
not, directly, or indirectly through any person or entity: (i) encourage,
solicit or attempt to initiate or procure discussions, negotiations or offers
with or from any person or entity (other than Yadkin) relating to a merger or
other acquisition of HC Financial or High Country or the purchase or acquisition
of any stock of HC Financial or High Country, any branch office of High Country
or all or any significant part of HC Financial's or High Country's assets (any
of the above being a "Transaction"), or provide assistance to any person in
connection with any such offer; (ii) except to the extent required by law,
disclose to any person or entity any information not customarily disclosed to
the public concerning HC Financial or its business or High Country or its
business, or afford to any other person or entity (other than Yadkin) access to
its properties, facilities, books or records; (iii) enter into or become bound
by any contract, agreement, commitment or letter of intent relating to, or
otherwise take or agree to take any action in furtherance of, any such
Transaction; or (iv) consummate a Transaction.
(k) Acquisition or Disposition of Assets. Neither HC Financial nor
------------------------------------
High Country will:
(i) Sell or lease (as lessor), or enter into or become bound by
any contract, agreement, option or commitment relating to the sale, lease (as
lessor) or other disposition of, any real estate in any amount;
(ii) Sell or lease (as lessor), or enter into or become bound by
any contract, agreement, option or commitment relating to the sale, lease (as
lessor) or other disposition of, any equipment or any other fixed or capital
asset (other than real estate) having a book value or a fair market value,
whichever is greater, of more than $10,000 for any individual item or asset, or
more than $25,000 in the aggregate for all such items or assets;
(iii) Purchase or lease (as lessee), or enter into or become bound
by any contract, agreement, option or commitment relating to the purchase, lease
(as lessee) or other acquisition of, any real property in any amount;
29
(iv) Purchase or lease (as lessee), or enter into or become bound
by any contract, agreement, option or commitment relating to the purchase, lease
(as lessee) or other acquisition of, any equipment or any other fixed asset
(other than real estate) having a purchase price, or involving aggregate lease
payments, in excess of $10,000 for any individual item or asset, or more than
$25,000 in the aggregate for all such items or assets;
(v) Enter into any purchase or other commitment or contract for
supplies or services which obligates HC Financial or High Country for a period
longer than six (6) months;
(vi) Except in the ordinary course of its business consistent with
its past practices, sell, purchase or repurchase, or enter into or become bound
by any contract, agreement, option or commitment to sell, purchase or
repurchase, any loan or other receivable or any participation in any loan or
other receivable; or
(vii) Except in the ordinary course of its business consistent
with its past practices, sell or dispose of, or enter into or become bound by
any contract, agreement, option or commitment relating to the sale or other
disposition of, any other asset (whether tangible or intangible, and including
without limitation any trade name, trademark, copyright, service xxxx or
intellectual property right or license), or assign its right to or otherwise
give any other person its permission or consent to use or do business under the
corporate name of HC Financial or High Country or any name similar thereto, or
release, transfer or waive any license or right granted to it by any other
person or entity to use any trademark, trade name, copyright, service xxxx or
intellectual property right.
(l) Debt; Liabilities. Except in the ordinary course of its business
-----------------
consistent with its past practices, neither HC Financial nor High Country will:
(i) enter into or become bound by any promissory note, loan agreement or other
agreement or arrangement pertaining to the borrowing of money; (ii) assume,
guarantee, endorse or otherwise become responsible or liable for any obligation
of any other person or entity; or (iii) incur any other liability or obligation
(absolute or contingent).
(m) Liens; Encumbrances. Neither HC Financial nor High Country will
-------------------
mortgage, pledge or subject any of its assets to, or permit any of its assets to
become or, except for those liens or encumbrances Previously Disclosed to
Yadkin, remain subject to, any lien or any other encumbrance (other than in the
ordinary course of business consistent with its past practices in connection
with securing public funds deposits or repurchase agreements).
(n) Waiver of Rights. Neither HC Financial nor High Country will
----------------
waive, release or compromise any rights in its favor against or with respect to
any of its officers, directors or shareholders or members of families of
officers, directors or shareholders, nor will HC Financial or High Country
waive, release or compromise any material rights against or with respect to any
other person or entity except in the ordinary course of business and in good
faith for fair value in money or money's worth.
(o) Other Contracts. Neither HC Financial nor High Country will enter
---------------
into or become bound by any contracts, agreements, commitments or understandings
(other than those permitted elsewhere in this Paragraph 4.02): (i) for or with
respect to any charitable contributions exceeding $5,000 in the aggregate; (ii)
with any governmental agency or Regulatory Authority; (iii) pursuant to which HC
Financial or High Country would assume, guarantee, endorse or otherwise become
liable for the debt, liability or obligation of any other person or entity; (iv)
which is entered into other than in the ordinary course of its business; or (v)
which, in the case of any one contract, agreement, commitment or understanding,
and whether or not in the ordinary course of its business, would obligate or
commit HC Financial or High Country to make expenditures over any period of time
of more than $5,000 (other than contracts, agreements, commitments or
understandings entered into in the ordinary course of High Country's lending
operations).
(p) Aggregate Deposit Liabilities. High Country will not take any
-----------------------------
actions designed to materially increase or decrease the aggregate level of its
deposits as they exist on the date of this Agreement.
30
(q) Foreclosures. Except in ordinary course of business in connection
------------
with any foreclosure of a mortgage or deed of trust securing a loan, neither HC
Financial nor High Country will bid for or purchase any real property which is
covered by that mortgage or deed of trust or which is the subject of that
foreclosure.
ARTICLE V
COVENANTS OF YADKIN
5.01. Affirmative Covenants of Yadkin. Yadkin hereby covenants and agrees
-------------------------------
as follows with HC Financial and High Country:
(a) Yadkin Shareholders' Meeting. Yadkin agrees to cause a meeting of
----------------------------
its shareholders (the "Yadkin Shareholders Meeting") to be duly called and held
as soon as practicable after the date of this Agreement for the purpose of
voting by Yadkin's shareholders on the approval of this Agreement and the
Merger. In connection with the call and conduct of, and all other matters
relating to the Yadkin Shareholders Meeting (including the solicitation of
proxies), Yadkin will comply in all material respects with all provisions of
applicable law and regulations and with its Articles of Incorporation and
Bylaws.
Unless, due to a material change in circumstances after the date
hereof, Yadkin's Board of Directors reasonably believes in good faith, based on
the written opinion of its legal counsel, that such a recommendation would
violate the directors' duties or obligations as such to Yadkin or to its
shareholders, Yadkin covenants that its Board of Directors will recommend and
actively encourage Yadkin's shareholders to vote their shares of Yadkin Common
Stock at the Yadkin Shareholders' Meeting in favor of approval of this Agreement
and the Merger, and the Proxy Statement will so indicate and state that Yadkin's
Board of Directors considers the Merger to be advisable and in the best
interests of Yadkin and its shareholders.
(b) Access. Yadkin agrees that, following the date of this Agreement
------
and to and including the Effective Time, it will provide HC Financial and High
Country and their respective employees, accountants, legal counsel,
environmental consultants or other representatives access to all its books,
records, files and other information (whether maintained electronically or
otherwise), to all its properties and facilities, and to all its employees,
accountants, legal counsel and consultants, as HC Financial or High Country
shall, in their respective sole discretion, consider to be necessary or
appropriate; provided, however, that any investigation or reviews conducted by
or on behalf of HC Financial or High Country shall be performed in such a manner
as will not interfere unreasonably with Yadkin's normal operations or with its
relationship with its customers or employees, and shall be conducted in
accordance with procedures established by the parties; and, provided further,
that neither HC Financial nor High Country shall have any right of access to
Yadkin's personnel files and records.
(c) Further Action; Instruments of Transfer. Yadkin covenants and
---------------------------------------
agrees with HC Financial and High Country that it (i) will use its best efforts
in good faith to take or cause to be taken all action required of it under this
Agreement as promptly as practicable so as to permit the consummation of the
transactions described herein at the earliest possible date; (ii) shall perform
all acts and execute and deliver to HC Financial and High Country all documents
or instruments required herein, or as otherwise shall be reasonably necessary or
useful to or requested by HC Financial or High Country, in consummating such
transactions; (iii) will cooperate with HC Financial and High Country in every
way in carrying out, and will pursue diligently the expeditious completion of,
such transactions; and, (iv) shall take such corporate action as is necessary to
authorize the issuance of additional shares of Yadkin Stock as necessary to
complete the Merger.
(d) Employment of Other HC Financial and High Country Employees. In
-----------------------------------------------------------
the case of employees of HC Financial and High Country other than those
employees of HC Financial and High Country that are party to an employment
agreement set forth in Paragraph 2.25(a) hereof, and provided they remain
employed by HC Financial or High Country at the Effective Time, Yadkin will
attempt in good faith to locate positions with Yadkin for which employment may
be offered, and Yadkin will offer employment to as many of those employees as
Yadkin, in its discretion, considers to be feasible. However, except as provided
in Paragraphs 1.08 and 6.09, notwithstanding anything contained in this
Agreement to the contrary, Yadkin shall not have any obligation to
31
employ or provide employment to any employee of HC Financial or High Country or
to any particular number of such employees. Any employment so offered to an
employee of HC Financial or High Country shall be in such a position, at such
location within Yadkin's branch system, and for such rate of compensation, as
Yadkin shall determine in its sole discretion. Each such person's employment
shall be on an "at-will" basis, and nothing in this Agreement shall be deemed to
constitute an employment agreement with any such person or to obligate Yadkin to
employ any such person for any specific period of time or in any specific
position or to restrict Yadkin's right to terminate the employment of any such
person at any time and for any reason satisfactory to it. Any employee of HC
Financial or High Country who is not offered employment by Yadkin at the
Effective Time ("Non-Continuing Employee") will be paid such severance as the
parties shall mutually determine on a case-by-case basis, but in no event shall
such severance be less than two (2) weeks salary of the Non-Continuing Employee.
(e) Employee Benefits. Except as otherwise provided in this Agreement,
-----------------
any employee of HC Financial or High Country who becomes an employee of Yadkin
at the Effective Time (a "New Employee") shall be entitled to receive all
employee benefits and to participate in all benefit plans provided by Yadkin on
the same basis (including cost) and subject to the same eligibility and vesting
requirements, and to the same conditions, restrictions and limitations, as
generally are in effect and applicable to other newly hired employees of Yadkin,
except that New Employees shall be immediately eligible to participate in all
benefit plans as of the Effective Date. Each New Employee shall be given credit
for his or her full years of service with HC Financial or High Country for: (i)
eligibility for participation and vesting in Yadkin's Section 401(k) savings
plan; and (ii) all purposes under Yadkin's other benefit plans (including
entitlement to vacation and sick leave). For purposes of Yadkin's health
insurance coverage, a New Employee's participation will be without regard to
pre-existing condition requirements under Yadkin's health insurance plan,
provided that any such pre-existing condition at the Effective Time was covered
under HC Financial's or High Country's health insurance plan(s) at the Effective
Time and the New Employee provides evidence of such previous coverage in a form
satisfactory to Yadkin's health insurance carrier.
Any Non-Continuing Employee will be permitted to obtain continued
health insurance coverage through the exercise of his or her COBRA rights
offered under Yadkin's health insurance coverage; and Yadkin will give any
required COBRA notices.
For the calendar year during which the Effective Time occurs, Yadkin
will grant to each New Employee a number of days of sick leave and vacation
leave, respectively, equal, in each case, to (i) the full number of such days to
which the New Employee would be entitled for that year, based on his or her
credited years of service and in accordance with Yadkin's standard leave
policies, less (ii) the number of days of sick leave and vacation leave used by
the New Employee as an employee of HC Financial or High Country during that
calendar year.
(f) Directors. In accordance with the provisions of Paragraph 1.08
---------
hereof, at the Effective Time Yadkin will cause Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx
and C. Xxxxxxx Xxxxxx, provided each is in office as a director of HC Financial
and High Country at the Effective Time to be appointed a director of Yadkin. In
the event one or more of these named directors is not in office as a director of
HC Financial and High Country at the Effective Time, Yadkin will appoint another
director of HC Financial and High Country in office at the Effective Time, as
selected by the Presidents of Yadkin and HC Financial, to serve as a director of
Yadkin; provided that not more than three former HC Financial directors shall be
appointed to the Board of Yadkin at the Effective Time (each a "Continuing
Director"). Each Continuing Director's continued service as a director of Yadkin
will be subject to the normal nomination and election processes. Immediately
after the appointment of these individuals, the board of directors of Yadkin
will consist of fourteen (14) directors. Each member of the Board of Directors
of HC Financial and High Country serving at the Effective Time who will not
serve as a Continuing Director shall be appointed to serve on the advisory board
of Yadkin for the Watauga County region of North Carolina ("Advisory Director").
Provided any such Advisory Director does not serve as a director, officer,
employee or consultant to an entity reasonably deemed to compete with Yadkin,
each such Advisory Director shall be entitled to receive from Yadkin, for the
three years following the Effective Time, fees in an amount equal to $600 per
month, paid, at the election of the Advisory Director, either in lump sum at the
Closing or in monthly installments. In lieu of such fees, each such Advisory
Director may choose to be compensated through the purchase of an annuity for the
benefit of such director, the terms of such annuity prohibiting the beneficiary
from competing with Yadkin for the three years
32
following the Effective Time. Following expiration of this three-year period,
any Advisory Director who elects to continue as an advisory board member shall
be compensated in the same manner as other advisory board members of Yadkin.
(g) "Blue Sky" Approvals. Yadkin shall use its best efforts to take
-------------------
all actions, if any, required by applicable state securities or "blue sky" laws:
(i) to cause the Yadkin Common Stock issued at the Effective Time, at the time
of the issuance thereof, to be duly qualified or registered (unless exempt)
under such laws, or to cause all conditions to any exemptions from qualification
or registration thereof under such laws to have been satisfied; and (ii) to
obtain any and all other approvals or consents to the issuance of the Yadkin
Common Stock that are required under state or federal law.
(h) Available Funds. By Closing, Yadkin will have transferred to the
---------------
Exchange Agent the funds necessary to satisfy its obligations under Article I of
this Agreement.
(i) NASDAQ Notification. By Closing, Yadkin shall file with the
-------------------
National Association of Securities Dealers such notifications and other
materials (and shall pay such fees) as shall be required for the listing on
Nasdaq National Market of the shares of Yadkin Common Stock to be issued to HC
Financial's shareholders pursuant to the Merger.
5.02. Negative Covenants of Yadkin. Yadkin hereby covenants and agrees
----------------------------
that, between the date hereof and the Effective Time, it will not do any of the
following things or take any of the following actions without the prior written
consent and authorization of HC Financial's President.
(a) Amendments to Articles of Incorporation or Bylaws. Yadkin will not
-------------------------------------------------
amend its Articles of Incorporation or Bylaws.
(b) Change in Capital Stock. Yadkin will not: (i) make any change in
-----------------------
its authorized capital stock, or create any other or additional authorized
capital stock or other securities; or (ii) issue (including any issuance of
shares pursuant to a stock dividend or any issuance of any securities
convertible into capital stock), sell, purchase, redeem, retire, reclassify,
combine or split any shares of its capital stock or other securities, or enter
into any agreement or understanding with respect to any such action. However,
notwithstanding anything contained herein to the contrary, Yadkin shall be
permitted to issue shares of Yadkin Common Stock in conjunction with the
exercise of outstanding options referred to in Paragraph 3.05 hereof, or
pursuant to its stock purchase or dividend reinvestment plan.
(c) Options, Warrants and Rights. Yadkin will not grant or issue any
----------------------------
options, warrants, calls, puts or other rights of any kind relating to the
purchase, redemption or conversion of shares of its capital stock or any other
securities (including securities convertible into capital stock) or enter into
any agreement or understanding with respect to any such action. However,
notwithstanding anything contained herein to the contrary, following the date of
this Agreement Yadkin may grant additional options to purchase shares of Yadkin
Common Stock pursuant to its existing employee and/or director stock option
plans.
(d) Dividends. Yadkin will not declare or pay any dividends on its
---------
outstanding shares of capital stock or make any other distributions on or in
respect of any shares of its capital stock or otherwise to its shareholders.
(e) Accounting Practices. Yadkin will not make any changes in its
---------------------
accounting methods, practices or procedures or in depreciation or amortization
policies, schedules or rates heretofore applied (except as required by GAAP or
governmental regulations).
33
(f) Changes in Business Practices. Except as may be required by the
-----------------------------
Regulatory Authorities or any other governmental agency, or as shall be required
by applicable law, regulation or this Agreement, Yadkin will not: (i) change in
any material respect the nature of its business; (ii) discontinue any material
portion or line of its business; or (iii) change in any material respect its
lending, investment, asset-liability management or other material banking or
business policies.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Preparation and Distribution of Proxy Statement/Offering Circular.
-----------------------------------------------------------------
Yadkin and HC Financial jointly will prepare a joint proxy statement/offering
circular (the "Proxy Statement/Offering Circular") for distribution to Yadkin's
and HC Financial's shareholders as Yadkin's proxy statement relating to Yadkin's
solicitation of proxies for use at the Yadkin Shareholders Meeting, HC
Financial's proxy statement relating to HC Financial's solicitation of proxies
for use at the High Country Shareholders Meeting and as Yadkin's offering
circular relating to its offer and distribution of Yadkin Common Stock to HC
Financial's shareholders as described in this Agreement. The Proxy
Statement/Offering Circular shall, in all material respects, be prepared in such
form and contain or be accompanied by such information regarding the Yadkin
Shareholders Meeting, the High Country Shareholders Meeting, this Agreement, the
parties hereto, the Merger, the Bank Merger and other transactions described
herein as is required by regulations of the FDIC applicable to Yadkin and the
SEC as applicable to HC Financial or otherwise as shall be agreed upon by Yadkin
and HC Financial.
Yadkin and HC Financial will mail the Proxy Statement/Offering
Circular to their shareholders on a date mutually agreed upon by Yadkin and HC
Financial not less than twenty (20) business days prior to the scheduled date of
the Yadkin Shareholders' Meeting and the scheduled date of the High Country
Shareholders Meeting, whichever is earlier; provided, however, that no such
materials shall be mailed to Yadkin's shareholders or HC Financial's
shareholders unless and until Yadkin shall have received the authorization of
the FDIC, HC Financial shall have received the authorization of the SEC, and HC
Financial and Yadkin shall have agreed on the form and content of such
materials.
6.02. Regulatory Approvals. Yadkin, High Country and HC Financial each
--------------------
agrees with the others that, as soon as practicable following the date of this
Agreement, it will prepare and file, or cause to be prepared and filed, all
applications required to be filed by it under applicable law and regulations for
approvals by Regulatory Authorities of the Merger, the Bank Merger or other
transactions described in this Agreement, including without limitation any
required applications for the approval of the Commissioner, the FDIC, the FRB
and the North Carolina Banking Commission (the "Commission"). Yadkin, High
Country and HC Financial each agrees (i) to use its best efforts in good faith
to obtain all necessary approvals of Regulatory Authorities required for
consummation of the Merger and other transactions described herein; and (ii)
before the filing of any such application required to be filed, to give each
other party an opportunity to review and comment on the form and content of such
application. Should the appearance of any of the officers, directors, employees,
financial advisors or counsel of Yadkin, High Country or HC Financial be
requested by each other or by any Regulatory Authority at any hearing in
connection with any such application, it will use its best efforts to arrange
for such appearance.
6.03. Information for Proxy Statement/Offering Circular and Applications
------------------------------------------------------------------
for Regulatory Approvals. Yadkin, High Country and HC Financial each covenants
------------------------
with the other that (i) it will cooperate with the other parties in the
preparation of the Proxy Statement/Offering Circular, and applications for
required approvals of Regulatory Authorities, and it will promptly respond to
requests by the other parties and their legal counsel for information, and will
provide all information, documents, financial statements or other material, that
is required for, or that may be reasonably requested by any other party for
inclusion in, any such document; and (ii) none of the information provided by it
for inclusion in any of such documents, at the time of the mailing of those
materials to HC Financial's and Yadkin's shareholders, or at the time of receipt
of any such required approval of a Regulatory Authority, as the case may be,
will contain any untrue statement of a material fact or omit any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
34
6.04. Expenses. Subject to the provisions of Paragraph 8.03, and whether or
--------
not this Agreement shall be terminated or the Merger or the Bank Merger shall be
consummated, Yadkin, High Country and HC Financial each agrees to pay its own
legal, accounting and financial advisory fees and all its other costs and
expenses incurred or to be incurred in connection with the execution and
performance of its obligations under this Agreement, or otherwise in connection
with this Agreement and the transactions described herein (including without
limitation all accounting fees, legal fees, consulting or advisory fees, filing
fees, printing and mailing costs, and travel expenses). For purposes of this
Agreement, expenses associated with the printing and mailing of the Proxy
Statement/Offering Circular described in Paragraph 6.01, and with the Tax
Opinion described in Paragraph 6.11, shall be deemed to have been incurred by
Yadkin and HC Financial equally. Expenses owed to Xxxxx Capital, including its
fees for rendering the "HC Financial Fairness Opinion" described in Paragraph
7.01(d)(ii), shall be deemed to have been incurred solely by HC Financial.
Expenses owed to The Xxxxxx Xxxxxx Company, including its fees for rendering the
"Yadkin Fairness Opinion" described in Paragraph 7.01(d)(i), shall be deemed to
have been incurred solely by Yadkin.
6.05. Announcements. Yadkin, High Country and HC Financial each agrees that
-------------
no persons other than the parties to this Agreement are authorized to make any
public announcements or statements about this Agreement or any of the
transactions described herein, and that, without the prior review and consent of
the other parties (which consent shall not unreasonably be denied or delayed),
it will not make any public announcement, statement or disclosure as to the
terms and conditions of this Agreement or the transactions described herein,
except for such disclosures as may be required incidental to obtaining the
required approval of any Regulatory Authority to the consummation of the
transactions described herein. However, notwithstanding anything contained
herein to the contrary, neither Yadkin, High Country nor HC Financial shall be
required to obtain the prior consent of the other parties for any such
disclosure which it, in good faith and upon the advice of its legal counsel,
believes is required by law.
6.06. Real Property Matters.
---------------------
(a) Yadkin, at its own option or expense, may cause to be conducted:
(i) a title examination, physical survey, zoning compliance review, and
structural inspection of the High Country Real Property and improvements thereon
(the "Property Examination"); and (ii) site inspections, historic reviews,
regulatory analyses, and Phase 1 environmental assessments of the High Country
Real Property, together with such other studies, testing and intrusive sampling
and analyses as Yadkin shall deem necessary or desirable (the "Environmental
Survey").
(b) If, in the course of the Property Examination or Environmental
Survey, Yadkin discovers a "Material Defect" (as defined below) with respect to
the High Country Real Property which has not been Previously Disclosed, Yadkin
will give prompt written notice thereof to HC Financial describing the facts or
conditions constituting the Material Defect, and Yadkin shall have the option,
exercisable upon written notice to HC Financial, to either: (i) waive the
Material Defect; or (ii) terminate this Agreement.
(c) For purposes of this Agreement, a "Material Defect" shall include:
(i) the existence of any lien (other than the lien of real
property taxes not yet due and payable), encumbrance, zoning restriction,
easement, covenant, or other restriction, title imperfection or title
irregularity, or the existence of any facts or conditions that constitute a
breach of HC Financial's or High Country's representations and warranties
contained in Paragraph 2.16 or 2.21, in either such case that Yadkin reasonably
believes will materially affect its use of any parcel of the High Country Real
Property for the purpose for which it currently is used or the value or
marketability of any parcel of the High Country Real Property, or as to which
Yadkin otherwise objects; or
(ii) the existence of any structural defects or conditions of
disrepair in the improvements on the High Country Real Property (including any
equipment, fixtures or other components related
35
thereto) that Yadkin reasonably believes would cost an aggregate of $200,000 or
more to repair, remove or correct as to all such High Country Real Property; or
(iii) the existence of facts or circumstances relating to any of
the High Country Real Property reflecting that (A) there likely has been a
discharge, disposal, release, threatened release, or emission by any person of
any Hazardous Substance (as such term is defined in Paragraph 2.21(a)(ii)
hereof) on, from, under, at, or relating to the High Country Real Property; or
(B) any action has been taken or not taken, or a condition or event likely has
occurred or exists, with respect to the High Country Real Property which
constitutes or would constitute a violation of any Environmental Laws or any
contract or other agreement between HC Financial or High Country and any other
person or entity, as to which, in either such case, Yadkin reasonably believes,
based on the advice of legal counsel or other consultants, that HC Financial or
High Country could become responsible or liable, or that HC Financial or High
Country could become responsible or liable following the Effective Time, for
assessment, removal, remediation, monetary damages, or civil, criminal or
administrative penalties or other corrective action and in connection with which
the amount of expense or liability which HC Financial or High Country could
incur, or for which HC Financial or High Country could become responsible or
liable, following consummation of the Merger at any time or over any period of
time could equal or exceed an aggregate of $50,000 or more as to all such High
Country Real Property.
6.07. Treatment of High Country Options and Warrants.
----------------------------------------------
(a) Yadkin and HC Financial agree that, as of the Effective Time,
holders of HC Financial's 206,250 outstanding options to purchase shares of HC
Financial Common Stock referenced in Paragraph 2.05 (each a "High Country
Option" and collectively the "High Country Options") and 276,322 outstanding
warrants to purchase shares of HC Financial Common Stock referenced in Paragraph
2.05 (each a "High Country Warrant" and collectively the "High Country
Warrants") shall have the option to surrender their High Country Options or High
Country Warrants and receive solely a cash payment amount equal to (A) the
excess of $24.02 over the exercise price per share of HC Financial Common Stock
covered by the High Country Option or High Country Warrant, (B) multiplied by
the total number of shares of HC Financial Common Stock covered by the High
Country Option or High Country Warrant. HC Financial and High Country will
obtain from each person who holds a High Country Option, and will deliver to
Yadkin at the Closing, a written agreement in a form specified by Yadkin
confirming and agreeing to the surrender of such person's High Country Option
upon payment of the amounts described above.
(b) Yadkin and HC Financial agree that, as of the Effective Time, all
High Country Options that are not surrendered shall be assumed by Yadkin on
their then current terms and conditions and be converted into options to
purchase shares of Yadkin Common Stock, such conversion to be made such that
following the Effective Time each High Country Option will represent an option
to purchase a number of shares of Yadkin Common Stock equal to the Exchange
Ratio for every one (1) share of HC Financial Common Stock covered by such High
Country Option prior to the Effective Time with an appropriate adjustment to the
exercise price for such High Country Option. In addition, each High Country
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Code and the regulations promulgated thereunder so as to
continue as an incentive stock option under Section 424(a) of the Code, and so
as not to constitute a modification, extension, or renewal of the option, within
the meaning of Section 424(h) of the Code. Yadkin and HC Financial shall take
all necessary steps to effectuate the foregoing provisions of this Paragraph
6.07(b), including appropriate amendments to the HC Financial option plans if
necessary.
(c) The HC Financial Board of Directors agrees, if requested by
Yadkin, to accelerate, in accordance with the High Country Warrant agreement,
the exercise date of the High Country Warrants to the Effective Time.
6.08. Treatment of 401(k) Plan. High Country agrees that, prior to the
------------------------
Closing Date, it will take or cause to be taken such actions as Yadkin shall
reasonably consider necessary or desirable in connection with or to effect or
facilitate termination of High Country's 401(k) Plan (the "Plan") in accordance
with the Plan and applicable law. Each participant in the Plan on such
termination date may elect, upon completion of the termination and the final
liquidation of the Plan, to receive a distribution of the assets credited to his
or her Plan account at that time or, if the participant has become a participant
in Yadkin's Section 401(k) plan ("Yadkin Plan"), to have those
36
assets credited as a "roll-over" to the participant's account under the Yadkin
Plan. Yadkin agrees that it will assume, as of the Effective Time, any and all
administrative and fiduciary duties of High Country with respect to the duties
related to termination and final liquidation of the Plan. Yadkin shall not
assume any other duties with regard to the Plan other than those necessary to
complete the termination and liquidation of the Plan.
6.09. Officer Employment Agreements. Effective with the execution of this
-----------------------------
Agreement, Xxxx X. Xxxxxxxx and Xxxxxx Xxxxxxx have entered into Employment
Agreements with Yadkin that will become effective on the Closing Date of the
Merger.
6.10. Directors' and Officers' Liability Insurance. Yadkin and HC Financial
--------------------------------------------
agree that, to the extent the same can be purchased at a cost to which they both
agree, then immediately prior to the Effective Time HC Financial shall purchase
"tail" coverage, effective at the Effective Time, under and in the same amount
of coverage, and insuring the same persons and entities as is provided by its
then current directors' and officers' liability insurance policy. To the extent
reasonably possible, Yadkin shall attempt to obtain such "tail" coverage for a
period of three years.
6.11 Tax Opinion. Yadkin and HC Financial agree to use their best efforts
-----------
to cause the Bank Merger, the Merger, and the conversion of outstanding shares
of HC Financial Common Stock into shares of Yadkin Common Stock, on the terms
contained in this Agreement, to be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and to obtain from
Xxxxxx Xxxxxx, P.A., a written opinion (the "Tax Opinion"), addressed jointly to
the Boards of Directors of Yadkin and HC Financial, to the foregoing effect.
ARTICLE VII
CONDITIONS PRECEDENT TO MERGER
7.01. Conditions to all Parties' Obligations. Notwithstanding any other
--------------------------------------
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date.
(a) Approval by Regulatory Authorities; Disadvantageous Conditions.
--------------------------------------------------------------
(i) The Merger, the Bank Merger and other transactions described in this
Agreement shall have been approved, to the extent required by law, by the FDIC,
the FRB, the Commissioner, the Commission, and by all other Regulatory
Authorities having jurisdiction over such transactions; (ii) no Regulatory
Authority shall have objected to or withdrawn its approval of such transactions
or imposed any condition on such transactions or its approval thereof, which
condition is reasonably deemed by HC Financial or Yadkin to so adversely impact
the economic or business benefits of this Agreement to HC Financial, High
Country or Yadkin as to render it inadvisable for HC Financial, High Country or
Yadkin to consummate the Merger or the Bank Merger; (iii) the 15-day or 30-day
waiting period, as applicable, required following necessary approvals by the
FDIC and the FRB for review of the transactions described herein by the United
States Department of Justice shall have expired, and, in connection with any
such review, no objection to the Merger or the Bank Merger shall have been
raised; and (iv) all other consents, approvals and permissions, and the
satisfaction of all of the requirements prescribed by law or regulation,
necessary to the carrying out of the transactions contemplated herein shall have
been procured.
37
(b) Adverse Proceedings, Injunction, Etc. There shall not be: (i) any
------------------------------------
order, decree or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Merger, the Bank Merger or any of the other
transactions described in this Agreement or any of the parties hereto from
consummating any such transaction; (ii) any pending or threatened investigation
of the Merger, the Bank Merger or any of such other transactions by the United
States Department of Justice, or any actual or threatened litigation under
federal antitrust laws relating to the Merger, the Bank Merger or any other such
transaction; (iii) any suit, action or proceeding by any person or entity
(including any governmental, administrative or regulatory agency), pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit Yadkin, High Country or HC Financial from consummating the
Merger or the Bank Merger or carrying out any of the terms or provisions of this
Agreement; or (iv) any other suit, claim, action or proceeding pending or
threatened against Yadkin, High Country or HC Financial or any of their
respective officers or directors which shall reasonably be considered by Yadkin,
High Country or HC Financial to be materially burdensome in relation to the
proposed Merger or Bank Merger or materially adverse in relation to the
financial condition, results of operations, prospects, businesses, assets, loan
portfolio, investments, properties or operations of any party hereto, and which
has not been dismissed, terminated or resolved to the satisfaction of all
parties hereto within 90 days of the institution or threat thereof.
(c) Approval by Boards of Directors and Shareholders. The respective
------------------------------------------------
Boards of Directors of Yadkin, High Country and HC Financial shall have duly
adopted this Agreement and the Merger by appropriate resolutions, the
shareholders of Yadkin shall have duly approved this Agreement and the Merger at
the Yadkin Shareholders Meeting, the shareholders of HC Financial shall have
duly approved this Agreement and the Merger at the High Country Shareholders
Meeting and HC Financial, acting in its capacity as the sole shareholder of High
Country, shall have duly approved this Agreement and the Merger, all to the
extent required by and in accordance with the provisions of this Agreement,
applicable law, and applicable provisions of their respective Articles of
Incorporation and Bylaws.
(d) Fairness Opinions.
-----------------
(i) Yadkin shall have received from The Xxxxxx Xxxxxx Company a
written opinion (the "Yadkin Fairness Opinion") to the effect that the Merger is
fair, from a financial point of view, to Yadkin and its shareholders; and, The
Xxxxxx Xxxxxx Company shall have delivered a letter to Yadkin, dated as of a
date within five business days following the date of determination of the
Exchange Ratio pursuant to Paragraph 1.05(b), to the effect that it remains its
opinion that the terms of the Merger are fair, from a financial point of view,
to Yadkin and its shareholders.
(ii) HC Financial shall have received from Xxxxx Capital, a written
opinion (the "HC Financial Fairness Opinion") to the effect that the
consideration received by HC Financial's shareholders is fair, from a financial
point of view, to HC Financial and its shareholders; and Xxxxx Capital shall
have delivered a letter to HC Financial, dated as of a date within five business
days following the date of determination of the Exchange Ratio pursuant to
Paragraph 1.05(b), to the effect that it remains its opinion that the terms of
the Merger are fair, from a financial point of view, to HC Financial and its
shareholders.
(e) Tax Opinion. Yadkin and HC Financial shall have received the Tax
-----------
Opinion in form satisfactory to each of them.
(f) No Termination or Abandonment. This Agreement shall not have been
-----------------------------
terminated or abandoned by any party hereto.
(g) Articles of Merger; Other Actions. Separate Articles of Merger
---------------------------------
described in Paragraph 1.09 of this Agreement pertaining to the Merger and the
Bank Merger shall have been duly executed by Yadkin and filed with the North
Carolina Secretary of State as provided in that Paragraph.
7.02. Additional Conditions to Yadkin's Obligations. Notwithstanding any
---------------------------------------------
other provision of this Agreement to the contrary, Yadkin's separate obligation
to consummate the transactions described herein shall be conditioned upon the
satisfaction of each of the following conditions precedent on or before the
Closing Date:
38
(a) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the consolidated financial condition or results of
operations of HC Financial, and there shall not have occurred any event or
development, and there shall not exist any condition or circumstance which, with
the lapse of time or otherwise, is likely to cause, create or result in any such
material adverse change.
(b) Compliance with Laws. HC Financial and High Country shall have
--------------------
complied in all material respects with all federal and state laws and
regulations applicable to them in connection with the transactions described in
this Agreement where the violation of or failure to comply with any such law or
regulation is likely to have a material adverse effect on the financial
condition, results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations of HC Financial or High Country, or of
Yadkin after the Effective Time, or on HC Financial's or High Country's ability
to consummate the Merger or the Bank Merger.
(c) HC Financial's and High Country's Representations and Warranties
----------------------------------------------------------------
and Performance of Agreements; Officers' Certificate. Unless waived in writing
----------------------------------------------------
by Yadkin as provided in Paragraph 10.02 hereof, each of the representations and
warranties of HC Financial and High Country contained in this Agreement shall
have been true and correct in all material respects as of the date hereof, and
they shall remain true and correct on and as of the Closing Date with the same
force and effect as though made on and as of such date, except: (i) for changes
which are not, in the aggregate, material and adverse to the financial
condition, results of operations, prospects, businesses, assets, loan portfolio,
investments, properties or operations of HC Financial and High Country
considered as one enterprise or to HC Financial's and High Country's ability to
consummate the Merger or the Bank Merger, respectively, and other transactions
described herein; and (ii) as otherwise contemplated by this Agreement; and HC
Financial and High Country each shall have performed in all material respects
all of its obligations, covenants and agreements hereunder to be performed by it
on or before the Closing Date.
Yadkin shall have received a certificate dated as of the Closing Date
and executed by the President and CEO and the Chief Financial Officer of HC
Financial and High Country to the effect that the conditions of this
subparagraph have been met and as to such other matters as may be reasonably
requested by Yadkin.
(d) Legal Opinion of HC Financial's and High Country's Counsel. Yadkin
----------------------------------------------------------
shall have received the written legal opinion of Brooks, Pierce, XxXxxxxx,
Xxxxxxxx & Xxxxxxx, L.L.P., counsel for HC Financial and High Country, dated as
of the Closing Date and in form and substance reasonably satisfactory to Yadkin.
(e) Other Documents and Information. HC Financial and High Country
-------------------------------
shall have provided to Yadkin correct and complete copies (certified by their
respective Secretaries) of resolutions of their respective Boards of Directors
and shareholders pertaining to approval of this Agreement, the Merger and the
Bank Merger and other transactions contemplated herein, together with a
certificate of the incumbency of their officers who executed this Agreement or
any other documents delivered to Yadkin in connection with the Closing.
(f) Acceptance by Yadkin's Counsel. The form and substance of all
------------------------------
legal matters described in this Agreement or related to the transactions
contemplated herein shall be reasonably acceptable to Yadkin's legal counsel.
(g) Option Plan Matters. HC Financial and High Country shall have
-------------------
delivered to Yadkin the written agreement of each individual holder of the High
Country Options, as required by Paragraph 6.07(a).
(h) Consents to Assignment of Property Leases. HC Financial and High
-----------------------------------------
Country shall have obtained all required consents to the assignment to Yadkin of
its rights and obligations under any personal property lease and any Real
Property Lease material to the business of HC Financial and High Country, and
such consents shall be in such form and substance as shall be satisfactory to
Yadkin; and each of the lessors of HC Financial and High Country shall have
confirmed in writing that HC Financial and High Country is not in default under
the terms and conditions of any personal property lease or any Real Property
Lease.
39
(i) Officer Agreements. Xxxx X. Xxxxxxxx and Xxxxxx Xxxxxxx shall have
------------------
entered into the Employment Agreements set forth in Paragraph 6.09 hereof.
7.03. Additional Conditions to HC Financial's and High Country's
----------------------------------------------------------
Obligations. Notwithstanding any other provision of this Agreement to the
-----------
contrary, HC Financial's and High Country's separate obligations to consummate
the transactions described herein shall be conditioned upon the satisfaction of
each of the following conditions precedent on or before the Closing Date:
(a) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations of Yadkin, and there shall not have occurred any event or
development, and there shall not exist any condition or circumstance which, with
the lapse of time or otherwise, is likely to cause, create or result in any such
material adverse change.
(b) Compliance with Laws. Yadkin shall have complied in all material
--------------------
respects with all federal and state laws and regulations applicable to it in
connection with the transactions described in this Agreement and where the
violation of or failure to comply with any such law or regulation is likely to
have a material adverse effect on the financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of Yadkin after the Effective Time, or on Yadkin's
ability to consummate the Merger or the Bank Merger.
(c) Yadkin's Representations and Warranties and Performance of
----------------------------------------------------------
Agreements; Officers' Certificate. Unless waived in writing by HC Financial or
---------------------------------
High Country as provided in Paragraph 10.02, each of the representations and
warranties of Yadkin contained in this Agreement shall have been true and
correct in all material respects as of the date hereof, and they shall remain
true and correct at and as of the Closing Date with the same force and effect as
though made on and as of such date, except: (i) for changes which are not, in
the aggregate, material and adverse to the financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of Yadkin or to Yadkin's ability to consummate the
Merger, the Bank Merger and other transactions described herein: and (ii) as
otherwise contemplated by this Agreement; and, Yadkin shall have performed in
all material respects all of its obligations, covenants and agreements hereunder
to be performed by it on or before the Closing Date.
HC Financial and High Country shall have received a certificate dated
as of the Closing Date and executed by Yadkin's President and CEO and Chief
Financial Officer to the effect that the conditions of this subparagraph have
been met and as to such other matters as may be reasonably requested by HC
Financial and High Country.
(d) Legal Opinion of Yadkin's Counsel. HC Financial shall have
---------------------------------
received the written legal opinion of Xxxxxx Xxxxxx, P.A., counsel to Yadkin,
dated as of the Closing Date and in form and substance reasonably satisfactory
to HC Financial.
(e) Other Documents and Information. Yadkin shall have provided to HC
-------------------------------
Financial and High Country correct and complete copies (all certified by
Yadkin's Secretary) of Yadkin's Articles of Incorporation and Bylaws, and
resolutions of its Board of Directors and shareholders pertaining to approval of
this Agreement, the Merger and the Bank Merger and other transactions
contemplated herein, together with a certificate as to the incumbency of
Yadkin's officers who executed this Agreement or any other documents delivered
to HC Financial or High Country in connection with the Closing.
(f) Acceptance by HC Financial's Counsel. The form and substance of
------------------------------------
all legal matters described in this Agreement or related to the transactions
contemplated herein shall be reasonably acceptable to HC Financial's legal
counsel.
(g) Merger Expenses. Expenses incurred by HC Financial and High
---------------
Country in connection with this Agreement and the Merger (including without
limitation the entire amount of fees payable to Xxxxx Capital
40
for the Fairness Opinion and fees payable to HC Financial and High Country's
accountants and attorneys) shall not exceed an aggregate of $150,000. If HC
Financial and High Country determine in good faith that its expenses could
exceed $150,000, Yadkin will negotiate in good faith with HC Financial and High
Country on increasing the amount allocated for HC Financial and High Country's
merger expenses.
ARTICLE VIII
TERMINATION; BREACH; REMEDIES
8.01. Mutual Termination. At any time prior to the Effective Time (and
------------------
whether before or after approval hereof by the shareholders of Yadkin or HC
Financial), this Agreement may be terminated by the mutual agreement of HC
Financial, High Country and Yadkin. Upon any such mutual termination, all
obligations of Yadkin, High Country and HC Financial hereunder shall terminate
and each party shall pay its own costs and expenses as provided in Paragraph
6.04.
8.02. Unilateral Termination. Prior to the Effective Time, this Agreement
----------------------
may be terminated by either HC Financial or Yadkin (whether before or after
approval hereof b y Yadkin's shareholders or HC Financial's shareholders) upon
written notice to the other parties in the manner provided herein and under the
circumstances described below.
(a) Termination by HC Financial and High Country. This Agreement may
--------------------------------------------
be terminated by HC Financial by action of its Board of Directors:
(i) if any of the conditions to the obligations of HC Financial or
High Country set forth in Paragraphs 7.01 and 7.03 shall not have been satisfied
in all material respects or effectively waived in writing by HC Financial within
15 days of receipt of all shareholder and regulatory approvals (except to the
extent that the failure of such condition to be satisfied has been caused by the
failure of HC Financial or High Country to satisfy any of its obligations,
covenants or agreements contained herein);
(ii) if Yadkin shall have violated or failed to fully perform any of
its obligations, covenants or agreements contained in Articles V or VI herein in
any material respect;
(iii) if HC Financial or High Country determines at any time that any
of Yadkin's representations or warranties contained in Article III hereof or in
any other certificate or writing delivered pursuant to this Agreement shall have
been false or misleading in any material respect when made or would have been
false or misleading in any material respect except for the fact that the
representation or warranty was limited to or qualified based on the Best
Knowledge of any person, or that there has occurred any event or development or
that there exists any condition or circumstance which has caused or, with the
lapse of time or otherwise, is likely to cause any such representations or
warranties to become false or misleading in any material respect or that would
cause any such representation or warranty to become false or misleading in any
material respect except for the fact that the representation or warranty was
limited to or qualified based on the Best Knowledge of any person;
(iv) if, notwithstanding HC Financial's and High Country's
satisfaction of their respective obligations under Paragraphs 6.01 and 6.03, HC
Financial's shareholders do not approve this Agreement and the Merger at the
High Country Shareholders Meeting, or if the Yadkin Shareholders Meeting is not
held by December 31, 2003;
(v) if the Merger shall not have become effective on or before March
31, 2004 or such later date as shall be mutually agreed upon in writing by HC
Financial, High Country and Yadkin;
(vi) if the Yadkin Average Price is less than $13.50; or
(vii) if one or more persons or entities other than Yadkin makes a
bona fide proposal for a Transaction (as defined in Paragraph 4.02(j)(i)) and
the HC Financial Board of Directors determines, in its good faith judgment and
in the reasonable exercise of its fiduciary duties, with respect to legal
matters on the written
41
opinion of its legal counsel and as to financial matters on the written opinion
of Xxxxx Capital or other investment banking firm of national reputation: (A)
that the Transaction is more favorable to HC Financial's shareholders than the
transaction contemplated by this Agreement; and (B) that the failure to
terminate this Agreement and accept such alternative Transaction proposal would
be inconsistent with the proper exercise of its fiduciary duties.
However, before HC Financial may terminate this Agreement for any of
the reasons specified above in (i), (ii) or (iii) of this Paragraph 8.02(a), it
shall give written notice to Yadkin in the manner provided herein stating its
intent to terminate and a description of the specific breach, default, violation
or other condition giving rise to its right to so terminate, and, such
termination by HC Financial shall not become effective if, within 30 days
following the giving of such notice, Yadkin shall cure such breach, default or
violation or satisfy such condition to the reasonable satisfaction of HC
Financial. In the event Yadkin cannot or does not cure such breach, default or
violation or satisfy such condition to the reasonable satisfaction of HC
Financial within such notice period, termination of this Agreement by HC
Financial thereafter shall be effective upon its giving of written notice
thereof to Yadkin in the manner provided herein.
(b) Termination by Yadkin. Prior to the Effective Time, this Agreement
---------------------
may be terminated by Yadkin:
(i) if any of the conditions to the obligations of Yadkin set
forth in Paragraphs 7.01 and 7.02 shall not have been satisfied in all material
respects or effectively waived in writing by Yadkin within 15 days of receipt of
all shareholder and regulatory approvals (except to the extent that the failure
of such condition to be satisfied has been caused by the failure of Yadkin to
satisfy any of its obligations, covenants or agreements contained herein);
(ii) if HC Financial or High Country shall have violated or failed
to fully perform any of their respective obligations, covenants or agreements
contained in Articles IV or VI herein in any material respect;
(iii) if Yadkin determines that any of HC Financial's or High
Country's respective representations and warranties contained in Article II
hereof or in any other certificate or writing delivered pursuant to this
Agreement shall have been false or misleading in any material respect when made
or would have been false or misleading in any material respect except for the
fact that the representation or warranty was limited to or qualified based on
the Best Knowledge of any person, or that there has occurred any event or
development or that there exists any condition or circumstance which has caused
or, with the lapse of time or otherwise, is likely to cause any such
representations or warranties to become false or misleading in any material
respect or that would cause any such representation or warranty to become false
or misleading in any material respect except for the fact that the
representation or warranty was limited to or qualified based on the Best
Knowledge of any person;
(iv) if, notwithstanding Yadkin's satisfaction of its obligations
contained in Paragraphs 6.01 and 6.03, its shareholders do not approve this
Agreement and the Merger at the Yadkin Shareholders Meeting, or the High Country
Shareholders Meeting is not held by December 31, 2003;
(v) if the Merger shall not have become effective on or before
March 31, 2004, or such later date as shall be mutually agreed upon in writing
by HC Financial, High Country and Yadkin;
(vi) if the Yadkin Average Price is greater than $22.50; or
(vii) if the Yadkin Board of Directors determines, in its good
faith judgment and in the reasonable exercise of its fiduciary duties, based on
the written opinion of its legal counsel, that the failure to terminate this
Agreement would be inconsistent with the proper exercise of its fiduciary
duties.
However, before Yadkin may terminate this Agreement for any of the
reasons specified above in clause (i), (ii) or (iii) of this Paragraph 8.02(b),
it shall give written notice to HC Financial in the manner provided herein
stating its intent to terminate and a description of the specific breach,
default, violation or other condition
42
giving rise to its right to so terminate, and, such termination by Yadkin shall
not become effective if, within 30 days following the giving of such notice, HC
Financial or High Country shall cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of Yadkin. In the event HC
Financial or High Country cannot or does not cure such breach, default or
violation or satisfy such condition to the reasonable satisfaction of Yadkin
within such notice period, termination of this Agreement by Yadkin thereafter
shall be effective upon its giving of written notice thereof to HC Financial and
High Country in the manner provided herein.
8.03. Breach; Remedies.
----------------
(a) Except as otherwise provided below: (i) in the event of a breach
by Yadkin of any of its representations or warranties contained in Article III
of this Agreement or in any other certificate or writing delivered pursuant to
this Agreement, or in the event of its failure to perform or violation of any of
its obligations, agreements or covenants contained in Articles V or VI of this
Agreement, then HC Financial's and High Country's sole right and remedy shall be
to terminate this Agreement prior to the Effective Time as provided in Paragraph
8.02(a) or, in the alternative, in the case of a failure to perform or violation
of any obligations, agreements or covenants, to seek specific performance
thereof; and (ii) in the event of any such termination of this Agreement by HC
Financial or High Country due to a failure by Yadkin to perform any of its
obligations, agreements or covenants contained in Articles V or VI of this
Agreement, then Yadkin shall be obligated to reimburse HC Financial and High
Country for up to (but not more than) $150,000 in expenses described in
Paragraph 6.04 which actually have been incurred by HC Financial and High
Country.
(b) Except as otherwise provided below: (i) in the event of a breach
by HC Financial or High Country of any of its representations or warranties
contained in Article II of this Agreement, or in the event of its failure to
perform or violation of any of its obligations, agreements or covenants
contained in Articles IV or VI of this Agreement, then Yadkin's sole right and
remedy shall be to terminate this Agreement prior to the Effective Time as
provided in Paragraph 8.02(b), or, in the case of a failure to perform or
violation of any obligations, agreements or covenants, to seek specific
performance thereof; and (ii) in the event of any such termination of this
Agreement by Yadkin due to a failure by HC Financial or High Country to perform
any of its obligations, agreements or covenants contained in Articles IV or VI
of this Agreement, then HC Financial or High Country shall be obligated to
reimburse Yadkin for up to (but not more than) $150,000 in expenses described in
Paragraph 6.04 which actually have been incurred by Yadkin, plus the amount set
forth in Paragraph 8.03(c) below, should the provisions of that Paragraph be
applicable.
(c) As a condition of Yadkin's willingness, and in order to induce
Yadkin to enter into this Agreement and to reimburse Yadkin for incurring the
costs and expenses related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, HC Financial hereby agrees to pay
Yadkin and Yadkin shall be entitled to payment of a fee of $1,000,000 (the
"Fee"), if this Agreement is terminated for the reason specified in Paragraph
8.02(a)(vii). The Fee shall be due and payable to Yadkin at the time HC
Financial or High Country takes any of the actions described in Paragraph
4.02(j)(iii) or (iv) within 12 months after termination of this Agreement and
shall be in addition to any amounts payable by HC Financial pursuant to
subparagraph (b) above. If demand for payment of the Fee is made pursuant to
this Paragraph 8.03(c) and payment is timely made, then Yadkin will not have any
other rights or claims against HC Financial or High Country and their officers,
directors, attorneys and financial advisors under this Agreement, it being
agreed that the acceptance of the Fee under this Paragraph 8.03(c) and the
payment due under Paragraph 8.03(b) will constitute the sole and exclusive
remedy of Yadkin against HC Financial and High Country.
(d) Notwithstanding any provision of this Agreement to the contrary,
if any party to this Agreement breaches this Agreement by willfully or
intentionally failing to perform or violating any of its obligations, agreements
or covenants contained in Articles IV, V or VI of this Agreement, such party
shall be obligated to pay all expenses of the other parties described in
Paragraph 6.04, and (except as contemplated in Paragraph 8.02(a)vii)) such other
damages as may be recoverable at law or in equity.
ARTICLE IX
43
INDEMNIFICATION
9.01. Indemnification Following Termination of Agreement.
--------------------------------------------------
(a) By Yadkin. Yadkin agrees that, in the event this Agreement is
---------
terminated for any reason and the Merger is not consummated, it will indemnify,
hold harmless and defend HC Financial and High Country and their respective
officers, directors, attorneys and financial advisors from and against any and
all claims, disputes, demands, causes of action, suits or proceedings of any
third party (including any Regulatory Authority), together with all losses,
damages, liabilities, obligations, costs and expenses of every kind and nature
in connection therewith (including without limitation reasonable attorneys' fees
and legal costs and expenses in connection therewith), whether known or unknown,
and whether now existing or hereafter arising, which may be threatened against,
incurred, undertaken, received or paid by HC Financial or High Country:
(i) in connection with or which arise out of, result from, or are
based upon: (A) Yadkin's operations or business transactions or its relationship
with any of its employees; or (B) Yadkin's failure to comply with any statute or
regulation of any federal, state or local government or agency (or any political
subdivision thereof) in connection with the transactions described in this
Agreement;
(ii) in connection with or which arise out of, result from, or are
based upon any fact, condition or circumstance that constitutes a breach by
Yadkin of, or any inaccuracy, incompleteness or inadequacy in, any of its
representations or warranties under or in connection with this Agreement, or any
failure of Yadkin to perform any of its covenants, agreements or obligations
under or in connection with this Agreement; or,
(iii) in connection with or which arise out of, result from, or are
based upon any information provided by Yadkin which is included in the Proxy
Statement/Offering Circular and which information causes the Proxy
Statement/Offering Circular, at the time of its mailing to Yadkin's shareholders
and HC Financial's shareholders, to contain any untrue statement of a material
fact or to omit any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not false or misleading.
(b) By HC Financial and High Country. HC Financial and High Country
--------------------------------
agree that, in the event this Merger is not consummated, it will indemnify, hold
harmless and defend Yadkin and its officers, directors, attorneys and financial
advisors from and against any and all claims, disputes, demands, causes of
action, suits, proceedings of any third party (including any Regulatory
Authority), together with all losses, damages, liabilities, obligations, costs
and expenses of every kind and nature in connection therewith (including without
limitation reasonable attorneys' fees and legal costs and expenses in connection
therewith), whether known or unknown, and whether now existing or hereafter
arising, which may be threatened against, incurred, undertaken, received or paid
by Yadkin:
(i) in connection with or which arise out of, result from, or are
based upon: (A) HC Financial's or High Country's operations or business
transactions or its relationship with any of its employees; (B) HC Financial's
or High Country's failure to comply with any statute or regulation of any
federal, state or local government or agency (or any political subdivision
thereof) in connection with the transactions described in this Agreement; or (C)
actions, suits, proceedings, injunctions or any other type of legal action
brought by shareholders of HC Financial in connection with the Merger;
(ii) in connection with or which arise out of, result from, or are
based upon any fact, condition or circumstance that constitutes a breach by HC
Financial or High Country of, or any inaccuracy, incompleteness or inadequacy
in, any of its representations or warranties under or in connection with this
Agreement, or any failure of HC Financial or High Country to perform any of its
covenants, agreements or obligations under or in connection with this Agreement;
or,
(iii) in connection with or which arise out of, result from, or are
based upon any information provided by HC Financial or High Country which is
included in the Proxy Statement/Offering Circular
44
and which information causes the Proxy Statement/Offering Circular, at the time
of its mailing to Yadkin's shareholders and HC Financial's shareholders, to
contain any untrue statement of a material fact or to omit any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
false or misleading.
9.02. Procedure for Claiming Indemnification. If any matter subject to
--------------------------------------
indemnification under this Article IX arises in the form of a claim (herein
referred to as a "Third Party Claim") against HC Financial, High Country or
Yadkin, or their respective successors and assigns, or any of their respective
subsidiary corporations, officers, directors, attorneys or financial advisors
(collectively, the "Indemnitees"), the Indemnitee promptly shall give notice and
details thereof, including copies of all pleadings and pertinent documents, to
the party obligated for indemnification hereunder (the "Indemnitor"). Within 15
days of such notice, the Indemnitor either: (i) shall pay the Third Party Claim
either in full or upon agreed compromise; or (ii) shall notify the applicable
Indemnitee that the Indemnitor disputes the Third Party Claim and intends to
defend against it, and thereafter shall so defend and pay any adverse final
judgment or award in regard thereto. Such defense shall be controlled by the
Indemnitor and the cost of such defense shall be borne by it, except that the
Indemnitee shall have the right to participate in such defense at its own
expense and provided that the Indemnitor shall have no right in connection with
any such defense or the resolution of any such Third Party Claim to impose or
agree to any liability, cost, restriction, limitation or condition of any kind
that compromises the Indemnitee hereunder. In the case of an Indemnitee that is
an officer, director, financial advisor or attorney of a party to this
Agreement, then that party agrees that it shall cooperate in all reasonable
respects in the defense of any such Third Party Claim, including making
personnel, books and records relevant to the Third Party Claim available to the
Indemnitor without charge therefor except for out-of-pocket expenses. Any
settlement to a Third Party Claim agreed to by an Indemnitor shall provide for
an unconditional release of the Indemnitee unless the Indemnitee agrees in
writing otherwise. If the Indemnitor fails to take action within 15 days as
hereinabove provided or, having taken such action, thereafter fails diligently
to defend and resolve the Third Party Claim, the Indemnitee shall have the right
to pay, compromise or defend the Third Party Claim and to assert the
indemnification provisions hereof. The Indemnitee also shall have the right,
exercisable in good faith, to take such action as may be necessary to avoid a
default prior to the assumption of the defense of the Third Party Claim by the
Indemnitor.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01. Survival of Representations, Warranties, Indemnification and Other
------------------------------------------------------------------
Agreements.
----------
(a) Representations, Warranties and Other Agreements. None of the
------------------------------------------------
representations, warranties or agreements contained in this Agreement shall
survive the Effective Time, and no party shall have any right after the
Effective Time to recover damages or any other relief from any other party to
this Agreement by reason of any breach of representation or warranty, any
nonfulfillment or nonperformance of any agreement contained herein, or
otherwise.
(b) Indemnification. The parties' indemnification agreements and
---------------
obligations pursuant to Paragraph 9.01 shall become effective only in the event
this Agreement is terminated and shall survive any such termination, and neither
of the parties shall have any obligations under Paragraph 9.01 in the event of
or following consummation of the Merger and the Bank Merger.
10.02. Waiver. Any term or condition of this Agreement may be waived
------
(except as to matters of required regulatory approvals and other approvals
required by law), either in whole or in part, at any time by the party which is,
and whose shareholders are, entitled to the benefits thereof; provided, however,
that any such waiver shall be effective only upon a determination by the waiving
party (through action of its Board of Directors) that such waiver would not
materially adversely affect the interests of the waiving party or its
shareholders; and, provided further, that no waiver of any term or condition of
this Agreement by any party shall be effective unless such waiver is in writing
and signed by the waiving party, nor shall any such waiver be construed to be a
waiver of any succeeding breach of the same term or condition or a waiver of any
other or different term or condition. No failure or delay of any party to
exercise any power, or to insist upon a strict compliance by any other party of
any
45
obligation, and no custom or practice at variance with any terms hereof, shall
constitute a waiver of the right of any party to demand full and complete
compliance with such terms.
10.03. Amendment. This Agreement may be amended, modified or supplemented
---------
at any time or from time to time prior to the Effective Time, and either before
or after its approval by the shareholders of Yadkin or the shareholders of HC
Financial, by an agreement in writing approved by the Boards of Directors of HC
Financial, High Country and Yadkin executed in the same manner as this
Agreement; provided however, that, except with the further approval of Yadkin's
shareholders and HC Financial's shareholders of that change or as otherwise
provided herein, following approval of this Agreement by Yadkin's shareholders
and HC Financial's shareholders no change may be made in the amount of Merger
Consideration into which each share of HC Financial Common Stock will be
converted.
10.04. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if delivered personally or
by courier or overnight delivery service, or by U.S. mail, first class postage
prepaid, and addressed as follows:
If to Yadkin: With copy to:
Xxxxxxx X. Xxxx Xxxxxx X. Xxxxxx, Esq.
President and CEO Maupin, Taylor, P.A.
Yadkin Valley Bank and Trust Company Xxxxxxxxx Xxxxx Xxx, Xxxxx 000
000 Xxxxx Xxxxxx Xxxxxx 0000 Xxxxxxxxx Xxxxx
Xxxxx, XX 00000-0000 Xxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
If to HC Financial or High Country: With copy to:
Xxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxx, III, Esq.
High Country Bank Brooks, Pierce, XxXxxxxx, Xxxxxxxx &
High Country Financial Corporation Xxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxx 0000 Xxxxxxxxxxx Xxxxx
Xxxxx, Xxxxx Xxxxxxxx 00000 000 Xxxxx Xxx Xxxxxx (27401)
Fax: 000-000-0000 Xxxxxxxxxx, XX 00000-0000
Fax: 000-000-0000
10.05. Further Assurance. Yadkin, High Country and HC Financial each agrees
-----------------
to furnish to each other party such further assurances with respect to the
matters contemplated in this Agreement and their respective agreements,
covenants, representations and warranties contained herein, including the
opinion of legal counsel, as such other party may reasonably request.
10.06. Headings and Captions. Headings and captions of the Paragraphs of
---------------------
this Agreement have been inserted for convenience of reference only and do not
constitute a part hereof.
10.07. Gender and Number. As used herein, the masculine gender shall
-----------------
include the feminine and neuter, the singular number, the plural, and vice
versa, whenever such meanings are appropriate.
10.08. Entire Agreement. This Agreement (including all schedules and
----------------
exhibits attached hereto and all documents incorporated herein by reference)
contains the entire agreement of the parties with respect to the transactions
described herein and supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements by or to, or
any agreements between, any of the parties hereto other than those contained
herein in writing.
46
10.09. Severability of Provisions. The invalidity or unenforceability of
--------------------------
any term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision hereof shall in no way affect the validity or enforceability of any
other provision or part hereof.
10.10. Assignment. This Agreement may not be assigned by any party hereto
----------
except with the prior written consent of each of the other parties hereto.
10.11. Counterparts. Any number of counterparts of this Agreement may be
------------
signed and delivered, each of which shall be considered an original and which
together shall constitute one agreement.
10.12. Governing Law. This Agreement is made in and shall be construed and
-------------
enforced in accordance with the laws of the State of North Carolina.
10.13. Previously Disclosed Information. As used in this Agreement,
--------------------------------
"Previously Disclosed" shall mean the disclosure of information by Yadkin to HC
Financial and High Country, or by HC Financial and High Country to Yadkin, in a
letter delivered by the disclosing party or parties to the other parties prior
to the date hereof, specifically referring to this Agreement, and arranged in
paragraphs corresponding to the Paragraphs, Subparagraphs and items of this
Agreement applicable thereto. Information shall be deemed Previously Disclosed
for the purpose of a given Paragraph, Subparagraph or item of this Agreement
only to the extent that a specific reference thereto is made in connection with
disclosure of such information at the time of such delivery.
10.14 Best Knowledge. The term "Best Knowledge" as used in this Agreement
--------------
with reference to certain facts or information shall be deemed to refer to facts
or information of which officers of Yadkin, or officers of HC Financial or High
Country, as the case may be, are consciously aware or of which they should have
become consciously aware in the ordinary course of business and the performance
of their management duties.
10.15. Inspection.
----------
(a) Any right of HC Financial or High Country under this Agreement to
investigate or inspect the assets, books, records, files and other information
of Yadkin in no way shall establish any presumption that HC Financial or High
Country should have conducted any investigation or that such right has been
exercised by HC Financial or High Country, their respective agents,
representatives or others. Any investigations or inspections actually made by HC
Financial or High Country or their respective agents, representatives or others
prior to the date of this Agreement or otherwise prior to the Effective Time
shall not be deemed in any way in derogation or limitation of the covenants,
representations and warranties made by or on behalf of Yadkin in this Agreement.
(b) Any right of Yadkin under this Agreement to investigate or inspect
the assets, books, records, files and other information of HC Financial or High
Country in no way shall establish any presumption that Yadkin should have
conducted any investigation or that such right has been exercised by Yadkin, its
respective agents, representatives or others. Any investigations or inspections
actually made by Yadkin or its respective agents, representatives or others
prior to the date of this Agreement or otherwise prior to the Effective Time
shall not be deemed in any way in derogation or limitation of the covenants,
representations and warranties made by or on behalf of HC Financial or High
Country in this Agreement.
[The remainder of this page was left blank intentionally. Signatures are on the
following page.]
47
IN WITNESS WHEREOF, Yadkin, High Country and HC Financial each has caused
this Agreement to be executed in its name by its duly authorized officers and
its corporate seal to be affixed hereto as of the date first above written.
YADKIN VALLEY BANK AND TRUST COMPANY
[CORPORATE SEAL]
By: /s/ Xxxxxxx X. Xxxx
--------------------
Xxxxxxx X. Xxxx
CEO and President
ATTEST:
/s/ Xxxxxxxx X. Xxxxxx
----------------------
Secretary
HIGH COUNTRY FINANCIAL CORPORATION
[CORPORATE SEAL]
By: /s/ Xxxx X. Xxxxxxxx
---------------------
Xxxx X. Xxxxxxxx
CEO and President
ATTEST:
/s/ Xxxxx X. Xxxxxx
-------------------
Secretary
HIGH COUNTRY BANK
[CORPORATE SEAL]
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Xxxx X. Xxxxxxxx
CEO and President
ATTEST:
/s/ Xxxxx X. Xxxxxx
-------------------
Secretary
48
As an inducement to Yadkin Valley Bank and Trust Company to enter into this
Agreement, each of the undersigned directors of High Country Financial
Corporation executes this Agreement and in so doing agrees to vote all share of
common stock of High Country Financial Corporation in favor of this Agreement
and the Merger contemplated hereby, unless advised in writing by High Country
Financial Corporation's counsel that such a vote is a breach of the directors'
fiduciary duties as contemplated by Paragraph 4.01(a) of this Agreement. .
/s/ Xxxx X. Xxxxxxxx
-----------------------
Xxxx X. Xxxxxxxx
Director
/s/ Xxxx X. Xxxxxx
-----------------------
Xxxx X. Xxxxxx
Director
/s/ Xxxx X. Xxxxxxxx
-----------------------
Xxxx X. Xxxxxxxx
Director
/s/ Xxxxx X. Xxxxx
-----------------------
Xxxxx X. Xxxxx
Director
/s/ Xxxxx X. Xxxxxx
-----------------------
Xxxxx X. Xxxxxx
Director
/s/ Xxxxx X. Xxxxxx
-----------------------
Xxxxx X. Xxxxxx
Director
/s/ Xxxx X. Xxxxxx
-----------------------
Xxxx X. Xxxxxx
Director
/s/ Xxxxx X. Xxxxxx
-----------------------
Xxxxx X. Xxxxxx
Director
/s/ Xxxx X. Xxxxxx
-----------------------
Xxxx X. Xxxxxx
Director
/s/ C. Xxxxxxx Xxxxxx
-----------------------
C. Xxxxxxx Xxxxxx
Director
/s/ Xxxxx X. Xxxxxx
-----------------------
Xxxxx X. Xxxxxx
Director
49
INDEX OF EXHIBITS
Document Exhibit
-------- -------
Plan of Merger A
Plan of Bank Merger B
50
Exhibit A
---------
PLAN OF MERGER
By and Between
Yadkin Valley Bank and Trust Company
and
HIGH COUNTRY FINANCIAL CORPORATION
1.01. Names of Merging Corporations. The names of the corporations proposed
-----------------------------
to be merged are Yadkin Valley Bank and Trust Company ("Yadkin") and High
Country Financial Corporation ("HC Financial").
1.02. Nature of Transaction; Plan of Merger. At the "Effective Time"
-------------------------------------
specified in the Articles of Merger filed with the North Carolina Secretary of
State, HC Financial will be merged into and with Yadkin (the "Merger") as
provided in this Plan of Merger.
1.03 Effect of Merger; Surviving Corporation. At the Effective Time, and by
---------------------------------------
reason of the Merger, the separate corporate existence of HC Financial shall
cease while the corporate existence of Yadkin, as the surviving corporation in
the Merger, shall continue with all of its purposes, objects, rights,
privileges, powers and franchises, all of which shall be unaffected and
unimpaired by the Merger. Following the Merger, Yadkin shall continue to operate
as a North Carolina banking corporation and will conduct its business at its
then legally established branch and main offices. The duration of the corporate
existence of Yadkin, as the surviving corporation in the Merger, shall be
perpetual and unlimited.
1.04. Assets and Liabilities of HC Financial. At the Effective Time, and by
--------------------------------------
reason of the Merger, and in accordance with applicable law, all of the
property, assets and rights of every other kind and character of HC Financial
(including without limitation all real, personal or mixed property, all debts
due on whatever account, all other choses in action and every other interest of
or belonging to or due to HC Financial, whether tangible or intangible) shall be
transferred to and vest in Yadkin, and Yadkin shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private
nature of HC Financial, all without any conveyance, assignment or further act or
deed; and, Yadkin shall become responsible for all of the liabilities, duties
and obligations of every kind, nature and description of HC Financial as of the
Effective Time. By virtue of the Merger, HC Financial's interest in and
ownership of the outstanding shares of common stock of its wholly-owned
subsidiary, High Country Bank ("High Country"), shall be transferred to and vest
in Yadkin, and High Country shall become a wholly-owned subsidiary of Yadkin.
1.05. Terms and Conditions of the Merger. The Merger shall be effected
----------------------------------
pursuant to the terms and conditions of this Plan of Merger and of the Agreement
and Plan of Reorganization and Merger, dated as of August __, 2003, by and among
HC Financial, High Country and Yadkin (the "Agreement").
1.06. Articles of Incorporation. The Articles of Incorporation and Bylaws
-------------------------
of Yadkin in effect at the Effective Time shall be the Articles of Incorporation
and Bylaws of Yadkin as the surviving corporation in the Merger. Three directors
of HC Financial, as provided in the Agreement, shall be appointed to the Board
of Directors of Yadkin, each to hold such office until removed as provided by
law or until the election or appointment of their respective successors. The
directors of Yadkin in office at the Effective Time shall continue to hold such
offices until removed as provided by law or until the election or appointment of
their respective successors. The officers of HC Financial in office at the
effective time shall be named to positions with Yadkin as provided in the
Agreement.
1.07. Closing; Effective Time. The closing of the Merger and other
-----------------------
transactions contemplated by this Plan of Merger (the "Closing") shall take
place at the offices of Yadkin, in Elkin, North Carolina, or at such other place
as Yadkin and HC Financial may agree, on a date mutually agreeable to Yadkin and
HC Financial (the "Closing Date") after expiration of any and all required
waiting periods following the effective date of required
51
approvals of the Merger by governmental or regulatory authorities (but in no
event more than sixty (60) days following the expiration of all such required
waiting periods).
52
Exhibit B
---------
Plan of Bank Merger
By and Between
Yadkin Valley Bank and Trust Company
and
HIGH COUNTRY Bank
1.01. Names of the Merging Corporations. The names of the banking
---------------------------------
corporations proposed to be merged are Yadkin Valley Bank and Trust Company
("Yadkin") and High Country Bank ("High Country"). Yadkin, as parent corporation
of High Country, is the owner of all of the issued and outstanding shares of
capital stock of High Country.
1.02. Nature of Transaction; Plan of Bank Merger. Subject to the provisions
------------------------------------------
of this Plan of Merger, at the "Effective Time" specified in the Articles of
Merger filed with the North Carolina Secretary of State, High Country will be
merged into and with Yadkin (the "Bank Merger").
1.03. Effect of Bank Merger; Surviving Corporation. At the Effective Time,
--------------------------------------------
and by reason of the Bank Merger, the separate corporate existence of High
Country shall cease while the corporate existence of Yadkin, as the surviving
corporation in the Bank Merger, shall continue with all of its purposes,
objects, rights, privileges, powers and franchises, all of which shall be
unaffected and unimpaired by the Bank Merger. The duration of the corporate
existence of Yadkin, as the surviving corporation in the Bank Merger, shall be
perpetual and unlimited.
1.04. Assets and Liabilities of High Country. At the Effective Time, and by
--------------------------------------
reason of the Bank Merger, and in accordance with applicable law, all property,
assets and rights of every kind and character of High Country (including without
limitation all real, personal or mixed property, all debts due on whatever
account, all other choses in action and every other interest of or belonging to
or due to High Country, whether tangible or intangible) shall be transferred to
and vest in Yadkin, and Yadkin shall succeed to all the rights, privileges,
immunities, powers, purposes and franchises of a public or private nature of
High Country (including all trust and other fiduciary properties, powers and
rights), all without any conveyance, assignment or further act or deed; and,
Yadkin shall become responsible for all other liabilities, duties and
obligations of every kind, nature and description of High Country (including
duties as trustee or fiduciary) as of the Effective Time.
1.05. Cancellation of High Country Stock. At the Effective Time, all rights
----------------------------------
of Yadkin as sole shareholder of all of High Country's issued and outstanding
shares of $5.00 par value common stock shall cease to exist and Yadkin shall
receive no consideration for such shares of High Country, with such shares and
all rights related thereto being canceled, terminated and extinguished.
1.06. Articles of Incorporation, Bylaws and Management. The Articles of
------------------------------------------------
Incorporation and Bylaws of Yadkin in effect at the Effective Time shall be the
Articles of Incorporation and Bylaws of Yadkin as the surviving corporation in
the Bank merger.
1.07. Closing; Effective Time. The closing of the Bank Merger and other
-----------------------
transactions contemplated by this Plan of Merger (the "Closing") shall take
place at the offices of Yadkin, in Elkin, North Carolina, or at such other place
as Yadkin shall designate, on such date as Yadkin shall designate (the "Closing
Date") after the expiration of any and all required waiting periods following
the effective date of required approvals of the Bank Merger by governmental or
regulatory authorities (but in no event more than sixty (60) days following the
expiration of all such required waiting periods).
53
