Exhibit 99.B.3
CFS CAPITAL TRUST I
$10,000,000
Floating Rate TRUPS(R)
Fully and Unconditionally Guaranteed as to Distributions
and Other Payments by
CHESAPEAKE FINANCIAL SHARES, INC.
PLACEMENT AGREEMENT
New York, New York
December 11, 2002
Xxxxxxx Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Chesapeake Financial Shares, Inc., a financial holding company incorporated
in Virginia (the "Company") and CFS Capital Trust I, a Delaware statutory trust
(the "Trust"), propose, subject to the terms and conditions stated herein, to
issue and sell 10,000 of Floating Rate TRUPS(R) of the Trust, having a stated
liquidation amount of $1,000 per capital security and bearing a variable
distribution rate per annum, reset quarterly, equal to LIBOR (as defined in the
Indenture (as defined below)) plus 3.35% provided, that the applicable interest
rate may not exceed 12.5% through the interest payment date in January, 2008
(the "Floating Rate") (the "Capital Securities"). Xxxxxxx Xxxxx Xxxxxx Inc. is
acting as the exclusive agent of the Company and the Trust in connection with
the offering of the Capital Securities.
The Capital Securities will be fully and unconditionally guaranteed on a
subordinated basis by the Company with respect to distributions and amounts
payable upon liquidation, redemption or repayment (the "Guarantee") pursuant to
the Guarantee Agreement (the "Guarantee Agreement"), to be dated as of the
Closing Date specified in Section 3 hereof, and executed and delivered by the
Company and Wilmington Trust Company, as trustee (the "Guarantee Trustee"), for
the benefit of the holders from time to time of the Capital Securities. The
entire proceeds from the sale of the Capital Securities will be combined with
the entire proceeds from the sale by the Trust to the Company of its common
securities (the "Common Securities"), and will be used by the Trust to purchase
$10,310,000 in principal amount of the Floating Rate Junior Subordinated Debt
Securities due 2033 of the Company (the "Subordinated Debt Securities"). The
Capital Securities and the Common Securities of the Trust will be issued
pursuant to the Amended and Restated Declaration of Trust (the "Declaration"),
to be dated as of the Closing Date among the Company, as sponsor, the
Administrator(s) named therein (the
"Administrators"), Wilmington Trust Company, as Delaware trustee (the "Delaware
Trustee"), Wilmington Trust Company, as institutional trustee (the
"Institutional Trustee"), and the holders from time to time of undivided
beneficial interests in the assets of the Trust. The Subordinated Debt
Securities will be issued pursuant to an Indenture, to be dated as of the
Closing Date (the "Indenture"), between the Company and Wilmington Trust
Company, as indenture trustee (the "Indenture Trustee").
The Capital Securities, the Common Securities and the Subordinated Debt
Securities are collectively referred to herein as the "Securities." This
Agreement, the Indenture, the Declaration, the Guarantee Agreement, the Capital
Securities Subscription Agreement (as defined below) and the Securities are
referred to collectively as the "Operative Documents." Capitalized terms used
herein without definition have the respective meanings specified in the
Declaration.
The Securities have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act").
1. Representations and Warranties. The Company and the Trust jointly and
severally represent and warrant to, and agree with you and the Purchaser (as
defined in Section 2 hereof) as set forth below in this Section 1 (provided,
that, none of the following representations or warranties apply or relate to any
acts or omissions by you).
(a) Neither the Company nor the Trust, nor any of their Affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on its or their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of any of the Securities
under the Securities Act.
(b) Neither the Company nor the Trust, nor any of their Affiliates, nor any
person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(d) Neither the Company nor the Trust, nor any of their Affiliates, nor any
person acting on its or their behalf, has engaged or will engage in any directed
selling efforts with respect to the Securities within the meaning of Regulation
S.
(e) Neither the Company nor the Trust is, nor after giving effect to the
offering and sale of the Securities will be, an "investment company" or an
entity "controlled" by an "investment company," required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
(f) Neither the Company nor the Trust has paid or agreed to pay to any
person any compensation for soliciting another to purchase any of the Securities
(except as contemplated by this Agreement).
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(g) The Trust has been duly created and is validly existing in good
standing as a statutory trust under the Delaware Statutory Trust Act, 12 Del. C.
3801, et seq. (the "Statutory Trust Act") with the power and authority to own
property and to conduct the business it transacts and proposes to transact and
to enter into and perform its obligations under the Operative Documents. The
Trust is duly qualified to transact business as a foreign entity and is in good
standing in each jurisdiction in which such qualification is necessary, except
where the failure to so qualify or be in good standing would not have a material
adverse effect on such Trust. The Trust is not a party to or otherwise bound by
any agreement other than the Operative Documents. The Trust is and will, under
current law, be classified for federal income tax purposes as a grantor trust
and not as an association taxable as a corporation.
(h) The Declaration has been duly authorized by the Company and, on the
Closing Date, will have been duly executed and delivered by the Company and the
Administrators of the Trust, and, assuming due authorization, execution and
delivery by the Delaware Trustee and the Institutional Trustee, be a valid and
binding obligation of the Company and such Administrators, enforceable against
them in accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general principles
of equity ("Bankruptcy and Equity"). Each of the Administrators of the Trust is
an employee or a director of the Company and has been duly authorized by the
Company to execute and deliver the Declaration.
(i) Each of the Guarantee Agreement and the Indenture has been duly
authorized by the Company and, on the Closing Date will have been duly executed
and delivered by the Company, and, assuming due authorization, execution and
delivery by the Guarantee Trustee, in the case of the Guarantee, and by the
Indenture Trustee, in the case of the Indenture, be a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to Bankruptcy and Equity.
(j) The Capital Securities and the Common Securities have been duly
authorized by the Declaration and, when issued and delivered against payment
therefor on the Closing Date to you, in the case of the Capital Securities, and
to the Company, in the case of the Common Securities, each in accordance with
this Agreement, the Declaration and the Capital Securities Subscription
Agreement and the common securities subscription agreement, respectively, will
be validly issued and represent undivided beneficial interests in the assets of
the Trust. The issuance of the Capital Securities or the Common Securities is
not subject to any preemptive or other similar rights. On the Closing Date, all
of the issued and outstanding Common Securities will be directly owned by the
Company free and clear of any pledge, security interest, claim, lien or other
encumbrance.
(k) The Subordinated Debt Securities have been duly authorized by the
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture and
the debenture subscription agreement, and, when authenticated in the manner
provided for in the Indenture and delivered against payment therefor by the
Trust, will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture enforceable against the Company in accordance with
their terms, subject to Bankruptcy and Equity.
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(l) This Agreement has been duly authorized, executed and delivered by the
Company and the Trust.
(m) The Trust is not in violation of any provision of the Statutory Trust
Act and when executed and delivered will not be in violation of the Declaration.
The execution, delivery and performance of the Operative Documents to which it
is a party by the Company or the Trust, and the consummation of the transactions
contemplated herein or therein, will not conflict with or constitute a breach
of, or a default under, or result in the creation or imposition of any lien,
charge or other encumbrance upon any property or assets of the Trust, the
Company or any of the Company's subsidiaries pursuant to any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Trust, the Company or any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of any of
them is subject, except for a conflict, breach, default, lien, charge or
encumbrance which could not reasonably be expected to have an adverse effect on
the consummation of the transactions contemplated herein or therein, nor will
such action result in any violation of the Declaration or the Statutory Trust
Act or require the consent, approval, authorization or order of any court or
xxxx rnmental agency or body.
(n) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Virginia, with all requisite
corporate power and authority to own or lease its properties and conduct the
business it transacts and proposes to transact, and is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its activities requires such qualification
except where the failure of the Company to be so qualified would not, singly or
in the aggregate, have a materially adverse effect on the condition (financial
or otherwise), earnings or business of the Company and its subsidiaries taken as
a whole, whether or not occurring in the ordinary course of business (a
"Material Adverse Effect").
(o) Each of the Company's significant subsidiaries listed in Exhibit 1 (the
"Subsidiaries") has been duly incorporated and is validly existing as an entity
in good standing under the laws of the jurisdiction in which it is chartered or
organized, with all requisite corporate power and authority to own or lease its
properties and conduct the business it transacts and proposes to transact, and
is duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its activities requires
such qualification except where the failure of such Subsidiary to be so
qualified would not, singly or in the aggregate, have a Material Adverse Effect.
(p) The Company and each of its Subsidiaries have all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from regulatory or governmental officials, bodies and tribunals, to own or lease
their respective properties and to conduct their respective businesses as now
being conducted, and neither the Company nor any of the Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such authorizations, approvals, orders, licenses, certificates or permits
which, singly or in the aggregate, if the failure to be so licensed or approved
or if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect; and the Company and its Subsidiaries are in compliance
with all applicable laws, rules, regulations and orders and consents, the
violation of which would have a Material Adverse Effect.
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(q) The audited consolidated financial statements (including the notes
thereto) and schedules of the Company and its consolidated subsidiaries for the
year ended December 31, 2001 (the "Financial Statements") and the interim
unaudited consolidated financial statements of the Company and its consolidated
subsidiaries for the nine months ended September 30, 2002 (the "Interim
Financial Statements") provided to you are the most recent available audited and
unaudited consolidated financial statements of the Company and its consolidated
subsidiaries, respectively, and fairly present in all material respects, in
accordance with generally accepted accounting principles, the financial position
of the Company and its consolidated subsidiaries, and the results of operations
and changes in financial condition as of the dates and for the periods therein
specified, subject, in the case of Interim Financial Statements, to year-end
adjustments. Such consolidated financial statements and schedules have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein).
(r) The Company's report on form FR Y-9C dated September 30, 2002 provided
to you is the most recent available such report and the information therein
fairly presents in all material respects the financial position of the Company
and its subsidiaries.
(s) Since the respective dates of the Financial Statements, the Interim
Financial Statements and the FR Y-9C, FR Y-9LP and FR Y-6, there has been no
material adverse change or development with respect to the financial condition
or earnings of the Company and its subsidiaries, taken as a whole.
(t) Neither the Company nor any of the Subsidiaries is in violation of its
respective charter or by-laws or similar organizational documents or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of the Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have a Material Adverse Effect.
(u) The Company is duly registered as a financial holding company under the
Xxxxx-Xxxxx-Xxxxxx Act, and the regulations of the Board of Governors of the
Federal Reserve System (the "Federal Reserve"), and the deposit accounts of the
Company's subsidiary banks are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the fullest extent permitted by law and the rules and
regulations of the FDIC, and no proceeding for the termination of such insurance
is pending or to the best of our knowledge threatened.
(v) No action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
Subsidiaries or its or their property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement, the Indenture, the
Declaration and the Guarantee, or the consummation of any of the transactions
contemplated hereby or thereby; or (ii) could reasonably be expected to have a
Material Adverse Effect.
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(w) Neither the Company nor any of its Subsidiaries is party to or
otherwise the subject of any consent decree, memorandum of understanding,
written commitment or other written supervisory agreement or enforcement action
with the FDIC or any other Federal or state authority or agency charged with the
supervision or insurance of the Company and its subsidiaries.
(x) Each of the Company and its Subsidiaries owns or leases all such
properties as are necessary to the conduct of its operations as presently
conducted.
2. Sale of the Capital Securities. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company and the Trust jointly and severally hereby appoint you as placement
agent (the "Placement Agent"), and you hereby accept such appointment, to act as
the agent of the Company and the Trust, in connection with the offering of the
Capital Securities contemplated hereby, for the purpose of soliciting offers and
sales of the Capital Securities from the Purchaser (as defined below). You agree
to use your best efforts, subject to the terms and conditions of this Agreement,
on or prior to the Closing Date, to effect such placement of the Capital
Securities with an aggregate stated liquidation amount of $10,000,000 at a
purchase price equal to 100% of the stated liquidation amount thereof.
The Company and the Trust propose to issue and sell the Capital Securities
on the Closing Date to TPref Funding III, Ltd., a newly formed company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser"), pursuant to the terms of the Capital Securities Subscription
Agreement, to be entered into on or prior to the Closing Date (the "Capital
Securities Subscription Agreement"), between the Company, the Trust and the
Purchaser. The Company and the Trust agree to execute the Capital Securities
Subscription Agreement with the Purchaser and to return the same to you. In
addition, the Company and the Trust agree that the Purchaser shall be entitled
to the benefit of, and to rely on, the provisions of this Agreement to the
extent such provisions address or relate to the Purchaser or the Capital
Securities to be purchased by the Purchaser. No Placement Agent shall, in
fulfilling its obligations hereunder, act as an underwriter for the Capital
Securities nor is in any way obligated, directly or indirectly, to advance its
own funds to purchase any Capital Securities.
If the sale and delivery of the Capital Securities as provided herein is
consummated, the Company will pay to you on the Closing Date a commission per
Capital Security equal to 3.00% of the stated liquidation amount thereof. Any
payment pursuant to this Section 2 shall be made by wire transfer in immediately
available funds to the U.S. account designated in writing by the party entitled
to receive such payment.
The distribution rate of the Capital Securities, as of the date hereof, is
the Floating Rate. Under certain circumstances, the distribution rate of the
Capital Securities may be reduced pursuant to a written agreement among you, the
Purchaser and the Company made prior to the Closing Date.
3. Delivery and Payment. Delivery of and payment for the Capital Securities
shall be made at 10:00 a.m. New York City time, on December 19, 2002, or such
later date as you shall designate in writing, which date and time may be
postponed by agreement between
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you, on the one hand, and the Company and the Trust, on the other hand (such
date and time of delivery and payment for the Capital Securities being herein
called the "Closing Date"); provided, that the Closing Date may be no later than
60 days from the date hereof.
Delivery of the Capital Securities shall be made at such location, and in
such names and denominations, as you shall designate at least one business day
in advance of the Closing Date. The Company and the Trust agree to have the
Capital Securities available for inspection and checking by you in New York, New
York, not later than 1:00 p.m. on the business day prior to the Closing Date.
The closing for the purchase and sale of the Capital Securities shall occur at
the offices of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx Xxxx,
XX 00000, or such other place as the parties hereto shall agree.
4. Representations. The Placement Agent represents to the Company and the
Trust that:
(a) It is aware that the Securities have not been and will not be
registered under the Securities Act and may not be offered or sold within the
United States or to U.S. persons except in accordance with Rule 903 of
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. It will not offer, sell or
arrange for the offer or sale of any Securities to purchasers ("Purchasers")
except in privately negotia xxx transactions that will not require registration
of the Securities under the Securities Act. Terms used in the first sentence of
this Section 4 have the meanings given to them by Regulation S under the
Securities Act.
(b) Neither it, nor any of its Affiliates, nor any person acting on its or
their behalf has engaged, or will engage, in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities.
(c) Neither it, nor any of its Affiliates, nor any person acting on its or
their behalf has engaged or will engage in any directed selling efforts within
the meaning of Regulation S under the Securities Act with respect to the
Securities.
5. Agreements. The Company and the Trust agree with the Placement Agent and
the Purchaser that:
(a) Neither the Company nor the Trust will, nor will either of them permit
any of its Affiliates to, resell any Capital Securities that have been acquired
by any of them.
(b) Neither the Company nor the Trust will, nor will either of them permit
any of its Affiliates, nor any person acting on its or their behalf, to,
directly or indirectly, make offers or sales of any security, or solicit offers
to buy any security, under circumstances that would require the registration of
any of the Securities under the Securities Act, provided, however, this
obligation does not apply to acts or omissions of the Placement Agent.
(c) Neither the Company nor the Trust will, nor will either of them permit
any of its Affiliates, nor any person acting on its or their behalf, to, engage
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any
7
offer or sale of any of the Securities, provided, however, this obligation does
not apply to acts or omissions of the Placement Agent.
(d) Neither the Company nor the Trust will, nor will either of them permit
any of its Affiliates, nor any person acting on its or their behalf, to, engage
in any directed selling efforts within the meaning of Regulation S under the
Securities Act with respect to the Securities, provided, however, this
obligation does not apply to acts or omissions of the Placement Agent.
(e) So long as any of the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act, each
of the Company and the Trust will, during any period in which it is not subject
to and in compliance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or it is not exempt from such reporting
requirements pursuant to and in compliance with Rule 12g3-2(b) under the
Exchange Act, provide to each holder of such restricted securities and to each
prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Securities Act.
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of such
restricted securities. The information provided by the Company and the Trust
pursuant to this Section 5(e) will not, at the date thereof, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(f) Neither the Company nor the Trust will, until 180 days following the
Closing Date, wit hout your prior written consent, offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, directly or
indirectly, (i) any Capital Securities or other securities of the Trust other
than as contemplated by this Agreement, (ii) any securities that are
substantially similar to the Securities or (iii) any other securities
convertible into, or exercisable or exchangeable for, any of (i) or (ii), or
enter into an agreement, or announce an intention, to do any of the foregoing.
(g) The Company agrees to pay (i) the costs incident to the authorization,
issuance, sale and delivery of the Capital Securities and any taxes payable in
that connection and (ii) after December 19, 2002, the fees and disbursements of
counsel for the Institutional Trustee, the Guarantee Trustee and the Indenture
Trustee.
6. Conditions to the Obligations of the Placement Agent. The Placement
Agent's obligations to use its best efforts to procure subscription and payment
for the Capital Securities and the Purchaser's obligations on the Closing Date
shall be subject to the accuracy of the representations and warranties on the
part of the Company and the Trust contained herein as of the date and time that
this Agreement is executed (the "Execution Time") and the Closing Date, to the
accuracy of the statements of the Company and the Trust made in any certificates
pursuant to the provisions hereof, to the performance by the Company and the
Trust of their obligations hereunder and to the following additional conditions:
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(a) The Company shall have furnished to you and the Purchaser the opinion
of XxXxxxx Xxxx, special counsel for the Company, dated the Closing Date,
addressed to you, in substantially the form set out in Annex A hereto.
(b) The Company shall have furnished to you and the Purchaser the opinion
of XxXxxxx Xxxx, special tax counsel for the Company, dated the Closing Date,
containing such assumptions, qualifications and limitations as shall be
reasonably acceptable to you and your counsel to the effect that for U.S.
federal income tax purposes, the Subordinated Debt Securities will constitute
indebtedness of the Company, in substantially the form set out in Annex B
hereto.
(c) You and the Purchaser shall have received the opinion of Xxxxxx, Xxxxx,
Xxxxxxxx & Xxxxxxxx LLP, special Delaware counsel for the Company and the Trust,
dated the Closing Date, addressed to you, in substantially the form set out in
Annex C hereto.
(d) You and the Purchaser shall have received the opinion of Xxxxxx, Xxxxx,
Xxxxxxxx & Xxxxxxxx LLP, counsel for the Guarantee Trustee, the Institutional
Trustee, the Delaware Trustee and the Indenture Trustee, dated the Closing Date
addressed to you, in substantially the form set out in Annex D hereto.
(e) The Company shall have furnished to you a certificate of the Company,
signed by the President or a Vice President and by a Treasurer or Chief
Financial Officer of the Company, dated the Closing Date, to the effect that:
(i) the representations and warranties of the Company and the Trust in
this Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date, and
the Company and the Trust have complied with all the agreements and
satisfied all the conditions on either of their part to be performed or
satisfied at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements provided
to the Placement Agent, there has been no material adverse change in the
condition (financial or other), earnings, business or properties of the
Company and its subsidiaries, whether or not arising from transactions in
the ordinary course of business.
(f) Subsequent to the Execution Time there shall not have been any change,
or any development involving a prospective change, in or affecting the business
or properties of the Company and its subsidiaries the effect of which, is, in
your judgment, so material and adverse as to make it impractical or inadvisable
to proceed with the offering or delivery of the Capital Securities.
(g) Prior to the Closing Date, the Company and the Trust shall have
furnished to you and to the Purchaser such further information, certificates and
documents as you may reasonably request.
(h) At the Closing Date, each of the Operative Documents shall have been
duly authorized, executed and delivered by each party thereto, and copies
thereof shall have been delivered to you.
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If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions, certificates and documents mentioned above or elsewhere in
this Agreement shall not be in all material respects reasonably satisfactory in
form and substance to you, this Agreement and all the Placement Agent's
obligations hereunder may be canceled at, or at any time prior to, the Closing
Date by you. Notice of such cancellation shall be given to the Company and the
Trust in writing or by telephone or telegraph confirmed in writing.
7. Reimbursement of Expenses of the Placement Agent. If the sale of the
Capital Securities provided for herein is not consummated because any
condition set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 9 hereof or because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof, the Company will reimburse the Placement
Agent upon demand for all documented out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
you in connection with the proposed offering of the Capital Securities.
8. Indemnification and Contribution. (a) The Company and the Trust agree
jointly and severally to indemnify and hold harmless the Placement Agent and the
Purchaser and their respective directors, officers, employees and agents and
each person who controls the Placement Agent or the Purchaser within the meaning
of either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in any information (whether oral or written) or
documents furnished or made available to the Placement Agent or the Purchaser by
the Company or the Trust, or their respective representatives in connection with
the transactions contemplated herein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which the Company or the Trust
may otherwise have.
(b) The Company agrees to indemnify the Trust against all loss, liability,
claim, damage and expense whatsoever, as due from the Trust under Section 8(a)
hereunder.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) above, unless and to the
extent that the indemnifying party did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to
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any indemnified party other than the indemnification obligation provided in
paragraph (a) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding. An indemnified party will
not, without the prior written consent of the indemnifying parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action).
(d) In the event that the indemnity provided in paragraph (a), (b) or (c)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company, the Trust and you agree to contribute to the
aggregate lo sses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Trust and you may be subject
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Trust on the one hand and by you on the other from the
offering of the Securities; provided, however, that in no case shall you be
responsible for any amount in excess of the purchase discount or commission
applicable to the Securities purchased hereunder. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, the Company,
the Trust and you shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Trust on the one hand and of you on the other in connection with
the statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company and the
Trust shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses) received by it, and benefits received by you shall
be deemed to be equal to the total commissions specified in Section 2. Relative
fault shall be determined by
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reference to, among other things, whether any untrue or any alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information provided by the Company and the Trust on
the one hand or you on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Trust and yo u agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, the Purchaser, each person
who controls the Placement Agent or the Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer, employee and
agent of the Placement Agent or the Purchaser shall have the same rights to
contribution as you, and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act, each officer and director of
the Company and each Administrator of the Trust shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination in the
absolute discretion of you, by notice given to the Company and the Trust prior
to delivery of and payment for the Capital Securities, if prior to such time (i)
there has occurred any Material Adverse Effect, or (ii) trading in any of the
Company's securities shall have been suspended by the Commission or the exchange
upon which the Company's securities are traded, if any, or trading in securities
generally on the New York Stock Exchange shall have been suspended or limited or
minimum prices shall have been established on such Exchange, (iii) a banking
moratorium shall have been declared either by Federal or Virginia authorities,
or (iv) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in your judgment, impracticable or inadvisable to proceed with the offering
or delivery of the Capital Securities.
10. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company and
the Trust or their respective officers or trustees and of the Placement Agent
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Placement
Agent, the Company or the Trust or any of the officers, directors or trustees,
administrators, controlling persons, and will survive delivery of and payment
for the Capital Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Placement Agent, will be mailed, delivered
or telecopied and confirmed to at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
attention of the Legal Department; if sent to the Company or the Trust, will be
mailed, delivered or telecopied and confirmed to it at P.O. Box 1419,
Kilmarmock, VA 22482.
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12. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons, and no other person will have any right or
obligation hereunder.
13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
14. Counterparts. This Agreement may contain more than one counterpart of
the signature page and this Agreement may be executed by the affixing of the
signature of each of the Company, the Trust and you to any of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a signature page.
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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the
Company, the Trust and you.
Very truly yours,
CHESAPEAKE FINANCIAL SHARES, INC.
By:
------------------------------
Name:
Title:
CFS CAPITAL TRUST I
By: CHESAPEAKE FINANCIAL SHARES,
INC., as Sponsor
By:
------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Xxxxxxx Xxxxx Xxxxxx Inc.
By:
------------------------
Name:
Title:
SCHEDULE 1
List of Significant Subsidiaries
Chesapeake Bank
Chesapeake Investment Group, Inc.
1
ANNEX A
Pursuant to Section 6(a) of the Placement Agreement, special counsel for
the Company shall deliver an opinion in substantially the following form:
(i) each of the Company and the Subsidiaries (A) has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate power
and authority to own its properties and conduct the business it transacts and
proposes to transact, (B) is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction which
requires such qualification wherein it owns or leases properties or conducts
business, except where the failure to be so qualified would not, singularly or
in the aggregate, have a Material Adverse Effect, and (C) holds all approvals,
authorizations, orders, licenses, certificates and permits from governmental
authorities necessary for the conduct of its business, except where the failure
to hold such approvals, authorizations, orders, licenses, certificates and/or
permits would not, singularly or in the aggregate, have a Material Adverse
Effect;
(ii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated herein or in the Operative Documents, in connection with the
solicitation of the purchase and sale of the Capital Securities by you or the
purchase of the Subordinated Debt Securities by the Trust except such approvals
(specified in such opinion) as have been obtained;
(iii) neither the issue and sale of the Capital Securities or the
Subordinated Debt Securities, the execution and delivery of the Operative
Documents by the Company or the Trust and the consummation of any other of the
transactions therein contemplated in any Operative Document nor the fulfillment
of the terms thereof will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by- laws of the Company or
any of its Subsidiaries, the terms of any indenture or other agreement or
instrument known to such counsel and to which the Company or any of its
Subsidiaries is a party or bound or any judgment, order, decree, of any court,
regulatory body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its Subsidiaries, or any provision of
applicable law, known to such counsel to be applicable to the Company or any of
its Subsidiaries, except for such conflicts, breaches, violations or defaults
which are not, in the aggregate, material to the Company and its subsidiaries
taken as a whole and which do not adversely affect the consummation of the
transactions contemplated in this Agreement and the Operative Documents;
(iv) the Company is duly registered as a financial holding company under
the Xxxxx- Xxxxx-Xxxxxx Act and the regulations thereunder of the Federal
Reserve, and the deposit accounts of the Company's banking subsidiaries are
insured by the FDIC to the fullest extent permitted by law and the rules and
regulations of the FDIC,
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and, to the best of our knowledge no proceeding for the termination of such
insurance is pending or threatened;
(v) each of the Indenture and the Guarantee Agreement has been duly
authorized, executed and delivered by the Company, and (in the case of the
Indenture and the Guarantee, respectively, assuming it is duly authorized,
executed and delivered by the Indenture Trustee and the Guarantee Trustee,
respectively) constitutes a legal, valid and binding instrument of the Company
enforceable against the Company in accordance with its terms, subject to
Bankruptcy and Equity; the Subordinated Debt Securities have been duly and
validly authorized and delivered to the Indenture Trustee for authentication in
accordance with the Indenture, and when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Trust, will
constitute legal, valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
its terms, subject to Bankruptcy and Equity;
(vi) each of the Placement Agreement and the Capital Securities
Subscription Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding instrument of the Company,
enforceable against the Company in accordance with its terms;
(vii) the Declaration has been duly authorized, executed and delivered by
the Company and the Administrators;
(viii) each of the Placement Agreement and the Capital Securities
Subscription Agreement have been duly executed and delivered by the Trust and
constitutes a valid and binding instrument of the Trust, enforceable against the
Trust in accordance with its terms;
(ix) neither the Company nor the Trust is, and, following the issuance of
the Capital Securities and the consummation of the transactions contemplated by
the Operative Documents and the application of the proceeds therefrom, neither
the Company nor the Trust will be an "investment company" or an entity
"controlled" by an "investment company," required to be registered under the
Investment Company Act; and
(x) assuming the accuracy of the representations and warranties and
compliance with the agreements contained herein, no registration of any of the
Securities under the Securities Act is required for the offer, and sale and
delivery by the Trust to the Purchaser of the Capital Securities in the manner
contemplated by this Agreement, and the Indenture, the Declaration and the
Guarantee are not required to be qualified under the Trust Indenture Act of
1939.
In rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of New York, the corporate laws of the State of Delaware and
the Federal laws of the United States and (B) rely as to matters involving the
application of laws of any jurisdiction other than New York and Delaware or the
United States, to the extent deemed proper and specified in such opinion, upon
the opinion of other counsel of good standing believed to be reliable and who
are
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satisfactory to you and as to matters of fact, to the extent deemed proper, on
certificates of responsible officers of the Company and public officials.
3
ANNEX B
Pursuant to Section 6(b) of the Placement Agreement, special tax counsel
for the Company shall deliver an opinion in substantially the following form:
We have acted as special tax counsel to Chesapeake Financial Shares, Inc.,
a Virginia corporation (the "Company"), in connection with the offering by CFS
Capital Trust I (the "Trust") of 10,000 Floating Rate TRUPS(R) (liquidation
amount $1,000 per capital security) (the "Capital Securities"). The Capital
Securities represent undivided beneficial ownership interests in $10,310,000 in
aggregate principal amount of Floating Rate Junior Subordinated Debt Securities
due 2033 of the Company (the "Subordinated Debt Securities"). This opinion
letter is furnished pursuant to Section 6(b) of the Placement Agreement dated
December 11, 2002, between the Company, the Trust and you.
In arriving at the opinions expressed below we have examined executed
copies of (i) the Amended and Restated Declaration of Trust of the Trust dated
the date hereof (the "Declaration"), and (ii) the Indenture relating to the
issuance of the Subordinated Debt Securities dated the date hereof (the
"Indenture") (together, the "Operative Documents"). In addition, we have made
such investigations of law and fact as we have deemed appropriate as a basis for
the opinion expressed below.
It is our opinion that, under current law and assuming the performance of
the Operative Documents in accordance with the terms described therein, the
Subordinated Debt Securities will be treated for United States federal income
tax purposes as indebtedness of the Company.
Our opinion is based on the U.S. Internal Revenue Code of 1986, as amended,
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are subject
to change, possibly on a retroactive basis. In rendering this opinion, we are
expressing our views only as to the federal income tax laws of the United States
of America.
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ANNEX C
Pursuant to Section 6(c) of the Placement Agreement, special Delaware
counsel for the Company and the Trust shall deliver an opinion in substantially
the following form:
1. The Trust has been duly formed and is validly existing in good standing
as a statutory trust under the Act.
2. The Declaration constitutes a valid and binding obligation of the
Sponsor and Trustees party thereto, enforceable against such Sponsor and
Trustees in accordance with its terms.
3. Under the Act and the Declaration, the Trust has the requisite trust
power and authority (i) to own its properties and conduct its business, all as
described in the Declaration, (ii) to execute and deliver, and perform its
obligations under, the Trust Documents, (iii) to authorize, issue, sell and
perform its obligations under its Trust Securities, and (iv) to purchase and
hold the Debentures.
4. The Capital Securities of the Trust have been duly authorized for
issuance by the Trust and, when issued, executed and authenticated in accordance
with the Declaration and delivered against payment therefor in accordance with
the Declaration and the Capital Securities Subscription Agreement, will be
validly issued and, subject to the qualifications set forth in paragraph 5
below, fully paid and nonassessable undivided beneficial interests in the assets
of the Trust and the Capital Security Holders will be entitled to the benefits
provided by the Declaration.
5. Each Capital Security Holder, in such capacity, will be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note, however, that the Capital Security Holders may be required
to make payment or provide indemnity or security as set forth in the
Declaration.
6. Under the Declaration and the Act, the issuance of the Trust Securities
of the Trust is not subject to preemptive rights.
7. The Common Securities of the Trust have been duly authorized for
issuance by the Trust and, when issued and executed in accordance with the
Declaration and delivered against payment therefor in accordance with the
Declaration and the Common Securities Subscription Agreement, will be validly
issued undivided beneficial interests in the assets of the Trust and the Common
Security Holders will be entitled to the benefits provided by the Declaration.
8. Under the Declaration and the Act, the execution and delivery by the
Trust of the Trust Documents, and the performance by the Trust of its
obligations thereunder, have been duly authorized by the requisite trust action
on the part of such Trust.
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9. The issuance and sale by the Trust of its Trust Securities, the
execution, delivery and performance by the Trust of the Trust Documents, the
consummation by the Trust of the transactions contemplated by the Trust
Documents, and the compliance by the Trust with its obligations thereunder are
not prohibited by (i) the Declaration or the Certificate, or (ii) any law or
administrative regulation of the State of Delaware applicable to such Trust.
10. No authorization, approval, consent or order of any Delaware court or
Delaware governmental authority or Delaware agency is required to be obtained by
the Trust solely in connection with the issuance and sale by the Trust of its
Trust Securities, the due authorization, execution and delivery by the Trust of
the Trust Documents or the performance by the Trust of its obligations under the
Trust Documents.
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11. The Capital Security Holders (other than those Capital Security Holders
who reside or are domiciled in the State of Delaware) will have no liability for
income taxes imposed by the State of Delaware solely as a result of their
participation in the Trust, and the Trust will not be liable for any income tax
imposed by the State of Delaware.
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ANNEX D
Pursuant to Section 6(d) of the Placement Agreement, counsel for the
Guarantee Trustee, the Institutional Trustee, the Delaware Trustee and the
Indenture Trustee shall deliver an opinion in substantially the following form:
1. Wilmington Trust Company ("WTC") is a Delaware banking corporation with
trust powers, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with requisite corporate power and authority to
execute and deliver, and to perform its obligations under, the Transaction
Documents.
2. The execution, delivery, and performance by WTC of the Transaction
Documents have been duly authorized by all necessary corporate action on the
part of WTC, and the Transaction Documents have been duly executed and delivered
by WTC.
3. The execution, delivery and performance of the Transaction Documents by
WTC and the consummation of any of the transactions by WTC contemplated thereby
are not prohibited by (i) the Charter or Bylaws of WTC, (ii) any law or
administrative regulation of the State of Delaware or the United States of
America governing the banking and trust powers of WTC, or (iii) to our knowledge
(based and relying solely on the Officer Certificates), any agreements or
instruments to which WTC is a party or by which WTC is bound or any judgments or
order applicable to WTC.
4. The Debentures delivered on the date hereof have been authenticated by
due execution thereof and delivered by WTC, as Debenture Trustee, in accordance
with the Corporation Order. The Capital Securities delivered on the date hereof
have been authenticated by due execution thereof and delivered by WTC, as
Institutional Trustee, in accordance with the related Trust Order.
5. None of the execution, delivery and performance by WTC of the
Transaction Documents and the consummation of any of the transactions by WTC
contemplated thereby requires the consent, authorization, order or approval of,
the withholding of objection on the part of, the giving of notice to, the
registration with or the taking of any other action in respect of, any
governmental authority or agency, under any law or administrative regulation of
the State of Delaware or the United States of America governing the banking and
trust powers of WTC, except for the filing of the Certificate for the Trust with
the Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Statutory Trust Act 12 Del.C. ss3801, et seq. (which filing has been
duly made).
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