MERGER AGREEMENT
by and between
BANK OF GRANITE CORPORATION
and
FIRST COMMERCE CORPORATION
Dated as of December 18, 2002
TABLE OF CONTENTS
Page
ARTICLE I
DEFINED TERMS
1.1 Definitions..........................................................1
ARTICLE II
THE HOLDING COMPANY MERGER;
CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1 The Holding Company Merger...........................................9
2.2 Company Shares......................................................10
2.3 Merger Consideration................................................10
2.4 Election and Pro Ration Procedures..................................11
2.5 Closing Payment.....................................................13
2.6 Exchange Procedures.................................................13
2.7 Dissenting Shares...................................................14
2.8 Company Stock Options...............................................14
ARTICLE III
THE BANK MERGER;
CONVERSION AND EXCHANGE OF COMPANY BANK SHARES
3.1 The Bank Merger.....................................................16
3.2 Company Bank Shares.................................................16
3.3 Company Bank Offices................................................16
ARTICLE IV
THE CLOSING
4.1 Closing.............................................................16
4.2 Deliveries by the Company...........................................16
4.3 Deliveries by the Buyer.............................................17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1 Organization; Standing and Power....................................17
5.2 Authority; No Conflicts.............................................17
5.3 Capital Stock.......................................................18
5.4 SEC Filings; Company Financial Statements...........................18
5.5 Absence of Undisclosed Liabilities..................................19
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5.6 Absence of Certain Changes or Events................................19
5.7 Tax Matters.........................................................19
5.8 Assets..............................................................20
5.9 Securities Portfolio and Investments................................21
5.10 Environmental Matters...............................................21
5.11 Compliance with Laws................................................21
5.12 Labor Relations.....................................................22
5.13 Employee Benefit Plans..............................................22
5.14 Contracts...........................................................23
5.15 Legal Proceedings...................................................24
5.16 Reports.............................................................24
5.17 Registration Statement; Proxy Statement.............................24
5.18 Accounting, Tax, and Regulatory Matters.............................24
5.19 State Takeover Laws.................................................24
5.20 Charter Provisions..................................................24
5.21 Records.............................................................25
5.22 Derivatives.........................................................25
5.23 Certain Regulated Businesses........................................25
5.24 Commissions.........................................................25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
6.1 Organization; Standing and Power....................................25
6.2 Authority; No Conflicts.............................................26
6.3 Buyer's Stock.......................................................26
6.4 SEC Filings; Buyer Financial Statements.............................27
6.5 Absence of Undisclosed Liabilities..................................27
6.6 Tax Matters.........................................................28
6.7 Absence of Certain Changes or Events................................28
6.8 Compliance with Laws................................................28
6.9 Securities Portfolio................................................28
6.10 Employee Benefit Plans..............................................29
6.11 Legal Proceedings...................................................29
6.12 Reports.............................................................29
6.13 Registration Statement; Proxy Statement.............................29
6.14 Accounting, Tax, and Regulatory Matters.............................30
6.15 Derivatives.........................................................30
6.16 Commissions.........................................................30
ARTICLE VII
COVENANTS
7.1 Covenants of the Company............................................30
7.2 Covenants of the Buyer..............................................33
7.3 Covenants of All Parties to the Agreement...........................36
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ARTICLE VIII
DISCLOSURE OF ADDITIONAL INFORMATION
8.1 Access to Information...............................................37
8.2 Access to Premises..................................................37
8.3 Environmental Survey................................................38
8.4 Confidentiality.....................................................38
8.5 Publicity...........................................................38
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Mutual Conditions...................................................38
9.2 Conditions to the Obligations of the Company........................39
9.3 Conditions to the Obligations of the Buyer..........................40
ARTICLE X
TERMINATION
10.1 Termination.........................................................41
10.2 Procedure and Effect of Termination.................................43
10.3 Termination Fee; Expenses...........................................44
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses............................................................44
11.2 Survival of Representations.........................................44
11.3 Amendment and Modification..........................................44
11.4 Waiver of Compliance; Consents......................................45
11.5 Notices.............................................................45
11.6 Assignment..........................................................46
11.7 Separable Provisions................................................46
11.8 Governing Law.......................................................46
11.9 Counterparts........................................................46
11.10 Interpretation......................................................46
11.11 Entire Agreement....................................................46
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EXHIBITS
Exhibit A Form of Plan of Merger in respect of the Holding Company
Merger
Exhibit B Form of Plan of Merger in respect of the Bank Merger
Exhibit C Form of Employment Agreement of Xxxxxx X. Xxxxxxx
Exhibit D Form of Affiliate Letter
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement"), dated as of the 18th day of
December, 2002, is by and between:
BANK OF GRANITE CORPORATION, a Delaware corporation and a holding company
registered with the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956, as amended (the "Buyer"); and
FIRST COMMERCE CORPORATION, a North Carolina corporation and a holding
company registered with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended (the "Company").
Background Statement
The Buyer and the Company desire to effect a merger pursuant to which the
Company will merge into the Buyer, with the Buyer being the surviving
corporation (the "Holding Company Merger"). In consideration of the Holding
Company Merger, the shareholders of the Company will receive shares of common
stock of the Buyer and/or cash. It is intended that the Holding Company Merger
qualify as a tax-free reorganization under Section 368 of the Code (as defined
below). The Holding Company Merger is expected to be accounted for under the
purchase method. Subsequent to the Holding Company Merger, it is expected that
the Buyer Bank and the Company Bank (each, as hereinafter defined) will effect a
merger pursuant to which the Company Bank will merge into the Buyer Bank, with
the Buyer Bank being the surviving corporation (the "Bank Merger," and together
with the Holding Company Merger, the "Mergers").
Statement of Agreement
In consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE I.........
DEFINED TERMS
1.1 Definitions. As used in this Agreement, the following terms have the
following meanings:
"Acquisition Proposal" means any offer or proposal by any Person concerning
any tender or exchange offer, proposal for a merger, share exchange,
recapitalization, consolidation or other business combination involving the
Company or any of its subsidiaries or any divisions of any of the foregoing, or
any proposal or offer to acquire in any manner, directly or indirectly, a 10% or
more equity interest in, or 10% or more of the assets, business or deposits of,
the Company or any of its subsidiaries, other than pursuant to the transactions
contemplated by this Agreement.
"Acquisition Transaction" means the consummation of any merger, share
exchange, recapitalization, consolidation or other business combination
involving the Company or any of its subsidiaries or any divisions of the
foregoing, or the acquisition in any manner, directly or indirectly, of a
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10% or more equity interest in, or 10% or more of the assets, business or
deposits of, the Company or any of its subsidiaries, other than pursuant to the
transactions contemplated by this Agreement.
"Affiliate" means, with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls, or
is controlled by or under common control with, such Person, and shall be deemed
to include the directors and executive officers of a corporate Person. For the
purpose of this Agreement, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the foregoing, as used with respect to the Company,
the term "Affiliates" includes its subsidiaries.
"Agreement" means this Merger Agreement.
"Assets" means all of the assets, properties, businesses and rights of a
Person of every kind, nature, character and description, whether real, Personal
or mixed, tangible or intangible, accrued or contingent, whether or not carried
on any books and records of such Person, whether or not owned in such Person's
name and wherever located.
"Average Closing Price" means with respect to the Buyer's Stock, the
average of the daily closing sales price thereof on the Nasdaq National Market
System during a specified period, as reported in The Wall Street Journal (or, if
not reported thereby, any other authoritative source).
"Bank Holding Company Act" means the Bank Holding Company Act of 1956, as
amended.
"Bank Merger" has the meaning given to it in the Background Statement
hereof.
"Bank Merger Effective Time" has the meaning given to it in Section 3.1.
"Benefit Plans" means all pension, retirement, profit-sharing, deferred
compensation, stock option, stock purchase, employee stock ownership, restricted
stock, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including without limitation "employee benefit plans" as
that term is defined in Section 3(3) of ERISA maintained by, sponsored in whole
or in part by, or contributed to by, a Person or any of its subsidiaries for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate.
"BPMHL" means Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
"Business Day" means any day excluding Saturday, Sunday and any day that is
a legal holiday in the State of North Carolina.
"Buyer" has the meaning given to it in the introductory paragraph hereof.
"Buyer Bank" means Bank of Granite, a North Carolina bank and a wholly
owned subsidiary of the Buyer.
"Buyer Financial Statements" means, with respect to the Buyer and its
subsidiaries, the consolidated audited statements of income, comprehensive
income, changes in shareholders' equity and cash flows for the years ended
December 31, 2001, 2000 and 1999 and consolidated audited balance
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sheets as of December 31, 2001, 2000 and 1999, as well as the interim unaudited
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2001 and the consolidated interim balance sheets as of each
such quarter.
"Buyer Parties" means the Buyer and the Buyer Bank.
"Buyer SEC Reports" has the meaning given to it in Section 6.4.
"Buyer's Stock" means the common stock of Bank of Granite Corporation,
$1.00 par value, transactions in which are quoted on the Nasdaq National Market
System.
"Cash Election Shares" has the meaning given to it in Section 2.4.
"Closing" means the closing of the Holding Company Merger, as identified
more specifically in Article IV.
"Closing Date" has the meaning given to it in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed also to refer to any successor sections.
"Company" has the meaning given to it in the introductory paragraph hereof.
"Company Bank" means First Commerce Bank, a North Carolina bank and a
wholly owned subsidiary of the Company.
"Company Bank Shares" has the meaning given to it in Section 3.2.
"Company Contracts" has the meaning given to it in Section 5.14.
"Company Financial Statements" means, with respect to the Company and its
subsidiaries, the consolidated audited statements of operations and
comprehensive income, changes in stockholders' equity and cash flows for the
years ended December 31, 2001, 2000 and 1999 and consolidated audited balance
sheets as of December 31, 2001, 2000 and 1999, as well as the interim unaudited
consolidated statements of statements of operations and comprehensive income,
changes in stockholders' equity and cash flows for each of the completed fiscal
quarters since December and the consolidated interim balance sheets as of each
such quarter.
"Company Option Plans" has the meaning given to it in Section 2.8.
"Company Options" has the meaning given to it in Section 2.8.
"Company Parties" means the Company and the Company Bank.
"Company SEC Reports" has the meaning given to it in Section 5.4.
"Company Shares" has the meaning given to it in Section 2.2.
"Confidentiality Agreements" has the meaning given to it in Section 8.4.
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"Consent" means any consent, approval, authorization, clearance, exemption,
waiver, or similar affirmation by any Person given or granted with respect to
any Contract, Law, Order, or Permit.
"Contract" means any agreement, warranty, indenture, mortgage, guaranty,
lease, license or other contract, agreement, arrangement, commitment or
understanding, written or oral, to which a Person is a party.
"Costs" means the legal, accounting, investment banking, printing, mailing
and other out-of-pocket fees and expenses incurred by the Company Parties or
Buyer Parties, as the case may be, in connection with this Agreement and the
transactions contemplated herein.
"Default" means (i) any breach or violation of or default under any
Contract, Order or Permit (including any noncompliance with restrictions on
assignment, where assignment is defined to include a change of control of the
parties to this Agreement or any of their subsidiaries or the merger or
consolidation of any of them with another Person), (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute such a breach or violation of or default under any Contract, Order or
Permit, or (iii) any occurrence of any event that with or without the passage of
time or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"Dissenting Shares" has the meaning given to it in Section 2.7.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Plan" means any Benefit Plan that is an "employee welfare benefit
plan," as that term is defined in Section 3(l) of ERISA, or an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA.
"Effective Time" has the meaning given to it in Section 2.1(f).
"Election Deadline" has the meaning given to it in Section 2.4.
"Election Form" has the meaning given to it in Section 2.4.
"Environmental Assessment" means any and all soil and groundwater tests,
surveys, environmental assessments and other inspections, tests and inquiries
conducted by the Buyer or any agent of the Buyer and related to the Real
Property of the Company and its subsidiaries.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, permit, directive, license, approval, guidance,
interpretation, order or other legal requirement relating to the protection of
human health or the environment, including but not limited to any requirement
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of materials that are or may constitute a threat to
human health or the environment. Without limiting the foregoing, each of the
following is an Environmental Law: the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), the Safe Drinking
4
Water Act (42 U.S.C. ss. 300 et seq.) and the Occupational Safety and Health Act
(29 U.S.C. ss. 651 et seq.) ("OSHA"), as such laws and regulations have been or
are in the future amended or supplemented, and each similar federal, state or
local statute, and each rule and regulation promulgated under such federal,
state and local laws.
"Environmental Survey" has the meaning given to it in Section 8.3.
"Exchange Agent" has the meaning given to it in Section 2.5.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"GAAP" means generally accepted accounting principles in the United States
as recognized by the American Institute of Certified Public Accountants, as in
effect from time to time, consistently applied and maintained on a consistent
basis for a Person throughout the period indicated and consistent with such
Person's prior financial practice.
"Governmental Authority" means any nation, province or state, or any
political subdivision thereof, and any agency, department, natural Person or
other entity exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, including Regulatory Authorities.
"Hazardous Material" means any substance or material that either is or
contains a substance designated as a hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law or is otherwise regulated under any Environmental Law, or the
presence of which in some quantity requires investigation, notification or
remediation under any Environmental Law.
"Holding Company Merger" has the meaning given to it in the Background
Statement hereof.
"Holding Company Plan of Merger" has the meaning given to it in Section
2.1.
"Knowledge of the Buyer Parties" means the actual personal knowledge of any
of the directors and executive officers of the Buyer and the Buyer Bank.
"Knowledge of the Company Parties" means the actual personal knowledge of
any of the directors and executive officers of the Company and the Company Bank.
"Law" means any code, law, ordinance, rule, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, business or operations promulgated, interpreted or enforced by any
Governmental Authority.
"Liability" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of
investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, asserted, absolute or contingent,
liquidated or unliquidated, matured or unmatured or otherwise.
"Lien" means, whether contractual or statutory, any conditional sale
agreement, participation or repurchase agreement, assignment, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other
5
security arrangement, or any adverse right or interest, charge or claim of any
nature whatsoever of, on, or with respect to any property or property interest,
other than (i) Liens for current property Taxes not yet due and payable, (ii)
easements, restrictions of record and title exceptions that could not reasonably
be expected to have a Material Adverse Effect, and (iii) pledges to secure
deposits and other Liens incurred in the ordinary course of the banking
business.
"Litigation" means any action, arbitration, cause of action, complaint,
criminal prosecution, governmental investigation of which the Person being
investigated has been notified, hearing, or administrative or other proceeding,
but shall not include regular, periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities.
"Loan Collateral" means all of the assets, properties, businesses and
rights of every kind, nature, character and description, whether real, Personal,
or mixed, tangible or intangible, accrued or contingent, owned by whomever and
wherever located, in which the Company or any of its subsidiaries has taken a
security interest with respect to, on which the Company or any of it
subsidiaries has placed a Lien with respect to, or which is otherwise used to
secure, any loan made by the Company or any of its subsidiaries or any note,
account, or other receivable payable to the Company or any of its subsidiaries.
"Mailing Date" has the meaning given to in Section 2.4.
"Market Value" of the Buyer's Stock on any date shall be the closing price
of such stock as quoted on the Nasdaq National Market System (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative
source), or if such date is not a trading day, on the last trading day preceding
that date.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided, however, that
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any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Person shall mean an event, change, or
occurrence that, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Person and its subsidiaries, taken as
a whole, or (ii) the ability of such Person to perform its obligations under
this Agreement or to consummate the Mergers or the other transactions
contemplated by this Agreement, provided, however, that "Material Adverse
-------- -------
Effect" shall not be deemed to include the impact of (a) changes in banking and
similar Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in GAAP or regulatory accounting
principles generally applicable to banks and their holding companies, (c)
actions and omissions of a party to this Agreement (or any of its subsidiaries)
taken with the prior informed consent of the other party hereto in contemplation
of the transactions contemplated hereby, and (d) the Mergers (and the reasonable
expenses incurred in connection therewith) and compliance with the provisions of
this Agreement on the operating performance of the Buyer Parties or the Company
Parties.
"Measurement Period" means the 20-trading day period ending three trading
days prior to the Effective Time.
"Merger Consideration" has the meaning given to it in Section 2.3.
"Mergers" has the meaning given to it in the Background Statement hereof.
"Mixed Election Cash Amount" has the meaning given to it in Section 2.4.
6
"Mixed Election Stock Amount" has the meaning given to it in Section 2.4.
"Mixed Election Shares" has the meaning given to it in Section 2.4.
"Order" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local, foreign or other court, arbitrator, mediator, tribunal,
or Governmental Authority.
"Participation Facility" shall mean any facility or property in which the
Person in question or any of its subsidiaries participates in the management
(including but not limited to participating in a fiduciary capacity) and, where
required by the context, said term means the owner or operator of such facility
or property, but only with respect to such facility or property.
"Pension Plan" means any ERISA Plan that also is a "defined benefit plan"
(as defined in Section 414(j) of the Code or Section 3(35) of ERISA).
"Per Share Cash Consideration" has the meaning given to it in Section 2.3.
"Per Share Mixed Consideration" has the meaning given to in Section 2.3.
"Per Share Stock Consideration" has the meaning given to in Section 2.3.
"Permit" means any approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right given by a Governmental Authority
to which any Person is a party or that is or may be binding upon or inure to the
benefit of any Person or its securities, Assets or business.
"Person" means a corporation, a limited liability company, an association,
a joint venture, a partnership, an organization, a business, an individual, a
trust, a Governmental Authority or any other legal entity, or any group of any
of the foregoing acting in concert.
"Proxy Statement" has the meaning given to it in Section 5.17.
"Real Property" means all of the land, buildings, premises, or other real
property in which a Person has ownership or possessory rights, whether by title,
lease or otherwise (including banking facilities and any foreclosed properties).
Notwithstanding the foregoing, "Real Property," as used with respect to any of
the Company and its subsidiaries, does not include any Loan Collateral not yet
foreclosed and conveyed to the Company or one of its subsidiaries as of the date
with respect to which the term "Real Property" is being used.
"Registration Statement" has the meaning given to it in Section 5.17.
"Regulatory Authorities" means, collectively, the Federal Trade Commission;
the United States Department of Justice; the Federal Reserve Board; the North
Carolina Commissioner of Banks, the North Carolina Banking Commission; the FDIC,
the National Association of Securities Dealers, Inc.; the SEC; and all other
regulatory agencies having jurisdiction over the parties hereto and their
respective subsidiaries.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
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"SEC" means the Securities and Exchange Commission.
"Securities Documents" means all forms, proxy statements, registration
statements, reports, schedules and other documents filed or required to be filed
by a Person or any of its subsidiaries with any Regulatory Authority pursuant to
the Securities Laws.
"Securities Laws" means the Securities Act of 1933, the Securities Exchange
Act of 1934, the Investment Company Act of 1940, the Investment Advisors Act of
1940, the Trust Indenture Act of 1939, each as amended, and the rules and
regulations of any Governmental Authority promulgated under each.
"Shareholder Meeting" has the meaning given to it in Section 5.17.
"Stock Adjustment" has the meaning given to it in Section 2.3.
"Stock Election Shares" has the meaning given to it in Section 2.4.
"Xxxxxxx Employment Agreement" means the Employment Agreement to be entered
into at or prior to Closing between the Buyer, the Buyer Bank and Xxxxxx X.
Xxxxxxx, substantially in the form attached hereto as Exhibit C.
"Superior Proposal" means a bona fide written unsolicited Acquisition
Proposal (including a new or solicited proposal received by the Company or any
of its subsidiaries after execution of this Agreement from a party whose initial
contact with the Company may have been solicited prior to the execution of this
Agreement) that the Company's board of directors concludes in good faith to be
more favorable from a financial point of view to the Company's shareholders than
the Holding Company Merger and the other transactions contemplated hereby, (i)
based on the advice of its financial advisors (which shall be reasonably
acceptable to the Buyer, but which shall include BPMHL in any event), (ii) after
taking into account the likelihood of consummation of such transaction on the
terms set forth therein (as compared to, and with due regard for, the terms
herein), and (iii) after taking into account all legal (with the advice of
outside counsel reasonably acceptable to the Buyer, but which shall include
BPMHL in any event), financial (including the financing terms of any such
proposal), regulatory and other aspects of such proposal and any other relevant
factors permitted under applicable Law.
"Surviving Bank" has the meaning given to it in Section 3.1.
"Surviving Holding Company" has the meaning given to it in Section 2.1.
"Tax" or "Taxes" means any and all taxes, charges, fees, levies or other
assessments (whether federal, state, local or foreign), including without
limitation income, gross receipts, excise, property, estate, sales, use, value
added, transfer, license, payroll, franchise, ad valorem, withholding, Social
Security and unemployment taxes, as well as any interest, penalties and other
additions to such taxes, charges, fees, levies or other assessments.
"Tax Return" means any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.
"Taxable Period" shall mean any period prescribed by any Governmental
Authority for which a Tax Return is required to be filed or Tax is required to
be paid.
"Total Cash Consideration" has the meaning given to it in Section 2.3.
8
"Total Cash Election Amount" has the meaning given to it in Section 2.4.
"Total Stock Consideration" has the meaning given to it in Section 2.3.
"Total Stock Election Amount" has the meaning given to it in Section 2.4.
ARTICLE II........
THE HOLDING COMPANY MERGER;
CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1 The Holding Company Merger.
(a) The Merger. On the terms and subject to the conditions of this
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Agreement, the Plan of Merger in respect of the Holding Company
Merger, which shall be substantially in the form attached hereto as
Exhibit A (the "Holding Company Plan of Merger"), and applicable North
Carolina and Delaware Law, the Company shall merge into the Buyer, the
separate existence of the Company shall cease, and the Buyer shall be
the surviving corporation (the "Surviving Holding Company").
(b) Governing Documents. The certificate of incorporation of the Buyer in
-------------------
effect at the Effective Time shall be the certificate of incorporation
of the Surviving Holding Company until further amended in accordance
with applicable Law. The bylaws of the Buyer in effect at such
Effective Time shall be the bylaws of the Surviving Holding Company
until further amended in accordance with applicable Law.
(c) Directors and Officers. Subject to Section 7.2(b), from and after the
----------------------
Effective Time, until successors or additional directors are duly
elected or appointed in accordance with applicable Law, (i) the
directors of the Buyer at the Effective Time shall be the directors of
the Surviving Holding Company, and (ii) the officers of the Buyer at
the Effective Time shall be the officers of the Surviving Holding
Company.
(d) Headquarters. The headquarters of the Surviving Holding Company and
------------
the Surviving Bank after the Merger, unless and until relocated by the
Buyer, shall be Granite Falls, North Carolina.
(e) Approval. The parties hereto shall take and cause to be taken all
--------
action necessary to approve and authorize (i) this Agreement and the
other documents contemplated hereby (including without limitation the
Holding Company Plan of Merger) and (ii) the Holding Company Merger
and the other transactions contemplated hereby.
(f) Effective Time. The Holding Company Merger shall become effective on
--------------
the date and at the time of filing of the related Certificate of
Merger and Articles of Merger, each containing the Holding Company
Plan of Merger, in the form required by and executed in accordance
with applicable Delaware and North Carolina Law, or at such other time
specified therein. The date and time when the Holding Company Merger
shall become effective is herein referred to as the "Effective Time."
(g) Filing of Certificate of Merger and Articles of Merger. At the
------------------------------------------------------
Closing, (i) the Buyer and the Company shall cause the Certificate of
Merger and (ii) the Company shall cause the Articles of Merger in
respect of the Holding Company Merger, each containing the Holding
Company Plan of Merger, to be executed and filed with the Secretary of
State of Delaware and the Secretary of State of North Carolina,
respectively, as required by applicable Delaware and North Carolina
Law, and shall take
any and all other actions and do any and all other things to cause the Holding
Company Merger to become effective as contemplated hereby.
2.2 Company Shares.
(a) Each share of the Company's capital stock (the "Company Shares"), no
par value per share, issued and outstanding to Persons, except for the
Company Shares held by the Buyer and its Affiliates immediately prior
to the Effective Time (other than shares held in a fiduciary capacity
or as a result of debts previously contracted), shall, by virtue of
the Holding Company Merger and without any action on the part of the
holders thereof, be canceled and converted at the Effective Time into
the right to receive the Merger Consideration (as defined below) in
accordance with this Article II.
(b) Each Company Share, by virtue of the Holding Company Merger and
without any action on the part of the holder thereof, shall at the
Effective Time no longer be outstanding, shall be canceled and retired
and shall cease to exist, and each holder of certificates representing
any such Company Shares shall thereafter cease to have any rights with
respect to such shares, except for the right to receive the Merger
Consideration.
(c) From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Holding Company of the Company
Shares that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates representing Company Shares
are presented to the Surviving Holding Company, they shall be
canceled, and exchanged and converted into the Merger Consideration as
provided for herein.
2.3 Merger Consideration.
(a) Subject to Sections 2.4, 2.5 and 2.6, at the Effective Time, the
holders of Company Shares outstanding at the Effective Time, other
than the Buyer and its Affiliates, shall be entitled to receive, and
the Buyer shall pay or issue and deliver, one of the following for
each Company Share: (i) 0.658 shares of the Buyer's Stock plus $4.49
of cash (the "Per Share Mixed Consideration"); (ii) 0.9022 shares of
the Buyer's Stock (the "Per Share Stock Consideration"); or (iii)
$16.60 in cash (the "Per Share Cash Consideration"); provided,
--------
however, that such consideration to be paid by the Buyer under clauses
-------
(i) and (ii) above in connection with the Holding Company Merger shall
be subject to adjustment based on the Average Closing Price of the
Buyer's Stock for the Measurement Period pursuant to Section 2.3(b)
and Section 10.1(g). The foregoing consideration, collectively and in
the aggregate, as adjusted in accordance with the terms hereof, is
referred to here in as the "Merger Consideration."
(b) In the event that the Average Closing Price of the Buyer's Stock for
the Measurement Period is more than $22.08, (i) the Per Share Stock
Consideration shall be decreased so that the value of the Per Share
Stock Consideration, based on the Average Closing Price of the Buyer's
Stock for the Measurement Period, is as close as practical to $19.92,
and (ii) the stock and/or cash components of the Per Share Mixed
Consideration shall be adjusted so that the value of the Buyer's Stock
comprising the Per Share Mixed Consideration, based on the Average
Closing Price of the Buyer's Stock for the Measurement Period, plus
the amount of cash comprising the Per Share Mixed Consideration is as
close as practical to $19.02. The determination of whether to adjust
the stock, the cash or a combination of the stock and cash components
of the Per Share Mixed Consideration pursuant to the foregoing clause
(ii) shall be at the sole discretion of the Buyer.
(c) Subject to the 2.3(b) and Section 2.4, each holder of a Company Share
may elect to receive the Per Share Stock Consideration, the Per Share
Cash Consideration or the Per Share Mixed
10
Consideration for each such Company Share; provided, however, that if any holder
-------- -------
(or beneficial owner) of Company Shares makes any such election or aggregate
elections with respect to more Company Shares than held or owned by such Person,
the excess number of Company Shares with respect to which elections were made
shall be deducted from the number of Company Shares with respect to which an
election for the Per Share Stock Consideration was made; provided, further,
-------- -------
however, that (i) the aggregate number of shares of the Buyer's Stock to be paid
-------
as Merger Consideration shall be 671,612 shares, including any fractional shares
of the Buyer's Stock that would be issued but for Section 2.3(d), and (ii) the
aggregate amount of cash to be paid as Merger Consideration shall be $4,584,880,
(x) subject to equitable adjustment to reflect any stock dividend, stock split
or other stock payment in respect of the Buyer's Stock, the exercise of any
Company Options, and the issuance of Company Shares pursuant to Section 2.8(d)
after the date hereof and prior to the Effective Time and (y) subject to the
effect of any adjustment made as provided in Section 2.3(b) and Section 10.1(g).
The aggregate amount of the Buyer's Stock to be paid as Merger Consideration
shall be referred to in this Agreement as the "Total Stock Consideration," and
the aggregate amount of cash to be paid by the Buyer is referred to in this
Agreement as the "Total Cash Consideration."
(d) No fractional shares of the Buyer's Stock shall be issued or delivered
in connection with the Holding Company Merger. In lieu of any such
fractional share, subject to Section 2.5, each holder of Company
Shares who would otherwise have been entitled to a fraction of a share
of the Buyer's Stock shall be entitled to receive cash (without
interest) in an amount equal to such fraction multiplied by the Market
Value of one share of the Buyer's stock on the trading day immediately
prior to the Effective Time.
(e) In the event the Buyer changes the number of shares of the Buyer's
Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend or similar recapitalization with
respect to such stock (each a "Stock Adjustment") and the record date
therefor (in the case of a stock dividend) or the effective date
thereof (in the case of a stock split or similar recapitalization for
which a record date is not established) shall be prior to the
Effective Time, the amount of the Buyer's Stock to be exchanged for
Company Shares in connection with the Holding Company Merger shall be
equitably adjusted to reflect such change.
2.4 Election and Pro Ration Procedures.
(a) Election.
--------
(i) An election form ("Election Form") together with the other
transmittal materials described in Section 2.6 shall be mailed as soon as
reasonably practicable after the Effective Time to each holder of Company
Shares of record at the Effective Time. Such date of mailing shall be
referred to hereinafter as the "Mailing Date." Each Election Form shall
permit a holder (or the beneficial owner through appropriate and customary
documentation and instruction) of Company Shares to elect to receive the
Per Share Mixed Consideration, the Per Share Stock Consideration or the Per
Share Cash Consideration with respect to all or any of such holder's (or
beneficial owner's) Company Shares.
Company Shares as to which an election is properly made for the Per
Share Mixed Consideration and Company Shares as to which no election for
receipt of the Per Share Stock Consideration or the Per Share Cash
Consideration is properly made are referred to herein as the "Mixed
Election Shares;" Company Shares as to which a proper election is made for
the Per Share Stock Consideration are referred to herein as the "Stock
Election Shares;" and Company Shares as to which a proper election is made
for the Per Share Cash Consideration are referred to
11
herein as the "Cash Election Shares." In addition, all Dissenting Shares shall
be deemed Cash Election Shares.
The "Total Stock Election Amount" equals the sum of (i) the Per Share
Stock Consideration multiplied by the total number of Stock Election
Shares, plus (ii) the Mixed Election Stock Amount (as defined below). The
----
"Total Cash Election Amount" equals the sum of (a) the Per Share Cash
Consideration multiplied by the total number of Cash Election Shares, plus
----
(b) the Mixed Election Cash Amount (as defined below). The "Mixed Election
Stock Amount" equals the amount of the Buyer's Stock comprising the Per
Share Mixed Consideration multiplied by the total number of Mixed Election
Shares. The "Mixed Election Cash Amount" equals the amount of the cash
comprising the Per Share Mixed Consideration multiplied by the total number
of Mixed Election Shares.
(ii) Any Company Share with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before
a date after the Effective Time to be agreed upon by the parties hereto
(which date will be set forth on the Election Form), but in any event not
earlier than the 20th Business Day after the Mailing Date (such deadline,
the "Election Deadline") shall be deemed, at the discretion of the Buyer,
either a Mixed Election Share, a Stock Election Share or a Cash Election
Share.
(iii) Any such election shall have been properly made only if the
Exchange Agent shall have actually received a properly completed Election
Form by the Election Deadline. An Election Form shall be deemed properly
completed only if accompanied by one or more certificates (or customary
affidavits and indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates) representing
all Company Shares covered by such Election Form, together with duly
executed transmittal materials included with the Election Form. Any
Election Form may be revoked or changed by the Person submitting such
Election Form (or the beneficial owner of the shares covered by such
Election Form through appropriate and customary documentation and
instruction) at or prior to the Election Deadline. In the event an Election
Form is revoked prior to the Election Deadline and no other valid election
is made, the Company Shares represented by such Election Form shall be
Mixed Election Shares. Subject to the terms of this Agreement and of the
Election Form, the Exchange Agent shall have reasonable discretion to
determine whether any election, revocation or change has been properly or
timely made and to disregard immaterial defects in the Election Forms, and
any good faith decisions of the Exchange Agent regarding such matters shall
be binding and conclusive. Neither the Buyer nor the Exchange Agent shall
be under any obligation to notify any Person of any defect in an Election
Form.
(b) Allocation. As soon as reasonably practicable after the Effective Time,
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the Buyer shall cause the Exchange Agent to allocate the Merger Consideration
among the holders of Company Shares. The allocation shall be effected by the
Exchange Agent as follows:
(i) Each Mixed Election Share shall be converted into the right to
receive an amount of cash and a number of shares of the Buyer's Stock
comprising the Per Share Mixed Consideration.
(ii) If the Total Stock Consideration is less than the Total Stock
Election Amount (or if the Total Cash Consideration is greater than the
Total Cash Election Amount), then:
12
(A) each Cash Election Share shall be converted into the right to
receive an amount of cash equal to the Per Share Cash Consideration; and
(B) each Stock Election Share shall be converted into the right to
receive (I) an amount in cash equal to the Total Cash Consideration less
the Total Cash Election Amount divided by the total number of Stock
Election Shares, and (II) a number of shares of the Buyer's Stock equal to
the Total Stock Consideration less the aggregate Mixed Election Stock
Amount divided by the total number of Stock Election Shares.
(iii) If the Total Stock Consideration is greater than the Total Stock
Election Amount (or if the Total Cash Consideration is less than the Total Cash
Election Amount), then:
(A) each Stock Election Share shall be converted into the right to
receive the Per Share Stock Consideration; and
(B) each Cash Election Share shall be converted into the right to
receive (I) an amount in cash equal to the Total Cash Consideration less
the aggregate Mixed Election Cash Amount, divided by the total number of
Cash Election Shares, and (II) a number of shares of the Buyer's Stock
equal to the Total Stock Consideration less the Total Stock Election Amount
divided by the total number of Cash Election Shares.
2.5 Closing Payment. At the Effective Time, the Buyer shall deposit with an
exchange and transfer agent selected by the Buyer (the "Exchange Agent"), for
the benefit of the holders of Company Shares, (i) a certificate or certificates
representing the aggregate number of shares of the Buyer's Stock comprising the
Merger Consideration, and (ii) an aggregate amount of cash comprising the Merger
Consideration and in lieu of any fractional shares, to be issued and paid as the
Merger Consideration in accordance with the provisions of this Agreement. The
Exchange Agent shall deliver the Merger Consideration in accordance with the
procedures set forth in Section 2.6 below. The Exchange Agent shall invest any
cash so deposited as instructed by the Buyer and any interest resulting from
such investment shall be paid to the Buyer. The Buyer shall not be obligated pay
any of the Merger Consideration to any holder of Company Shares until such
holder surrenders the certificates representing such holder's Company Shares.
2.6 Exchange Procedures.
(a) After the Effective Time, the Buyer shall cause the Exchange Agent to
mail to the shareholders of the Company of record at the Effective Time, the
Election Form, as required under Section 2.4 and other appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates representing Company Shares prior to the Effective
Time shall pass, only upon proper delivery of such certificates to the Exchange
Agent). After the Effective Time, each holder of Company Shares issued and
outstanding at the Effective Time (other than any of such shares held by the
Buyer or any Affiliate thereof or canceled pursuant to Section 2.2(c)) shall
surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the number of shares of the Buyer's Stock and the cash to which such
holder is entitled hereunder (including any cash payments to which such holder
is entitled hereunder in respect of rights to receive fractional shares). The
Exchange Agent shall not be obligated to deliver any of such payments in cash or
stock until such holder surrenders the certificate(s) representing such holder's
Company Shares. The certificate(s) so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither the Buyer nor the Exchange Agent shall be liable to any
holder of Company Shares for any amounts paid or properly delivered in good
faith to a public official pursuant to any applicable abandoned property Law.
13
(b) To the extent permitted by applicable Law, former shareholders of
record of the Company shall be entitled to vote after the Merger Consideration
has been allocated pursuant to the provisions of this Article at any meeting of
the Buyer's stockholders the number of whole shares of the Buyer's Stock into
which their respective Company Shares are converted pursuant to the Holding
Company Merger, regardless of whether such holders have exchanged their
certificates representing such Company Shares for certificates representing the
Buyer's Stock in accordance with the provisions of this Agreement. Whenever a
dividend or other distribution is declared by the Buyer on the Buyer's Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares of the Buyer's
Stock issuable pursuant to this Agreement, but beginning at the Effective Time,
no dividend or other distribution payable to the holders of record of the
Buyer's Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing any of the Company Shares issued
and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in this Section 2.6. However, upon
surrender of such certificate(s), both the certificate(s) representing the
shares of the Buyer's Stock to which such holder is entitled and any such
undelivered dividends (without any interest) shall be delivered and paid with
respect to each share represented by such certificates.
2.7 Dissenting Shares. Notwithstanding any other provision of this
Agreement to the contrary, Company Shares that are outstanding immediately prior
to the Effective Time and that are held by shareholders who shall have not voted
in favor of the Holding Company Merger or consented thereto in writing and who
properly shall have demanded appraisal for such shares in accordance with North
Carolina Law (collectively, the "Dissenting Shares") shall not be converted into
or represent the right to receive the Merger Consideration. Such shareholders
instead shall be entitled to receive payment of the appraised value of such
shares held by them in accordance with the provisions of North Carolina Law,
except that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or otherwise lost their rights
to appraisal of such shares under North Carolina Law shall thereupon be deemed
to have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration upon surrender in the manner provided in Section 2.6 of the
certificate or certificates that, immediately prior to the Effective Time,
evidenced such shares. The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any shares of Company Shares, attempted
withdrawals of such demands for appraisal or any other instruments served
pursuant to North Carolina Law and received by the Company relating to
shareholders' rights of appraisal, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands under North Carolina
Law consistent with the obligations of the Company thereunder. The Company shall
not, except with the prior written consent of the Buyer, (x) make any payment
with respect to such demand, (y) offer to settle or settle any demand for
appraisal or (z) waive any failure to timely deliver a written demand for
appraisal or timely take any other action to perfect appraisal rights in
accordance with North Carolina Law.
2.8 Company Stock Options.
(a) At the Effective Time, each option to acquire Company Shares granted or
deemed granted pursuant to the Company's Employee Option Plan, Director Option
Plan, or Omnibus Stock and Incentive Plan (collectively, the "Company Option
Plans") that is then outstanding and unexercised ("Company Options"), whether or
not vested, up to a maximum number of Company Options covering 222,579 Company
Shares (less any Company Shares covered by options exercised on and after the
date of this Agreement prior to the Effective Time), shall be converted into and
become rights with respect to the Buyer's Stock, and the Buyer shall assume each
Company Option, in accordance with the terms of the Company Option Plans and any
applicable option or incentive agreements, except that from and after the
Effective Time: (i) the Buyer and the Compensation Committee of its board of
directors shall be substituted for the Company and the Compensation Committee of
its board of directors (including, if
14
applicable, the entire board of directors of the Company administering the
Company Option Plans); (ii) the Company Options assumed by the Buyer may be
exercised solely for shares of the Buyer's Stock; (iii) the number of shares of
the Buyer's Stock subject to such converted Company Options shall be equal to
the number of Company Shares subject to Company Options immediately prior to the
Effective Time multiplied by the Per Share Stock Consideration, rounded to the
next highest share; (iv) the per-share exercise price under each such converted
Company Option shall be adjusted by dividing the exercise price of the Company
Option immediately prior to the Effective Time by the Per Share Stock
Consideration, rounded down to the nearest cent, (v) all such assumed Company
Options shall become vested and exercisable upon completion of the Holding
Company Merger, and (vi) all directors of the Company who do not serve or
subsequently cease to serve on the board of directors of the Buyer or the Buyer
Bank or the Buyer's Mecklenburg Local Advisory Board shall have up to one year
after the Effective Time or after subsequently ceasing service on any such
board, as the case may be, to exercise their options before their expiration.
(b) In addition, each assumed Company Option that is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of the
Code.
(c) As soon as reasonably practicable after the Effective Time, the Buyer
shall deliver to each holder of an assumed Company Option who remains employed
by the Buyer an appropriate notice setting forth such participant's rights
pursuant thereto, and the grants pursuant to such options shall continue in
effect on substantially the same terms and conditions (subject to the
adjustments required by Section 2.8(a) after giving effect to the Holding
Company Merger), and the Buyer shall comply with the terms of the assumed
Company Options to ensure, to the extent required by, and subject to the
provisions of, such options, that the Company Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the Effective
Time, and at all times thereafter, the Buyer shall have reserved a sufficient
number of shares of the Buyer's Stock for issuance upon exercise of the Company
Options assumed by it in accordance with this Section 2.8. The Buyer agrees to
file within a reasonable period of time after the Effective Time a registration
statement on Form S-8 covering the offering of such options and the offering and
sale of the shares of the Buyer's Stock issuable pursuant to such options.
(d) The Company shall issue to the Company's employee stock purchase plan
(Stock Purchase Rights under the Company's Omnibus Stock and Incentive Plan),
and shall cause such plan to complete the purchase of, no later than one
Business Day prior to the Effective Time, all Company Shares required to be
issued to and purchased by or under such plan between the date of this Agreement
and the Effective Time, but in any event not to exceed 3,029 Company Shares. The
Company shall cause such plan to be terminated no later than immediately prior
to the Effective Time.
(e) The Company shall cause its Deferred Compensation Plan for Directors to
be terminated no later than immediately prior to the Effective Time, with the
amounts credited to each of the Company's directors under such plan to be paid
to each such director in cash promptly after the time of termination of such
plan. In addition, the Buyer shall make a cash payment promptly after the
Effective Time to each of the Company's directors under such plan in an amount
equal to the difference between (i) the amount allocated to each such director
under such plan and (ii) the value of the Company Shares that could have been
purchased in such director's account under such plan, assuming for such purpose
that the purchase price per Company Share is $16.60.
15
ARTICLE III.......
THE BANK MERGER;
CONVERSION AND EXCHANGE OF COMPANY BANK SHARES
3.1 The Bank Merger. After the consummation of the Holding Company Merger
and pursuant to the Plan of Merger in respect of the Bank Merger, which shall be
substantially in the form of Exhibit B, attached hereto, and applicable North
Carolina Law, it is expected that the Company Bank shall merge and combine into
the Buyer Bank, the separate existence of the Company Bank shall cease, and the
Buyer Bank shall be the surviving corporation (the "Surviving Bank"). The date
and time when the Bank Merger shall become effective is referred to herein as
the "Bank Merger Effective Time."
3.2 Company Bank Shares.
(a) Each share of the Company Bank's capital stock (the "Company Bank
Shares"), $5.00 par value per share, issued and outstanding to Persons
immediately prior to the Bank Merger Effective Time shall, by virtue of the Bank
Merger and without any action on the part of the holder thereof, be canceled and
retired and shall cease to exist, and each holder of certificates representing
any such shares shall thereafter cease to have any rights with respect to such
shares.
(b) From and after the Bank Merger Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Bank of the Company Bank
Shares that were outstanding immediately prior to the Bank Merger Effective
Time. If, after the Bank Merger Effective Time, certificates representing the
Company Bank Shares are presented to the Surviving Bank, they shall be canceled.
3.3 Company Bank Offices. After the consummation of the Bank Merger, the
offices and branches of the Surviving Bank shall become offices and branches of
the Buyer Bank.
ARTICLE IV........
THE CLOSING
4.1 Closing. The Closing of the Holding Company Merger shall take place at
the offices of Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A. in Charlotte, North Carolina as
soon as reasonably practical after all conditions to Closing have been met, or
on such other date or at such other location as the Buyer and the Company may
mutually agree (such date, the "Closing Date"). At the Closing, the parties
hereto will execute, deliver and file all documents necessary to effect the
transactions contemplated to occur at Closing herein, including the Certificate
of Merger and Articles of Merger in respect of the Holding Company Merger.
4.2 Deliveries by the Company. At or by the Closing, the Company shall have
caused the following documents to be executed and delivered:
(a) the agreements, opinions, certificates, instruments and other documents
contemplated in Section 9.3;
(b) the Xxxxxxx Employment Agreement; and
(c) all other documents, certificates and instruments required hereunder to
be delivered to the Buyer, or as may reasonably be requested by the Buyer at or
prior to the Closing.
16
4.3 Deliveries by the Buyer. At or by the Closing, the Buyer shall have
caused the following documents to be executed and delivered:
(a) the agreements, opinions, certificates, instruments and other documents
contemplated in Section 9.2;
(b) the Xxxxxxx Employment Agreement; and
(c) all other documents, certificates and instruments required hereunder to
be delivered to the Company, or as may reasonably be requested by the Company at
or prior to the Closing.
ARTICLE V.........
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule, the Company
represents and warrants to the Buyer that the statements contained in this
Article V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date.
5.1 Organization; Standing and Power.
(a) The Company is a North Carolina corporation and a bank holding company
registered with the Federal Reserve Board under the Bank Holding Company Act,
and the Company Bank is a bank chartered under North Carolina Law. The Company
Bank is an "insured institution" as defined in the Federal Deposit Insurance Act
and applicable regulations thereunder, and subject to dollar limits under such
Act, all deposits in the Company Bank are fully insured by the FDIC to the
extent permitted by Law.
(b) Each of the Company and its subsidiaries (i) is a corporation or a bank
duly organized or chartered, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization, (ii) has the
corporate or other applicable power and authority to carry on, its businesses as
now conducted and to own, lease and operate its Assets, and (iii) is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except where the failure to do so will not cause a
Material Adverse Effect on the Company.
5.2 Authority; No Conflicts.
(a) Subject to required regulatory and shareholder approvals, the Company
has the corporate power and authority necessary to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of the Company's
obligations under this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Company. This Agreement
represents a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceeding may be brought).
17
(b) Neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company Parties of the transactions contemplated
hereby, nor compliance by the Company Parties with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of the articles of
incorporation, certificate of incorporation, bylaws or any other similar
governing document of either Company Party, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of the Company or any of its subsidiaries under, any
Contract or Permit of the Company or any of its subsidiaries, or (iii) subject
to obtaining the requisite Consents referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to the Company or any of its
subsidiaries or any of their Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws and banking Regulatory Authorities, no notice to, filing with,
or Consent of, any Governmental Authority is necessary for the consummation by
the Company and the Company Bank of the Mergers and the other transactions
contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of the Company consists of (a) 20,000,000
shares of common stock, no par value per share, of which 1,020,635 shares are
issued and outstanding as of the date of this Agreement, and except for such
1,020,635 shares of common stock, there are no shares of capital stock or other
equity securities of the Company outstanding. The authorized capital stock of
the Company Bank consists of 20,000,000 shares of common stock, $5.00 par value
per share, of which 922,689 shares are issued and outstanding as of the date of
this Agreement and are owned and held by the Company, and except for such
922,689 shares of common stock, there are no shares of capital stock or other
equity securities of the Company Bank outstanding. Section 5.3 of the Company's
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Disclosure Schedule lists all of the Company's direct and indirect subsidiaries
other than the Company Bank as of the date of this Agreement. The Company or one
of its subsidiaries owns all of the issued and outstanding shares of capital
stock of each such subsidiary.
(b) All of the issued and outstanding shares of capital stock of the
Company and its subsidiaries are duly and validly issued and outstanding and are
fully paid and nonassessable except, in the case of the Company Bank, pursuant
to Section 53-42 of the North Carolina General Statutes. None of the outstanding
shares of capital stock of the Company or any of its subsidiaries has been
issued in violation of any preemptive rights of the current or past shareholders
of such Persons.
(c) No equity securities of the Company or any subsidiary of the Company
are or may become required to be issued (other than to the Company or any of its
subsidiaries) by reason of any Rights, and there are no Contracts by which the
Company or any subsidiary of the Company is bound to issue (other than to the
Company or subsidiary of the Company) additional shares of its capital stock or
Rights or by which the Company or any of its subsidiaries is or may be bound to
transfer any shares of the capital stock of the Company or any subsidiary of the
Company (other than to the Company or any of its subsidiaries). There are no
equity securities reserved for any of the foregoing purposes, and there are no
Contracts relating to the rights of the Company or any of its subsidiaries to
vote or to dispose of any shares of the capital stock of any subsidiary of the
Company. All Company Options are issued or deemed issued under, governed by and
subject to the Company Option Plans.
5.4 SEC Filings; Company Financial Statements.
(a) The Company has filed and made available to the Buyer all forms, reports,
and documents required to be filed by the Company with the SEC since December
31, 1997 (collectively, the "Company SEC Reports"). The Company SEC Reports (i)
at the time filed, complied in all Material
18
respects with the applicable requirements of the Securities Laws, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such Company SEC Reports or necessary in
order to make the statements in such Company SEC Reports, in light of the
circumstances under which they were made, not misleading. None of the Company's
subsidiaries is required to file any forms, reports, or other documents with the
SEC.
(b) Each of the Company Financial Statements (including, in each case, any
related notes) contained in the Company SEC Reports, including any Company SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared or
will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements, or, in the case of unaudited statements, as permitted by
Form 10-QSB of the SEC), and fairly presented or will fairly present in all
material respects the consolidated financial position of the Company and its
subsidiaries as at the respective dates and the related consolidated income,
comprehensive income and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments that were not or are not expected to be Material
in amount or effect (except as may be indicated in such financial statements or
notes thereto).
5.5 Absence of Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any Liabilities that are Material, either individually or in
the aggregate, except Liabilities that are accrued or reserved against in the
consolidated balance sheet of the Company as of December 31, 2001, included in
the Company Financial Statements or reflected in the notes thereto and except
for Liabilities incurred in the ordinary course of business consistent with past
practice subsequent to December 31, 2001. Neither the Company nor any of its
subsidiaries has incurred or paid any Liabilities that are Material, either
individually or in the aggregate, since December 31, 2001, except for
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice. To the Knowledge of the Company Parties, no facts or
circumstances exist that could reasonably be expected to serve as the basis for
any other Liabilities of the Company or any of its subsidiaries that are
Material, either individually or in the aggregate.
5.6 Absence of Certain Changes or Events. Since December 31, 2001, (i)
there have been no events, changes, or occurrences that have had, or could
reasonably be expected to have, a Material Adverse Effect on the Company, and
(ii) each of the Company and its subsidiaries has conducted in all Material
respects its respective businesses as now conducted in the ordinary and usual
course (excluding the incurrence of expenses in connection with this Agreement
and the transactions contemplated hereby).
5.7 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of Company
and its subsidiaries have been timely filed, or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 2001, and all Tax Returns filed are complete and accurate in all
Material respects. All Tax Returns for periods ending on or before the date of
the most recent fiscal year end immediately preceding the Effective Time will be
timely filed or requests for extensions will be timely filed. All Taxes shown on
filed Tax Returns have been paid. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes, except to the extent reserved
against in the Company Financial Statements dated prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
19
(b) None of the Company or its subsidiaries has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Company or its subsidiaries for the period or periods through and including the
date of the respective Company Financial Statements has been made and is
reflected on such Company Financial Statements.
(d) Each of the Company and its subsidiaries is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Code.
(e) None of the Company and its subsidiaries has made any payments, is
obligated to make any payments, or is a party to any contract, agreement, or
other arrangement that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Code.
(f) There are no Liens with respect to Taxes upon any of the Assets of the
Company and its subsidiaries.
(g) There has not been an ownership change, as defined in Code Section
382(g), of the Company and its subsidiaries that occurred during any Taxable
Period in which any of the Company and its subsidiaries has incurred a net
operating loss that carries over to another Taxable Period.
(h) Neither the Company nor any of its subsidiaries has filed any consent
under Section 341(f) of the Code concerning collapsible corporations.
(i) Neither the Company nor any of its subsidiaries has or has had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
5.8 Assets. Each of the Company and its subsidiaries have good and
marketable title, free and clear of all Liens, to all of their respective
Assets, except for Liens to secure public deposits, repurchase agreements and
borrowings from the Federal Home Loan Bank in the ordinary course of business
consistent with past practice. All tangible properties used in the businesses of
the Company and its subsidiaries are in good condition in all Material respects,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with each of their past practices. All Assets held under
leases or subleases by any of the Company and its subsidiaries are held under
valid Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. Each of the Company and its
subsidiaries currently maintain insurance in amounts, scope, and coverage
reasonably necessary for their operations. None of the Company or its
subsidiaries has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be increased in any Material respect. The Assets of the Company and its
subsidiaries include all Assets required to operate in all Material respects
their businesses taken as a whole as presently conducted.
20
5.9 Securities Portfolio and Investments. All securities owned by the
Company or any of its subsidiaries (whether owned of record or beneficially) are
held free and clear of all Liens that would impair the ability of the owner
thereof to dispose freely of any such security and/or otherwise to realize the
benefits of ownership thereof at any time, except for those Liens to secure
public deposits, repurchase agreements and borrowings from the Federal Home Loan
Bank, in the ordinary course of business consistent with past practice. There
are no voting trusts or other agreements or undertakings to which the Company or
any of its subsidiaries is a party with respect to the voting of any such
securities. Except for fluctuations in the market values of United States
Treasury and agency, mortgage-backed or municipal securities, since December 31,
2001, there has been no significant deterioration or Material adverse change in
the quality, or any Material decrease in the value, of the securities portfolio
of the Company and its subsidiaries, taken as a whole.
5.10 Environmental Matters.
(a) Each of the Company and its subsidiaries, its Participation Facilities,
and its Loan Collateral are, and have been, in compliance in all Material
respects with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of the Company
Parties, threatened before any court, Governmental Authority, or other forum in
which any of the Company and its subsidiaries or any of its Participation
Facilities has been or, with respect to threatened Litigation, may reasonably be
expected to be named as a defendant (i) for alleged noncompliance (including by
any predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, or involving a site owned, leased, or operated by the Company or any of
its subsidiaries or any of its Participation Facilities.
(c) There is no Litigation pending or, to the Knowledge of the Company
Parties, threatened before any court, Governmental Authority, or other forum in
which any Loan Collateral (or the Company or any of its subsidiaries in respect
of such Loan Collateral) has been or, with respect to threatened Litigation, may
reasonably be expected to be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, or involving Loan
Collateral.
(d) To the Knowledge of the Company Parties, no facts exist that provide a
reasonable basis for any Litigation of a type described in subsections (b) or
(c).
(e) During and, to the Knowledge of the Company Parties, prior to, the
period of (i) any of the Company's or its subsidiaries' ownership or operation
of any of their respective current properties, (ii) any of the Company's or its
subsidiaries' participation in the management of any Participation Facility, or
(iii) any of the Company's or subsidiaries' holding of a security interest in
Loan Collateral, there have been no releases of Hazardous Material in, on,
under, or affecting (or potentially affecting) such properties.
5.11 Compliance with Laws. Each of the Company and its subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its Assets and to
carry on its business in all Material respects, and there has occurred no
Default under any such Permit that could have a Material Adverse Effect on the
Company. None of the Company or its subsidiaries: (i) is in violation, in any
Material respect, of any Laws, Orders, or Permits applicable to its business or
employees conducting its business; and (ii) has received any notification or
communication from any Governmental Authority or any Regulatory Authority or the
staff thereof (a) asserting that any of the Company and its subsidiaries is not
in compliance with any of the Laws or Orders that such Governmental Authority or
Regulatory Authority
21
enforces, (b) threatening to revoke any Permits, or (iii) requiring the Company
or any of its subsidiaries (x) to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or (y) to adopt any board or directors resolution or similar
undertaking that restricts the conduct of its business, or in any manner relates
to its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
5.12 Labor Relations. Neither the Company nor any of its subsidiaries is
the subject of any Litigation asserting that it has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment, nor is any of them a party to or bound by any
collective bargaining Contract, with a labor union or labor organization, nor is
there any strike or other labor dispute involving any of them pending or, to the
Knowledge of the Company Parties, threatened, nor, to the Knowledge of the
Company Parties, is there any activity involving any of the Company's or its
subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.13 Employee Benefit Plans.
(a) The Company has made available to the Buyer prior to the execution of
this Agreement correct and complete copies in each case of all Company Benefits
Plans.
(b) All Company Benefit Plans are in compliance in all Material respects
with the applicable terms of ERISA, the Code, and any other applicable Laws.
(c) Neither the Company nor any of its subsidiaries has an "obligation to
contribute" (as defined in ERISA Section 4212) to a "multiemployer plan" (as
defined in ERISA Sections 4001(a)(3) and 3(37)(A)).
(d) Each "employee pension benefit plan," as defined in Section 3(2) of
ERISA, ever maintained by the Company or its subsidiaries that was intended to
qualify under Section 401(a) of the Code and with respect to which the Company
or any of its subsidiaries has any Liability, is disclosed as such in Section
-------
5.13 of the Company's Disclosure Schedule.
----
(e) The Company has made available to the Buyer prior to the execution of
this Agreement correct and complete copies of the following documents: (i) all
trust agreements or other funding arrangements for such Company Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such Company Benefit Plans or amendments, all determination letters,
rulings, opinion letters, information letters, or advisory opinions issued by
the Internal Revenue Service, the United States Department of Labor, or the
Pension Benefit Guaranty Corporation after December 31, 1997, (iii) annual
reports or returns, audited or unaudited financial statements, actuarial
valuations and reports, and summary annual reports prepared for any Company
Benefit Plan with respect to the most recent plan year, and (iv) the most recent
summary plan descriptions and any modifications thereto.
(f) Each Company ERISA Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and, to the Knowledge of the Company Parties, there is
no circumstance that will or could reasonably be expected to result in
revocation of any such favorable determination letter. Each trust created under
any Company ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Code and the Company is not aware of any circumstance that will or
could reasonably be expected to result in revocation of such exemption. With
respect to each such Company Benefit Plan, no event has occurred that will or
could reasonably be expected to give rise to a loss of any intended Tax
consequences under
22
the Code or to any Tax under Section 511 of the Code. There is no Litigation
pending or, to the Knowledge of the Company Parties, threatened relating to any
Company ERISA Plan.
(g) Neither the Company nor any of its subsidiaries has engaged in a
transaction with respect to any Company Benefit Plan that, assuming the Taxable
Period of such transaction expired as of the date of this Agreement, would
subject the Company or any of its subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA. Neither the Company
or any of its subsidiaries nor, to the Knowledge of the Company Parties, any
administrator or fiduciary of any Company Benefit Plan (or any agent of any of
the foregoing) has engaged in any transaction, or acted or failed to act in any
manner, that could subject the Company or any of its subsidiaries to any direct
or indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA. No oral or written representation or
communication with respect to any aspect of the Company Benefit Plans has been
made to employees of the Company or any of its subsidiaries that is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans.
(h) Neither the Company nor any of its subsidiaries maintains or has ever
maintained a Pension Plan.
(i) Neither the Company nor any of its subsidiaries has any obligation for
retiree health and retiree life benefits under any of the Company Benefit Plans
other than with respect to benefit coverage mandated by applicable Law.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any payment (including without limitation severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee of the Company or it subsidiaries from the Company or any of its
subsidiaries under any Company Benefit Plan or otherwise, (ii) increase any
benefit otherwise payable under any Company Benefit Plan, or (iii) result in any
acceleration of the time of any payment or vesting of any benefit.
5.14 Contracts. None of the Company or its subsidiaries, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating to
the borrowing of money by the Company or its subsidiaries or the guarantee by
the Company or its subsidiaries of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Home Loan Bank advances to depository
institution subsidiaries, trade payables, and Contracts relating to borrowings
or guarantees made in the ordinary course of business), and (iii) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-KSB filed by the Company with the SEC as of the date of this
Agreement that has not been filed as an exhibit to the Company's Form 10-KSB
filed for the fiscal year ended December 31, 2001, or in another SEC Document
and identified to the Buyer (together with all Contracts referred to in Sections
5.8 and 5.13(a) of this Agreement, the "Company Contracts"). With respect to
each Company Contract: (i) the Contract is in full force and effect; (ii) none
of the Company or its subsidiaries is in Default in any Material respect
thereunder; (iii) neither the Company nor any of its subsidiaries has repudiated
or waived any Material provision of any such Contract; and (iv) no other party
to any such Contract is, to the Knowledge of the Company Parties, in Default in
any respect, or has repudiated or waived any Material provision thereunder.
Except for Federal Home Loan Bank advances, all of the indebtedness of the
Company and its subsidiaries for money borrowed (not including deposit
Liabilities) is prepayable at any time without penalty or premium.
23
5.15 Legal Proceedings. There is no Litigation pending, or, to the
Knowledge of the Company Parties, threatened against the Company or any of its
subsidiaries, or against any Asset, employee benefit plan, interest, or right of
any of them, nor are there any Orders of any Regulatory Authorities, other
Governmental Authorities, or arbitrators outstanding against any the Company or
its subsidiaries. There is no Litigation to which the Company or any of its
subsidiaries is a party that names the Company or any of its subsidiaries as a
defendant or cross-defendant and where the maximum exposure is estimated to be
$25,000 or more.
5.16 Reports. Since December 31, 1997, or the date of organization if
later, each of the Company and its subsidiaries has timely filed all Material
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with any Regulatory Authorities.
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all Material
respects with all applicable Laws.
5.17 Registration Statement; Proxy Statement. Subject to the accuracy of
the representations contained in Section 6.13, the information supplied by the
Company or its subsidiaries for inclusion in the registration statement on Form
S-4 (or on such other form as may be appropriate) (the "Registration Statement")
covering the offering of shares of the Buyer's Stock to be issued pursuant to
this Agreement shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain any
untrue statement of a Material fact or omit to state any Material fact required
to be stated therein or necessary to make the statements therein not misleading.
The information supplied by or on behalf of the Company and its subsidiaries for
inclusion in the proxy statement/prospectus to be sent to the shareholders of
the Company to consider at a special meeting (the "Shareholder Meeting") to vote
on the Holding Company Merger (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") will not, on the
date the Proxy Statement is first mailed to shareholders, at the time of the
Shareholder Meeting and at the Effective Time, contain any untrue statement of a
Material fact or omit to state any Material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If at any time prior to the Effective Time any event relating to
the Company or its subsidiaries or any of their Affiliates should be discovered
by the Company or its subsidiaries that should be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement, the Company
will promptly inform the Buyer. The Proxy Statement shall comply in all Material
respects with the requirements of the Securities Laws and the rules and
regulations thereunder. Notwithstanding the foregoing, neither the Company nor
any of its subsidiaries makes any representation or warranty with respect to any
information supplied by the Buyer or any of its subsidiaries that is contained
or incorporated by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Proxy Statement.
5.18 Accounting, Tax, and Regulatory Matters. None of the Company or its
subsidiaries or any Affiliate thereof has taken or agreed to take any action,
that could not reasonably be expected to (i) prevent the Holding Company Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code, or (ii) impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement.
5.19 State Takeover Laws. Each of the Company and its subsidiaries has
taken all necessary action to exempt the transactions contemplated by this
Agreement from any applicable "moratorium," "control share," "fair price,"
"business combination," or other anti-takeover Laws of the State of North
Carolina.
5.20 Charter Provisions. Each of the Company and the Company Bank has taken
all action so that the entering into of this Agreement and the consummation of
the Mergers and the other
24
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the articles of incorporation,
certificate of incorporation, bylaws, or other governing instruments of either
of the Company Parties or restrict or impair the ability of the Buyer or any of
its subsidiaries to vote, or otherwise to exercise the rights of a shareholder
with respect to, the capital stock of the Company or any of its subsidiaries
that may be directly or indirectly acquired or controlled by it.
5.21 Records. Complete and accurate copies of the articles of
incorporation, certificate of incorporation, bylaws, or other governing
instruments of either of the Company Parties have been made available to the
Buyer. The stock book of each such Person contains, in all Material respects,
complete and accurate records of the record share ownership of the issued and
outstanding shares of stock thereof.
5.22 Derivatives. Neither the Company nor any of its subsidiaries has
entered into or otherwise is a party to any interest rate swap, cap, floor,
option agreement, future or forward contract, or other similar risk management
arrangements, whether for the account of the Company or its subsidiaries or
their customers.
5.23 Certain Regulated Businesses. Neither the Company nor any of its
subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended, nor is it a "public utility holding company" as defined in
the Public Utility Holding Company Act of 1935, as amended.
5.24 Commissions. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees from the Company or any of its
subsidiaries in connection with the transactions contemplated hereby by reason
of any action taken by the Company or any of its subsidiaries or, to the
Knowledge of the Company Parties, any of the Company's shareholders.
ARTICLE VI........
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth on the Buyer's Disclosure Schedule, the Buyer
represents and warrants to the Company that the statements contained in this
Article VI are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date.
6.1 Organization; Standing and Power.
(a) The Buyer is Delaware corporation and a bank holding company registered
with the Federal Reserve Board under the Bank Holding Company Act. The Buyer
Bank is a bank chartered under North Carolina Law. The Buyer Bank is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Buyer Bank are fully insured by the FDIC to the extent permitted
by Law.
(b) Each of the Buyer and its subsidiaries (i) is a corporation or a bank
duly organized or chartered, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization, (ii) has the
corporate or other applicable power and authority to carry on its businesses as
now conducted and to own, lease and operate its Assets, and (iii) is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except where the failure to do so will not cause a
Material Adverse Effect on the Buyer.
25
6.2 Authority; No Conflicts.
(a) Subject to required regulatory approvals, the Buyer has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of and performance of its obligations under this
Agreement and the other documents contemplated hereby, and the consummation of
the transactions contemplated herein have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of the Buyer. This
Agreement represents a legal, valid, and binding obligation of the Buyer,
enforceable against it in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by the Buyer, nor
the consummation by the Buyer Parties of the transactions contemplated hereby,
nor compliance by the Buyer Parties with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of any Buyer Party's
certificate of incorporation or bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of the Buyer or any of its subsidiaries under, any
Contract or Permit of the Buyer or any of its subsidiaries, or (iii) subject to
obtaining the requisite Consents referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to the Buyer Parties or any of
their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws and banking Regulatory Authorities, no notice to, filing with,
or Consent of, any Governmental Authority is necessary for the consummation by
the Buyer and the Buyer Bank of the Mergers and the other transactions
contemplated in this Agreement.
6.3 Buyer's Stock.
(a) The authorized capital stock of the Buyer consists of 25,000,000 shares
of common stock, $1.00 par value per share, of which 14,420,986 shares are
issued as of the date of this Agreement, 13,359,111 shares are outstanding and
1,061,875 shares are treasury shares, and except for such 13,359,111 shares,
there are no shares of capital stock of the Buyer outstanding. The authorized
capital stock of the Buyer Bank consists of 4,000,000 shares of common stock,
$5.00 par value per share, of which 1,484,866 shares are issued and outstanding
as of the date of this Agreement, and except for such shares, there are no
shares of capital stock of the Buyer Bank outstanding. The Buyer owns all of the
issued and outstanding shares of capital stock of the Buyer Bank, and no shares
of capital stock of the Buyer Bank are owned by any other Person. Section 6.3 of
-----------
the Buyer's Disclosure Schedule lists all of the Buyer's direct and indirect
subsidiaries other than the Buyer Bank as of the date of this Agreement. The
Buyer or one of its subsidiaries owns all of the issued and outstanding shares
of capital stock of each such subsidiary.
(b) All of the issued and outstanding shares of capital stock of the Buyer
and its subsidiaries are duly and validly issued and outstanding and are fully
paid and nonassessable except, in the case of the Buyer Bank, pursuant to
Section 53-42 of the North Carolina General Statutes. Shares of the Buyer's
Stock to be issued hereunder are duly authorized and, upon issuance, will be
validly issued and outstanding and fully paid and nonassessable, free and clear
of any Liens, pledges or encumbrances. None of the outstanding shares of capital
stock of the Buyer or any of its subsidiaries has been issued in violation of
any preemptive rights of the current or past stockholders of such Persons, and
none of the
26
shares of the Buyer's Stock to be issued pursuant to this Agreement will be
issued in violation of any preemptive rights of the current or past stockholders
of the Buyer.
(c) No equity securities of the Buyer or any subsidiary of the Buyer are or
may become required to be issued (other than to the Buyer or any of its
subsidiaries) by reason of any Rights, and there are no Contracts by which the
Buyer or any subsidiary of the Buyer is bound to issue (other than to the Buyer
or subsidiary of the Buyer) additional shares of its capital stock or Rights or
by which the Buyer or any of its subsidiaries is or may be bound to transfer any
shares of the capital stock of the Buyer or any subsidiary of the Buyer (other
than to the Buyer or any of its subsidiaries). There are no equity securities
reserved for any of the foregoing purposes, and there are no Contracts relating
to the rights of the Buyer or any of its subsidiaries to vote or to dispose of
any shares of the capital stock of any subsidiary of the Buyer.
6.4 SEC Filings; Buyer Financial Statements.
(a) The Buyer has filed all forms, reports, and documents required to be
filed by the Buyer with the SEC since December 31, 1997 (collectively, the
"Buyer SEC Reports"). The Buyer SEC Reports (i) at the time filed, complied in
all Material respects with the applicable requirements of the Securities Laws,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a Material fact or omit to state
a Material fact required to be stated in such Buyer SEC Reports or necessary in
order to make the statements in such Buyer SEC Reports, in light of the
circumstances under which they were made, not misleading. None of the Buyer's
subsidiaries is required to file any forms, reports, or other documents with the
SEC.
(b) Each of the Buyer Financial Statements (including, in each case, any
related notes) contained in the Buyer SEC Reports, including any Buyer SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared or
will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements, or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC), and fairly presented or will fairly present in all
material respects the consolidated financial position of the Buyer and its
subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments that were not or are not expected to be Material in amount
or effect (except as may be indicated in such financial statements or notes
thereto).
6.5 Absence of Undisclosed Liabilities. Neither the Buyer nor any of its
subsidiaries has any Liabilities that are Material, either individually or in
the aggregate, except Liabilities that are accrued or reserved against in the
consolidated balance sheets of the Buyer as of December 31, 2001, included in
the Buyer Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business consistent with past
practice subsequent to December 31, 2001. Neither the Buyer nor any of its
subsidiaries has incurred or paid any Liabilities that are Material, either
individually or in the aggregate, since December 31, 2001, except for such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice. No facts or circumstances exist that could reasonably be
expected to serve as the basis for any other Liabilities of the Buyer or any of
its subsidiaries that are Material, either individually or in the aggregate.
27
6.6 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of Buyer
and its subsidiaries have been timely filed, or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 2001, and all Tax Returns filed are complete and accurate in all
Material respects. All Tax Returns for periods ending on or before the date of
the most recent fiscal year end immediately preceding the Effective Time will be
timely filed or requests for extensions will be timely filed. All Taxes shown on
filed Tax Returns have been paid. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes, except to the extent reserved
against in the Buyer Financial Statements dated prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the Buyer or its subsidiaries has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Buyer or its subsidiaries for the period or periods through and including the
date of the respective Buyer Financial Statements has been made and is reflected
on such Buyer Financial Statements.
(d) There are no Liens with respect to Taxes upon any of the Assets of the
Buyer and its subsidiaries.
6.7 Absence of Certain Changes or Events. Since December 31, 2001, (i)
there have been no events, changes, or occurrences that have had, or could
reasonably be expected to have, a Material Adverse Effect on the Buyer, and (ii)
each of the Buyer and its subsidiaries has conducted in all Material respects
its respective businesses as now conducted in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
6.8 Compliance with Laws. Each of the Buyer and its subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its Assets and to
carry on its business in all Material respects, and there has occurred no
Default under any such Permit that could have a Material Adverse Effect on the
Buyer. None of the Buyer or its subsidiaries: (i) is in violation in any
Material respect of any Laws, Orders, or Permits applicable to its business or
employees conducting its business; and (ii) has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (a) asserting that
any of the Buyer and its subsidiaries is not in compliance with any of the Laws
or Orders that such governmental authority or Regulatory Authority enforces, (b)
threatening to revoke any Permits, or (c) requiring the Buyer or any of its
subsidiaries (x) to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of understanding,
or (y) to adopt any board or directors resolution or similar undertaking that
restricts the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
6.9 Securities Portfolio. Except for fluctuations in the market values of
United States Treasury and agency, mortgage-backed or municipal securities,
since December 31, 2001, there has been no significant deterioration or Material
adverse change in the quality, or any Material decrease in the value, of the
securities portfolio of the Buyer and its subsidiaries, taken as a whole.
28
6.10 Employee Benefit Plans.
(a) All Buyer Benefit Plans are in compliance in all Material respects with
the applicable terms of ERISA, the Code, and any other applicable Laws.
(b) Each Buyer ERISA Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and, to the Knowledge of the Buyer Parties, there is
no circumstance that will or could reasonably be expected to result in
revocation of any such favorable determination letter. Each trust created under
any Buyer ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Code and the Buyer is not aware of any circumstance that will or
could reasonably be expected to result in revocation of such exemption. With
respect to each such Buyer Benefit Plan, no event has occurred that will or
could reasonably be expected to give rise to a loss of any intended Tax
consequences under the Code or to any Tax under Section 511 of the Code. There
is no Litigation pending or, to the Knowledge of the Buyer Parties, threatened
relating to any Buyer ERISA Plan.
(c) Neither the Buyer nor any of its subsidiaries has engaged in a
transaction with respect to any Buyer Benefit Plan that, assuming the Taxable
Period of such transaction expired as of the date of this Agreement, would
subject the Buyer or any of its subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA. Neither the Buyer or
any of its subsidiaries nor, to the Knowledge of the Buyer Parties, any
administrator or fiduciary of any Buyer Benefit Plan (or any agent of any of the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner, that could subject the Buyer or any of its subsidiaries to any direct or
indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA. No oral or written representation or
communication with respect to any aspect of the Buyer Benefit Plans has been
made to employees of the Buyer or any of its subsidiaries that is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans.
6.11 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of the Buyer Parties, threatened against the Buyer or any of
its subsidiaries, or against any Asset, employee benefit plan, interest, or
right of any of them, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against any the Buyer
or its subsidiaries. There is no Litigation as of the date of this Agreement to
which the Buyer or any of its subsidiaries is a party and that names the Buyer
or any of its subsidiaries as a defendant or cross-defendant and where the
maximum exposure is estimated to be $25,000 or more.
6.12 Reports. Since December 31, 1997, or the date of organization if
later, each of the Buyer and its subsidiaries has timely filed all Material
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with any Regulatory Authorities.
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all Material
respects with all applicable Laws.
6.13 Registration Statement; Proxy Statement. Subject to the accuracy of
the representations contained in Section 5.17, the information supplied by the
Buyer or its subsidiaries for inclusion in the Registration Statement shall not,
at the time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, contain any untrue statement of a
Material fact or omit to state any Material fact required to be stated therein
or necessary to make the statements therein not misleading. The information
supplied by the Buyer or its subsidiaries for inclusion in the Proxy Statement
will not, on the date the Proxy Statement is first mailed to shareholders, at
the time of the Shareholder Meeting and at the Effective Time, contain any
untrue statement of a Material fact or omit to state any Material fact necessary
to make the statements therein, in light of circumstances under
29
which they were made, not misleading. If at any time prior to the Effective Time
any event relating to the Buyer or its subsidiaries or any of their Affiliates
should be discovered by the Buyer or its subsidiaries that should be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, the Buyer will promptly inform the Company. The Proxy Statement shall
comply in all Material respects with the requirements of the Securities Laws and
the rules and regulations thereunder. Notwithstanding the foregoing, the Buyer
makes no representations or warranties with respect to any information supplied
by the Company and its subsidiaries that is contained or incorporated by
reference in, or furnished in connection with the preparation of, the
Registration Statement or the Proxy Statement.
6.14 Accounting, Tax, and Regulatory Matters. None of the Buyer or it
subsidiaries or any Affiliate thereof has taken or agreed to take any action,
that could reasonably be expected to (i) prevent the Holding Company Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) of this Agreement.
6.15 Derivatives. Neither the Buyer nor any of its subsidiaries has entered
into or otherwise is a party to any interest rate swap, cap, floor, option
agreement, future or forward contract, or other similar risk management
arrangements, whether for the account of the Buyer or its subsidiaries or their
customers.
6.16 Commissions. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees from the Buyer or any of its
subsidiaries in connection with the transactions contemplated hereby by reason
of any action taken by the Buyer or any of its subsidiaries or, to the Knowledge
of the Buyer Parties, any of the Buyer's shareholders.
ARTICLE VII.......
COVENANTS
7.1 Covenants of the Company.
(a) Ordinary Conduct of Business. Except as otherwise expressly permitted
----------------------------
by this Agreement, the Company will, and will cause its subsidiaries (including
the Company Bank) to, from the date of this Agreement to the Closing, conduct
its business in the ordinary course in substantially the same manner as
presently conducted and make reasonable commercial efforts consistent with past
practices to preserve its relationships with other Persons. Additionally, except
as otherwise contemplated by this Agreement or as set forth on Section 7.1(a) of
-------------
the Company's Disclosure Schedule, the Company will not, and it will not permit
its subsidiaries (including the Company Bank) to do any of the following without
the prior written consent of the Buyer:
(i) amend its governing documents;
(ii) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver any stock or stock options or other equity equivalents of
any class or any other of its securities (other than the issuance of any Company
Shares pursuant to the exercise of options set forth on Section 5.3 of the
-----------
Company's Disclosure Schedule), or amend any of the terms of any securities
outstanding as of the date hereof;
(iii) (A) split, combine or reclassify any shares of its capital stock, (B)
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any
30
combination thereof) in respect of its capital stock, or (C) redeem or
otherwise acquire any of its securities (other than the acceptance of any
Company Shares as payment of the exercise price in connection with the exercise
of options set forth on Section 5.3 of the Company's Disclosure Schedule);
-----------
(iv) (A) incur or assume any long-term debt or issue any debt securities
other than in the ordinary course of business consistent with past practice or,
except under existing lines of credit and in amounts not Material to it, incur
or assume any short-term debt other than in the ordinary course of business, (B)
other than in the ordinary course of business consistent with past practice
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person,
(C) make any loans, advances or capital contributions to, or investments in, any
other Person, other than in the ordinary course and consistent with past
practice up to an amount per loan relationship of $1.0 million, pledge or
otherwise encumber shares of its capital stock, or (D) mortgage or pledge any of
its assets, tangible or intangible, or create or suffer to exist any Lien
thereupon, other than Liens permitted by the proviso clause in the definition of
Liens and Liens created or existing in the ordinary course of business
consistent with past practice.
(v) except as required by Law or as contemplated herein, adopt or amend any
Benefit Plan;
(vi) grant to any director or executive officer or employee any stock
options or increase in his or her compensation (except in the ordinary course of
business consistent with past practice) or pay or agree to pay to any such
Person, other than in the ordinary course of business consistent with past
practice, any bonus, severance or termination payment, specifically including
any such payment that becomes payable upon the termination of such Person by it
after the Closing;
(vii) enter into or amend any employment Contract (including any
termination agreement);
(viii) sell, dispose of, acquire or lease any Assets outside the ordinary
course of business, or that in the aggregate are Material to it, or acquire any
Person (or division thereof), any equity interest therein or the assets thereof
outside the ordinary course of business consistent with past practice;
(ix) change or modify any of the accounting principles or practices used by
it or revalue in any Material respect any of its Assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(x) enter into, cancel or modify any Contract (other than loans, advances,
capital contributions, certificates of deposit or investments permitted by
Section 7.1(a)(iv)) other than in the ordinary course of business consistent
with past practice, but not in any event involving an amount in excess of
$25,000 of payments in any twelve-month period per Contract, or enter into or
amend any Contract with respect to any of the foregoing;
(xi) make or authorize to make any capital expenditure or expenditures
other than in the ordinary course of business consistent with past practice, but
not in any event involving an aggregate amount in excess of $100,000;
31
(xii) make or authorize to make any charitable contributions or pledges to
make contributions other than in the ordinary course of business consistent with
past practice, but not in any event involving an amount per contribution or
pledge in excess of $5,000 or $25,000 in the aggregate.
(xiii) pay, discharge or satisfy, cancel, waive or modify any Liabilities,
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in or contemplated by the
Company Financial Statements, or incurred in the ordinary course of business
consistent with past practices;
(xiv) settle or compromise any Material pending or threatened Litigation
relating to the transactions contemplated hereby;
(xv) take, or agree in writing or otherwise to take, any action that would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or result in any of the conditions set forth in
this Agreement not being satisfied;
(xvi) make any election with respect to Taxes without the prior consent of
the Buyer; or
(xvii) agree, whether in writing or otherwise, to do any of the foregoing.
(b) Consents. The Company will exercise its best efforts to obtain such
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Consents as may be necessary or desirable for the consummation of the
transactions contemplated hereby from the appropriate parties to those Contracts
listed on Section 5.2 of the Company's Disclosure Schedule such that such
-----------
Contracts shall survive the Mergers and not be breached thereby.
(c) Acquisition Proposals.
---------------------
(i) The Company shall not, and shall not permit any of its subsidiaries or
any of the respective Affiliates, representatives, advisers or agents of the
Company and its subsidiaries to, directly or indirectly, (x) take any action to
solicit, initiate or encourage any Acquisition Proposal, or (y) participate in
any discussions or negotiations with or encourage any effort or attempt by any
other Person or take any other action to facilitate an Acquisition Proposal.
From and after the date hereof, the Company shall, and shall cause its
subsidiaries and the Affiliates, representatives, advisers and agents of the
Company and its subsidiaries to, cease doing any of the foregoing.
(ii) Notwithstanding the foregoing, in the event of the receipt by the
Company or any of its subsidiaries of an Acquisition Proposal and (x) the
Company's board of directors concludes in good faith that there is a reasonably
likelihood that such Acquisition Proposal constitutes or is reasonably likely to
result in a Superior Proposal, and (y) neither the Company nor any of its
subsidiaries or any of the respective Affiliates, representatives, advisers or
agents of the Company and its subsidiaries solicited, initiated or encouraged
such Acquisition Proposal, the Company may furnish to any party information and
access in response to a request for information or access made incident to such
Acquisition Proposal and may participate in discussions and negotiate with such
party concerning its Acquisition Proposal to the extent that the Company's board
of directors shall have determined, based upon the written advice of outside
counsel reasonably acceptable to the Buyer (which shall include BPMHL in any
event), that failing to take such action would violate the directors' fiduciary
duties under applicable Law; provided, however, that prior to providing any
-----------------
nonpublic information permitted to be provided by this subsection (ii), the
32
Company and its subsidiaries shall have entered into a confidentiality
agreement with such third party on terms no less favorable to them than
contained in the Confidentiality Agreements.
(iii) Unless this Agreement has been terminated in accordance with the
provisions hereof, the board of directors of the Company shall notify the
Buyer immediately of any and all communications regarding or in
anticipation of an Acquisition Proposal and of any Acquisition Proposals
that are made, and shall in such notice indicate in reasonable detail, to
the extent reasonably possible, the identity of the offeror and the terms
and conditions of such Acquisition Proposal and shall keep the Buyer
promptly advised of all developments relating thereto or that could
culminate in the board of directors withdrawing, modifying or amending its
recommendation of the Holding Company Merger and the other transactions
contemplated by this Agreement. Unless this Agreement has been terminated,
neither the Company nor any of its subsidiaries shall waive or modify any
provisions contained in any confidentiality agreement entered into relating
to a possible acquisition (whether by merger, stock purchase, asset
purchase or otherwise) or recapitalization of the Company or any of its
subsidiaries.
(d) Shareholder Approval. The Company shall, at the earliest
--------------------
practicable date, hold the Shareholder Meeting. In connection with the
Shareholder Meeting, the Company's board of directors shall recommend to
the Company's shareholders approval of the Holding Company Merger;
provided, however, that in the event of the receipt by the Company or any
-----------------
of its subsidiaries of an Acquisition Proposal and (x) the Company's board
of directors has concluded in good faith that such Acquisition Proposal
constitutes a Superior Proposal, (y) neither the Company nor any of its
subsidiaries or any of the respective Affiliates, representatives, advisers
or agents of the Company and its subsidiaries solicited, initiated or
encouraged such Acquisition Proposal, and (z) the Company's board of
directors shall have determined in good faith, based upon the written
advice of outside counsel reasonably acceptable to the Buyer, that
continuing to recommend the Holding Company Merger to the Company's
shareholders would violate the directors' fiduciary duties under applicable
Law, then in submitting the Holding Company Merger to the Company's
shareholders for a vote, the Company's board of directors may submit the
Holding Company Merger without recommendation, in which event the Company's
board of directors may communicate the basis for its lack of a
recommendation to the Company's shareholders in the Proxy Statement (or an
appropriate amendment or supplement thereto, to the extent required by
Law); provided, further, however, that the Company may not take any actions
-------- ------- -------
under this sentence until after giving the Buyer at least five Business
Days notice to respond to such Acquisition Proposal (and after giving the
Buyer at least five Business Days notice of the latest Material terms and
conditions comprising such Acquisition Proposal) and then taking into
account any amendment or modification to this Agreement proposed by the
Buyer.
7.2 Covenants of the Buyer.
(a) Reservation of Shares of the Buyer's Stock. The Buyer shall reserve for
------------------------------------------
issuance a sufficient number of shares of the Buyer's Stock to cover the
issuances of such stock required hereby.
(b) Directors.
---------
(i) As soon as reasonably practicable after the Effective Time, the Buyer
shall use its reasonable best efforts to cause the Chairman of the
Company's board of directors to be elected or appointed as (A) a member of
the board of directors of the Buyer and the Buyer Bank, to serve until the
next scheduled annual meetings of the stockholders of the Buyer and the
Buyer Bank and (B) a member of the Executive Committee of Buyer's and Buyer
Bank's board of directors, in each case conditioned upon any necessary
regulatory requirements. At the next scheduled annual meeting of
stockholders of the Buyer and of the Buyer Bank and thereafter, such
33
Chairman of the Company's board of directors shall be subject to the same
nomination and election procedures as the other directors on the boards of the
Buyer and the Buyer Bank.
(ii) Additionally, for a period of two years after the Effective Time, each
of the Company's board members at the Effective Time who does not join the
Buyer's board of directors shall be paid $250.00 per quarterly meeting for his
or her attendance at and service on the Mecklenburg Local Advisory Board of the
Buyer (which advisory board the Buyer agrees to establish promptly after the
Closing and maintain for at least two years after the Closing Date and which
advisory board shall meet at least quarterly).
(iii) In addition, each individual who serves on the board of directors of
the Buyer or the Buyer Bank, or such local advisory board, for calendar year
2003 shall be eligible to receive from the Buyer or the Buyer Bank a single
retainer payment in the amount of $2,000 relating to its service on any such
board for calendar year 2003, provided, however, that if any such individual
shall have received a retention or similar payment from the Company or any of
its subsidiaries at or prior to Closing with respect to service on any board or
committee for calendar year 2003, such individual shall not be eligible to
receive the above-described retainer payment from the Buyer.
(c) Employees.
---------
(i) Except as covered by the Xxxxxxx Employment Agreement, any and all
of the Company Parties' employees will be employed by the Buyer or the
Buyer Bank on an "at-will" basis, and nothing in this Agreement shall be
deemed to constitute an employment agreement with any such individual or to
obligate the Buyer or any Affiliate thereof to employ any such individual
for any specific period of time or in any specific position or to restrict
the Buyer's or any of its Affiliates' right to terminate the employment of
any such individual at any time and for any reason satisfactory to it.
(ii) Notwithstanding the foregoing clause (i), except with respect to
employees of the Company or the Company Bank who become subject to an
employment agreement with the Buyer upon Closing or are subject to a change
of control agreement with the Company or the Company Bank, the Buyer shall
make severance payments to employees of the Company or the Company Bank (a)
who are employed with the Company or the Company Bank at the Effective
Time, (b) become and remain employed with the Buyer or the Buyer Bank for a
period of time ending not later than the date that is sixty (60) days after
the completion of the data process conversion in respect of the Mergers or
such lesser period of time with respect to each such employee as determined
by the Buyer or the Buyer Bank in its discretion, and (c) whose employment
with the Buyer or the Buyer Bank shall then have been terminated by the
Buyer or the Buyer Bank. For each such employee, such severance payment
shall be in the amount of three months of such employee's base salary, plus
an amount equal to an two weeks of such employee's base salary for each
full year of employment completed at the Effective Time by such employee
with the Company or any of its subsidiaries.
(iii) Such Company Parties' employees who continue employment with the
Buyer or any of its subsidiaries will be eligible for benefits consistent
with those of existing employees of the Buyer Bank, with credit for past
service with the Company or the Company Bank for purposes of participation,
eligibility and vesting (including with respect to any amounts to be
contributed by the Buyer or any of its subsidiaries or amounts that will
vest under any Buyer Benefit Plan, but not including the calculation of any
other benefit accrual); provided, however, that any such continuing
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employee will not be subject to any exclusion or penalty for pre-existing
34
conditions that were covered under the Company's or any of its subsidiaries'
medical plans as of the Closing Date or any waiting period relating to coverage
under the Buyer's or any of its subsidiaries' medical plans. There shall be no
waiting periods applicable to any such Company employees to participate in such
benefits (including applicable insurance benefits).
(d) Directors and Officers Insurance and Indemnification.
----------------------------------------------------
(i) The Buyer shall maintain, or shall cause the Buyer Bank to
maintain, in effect for three years from the Closing Date, if available,
the current directors' and officers' liability insurance policies
maintained by the Company; provided, however, that Buyer may substitute
-----------------
therefor policies of at least the same coverage containing terms and
conditions that are no less favorable to the insured with respect to
matters occurring prior to the Effective Time.
(ii) From and after the Effective Time, the Buyer shall, or shall
cause the Buyer Bank to, indemnify, defend and hold harmless each
individual who is now, or who has been at any time before the date hereof
or who becomes before the Effective Time, an officer or director of the
Company or Company Bank (the "Indemnified Parties") against all losses,
claims, damages, awards, penalties, fines (including excise taxes), costs,
expenses (including reasonable attorneys' fees), liabilities or judgments
or amounts that are paid in settlement (which settlement shall require the
prior written consent of Buyer, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each a "Claim"),
in which an Indemnified Person is, or is threatened to be made, a party or
witness arising in whole or in part out of the fact that such individual is
or was a director, officer or employee of the Company Bank or any of its
subsidiaries if such Claim pertains to any matter or fact arising, existing
or occurring before the Effective Time (including without limitation the
Mergers and the other transactions contemplated hereby), regardless of
whether such Claim is asserted or claimed before, at or after the Effective
Time (the "Indemnified Liabilities"), to the fullest extent permitted by
applicable Law in effect as of the date hereof or as amended applicable to
a time before the Effective Time. Any Indemnified Person wishing to claim
indemnification under this Section 7.2(d)(ii), upon learning of any Claim,
shall notify the Buyer (but the failure so to so notify shall not relieve
the Buyer from any liability that it may have under this Section
7.2(d)(ii), except to the extent such failure Materially prejudices the
Buyer or its Affiliates). In the event of any such Claim, whether arising
before, on or after the Effective Time, (1) the Buyer shall have the right
to assume the defense thereof (in which event the Indemnified Parties will
cooperate in the defense of any such matter) and upon such assumption, the
Buyer shall not be liable to any Indemnified Person for any legal expenses
of other counsel or any other expenses subsequently incurred by any
Indemnified Person in connection with the defense therefor, except that if
the Buyer elects not to assume such defense, or counsel for the Indemnified
Parties reasonably advises the Indemnified Parties that there are or may be
(whether or not any have yet actually arisen) issues that raise conflicts
of interest between the Buyer and the Indemnified Parties, the Indemnified
Parties may retain counsel reasonably satisfactory to them, and the Buyer
shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) except as provided in the immediately preceding
clause (1), the Buyer shall be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties whose reasonable
fees and expenses shall be paid promptly as statements are received, (3)
the Buyer shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld), and (4)
the Buyer shall have no obligation hereunder to any Indemnified Person when
and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and nonappealable, that
indemnification of such Indemnified Person in the manner contemplated
hereby is prohibited by applicable Law (it being acknowledged by the
parties hereto that in the event of any good faith
35
dispute about the lawfulness of such indemnification, the Buyer may place
the amounts at issue in escrow pending the final and nonappealable
determination of such dispute). The obligations of the Buyer pursuant to
this Section 7.2(d) are intended to be enforceable against the Buyer
directly by the Indemnified Parties. The indemnification provided herein
shall be in addition to any indemnification rights that any Indemnified
Parties may have by Law, pursuant to the articles of incorporation,
certificate of incorporation, bylaws or other governing instruments of the
Company or any of its subsidiaries or pursuant to the terms of any employee
benefit plan or trust for which any Indemnified Party serves as a
fiduciary.
7.3 Covenants of All Parties to the Agreement.
(a) Reorganization for Tax Purposes. Each of the parties hereto undertakes
-------------------------------
and agrees to use its reasonable efforts to cause the Holding Company Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code
and that it will not intentionally take any action that would cause the Holding
Company Merger to fail to so qualify.
(b) Notification. Each party hereto agrees to notify promptly the other
------------
party hereto of any event, fact, or other circumstance arising after the date
hereof that would have caused any representation or warranty herein, including,
in the case of the Company, any information on any schedule hereto, to be untrue
or misleading had such event, fact, or circumstance arisen prior to the
execution of this Agreement. The parties hereto will exercise their reasonable
best efforts to ensure that no such events, facts, or other circumstances occur,
come to pass, or become true.
(c) Consummation of Agreement. Subject to Section 7.1(c), the parties
-------------------------
hereto each agree to use their reasonable efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by them under this
Agreement so that the transactions contemplated hereby shall be consummated.
Except for events that are the subject of specific provisions of this Agreement,
if any event should occur, either within or outside the control of the Company
Parties or the Buyer Parties, that would Materially delay or prevent fulfillment
of the conditions upon the obligations of either party hereto to consummate the
transactions contemplated by this Agreement, each party will notify the other of
any such event and, subject to Section 7.1(c), the parties will use their
reasonable, diligent and good faith efforts to cure or minimize the same as
expeditiously as possible. Subject to Section 7.1(c), each party hereto shall
use its reasonable efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement and to assist in
the procuring or providing of all documents that must be procured or provided
pursuant to the provisions hereof. Notwithstanding anything to the contrary
contained in this Agreement, but subject to Section 7.1(c), neither of the
parties hereto will take any action that would (i) Materially affect or delay
receipt of the approvals contemplated in Section 9.1(b) from the Regulatory
Authorities, or (ii) Materially adversely affect or delay its ability to perform
its covenants and agreements made pursuant to this Agreement.
(d) Corporate Action. Subject to the terms and conditions hereof (including
----------------
Section 7.1(c)), each of the parties hereto shall, and each of them shall cause
their subsidiaries to, take all corporate action, including the Company's
recommendation of the Holding Company Merger by its board of directors to its
shareholders, and use each of their best efforts to cause all requisite
shareholder action to be taken, necessary to consummate and give effect to the
Mergers.
(e) Maintenance of Corporate Existence. Each of the parties hereto shall,
----------------------------------
and each of them shall cause their Affiliates to, maintain in full force and
effect each their respective corporate or legal existences.
36
(f) Applications and Reports. The Buyer shall prepare and file as soon as
------------------------
reasonably practical after the date of this Agreement, and the Company shall
cooperate in the preparation and, where appropriate, filing of, all
applications, reports and statements with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by this
Agreement.
(g) Registration Statement and Proxy Statement. As soon as reasonably
------------------------------------------
practicable after the execution of the Agreement and after the furnishing by the
Company and the Company Bank of all information required to be contained
therein, the Buyer shall file with the SEC the Registration Statement, which
shall contain the Proxy Statement. As soon as reasonably practicable after all
consents contemplated by Section 9.1(b) have been obtained, the Buyer and the
Company shall prepare, and the Company shall deliver by mail to the holders of
record of the Company Shares, the Proxy Statement. The Buyer and the Company
shall each use their reasonable best efforts to cause the Proxy Statement to
comply in all Material respects with the requirements of the Securities Laws and
the rules and regulations thereunder. Subject to Section 7.1(c), the Proxy
Statement shall include the recommendation of the board of directors of the
Company in favor of the Holding Company Merger. The Buyer and the Company shall
each use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable.
(h) Affiliate Agreements. Not less than 45 days prior to the Effective
--------------------
Time, the Company shall deliver to the Buyer a letter identifying all Persons
who, in the judgment of the Company, may be deemed an "affiliate" of the Company
for purposes of Rule 145 under the Securities Act and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date of delivery thereof. The Company shall use reasonable best efforts to
cause each Person identified on such list to deliver to the Buyer not less than
10 days prior to the Effective Time, a written agreement substantially in the
form attached hereto as Exhibit D.
(i) Closing. Subject to the terms and conditions hereof (including Section
--------
7.1(c)), the parties hereto shall use their reasonable best efforts to
consummate the Closing within 30 days after all conditions to the Closing have
been satisfied.
ARTICLE VIII
DISCLOSURE OF ADDITIONAL INFORMATION
8.1 Access to Information. Prior to the Closing Date, the parties hereto
shall, and shall cause each of their subsidiaries to:
(a) give the other and its authorized representatives reasonable access,
during normal business hours and upon reasonable notice, to its books, records,
offices and other facilities and properties; and
(b) furnish the other with such financial and operating data and other
information with respect to its business, condition (financial or otherwise) and
properties, as it may reasonably request.
8.2 Access to Premises. Prior to Closing, the Company shall, and shall
cause its subsidiaries to, give the Buyer and its authorized representatives
reasonable access to all of the Company's and its subsidiaries' Real Property
for the purpose of inspecting such property.
37
8.3 Environmental Survey. At its option, the Buyer may cause to be conducted
Phase I environmental assessments of the Real Property of the Company and its
subsidiaries, whether owned or leased, or any portion thereof, together with
such other studies, testing and intrusive sampling and analyses as the Buyer
shall deem necessary or desirable (collectively, the "Environmental Survey").
The Buyer shall complete all such Phase I environmental assessments within 60
days following the date of this Agreement and thereafter conduct and complete
any such additional studies, testing, sampling and analyses within 60 days
following completion of all Phase I environmental assessments. Subject to any
rights Buyer may have under Section 10.2, the costs of the Environmental Survey
shall be paid by the Buyer.
8.4 Confidentiality. The parties hereto acknowledge that each of the Buyer
and the Company have previously executed separate agreements (the
"Confidentiality Agreements") dated November 26, 2002 in contemplation of
negotiations regarding the Mergers and agree that such agreements shall continue
in full force and effect in accordance with their terms.
8.5 Publicity. Without the prior consent of the other party hereto, neither
party hereto shall issue any news release or other public announcement or
disclosure, or any general public announcement to its employees, suppliers or
customers, regarding this Agreement or the transactions contemplated hereby,
except as may be required by Law, but in which case the disclosing party shall
provide the other party hereto with reasonable advance notice of the timing and
substance of any such disclosure.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Mutual Conditions. The respective obligations of each party hereto to
perform this Agreement and consummate the Holding Company Merger and the other
transactions contemplated at Closing hereby are subject to the satisfaction of
the following conditions, unless waived by both parties hereto pursuant to
Section 11.4 of this Agreement:
(a) Adverse Proceedings. Neither the Company, the Company Bank, the Buyer,
-------------------
the Buyer Bank, nor any shareholder or stockholder of any of the foregoing shall
be subject to any Order that enjoins or prohibits the consummation of this
Agreement or the Mergers, and no Governmental Authority shall have instituted a
suit or proceeding that is then pending and seeks to enjoin or prohibit the
transactions contemplated hereby. Any party who is subject to any such Order or
the subject of any such Litigation shall take any reasonable steps within that
party's control to cause any such Order to be modified so as to permit the
Closing and to cause any such Litigation to be dismissed.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
--------------------
and notifications to, all Regulatory Authorities required for consummation of
the Mergers shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No such
Consent obtained from any Regulatory Authority shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) not reasonably anticipated as
of the date of this Agreement that in the reasonable judgment of the board of
directors of the Buyer or the Company would so Materially adversely impact the
economic or business assumptions of the transactions contemplated by this
Agreement that had such condition or requirement been known, such party would
not, in its reasonable judgment, have entered into this Agreement.
(c) Consents and Approvals. Each party hereto shall have obtained any and
----------------------
all Consents required for consummation of the Mergers or for the preventing of
any Default under any Contract or
38
Permit of such Person, including those Consents listed on Section 5.2 of
-----------
the Company's Disclosure Schedule.
(d) Effectiveness of Registration Statement. The Registration Statement
---------------------------------------
shall have been declared effective by the SEC, and no stop order suspending such
effectiveness shall have been initiated or, to the Knowledge of the Buyer
Parties, threatened by the SEC.
(e) Approval. The Company's shareholders shall have approved this Agreement
--------
and the Holding Company Merger in accordance with applicable Law.
(f) Tax Opinion. On the basis of facts, representations and assumptions
-----------
that shall be consistent with the state of facts existing at the Closing Date,
the Buyer and the Company shall have received an opinion of an acceptable tax
advisor reasonably acceptable in form and substance to each of them dated as of
the Closing Date, substantially to the effect that, for federal income tax
purposes: (i) the Holding Company Merger, when consummated in accordance with
the terms hereof, will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) no gain or loss will be recognized by the Buyer, the
Buyer Bank, the Company or the Company Bank by reason of the Holding Company
Merger, (iii) the exchange or cancellation of Company Shares in the Holding
Company Merger will not give rise to recognition of gain or loss for federal
income tax purposes to the shareholders of the Company to the extent such
shareholders receive Buyer's Stock in exchange for their Company Shares, (iv)
the basis of the Buyer's Stock to be received by a shareholder of the Company
will be the same as the basis of the Company Shares surrendered therefor in
connection with the Holding Company Merger, and (v) the holding period of the
shares of the Buyer's Stock to be received by a shareholder of the Company will
include the period during which the shareholder held the Company Shares
surrendered therefor in connection with the Holding Company Merger, provided
that the Company Shares surrendered in connection with the Holding Company
Merger are held as a capital asset at the Effective Time. Each of the Buyer and
the Company shall provide a letter to the tax advisor setting forth the facts,
assumptions and representations on which such tax advisor may rely in rendering
its opinion.
(g) Blue Sky Approvals. The Buyer shall have received all state securities
------------------
or "Blue Sky" Permits or other authorizations or confirmations as to the
availability of exemptions from "Blue Sky" registration requirements as may be
necessary, and no stop orders or proceedings shall be pending, or to the
Knowledge of the Buyer Parties or the Company Parties, threatened by a state
"Blue Sky" administrator to suspend the effectiveness of any registration
statement filed therewith with respect to the offering of the Buyer's Stock in
the Holding Company Merger.
(h) Nasdaq Listing. As of the Effective Time, the Buyer shall have
--------------
satisfied all requirements in order for the shares of the Buyer's Stock to be
issued to shareholders of the Company in connection with the Holding Company
Merger to be qualified for quotation on the Nasdaq National Market System as of
the Effective Time.
9.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the transactions contemplated hereby shall be further subject
to the fulfillment of the following conditions, unless waived by the Company
pursuant to Section 11.4 of this Agreement:
(a) All representations and warranties of the Buyer contained in this
Agreement shall be true and correct as of the Closing Date as though made as of
such date (except for representations and warranties that are made as of a
specific date). The Buyer shall have performed and complied with all covenants
and agreements contained in this Agreement required to be performed and complied
with by it at or prior to the Closing.
39
(b) All documents and agreements required to have been executed and
delivered by the Buyer to the Company at or prior to the Closing shall have been
so executed and delivered, whether or not such documents have been or will be
executed and delivered by the other parties contemplated thereby.
(c) The Company shall have received from Trident Securities, a division of
McDonald Investments Inc., a letter, dated not more than three Business Days
prior to the Proxy Statement, stating that the Merger Consideration is fair,
from a financial point of view, to the holders of the Company's Shares.
(d) The Company shall have received an opinion of Xxxxxxxx, Xxxxxxxx &
Xxxxxx, P.A., counsel to the Buyer, dated as of the Closing Date, in form and
substance reasonably acceptable to the Company.
(e) As of the Closing Date, the Company shall have received the following
documents with respect to the Buyer:
(i) a true and complete copy of its certificate of incorporation and
all amendments thereto, certified by the jurisdiction of its incorporation
as of a recent date;
(ii) a true and complete copy of its bylaws, certified by its
Secretary or an Assistant Secretary;
(iii) a certificate from its Secretary or an Assistant Secretary
certifying that its certificate of incorporation have not been amended
since the date of the certificate described in subsection (i) above and
that nothing has occurred since such date that would adversely affect its
existence;
(iv) a true and complete copy of the resolutions of its board of
directors and shareholders authorizing the execution, delivery and
performance of this Agreement, and all instruments and documents to be
delivered in connection herewith, and the transactions contemplated hereby,
certified by its Secretary or an Assistant Secretary; and
(v) a certificate from its Secretary or an Assistant Secretary
certifying the incumbency and signatures of its officers who will execute
documents at the Closing or who have executed this Agreement.
(f) The Exchange Agent shall have delivered to the Company a certificate,
dated as of the Closing Date, to the effect that the Exchange Agent has received
from the Buyer appropriate instructions and authorization for the Exchange Agent
to issue a sufficient number of shares of Buyer Stock in exchange for all of the
Company Shares and to the effect that the Exchange Agent has received a
sufficient amount of cash to pay in exchange for all of the Company Shares and
has appropriate instructions and authorization to deliver the cash Merger
Consideration as required by this Agreement.
9.3 Conditions to the Obligations of the Buyer. The obligations of the
Buyer to effect the transactions contemplated hereby shall be further subject to
the fulfillment of the following conditions, unless waived by the Buyer pursuant
to Section 11.4 of this Agreement:
(a) All representations and warranties of the Company contained in this
Agreement shall be true and correct as of the Closing Date as though made as of
such date (except for representations and warranties that are made as of a
specific date). The Company shall have performed and complied with all
40
covenants and agreements contained in this Agreement required to be performed
and complied with by them at or prior to the Closing.
(b) Holders of Company Shares representing no more than ten percent (10%)
of the issued and outstanding Company Shares immediately prior to the Effective
Time shall have exercised dissenters' or similar rights with respect to the
Holding Company Merger.
(c) All documents and agreements required to have been executed and
delivered by the Company or any third party to the Buyer at or prior to the
Closing shall have been so executed and delivered, whether or not such documents
have been or will be executed and delivered by the other parties contemplated
thereby.
(d) The Buyer shall have received a legal opinion from BPMHL, counsel to
the Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Buyer.
(e) As of the Closing Date, the Buyer shall have received the following
documents with respect to each of the Company and its subsidiaries (including
the Company Bank):
(i) a certificate of its corporate existence issued by the jurisdiction of
its incorporation as of a recent date and a certificate of existence or
authority as a foreign corporation issued as of a recent date by each of the
jurisdictions in which it is qualified to do business as a foreign corporation;
(ii) a true and complete copy of its articles of incorporation or charter
and all amendments thereto, certified by the jurisdiction of its incorporation
as of a recent date;
(iii) a true and complete copy of its bylaws, certified by its Secretary or
an Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant Secretary certifying
that its articles of incorporation or charter have not been amended since the
date of the certificate described in subsection (ii) above, and that nothing has
occurred since the date of issuance of the certificate of existence specified in
subsection (i) above that would adversely affect its existence;
(v) with respect to the Company only, a true and complete copy of the
resolutions of its board of directors and shareholders authorizing the
execution, delivery and performance of this Agreement, and all
instruments and documents to be delivered in connection herewith, and
the transactions contemplated hereby, certified by its Secretary or an
Assistant Secretary; and
(vi) with respect to the Company only, a certificate from its Secretary or
an Assistant Secretary certifying the incumbency and signatures of its
officers who will execute documents at the Closing or who have executed
this Agreement.
ARTICLE X
TERMINATION
10.1 Termination. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:
41
(a) by mutual written consent of the Company and the Buyer;
(b) by either the Buyer or the Company, if there shall be any Law that
makes consummation of this Agreement illegal or otherwise prohibited or if any
Order enjoining the Company or its shareholders, the Company Bank, the Buyer or
its stockholders, or the Buyer Bank from consummating this Agreement is entered
and such Order shall become final and nonappealable; provided, however, that the
-------- -------
right to terminate this Agreement under this Section 10.1(b) shall not be
available to the party whose failure to fulfill its obligations hereunder shall
have been the cause of or resulted in such Order;
(c) by either the Buyer or the Company, if the Effective Time shall not
have occurred on or before December 31, 2003, provided, however, that the right
-------- -------
to terminate this Agreement under this Section 10.1(c) shall not be available to
the party whose failure to fulfill its obligations hereunder shall have been the
cause of or resulted in the failure of the Effective Time to occur on or before
December 31, 2003;
(d) At any time on or prior to the Closing Date:
(i) by the Buyer in writing, if the Company (i) has breached any
covenant or agreement contained herein in any Material respect or (ii) any
representation or warranty contained herein becomes untrue, in either case
such that the condition contained in Section 9.3(a) would not be satisfied
and in either case if such breach has not been cured by the earlier of 10
Business Days after the date on which the Buyer gives written notice of
such breach to the Company or the Closing Date; or
(ii) by the Company in writing, if the Buyer (i) has breached any
covenant or agreement contained herein in any Material respect or (ii) any
representation or warranty contained herein becomes untrue, in either case
such that the condition contained in Section 9.2(a) would not be satisfied
and in either case if such breach has not been cured by the earlier of 10
Business Days after the date on which the Company gives written notice of
such breach to the Buyer or the Closing Date;
(e) by either the Company or the Buyer if: (i) the approval of the
Company's shareholders required for the consummation of the Holding Company
Merger shall not have been obtained by reason of the failure to obtain the
required vote upon the taking of such vote at a duly held meeting of the
Company's shareholders or at any adjournment thereof or (ii) such approval was
obtained but holders of Company Shares representing more than ten percent (10%)
of the issued and outstanding Company Shares immediately prior to the Effective
Time exercised dissenters' or similar rights with respect to the Holding Company
Merger;
(f) by the Buyer, if:
(i) the Company's board of directors shall have failed to recommend
the Holding Company Merger to its shareholders at the Shareholder Meeting,
(ii) withdrawn its recommendation of the Holding Company Merger to its
shareholders, (iii) modified or qualified its recommendation of the Holding
Company Merger in any manner adverse to the consummation of the Holding
Company Merger, (iv) failed to confirm its recommendation of the Holding
Company Merger within five Business Days of the Buyer's request to do so
(or resolved or proposed to take any of the foregoing actions);
(ii) the Company shall have breached its obligation under this
Agreement by reason of a failure to timely call and hold the Shareholder
Meeting in accordance with Section 7.1(b); or
42
(iii) a tender or exchange offer relating to securities of the Company
or any of its subsidiaries shall have been commenced by a Person who is not
an Affiliate of the Company or its subsidiaries, and the Company shall not
have sent to its shareholders within 10 Business Days after such tender or
exchange offer is first published, sent or given, a statement that the
Company's board of directors recommends rejection of such tender or
exchange offer;
(g) by the Company, if the Average Closing Price of the Buyer's Stock is
less than $14.72 for the Measurement Period and the Company's board of directors
elects to terminate this Agreement. The Company must give written notice of any
such election to terminate this Agreement within two Business Days after the end
of the Measurement Period (but in any event prior to the Effective Time).
Notwithstanding the foregoing, upon receipt of notice of termination pursuant to
this Section 10.1(g) from the Company, the Buyer shall have the right to pay as
Merger Consideration an additional amount of cash per Company Share so that (i)
the value of the Per Share Stock Consideration, based on the Average Closing
Price of the Buyer's Stock for the Measurement Period, plus such additional
amount of cash is as close as practical to $13.28, and (ii) the value of the Per
Share Mixed Consideration comprising the Buyer's Stock, based on the Average
Closing Price of the Buyer's Stock for the Measurement Period, plus the amount
of cash comprising the Per Share Mixed Consideration, plus such additional
amount of cash is as close as practical to $14.18, in which event this Agreement
shall not be terminated and the Mergers shall be consummated as set forth in
this Agreement, subject to the changes described in this Section 10.1(g); or
(h) by the Company, if (i) the board of directors of the Company shall have
determined, based upon the written advice of outside counsel reasonably
acceptable to the Buyer (which shall include BPMHL in any event), that an
Acquisition Proposal constitutes a Superior Proposal; provided, however, that
the Company may not terminate this Agreement pursuant to this Section 10.1(h)
unless, after giving the Buyer at least five Business Days notice to respond to
such Acquisition Proposal (and after giving the Buyer notice of the latest
Material terms and conditions comprising such Acquisition Proposal), and then
taking into account any amendment or modification to this Agreement proposed by
the Buyer, the Company's board of directors believes, based upon the written
advice of outside counsel reasonably acceptable to the Buyer (which shall
include BPMHL in any event), that such Acquisition Proposal constitutes a
Superior Proposal, and (ii) the Company thereafter executes a definitive,
binding transaction agreement to consummate an Acquisition Transaction in
furtherance of such Acquisition Proposal.
10.2 Procedure and Effect of Termination. (a) In the event of a termination
contemplated hereby by either party pursuant to Section 10.1, the party seeking
to terminate this Agreement shall give prompt written notice thereof to the
other party, and the transactions contemplated hereby shall be abandoned,
without further action by either party hereto. In such event:
(i) the parties hereto shall continue to be bound by (a) their
obligations of confidentiality set forth in the Confidentiality Agreements,
and all copies of the information provided by the a party hereto to the
other party will be returned or destroyed immediately upon its request
therefor, (b) the provisions set forth in Section 8.5 relating to
publicity, and (c) the provisions set forth in Section 11.1 relating to
expenses;
(ii) all filings, applications and other submissions relating to the
transactions contemplated hereby shall, to the extent practicable, be
withdrawn from the Person to which made; and
(iii) if the termination is pursuant to Section 10.1(d) or Section 10.1(f),
the terminating party shall be entitled to seek any remedy to which such party
may be entitled at law
43
or in equity for the violation or breach of any agreement, covenant,
representation or warranty contained in this Agreement.
10.3 Termination Fee; Expenses.
(a) If this Agreement is terminated by the Company pursuant to Section
10.1(h), the Company shall pay to the Buyer, within one Business Day following
such termination, an amount equal to five percent (5%) of the Merger
Consideration offered by the Buyer at the time of termination of this Agreement
pursuant to Section 10.1(h), such amount to be calculated based on the Average
Closing Price of the Buyer's Stock for the Measurement Period assuming that that
the Effective Time occurred on the date of such termination.
(b) If the Company or any of its subsidiaries receives an Acquisition
Proposal and the Company's board of directors fails to recommend or continue
recommending approval of the Holding Company Merger to the Company's
shareholders or amends or withdraws its recommendation of the Holding Company
Merger to the Company's shareholders, and the Company's shareholders do not
approve the Holding Company Merger at the Shareholder Meeting, the Company shall
pay to the Buyer, within one Business Day following the Shareholder Meeting, the
amount of $925,000(less the amount, if any, paid by the Company pursuant to
Section 10.3(a)).
(c) If this Agreement is terminated by the Company pursuant to Section
10.1(d)(ii), the Buyer shall reimburse the Company's Costs within one Business
Day of the date of termination.
(d) If this Agreement is terminated by the Buyer pursuant to
Section10.1(d)(i), the Company shall reimburse the Buyer's Costs within one
Business Day of the date of termination.
(e) All amounts payable pursuant to this Section 10.3 shall be payable by
wire transfer of immediately available funds to an account designated by the
recipient.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses. Except as provided in Section 10.3, whether or not the
transactions contemplated hereby are consummated, (i) the Buyer shall pay all
costs and expenses incurred by it and the Buyer Bank in connection with this
Agreement and the Mergers and (ii) the Company shall pay all costs and expenses
incurred by it and the Company Bank in connection with this Agreement and the
Mergers.
11.2 Survival of Representations. The representations and warranties made
by the parties hereto will not survive the Closing, and no party shall make or
be entitled to make any claim based upon such representations and warranties
after the Closing Date. No warranty or representation shall be deemed to be
waived or otherwise diminished as a result of any due diligence investigation by
the party to whom the warranty or representation was made or as a result of any
actual or constructive knowledge by such party with respect to any facts,
circumstances or claims or by the actual or constructive knowledge of such party
that any warranty or representation is false at the time of signing or Closing.
11.3 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of both parties hereto.
44
11.4 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of the Buyer Parties, on one hand, and the Company
Parties, on the other, to comply with any obligation, representation, warranty,
covenant, agreement or condition herein may be waived by the Buyer or the
Company, as applicable, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of either party hereto, such consent shall be given in writing
in a manner consistent with the requirements for a waiver of compliance as set
forth in this Section 11.4.
11.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered by hand or by facsimile
transmission, one Business Day after sending by a reputable national over-night
courier service or three Business Days after mailing when mailed by registered
or certified mail (return receipt requested), postage prepaid, to the parties in
the manner provided below:
(a) Any notice to any of the Company shall be delivered to the following
addresses:
First Commerce Corporation
000 Xxxxx XxXxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx
P.O. Box 26000 Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Any notice to the Buyer shall be delivered to the following addresses:
Bank of Granite Corporation
X.X. Xxx 000
00 Xxxxx Xxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
45
with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party may change the address to which notice is to be given by notice
given in the manner set forth above.
11.6 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party hereto without the prior written consent of the other
party.
11.7 Separable Provisions. If any provision of this Agreement shall be held
invalid or unenforceable, the remainder nevertheless shall remain in full force
and effect.
11.8 Governing Law. The execution, interpretation and performance of this
Agreement shall be governed by the internal laws and judicial decisions of the
State of North Carolina.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
11.11 Entire Agreement. This Agreement, including the agreements and
documents that are Schedules and Exhibits hereto, embodies the entire agreement
and understanding of the parties with respect of the subject matter of this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transactions contemplated hereby and
subject matter hereof.
46
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of
the date first above written.
BUYER:
BANK OF GRANITE CORPORATION
By: /s/Xxxx X. Xxxxxxxx, Xx.
-------------------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: Chairman and Chief Executive Officer
COMPANY:
FIRST COMMERCE CORPORATION
By: /s/Xxxxxx X.Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
