EXHIBIT 10.39
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is dated as of the 15th day of
October, 2003, by and between COMMUNITY CAPITAL CORPORATION, a South 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 "Buyer"); and ABBEVILLE CAPITAL CORPORATION, a South 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). 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").
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 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 American Stock Exchange
during the 20 consecutive trading day period ending three trading days prior to
the Effective Time, 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.
"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.
"Business Day" means any day excluding Saturday, Sunday and any day that is
a legal holiday in the State of South Carolina.
"Buyer" has the meaning given to it in the introductory paragraph hereof.
"Buyer Bank" means CapitalBank, a South 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, 2002, 2001 and 2000 and consolidated audited balance sheets as of
December 31, 2002, 2001 and 2000, 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, 2002 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 Buyer, $1.00 par value,
transactions in which are quoted on the American Stock Exchange.
"Cash Consideration" has the meaning given to it in Section 2.3.
"Cash Election Shares" has the meaning given to it in Section 2.3(a).
"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 The Bank of Abbeville, a South Carolina bank and a
wholly owned subsidiary of the Company.
"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, 2002, 2001 and 2000 and consolidated audited balance
sheets as of December 31, 2002, 2001 and 2000, 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 31, 2002 and the consolidated interim balance sheets as
of each such quarter.
"Company Parties" means the Company and the Company Bank.
"Company Shares" has the meaning given to it in Section 2.2.
"Confidentiality Agreement" has the meaning given to it in Section 8.4.
"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 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.
"Exchange Ratio" has the meaning given to it in Section 2.3(b).
"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.
"HSB" means Haynsworth Xxxxxxx Xxxx, P.A., a South Carolina professional
corporation.
"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(a).
"Howie Employment Agreement" means the Employment Agreement to be entered
into at or prior to Closing between the Buyer Bank and Xxxxxxxx X. Xxxxx,
substantially in the form attached hereto as Exhibit B .
"Interim Distributions" has the meaning given to it in Section
7.1(a)(xviii).
"Xxxxx Employment Agreement" means the Employment Agreement to be entered
into at or prior to Closing between the Buyer Bank and C. Xxxxxxx Xxxxx, Jr.,
substantially in the form attached hereto as Exhibit C.
"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 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 it 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 American Stock Exchange (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
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.
"Merger Consideration" has the meaning given to it in Section 2.3.
"Mergers" means the Holding Company Merger together with the Bank Merger.
"Mixed Consideration" has the meaning given to it in Section 2.3.
"Mixed Election" has the meaning given to it in Section 2.3.
"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).
"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.
"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 South
Carolina State Board of Financial Institutions; 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.
"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.
"Xxxxxxx Employment Agreement" means the Employment Agreement to be entered
into at or prior to Closing between the Buyer Bank and Xxxxxx X. Xxxxxxx, Xx.,
substantially in the form attached hereto as Exhibit D .
"Stock Adjustment" has the meaning given to it in Section 2.3.
"Stock Consideration" has the meaning given to in Section 2.3.
"Stock Election " has the meaning given to it in Section 2.3.
"Stock Election Shares" has the meaning given to it in Section 2.3.
"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 HSB 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 HSB
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.
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
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 South Carolina 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 articles of incorporation of the Buyer in
effect at the Effective Time shall be the articles 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 Greenwood, South 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 Articles of Merger, containing
the Holding Company Plan of Merger, in the form required by and executed in
accordance with applicable South 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 Articles of Merger. At the Closing, the Company shall cause
the Articles of Merger in respect of the Holding Company Merger, containing the
Holding Company Plan of Merger, to be executed and filed with the Secretary of
State of South Carolina, as required by applicable South 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"), $5.00
par value per share, issued and outstanding 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) At the Effective Time, subject to Sections 2.4, 2.5 and 2.6 and
assuming that 237,615 Company Shares are outstanding at the Effective Time, each
Company Share issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares), shall, by virtue of the Holding Company Merger,
automatically and without any action on the part of the holder thereof, become
and be converted into the right to receive, at the election of the holder,
either (i) $63.13 in cash, without interest (the "Cash Consideration," with such
election referred to as a "Cash Election"), (ii) a number of shares of the
Buyer's Stock equal to the Exchange Ratio (the "Stock Consideration", with such
election referred to as a "Stock Election") or (iii) a combination of 50% of
such consideration in cash and 50% of such consideration in shares of Buyer's
Stock (the "Mixed Consideration", with such election referred to as a "Mixed
Election"). Company Shares as to which no election has been made are referred to
herein as "No Election Shares" and shall receive the mix of Merger Consideration
specified in Section 2.4 below. For purposes of this Agreement, Cash
Consideration, Stock Consideration and any combination thereof shall be
collectively referred to herein as "Merger Consideration." Company Shares as to
which a Cash Election has been made (including pursuant to a Mixed Election) are
referred to herein as "Cash Election Shares." Company Shares as to which a Stock
Election has been made (including pursuant to a Mixed Election) are referred to
herein as "Stock Election Shares." All Dissenting Shares will be deemed Cash
Election Shares for purposes of determining the Cash Consideration available for
distribution to other shareholders.
(b) For purposes of this Agreement, the "Exchange Ratio" shall be equal
(rounded to the nearest ten-thousandth) to (x) 4.6419, if the Average Closing
Price is less than or equal to $13.60, (y) 3.0946, if the Average Closing Price
is greater than or equal to $20.40, or (z) if the Average Closing Price is
between $13.60 and $20.40, the result obtained by dividing $63.13 by the Average
Closing Price.
(c) (i) In the event that the sum of (x) the number of Cash Election Shares
plus (y) 50.0% of the number of No Election Shares exceeds (z) 50.0% of the
total number of issued and outstanding Company Shares, then the holders of
Cash Election Shares will receive a combination of cash and shares of
Buyer's Stock to be determined as follows: (A) the number of Cash Election
Shares which shall be converted into the right to receive the Cash
Consideration shall equal the amount obtained by multiplying (I) the number
of Company Shares covered by such Cash Election by (II) a fraction of which
the numerator shall be the cash required to be made available by Buyer
(pursuant to clause (iii) below) and the denominator of which shall be
$63.13 multiplied by the number of Cash Election Shares; and (B) the
balance of such Cash Election Shares shall be converted into the right to
receive Stock Consideration.
(ii) In the event the foregoing clause (i) is not applicable, each
holder of Company Shares (A) that makes a Stock Election will receive the
Stock Consideration, (B) that makes a Cash Election will receive the Cash
Consideration or (C) that makes a Mixed Election will receive the
combination of Buyer's Stock and cash set forth in such election.
(iii)For purposes of this Section, the amount of cash required to be
made available by Buyer shall be equal to the difference between (A) the
amount obtained by multiplying (I) $63.13 by (II) 50% of the number of
outstanding Company Shares, minus (B) the amount of Cash Consideration
attributable to the Dissenting Shares, minus (C) the amount of Cash
Consideration required to be paid to No Election Shares. For purposes of
this Section, the number of shares of Buyer's Stock required to be made
available by Buyer shall be equal to the difference between (A) the number
of shares obtained by multiplying (I) the Exchange Ratio by (II) the number
of outstanding Company Shares for which a Stock Election has been made,
minus (B) the amount of Stock Consideration required to be paid to No
Election Shares. Regardless of the applicability of clauses (i) or (ii)
above, each No Election Share shall be converted in the Merger into the
right to receive 50% Stock Consideration and 50% Cash Consideration.
Notwithstanding anything contained herein, the aggregate amount of cash to
be paid as Merger Consideration, plus any cash paid in lieu of fractional
shares pursuant to Section 2.3(d) and any cash paid for Dissenting Shares
shall not exceed $7,500,000, subject to the effect of any adjustment made
as provided in this Article.
(d) No fractional shares of the Buyer's Stock shall be issued or delivered
in connection with the Holding Company Merger. In lieu of the issuance of any
such fractional share, Buyer shall pay to each former stockholder of the Company
who otherwise would be entitled to receive a fractional share of Buyer's Stock
an amount in cash equal to the product of
(x) the Average Closing Price, times (y) the fraction of a share of Buyer's
Stock which such holder would otherwise be entitled to receive pursuant to this
Article.
(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.
(f) Notwithstanding any other provision contained in this Agreement, it is
intended that the Holding Company Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Code and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code. In order that the Holding Company Merger will not fail to satisfy the
continuity of interest requirements under applicable federal income tax
principles relating to reorganizations under Section 368(a) of the Code, as of
the Effective Time, Buyer may, but shall not be obligated to, increase the Stock
Consideration and decrease the Cash Consideration proportionally (i) so that the
Stock Consideration measured at Market Value will represent at least 50% of the
value of the aggregate Merger Consideration payable to the shareholders of the
Company; (ii) the Cash Consideration is reduced by the aggregate amount of the
Interim Distributions, cash paid in lieu of fractional shares pursuant to
Section 2.3(d), and cash paid for Dissenting Shares; and/or (iii) any other
reason the Buyer, in its sole discretion, determines is necessary to cause the
Holding Company Merger to qualify as a tax-free reorganization under Section
368(a) of the Code. Upon any such adjustment, the components of the Mixed
Consideration and the Stock Consideration set forth in Section 2.3(a) shall be
equitably and proportionately adjusted to reflect the increase in the number of
shares of the Buyer's Stock being paid, and the decrease in the amount of cash
being paid, as Merger Consideration to each shareholder of the Company.
2.4 Election and Allocation Procedures.
(a) Election.
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(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 Mixed
Consideration, the Stock Consideration or the Cash Consideration with
respect to all or any of such holder's (or beneficial owner's) Company
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 to be No Election Shares.
(b) Allocation. As soon as reasonably practicable after the Effective Time,
the Buyer shall cause the Exchange Agent to allocate the Merger Consideration
among the holders of Company Shares in accordance with the terms of this
Agreement.
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 to
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 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.
(b) Any portion of the Merger Consideration that remains unclaimed by the
shareholders of the Company for six months after the Effective Time shall be
paid to Buyer. Any shareholders of the Company who have not theretofore complied
with this Article shall thereafter look only to Buyer for payment of their
portion of the Cash Consideration and their shares of Buyer's Stock, cash in
lieu of fractional shares and unpaid dividends and distributions on Buyer's
Stock deliverable in respect of each share of Company Shares such stockholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of Buyer, Company, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Company Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar Law.
(c) 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 South
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 South 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 South 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 South 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 South 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 South Carolina Law.
2.8 No Company Stock Options.
(a) At the Effective Time, no options to acquire Company Shares shall be
then outstanding and unexercised.
(b) The Company shall cause all of its stock option plans (if any) to be
terminated no later than immediately prior to the Effective Time.
ARTICLE III
THE BANK MERGER
3.1 The Bank Merger. After the consummation of the Holding Company Merger,
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 shall be determined by the Buyer in its sole.
3.2 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 Xxxxxx Xxxxx Xxxxxx & Xxxxxxx, LLC in Columbia, South 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 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, Howie Employment Agreement and the
Xxxxx 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.
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, Howie Employment Agreement and the
Xxxxx 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 South 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 South 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 State of South Carolina, (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).
(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, 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 1,000,000
shares of common stock, $5.00 par value per share, of which 237,615 shares are
issued and outstanding as of the date of this Agreement, and except for such
237,615 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 1,000,000 shares of common stock, $5.00 par value
per share, of which 248,761 shares are issued and outstanding as of the date of
this Agreement and are owned and held by the Company, and except for such
248,761 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
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, if any.
(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. 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) There are no outstanding Rights to acquire directly or indirectly any
shares of the capital stock of the Company or the Company Bank. No equity
securities of the Company or any subsidiary of the Company are or may become
required to be issued by reason of any Rights, and there are no Contracts by
which the Company or any subsidiary of the Company is bound to issue 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. 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.
5.4 SEC Filings; Company Financial Statements.
(a) Neither the Company nor any of the Company's subsidiaries is, or has
ever been, 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) 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 were or are subject to normal and recurring year-end
adjustments), 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, 2002, 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, 2002. 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, 2002, 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, 2002, (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, 2002, 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.
(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.
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,
2002, 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 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 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 (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.
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. 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 [Reserved]
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 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, 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, 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 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.
5.23 Commissions. Except for The Xxx Group, 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 South Carolina 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 South 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 State of South Carolina, (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.
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
articles 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 10,000,000 shares
of common stock, $1.00 par value per share, of which 3,442,405 shares are issued
and outstanding as of the date of this Agreement, and 2,000,000 shares of "blank
check" preferred stock of which no shares are outstanding. The authorized
capital stock of the Buyer Bank consists of 10,000,000 shares of common stock,
$5.00 par value per share, of which 400,000 shares are issued and outstanding as
of the date of this Agreement. 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. 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 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.
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, 1999 (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, 2002, 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, 2002. 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, 2002, 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.
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, 2002, 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, 2002, (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, 2002, 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.
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 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 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) end 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 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 other than usual and customary renewals;
(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) except as required by GAAP or regulatory authorities, 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
$25,000;
(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 $15,000 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;
(xvii) agree, whether in writing or otherwise, to do any of the
foregoing; or
(xviii) during the period commencing on August 18, 2003 and ending at
the Effective Time, the Company shall not (A) declare, set aside or pay any
dividends or make any distributions with respect to its capital stock which
in the aggregate exceed $178,000 (collectively the "Interim
Distributions"), or (B) redeem, purchase or otherwise acquire any Company
Shares.
(b) Consents. The Company will exercise its best efforts to obtain such
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 HSB 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
Company and its subsidiaries shall have entered into a confidentiality
agreement with such third .
(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) Director. As soon as reasonably practicable after the Effective Time,
the Buyer shall use its reasonable best efforts to cause Xxxxxx X. Xxxxxx, Xx.,
(or if Xx. Xxxxxx is unable to serve as of the Effective Time, one other member
of the Company's board of directors, designated to the Buyer by the Company in
writing on or before the Effective Time), to be elected or appointed as a member
of the board of directors of the Buyer, to serve until the scheduled annual
meeting of the stockholders of the Buyer to be held not less than 2 years after
the Effective Time, subject to and conditioned upon any necessary regulatory
requirements. Thereafter, such individual shall be subject to the same
nomination and election procedures as the other directors of the Buyer.
(c) Employees.
(i) Except as covered by the Xxxxxxx Employment Agreement, Howie
Employment Agreement and Xxxxx 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) 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
employee will not be subject to any exclusion or penalty for pre-existing
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. The Buyer shall maintain, or shall
cause the Company Bank or 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.
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; provided however, that this Section shall
not be deemed to limit Buyer's discretion as provided in Section 2.3 to
determine whether to adjust the amount of Buyer's Stock and cash delivered as
Merger Consideration so that the Holding Company Merger will qualify as a tax
free reorganization under Section 368(a) of the Code.
(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;
provided however, that this Section shall not be deemed to limit Buyer's
discretion as provided in Section 2.3 to determine whether to adjust the amount
of
Buyer's Stock and cash delivered as Merger Consideration so that the Holding
Company Merger will qualify as a tax free reorganization under Section 368(a) of
the Code. 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.
(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
E.
(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.
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"). 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 an agreement (the "Confidentiality
Agreement") dated June 26, 2003 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 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 be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; and (ii) the
Buyer and the Company each will be a party to that reorganization within the
meaning of Section 368(b) of the Code. Each of the Buyer and the Company shall
provide a letter or certificate 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) American Stock Exchange 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 listing on the American Stock Exchange 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.
(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 The Xxx Group, 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 Xxxxxx Xxxxx Xxxxxx &
Xxxxxxx, LLC, 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 articles 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 articles 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 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's 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 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 HSB, 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 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 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:
(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 August 31, 2004, 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
August 31, 2004;
(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: 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;
(f) by the Buyer prior to the Shareholder Meeting, if:
(i) (a) the Company's board of directors shall have failed to
recommend the Holding Company Merger to its shareholders at the time of
giving of notice of the Shareholder Meeting, (b) withdrawn its
recommendation of the Holding Company Merger to its shareholders, (c)
modified or qualified its recommendation of the Holding Company Merger in
any manner adverse to the consummation of the Holding Company Merger, or
(d) 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); or
(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
(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 (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 HSB 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(g)
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 HSB 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; or
(h) by the Buyer, in the event (i) the board of directors of the Company
shall have determined that an Acquisition Proposal constitutes a Superior
Proposal, or (ii) 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.
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 Agreement,
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 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 (i) pursuant to Section 10.1(g), or
(ii) pursuant to Section 10.1(h)(i) and the Company, within one year after
receipt by the Buyer of notice of termination in accordance with Section 10.2(a)
above, executes a definitive, binding transaction agreement to consummate an
Acquisition Transaction in furtherance of such Acquisition Proposal, the Company
shall pay to the Buyer, within one Business Day following the later of such
termination or the execution of such definitive agreement, the sum of Four
Hundred Fifty Thousand and No/100 ($450,000.00) Dollars, plus an amount equal to
the Buyer's Costs
(b) (i) 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, (ii) the Company's shareholders do not
approve the Holding Company Merger at the Shareholder Meeting, and (iii) the
Company within one year after the date of the Shareholder Meeting executes a
definitive, binding transaction agreement to consummate an Acquisition
Transaction, the Company shall pay to the Buyer, within one Business Day
following execution o such definitive agreement, the sum of Four Hundred Fifty
Thousand and No/100 ($450,000.00) Dollars, plus an amount equal to the Buyer's
Costs (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 Section
10.1(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.
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:
Abbeville Capital Corporation
000 X. Xxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Haynsworth Xxxxxxx Xxxx, P.A.
X.X. Xxx 00000
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Any notice to the Buyer shall be delivered to the following addresses:
Community Capital Corporation
0000-X Xxxxxxx 00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxx Xxxxxx & Xxxxxxx, LLC
0000 Xxxx Xxxxxx, Xxxxx 0000
Post Office Box 2426
Columbia, South Carolina 29201
Attention: Xxxxxx Xxxxxx III
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 South 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, including but not limited to that certain Letter of
Intent dated August 18, 2003, by and among Buyer, Buyer Bank, Company and
Company Bank.
[SIGNATURE PAGE ATTACHED HERETO]
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of
the date first above written.
BUYER:
------
COMMUNITY CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
COMPANY:
ABBEVILLE CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Xxxxxx X. Xxxxxxx, Xx.
Title: President
SCHEDULE OF EXHIBITS
EXHIBIT A Holding Company Plan of Merger
EXHIBIT B Howie Employment Agreement
EXHIBIT C Xxxxx Employment Agreement
EXHIBIT X Xxxxxxx Employment Agreement
EXHIBIT E Form of Affiliate Agreement
