Exhibit 99.2
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT"), dated as of the 4th day of
October, 2001, is by and between:
CAPITAL BANK CORPORATION, a North Carolina corporation and a holding
company registered with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended, and a North Carolina
bank holding company (the "BUYER"); and
FIRST COMMUNITY FINANCIAL CORPORATION, a North Carolina corporation and
holding company registered with the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended, and a North
Carolina savings bank holding company (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 "MERGER"). In consideration of the Merger, the shareholders of
the Company will receive shares of common stock of the Buyer and/or cash. It is
intended that the Merger qualify as a tax-free reorganization under Section 368
of the Internal Revenue Code. The Merger is expected to be accounted for under
the purchase method.
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" has the meaning given to it in Section 6.1(c).
"ACQUISITION TRANSACTION" means any merger, share exchange, stock sale,
recapitalization, consolidation or other business combination involving the
Company or any of its Subsidiaries or divisions of any of the foregoing and an
unaffiliated third party, or any acquisition in any manner, directly or
indirectly, of a more than a thirty percent (30%) equity interest in, or more
than a thirty percent (30%) portion of the consolidated assets of, the Company
and 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. 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.
"AFFILIATES' AGREEMENT" has the meaning given to it in Section 6.1(e).
"AGREEMENT" means this Merger Agreement.
"ASSETS" means all of the assets, properties, businesses and rights of a
Person of every
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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" has the meaning given to it in Section 9.1(f).
"BENEFIT PLANS" means all pension, retirement, profit-sharing, deferred
compensation, stock option, 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 (a) Saturday, (b) Sunday and (c) any
day that shall be a legal holiday in the State of North Carolina.
"BUYER" has the meaning given to it in the introductory paragraph hereof.
"BUYER BANK" means Capital Bank, a North Carolina bank and a wholly owned
subsidiary of the Buyer.
"BUYER FINANCIAL STATEMENTS" means, with respect to the Buyer and its
subsidiaries, the consolidated audited statements of income and stockholder's
equity and cash flows for the years ended December 31, 2000, 1999 and 1998 and
consolidated audited balance sheets as of December 31, 2000, 1999 and 1998, as
well as the interim unaudited consolidated statements of income and
stockholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2000 and the consolidated interim balance sheet as of each
such quarter.
"BUYER SEC REPORTS" has the meaning given to it in Section 5.4.
"BUYER'S DISCLOSURE SCHEDULE" has the meaning given to it in the preamble
to ARTICLE V.
"BUYER'S STOCK" means the common stock of Capital Bank Corporation no par
value, as traded on the Nasdaq SmallCap Market System.
"BUYER'S STOCK PERCENTAGE CHANGE" has the meaning given to it in Section
9.1(f).
"CASH ELECTION AMOUNT" has the meaning given to it in Section 2.4(a).
"CASH ELECTION SHARES" has the meaning given to it in Section 2.4(a).
"CAUSE" means: (i) any act of gross negligence, misconduct, unlawfulness or
dishonesty by an employee in connection with his or her employment which is
detrimental to the Buyer's or its Subsidiaries' interests; (ii) an employee's
willful failure to comply with the employee policies or reasonable directions of
the management of the Buyer or one of its Subsidiaries (excluding a requirement
to relocate his or her principal work location outside of Alamance County, North
Carolina); or (iii) an employee's material breach of any agreement between such
employee and Buyer or its Subsidiaries.
"CLAIM" has the meaning given to it in Section 6.2(d).
"CLOSING" means the closing of the Merger, as identified more specifically
in ARTICLE III.
"CLOSING DATE" has the meaning given to it in Section 3.1.
"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
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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 Community Savings Bank, Inc., a North Carolina stock
savings bank.
"COMPANY CONTRACTS" has the meaning given to it in Section 4.14.
"COMPANY FINANCIAL STATEMENTS" means, with respect to the Company and its
subsidiaries, the consolidated audited statements of income and stockholder's
equity and cash flows for the years ended December 31, 2000, 1999 and 1998 and
consolidated audited balance sheets as of December 31, 2000, 1999 and 1998, as
well as the interim unaudited consolidated statements of income and
stockholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2000 and the consolidated interim balance sheet as of each
such quarter.
"COMPANY OPTIONS" has the meaning given to it in Section 2.8.
"COMPANY SEC REPORTS" has the meaning given to it in Section 4.4.
"COMPANY SHARES" has the meaning given to it in Section 2.2(a).
"COMPANY'S DISCLOSURE SCHEDULE" has the meaning given to it in the preamble
to ARTICLE IV.
"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.
"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 Affiliates 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.
"EFFECTIVE TIME" has the meaning given to it in Section 2.1(e).
"ELECTION DEADLINE" has the meaning given to it in Section 2.4(a).
"ELECTION FORM" has the meaning given to it in Section 2.4(a).
"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 Affiliates.
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"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 7.3.
"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.
"EXCHANGE AGENT" has the meaning given to it in Section 2.6(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles 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.
"XXXXXXX EMPLOYMENT AGREEMENT" means the Employment Agreement to be entered
into at or prior to Closing between the Buyer and Xxxxxxx X. Xxxxxxx,
substantially in the form attached hereto as EXHIBIT B.
"GOVERNMENTAL AUTHORITY" means any nation, province or state, or any
political subdivision thereof, and any agency, department, natural person or
other entity exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, including Regulatory Authorities.
"HAZARDOUS MATERIAL" means any substance or material that either is or
contains a substance designated as a hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law or is otherwise regulated under any Environmental Law, or the
presence of which in some quantity requires investigation, notification or
remediation under any Environmental Law.
"INDEMNIFIED PARTIES" has the meaning given to it in Section 6.2(d).
"INDEMNIFIED LIABILITIES" has the meaning given to it in Section 6.2(d).
"INDEX PERCENTAGE CHANGE" has the meaning given to it in Section 9.1(f).
"INTELLECTUAL PROPERTY" means (a) all inventions and discoveries (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances,
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continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrights and all applications, registrations and renewals in connection
therewith, (d) all know-how, trade secrets, whether patentable or unpatentable
and whether or not reduced to practice (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
process and techniques, technical data, designs, drawings, specifications,
pricing and cost information and business and marketing plans and proposals),
(e) all computer software (including data and related documentation) and (f) all
other proprietary rights.
"JOINT PROXY STATEMENT" has the meaning given to it in Section 4.17.
"KNOWLEDGE OF THE BUYER" means the actual personal knowledge of any of the
directors and officers of the Buyer or the Buyer Bank or any of their
Subsidiaries.
"KNOWLEDGE OF THE COMPANY" means the actual personal knowledge of any of
the directors and officers of the Company or the Company Bank or any of their
Subsidiaries.
"LAW" means any code, law, ordinance, rule, regulation, reporting or
licensing requirement, 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, 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, Liens to secure advances from the Federal Home Loan Bank of
Atlanta 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, 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 any Person has taken a security interest with respect
to, on which any Person has placed a Lien with respect to, or which is otherwise
used to secure, any loan made by the Person or any note, account, or other
receivable payable to the Person.
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"MAILING DATE" has the meaning given to in Section 2.4.
"MARKET VALUE" of the Buyer's Stock on any date shall be the closing price
of such stock on the Nasdaq SmallCap Market System (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source), or
if such date is not a trading day, on the last trading day preceding that date.
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided 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 Merger or the other transactions
contemplated by this Agreement, provided 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 market interest rates, real estate markets,
securities markets or other market conditions applicable to banks or thrift
institutions generally, (c) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (d) actions and
omissions of a Person (or any of its Affiliates) taken with the prior informed
consent of the other Person in contemplation of the transactions contemplated
hereby, and (e) the Merger (and the reasonable expenses incurred in connection
therewith) and compliance with the provisions of this Agreement on the operating
performance of the Persons.
"MEASUREMENT PERIOD" has the meaning given to it in Section 9.1(f).
"MERGER CONSIDERATION" has the meaning given to it in Section 2.3(a).
"MERGER" has the meaning given to it in the Background Statement hereof.
"MIXED CASH CONSIDERATION ELECTION AMOUNT" has the meaning given to it in
Section 2.4(a).
"MIXED ELECTION SHARE" has the meaning given to it in Section 2.4(a).
"MIXED STOCK CONSIDERATION ELECTION AMOUNT" has the meaning given to it in
Section 2.4(a).
"NORTH CAROLINA ADMINISTRATOR" means the North Carolina Administrator,
Savings Institutions Division, North Carolina Department of Commerce.
"NORTH CAROLINA COMMISSIONER OF BANKS" means the North Carolina
Commissioner of Banks, North Carolina Department of Commerce.
"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,
administrative agency or Governmental Authority.
"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 company, an association, a joint venture, a
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partnership, an organization, a business, an individual, a trust, a Governmental
Authority or any other legal entity.
"PER SHARE CASH CONSIDERATION" has the meaning given to it in Section 2.3.
"PER SHARE STOCK CONSIDERATION" has the meaning given to in Section 2.3.
"PER SHARE MIXED CONSIDERATION" has the meaning given to it in Section 2.3.
"PER SHARE MIXED CASH CONSIDERATION" has the meaning given to it in Section
2.3.
"PER SHARE MIXED STOCK CONSIDERATION" has the meaning given to it in
Section 2.3.
"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
Person, does not include any Loan Collateral not yet foreclosed and conveyed to
the Person 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 4.17.
"REGULATORY AUTHORITIES" means, collectively, the Federal Trade Commission,
the United States Department of Justice, the Federal Reserve Board, the North
Carolina Administrator, the North Carolina Commissioner of Banks, the FDIC, the
National Association of Securities Dealers and the SEC, and all other regulatory
agencies having jurisdiction over the parties hereto and their respective
Affiliates.
"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 Affiliates 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 MEETINGS" has the meaning given to it in Section 4.17.
"SNL INDEX" has the meaning given to it in Section 9.1(f).
"STOCK ADJUSTMENT" has the meaning given to it in Section 2.3(d).
"STOCK ELECTION AMOUNT" has the meaning given to it in Section 2.4(a).
"STOCK ELECTION SHARES" has the meaning given to it in Section 2.4(a).
"STOCK PERCENTAGE CHANGE" has the meaning given to it in Section 9.1(f).
"SUBSIDIARY" means, with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, is controlled by
such Person.
"SUPERIOR PROPOSAL" means a bona fide, written and unsolicited proposal or
offer (including a new or solicited proposal received by the Company after
execution of this Agreement from a person whose initial contact with the Company
may have been solicited by
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the Company or its representatives prior to the execution of this Agreement)
made by any person or group (other than an Affiliate of the Company) with
respect to an Acquisition Proposal on terms which the Board of Directors of the
Company determines in good faith (based on the advice of independent financial
advisors and outside legal counsel), to be superior to the transactions
contemplated hereby, taking into consideration all elements of the transactions
contemplated hereby including, without limitation, the non-taxable element of
such transactions.
"SURVIVING HOLDING COMPANY" has the meaning given to it in Section 2.1(a).
"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, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is required
to be filed or Tax is required to be paid.
"TOTAL CASH MERGER CONSIDERATION" has the meaning given to it in Section
2.3.
"TOTAL STOCK MERGER CONSIDERATION" has the meaning given to it in Section
2.3.
"UPWARD INDEX PERCENTAGE CHANGE" has the meaning given to it in Section
9.1(f).
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1. THE MERGER.
(a) The Merger. On the terms and subject to the conditions of this
Agreement, the Plan of Merger in respect of the Merger, which shall be
substantially in the form attached hereto as EXHIBIT A, and North 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 (as defined below) of the Merger 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 6.2(b) and the Xxxxxxx
Employment Agreement, from and after the Effective Time of the Merger, until
successors or additional directors are duly elected or appointed in accordance
with applicable law, (i) the directors of the Buyer at such Effective Time shall
be the directors of the Surviving Holding Company, and (ii) the officers of the
Buyer at such Effective Time shall be the officers of the Surviving Holding
Company.
(d) 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
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(including without limitation the above-described Plan of Merger) and (ii) the
Merger and the other transactions contemplated hereby.
(e) Effective Time. The Merger shall become effective on the date and at
the time of filing of the related Articles of Merger, in the form required by
and executed in accordance with North Carolina Law, or at such other time
specified therein. The date and time when the Merger shall become effective is
herein referred to as the "EFFECTIVE TIME" of the Merger.
(f) Filing of Articles of Merger. At the Closing, the Buyer and the Company
shall cause the Articles of Merger (containing the above-referenced Plan of
Merger) in respect of the Merger to be executed and filed with the Secretary of
State of North Carolina, as required by North Carolina Law, and shall take any
and all other actions and do any and all other things to cause the Merger to
become effective as contemplated hereby.
2.2 COMPANY SHARES.
(a) Each share of the Company's capital stock (the "COMPANY SHARES"), no
par value per share, issued and outstanding to Persons, except for Company
Shares held by the Buyer and its Affiliates immediately prior to the Effective
Time of the Merger (other than shares held in a fiduciary capacity or as a
result of debts previously contracted), shall, by virtue of the Merger and
without any action on the part of the holders thereof, be canceled and converted
at such 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 Merger and without any action on
the part of the holder thereof, shall at the Effective Time of the Merger 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) Each Company Share in the Community Savings Bank, Inc. Management
Recognition Plan and Trust at the Effective Time that has not been granted to a
participant in such plan shall be canceled without any conversion thereof, and
no payment shall be made with respect thereto.
(d) Notwithstanding anything contained in this Section 2.2 to the contrary,
any Company Shares held in the treasury of the Company immediately prior to the
Effective Time of the Merger shall be canceled without any conversion thereof,
and no payment shall be made with respect thereto.
(e) From and after the Effective Time of the Merger, 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 of
the Merger. If, after such Effective Time, certificates representing Company
Shares are presented to the Surviving Holding Company, they shall be canceled,
and exchanged and converted into the Merger Consideration as provided for
herein.
2.3 MERGER CONSIDERATION.
(a) Subject to Sections 2.2, 2.4, 2.5 and 2.6, at the Effective Time of the
Merger, the holders of Company Shares outstanding at such Effective Time, other
than the Buyer and its
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Affiliates, shall be entitled to receive, and the Buyer shall pay or issue and
deliver, in the aggregate, (i) 1.30275 shares of the Buyer's Stock for each
Company Share plus an amount equal to $16.20 in cash for each such Company Share
(the "PER SHARE MIXED CONSIDERATION"), (ii) 2.6055 shares of Buyer's Stock for
each Company Share (the "PER SHARE STOCK CONSIDERATION"), or (iii) an amount
equal to $32.40 in cash for each such Company Share (the "PER SHARE CASH
CONSIDERATION"). The foregoing consideration, collectively and in the aggregate,
shall be referred to herein as the "MERGER CONSIDERATION."
(b) Subject to the allocation provisions of Section 2.4, each holder of a
Company Share may elect to receive the Per Share Mixed Consideration, the Per
Share Stock Consideration or the Per Share Cash Consideration for each such
Company Share; provided, (i) that the aggregate number of shares of Buyer Stock
(excluding fractions of Company Shares issued or not issued pursuant to Section
2.3(c) as a result of rounding) paid as the Merger Consideration shall be
2,089,302 shares (subject to equitable adjustment for any stock dividend, stock
split or other stock payment by the Buyer and exercises of Company Options after
the date hereof but prior to the Effective Time), subject to adjustment so that
the amount of the Merger Consideration paid in shares of the Buyer's Stock shall
not be less than the amount (currently 40%) necessary to qualify the Merger as a
reorganization under Section 368 of the Code, as determined by the Company at or
immediately after the Effective Time upon consultation with its independent
accountants and counsel; and (ii) that the aggregate cash with respect to which
the Per Share Mixed Consideration and the Per Share Cash Consideration shall be
paid as Merger Consideration shall be $25,980,961 subject to equitable
adjustment to reflect exercises of Company Options and subject to adjustment so
that, if the amount of the Merger Consideration paid in shares of the Buyer's
Stock is adjusted as provided in Section 2.3(b)(i) to qualify the Merger as a
reorganization under Section 368 of the Code, the aggregate amount of cash paid
as the Merger Consideration shall be adjusted so that the aggregate value of the
Merger Consideration paid after such adjustment is equal to the aggregate value
of the Merger Consideration which would have been paid in the absence of such
adjustment. Such amount of the Buyer's Stock paid as Merger Consideration shall
be referred to in this Agreement as the "TOTAL STOCK MERGER CONSIDERATION," and
such amount of cash paid as Merger Consideration shall be referred to as the
"TOTAL CASH MERGER CONSIDERATION."
(c) No fractional shares of the Buyer's Stock shall be issued or delivered
in connection with the Merger. Instead, the number of shares of Buyer's Stock to
which a holder of the Company Shares is entitled to receive pursuant to this
Article II shall be rounded to the nearest whole share with 0.5 share rounded up
to the nearest whole share.
(d) In the event the Buyer or Company changes the number of shares of the
Buyer's Stock or Company's Shares issued and outstanding prior to the Effective
Time of the Merger 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 such Effective Time, the Per
Share Mixed Consideration and the Per Share Stock Consideration shall each be
equitably adjusted to reflect such change.
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2.4 ELECTION AND ALLOCATION PROCEDURES.
(a) Election.
(i) An election form ("ELECTION FORM"), together with
the other transmittal materials described in Section 2.6, shall be
mailed as soon as reasonably practicable after the Effective Time to each holder
of Company Shares of record at the Effective Time. Such date of mailing shall be
referred to hereinafter as the "MAILING DATE." Each Election Form shall provide
that a holder (or the beneficial owner through appropriate and customary
documentation and instruction) of Company Shares will receive the Per Share
Mixed Consideration unless such holder (or the beneficial owner through
appropriate and customary documentation and instruction) elects to receive the
Per Share Cash Consideration or the Per Share Stock Consideration with respect
to all or any of such holder's Company Shares. Company Shares as to which no
election for Per Share Stock Consideration or Per Share Cash Consideration is
made shall be herein referred to as the "MIXED ELECTION SHARES"; Company Shares
as to which the Per Share Cash Consideration election is made shall be referred
to as the "CASH ELECTION SHARES"; and Company Shares as to which the Per Share
Stock Consideration election is made shall be referred to as the "STOCK ELECTION
SHARES". In addition, all Dissenting Shares shall be deemed Cash Election
Shares. The "CASH ELECTION AMOUNT" shall be equal to the Per Share Cash
Consideration multiplied by the total number of Cash Election Shares plus the
amount of the Per Share Mixed Consideration consisting of cash multiplied by the
total number of Mixed Election Shares (the "MIXED CASH CONSIDERATION ELECTION
AMOUNT"). The "STOCK ELECTION AMOUNT" shall be equal to the Per Share Stock
Consideration multiplied by the total number of Stock Election Shares plus the
amount of the Per Share Mixed Consideration consisting of Buyer's Stock
multiplied by the total number of Mixed Election Shares (the "MIXED STOCK
CONSIDERATION ELECTION AMOUNT").
(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 Date 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 converted into the Per Share Mixed Consideration as set
forth in Section 2.4(b) and shall be deemed to be Mixed Election Shares.
(iii) The Buyer shall make available one or more Election
Forms as may be reasonably requested by all persons who become holders (or
beneficial owners) of Company Shares between the Mailing Date and the close of
business on the business day prior to the Election Deadline, and the Buyer shall
provide to the Exchange Agent all information reasonably necessary for it to
perform as specified herein.
(iv) Any such election shall have been properly made
only if the Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall be deemed
properly completed only if accompanied by one or more
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certificates (or customary affidavits and indemnification regarding the loss or
destruction of such certificates or the guaranteed delivery of such
certificates) representing all Company Shares covered by such Election Form,
together with duly executed transmittal materials included with the Election
Form. Any Election Form may be revoked or changed by the person submitting such
Election Form (or the beneficial owner of the shares covered by such Election
Form through appropriate and customary documentation and instruction) at or
prior to the Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline and no other valid election is made, the Company Shares
represented by such Election Form shall be Mixed Election Shares. Subject to the
terms of this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. Neither the Buyer nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
(b) Allocation. As soon as reasonably practicable after the Effective Time
of the Merger, the Buyer shall cause the Exchange Agent to allocate the Merger
Consideration among the holders of Company Shares, which shall be effected by
the Exchange Agent as follows:
(i) Each Mixed Election Share shall be converted into
the right to receive an amount of cash and a number of shares of Buyer's Stock
equal to the Per Share Mixed Consideration.
(ii) If the Total Cash Merger Consideration is greater
than the aggregate Cash Election Amount or if the Total Stock Merger
Consideration is less than the aggregate Stock Election Amount, then:
(A) each Cash Election Share shall be
converted into the right to receive an amount of cash equal to
the Per Share Cash Consideration; and
(B) each Stock Election Share shall be
converted into the right to receive (I) an amount in cash
equal to the Total Cash Merger Consideration less the
aggregate Cash Election Amount divided by the total number of
Stock Election Shares, and (II) a number of shares of the
Buyer's Stock equal to the Total Stock Merger Consideration
less the aggregate Mixed Stock Consideration Election Amount
divided by the total number of Stock Election Shares.
(iii) If the Total Cash Merger Consideration is less than
the Cash Election Amount or if the Total Stock Merger Consideration is
greater than the aggregate Stock Election Amount, then:
(A) each Stock Election Share shall be converted
into the right to receive the Per Share Stock Consideration;
and
(B) each Cash Election Share shall be
converted into the right to receive (I) an amount in cash
equal to the Total Cash Merger Consideration less
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the aggregate Mixed Cash Consideration Election Amount
divided by the total number of Cash Election Shares, and
(II) a number of shares of the Buyer's Stock equal to the
Total Stock Merger Consideration less the aggregate Stock
Election Amount divided by the total number of Cash Election
Shares.
2.5 CLOSING PAYMENT. At the Effective Time of the Merger or as soon
thereafter as is reasonably practicable, the holders of the Company Shares shall
surrender the certificates representing such shares to the Buyer and in exchange
therefor, the Buyer shall issue and deliver to each such holder certificates
representing the number of shares of the Buyer's Stock to which such shareholder
is entitled hereunder and cash payments to which such holder is entitled
hereunder. The Buyer shall not be obligated to deliver any of such shares of the
Buyer's Stock or cash payments until such holder surrenders the certificates
representing such holder's Company Shares.
2.6 EXCHANGE PROCEDURES.
(a) After the Effective Time of the Merger, the Buyer shall
cause the exchange agent selected by the Buyer (the "EXCHANGE AGENT"), subject
to the reasonable satisfaction of the Company and which may be an Affiliate of
the Buyer, 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 shares of the Company
prior to such Effective Time shall pass, only upon proper delivery of such
certificates to the Exchange Agent). After such Effective Time, each holder of
Company Shares issued and outstanding at such Effective Time (other than any of
such shares held by the Buyer or any Affiliate thereof or canceled pursuant to
Section 2.2(c) or (d)) 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. The Buyer shall not be
obligated to deliver any of such payments in cash or stock until such holder
surrenders the certificate(s) representing such holder's Company Shares. The
certificate(s) so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither the
Buyer nor the Exchange Agent shall be liable to any holder of Company Shares for
any amounts paid or properly delivered in good faith to a public official
pursuant to any applicable abandoned property Law.
(b) To the extent permitted by applicable Law, former
shareholders of record of the Company shall be entitled to vote after the Total
Stock Merger Consideration has been allocated pursuant to the provisions of this
Article at any meeting of the Buyer's shareholders the number of whole shares of
the Buyer's Stock into which their respective Company Shares are converted
pursuant to the 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 of the Merger, the
declaration shall include dividends or other distributions on all shares of the
Buyer's Stock issuable pursuant to this Agreement, but beginning at such
Effective Time no dividend or
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other distribution payable to the holders of record of the Buyer's Stock as of
any time subsequent to such Effective Time of the Merger shall be delivered to
the holder of any certificate representing any of the Company Shares issued and
outstanding at such 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 stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who properly
shall have demanded appraisal for such shares in accordance with North Carolina
Law (collectively, the "DISSENTING SHARES") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
instead shall be entitled to receive payment of the appraised value of such
shares held by them in accordance with the provisions of North Carolina Law,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or otherwise lost their rights
to appraisal of such shares under North Carolina Law shall thereupon be deemed
to have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration upon surrender in the manner provided in Section 2.6 of the
certificate or certificates that, immediately prior to the Effective Time,
evidenced such shares. The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any shares of Company Shares, attempted
withdrawals of such demands for appraisal or any other instruments served
pursuant to North Carolina Law and received by the Company relating to
shareholders' rights of appraisal, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands under North Carolina
Law consistent with the obligations of the Company thereunder. The Company shall
not, except with the prior written consent of the Buyer, (x) make any payment
with respect to such demand, (y) offer to settle or settle any demand for
appraisal or (z) waive any failure to timely deliver a written demand for
appraisal or timely take any other action to perfect appraisal rights in
accordance with North Carolina Law.
2.8 COMPANY STOCK OPTIONS.
(a) At the Effective Time of the Merger, each option or other right to
purchase Company Shares pursuant to stock options ("COMPANY OPTIONS") granted by
the Company under its Benefit Plans that are outstanding at the Effective Time
of the Merger shall be converted into and become rights with respect to the
Buyer's Stock, and the Buyer shall assume each Company Option, in accordance
with the terms of the applicable Benefit Plan of the Company and the stock
option agreement by which such Company Option is evidenced, except that from and
after such Effective Time: (i) the Buyer and its compensation committee shall be
substituted for the Company and the compensation committee of its board of
directors (including if applicable, the entire Board of Directors of the
Company) administering such Benefit Plan or Plans of the Company; (ii) the
Company Options assumed by the Buyer may be exercised solely for shares of the
Buyer's Stock; (iii) the number of shares of the Buyer's Stock subject to such
14
converted Company Options shall be equal to the number of Company Shares subject
to such Company Options immediately prior to the Effective Time multiplied by
the Per Share Stock Consideration, rounded to the next highest share; (iv) the
per-share exercise price under each such converted Company Option shall be
adjusted by dividing the exercise price of the Company Option immediately prior
to the Effective Time by the Per Share Stock Consideration, rounded down to the
nearest cent; and (v) all unvested Company Options held by non-employee
directors of the Company shall be deemed to be automatically vested.
(b) In addition, notwithstanding clauses (ii), (iii) and (iv) of Section
2.8(a), each assumed Company Option that is an "incentive stock option" shall be
adjusted as required by Section 424 of the Internal Revenue Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of the
Internal Revenue Code.
(c) As soon as practicable after the Effective Time of the Merger, the
Buyer shall deliver to each holder of an assumed Company Option who remains
employed by the Buyer an appropriate notice setting forth such participant's
rights pursuant thereto, and the grants pursuant to such options shall continue
in effect on substantially the same terms and conditions (subject to the
adjustments required by the above subsection (a) after giving effect to the
Merger), and the Buyer shall comply with the terms of the assumed Company
Options to ensure, to the extent required by, and subject to the provisions of,
such options, that the Company Options that qualified as incentive stock options
prior to the Effective Time of the Merger continue to qualify as incentive stock
options after such Effective Time. At or prior to the Effective Time of the
Merger, and at all times thereafter, the Buyer shall have reserved a sufficient
number of shares of the Buyer's Stock for issuance upon exercise of the Company
Options assumed by it in accordance with this Section 2.8. The Buyer agrees to
file as promptly as practicable, and in no event later than 60 days, after the
Effective Time, a registration statement on Form S-8 covering the shares of the
Buyer's Stock issuable pursuant to such options.
(d) Following the Effective Time of the Merger, in the event of any Stock
Adjustment by the Buyer, or any consolidation or merger of the Buyer with or
into any other entity, or the sale or transfer of all or substantially all of
the Buyer's assets, the rights of the holders of outstanding Company Options
shall be appropriately adjusted so that such holders will be in substantially
the same position as if their options had been exercised immediately before such
corporate action or transaction.
ARTICLE III
THE CLOSING
3.1 CLOSING. The Closing of the Merger shall take place at the offices of
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P. in Raleigh, North
Carolina as soon as reasonably practical after all conditions to Closing have
been met, or on such other date or at such other location as the Buyer and the
Company may mutually agree (such date, the "CLOSING DATE"). At the Closing, the
parties will execute, deliver and file all documents
15
necessary to effect the transactions contemplated with respect to the Merger,
including the Articles of Merger in respect of the Merger.
3.2 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 8.3;
(b) the Xxxxxxx Employment Agreement; and
(c) all other documents, certificates and instruments required hereunder to
be delivered to the Buyer, or as may reasonably be requested by the Buyer at or
prior to the Closing.
3.3 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 8.2;
(b) the Xxxxxxx Employment Agreement; and
(c) all other documents, certificates and instruments required hereunder to
be delivered to the Company, or as may reasonably be requested by the Company at
or prior to the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule (the "COMPANY'S
DISCLOSURE SCHEDULE"), the Company represents and warrants to the Buyer that the
statements contained in this ARTICLE IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
4.1 ORGANIZATION, STANDING AND POWER.
(a) The Company is a bank holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956, as amended, and the Company Bank is a stock savings bank under North
Carolina Law. The Company Bank is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and subject
to dollar limits under such Act, all deposits in the Company Bank are fully
insured by the FDIC to the extent permitted by Law.
(b) Each of the Company and its Subsidiaries is either a bank or a
corporation, duly organized, validly existing and in good standing under the
Laws of the State of North Carolina. Each of the Company and its Subsidiaries
has the corporate or other applicable power and
16
authority to carry on, in all Material respects, its businesses as now conducted
and to own, lease and operate its Assets. Each of the Company and its
Subsidiaries 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 for such
jurisdictions in which the failure to be so qualified or licensed could not
reasonably be expected to have a Material Adverse Effect on the Company.
4.2 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 other documents contemplated hereby and
the consummation of the transactions contemplated herein, including the Merger,
have been duly and validly authorized by all necessary corporate action (and by
Closing, all such shareholder action) in respect thereof on the part of the
Company. The number of members of the Company's board of directors required by
the Company's articles of incorporation so that the approval of 75% of the
outstanding shares of the Company's voting stock is not required under the
Company's articles of incorporation have approved the execution, delivery and
performance of this Agreement and the Company's obligations under this Agreement
and the other documents contemplated hereby and the consummation of the
transactions contemplated herein. 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 of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of the articles of incorporation,
charter, bylaws or any other similar governing document of the Company or any of
its Subsidiaries, 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, except as could not reasonably be expected
to have a Material Adverse Effect on the Company, or (iii) subject to obtaining
the requisite Consents referred to in Section 8.1(b) of this Agreement, violate
any Law or Order applicable to the Company or any of its Subsidiaries 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 Company of the Merger and the other transactions contemplated in this
Agreement.
17
4.3 CAPITAL STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of (a) 20,000,000
shares of common stock, no par value per share, of which 1,616,483 shares are
issued and outstanding as of the date of this Agreement, and (b) 5,000,000
shares of Preferred Stock, no par value per share, none of which is issued and
outstanding, and except for such 1,616,483 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 100,000 shares of
common stock, no par value per share, of which 1,000 shares are issued and
outstanding as of the date of this Agreement and are owned and held by the
Company, and except for such 1,000 shares of common stock, there are no shares
of capital stock or other equity securities of the Company Bank outstanding.
Section 4.3 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.
(b) All of the issued and outstanding shares of capital stock of the
Company and its Subsidiaries are duly and validly issued and outstanding and are
fully paid and nonassessable except to the extent otherwise required by
applicable banking Laws. 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. Except as
set forth on Section 4.3 of the Company's Disclosure Schedule, no equity
securities of any Subsidiaries of the Company are or may become required to be
issued (other than to the Company or any of its Subsidiaries) by reason of any
Rights, and there are no Contracts by which the Company or any Subsidiary of the
Company is bound to issue (other than to the Company or any of its Subsidiaries)
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 any Subsidiary of the Company (other than to the Company or any of its
Subsidiaries). There are no equity securities reserved for any of the foregoing
purposes, and there are no Contracts relating to the rights of the Company or
any of its Subsidiaries to vote or to dispose of any shares of the capital stock
of any Subsidiary of the Company.
4.4 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed and made available to the Buyer all forms,
reports, and documents required to be filed by the Company with the SEC since
December 31, 1998 (collectively, the "COMPANY SEC REPORTS"). The Company 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 Company SEC Reports or necessary in order to make the
statements in such Company SEC Reports, in light of the circumstances under
which they were made, not misleading. None of the Company's Subsidiaries is
required to file any forms, reports, or other documents with the SEC.
(b) Each of the Company Financial Statements (including, in each case, any
related notes) contained in the Company SEC Reports, including any Company SEC
Reports filed after the date of this Agreement until the Effective Time of the
Merger, 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
18
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements, or, in the case of unaudited statements,
as permitted by Form 10-QSB of the SEC), and fairly presented or will fairly
present the consolidated financial position of the Company 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).
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any Liabilities that could reasonably be expected to have a
Material Adverse Effect on the Company, except Liabilities that are accrued or
reserved against in the consolidated balance sheets of the Company as of June
30, 2001, included in the Company Financial Statements or reflected in the notes
thereto. Neither the Company nor any of its Subsidiaries has incurred or paid
any Liability since June 30, 2001, except for (a) such Liabilities incurred or
paid in the ordinary course of business consistent with past business practice
and (b) Liabilities that could not reasonably be expected to have a Material
Adverse Effect on the Company. 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, except as could not reasonably be expected
to have a Material Adverse Effect on the Company.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 2001, (i) there
have been no events, changes, or occurrences that have had, or could reasonably
be expected to have, a Material Adverse Effect on the Company, and (ii) each of
the Company and its Subsidiaries has conducted in all Material respects its
respective businesses in the ordinary and usual course (excluding the incurrence
of expenses in connection with this Agreement and the transactions contemplated
hereby).
4.7 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, 2000, and, to the Knowledge of the Company, 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 that could reasonably be expected to have a Material Adverse Effec t on
the Company, 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 Affiliates 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 Material Taxes due or to become due for the
Company or any of its Affiliates 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.
19
(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, except for any such instances of noncompliance
and such omissions as could not reasonably be expected to have a Material
Adverse Effect on the Company.
(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 Material 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 ending after December
31, 2000.
(h) Neither the Company nor any of its Subsidiaries has filed any consent
under Section 341(f) of the Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of the Buyer, which consent will
not be unreasonably withheld.
(j) 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.
4.8 ASSETS. Each of the Company and its Subsidiaries has good and
marketable title, free and clear of all Liens, to all of its 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. Except as could not reasonably be expected to have a Material Adverse
Effect on the Company, all tangible properties used in the businesses of the
Company and its Subsidiaries are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with past
practice. Except as could not reasonably be expected to have a Material Adverse
Effect on the Company, all Material 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 its 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
20
its Subsidiaries include all Assets required to operate in all Material respects
their businesses taken as a whole as presently conducted.
4.9 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 and Liens
that could not reasonably be expected to have a Material Adverse Effect on the
Company. 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 or municipal securities, since June 30, 2001, there
has been no significant deterioration or Material adverse change in the quality,
or any Material decrease in the value, of the securities portfolio of the
Company and its Subsidiaries, taken as a whole.
4.10 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, each of the Company and its
Subsidiaries, their respective facilities and properties, and their respective
Loan Collateral are, and have been, in compliance with all Environmental Laws,
except those violations that could not reasonably be expected to have a Material
Adverse Effect on the Company.
(b) To the Knowledge of the Company, there is no Litigation pending or
threatened before any court, governmental agency, or authority, or other forum
in which any of the Company and its Subsidiaries or any of their respective
facilities or properties 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 their facilities or properties,
except for such Litigation pending or threatened that could not reasonably be
expected to have a Material Adverse Effect on the Company.
(c) To the Knowledge of the Company, there is no Litigation pending or
threatened before any court, governmental agency or authority or other forum in
which any of its 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, except for such Litigation pending or threatened that could not
reasonably be expected to have a Material Adverse Effect on the Company.
(d) To the Knowledge of the Company, no facts exist that provide a
reasonable basis for any Litigation of a type described in subsections (b) or
(c), except such as could not reasonably be expected to have a Material Adverse
Effect on the Company.
(e) To the Knowledge of the Company, during and 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
21
facility or property, 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,
except such as could not reasonably be expected to have a Material Adverse
Effect on the Company.
4.11 COMPLIANCE WITH LAWS. Each of the Company and its Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its Material
Assets and to carry on, in all Material respects, its business as now conducted,
except for those Permits the absence of which could not reasonably be expected
to have a Material Adverse Effect on the Company, and there has occurred no
Default under any such Permit, other than Defaults that could not reasonably be
expected to have a Material Adverse Effect on the Company. None of the Company
or its Subsidiaries: (a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
violations that could not reasonably be expected to have a Material Adverse
Effect on the Company (provided that this clause (a) shall not apply to
Environmental Laws, which are covered in Section 4.10 above); or (b) 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 (i) 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, except where such noncompliance could not
reasonably be expected to have a Material Adverse Effect on the Company, (ii)
threatening to revoke any Permits, except where the revocation of which could
not reasonably be expected to have a Material Adverse Effect on the Company, 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 Materially 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.
4.12 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 agreement, Contract, or other agreement or understanding
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,
threatened, or to the Knowledge of the Company, 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.
4.13 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 with the applicable terms
of ERISA, the Code, and any other applicable Laws, except as could not
reasonably be expected to have a Material Adverse Effect on the Company.
(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)). Each "employee pension
benefit plan," as defined in Section 3(2) of
22
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
4.13 of the Company's Disclosure Schedule.
(d) 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, 1994, (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 three (3) most recent plan years, and (iv) the
most recent summary plan descriptions and any Material modifications thereto.
(e) 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, there is no
circumstance that will or could reasonably be expected to result in revocation
of any such favorable determination letter or in such Plan's failure to be so
qualified. 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, to
the Knowledge of the Company, 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 that could reasonably
be expected to have a Material Adverse Effect on the Company. There is no
Material Litigation pending or, to the Knowledge of the Company, threatened
relating to any Company ERISA Plan.
(f) Neither the Company nor any of its Affiliates 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 Affiliates to a Material tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in amounts
that could reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company or any of its Affiliates nor 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 Affiliates to any direct or indirect Liability
(by indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other
duty under ERISA, where such Liability could reasonably be expected to have a
Material Adverse Effect on the Company. 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 Affiliates that is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans, except where any Liability with respect to such representation or
disclosure could not reasonably be expected to have a Material Adverse Effect on
the Company.
(g) Neither the Company nor any of its Affiliates maintains or has ever
maintained a Company Pension Plan.
23
(h) Neither the Company nor any of its Affiliates has any Material
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.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any Material payment (including without limitation severance,
unemployment compensation, golden parachute, or otherwise) becoming due to any
director or any employee of the Company or it Affiliates from the Company or any
of its Affiliates under any Company Benefit Plan or otherwise, (ii) Materially
increase any benefit otherwise payable under any Company Benefit Plan, or (iii)
result in any acceleration of the time of any Material payment or vesting of any
Material benefit.
4.14 MATERIAL 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 Reserve or Federal Home Loan Bank advances of
depository institution Subsidiaries, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), and (iii) any
other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-KSB filed by the Company with the SEC as of the date of
this Agreement that has not been filed or incorporated by reference as an
exhibit to the Company's Form 10-KSB filed for the fiscal year ended December
31, 2000, or in another SEC Document and identified to the Buyer (together with
all Contracts referred to in Sections 4.8 and 4.13(a) of this Agreement, the
"COMPANY CONTRACTS"). With respect to each Company Contract, except as could not
reasonably be expected to have a Material Adverse Effect on the Company: (i) the
Contract is in full force and effect; (ii) none of the Company or its
Subsidiaries is in Default 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, in Default in any respect, or has repudiated or waived any
provision thereunder. Except for Federal Reserve and 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.
4.15 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or against any Asset, employee benefit plan, interest, or right of
any of them, except as could not reasonably be expected to have a Material
Adverse Effect on the Company, nor are there any Orders of any Regulatory
Authorities, other Governmental Authorities, or arbitrators outstanding against
any the Company or its Subsidiaries, except as could not reasonably be expected
to have a Material Adverse Effect on the Company. 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.
4.16 REPORTS. Since December 31, 1998, or the date of organization if
later, each of the Company and its Subsidiaries has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities, except
failures to file that could not reasonably be expected to have a
24
Material Adverse Effect on the Company. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied with all applicable Laws, except noncompliance that
could not reasonably be expected to have a Material Adverse Effect on the
Company.
4.17 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. Subject to the accuracy
of the representations contained in Section 5.15, the information supplied by
the Company or its Subsidiaries for inclusion in the registration statement (the
"REGISTRATION STATEMENT") covering the 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 joint proxy statement/prospectus to be
sent to the shareholders of the Company and the Buyer to consider, at special
meetings (the "COMPANY SHAREHOLDER MEETINGS"), the Merger (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"JOINT PROXY STATEMENT") will not, on the date the Joint Proxy Statement is
first mailed to shareholders, at the time of each of the Company Shareholder
Meetings and at the Effective Time of the Merger, 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 of the Merger any
event relating to the Company or its Subsidiaries or any of their Affiliates,
officers or directors 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 Joint Proxy Statement, the Company will promptly inform the
Buyer. The Joint 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 Company makes no representation or warranty
with respect to any information supplied by the Buyer and its Subsidiaries and
Affiliates that is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Registration Statement or the Joint
Proxy Statement.
4.18 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of the
Company, none of the Company or any of its Subsidiaries has taken or agreed to
take any action, that could not reasonably be expected to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
Materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 8.1(b) of this Agreement.
4.19 STATE TAKEOVER LAWS. Each of the Company and its Subsidiaries has
taken all necessary action to exempt the transactions contemplated by this
Agreement from any applicable "moratorium," "control share," "fair price,"
"business combination," or other anti-takeover laws and regulations of the State
of North Carolina.
4.20 CHARTER PROVISIONS. Each of the Company and its Subsidiaries has taken
all action so that the entering into of this Agreement and the consummation of
the Merger 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 any of them 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
25
the Company or any of its Subsidiaries that may be directly or indirectly
acquired or controlled by it.
4.21 RECORDS. Complete and accurate copies of the articles of incorporation
or charter and bylaws of each of the Company and its Subsidiaries 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.
4.22 DERIVATIVES. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for the account of the Company or it Affiliates or their
customers were entered into (i) in accordance with prudent business practices
and all applicable Laws, and (ii) with counterparties believed to be financially
responsible.
4.23 CERTAIN REGULATED BUSINESSES. Neither the Company nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company Act
of 1940, as amended, nor is it a "public utility holding company" as defined in
the Public Utility Holding Company Act of 1935, as amended.
4.24 COMMISSIONS. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Company, any of its
Subsidiaries or any of the Company's shareholders.
26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth on the Buyer's Disclosure Schedule (the "BUYER'S
DISCLOSURE SCHEDULE"), the Buyer represents and warrants to the Company 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 Buyer is a financial holding company registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956, as amended, and/or other applicable Law, and the Buyer Bank is a bank
under North Carolina Law. The Buyer Bank is an "insured institution" as defined
in the Federal Deposit Insurance Act and applicable regulations thereunder, and
subject to dollar limits under such Act, all deposits in the Buyer Bank are
fully insured by the FDIC to the extent permitted by Law.
(b) Each of the Buyer and its Subsidiaries is either a corporation or a
bank duly organized, validly existing and in good standing under the Laws of the
State of North Carolina, and has the corporate power and authority to carry on,
in all Material respects, its businesses as now conducted and to own, lease and
operate its Assets. Each of the Buyer and its Subsidiaries 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 for such jurisdiction, in which the failure to be so
qualified or licensed could not reasonably be expected to have a Material
Adverse Effect on the Buyer.
5.2 AUTHORITY; NO CONFLICTS.
(a) Subject to required regulatory and shareholder 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, including the Merger, have been duly
and validly authorized by all necessary corporate action (and by Closing, all
such shareholder 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).
27
(b) Neither the execution and delivery of this Agreement by the Buyer, nor
the consummation by the Buyer of the transactions contemplated hereby, nor
compliance by the Buyer with any of the provisions hereof will (i) conflict with
or result in a breach of any provision of the articles of incorporation or
bylaws of the Buyer or any of its Subsidiaries, 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, except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer, or (iii)
subject to obtaining the requisite Consents referred to in Section 8.1(b) of
this Agreement, violate any Law or Order applicable to the Buyer or any of its
Subsidiaries 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 of the Merger and the other transactions contemplated in this
Agreement.
5.3 BUYER'S STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Buyer consists of 20,000,000 shares
of common stock, no par value per share, of which 3,622,239 shares are issued
and outstanding as of the date of this Agreement, and except for such shares,
there are no shares of capital stock of the Buyer outstanding. The authorized
capital stock of the Buyer Bank consists of 20,000,000 shares of common stock,
$5.00 par value per share, of which 2,477,651 shares are issued and outstanding
as of the date of this Agreement, and except for such shares, there are no
shares of capital stock of the Buyer Bank outstanding. The Buyer owns all of the
issued and outstanding shares of capital stock of the Buyer Bank and its other
Subsidiaries, and no shares of capital stock of the Buyer Bank or such other
Subsidiaries are owned by any other Person. Section 5.3 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 Subsidiaries.
(b) All of the issued and outstanding shares of capital stock of the Buyer
and its Subsidiaries are duly and validly issued and outstanding and are fully
paid and nonassessable, except to the extent otherwise required by the North
Carolina General Statutes 53-42 or other applicable banking Law. 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 shareholders 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 shareholders of the Buyer.
5.4 SEC FILINGS; BUYER FINANCIAL STATEMENTS.
(a) The Buyer has filed and made available to the Company all forms,
reports, and
28
documents required to be filed by the Buyer with the SEC since December 31, 1998
(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 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).
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Buyer nor any of its
Subsidiaries has any Liabilities that could reasonably be expected to have a
Material Adverse Effect on the Buyer, except Liabilities that are accrued or
reserved against in the consolidated balance sheets of the Buyer as of June 30,
2001, included in the Buyer Financial Statements or reflected in the notes
thereto and except for Liabilities incurred in the ordinary course of business
subsequent to June 30, 2001. Neither the Buyer nor any of its Subsidiaries has
incurred or paid any Liability since June 30, 2001, except for (a) such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice and (b) Liabilities that could not reasonably be expected
to have a Material Adverse Effect on the Buyer. 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, except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 2001, (i) there
have been no events, changes, or occurrences that have had, or could reasonably
be expected to have, a Material Adverse Effect on the Buyer, and (ii) each of
the Buyer and its Subsidiaries has conducted, in all Material respects, its
respective businesses 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.
29
(a) All Tax Returns required to be filed by or on behalf of any of the
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, 2000, and, to the Knowledge of the Buyer, 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 that could reasonably be expected to have a Material
Adverse Effect on the Buyer, 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 Material 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) Each of the Buyer 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, except for any such instances of noncompliance
and such omissions as could not reasonably be expected to have a Material
Adverse Effect on the Buyer.
(e) None of the Buyer 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 Material Liens with respect to Taxes upon any of the
Assets of the Buyer and its Subsidiaries.
(g) There has not been an ownership change, as defined in Code Section
382(g), of the Buyer and its Subsidiaries that occurred during any Taxable
Period in which any of the Buyer and its Subsidiaries has incurred a net
operating loss that carries over to another Taxable Period ending after December
31, 2000.
(h) Neither the Buyer nor any of its Subsidiaries has filed any consent
under Section 341(f) of the Code concerning collapsible corporations.
30
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of the Company, which consent will
not be unreasonably withheld.
(j) Neither the Buyer 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 Buyer 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. Except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer, all
tangible properties used in the businesses of the Buyer and its Subsidiaries are
in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with each of their past practices. Except
as could not reasonably be expected to have a Material Adverse Effect on the
Buyer, all Material Assets held under leases or subleases by any of the Buyer
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
Buyer and its Subsidiaries currently maintain insurance in amounts, scope, and
coverage reasonably necessary for their operations. None of the Buyer 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 Buyer 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 Buyer
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 and those Liens
that could not reasonably be expected to have a Material Adverse Effect on the
Buyer. There are no voting trusts or other agreements or undertakings to which
the Buyer 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 or municipal securities, since June 30, 2001, there
has been no significant deterioration or Material adverse change in the quality,
or any Material decrease in the value, of the securities portfolio of the Buyer
and its Subsidiaries, taken as a whole.
5.10 ENVIRONMENTAL MATTERS.
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(a) To the Knowledge of the Buyer, each of the Buyer and its Subsidiaries,
their respective facilities and properties, and their respective Loan Collateral
are, and have been, in compliance with all Environmental Laws, except those
violations that could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
(b) To the Knowledge of the Buyer, there is no Litigation pending or
threatened before any court, governmental agency, or authority, or other forum
in which any of the Buyer and its Subsidiaries or any of their respective
facilities and properties 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 Buyer or any of its Subsidiaries or any of their facilities or
properties, except for such Litigation pending or threatened that could not
reasonably be expected to have a Material Adverse Effect on the Buyer.
(c) To the Knowledge of the Buyer, there is no Litigation pending or
threatened before any court, governmental agency, or authority, or other forum
in which any of its Loan Collateral (or the Buyer 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, except for such Litigation pending or threatened that could not
reasonably be expected to have a Material Adverse Effect on the Buyer.
(d) To the Knowledge of the Buyer, no facts exist that provide a reasonable
basis for any Litigation of a type described in subsections (b) or (c), except
such could not reasonably be expected to have a Material Adverse Effect on the
Buyer.
(e) To the Knowledge of the Buyer, during and prior to the period of (i)
any of the Buyer's or its Subsidiaries' ownership or operation of any of their
respective current properties, (ii) any of the Buyer's or its Subsidiaries'
participation in the management of any facility of property, or (iii) any of the
Buyer'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, except such as could not reasonably
be expected to have a Material Adverse Effect on the Buyer.
5.11 COMPLIANCE WITH LAWS. Each of the Buyer and its Subsidiaries has in
effect all Permits necessary for it to own, lease, or operate its Material
Assets and to carry on, in all Material respects, its business as now conducted,
except for those Permits the absence of which could not reasonably be expected
to have a Material Adverse Effect on the Buyer, and there has occurred no
Default under any such Permit, other than Defaults that could not reasonably be
expected to have a Material Adverse Effect on the Buyer. None of the Buyer or
its Subsidiaries: (a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for violations that
could not reasonably be expected to
32
have a Material Adverse Effect on the Buyer (provided that this clause (a) shall
not apply to Environmental Laws, which are covered in Section 5.10 above); or
(b) 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 (i) 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, except where such noncompliance could not
reasonably be expected to have a Material Adverse Effect on the Buyer, (ii)
threatening to revoke any Permits, except where the revocation of which could
not reasonably be expected to have a Material Adverse Effect on the Buyer, or
(iii) 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 Materially 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 Buyer 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 agreement, Contract, or other agreement or understanding
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 Buyer,
threatened, or to the Knowledge of the Buyer, is there any activity involving
any of the Buyer'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 Buyer has made available to the Company prior to the execution of
this Agreement correct and complete copies in each case of all Buyer Benefits
Plans.
(b) All Buyer Benefit Plans are in compliance with the applicable terms of
ERISA, the Code, and any other applicable Laws, except as could not reasonably
be expected to have a Material Adverse Effect on the Buyer.
(c) Neither the Buyer 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)). Each "employee pension
benefit plan," as defined in Section 3(2) of ERISA, ever maintained by the Buyer
or its Subsidiaries that was intended to qualify under Section 401(a) of the
Code and with respect to which the Buyer or any of its Subsidiaries has any
Liability, is disclosed as such in Section 5.13 of the Buyer's Disclosure
Schedule.
(d) 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, there is no
circumstance that will or could reasonably be expected to result in revocation
of any such favorable determination letter or in such Plan's failure to be so
33
qualified. 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, to
the Knowledge of the Buyer, 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 that could reasonably be
expected to have a Material Adverse Effect on the Buyer. There is no Material
Litigation pending or, to the Knowledge of the Buyer, threatened relating to any
Buyer ERISA Plan.
(e) Neither the Buyer nor any of its Affiliates 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 Affiliates to a Material tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in amounts that
could reasonably be expected to have a Material Adverse Effect on the Buyer.
Neither the Buyer or any of its Affiliates nor 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 Affiliates to any direct or indirect Liability (by indemnity
or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under
ERISA, where such Liability could reasonably be expected to have a Material
Adverse Effect on the Buyer. 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 Affiliates that is not in accordance with the written
or otherwise preexisting terms and provisions of such plans, except where any
Liability with respect to such representation or disclosure could not reasonably
be expected to have a Material Adverse Effect on the Buyer.
(f) Neither the Buyer nor any of its Affiliates maintains or has ever
maintained a Buyer Pension Plan.
(g) Neither the Buyer nor any of its Affiliates has any Material obligation
for retiree health and retiree life benefits under any of the Buyer Benefit
Plans other than with respect to benefit coverage mandated by applicable Law.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any Material payment (including without limitation severance,
unemployment compensation, golden parachute, or otherwise) becoming due to any
director or any employee of the Buyer or its Affiliates from the Buyer or any of
its Affiliates under any Buyer Benefit Plan or otherwise, (ii) Materially
increase any benefit otherwise payable under any Buyer Benefit Plan, or (iii)
result in any acceleration of the time of any Material payment or vesting of any
Material benefit.
5.14 MATERIAL CONTRACTS. None of the Buyer 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 any Contract or amendment thereto
that would be required to be filed as an exhibit to a Form 10-K filed by the
Buyer with the SEC as of the date of this Agreement that has not been filed or
incorporated by reference as an exhibit to the Buyer's Form 10-K filed for
34
the fiscal year ended December 31, 2000, or in another SEC Document and
identified to the Company.
5.15 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of the Buyer, threatened against the Buyer or any of its
Subsidiaries, or against any Asset, employee benefit plan, interest, or right of
any of them, except as could not reasonably be expected to have a Material
Adverse Effect on the Buyer, nor are there any Orders of any Regulatory
Authorities, other Governmental Authorities, or arbitrators outstanding against
any the Buyer or its Subsidiaries, except as could not reasonably be expected to
have a Material Adverse Effect on the Buyer. 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.
5.16 REPORTS. Since December 31, 1998, or the date of organization if
later, each of the Buyer and its Subsidiaries has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities, except
failures to file that could not reasonably be expected to have a Material
Adverse Effect on the Buyer. As of their respective dates, each of such reports
and documents, including the financial statements, exhibits, and schedules
thereto, complied with all applicable Laws, except noncompliance that could not
reasonably be expected to have a Material Adverse Effect on the Buyer
5.17 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. Subject to the accuracy
of the representations contained in Section 4.17, the information supplied by
the Buyer and 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 and its Subsidiaries for inclusion in the
Joint Proxy Statement will not, on the date the Joint Proxy Statement/Prospectus
is first mailed to shareholders, at the time each of the Shareholder Meetings
and at the Effective Time of the Merger, 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 of the Merger any event
relating to the Buyer or the Buyer Bank or any of their Affiliates, officers or
directors should be discovered by the Buyer or any of its Subsidiaries that
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement, the Buyer or the Buyer Bank will
promptly inform the Company. The Joint Proxy Statement shall comply in all
Material respects with the requirements of the Securities Laws. Notwithstanding
the foregoing, the Buyer makes no representation or warranty 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 Joint Proxy Statement.
5.18 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge
35
of the Buyer, none of the Buyer or any of its Subsidiaries has taken or agreed
to take any action, that could reasonably be expected to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
Materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 8.1(b) of this Agreement.
5.19 COMMISSIONS. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Buyer, any of its
Subsidiaries or any of the Buyer's shareholders.
5.20 DERIVATIVES. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for the account of the Buyer or it Affiliates or their
customers were entered into (i) in accordance with prudent business practices
and all applicable Laws, and (ii) with counterparties believed to be financially
responsible.
5.21 RECORDS. Complete and accurate copies of the articles of incorporation
or charter and bylaws of each of the Buyer and its Subsidiaries have been made
available to the Company. 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 Buyer 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.
ARTICLE VI
COVENANTS
6.1 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 6.1(a) of
the Company's Disclosure Schedule, the Company will not, and it will not permit
its Subsidiaries (including the Company Bank) to, do any of the following
without the prior written consent of the Buyer:
(i) amend its governing documents;
36
(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 4.3 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 (except for regular quarterly cash dividends paid in
accordance with past practice at the rate of $0.115 per share, including
the payment of any quarterly dividend in the amount of $0.115 per share as
is necessary to prevent the Company's shareholders from failing to receive
a quarterly dividend from either the Company or the Buyer during any
particular calendar quarter and except for the dividend described in
Section 8.1(i)), or (C) redeem or otherwise acquire any of its securities;
(iv) (A) incur or assume any long-term debt or issue any debt
securities 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 and except as may be necessary to allow payment
of the dividend described in Section 8.1(i), (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 of $250,000, pledge or otherwise encumber shares of its
capital stock, or (D) mortgage or pledge any of its assets, tangible or
intangible, or create or suffer to exist any Lien thereupon, other than
Liens permitted by the proviso clause in the definition of Liens and Liens
created or existing in the ordinary course of business consistent with past
practice;
(v) except as required by Law or as contemplated herein, adopt or
amend any Benefit Plan;
(vi) grant to any director or executive officer or employee any stock
options or increase in his or her compensation (except in the ordinary
course of business consistent with past practice) or pay or agree to pay to
any such person other than in the ordinary course of business any bonus,
severance or termination payment, specifically including any such payment
that becomes payable upon the termination of such person by it or Buyer
after the Closing; provided, however, that Company may establish a paid
"stay plan" in an amount not to exceed $45,000 in the aggregate, the
distribution of which will be jointly agreed upon by the Buyer and the
Company;
(vii) enter into or amend any employment Contract (including any
termination agreement), except that any automatic renewals contained in
currently existing contracts and agreements shall be allowed and
compensation payable under employment Contracts
37
may be increased in the ordinary course of business consistent with past
practice;
(viii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business, or any other assets 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;
(ix) change or modify any of the accounting principles or practices
used by it or revalue in any Material respect any of its assets, including
without limitation writing down the value of inventory or writing off notes
or accounts receivable other than in the ordinary course of business
consistent with past practices or as required by GAAP or any Regulatory
Authority;
(x) (A) enter into, cancel or modify any Contract (other than loans,
advances, capital contributions or investments permitted by subclause
(iv)(C) of this Section 6.1) other than in the ordinary course of business
consistent with past practices, but not in any event involving an amount in
excess of $10,000; (B) authorize or make any capital expenditure or
expenditures that, individually or in the aggregate, are in excess of
$10,000; or (C) enter into or amend any Contract with respect to any of the
foregoing;
(xi) pay, discharge or satisfy, cancel, waive or modify any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), 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;
(xii) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(xiii) 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; or
(xiv) agree, whether in writing or otherwise, to do any of the
foregoing.
(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 4.2 of the Company's Disclosure Schedule such that such
Contracts shall survive the Merger and not be breached thereby.
(c) Acquisition Proposals. Any offer or proposal by any Person or group
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 divisions of any of the foregoing, or any
proposal or offer to acquire in any manner, directly or indirectly, more than a
thirty percent (30%) equity interest in, or more than thirty percent (30%)
38
of the consolidated assets of, the Company and its Subsidiaries, other than
pursuant to the transactions contemplated by this Agreement, is hereby defined
as an "ACQUISITION PROPOSAL". Unless this Agreement is terminated, the Company
shall not, and shall not permit any of its Subsidiaries to, permit any of their
respective officers, directors, affiliates, representatives or agents to,
directly or indirectly, (a) take any action to solicit, initiate or encourage
any Acquisition Proposal, or (b) 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 and its Subsidiaries and all officers, directors, employees of, and
all investment bankers, attorneys and other advisors and representatives of, the
Company and its Affiliates shall cease doing any of the foregoing.
Notwithstanding the foregoing, the Company or any such Persons may, directly or
indirectly, subject to a confidentiality agreement containing customary terms,
furnish to any party information and access in response to a request for
information or access made incident to an unsolicited written Acquisition
Proposal setting forth a Superior Proposal made after the date hereof and may
participate in discussions and negotiate with such party concerning any written
Superior Proposal made after the date hereof, not recommend shareholder approval
of the Merger and terminate this Agreement as provided in Section 9.1(g)
(provided that neither the Company nor any such Person, after the date hereof,
solicited, initiated or encouraged such Acquisition Proposal), if the board of
directors of the Company shall have determined in its good faith judgment based
upon the written opinion of outside counsel reasonably acceptable to the Buyer
(which shall in any event include Xxxxxx Xxxxxx XxXxxxxx Xxxxxxxx & Xxxxxxx,
L.L.P.) that failing to take such action would violate the directors' fiduciary
duties under applicable law. Unless this Agreement has been terminated, the
board of directors of the Company shall notify the Buyer immediately if any
Acquisition Proposal is received by the Company, or if any information is
requested from, or if any requests for negotiations or discussion is sought to
be initiated or continued with the Company or any such Person and shall in such
notice indicate in reasonable detail the identity of the offeror and the terms
and conditions of such Acquisition Proposal, information request, negotiations
or discussions and shall keep the Buyer promptly advised of all Material
developments that could culminate in the board of directors withdrawing,
modifying or amending its recommendation of the 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
Affiliates.
(d) Shareholder Approval. Subject to Section 6.1(c), the Company will, at
the earliest practicable date, hold a meeting of its shareholders for the
purpose of approving the Merger. In connection with such shareholder meeting,
subject to Section 6.1(c), the Company's board of directors will recommend to
the Company's shareholders such approval.
(e) Affiliates' Letters. Within 60 days of the date hereof, each
shareholder of the Company who is also an officer, director or ten percent
shareholder of the Company and who will become an "affiliate" of the Buyer (as
defined in the Rule 144(a) under the Securities Act of 1933, as amended) as a
result of the Merger shall have executed and delivered a commitment and
39
undertaking in a form reasonably acceptable to Buyer (the "AFFILIATES'
AGREEMENT") relating to restrictions on shares of the Buyer's Stock to be
received by such officers, directors and ten percent shareholders of the Company
pursuant to this Agreement. Certificates for the shares of the Buyer's Stock
issued to such officers, directors and ten percent shareholders shall bear a
restrictive legend (substantially in the form as shall be set forth in the
Affiliates' Agreement) with respect to the restrictions applicable to such
shares.
(f) Loan Loss Reserve. To the extent permitted by GAAP, regulatory
accounting requirements and other applicable Laws, immediately prior to the
Effective Time of the Merger, the Company shall increase its loan loss reserve
to an amount satisfactory to Buyer in its reasonable discretion, provided,
however, that such action by the Company shall not be deemed a default by the
Company of any provision of this Agreement.
(g) Expenses Prior to Effective Time. To the extent permitted by GAAP,
regulatory accounting requirements and other applicable Laws, the Company shall
establish accruals, or make payments for fees, costs and other expenses incurred
in connection with the Merger and other expenses and fees incurred by the
Company and the Company Bank immediately prior to the Effective Time of the
Merger. Such action by the Company shall not be deemed a default hereunder.
(h) Extraordinary Dividend. The Company and the Company Bank shall use
their reasonable best efforts to obtain any consents or non-objections as may be
required for the Company Bank to pay the dividend described in Section 8.3(h).
40
6.2 COVENANTS OF THE BUYER.
(a) Reservation of Shares of the Buyer's Stock. The Buyer shall reserve for
issuance a sufficient number of shares of the Buyer's Stock to cover the
issuances of such stock required hereby.
(b) Directors.
(i) Effective at the Effective Time of the Merger, the Buyer shall
cause 13 of its 19 directors to resign and shall cause Xxxxxxx X. Xxxxxxx
to be appointed as a Class II member and, for a period of at least two
years, Vice Chairman of the board of directors of the Buyer and two other
members of the Company's current board of directors agreed upon by the
Company and Buyer to be appointed as Class I and Class III members of the
board of directors of the Buyer, but conditional upon obtaining any
necessary regulatory approvals. Thereafter, such designated persons shall
be subject to the same nomination and election procedures as the other
directors on the board of the Buyer.
(ii) Subsequent to the Merger, if and when a merger between the
Company Bank and the Buyer Bank is effected with the Buyer Bank as the
surviving corporation, the Buyer shall cause Xxxxxxx X. Xxxxxxx to be
elected or appointed as a member and Vice Chairman of the board of
directors of the Buyer Bank and four other members of the Company's current
board of directors (including the two members other than Xxxxxxx X. Xxxxxxx
appointed or elected to the Buyer's board of directors) mutually agreed
upon by the Company and the Buyer to be appointed or elected as members of
the board of directors of the Buyer Bank, but conditional upon any
necessary regulatory approvals. After the initial appointment or election
of such designated persons, such persons shall be subject to the same
nomination and election procedures as the other directors of the Buyer
Bank's board of directors.
(iii) For service on the Buyer's board of directors and Buyer Bank's
board of directors and for all board and committee services provided to the
Buyer and Buyer Bank, each of the members on the Company's board of
directors who are appointed to the board of directors of the Buyer or Buyer
Bank shall at the Effective Time of the Merger be paid $12,000, except
Xxxxxxx X. Xxxxxxx, Chairman of the Company's board of directors, who shall
be paid $13,200. This amount shall constitute the sole compensation
(excluding reimbursed expenses) payable to such directors for serving on
the board of directors and all board committees of the Buyer and Buyer Bank
during the fiscal year ended December 31, 2002. Thereafter, such members
shall receive the customary fees set by the Buyer's and the Buyer Bank's
board of directors or committees thereof. The Buyer will assume and
maintain for the directors of the Company at the Effective Time of the
Merger, in accordance with their terms, including making future payments,
the Company's deferred compensation (for compensation while a director of
the Company or Company Bank) and retirement plans for the Company Bank's or
Company's directors who were eligible to participate in such plans at the
Effective Time of the Merger.
(iv) The Buyer shall form an advisory board for the Alamance County,
North
41
Carolina market and shall offer to each member of the Company's Board of
Directors (other than those elected or appointed to Buyer's or Buyer Bank's
board of directors) at the Effective Time of the Merger membership on such
advisory board. For services on such advisory board and for their services
in promoting the Company Bank in the Company's local community during the
fiscal year ended December 31, 2002, each member of the Company's board of
directors who is not elected or appointed as a director of the Buyer or
Buyer Bank shall be paid at the Effective Time $12,000. Thereafter, the
members of such advisory board shall receive such fees as are determined by
the Buyer.
(c) Employees.
(i) Except as covered by the Xxxxxxx Employment Agreement, any and all
of the Company's employees will be employed on an "at-will" basis, and
nothing in this Agreement shall be deemed to constitute an employment
agreement with any such person to obligate the Buyer or any Affiliate
thereof to employ any such person 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 person at any time and for
any reason satisfactory to it (subject to the Company's Special Termination
Agreements with Xxxxxxxxxxx X. Xxxxxx, Xxxxxx X. Canada, Xxxxxx Xxxxxxx and
Xxxx X. Xxxxxxxxxx).
(ii) Such Company's employees who continue employment with the Buyer
or any of its Affiliates will be eligible for benefits consistent with
those of existing employees of the Buyer or such Affiliate, 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 one of its Affiliates 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 Affiliates' medical
plans. There shall be no waiting periods applicable to any such Company
employees to participate in such benefits (including applicable insurance
benefits).
(iii) The Buyer or one of its Affiliates shall honor any and all
vacation accrued by the employees of the Company and the Company Bank and
any sick leave up to 90 days, and any such employee who is not retained for
employment by the Buyer shall be paid for all accrued but unused vacation
as of the date of termination of employment.
(iv) If any employee of the Company at the Effective Time of the
Merger who becomes an employee of the Buyer is terminated by the Buyer
within one year after the Effective Time of the Merger, for any reason
other than Cause, death or disability or if any such employee shall
terminate his employment after being required to relocate his or her
principal work location outside of Alamance County, North Carolina or
having his or her base compensation (excluding benefits) Materially reduced
and within one year after the Effective Time of the Merger, such employee
shall receive severance pay equal to
42
two week's pay at his or her current salary for each year of consecutive
service to the Company and/or the Buyer, provided, however that such
severance pay shall not be less than four (4) weeks pay and not more than
twenty-six (26) weeks pay and provided, further, that neither Xxxxxxx X.
Xxxxxxx, any employee who is a party to a Special Termination Agreement (as
described below) nor any employee eligible for retirement who is eligible
for participation in the Buyer's retirement plan at the time of termination
shall receive such severance pay.
(v) Special Termination Agreements. At the Effective Time, the Buyer
shall either assume the obligations of the Special Termination Agreements
with Xxxxxx X. Canada, Xxxxxx Xxxxxxx, Xxxxxxxxxxx X. Xxxxxx and Xxxx X.
Xxxxxxxxxx or negotiate new mutually acceptable special termination
agreements with such persons containing terms not less favorable to such
persons than the terms contained in their current agreements. The Buyer
agrees to allow each such Special Termination Agreement to extend pursuant
to its terms at the first anniversary of such Special Termination Agreement
after the Effective Time.
(vi) Employment Agreement with Xxxxxxx X. Xxxxxxx. At or prior to the
Effective Time, Xxxxxxx X. Xxxxxxx has agreed to terminate his current
employment agreement with the Company and enter into a new employment
agreement with the Buyer substantially in the form of EXHIBIT B, and in the
event that such existing agreement is terminated and such new agreement is
entered into by Xx. Xxxxxxx, the Buyer shall make a lump sum payment to Xx.
Xxxxxxx equal to the following amount: $453,663. The Buyer will enter in to
the Xxxxxxx Employment Agreement at the Effective Time.
(vii) Payment to Xxxxxxx Xxxxxxx. At the Effective Time, in full and
final satisfaction of the Agreement dated January 26, 1993 between Xxxxxxx
Xxxxxxx and Community Federal Savings and Loan Association, the Buyer shall
provide to Xxxxxxx Xxxxxxx (A) a lump sum payment of $24,000 and (B)
coverage under the Buyer's group medical insurance for so long as such
coverage can be provided to Xxxxxxx Xxxxxxx at no greater cost than that
incurred by Buyer for the Buyer's employees (or nearly equivalent coverage
may be provided through another insurance carrier acceptable to Buyer and
Xxxxxxx Xxxxxxx). In addition, the Buyer shall reimburse Xxxxxxx Xxxxxxx'
annual customary and reasonable dues actually paid for membership in the
Alamance Rotary Club for so long as he shall be a member of such Club.
(viii) Employee Stock Ownership Plan. The Employee Stock Ownership
Plan of Community Savings Bank, Inc. shall be terminated as soon as
practicable after the Effective Time.
(ix) Management Recognition Plan. The Community Savings Bank, Inc.
Management Recognition Plan and Trust will be terminated as soon as
practicable after the Effective Time of the Merger and Company Shares held
by such trust on the Effective Time that have not been granted at the
Effective Time of the Merger will be cancelled
43
and retired as of such Effective Time. All shares which have been granted
but which are not vested under such plan shall be deemed vested at the
Effective Time.
(x) 401(k) Plan. Company's 401(k) Plan will be merged into Buyer's
401(k) Plan as soon as practicable after the Effective Time in accordance
with applicable Law. Participants in Company's 401(k) Plan will
automatically become participants in Buyer's 401(k) Plan and will
automatically be vested in their benefits.
(xi) Supplemental Income Agreements. After the Effective Time, the
Buyer will assume and maintain for Xxxxxxx X. Xxxxxxx the two supplemental
income agreements between the Company Bank and Xxxxxxx X. Xxxxxxx in
accordance with their terms, including making future payments.
(d) Directors' and Officers' Insurance and Indemnification.
(i) At its option, the Company may obtain or require the Buyer to
obtain and maintain, or cause the Buyer Bank to obtain and maintain, in
effect for three years from the Closing Date, if available, the current
directors' and officers' liability insurance policies maintained by the
Company or substitute policies of at least the same coverage containing
terms and conditions that are not taken as a whole Materially less
favorable to the insured with respect to matters occurring prior to the
Effective Time of the Merger. Such insurance shall cover all persons and
entities who are currently covered by the Company's existing director's and
officers' liability policy (including all existing directors and officers
of the Company and its Subsidiaries) and shall included coverage for
matters occurring prior to the Effective Time of the Merger.
(ii) From and after the Effective Time of the Merger, the Buyer shall,
or shall cause the Buyer Bank to, indemnify, defend and hold harmless each
person who is now, or who has been at any time before the date hereof or
who becomes before the Effective Time of the Merger, an officer or director
of the Company or any of its Subsidiaries (the "INDEMNIFIED PARTIES")
against all losses, claims, damages, costs, expenses (including reasonable
attorneys' fees), liabilities or judgments or amounts that are paid in
settlement (which settlement shall require the prior written consent of
Buyer, which consent shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, or administrative (each a "CLAIM"), in which an
Indemnified Person is, or is threatened to be made, a party or witness
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any of its Subsidiaries if
such Claim pertains to any matter or fact arising, existing or occurring
before the Effective Time (including without limitation the Merger and the
other transactions contemplated hereby), regardless of whether such Claim
is asserted or claimed before, at or after the Effective Time of the Merger
(the "INDEMNIFIED LIABILITIES"), to the fullest extent permitted by
applicable Law in effect as of the date hereof or as amended applicable to
a time before the Effective Time. Any Indemnified Person wishing to claim
indemnification under this Section 6.2(d)(ii), upon learning of any Claim,
shall notify the Buyer (but the failure so to
44
so notify shall not relieve the Buyer or the Buyer Bank from any liability
that it may have under this Section 6.2(d)(ii), except to the extent such
failure Materially prejudices the Buyer or its Subsidiaries). In the event
of any such Claim, whether arising before, on or after the Effective Time
of the Merger, (1) the Buyer shall have the right to assume the defense
thereof (in which event the Indemnified Parties will cooperate in the
defense of any such matter) and upon such assumption, the Buyer shall not
be liable to any Indemnified Person for any legal expenses of other counsel
or any other expenses subsequently incurred by any Indemnified Person in
connection with the defense therefor, except that if the Buyer elects not
to assume such defense, or counsel for the Indemnified Parties reasonably
advises the Indemnified Parties that there are or may be (whether or not
any have yet actually arisen) issues that raise conflicts of interest
between the Buyer and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them, and the Buyer shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties,
(2) the Buyer shall be obligated pursuant to this paragraph to pay for only
one firm of counsel for all Indemnified Parties (unless counsel for one or
more Indemnified Parties advises his or her client that a conflict exists
between his or her client and one or more other Indemnified Parties, in
which event the fees and expenses of such counsel shall also be paid by the
Buyer) whose reasonable fees and expenses shall be paid promptly as
statements are received, (3) the Buyer shall not be liable for any
settlement effected without its prior written consent (which consent shall
not be unreasonably withheld), and (4) the Buyer shall have no obligation
hereunder to any Indemnified Person when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified
Person in the manner contemplated hereby is prohibited by applicable Law
(it being acknowledged by the parties hereto that in the event of any good
faith dispute about the lawfulness of such indemnification, the Buyer or
the Buyer Bank may place the amounts at issue in escrow pending the final
and nonappealable determination of such dispute). The obligations of the
Buyer and the Buyer Bank pursuant to this Section 6.2(d) are intended to be
enforceable against the Buyer and the Buyer Bank directly by the
Indemnified Parties. The indemnification provided herein shall be in
addition to any indemnification rights that any Indemnified Parties may
have by Law, pursuant to the articles of incorporation or bylaws of the
Company or any of its subsidiaries or pursuant to the terms of any employee
benefit plan or trust for which any Indemnified Party serves as a
fiduciary.
(e) As soon as reasonably practicable after the Effective Time of the
Merger, the Buyer shall implement a dividend policy pursuant to which it would
seek to pay approximately 20% of its annual net earnings to shareholders in the
form of annual cash dividends to the extent the establishment and maintenance of
such policy is consistent with the fiduciary duties of the Buyer's board of
directors, is in the best interest of the Buyer in the business judgment of the
Buyer's board of directors and is consistent with maintaining the Buyer's
well-capitalized status; provided, however, that during the first fiscal year
following the Effective Time of the Merger, the Buyer will pay dividends equal
to the greater of 20% of annual net earnings or $0.20 per share, payable on a
quarterly basis, to the extent permitted by applicable Law and is consistent
with maintaining the Buyer's well-capitalized status. To the extent permitted by
applicable Law,
45
the first such dividend payment shall be made so as to ensure that holders of
the Company Shares will not miss a quarterly dividend payment, and the first
such quarterly dividend payment shall not be less than $0.05 per share.
(f) Shareholder Approval. The Buyer will, at the earliest practicable date,
hold a meeting of its shareholders for the purpose of approving the Merger. In
connection with such shareholder meeting, the Buyer's board of directors will
recommend to the Buyer's shareholders such approval.
6.3 COVENANTS OF BOTH 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 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 Merger to fail to so
qualify.
(b) Notification. Each of the parties 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 6.1(c), the parties
hereto each agree to use their reasonable efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by them under this
Agreement so that the transactions contemplated hereby shall be consummated.
Except for events that are the subject of specific provisions of this Agreement,
if any event should occur, either within or outside the control of the Company,
or the Buyer, that would Materially delay or prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, each party will notify the others
of any such event and, subject to Section 6.1(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 6.1(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 6.1(c), none of the parties
hereto will take any action that would (i) Materially affect or delay receipt of
the approvals contemplated in Section 8.1(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 6.1(c)), each of the parties hereto shall, and each of them shall cause
their Subsidiaries to, take all corporate action, including the recommendation
of the Merger by their respective boards of directors to their respective
shareholders, and use each of their best efforts to cause all
46
shareholder action to be taken, necessary to consummate and give effect to the
Merger.
(e) Maintenance of Corporate Existence. Each of the parties hereto shall,
and each of them shall cause their Subsidiaries to, maintain in full force and
effect 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 Joint 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 on Form
S-4 (or on such other form as shall be appropriate), which shall contain the
Joint Proxy Statement. The Buyer and the Company shall each use their reasonable
best efforts to cause the Joint Proxy Statement to comply in all Material
respects with the requirements of the Securities Laws and the rules and
regulations thereunder. The Buyer and the Company shall each use all reasonable
efforts to cause the Registration Statement to become effective as soon
thereafter as practicable. Subject to Section 6.1(c), the Joint Proxy Statement
shall include the recommendation of the Boards of Directors of the Company and
the Buyer in favor of the Merger.
(h) Closing. Subject to the terms and conditions hereof (including Section
6.1(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 VII
DISCLOSURE OF ADDITIONAL INFORMATION
7.1 ACCESS TO INFORMATION. Prior to the Closing Date, the parties hereto
shall, and shall cause each of their Affiliates 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.
7.2 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.
47
7.3 ENVIRONMENTAL SURVEY. At its option, the Buyer may cause to be
conducted environmental assessments of the Real Property of the Company and its
Affiliates, whether owned or leased, or any portion thereof, together with such
other studies, testing and intrusive sampling and analyses as the Company shall
deem necessary or desirable (collectively, the "ENVIRONMENTAL SURVEY"). The
Buyer shall complete all such environmental assessments within 60 days following
the date of this Agreement and thereafter conduct and complete any such
additional studies, testing, sampling and analyses within 60 days following
completion of all Phase I environmental assessments. Subject to the breach of
any representation or warranty contained herein, the costs of the Environmental
Survey shall be paid by the Buyer. Notwithstanding anything in this Agreement to
the contrary, the Buyer shall not have the right to terminate this Agreement or
the Merger due to the existence of any environmental condition of any Real
Property of the Company or due to the breach of any representation or warranty
by the Company with respect to environmental matters, including, without
limitation, the representations and warranties set forth in Section 4.10 hereof,
unless the losses, costs, or expenses (including attorneys' fees, assessments,
and remediation expenses) to be incurred by the Buyer with respect to such
environmental condition or breach of warranty or representation are reasonably
likely to exceed $500,000, provided that Company and Buyer agree that any such
losses, costs, or expenses that exceed $175,000 and are less than $500,000 shall
result in a dollar-for-dollar reduction in the Merger Consideration (allocated
in Buyer's discretion).
7.4 CONFIDENTIALITY. Prior to Closing, except as otherwise provided in
Section 7.5, each of parties hereto shall not, and shall not permit its
Affiliates to, and each shall use its best efforts to cause its and its
Affiliates' respective employees, lenders, accountants, representatives, agents,
consultants and advisors not to, discuss or disclose, or use for any purpose
other than the transactions contemplated hereby, the subject matter or
transactions contemplated by this Agreement or information pertaining to the
other party or any of its Affiliates, with any other Person without the prior
consent of the other party hereto, unless (a) such information is public other
than as a result of a violation of this Agreement, or (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
Consent necessary or desirable for the consummation of the transactions
contemplated hereby.
7.5 PUBLICITY. Without the prior consent of the other party, no 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 VIII
CONDITIONS TO CLOSING
8.1 MUTUAL CONDITIONS. The respective obligations of each party hereto to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by all parties
48
hereto pursuant to Section 10.4 of this Agreement:
(a) Adverse Proceedings. Neither the Company, the Company Bank, the Buyer,
the Buyer Bank nor any shareholder of any of the foregoing shall be subject to
any order, decree or injunction of a court of competent jurisdiction that
enjoins or prohibits the consummation of this Agreement or the Merger, 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, decree or injunction or the subject
of any such suit or proceeding shall take any reasonable steps within that
party's control to cause any such order, decree or injunction to be modified so
as to permit the Closing and to cause any such suit or proceeding to be
dismissed.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger 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 hereto 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 Merger or for the preventing of
any Default under any Contract or Permit of such Person, including those
Consents listed on Section 4.2 of the Company's Disclosure Schedule, except to
the extent that the failure to obtain such any such Consents would not,
individually or in the aggregate result in a Material Adverse Effect on such
Person.
(d) Effectiveness of Registration Statement. The Registration Statement
filed with the SEC covering the shares of the Buyer's Stock to be issued
pursuant hereto 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, threatened by the SEC.
(e) Approval. The Company's and the Buyer's shareholders shall have
approved this Agreement, the Plan of Merger and the Merger in accordance with
applicable corporate 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 Smith, Anderson,
Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P. or another reputable 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 Merger, when consummated in accordance with the terms hereof, will
constitute a reorganization within the meaning of Section 368(a) of the Code,
(ii) no gain or loss will be recognized by the Buyer or the Company by reason of
the Merger, (iii) the exchange or cancellation of Company
49
Shares in the Merger will not give rise to recognition of gain or loss for
federal income tax purposes to the shareholders of the Company to the extent
such shareholders receive Buyer's Stock in exchange for their Company Shares,
(iv) the basis of the Buyer's Stock to be received by a shareholder of the
Company will be the same as the basis of the stock of the Company surrendered in
connection with the Merger, (v) Section 356 of the Code will apply to
shareholders of the Company who receive both cash and Buyer's Stock in the
Merger and will govern the amount and character of any gain recognized by such
shareholders, and (vi) the holding period of the shares of the Buyer's Stock to
be received by a shareholder of the Company will include the period during which
the shareholder held the Company Shares surrendered in connection with the
Merger, provided that the Company Shares surrendered in connection with the
Merger are held as a capital asset at the Effective Time of such Merger. Each of
the Buyer and the Company shall provide a letter to the tax advisor setting
forth the facts, assumptions and representations on which such tax advisor may
rely in rendering its opinion.
(g) Blue Sky Approvals. The Buyer shall have received all state securities
or "Blue Sky" Permits or other authorizations or confirmations as to the
availability of exemptions from "Blue Sky" registration requirements as may be
necessary, and no stop orders or proceedings shall be pending, or to the
Knowledge of the Buyer or the Company, threatened by a state "Blue Sky"
administrator to suspend the effectiveness of any registration statement filed
therewith with respect to the issuance of the Buyer's Stock in the Merger.
(h) Nasdaq Listing. As of the Effective Time, the Buyer shall have
satisfied all requirements in order for the shares of the Buyer's Stock to be
issued to shareholders of the Company in connection with the Merger to be listed
on the Nasdaq SmallCap Market System as of the Effective Time (provided that
Buyer shall use its commercially reasonable efforts to cause such shares to be
listed on the Nasdaq National Market System as of the Effective Time or as soon
thereafter as is reasonably practicable).
8.2 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 such parties
pursuant to Section 10.4 of this Agreement:
(a) All representations and warranties of the Buyer contained in this
Agreement shall be true and correct in all Material respects 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 in all Material respects 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 required to have been executed and delivered by the Buyer
to the Company at or prior to the Closing shall have been so executed and
delivered, whether or not such documents have been or will be executed and
delivered by the other parties contemplated thereby.
(c) The Company shall have received from Trident Securities, a division of
50
McDonald Investments, Inc., a letter, dated as of the date of the Joint Proxy
Statement, that the Merger 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 Smith, Anderson, Blount,
Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P., 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 (1) its articles of incorporation or charter have not been
amended since the date of the certificate described in subsection (ii)
above, and that nothing has occurred since the date of issuance of the
certificate of existence specified in subsection (iv) below that would
adversely affect its existence, and (2) Buyer has complied with the
conditions set forth in this Section 8.2 as may be reasonably required by
the Company, including without limitation a Certificate as to the matters
set forth in Section 8.2(a);
(iv) 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;
(v) 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) a certificate from its Secretary or an Assistant Secretary
certifying the incumbency and signatures of its officers who will execute
documents at the Closing or who have executed this Agreement.
(f) The Exchange Agent shall have delivered to the Company a certificate,
dated as of the Closing Date, to the effect that the Exchange Agent has received
from the Buyer appropriate instructions and authorization for the Exchange Agent
to issue a sufficient number of shares of Buyer Stock in exchange for all of the
Company Shares and to the effect that the Exchange Agent has received the Total
Cash Merger Consideration from the Buyer and appropriate instructions and
authorization to deliver the Total Cash Merger Consideration as required by this
Agreement.
51
8.3 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 10.4 of this Agreement:
(a) All representations and warranties of the Company contained in this
Agreement shall be true and correct in all Material respects 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 in all Material respects 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
Merger.
(c) Holders of Buyer's Stock representing no more than ten percent (10%) of
the issued and outstanding shares of Buyer's Stock immediately prior to the
Effective Time shall have exercised dissenters' or similar rights with respect
to the Merger.
(d) All documents 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.
(e) The Buyer shall have received a legal opinion from Brooks, Pierce,
XxXxxxxx, Xxxxxxxx & Xxxxxxx, LLP, counsel to the Company, dated as of the
Closing Date, in form and substance reasonably satisfactory to the Buyer.
(f) Buyer shall have received a written opinion in form and substance
satisfactory to Buyer from The Xxx Group, addressed to Buyer and dated as of the
date of the Joint Proxy Statement to the effect that the terms of the Merger,
including the Merger Consideration, are fair, from a financial point of view, to
Buyer and its shareholders.
(g) As of the Closing Date, the Buyer shall have received the following
documents with respect to each of the Company and its Subsidiaries (including
the Company Bank):
(i) a certificate of its corporate existence issued by the
jurisdiction of its incorporation as of a recent date and a certificate of
existence or authority as a foreign corporation issued as of a recent date
by each of the jurisdictions in which it is qualified to do business as a
foreign corporation;
(ii) a true and complete copy of its articles of incorporation or
charter and all amendments thereto, certified by the jurisdiction of its
incorporation as of a recent date.
(iii) a true and complete copy of its bylaws, certified by its
Secretary or an
52
Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant Secretary
certifying that (1) its articles of incorporation or charter have not been
amended since the date of the certificate described in subsection (ii)
above, and that nothing has occurred since the date of issuance of the
certificate of existence specified in subsection (i) above that would
adversely affect its existence, and (2) Company has complied with the
conditions set forth in this Section 8.3 as may be reasonably required by
the Buyer, including without limitation a Certificate as to the matters set
forth in Section 8.3(a);
(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.
(h) As of the Closing Date, the Company Bank shall have liquid assets of
not less than $25,000,000 in excess of its normal liquidity requirements and
there shall be no regulatory or legal restriction or regulatory objection or
prohibition which would prevent the Company Bank from paying a dividend to the
Buyer immediately after the Effective Time equal to the lesser of (i)
$25,000,000 or (ii) the maximum amount of the dividend which could be paid
without causing the Company Bank to cease to be deemed "well capitalized" under
applicable banking Laws.
ARTICLE IX
TERMINATION
9.1 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 or
regulation that makes consummation of this Agreement illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining the Company
or its shareholders or the Buyer or its shareholders from consummating this
Agreement is entered and such judgment, injunction, order or decree shall become
final and nonappealable;
(c) By either the Buyer or the Company, if the conditions to the obligation
to effect the transactions contemplated hereby of the party seeking termination
shall not have been fulfilled or waived by June 30, 2002, and if the party
seeking termination is in Material
53
compliance with all of its obligations under this Agreement;
(d) By either the Buyer or the Company, if a condition to the obligation to
effect the transactions contemplated hereby of the party seeking termination
shall have become incapable of fulfillment (notwithstanding the efforts of the
party seeking to terminate as set forth in Section 6.3(c)), and has not been
waived;
(e) At any time on or prior to the Closing Date, by the Buyer in writing,
if the Company has, or by the Company, if the Buyer has, in any Material
respect, breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if such breach
has not been cured by the earlier of 30 days after the date on which written
notice of such breach is given to the party committing such breach or the
Closing Date;
(f) By the Company, if its board of directors determines to terminate this
Agreement and the Merger and (i) the Average Closing Price of the Buyer's Stock
is less than $9.00 for the 20-trading day period (the "MEASUREMENT PERIOD")
ending three Business Days prior to the date of the Shareholder Meeting of the
Company's shareholders, and (ii) the percentage (the "BUYER'S STOCK PERCENTAGE
CHANGE") by which the Average Closing Price of the Buyer's Stock during the
Measurement Period is lower than $12.90 exceeds by more than 15 percentage
points the percentage (the "INDEX PERCENTAGE CHANGE") by which the Average
Closing Price of the SNL Index during the Measurement Period is lower than the
Average Closing Price of the SNL Index on August 29, 2001 (Examples: If the
Average Closing Price of the SNL Index has declined by 20%, the Average Closing
Price of the Buyer's Stock during the Measurement Period must be more than 35%
lower than $12.90; if the Average Closing Price of the SNL Index has declined by
25%, the Average Closing Price of the Buyer's Stock during the Measurement
Period must be more than 40% lower than $12.90). If the Company so elects to
terminate this Agreement and the Merger, it must give notice of such termination
to the Buyer within ten (10) days after the end of the Measurement Period. If
within five (5) days after the giving of such notice to the Buyer, the Buyer
gives notice to the Company that it agrees to (i) increase the Per Share Mixed
Stock Consideration to a specified amount and/or the Per Share Mixed Cash
Consideration to a specified amount so that the aggregate nominal value of the
Per Share Mixed Consideration is equal to what would be the aggregate nominal
value of the Per Share Mixed Consideration if the Buyer's Stock was valued at
the lower of (A) $9.00 per share or (B) the product of $12.90 per share
multiplied by the sum of (x) 100 percent, minus (y) the Index Percentage Change,
minus (z) 15 percent (and so that the Merger continues to qualify as a
reorganization under Section 368 of the Code), and (ii) increase the Per Share
Stock Consideration to a specified amount so that the nominal value of the Per
Share Stock Consideration is equal to what would be the nominal value of the Per
Share Stock Consideration if the Buyer's Stock was valued at the lower of (A)
$9.00 per share or (B) the product of $12.90 per share multiplied by the sum of
(x) 100 percent, minus (y) the Index Percentage Change, minus (z) 15 percent,
then this Agreement and the Merger shall not be terminated and the Merger shall
be consummated as set forth in this Agreement, subject to the charges described
in this subclause (f).
54
For purposes of this subclause (f): "AVERAGE CLOSING PRICE" means, with
respect to the Buyer's Stock, the average of the daily closing sales price
thereof on the Nasdaq SmallCap Market System during a specified period as
reported in The Wall Street Journal and, with respect to the SNL Index, the
average of the daily closing prices of such SNL Index as reported by SNL
Securities; and "SNL INDEX" means the SNL Nationwide Bank Index (banks with
assets of less than $500 million); and
(g) By the Company if (i) the board of directors of the Company shall
determine that an Acquisition Proposal constitutes a Superior Proposal,
provided, however, that the Company may not terminate this Agreement pursuant to
this subsection (g) unless (x) five business days shall have elapsed after
delivery to Buyer of a written notice of such determination by such board of
directors, and, during such five business day period, the Company shall have
informed Buyer of the terms and conditions of such Acquisition Proposal and the
identity of the person or group making such an Acquisition Proposal, and (y) at
the end of such five business day period, the Board of Directors of the Company
believes that such Acquisition Proposal constitutes a Superior Proposal, and
(ii) the Company thereafter executes a definitive, binding transaction agreement
to consummate the transaction that is the subject of such Acquisition Proposal.
9.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of a termination
contemplated hereby by any party pursuant to Section 9.1, 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 any party hereto. In such event:
(a) The parties hereto shall continue to be bound by (i) their obligations
of confidentiality set forth herein, and all copies of the information provided
by the Company hereunder will be returned to the Company or destroyed
immediately upon its request therefor, (ii) the provisions set forth in Section
7.5 relating to publicity and (iii) the provisions set forth in Section 10.1
relating to expenses.
(b) 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.
(c) In addition to any remedies provided in this Agreement, 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.
9.3 TERMINATION EXPENSES AND FEES.
(a) In the event Company terminates this Agreement pursuant to Section
9.1(g), the Company shall pay within one (1) business day following such
termination, a termination fee of $500,000, payable by wire transfer of
immediately available funds to an account designated by Buyer.
(b) In the event (i) the Company or any of its Subsidiaries receives
an Acquisition Proposal, (ii) the Company's board of directors terminates
this Agreement pursuant to Section 9.1(g), and (iii) within twelve (12)
months after the date of such Acquisition Proposal,
55
the Company consummates an Acquisition Transaction with the party making
the Acquisition Proposal, then upon, and within one (1) business day
following, the consummation of such Acquisition Transaction, the Company
shall pay the Buyer a termination fee of $1,500,000, payable by wire
transfer of immediately available funds to an account designated by Buyer.
(c) In the event (i) the Company or any of its Subsidiaries receives
an Acquisition Proposal, (ii) the Company's board of directors fails to
recommend approval of the Merger to the Company's shareholders or amends or
withdraws its recommendation of the Merger to the Company's shareholders in
manner adverse to the Buyer and (iii) within twelve (12) months after the
date of such Acquisition Proposal, the Company consummates an Acquisition
Transaction with the party making the Acquisition Proposal, then upon, and
within one (1) business day following, the consummation of such Acquisition
Transaction, the Company shall pay the Buyer a termination fee of
$2,000,000, less any amounts paid by the Company pursuant to Sections
9.3(a) and (b), payable by wire transfer of immediately available funds to
an account designated by Buyer.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, (i) the Buyer shall pay all costs and expenses incurred by it in
connection with this Agreement and the Merger and (ii) the Company shall pay all
costs and expenses incurred by it in connection with this Agreement and the
Merger.
10.2 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
person that any warranty or representation is false at the time of signing or
Closing.
10.3 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented only by written agreement of all parties hereto.
10.4 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in this
Agreement, any failure of the Buyer, on one hand, and the Company, on the other,
to comply with any obligation, representation, warranty, covenant, agreement or
condition herein may be waived by the other party 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 any party hereto, such consent shall be given
in writing in a manner consistent
56
with the requirements for a waiver of compliance as set forth in this Section
10.4.
10.5 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 other
party in the manner provided below:
(a) Any notice to any of the Company shall be delivered to the following
addresses:
First Community Financial Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile:
with a copy to:
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx (27401)
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Any notice to the Buyer shall be delivered to the following addresses:
Capital Bank Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: D. Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (919) 821-6800
57
Any party may change the address to which notice is to be given by notice given
in the manner set forth above.
10.6 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 any party hereto without the prior written consent of the other
parties.
10.7 SEPARABLE PROVISIONS. If any provision of this Agreement shall be held
invalid or unenforceable, the remainder nevertheless shall remain in full force
and effect.
10.8 GOVERNING LAW. The execution, interpretation and performance of this
Agreement shall be governed by the internal laws and judicial decisions of the
State of North Carolina.
10.9 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.
10.10 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.
10.11 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.
58
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
FIRST COMMUNITY FINANCIAL CORPORATION
By: /s/ X.X. Xxxxxxx
---------------------------------
Name: X. X. Xxxxxxx
Title: President & Chm of Board
BUYER:
CAPITAL BANK CORPORATION
By: /s/ Xxxxx X. Xxxx
----------------------------------
Name: Xxxxx X. Xxxx
Title: President and Chief
Executive Officer
59
EXHIBIT A
FORM OF PLAN OF MERGER OF
FIRST COMMUNITY FINANCIAL CORPORATION
INTO CAPITAL BANK CORPORATION
A. Corporations Participating in Merger.
First Community Financial Corporation, a North Carolina corporation (the
"Merging Corporation"), will merge with and into Capital Bank Corporation, a
North Carolina corporation, which will be the surviving corporation (the
"Surviving Corporation") of such merger.
B. Name of Surviving Corporation.
After the merger, the Surviving Corporation shall have the name "Capital
Bank Corporation"
C. Merger.
The merger of the Merging Corporation into the Surviving Corporation shall
be effected pursuant to the terms and conditions of this Plan. Upon the merger
becoming effective, the corporate existence of the Merging Corporation will
cease, and the corporate existence of the Surviving Corporation will continue.
The merger shall become effective on the date and at the time of filing of the
Articles of Merger containing this Plan with the North Carolina Secretary of
State or at such other time as may be specified in such Articles of Merger. The
time when the merger becomes effective is hereinafter referred to as the
"Effective Time."
D. Conversion and Exchange of Shares.
At the Effective Time, the outstanding shares of the common stock of the
corporations participating in the merger will be converted and exchanged as
follows:
1. Merging Corporation. Each outstanding share of the common stock of the
Merging Corporation shall at the Effective Time no longer be outstanding and
shall be canceled and retired and shall cease to exist, and the holders of the
certificates representing such shares shall thereafter cease to have any rights
with respect to such shares except for the right to receive, in consideration
for each such share and subject to certain election and allocation procedures,
the issuance and delivery of (i) 1.30275 shares of the Surviving Corporation's
common stock plus an amount equal to $16.20 in cash, (ii) an amount equal to
$32.40 in cash, or (iii) 2.6055 shares of the Surviving Corporation's common
stock.
2. Surviving Corporation.
(a) Each outstanding share of the common stock of the Surviving Corporation
shall remain outstanding after the Effective Time and shall not be affected by
the merger.
1
(b) In the event the Surviving Corporation or the Merging Corporation
changes the number of shares of its common stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend or similar
reorganization with respect to such stock and the record date thereof (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 such Effective Time, the per share consideration to be
exchanged for the Merging Corporation's shares shall be equitably adjusted to
reflect such change.
3. Fractional Shares. No fractional shares of the common stock of the
Surviving Corporation shall be delivered as consideration for the merger
described herein. Instead, the number of shares of the common stock of the
Surviving Corporation to which a holder of the shares of the Merging
Corporation's common stock is entitled to receive shall be rounded to the
nearest whole share.
4. Surrender of Share Certificates. Each holder of a certificate
representing shares to be converted or exchanged in the merger shall surrender
such certificate for cancellation, and after the Effective Time and after such
surrender, shall be entitled to receive in exchange therefor the consideration
to which it is entitled under this Plan. Until so surrendered, each outstanding
certificate that prior to the Effective Time represented shares of common stock
of the Merging Corporation shall be deemed for all purposes to evidence
ownership of the consideration to be issued and paid for the conversion or
exchange of such shares under this Plan.
5. No Further Transfers. From and after the Effective Time of the merger,
there shall be no further transfers on the stock transfer books of the Merging
Corporation of the shares of the Merging Corporation that were outstanding
immediately prior to the Effective Time of the merger. If after such Effective
Time, certificates representing shares of the Merging Corporation are presented
to the Surviving Corporation, they shall be canceled, and exchanged and
converted into the merger consideration as provided for herein.
E. Abandonment.
At any time prior to the merger becoming effective, the board of directors
of the Merging Corporation or the Surviving Corporation may, in each of their
discretion, abandon the merger.
2
EXHIBIT B
XXXXXXX EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of the ____ day of
_________________, 2001 by and among CAPITAL BANK CORPORATION, a bank holding
company formed under the laws of the State of North Carolina and having its
principal place of business in Wake County, North Carolina (hereinafter called
the "Company") and XXXXXXX X. XXXXXXX, a resident of Alamance County, North
Carolina (hereinafter called the "Executive").
WHEREAS, on the date hereof the Company is merging with First Community
Financial Corporation (hereinafter called "First Community") in a transaction in
which the Company will be the surviving entity (hereinafter called the
"Merger"); and
WHEREAS, the Executive has previously been the President and Chief
Executive Officer of First Community and its wholly-owned subsidiary, Community
Savings Bank, Inc. (hereinafter called "Community Savings"); and
WHEREAS, the Company and the Executive wish to provide for the continued
employment by the Executive with the Company.
1. Employment and Duties. Commencing on the date hereof the Company or one
of its commercial bank subsidiaries will employ the Executive as
________________________ for the first two years in the term of this Agreement,
and the Executive hereby accepts such employment upon the terms and conditions
hereinafter set forth. The Executive shall (i) represent and promote the Company
with its shareholders, within the banking industry and in the communities in
which the Company and its subsidiaries have offices, (ii) assist the Company and
its subsidiaries in retaining existing customer relationships and developing new
customer relationships in Alamance County, North Carolina, (iii) advise and
assist management of the Company and its subsidiaries and (iv) perform such
other duties as shall be determined by the Company and, its subsidiaries and the
Executive. Following a reasonable transition period after the merger of
Community Savings with and into the Company's subsidiary bank, Capital Bank (if
such merger is effected), it is not expected that the Executive will be required
to maintain any
3
established office hours. The Executive will not be required to maintain any
office outside of Burlington, North Carolina, and the Executive will be provided
with an office in Burlington, North Carolina if office space is available in
facilities owned or leased by the Company or its subsidiaries there.
For the second two (2) years in the term of this Agreement, the Executive
will consult with management of the Company and its subsidiaries at reasonable
times satisfactory to the Company, its subsidiaries and the Executive.
The Executive shall conduct himself at all times in such a manner as to
maintain the good reputation of the Company. The making of personal investments
and engaging in business activities other than for the account of the Company
and its subsidiaries shall not be prohibited hereunder; provided, that such
activities do not compete with the Company or any of its subsidiaries, violate
the provisions of any laws applicable to the Company, or any of its subsidiaries
or the Executive (including, but not limited to, applicable federal and state
securities laws) or detract from the performance of the Executive's duties
hereunder.
2. Term. The term of this Agreement shall commence on the date hereof and
shall continue for four (4) years thereafter, unless terminated earlier as
provided in Section 7.
3. Salary, Benefits and Expenses. For all services rendered by the
Executive under this Agreement, the Company shall pay the Executive compensation
and fringe benefits as follows:
(a) Salary. During the first two (2) years of the term hereof, the Company
or one of its subsidiaries shall pay the Executive a salary at the rate of One
Hundred Forty-Two Thousand Five Hundred Dollars ($142,500) per year (less
applicable withholdings), payable in equal installments, not less frequently
than monthly, iand during the second two (2) years of the term hereof, the
Company or one of its subsidiaries shall pay the Executive a salary at the rate
of Seventy-Five Thousand Dollars ($75,000) (less applicable withholdings) per
year, such salary payments shall be payable in equal installments, not less
frequently than monthly, in accordance with the Company's regular payroll
practices, policies and procedures as they may exist from time to time. Payments
for partial months shall be prorated.
In addition, beginning on January 1, 2003, the Executive, who will be
appointed as a director of the Company and, if and when Community Savings merges
with and into Capital Bank, a director of Capital Bank, shall
4
be paid the same directors' fees as are paid to non-employee directors during
the period of his service on such boards of directors.
(b) Fringe Benefit Plans. The Executive shall be entitled to participate
with executive officers and other employees of the Company and its subsidiaries
in all deferred compensation, stock benefit, life insurance, medical, disability
and dental insurance, sick pay, retirement, pension, profit sharing and other
group fringe benefit plans or other group arrangements authorized and adopted by
the Company and its subsidiaries from time to time and applicable generally to
the Company's executive officers, unless the Executive shall elect in writing
not to participate; provided, however, that the Executive's participation in
benefit plans and programs is subject to the applicable terms, conditions and
eligibility requirements of those plans and programs some of which are within
the plan administrator's discretion.
(c) Life Insurance Policy. For a period of three (3) years from the date of
this Agreement, unless this Agreement is terminated earlier for Cause (as
defined below) or death, the Company or one of its subsidiaries shall continue
to make payments of all the premiums payable and necessary to keep in force in
its current form the $250,000 life insurance policy, issued by Manulife
Financial/Manufacturers Life Insurance Company, USA and having policy number 51
926 285, which is owned by the Executive. In addition, the Company shall
annually pay to the Executive an amount reasonably estimated to be the increased
income taxes payable by the Executive as a result of the afore-described payment
of insurance premiums.
(d) Expenses. For the entire term of this Agreement, the Executive shall be
entitled to receive reimbursement by the Company or one of its subsidiaries for
all reasonable out-of pocket expenses incurred by the Executive in connection
with the performance of his services hereunder. The Executive's right to
reimbursement hereunder shall, however, be subject to such policies and
procedures as may be established by the Company from time to time for its senior
level employees which policies and procedures may include advance approval with
respect to any particular expenditure. For the entire term of this Agreement,
the Company or one of its subsidiaries shall reimburse the Executive for all
reasonable expenses incurred in connection with the attendance by the Executive
and his spouse at the annual convention of the North Carolina Bankers
Association and at the
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annual North Carolina Bankers Association Management Team Conference, or at any
meetings which replace either such convention or conference.
(e) Club Fees. For the entire term of this Agreement, the Company or one of
its subsidiaries shall pay all dues incurred by the Executive arising from his
membership in the Alamance Country Club, Inc. and all dues incurred by the
Executive arising from his membership in the Alamance Rotary Club and
Altamahaw-Ossipee Civitan Club
(f) Vacation. The Executive shall be entitled to vacation, with pay, during
each calendar year in accordance with the Company's current policy for senior
management officials, as established by the Company's Board of Directors.
(g) Sickness and Disability. The Executive's compensation and benefits
pursuant to this Agreement shall not be reduced as a result of any sickness or
disability suffered by the Executive; provided, however, that the Executive's
compensation may be reduced as a result of a disability, so long as the sum of
the salary paid by the Company or one of its subsidiaries and the benefits paid
from any disability insurance policy maintained by the Company or one of its
subsidiaries equals or exceeds the salary payable hereunder.
(h) Automobile. At the effective time of the Merger, the Company or one of
its subsidiaries shall convey to the Executive title to the automobile he is
currently using at no cost to the Executive. At such time, the Company or one of
its subsidiaries shall also pay to the Executive an amount reasonably estimated
to equal the income taxes payable by the Executive as a result of his receipt of
title to such automobile.
(i) Other Compensation and Benefits. Nothing herein shall be deemed to
preclude the Company or its subsidiaries from awarding additional compensation
or benefits to the Executive during the term of this Agreement, upon approval of
the board of directors of the Company or one of its subsidiaries, whether in the
form of raises, bonuses, additional fringe benefits, or otherwise.
4. Non-Disclosure of Information. The Executive recognizes and acknowledges
that the trade secrets and proprietary processes of the Company and its
subsidiaries as they may exist from time to time are valuable, special and
unique assets of the Company's business, access to and knowledge of which are
essential to the performance of the Executive's duties hereunder. The Executive
will not, during or after the term of this Agreement,
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disclose such secrets or processes to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever, nor shall the Executive
make use of any such secrets or processes for his own purposes or for the
benefit of any person, firm, corporation, or other entity (except the Company
and its subsidiaries) under any circumstances during or after the termination of
his employment with the Company and its subsidiaries; provided, that after the
termination of his employment with the Company and its subsidiaries these
restrictions shall not apply to such secrets and processes which are then, or
are from time to time thereafter, in the public domain (provided that the
Executive was not responsible, directly or indirectly, for permitting such
secrets or processes to enter the public domain without the consent of the
Company or one of its subsidiaries) or which are obtained from a third party
which is not obligated under an agreement of confidentiality with the Company or
one of its subsidiaries.
5. Covenant Not to Compete. During and for a period of two (2) years
following the termination of this Agreement, the Executive covenants and agrees
that he will not, directly or indirectly, Compete with the Company or any of its
subsidiaries.
For the purposes of this Paragraph 5, the following terms shall have the
meanings set forth below:
(a) The term "Compete" shall mean:
(i) providing Financial Products or Services on behalf of any
Financial Institution for any Person residing in the Territory;
(ii) assisting any Financial Institution in providing Financial
Products or Services to any Person residing in the Territory; or
(iii) inducing or attempting to induce any Person who was a Customer
of the Company or one of its subsidiaries at the date of
termination of the Executive's employment to seek Financial
Products or Services from another Financial Institution.
(b) The words "directly or indirectly" as they modify the word Compete
shall include acting as a consultant, officer, director, independent contractor,
or employee of any Financial Institution in Competition (as defined in Paragraph
(a) above) with the Company or one of its subsidiaries in the Territory.
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(c) The term "Customer" shall mean any Person to whom the Company or one of
its subsidiaries is providing Financial Products or Services on the date of
termination of the Executive's employment.
(d) The term "Financial Institution" shall mean any institution, the
business of which is engaging in activities that are financial in nature or
incidental to such financial activities as described in section 4(k) of the Bank
Holding Company Act of 1956, other than the Company or one of its subsidiaries
or affiliated corporations.
(e) "Financial Product or Service" means any product or service that a
financial holding company could offer by engaging in an activity that is
financial in nature or incidental to such a financial activity under section
4(k) of the Bank Holding Company Act of 1956 and that is offered by the Company
on the date of termination of the Executive's employment with the Company and
its subsidiaries.
(f) The term "Person" shall mean any individual or individuals,
corporation, partnership, fiduciary or association.
(g) The term "Territory" shall mean: (i) that area consisting of Alamance
County, North Carolina as such area is constituted as of the date of this
Agreement; (ii) that area consisting of all counties contiguous with Alamance
County, North Carolina; or (iii) that area which is within a fifteen (15) mile
radius of any full-service banking office of the Company or any of its
subsidiaries at the date of the Executive's termination of this Agreement.
In the event that any provision of this paragraph or any word, phrase,
clause, sentence or other portion thereof (including, without limitation, the
geographical and temporal restrictions contained herein) should be held to be
unenforceable or invalid for any reason, such provision or portion thereof shall
be modified or deleted in such a manner as to make the provisions hereof, as
modified, legal and enforceable to the fullest extent permitted under applicable
law.
6. Injunctive Relief. If there is a breach or threatened breach of the
provisions of Paragraphs 4 or 5 of this Agreement, the Company and its
subsidiaries shall be entitled to an injunction restraining the Executive from
such breach. Nothing herein shall be construed as prohibiting the Company or any
of its subsidiaries from pursuing any other remedies for such breach or
threatened breach.
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7. Termination. This Agreement shall be deemed to be terminated and the
employment relationship between the Executive and the Company and its
subsidiaries shall be deemed severed upon the occurrence of any of the
following:
(a) The death of the Executive. In such event, the Company or one of its
subsidiaries shall pay to the Executive's estate the compensation which would
otherwise be payable to the Executive up to the end of the month in which his
death occurs.
(b) The termination of the Executive's employment by the Company and its
subsidiaries for Cause. For the purposes hereof, the Company and its
subsidiaries shall have "Cause" to terminate the Executive's employment upon the
occurrence of any of the following:
(i) A determination by the Company and its subsidiaries that the
Executive has intentionally breached or failed to perform,
in any material respect, his duties of employment or the
terms of this Agreement, unless the Executive cures such
breach within a period of ten (10) business days after the
Company or any subsidiary of the Company has given written
notice of such breach to the Executive;
(ii) The violation by the Executive, due to the Executive's
intentional disregard, of the rules and regulations
governing the Company and its subsidiaries promulgated by
the Federal Deposit Insurance Corporation or the North
Carolina State Banking Commission which violation results in
any substantial damage to the of the Company or one of its
subsidiaries;
(iii) The suspension of the Executive from office or temporary
prohibition from participating in the conduct of the affairs
of the Company and its subsidiaries pursuant to the
direction of the North Carolina State Banking Commission or
the Federal Deposit Insurance Corporation; or
(iv) The conviction of the Executive of a felony.
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(c) The Executive's termination of his employment pursuant to subparagraph
8(c), after a Change in Control; or
(d) The expiration of the term of this Agreement and any extensions
thereof.
Upon the termination of this Agreement as hereinabove set forth, all rights
and obligations of the parties will cease without further liability effective as
of the date of termination; provided, however, that this Agreement shall
continue to be binding and effective as to any prior obligation still owed by
either party and as to the post-termination obligations set forth herein
including, without limitation, the obligations of Executive under Paragraphs 4
and 5 hereof and the obligations of the Company under Paragraph 8 hereof.
8. Change in Control. (a) For the purposes of this Agreement, a "Change in
Control" shall mean:
(i) A change in control of a nature that would be required to be
reported by the Company in response to Item 1 of the Current
Report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 0000 (xxx "Xxxxxxxx Xxx"); or
(ii) such time as any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act), other than the Company
or one of its subsidiaries, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company or any
bank subsidiary of the Company representing more than 50
percent of the combined voting power of the outstanding
common stock of the Company or of such subsidiary, as
applicable; or
(iii) individuals who constitute the board of directors of the
Company on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at
least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election
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by the Company's shareholders was approved by the Company's
Board of Directors or Nominating Committee, as applicable,
shall be considered as though he or she were a member of the
Incumbent Board; or
(iv) either the Company or any banking subsidiary of the Company
consolidates or merges with or into another corporation,
association or entity or is otherwise reorganized, where
neither the Company nor such subsidiary nor any subsidiary
of the Company is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Company
or any banking subsidiary of the Company are sold or
otherwise transferred to or are acquired by any other entity
or group, other than another subsidiary of the Company.
The "Effective Date" shall mean the date on which a Change in Control
occurs.
In the event that during the term of this Agreement a Change in Control
occurs:
(b) The Executive may elect to terminate this Agreement at any time within
sixty (60) days after the Effective Date by giving thirty (30) days advance
written notice (the "Termination Notice") to the Company specifying the
effective date of termination (the "Termination Date").
(c) If the Executive specifies a Termination Date, the Company or one its
subsidiaries shall, on the Termination Date, pay to the Executive a lump sum
amount equal to the salary which would have been payable during the remainder of
the term of this Agreement, as extended prior to the Effective Time (if
applicable), if there had been no such termination. In addition, the Executive
shall be entitled to a continuation of all benefits and perquisites he is then
receiving under this Agreement for the remainder of the initial four (4) year
term of this Agreement, as extended prior to the Effective Time if applicable.
If the Executive's continued participation in any benefit plan or program is
barred, the Company or one of its subsidiaries shall arrange, upon comparable
terms, and at no greater cost to the Executive than the cost he bore for such
plan or program prior to the Termination Date, to provide the Executive with
benefits substantially similar to, or greater than, those which he is then
entitled to receive under any such plan or program.
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9. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail, return receipt requested, first class postage
pre-paid, addressed as follows:
If to the Executive:
Xxxxxxx X. Xxxxxxx
0000 Xxxxx XX 00
Xxxx, Xxxxx Xxxxxxxx 00000
If to the Company:
Capital Bank Corporation
Xxxx Xxxxxx Xxx 00000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
ATTN: Xxxxx X. Xxxx, President and Chief Executive Officer
If delivered personally, the date on which a notice, request, instruction
or document is delivered shall be the date on which such delivery is made and,
if delivered by mail, three (3) calendar days after the date on which such
notice, request, instruction or document is mailed shall be the date of
delivery.
Any party hereto may change the address specified for notices herein by
designating a new address by notice given in accordance with the procedures
hereinabove set forth.
10. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
11. North Carolina Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina.
12. Successors. The rights and obligations of the parties under this
Agreement shall inure to the benefit of and shall be binding upon their heirs,
successors and assigns.
13. Entire Agreement. This instrument contains the entire agreement of the
parties with respect to the subject matter hereof. It may not be modified or
amended orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, modification, extension or discharge is sought.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first hereinabove written.
COMPANY:
CAPITAL BANK CORPORATION
BY:
--------------------------------------------
Xxxxx X. Xxxx
President and Chief Executive Officer
EXECUTIVE:
---------------------------------------------
Xxxxxxx X. Xxxxxxx
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