AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FNB CORP.
AND
CAROLINA FINCORP, INC.
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
the 16th day of October, 1999 by and between CAROLINA FINCORP, INC., a North
Carolina corporation and savings bank holding company ("Carolina"), and FNB
CORP., a North Carolina corporation and national bank holding company ("FNB");
W I T N E S S E T H:
WHEREAS, the parties hereto have agreed that it is in their mutual best
interests and in the best interests of their respective shareholders for FNB
Acquisition Corp., a corporation to be organized under the laws of the State of
North Carolina as a wholly owned subsidiary of FNB (the "Merger Sub"), to be
merged with and into Carolina pursuant to a plan of merger (the "Plan of
Merger") in the form attached hereto as Schedule A, and the parties desire to
provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the Merger and transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, the mutual benefits to
be derived from this Agreement, and of the representations, warranties,
conditions, covenants and promises herein contained, and subject to the terms
and conditions hereof, the parties hereto mutually agree as follows:
ARTICLE I. THE MERGER
1.1 MERGER. Subject to the provisions of this Agreement and the Plan of
Merger, as of the Effective Time (as defined in Section 1.9 hereof), Merger Sub
shall be merged with and into Carolina (the "Merger"), the separate corporate
existence of Merger Sub shall cease and the corporate existence of Carolina, as
the surviving corporation in the Merger, shall continue under the laws of the
State of North Carolina. Carolina, as the surviving corporation in the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 EFFECT OF THE MERGER. At the Effective Time and by reason of the
Merger, and in accordance with applicable law, all of the property, assets and
rights of every kind and character of Merger Sub and of Carolina including,
without limitation, its stock in its wholly owned subsidiary, Richmond Savings
Bank, Inc., SSB ("Richmond Savings"), and all real, personal or mixed property,
all debts due on whatever account, all other choses in action and
every other interest of or belonging to or due to Carolina, whether tangible or
intangible, shall vest in the Surviving Corporation, and the Surviving
Corporation shall succeed to all the rights, privileges, immunities, powers,
purposes and franchises of a public or private nature of Carolina and Merger
Sub, all without any conveyance, assignment or further act or deed; and the
Surviving Corporation shall become responsible for all of the liabilities,
duties and obligations of every kind, nature and description of Carolina and
Merger Sub as of the Effective Time.
1.3 ARTICLES OF INCORPORATION, BYLAWS AND MANAGEMENT. The Articles of
Incorporation and bylaws of Carolina in effect at the Effective Time shall be
the Articles of Incorporation and bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable laws. The officers and
directors of Carolina at the Effective Time shall continue to hold such offices
and positions of the Surviving Corporation until removed as provided by law or
until the election or appointment of their respective successors.
1.4 CONVERSION OF SHARES.
(A) CAROLINA STOCK. Except as otherwise provided herein, at the Effective
Time, all rights of Carolina's shareholders with respect to all then outstanding
shares of the common stock of Carolina, no par value ("Carolina Stock"), shall
cease to exist, and the holders of shares of Carolina Stock shall cease to be,
and shall have no further rights as, shareholders of Carolina. At the Effective
Time, each such outstanding share of Carolina Stock (except for shares held,
other than in a fiduciary capacity or as a result of debts previously
contracted, by Carolina, FNB or any of their subsidiaries, which shall be
canceled in the Merger) shall be converted, without any action on the part of
the holder of such shares, into a number of shares of the common stock of FNB,
par value $2.50 (the "FNB Stock"), equal to seventy-nine hundredths of one share
(.79 shares) of FNB Stock (subject to possible adjustment in accordance with
Section 1.4(b) below and/or Section 8.2(c) below, the "Exchange Ratio").
(B) ANTI-DILUTION PROVISIONS. In the event FNB changes the number of
shares of FNB Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, recapitalization, reclassification,
combination, exchange of shares, or similar transaction with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date thereof (in the case of a stock split, recapitalization,
reclassification, combination, exchange of shares, or similar transaction for
which a record date is not established) shall be prior to the Effective Time,
the Exchange Ratio shall be proportionately adjusted.
(C) OUTSTANDING FNB STOCK. Each share of FNB Stock issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding and shall not be affected by the Merger.
(D) MERGER SUB STOCK. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged
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for one validly issued, full paid and nonassessable share of common stock of the
Surviving Corporation.
1.5 EXCHANGE OF SHARES.
(A) EXCHANGE PROCEDURES. Following the Effective Time, certificates
representing shares of Carolina Stock outstanding at the Effective Time (herein
sometimes referred to as "Carolina Certificates") shall evidence only the right
of the registered holder thereof to receive, and may be exchanged for, whole
shares of FNB Stock and cash in lieu of fractional shares, as provided herein.
At the Effective Time, FNB shall issue and deliver, or cause to be issued and
delivered, to First National Bank and Trust Company, a national banking
association wholly owned by FNB ("First National"), in its capacity as the
transfer agent of FNB Stock (the "Transfer Agent"), certificates representing
whole shares of FNB Stock into which outstanding shares of Carolina Stock have
been converted as provided above and cash in payment of fractional shares. As
promptly as practicable following the Effective Time, FNB shall send or cause to
be sent to each former shareholder of record of Carolina immediately prior to
the Effective Time written instructions and transmittal materials (a
"Transmittal Letter") for use in surrendering Carolina Certificates to the
Transfer Agent. Upon the proper surrender and delivery to the Transfer Agent (in
accordance with FNB's instructions, and accompanied by a properly completed
Transmittal Letter) by a former shareholder of Carolina of such shareholder's
Carolina Certificate(s), the Transfer Agent shall as soon as practicable issue,
register and deliver to such shareholder a certificate evidencing the number of
whole shares of FNB Stock to which such shareholder is entitled pursuant to
Section 1.4 above, and a check in the amount of cash to which the shareholder is
entitled, if any, in payment of fractional shares as provided in Section 1.5(b)
below, subject to any required withholding of applicable taxes.
(B) FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Carolina Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of FNB Stock (after taking into account all certificates delivered by such
holder under Section 1.5(a) above shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of FNB Stock
multiplied by the market value of one share of FNB Stock at the Effective Time.
The market value of one share of FNB Common Stock at the Effective Time shall be
the last sale price of FNB Stock on Nasdaq Stock Market, Inc. National Market
System ("Nasdaq") as reported by THE WALL STREET JOURNAL or, if not reported
thereby, any other authoritative source selected by FNB, on the last trading day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
(C) SURRENDER OF CERTIFICATES. Subject to Section 1.5(d) below, no FNB
Stock certificate or cash in lieu of fractional shares shall be delivered to any
former shareholder of Carolina unless and until such shareholder shall have
properly surrendered to the Transfer Agent the Carolina Certificate(s) formerly
representing his or her shares of Carolina Stock, together with a properly
completed Transmittal Letter in such form as shall be provided to the
shareholder by FNB for that purpose. Any other provision of this Agreement
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notwithstanding, neither FNB nor the Exchange Agent shall be liable to a holder
of Carolina Stock for any amounts paid or properly delivered in good faith to a
public official pursuant to any applicable abandoned property law.
(D) LOST CERTIFICATES. Any shareholder of Carolina whose certificate
representing shares of Carolina Stock has been lost, destroyed, stolen or
otherwise is missing shall be entitled to receive a certificate representing the
shares of FNB Stock and cash in lieu of fractional shares to which he or she is
entitled in accordance with and upon compliance with conditions reasonably
imposed by the Transfer Agent or FNB (including without limitation a requirement
that the shareholder provide a lost instruments indemnity bond in form,
substance and amount reasonably satisfactory to the Transfer Agent and FNB).
(E) RIGHTS OF FORMER CAROLINA SHAREHOLDERS. At the Effective Time, the
stock transfer books of Carolina shall be closed as to holders of Carolina Stock
immediately prior to the Effective Time and no transfer of Carolina Stock by any
such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 1.5(a) of this Agreement,
each certificate theretofore representing shares of Carolina Stock (other than
shares to be canceled pursuant to Section 1.4(a) of this Agreement) shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in this Agreement in exchange therefor. To
the extent permitted by North Carolina law, former shareholders of record of
Carolina shall be entitled to vote after the Effective Time at any meeting of
shareholders of FNB the number of whole shares of FNB Stock into which their
respective shares of Carolina Stock are converted, regardless of whether such
holders have exchanged their certificates representing Carolina Stock for
certificates representing FNB Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by FNB on the
FNB Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of FNB
Stock to be issued pursuant to the Merger, but beginning 60 days after the
Effective Time no dividend or other distribution payable to the holders of
record of FNB Stock as of any time subsequent to the Effective Time shall be
delivered to the holder of any certificate representing shares of Carolina Stock
issued and outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 1.5(a) of this Agreement;
provided, however, that upon surrender of such Carolina Stock certificate (or
compliance with Section 1.5(d) of this Agreement), the FNB Stock certificate,
together with all undelivered dividends or other distributions (without
interest) and any cash payments to be paid for fractional share interests
(without interest), shall be delivered and paid with respect to each share
represented by such Carolina Stock certificate.
1.6 TREATMENT OF CAROLINA STOCK OPTIONS. (a) At the Effective Time, FNB
shall assume each option to purchase Carolina Stock granted and outstanding
under the Carolina Fincorp, Inc. Stock Option Plan (the "Carolina Option Plan"),
whether or not then exercisable, in accordance with the terms of the Carolina
Option Plan and stock option agreement by which it is evidenced, except that
from and after the Effective Time with respect to each such plan or agreement:
(i) FNB shall be substituted for Carolina; (ii) the FNB stock option committee
shall be substituted for the Compensation Committee of the
4
Carolina Board of Directors administering the Option Plan; (iii) each stock
option granted and outstanding under the Carolina Option Plan may be exercised
solely for shares of FNB Stock; (iv) the number of shares of FNB Stock subject
to each such stock option shall be the number of whole shares of FNB Stock
(omitting any fractional share) determined by multiplying the number of shares
of Carolina Stock subject to such stock option immediately prior to the
Effective Time by the Exchange Ratio; and (v) the per share exercise price under
each such stock option shall be adjusted by dividing the per share exercise
price under each such stock option by the Exchange Ratio and rounding up to the
nearest cent. In addition, each stock option which is an "incentive stock
option" under the Option Plan shall be adjusted as required by Section 424 of
the Internal Revenue Code of 1986, as amended ("the Code") and the regulations
promulgated thereunder so as to continue as an incentive stock option under
Section 424(a) of the Code, and so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of the
Code. FNB and Carolina shall take all necessary steps to effectuate the
foregoing provisions of this Section 1.6, including appropriate amendments to
the Carolina Option Plan if necessary.
(b) As soon as practicable after the Effective Time, FNB shall deliver to
each of the participants in the Carolina Option Plan an appropriate notice
setting forth such participant's rights pursuant thereto, and the grants
pursuant to the Carolina Option Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 1.6(a) after
giving effect to the Merger). At or prior to the Effective Time, FNB shall take
all corporate action necessary to reserve for issuance sufficient shares of FNB
Stock for delivery upon exercise of the stock options assumed by it in
accordance with this Section 1.6. Carolina hereby represents that the Carolina
Option Plan in its current form complies with Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), as in effect as of
the date hereof.
(c) Notwithstanding the foregoing provisions of this Section 1.6, FNB may
at its election substitute as of the Effective Time options under the FNB Corp.
Stock Compensation Plan (the "FNB Plan") for all or a part of the stock options
granted and outstanding under the Option Plan, subject to the following
conditions: (i) the requirements of Section 1.6 (a)(iv) and (v) shall be met;
(ii) such substitution shall not constitute a modification, extension or renewal
of any of the stock options that are incentive stock options; and (iii) the
substituted options shall continue in effect with the same terms and conditions
in all material respects as provided in the Carolina Option Plan and respective
stock option agreement under which the original options were granted. As soon as
practicable following the Effective Time, FNB shall deliver to the participants
receiving substitute options under the FNB Plan an appropriate notice setting
forth each such participant's rights pursuant thereto. FNB has reserved under
the FNB Plan adequate shares of FNB Stock for delivery upon exercise of any such
substituted options. FNB hereby represents that the FNB Plan in its current form
complies with Rule 16b-3 promulgated under the 1934 Act, as in effect on the
date hereof.
(d) As soon as practicable after the Effective Time, FNB will use its best
efforts to cause the shares subject to options granted under the Carolina Option
Plan prior to the Effective Time (or any substitute options) to be registered
under the Securities Act of 1933,
5
as amended (the "1933 Act"), on a Form S-8 (or equivalent successor form)
registration statement.
1.7 MANAGEMENT RECOGNITION PLAN. (a) At the Effective Time, each share of
Carolina Stock held by the trustees under the Richmond Savings Bank, Inc., SSB
Management Recognition Plan (the "MR Plan"), including unvested shares subject
to Awards as defined in the MR Plan heretofore granted to participants under the
MR Plan and any shares purchased by the MR Plan but not subject to Awards, shall
be converted into and exchanged for FNB Stock and cash in lieu of fractional
shares pursuant to the provisions of Sections 1.4 and 1.5 above, and such shares
and cash shall thereafter be held to be delivered to the respective participants
at such times that the shares of Restricted Stock (as defined in the respective
stock grant agreements under the MR Plan), or the consideration into which they
may be converted in the Merger, would have become vested and nonforfeitable
under the MR Plan and the respective stock grant agreement. At the Effective
Time, the MR Plan and each stock grant agreement pursuant to which Awards were
granted shall remain in effect, except that from and after the Effective Time
the MR Plan and each such stock grant agreement shall be amended as necessary to
provide that: (i) FNB shall be substituted for Richmond Savings; (ii) the FNB
Board of Directors or its Compensation Committee shall be substituted for the
Committee of the Richmond Savings Board of Directors with respect to the
administration of the MR Plan; (iii) unvested shares of FNB Stock and cash
determined in accordance with the provisions of Sections 1.4 and 1.5 above shall
be substituted for unvested shares of Carolina Stock; (iv) cash held by the
Trustees of the MR Plan with respect to the unvested portion of an Award under
the Plan shall earn interest (at the rate payable with respect to deferred
directors' fees under First National's Deferred Directors' Fee Plan) to be
distributed to the participant upon vesting of the Award or portion thereof; (v)
no shares or other assets in addition to the initial 54,045 shares of Carolina
Stock purchased and awarded under the MR Plan shall be purchased by or for the
MR Plan; and (vi) shares, cash or other interests in the MR Plan or Awards not
awarded under the MR Plan or forfeited by participants shall not be retained by
the Trustee and shall not be available for making additional Awards under the MR
Plan but shall be remitted to and become assets of FNB.
(b) As soon as practicable after the Effective Time, FNB shall deliver to
each of the participants in the MR Plan an appropriate notice setting forth such
participant's rights pursuant thereto, including the consideration into which
such participant's unvested shares of Carolina Stock subject to the stock grant
agreement has been converted.
1.8 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx Xxxx Xxxxxx
Xxxx & Xxxxxxxxxx P.L.L.C. in Greensboro, North Carolina, or at such other place
as FNB shall designate, on a date mutually agreeable to Carolina and FNB (the
"Closing Date") after the expiration of any and all required waiting periods
following the effective date of all required approvals of the Merger by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
the Administrator of the North Carolina Savings Institutions Division (the
"Administrator") and any other governmental or regulatory authorities (as soon
as practicable, but in no event to be more than 60 days following the expiration
of all such
6
required waiting periods). At the Closing, FNB and Carolina shall take such
actions (including, without limitation, the delivery of certain closing
documents and the execution of Articles of Merger under North Carolina law) as
are required herein and as otherwise shall be required by law to consummate the
Merger and cause it to become effective.
1.9 EFFECTIVE TIME. Subject to satisfaction or waiver of all conditions
precedent set forth in this Agreement, the Merger shall become effective (the
"Effective Time") the date and at the time on which Articles of Merger
containing the Plan of Merger and the other provisions required by, and executed
in accordance with applicable North Carolina and applicable federal law shall
have been accepted for filing by the Secretary of State of the State of North
Carolina (or such later time as may be specified in the Articles of Merger);
provided, however, that unless otherwise mutually agreed upon by the parties
hereto, the Effective Time shall in no event be more than ten days following the
Closing Date.
1.10 FURTHER ASSURANCES. If at any time after the Effective Time FNB shall
consider or be advised that any further deeds, assignments or assurances in law
or any other actions are necessary, desirable or proper to vest, perfect or
confirm of record or otherwise, in the Surviving Corporation, the title to any
property or rights of Carolina acquired or to be acquired by reason of, or as a
result of, the Merger, Carolina, its subsidiaries and their officers and
directors shall execute and deliver all such proper deeds, assignments and
assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such property or rights in FNB and otherwise to
carry out the purpose of this Agreement, and that the officers and directors of
FNB are fully authorized and directed in the name of Carolina or otherwise to
take any and all such actions.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF CAROLINA
Except as otherwise specifically provided herein or as "Previously
Disclosed" to FNB, Carolina hereby makes the following representations and
warranties to FNB. ("Previously Disclosed" shall mean, as to Carolina, the
disclosure of information in a letter delivered by Carolina to FNB specifically
referring to this Agreement and arranged in sections corresponding to the
sections, subsections and items of this Agreement applicable thereto, and which
letter has been delivered prior to the execution of this Agreement. Information
shall be deemed Previously Disclosed for the purpose of a given section,
subsection or item of this Agreement only to the extent that a specific
reference thereto is made in connection with disclosure of such information at
the time of such delivery.)
2.1 CORPORATE ORGANIZATION, CAPACITY AND AUTHORITY.
(A) ORGANIZATION. Carolina is a corporation duly organized and validly
existing under the laws of the State of North Carolina and is registered with
the Administrator as a savings institution holding company and with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended.
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(B) SUBSIDIARIES. Carolina has one wholly owned subsidiary, Richmond
Savings. Richmond Savings has one wholly owned subsidiary, Richmond Investment
Services, Inc., a North Carolina corporation ("RIS"). Richmond Savings and RIS
are sometimes referred to as the subsidiaries of Carolina. Other than Richmond
Savings and RIS, Carolina has no subsidiaries, direct or indirect, and does not
own, directly or indirectly, any stock or other equity interest in any other
corporation, service corporation, joint venture, partnership or other entity,
except for equity issues reflected in Richmond Savings' investment portfolio and
securities held in a fiduciary capacity.
(C) ORGANIZATION OF SUBSIDIARIES. Each of Carolina's subsidiaries is duly
organized and validly existing under the laws of the State of North Carolina,
and all of the outstanding capital stock of each such subsidiary is owned of
record and beneficially, free and clear of all security interests and claims, by
Carolina or Richmond Savings. Carolina has previously delivered to FNB true,
accurate and complete copies of the currently effective charter and bylaws or
equivalent organizational documents of Carolina and each of Carolina's
subsidiaries, including all amendments and proposed amendments thereto. All of
the outstanding shares of capital stock of each of Carolina's subsidiaries are
duly authorized, validly issued, fully paid and nonassessable.
(D) POWER AND AUTHORITY. Each of Carolina and its subsidiaries has all
requisite power and authority (corporate and other) to own, lease and operate
its properties and to carry on its business as it is now being conducted, is
duly qualified to do business and is in good standing in each other jurisdiction
in which the character of the properties owned, leased or operated by it therein
or in which the transaction of its business makes such qualification necessary,
except where failure so to qualify would not have a Material Adverse Effect (as
defined herein) on Carolina and its subsidiaries, and, to the best knowledge and
belief of the management of Carolina, is not transacting business or operating
any properties owned or leased by it in violation of any provision of federal,
state or local law or any rule or regulation promulgated thereunder, which
violation would have a Material Adverse Effect on Carolina and its subsidiaries.
For purposes of this Article II, "Material Adverse Effect" shall mean: (a) with
respect to references to Carolina, any change in the business of Carolina that
is or could be materially adverse to the financial condition, results of
operations, prospects, business, assets, investments, properties or operations
of Carolina, or (b) with respect to references to Carolina and its subsidiaries,
any change in the business of Carolina or any of its subsidiaries that is or
could be materially adverse to the financial condition, results of operations,
prospects, business, assets, loan portfolio, investments, properties or
operations of Carolina and its subsidiaries considered as one enterprise.
2.2 CAPITAL STOCK. The authorized capital stock of Carolina consists of
20,000,000 shares of common stock, no par value, of which 1,871,545 shares are
issued and outstanding, and 5,000,000 shares of preferred stock, no par value,
of which no shares are issued and outstanding. Other than the Carolina Stock,
Carolina has no outstanding class of capital stock. Each outstanding share of
Carolina Stock has been duly authorized and validly issued, is fully paid and
nonassessable, has been issued in compliance with applicable federal and state
securities laws and has not been issued in violation of the preemptive rights of
any shareholder.
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2.3 PRINCIPAL SHAREHOLDERS. Except as Previously Disclosed, there are no
persons or entities known to Carolina that own beneficially, directly or
indirectly, more than 5% of the outstanding shares of Carolina Stock.
2.4 CONVERTIBLE SECURITIES, OPTIONS, ETC. Except for the Stock Option Plan
and the stock options granted thereunder, the option granted to FNB pursuant to
an option agreement of even date herewith (the "FNB Option"), the MR Plan and
the Richmond Savings Bank Employee Stock Ownership Plan, Carolina does not have
any outstanding (i) securities or other obligations (including debentures or
other debt instruments) which are convertible into shares of Carolina Stock or
any other securities of Carolina, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or acquire any
shares of Carolina Stock or any other securities of Carolina or (iii) plan,
agreement or other arrangement pursuant to which shares of Carolina Stock or any
other securities of Carolina or options, warrants, rights, calls or other
commitments of any nature pertaining thereto, have been or may be issued.
2.5 AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been duly
and validly approved by Carolina's Board of Directors. Subject only to approval
of the Plan of Merger by the shareholders of Carolina, (i) Carolina has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations and agreements and carry out the transactions described
herein, (ii) all corporate proceedings and approvals required to be taken to
authorize Carolina to enter into this Agreement and to perform its obligations
and agreements and to carry out the transactions described herein have been duly
and properly taken, and (iii) this Agreement constitutes the valid and binding
agreement of Carolina enforceable in accordance with its terms (except to the
extent enforceability may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect which
affect creditors' rights generally, (B) legal and equitable limitations on the
availability of injunctive relief, specific performance and other equitable
remedies and (C) general principles of equity and applicable laws or court
decisions limiting the enforceability of indemnification provisions).
2.6 VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
Provided the required approvals of Carolina's shareholders and of governmental
or regulatory authorities are obtained, neither the execution and delivery of
this Agreement, nor the consummation of the transactions described herein, nor
compliance by Carolina with any of its obligations or agreements contained
herein, will: (i) conflict with or result in a breach of the terms and
conditions of, or constitute a default or violation under any provision of, the
Articles of Incorporation or bylaws or the equivalent organizational documents
of Carolina or any subsidiary, or any material contract, agreement, lease,
mortgage, note, bond, indenture, license, or obligation or understanding (oral
or written) to which Carolina or any subsidiary is bound or by which it or its
business, capital stock or any of its properties or assets may be affected; (ii)
result in the creation or imposition of any lien, claim, interest, charge,
restriction or encumbrance upon any of the properties or assets of Carolina or
any subsidiary; (iii) violate any applicable federal or state statute, law, rule
or regulation, or any judgment, order, writ, injunction or decree of any court,
administrative or regulatory agency or governmental body; (iv) result in the
acceleration of any obligation or indebtedness of
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Carolina or any subsidiary; or (v) interfere with or otherwise adversely affect
the ability of Carolina to carry on its business as presently conducted, or
interfere with or otherwise adversely affect the ability of FNB to carry on such
business after the Effective Time. No consents, approvals or waivers are
required to be obtained from any person or entity in connection with Carolina's
execution and delivery of this Agreement, or the performance of its obligations
or agreements or the consummation of the transactions described herein, except
for required approvals of Carolina's shareholders as described in Section 7.1(a)
below and of governmental or regulatory authorities as described in Section
7.1(d) below and approvals previously obtained.
2.7 BOOKS AND RECORDS. The books of account of each of Carolina and its
subsidiaries have been maintained in material compliance with all applicable
legal and accounting requirements and in accordance with good business
practices, and such books of account are complete and reflect accurately in all
material respects Carolina's and its subsidiaries', respectively, items of
income and expense and all of its assets, liabilities and shareholders' equity.
The minute books of each of Carolina and its subsidiaries accurately reflect in
all material respects the corporate actions which its respective shareholders
and board of directors, and all committees thereof, have taken during the time
periods covered by such minute books. All such minute books have been or will be
made available to FNB and its representatives.
2.8 REGULATORY REPORTS. Since January 1, 1995, each of Carolina and
Richmond Savings has filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that were required
to be filed with (i) the FDIC, (ii) the North Carolina Savings Institutions
Division (the "Division") or the Administrator and (iii) any other governmental
or regulatory authorities having jurisdiction over Carolina or any subsidiary
except to the extent that failure to file such reports, registrations and
statements would not have a Material Adverse Effect on Carolina and its
subsidiaries. All such reports, registrations and statements filed by Carolina
or Richmond Savings with the FDIC, the Division, the Administrator or other such
regulatory authority are collectively referred to herein as the "Carolina
Reports." As of their respective dates, the Carolina Reports complied in all
material respects with all the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
neither Carolina nor any of its subsidiaries has been notified that any such
Carolina Reports were deficient as to form or content. Following the date of
this Agreement, Carolina shall deliver to FNB, simultaneous with the filing
thereof, a copy of each report, registration, statement or other regulatory
filing made thereafter by Carolina or any subsidiary, with the FDIC, the
Division, the Administrator or any other such regulatory authority.
2.9 SEC FILINGS; FINANCIAL STATEMENTS.
(A) SEC FILINGS. Carolina has filed and made available to
FNB all forms, reports, and documents required to be filed by
Carolina with the Securities and Exchange
10
Commission (the "SEC") since December 31, 1995 (collectively, the "Carolina SEC
Reports"). The Carolina SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act 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 Carolina SEC Reports or necessary in order to make
the statements in such Carolina SEC Reports, in light of the circumstances under
which they were made, not misleading.
(B) FINANCIAL STATEMENTS. Carolina has filed with the SEC and made
available to FNB copies of its audited consolidated balance sheets as of June
30, 1999 and 1998 and its consolidated statements of operations, changes in
shareholders' equity and cash flows for the years ended June 30, 1999, 1998 and
1997, together with notes thereto (collectively, the "Carolina Financial
Statements"); and following the date of this Agreement, Carolina promptly will
deliver to FNB all other annual or interim financial statements prepared by or
for Carolina. The Carolina Financial Statements (including any related notes and
schedules thereto) (i) are in accordance in all material respects with
Carolina's books and records, and (ii) except as stated therein, were prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods indicated and present fairly, in all
material respects, Carolina's consolidated financial condition, assets and
liabilities, results of operations, changes in shareholders' equity and changes
in cash flows as of the dates indicated and for the periods specified therein.
The Carolina Financial Statements have been audited by Xxxxx Xxxx PLLC,
independent certified public accountants.
2.10 TAX RETURNS AND OTHER TAX MATTERS. (i) Each of Carolina and its
subsidiaries has timely filed or caused to be filed, or obtained proper
extensions of time for filing, all federal, state and local income tax returns
and reports which are required by law to have been filed, and all such returns
and reports were true, correct and complete in all material respects and
contained all material information required to be contained therein; (ii) all
federal, state and local income, profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other taxes (including interest
and penalties), charges and assessments which have become due from or been
assessed or levied against Carolina, any subsidiary or their respective
properties have been fully paid or, if not yet due, a reserve or accrual which
is reasonably believed by the management of Carolina to be adequate in all
material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes is reflected on the Carolina Financial
Statements; (iii) tax returns and reports of Carolina and its subsidiaries have
not been subject to audit by the Internal Revenue Service (the "IRS") or the
North Carolina Department of Revenue in the last seven years and neither
Carolina nor any subsidiary has received any indication of the pendency of any
audit or examination in connection with any such tax return or report or has any
knowledge that any such return or report is subject to adjustment; and (iv)
neither Carolina nor any subsidiary has executed any waiver or extended the
statute of limitations (or been asked to execute a waiver or extend a statute of
limitations) with respect to any tax.
11
2.11 ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER EVENTS. (a)
Since June 30, 1999, each of Carolina and its subsidiaries have conducted its
respective business only in the ordinary course, and there has been no Material
Adverse Effect, and there has occurred no event or development and there
currently exists no condition or circumstance which, with the lapse of time or
otherwise, may or could cause, create or result in a Material Adverse Effect, on
Carolina and its subsidiaries.
(b) Since June 30, 1999, and other than in the ordinary course of its
business, neither Carolina nor any subsidiary has incurred any material
liability or engaged in any material transaction or entered into any material
agreement, increased the salaries, compensation or general benefits payable to
its employees, suffered any loss, destruction or damage to any of its respective
properties or assets, or made a material acquisition or disposition of any
assets or entered into any material contract or lease. For purposes of this
Section 2.11(b), "material" means material to Carolina and its subsidiaries
considered as one enterprise.
2.12 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Carolina nor any
subsidiary has any liabilities or obligations, whether known or unknown, matured
or unmatured, accrued, absolute, contingent or otherwise, whether due or to
become due (including without limitation tax liabilities or unfunded liabilities
under employee benefit plans or arrangements), other than (i) those reflected in
the Carolina Financial Statements, or (ii) obligations or liabilities incurred
in the ordinary course of its business since June 30, 1999 and which are not,
individually or in the aggregate, material to Carolina and its subsidiaries
considered as one enterprise.
2.13 LITIGATION AND COMPLIANCE WITH LAW.
(a) There are no actions, suits, arbitrations, controversies or other
proceedings or investigations (or, to the best knowledge and belief of
management of Carolina, any facts or circumstances which reasonably could result
in such), including without limitation any such action by any governmental or
regulatory authority, which currently exist or are ongoing, pending or, to the
best knowledge and belief of management of Carolina, threatened, contemplated or
probable of assertion, against, relating to or otherwise affecting Carolina, any
subsidiary or any of their respective properties, assets or employees which, if
determined adversely, could result in liability on the part of Carolina or any
subsidiary for, or subject Carolina or its subsidiary to, material monetary
damages, fines or penalties or an injunction, or which could have a Material
Adverse Effect on Carolina and its subsidiaries or on Carolina's ability to
consummate the Merger.
(b) Except for such licenses, permits, orders, authorizations or approvals
("Permits") the absence of which would not have a Material Adverse Effect on
Carolina or its subsidiaries, each of Carolina and its subsidiaries has all
Permits of any federal, state, local or foreign governmental or regulatory body
that are material to or necessary for the conduct of its respective business or
to own, lease and operate its respective properties. Except as would not have a
Material Adverse Effect on Carolina and its subsidiaries, all such Permits are
in full force and effect and no violations are or have been recorded in respect
of any such
12
Permits. No proceeding is pending or, to the best knowledge and belief of
management of Carolina, threatened or probable of assertion to suspend, cancel,
revoke or limit any Permit.
(c) Neither Carolina nor any subsidiary is subject to any supervisory
agreement, enforcement order, writ, injunction, capital directive, supervisory
directive, memorandum of understanding or other similar agreement, order,
directive, memorandum or consent of, with or issued by any regulatory or other
governmental authority (including without limitation the Federal Reserve Board,
the FDIC or the Administrator) relating to its financial condition, directors or
officers, employees, operations, capital, regulatory compliance or otherwise;
there are no judgments, orders, stipulations, injunctions, decrees or awards
against Carolina or a subsidiary which in any manner limits, restricts,
regulates, enjoins or prohibits any present or past business or practice of
Carolina or any subsidiary; and neither Carolina nor any subsidiary has been
advised or has any reason to believe that any regulatory or other governmental
authority or any court is contemplating, threatening or requesting the issuance
of any such agreement, order, injunction, directive, memorandum, judgment,
stipulation, decree or award.
(d) Neither Carolina nor any subsidiary is in violation or default under,
and each has complied with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions or decrees of any court or federal, state, municipal
or other governmental or regulatory authority having jurisdiction or authority
over it or its business operations, properties or assets (including without
limitation all provisions of North Carolina law relating to usury, the Consumer
Credit Protection Act, and all other laws and regulations applicable to
extensions of credit) except for any such violation, default or noncompliance as
does not or would not have a Material Adverse Effect on Carolina and its
subsidiaries, and, to the best knowledge and belief of management of Carolina,
there is no basis for any claim by any person or authority for compensation,
reimbursement or damages or otherwise for any violation of any of the foregoing.
2.14 REAL PROPERTIES. Carolina has Previously Disclosed to FNB a listing
of all real property owned or leased by Carolina or any subsidiary (the "Real
Property") and all leases pertaining to any such Real Property to which Carolina
or any subsidiary is a party (the "Real Property Leases"). With respect to all
Real Property, Carolina or any subsidiary has good and marketable fee simple
title to, or a valid and subsisting leasehold interest in, such Real Property
and owns the same free and clear of all mortgages, liens, leases, encumbrances,
title defects and exceptions to title other than (i) the lien of current taxes
not yet due and payable, and (ii) such imperfections of title and restrictions,
covenants and easements (including utility easements) which do not materially
affect the value of the Real Property and which do not and will not materially
detract from, interfere with or restrict the present or future use of the
properties subject thereto or affected thereby. With respect to each Real
Property Lease (i) such lease is valid and enforceable in accordance with its
terms, (ii) there currently exists no circumstance or condition which
constitutes an event of default by Carolina or any subsidiary (as lessor or
lessee) or its respective lessor or which, with the passage of time or the
giving of required notices will or could constitute such an event of default,
and (iii) subject to any required consent of Carolina's lessor, each such Real
Property Lease may be assigned to FNB and the execution and delivery of this
Agreement
13
does not constitute an event of default thereunder. To the best knowledge and
belief of management of Carolina, the Real Property complies with all applicable
federal, state and local laws, regulations, ordinances or orders of any
governmental authority, including those relating to zoning, building and use
permits, except for such noncompliance as does not or would not have a Material
Adverse Effect on Carolina and its subsidiaries, and the Real Property may be
used under applicable zoning ordinances for commercial banking facilities as a
matter of right rather than as a conditional or nonconforming use. All
improvements and fixtures included in or on the Real Property are in good
condition and repair, ordinary wear and tear excepted, and there does not exist
any condition which materially adversely affects the economic value thereof or
materially adversely interferes (or will interfere after the Merger) with the
contemplated use thereof.
2.15 LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES. Except to the extent as
would not have a Material Adverse Effect on Carolina and its subsidiaries, (a)
All loans, accounts, notes and other receivables reflected as assets on the
books and records of Carolina and its subsidiaries (i) have resulted from bona
fide business transactions in the ordinary course of operations of Carolina and
its subsidiaries, (ii) were made in accordance with the standard loan policies
and procedures of Carolina and its subsidiaries, and (iii) are owned by Carolina
or a subsidiary free and clear of all liens, encumbrances, assignments,
participation or repurchase agreements or other exceptions to title or to the
ownership or collection rights of any other person or entity.
(b) All of the records of Carolina and its subsidiaries regarding all
outstanding loans, accounts, notes and other receivables, and all other real
estate owned, are accurate in all material respects, and, with respect to such
loans the loan documentation of which indicate are secured by any real or
personal property or property rights ("Loan Collateral"), such loans are in all
material respects secured by valid, perfected and enforceable liens on all such
Loan Collateral having the priority described in the records of such loan,
except to the extent failure to have such a lien would not have a Material
Adverse Effect on Carolina and its subsidiaries.
(c) To the best knowledge and belief of management of Carolina, each loan
reflected as an asset on the books of Carolina and its subsidiaries and each
guaranty therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon, and no defense, offset or counterclaim has been asserted with
respect to any such loan or guaranty, except to the extent as would not have a
Material Adverse Effect on Carolina and its subsidiaries.
(d) Carolina has previously delivered to FNB (i) a written listing of each
loan, extension of credit or other asset of Carolina or any subsidiary which, as
of June 30, 1999, is classified by the FDIC or the Administrator as "Loss,"
"Doubtful," "Substandard" or "Special Mention" (or otherwise by words of similar
import), or which it has designated as a special asset or for special handling
or placed on any "watch list" because of concerns regarding the ultimate
collectibility or deteriorating condition of such asset or any obligor or Loan
Collateral therefor, and (ii) a written listing of each loan or extension of
credit that, as of June 30, 1999, was past due as to the payment of principal or
interest or both, or as to which any obligor thereon (including the borrower or
any guarantor) otherwise was in
14
default, is the subject of a proceeding in bankruptcy or otherwise has indicated
any inability or intention not to repay such loan or extension of credit. Each
such listing is accurate and complete in all material respects as of the date
indicated.
(e) As of September 30, 1999, Carolina's, or any subsidiary's, reserve for
possible loan losses (the "Loan Loss Reserve") has been established in
conformity with GAAP, sound banking practices and all applicable requirements,
rules and policies of the FDIC and the Administrator and, in the best judgment
of management of Carolina, is reasonable in view of the size and character of
its loan portfolios, current economic conditions and other relevant factors, and
is adequate to provide for losses relating to or the risk of loss inherent in
its loan portfolios. At September 30, 1999, Carolina's Loan Loss Reserve was
$527,910.
2.16 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by
Carolina or any subsidiary (whether owned of record or beneficially) are held
free and clear of all mortgages, liens, pledges, encumbrances or any other
restriction or rights of any other person or entity, whether contractual or
statutory, which would materially impair the ability of Carolina or any
subsidiary to dispose freely of any such security or otherwise to realize the
benefits of ownership thereof at any time. There are no voting trusts or other
agreements or undertakings to which Carolina or any subsidiary is a party with
respect to the voting of any such securities. With respect to all "repurchase
agreements" to which Carolina or any subsidiary has "purchased" securities under
agreement to resell, Carolina or such subsidiary has a valid, perfected first
lien or security interest in the government securities or other collateral
securing the repurchase agreement, and the value of the collateral securing each
such repurchase agreement equals or exceeds the amount of the debt owed that is
secured by such collateral. Except for fluctuations in the market values of its
investment securities, since June 30, 1999, there has been no significant
deterioration or material adverse change in the quality, or any material
decrease in the value, of Carolina's securities portfolio as a whole.
2.17 PERSONAL PROPERTY AND OTHER ASSETS. All tangible personal property of
Carolina or any subsidiary material to the business operations of Carolina and
its subsidiaries (including without limitation all banking equipment, data
processing equipment, vehicles, and all other tangible personal property located
in any office of or used by Carolina or such subsidiary in the operation of its
business) is owned or leased by Carolina or such subsidiary free and clear of
all liens, encumbrances, leases, title defects or exceptions to title other than
such as are not material in character, amount or extent, and which do not
materially detract from the value of, or interfere with the present or future
use or ability to convey, the property subject thereto or affected thereby. All
of Carolina's or any subsidiary's tangible personal property material to its
business is in good operating condition and repair, ordinary wear and tear
excepted.
2.18 PATENTS AND TRADEMARKS. To the best knowledge and belief of
management of Carolina, Carolina and its subsidiaries own, possess or have the
right to use any and all patents, licenses, trademarks, trade names, copyrights,
trade secrets and proprietary and other confidential information necessary to
conduct their business as now conducted; and neither Carolina nor any subsidiary
has violated, and currently is not in conflict with, any
15
patent, license, trademark, trade name, copyright or proprietary right of any
other person or entity.
2.19 ENVIRONMENTAL MATTERS. (a) Carolina has Previously Disclosed to FNB
copies of all written reports, correspondence, notices or other materials, if
any, in its or any subsidiary's possession pertaining to environmental surveys
or assessments of the Real Property or any of its Loan Collateral and any
improvements thereon, or to any violation of "Environmental Laws" (as defined
below) on, affecting or otherwise involving the Real Property or any Loan
Collateral.
(b) There has been no presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, reporting,
testing, processing, emission, discharge, release, threatened release, control,
removal, clean-up or remediation of any "Hazardous Substances" (as defined
below) by any person prior to the date hereof on, from or relating to the Real
Property or, to the best knowledge and belief of management of Carolina, the
Loan Collateral, which constitutes a violation of any Environmental Laws, except
to the extent such presence, use, etc., when taken as a whole, would not have a
Material Adverse Effect on Carolina or its subsidiaries.
(c) Neither Carolina nor any subsidiary has violated any federal, state or
local law, rule, regulation, order, permit or other requirement relating to
health, safety or the environment or imposing liability, responsibility or
standards of conduct applicable to environmental conditions, and there has been
no violation of any Environmental Laws (as defined in Section 2.19(f) below)
(including, to the best knowledge and belief of management of Carolina, any
violation with respect to or relating to any Loan Collateral) by any other
person or entity for whose liability or obligation with respect to any
particular matter or violation Carolina or any subsidiary is or may be
responsible or liable, except to the extent any violations of which, when taken
as a whole, would not have a Material Adverse Effect on Carolina or its
subsidiaries.
(d) Neither Carolina nor any subsidiary is subject to any claims, demands,
causes of action, suits, proceedings, losses, damages, penalties, liabilities,
obligations, costs or expenses of any kind and nature which arise out of, under
or in connection with, or which result from or are based upon the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission, discharge,
release, threatened release, control, removal, clean-up or remediation of any
Hazardous Substances on, from or relating to the Real Property or, to the best
knowledge and belief of management of Carolina, any Loan Collateral by any
person or entity, except to the extent such claims, demands, etc., when taken as
a whole would not have a Material Adverse Effect on Carolina or its
subsidiaries.
(e) No facts, events or conditions relating to the Real Property or, to
the best knowledge and belief of management of Carolina, any Loan Collateral, or
the operations of Carolina or any subsidiary, will prevent, hinder or limit
continued compliance with Environmental Laws, or give rise to any investigatory,
emergency removal, remedial or corrective actions, obligations or liabilities
(whether accrued, absolute, contingent,
16
unliquidated or otherwise) pursuant to Environmental Laws, except to the extent
as would not, when taken as a whole, have a Material Adverse Effect on Carolina
or its subsidiaries.
(f) For purposes of this Agreement, "Environmental Laws" shall include:
(i) all federal, state and local statutes, regulations, ordinances,
orders, decrees, and similar provisions having the force or effect of law,
(ii) all contractual agreements, and
(iii) all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all standards of
conduct and bases of obligations relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, discharge, release,
threatened release, control, emergency removal, clean-up or remediation of any
Hazardous Substances (including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Superfund Amendment
and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances
Control Act, any "Superfund" or "Superlien" law, the Americans with Disabilities
Act, and the Occupational Safety and Health Act), as such may now or at any time
hereafter be defined or in effect.
(g) For purposes of this Agreement, "Hazardous Substances" shall include
hazardous, toxic or otherwise regulated materials, substances or wastes;
chemical substances or mixtures; pesticides; pollutants; contaminants; toxic
chemicals; oil or other petroleum products, byproducts, or constituents
(including but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other waste, oil sludge, and all
other liquid hydrocarbons regardless of specific gravity); asbestos or asbestos
containing material; flammable explosives; polychlorinated biphenyls ("PCBs") or
any material containing PCBs; radioactive materials; biological micro organisms,
viruses, fungi, spores; environmental tobacco smoke; radon or radon gas;
formaldehyde or any material containing formaldehyde; fumigants; any material or
substance comprising or contributing to conditions known as "sick building
syndrome," "building-related illness" or similar conditions or exposures; and/or
any hazardous, toxic, regulated or dangerous waste, substance or material
defined as such by the United States Environmental Protection Agency or any
other federal, state or local governmental agency or political subdivision
thereof, or for the purpose of or by any Environmental Laws, as now or at any
time hereafter may be in effect.
2.20 BROKERAGE OR FINDERS' COMMISSIONS. All negotiations relative to this
Agreement and the transactions described herein have been carried on by Carolina
or its representative, Trident Securities, a division of McDonald Investments
("Trident"), directly with FNB or its representatives, and no person or firm
other than Trident has been retained by or has acted on behalf of, pursuant to
any agreement, arrangement or understanding with,
17
or under the authority of, Carolina or its Board of Directors, as a broker,
finder or agent or has performed similar functions or otherwise is or may be
entitled to receive or claim a brokerage fee or other commission in connection
with or as a result of the transactions described herein.
2.21 MATERIAL CONTRACTS. (a) Except as Previously Disclosed, neither
Carolina nor any subsidiary is a party to or bound by any agreement, other than
loans made in the ordinary course of business, (i) involving money or other
property in an amount or with a value in excess of $50,000, (ii) which calls for
the provision of goods or services to Carolina and cannot be terminated without
material penalty upon written notice to the other party thereto, (iii) which is
material to Carolina or any subsidiary and was not entered into in the ordinary
course of business, (iv) which involves hedging, options or any similar trading
activity, or interest rate exchanges or swaps, (v) which commits Carolina or any
subsidiary to extend any loan or credit (with the exception of letters of
credit, lines of credit and loan commitments extended in the ordinary course of
a subsidiary's business), (vi) which involves the purchase or sale of any assets
of Carolina or any subsidiary, or the purchase, sale, issuance, redemption or
transfer of any capital stock or other securities of Carolina or any subsidiary,
or (vii) with any director, officer or principal shareholder of Carolina or any
subsidiary (including without limitation any consulting agreement, but not
including any agreement relating to loans or other banking services which were
made in the ordinary course of its business and on substantially the same terms
and conditions as were prevailing at that time for similar agreements with
unrelated persons).
(b) Neither Carolina nor any subsidiary is in default, and there has not
occurred any event which with the lapse of time or giving of notice or both
would constitute such a default, under any contract, lease, insurance policy,
commitment or arrangement to which it is a party or by which it or its property
is or may be bound or affected or under which it or its property receives
benefits, where the consequences of such default would have a Material Adverse
Effect on Carolina and its subsidiaries.
2.22 EMPLOYMENT MATTERS; EMPLOYEE RELATIONS. (a) Each of Carolina and its
subsidiaries (i) has paid in full to or accrued on behalf of all its respective
directors, officers and employees all wages, salaries, commissions, bonuses,
fees and other direct compensation for all labor or services rendered, including
all wages, salaries, commissions, bonuses, fees and other direct compensation
for all labor or services performed by them to the date of this Agreement and
all vacation pay, sick pay, severance pay and other amounts promised to the
extent required by law or its existing policies or practices, and (ii) is in
compliance in all material respects with all applicable federal, state and local
laws, statutes, rules and regulations with regard to employment and employment
practices, terms and conditions, and wages and hours and other compensation
matters; and no person has, to the best knowledge and belief of management of
Carolina, asserted that Carolina or any subsidiary is liable in any amount for
any arrearages in wages or employment taxes or for any penalties for failure to
comply with any of the foregoing.
(b) There is no action, suit or proceeding by any person pending or, to
the best knowledge and belief management of Carolina, threatened against
Carolina or any Subsidiary
18
(or their employees), involving employment discrimination, sexual harassment,
wrongful discharge or similar claims. Neither Carolina nor any subsidiary is a
party to or bound by any collective bargaining agreement with any of its
employees, any labor union or any other collective bargaining unit or
organization. There is no pending or threatened labor dispute, work stoppage or
strike involving Carolina, any subsidiary, or any of their employees, or any
pending or threatened proceeding in which it is asserted that Carolina or any
subsidiary has committed an unfair labor practice; and, neither Carolina nor any
subsidiary is aware of any activity involving it or any of its employees seeking
to certify a collective bargaining unit or engaging in any other labor
organization activity.
2.23 EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS. (a) Carolina has
Previously Disclosed to FNB a true and complete list of all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and stock option
plans; all employment and severance contracts; all medical, dental, health, and
life insurance plans; all vacation, sickness and other leave plans, disability
and death benefit plans; and all other employee benefit plans, contracts, or
arrangements maintained or contributed to by Carolina or any subsidiary for the
benefit of any employees, former employees, directors, former directors or any
of their beneficiaries (collectively, the "Plans"). True and complete copies of
all Plans, including, but not limited to, any trust instruments or insurance
contracts, if any, forming a part thereof, and all amendments thereto,
previously have been supplied to FNB. Neither Carolina nor any subsidiary
maintains, sponsors, contributes to or otherwise participates in any "Employee
Benefit Plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), any "Multiemployer Plan"
within the meaning of Section 3(37) of ERISA, or any "Multiple Employer Welfare
Arrangement" within the meaning of Section 3(40) of ERISA. Each Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
which is intended to be qualified under Section 401(a) of the Code, has received
or applied for a favorable determination letter from the IRS and Carolina is not
aware of any circumstances reasonably likely to result in the revocation or
denial of any such favorable determination letter. All reports and returns with
respect to the Plans (and any Plans previously maintained by Carolina or any
subsidiary) required to be filed with any governmental department, agency,
service or other authority, including without limitation Internal Revenue
Service Form 5500 (Annual Report), have been properly and timely filed.
(b) All "Employee Benefit Plans" maintained by or otherwise covering
employees or former employees of Carolina or its subsidiaries currently are, and
at all times have been, in compliance with all provisions and requirements of
ERISA except those the noncompliance of which, when taken as a whole, would not
have a Material Adverse Effect on Carolina or its subsidiaries. There is no
pending or threatened litigation relating to any Plan or any such Plan
previously maintained by Carolina. Neither Carolina nor any subsidiary has
engaged in a transaction with respect to any Plan that has subjected it, or
absent the exemption under which the transaction was effected, would subject it
to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA.
19
(c) Carolina has delivered to FNB a true, correct and complete copy
(including copies of all amendments thereto) of each of its retirement plans
that is intended to be qualified under Section 401(a) of the Code (collectively,
the "Retirement Plans"), together with true, correct and complete copies of the
summary plan descriptions relating to the Retirement Plans, the most recent
determination letters received from the IRS regarding the Retirement Plans, and
the most recent Annual Reports (Form 5500 series) and related schedules, if any,
for the Retirement Plans. The Retirement Plans are qualified under the
provisions of Section 401(a) of the Code, the trusts under the Retirement Plans
are exempt trusts under Section 501(a) of the Code, and determination letters
have been issued or applied for with respect to the Retirement Plans to said
effect, including determination letters covering the current terms and
provisions of the Retirement Plans. There are no issues relating to said
qualification or exemption of the Retirement Plans currently pending before the
IRS, the United States Department of Labor, the Pension Benefit Guaranty
Corporation or any court. The Retirement Plans and the administration thereof
meet (and have met since the establishment of the Retirement Plans) the
requirements of ERISA, the Code and all other laws, rules and regulations
applicable to the Retirement Plans and do not violate (and since the
establishment of the Retirement Plans have not violated) any of the provisions
of ERISA, the Code and such other laws, rules and regulations, except to the
extent such violation, when taken as a whole, would not have a Material Adverse
Effect on Carolina or its subsidiaries. Without limiting the generality of the
foregoing, all reports and returns with respect to the Retirement Plans required
to be filed with any governmental department, agency, service or other authority
have been properly and timely filed. There are no disputes or unresolved
disagreements with respect to the Retirement Plans or the administration thereof
currently existing between Carolina, any subsidiary or any trustee or other
fiduciary thereunder, and any governmental agency, any current or former
employee of Carolina, any subsidiary or beneficiary of any such employee or any
other person or entity. No "reportable event" within the meaning of Section
4043(b) of ERISA has occurred at any time with respect to the Retirement Plans,
other than those, when taken as a whole, would not have a Material Adverse
Effect on Carolina or its subsidiaries.
(d) No liability under subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Carolina or any subsidiary with respect to the
Retirement Plans or with respect to any other ongoing, frozen or terminated
defined benefit pension plan currently or formerly maintained by Carolina or any
subsidiary. Neither Carolina nor any subsidiary presently contributes to a
"Multiemployer Plan" or has ever contributed to such a plan. All contributions
required to be made pursuant to the terms of each of the Plans (including
without limitation the Retirement Plans and any other "pension plan" (as defined
in Section 3(2) of ERISA, provided such plan is intended to qualify under the
provisions of Section 401(a) of the Code) maintained by Carolina or any
subsidiary have been timely made. Neither the Retirement Plans nor any other
"pension plan" maintained by Carolina or any subsidiary have an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither Carolina nor any subsidiary has
provided, and is not required to provide, security to any "pension plan" or to
any "Single Employer Plan" pursuant to Section 401(a)(29) of the Code. Under the
Retirement Plans and any other "pension plan" maintained by Carolina or any
subsidiary as of the last day of the most recent plan year ended prior to the
date hereof, the actuarially
20
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the plan's most recent actuarial valuation) did not
exceed the then current value of the assets of such plan, and there has been no
material change in the financial condition of any such plan since the last day
of the most recent plan year.
(e) There are no restrictions on the rights of Carolina or any subsidiary
to amend or terminate any Plan. There are no restrictions on the rights or
ability of Carolina to satisfy its obligations under Section 4.1(f) below, or on
the right or ability of FNB to terminate the ESOP (as defined in Section 4.1(f)
below), without Carolina or FNB incurring any liability under the ESOP or ERISA,
assuming that such termination is in compliance with the Code and ERISA. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (except as otherwise specifically provided
for or contemplated by the transactions described in this Agreement) (i) result
in any payment to any person (including without limitation any severance
compensation or payment, unemployment compensation, "golden parachute" or
"change in control" payment, or otherwise) becoming due under any plan or
agreement to any director, officer, employee or consultant, (ii) increase any
benefits otherwise payable under any plan or agreement, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
2.24 INSURANCE. Carolina has in effect a "financial institutions bond" and
such other policies of general liability, casualty, directors and officers
liability, employee fidelity, errors and omissions and other property and
liability insurance as have been previously disclosed to FNB (the "Policies").
The Policies provide coverage in such amounts and against such liabilities,
casualties, losses or risks as is required by applicable law or regulation; and,
in the judgment of management of Carolina, the insurance coverage provided under
the Policies is reasonable and adequate in all respects for Carolina and its
subsidiaries. Each of the Policies is in full force and effect and is valid and
enforceable in accordance with its terms, and is underwritten by an insurer of
recognized financial responsibility that is qualified to transact business in
North Carolina; and Carolina and its subsidiaries have taken all requisite
actions (including the giving of required notices) under each such Policy to
preserve all rights thereunder with respect to all matters. Neither Carolina nor
any subsidiary is in default under the provisions of, has received notice of
cancellation or nonrenewal of or any premium increase on, or has any knowledge
of any failure to pay any premium on or any inaccuracy in any application for
any Policy. There are no pending claims under any Policy, and Carolina has no
knowledge of any facts or of the occurrence of any event that is reasonably
likely to result in any such claim.
2.25 INSURANCE OF DEPOSITS. The deposits of each depositor in Richmond
Savings are insured by the Savings Association Insurance Fund of the FDIC to the
maximum amount provided by law, all deposit insurance premiums due from Richmond
Savings to the FDIC have been paid in full in a timely fashion, and, to the best
knowledge and belief of Carolina, no proceedings have been commenced or are
contemplated by the FDIC or otherwise to terminate such insurance.
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2.26 COMPENSATION; STOCK OWNERSHIP. Carolina has Previously Disclosed (i)
the name and current salary or wage rate for each present employee of Carolina
or its subsidiaries, (ii) the name of and number of shares of Carolina Stock
beneficially owned by each of the directors and officers of Carolina and by any
person or entity known to Carolina to own beneficially 5% or more of Carolina
Stock, and (iii) the name, number and vesting schedule of outstanding options
and restricted stock awards held by each person to whom a stock option or
restricted stock award has been granted and currently is outstanding under any
stock option or other plan of Carolina including, without limitation, the
Carolina Option Plan and the MR Plan.
2.27 AFFILIATES. Carolina will deliver to FNB within 15 days of the date
hereof a listing of those persons deemed by Carolina and its counsel as of the
date of this Agreement to be "Affiliates" of Carolina as that term is defined in
Rule 405 promulgated under the 1933 Act, including persons, trust, estates or
other entities related to persons deemed to be Affiliates of Carolina.
2.28 STATE TAKEOVER LAWS. Carolina 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 (collectively,
"Takeover Laws").
2.29 OBSTACLES TO REGULATORY APPROVAL OR TAX TREATMENT. To the best
knowledge and belief of management of Carolina, there exists no fact or
condition relating to Carolina or any subsidiary that may reasonably be expected
to (i) prevent, impede or delay FNB or Carolina from obtaining the regulatory
approvals required to consummate transactions described herein, or (ii) prevent
the Merger from qualifying to be a tax-free reorganization under Section
368(a)(1)(A) of the Code; and, if any such fact or condition becomes known to
Carolina, Carolina shall promptly (and in any event within three days after
obtaining such knowledge) communicate such fact or condition to the President of
FNB.
2.30 YEAR 2000. Carolina has completed the four phases of its Year 2000
readiness program, as described in the May 5, 1997, Statement of the Federal
Financial Institutions Examination Council ("FFIEC"), entitled "YEAR 2000
Project Management Awareness" and the April 10, 1998, "Guidance Concerning
Testing for Year 2000 Readiness." Carolina has made available to FNB complete
and accurate copies of its Year 2000 remediation contingency plan, as described
in the FFIEC Statements of March 17, 1998, and May 13, 1998, entitled "Guidance
Concerning Institution Due Diligence in Connection with Service Provider and
Software Vendor Year 2000 Readiness" and "Guidance Concerning Contingency
Planning in Connection with Year 2000 Readiness," respectively. Carolina has
completed the four phases of the business resumption contingency planning
process, as set forth in the guidance issued by FFIEC on December 11, 1998, and
May 13, 1998, and has provided to FNB a complete and accurate copy of its
business resumption contingency plan, written documentation supporting the
plan's development and valuation, the results of tests on the plan, and a
schedule for any future tests.
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2.31 DISCLOSURE. To the best knowledge and belief of management of
Carolina, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of Carolina at any time to FNB in
connection with this Agreement (including without limitation the statements
contained herein), when considered as a whole, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Carolina to FNB is or will be a true and
complete copy of such document, unmodified except by another document delivered
by Carolina.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF FNB
Except as otherwise specifically described herein or as "Previously
Disclosed" to Carolina, FNB hereby makes the following representations and
warranties to Carolina. ("Previously Disclosed" shall mean, as to FNB, the
disclosure of information in a letter delivered by FNB to Carolina specifically
referring to this Agreement and arranged in sections corresponding to the
sections, subsections and items of this Agreement applicable thereto, and which
letter has been delivered prior to the execution of this Agreement. Information
shall be deemed Previously Disclosed for the purpose of a given section,
subsection or item of this Agreement only to the extent a specific reference
thereto is made in connection with disclosure of such information at the time of
such delivery.)
3.1 CORPORATE ORGANIZATION, CAPACITY AND AUTHORITY.
(A) ORGANIZATION. FNB is a corporation duly organized and validly existing
under the laws of the State of North Carolina and is registered with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended.
(B) SUBSIDIARIES. FNB has one wholly owned subsidiary, First National Bank
and Trust Company, a national banking corporation. First National is sometimes
referred to as the subsidiary of FNB. Other than First National, FNB has no
subsidiaries, direct or indirect, and does not own, directly or indirectly, any
stock or other equity interest in any other corporation, service corporation,
joint venture, partnership or other entity, except for equity issues reflected
in First National's investment portfolio and securities held in a fiduciary
capacity.
(C) ORGANIZATION OF SUBSIDIARY. First National is duly organized and
validly existing under the laws of the United States, and all of the outstanding
capital stock of such subsidiary is owned of record and beneficially, free and
clear of all security interests and claims, by FNB. FNB has previously delivered
to Carolina true, accurate and complete copies of the currently effective
charter and bylaws or equivalent organizational documents of its subsidiary,
including all amendments and proposed amendments thereto. All of the outstanding
shares of capital stock of FNB's subsidiary are duly authorized, validly issued,
fully paid and nonassessable.
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(D) POWER AND AUTHORITY. Each of FNB and its subsidiary has all requisite
power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as now being conducted, is duly qualified to
do business and is in good standing in each other jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where
failure so to qualify would not have a Material Adverse Effect (as defined
herein) on FNB and its subsidiary, and is not transacting business, or operating
any properties owned or leased by it, in violation of any provision of federal
or state law or any rule or regulation promulgated thereunder, which violation
would have a Material Adverse Effect on FNB and its subsidiary. For purposes of
this Article III, "Material Adverse Effect" shall mean: (a) with respect to
references to FNB, any change in the business of FNB that is or could be
materially adverse to the financial condition, results of operations, prospects,
business, assets, investments, properties or operations of FNB, or (b) with
respect to references to FNB and its subsidiary, any change in the business of
FNB or its subsidiary that is or could be materially adverse to the financial
condition, results of operations, prospects, business, assets, loan portfolio,
investments, properties or operations of FNB and its subsidiary considered as
one enterprise.
3.2 CAPITAL STOCK. The authorized capital stock of FNB consists of
10,000,000 shares of FNB Stock, of which 3,660,626 shares are issued and
outstanding, and 200,000 shares of preferred stock, par value $10.00, of which
no shares are issued and outstanding. Each outstanding share of FNB Stock has
been duly authorized and validly issued, is fully paid and nonassessable, has
been issued in compliance with applicable federal and state securities laws and
has not been issued in violation of the preemptive rights of any shareholder.
The shares of FNB Stock issued to Carolina's shareholders pursuant to this
Agreement, when issued as described herein, will be duly authorized, validly
issued, fully paid and nonassessable, and will be issued in compliance with
applicable federal and state securities laws.
3.3 CONVERTIBLE SECURITIES, OPTIONS, ETC. FNB does not have any
outstanding (i) securities or other obligations (including debentures or other
debt instruments) which are convertible into shares of FNB Stock or any other
securities of FNB, (ii) options, warrants, rights, calls or other commitments of
any nature which entitle any person to receive or acquire any shares of FNB
Stock or any other securities of FNB, or (iii) plan, agreement or other
arrangement pursuant to which shares of FNB Stock or any other securities of
FNB, or options, warrants, rights, calls or other commitments of any nature
pertaining thereto, have been or may be issued.
3.4 AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been duly
and validly approved by FNB's Board of Directors. Subject only to approval of
the Plan of Merger by the shareholders of FNB, (i) FNB has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations and agreements and carry out the transactions described herein, (ii)
all corporate proceedings and approvals required to be taken to authorize FNB to
enter into this Agreement and to perform its respective obligations and
agreements and to carry out the transactions described herein have been duly and
properly taken, and (iii) this Agreement constitutes the valid and binding
agreement of
24
FNB enforceable in accordance with its terms (except to the extent
enforceability may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect which
affect creditors' rights generally, (B) legal and equitable limitations on the
availability of injunctive relief, specific performance and other equitable
remedies, and (C) general principles of equity and applicable laws or court
decisions limiting the enforceability of indemnification provisions).
3.5 VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
Provided the required approvals of FNB's shareholders and of governmental or
regulatory authorities are obtained, neither the execution and delivery of this
Agreement, nor the consummation of the transactions described herein, nor
compliance by FNB with any of its obligations or agreements contained herein,
will: (i) conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, the Articles of
Incorporation or bylaws or the equivalent organizational documents of FNB or its
subsidiary, or any material contract, agreement, lease, mortgage, note, bond,
indenture, license, or obligation or understanding (oral or written) to which
FNB or its subsidiary is bound or by which it, its business, capital stock or
any of its properties or assets may be affected; (ii) result in the creation or
imposition of any lien, claim, interest, charge, restriction or encumbrance upon
any of the properties or assets of FNB or its subsidiary; (iii) violate any
applicable federal or state statute, law, rule or regulation, or any order,
writ, injunction or decree of any court, administrative or regulatory agency or
governmental body; (iv) result in the acceleration of any obligation or
indebtedness of FNB or its subsidiary; or (v) interfere with or otherwise
adversely affect FNB's ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained from any person or
entity in connection with FNB's execution and delivery of this Agreement, or the
performance of its obligations or agreements or the consummation of the
transactions described herein, except for required approvals of governmental or
regulatory authorities described in Section 7.1(d) below and approvals
previously obtained.
3.6 BOOKS AND RECORDS. The books of account of FNB and its subsidiary have
been maintained in material compliance with all applicable legal and accounting
requirements and in accordance with good business practices, and such books of
account are complete and reflect accurately in all material respects FNB's and
its subsidiary's, respectively, items of income and expense and all of its
assets, liabilities and shareholders' equity. The minute books of each of FNB
and its subsidiary accurately reflect in all material respects the corporate
actions which its respective shareholders and board of directors, and all
committees thereof, have taken during the time periods covered by such minute
books. All such minute books have been or will be made available to Carolina and
its representatives.
3.7 REGULATORY REPORTS. Since January 1, 1995, FNB and its subsidiary have
filed all reports, registrations and statements, together with any amendments
that were required to be made with respect thereto, that were required to be
filed with the Federal Reserve Board, the FDIC, the Office of the Comptroller of
the Currency ("OCC") and any other governmental or regulatory authorities having
jurisdiction over FNB or its subsidiary except to the extent that failure to
file such reports, registrations and statements would not have a Material
Adverse Effect on FNB and its subsidiary. All such reports and statements filed
25
with the Federal Reserve Board, the FDIC, the OCC or other such regulatory
authority are collectively referred to herein as the "FNB Reports." As of their
respective dates, the FNB Reports complied in all material respects with all the
statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they were filed and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, FNB has not been
notified that any such FNB Reports were deficient in any material respect as to
form or content. Following the date of this Agreement, FNB shall deliver to
Carolina upon its request a copy of any report, registration, statement or other
regulatory filing made by FNB or its subsidiary with Federal Reserve Board, the
FDIC, the OCC or any other such regulatory authority.
3.8 SEC FILINGS; FINANCIAL STATEMENTS.
(A) SEC FILINGS. FNB has filed and made available to Carolina all forms,
reports, and documents required to be filed by FNB with the SEC since December
31, 1996 (collectively, the "FNB SEC Reports"). The FNB SEC Reports (i) at the
time filed, complied in all material respects with the applicable requirements
of the 1933 Act and the 1934 Act 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 FNB SEC Reports
or necessary in order to make the statements in such FNB SEC Reports, in light
of the circumstances under which they were made, not misleading.
(B) FINANCIAL STATEMENTS. FNB has filed with the SEC and made available to
Carolina copies of its audited consolidated balance sheets as of December 31,
1998 and 1997 and its consolidated statements of operations, changes in
shareholders' equity and cash flows for the years ended December 31, 1998, 1997
and 1996, together with notes thereto (collectively, the "FNB Financial
Statements"); and, following the date of this Agreement, FNB promptly will
deliver to Carolina all other annual or interim financial statements prepared by
or for FNB. The FNB Financial Statements (including any related notes and
schedules thereto) (i) are in accordance with FNB's books and records, and (ii)
were prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated and present fairly, in all material respects, FNB's
consolidated financial condition, assets and liabilities, results of operations,
changes in shareholders' equity and changes in cash flows as of the dates
indicated and for the periods specified therein. The FNB Financial Statements
have been audited by KPMG LLP, independent certified public accountants.
3.9 TAX RETURNS AND OTHER TAX MATTERS. (i) Each of FNB and its subsidiary
has timely filed or caused to be filed, or obtained proper extensions of time
for filing, all federal, state and local income tax returns and reports which
are required by law to have been filed, and all such returns and reports were
true, correct and complete in all material respects and contained all material
information required to be contained therein; (ii) all federal, state and local
income, profits, franchise, sales, use, occupation, property, excise,
withholding, employment and other taxes (including interest and penalties),
charges and assessments which have become due from or been assessed or levied
against FNB, its subsidiary or their
26
respective properties have been fully paid or, if not yet due, a reserve or
accrual which is reasonably believed by the management of FNB to be adequate in
all material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes is reflected on the FNB Financial Statements;
(iii) tax returns and reports of FNB and its subsidiary have not been subject to
audit by the Internal Revenue Service (the "IRS") or the North Carolina
Department of Revenue in the last seven years and neither FNB nor its subsidiary
has received any indication of the pendency of any audit or examination in
connection with any such tax return or report or has any knowledge that any such
return or report is subject to adjustment; and (iv) neither FNB nor its
subsidiary has executed any waiver or extended the statute of limitations (or
been asked to execute a waiver or extend a statute of limitations) with respect
to any tax.
3.10 ABSENCE OF MATERIAL ADVERSE CHANGES. Since December 31, 1998, there
has been no material adverse change, and there has occurred no event or
development and there currently exists no condition or circumstance which, with
the lapse of time or otherwise, may or could cause, create or result in a
Material Adverse Effect on FNB and its subsidiary.
3.11 ABSENCE OF UNDISCLOSED LIABILITIES. Neither FNB nor its subsidiary
has any liabilities or obligations, whether known or unknown, matured or
unmatured, accrued, absolute, contingent or otherwise, whether due or to become
due (including without limitation tax liabilities or unfunded liabilities under
employee benefit plans or arrangements), other than (i) those reflected in the
FNB Financial Statements, or (ii) obligations or liabilities incurred in the
ordinary course of its business since December 31, 1998 and which are not,
individually or in the aggregate, material to FNB and its subsidiary considered
as one enterprise.
3.12 LITIGATION AND COMPLIANCE WITH LAW.
(a) There are no actions, suits, arbitrations, controversies or other
proceedings or investigations (or, to the best knowledge and belief of
management of FNB, any facts or circumstances which reasonably could result in
such), including without limitation any such action by any governmental or
regulatory authority, which currently exist or are ongoing, pending or, to the
best knowledge and belief of management of FNB, threatened, contemplated or
probable of assertion, against, relating to or otherwise affecting FNB, its
subsidiary or any of their respective properties, assets or employees which, if
determined adversely, could result in liability on the part of FNB or its
subsidiary for, or subject FNB or its subsidiary to, material monetary damages,
fines or penalties or an injunction, or which could have a Material Adverse
Effect on FNB and its subsidiary or on FNB's ability to consummate the Merger.
(b) Except for such licenses, permits, orders, authorizations or approvals
("Permits") the absence of which would not have a Material Adverse Effect on FNB
or its subsidiary, each of FNB and its subsidiary has all Permits of any
federal, state, local or foreign governmental or regulatory body that are
material to or necessary for the conduct of its respective business or to own,
lease and operate its respective properties. Except as would not have a Material
Adverse Effect on FNB and its subsidiary, all such Permits are in full
27
force and effect and no violations are or have been recorded in respect of any
such Permits. No proceeding is pending or, to the best knowledge and belief of
management of FNB, threatened or probable of assertion to suspend, cancel,
revoke or limit any Permit.
(c) Neither FNB nor its subsidiary is subject to any supervisory
agreement, enforcement order, writ, injunction, capital directive, supervisory
directive, memorandum of understanding or other similar agreement, order,
directive, memorandum or consent of, with or issued by any regulatory or other
governmental authority (including without limitation the Federal Reserve Board,
the FDIC or the OCC) relating to its financial condition, directors or officers,
employees, operations, capital, regulatory compliance or otherwise; there are no
judgments, orders, stipulations, injunctions, decrees or awards against FNB or
its subsidiary which in any manner limits, restricts, regulates, enjoins or
prohibits any present or past business or practice of FNB or its subsidiary; and
neither FNB nor its subsidiary has been advised or has any reason to believe
that any regulatory or other governmental authority or any court is
contemplating, threatening or requesting the issuance of any such agreement,
order, injunction, directive, memorandum, judgment, stipulation, decree or
award.
(d) Neither FNB nor its subsidiary is in violation or default under, and
each has complied with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions or decrees of any court or federal, state, municipal
or other governmental or regulatory authority having jurisdiction or authority
over it or its business operations, properties or assets (including without
limitation all provisions of North Carolina law relating to usury, the Consumer
Credit Protection Act, and all other laws and regulations applicable to
extensions of credit) except for any such violation, default or noncompliance as
does not or would not have a Material Adverse Effect on FNB and its subsidiary,
and, to the best knowledge and belief of management of FNB, there is no basis
for any claim by any person or authority for compensation, reimbursement or
damages or otherwise for any violation of any of the foregoing.
3.13 ABSENCE OF BROKERAGE OR FINDERS' COMMISSIONS. All negotiations
relative to this Agreement and the transactions described herein have been
carried on by FNB or its representative, Wheat First Securities, a division of
First Union Securities, Inc. ("Wheat First"), directly with Carolina or its
representatives and no person or firm or other than Wheat First has been
retained by or has acted on behalf of, pursuant to any agreement, arrangement or
understanding with, or under the authority of, FNB or its Board of Directors, as
a broker, finder or agent or has performed similar functions or otherwise is or
may be entitled to receive or claim a brokerage fee or other commission in
connection with or as a result of the transactions described herein.
3.14 OBSTACLES TO REGULATORY APPROVAL OR TAX TREATMENT. To the best of the
knowledge and belief of the management of FNB, no fact or condition relating to
FNB exists that may reasonably be expected to (i) prevent, impede or delay FNB
or Carolina from obtaining the regulatory approvals required in order to
consummate transactions described herein, or (ii) prevent the Merger from
qualifying to be a tax-free reorganization under Section 368(a)(1)(A) of the
Code; and, if any such fact or condition becomes known to the
28
executive officers of FNB, FNB promptly (and in any event within three days
after obtaining such knowledge) shall communicate such fact or condition to the
President of Carolina.
3.15 YEAR 2000. FNB has completed the four phases of its Year 2000
readiness program, as described in the May 5, 1997, Statement of the Federal
Financial Institutions Examination Council ("FFIEC"), entitled "YEAR 2000
Project Management Awareness" and the April 10, 1998, "Guidance Concerning
Testing for Year 2000 Readiness." FNB will make available to Carolina complete
and accurate copies of its Year 2000 remediation contingency plan, as described
in the FFIEC Statements of March 17, 1998, and May 13, 1998, entitled "Guidance
Concerning Institution Due Diligence in Connection with Service Provider and
Software Vendor Year 2000 Readiness" and "Guidance Concerning Contingency
Planning in Connection with Year 2000 Readiness," respectively. FNB has
completed the four phases of the business resumption contingency planning
process, as set forth in the guidance issued by FFIEC on December 11, 1998, and
May 13, 1998, and has made available to Carolina a complete and accurate copy of
its business resumption contingency plan, written documentation supporting the
plan's development and valuation, the results of tests on the plan, and a
schedule for any future tests.
3.16 DISCLOSURE. To the best of the knowledge and belief of FNB, no
written statement, certificate, schedule, list or written information furnished
by or on behalf of FNB at any time to Carolina in connection with this Agreement
(including without limitation the statements contained herein), when considered
as a whole, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. Each document delivered or to be delivered by FNB to
Carolina is or will be a true and complete copy of such document, unmodified
except by another document delivered by FNB.
ARTICLE IV. COVENANTS OF CAROLINA
4.1 AFFIRMATIVE COVENANTS OF CAROLINA. Carolina hereby covenants and
agrees as follows with FNB:
(A) "AFFILIATES" OF CAROLINA. Carolina will use its best efforts to cause
each Affiliate disclosed to FNB (in addition to each additional person who shall
become an Affiliate of Carolina after the date of this Agreement or who shall be
deemed by FNB or its counsel, in their sole discretion, to be an Affiliate of
Carolina, and including persons, trusts, estates, corporations or other entities
related to persons deemed to be Affiliates of Carolina) to execute and deliver
to FNB prior to the Closing a written agreement (the "Affiliates' Agreement")
relating to restrictions on shares of FNB Stock to be received by such
Affiliates pursuant to this Agreement, which Affiliates' Agreement shall be in
form and content reasonably satisfactory to FNB. Certificates for the shares of
FNB Stock issued to Affiliates of Carolina 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.
29
(B) CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME. Between the date of this
Agreement and the Effective Time, except as otherwise agreed by FNB in writing,
Carolina will carry on its business in and only in the regular and usual course
in substantially the same manner as such business heretofore was conducted, and
will, and where applicable will cause each of its subsidiaries to:
(i) make all reasonable efforts to preserve intact its present
business organization, keep available their present officers and
employees, and preserve its relationships with customers, depositors,
creditors, correspondents, suppliers, and others having business
relationships with them;
(ii) maintain all of its properties and equipment used in its
business in customary repair, order and condition, ordinary wear and tear
excepted;
(iii) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with sound business practices
applied on a consistent basis except to the extent otherwise reasonably
required by applicable laws or regulations or GAAP;
(iv) comply with all laws, rules and regulations applicable to it,
its properties, assets or employees and to the conduct of its business;
(v) not change its existing loan underwriting guidelines, policies
or procedures except as may be required by law;
(vi) continue to maintain in force insurance such as is described in
Section 2.24 above; not modify any bonds or policies of insurance in
effect as of the date hereof unless the same, as modified, provides
substantially equivalent coverage; and, not cancel, allow to be terminated
or, to the extent available, fail to renew, any such bond or policy of
insurance unless the same is replaced with a bond or policy providing
substantially equivalent coverage; and
(vii) promptly provide to FNB such information about its financial
condition, results of operations, prospects, businesses, assets, loan
portfolio, investments, properties or operations as FNB reasonably shall
request.
Carolina shall be permitted to conduct any proxy contests that may occur with
respect to its 1999 annual shareholders meeting in the manner believed by
management of Carolina, in consultation with its advisors, to be proper and in
accordance with law.
(C) LOANS. Carolina will obtain FNB's prior approval for each new
extension of credit (including the issuance of unfunded commitments) that it or
any of its subsidiaries proposes to make within the following categories: (i)
loan participations, (ii) home mortgage loans exceeding $240,000 in principal
and saleable (FNMA or FHLMC conforming) in the secondary market, (iii) home
mortgage loans exceeding $250,000 in principal amount not immediately saleable
(FNMA or FHLMC nonconforming) at par in the secondary market,
30
(iv) loans for commercial, business or agricultural purposes exceeding $200,000
in principal amount, and (v) loans for consumer or personal purposes (other than
home equity loans) exceeding $50,000 in principal amount. Carolina will cease
purchasing any loans from any automobile dealership and will cease any other
form of indirect lending unless FNB has otherwise consented. Additionally,
Carolina will make available and provide to FNB the following information with
respect to its loans and other extensions of credit (such assets herein referred
to as "Loans") as of September 30, 1999 and as of the end of each month
thereafter until the Effective Time, such information for each month to be in
form and substance as is usual and customary in the conduct of its business and
to be furnished within 25 days of the end of each month ending after the date
hereof, except as otherwise provided:
(i) a list of Loans past due for 30 days or more as to principal or
interest;
(ii) an analysis of the Loan Loss Reserve and management's
assessment of the adequacy of the Loan Loss Reserve, which analysis and
assessment shall include a list of all classified or "watch list" Loans,
along with the outstanding balance and amount specifically allocated to
the Loan Loss Reserve for each such classified or "watch list" Loan;
(iii) a list of Loans in nonaccrual status;
(iv) a list of all Loans over $50,000 without principal reduction
for a period of longer than one year;
(v) a list of all foreclosed real property or other real estate
owned and all repossessed personal property;
(vi) a list of reworked or restructured Loans over $50,000 and still
outstanding, including original terms, restructured terms and status; and
(vii) a list of any actual or threatened litigation by or against
Carolina pertaining to any Loans or credits, together with the pleadings
and other filed documents related thereto.
(D) NOTICE OF CERTAIN CHANGES OR EVENTS. Following the execution of this
Agreement and up to the Effective Time, Carolina promptly will notify FNB in
writing of and provide to it such information as it shall request regarding (i)
any material adverse change in its consolidated financial condition,
consolidated results of operations, prospects, business, assets, loan portfolio,
investments, properties or operations, or of the actual or prospective
occurrence of any condition or event which, with the lapse of time or otherwise,
may or could cause, create or result in any such material adverse change, or of
(ii) the actual or prospective existence or occurrence of any condition or event
which, with the lapse of time or otherwise, has caused or may or could cause any
statement, representation or warranty of Carolina herein to be or become
inaccurate, misleading or incomplete, or which has resulted or may or could
cause, create or result in the breach or violation of any of
31
Carolina's covenants or agreements contained herein or in the failure of any of
the conditions described in Sections 7.1 or 7.3 below.
(E) CONSENTS TO ASSIGNMENT OF LEASES. Carolina will use its best efforts
to obtain all required consents of its lessors to the assignment to FNB of
Carolina's rights and obligations under any personal or real property leases,
each of which consents shall be in such form as shall be specified by FNB.
(F) QUALIFIED PLANS. Carolina shall take all appropriate action as shall
be necessary to maintain the Employee Stock Ownership Plan of Richmond Savings
Bank, Inc., SSB (the "ESOP"), the Richmond Savings Bank, SSB Savings Plan (the
"Carolina 401(k) Plan"), and the Richmond Savings Bank, Inc., SSB Flexible
Benefits Plan (the "Carolina Cafeteria Plan") as qualified plans for purposes of
ERISA. Carolina acknowledges that FNB intends (i) that the ESOP will be
terminated effective upon the merger of Richmond Savings into First National
(which will be upon or after the Effective Time), (ii) that the Carolina 40l(k)
Plan will be merged into FNB's Section 401(k) Savings Plan (the "FNB 401(k)
Plan") as soon as practicable after the Effective Time and (iii) that the
Carolina Cafeteria Plan will be terminated as soon as practical after the
Effective Time. Carolina shall take all such actions with respect to such plans
as shall be necessary to accomplish such intent and, until the Effective Time,
will not take any other extraordinary actions with respects to such plans
without the written consent of FNB.
(G) FURTHER ACTION; INSTRUMENTS OF TRANSFER. Carolina shall (i) use its
best efforts in good faith to take or cause to be taken all action required of
it hereunder as promptly as practicable so as to permit the expeditious
consummation of the transactions described herein, (ii) perform all acts and
execute and deliver to FNB all documents or instruments required herein or as
otherwise shall be reasonably necessary or useful to or requested of Carolina in
consummating such transactions and (iii) cooperate with FNB fully in carrying
out, and will pursue diligently the expeditious completion of, such
transactions.
4.2 NEGATIVE COVENANTS OF CAROLINA. Between the date hereof and the
Effective Time, neither Carolina nor, if applicable, any of its subsidiaries,
will do any of the following things or take any of the following actions without
the prior written consent and authorization of the President of FNB.
(A) AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS. Amend its Articles
of Incorporation or bylaws.
(B) CHANGE IN CAPITAL STOCK. Make any change in its authorized capital
stock, or create any other or additional authorized capital stock or other
securities, or issue (except pursuant to the exercise of options heretofore
granted and outstanding under the Carolina Option Plan), sell, purchase, redeem,
retire, reclassify, combine or split any shares of its capital stock or other
securities (including securities convertible into capital stock), or enter into
any agreement or understanding with respect to any such action.
32
(C) OPTIONS, WARRANTS AND RIGHTS. Grant or issue any options, warrants,
calls, puts or other rights of any kind relating to the purchase, redemption or
conversion of shares of its capital stock or any other securities (including
securities convertible into capital stock) or enter into any agreement or
understanding with respect to any such action, other than the FNB Option.
(D) DIVIDENDS. Declare or pay any dividends on the outstanding shares of
capital stock or make any other distributions on or in respect of any shares of
its capital stock or otherwise to its shareholders, other than its regularly
scheduled quarterly dividend in the amount of $.06 per share of Carolina Stock;
provided, however, that Carolina may declare and pay prior to the Effective Time
such additional quarterly dividend of no more than $.06 per share if necessary
to prevent its shareholders from failing to receive a quarterly dividend from
either Carolina or FNB during a particular calendar quarter.
(E) EMPLOYMENT, BENEFIT OR RETIREMENT AGREEMENTS OR PLANS. Except as
required by law or contemplated by this Agreement, (i) enter into or become
bound by any oral or written contract, agreement or commitment for the
employment or compensation of any director, officer, employee or consultant
which is not immediately terminable by Carolina or any of its subsidiaries
without cost or other liability on no more than 30 days' notice; (ii) amend any
existing, or adopt, enter into or become bound by any new or additional,
profit-sharing, bonus, incentive, change in control or "golden parachute," stock
option, stock purchase, pension, retirement, insurance (hospitalization, life or
other), paid leave (sick leave, vacation leave or other) or similar contract,
agreement, commitment, understanding, plan or arrangement (whether formal or
informal) with respect to or which provides for benefits for any of its current
or former directors, officers, employees or consultants; (iii) grant or amend
any existing options under the Carolina Option Plan or awards under the MR Plan;
(iv) make contributions to the Carolina 401(k) Plan other than matching
contributions not to exceed $36,000 per year; (v) make contributions to the ESOP
other than contributions (not to exceed $45,000 per quarter) necessary for the
ESOP to meet its quarterly loan payment obligations; or (vi) enter into or
become bound by any contract with or commitment to any labor or trade union or
association or any collective bargaining group.
(F) INCREASE IN COMPENSATION. With the exception of the anticipated
increases in annual salary and annual officer and employee bonuses Previously
Disclosed to FNB, increase the compensation or benefits of, or pay any bonus or
other special or additional compensation to, any of its directors, officers,
employees or consultants.
(G) ACCOUNTING PRACTICES. Make any changes in its accounting methods,
practices or procedures or in depreciation or amortization policies, schedules
or rates heretofore applied (except as required by GAAP or governmental
regulations).
(H) ACQUISITIONS; ADDITIONAL BRANCH OFFICES. Except for the branch office
proposed in Pinehurst, North Carolina, directly or indirectly (i) acquire or
merge with, or acquire any branch or all or any significant part of the assets
of, any other person or entity, (ii) open any new branch office, or (iii) enter
into or become bound by any contract, agreement,
33
commitment or letter of intent relating to, or otherwise take or agree to take
any action in furtherance of, any such transaction or the opening of a new
branch office.
(I) CHANGES IN BUSINESS PRACTICES. Except as may be required by the FDIC,
the Administrator or any other governmental or other regulatory agency or as
shall be required by applicable law, regulation or this Agreement, (i) change in
any material respect the nature of its business or the manner in which it
conducts its business, (ii) discontinue any material portion or line of its
business or (iii) change in any material respect its lending, investment,
asset-liability management or other material banking or business policies
(except to the extent required by Section 4.1(b) above and Section 6.9 below.
(J) EXCLUSIVE MERGER AGREEMENT. Directly or indirectly, through any person
(i) encourage, solicit or attempt to initiate or procure discussions,
negotiations or offers with or from any person or entity (other than FNB)
relating to a merger or other acquisition of Carolina or the purchase or
acquisition of any Carolina Stock or all or any significant part of Carolina's
assets; or, except as required by law or by fiduciary obligations owed to the
person assisted, provide assistance to any person in connection with any such
offer; (ii) except to the extent required by law, disclose to any person or
entity any information not customarily disclosed to the public concerning
Carolina or its business, or afford to any other person or entity access to its
properties, facilities, books or records; (iii) sell or transfer all or any
significant part of Carolina's assets to any other person or entity; or (iv)
enter into or become bound by any contract, agreement, commitment or letter of
intent relating to, or otherwise take or agree to take any action in furtherance
of, any such transaction.
(K) ACQUISITION OR DISPOSITION OF ASSETS.
(i) Except in the ordinary course of business consistent with its
past practices, sell or lease (as lessor), or enter into or become bound
by any contract, agreement, option or commitment relating to the sale,
lease (as lessor) or other disposition of any real estate; or sell or
lease (as lessor), or enter into or become bound by any contract,
agreement, option or commitment relating to the sale, lease (as lessor) or
other disposition of any equipment or any other fixed or capital asset
(other than real estate) having a book value or a fair market value,
whichever is greater, of more than $25,000 for any individual item or
asset, or more than $50,000 in the aggregate for all such items or assets;
(ii) Except in the ordinary course of business consistent with past
practices, purchase or lease (as lessee), or enter into or become bound by
any contract, agreement, option or commitment relating to the purchase,
lease (as lessee) or other acquisition of any real property; or purchase
or lease (as lessee), or enter into or become bound by any contract,
agreement, option or commitment relating to the purchase, lease (as
lessee) or other acquisition of any equipment or any other fixed assets
(other than real estate) having a purchase price, or involving aggregate
lease payments, in excess of $25,000 for any individual item or asset, or
more than $50,000 in the aggregate for all such items or assets;
34
(iii) Enter into any purchase commitment for supplies or services
which calls for prices of goods or fees for services materially higher
than current market prices or fees or which obligates Carolina or any
subsidiary for a period longer than six months;
(iv) Except in the ordinary course of its business consistent with
its past practices, sell, purchase or repurchase, or enter into or become
bound by any contract, agreement, option or commitment to sell, purchase
or repurchase, any loan or other receivable or any participation in any
loan or other receivable; or
(v) Sell or dispose of, or enter into or become bound by any
contract, agreement, option or commitment relating to the sale or other
disposition of, any other asset (whether tangible or intangible, and
including without limitation any trade name, trademark, copyright, service
xxxx or intellectual property right or license) other than assets that are
obsolete or no longer used in Carolina's business; or assign its right to
or otherwise give any other person its permission or consent to use or do
business under the corporate name of Carolina or any subsidiary or any
name similar thereto; or release, transfer or waive any license or right
granted to it by any other person to use any trademark, trade name,
copyright, service xxxx or intellectual property right.
(L) DEBT; LIABILITIES. Except in the ordinary course of its business
consistent with its past practices, (i) enter into or become bound by any
promissory note, loan agreement or other agreement or arrangement pertaining to
its borrowing of money, (ii) assume, guarantee, endorse or otherwise become
responsible or liable for any obligation of any other person or entity, or (iii)
incur any other liability or obligation (absolute or contingent).
(M) LIENS; ENCUMBRANCES. Mortgage, pledge or subject any of its assets to,
or permit any of its assets to become or (with the exception of those liens and
encumbrances Previously Disclosed to FNB with specificity) remain subject to,
any lien or any other encumbrance (other than in the ordinary course of business
consistent with its past practices in connection with borrowings from the
Federal Home Loan Bank of Atlanta, securing of public funds deposits, repurchase
agreements or other similar operating matters).
(N) WAIVER OF RIGHTS. Waive, release or compromise any material rights in
its favor (except in the ordinary course of business) except in good faith for
fair value in money or money's worth, nor waive, release or compromise any
rights against or with respect to any of its officers, directors or shareholders
or members of families of officers, directors or shareholders.
(O) OTHER CONTRACTS. Except as Previously Disclosed, enter into or become
bound by any contracts, agreements, commitments or understandings (other than
those described elsewhere in this Section 4.2) (i) for or with respect to any
charitable contributions; (ii) with any governmental or regulatory agency or
authority; (iii) pursuant to which Carolina or any subsidiary would assume,
guarantee, endorse or otherwise become liable for the debt, liability or
obligation of any other person or entity; (iv) which is entered into other than
in
35
the ordinary course of its business; or (v) which, in the case of any one
contract, agreement, commitment or understanding and whether or not in the
ordinary course of its business, would obligate or commit Carolina or any
subsidiary to make expenditures of more than $25,000 (other than contracts,
agreements, commitments or understandings entered into in the ordinary course of
Carolina's or any subsidiary's lending operations).
(P) DEPOSIT LIABILITIES. Make any change in its current deposit policies,
including pricing and acceptance, and shall not take any actions designed to
materially decrease the aggregate level of deposits as of the date of this
Agreement.
ARTICLE V. COVENANTS OF FNB
FNB hereby covenants and agrees as follows with Carolina:
5.1 NASDAQ NOTIFICATION. Prior to the Effective Time, FNB shall file with
the National Association of Securities Dealers such notifications and other
materials (and shall pay such fees) as shall be required for the listing on
Nasdaq of the shares of FNB Stock to be issued to Carolina's shareholders
pursuant to the Merger.
5.2 EMPLOYMENT.
(A) R. XXXXX XXXXXXXX. Provided he remains employed as President and Chief
Executive Officer of Carolina and Richmond Savings at the Effective Time, FNB
shall enter into an employment agreement with R. Xxxxx Xxxxxxxx as of the
Effective Time which shall contain substantially the same terms and conditions
and be in substantially the same form as is attached hereto as Schedule B.
(B) XXXX X. XXXXXXX. Provided he remains employed as Executive Vice
President and Chief Operations Officer of Richmond Savings at the Effective
Time, FNB or its subsidiary shall either (i) assume the obligations of Richmond
Savings under that certain employment agreement dated as of November 22, 1996
between Richmond Savings and Xxxx X. Xxxxxxx or (ii) enter into a new employment
agreement with Xxxx X. Xxxxxxx on mutually agreeable terms. In any event, FNB or
its subsidiary will assume any obligations of Richmond Savings under the Xxxx X.
Xxxxxxx'x executive income and deferred compensation and split dollar agreements
Previously Disclosed to FNB.
(C) OTHER EMPLOYEES; SEVERANCE PLAN. After the Effective Time, FNB may,
but shall be under no obligation to, retain other employees of Carolina and its
subsidiaries. Any such person retained shall be an employee of FNB on an
"at-will" basis, and nothing in this Agreement shall be deemed to constitute an
employment agreement with any such person or to obligate FNB to employ any such
person for any specific period of time or in any specific position or location
or to restrict FNB's right to change the rate of compensation or terminate the
employment of any such person at any time and for any reason. FNB acknowledges
the obligations of Richmond Savings and shall cause Richmond Savings or First
National (if successor to Richmond Savings) to pay severance benefits to
employees of Richmond Savings under the Richmond Savings Bank, SSB Severance
Plan effective
36
November 22, 1996 (the "Severance Plan") if their employment is terminated after
a Change in Control (as defined in the Severance Plan). FNB shall pay "pay to
stay" compensation to those employees of Richmond Savings determined by FNB and
Carolina to be key employees and necessary to the transition of the merger of
the operations of Richmond Savings and First National provided that they remain
through any transition period.
5.3 EMPLOYEE BENEFITS.
(A) GENERALLY. Except as otherwise provided herein and to the extent
permitted by contribution and deduction limitations of ERISA and the Code with
respect to FNB's qualified plans, any employee of Carolina or its subsidiaries
who continues employment with FNB, Carolina or their subsidiaries at the
Effective Time (a "New Employee") shall become entitled to receive all employee
benefits and to participate in all benefit plans provided by FNB or First
National on the same basis and subject to the same eligibility and vesting
requirements, and to the same conditions, restrictions and limitations, as
generally are in effect and applicable to other newly hired employees of FNB or
First National. However, each New Employee shall be given credit for his or her
full years of service with Carolina or any of its subsidiaries for purposes of
(i) entitlement to vacation and sick leave and for participation in all FNB or
First National welfare, insurance and other fringe benefit plans, and (ii)
eligibility for participation and vesting in the FNB 401(k) Plan and in FNB's
defined benefit pension plan (the "FNB Pension Plan"). Notwithstanding any
provision herein to the contrary, FNB will not be required to take any action
that could adversely affect the continuing qualification of the FNB 40l(k) Plan
or the FNB Pension Plan. FNB will grant to each New Employee a pro rata amount
of sick leave and vacation leave, in accordance with FNB standard leave
policies, for the period between the Effective Time and the end of the calendar
year during which the Effective Time occurs. Each New Employee will be permitted
to carry over accrued and unused sick leave and vacation leave earned at
Richmond Savings but shall thereafter be subject to FNB's leave policies.
(B) HEALTH INSURANCE. Each New Employee shall be entitled to participate
in First National's group health insurance plan at a cost equal to the cost for
any First National employee and such participation shall be without regard to
pre-existing condition requirements under First National's group health
insurance plan, to the extent any such condition at the Effective Time would
have been covered under the health insurance plans of Carolina.
(C) OPTION AND MR PLANS. FNB shall assume each stock option granted under
the Carolina Option Plan as provided in Section 1.6(a) above, or shall
substitute options under the FNB Plan in accordance with the provisions of
1.6(c) above. FNB will assume the obligations of Richmond Savings under the MR
Plan as provided in Section 1.7 above.
5.4 CAROLINA DIRECTORS.
(A) REPRESENTATION ON FNB BOARD. FNB shall take such actions as shall be
required to increase the number of members of its Board of Directors by two and
shall appoint two persons nominated by Carolina at the Effective Time to fill
such positions and
37
serve as directors of FNB until the next annual meeting of shareholders at which
directors of FNB are elected. FNB's Board shall, if necessary, nominate such
persons for election at annual meetings of FNB shareholders such that such
nominees of Carolina, if elected by FNB's shareholders, would be able to serve
as directors of FNB for no less than three years after the Effective Time. FNB
will take such action as shall be necessary to waive any mandatory retirement
policies of FNB with respect to its Board of Directors for such nominees to
serve for no less than three years after the Effective Time.
(B) ADVISORY BOARD. Each of the members of Carolina's Board of Directors
(other than those appointed as members of the FNB Board of Directors pursuant to
Section 5.4 (a) above) at the Effective Time shall be appointed to serve as a
member of FNB's local advisory board in Rockingham, North Carolina after the
Effective Time notwithstanding any mandatory retirement policy of FNB for its
advisory directors generally. Each person so appointed, shall diligently
discharge his or her duties as an advisory board member and promote in good
faith FNB's best interests. For their services as advisory board members, each
person so appointed shall be compensated at the rate presently in effect as
Previously Disclosed for serving as a member of the Carolina Board of Directors
for a period of three years after the Effective Time provided that he or she
remains a director of the advisory board and provided further that he or she not
be serving as a director or advisory director of another financial institution
or financial institution holding company. Each such person's service as an
advisory director will be at FNB's pleasure and will be subject to FNB's normal
policies and procedures regarding the appointment and service of advisory
directors; provided, however, that if any such person's service as an advisory
director is terminated by FNB, FNB shall continue to pay such person
compensation for the balance of the three-year period after the Effective Time
upon such termination.
(C) DEFERRED COMPENSATION. FNB shall assume the obligations of Carolina
under the Previously Disclosed deferred compensation arrangements presently in
effect for Carolina's directors.
5.5 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) After the Effective
Time, without releasing any insurance carrier and after exhaustion of all
applicable director and liability insurance coverage for Carolina and its
directors and officers, FNB shall indemnify, hold harmless and defend the
directors and officers of Carolina in office on the date hereof or the Effective
Time, to the same extent as it indemnifies its own directors and officers, from
and against any and all claims, disputes, demands, causes of action, suits,
proceedings, losses, damages, liabilities, obligations, costs and expenses of
every kind and nature including without limitation reasonable attorneys' fees
and legal costs and expenses therewith whether known or unknown and whether now
existing or hereafter arising which may be threatened against, incurred,
undertaken, received or paid by such persons in connection with or which arise
out of or result from or are based upon any action or failure to act by such
person in the ordinary scope of his duties as a director or officer of Carolina
(including service as a director or officer of any Carolina subsidiary or
fiduciary of any of the Carolina Plans (as defined in Section 2.23(a)) through
the Effective Time; provided, however, that FNB shall not be obligated to
indemnify such person for (i) any act not available for statutory or permissible
indemnification under North Carolina law, (ii) any penalty, decree,
38
order, finding or other action imposed or taken by any regulatory authority,
(iii) any violation or alleged violation of federal or state securities laws to
the extent that indemnification is prohibited by law, or (iv) any claim of
sexual or other unlawful harassment, or any form of employment discrimination
prohibited by federal or state law; further, provided, however, that (A) FNB
shall have the right to assume the defense thereof and upon such assumption FNB
shall not be liable to any director or officer of Carolina for any legal
expenses of other counsel or any other expenses subsequently incurred by such
director or officer in connection with the defense thereof, except that if FNB
elects not to assume such defense or counsel for such director or officer
reasonably advises such director or officer that there are issues which raise
conflicts of interest between FNB and such director or officer, such director or
officer may retain counsel reasonably satisfactory to him, and FNB shall pay the
reasonable fees and expenses of such counsel, (B) FNB shall not be liable for
any settlement effected without its prior written consent, and (C) FNB shall
have no obligation hereunder to any director or officer of Carolina when and if
a court of competent jurisdiction shall determine that indemnification of such
director or officer in the manner contemplated hereby is prohibited by
applicable law. The indemnification provided herein shall be in addition to any
indemnification rights an indemnitee may have by law, pursuant to the charter or
bylaws of Carolina or any of its subsidiaries or pursuant to any Plan for which
the indemnity serves as a fiduciary.
(b) From and after the Effective Time, FNB will directly or indirectly
cause the persons who served as directors or officers of Carolina at the
Effective Time to be covered by Carolina's existing directors' and officers'
liability insurance policy (provided that FNB may substitute therefor policies
of at least the same coverage in amounts contained and terms and conditions
which are not less advantageous than such policy). Such insurance coverage shall
commence at the Effective Time and will be provided for a period of no less than
three years after the Effective Time.
(c) The indemnification provided by this Section 5.5 is the sole
indemnification provided by FNB to the directors and officers of Carolina for
service in such positions up to and through the Effective Time. This Section 5.5
is intended to create personal rights in the directors and officers of Carolina,
who shall be deemed to be third-party beneficiaries hereof. Notwithstanding any
other provision of this Agreement, at the Effective Time, the indemnification
rights provided herein shall not be extinguished but shall instead survive for a
period of three years after the Effective Time.
5.6 MERGER SUB ORGANIZATION. FNB shall organize Merger Sub under the laws
of the State of North Carolina prior to the Effective Time. The outstanding
capital stock of Merger Sub shall consist of 1,000 shares of common stock, all
of which will be owned by FNB. Prior to the Effective Time, Merger Sub shall not
(i) conduct any business operations whatsoever or (ii) enter into any contract
or agreement of any kind, acquire any assets, or incur any liability, except as
may be expressly contemplated by this Agreement or the Plan of Merger or as FNB
and Carolina may otherwise agree. FNB, as the sole shareholder of Merger Sub,
shall vote prior to the Effective Time the shares of common stock of Merger Sub
in favor of the Plan of Merger and shall take all such other actions as shall be
necessary for Merger Sub to consummate the transactions described herein. At the
Effective Time,
39
Merger Sub shall be a corporation duly organized and validly existing under the
laws of the State of North Carolina with the corporate power and authority
necessary to consummate the transactions contemplated by the Plan of Merger.
5.7 NOTICE OF CERTAIN CHANGES OR EVENTS. Following the execution of this
Agreement and up to the Effective Time, FNB promptly will notify Carolina in
writing of and provide to it such information as it shall request regarding (i)
any material adverse change in its consolidated financial condition,
consolidated results of operations, prospects, business, assets, loan portfolio,
investments, properties or operations, or of the actual or prospective
occurrence of any condition or event which, with the lapse of time or otherwise,
may or could cause, create or result in any such material adverse change, or of
(ii) the actual or prospective existence or occurrence of any condition or event
which, with the lapse of time or otherwise, has caused or may or could cause any
statement, representation or warranty of FNB herein to be or become inaccurate,
misleading or incomplete, or which has resulted or may or could cause, create or
result in the breach or violation of any of FNB's covenants or agreements
contained herein or in the failure of any of the conditions described in
Sections 7.1 or 7.2 below.
5.8 FURTHER ACTION; INSTRUMENTS OF TRANSFER. FNB shall (i) use its best
efforts in good faith to take or cause to be taken all action required of it
hereunder as promptly as practicable so as to permit the expeditious
consummation of the transactions described herein, (ii) perform all acts and
execute and deliver to Carolina all documents or instruments required herein or
as otherwise shall be reasonably necessary or useful to or requested of FNB in
consummating such transactions and (iii) cooperate with Carolina fully in
carrying out, and will pursue diligently the expeditious completion of, such
transactions.
ARTICLE VI. MUTUAL AGREEMENTS
6.1 REGISTRATION STATEMENT SHAREHOLDERS' MEETINGS; JOINT PROXY
STATEMENT/PROSPECTUS.
(A) REGISTRATION STATEMENT AND "BLUE SKY" APPROVALS. As soon as
practicable following the execution of this Agreement, FNB shall prepare and
file with the SEC under the 1933 Act a registration statement on Form S-4 (or on
such other form as FNB shall determine to be appropriate) (the "Registration
Statement") covering the FNB Stock to be issued to shareholders of Carolina
pursuant to this Agreement. Additionally, FNB shall take all such other actions,
if any, as shall be required by applicable state securities or "blue sky" laws
(i) to cause the FNB Stock to be issued upon consummation of the Merger, and at
the time of the issuance thereof, to be duly qualified or registered (unless
exempt) under such laws, (ii) to cause all conditions to any exemptions from
qualification or registration under such laws to have been satisfied, and (iii)
to obtain any and all required approvals or consents to the issuance of such
stock. FNB shall deliver to Carolina and its counsel a preliminary draft of the
Registration Statement and the Joint Proxy Statement/Prospectus as soon as
practicable after the date of this Agreement.
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(B) MEETINGS OF SHAREHOLDERS. Each of Carolina and FNB shall cause a
special meeting of its shareholders to be duly called and held as soon as
practicable for the purpose of voting on the approval and adoption of this
Agreement and Plan of Merger. In connection with the call and conduct of and all
other matters relating to its respective shareholders' meeting (including the
solicitation of proxies), Carolina and FNB shall each fully comply with all
provisions of applicable federal and state law and regulations and with its
Articles of Incorporation and bylaws.
(C) PREPARATION AND DISTRIBUTION OF PROXY STATEMENT/PROSPECTUS. FNB and
Carolina jointly shall prepare a "Joint Proxy Statement/Prospectus" for
distribution to their shareholders as the proxy statement relating to
solicitation of proxies for use at the shareholders' meetings contemplated in
Section 6.1(b) above and as FNB's prospectus relating to the offer and
distribution of FNB Stock as described herein. The Joint Proxy
Statement/Prospectus shall be in such form and shall contain or be accompanied
by such information regarding the shareholders' meetings, this Agreement, the
parties hereto, the Merger and other transactions described herein as is
required by applicable law and regulations and otherwise as shall be agreed upon
by FNB and Carolina. FNB shall include the Joint Proxy Statement/Prospectus as
the prospectus in its "Registration Statement" described below; and FNB and
Carolina shall cooperate with each other in good faith and shall use their best
efforts to cause the Joint Proxy Statement/Prospectus to comply with any
comments of the SEC. Each of Carolina and FNB shall mail the Joint Proxy
Statement/Prospectus to its shareholders prior to the scheduled date of its
shareholders' meeting; provided, however, that no such materials shall be mailed
to Carolina's shareholders unless and until FNB shall have determined to its own
satisfaction that the conditions specified in Sections 7.1(b) and (c) below have
been satisfied and shall have approved such mailing.
(D) RECOMMENDATION OF BOARDS OF DIRECTORS. Subject to their fiduciary
obligations, the Board of Directors of each of Carolina and FNB shall recommend
to the shareholders of its respective corporation that they vote their shares at
the shareholders' meeting contemplated by Section 6.1(b) above to approve this
Agreement and the Plan of Merger, and the Joint Proxy Statement/Prospectus will
so indicate and state that each respective Board of Directors considers the
Merger to be advisable and in the best interests of the respective corporation
and its shareholders.
(E) INFORMATION FOR PROXY STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT.
Each of FNB and Carolina shall promptly respond, and use its best efforts to
cause its directors, officers, accountants and affiliates to promptly respond,
to requests by the other party and its counsel for information for inclusion in
the various applications for regulatory approvals and in the Joint Proxy
Statement/Prospectus. Each of FNB and Carolina hereby covenants with the other
that none of the information provided by it for inclusion in the Joint Proxy
Statement/Prospectus will, at the time of its mailing, contain any untrue
statement of a material fact or omit any material fact required to be stated
therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading; and, at all
times following such mailing up to and including the Effective Time, none of
such information contained in the Joint Proxy Statement/Prospectus,
41
as it may be amended or supplemented, will contain any untrue statement of a
material fact or omit any material fact required to be stated therein or
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.2 REGULATORY APPROVALS. Within 75 days after the date of this Agreement,
each of FNB and Carolina shall prepare and file, or cause to be prepared and
filed, all applications for regulatory approvals and actions as may be required
of it, by applicable law and regulations with respect to the transactions
described herein (including applications to the Federal Reserve Board, the
Administrator and to any other applicable federal or state banking, securities
or other regulatory authority). Each party shall use its best efforts in good
faith to obtain all necessary regulatory approvals required for consummation of
the transactions described herein. Each party shall cooperate with the other
party in the preparation of all applications to regulatory authorities and, upon
request, promptly shall furnish all documents, information, financial statements
or other material that may be required by any other party to complete any such
application; and, before the filing therefor, each party to this Agreement shall
have the right to review and comment on the form and content of any such
application to be filed by any other party. Should the appearance of any of the
officers, directors, employees or counsel of any of the parties hereto be
requested by any other party or by any governmental agency at any hearing in
connection with any such application, such party shall promptly use its best
efforts to arrange for such appearance.
6.3 ACCESS. Following the date of this Agreement and to and including the
Effective Time, Carolina and FNB shall each provide the other party and such
other party's employees, accountants, counsel or other representatives, access
to all its books, records, files and other information (whether maintained
electronically or otherwise), to all its properties and facilities, and to all
its employees, accountants, counsel and consultants as Carolina and FNB, as the
case may be, shall, in its sole discretion, consider to be necessary or
appropriate; provided, however, that any investigation or reviews conducted by
FNB or Carolina shall be performed in such a manner as will not interfere
unreasonably with the other party's normal operations or with relationship with
its customers or employees, and shall be conducted in accordance with procedures
established by the parties having due regard for the foregoing.
6.4 COSTS. Subject to the provisions of Section 8.3(c) below, and whether
or not this Agreement shall be terminated or the Merger shall be consummated,
each of FNB and Carolina shall pay its own legal, accounting and financial
advisory fees and all its other costs and expenses incurred or to be incurred in
connection with the execution and performance of its obligations under this
Agreement or otherwise in connection with this Agreement and the transactions
described herein (including without limitation all accounting fees, legal fees,
filing fees, printing costs, travel expenses, and investment banking fees).
However, subject to the provisions of Section 8.3(c) below, all costs incurred
in connection with the printing and mailing of the Joint Proxy
Statement/Prospectus shall be deemed to be incurred and shall be paid fifty
percent (50%) by Carolina and fifty percent (50%) by FNB.
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6.5 ANNOUNCEMENTS. No person other than the parties to this Agreement is
authorized to make any public announcements or statements about this Agreement
or any of the transactions described herein, and, without the prior review and
consent of the others (which consent shall not unreasonably be denied or
delayed), no party hereto may make any public announcement, statement or
disclosure as to the terms and conditions of this Agreement or the transactions
described herein, except for such disclosures as may be required incidental to
obtaining the prior approval of any regulatory agency or official to the
consummation of the transactions described herein. However, notwithstanding
anything contained herein to the contrary, prior review and consent shall not be
required if in the good faith opinion of counsel to FNB or Carolina any such
disclosure by FNB or Carolina, as the case may be, is required by law or
otherwise is prudent.
6.6 CONFIDENTIALITY. FNB and Carolina each shall treat as confidential and
not disclose to any unauthorized person any documents or other information
obtained from or learned about the other during the course of the negotiation of
this Agreement and the carrying out of the events and transactions described
herein (including any information obtained during the course of any due
diligence investigation or review provided for herein or otherwise) and which
documents or other information relates in any way to the business, operations,
personnel, customers or financial condition of such other party; and that it
will not use any such documents or other information for any purpose except for
the purposes for which such documents and information were provided to it and in
furtherance of the transactions described herein. However, the above obligations
of confidentiality shall not prohibit the disclosure of any such document or
information by any party to this Agreement to the extent (i) such document or
information is then available generally to the public or is already known to the
person or entity to whom disclosure is proposed to be made (other than through
the previous actions of such party in violation of this Section 6.6), (ii) such
document or information was available to the disclosing party on a
nonconfidential basis prior to the same being obtained pursuant to this
Agreement, (iii) disclosure is required by subpoena or order of a court or
regulatory authority of competent jurisdiction, or by the SEC or other
regulatory authorities in connection with the transactions described herein, or
(iv) to the extent that, in the reasonable opinion of legal counsel to such
party, disclosure otherwise is required by law. In the event this Agreement is
terminated for any reason, then each of the parties hereto immediately shall
return to the other party all copies of any and all documents or other written
materials or information (including computer generated and stored data) of or
relating to such other party which were obtained from them during the course of
the negotiation of this Agreement and the carrying out of the events and
transactions described herein (whether during the course of any due diligence
investigation or review provided for herein or otherwise) and which documents or
other information relates in any way to the business, operations, personnel,
customers or financial condition of such other party. The parties' obligations
of confidentiality under this Section 6.6 shall survive and remain in effect
following any termination of this Agreement.
6.7 ENVIRONMENTAL STUDIES. At its option, FNB may cause to be conducted
Phase I environmental assessments of the Real Property, the real estate subject
to any Real Property Lease, or the Loan Collateral, or any portion thereof,
together with such other studies, testing and intrusive sampling and analyses as
FNB shall deem necessary or desirable
43
(collectively, the "Environmental Survey"); provided, however, that the
Environmental Survey, as much as possible, shall be performed in such a manner
as will not interfere unreasonably with Carolina's normal operations, and
provided further, however, that Carolina shall use its best efforts to obtain
any required consents of third parties to permit any Environmental Survey of any
Loan Collateral. FNB shall attempt in good faith to complete all such Phase I
environmental assessments within 60 days following the date of this Agreement
and thereafter to conduct and complete any such additional studies, testing,
sampling and analyses as promptly as practicable. Subject to the provisions of
Section 8.3(c) below, the costs of the Environmental Survey shall be paid by
FNB. If (i) the final results of any Environmental Survey (or any related
analytical data) reflect that there likely has been any discharge, disposal,
release or emission by any person of any Hazardous Substance on, from or
relating to any of the Real Property, real estate subject to a Real Property
Lease or Loan Collateral at any time prior to the Effective Time, or that any
action has been taken or not taken, or a condition or event likely has occurred
or exists, with respect to any of the Real Property, real estate subject to a
Real Property Lease or Loan Collateral which constitutes or would constitute a
violation of any Environmental Laws, and if, (ii) based on the advice of its
legal counsel or other consultants, FNB believes that Carolina or, following the
Merger, FNB, could become responsible for the remediation of such discharge,
disposal, release or emission or for other corrective action with respect to any
such violation, or that Carolina or, following the Merger, FNB, could become
liable for monetary damages (including without limitation any civil or criminal
penalties or assessments) resulting therefrom (or that, in the case of any of
the Loan Collateral, Carolina or, following the Merger, FNB, could incur any
such liability if it acquired title to such Loan Collateral), and if, (iii)
based on the advice of their legal counsel or other consultants, FNB reasonably
believes the amount of expenses or liability which either of them could incur or
for which either of them could become responsible or liable on account of any
and all such remediation, corrective action or monetary damages at any time or
over any period of time could equal or exceed an aggregate of $250,000 over any
period of time, then FNB shall give Carolina prompt written notice thereof
(together with all information in its possession relating thereto) and, at FNB's
sole option and discretion, at any time thereafter and up to the Effective Time,
it may terminate this Agreement without further obligation or liability to
Carolina or its shareholders.
6.8 TAX-FREE REORGANIZATION. FNB and Carolina shall each use its best
efforts to cause the Merger to qualify as a tax-free "reorganization" within the
meaning of Section 368(a)(1)(A) of the Code and that it shall not intentionally
take any action that would cause the Merger to fail to so qualify.
6.9 CERTAIN MODIFICATIONS. FNB and Carolina shall consult with each other
with respect to their loan, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) and Carolina
shall make such modifications or changes to its policies and practices, if any,
prior to the Effective Time, as may be mutually agreed upon. FNB and Carolina
also shall consult with each other with respect to the character, amount and
timing of restructuring and Merger-related expense charges to be taken by each
of them in connection with the transactions contemplated by this Agreement and
shall take such charges in accordance with GAAP as may be mutually agreed upon
by them. The
44
representations, warranties and covenants of each of FNB and Carolina contained
in this Agreement shall not be deemed to be inaccurate or breached in any
respect as a consequence of any modifications or charges undertaken by reason of
this Section 6.9.
6.10 TRANSITION TEAM. FNB and Carolina shall create a transition team
comprised of staff and representatives of Carolina and staff and representatives
of FNB (the "Transition Team"). The purpose of the Transition Team shall be to
provide detailed guidance to FNB in fulfilling and consummating the Merger, to
maintain open lines of communication between Carolina and FNB, and to handle
customer inquiries regarding the Merger. The Transition Team shall meet as
necessary until the Effective Time. Members of the Transition Team shall receive
no separate compensation for such service.
ARTICLE VII. CONDITIONS PRECEDENT TO MERGER
7.1 CONDITIONS TO ALL PARTIES' OBLIGATIONS. Notwithstanding any other
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date:
(A) CORPORATE ACTION. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the Plan of Merger in
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken, including without limitation the approvals of the
shareholders of Carolina and of FNB of this Agreement and the Plan of Merger.
(B) REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
(including any post-effective amendments thereto) shall be effective under the
1933 Act, and no stop orders or proceedings shall be pending or, to the
knowledge of FNB, threatened by the SEC to suspend the effectiveness of such
Registration Statement.
(C) "BLUE SKY" APPROVALS. FNB 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 FNB, threatened by any state Blue Sky administration to suspend the
effectiveness of any registration statement filed therewith with respect to the
issuance of FNB Stock in the Merger.
(D) REGULATORY APPROVALS. (i) The Merger and other transactions described
herein shall have been approved, to the extent required by law, by the Federal
Reserve Board, the Administrator, and by all other governmental or regulatory
agencies or authorities having jurisdiction over such transactions, (ii) no
governmental or regulatory agency or authority shall have withdrawn its approval
of such transactions or imposed any condition on such transactions or
conditioned its approval thereof, which condition is reasonably deemed by FNB or
Carolina to be materially disadvantageous or burdensome or to so adversely
affect the economic or business benefits of this Agreement to FNB or Carolina's
shareholders as to render it inadvisable for it to consummate the Merger; (iii)
all applicable waiting periods
45
following regulatory approvals shall have expired without objection to the
Merger by the Federal Reserve Board or other applicable regulatory authorities;
and (iv) all other consents, approvals and permissions, and the satisfaction of
all of the requirements prescribed by law or regulation, necessary to the
carrying out of the transactions contemplated herein shall have been procured.
(E) ADVERSE PROCEEDINGS, INJUNCTION, ETC. There shall not be (i) any
order, decree or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Merger or any of the other transactions described
herein or any of the parties hereto from consummating any such transaction, (ii)
any pending or threatened investigation of the Merger or any of such other
transactions by the Federal Reserve Board, or any actual or threatened
litigation under federal antitrust laws relating to the Merger or any other such
transaction, (iii) any suit, action or proceeding by any person (including any
governmental, administrative or regulatory agency), pending or threatened before
any court or governmental agency in which it is sought to restrain or prohibit
Carolina or FNB from consummating the Merger or carrying out any of the terms or
provisions of this Agreement, or (iv) any other suit, claim, action or
proceeding pending or threatened against Carolina or FNB or any of their
respective officers or directors which shall reasonably be considered by
Carolina or FNB to be materially burdensome in relation to the proposed Merger
or materially adverse in relation to the financial condition, results of
operations, prospects, businesses, assets, loan portfolio, investments,
properties or operations of either such corporation, and which has not been
dismissed, terminated or resolved to the satisfaction of all parties hereto
within 90 days of the institution or threat thereof.
(F) TAX OPINION. The parties shall have received an opinion of Xxxxxx Xxxx
Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C. in form and substance satisfactory to FNB and
Carolina, substantially to the effect that: (i) for federal income tax purposes,
consummation of the Merger will constitute a "reorganization" as defined in
Section 368(a) of the Code; (ii) no taxable gain will be recognized by a
shareholder of Carolina upon such shareholder's receipt solely of FNB Stock in
exchange for his or her Carolina Stock (except with respect to cash in lieu of
fractional shares); (iii) the basis of the FNB Stock received by the shareholder
in the Merger will be the same as the basis in such shareholder's Carolina Stock
surrendered in exchange therefor decreased by the amount of cash received, if
any, in lieu of a fractional share; and (iv) if Carolina Stock is a capital
asset in the hands of the shareholder at the Effective Time, the holding period
of the FNB Stock received by the shareholder in the Merger will include the
holding period of Carolina Stock surrendered in exchange therefor. In rendering
its opinion, Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C. will require and rely
on representations by officers of FNB and Carolina, and will be entitled to make
reasonable assumptions.
(G) NASDAQ LISTING. FNB shall have satisfied all requirements for the
shares of FNB Stock to be issued to the shareholders of Carolina and holders of
options issued under the Carolina Option Plan in connection with the Merger to
be listed on Nasdaq as of the Effective Time.
46
(H) POOLING LETTERS. FNB shall have received a letter, dated as of the
Effective Time, in form and substance reasonably satisfactory to FNB, from KPMG
LLP, independent public accountants, to the effect that the Merger will qualify
for pooling-of-interests accounting treatment. FNB shall have received a letter,
dated as of the Effective Time, in form and substance reasonably satisfactory to
FNB, from Xxxxx Xxxx P.L.L.C., independent public accountants, to the effect
that such firm is not aware of any matters relating to Carolina or its
subsidiaries that would preclude the Merger from qualifying for
pooling-of-interests accounting treatment.
7.2 ADDITIONAL CONDITIONS TO CAROLINA'S OBLIGATIONS. Notwithstanding any
other provision of this Agreement to the contrary, Carolina's separate
obligation to consummate the transactions described herein shall be conditioned
upon the satisfaction of each of the following conditions precedent on or prior
to the Closing Date:
(A) MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the consolidated financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations of FNB and its consolidated subsidiary considered as one enterprise
and there shall not have occurred any event or development and there shall not
exist any condition or circumstance which, with the lapse of time or otherwise,
may or could cause, create or result in any such material adverse change.
(B) COMPLIANCE WITH LAWS. FNB shall have complied in all material respects
with all federal and state laws and regulations applicable to the transactions
described herein and where the violation of or failure to comply with any such
law or regulation could or may have a material adverse effect on the
consolidated financial condition, results of operations, prospects, businesses,
assets, loan portfolio, investments, properties or operations of FNB and its
consolidated subsidiary considered as one enterprise.
(C) FNB'S REPRESENTATIONS AND WARRANTIES AND PERFORMANCE OF AGREEMENTS;
OFFICERS' CERTIFICATE. Unless waived in writing by Carolina as provided in
Section 10.2 below, (i) each of the representations and warranties of FNB
contained in this Agreement shall have been true and correct as of the date
hereof and shall be true and correct on and as of the Effective Time with the
same force and effect as though made on and as of such date, except (A) for
changes which are not, in the aggregate, material and adverse to the
consolidated financial condition, results of operations, prospects, businesses,
assets, loan portfolio, investments, properties or operations of FNB and its
consolidated subsidiary considered as one enterprise, and (B) for the effect of
any activities or transactions that may have taken place after the date of this
Agreement and are expressly contemplated by this Agreement; and (ii) FNB shall
have performed in all material respects all of its obligations, covenants and
agreements hereunder to be performed by it on or before the Closing Date.
Carolina shall have received a certificate dated as of the Closing Date and
executed by the chief executive officer and chief financial officer of FNB to
the foregoing effect and as to such other matters as may be reasonably requested
by Carolina.
(D) LEGAL OPINION OF FNB'S COUNSEL. Carolina shall have received from
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C., counsel for FNB, a written
opinion dated as of
47
the Closing Date in form and substance customary for transactions of this nature
and otherwise reasonably satisfactory to Carolina and its counsel.
(E) FAIRNESS OPINION. Carolina shall have received from its financial
advisor, Trident, dated as of a date prior to the mailing of the Joint Proxy
Statement/Prospectus to Carolina's shareholders in connection with its
shareholders' meeting to the effect that the consideration to be received by
Carolina's shareholders in the Merger is fair, from a financial point of view,
to Carolina and its shareholders.
(F) OTHER DOCUMENTS AND INFORMATION FROM FNB. FNB shall have provided to
Carolina correct and complete copies of its Articles of Incorporation, bylaws
and Board of Directors and shareholder resolutions approving this Agreement and
the Merger (all certified by its Secretary), together with certificates of the
incumbency of its officers and such other closing documents and information as
may be reasonably requested by Carolina or its counsel.
7.3 ADDITIONAL CONDITIONS TO FNB'S OBLIGATIONS. Notwithstanding any other
provision of this Agreement to the contrary, FNB's obligations to consummate the
transactions described herein shall be conditioned upon the satisfaction of each
of the following conditions precedent on or prior to the Closing Date:
(A) MATERIAL ADVERSE CHANGE. There shall not have occurred any material
adverse change in the consolidated financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations of Carolina and its subsidiaries considered as one enterprise and
there shall not have occurred any event or development and there shall not exist
any condition or circumstance which, with the lapse of time or otherwise, may or
could cause, create or result in any such material adverse change.
(B) COMPLIANCE WITH LAWS. Carolina shall have complied in all material
respects with all federal and state laws and regulations applicable to the
transactions described herein and where the violation of or failure to comply
with any such law or regulation could or may have a material adverse effect on
the consolidated financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or operations of FNB
or Carolina.
(C) CAROLINA'S REPRESENTATIONS AND WARRANTIES AND PERFORMANCE OF
AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in writing by FNB as provided
in Section 10.2 below, (i) each of the representations and warranties of
Carolina contained in this Agreement shall have been true and correct as of the
date hereof and shall be true and correct at and as of the Effective Time with
the same force and effect as though made on and as of such date, except (A) for
changes which are not, in the aggregate, material and adverse to the
consolidated financial condition, results of operations, prospects, businesses,
assets, loan portfolio, investments, properties or operations of Carolina and
its subsidiaries considered as one enterprise, and (B) for the effect of any
activities or transactions that may have taken place after the date of this
Agreement and are expressly contemplated by this Agreement, and (ii) Carolina
shall have performed in all material respects all its obligations, covenants and
48
agreements hereunder to be performed by it on or before the Closing Date. FNB
shall have received a certificate dated as of the Closing Date and executed by
the chief executive officer and chief financial officer of Carolina to the
foregoing effect and as to such other matters as may be reasonably requested by
FNB.
(D) LEGAL OPINION OF CAROLINA'S COUNSEL. FNB shall have received from
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P., counsel to Carolina, a
written opinion, dated as of the Closing Date in form and substance customary
for transactions of this nature and otherwise reasonably satisfactory to FNB and
its counsel.
(E) FAIRNESS OPINION. FNB shall have received from its financial advisor,
Wheat First, a written opinion dated as of a date prior to the mailing of the
Joint Proxy Statement/Prospectus to FNB's shareholders in connection with its
shareholders' meeting to the effect that the consideration to be paid in the
Merger is fair, from a financial point of view, to FNB and its shareholders.
(F) OTHER DOCUMENTS AND INFORMATION FROM CAROLINA. Carolina shall have
provided to FNB correct and complete copies of Carolina's Articles of
Incorporation, bylaws and Board and shareholder resolutions (all certified by
Carolina's Secretary), together with certificates of the incumbency of
Carolina's officers and such other closing documents and information as may be
reasonably requested by FNB or its counsel.
(G) AMENDMENTS TO BENEFIT PLANS. The Board of Directors of Carolina shall
have adopted and implemented, effective as of the Effective Time, such
amendments to the Carolina Option Plan and the MR Plan as may be necessary in
accordance with the provisions of this Agreement and otherwise satisfactory to
FNB.
(H) CONSENTS TO ASSIGNMENT OF PROPERTY LEASES. Carolina shall have
obtained all required consents to the assignment to FNB of its rights and
obligations under any personal property lease and any Real Property Lease
material to the business of Carolina and its subsidiaries considered as one
enterprise, and such consents shall be in such form and substance as shall be
satisfactory to FNB; and each of the lessors of Carolina shall have confirmed in
writing that Carolina is not in default under the terms and conditions of any
personal property lease or any Real Property Lease.
ARTICLE VIII. TERMINATION; BREACH; REMEDIES
8.1 MUTUAL TERMINATION. At any time prior to the Effective Time (and
whether before or after approval hereof by the shareholders of Carolina and
FNB), this Agreement may be terminated by the mutual agreement of FNB and
Carolina. Upon any such mutual termination, all obligations of Carolina and FNB
hereunder shall terminate and each party shall pay costs and expenses as
provided in Section 6.4 above.
8.2 UNILATERAL TERMINATION. This Agreement may be terminated by either FNB
or Carolina (whether before or after approval hereof by Carolina's or FNB's
shareholders) upon written notice to the other parties and under the
circumstances described below.
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(A) TERMINATION BY FNB. This Agreement may be terminated by FNB by action
of its Board of Directors:
(i) if any of the conditions to the obligations of FNB (as set forth
in Section 7.1 and 7.3 above) shall not have been satisfied or effectively
waived in writing by FNB by June 30, 2000 (except to the extent that the
failure of such condition to be satisfied has been caused by the failure
of FNB to satisfy any of its obligations, covenants or agreements
contained herein);
(ii) if Carolina shall have violated or failed to fully perform any
of its obligations, covenants or agreements contained in Article IV or
Article VI herein in any material respect;
(iii) if FNB determines at any time that any of Carolina's
representations or warranties contained in Article II above or in any
other certificate or writing delivered pursuant to this Agreement shall
have been false or misleading in any material respect when made, or that
there has occurred any event or development or that there exists any
condition or circumstance which has caused or, with the lapse of time or
otherwise, may or could cause any such representations or warranties to
become false or misleading in any material respect;
(iv) if, notwithstanding FNB's satisfaction of its obligations under
Section 6.1 above, Carolina's or FNB's shareholders do not approve this
Agreement and Plan of Merger at its shareholders' meeting held for such
purpose;
(v) if the Merger shall not have become effective on or before June
30, 2000 unless such date is extended as evidenced by the written mutual
agreement of the parties hereto; provided, however, that in the event
there is a delay of not more than 30 days caused by circumstances beyond
the control of the parties hereto, the dates set forth in this Section
8.2(a) shall be extended by mutual agreement for up to an additional 60
days; or
(vi) under the circumstances described in Section 6.7 above.
However, before FNB may terminate this Agreement for any of the reasons
specified above in (i), (ii) or (iii) of this Section 8.2(a), it shall give
written notice to Carolina as provided herein stating its intent to terminate
and a description of the specific breach, default, violation or other condition
giving rise to its right to so terminate, and, such termination by FNB shall not
become effective if, within 30 days following the giving of such notice,
Carolina shall cure such breach, default or violation or satisfy such condition
to the reasonable satisfaction of FNB. In the event Carolina cannot or does not
cure such breach, default or violation or satisfy such condition to the
reasonable satisfaction of FNB within such 30-day period, FNB shall have 30 days
to notify Carolina of its intention to terminate this Agreement. A failure to so
notify Carolina will be deemed to be a waiver by FNB of the breach, default or
violation pursuant to Section 10.2 below.
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(B) TERMINATION BY CAROLINA. This Agreement may be terminated by Carolina
by action of its Board of Directors:
(i) if any of the conditions of the obligations of Carolina (as set
forth in Section 7.1 and 7.2 above) shall not have been satisfied or
effectively waived in writing by Carolina by June 30, 2000 (except to the
extent that the failure of such condition to be satisfied has been caused
by the failure of Carolina to satisfy any of its obligations, covenants or
agreements contained herein);
(ii) if FNB shall have violated or failed to fully perform any of
its obligations, covenants or agreements contained in Article V or Article
VI herein in any material respect;
(iii) if Carolina determines that any of FNB's representations and
warranties contained in Article III herein or in any other certificate or
writing delivered pursuant to this Agreement shall have been false or
misleading in any material respect when made, or that there has occurred
any event or development or that there exists any condition or
circumstance which has caused or, with the lapse of time or otherwise, may
or could cause any such representations or warranties to become false or
misleading in any material respect;
(iv) if, notwithstanding Carolina's satisfaction of its obligations
contained in Section 6.1 above, FNB's or Carolina's shareholders do not
approve this Agreement and Plan of Merger at its shareholders' meeting
called for such purpose;
(v) if the Merger shall not have become effective on or before June
30, 2000 unless such date is extended as evidenced by the written mutual
agreement of the parties hereto; provided, however, that in the event
there is a delay of not more than 30 days caused by circumstances beyond
the control of the parties hereto, the dates set forth in this Section
8.2(b) shall be extended by mutual agreement for up to an additional 60
days; or
(vi) under the provisions of Section 8.2(c) below.
However, before Carolina may terminate this Agreement for any of the
reasons specified above in clause (i), (ii) or (iii) of this Section 8.2(b), it
shall give written notice to FNB as provided herein stating its intent to
terminate and a description of the specific breach, default, violation or other
condition giving rise to its right to so terminate, and, such termination by
Carolina shall not become effective if, within 30 days following the giving of
such notice, FNB shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of Carolina. In the event FNB cannot or
does not cure such breach, default or violation or satisfy such condition to the
reasonable satisfaction of Carolina within such 30-day period, Carolina shall
have 30 days to notify FNB of its intention to terminate this Agreement. A
failure to so notify FNB will be deemed to be a waiver by Carolina of the
breach, default or violation pursuant to Section 10.2 below.
51
(C) TERMINATION BY CAROLINA OR INCREASE IN EXCHANGE RATIO. This Agreement
may be terminated by action of the Board of Directors of Carolina if it
determines by a vote of a majority of the members of its entire Board, at any
time during the ten-day period commencing two days after the Determination Date
(as defined below), that both of the following conditions are satisfied:
(a) the Average Closing Price (as defined below) shall be less than
the product of (i) 0.80 and (ii) the Starting Price (as defined
below); and
(b) the quotient obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to herein as
the "FNB Ratio") shall be less than the "Index Ratio" (which shall
mean the quotient obtained by dividing the Index Price on the
Determination Date by the Index Price (as defined below) on the
Starting Date (as defined below) less 0.15);
subject, however, to the following three sentences. If Carolina
desires to terminate the Merger pursuant to this Section 8.2(c), it
shall give prompt written notice thereof to FNB; provided, that such
notice of election to terminate may be withdrawn at any time within
the aforementioned ten-day period. During the five-day period
commencing with its receipt of such notice, FNB shall have the
option to elect to increase the Exchange Ratio to equal the lesser
of (i) the quotient (rounded to the nearest one-ten-thousandth)
obtained by dividing (A) the product of 0.80, the Starting Price,
and the Exchange Ratio (as then in effect) by (B) the Average
Closing Price, and (ii) the quotient (rounded to the nearest
one-ten-thousandth) obtained by dividing (A) the product of the
Index Ratio and the Exchange Ratio (as then in effect) by (B) the
FNB Ratio. If FNB makes an election contemplated by the preceding
sentence, within such five-day period, it shall give prompt written
notice to Carolina of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this
Section 8.2(c) and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 8.2(c).
For purposes of this Section 8.2(c), the following terms shall have
the meanings indicated:
"Average Closing Price" shall mean the average of the daily last
sales prices of FNB Stock as reported on Nasdaq (as reported by THE
WALL STREET JOURNAL or, if not reported thereby, another
authoritative source as chosen by FNB) for the ten consecutive full
trading days in which such shares are traded on Nasdaq ending at the
close of trading on the Determination Date.
"Determination Date" shall mean the later of the date on which both
(i) all requisite consents to or approval of the Merger by
applicable federal and state
52
regulatory authorities having jurisdiction over the Merger and
(without regard to any requisite waiting period thereof) shall be
received and (ii) the shareholders of both Carolina and FNB shall
have approved the Merger at their respective shareholders' meetings.
"Index Group" shall mean the ten bank holding companies listed
below, the common stocks of all of which shall be publicly traded
and as to which there shall not have been, since the Starting Date
and before the Determination Date, any public announcement of a
proposal for such company to be acquired or for such company to
acquire another company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization. In the event
that any such company or companies are removed from the Index Group,
the weights (which shall be determined based upon the number of
outstanding shares of common stock) shall be redistributed
proportionately for purposes of determining the Index Price. The ten
bank holding companies and the weights attributed to them are as
follows:
Bank Holding Company Weight
Atlantic Financial Corporation 11.80%
Community Bankshares, Inc. 7.69
Community Capital Corp 8.77
First Bancorp 12.74
FNB Financial Services Corporation 12.55
FNB Corporation 11.52
Xxxxx River Bankshares, Inc. 12.88
Peoples Bancorp of NC 8.24
Resource Bankshares Corporation 7.16
Virginia Commonwealth Financial Corp. 6.66
------
100.00%
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the factors listed above) of the last
sales prices of the companies composing the Index Group.
"Starting Date" shall mean October 18, 1999.
"Starting Price" shall mean the last sale price per share of FNB
Stock as reported on Nasdaq (as reported by THE WALL STREET JOURNAL
or, if not reported thereby, another authoritative source as chosen
by FNB) on the Starting Date.
If any company belonging to the Index Group or FNB declares or
effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares, or similar transaction
between the date of this Agreement and the Determination Date, the
prices for the common stock of such company
53
or FNB shall be appropriately adjusted for the purposes of applying
this Section 8.2(c).
8.3 BREACH; REMEDIES. (a) Except as otherwise provided below, in the event
of a breach by Carolina of any of its representations or warranties contained in
this Agreement or in any other certificate or writing delivered pursuant to this
Agreement, or in the event of its failure to perform or violation of any of its
obligations, agreements or covenants contained in this Agreement, then FNB's
sole right and remedy shall be to terminate this Agreement prior to the
Effective Time as provided in Section 8.2 above, or, in the case of a failure to
perform or violation of any obligations, agreements or covenants, to seek
specific performance thereof.
(b) Likewise, and except as otherwise provided below, in the event of a
breach by FNB of any of its representations or warranties contained in this
Agreement, or in the event of its failure to perform or violation of any of its
obligations, agreements or covenants contained in this Agreement, then
Carolina's sole right and remedy shall be to terminate this Agreement prior to
the Effective Time as provided in Section 8.2 above, or, in the case of a
failure to perform or violation of any obligations, agreements or covenants, to
seek specific performance thereof.
(c) Notwithstanding anything contained herein to the contrary, if either
party to this Agreement breaches this Agreement by willfully or intentionally
failing to perform or violating any of its obligations, agreements or covenants
contained in this Agreement, such party shall be obligated to pay all expenses
of the other party described in Section 6.4, together with other damages
recoverable at law or in equity.
ARTICLE IX. INDEMNIFICATION
9.1 AGREEMENT TO INDEMNIFY. In the event this Agreement is terminated for
any reason and the Merger is not consummated, then Carolina and FNB will
indemnify each other as provided below.
(A) BY CAROLINA. Carolina shall indemnify, hold harmless and defend FNB
from and against any and all claims, disputes, demands, causes of action, suits,
proceedings, losses, damages, liabilities, obligations, costs and expenses of
every kind and nature that arise from or are related to claims by third parties,
including without limitation reasonable attorneys' fees and legal costs and
expenses in connection therewith, whether known or unknown, and whether now
existing or hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by FNB:
(i) in connection with or which arise out of or result from or are
based upon (A) Carolina's operations or business transactions or its
relationship with any of its employees, or (B) Carolina's failure to
comply with any statute or regulation of any federal, state or local
government or agency (or any political subdivision thereof) in connection
with the transactions described in this Agreement;
54
(ii) in connection with or which arise out of or result from or are
based upon any fact, condition or circumstance that constitutes a breach
by Carolina of, or any inaccuracy, incompleteness or inadequacy in, any of
its representations or warranties under or in connection with this
Agreement, or any failure of Carolina to perform any of its covenants,
agreements or obligations under or in connection with this Agreement;
(iii) in connection with or which arise out of or result from or are
based upon any information provided by Carolina which is included in the
Joint Proxy Statement/Prospectus and which information causes the Joint
Proxy Statement/Prospectus at the time of its mailing to Carolina's and
FNB's shareholders to contain any untrue statement of a material fact or
to omit any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the
circumstances under which they were made, not false or misleading; and
(iv) in connection with or which arise out of or result from or are
based upon the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
reporting, testing, processing, emission, discharge, release, threatened
release, control, removal, clean-up or remediation on, from or relating to
the Real Property by Carolina or any other person of any Hazardous
Substances, or any action taken or any event or condition occurring or
existing with respect to the Real Property which constitutes a violation
of any Environmental Laws by Carolina or any other person.
(B) BY FNB. FNB shall indemnify, hold harmless and defend Carolina from
and against any and all claims, disputes, demands, causes of action, suits,
proceedings, losses, damages, liabilities, obligations, costs and expenses of
every kind and nature that arise from or are related to claims by third parties,
including without limitation reasonable attorneys' fees and legal costs and
expenses in connection therewith, whether known or unknown, and whether now
existing or hereafter arising, which may be threatened against, incurred,
undertaken, received or paid by Carolina:
(i) in connection with or which arise out of or result from or are
based upon (A) FNB's operations or business transactions or its
relationship with any of its employees, or (B) FNB's failure to comply
with any statute or regulation of any federal, state or local government
or agency (or any political subdivision thereof) in connection with the
transactions described in this Agreement;
(ii) in connection with or which arise out of or result from or are
based upon of any fact, condition or circumstance that constitutes a
breach by FNB of, or any inaccuracy, incompleteness or inadequacy in, any
of its representations or warranties under or in connection with this
Agreement, or any failure of FNB to perform any of its covenants,
agreements or obligations under or in connection with this Agreement; and,
55
(iii) in connection with or which arise out of or result from or are
based upon any information provided by FNB which is included in the Joint
Proxy Statement/Prospectus and which information causes the Joint Proxy
Statement/Prospectus at the time of its mailing to FNB's and Carolina's
shareholders to contain any untrue statement of a material fact or to omit
any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under
which they were made, not false or misleading.
9.2 PROCEDURE FOR CLAIMING INDEMNIFICATION.
(A) BY FNB. If any matter subject to indemnification hereunder arises in
the form of a claim against FNB or its successors and assigns (herein referred
to as a "Third Party Claim"), FNB promptly shall give notice and details
thereof, including copies of all pleadings and pertinent documents, to Carolina.
Within 15 days of such notice, Carolina either (i) shall pay the Third Party
Claim either in full or upon agreed compromise or (ii) shall notify FNB that
Carolina disputes the Third Party Claim and intends to defend against it, and
thereafter shall so defend and pay any adverse final judgment or award in regard
thereto. Such defense shall be controlled by Carolina and the cost of such
defense shall be borne by Carolina except that FNB shall have the right to
participate in such defense at its own expense and provided that Carolina shall
have no right in connection with any such defense or the resolution of any such
Third Party Claim to impose any cost, restriction, limitation or condition of
any kind upon FNB or its successors or assigns. FNB agrees that it shall
cooperate in all reasonable respects in the defense of any such Third Party
Claim, including making personnel, books and records relevant to the Third Party
Claim available to Carolina without charge therefor except for out-of-pocket
expenses. If Carolina fails to take action within 15 days as hereinabove
provided or, having taken such action, thereafter fails diligently to defend and
resolve the Third Party Claim, FNB shall have the right to pay, compromise or
defend the Third Party Claim and to assert the indemnification provisions
hereof. FNB also shall have the right, exercisable in good faith, to take such
action as may be necessary to avoid a default prior to the assumption of the
defense of the Third Party Claim by Carolina.
(B) BY CAROLINA. If any matter subject to indemnification hereunder arises
in the form of a claim against Carolina or its successors and assigns (herein
referred to as a "Third Party Claim"), Carolina promptly shall give notice and
details thereof, including copies of all pleadings and pertinent documents, to
FNB. Within 15 days of such notice, FNB either (i) shall pay the Third Party
Claim either in full or upon agreed compromise or (ii) shall notify Carolina
that FNB disputes the Third Party Claim and intends to defend against it, and
thereafter shall so defend and pay any adverse final judgment or award in regard
thereto. Such defense shall be controlled by FNB and the cost of such defense
shall be borne by FNB except that Carolina shall have the right to participate
in such defense at its own expense and provided that FNB shall have no right in
connection with any such defense or the resolution of any such Third Party Claim
to impose any cost, restriction, limitation or condition of any kind upon
Carolina or its successors and assigns. Carolina agrees that it shall cooperate
in all reasonable respects in the defense of any such Third Party Claim,
including making personnel, books and records relevant to the Third Party Claim
available to FNB without
56
charge therefor except for out-of-pocket expenses. If FNB fails to take action
within 15 days as hereinabove provided or, having taken such action, thereafter
fails diligently to defend and resolve the Third Party Claim, Carolina shall
have the right to pay, compromise or defend the Third Party Claim and to assert
the indemnification provisions hereof. Carolina also shall have the right,
exercisable in good faith, to take such action as may be necessary to avoid a
default prior to the assumption of the defense of the Third Party Claim by FNB.
ARTICLE X. MISCELLANEOUS PROVISIONS
10.1 RESERVATION OF RIGHT TO REVISE STRUCTURE. Notwithstanding any
provision herein to the contrary, at FNB's election, the Merger may
alternatively be structured such that Carolina is merged with and into the
Merger Sub or such that Carolina is merged with and into FNB; provided, however,
that no such change will (i) alter or change the amount or kind of consideration
to be received by the shareholders of Carolina in the Merger or (ii) adversely
affect the tax treatment to the shareholders of Carolina as a result of
receiving such consideration. In the event of such election by FNB, the parties
hereto shall execute an appropriate amendment to this Agreement.
10.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNIFICATION AND OTHER
AGREEMENTS.
(A) REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. None of the
representations, warranties or agreements herein shall survive the effectiveness
of the Merger, and no party shall have any right after the Effective Time to
recover damages or any other relief from any other party to this Agreement by
reason of any breach of representation or warranty, any nonfulfillment or
nonperformance of any agreement contained herein, or otherwise; provided,
however, that the parties' agreements contained in Section 6.6 above, FNB's
covenants contained in Sections 5.1 through 5.5 above, and FNB's representation
and warranty contained in Section 3.2 above, shall survive the effectiveness of
the Merger.
(B) INDEMNIFICATION. The parties' indemnification agreements and
obligations pursuant to Section 9.1 above shall become effective only in the
event this Agreement is terminated, and neither of the parties shall have any
obligations under Section 9.1 in the event of or following consummation of the
Merger.
10.3 WAIVER. Any term or condition of this Agreement may be waived (except
as to matters of regulatory approvals and approvals required by law), either in
whole or in part, at any time by the party which is, and whose shareholders are,
entitled to the benefits thereof, provided, however, that any such waiver shall
be effective only upon a determination by the waiving party (through action of
its Board of Directors) that such waiver would not adversely affect the
interests of the waiving party or its shareholders; and, provided further, that
no waiver of any term or condition of this Agreement by any party shall be
effective unless such waiver is in writing and signed by the waiving party or as
provided in Sections 8.2(a) and 8.2(b) above, or be construed to be a waiver of
any succeeding breach of the same term or condition. No failure or delay of any
party to exercise any power, or to insist upon a strict
57
compliance by any other party of any obligation, and no custom or practice at
variance with any terms hereof, shall constitute a waiver of the right of any
party to demand full and complete compliance with such terms.
10.4 AMENDMENT. This Agreement may be amended, modified or supplemented at
any time or from time to time prior to the Effective Time, and either before or
after its approval by the shareholders of Carolina and FNB, by an agreement in
writing approved by a majority of the Boards of Directors of FNB and Carolina
executed in the same manner as this Agreement; provided however, that the
provisions of this Agreement relating to the manner or basis in which shares of
Carolina Stock are converted into FNB Stock shall not be amended (except in
accordance with Section 8.2(c) of this Agreement) after the approval of this
Agreement and Plan of Merger by the shareholders of Carolina and FNB without the
requisite approval of such shareholders of such amendment.
10.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
by courier, or mailed by certified mail, return receipt requested, postage
prepaid, and addressed as follows:
(a) If to Carolina, to:
Carolina Fincorp, Inc.
Attention: R. Xxxxx Xxxxxxxx, President
Post Office Box 1324 (28379)
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
With copy to:
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P
Attention: Xxxxxx X. Xxxxxxx III
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
(b) If to FNB, to:
FNB Corp.
Attention: Xx. Xxxxxxx X. Xxxxxx, President
Post Office Box 1328 (27204)
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
With copy to:
58
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C.
Attention: Xxxxx X. Xxxx
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
10.6 FURTHER ASSURANCE. Carolina and FNB shall each furnish to the other
such further assurances with respect to the matters contemplated herein and
their respective agreements, covenants, representations and warranties contained
herein, including the opinion of legal counsel, as such other party may
reasonably request.
10.7 HEADINGS AND CAPTIONS. Headings and captions of the sections and
Sections of this Agreement have been inserted for convenience of reference only
and do not constitute a part hereof.
10.8 ENTIRE AGREEMENT. This Agreement (including all schedules and
exhibits attached hereto and all documents incorporated herein by reference)
contains the entire agreement of the parties with respect to the transactions
described herein and supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements by or to, or
any agreements between, any of the parties hereto other than those contained
herein in writing.
10.9 SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of any
term, phrase, clause, Section, restriction, covenant, agreement or other
provision hereof shall in no way affect the validity or enforceability of any
other provision or part hereof.
10.10 ASSIGNMENT. This Agreement may not be assigned by either party
hereto except with the prior written consent of the other party hereto.
10.11 COUNTERPARTS. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and all of
which together shall constitute one agreement.
10.12 GOVERNING LAW. This Agreement is made in and shall be construed and
enforced in accordance with the laws of North Carolina.
10.13 INSPECTION. Any right of FNB or Carolina hereunder to investigate or
inspect the assets, books, records, files and other information of the other in
no way shall establish any presumption that FNB or Carolina should have
conducted any investigation or that such right has been exercised by FNB or
Carolina or their agents, representatives or others. Any investigations or
inspections that have been made by FNB or Carolina or their agents,
representatives or others prior to the Closing Date shall not be deemed in any
way in derogation or limitation of the covenants, representations and warranties
made by or on behalf of Carolina or FNB in this Agreement.
59
IN WITNESS WHEREOF, Carolina and FNB each has caused this Agreement to be
executed in its name by its duly authorized officers and its corporate seal to
be affixed hereto as of the date first above written.
CAROLINA FINCORP, INC.
By: /s/ R. Xxxxx Xxxxxxxx
-------------------------------------
R. Xxxxx Xxxxxxxx
President and Chief Executive Officer
FNB CORP.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
60
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
SCHEDULE DESCRIPTION
A Plan of Merger
B Form of Employment Agreement
61
SCHEDULE A
to Agreement and Plan of Merger
dated as of October 16, 1999
PLAN OF MERGER
OF
FNB ACQUISITION CORP.
WITH AND INTO
CAROLINA FINCORP, INC.
A. Parties to Merger. The parties to the proposed merger are Carolina
Fincorp, Inc., a North Carolina corporation ("Carolina"), FNB Corp., a North
Carolina corporation ("FNB"), and FNB Acquisition Corp., a North Carolina
corporation and wholly owned subsidiary of FNB (the "Merger Subsidiary").
B. Nature of Transaction. Subject to the provisions of this Plan of
Merger, the Merger Subsidiary shall be merged with and into Carolina (the
"Merger") with the effect provided in the North Carolina Business Corporation
Act.
C. Surviving Corporation. Carolina shall be the surviving corporation in
the Merger. At the Effective Time (as hereinafter defined) of the Merger, the
name of the surviving corporation shall be changed to "FNB Acquisition Corp."
D. Effective Time. This Plan of Merger shall be effective upon the filing
of Articles of Merger with respect hereto with the North Carolina Secretary of
State (the "Effective Time"). At the Effective Time, the separate corporate
existence of the Merger Subsidiary shall cease and the corporate existence of
Carolina shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger.
E. Conversion and Exchange of Shares.
1. Except as otherwise provided herein, at the Effective Time, all
rights of Carolina's shareholders with respect to all then outstanding
shares of the common stock of Carolina, no par value ("Carolina Stock"),
shall cease to exist, and the holders of Carolina Stock shall cease to be,
and shall have no further rights as, shareholders of Carolina. At the
Effective Time, each such outstanding share of Carolina Stock (except for
shares held, other than in a fiduciary capacity or as a result of debts
previously contracted, by Carolina, the Merger Subsidiary, FNB or any of
their subsidiaries, which shall be canceled in the Merger) shall be
converted, without any action on the part of the holder of such shares,
into a number of shares of the common stock of FNB, par value $2.50 (the
"FNB Stock"), equal to seventy-nine hundredths of one share (.79 shares)
of FNB Stock (the "Exchange Ratio"). [THE EXCHANGE RATIO IS SUBJECT TO
POSSIBLE ADJUSTMENT IN ACCORDANCE WITH SECTION 1.4(B) OF THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF OCTOBER 16, 1999, BY
AND BETWEEN FNB AND CAROLINA. IF SO ADJUSTED, THE ADJUSTED EXCHANGE RATIO
SHALL BE REFLECTED IN THIS PLAN OF MERGER PRIOR TO FILING WITH THE
SECRETARY OF STATE OF NORTH CAROLINA.]
2. Each share of the FNB Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall continue to be issued and
outstanding and shall not be affected by the Merger.
3. At the Effective Time, each share of capital stock of the Merger
Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one share of common stock, no
par value, of the surviving corporation in the Merger.
4. Following the Effective Time, certificates representing shares of
Carolina Stock outstanding at the Effective Time (herein sometimes
referred to as "Carolina Certificates") shall evidence only the right of
the registered holder thereof to receive, and may be exchanged for, whole
shares of FNB Stock, and cash in lieu of fractional shares, as provided
herein. At the Effective Time, FNB shall issue and deliver, or cause to be
issued and delivered, to the transfer agent of FNB Stock (the "Transfer
Agent"), certificates representing whole shares of FNB Stock into which
outstanding shares of Carolina Stock have been converted as provided above
and cash in payment of fractional shares. As promptly as practicable
following the Effective Time, FNB shall send or cause to be sent to each
former shareholder of record of Carolina immediately prior to the Merger
written instructions and transmittal materials (a "Transmittal Letter")
for use in surrendering Carolina Certificates to the Transfer Agent. Upon
the proper surrender and delivery to the Transfer Agent (in accordance
with FNB's instructions, and accompanied by a properly completed
Transmittal Letter) by a former shareholder of Carolina of such
shareholder's Carolina Certificate(s), the Transfer Agent shall as soon as
practicable issue, register and deliver to such shareholder a certificate
evidencing the number of whole shares of FNB Stock to which such
shareholder is entitled pursuant to Section E.1 above, and a check in the
amount of cash to which the shareholder is entitled, if any, in payment of
fractional shares as provided in Section E.5 below, subject to any
required withholding of applicable taxes.
5. Notwithstanding any other provision of this Plan of Merger, each
holder of shares of Carolina Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of FNB
Stock (after taking into account all certificates delivered by such holder
under Section E.4 above shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of FNB
Stock multiplied by the market value of one share of FNB Stock upon the
Effective Time. The market value of one share of FNB Common Stock at the
Effective Time shall be the last sale price of FNB Stock on Nasdaq Stock
Market, Inc. National Market System as reported by THE WALL STREET JOURNAL
or, if not reported thereby, any other authoritative source selected by
FNB, on the last trading day preceding the Effective Time. No such holder
will be entitled to
2
dividends, voting rights, or any other rights as a shareholder in respect
of any fractional shares.
6. Subject to Section E.7 below, no FNB Stock certificate or cash in
lieu of fractional shares shall be delivered to any former shareholder of
Carolina unless and until such shareholder shall have properly surrendered
to the Transfer Agent the Carolina Certificate(s) formerly representing
his or her shares of Carolina Stock, together with a properly completed
Transmittal Letter in such form as shall be provided to the shareholder by
FNB for that purpose. Any other provision of this Plan of Merger
notwithstanding, neither FNB nor the Exchange Agent shall be liable to a
holder of Carolina Stock for any amounts paid or properly delivered in
good faith to a public official pursuant to any applicable abandoned
property law.
7. Any shareholder of Carolina whose certificate representing shares
of Carolina Stock has been lost, destroyed, stolen or otherwise is missing
shall be entitled to receive a certificate representing the shares of FNB
Stock and cash in lieu of fractional shares to which he or she is entitled
in accordance with and upon compliance with conditions reasonably imposed
by the Transfer Agent or FNB (including without limitation a requirement
that the shareholder provide a lost instruments indemnity or surety bond
in form, substance and amount reasonably satisfactory to the Transfer
Agent and FNB).
8. At the Effective Time, the stock transfer books of Carolina shall
be closed as to holders of Carolina Stock immediately prior to the
Effective Time and no transfer of Carolina Stock by any such holder shall
thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section E.4 above, each certificate
theretofore representing shares of Carolina Stock (other than shares to be
canceled pursuant to Section E.1 above) shall from and after the Effective
Time represent for all purposes only the right to receive the
consideration provided in this Plan of Merger in exchange therefor. To the
extent permitted by North Carolina law, former shareholders of record of
Carolina shall be entitled to vote after the Effective Time at any meeting
of shareholders of FNB the number of whole shares of FNB Stock into which
their respective shares of Carolina Stock are converted, regardless of
whether such holders have exchanged their certificates representing
Carolina Stock for certificates representing FNB Stock in accordance with
the provisions of this Plan of Merger. Whenever a dividend or other
distribution is declared by FNB on the FNB Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of FNB Stock issued
pursuant to the Merger, but beginning 60 days after the Effective Time no
dividend or other distribution payable to the holders of record of FNB
Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing shares of Carolina Stock
issued and outstanding at the Effective Time until such holder surrenders
such certificate for exchange as provided in Section E.4 above; provided,
however, that upon surrender of such Carolina Stock certificate (or
compliance with Section E.7), the FNB Stock certificate, together with all
undelivered dividends or other distributions (without
3
interest) and any cash payments to be paid for fractional share interests
(without interest), shall be delivered and paid with respect to each share
represented by such Carolina Stock certificate.
F. Abandonment. This Plan of Merger may be terminated and the Merger may
be abandoned at any time prior to the Effective Time upon termination of the
Agreement and Plan of Merger, dated as of October 16, 1999, by and between FNB
and Carolina.
4
SCHEDULE B
to Agreement and Plan of Merger
dated as of October 16, 1999
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the ____ day of ______, 2000, by and between FIRST NATIONAL BANK AND TRUST
COMPANY, a national banking corporation with its principal office and place of
business located in Asheboro, North Carolina (the "Bank") and R. XXXXX XXXXXXXX
(the "Employee").
W I T N E S S E T H:
WHEREAS, the Bank desires to employ the Employee, the Employee desires to
accept employment with the Bank, and each desires to enter into an agreement
embodying the terms of such employment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Employment. The Bank hereby employs the Employee, and the Employee
hereby accepts employment with the Bank, for the term set forth in Section 2
below, in the position and with the duties and responsibilities set forth in
Section 3 below, and upon the other terms and conditions hereinafter stated.
2. Term. The term of this Agreement shall commence as of the date hereof
and, unless otherwise terminated as hereinafter provided, shall continue for an
initial term of three years and shall automatically be extended on each
anniversary date of this Agreement for an additional one year period so that the
term shall again be three years unless either party notifies the other of its
decision not to continue such annual renewal by written notice given not less
than 90 days prior to such anniversary date. Notwithstanding the foregoing,
there shall be no automatic extension of the term of this Agreement after the
sixth anniversary date of this Agreement, but absent written notice from either
party in accordance with the previous sentence, this Agreement will be
automatically extended on the sixth anniversary date so that the term will again
be three years from such date.
3. Position and Responsibilities. The Employee shall serve as a Senior
Vice President and Regional Manager of the Bank for Richmond County, North
Carolina and for such other counties in North Carolina as the Bank may
designate, or in such other appropriate position and with such duties as the
Bank may in the future designate. In such capacity, the Employee shall at all
times report to, and his activities shall at all times be subject to the
direction and control of, the principal executive officer of the Bank or his
designee. The Employee shall devote substantially all of his business time,
attention and services to discharge faithfully and diligently his duties and
responsibilities under this Agreement and to use his best efforts for both the
successful operation of the Bank's business and the successful implementation of
the policies established by the Bank or its parent, FNB Corp. ("FNB").
4. Compensation and Benefits. During the term of this Agreement, the Bank
shall provide to the Employee the following compensation and benefits:
(a) Salary. In consideration of the services to be rendered by the
Employee to the Bank and the Employee's covenants hereunder, the Bank shall pay
to the Employee a base salary at the rate of $100,000 per annum (such salary as
it may be increased from time to time being hereinafter referred to as the "Base
Salary"). The Employee shall receive from the Bank a formal review of Employee's
performance at least as frequently as annually, and Employee may be considered
for merit increases to his Base Salary in accordance with the Bank's policies
and practices for employee compensation as established or modified from time to
time. Except as may otherwise be agreed, the Base Salary shall be payable in
accordance with the Bank's policies and practices for employee compensation as
established or modified from time to time; provided that the Base Salary shall
be payable not less frequently than monthly. Salary payments shall be subject to
all applicable federal and state withholding, payroll and other taxes.
(b) Group Benefit Plans and Programs. The Employee will be entitled to
participate, in accordance with the provisions thereof, in any group health,
disability and life insurance, and any bonus, pension, retirement and other
employee benefit plans and programs made available by the Bank or FNB to their
employees generally.
(c) Supplemental Plans. The Bank shall assume the obligations of Richmond
Savings Bank, Inc., SSB (the "Savings Bank") with respect to that Executive
Income Plan Deferred Compensation Agreement and Split Dollar Agreement each
dated January 1, 1987 and subsequently amended January 1, 1992 (collectively,
the "Supplemental Plans") and shall continue the Supplemental Retirement Plans
in effect in accordance with the terms thereof; provided, however, that nothing
herein shall prohibit the Bank from terminating either or both Supplemental
Retirement Plans upon the Employee's voluntary termination of employment or upon
a termination for Cause (as defined below).
(d) Club Dues. The Bank shall pay or reimburse the Employee for the
monthly dues and assessments necessary for Employee to maintain the status of an
active member of the Richmond Pines Country Club.
(e) Vacation. The Employee shall be entitled to such vacation and other
leave as may be provided by the Bank or FNB to their employees in similar
positions generally; provided, however, that, to the extent that the amount of
vacation and other leave to which the Employee is entitled is related to the
Employee's years of service to the Bank or FNB, the Employee shall be given
credit for each year of service as an employee of the Savings Bank.
(f) Automobile. The Bank shall provide the Employee with a suitable
vehicle for his exclusive use in the discharge of his duties hereunder and shall
pay all operating and service expenses, including automobile insurance, related
to such vehicle. Any personal use of such
2
vehicle by the Employee will be appropriately accounted for and reported as
additional compensation.
(g) Business Expenses. The Bank shall reimburse the Employee for any
reasonable out-of-pocket business and travel expenses incurred by the Employee
in the ordinary course of performing his duties for the Bank upon presentation
by the Employee, from time to time, of appropriate documentation therefor and in
accordance with the Bank's policies and practices as established or modified
from time to time.
(h) Convention Attendance. The Bank shall pay all registration, travel,
accommodation and meal expenses for the Employee and his spouse to attend the
annual convention of the North Carolina Bankers Association each year.
5. Termination. The Employee's term of employment under this Agreement may
be terminated before the end of the initial term or any extension thereof as
follows:
(a) Death. In the event of the death of the Employee during his employment
under this Agreement, this Agreement shall be terminated as of the date of
death. In such event, the Bank shall pay the Employee's Base Salary, at the rate
in effect at the time of his death and through the last day of the calendar
month in which such death occurs, to the Employee's designated beneficiary, or,
in the absence of such designation, to the estate or other legal representative
of the Employee. Any rights and benefits the Employee's estate or any other
person may have under employee benefit plans and programs of the Bank or any
benefit plans or agreements of Richmond Savings Bank, Inc., SSB ("Richmond
Savings") or Carolina Fincorp, Inc. ("Carolina") that are assumed by the Bank or
FNB in the event of the Employee's death shall be determined in accordance with
the terms of such plans and programs.
(b) Long-Term Disability. If the Employee suffers any disability while
employed under this Agreement that prevents him from performing his duties under
this Agreement for a period of 90 consecutive days, then, unless otherwise then
agreed in writing by the parties hereto, the employment of the Employee under
this Agreement shall, at the election of the Bank, be terminated effective as of
the ninetieth day of such period. Upon termination of the Employee's employment
by reason of disability under this Section 5(b), the Employee shall be entitled
to receive his Base Salary, at the rate in effect on the date of such
termination, less any disability insurance payments paid to the Employee on a
policy maintained for the benefit of the Employee by the Bank or FNB, through
the end of the then current term of this Agreement. Any rights and benefits the
Employee may have under employee benefit plans and programs of the Bank or any
benefit plans or agreements of Richmond Savings or Carolina that are assumed by
the Bank or FNB in the event of the Employee's disability shall be determined in
accordance with the terms of such plans and programs.
For purposes of this Agreement, "disability" shall mean the inability, by
reason of bodily injury or physical or mental disease, or any combination
thereof, of the Employee to perform his customary or other comparable duties
with the Bank. In the event that the Employee and the Bank are unable to agree
as to whether the Employee is suffering a disability, the Employee and the Bank
shall each select a physician and the two physicians so chosen shall make the
3
determination or, if they are unable to agree, they shall select a third
physician, and the determination as to whether the Employee is suffering a
disability shall be based upon the determination of a majority of the three
physicians. The Bank shall pay the reasonable fees and expenses of all
physicians selected pursuant to this Section 5(b).
(c) Termination for Cause. Nothing herein shall prevent the Bank from
terminating the Employee's employment at any time for Cause (as hereinafter
defined). Upon termination for Cause, the Employee shall receive his Base Salary
only through the date that such termination becomes effective. Neither the
Employee nor any other person shall be entitled to any further payments from the
Bank, for salary or any other amounts. Notwithstanding the foregoing, any rights
and benefits the Employee may have under employee benefit plans and programs of
the Bank or any benefit plans or agreements of Richmond Savings or Carolina that
are assumed by the Bank or FNB following a termination of the Employee's
employment for Cause shall be determined in accordance with the terms of such
plans, agreements and programs. For purposes of this Agreement, termination for
Cause shall mean termination by the Bank of the Employee's employment as a
result of (i) an intentional, willful and continued failure by the Employee to
perform his duties in the capacities indicated above (other than due to
disability); (ii) an intentional, willful and material breach by the Employee of
his fiduciary duties of loyalty and care to the Bank; (iii) an intentional,
willful and knowing violation by the Employee of any provision of this
Agreement; (iv) a conviction of, or the entering of a plea of nolo contendere by
the Employee for any felony or any crime involving fraud or dishonesty, or (v) a
willful and knowing violation of any material federal or state banking law or
regulation applicable to the Bank or the occurrence of any event described in
Section 19 of the Federal Deposit Insurance Act or any other act or event as a
result of which the Employee becomes unacceptable to, or is removed, suspended
or prohibited from participating in the conduct of the Bank's affairs by any
regulatory authority having jurisdiction over the Bank or FNB.
(d) Termination Other Than For Cause. The Bank may terminate the
Employee's employment under this Agreement at any time upon 90 days written
notice to the Employee for whatever reason it deems appropriate, or for no
reason. In the event such termination by the Bank occurs and is not due to death
as provided in Section 5(a) above or for Cause as provided in Section 5(c)
above, the Bank shall continue the Employee's Base Salary, at the rate in effect
at the time of such termination through the end of the then current term of this
Agreement. Such salary continuation shall be subject to all applicable federal
and state withholding taxes. Any rights and benefits the Employee may have under
employee benefit plans and programs of the Bank or FNB or under any benefit
plans or agreements of Richmond Savings or FNB that are assumed by the Bank or
FNB following a termination of the Employee's employment other than for Cause
shall be determined in accordance with the terms of such plans, agreements and
programs. In addition to and notwithstanding the foregoing, in the event of a
termination pursuant to this Section 5(d), (i) the Bank shall continue to
provide to the Employee either the benefits to which the Employee is entitled
under this Agreement or the economic equivalent thereof for the remainder of the
term of this Agreement and (ii) FNB shall, upon such termination and at its
election, either (A) cause the full vesting of any unvested options and awards
of the Employee under the Richmond Savings Bank, Inc., SSB Stock Option Plan (
the "Option Plan") and the Richmond Savings Bank, SSB Management Recognition
Plan (the "MR Plan"), respectively, as assumed by FNB or (B) provide the
Employee the economic equivalent
4
of any unvested portion of such options under the Option Plan and such awards
under the MR Plan.
(e) At the Employee's Option. The Employee may terminate his employment at
any time upon at least 60 days advance written notice to the Bank; provided,
however, that the Bank, in its discretion, may cause such termination to be
effective at any time during such notice period. In the event of such a
voluntary termination of employment, the Employee will be entitled to receive
only any earned but unpaid Base Salary and the other benefits of this Agreement
through the date on which the Employee's termination becomes effective.
6. No Solicitation of Change in Control. The Employee will not solicit,
counsel or encourage any acquisition, merger or other change in control of FNB
or the Bank without the prior written approval of the Board of Directors of the
Bank or FNB. A violation of this Section 6 shall be deemed to constitute a
forfeiture by the Employee of all of his rights under Section 5(d) hereof.
7. Noncompetition Covenant; Nonsolicitation. For purposes of this Section
7 and the following Sections 8 through 12, "Bank" shall mean the Bank, FNB
and/or any of its subsidiaries.
(a) For a period commencing on the date hereof and continuing until (i)
one (1) year after the date of expiration of the term hereof or the date that
any termination of the Employee's employment under this Agreement becomes
effective or (ii) the last day of the period after the date that any termination
of the Employee's employment under this Agreement becomes effective in which the
Employee is entitled to receive any Base Salary pursuant to Section 5 hereof,
whichever is later, the Employee will not, directly or indirectly:
(i) own any interest in, manage, operate, control, be employed by,
render consulting or advisory services to, or participate in or be
connected with the management or control of any business that is then
engaged in the operation of a bank, savings bank, credit union, mortgage
company, savings and loan association or similar financial institution
that conducts any of its operations within 60 miles of Rockingham, North
Carolina; provided, however, that the Employee may, without violating this
Agreement, own as a passive investment not in excess of two percent (2%)
of the outstanding capital stock of any such business whose stock is
publicly traded or quoted on the NASDAQ over-the-counter market, the New
York Stock Exchange, the American Stock Exchange, the National Daily
Quotation System "Pink Sheets" or the OTC Bulletin Board;
(ii) influence or attempt to influence any customer of the Bank to
discontinue its use of the Bank's services or to divert such business to
any other person, firm or corporation;
(iii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Bank and any of its
respective customers, suppliers, principals, distributors, lessors or
licensors; and
5
(iv) solicit any officer or employee of the Bank, whose base annual
salary at the time of the Employee's termination was $20,000 or more, to
work for any other person, firm or corporation.
(b) It is expressly agreed that the provisions and covenants in this
Section 7 shall not apply and shall be of no force or effect in the event that
the Bank fails to honor its obligations hereunder.
(c) The Employee and the Bank intend that Section 7 of this Agreement be
enforced as written. However, if one or more of the provisions contained in
Section 7 shall for any reason be held to be unenforceable because of the
duration or scope of such provision or the area covered thereby, the Employee
and the Bank agree that the court making such determination shall have the power
to reform the duration, scope and/or area of such provision and in its reformed
form such provision shall then be enforceable and shall be binding on the
parties.
8. Confidentiality. The Employee hereby acknowledges and agrees that (i)
in the course of his service as an employee of the Bank, he will gain
substantial knowledge of and familiarity with the Bank's customers and its
dealings with them, and other information concerning the business of the Bank,
all of which constitute valuable assets and privileged information that is
particularly sensitive due to the fiduciary responsibilities inherent in the
banking business; and (ii) to protect the interest in and to assure the benefit
of the business of the Bank, it is reasonable and necessary to place certain
restrictions on the Employee's ability to disclose information about the
business and customers of the Bank. For that purpose, and in consideration of
the agreements contained herein, the Employee covenants and agrees that any and
all data, figures, projections, estimates, lists, files, records, documents,
manuals or other such materials or information (financial or otherwise) relating
to the Bank and its business, regulatory examinations, financial results and
condition, lending and deposit operations, customers (including lists of the
customers and information regarding their accounts and business dealings with
the Bank), policies and procedures, computer systems and software, shareholders,
employees, officers and directors (herein referred to as "Confidential
Information") are proprietary to the Bank and are valuable, special and unique
assets of the business to which the Employee will have access during his
employment hereunder. The Employee shall consider, treat and maintain all
Confidential Information as the confidential, private and privileged records and
information of the Bank. Further, at all times during the term of his employment
and following the termination of his employment under this Agreement for any
reason, and except as shall be required in the course of the performance by the
Employee of his duties on behalf of the Bank or otherwise pursuant to the
direct, written authorization of the Bank, the Employee will not divulge any
Confidential Information to any other person, firm, corporation, bank, savings
and loan association or similar financial institution, remove any such
Confidential Information in written or other recorded form from the Bank's
premises, or make any use of the Confidential Information for his own purposes
or for the benefit of any person, firm, corporation, bank, savings and loan
association or similar financial institution other than the Bank. However,
following the termination of the Employee's employment with the Bank, this
Section 8 shall not apply to any Confidential Information which then is in the
public domain (provided that the Employee was not responsible, directly or
indirectly, for permitting such Confidential Information to enter the public
domain without the Bank's consent), or which is
6
obtained by the Employee from a third party which or who is not obligated under
an agreement of confidentiality with respect to such information.
9. Remedies Upon Breach. Each party agrees that any breach of this
Agreement by either party could cause irreparable damage to the other party and
that in the event of such breach the other party shall have, in addition to any
and all remedies of law, the right to an injunction, specific performance or
other equitable relief to prevent the violation of the obligations of the
breaching party hereunder, without the necessity of posting a bond, plus the
recovery of any and all costs and expenses incurred by the enforcing party,
including reasonable attorneys' fees in connection with the enforcement of this
Agreement, provided that the enforcing party shall have been successful on the
merits or otherwise in any proceeding related to the enforcement thereof.
10. Acknowledgments. The Employee hereby acknowledges that the enforcement
of Sections 7 and 8 of this Agreement is necessary to ensure the preservation,
protection and continuity of the business, trade secrets and goodwill of the
Bank, and that the restrictions set forth in Sections 7 and 8 of this Agreement
are reasonable as to time, scope and territory and in all other respects.
11. Tolling Period. In the event the Employee breaches any of the
provisions contained herein and the Bank seeks compliance with such provisions
by judicial proceedings, the time period during which the Employee is restricted
by such provisions shall be extended by the time during which the Employee has
actually competed with the Bank or been in violation of any such provision and
any period of litigation required to enforce the Employee's obligations under
this Agreement.
12. Termination of Previous Employment Agreement. The Employee
specifically agrees that the Employment Agreement dated November 22, 1996, as
the same may have been amended, by and between the Employee and the Savings Bank
hereby is terminated and shall be of no further force or effect, and the
Employee hereby waives any and all of his rights, and releases the Bank and the
Savings Bank from any and all obligations, under such agreement.
13. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.
14. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that his employment with the Bank on the terms and conditions set
forth herein and his execution and performance of this Agreement do not
constitute a breach or violation of any other agreement, obligation or
understanding with any third party. The Employee represents that he is not bound
by any agreement or any other existing or previous business relationship which
conflicts with, or may conflict with, the performance of his obligations
hereunder or prevents the full performance of his duties and obligations
hereunder.
7
15. Waivers and Modifications. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 15. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
sets forth all of the terms of the understandings between the parties with
reference to the subject matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought.
16. Assignment. The Employee acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Employee may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
The Bank shall have the right to assign this Agreement to FNB or any of its
subsidiaries or to its successors under law, and the rights and obligations of
the Bank under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the Bank.
17. Notices. All notices hereunder shall be (i) delivered by hand, (ii)
sent by first-class certified mail, postage prepaid, return receipt requested,
(iii) delivered by overnight commercial courier, or (iv) transmitted by telecopy
or facsimile machine, to the following address of the party to whom such notice
is to be made, or to such other address as such party may designate in the same
manner provided herein:
If to the Bank:
FNB Corp.
Attention: Xx. Xxxxxxx X. Xxxxxx, President
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
With copy to:
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx P.L.L.C.
Attention: Xxx X. Xxxxxx, Xx.
000 Xxxxx Xxx Xxxxxx
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
If to the Employee, to his last address as shown on the personnel records
of the Bank.
With copy to:
8
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P
Attention: Xxxxxx X. Xxxxxxx III
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
18. Survival of Obligations. The Employee's obligations under Sections 7
through 12 of this Agreement shall survive the termination of his employment
with the Bank regardless of the manner of such termination and shall be binding
upon his heirs, executors and administrators. The existence of any claim or
cause of action by Employee against the Bank or FNB shall not constitute and
shall not be asserted as a defense to the enforcement by the Bank of this
Agreement.
19. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST NATIONAL BANK
AND TRUST COMPANY
By: ______________________________
Title: ______________________________
--------------------------------(SEAL)
R. Xxxxx Xxxxxxxx
9
