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AGREEMENT AND PLAN OF MERGER
dated as of January 26, 2001
between
CENTURA BANKS, INC.
and
ROYAL BANK OF CANADA
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TABLE OF CONTENTS
PAGE
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RECITALS......................................................................1
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions....................................................2
1.02 Interpretation.........................................................7
ARTICLE II
The Merger
2.01 The Merger.............................................................8
2.02 Reservation of Right to Revise Structure...............................9
2.03 Effective Time.........................................................9
ARTICLE III
Consideration
3.01 Effect on Capital Stock................................................9
3.02 Rights as Shareholders; Stock Transfers...............................10
3.03 Exchange Procedures...................................................10
3.04 Anti-Dilution Provisions..............................................11
3.05 Company Stock Options.................................................11
ARTICLE IV
Actions Pending the Merger
4.01 Forbearances of the Company...........................................12
4.02 Forbearances of the Acquiror..........................................15
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PAGE
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ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules..................................................15
5.02 Standard..............................................................16
5.03 Representations and Warranties of the Company.........................16
5.04 Representations and Warranties of the Acquiror........................29
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts...............................................33
6.02 Shareholder Approvals.................................................33
6.03 Registration Statement................................................34
6.04 Press Releases........................................................35
6.05 Access; Information...................................................35
6.06 Acquisition Proposals.................................................36
6.07 Affiliate Agreements..................................................37
6.08 Takeover Laws.........................................................37
6.09 No Rights Triggered...................................................37
6.10 NYSE Listing..........................................................37
6.11 Regulatory Applications...............................................37
6.12 Indemnification.......................................................38
6.13 Accountants' Letters..................................................40
6.14 Notification of Certain Matters.......................................40
6.15 Employee Benefits.....................................................40
6.16 Certain Adjustments...................................................41
6.17 Formation of Newco....................................................41
6.18 Certain Tax Matters...................................................41
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger............42
7.02 Conditions to Obligation of the Company...............................43
7.03 Conditions to Obligation of the Acquiror..............................44
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PAGE
ARTICLE VIII
Termination
8.01 Termination............................................................44
8.02 Effect of Termination and Abandonment..................................46
8.03 Termination Fee........................................................46
ARTICLE IX
Miscellaneous
9.01 Survival...............................................................47
9.02 Waiver; Amendment......................................................47
9.03 Counterparts...........................................................48
9.04 Governing Law..........................................................48
9.05 Expenses...............................................................48
9.06 Notices................................................................48
9.07 Entire Understanding; No Third-Party Beneficiaries.....................49
9.08 Assignment.............................................................49
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B List of Persons to Execute Compensation-Related Agreements
EXHIBIT C Form of Employment Agreement
EXHIBIT D Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER, dated as of January 26, 2001 (this
"Agreement"), between Centura Banks, Inc. (the "Company") and Royal Bank of
Canada (the "Acquiror").
RECITALS
A. The Company. The Company is a North Carolina corporation, having its
principal place of business in Rocky Mount, North Carolina.
B. The Acquiror. The Acquiror is a Canadian chartered bank, having its
principal places of business in Toronto, Ontario and Xxxxxxxx, Xxxxxx, Xxxxxx.
C. The Merger. On the terms and subject to the conditions contained in
this Agreement, the parties to this Agreement intend to effect the merger of a
direct wholly owned subsidiary of the Acquiror to be organized under North
Carolina law ("Newco") with and into the Company, with the Company as the
surviving corporation in the merger.
D. Stock Option Agreement. As a condition of and inducement to the
Acquiror's willingness to enter into this Agreement, following the execution and
delivery of this Agreement, the Company is entering into a Stock Option
Agreement in substantially the form of Exhibit A (the "Stock Option Agreement"),
pursuant to which the Company is granting to the Acquiror an option to purchase,
under certain circumstances, shares of Company Common Stock.
E. Employment Agreements. Certain employees and directors of the
Company identified on Exhibit B have agreed to execute agreements related to
certain employment and compensation matters in substantially the form of Exhibit
C.
F. Intention of the Parties. It is the intention of the parties that
the business combination contemplated hereby be treated as a "reorganization"
under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
G. Board Action. The respective Boards of Directors of each of the
Company and the Acquiror have each adopted resolutions approving this Agreement,
the Merger (as defined herein), the Stock Option Agreement, and, in the case of
the Board of Directors of the Company, declaring the advisability of this
Agreement in accordance with the North Carolina Business Corporation Act, as
amended (the "NCBCA").
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS; INTERPRETATION
1.01 Certain Definitions. The following terms are used in this
Agreement with the meanings assigned below:
"Acquiror" has the meaning assigned in the preamble to this Agreement.
"Acquiror Common Stock" means the common shares, without nominal or par
value, of the Acquiror.
"Acquiror First Preferred Stock" means the first preferred shares,
without nominal or par value, of the Acquiror.
"Acquiror Ratio" has the meaning assigned in Section 8.01(f)(ii).
"Acquiror Second Preferred Stock" means the second preferred shares,
without nominal or par value, of the Acquiror.
"Acquiror Stock" means, collectively, the Acquiror Common Stock, the
Acquiror First Preferred Stock and the Acquiror Second Preferred Stock.
"Acquisition Proposal" has the meaning assigned in Section 6.06.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Average Closing Price" means the average of the daily last sale prices
per share of Acquiror Common Stock as reported on the Toronto Stock
Exchange for the ten consecutive full trading days (on which such shares
are traded) ending at the close of trading on the Determination Date.
"Closing Date" has the meaning assigned in Section 2.03.
"Code" has the meaning assigned in Recital F.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Affiliate" has the meaning assigned in Section 6.07.
"Company Articles" means the Amended and Restated Articles of
Incorporation of the Company.
"Company Board" means the Board of Directors of the Company.
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"Company By-Laws" means the Amended and Restated By-laws of the
Company.
"Company Common Stock" means the common stock, without par value, of
the Company.
"Company IP Rights" has the meaning assigned in Section 5.03(w).
"Company Meeting" has the meaning assigned in Section 6.02.
"Company Preferred Stock" means the preferred stock, without par value,
of the Company.
"Company Reports" has the meaning assigned in Section 5.03(j).
"Company Stock" means, collectively, the Company Common Stock and the
Company Preferred Stock.
"Company Stock Option" means each option to purchase shares of Company
Common Stock outstanding under the Company Stock Plans.
"Company Stock Plans" has the meaning assigned in Section 5.03(b).
"Company's SEC Documents" has the meaning assigned in Section 5.03(g).
"Confidentiality Agreement" means the confidentiality agreement between
the Company and the Acquiror, dated January 12, 2001.
"Compensation Plans" has, with respect to any person, the meaning
assigned in Section 5.03(n).
"Consideration" has the meaning assigned in Section 3.01(a).
"Consideration Per Share" has the meaning assigned in Section 3.05.
"Contract" means, with respect to any person, any agreement, indenture,
undertaking, debt instrument, contract, lease or other commitment to which
such person or any of its Subsidiaries is a party or by which any of them
is bound or to which any of their properties is subject.
"Costs" has the meaning assigned in Section 6.12(a).
"Determination Date" means the date of receipt of all approvals of the
Minister of Finance, Canada, necessary to consummate the Merger.
"Disclosure Schedule" has the meaning assigned in Section 5.01.
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"Effective Time" means the date and time at which the Merger becomes
effective.
"Environmental Laws" means any federal, state or local law, regulation,
order, decree, permit, authorization, common law or agency requirement
relating to: (1) the protection or restoration of the environment, health
or safety (in each case as relating to the environment) or natural
resources; or (2) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has, with respect to any person, the meaning assigned
in Section 5.03(n).
"ERISA Affiliate Plan" has the meaning assigned in Section 5.03(n).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning assigned in Section 3.03(a).
"Exchange Ratio" has the meaning assigned in Section 3.01(a).
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Hazardous Substance" means any substance in any concentration that is:
(1) listed, classified or regulated pursuant to any Environmental Law; (2)
any petroleum product or by-product, asbestos-containing material, lead-
containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (3) any other substance which may be the subject of
regulatory action by any Governmental Authority pursuant to any
Environmental Law.
"Indemnified Party" has the meaning assigned in Section 6.12(a).
"Indemnified Person" has the meaning assigned in Section 5.03(n).
"Index Price" means the TSE Banks & Trusts Index.
"Index Ratio" has the meaning assigned in Section 8.01(f)(ii).
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"Insurance Amount" has the meaning assigned in Section 6.12(b).
"Insurance Policies" has the meaning assigned in Section 5.03(u).
"Intellectual Property Rights" shall mean all worldwide industrial and
intellectual property rights, including, without limitation, patents,
patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service xxxx applications, copyright, copyright
applications, franchises, licenses, inventories, know-how, trade secrets,
customer lists, proprietary processes and formulae, all source and object
code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools, software, databases and all documentation
and media constituting, describing or relating to the above, including,
without limitation, manuals, memoranda and records.
"IRS" means the United States Internal Revenue Service.
"knowledge of the Company" and "Company knowledge" mean the knowledge
of Xxxxx Xxxxxx, Xxxxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxx, Xxxxx Xxxxxx,
Xxx Xxxxxx, Xxx Xxxxxxxx and Xxxxx Xxxxxx.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Loans" means loans, leases, extensions of credit, commitments to
extend credit and other assets.
"Material Adverse Effect" means, with respect to the Acquiror or the
Company, any effect that (1) is materially adverse to the financial
position, results of operations, shareholder's equity or business of the
Acquiror and its Subsidiaries taken as a whole, or the Company and its
Subsidiaries taken as a whole, respectively, other than (A) the effects of
changes in economic conditions generally (including general levels of
interest rates), except to the extent that the effect of such change
disproportionately affects the Acquiror or the Company, respectively, as
compared to depositary institutions in general in Canada or the United
States, respectively, (B) payments of expenses associated with the Merger
as contemplated by this Agreement, (C) changes in generally accepted
accounting principles applicable to bank holding companies generally in
Canada or the United States, respectively, and (D) any changes resulting
primarily from changes in banking laws or regulations (or interpretations
thereof) of general applicability in Canada or the United States,
respectively; or (2) would materially impair the ability of either the
Acquiror or the Company to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement.
"Merger" has the meaning assigned in Section 2.01(a).
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"Multiemployer Plan" means, with respect to any person, a multiemployer
plan within the meaning of Section 3(37) of ERISA.
"NCBCA" has the meaning assigned in Recital G.
"NCCOB" means the North Carolina Commissioner of Banks.
"New Certificates" has the meaning assigned in Section 3.03.
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning assigned in Section 3.03.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has, with respect to any person, the meaning assigned in
Section 5.03(n).
"person" means any individual, bank, savings bank, corporation,
partnership, association, joint-stock company, business trust or
unincorporated organization.
"Previously Disclosed" means, with respect to the Company or the
Acquiror, information set forth in such party's Disclosure Schedule in a
paragraph or section identified as corresponding to the provision of this
Agreement in respect of which such information has been so set forth or has
otherwise been set forth in a manner reasonably indicating to a reader the
provisions to which such information may be relevant.
"Proxy Statement" has the meaning assigned in Section 6.03.
"Registration Statement" has the meaning assigned in Section 6.03.
"representatives" means, with respect to any person, such person's
directors, officers, employees, legal or investment or financial advisors
or any representatives of such legal or financial advisors.
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Significant Subsidiary" has the meaning assigned to it in Rule 1-02 of
Regulation S-X of the SEC.
"Starting Date" means January 26, 2001.
"Starting Price" means C$51.80.
"Stock Option Agreement" has the meaning assigned in the preamble to
this Agreement.
"Subsidiary" includes both a "subsidiary" as defined in Rule 1-02 of
Regulation S-X of the SEC and a "subsidiary" as defined in Section 2(d) of
the Bank Holding Company Act of 1956.
"Superior Proposal" has the meaning assigned in Section 6.06.
"Surviving Corporation" has the meaning assigned in Section 2.01.
"Takeover Laws" has the meaning assigned in Section 5.03(e).
"Taxes" means all taxes, charges, fees, levies or other assessments,
however denominated, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, custom duties, fees, or charges of any
kind whatsoever, together with any interest and any penalties or additions
to tax with respect thereto and with respect to any information reporting
requirements imposed by the Code or any similar provision of foreign, state
or local law and any interest in respect of such additions or penalties
imposed by any taxing authority whether arising before, on or after the
Closing Date.
"Tax Returns" means all reports and returns required to be filed on or
before the Closing Date with respect to the Taxes of the Company or any of
its Subsidiaries including, without limitation, consolidated federal income
tax returns and any documentation required to be filed with any taxing
authority or to be retained by the Company or any of its Subsidiaries in
respect of information reporting requirements imposed by the Code or any
similar foreign, state or local law.
1.02 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part
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of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." No rule of construction against the draftsperson shall be
applied in connection with the interpretation or enforcement of this Agreement.
Whenever this Agreement shall require a party to take an action, such
requirement shall be deemed to constitute an undertaking by such party to cause
its Subsidiaries, and to use its reasonable best efforts to cause its other
affiliates, to take appropriate action in connection therewith. References to
"knowledge" of a person means knowledge after reasonable diligence in the
circumstances. References herein to "transaction contemplated by this Agreement"
shall be deemed to include a reference to the transactions contemplated by the
Stock Option Agreement. All references to "dollars" or "$" mean the lawful
currency of the United States, and all references to "Canadian dollars" or "C$"
mean the lawful currency of Canada, unless otherwise indicated.
ARTICLE II
THE MERGER
2.01 The Merger. At the Effective Time, on the terms and subject to the
conditions set forth in this Agreement, the following shall occur:
(a) Structure and Effects of the Merger. Newco shall merge with
and into the Company, and the separate corporate existence of Newco
shall thereupon cease (the "Merger"). The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of North Carolina, and the separate corporate
existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the NCBCA.
(b) Articles of Incorporation. The articles of incorporation of
the Surviving Corporation shall be amended to read in their entirety
the same as the articles of incorporation of Newco as in effect
immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and the NCBCA, except that the name
of the Surviving Corporation shall be changed to "RBC Centura Banks,
Inc.".
(c) By-Laws. The by-laws of the Surviving Corporation shall be
amended to read in their entirety the same as the by-laws of Newco as
in effect immediately prior to the Effective Time, until duly amended
in accordance with the terms thereof and the articles of incorporation
referred to in Section 2.01(b).
(d) Directors. Unless otherwise agreed by the Acquiror and the
Company, the directors of the Surviving Corporation shall be comprised
of nine individuals, five of whom shall be designated by the Acquiror
and four of whom
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shall be designated by the Company (with the reasonable consent of the
Acquiror) prior to the Effective Time, and such directors shall hold
office until such time as their successors shall be duly elected and
qualified.
2.02 Reservation of Right to Revise Structure. At the Acquiror's
election, the Merger may alternatively be structured so that (i) the Company is
merged with and into any direct or indirect wholly owned subsidiary of the
Acquiror or (ii) any other direct or indirect wholly owned subsidiary of the
Acquiror is merged with and into the Company; provided, however, that no such
change shall (a) alter or change the amount or kind of the Consideration or the
treatment of the holders of Company Stock Options, (b) prevent the parties from
obtaining the opinions of Hunton & Xxxxxxxx and Xxxxxxxx & Xxxxxxxx referred to
in Sections 7.02(c) and 7.03(c), respectively, or (c) materially impede or delay
consummation of the transactions contemplated by this Agreement. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
2.03 Effective Time. The Merger shall become effective upon the filing,
in the office of the Secretary of State of the State of North Carolina, of
articles of merger in accordance with Section 55-11-05 of the NCBCA, or at such
later date and time as may be set forth in such articles. Subject to the terms
of this Agreement, the parties shall cause the Merger to become effective (1) on
the date that is the third business day to occur after the last of the
conditions set forth in Article VII (other than conditions relating solely to
the delivery of documents dated the Closing Date) shall have been satisfied or
waived in accordance with the terms of this Agreement (or, at the election of
the Acquiror, on the last business day of the month in which such day occurs),
or (2) on such date as the parties may agree in writing (the "Closing Date").
ARTICLE III
CONSIDERATION
3.01 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock:
(a) Conversion of Company Common Stock. Each share of Company
Common Stock outstanding immediately prior to the Effective Time shall
be converted into the right to receive consideration (the
"Consideration") comprising 1.684 (the "Exchange Ratio") fully paid and
nonassessable shares of Acquiror Common Stock. At the Effective Time,
the shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and cease to exist, and from and after
the Effective Time, certificates representing Company Common Stock
immediately prior to the Effective Time shall be deemed for all
purposes to represent the number of shares of Acquiror
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Common Stock into which they were converted as part of the
Consideration pursuant to this Section 3.01(a).
(b) Newco Common Stock. Each share of Newco common stock issued
and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
3.02 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of Company Common Stock shall cease to be, and shall have no rights as,
shareholders of the Company, other than to receive any dividend or other
distribution with respect to such Company Common Stock with a record date
occurring prior to the Effective Time and the conversion rights provided under
this Article III. After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of shares of Company Common
Stock.
3.03 Exchange Procedures. (a) Promptly upon occurrence of the Effective
Time, the Acquiror shall deposit, or cause to be deposited, with the Acquiror's
transfer agent or a U.S. depository or trust institution of recognized standing
selected by the Acquiror and reasonably satisfactory to the Company (in such
capacity, the "Exchange Agent"), for the benefit of the holders of certificates
formerly representing shares of Company Common Stock ("Old Certificates") to be
exchanged in accordance with this Article III, certificates representing the
shares of Acquiror Common Stock ("New Certificates").
(b) Promptly after the Effective Time, the Acquiror shall send or cause
to be sent to each former holder of record of shares of Company Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for New Certificates. The
Acquiror shall cause the New Certificates and/or any check in respect of
dividends or distributions which such person shall be entitled to receive to be
delivered to such shareholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of Company Common Stock (or indemnity
reasonably satisfactory to the Acquiror and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on the cash such person shall be entitled to receive
pursuant to this Article III upon such delivery.
(c) Neither the Exchange Agent nor any party hereto shall be liable to
any former holder of Company Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(d) From and after the 30th day following the Effective Time, no
dividends or other distributions with respect to Acquiror Common Stock with a
record date occurring after the Effective Time shall be paid in respect of any
unsurrendered Old Certificate representing shares of Acquiror Common Stock
converted in the Merger into the right to receive shares of Acquiror Common
Stock. Upon surrender of Old Certificates (or indemnity reasonably satisfactory
to the Acquiror and the Exchange Agent, if any of such certificates are lost,
stolen or destroyed) in accordance
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with this Section 3.03, the record holder thereof shall be entitled to receive
any such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Acquiror Common Stock
such holder had the right to receive upon surrender of Old Certificates (or
delivery of such indemnity).
(e) Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock and no certificates or scrip therefor, or other evidence
of ownership thereof, will be issued in the Merger; instead, the Acquiror shall
pay to each holder of Company Common Stock who would otherwise be entitled to a
fractional share of Acquiror Common Stock (after taking into account all Old
Certificates delivered by such holder) an amount in cash (without interest)
determined by multiplying such fraction by the average of the last reported sale
prices of Acquiror Common Stock, as reported by the Toronto Stock Exchange, for
the ten Toronto Stock Exchange trading days immediately preceding the Effective
Time (with the last reported sale price for each such trading day converted to
U.S. dollars at the Bank of Canada Closing Rate in Toronto on such trading day).
3.04 Anti-Dilution Provisions. If the Acquiror changes (or establishes
a record date for changing) the number or kind of shares of Acquiror Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, recapitalization, reclassification, reorganization or
similar transaction with respect to the outstanding Acquiror Common Stock and
the record date therefor shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.05 Company Stock Options. At the Effective Time, each Company Stock
Option, whether vested or unvested, exercisable or unexercisable, without any
action on the part of the holder shall be converted into the right to receive
payment of an amount in cash equal to the product of (1) the excess of the
Consideration Per Share over the exercise price per share subject to such
Company Stock Option and (2) the number of Shares subject to such Company Stock
Option payable to the holder of such Company Stock Option at any time during the
period commencing on the date hereof and ending immediately prior to the
Effective Time; provided, that the Company shall be entitled to withhold from
such cash payment any amounts required to be withheld by applicable law. For
purposes of clarity, if the exercise price per share subject to a Company Stock
Option exceeds the Consideration Per Share (i.e., an "underwater" stock option)
then, the holder of such option shall not be entitled to any payment with
respect thereto. Each Company Stock Option to which this paragraph applies will
be cancelled and shall cease to exist by virtue of such payment. For the
purposes of this Section 3.05, "Consideration Per Share" means the product of
(x) the average of the last reported sale prices of Acquiror Common Stock, as
reported by the Toronto Stock Exchange, for the ten Toronto Stock Exchange
trading days immediately preceding the Effective Time (with the last reported
sale price for each such trading day converted to U.S. dollars at the Bank of
Canada Closing Rate in Toronto on such trading day) and (y) the Exchange Ratio.
Prior to the Effective Time the Company shall take all necessary actions,
including obtaining employee consents and resolutions of the Company Board or of
a committee established under a Company Stock Plan, if applicable, to effect the
foregoing.
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ARTICLE IV
ACTIONS PENDING THE MERGER
4.01 Forbearances of the Company. Until the Effective Time (or the
earlier of the termination of this Agreement), except as expressly provided in
this Agreement or the Disclosure Schedule, without the prior written consent of
the Acquiror, the Company will not, and will cause each of its Subsidiaries not
to:
(a) Ordinary Course. Conduct the business of the Company and its
Subsidiaries other than in the ordinary and usual course or, to the
extent consistent therewith, fail to use reasonable efforts to preserve
intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers,
employees and business associates; or, subject to the restriction in
Section 4.01(o)(3), engage in any material new activities or lines of
business or make any material changes to their existing activities or
lines of business.
(b) Capital Stock. Other than pursuant to Rights Previously
Disclosed and outstanding on the date hereof or pursuant to the Stock
Option Agreement, (1) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of
Company Common Stock or any Rights, (2) permit any additional shares of
Company Common Stock to become subject to new grants of employee or
director stock options, or stock-based employee rights or
arrangements, (3) repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of Company Common Stock, (4) effect any
recapitalization, reclassification, stock split or like change in
capitalization, or (5) enter into, or take any action to cause any
holders of Company Common Stock to enter into, any agreement,
understanding or commitment relating to the right of holders of Company
Common Stock to vote any shares of Company Common Stock, or cooperate
in any formation of any voting trust relating to such shares.
(c) Dividends, Etc. Make, declare, pay or set aside for payment
any dividend, other than (1) regular quarterly cash dividends on
Company Common Stock in an amount not to exceed $0.34 per share (or
$0.36 per share for dividends payable with respect to periods after the
first quarter of 2001); provided that the Company shall coordinate with
the Acquiror regarding the declaration and payment of any dividends in
respect of the Company Common Stock and the record dates and the
payment dates relating thereto, it being the intention of the Company
and the Acquiror that holders of Company Common Stock shall not receive
two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of Company Common Stock and/or any
shares of Acquiror Common Stock that any such holder receives in
exchange therefor pursuant to the Merger; and (2) dividends from wholly
owned Subsidiaries to the Company or to another wholly owned Subsidiary
of the
-12-
Company, as applicable, on or in respect of, or declare or make any
distribution on any shares of its capital stock or split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.
(d) Compensation; Employment Contracts; Etc. Enter into, amend,
modify, renew or terminate any employment, consulting, severance or
similar Contracts (including the agreements entered into pursuant to
Recital E hereof) with any directors, officers, employees of, or
independent contractors with respect to, the Company or its
Subsidiaries, or grant any salary, wage or other increase or increase
any employee benefit (including incentive or bonus payments), except
(1) for changes that are required by applicable law, (2) to satisfy
Previously Disclosed Contracts existing on the date hereof (as such
Contracts are modified, as applicable, pursuant to the agreements
entered into pursuant to Recital E hereof), (3) for merit-based or
annual salary increases in the ordinary course of business and in
accordance with past practice or (4) for employment arrangements for,
or grants of awards to, newly hired non-executive employees in the
ordinary and usual course of business consistent with past practice
provided that total annual guaranteed compensation for any such newly
hired non-executive employee shall not exceed U.S. $100,000.
(e) Benefit Plans. Enter into, establish, adopt, amend, modify or
terminate any pension, retirement, stock option, stock purchase,
savings, profit sharing, employee stock ownership, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare Contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of
any current or former directors, officers, employees, former employees
of, or independent contractors with respect to, the Company or its
Subsidiaries (or any dependent or beneficiary of any of the foregoing
persons), including taking any action that accelerates the vesting or
exercisability of or the payment or distribution with respect to, stock
options, restricted stock or other compensation or benefits payable
thereunder, except, in each such case, (1) as may be required by
applicable law or (2) to satisfy Previously Disclosed Contracts
existing on the date hereof.
(f) Dispositions. Except (i) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (ii) for sales of debt
securities or similar investments in the ordinary and usual course of
business consistent with past practice, sell, transfer, mortgage,
lease, encumber or otherwise dispose of or permit the creation of any
Lien (except for a Lien for Taxes not yet due and payable) in respect
of or discontinue any material portion of its assets, business or
properties.
(g) Acquisitions. Except (1) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (2) by way of foreclosures in
satisfaction of debts previously contracted in good faith, in each case
in the ordinary and usual course of business consistent with past
practice, acquire any material amount, taken individually and in the
aggregate, of assets,
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properties or deposits of another person in any one transaction or a
series of related transactions.
(h) Governing Documents. Amend the Company Articles, the Company
By-laws or the articles of incorporation or by-laws (or similar
governing documents) of any of the Company's Subsidiaries.
(i) Accounting Methods. Implement or adopt any material change in
the accounting principles, practices or methods used by the Company and
its Subsidiaries, other than as may be required by generally accepted
accounting principles.
(j) Contracts. Except in the ordinary course of business
consistent with past practice, enter into or terminate any material
Contract or amend or modify in any material respect any of its existing
material Contracts.
(k) Claims. Settle any claim, action or proceeding, except for
any claim, action or proceeding involving solely money damages in an
amount, individually and in the aggregate for all such settlements, not
more than U.S. $250,000 and which would not reasonably be expected to
establish an adverse precedent or reasonable basis for subsequent
settlements or require material changes in business practices.
(l) Risk Management. Except as required by applicable law or
regulation: (1) implement or adopt any material change in its credit
risk and interest rate risk management and hedging policies, procedures
or practices; (2) fail to follow its existing policies or practices
with respect to managing its exposure to credit and interest rate risk;
or (3) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
(m) Indebtedness. Other than in the ordinary course of business
(including by way of creation of deposit liabilities, entry into
repurchase agreements, purchases or sales of federal funds, Federal
Home Loan Bank advances, and sales of certificates of deposit)
consistent with past practice, (1) incur any indebtedness for borrowed
money, (2) assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other person or (3)
cancel, release, assign or modify any material amount of indebtedness
of any other person.
(n) Loans. (1) Make any loan or advance other than in the
ordinary course of business consistent with lending policies as in
effect on the date hereof or (2) make any commercial real estate loan
or advance in excess of $10,000,000, or any other loan or advance in
excess of $20,000,000; provided that the Company or any of its
Subsidiaries may make any such loan or advance in the event (A) the
Company or any of its Subsidiaries has delivered to the Acquiror or its
designated representative a notice of its intention to make
-14-
such loan or advance and such additional information as the Acquiror or
its designated representative may reasonably require and (B) the
Acquiror or its designated representative shall not have reasonably
objected to such loan or advance by giving notice of such objection
within five business days following the actual receipt by the Acquiror
of the applicable notice of intention.
(o) Adverse Actions. (1) Take any action reasonably likely to
prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code; (2) subject to Section 6.06,
take any action that is intended or is reasonably likely to result in
(A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (B) any of the conditions to the
Merger set forth in Article VII not being satisfied or (C) a material
breach of any provision of this Agreement; except, in each case, as may
be required by applicable law, or (3) engage in any new line of
business or make any acquisition that would not be permissible for a
United States bank holding company (as defined in the Bank Holding
Company Act of 1956, as amended) or would subject the Acquiror, the
Company or any Subsidiary of either to material regulation by a
Governmental Authority that does not presently regulate such company or
to regulation by a Governmental Authority that is materially different
from current regulation.
(p) Tax Elections. Make any material election with respect to
Taxes.
(q) Commitments. Agree or commit to do, or enter into any
Contract regarding, anything that would be precluded by clauses (a)
through (p) without first obtaining the Acquiror's consent.
4.02 Forbearances of the Acquiror. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of the Company, the Acquiror will not, and will cause each
of its Subsidiaries not to: (1) take any action reasonably likely to prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (2) take any action that is intended or is
reasonably likely to result in (A) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (B) any of the conditions to the Merger
set forth in Article VII not being satisfied or (C) a material breach of any
provision of this Agreement; except, in each case, as may be required by
applicable law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, the Company
has delivered to the Acquiror and the Acquiror has delivered to the
-15-
Company a schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
either (a) in response to an express disclosure requirement contained in a
provision hereof or (b) as an exception to one or more representations or
warranties contained in Section 5.03 or 5.04, respectively, or to one or more of
its covenants contained in Article IV; provided that the inclusion of an item in
a Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by the disclosing party that such item (or any
undisclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstance with respect to
the Company or the Acquiror, respectively.
5.02 Standard. No representation or warranty of the Company or the
Acquiror contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect,
and no party hereto shall be deemed to have breached a representation or
warranty, as a consequence of the existence of any fact, event or circumstance
unless such fact, event or circumstance, (a) is not Previously Disclosed and (b)
individually or taken together with all other facts, events or circumstances
that should have been Previously Disclosed with respect to any representation or
warranty contained in Section 5.03 (other than Section 5.03(h)) or 5.04 (other
than Section 5.04(h)), has had or is reasonably likely to have a Material
Adverse Effect with respect to the Company or the Acquiror, respectively.
5.03 Representations and Warranties of the Company. Except as
Previously Disclosed, the Company hereby represents and warrants to the Acquiror
as set forth in its Disclosure Schedules and as follows:
(a) Organization, Standing and Authority. The Company is duly
organized, validly existing and in good standing as a corporation under
the laws of North Carolina, and is duly qualified to do business and is
in good standing in all the jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires
it to be so qualified.
(b) Company Stock. As of the date hereof, the authorized capital
stock of the Company consists solely of 100,000,000 shares of Company
Common Stock, of which not more than 39,490,122 shares are outstanding
as of January 25, 2001, and 25,000,000 shares of Company Preferred
Stock, no shares of which are outstanding. The outstanding shares of
Company Stock have been duly authorized and are validly issued, fully
paid and nonassessable, and subject to no preemptive rights (and were
not issued in violation of any preemptive rights). Except as Previously
Disclosed, there are no shares of Company Stock reserved for issuance,
the Company does not have any Rights issued or outstanding with respect
to Company Stock, and the Company does not have any commitment to
authorize, issue or sell any Company Stock or Rights, except pursuant
to this Agreement and the Stock Option Agreement. The Company has
Previously Disclosed a list of each Compensation Plan under which any
shares of capital stock of the Company or any Rights with respect
thereto have been or may be awarded or issued
-16-
("Company Stock Plans"). As of January 25, 2001, the Company has
outstanding Company Stock Options representing the right to acquire no
more than 3,066,363 shares of Company Common Stock. Except as described
in the immediately preceding sentence, the Company has no Company
Common Stock authorized for issuance pursuant to any Company Stock
Plans. The shares of Company Common Stock issuable pursuant to the
Stock Option Agreement have been duly authorized for issuance by the
Company and, upon any issuance of such shares in accordance with the
terms of the Stock Option Agreement, such shares will be duly
authorized, validly issued, fully paid and nonassessable and free and
clear of any Liens. The Company does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of the
Company on any matter.
(c) Subsidiaries. (1)(A) The Company has Previously Disclosed a
list of all its Subsidiaries together with the jurisdiction of
organization of each such Subsidiary, (B) the Company owns, directly or
indirectly, all the outstanding equity securities of each of its
Subsidiaries, (C) no equity securities of any of its Subsidiaries are
or may become required to be issued (other than to the Company or its
Subsidiaries), (D) there are no contracts, commitments, understandings
or arrangements by which any of such Subsidiaries is or may be bound to
sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to the Company or its Subsidiaries), (E) there
are no contracts, commitments, understandings, or arrangements relating
to its rights to vote or to dispose of such securities (other than to
the Company or its Subsidiaries), and (F) all the equity securities of
each such Subsidiary held by the Company or its Subsidiaries are fully
paid and nonassessable and are owned by the Company or its Subsidiaries
free and clear of any Liens.
(2) The Company has Previously Disclosed, as of the date
hereof, a list of all equity securities it or one of its Subsidiaries
holds involving, in the aggregate, beneficial ownership or control by
the Company or any such Subsidiary of 5% or more of any class of the
issuer's voting securities or 25% or more of any class of the issuer's
securities, including a description of any such issuer and the
percentage of the issuer's voting and/or non-voting securities and, as
of the Effective Time, no additional persons would need to be included
on such a list. The Company has Previously Disclosed a list, as of the
date hereof, of all partnerships, limited liability companies, joint
ventures or similar entities, in which it owns or controls an equity,
partnership or membership interest, directly or indirectly, and the
nature and amount of each such interest, and as of the Effective Time,
no additional persons would need to be included on such a list.
(3) Each of the Company's Subsidiaries has been duly
organized and is validly existing and in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do
business and in good
-17-
standing in all the jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(d) Corporate Power. The Company and each of its Subsidiaries has
the requisite power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and the
Company has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby.
(e) Corporate Authority and Action. (1) The Company has taken all
corporate action necessary in order (A) to authorize the execution and
delivery of, and performance of its obligations under, this Agreement
and the Stock Option Agreement and (B) subject only to receipt of the
approval of the plan of merger contained in this Agreement by the
holders of a majority of the outstanding shares of Company Common
Stock, to consummate the Merger. This Agreement and the Stock Option
Agreement each is a valid and legally binding obligation of the
Company, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(2) The Company has taken all action required to be taken by
it in order to exempt this Agreement, the Stock Option Agreement and
the transactions contemplated hereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby each is
exempt from, the requirements of (A) any applicable "moratorium,"
"control share," "fair price," or other antitakeover laws and
regulation of any state (collectively, "Takeover Laws"), including
Sections 55-9 and 55-9A of the NCBCA and (B) Sections 10.2 and 10.3 of
the Company Articles.
(3) The Company has received the opinion of Xxxxx, Xxxxxxxx
& Xxxxx, Inc., dated the date of this Agreement, to the effect that, as
of the date of this Agreement, the Consideration to be received in the
Merger by the shareholders of the Company is fair to the shareholders
of the Company from a financial point of view.
(f) Regulatory Filings; No Defaults. (1) No consents or approvals
of, or filings or registrations with, any Governmental Authority or
with any third party are required to be made or obtained by the Company
or any of its Subsidiaries in connection with the execution, delivery
or performance by the Company of this Agreement or the Stock Option
Agreement, or to consummate the Merger or the other transactions
contemplated hereby, except for (A) the filing with the SEC of the
Proxy Statement in definitive form, (B) the filing of applications and
notices, as applicable, with the Federal Reserve System and the NCCOB
with respect to the Merger, (C) the filing of a notification, if
required, and expiration of the related waiting period under the XXX
Xxx,
-00-
(X) the filing of articles of merger with the Secretary of State of the
State of North Carolina pursuant to the NCBCA and (E) the filings of
applications and notices, as applicable, required to be made pursuant
to the Bank Act (Canada). As of the date hereof, the Company is not
aware of any reason why the approvals of all Governmental Authorities
necessary to permit consummation of the transactions contemplated by
this Agreement will not be received without the imposition of a
condition or requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in the preceding
paragraph and the making of required filings under federal and state
securities laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of
the Company or of any of its Subsidiaries or to which the Company or
any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Company
Articles or the Company By-laws, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or Contract.
(g) SEC Documents; Financial Statements. The Company's Annual
Reports on Form 10-K for the fiscal years ended December 31, 1997, 1998
and 1999, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by the
Company or any of its Subsidiaries subsequent to December 31, 1999
under the Securities Act, or under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the form filed or to be filed (collectively,
the "Company's SEC Documents") with the SEC, as of the date filed, (A)
complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not (or if amended or superseded by a
filing prior to the date of this Agreement, then did not as of the date
of such filing) and will 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 the light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such SEC Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial position of
the Company and its Subsidiaries as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows
or equivalent statements in such SEC Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in shareholders' equity and changes
in cash flows, as the case may be, of the Company and its Subsidiaries
for the periods to which they
-19-
relate, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in
each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(h) Absence of Undisclosed Liabilities and Changes. (1) Except as
disclosed in the Company's SEC Documents filed prior to the date
hereof, none of the Company or its Subsidiaries has any obligation or
liability (contingent or otherwise), that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect with respect to the Company and, since September 30, 2000, on a
consolidated basis the Company and its Subsidiaries have not incurred
any liability other than in the ordinary course of business.
(2) Since September 30, 2000, except for execution of this
Agreement and performance of its obligations hereunder, (A) the Company
and its Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practice and (B) no
event has occurred or circumstance arisen that, individually or taken
together with all other facts, events and circumstances (described in
any paragraph of Section 5.03 or otherwise), has had or is reasonably
likely to have a Material Adverse Effect with respect to the Company.
(i) Litigation. Except as disclosed in the Company's SEC
Documents filed before the date hereof, no litigation, claim or other
proceeding before any court, arbitrator or Governmental Authority is
pending against the Company or any of its Subsidiaries and, to the
Company's knowledge, no such litigation, claim or other proceeding has
been threatened.
(j) Compliance with Laws. (1) The Company and each of its
Subsidiaries:
(A) conducts its business in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses,
including, without limitation, applicable fair lending laws and
other laws relating to discriminatory business practices;
(B) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities required in
order to permit them to own or lease their properties and to
conduct their businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the Company's
knowledge, no suspension or cancellation of any of them is
threatened;
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(C) has received, since December 31, 1998, no notification
or communication from any Governmental Authority (i) asserting
that the Company or any of its Subsidiaries is not in compliance
with any of the statutes, regulations, or ordinances that such
Governmental Authority enforces or (ii) threatening to revoke any
license, franchise, permit, or governmental authorization (nor,
to the Company's knowledge, do grounds for any of the foregoing
exist), or (iii) restricting or disqualifying their activities
(except for restrictions generally imposed by rule, regulation or
administrative policy on banking organizations generally);
(D) is not aware of any pending or threatened
investigation, review or disciplinary proceedings by any
Governmental Authority against the Company, any of its
Subsidiaries or any officer, director or employee thereof;
(E) is not subject to any order or decree issued by, or a
party to any agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or
subject to any order or directive by, a recipient of any
supervisory letter from or has adopted any board resolutions at
the request of any Governmental Authority, or been advised by any
Governmental Authority that it is considering issuing or
requesting any such agreement or other action; and
(F) since December 31, 1998, has timely filed all reports,
registrations and statements, together with any amendments
required to be made with respect thereto, that were required to
be filed under any applicable law, regulation or rule, with any
applicable Governmental Authority (collectively, the "Company
Reports"). As of their respective dates, the Company Reports
complied with the applicable statutes, rules, regulations and
orders enforced or promulgated by the regulatory authority with
which they were filed.
(2) None of the Company or its Subsidiaries has engaged (or,
with respect to First Greenboro Home Equity, Inc., has engaged to the
knowledge of the Company) in any of the practices listed in Office of
the Comptroller of the Currency Advisory Letter AL 2000-7 as
"indications that an institution may be engaging in abusive lending
practices" or as practices that "may suggest the potential for fair
lending violations".
(k) Material Contracts; Defaults. The Company has Previously
Disclosed a complete and accurate list of all material Contracts to
which the Company or any of its Subsidiaries is a party, including the
following categories:
(1) any Contract that (A) is not terminable at will both
without cost or other liability to the Company or any of its
Subsidiaries and upon notice of ninety (90) days or less and (B)
provides for fees or other
-21-
payments in excess of $100,000 per annum or in excess of
$100,000 for the remaining term of the Contract;
(2) any Contract with a term beyond the Effective Time
under which the Company or any of its Subsidiaries created,
incurred, assumed, or guaranteed (or may create, incur, assume,
or guarantee) indebtedness for borrowed money (including
capitalized lease obligations);
(3) any Contract to which the Company or any of its
Subsidiaries is a party, on the one hand, and under which any
affiliate, officer, director, employee or equity holder of the
Company or any of its Subsidiaries, on the other hand, is a party
or beneficiary;
(4) any Contract with respect to the employment of, or
payment to, any present or former directors, officers, employees
or consultants; and
(5) any Contract involving the purchase or sale of assets
with a book value greater than $100,000 entered into since
December 31, 1999.
Neither the Company nor any of its Subsidiaries nor, to the Company's
knowledge, any other party thereto is in default under any such
Contract and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(l) Non-Competition. Neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or
any other agreement or obligation (1) which limits or purports to limit
in any respect the manner in which, or the localities in which, any
business of the Company or its affiliates is or could be conducted or
the types of business that the Company or its affiliates conducts or
may conduct or (2) which would reasonably be understood to limit or
purport to limit in any respect the manner in which, or the localities
in which, any business of the Acquiror or its affiliates is or could be
conducted or the types of business that the Acquiror or its affiliates
conducts or may conduct.
(m) Properties. Except as disclosed in the financial statements
filed in its SEC Documents on or before the date hereof, the Company
and its Subsidiaries have good and marketable title, free and clear of
all Liens (other than Liens for current taxes not yet delinquent,
mechanics liens, materialmen liens, or other inchoate liens) to the
properties and assets, tangible or intangible, reflected in such
financial statements as being owned by the Company and its Subsidiaries
as of the dates thereof. All buildings and all fixtures, equipment, and
other property and assets which are material to its business and are
held under leases or subleases by any of the Company and
-22-
its Subsidiaries are held under valid leases or subleases enforceable
in accordance with their respective terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and to
general equity principles).
(n) Employee Benefit Plans. (1) The Company's Disclosure Schedule
contains a complete list of all bonus, vacation, deferred compensation,
commission-based, pension, retirement, profit sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted
stock, stock appreciation and stock option plans, all employment or
severance contracts, all medical, dental, disability, severance, health
and life plans, all other employee benefit and fringe benefit plans,
contracts or arrangements and any "change of control" or similar
provisions in any plan, contract or arrangement maintained or
contributed to by the Company or any of its Subsidiaries for the
benefit of current or former officers, employees or directors or the
beneficiaries or dependents of any of the foregoing (collectively, the
"Compensation Plans"), other than plans that are not currently
maintained or contributed to by the Company or any of its Subsidiaries.
(2) With respect to each Compensation Plan, if applicable,
the Company has made available to the Acquiror, true and complete
copies of the existing: (A) Compensation Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most
recent Forms 5500 filed with the IRS; (D) most recent actuarial report
and financial statement; (E) most recent summary plan description; (F)
forms filed with the PBGC (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310 or
Form 5330 filed with the IRS; (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests);
and (J) documentation relating to outstanding loans made to the
Company's employee stock ownership plan. Each Form 5500, actuarial
report and financial statement referred to in the preceding sentence
accurately reflects the contributions, liabilities and funding levels
of the applicable Compensation Plan.
(3) Each of the Compensation Plans has been administered and
operated in accordance with the terms thereof and with applicable law,
including ERISA, the Code and the Securities Act. Each of the
Compensation Plans which is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter from the IRS, and the Company is not
aware of any circumstances that would likely result in the revocation
or denial of any such favorable determination letter. None of the
Company, any of its Subsidiaries or an Indemnified Person has engaged
in any transaction with respect to any Compensation Plan that has
subjected, or (assuming the taxable period with respect to the
transaction expired as of the date hereof) could subject the Company or
any of its Subsidiaries to a tax or penalty imposed by either Section
4975 of the Code or
-23-
Section 502 of ERISA in an amount which would be material. There is no
pending or, to the Company's knowledge, threatened litigation or
governmental audit, examination or investigation relating to the
Company's Compensation Plans. There are no outstanding loans made to
the Company's employee stock ownership plan.
(4) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any "single-employer plan" (within the
meaning of Section 4001 (a)(15) of ERISA) or Multiemployer Plan
currently or formerly maintained or contributed to by any of them, or
the single-employer plan or Multiemployer Plan of any entity (an "ERISA
Affiliate") which is considered one employer with the Company under
Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an
"ERISA Affiliate Plan"). No notice of a "reportable event," within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived or extended, other than pursuant to
PBGC Reg. Section 4043.66, has been required to be filed for any
Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and, to the
Company's knowledge, no condition exists that presents a material risk
that such proceedings will be instituted. The Company and its
Subsidiaries have not incurred and do not expect to incur any
withdrawal liability with respect to a Multiemployer Plan under
Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate).
(5) All contributions, premiums and payments required to
have been made under the terms of any of the Compensation Plans or
applicable law have been timely made or reflected in the Company's SEC
Documents. Neither any of the Pension Plans nor ERISA Affiliate Plans
has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. None of
the Company, any of its Subsidiaries or any ERISA Affiliate has
provided, or is required to provide, security to any Pension Plan or
any ERISA Affiliate Plan pursuant to Section 401(a)(29) or Section
412(n) of the Code.
(6) Under each Pension Plan which is a single-employer
plan, as of the last day of the most recent plan year ended prior to
the date hereof, the actuarially 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 by more than
$10 million. Under each of the Pension Plans, there has been no adverse
change in the financial condition of any Pension Plan (with respect to
either assets or benefits) since the last day of the most recent plan
year.
(7) No Compensation Plan provides benefits, including death
or medical benefits, with respect to any employees or former employees
of the
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Company or any of its Subsidiaries (or their spouses, beneficiaries, or
dependents) beyond the retirement or other termination of service of
any such employee other than (A) coverage mandated by Part 6 of Title I
of ERISA or Section 4980B of the Code, (B) retirement, death or
disability benefits under any Pension Plan, (C) disability benefits
under any Compensation Plan which is an employee welfare benefit plan
(as defined under Section 3(1) of ERISA) that have been fully provided
for by insurance or otherwise, or (D) benefits in the nature of
severance pay under any Compensation Plan. The Company and its
Subsidiaries may amend or terminate any Compensation Plan which
provides post-retirement or termination of employment benefits at any
time without incurring any liability thereunder (other than liability
for vested, accrued benefits under any Compensation Plan as of the date
of such amendment or termination). There has been no communication to
employees, former employees or their spouses, beneficiaries or
dependents by the Company or any of its Subsidiaries that promised or
guaranteed such employees retiree health or life insurance or other
retiree death benefits on a permanent basis or promised or guaranteed
that any such benefits could not be modified, eliminated or terminated.
(8) There has been no amendment to, announcement by the
Company or any of its Subsidiaries relating to, or change in employee
participation or coverage under, any Compensation Plan which would
increase the expense of maintaining such Plan above the level of the
expense incurred therefor for the most recent fiscal year. Neither the
execution of this Agreement, shareholder approval of this Agreement nor
the consummation of the transactions contemplated hereby will (w)
entitle any employees of the Company or any of its Subsidiaries to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (x) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of
the Compensation Plans, (y) cause the Company or any of its
Subsidiaries to record additional compensation expense on its income
statement with respect to any outstanding stock option or other
equity-based award or (z) result in payments under any of the
Compensation Plans which would not be deductible under Section 162(m)
or Section 280G of the Code.
(9) Neither the Company nor any of its Subsidiaries
maintains any compensation plans, programs or arrangements the payments
under which are or would not reasonably be expected to be deductible as
a result of the limitations under Section 162(m) of the Code and the
regulations issued thereunder.
(10) The retirement or disability benefit historically paid
pursuant to each Supplemental Executive Retirement Agreement has been
calculated based on the participant's base-salary and annual
performance
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bonuses paid to the participant, including amounts voluntarily
deferred by a participant.
(o) Labor Matters. Each of the Company and its Subsidiaries is in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including, without limitation, the Immigration Reform and
Control Act, any such laws respecting employment discrimination,
disability rights or benefits, equal opportunity, affirmative action,
workers' compensation, employee benefits, severance payments, labor
relations, employee leave issues, wage and hour standards, occupational
safety and health requirements and unemployment insurance and related
matters. Neither the Company nor any of its Subsidiaries is a party to
or is bound by any collective bargaining Contract or understanding with
a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning
of the National Labor Relations Act) or seeking to compel the Company
or any such Subsidiary to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other
labor dispute involving it or any of its Subsidiaries pending or, to
the Company's knowledge, threatened, nor is the Company aware of any
activity involving it or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other
organizational activity.
(p) Environmental Matters. (1) The Company and each of its
Subsidiaries has complied with applicable Environmental Laws; (2) to
the Company's knowledge, no property (including buildings and any other
structures) currently or formerly owned or operated by the Company or
any of its Subsidiaries or in which the Company or any of its
Subsidiaries has a Lien, has been contaminated with, or has had any
release of, any Hazardous Substance; (3) neither the Company nor any of
its Subsidiaries could be deemed the owner or operator under any
Environmental Law of any property in connection with any Loans or in
which it has currently or formerly held a Lien or security interest;
(4) neither the Company nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any
other third-party property; (5) neither the Company nor any of its
Subsidiaries has received any notice, demand letter, claim or request
for information alleging any violation of, or liability under, any
Environmental Law; (6) neither the Company nor any of its Subsidiaries
is subject to any order, decree, injunction or other agreement with any
Governmental Authority or any third party relating to any Environmental
Law; (7) to the Company's knowledge, there are no other circumstances
or conditions involving the Company or any of its Subsidiaries, any
currently or formerly owned or operated property, or any Lien held by
the Company or any of its Subsidiaries (including the presence of
asbestos, underground storage tanks, contamination, polychlorinated
biphenyls or gas station sites) that would reasonably be expected to
result in any claims, liability or investigations or result in any
restrictions on the ownership, use, or transfer of
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any property pursuant to any Environmental Law; and (8) the Company has
made available to the Acquiror copies of all environmental reports,
studies, sampling data, correspondence, filings and other environmental
information in its possession or reasonably available to it relating to
the Company, any of its Subsidiaries, any currently or formerly owned
or operated property or any property in which the Company or any of its
Subsidiaries has held a Lien.
(q) Tax Matters. (1) All Tax Returns that are required to be
filed with respect to the Company or any of its Subsidiaries, have been
or will be timely filed, or requests for extensions have been timely
filed and have not expired; (2) all Tax Returns filed by the Company
and its Subsidiaries are complete and accurate; (3) all Taxes shown to
be due and payable (without regard to whether such Taxes have been
assessed) on such Tax Returns (or, with respect to Tax Returns for
which an extension has been timely filed, will be required to be shown
as due and payable when such Tax Returns are filed) have been paid or
adequate reserves have been established for the payment of such Taxes;
(4) all state and federal income Tax Returns referred to in clause (1)
have been examined by the Internal Revenue Service or the appropriate
state taxing authority or the period for assessment of the Taxes for
which such return has been filed has expired; (5) no audit or
examination or refund litigation with respect to any such Tax Return is
pending or, to the Company's knowledge, has been threatened; (6) all
deficiencies asserted or assessments made as a result of any
examination of a Tax Return of the Company or any of its Subsidiaries,
have been paid in full or are being contested in good faith; (7) no
waivers of statute of limitations have been given by or requested with
respect to any Taxes of the Company or its Subsidiaries for any
currently open taxable period; (8) the Company and each of its
Subsidiaries has in its respective files all Tax Returns that it is
required to retain in respect of information reporting requirements
imposed by the Code or any similar foreign, state or local law; (9) the
Company and its Subsidiaries have never been a member of an affiliated,
combined, consolidated or unitary Tax group for purposes of filing any
Tax Return (other than a consolidated group of which the Company was
the common parent); (10) no closing agreements, private letter rulings,
technical advice memoranda or similar agreement or rulings have been
entered into or issued by any taxing authority with respect to the
Company or any of its Subsidiaries; (11) no tax is required to be
withheld pursuant to Section 1445 of the Code as a result of the
transfer contemplated by this Agreement; (12) the Company and its
Subsidiaries are not bound by any tax indemnity, tax sharing or tax
allocation agreement or arrangement; and (13) all Taxes that the
Company or any Subsidiary is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent
required by applicable law, have been paid to the proper Governmental
Authority or other person.
(r) Risk Management; Allowance for Loan Losses. (1) All swaps,
caps, floors, option agreements, futures and forward contracts and
other similar risk management arrangements, whether entered into for
the Company's own account, or for the account of one or more of the
Company's Subsidiaries or
-27-
their customers, were entered into (1) in accordance with prudent
business practices and all applicable laws, rules, regulations and
regulatory policies and (2) with counterparties believed to be
financially responsible at the time; and each of them constitutes the
valid and legally binding obligation of the Company or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect. Neither
the Company nor its Subsidiaries, nor to the Company's knowledge any
other party thereto, is in breach of any of its obligations under any
such agreement or arrangement.
(2) The allowances for loan losses reflected on the
consolidated balance sheets included in the Company's SEC Documents
are, in the reasonable judgment of the Company's management, adequate
as of their respective dates under the requirements of generally
accepted accounting principles and applicable regulatory requirements
and guidelines.
(s) Books and Records. The books and records of the Company and
its Subsidiaries have been properly and accurately maintained, and
there are no inaccuracies or discrepancies contained or reflected
therein.
(t) Accounting Controls. Each of the Company and its Subsidiaries
has devised and maintained systems of internal accounting controls
sufficient to provide reasonable assurances, in the judgment of the
Board of Directors of the Company, that (a) all material transactions
are executed in accordance with management's general or specific
authorization; (b) all material transactions are recorded as necessary
to permit the preparation of financial statements in conformity with
generally accepted accounting principals consistently applied with
respect to any criteria applicable to such statements, (c) access to
the material property and assets of the Company and its Subsidiaries is
permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate
action is taken with respect to any differences.
(u) Insurance. The Company has made available to the Acquiror all
of the insurance policies, binders, or bonds maintained by or for the
benefit of the Company or its Subsidiaries ("Insurance Policies") or
their representatives. The Company and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the
management of the Company reasonably has determined to be prudent in
accordance with industry practices. All of the Insurance Policies are
in full force and effect; the Company and its Subsidiaries are not in
default thereunder; and all claims thereunder have been filed in due
and timely fashion.
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(v) No Brokers. No action has been taken by the Company that
would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other, like payment with respect
to the transactions contemplated by this Agreement, except that the
Company has employed Credit Suisse First Boston Corporation and Xxxxx
Xxxxxxxx & Xxxxx, Inc. in connection with this transaction on
Previously Disclosed terms.
(w) Intellectual Property. The Company and its Subsidiaries own
or have the right to use all material Intellectual Property Rights
necessary or required for the operation of their business as currently
conducted (collectively, "Company IP Rights"), and have the right to
use, license, sublicense or assign the same without material liability
to, or any requirement of consent from, any other person or party. The
Company's use of the Company IP Rights does not infringe any
Intellectual Property Rights of any person; there is no pending or, to
the knowledge of the Company, threatened litigation, adversarial
proceeding, administrative action or other challenge or claim relating
to any Company IP Rights; to the knowledge of the Company, there is
currently no infringement by any person of any Company IP Rights; and
the Company IP Rights owned, used or possessed by the Company and its
Subsidiaries are sufficient and adequate to conduct the business of the
Company and its Subsidiaries to the full extent as such business is
currently conducted.
(x) Disclosure. The information Previously Disclosed or otherwise
provided to the Acquiror in connection with this Agreement, when taken
together with the representations and warranties contained herein, does
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained
therein, in the light of the circumstances in which they are being
made, not misleading. The copies of all documents furnished to the
Acquiror hereunder are true and complete.
5.04 Representations and Warranties of the Acquiror. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, the Acquiror hereby represents and warrants to the
Company as set forth in its Disclosure Schedule and as follows:
(a) Organization, Standing and Authority. The Acquiror is duly
organized, validly existing and in good standing under the laws of
Canada. Following its formation, Newco will be duly organized, validly
existing and in good standing under the laws of North Carolina. The
Acquiror is, and Newco will be, duly qualified to do business and in
good standing in the jurisdictions where the ownership or leasing of
property or assets or the conduct of business requires such
qualification.
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(b) Acquiror Stock. (1) As of the date hereof, the authorized
capital of the Acquiror consists solely of an unlimited number of
shares of Acquiror Common Stock which may be issued for a maximum
aggregate consideration of C$10,000,000,000, an unlimited number of
shares of Acquiror First Preferred Stock which may be issued for a
maximum aggregate consideration of C$5,000,000,000 and an unlimited
number of shares of Acquiror Second Preferred Stock which may be issued
for a maximum aggregate consideration of C$5,000,000,000. As of October
31, 2000 not more than 602,398,000 shares of Acquiror Common Stock, not
more than 65,500,000 shares of Acquiror First Preferred Stock and no
shares of Acquiror Second Preferred Stock were issued and outstanding.
Except as Previously Disclosed, there are no shares of Acquiror Stock
reserved for issuance, the Acquiror does not have any Rights issued or
outstanding with respect to Acquiror Stock, and the Acquiror does not
have any commitment to authorize, issue or sell any Acquiror Stock or
Rights, except pursuant to this Agreement. The number of shares of
Acquiror Common Stock which are issuable and reserved for issuance upon
exercise of any employee or director stock options to purchase shares
of Acquiror Common Stock, and the number and terms of any Rights, as of
October 31, 2000, are Previously Disclosed in the Acquiror's Disclosure
Schedule.
(2) The shares of Acquiror Common Stock to be issued as
Consideration, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(c) Subsidiaries. Each of the Acquiror's Significant Subsidiaries
has been duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its organization, and is duly
qualified to do business and in good standing in the jurisdictions
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(d) Corporate Power. The Acquiror and each of its Significant
Subsidiaries each has the requisite power and authority to carry on its
business as it is now being conducted and to own all its properties and
assets; the Acquiror has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated
hereby.
(e) Corporate Authority and Action. The Acquiror has, and Newco
will have, taken all corporate action necessary in order to authorize
the execution and delivery of, and performance of its obligations
under, this Agreement and, in the case of the Acquiror, the Stock
Option Agreement, and to consummate the Merger. Each of this Agreement
and, in the case of the Acquiror, the Stock Option Agreement, is a
valid and legally binding agreement of the Acquiror and, upon its
execution by Newco, will be a valid and legally binding agreement of
Newco, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, and similar laws of general applicability relating to
or affecting creditors' rights or by general equity principles).
(f) Regulatory Approvals; No Defaults. (1) No consents or
approvals of, or filings or registrations with, any Governmental
Authority or with any third party are required to be made or obtained
by the Acquiror or any of its Subsidiaries in connection with the
execution, delivery or performance by the Acquiror of this Agreement or
the Stock Option Agreement or to consummate the Merger or the other
transactions contemplated hereby except for (A) the filing of
applications and notices, as applicable, with the Federal Reserve
System and the NCCOB with respect to the Merger; (B) the filing of a
notification, and expiration of the related waiting period under the
HSR Act, (C) approval of the listing on the NYSE of the Acquiror Common
Stock to be issued in the Merger; (D) the filing and declaration of
effectiveness by the SEC of the Registration Statement; (E) the filing
of articles of merger with the Secretary of State of the State of North
Carolina pursuant to the NCBCA; (F) approval by the Minister of Finance
and the Office of the Superintendent of Financial Institutions under
the Bank Act (Canada), and (G) such filings as are required to be made
or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
Acquiror Common Stock in the Merger. As of the date hereof, the
Acquiror is not aware of any reason why the approvals of all
Governmental Authorities necessary to permit consummation of the
transactions contemplated hereby will not be received without the
imposition of a condition or requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in the preceding
paragraph and the making of all required filings under federal and
state securities laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of
the Acquiror or of any of its Subsidiaries or to which the Acquiror or
any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the articles
of incorporation or by-laws (or similar governing documents) of the
Acquiror or any of its Subsidiaries, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) SEC Documents; Financial Statements. The Acquiror's Annual
Reports on Form 40-F for the fiscal years ended October 31, 1998, 1999
and 2000, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by the
Acquiror or any of its Subsidiaries subsequent to October 31, 1999
under the Securities Act, or
-31-
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the
form filed or to be filed (collectively, the "Acquiror's SEC
Documents") with the SEC, as of the date filed, (A) complied or will
comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case
may be, and (B) did not (or if amended or superseded by a filing prior
to the date of this Agreement, then did not as of the date of such
filing) and will 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 the light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such SEC Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial position of the
Acquiror and its Subsidiaries as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows
or equivalent statements in such SEC Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in shareholders' equity and changes
in cash flows, as the case may be, of the Acquiror and its Subsidiaries
for the periods to which they relate, in each case in accordance with
generally accepted accounting principles in Canada, consistently
applied during the periods involved, except in each case as may be
noted therein, subject to normal year-end audit adjustments in the case
of unaudited statements.
(h) Absence of Undisclosed Liabilities and Changes. (1) Except as
disclosed in the Acquiror's SEC Documents filed prior to the date
hereof, none of the Acquiror or its Subsidiaries has any obligation or
liability (contingent or otherwise), that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect with respect to the Acquiror.
(2) Since October 31, 2000, (A) the Acquiror and its
Subsidiaries have conducted their respective businesses in the ordinary
and usual course consistent with past practice and (B) no event has
occurred or circumstance arisen that, individually or taken together
with all other facts, events and circumstances (described in any
paragraph of Section 5.04 or otherwise), has had or is reasonably
likely to have a Material Adverse Effect with respect to the Acquiror.
(i) No Brokers. No action has been taken by the Acquiror that
would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other, like payment with respect
to the transactions contemplated by this Agreement, except that the
Acquiror has employed Credit Suisse First Boston Corporation in
connection with this transaction.
(j) Interim Operations of Newco. Newco will be formed solely for
the purpose of engaging in the transactions contemplated hereby and
will not engage in any business other than in connection with the
transactions contemplated by this Agreement.
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(k) Disclosure. The information Previously Disclosed or otherwise
provided to the Company in connection with this Agreement does not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained
therein, in the light of the circumstances in which they are being
made, not misleading. The copies of all documents furnished to the
Company hereunder are true and complete.
(l) Certain Treasury Regulation Requirements. The Acquiror
satisfies all the requirements of the "active trade or business test"
under Treasury Regulationss ss.1.367(a)-3(c)(3).
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. (a) Subject to the terms and conditions
of this Agreement, each of the Company and the Acquiror agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
(b) Without limiting the generality of Section 6.01(a), the Company
agrees to use its reasonable best efforts to obtain the consent or approval of
all persons party to a Contract with the Company or any of its Subsidiaries, to
the extent such consent or approval is required in order to consummate the
Merger or for the Surviving Corporation to receive the benefits of such
Contract; provided that in no event shall the Company be deemed to have failed
to satisfy the condition set forth in 7.03(b) solely on the basis that such
consents or approvals have not been obtained as of the Closing Date.
6.02 Shareholder Approvals. The Company agrees to take, in accordance
with applicable law, applicable stock exchange rules, the Company Articles and
the Company By-Laws, all action necessary to convene an appropriate meeting of
shareholders of the Company to consider and vote upon the approval of this
Agreement and any other matters required to be approved by the Company's
shareholders for consummation of the Merger and the transactions contemplated
hereby (including any adjournment or postponement, the "Company Meeting"), and
to solicit shareholder approval, as promptly as practicable after the date
hereof. The Company Board has adopted a resolution contemplated by NCBCA ss.
55-11-03, recommending that the shareholders approve this Agreement (and will
keep such resolution in effect) and take any other action required to permit
consummation of the transactions contemplated hereby. The obligation of the
Company to hold the Company Meeting shall not be affected by any Acquisition
Proposal or other event or circumstance.
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6.03 Registration Statement. (a) The Acquiror agrees to prepare a
registration statement on Form F-4 (the "Registration Statement"), to be filed
by the Acquiror with the SEC in connection with the issuance of Acquiror Common
Stock in the Merger (including the proxy statement and prospectus and other
proxy solicitation materials of the Company constituting a part thereof (the
"Proxy Statement") and all related documents). The Company agrees to cooperate,
and to cause its Subsidiaries to cooperate, with the Acquiror, its counsel and
its accountants, in preparation of the Registration Statement and the Proxy
Statement; and, provided that the Company and its Subsidiaries have cooperated
as required above, the Acquiror agrees to file the Proxy Statement in
preliminary form with the SEC as promptly as reasonably practicable, and to file
the Registration Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Proxy Statement are resolved.
Each of the Company and the Acquiror agrees to use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof. The
Acquiror also agrees to use all reasonable best efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement. The Company agrees to furnish
to the Acquiror all information concerning the Company, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of the Company and the Acquiror agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (1) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (2) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to shareholders and at the time of the Company Meeting, contain any
untrue statement which, at the time and in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any earlier
statement in the Proxy Statement or any amendment or supplement thereto. Each of
the Company and the Acquiror further agrees that if it shall become aware prior
to the Effective Time of any information furnished by it that would cause any of
the statements in the Proxy Statement to be false or misleading with respect to
any material fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform the other party
thereof and to take the necessary steps to correct the Proxy Statement.
(c) The Acquiror agrees to advise the Company, promptly after the
Acquiror receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of the
Acquiror Stock for offering or sale in any jurisdiction, of the initiation or
threat of any proceeding for any such
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purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.04 Press Releases. The initial press release concerning the Merger
and the other transactions contemplated by this Agreement and the Stock Option
Agreement shall be a joint press release in such form agreed to by the parties,
and thereafter each of the Company and the Acquiror agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby (except for any release or statement that, in the written
opinion of outside counsel to the Company or the Acquiror, as the case may be,
is required by law or regulation and as to which the Company or the Acquiror, as
the case may be, has used its best efforts to discuss with the other in advance,
provided that such release or statement has not been caused by, or is not the
result of, a previous disclosure by or at the direction of the Company or the
Acquiror, as the case may be, or any of its representatives that was not
permitted by this Agreement).
6.05 Access; Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall
afford the Acquiror and its officers, employees, counsel, accountants and other
authorized representatives, such access during normal business hours throughout
the period prior to the Effective Time to the books, records (including, without
limitation, credit files, tax returns and work papers of independent auditors),
properties, personnel and to such other information as it may reasonably request
and, during such period, the Company shall furnish promptly (1) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (2) all other
information concerning its business, properties and personnel as the other may
reasonably request.
(b) Each of the Company and the Acquiror agrees that it will not, and
will cause its representatives not to, use any information obtained pursuant to
this Section 6.05 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Subject to the requirements of law,
each party will keep confidential, and will cause its representatives to keep
confidential, all information and documents obtained pursuant to this Section
6.05 unless such information (1) was already known to such party, (2) becomes
available to such party from other sources not known by such party to be bound
by a confidentiality obligation, (3) is disclosed with the prior written
approval of the party to which such information pertains or (4) is or becomes
readily ascertainable from published information or trade sources. In the event
that this Agreement is terminated or the transactions contemplated by this
Agreement shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto to be returned to the party which furnished the
same, or at the other party's request, destroyed.
(c) No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation, warranty,
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covenant or agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this Agreement.
6.06 Acquisition Proposals. The Company agrees that it shall not, and
shall cause its Subsidiaries and its and its Subsidiaries' representatives not
to, solicit or encourage inquiries or proposals with respect to, or engage in
any negotiations concerning, or provide any confidential information to, or have
any discussions with, any person relating to, any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving the
Company or any of its Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
or deposits of, the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement or the Stock Option Agreement (any
of the foregoing, an "Acquisition Proposal"); provided, that nothing contained
in this Agreement shall prevent the Company Board from (i) making any disclosure
to its shareholders if, in the good faith judgment of the Company Board, failure
so to disclose would be inconsistent with its obligations under applicable law;
(ii) until the date of the Company Meeting, providing (or authorizing the
provision of) information to, or engaging in (or authorizing) such discussions
or negotiations with, any person who has made a bona fide written Acquisition
Proposal received after the date hereof which did not result from a breach of
this Section 6.06; or (iii) recommending such an Acquisition Proposal to its
shareholders if and only to the extent that, in the case of actions referred to
in clause (ii) or (iii), (x) such Acquisition Proposal is a Superior Proposal,
(y) the Company Board, after having consulted with and considered the advice of
outside counsel to the Company Board, determines in good faith that providing
such information or engaging in such negotiations or discussions, or making such
recommendation is required in order to discharge the directors' fiduciary duties
in accordance with the NCBCA and (z) the Company receives from such person a
confidentiality agreement substantially in the form of the Confidentiality
Agreement. For purposes of this Agreement, a "Superior Proposal" means any
Acquisition Proposal by a third party on terms that the Company Board determines
in its good faith judgment, after receiving the advice of its financial advisors
(whose advice shall be communicated to the Acquiror), to be more favorable from
a financial point of view to its shareholders than the Merger and the other
transactions contemplated hereby, after taking into account the likelihood of
consummation of such transaction on the terms set forth therein, taking into
account all legal, financial (including the financing terms of any such
proposal), regulatory and other aspects of such proposal and any other relevant
factors permitted under applicable law, after giving the Acquiror at least five
business days to respond to such third-party Acquisition Proposal once the Board
has notified the Acquiror that in the absence of any further action by the
Acquiror it would consider such Acquisition Proposal to be a Superior Proposal,
and then taking into account any amendment or modification to this Agreement
proposed by the Acquiror. The Company also agrees immediately to cease and cause
to be terminated any activities, discussions or negotiations conducted prior to
the date of this Agreement with any parties other than the Acquiror, with
respect to any of the foregoing. The Company shall promptly (within 24 hours)
advise the Acquiror following the receipt by it of any Acquisition Proposal and
the material terms thereof (including the identity of
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the person making such Acquisition Proposal), and advise the Acquiror of any
developments (including any change in such terms) with respect to such
Acquisition Proposal promptly upon the occurrence thereof.
Nothing contained in this Section 6.06 or any other provision of this
Agreement will prohibit the Company or the Company Board from notifying any
third party that contacts the Company on an unsolicited basis after the date
hereof concerning an Acquisition Proposal of the Company's obligations under
this Section 6.06.
6.07 Affiliate Agreements. Not later than the 15th day prior to the
mailing of the Proxy Statement, the Company shall deliver to the Acquiror a
schedule of each person that, to the Company's knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an "affiliate"
of it (each, a "Company Affiliate") as that term is used in Rule 145 under the
Securities Act. The Company agrees to use its reasonable best efforts to cause
each person who may be deemed to be a Company Affiliate to execute and deliver
to the Company and the Acquiror on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit D.
6.08 Takeover Laws. No party shall knowingly take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.09 No Rights Triggered. The Company shall take all reasonable steps
necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions, or any other transactions contemplated hereby, do not
and will not result in the grant of any rights to any person (a) under the
Company Articles or the Company By-Laws or (b) under any material Contract to
which it or any of its Subsidiaries is a party except, in each case, as
contemplated by this Agreement and the Stock Option Agreement.
6.10 NYSE Listing. The Acquiror shall take all reasonable steps
necessary to ensure the listing, prior to the Effective Time, on the NYSE,
subject to official notice of issuance, the shares of Acquiror Common Stock to
be issued to the holders of Company Common Stock in the Merger.
6.11 Regulatory Applications. (a) The Acquiror and the Company and
their respective Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties and Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement. The Acquiror shall have the right to review in
advance, and to the extent
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practicable to consult with the Company, subject to applicable laws relating to
the exchange of information, with respect to, all material written information
submitted to any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. The Company shall have the
right to review in advance, and to the extent practicable to consult with the
Acquiror, subject to all applicable laws relating to the exchange of
information, with respect to, all material written information submitted to any
third party or any Governmental Authority, in connection with the transactions
contemplated by this Agreement, that is not confidential. In exercising the
foregoing rights, the Acquiror and the Company agree to act reasonably and as
promptly as practicable. Each of the Acquiror and the Company agrees that it
will consult with the other party hereto with respect to the obtaining of all
material consents, registrations, approvals, permits and authorizations of all
third parties and Governmental Authorities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party will keep the
other party apprised of the status of material matters relating to completion of
the transactions contemplated hereby.
(b) Each of the Acquiror and the Company agrees, upon request, to
furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with any filing, notice or
application made by or on behalf of such other party or any of its Subsidiaries
to any third party or Governmental Authority.
6.12 Indemnification. (a) Following the Effective Time and for a period
of six years thereafter, the Acquiror shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless the present and former
directors, officers and employees of the Company and its Subsidiaries (each, an
"Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company is permitted to indemnify its
directors, officers and employees under applicable law, the Company Articles and
the Company By-Laws as in effect on the date hereof (and the Acquiror shall, or
shall cause the Surviving Corporation to, also advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification);
provided that any determination required to be made with respect to whether such
an officer's or director's conduct complies with the standards set forth under
the NCBCA, the Company Articles and the Company By-Laws shall be made by
independent counsel reasonably acceptable to both the Indemnified Party and the
Surviving Corporation.
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(b) For a period of three years from the Effective Time, the Acquiror
shall use its reasonable best efforts to provide (or cause the Surviving
Corporation to provide) that portion of director's and officer's liability
insurance that serves to reimburse the present and former officers and directors
of the Company or any of its Subsidiaries (determined as of the Effective Time)
with respect to claims against such directors and officers arising from facts or
events which occurred before the Effective Time, which insurance shall contain
at least the same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by the Company; provided,
however, that in no event shall the Acquiror be required to expend more than
twice the current amount spent by the Company (the "Insurance Amount") to
maintain or procure such directors' and officers' insurance coverage; provided,
further, that if the Acquiror is unable to maintain or obtain the insurance
called for by this Section 6.12(b), the Acquiror shall use its reasonable best
efforts to obtain as much comparable insurance as is available for the Insurance
Amount; provided, further, that officers and directors of the Company or any
Subsidiary may be required to make application and provide customary
representations and warranties to the Acquiror's insurance carrier for the
purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify the Acquiror thereof;
provided that the failure so to notify shall not affect the obligations of the
Acquiror under Section 6.12(a) unless and to the extent that the Acquiror is
actually prejudiced as a result of such failure. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (1) the Acquiror or the Surviving Corporation shall have the
right to assume the defense thereof and the Acquiror shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Acquiror or the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues that raise conflicts of interest between the Acquiror or
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Acquiror or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Acquiror shall be obligated pursuant to this paragraph (c) to
pay for only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (2) the Indemnified Parties will cooperate
in the defense of any such matter and (3) the Acquiror shall not be liable for
any settlement effected without its prior written consent, which consent shall
not be unreasonably withheld; and provided, further, that the Acquiror shall not
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
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(d) If the Acquiror or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of the Acquiror shall
assume the obligations set forth in this Section 6.12.
6.13 Accountants' Letters. The Company shall use its reasonable best
efforts to cause to be delivered to the Acquiror, and the Acquiror's directors
and officers who sign the Registration Statement, letters of
PricewaterhouseCoopers LLP, independent auditors, dated a date shortly prior to
the Closing Date, and addressed to the Acquiror, and such directors and
officers, in form and substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Accounting Standards No.
72.
6.14 Notification of Certain Matters. Each of the Company and the
Acquiror shall give prompt notice to the other of any fact, event or
circumstance known to it that (1) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect with respect to it or (2) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
6.15 Employee Benefits. (a) The Acquiror agrees to permit or cause the
Company or its Subsidiaries to take appropriate action to honor all Compensation
Plans in accordance with their terms. The Acquiror agrees that, except as
otherwise specifically provided, the employee benefit plans maintained by the
Company and/or its Subsidiaries as of the date hereof, will continue until at
least December 31, 2002. Thereafter, the employees of the Company and its
Subsidiaries who are employed by the Company and its Subsidiaries on or before
the Effective Time will be provided employee pension, welfare and other
benefits, fringes, and perquisites that are generally comparable in the
aggregate to those provided by the Acquiror to similarly situated employees of
the Acquiror and its Subsidiaries. The Acquiror will cause each employee benefit
plan of the Acquiror and its Subsidiaries in which employees of the Company and
its Subsidiaries are eligible to participate to take into account for purposes
of eligibility and vesting thereunder, but not for purposes of benefit accrual,
the service of such employees with the Company and its Subsidiaries as if such
service were with the Acquiror and its Subsidiaries, to the same extent that
such service was credited under a comparable plan of the Acquiror and its
Subsidiaries. Employees of the Company and its Subsidiaries shall not be subject
to any waiting periods or pre-existing condition limitations under the medical,
dental and health plans of the Acquiror or its Subsidiaries in which they are
eligible to participate. Employees of the Company and its Subsidiaries will
retain credit for unused sick leave and vacation pay which has been accrued as
of the Effective Time and for purposes of determining the entitlement of such
employees to sick leave and vacation pay following the Effective Time, the
service of such employees with the Company and its Subsidiaries shall be treated
as if such service was with the Acquiror and its Subsidiaries.
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(b) The Company and its Subsidiaries will comply with the terms of the
relevant Compensation Plan with respect to the voting of any Company Common
Stock held by any such Plan. As mutually agreed by the Company and the Acquiror,
the Company's Employee Stock Ownership Plan feature of the Company's 401(k) Plan
may be terminated, amended, or discontinued as of the Effective Time in
accordance with the terms of the Plan and the requirements of applicable law.
(c) As soon as practicable following the date hereof, the Company will
grant retention bonus awards to the key employees designated by the Acquiror, on
terms, in form and in amounts satisfactory to the Acquiror.
(d) The Company shall freeze additional benefit accrual in its defined
benefit pension plan by resolution of the Company Board and all necessary plan
amendments, at least fifteen days prior to the Closing Date. The Company shall
also make such other amendments as are necessary to effect the changes set forth
on Company Disclosure Schedule 401(e) with respect to retirement plans.
(e) Prior to the Closing Date, the Company shall use its best efforts
to take the actions set forth on the Company Disclosure Schedule Section 4.01(e)
with respect to Supplemental Executive Retirement Plan Agreements.
6.16 Certain Adjustments. Upon the request of the Acquiror, the Company
shall (a) consistent with generally accepted accounting principles and regu-
latory accounting principles, use its best efforts to record any accounting
adjustments required to conform the loan, litigation and other reserve and real
estate valuation policies and practices (including loan classifications and
levels of reserves) of the Company and its Subsidiaries so as to reflect
consistently on a mutually satisfactory basis the policies and practices of the
Acquiror and (b) make reasonable adjustments to the corporate structure of the
Company or its direct or indirect subsidiaries and transfer assets or
liabilities between the Company and its Subsidiaries or between Subsidiaries;
provided, however, that the Company shall not be obligated to record any such
accounting adjustments (1) unless and until the Company shall be satisfied that
the conditions to the obligation of the parties to consummate the Merger will be
satisfied or waived on or before the Closing Date, and (2) in no event until the
day prior to the Closing Date.
6.17 Formation of Newco. As soon as practicable following the date of
this Agreement, the Acquiror shall cause Newco to be duly organized as a direct
wholly owned subsidiary of the Acquiror and to become a party to this Agreement
by executing and delivering a supplement hereto.
6.18 Certain Tax Matters. Each of the Acquiror and the Company (i)
shall cooperate before and after the Effective Time to assure, to the extent
feasible, compliance with Treasury Regulation ss. 1.367(a)-3(c), (ii) undertakes
and agrees to use its reasonable efforts to cause the Merger, and to take no
action that is reasonably likely to cause the Merger not, to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code for federal
income tax purposes, and (iii) for purposes of
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the tax opinions described in Section 7.02(c) and 7.03(c), shall provide
representation letters to counsel, in form and substance reasonably satisfactory
to the Acquiror, the Company and such counsel.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the Acquiror and the Company to consummate the
Merger is subject to the fulfillment or written waiver by the Acquiror and the
Company prior to the Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly
approved and adopted and a plan of merger shall have been duly approved
by the affirmative vote of the holders of the requisite number of the
outstanding shares of Company Common Stock entitled to vote thereon in
accordance with applicable law, the Company Articles and the Company
By-laws.
(b) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications
to, all Governmental Authorities required for the consummation of the
Merger, and for the prevention of any termination of any material
right, privilege, license or agreement of either the Acquiror or the
Company or their respective Subsidiaries, shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by law shall have expired; provided, however, that none of the
preceding shall be deemed obtained or made if it shall be subject to
any condition or restriction the effect of which, together with any
other such conditions or restrictions, would be reasonably expected to
have a Material Adverse Effect on the Surviving Corporation or the
Acquiror or its operations in the U.S. after the Effective Time.
(c) Third Party Consents. All consents or approvals of all
persons, other than Governmental Authorities, required for or in
connection with the execution, delivery and performance of this
Agreement and the consummation of the Merger shall have been obtained
and shall be in full force and effect, unless the failure to obtain any
such consent or approval is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Surviving
Corporation.
(d) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in
effect and prohibits consummation of the transactions contemplated by
this Agreement.
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(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending
the effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(f) Blue Sky Approvals. All permits and other authorizations
under the federal and state securities laws (other than that referred
to in Section 7.01(e)) and other authorizations necessary to consummate
the transactions contemplated hereby and to issue the shares of
Acquiror Common Stock to be issued in the Merger shall have been
received and be in full force and effect.
(g) Listing. The shares of Acquiror Common Stock to be issued in
the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
7.02 Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 5.02, the representations and warranties of the
Acquiror set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some
other date shall be true and correct only as of such date), and the
Company shall have received a certificate, dated the Closing Date,
signed on behalf of the Acquiror by a senior officer of the Acquiror to
such effect.
(b) Performance of Obligations of the Acquiror. The Acquiror
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate, dated the
Closing Date, signed on behalf of the Acquiror by a senior officer of
the Acquiror to such effect.
(c) Tax Opinion of Company's Counsel. The Company shall have
received an opinion of Hunton & Xxxxxxxx, counsel to the Company, dated
the Closing Date, to the effect that, for federal income tax purposes,
(1) the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (2) no gain or loss will be recognized by
shareholders of the Company to the extent they receive shares of
Acquiror Common Stock as Consideration in exchange for shares of
Company Common Stock (except for cash received in lieu of a fractional
share of Acquiror Common Stock). Such opinion may note that "5%
shareholders" will qualify for such nonrecognition treatment only if
they enter into a "gain recognition agreement" under regulations
promulgated
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under Section 367 of the Code. In rendering such opinion, counsel may
require and rely upon (and may incorporate by reference) certain
representations of the Acquiror and the Company reasonably
requested by such counsel.
7.03 Conditions to Obligation of the Acquiror. The obligation of the
Acquiror to consummate the Merger is also subject to the fulfillment or written
waiver by the Acquiror prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 5.02, the representations and warranties of the
Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some
other date shall be true and correct only as of such date) and the
Acquiror shall have received a certificate, dated the Closing Date,
signed on behalf of the Company by the Chief Executive Officer and the
Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and the Acquiror shall have received a certificate, dated the Closing
Date, signed on behalf of the Company by the Chief Executive Officer
and the Chief Financial Officer of the Company to such effect.
(c) Tax Opinion of the Acquiror's Counsel. The Acquiror shall
have received an opinion of Xxxxxxxx & Xxxxxxxx, counsel to the
Acquiror, dated the Closing Date, to the effect that, for federal
income tax purposes, the Merger constitutes a "reorganization" within
the meaning of Section 368 of the Code. In rendering such opinion,
counsel may require and rely upon (and may incorporate by reference)
certain representations of the Acquiror and the Company reasonably
requested by such counsel.
ARTICLE VII
TERMINATION
8.01 Termination. This Agreement may be terminated and the Merger may
be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by
the mutual consent of the Acquiror and the Company, if the Board of
Directors of each so determines by vote of a majority of the members of
its entire Board.
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(b) Breach. At any time prior to the Effective Time, by the
Acquiror or the Company, in each case if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in
the event of either: (1) a breach by the other party of any
representation or warranty contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to
the breaching party of such breach; or (2) a breach by the other party
of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach and which breach,
individually or in the aggregate with other such breaches, would cause
the conditions set forth in Section 7.03(a) or (b), in the case of a
breach or breaches by the Company, or Section 7.02(a) or (b), in the
case of a breach or breaches by the Acquiror, not to be satisfied or
would reasonably be expected to prevent, materially delay or materially
impair the ability of the Company or the Acquiror to consummate the
Merger and the other transactions contemplated by this Agreement.
(c) Delay. At any time prior to the Effective Time, by the
Acquiror or the Company, in each case if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in
the event that the Merger is not consummated by November 30, 2001,
except to the extent that the failure of the Merger then to be
consummated arises out of or results from the action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c).
(d) No Approval. By the Company or the Acquiror, in each case if
its Board of Directors so determines by a vote of a majority of the
members of its entire Board, in the event the approval of any
Governmental Authority required for consummation of the Merger and the
other transactions contemplated by this Agreement shall have been
denied by final nonappealable action of such Governmental Authority.
(e) Failure to Recommend, Etc. (1) By the Acquiror, if (i) at any
time prior to the receipt of the approval of the Company's shareholders
contemplated by Section 7.01(a), the Company Board shall not recommend
that the shareholders give such approval, or (ii) the Company Board
takes any of the actions described in clause (ii) or (iii) of the
proviso to Section 6.06.
(2) By the Company if, having acted in accordance with
Sections 6.02, 6.06 and 8.03 and the Company's other obligations
hereunder, (i) the Company Board shall have determined that an
Acquisition Proposal from a third party constitutes a Superior Proposal
and authorized and directed the Company to execute a definitive
agreement with such third party to effect such Superior Proposal and
(ii) immediately upon termination the Company executes such agreement.
(f) Possible Adjustment. By the Company, if the Company Board so
determines by a vote of a majority of the members of the entire Company
-45-
Board, at any time during the five-day period commencing with the
Determination Date, if both of the following conditions are satisfied:
(i) The Average Closing Price on the Determination Date of
shares of Acquiror Common Stock shall be less than the product of
0.80 and the Starting Price; and
(ii) (A) The number obtained by dividing the Average
Closing Price on the Determination Date by the Starting Price
(such number, the "Acquiror Ratio") shall be less than (B) the
number obtained by dividing the Index Price on the Determination
Date by the Index Price on the Starting Date and subtracting 0.20
from the quotient in this Section 8(f)(ii)(B) (such number, the
"Index Ratio");
subject, however, to the following four sentences. If the Company
elects to exercise its termination right pursuant to this Section
8.01(f), it shall give prompt written notice to the Acquiror; provided
that such notice of election may be withdrawn at any time within the
aforementioned five-day period. During the five-day period commencing
with its receipt of such notice, the Acquiror shall have the option of
adjusting the Exchange Ratio to the lesser of (i) a number equal to a
quotient (rounded to the nearest one-thousandth), the numerator of
which is the product of 0.80, the Starting Price and the Exchange Ratio
(as then in effect) and the denominator of which is the Average Closing
Price, and (ii) a number equal to a quotient (rounded to the nearest
one-thousandth), the numerator of which is the Index Ratio multiplied
by the Exchange Ratio (as then in effect) and the denominator of which
is the Acquiror Ratio. If the Acquiror determines so to increase the
Exchange Ratio within such five-day period, it shall give prompt
written notice to the Company of its determination and the revised
Exchange Ratio, whereupon no termination shall occur pursuant to this
Section 8.01(f) 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 the "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 8.01(f).
8.02 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article
VIII, no party to this Agreement shall have any liability or further obligation
to any other party hereunder except (a) as set forth in Sections 8.03 and 9.01
and (b) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination.
8.03 Termination Fee. (a) In addition to any other rights that the
Acquiror has under this Agreement, the Stock Option Agreement and/or otherwise,
if this Agreement is terminated by the Acquiror pursuant to (1) Section 8.01(b)
with respect to a breach of Section 6.01, 6.02 or 6.06 on the part of the
Company, or any knowing, or willful or intentional, breach on the part of the
Company (at a time when
-46-
an Initial Triggering Event (as defined in the Stock Option Agreement) has
occurred and the Company is unable to terminate pursuant to such Section
8.01(b)) or (2) Section 8.01(e)(1) or 8.01(e)(2), then the Company shall pay to
the Acquiror U.S. $100,000,000 (it being understood that such fee is not
intended as liquidated damages). In addition to any other rights that either
party has under this Agreement, the Stock Option Agreement and/or otherwise,
solely for the purpose of reimbursing an amount of certain out-of-pocket costs
and expenses incurred in connection with negotiations and investigations
undertaken with respect to the transactions contemplated hereby and not as
liquidated damages, if this Agreement is terminated pursuant to Section 8.01(b):
(x) by the Company (at a time when the Acquiror is unable to terminate pursuant
to Section 8.01(b)), then the Acquiror shall pay to the Company U.S. $20,000,000
and (y) by the Acquiror (other than with respect to a breach for which a fee is
payable under the preceding sentence, at a time when the Company is unable to
terminate pursuant to Section 8.01(b)), then the Company shall pay to the
Acquiror U.S. $20,000,000.
(b) Any payment required to be made under Section 8.03(a) shall be
payable, without setoff, by wire transfer in immediately available funds, to an
account specified by the Acquiror, within three business days following such
termination.
(c) The Company acknowledges that the agreements contained in this
Section 8.03 are an integral part of the transactions contemplated by this
Agreement and are cumulative with, and not intended to limit, other remedies
that may be available, and that, without these agreements, the Acquiror would
not enter into this Agreement; accordingly, if the Company fails promptly to pay
any amount due pursuant to this Section 8.03, and, in order to obtain such
payment, the Acquiror commences a suit which results in a judgment against the
Company for the payment set forth in this Section 8.03, the Company shall pay
the Acquiror's costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on any amount due pursuant to this Section
8.03 from the date such amount becomes payable until the date of such payment at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made plus two (2) percent.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement (1) other than those contained in Sections 6.05(b),
8.02, and 8.03 and in this Article IX, shall survive the termination of this
Agreement if this Agreement is terminated prior to the Effective Time, or (2)
other than those contained in Sections 6.12 and in this Article IX, shall
survive the Effective Time.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (a) waived by the party benefitted by the provision, or
-47-
(b) amended or modified at any time, by an agreement in writing executed by both
parties, except that, after approval of the Merger by the shareholders of the
Company, no amendment may be made which under applicable law requires further
approval of such shareholders without obtaining such required further approval.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of North Carolina
applicable to contracts made and to be performed entirely within such State.
9.05 Expenses. Subject to Section 8.03, each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that the Company shall pay printing and postage
expenses and the Acquiror shall pay SEC registration fees related to the
Registration Statement and Proxy Statement.
9.06 Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given (a) on the date of
delivery, if personally delivered or telecopied (with confirmation), (b) on the
first business day following the date of dispatch, if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing, if mailed by registered or certified mail (return receipt requested),
in each case to such party at its address or telecopy number set forth below or
such other address or numbers as such party may specify by notice to the parties
hereto.
If to the Company, to:
Centura Banks, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Chairman of the Board and Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Xx., Esq.
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
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If to the Acquiror, to:
Royal Bank of Canada
000 Xxx Xxxxxx
Royal Bank Plaza
Toronto, Ontario
Canada M5J 2J5
Attention: Xxxxx X. Xxxxxx
Vice-Chairman and Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
9.07 Entire Understanding; No Third-Party Beneficiaries. This Agreement
(together with the Disclosure Schedules, the Stock Option Agreement and the
Exhibits hereto) represents the entire understanding of the parties hereto with
reference to all the matters encompassed or contemplated herein and this
Agreement supersedes any and all other oral or written agreements heretofore
made. Except for Section 6.12, insofar as such Section expressly provides
certain rights to the Indemnified Parties named therein, nothing in this
Agreement, expressed or implied, is intended to confer upon any person, other
than the parties hereto or their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated, in whole or
in part (except by operation of law), by any of the parties hereto without the
prior written consent of each other party hereto, except that the Acquiror and
Newco may assign or delegate in their sole discretion any or all of their
rights, interests or obligations under this Agreement to any direct or indirect,
wholly owned subsidiary of the Acquiror, but no such assignment shall relieve
the Acquiror of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns.
* * *
-49-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CENTURA BANKS, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
------------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
ROYAL BANK OF CANADA
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice-Chairman and Chief
Financial Officer
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice-Chairman
Personal & Commercial Banking
-50-
EXHIBIT A
FORM OF STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January __, 2001 (this
"Agreement"), between Royal Bank of Canada, a Canadian chartered bank
("Grantee"), and Centura Banks, Inc., a North Carolina corporation ("Issuer").
RECITALS
A. Merger Agreement. Grantee and Issuer have entered into an Agreement
and Plan of Merger, dated as of January 26, 2001 (the "Merger Agreement"), which
agreement was executed and delivered on the date of this Stock Option Agreement,
pursuant to which a wholly owned subsidiary of Grantee to be organized under the
laws of the State of North Carolina is to merge with and into Issuer (the
"Merger"); and
B. Option. As a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Grant of Option. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to an aggregate of 7,858,534 fully paid and nonassessable
shares of the common stock, no par value, of Issuer ("Common Stock") at a price
per share equal to U.S. $44.69 (the "Option Price"); provided, however, that in
no event shall the number of shares for which this Option is exercisable exceed
19.9% of the issued and outstanding shares of Common Stock. The number of shares
of Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5 hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. Exercise. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10). Each of the following
shall be an "Exercise Termination Event": (i) the Effective Time (as defined in
the Merger Agreement) of the Merger; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by Grantee
pursuant to Section 8.01(b) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional) (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. The term "Holder" shall mean the holder or holders of the
Option. Notwithstanding anything to the contrary contained herein, the Option
may not be exercised at any time when Grantee shall be in material breach of any
of its covenants or agreements contained in the Merger Agreement such that
Issuer shall be entitled to terminate the Merger Agreement pursuant to Section
8.01(b) thereof.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "Issuer Subsidiaries"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary"), or the Board of
Directors of Issuer (the "Issuer Board") shall have recommended that
the stockholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary.
For purposes of this Agreement, (a) "Acquisition Transaction" shall
mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary, provided, however, that in
no event shall any merger, consolidation or similar transaction
involving only the Issuer and one or more of its Subsidiaries or
involving only any two or more of such Subsidiaries, if such
transaction is not in violation of the terms of the Merger Agreement,
be deemed to be an Acquisition Transaction, (y) a purchase, lease or
other acquisition of all or any substantial part of the assets or
business operations of Issuer or any Issuer Subsidiary, or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or other wise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary and
(b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under
the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial
-2-
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting
shall not have been held or shall have been canceled prior to
termination of the Merger Agreement if, prior to such meeting (or if
such meeting shall not have been held or shall have been canceled,
prior to such termination), it shall have been publicly announced that
any person (other than Grantee or any of its Subsidiaries) shall have
made, or disclosed an intention to make, a bona fide proposal to engage
in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn, modified or qualified
(or publicly announced its intention to withdraw, modify or qualify) in
any manner adverse in any respect to Grantee its recommendation that
the shareholders of Issuer approve the transactions contemplated by the
Merger Agreement in anticipation of engaging in an Acquisition
Transaction, or Issuer shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that
would constitute an Acquisition Transaction (or filed a preliminary
proxy statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement after an overture is made by a third
party to Issuer or its shareholders to engage in an Acquisition
Transaction, and (a) following such breach Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both) and (b) such breach shall not have been
cured prior to the Notice Date (as defined in Section 2(e)); or
(vii) Any person other than Grantee or any Grantee Subsidiary,
without Grantee's prior written consent, shall have filed an
application or notice with any regulatory or antitrust authority
regarding an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
-3-
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of any United States or
foreign regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
-4-
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of counsel to the Holder,
in form and substance reasonably satisfactory to the Issuer; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Covenants of Issuer. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
-5-
regulations promulgated thereunder and (y) in the event prior approval of or
notice to any state or other United States federal or foreign regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to such state or other United States federal or foreign regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. Exchange. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. Certain Adjustments. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in Common Stock by reason of a stock dividend, stock split, split-up,
recapitalization, stock combination, exchange of shares or similar transaction,
the type and number of shares or securities subject to the Option, and the
Option Price therefor, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so that Grantee shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Grantee would have received in respect of Common
Stock if the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable. If any additional shares of Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 5), the number of shares of
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Common Stock then
issued and outstanding.
-6-
6. Registration Rights. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within twelve (12) months (or such later period as
provided in Section 10) of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction, the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 331/3% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that
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Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. Repurchase. (a) At any time after the occurrence of a Repurchase
Event (as defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the sum of (x) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised, and (y) if applicable, the amount paid by Issuer to Grantee pursuant
to Section 8.03 of the Merger Agreement; and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase such number of Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the market/offer price multiplied by the number of Option
Shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of Common Stock at which a tender or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or any substantial part
of Issuer's assets or business operations, the sum of the net price paid in such
sale for such assets or business operations and the current market value of the
remaining assets or business operations of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. The Owner shall also represent and warrant that it has sole record
and beneficial ownership of such Option Shares and that such Option Shares are
then free and clear of all liens. As promptly as practicable, and in any event
within five (5) business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price
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therefor or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) shall be 25%.
8. Substitute Option. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or a Grantee Subsidiary, or engage
in a plan of exchange with any person, other than Grantee or a Grantee
Subsidiary and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, the then outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock shall
after such merger or plan of exchange represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (iii) to
sell or otherwise transfer all or a substantial part of its or any Issuer
Subsidiary's assets or business operations to any person, other than Grantee or
a Grantee Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other
than Issuer), (ii) the acquiring person in a plan of exchange in which
Issuer is acquired, (iii) the Issuer in a merger or plan of exchange in
which Issuer is the continuing or surviving or acquiring person and
(iv) the transferee of all or a substantial part of Issuer's assets or
business operations (or the assets or business operations of any Issuer
Subsidiary).
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(ii) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for six months immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common stock issued
by the person merging into Issuer or by any company which controls or
is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
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(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. Repurchase of Substitute Option. (a) At the request of the holder of
the Substitute Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the Substitute Option Holder
at a price (the "Substitute Option Repurchase Price") equal to the amount by
which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the
exercise price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised,
and at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to the Highest Closing Price multiplied by the number
of Substitute Shares so designated. The term "Highest Closing Price" shall mean
the highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the Substitute
Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five (5) business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
10. Extension of Periods Under Certain Circumstances. The periods for
exercise of certain rights under Sections 2, 6, 7, 9 and 14 shall be extended:
(i) to the extent necessary to obtain all regulatory approvals for the exercise
of such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such
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exercise; and (iii) when there exists an injunction, order or judgment that
prohibits or delays exercise of such right.
11. Representations and Warranties. (a) Issuer hereby represents and
warrants to Grantee as follows:
(i) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Issuer Board prior to the date hereof and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant thereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
Grantee has the requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board of
Directors of Grantee and no other corporate proceedings on the part of the
Grantee are necessary to authorize this Agreement or for Grantee to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(c) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed or except in a transaction registered or exempt from registration under
the 1933 Act.
12. Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event an Initial Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder.
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13. Filings, Etc. Each of Grantee and Issuer will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
14. Surrender of Option. (a) Grantee may, at any time following a
Repurchase Event and prior to the occurrence of an Exercise Termination Event
(or such later period as provided in Section 10), relinquish the Option
(together with any Option Shares issued to and then owned by Grantee) to Issuer
in exchange for a cash fee equal to the Surrender Price. The "Surrender Price"
shall be equal to U.S. $100 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares, (ii) minus, if applicable, the excess
of (A) the net price, if any, received by Grantee or a Grantee Subsidiary
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares and (iii) minus, if applicable,
the amount paid by Issuer to Grantee pursuant to Section 8.03(a) of the Merger
Agreement.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14 by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for Option
Shares, if any, accompanied by a written notice stating (i) that Grantee elects
to relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
15. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief. In connection
therewith, both parties waive the posting of any bond or similar requirement.
16. Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section l(a) hereof (as adjusted pursuant to Section
l(b) or Section 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
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17. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. Expenses. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Entire Agreement; Third-Party Rights. Except as otherwise expressly
provided herein or in the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereof, written or oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
22. Capitalized Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ROYAL BANK OF CANADA
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
CENTURA BANKS, INC.
By:
----------------------------------------
Name:
Title:
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EXHIBIT B
PERSONS TO EXECUTE EMPLOYMENT AGREEMENTS
Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxxx
H. Xxx Xxxxxx III
Xxxxxx Xxxxxx, Jr.
Xxxxx X. Xxxxxx, Xx.
EXHIBIT C
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 26th day of January, 2001, by and among
Centura Banks, Inc., a North Carolina corporation (the "Company"), Centura
Banks, a wholly-owned subsidiary of the Company, and [_______] (the
"Executive").
WHEREAS, the Company and Royal Bank of Canada, a Canadian chartered
bank (the "Parent") are parties to an Agreement and Plan of Merger dated as of
January 26th, 2001 (the "Merger Agreement");
WHEREAS, the Company and Parent have determined that it is in the best
interests of their respective shareholders to assure that the Company will have
the continued dedication of the Executive pending the transactions contemplated
in the Merger Agreement (the "Merger") and to provide the Company, after the
Merger, with continuity of management;
WHEREAS, the Executive and the Company are parties to a Change in
Control Agreement, ______, (the "Change in Control Agreement") and a
Supplemental Executive Retirement Agreement, dated ____ (the "SERP");
WHEREAS, it is acknowledged by the parties hereto that as a result of
the consummation of the Merger and the other transactions contemplated by the
Merger Agreement, as of the Closing Date (as defined in the Merger Agreement)
there will be a Change in Control of the Company, as contemplated by the Change
in Control Agreement and the SERP;
WHEREAS, Executive would have certain rights upon a Change in Control
under the Change in Control Agreement and the SERP, which rights are hereby
relinquished in consideration of the benefits to be provided under the terms of
this Agreement;
WHEREAS, Executive has executed an agreement, attached as Exhibit A,
terminating the SERP;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE TIME. This Agreement is effective as of the date hereof.
Subject to the consummation of the Merger, this Agreement amends and restates
the Change in Control Agreement.
2. EMPLOYMENT PERIOD. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby agrees to continue in the employ of the
Company, subject to the terms and conditions of this Agreement, for the period
commencing at the consummation of the Merger (the "Closing Date") and ending on
the fifth anniversary of the Closing Date (the "Employment Period").* Commencing
on the
----------
* Xxxxxx'x agreement ends at fifth anniversary.
fifth anniversary of the Closing Date and each year thereafter, the
Employment Period shall be automatically extended for one year unless either the
Company or the Executive shall give the other party not less than ninety (90)
days prior written notice of the intention to terminate this Agreement.
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as [TITLE] of the Company.
(ii) During the Employment Period, excluding any period of
vacation or sick leave to which Executive is entitled, Executive
agrees to devote substantially all of his attention and time
during normal business hours to the business and affairs of the
Company and to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities.
Executive shall also provide services to other member companies
of Parent from time to time as may be requested by the Vice
Chairman responsible for Personal and Commercial Banking of
Parent (the "Vice Chairman"). During the Employment Period, it
shall not be a violation of this Agreement for the Executive to
(A) serve on civic or charitable boards or committees, (B) serve
on corporate boards or committees, with prior approval of the
Vice Chairman, (C) deliver lectures, fulfill speaking engagements
or teach at educational institutions, or (D) manage personal
investments, so long as such activities do not interfere with the
performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement.
(b) Compensation.
(i) Annual Base Salary. During the Employment Period,
Executive shall receive an annual base salary of at least
[_______] (as increased by the Company from time to time, the
"Annual Base Salary"). Executive's Annual Base Salary shall be
adjusted annually to remain competitive with the Market, which
adjustment shall also be based on individual performance.
"Market", for this purpose, is similarly-situated executives of
Parent and its subsidiaries, and executives with similar
responsibilities at comparably-sized U.S. commercial banks and
bank holding companies. Annual Base Salary adjustments shall be
made on the anniversary of the consummation of the Closing Date,
or other annual date agreed to by Executive at the request of the
Company. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement.
(ii) Annual Performance Bonus. During the Employment
Period, the Executive shall be eligible to receive an annual cash
bonus ("Annual Bonus"), determined in accordance with the
Company's annual incentive plan as
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in effect from time to time. The Executive shall have a target
bonus equal to [___%] of the Executive's Annual Base Salary. The
Executive's Annual Bonus for the twelve-month period ending
December 31, 2001, will be based on the Company's plan in effect
as of the date hereof, excluding merger related expenses and
adjustments for purposes of calculating the Company's financial
performance thereunder. In future years, potential bonus payouts
will be comparable to Parent's and its subsidiaries' potential
payouts for similarly-situated executives and also comparable to
potential bonus payouts for executives with similar
responsibilities at U.S. commercial banks and bank holding
companies of similar size. Performance measures will be
established for future years based on strategic objectives of the
Parent and the business plan of the Company as agreed to by the
management of the Company (including the impact of any
carry-forward or rolling provision) and as agreed to and approved
by the Vice Chairman.
(iii) Retention Bonus. Executive shall be entitled to a
retention bonus of $_______ (the "Retention Bonus"), payable by
the Company on the third anniversary of the Closing Date,
provided that, except as otherwise specifically provided,
Executive is still employed by the Company or its affiliates at
that time.
(iv) Other Employee Benefit Plans. During the Employment
Period, except as otherwise expressly provided herein or on
Exhibit A, the Executive shall be entitled to participate in all
employee pension benefit, welfare and other similar plans,
practices, policies and programs of the Company (collectively,
"Employee Benefit Plans") as are in effect from time to time,
subject to the applicable eligibility provisions and other terms
and conditions of such plans. It is contemplated that such
Employee Benefit Plans will provide pension and welfare benefits
generally comparable to those in effect at the Company on the
Closing Date.
(v) Executive Benefits. Executive shall continue to receive
reimbursement for membership dues for clubs currently being paid,
will receive reimbursement for tax preparation costs and will
continue to be provided with a Company vehicle under arrangements
similar to that currently provided by the Company. It is
understood that the Company may change the vehicle arrangement to
be consistent with that provided elsewhere by the Parent whereby
the vehicle is leased and is retained for a period of 3 or 4
years.
(vi) Closing Bonus. The Company shall pay to the Executive
a one-time lump sum bonus of $[ ] in the first full pay period
following the Closing Date.
(vii) Parent Stock Option Grant. A stock option grant of
____ options to purchase Parent common shares will be made to
Executive effective as of the first day of the month after the
Closing Date. The exercise price and
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vesting schedule will be set at that time in accordance with the
Parent's stock option plan administrative guidelines. In future
years, grants of options and other equity-based compensation will
be made to Executive on the same basis as similarly-situated
employees of Parent and its subsidiaries.
(viii) Expenses. During the Employment Period, Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by Executive in accordance with the
policies, practices, and procedures of the Company applicable to
peer executives. In addition, if the Executive is required to
relocate his principal work location by more than thirty-five
(35) miles from the current location, then the Company shall
reimburse reasonable moving expenses for Executive's household,
pursuant to the Company's relocation policy.
(ix) Retirement.
(a) Subject to subsection (e) below, upon termination
of employment other than a termination by the Company for
Cause, following the attainment of age 58, Executive will
be entitled to a retirement payment based on Pensionable
Earnings, payable in equal monthly installments commencing
on the later of (X) the first day of the month following
Executive's termination of employment or (Y) the first day
of the month following Executive's attainment of age 58 and
shall continue thereafter each month until the month in
which Executive dies. The annual retirement payment shall
be 70% of the Pensionable Earnings, less:
(i) Executive's accrued vested benefit payable
under any defined benefit pension plan maintained by
the Company or its affiliates (payable as a life
annuity based on actuarial equivalencies no less
favorable to Executive than the assumptions used to
determine actuarial equivalencies under the Company's
qualified pension plan as of the Closing Date);
(ii) an amount equal to 1/10th of the Company's
aggregate contributions (other than employee salary
deferrals) to any 401(k) plan on behalf of the
Executive following the Closing Date;
(iii) Executive's accrual vested benefit under
any "excess benefit" or "top hat" plan maintained by
the Company or its affiliates to provide benefits
otherwise limited by Sections 401(a)(17) and 415 of
the Internal Revenue Code of 1986, as amended (the
"Code") (payable as a life annuity based on actuarial
equivalencies no less favorable to Executive than the
assumptions used to
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determine actuarial equivalencies under the Company's
qualified pension plan as of the Closing Date); and
(iv) commencing on the Executive's 62nd birthday,
an amount equal to Executive's primary social security
benefit payable under old age survivors and disability
insurance.
(b) "Pensionable Earnings" for purposes of computing
the retirement benefit hereunder shall mean the sum of (1)
twelve times Executive's monthly base salary as of his
termination of employment (but not less than Executive's
average annual base salary for the three full fiscal years
prior to termination) plus (2) the average of the Annual
Bonuses paid Executive during the prior three fiscal years,
including any compensation deferrals elected during such
years by the Executive.
(c) If the Executive dies before receipt of 180+
monthly payments of the retirement benefit under this
subsection and Executive does not have a surviving spouse,
a lump sum payment shall be paid to Executive's estate. The
lump sum payment shall be equal to the present value (using
the discount rate that is used, or would have been used, to
determine a lump sum payment payable in the month of
distribution under the Company's qualified defined benefit
pension plan) of the amount, if any, by which (1) the
product of 180 multiplied by the monthly benefit paid to
Executive (or payable to Executive at the time of
Executive's death in the event of death before Executive's
receipt of any payment) exceeds (2) the sum of the payments
to Executive under this subsection.
(d) A monthly benefit shall be payable under this
subsection to the surviving spouse of Executive. Such
benefit shall commence on the later of the first day of the
month following the date of Executive's death or the first
day of the month in which Executive would have attained age
58 and shall continue thereafter until the month in which
the surviving spouse dies. The monthly benefit payable to
the surviving spouse (as long as the Executive was married
to such spouse at the earlier of (I) the time of his death
or (II) the attainment of age 58) shall equal one-half of
the monthly retirement benefit that was being paid or was
payable to Executive under this subsection); provided,
however, that if the Executive has remarried after
attaining age 58 and the new surviving spouse is more than
10 years younger than the Executive, such amount shall be
actuarially reduced pursuant to standard actuarial
procedures to reflect such incremental age differential.
Upon the death of the surviving spouse, the estate of
Executive's surviving spouse shall be paid a lump
----------
+ Xxxxxx: 240
-5-
sum payment equal to the present value (using the discount
rate that is used, or would have been used, to determine a
lump sum payment payable in the month of distribution under
the Company's qualified defined benefit pension plan) of
the amount, if any, by which (1) the product of 180
multiplied by the monthly benefit paid to Executive (or
payable to Executive at the time of Executive's death in
the event of death before Executive's receipt of any
payment) exceeds (2) the sum of the payments to Executive
and surviving spouse.
(e) A benefit payable under this subsection shall be
payable in all events if Executive separates from service
for any reason other than a termination by the Company for
Cause (including death, disability or separation from
service); provided, however, that, if Executive terminates
employment without Good Reason, the benefits payable
hereunder shall not exceed an amount equal to the product
of 180 multiplied by the monthly benefit payable to
Executive at age 58 at the time of his termination of
employment.
(x) Additional Payment by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated
entities) to or for the benefit of Executive (whether
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments
required under this Section) (the "Payments") would be
subject to the excise tax imposed by Code Section 4999, or
any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Company shall pay to Executive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by
Executive of all taxes (including any Excise Tax) imposed
upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amounts
of such Excise Tax:
(i) Such Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of
the Code, but no parachute payments in excess of the
"base amount" (as defined under 280G(b)(3)
-6-
of the Code) shall be treated as subject to the Excise
Tax, unless, and except to the extent that, in the
opinion of nationally-recognized U.S. certified
independent accountants with experience in these
issues selected by Executive with the approval of the
Vice Chairman (the "Accounting Firm") or tax counsel
selected by such Accounting Firm, there is no
substantial authority that the Payments (in whole or
in part) do not constitute parachute payments, or
represent reasonable compensation for services
actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount"
or are otherwise not subject to the Excise Tax. All
fees and expenses of the Accounting Firm shall be
borne solely by the Company. The Gross-up Payment
under this Section with respect to any Payments shall
be made no later than thirty (30) days following the
receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with
a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will
not result in the imposition of a negligence or
similar penalty. Subject to Subsection 5(b)(x)c below,
the Determination by the Accounting Firm shall be
binding upon the Company and Executive.
(ii) For purposes of determining the amount of
the Gross-up Payment, the Executive shall be deemed to
(a) pay federal income taxes at the highest marginal
rates of federal income taxation for the calendar year
in which the Gross-up Payment is to be made, (b) pay
applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the
maximum reduction in federal income taxes which could
be obtained from deduction of such state and local
taxes.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which
will not have been made by the Company should have been
made ("Underpayment") or Gross-up Payments are made by the
Company which should not have been made ("Overpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is
required to make payment of any Excise Tax or additional
Excise Tax, the Accounting Firm
-7-
shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code)
shall be promptly paid by the Company to or for the benefit
of Executive. In the event the amount of the Gross-up
Payment exceeds the amount necessary to reimburse the
Executive for his Excise Tax, the Accounting Firm shall
determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the
rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Executive (to the extent he has received a
refund if the applicable Excise Tax has been paid to the
Internal Revenue Service) to or for the benefit of the
Company. Executive shall cooperate, provided his expenses
are reimbursed by the Company, with any reasonable requests
by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the
Excise Tax, including but not limited to taking action to
contest a claim by the Internal Revenue Service, and
permitting the Company to participate in proceedings
relating to such claim.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period and in that event the Date of Termination shall be
the date of death. If the Executive has become Disabled (as defined
below) during the Employment Period and is, therefore, unable to
perform his duties herein for more than one hundred eighty (180)
calendar days during any period of twelve (12) consecutive months, or
in the event of the Company's reasonable expectation that the
Executive's Disability will exist for more than a period of one hundred
eighty (180) calendar days, the Company may give to the Executive
written notice in accordance with Section 4(d) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
(i) The term "Disability" shall mean, for all purposes of
this Agreement, the incapacity of the Executive, due to injury,
illness, disease, or bodily or mental infirmity, to engage in the
performance of substantially all of the usual duties of
employment with the Company, such Disability to be determined by
the Vice Chairman or the head of Human Resources of Parent upon
receipt of and in reliance on medical advice from one (1) or more
individuals, selected by the Vice Chairman and the head of Human
Resources of Parent and reasonably acceptable to Executive, who
are qualified to give such professional medical advice.
-8-
(ii) If the Executive's employment is terminated by reason
of disability, the Date of Termination shall be the Disability
Effective Date, or any later date specified by the Company.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the continued failure of Executive to perform
substantially his duties with the Company (other than any such
failure resulting from Executive's incapacity due to physical or
mental illness, or any such failure subsequent to Executive being
delivered a Notice of Termination without Cause by the Company or
delivering a Notice of Termination for Good Reason to the
Company) after a written demand for substantial performance that
specifically identifies the manner in which the Company believes
that Executive has not substantially performed Executive's duties
is delivered to Executive by the Vice Chairman and the head of
Human Resources of Parent;
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is demonstrably injurious to the
Company or its affiliates;
(iii) the failure by Executive, due to willful conduct or
gross negligence, to maintain the privacy of financial, secret or
confidential information concerning the Company, or a deliberate
breach of a fiduciary duty owed by the Executive to the Company
or its affiliates; or
(iv) the Executive's chronic alcohol or drug abuse that
results in a material impairment of the Executive's ability to
perform his or her duties as an employee of the Company.
For purposes of this subsection (b), no act or failure to act, on the
part of the Executive, shall be considered "deliberate" or "willful"
unless it is done, or omitted to be done, by the Executive in bad faith
or without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to act,
based upon instructions of the Vice Chairman or the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of
the Company.
(c) Good Reason. The Executive may terminate employment for Good
Reason provided that Executive provides written notice within ninety
(90) days following Executive's knowledge of an event constituting Good
Reason or such event shall not constitute Good Reason under this
Agreement. "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events:
-9-
(i) a reduction by the Company in Executive's Annual Base
Salary or any other breach of Section 3(b) hereof by the Company,
which is not cured by the Company within 30 business days after
notice of such breach;
(ii) any requirement of the Company that Executive's
principal work location be based anywhere more than seventy-five
(75) miles from the office where Executive is located at the
Closing Date;
(iii) a material diminishment in Executive's duties or
title as in effect at the Closing Date, excluding for this
purpose an isolated and inadvertent action not taken in bad faith
and which is remedied by the Company within 30 days after receipt
of notice thereof given by Executive, it being understood that
diminishment in duties solely as a result of the Company becoming
a subsidiary of Parent or no longer being a public company shall
not be Good Reason;
(iv) the material breach of this Agreement by the Company;
or
(v) any notice of non-renewal given by the Company pursuant
to Section 2 hereof.+
(d) Notice of Termination. A termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 11(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a
written notice which indicates the Date of Termination, as specified
below. The Date of Termination means:
(i) if the Executive's employment is terminated by the
Company, the date of receipt of the Notice of Termination or any
later date specified therein within 30 days of such notice, or
(ii) if the Executive's employment is terminated by the
Executive, a date not less than 30 days after the date of the
Notice of Termination, provided, however, that the Company may
waive such 30-day provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives or to the
Executive, as the case may be, under this Agreement, other than for
payment of:
(i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid;
----------
+ Not for Xxxxxx.
-10-
(ii) a pro rata portion of target Annual Bonus for the
fiscal year in which the Date of Termination occurs based on 365
days, to the extent not theretofore paid;
(iii) the Retention Bonus, to the extent not theretofore
paid;
(iv) retirement benefits as set forth in Section 3(b)(ix);
and
(v) any other amounts or benefits required to be paid or
provided or for which the Executive is eligible to receive under
any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies through the Date of
Termination, to the extent not theretofore paid or provided,
including disability insurance benefits, if applicable (such
other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
Any amounts payable pursuant to subsections (i) through (iii) of
this Section 5(a) shall be paid to the Executive, the Executive's
estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination.
(b) Termination Without Cause or by the Executive for Good
Reason. If the Executive's employment is terminated after the Closing
Date, by reason of the Executive's termination by the Company without
Cause (other than by reason of death or Disability) or by the Executive
for Good Reason, this Agreement shall terminate without further
obligations to the Executive, under this Agreement, other than for
payment of:
(i) the Executive's Annual Base Salary through the end of
the month in which the Date of Termination occurs, to the extent
not theretofore paid, shall be paid in a lump sum within thirty
(30) days of Executive's Date of Termination;
(ii) a pro rata portion of any target Annual Bonus for the
fiscal year in which the Date of Termination occurs, based on 365
days, to the extent not theretofore paid, shall be paid in a lump
sum within thirty (30) days of Executive's Date of Termination;
(iii) the Retention Bonus, if not previously paid shall be
paid in a lump sum within thirty (30) days of Executive's Date of
Termination;
(iv) beginning on the last day of the month in which the
Date of Termination occurs and ending after the greater of (A)
the number of months remaining after the Date of Termination
until the end of the Employment Period or (B) thirty-six (36)
months, the Company shall pay Executive an amount equal to the
sum of (X) plus (Y), divided by twelve. For this purpose, (X)
equals the Executive's Annual Base Salary as in effect on the
Date of Termination, and (Y)
-11-
equals the average of the Annual Bonuses paid to Executive in the
preceding three years;
(v) from the Date of Termination and for the greater of (A)
the number of months remaining after the Date of Termination
until the end of the Employment Period or (B) thirty-six (36)
months thereafter, the Company shall continue welfare benefits to
Executive and/or Executive's family that are at least equal, on
an after-tax basis, to those which would have been provided to
them in accordance with the Employee Benefit Plans described in
Section 3(b)(iv) of this Agreement if Executive's employment had
not been terminated; provided, however, that if Executive becomes
re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein
shall be secondary to those available to Executive under such
other plan during such applicable period of eligibility;
(vi) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to Executive any other
amounts or benefits required to be paid or provided or which
Executive is eligible to receive as Other Benefits;
(vii) each stock option and any other stock-based award
outstanding immediately prior to the Date of Termination shall be
governed by the terms of the plan under which it was granted; and
(viii) retirement benefits as set forth in Section
3(b)(ix).
(c) Termination For Cause or by the Executive Without Good
Reason. If the Executive's employment shall be terminated for Cause or
the Executive terminates his employment prior to the end of the
Employment Period without Good Reason, this Agreement shall terminate
without further obligation to the Executive other than the obligation
to pay to the Executive his Annual Base Salary through the Date of
Termination to the extent theretofore unpaid and the Other Benefits and
for a termination by Executive without Good Reason, retirement benefits
as set forth in Section 3(b)(ix).
6. NON-EXCLUSIVITY OF RIGHTS. Except as specifically provided, nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 1 and Section 11(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement,
-12-
provided that the Executive shall not be eligible for severance benefits under
any other program or policy of the Company.
7. NO MITIGATION. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
8. COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION.
(a) During the term of this Agreement, and for a three-year
period after the Date of Termination, the Executive shall not:
(i) directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation
or control of, or be employed by or connected in any manner with,
any Competing Business, whether for compensation or otherwise,
without the prior written consent of the Company. For the
purposes of this Agreement, a "Competing Business" shall be any
business which is a direct competitor of the Company or any of
its affiliates at the Date of Termination within 200 miles of any
location of the Company or any of its affiliates over which the
Executive had responsibilities during the year prior to the Date
of Termination;
(ii) in any manner, directly or indirectly, Solicit a
Client to transact business with a Competing Business or to
reduce or refrain from doing any business with the Company, or
interfere or damage (or attempt to interfere with or damage) any
relationship between the Company and a Client. For purposes of
the Agreement, the term "Solicit" means any direct or indirect
communication of any kind whatsoever, regardless of by whom
initiated, inviting, advising, encouraging or requesting any
person or entity, in any manner, to take or refrain from taking
any action. For purposes of this Agreement, the term "Client"
means any client or customer or prospective client or customer of
the Company or any of its affiliates to whom the Executive
provided services, or for whom the Executive transacted business,
or whose identity became known to the Executive in connection
with the Executive's relationship with or employment by the
Company; or
(iii) in any manner, directly or indirectly, Solicit any
person who is an employee of the Company or any of its affiliates
to resign from the Company or to apply for or accept employment
with any Competing Business.
Notwithstanding the foregoing, this Section 8(a) shall not apply
if the Executive is terminated without Cause by the Company or if
Executive terminates employment for Good Reason.
-13-
(b) The Executive hereby acknowledges that, as an employee of the
Company, he will be making use of, acquiring and adding to confidential
information of a special and unique nature and value relating to the
Company and its strategic plan and financial operations. The Executive
further recognizes and acknowledges that all confidential information
is the exclusive property of the Company, is material and confidential,
and is critical to the successful conduct of the business of the
Company. Accordingly, the Executive hereby covenants and agrees that he
will use confidential information for the benefit of the Company only
and shall not at any time, directly or indirectly, during the term of
this Agreement and thereafter, divulge, reveal or communicate any
confidential information to any person, firm, corporation or entity
whatsoever, or use any confidential information for his own benefit or
for the benefit of others.
(c) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this
Section 8.
(d) In addition to the cessation of payments set forth in Section
8(f), the Executive acknowledges and agrees that the Company will have
no adequate remedy at law, and could be irreparably harmed, if the
Executive breaches or threatens to breach any of the provisions of this
Section 8. The Executive agrees that the Company shall be entitled to
equitable and/or injunctive relief to prevent any breach or threatened
breach of this Section 8, and to specific performance of each of the
terms hereof in addition to any other legal or equitable remedies that
the Company may have. The Executive further agrees that he shall not,
in any equity proceeding relating to the enforcement of the terms of
this Section 8, raise the defense that the Company has an adequate
remedy at law.
(e) The terms and provisions of this Section 8 are intended to be
separate and divisible provisions and if, for any reason, any one or
more of them is held to be invalid or unenforceable, neither the
validity nor the enforceability of any other provision of this
Agreement shall thereby be affected. The parties hereto acknowledge
that the potential restrictions on the Executive's future employment
imposed by this Section 8 are reasonable in both duration and
geographic scope and in all other respects. If for any reason any court
of competent jurisdiction, or arbitrator, shall find any provisions of
this Section 8 unreasonable in duration or geographic scope or
otherwise, the Executive and the Company agree that the restrictions
and prohibitions contained herein shall be effective to the fullest
extent allowed under applicable law in such jurisdiction.
(f) The parties acknowledge that this Agreement would not have
been entered into and the benefits described in Sections 3 or 5 would
not have been promised in the absence of the Executive's promises under
this Section 8 and that should the Executive engage in any activity or
conduct prescribed hereunder, all payments under this Agreement shall
cease.
-14-
9. ASSIGNMENTS. This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. Any
attempted or purported assignment hereof by the Executive shall be null and
void. This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
10. ARBITRATION. ANY AND ALL DISPUTES OR CONTROVERSIES, ARISING FROM OR
REGARDING THE INTERPRETATION, PERFORMANCE, ENFORCEMENT OR TERMINATION OF THIS
AGREEMENT SHALL BE RESOLVED BY FINAL AND BINDING ARBITRATION IN THE LOCATION
SELECTED BY EXECUTIVE, WITHIN THE CONTINENTAL UNITED STATES AND CANADA UNDER THE
PROCEDURES OF THE CPR INSTITUTE FOR DISPUTE RESOLUTION OR ITS SUCCESSOR ENTITY.
At the good faith election of either party, prior to commencing an arbitration
proceeding, the parties agree to submit a dispute or controversy to an
independent third-party mediation service for non-binding mediation; so long as
such mediation process shall last no longer than five days. Nothing in this
section is intended to prevent either party from obtaining either injunctive
relief in court to prevent irreparable harm pending the conclusion of any such
arbitration or from utilizing any judicial court system to seek enforcement of
an arbitration award.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
agreements made and wholly to be performed in such state. The captions
of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended or modified other
than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
To the address most recently on file with the Company.
If to the Company or to:
Centura Banks, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Attn: General Counsel
-15-
with a copy to Parent:
Royal Bank of Canada
8th Floor - South Tower
000 Xxx Xxxxxx
Xxxxxxx, XX X0X0X0
Attn: Vice Chairman of Personal and Commercial
Banking
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.The Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign
taxes as shall be required to be withheld pursuant to any applicable
law or regulation.
(d) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure
to assert any right the Executive or the Company may have hereunder
shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(e) From and after the date hereof this Agreement shall supersede
any other employment, severance or change of control agreement between
the Company or any of its affiliates, on the one hand, and the
Executive, on the other, with respect to the subject matter hereof.
12. COSTS OF ENFORCEMENT. In any action taken in good faith relating to
the enforcement of this Agreement or any provision herein, Executive shall be
entitled to be paid any and all costs and expenses incurred by him in enforcing
or establishing his rights thereunder, including, without limitation, reasonable
attorneys' fees, whether an arbitration proceeding be brought or not, and
whether or not incurred in an arbitration proceeding, trial, bankruptcy or
appellate proceedings, provided that the Executive prevails in such action.
Executive shall also be entitled to be paid all reasonable legal fees and
expenses, if any, incurred in connection with any tax audit or proceeding to the
extent attributable to the application of Code Section 4999 to any payment or
benefit hereunder. Such payment shall be made within fifteen (15) business days
after delivery of Executive's respective written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
-16-
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-----------------------------------------
Executive
CENTURA BANKS, INC.
By
-----------------------------------------
Title:
CENTURA BANK
By
-----------------------------------------
Title:
EXHIBIT D
FORM OF AFFILIATE LETTER
____________, 2001
Royal Bank of Canada
000 Xxx Xxxxxx
Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Centura Banks, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of
Centura Banks, Inc., a North Carolina corporation (the "Company") as that term
is defined in Rule 144 and used in Rule 145 promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Xxx 0000, as amended (the
"Securities Act"). I understand that pursuant to the terms of the Agreement and
Plan of Merger, dated as of January 26, 2001 (as amended from time to time,
including the exhibits thereto, the "Merger Agreement"), by and between the
Company and Royal Bank of Canada, a Canadian chartered bank (the "Acquiror"), a
wholly owned subsidiary of the Acquiror plans to merge with and into the
Company.
I further understand that as a result of the Merger, I may receive
shares of common stock, without nominal or par value, of the Acquiror ("Acquiror
Common Stock") in exchange for shares of common stock, without par value, of the
Company ("Company Common Stock").
I have carefully read this letter and reviewed the Merger Agreement and
discussed their requirements and other applicable limitations upon my ability to
sell, transfer, or otherwise dispose of Acquiror Common Stock and Company Common
Stock, to the extent I felt necessary, with my counsel or counsel for the
Company.
I represent, warrant and covenant with and to the Acquiror that in the
event I receive any Acquiror Common Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such
Acquiror Common Stock unless (i) such sale, transfer or other
disposition has been registered under the Securities Act, (ii)
such sale, transfer or other disposition is made in conformity
with the provisions of Rule 145 under the Securities Act (as such
rule may be amended from time to time), or (iii) in
the opinion of counsel in form and substance reasonably satisfactory to
the Acquiror, or under a "no-action" letter obtained by me from the
staff of the SEC, such sale, transfer or other disposition will not
violate or is otherwise exempt from registration under the Securities
Act.
2. I understand that the Acquiror is under no obligation to register
the sale, transfer or other disposition of shares of Acquiror
Common Stock by me or on my behalf under the Securities Act or to
take any other action necessary in order to make compliance with
an exemption from such registration available.
3. I understand that stop transfer instructions will be given to the
Acquiror's transfer agent with respect to shares of Acquiror
Common Stock issued to me as a result of the Merger and that
there will be placed on the certificates for such shares, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were
issued as a result of the merger of a subsidiary
of Royal Bank of Canada with and into Centura
Banks, Inc. on _______, 2001, in a transaction to
which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares represented by
this certificate may be transferred only in
accordance with the terms of a letter agreement
between the registered holder hereof and Royal
Bank of Canada, a copy of which agreement is on
file at the principal offices of Royal Bank of
Canada."
4. I understand that, unless transfer by me of the Acquiror Common
Stock issued to me as a result of the Merger has been registered
under the Securities Act or such transfer is made in conformity
with the provisions of Rule 145(d) under the Securities Act, the
Acquiror reserves the right, in its sole discretion, to place the
following legend on the certificates issued to my transferee:
"The shares represented by this certificate have
not been registered under the Securities Act of
1933 and were acquired from a person who, in
turn, received such shares as a result of the
merger of a subsidiary of Royal Bank of Canada
with and into Centura Banks, Inc. on ______,
2001, in a transaction to which Rule 145 under
the Securities Act of 1933 applies. The shares
have been acquired by the holder not with a view
to, or for resale in connection with, any
distribution thereof within the meaning of the
Securities Act of 1933 and may not be offered,
sold, pledged or otherwise transferred except in
accordance with an exemption from the
registration requirements of the Securities Act
of 1933."
It is understood and agreed that the legends set forth in paragraphs
(3) and (4) above shall be removed by delivery of substitute certificates
without such legends if I shall have delivered to the Acquiror (i) a copy of a
"no action" letter from the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to the Acquiror, to the effect that such
legend is not required for purposes of the Act, or (ii) evidence or
representations satisfactory to the Acquiror that Acquiror Common Stock
represented by such certificates is being or has been sold in conformity with
the provisions of Rule 145(d).
I further understand and agree that this letter agreement shall apply
to all shares of Company Common Stock and Acquiror Common Stock that I am deemed
to beneficially own pursuant to applicable federal securities law and I further
represent, warrant and covenant with and to the Acquiror that I will have, and
will cause each of the other parties whose shares are deemed to be beneficially
owned by me to have, all shares of Company Common Stock or Acquiror Common Stock
owned by me or such parties registered in my name or the name of such parties,
as applicable, prior to the effective date of the Merger and not the name of any
bank, broker or dealer, nominee or clearing house.
Very truly yours,
By:___________________________________
Name:
Accepted this ____ day of __________, 2001.
CENTURA BANKS, INC.
By: ____________________________________
Name:
Title:
ROYAL BANK OF CANADA
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
