AGREEMENT AND PLAN OF MERGER
between
ANCHOR FINANCIAL CORPORATION
and
COMSOUTH BANKSHARES, INC.
dated April 14, 1998
TABLE OF CONTENTS
Page
PREAMBLE.......................................................................1
RECITALS.......................................................................1
DEFINITIONS....................................................................2
ARTICLE I. MERGER.............................................................7
1.1 THE MERGER...................................................7
1.2 EFFECTIVE DATE...............................................7
ARTICLE II. MERGER CONSIDERATION..............................................7
2.1 CONSIDERATION................................................7
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS..........................8
2.3 FRACTIONAL SHARES............................................8
2.4 EXCHANGE PROCEDURES..........................................8
2.5 DISSENTING SHARES............................................9
2.6 RESERVATION OF RIGHT TO REVISE TRANSACTION...................9
2.7 OPTIONS......................................................9
2.8 ANTI-DILUTION ADJUSTMENTS...................................10
ARTICLE III. COMSOUTH ACTIONS PENDING CONSUMMATION...........................11
3.1 CAPITAL STOCK...............................................11
3.2 DISTRIBUTIONS...............................................11
3.3 LIABILITIES.................................................11
3.4 OPERATIONS..................................................11
3.5 LIENS AND ENCUMBRANCES......................................11
3.6 EMPLOYMENT ARRANGEMENTS.....................................12
3.7 BENEFIT PLANS...............................................12
3.8 CONTINUANCE OF BUSINESS.....................................12
3.9 AMENDMENTS..................................................12
3.10 CLAIMS......................................................12
3.11 CONTRACTS...................................................12
3.12 LOANS.......................................................13
ARTICLE IV. ANCHOR ACTIONS PENDING CONSUMMATION..............................13
ARTICLE V. REPRESENTATIONS AND WARRANTIES....................................13
5.1 COMSOUTH'S REPRESENTATIONS AND WARRANTIES...................13
5.2 ANCHOR'S REPRESENTATIONS AND WARRANTIES.....................25
5.3 EXCEPTIONS TO REPRESENTATIONS...............................28
-i-
Page
ARTICLE VI. COVENANTS........................................................29
6.1 BEST EFFORTS................................................29
6.2 THE PROXY...................................................29
6.3 REGISTRATION STATEMENT - COMPLIANCE
WITH SECURITIES LAWS........................................29
6.4 REGISTRATION STATEMENT EFFECTIVENESS........................30
6.5 PRESS RELEASES..............................................30
6.6 ACCESS; INFORMATION.........................................30
6.7 ACQUISITION PROPOSALS.......................................31
6.8 REGISTRATION STATEMENT PREPARATION; REGULATORY
APPLICATIONS PREPARATION....................................32
6.9 APPOINTMENT OF DIRECTORS....................................32
6.10 EMPLOYMENT AGREEMENTS.......................................32
6.11 BLUE-SKY FILINGS............................................32
6.12 AFFILIATE AGREEMENTS........................................33
6.13 TAKEOVER LAW................................................33
6.14 NO RIGHTS TRIGGERED.........................................33
6.15 SHARES LISTED...............................................33
6.16 CURRENT INFORMATION.........................................33
6.17 SEVERANCE...................................................34
6.18 INDEMNIFICATION.............................................34
ARTICLE VII. CONDITIONS TO CONSUMMATION
OF THE MERGER...............................................................34
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS......................34
7.2 CONDITIONS TO OBLIGATIONS OF ANCHOR.........................36
7.3 CONDITIONS TO OBLIGATIONS OF COMSOUTH.......................37
ARTICLE VIII. TERMINATION....................................................38
8.1 EVENTS OF TERMINATION.......................................38
8.2 CONSEQUENCES OF TERMINATION.................................41
ARTICLE IX. OTHER MATTERS....................................................41
9.1 SURVIVAL....................................................41
9.2 WAIVER; AMENDMENT...........................................41
9.3 COUNTERPARTS................................................42
9.4 GOVERNING LAW...............................................42
9.5 EXPENSES....................................................42
9.6 CONFIDENTIALITY.............................................42
9.7 NOTICES.....................................................42
9.8 ENTIRE UNDERSTANDING; NO THIRD PARTY
BENEFICIARIES...............................................43
9.9 HEADINGS....................................................43
-ii-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 14, 1998 (the
"Agreement"), is made and entered into by and between ANCHOR FINANCIAL
CORPORATION ("Anchor"), a South Carolina corporation, and COMSOUTH BANKSHARES,
INC. ("ComSouth"), a South Carolina corporation.
PREAMBLE
The management and Boards of Directors of Anchor and ComSouth believe,
respectively, that the business combination transaction provided for herein, in
which ComSouth will, subject to the terms and conditions set forth herein, merge
with and into Anchor so that Anchor is the surviving corporation in the Merger,
is in the best interests of Anchor and ComSouth's shareholders.
RECITALS
A. ANCHOR. Anchor is a corporation duly organized and validly existing
under South Carolina law and is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, with its principal offices located at
0000 Xxx Xxxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxxx. As of the date of this Agreement,
Anchor has 7,000,000 authorized shares of common stock, par value $6.00 per
share ("Anchor Common Stock") (no other class of capital stock being
authorized), of which 3,890,323 shares of Anchor Common Stock are issued and
outstanding and of which 388,784 shares are subject to issuance pursuant to
certain stock options.
B. COMSOUTH. ComSouth is a corporation duly organized and validly
existing under South Carolina law and is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended, with its principal executive
offices located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxx Xxxxxxxx.
As of the date of this Agreement, ComSouth has 75,000,000 authorized shares of
common stock, no par value per share ("ComSouth Common Stock") (with preferred
stock being authorized but no shares of which are issued), of which 2,341,320
shares of ComSouth Common Stock are issued and outstanding and of which 214,254
shares of ComSouth Common Stock are subject to issuance pursuant to certain
stock options.
C. APPROVALS. At meetings of the respective Boards of Directors of
Anchor and ComSouth, each such Board has approved and authorized the execution
of this Agreement.
D. INTENTION OF THE PARTIES. The parties intend the Merger to qualify,
for accounting purposes, as a "pooling of interests." The parties intend the
Merger to qualify, for federal income tax purposes, as a tax-free reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
In consideration of their mutual promises and obligations, Anchor and
ComSouth agree as follows:
DEFINITIONS
A. DEFINITIONS. Capitalized terms used in this Agreement have the following
meanings:
"Acquisition Proposal" has the meaning assigned in Section 6.7(A).
"Agreement" means this Agreement and Plan of Merger.
"Anchor" means Anchor Financial Corporation, a South Carolina corporation.
"Anchor Common Stock" has the meaning assigned in Recital A.
"Anchor Financial Reports" has the meaning assigned in Section 5.2(G).
"Anchor Option" has the meaning assigned in Section 2.7.
"Appraisal Laws" has the meaning assigned in Section 2.5.
"Asset Classification" has the meaning assigned in Section 5.1(5).
"Charleston Bank" means The Bank of Charleston, a national banking
association.
"Code" has the meaning assigned in Section 5.1(P)(2).
"Columbia Bank" means The Bank of Columbia, a national banking association.
"Compensation and Benefit Plans" has the meaning assigned in Section
5.1(P)(1).
"ComSouth" means ComSouth Bankshares, Inc., a South Carolina corporation.
"ComSouth Common Stock" has the meaning assigned in Recital B.
"ComSouth Financial Reports" has the meaning assigned in Section 5.1(H).
"ComSouth Option" has the meaning assigned in Section 2.7.
"Dissenting Shares" means the shares of ComSouth Common Stock held by those
shareholders of ComSouth who have timely and properly exercised their
dissenters' rights in accordance with the Appraisal Laws.
"Effective Date" has the meaning assigned in Section 1.2.
"Eligible ComSouth Common Stock" means shares of ComSouth Common Stock
validly issued and outstanding on the Effective Date other than Dissenting
Shares.
"Employment Agreement" means Exhibit C.
"Environmental Law" means (1) any federal state, and/or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, judgment, decree, injunction, requirement or
agreement with any governmental entity, relating to (a) the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or human health or
safety, or (b) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Material, in each case as amended and as now in effect,
including the Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, and the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, and (2) any common law or equitable doctrine
(including injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Material.
"ERISA" has the meaning assigned in Section 5.1(P)(2).
"ERISA Affiliate" has the meaning assigned in Section 5.1(P)(3).
2
"ERISA Plans" has the meaning assigned in Section 5.1(P)(2).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated under such statute.
"Exchange Agent" has the meaning assigned in Section 2.4.
"Exchange Ratio" has the meaning assigned in Section 2.1(B).
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"GAAP" means generally accepted accounting principles consistently applied.
"Hazardous Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or quantity,
including any oil or other petroleum product, toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
"Joint Proxy Statement" has the meaning assigned in Section 6.2.
"Loan/Fiduciary Property" means any property owned or controlled by
ComSouth or either of its Subsidiaries or in which ComSouth or either of its
Subsidiaries holds a security or other interest, and, where required by the
context, includes any such property where ComSouth or either of its Subsidiaries
constitutes the owner or operator of such property, but only with respect to
such property.
"Material Adverse Effect" means, with respect to any Party, an event,
occurrence or circumstance (including (i) the making of any provisions for
possible loan and lease losses, write-downs of other real estate owned and
taxes, and (ii) any breach of a representation or warranty contained in this
Agreement by such Party) that (a) has or is reasonably likely to have a material
adverse effect on the financial condition, results of operations, business or
prospects of such Party and its Subsidiaries, taken as a whole, or (b) would
materially impair such party's ability to perform its obligations under this
Agreement or the consummation of any of the transactions contemplated by this
Agreement.
"Meeting" has the meaning assigned in Section 6.2.
"Merger" has the meaning assigned in Section 1.1.
"Multiemployer Plans" has the meaning assigned in Section 5.1(P)(2).
"NASDAQ" means the National Association of Securities Dealers Automated
Quotations system.
"OCC" means the Office of the Comptroller of the Currency.
"Participation Facility" means any facility in which ComSouth or its
Subsidiaries participates in the management and, where required by the context,
includes the owner or operator of such facility.
"Party" means a party to this Agreement.
"Pension Plan" has the meaning assigned in Section 5.1(P)(2).
3
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, governmental
body, or other entity.
"Registration Statement" has the meaning assigned in Section 6.2.
"Regulatory Authorities" means federal or state governmental agencies,
authorities or departments charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits.
"Rights" means securities or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire, or any options,
calls or commitments relating to, shares of capital stock.
"Schedule" refers to information provided by a Party in a Schedule that is
delivered contemporaneously with the execution of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated under such statute.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, with respect to any entity, each partnership, limited
liability company, or corporation the majority of the outstanding partnership
interests, membership interests, capital stock or voting power of which is (or
upon the exercise of all outstanding warrants, options and other rights would
be) owned, directly or indirectly, at the time in question by such entity.
"Tax Returns" has the meaning assigned in Section 5.1(Z).
"Taxes" means federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes imposed on the income,
properties or operations of the respective Party or its Subsidiaries, together
with any interest, additions, or penalties relating to such taxes and any
interest charged on those additions or penalties.
B. GENERAL INTERPRETATION. Except as otherwise expressly provided in this
Agreement or unless the context clearly requires otherwise, the following rules
of interpretation apply: (i) the terms defined in this Agreement include the
plural as well as the singular; (ii) the phrase "in this Agreement" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and (iii) references in this
Agreement to Articles, Sections, Schedules, and Exhibits refer to Articles and
Sections of and Schedules and Exhibits to this Agreement. Whenever the words
"include," "includes," or "including" are used in this Agreement, they will be
deemed to be following by the words "without limitation." Unless otherwise
stated references to Subsections refer to the Subsections of the Section in
which the reference appears. All pronouns used in this Agreement include the
masculine, feminine and neuter gender, as the context requires. ARTICLE I.
MERGER 1.1 THE MERGER. Subject to the provisions of this Agreement and in
accordance with the terms of Section 00-00-000 of the Code of Laws of South
Carolina of 1976, as amended (the "South Carolina Code"), on the Effective Date,
ComSouth will merge with and into Anchor, under the Articles of Incorporation of
Anchor (the
4
"Merger"), and the resulting corporation will operate under the name "Anchor
Financial Corporation" (the "Merged Company"). After the Effective Date, the
Board of Directors of the Merged Company will consist of the directors of Anchor
immediately preceding the Effective Date plus four additional directors to be
designated from the current directors of ComSouth or its Subsidiary banks.
ComSouth may offer suggestions to Anchor, and Anchor shall make the final
designation of such directors.
1.2 EFFECTIVE DATE. Unless the Parties agree upon another date, the
"Effective Date" will be the tenth business day after the fulfillment or waiver
of all conditions precedent set forth in, and the granting of all approvals (and
expiration of any waiting period) required by, Article VII of this Agreement. A
business day is any day other than a Saturday, Sunday or legal holiday in the
State of South Carolina. If the Merger is not consummated in accordance with
this Agreement on or before December 31, 1998, Anchor or ComSouth may terminate
this Agreement in accordance with Article VIII.
ARTICLE II. MERGER CONSIDERATION
2.1 CONSIDERATION. Subject to the provisions of this Agreement, on the
Effective Date:
(A) OUTSTANDING ANCHOR COMMON STOCK. The shares of Anchor Common Stock
issued and outstanding immediately prior to the Effective Date will, on and
after the Effective Date, remain as issued and outstanding shares of Anchor
Common Stock.
(B) OUTSTANDING COMSOUTH COMMON STOCK. Except as provided below in Section
2.3, each share of Eligible ComSouth Common Stock issued and outstanding
immediately prior to the Effective Date will, by virtue of the Merger,
automatically and without any action on the part of the holder of the share, be
converted into the right to receive 0.75 shares of Anchor Common Stock (the
"Exchange Ratio").
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date, all shares,
other than Dissenting Shares, of ComSouth Common Stock issued and outstanding
immediately prior to the Effective Date will be converted into shares of Anchor
Common Stock in accordance with Section 2.1(B) by virtue of the Merger. After
the Effective Date, there will be no transfers on the stock transfer books of
ComSouth of the shares of ComSouth Common Stock that were issued and outstanding
immediately prior to the Effective Date.
2.3 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, no fractional shares of Anchor Common Stock and no certificates or
other evidence of ownership of such fractional shares will be issued in the
Merger. Anchor will pay to each holder of ComSouth Common Stock who would
otherwise be entitled to a fractional share an amount in cash (without interest)
determined by multiplying such fractional part of a share of Anchor Common Stock
by the closing price of Anchor Common Stock on the Effective Date on The Nasdaq
Stock Market (as reported in The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Anchor).
2.4 EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, Anchor will send or cause to be sent to each former shareholder of
ComSouth of record immediately prior to the Effective Date transmittal materials
for use in exchanging such shareholder's certificates for Anchor Common Stock
for the
5
consideration set forth in this Article II. The certificates representing the
shares of Anchor Common Stock for which shares of such shareholder's ComSouth
Common Stock are exchanged on the Effective Date, and any fractional share
checks that such shareholder will be entitled to receive will be delivered to
such shareholder only upon delivery to Anchor's exchange agent (the "Exchange
Agent") of the certificates representing all such shares of ComSouth Common
Stock (or indemnity satisfactory to Anchor and the Exchange Agent, in their
judgment, if any of such certificates are lost, stolen or destroyed).
Certificates surrendered for exchange by any person constituting an "affiliate"
of ComSouth for purposes of Rule 145 of the Securities Act will not be exchanged
for certificates representing Anchor Common Stock until Anchor has received a
written agreement from such person as specified in Section 6.12.
2.5 DISSENTING SHARES. Notwithstanding anything to the contrary in this
Agreement, each Dissenting Share whose holder, as of the Effective Date of the
Merger, has not effectively withdrawn or lost his dissenters' rights under
Section 00-00-000 of the South Carolina Code (the "Appraisal Laws") will not be
converted into or represent a right to receive Anchor Common Stock, but the
holder of such Dissenting Share will be entitled only to such rights as are
granted by the Appraisal Laws. Each holder of Dissenting Shares who becomes
entitled to payment for his ComSouth Common Stock pursuant to the provisions of
the Appraisal Laws will receive payment for such Dissenting Shares from Anchor
(but only after the amount of payment is agreed upon or finally determined
pursuant to the Appraisal Laws).
2.6 RESERVATION OF RIGHT TO REVISE TRANSACTION. In its sole discretion, and
notwithstanding any other provision of this Agreement to the contrary, Anchor
may at any time change the method of effecting its acquisition of ComSouth, but
no such change will (A) change the amount or kind of consideration to be issued
to holders of ComSouth Common Stock as provided for in this Agreement, or (B)
adversely affect the tax treatment to the ComSouth shareholders as a result of
receiving such consideration. If Anchor elects to change the method of
acquisition, ComSouth will cooperate with and assist Anchor with any necessary
amendment to this Agreement, and with the preparation and filing of such
applications, documents, instruments and notices as may be necessary or
desirable, in the opinion of counsel for Anchor, to obtain all necessary
shareholder approvals and approvals of any regulatory agency, administrative
body or governmental entity.
2.7 OPTIONS. On the Effective Date, by virtue of the Merger and without any
action on the part of any holder of an option, each option granted by ComSouth
to purchase shares of ComSouth Common Stock ("ComSouth Option") that has been
outstanding and unexercised will be converted into and become an option to
purchase Anchor Common Stock ("Anchor Option") on the same terms and conditions
as are in effect with respect to the ComSouth Options immediately prior to the
Effective Date, except that (A) each such Anchor Option may be exercised solely
for shares of Anchor Common Stock, (B) the number of shares of Anchor Common
Stock subject to such Anchor Options will be equal to the number of shares of
ComSouth Common Stock subject to such ComSouth Options immediately prior to the
Effective Date, multiplied by the Exchange Ratio, the product being rounded, if
necessary, up or down to the nearest whole share, and (C) the per share exercise
price under each such
6
Anchor Option will be adjusted by dividing the per share exercise price of the
ComSouth Option by the Exchange Ratio, and rounding up or down to the nearest
cent. The number of shares of ComSouth Common Stock that are issuable upon
exercise of ComSouth Options as of the date of this Agreement are disclosed in
Schedule 2.7.
2.8 ANTI-DILUTION ADJUSTMENTS. In the event Anchor changes the number of
shares of Anchor Common Stock issued and outstanding prior to the Effective Date
as a result of a stock split, stock dividend or similar recapitalization with
respect to Anchor Common Stock, and the record date therefore (in the case of a
stock dividend) or the effective date thereof (in the case of stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
ARTICLE III. COMSOUTH ACTIONS PENDING CONSUMMATION
Unless otherwise agreed to in writing by Anchor, ComSouth and its
Subsidiaries will conduct their business in the ordinary and usual course
consistent with past practice and will use their best efforts to maintain and
preserve their business organizations, employees and advantageous business
relationships and retain the services of their officers and key employees
identified by Anchor, and ComSouth, without the prior written consent of Anchor,
will not:
3.1 CAPITAL STOCK. Issue, sell or otherwise permit to become outstanding
any additional shares of capital stock of ComSouth, except pursuant to the
exercise of stock options outstanding on the date hereof, or grant any Rights
with respect to its capital stock, or enter into any agreement to do any of the
foregoing, or permit any additional shares of ComSouth Common Stock to become
subject to grants of employee stock options, stock appreciation rights or
similar stock-based employee compensation rights.
3.2 DISTRIBUTIONS. Make, declare or pay any dividend on or in respect of,
or declare or make any distribution on, or directly or indirectly combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its capital
stock or authorize the creation or issuance of, or issue, any additional shares
of its capital stock or grant any Rights with respect to its capital stock.
3.3 LIABILITIES. Other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible or liable
for the obligations of any other individual corporation or other entity.
3.4 OPERATIONS. Except as may be directed by any regulatory agency, (A)
change its lending, investment, liability management or other material banking
policies in any material respect, or (B) commit to incur any capital
expenditures other than in the ordinary course of business and not exceeding
$15,000 individually or $25,000 in the aggregate.
3.5 LIENS AND ENCUMBRANCES. Impose, or suffer the imposition, on any shares
of stock of any of its Subsidiaries, any lien, charge or encumbrance, or permit
any such lien, charge or encumbrance to exist, except such liens, charges or
encumbrances occurring in the ordinary course of business which do not have a
material adverse effect on ComSouth.
7
3.6 EMPLOYMENT ARRANGEMENTS. Hire any new employees, increase the number of
full time employees disclosed in Schedule 3.6, enter into or amend any
employment, severance or similar agreement or arrangement with any of its
directors, officers or employees, or grant any salary or wage increase, amend
the terms of any ComSouth Option or increase any employee benefit (including
incentive or bonus payments), except normal individual increases in regular
compensation to employees in the ordinary course of business consistent with
past practice or as disclosed in Schedule 3.6.
3.7 BENEFIT PLANS. Enter into or modify (except as may be required by
applicable law or to continue coverage) any pension, retirement, stock option,
stock purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees, including taking any action that
accelerates the vesting or exercise of any benefits payable thereunder.
3.8 CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion of its
assets, business or properties, that is material to ComSouth or any one of its
Subsidiaries taken as a whole, or merge or consolidate with, or acquire all or
any portion of, the business or property of any other entity that is material to
ComSouth or any one of its Subsidiaries taken as a whole (except foreclosures or
acquisitions by Comsouth or any one of its Subsidiaries in its fiduciary
capacity, in each case in the ordinary course of business consistent with past
practice).
3.9 AMENDMENTS. Amend its Articles of Incorporation or Bylaws.
3.10 CLAIMS. Settle any claim, litigation, action or proceeding involving
any liability for material money damages or restrictions upon the operations of
ComSouth.
3.11 CONTRACTS. Enter into, renew, terminate or make any change in any
material contract, agreement or lease, except in the ordinary course of business
consistent with past practice with respect to contracts, agreements and leases
that are terminable by it without penalty on no more than 60 days prior written
notice.
3.12 LOANS. Extend credit or account for loans and leases other than in
accordance with existing lending policies and accounting practices. With regard
to any new extension of credit in excess of $500,000, the Chief Financial
Officer of ComSouth will report to the Chief Financial Officer of Anchor, as
expeditiously as possible, the substance and nature of the transaction for the
purpose of keeping Anchor abreast of the ongoing credit quality at ComSouth.
ARTICLE IV. ANCHOR ACTIONS PENDING CONSUMMATION
From the date of this Agreement until the earlier of the Effective Date or
the termination of this Agreement, Anchor will continue to conduct the business
of Anchor and its Subsidiaries in a manner designed in its reasonable judgment
to enhance the long-term value of Anchor Common Stock and the business prospects
of Anchor, and will not: (1) make any distributions with respect to its capital
stock except its regular quarterly dividends made in accordance with its past
practices; or (2) take any action which would materially adversely affect the
ability of Anchor or ComSouth to obtain any regulatory approvals or other
consents required for the Merger described in this Agreement without imposition
of any condition or restriction that would adversely impact the transactions
8
contemplated hereby or prevent the Merger from qualifying as a pooling of
interests for accounting purposes or as a tax free organization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code, or materially
adversely affect the ability of any party to this Agreement to perform its
covenants or agreements under this Agreement.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 COMSOUTH'S REPRESENTATIONS AND WARRANTIES. ComSouth hereby represents
and warrants to Anchor as follows:
(A) RECITALS. The facts set forth in the Recitals of this Agreement with
respect to ComSouth are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. ComSouth is duly qualified to do
business and is in good standing in the States of the United States and foreign
jurisdictions where the failure to be duly qualified, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.
ComSouth and its Subsidiaries have in effect all federal state, local and
foreign governmental authorizations necessary for them to own or lease their
properties and assets and to carry on their businesses as they are now
conducted. The Columbia Bank and the Charleston Bank are "insured depository
institutions" as defined in the Federal Deposit Insurance Act, as amended, and
applicable regulations under such statute, and their deposits are insured by the
Bank Insurance Fund of the FDIC.
(C) SHARES. The outstanding shares of ComSouth's capital stock are validly
issued and outstanding, fully paid and nonassessable and are not subject to
preemptive rights of ComSouth's shareholders. Except as ComSouth disclosed in
Schedule 5.1(C), there are no shares of capital stock or other equity securities
of ComSouth outstanding and no outstanding Rights with respect to its capital
stock or other equity securities.
(D) SUBSIDIARIES. ComSouth has two Subsidiaries, The Bank of Columbia and
The Bank of Charleston.
(E) CORPORATE POWER. ComSouth has the corporate power and authority to
carry on its business as it is now being conducted and to own all its material
properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval by
its shareholders referred to in Section 7.1(A), this Agreement has been
authorized by all necessary corporate action of ComSouth, and this Agreement is
a valid and binding agreement of ComSouth, enforceable against ComSouth in
accordance with its terms, subject to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles.
(G) NO DEFAULTS. Subject to the approval by its shareholders referred to in
Section 7.1(A), the required regulatory approvals referred to in Section 7.1(B),
and the required filings under federal and state securities laws, and except as
set forth on Schedule 5.1(G), the execution, delivery and performance of this
Agreement and the consummation by ComSouth of the transactions contemplated by
this Agreement do not and will not (1) constitute a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree,
9
order, governmental permit or license, or agreement, indenture or instrument of
ComSouth or to which ComSouth or its properties is subject or bound, (2)
constitute a breach or violation of, or a default under its articles of
incorporation or bylaws, or (3) require any consent or approval under any such
law, rule, regulation, judgment, decree, order governmental permit or license or
the consent or approval of any other party to any such agreement, indenture or
instrument.
(H) FINANCIAL REPORTS. ComSouth's audited consolidated statements of
financial condition and the related consolidated statements of income, changes
in shareholders' equity and cash flows for the fiscal year ended December 31,
1997 (collectively, the "ComSouth Financial Reports") do 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 made therein, in light of the
circumstances under which they were made, not misleading; and each of the
consolidated balance sheets in or incorporated by reference into the ComSouth
Financial Reports (including the related notes and schedules thereto) fairly
presents and will fairly present the financial position of ComSouth as of its
date, and each of the consolidated statements of income and changes in
shareholders' equity and cash flows (including any related notes and schedules
thereto) fairly presents and will fairly present the results of operations,
changes in shareholders' equity and cash flows, as the case may be, for the
periods set forth therein, in accordance with GAAP.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
5.1(I), ComSouth has no obligation or liability (contingent or otherwise) except
(1) as reflected in the ComSouth Financial Reports prior to the date of this
Agreement, and (2) for commitments and obligations made, or liabilities
incurred, in the ordinary course of business consistent with past practice since
December 31, 1997.
(J) NO EVENTS. Since December 31, 1997, no event has occurred that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on ComSouth.
(K) PROPERTIES. ComSouth has good and marketable title, free and clear of
all liens, encumbrances, charges, defaults, or equities of any character, to all
of the properties and assets, tangible and intangible, reflected in the ComSouth
Financial Reports as being owned by ComSouth as of the dates of the ComSouth
Financial Reports, except those sold or otherwise disposed of in the ordinary
course of business. All buildings and all material fixtures, equipment, and
other property and assets that are held under leases or subleases by ComSouth
are held under valid leases or subleases enforceable in accordance with their
respective terms.
(L) LITIGATION. Except as disclosed in Schedule 5.2(L), before the date of
this Agreement:
(1) no criminal or administrative investigations or hearings, before or by
any Regulatory Authorities, or civil, criminal or administrative actions, suits,
claims or proceedings, before or by any person (including any Regulatory
Authority) are pending or, to the knowledge of its executive officers,
threatened, against it (including under the Truth in Lending Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act, or any fair lending law or other law relating
to discrimination); and
10
(2) neither ComSouth or either of its Subsidiaries nor any of their
officers, directors, controlling persons, nor any of their properties is a party
to or is subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or similar submission to, any
Regulatory Authority charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits (including the FDIC) or the
supervision or regulation of ComSouth or either of its Subsidiaries, and they
have not been advised by any such Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter or similar submission.
(M) COMPLIANCE WITH LAWS. ComSouth and its Subsidiaries:
(1) are in compliance, in the conduct of their businesses, with all
applicable federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees, including the Bank Secrecy Act,
the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure act and all
applicable fair lending laws or other laws relating to discriminations;
(2) have all permits, licenses, certificates of authority, orders, and
approvals of, and have made all filings, applications, and registrations with,
federal, state, local, and foreign governmental or regulatory bodies that are
required in order to permit them to carry on their businesses as they are
presently conducted;
(3) have no notification or other communication from any Regulatory
Authority (including any bank, insurance and securities regulatory authorities)
or its staff (1) asserting a failure to comply with any of the statutes,
regulations or ordinances that such Regulatory Authority enforces, (2)
threatening to revoke any license, franchise, permit or governmental
authorization, or (3) threatening or contemplating revocation or limitation of,
or that would have the effect of revoking or limiting, FDIC deposit insurance
(nor do any grounds for any of the foregoing exist);
(4) are not required to notify any federal banking agency before adding
directors to their boards of directors or employing senior executives (except
notifications required as a result of the Merger); and (5) have adopted and are
implementing a program to address any problems associated with the capacity of
the computer software operated by ComSouth and its Subsidiaries and their
vendors to properly process transactions after December 31, 1999.
(N) MATERIAL CONTRACTS. Neither ComSouth nor either of its Subsidiaries nor
their assets, businesses or operations, is a party to, or bound or affected by,
or receives benefits under, any material contract or agreement or amendment to
such contract or agreement. ComSouth or either of its Subsidiaries is not in
default under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party, by which its assets, business
or operations may be bound or affected or under which it or its respective
assets, business or operations receives benefits, 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. ComSouth or either of its Subsidiaries is
11
not subject to or bound by any contract containing covenants that limit its
ability to compete in any line of business or with any Person or that involve
any restriction of geographical area in which, or method by which, it may carry
on its business (other than as may be required by law or any applicable
Regulatory Authority).
(O) REPORTS. Since January 1, 1993, ComSouth and its Subsidiaries filed all
reports and statements, together with any required amendments, that they were
obligated to file with (1) the OCC, (2) the FDIC, (3) the Federal Reserve Board
and (4) any other Regulatory Authorities having jurisdiction over ComSouth
and/or its Subsidiaries. As of their respective dates (and without giving effect
to any amendments or modification filed after the date of this Agreement with
respect to reports and documents filed before the date of this Agreement), each
of such reports and documents, including the financial statements, exhibits and
schedules to the financial statements, complied with all of the statutes, rules
and regulations enforced or promulgated by the Regulatory Authority with which
they were filed and did not contain any untrue statement of fact or omit to
state any fact necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading.
(P) EMPLOYEE BENEFIT PLANS.
(1) Schedule 5.1(P)(1) contains a complete list of all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and stock option
plans, all employment or severance contracts, all medical, dental, health and
life insurance plans, all other employee benefit plans, contracts or
arrangements and any applicable "change of control" or similar provisions in any
plan, contract or arrangement maintained on contributed to by Comsouth and/or
its Subsidiaries for the benefit of employees, former employees, directors,
former directors or their beneficiaries (the "Compensation and Benefit Plans").
True and complete copies of all Compensation and Benefit Plans of ComSouth
and/or its Subsidiaries, including any trust instruments and/or insurance
contracts, if any, forming a part of such plans, and all related amendments,
have been supplied to Anchor.
(2) All "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), other
than "multiemployer plans" within the meaning of Section 3(37) of ERISA
("Multiemployer Plans"), covering employees or former employees of Comsouth
and/or its Subsidiaries (the "ERISA Plans"), to the extent subject to ERISA, are
in substantial compliance with ERISA. Each ERISA Plan 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
Internal Revenue Code of 1986 (as amended, the "Code") has received a favorable
determination letter from the Internal Revenue Service, and ComSouth is not
aware of any circumstances reasonably likely to result in the revocation or
denial of any such favorable determination letter or the inability to receive
such favorable determination letter. There is no material pending or, to its
knowledge, threatened litigation relating to the ERISA Plans. ComSouth or either
of its Subsidiaries has not engaged in a transaction with respect to any ERISA
Plan that could subject ComSouth or either of its Subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.
12
(3) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by ComSouth or either of its Subsidiaries with respect
to any ongoing, frozen or terminated "single- employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by it, or the
single-employer plan of any entity which is considered one employer with
ComSouth or either of its Subsidiaries under Section 4001(a)(15) of ERISA or
Section 414 of the Code (an "ERISA Affiliate"). ComSouth or either of its
Subsidiaries does not presently contribute to a Multiemployer Plan, nor has it
contributed to such a plan within the past five calendar years. 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, has been required to be filed
for any Pension Plan or by any ERISA Affiliate within the past 12-month period.
(4) All contributions required to be made under the terms of any ERISA Plan
have been timely made. Neither any Pension Plan nor any single-employer plan of
an ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Comsouth or either of its Subsidiaries has not provided, or is not required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a single-employer plan, as of the last
day of the most recent plan year, 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, and there has been no material changes in the financial
condition of such plan since the last day of the most recent plan year.
(6) ComSouth has no obligations for retiree health and life benefits under
any plan, except as set forth in Schedule 5.1(P)(6). There are no restrictions
on the rights of ComSouth to amend or terminate any such plan without incurring
any liability under the plan.
(7) Except as set forth on Schedule 5.1(P)(7), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
by this Agreement will (a) result in any payment (including severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of ComSouth or its Subsidiaries under any Compensation
and Benefit Plan or otherwise from ComSouth or its Subsidiaries, (b) increase
any benefits otherwise payable under any Compensation and Benefit Plan, or (c)
result in any acceleration of the time of payment or vesting of any such
benefit.
(Q) NO KNOWLEDGE. ComSouth knows of no reason why the regulatory approvals
referred to in Section 7.1(B) will not be obtained.
(R) LABOR AGREEMENTS. ComSouth is neither a party to nor bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is ComSouth the subject of a
proceeding asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it to bargain
with any labor organization as to wages and conditions of employment, nor is
there any strike or other labor dispute involving it pending or, to the best of
its
13
knowledge, threatened, nor is it aware of any activity involving its employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
(S) ASSET CLASSIFICATION. ComSouth has disclosed to Anchor in Schedule
5.1(S) a list, accurate and complete in all material respects, of the aggregate
amounts of loans, extensions of credit or other assets of ComSouth and its
Subsidiaries that have been classified by them as of December 31, 1997 (the
"Asset Classification"): and no amounts of loans, extensions of credit or other
assets that have been classified as of December 31, 1997 by any regulatory
examiner as "Other Loans Specially Mentioned," "Substandard," "Doubtful,"
"Loss," or words of similar import are excluded from the amounts disclosed in
the Asset Classification, other than amounts of loans, extension of credit or
other assets that were charged off by ComSouth and its Subsidiaries prior to
December 31, 1997.
(T) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses shown on the consolidated balance sheet in the December 31, 1997,
Financial Reports was, and the allowance for possible loan losses to be shown on
subsequent Financial Reports will be, adequate in the opinion of the Board of
Directors of ComSouth to provide for possible losses, net of recoveries relating
to loans previously charged off, on loans outstanding (including accrued
interest receivable) as of the dates noted.
(U) INSURANCE. ComSouth has taken all requisite action (including the
making of claims and the giving of notices) pursuant to its directors' and
officers' liability insurance policy or policies in order to preserve all rights
under the policy or policies. Set forth in Schedule 5.1(U) is a list of all
insurance policies maintained by or for the benefit of ComSouth and its
Subsidiaries and their directors, officers, employees or agents.
(V) AFFILIATES. Except as disclosed in Schedule 5.1(V), there is no person
who, as of the date of this Agreement, may be deemed to be an "affiliate" of
ComSouth as that term is used in Rule 145 under the Securities Act.
(W) TAKEOVER LAWS, ARTICLES OF ASSOCIATION. ComSouth has taken all
necessary action to exempt this Agreement, and the transactions contemplated by
this Agreement from, and this Agreement and such transactions are exempt from
(1) any applicable takeover laws, and (2) any takeover-related provisions of
Comsouth's Articles of Incorporation.
(X) NO FURTHER ACTION. ComSouth has taken all action so that entering into
this Agreement and the consummation of the transactions contemplated by this
Agreement (including the Merger) or any other action or combination of actions,
or any other transactions, contemplated by this Agreement do not and will not
(1) require a vote of shareholders (other than as set forth in Section 7.1(A)),
or (2) result in the grant of any rights to any Person under the Articles of
Incorporation or Bylaws of ComSouth under any agreement to which Comsouth is a
party, or (3) restrict or impair in any way the ability of Anchor to exercise
the rights granted under this Agreement.
14
(Y) ENVIRONMENTAL MATTERS.
(1) To ComSouth and its Subsidiaries' knowledge, the Participation
Facilities and the Loan/Fiduciary Properties are, and have been, in compliance
with all Environmental Laws.
(2) There is no proceeding pending or, to ComSouth and its Subsidiaries'
knowledge, threatened before any court, governmental agency or board or other
forum in which ComSouth or either of its Subsidiaries or any Participation
Facility has been, or with respect to threatened proceedings, reasonably would
be expected to be, named as a defendant or potentially responsible party (a) for
alleged noncompliance (including by any predecessor) with any Environmental Law,
or (b) relating to the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned, leased or
operated by ComSouth or either of its Subsidiaries or any Participation
Facility.
(3) There is no proceeding pending or, to ComSouth or its Subsidiaries'
knowledge, threatened before any court, governmental agency or board or other
forum in which any Loan/Fiduciary Property (or ComSouth or its Subsidiaries in
respect of any Loan/Fiduciary Property) has been, or with respect to threatened
proceedings, reasonably would be expected to be, named as a defendant or
potentially responsible party (a) for alleged noncompliance (including by any
predecessor) with any Environmental Law, or (b) relating to the release or
threatened release into the environment of any Hazardous Material, whether or
not occurring at or on a Loan/Fiduciary Property.
(4) To Comsouth or its Subsidiaries' knowledge, there is no reasonable
basis for any proceeding of a type described in subparagraph (2) or (3) of this
paragraph (Y).
(5) To ComSouth or its Subsidiaries' knowledge, during the period of (a)
ownership or operation by ComSouth or either of its Subsidiaries of any of its
current properties, (b) participation in the management of any Participation
Facility by ComSouth or either of its Subsidiaries, or (c) holding of a security
or other interest in a Loan/Fiduciary Property by ComSouth or either of its
Subsidiaries, there have been no releases of Hazardous Material in, on, under or
affecting any such property, Participation Facility or Loan Fiduciary Property.
(6) To ComSouth or its Subsidiaries' knowledge, prior to the period of (a)
ownership or operation by ComSouth or either of its Subsidiaries of any of its
current properties, (b) participation in the management of any Participation
Facility by ComSouth or either of its Subsidiaries or (c) holding of a security
or other interest in a Loan/Fiduciary Property by ComSouth or either of its
Subsidiaries, there was no release of Hazardous Material in, on, under or
affecting any such property, Participation Facility or Loan) Fiduciary Property.
(Z) TAX REPORTS. (1) All reports and returns with respect to Taxes that are
required to be filed by or with respect to ComSouth, including consolidated
federal income tax returns of ComSouth, (collectively, the "Tax Returns"), have
been duly filed, or requests for extensions have been timely filed and have not
expired, for periods ended on or prior to the most recent fiscal year-end, and
such Tax Returns were true, complete and accurate, (2) all Taxes shown to be due
on the Tax Returns have been paid in full, (3) the Tax Returns have been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority, or
15
the period for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (4) all Taxes due with respect to completed
and settled examinations have been paid in full, (5) no issues have been raised
by the relevant taxing authority in connection with the examination of any of
the Tax Returns except as reserved against in the Financial Reports, and (6) no
waivers of statutes of limitations (excluding such statutes that relate to years
under examination by the Internal Revenue Service) have been given by or
requested with respect to any Taxes of ComSouth.
(AA) ACCURACY OF INFORMATION. The statements with respect to ComSouth and
its Subsidiaries contained in this Agreement, the Schedules and any other
written documents executed and delivered by or on behalf of ComSouth and its
Subsidiaries or any other Party pursuant to the terms of or relating to this
Agreement are true and correct, and such statements and documents do not omit
any fact necessary to make the statements, in light of the circumstances under
which they were made, not misleading.
(BB) DERIVATIVES CONTRACTS. ComSouth is not a party to nor has it agreed to
enter into a Derivatives Contract or to own securities that are referred to as
"structured notes," except as set forth on Schedule 5.1(BB).
(CC) ACCOUNTING CONTROLS. ComSouth has devised and maintained systems of
internal accounting controls sufficient to provide reasonable assurances that
(1) all transactions are executed in accordance with management's general or
specific authorization, (2) all transactions are recorded as necessary to permit
the preparation of financial statements in conformity with GAAP, and to maintain
proper accountability for items, (3) access to the material property and assets
of ComSouth is permitted only in accordance with management's general or
specific authorization, and (4) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
(DD) COMMITMENTS AND CONTRACTS. ComSouth or either of its Subsidiaries is
not a party or subject to any of the following (whether written or oral, express
or implied):
(1) except disclosed in Schedule 5.1(DD)(1), any employment contract or
understanding (including any understandings or obligations with respect to
severance or termination pay liabilities or fringe benefits) with any present or
former officer, director or employee (other than those which are terminable at
will by ComSouth or its Subsidiaries without any obligation on the part of
ComSouth or its Subsidiaries to make any payment in connection with such
termination);
(2) except as disclosed in Schedule 5.1(DD)(2), any real or personal
property lease with annual rental payments aggregating $5,000 or more; or (3)
any material contract with any affiliate.
5.2 ANCHOR'S REPRESENTATIONS AND WARRANTIES. Anchor hereby represents and
warrants to ComSouth as follows:
(A) RECITALS. The facts set forth in the Recitals of this Agreement with
respect to Anchor are true and correct.
16
(B) ORGANIZATION, STANDING AND AUTHORITY. Anchor is duly qualified to do
business and is in good standing in the States of the United States and foreign
jurisdictions where the failure to be duly qualified, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it. Anchor
and its Subsidiaries have in effect all federal state, local and foreign
governmental authorizations necessary for them to own or lease their properties
and assets and to carry on their businesses as they are now conducted.
(C) SHARES. The outstanding shares of Anchor's capital stock are, and the
shares to be issued in exchange for ComSouth Common Stock when issued will be,
validly issued and outstanding, fully paid and nonassessable and subject to no
preemptive rights.
(D) CORPORATE POWER. Anchor has the corporate power and authority to carry
on its business as it is now being conducted or will be conduced and to own all
its material properties and assets.
(E) CORPORATE AUTHORITY. Subject to the approval by its shareholders
referred to in Section 7.1(A), this Agreement has been authorized by all
necessary corporate action of Anchor and is a valid and binding agreement of
Anchor, enforceable against Anchor in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles.
(F) NO DEFAULTS. Subject to the approval by its shareholders referred to in
Section 7.1(A), subject to receipt of the required regulatory approvals referred
to in Section 7.1(B), and the required filings under federal and state
securities laws, the execution, delivery and performance of this Agreement and
the consummation by Anchor and each of its Subsidiaries of the transactions
contemplated by this Agreement does not and will not (1) constitute a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of Anchor or any of its Subsidiaries or to which Anchor or any of its
Subsidiaries or its properties is subject or bound, (2) constitute a breach or
violation of, or a default under its articles of incorporation or bylaws of
Anchor or any of its Subsidiaries, or (3) require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license or the consent or approval of any other party to any such agreement,
indenture or instrument.
(G) FINANCIAL REPORTS. The Annual Report of Anchor on Form 10-K for the
fiscal year ended December 31, 1997, and all other documents filed or to be
filed subsequent to December 31, 1997 under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the form filed with the SEC (in each such case, the
"Anchor Financial Reports") did not and will not contain any untrue statement of
fact or omit to state a fact required to be stated or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading; and each of the consolidated balance sheets in or incorporated by
reference into the Anchor Financial Reports (including the related notes and
schedules thereto) fairly presents and will fairly present the financial
position of the entity or entities to which it relates as of its date, and each
of the consolidated statements of income and changes in shareholders' equity and
cash flows or equivalent statements in the Anchor Financial Reports (including
any related notes and schedules thereto) fairly presents and will fairly present
the results of operations, changes in
17
shareholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth herein, in each
case in accordance with GAAP, except as may be noted therein.
(H) NO EVENTS. Since December 31, 1997, no event has occurred which is
reasonably likely to have a Material Adverse Effect on Anchor.
(I) LITIGATION; REGULATORY ACTION. No litigation, proceeding or controversy
before any court or governmental agency is pending that alleges claims under any
fair lending law or other law relating to discrimination, including the Equal
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act and the
Home Mortgage Disclosure Act, and no such litigation, proceeding or controversy
has been threatened; and neither Anchor nor any of its Subsidiaries or any of
its or their material properties or their officers, directors or controlling
persons is a party to or is subject to any order, decree, agreement, memorandum
of understanding or similar arrangement with, or a commitment letter or similar
submission to, any Regulatory Authority, and neither Anchor nor any of its
Subsidiaries has been advised by any of such Regulatory Authorities that such
authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter or similar submission.
(J) REPORTS. Since December 31, 1993, Anchor and its Subsidiaries have
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (1) the FDIC, (2)
the Federal Reserve Board, and (3) any other Regulatory Authorities having
jurisdiction with respect to Anchor and its Subsidiaries. As of their respective
dates (and without giving effect to any amendments or modifications filed after
the date of this Agreement with respect to reports and documents filed before
the date of this Agreement), each of such reports and documents, including the
financial statements, exhibits and schedules thereto, complied in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the Regulatory Authority with which they were filed and did not contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements made, in light of the circumstances under which they were made,
not misleading.
(K) ACCURACY OF INFORMATION. The statements with respect to Anchor and its
Subsidiaries contained in this Agreement, the Schedules and any other written
documents executed and delivered by or on behalf of Anchor or any other Party
pursuant to the terms of this Agreement are true and correct, and such
statements and documents do not omit any material fact necessary to make the
statements, in light of the circumstances under which they were made, not
misleading.
(L) ABSENCE OF UNDISCLOSED LIABILITIES. Neither Anchor nor any of its
Subsidiaries has any obligation or liability (contingent or otherwise) except
(1) as reflected the Anchor Financial Reports prior to the date of this
Agreement, and (2) for commitments and obligations made, or liabilities
incurred, in the ordinary course of business consistent with past practice since
December 31, 1997. Since December 31, 1997, neither Anchor nor any of its
Subsidiaries has incurred or paid any obligation or liability that, individually
or in the aggregate, is unreasonably likely to have Material Adverse Effect on
Anchor.
18
(M) NO KNOWLEDGE. Anchor knows of no reason why the regulatory approvals
referred to in Section 7.1(B) will not be obtained.
(N) YEAR 2000 COMPLIANCE. Anchor has taken and is taking appropriate steps
to assure, and believes, that computer software operated by Anchor and its
Subsidiaries and their vendors will be able to properly process transactions and
function after December 31, 1999.
5.3 EXCEPTIONS TO REPRESENTATIONS.
(A) DISCLOSURE OF EXCEPTIONS. Each exception set forth in a Schedule is
disclosed only for purposes of the representations referred in that exception,
but the following conditions apply:
(1) no exception is required to be set forth in a Schedule if its absence
would not result in the related representation being found untrue or incorrect
under the standard established by Section 5.3(B); and
(2) the mere inclusion of an exception in a Schedule is not an admission by
a party that the exception represents a material fact, material set of facts, or
material event or would result in a Material Adverse Effect with respect to that
party.
(B) NATURE OF EXCEPTIONS. No representation contained in this Article V
will be found untrue or incorrect and no party to this Agreement will have
breached a representation due to the following: the existence of any fact, set
of facts, or event if the fact or event individually or taken together with
other facts or events would not, or, in the case of Article V is not reasonably
likely to, have a Material Adverse Effect with respect to such party.
ARTICLE VI. COVENANTS
ComSouth hereby covenants to Anchor, and Anchor hereby covenants to
ComSouth, that:
6.1 BEST EFFORTS. Subject to the terms and conditions of this Agreement and
to the exercise by its Board of Directors of such Board's fiduciary duties, it
will use its 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 soon as practicable and to otherwise enable consummation of the
transactions contemplated by this Agreement and will cooperate fully with the
other Parties to that end.
6.2 THE PROXY. ComSouth will promptly assist Anchor in the preparation of a
joint proxy statement (the "Joint Proxy Statement") to be mailed to the holders
of ComSouth Common Stock in connection with the transactions contemplated by
this Agreement and to be filed by Anchor in a registration statement (the
"Registration Statement") with the SEC as provided in Section 6.8, which will
conform to all applicable legal requirements. ComSouth and Anchor will call
meetings (the "Meetings") of the holders of ComSouth Common Stock and the
holders of Anchor Common Stock to be held as soon as practicable for purposes of
voting upon the transactions contemplated by this Agreement, and ComSouth and
Anchor will use their respective best efforts to solicit and obtain votes of the
holders of ComSouth Common Stock and the holders of Anchor Common Stock in favor
of the
19
transactions contemplated by this Agreement and, subject to the exercise of
their respective fiduciary duties, the Boards of Directors of ComSouth and
Anchor will recommend approval of such transactions by such holders.
6.3 REGISTRATION STATEMENT -- COMPLIANCE WITH SECURITIES LAWS. When the
Registration Statement or any post-effective amendment or supplement to the
Registration Statement becomes effective, and at all times subsequent to such
effectiveness, up to and including the dates of the Meetings, such Registration
Statement, and all amendments or supplements thereto, with respect to all
information set forth therein furnished or to be furnished by or on behalf of
ComSouth relating to ComSouth and by or on behalf of Anchor relating to Anchor,
(A) will comply in all material respects with the provisions of the Securities
Act and any other applicable statutory or regulatory requirements, and (B) 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 contained
therein not misleading. But, no Party will be liable for any untrue statement of
a material fact or omission to state a material fact in the Registration
Statement made in reliance upon, and in conformity with, written information
concerning another Party furnished by or on behalf of such other Party
specifically for use in the Registration Statement.
6.4 REGISTRATION STATEMENT EFFECTIVENESS. Anchor will advise ComSouth,
promptly after Anchor receives any notice 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
Anchor Common Stock for offering or sale in any jurisdiction, of the initiation
or threat of any proceeding for any such purpose, or of any request by the SEC
for the amendment or supplement of the Registration Statement or for additional
information.
6.5 PRESS RELEASES. ComSouth will not, without the prior approval of
Anchor, and Anchor will not, without the prior approval of ComSouth, issue any
press release or written statement for general circulation relating to the
transactions contemplated by this Agreement, except as otherwise required by
law.
6.6 ACCESS; INFORMATION.
(A) Upon reasonable notice, each party will afford the other party and its
officers, employees, counsel, accountants and other authorized representatives,
access, during normal business hours throughout the period up to the Effective
Date, to all of its properties, books, contracts, commitments and records and,
during the period up to the Effective Date, ComSouth will promptly furnish (and
cause its accountants and other agents to promptly furnish) to Anchor (1) a copy
of each material report, schedule and other document filed by ComSouth with any
Regulatory Authority, (2) such representations and certifications as are
necessary for purposes of the pooling letter described in Section 7.2(F), and
(3) all other information concerning the business, properties and personnel of
ComSouth as Anchor may reasonably request, provided that no investigation
pursuant to this Section 6.6 will affect or be deemed to modify or waive any
representation or warranty made by ComSouth in this Agreement or the conditions
to the obligations of ComSouth to consummate the transactions contemplated by
this Agreement; and
(B) Anchor will not use any information obtained pursuant to this Section
6.6 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement and, if this Agreement is
20
terminated, will hold all confidential information and documents obtained
pursuant to this paragraph in confidence (as provided in Section 9.6) unless and
until such time as such information or documents become publicly available other
than by reason of any action or failure to act by Anchor or as it is advised by
counsel that any such information or document is required by law or applicable
stock exchange rule to be disclosed, and in the event of the termination of this
Agreement, Anchor will, upon request by ComSouth, deliver to ComSouth all
documents so obtained by Anchor or destroy such documents and, in the case of
destruction, will certify such fact to ComSouth.
6.7 ACQUISITION PROPOSALS.
(A) ComSouth will not solicit, initiate or encourage inquiries or proposals
with respect to, or, except as required by the fiduciary duties of the Board of
Directors of ComSouth (as advised in writing by its outside counsel), furnish
any nonpublic information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, ComSouth or any
merger or other business combination with ComSouth other than as contemplated by
this Agreement ("Acquisition Proposal"); it will instruct its officers,
directors, agents, advisors and affiliates to refrain from doing any of the
foregoing; and it will notify Anchor immediately if any such inquiries or
proposals are received by, or any such negotiations or discussions are sought to
be initiated with, ComSouth.
(B) ComSouth will immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Anchor with respect to any Acquisition
Proposal.
6.8 REGISTRATION STATEMENT PREPARATION; REGULATORY APPLICATIONS
PREPARATION. Anchor will, as promptly as practicable following the date of this
Agreement, prepare and file the Registration Statement with the SEC with respect
to the shares of Anchor Common Stock to be issued to the holders of ComSouth
Common Stock pursuant to this Agreement, and Anchor will use its best efforts to
cause the Registration Statement to be declared effective as soon as practicable
after the filing of the Registration Statement. Anchor will, as promptly as
practicable following the date of this Agreement, prepare and file all necessary
notices or applications with Regulatory Authorities having jurisdiction with
respect to the transactions contemplated by this Agreement.
6.9 APPOINTMENT OF DIRECTORS. Immediately after the Effective Date, Anchor
will cause the appointment of four directors from the current directors of
ComSouth or its Subsidiaries to the Board of Directors of Anchor to hold office
until such time as his or her successor is elected and qualified.
6.10 EMPLOYMENT AGREEMENTS. Employment agreements, in form substantially
similar to that attached as Exhibit C, will have been duly executed and
delivered by Anchor and the parties to such employment agreements, including J.
Xxxxxxx Xxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxx, and Xxxxxx Xxxxx, provided
such persons have not terminated their employment with ComSouth or its
Subsidiaries at or prior to the Effective Date.
21
6.11 BLUE-SKY FILINGS. Anchor will use its best efforts to obtain, prior to
the effective date of the Registration Statement, any necessary state securities
laws or "blue sky" permits and approvals, provided that Anchor will not be
required as a result to submit to general jurisdiction in any state.
6.12 AFFILIATE AGREEMENTS. Comsouth will use its best efforts to induce
each person who may be deemed to be an "affiliate" of ComSouth for purposes of
Rule 145 under the Securities Act to execute and deliver to Anchor on or before
the mailing of the Joint Proxy Statement for the ComSouth Meeting an agreement
in the form attached hereto as Exhibit A restricting the disposition of such
affiliate's shares of ComSouth Common Stock and the shares of Anchor Common
Stock to be received by such person in exchange for such person's shares of
ComSouth Common Stock. In the case of Anchor, Anchor agrees to use its best
efforts to maintain the availability of Rule 145 for use by such "affiliates".
6.13 TAKEOVER LAW. ComSouth will not take any action that would cause the
transactions contemplated by this Agreement to be subject to any applicable
takeover statute, and ComSouth will take all necessary steps 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.
6.14 NO RIGHTS TRIGGERED. ComSouth will take all necessary steps to ensure
that entering into this Agreement and the consummation of the transactions
contemplated by this Agreement and any other action or combination of actions,
or any other transactions contemplated by this Agreement, do not and will not
(A) result in the grant of any rights to any Person under the Articles of
Incorporation or Bylaws of ComSouth or under any agreement to which ComSouth is
a party, or (B) restrict or impair in any way the ability of Anchor to exercise
the rights granted to Anchor under this Agreement or the Stock Option Agreement.
6.15 SHARES LISTED. Anchor will use its best efforts to cause to be listed,
prior to the Effective Date, on The Nasdaq Stock Market, upon official notice of
issuance, the shares of Anchor Common Stock to be issued to the holders of
ComSouth Common Stock.
6.16 CURRENT INFORMATION.
(A) During the period from the date of this Agreement to the Effective
Date, both ComSouth and Anchor will, and will cause its representatives to,
confer on a regular and frequent basis with representatives of the other.
(B) Both ComSouth and Anchor will promptly notify the other of (1) any
material change in the business or operations of it or its Subsidiaries, (2) any
material complaints, investigations or hearings (or communications indicating
that the same may be contemplated) of any Regulatory Authority relating to it or
its Subsidiaries, (3) the initiation or threat of material litigation involving
or relating to it or its Subsidiaries, or (4) any event or condition that might
reasonably be expected to cause any of its representations or warranties set
forth in this Agreement not to be true and correct in all material respects as
of the Effective Date or prevent it or its Subsidiaries from fulfilling its or
their obligations under this Agreement.
22
6.17 SEVERANCE. On the Effective Date, Anchor will adopt a severance plan
for employees of ComSouth and its Subsidiaries with terms as set forth in
Schedule 6.17.
6.18 INDEMNIFICATION.
(A) Anchor shall indemnify each officer, director and former director of
ComSouth or its Subsidiaries named as a defendant in the lawsuit styled Roof x.
Xxxxxxx et al which is pending in the Court of Common Pleas for Richland County,
South Carolina, including the advancing of the expenses of defending the case.
(B) Anchor agrees to purchase and keep in force for not less than three
years directors' and officers' liability insurance to the extent available
providing coverage for actions and omissions by officers and directors of
ComSouth and its Subsidiaries for claims made during the period commencing with
and after the Effective Date.
(C) Following the Effective Date, each director and officer of ComSouth or
any of its Subsidiaries shall be indemnified to the fullest extent permitted by
South Carolina law by Anchor against all liabilities and the expense of
defending claims of liability connected with or arising out of such director's
or officer's service as such.
ARTICLE VII. CONDITIONS TO
CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the transactions contemplated by this Agreement are
subject to the written waiver by such Party or the fulfillment on or prior to
the Effective Date of each of the following conditions:
(A) SHAREHOLDER VOTES. This Agreement will have been duly approved by the
requisite vote of ComSouth's shareholders and of Anchor's shareholders under
applicable law and the Articles of Incorporation and Bylaws of, respectively,
ComSouth and Anchor.
(B) REGULATORY APPROVALS. The Parties will have procured all necessary
regulatory consents and approvals by the appropriate Regulatory Authorities, any
waiting periods relating to such consents and approvals will have expired, and
no such approval or consent will have imposed any condition or requirement that,
in the opinion of Anchor, would deprive Anchor of the material economic or
business benefits of the transactions contemplated by this Agreement.
(C) NO INJUNCTION. There will not be in effect any order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated by this
Agreement.
(D) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement will have
become effective and no stop order suspending the effectiveness of the
Registration Statement will have been issued and no proceedings for that purpose
will have been initiated or threatened by the SEC or any other Regulatory
Authority.
23
(E) BLUE SKY PERMITS. Anchor will have received all state securities laws
and "blue sky" permits necessary to consummate the Merger.
(F) TAX OPINION. Anchor and ComSouth will have received an opinion from
Xxxxxxx & XxXxxxxx, P.C. to the effect that (1) the Merger constitutes a
tax-free merger under Section 368(a)(1)(A) of the Code, and (2) no gain or loss
will be recognized by shareholders of ComSouth who receive shares of Anchor
Common Stock in exchange for their shares of the ComSouth Common Stock, except
that gain or loss may be recognized as to cash received in lieu of fractional
share interests and, in rendering their opinion, Xxxxxxx & XxXxxxxx, P.C. may
require and rely upon representations contained in certificates of officers of
Anchor, ComSouth and others.
(G) NASDAQ LISTING. The shares of Anchor Common Stock to be issued pursuant
to this Agreement will have been approved for listing on The Nasdaq Stock Market
subject only to official notice of issuance.
(H) FAIRNESS OPINION. Anchor will have received, immediately prior to the
mailing of the Joint Proxy Statement to Anchor's shareholders, an opinion of
Sandler X'Xxxxx to the effect that the financial terms of the Merger are fair
from a financial point of view to Anchor's shareholders.
7.2 CONDITIONS TO OBLIGATIONS OF ANCHOR. The obligations of Anchor to
consummate the transactions contemplated by this Agreement also are subject to
the written waiver by Anchor or the fulfillment on or prior to the Effective
Date of each of the following conditions:
(A) LEGAL OPINION. Anchor will have received an opinion, dated the
Effective Date, of Xxxxxxx & Xxxx, P.A., counsel for ComSouth, incorporating the
opinions set forth in Exhibit B.
(B) OFFICERS' CERTIFICATE. (1) Each of the representations and warranties
contained in this Agreement of ComSouth will be true and correct as of the date
of this Agreement and upon the Effective Date with the same effect as though all
such representations and warranties had been made on the Effective Date, except
for any such representations and warranties that specifically relate to an
earlier date, which will be true and correct as of such earlier date, and (2)
the chief executive officers, chief financial officers, and chief lending
officers of ComSouth and its Subsidiaries will sign a certificate, dated the
Effective Date, certifying that each and all of the agreements and covenants of
ComSouth to be performed and complied with pursuant to this Agreement on or
prior to the Effective Date have been duly performed and complied with in all
material respects.
(C) RECEIPT OF AFFILIATE AGREEMENTS. Anchor will have received from each
affiliate of ComSouth the agreement referred to in Section 6.11.
(D) ADVERSE CHANGE. During the period from December 31, 1997 to the
Effective Date, there will not have been any material adverse change in the
financial position or results of operations of ComSouth, nor will ComSouth have
sustained any loss or damage to its properties, whether or not insured, that
materially affects its ability to conduct its business; and Anchor will have
received a certificate dated the Effective Date signed by the Chief Executive
Officer of ComSouth to such effect.
24
(E) DISSENTERS' RIGHTS. The number of shares of ComSouth Common Stock for
which cash is to be paid because dissenters' rights of appraisal under the
Appraisal Laws will have been effectively preserved as of the Effective Date or
because of the payment of cash in lieu of fractional shares of Anchor Common
Stock, will not exceed in the aggregate 6% of the outstanding shares of ComSouth
Common Stock.
(F) POOLING LETTER. Anchor will have received a letter dated as of the
Effective Date, in form and substance acceptable to Anchor, from Price
Waterhouse LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(G) CAPITAL. ComSouth's capital will not be less than $16,500,000 on the
Effective Date. (H) ALLOWANCE FOR LOAN AND LEASE LOSSES. ComSouth's allowance
for possible loan and lease losses will not be less than 1.2% of ComSouth's
total outstanding loans and leases and will be adequate to absorb ComSouth's
anticipated loan and lease losses.
7.3 CONDITIONS TO OBLIGATIONS OF COMSOUTH. The obligations of ComSouth to
consummate the transactions contemplated by this Agreement also are subject to
the written waiver by ComSouth or the fulfillment on or prior to the Effective
Date of each of the following conditions:
(A) OFFICER'S CERTIFICATE. (1) Each of the representations and warranties
of Anchor contained in this Agreement will be true and correct as of the date of
this Agreement and upon the Effective Date, with the same effect as though all
such representations and warranties had been made on the Effective Date, except
for any such representations and warranties that specifically relate to an
earlier date, which will be true and correct as of such earlier date, and (2)
each and all of the agreements and covenants of Anchor to be performed and
complied with pursuant to this Agreement on or prior to the Effective Date will
have been duly performed and complied with in all material respects, and
ComSouth will have received a certificate dated the Effective Date signed by an
executive officer of Anchor to such effect.
(B) ADVERSE CHANGE. During the period from December 31, 1997 to the
Effective Date, there will not have been any material adverse change in the
financial position or results of operations of Anchor, nor will Anchor have
sustained any loss or damage to its properties, whether or not insured, that
materially affects its ability to conduct its business; and ComSouth will have
received a certificate dated the Effective Date signed by an executive officer
of Anchor to such effect.
(C) FAIRNESS OPINION. ComSouth will have received, immediately prior to the
mailing of the Joint Proxy Statement to ComSouth's shareholders, an opinion of a
qualified firm to the effect that the financial terms of the Merger are fair
from a financial point of view to ComSouth's shareholders.
(D) LEGAL OPINION. ComSouth will have received an opinion, dated the
Effective Date, of Xxxxxxx & XxXxxxxx, P.C., counsel for Anchor, incorporating
the opinions set forth in Exhibit D.
ARTICLE VIII. TERMINATION
8.1 EVENTS OF TERMINATION. This Agreement may be terminated prior to the
Effective Date, either before or after receipt of required shareholder
approvals:
25
(A) MUTUAL CONSENT. By the mutual consent of Anchor and ComSouth, if the
Board of Directors of each so determines by vote of a majority of the members of
its entire board.
(B) BREACH. By Anchor or ComSouth, if its Board of Directors so determines
by vote of a majority of the members of its entire Board, in the event of (A) a
material breach by any other Party of any representation or warranty in this
Agreement, which breach cannot be or has not been cured within 30 days after
written notice of the breach has been given to the breaching Party, or (B) a
material breach by any other Party of any of the covenants or agreements in this
Agreement, which breach cannot be or has not been cured within 30 days after
written notice of the breach has been given to the breaching Party.
(C) DELAY. By Anchor or ComSouth, if its Board of Directors so determines
by vote of a majority of the members of the entire Board, in the event that the
Merger is not consummated by December 31, 1998; provided, however, that no Party
that is in material breach of any of the provisions of this Agreement will be
entitled to terminate this Agreement pursuant to this Section 8.1(C).
(D) NO SHAREHOLDER APPROVAL. By Anchor or ComSouth, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board, if the shareholder approval contemplated by Section 7.1(A) is not
obtained at the Meetings or any adjournment(s) of the Meetings.
(E) MARKET PRICE. By the Board of Directors of ComSouth, if it determines
by a vote of a majority of the members of its entire Board, at any time during
the ten-day period commencing two days after the Determination Date, if both of
the following conditions are satisfied:
(1) the Average Closing Price shall be twenty percent (20%) less than the
Starting Price; and
(2) (i) the quotient of the Average Closing Price divided by the Starting
Price (such quotient being the "Anchor Ratio") shall be less than (ii) the
quotient of the Average Index Price divided by the Index Price on the Starting
Date less 0.10 of such quotient (which quotient less 0.10 shall be the "Index
Ratio");
subject, however, to the following: If ComSouth refuses to consummate the Merger
pursuant to this Section 8.1(E), it shall give prompt written notice thereof to
Anchor; provided, that such notice of election to terminate may be withdrawn at
any time within the aforementioned ten-day period. During the five-day period
commencing with its receipt of such notice, Anchor shall have the option to
elect to increase the Exchange Ratio to equal the lesser of (i) the quotient
obtained by dividing (1) the product of 0.80, the Starting Price and the
Exchange Ratio (as then in effect) by (2) the Average Closing Price, and (ii)
the quotient obtained by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the Anchor Ratio. If Anchor makes an
election contemplated by the preceding sentence, within such five-day period, it
shall give prompt written notice to ComSouth of such election pursuant to this
Section 8.1(E) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this Section 8.1(E).
26
For purposes of this Section 8.1(E), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of Anchor Common Stock as reported on The Nasdaq Stock Market (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Anchor) for the 20 consecutive full trading
days in which such shares are traded ending at the closing of trading on the
Determination Date.
"Average Index Price" shall mean the average of the daily current market
price of the Index for the 20 consecutive full trading days ending at the
closing of trading on the Determination Date.
"Determination Date" shall mean the date on which the last consent of the
Board of Governors of the Federal Reserve System shall be received.
"Index" shall mean the NASDAQ Bank Index which is a broad-based
capitalization- weighted index of domestic and foreign common stock of banks
that are traded on the Nasdaq National Market System as well as the SmallCap
Market. The Index was developed with a base level of 100 as of February 5, 1971.
"Index Price" on a given date shall mean the current market price of the
Index for that day.
"Starting Date" shall mean April 14, 1998.
"Starting Price" shall mean $41.00 per share. If Anchor declares or effects
a stock dividend, reclassification, recapitalization, split up, combination,
exchange of shares, similar transaction between the date of this Agreement and
the Determination Date, the prices for the common stock of Anchor shall be
appropriately adjusted for the purposes of applying this Section 8.1(E).
8.2 CONSEQUENCES OF TERMINATION.
(A) GENERAL CONSEQUENCES. Subject to Section 6.6, in the event of the
termination or abandonment of this Agreement pursuant to the provisions of this
Section 8.1, this Agreement will become void and have no force or effect,
without any liability on the part of the Parties or any of their respective
directors or officers or shareholders with respect to this Agreement.
(B) OTHER CONSEQUENCES. Notwithstanding anything in this Agreement to the
contrary, no termination of this Agreement will relieve any Party of any
liability for any breach of this Agreement or for any misrepresentation under
this Agreement or be deemed to constitute a waiver of any remedy available for
such breach or misrepresentation. In any action or proceeding in connection with
such breach or misrepresentation, the prevailing Party will be entitled to
reasonable attorneys' fees and expenses.
(C) TERMINATION FEE. If this Agreement is terminated:
(1)(i) by Anchor, if at any time prior to the ComSouth Meeting, the Board
of Directors of ComSouth shall have failed to recommend the Merger to the
holders of ComSouth Common Stock, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the
27
interests of Anchor, or (ii) by the action of the Board of Directors of ComSouth
if a tender offer or exchange offer for 25% or more of the outstanding shares of
ComSouth Common Stock is commenced (other than by Anchor) and the Board of
ComSouth recommends that the stockholders of ComSouth tender their shares in
such tender or exchange offer or otherwise fails to recommend that such
stockholders reject such tender offer or exchange offer within ten business days
after the commencement thereof (which, in the case of an exchange offer, shall
be the effective date of the registration statement relating to such exchange
offer);
(2) by ComSouth or Anchor because of a failure to obtain the required
approval of the stockholders of ComSouth after an Acquisition Proposal for
ComSouth shall have been publicly disclosed, or any Person shall have publicly
disclosed an intention (whether or not conditional) to make an Acquisition
Proposal; or
(3) by Anchor pursuant to Section 8.1(B) if the breach by ComSouth giving
rise to such termination was willful and, at or prior to such termination, an
Acquisition Proposal shall have been made known to ComSouth or any of its
Subsidiaries or shall have been publicly disclosed to ComSouth's stockholders or
any Person shall have made known to ComSouth or any of its Subsidiaries or
otherwise publicly disclosed an intention (whether or not conditional) to make
an Acquisition Proposal and regardless of whether such Acquisition Proposal
shall have been rejected by ComSouth or withdrawn prior to the time of such
termination, then, in such case, ComSouth shall pay to Anchor a termination fee
of $2.5 million (the "Termination Fee"). Any Termination Fee that becomes
payable pursuant to this Section shall be paid promptly following the receipt of
a written request for Termination Fee to ComSouth from Anchor. Notwithstanding
the foregoing, in no event shall ComSouth be obligated to pay any Termination
Fee if ComSouth shall be entitled to terminate this Agreement pursuant to
Section 8.1(B) due to a breach by Anchor.
ARTICLE IX. OTHER MATTERS
9.1 SURVIVAL. Only those agreements and covenants in this Agreement that,
by their express terms apply in whole or in part after the Effective Date, will
survive the Effective Date. All other representations, warranties, and covenants
will be deemed only to be conditions of the Merger and will not survive the
Effective Date. If the Merger is abandoned and this Agreement is terminated, the
provisions of Article VIII will apply and the agreements of the Parties in
Section 6.6 will survive such abandonment and termination.
9.2 WAIVER; AMENDMENT. Prior to the Effective Date, any provision of this
Agreement may be (A) waived in writing by the Party benefitted by the provision,
or (B) amended or modified at any time (including the structure of the
transactions contemplated by this Agreement) by an agreement in writing among
the Parties approved by their respective Boards of Directors and executed in the
same manner as this Agreement, except that, after the votes by the shareholders
of Anchor and ComSouth, the consideration to be received by the shareholders of
ComSouth for each share of ComSouth Common Stock will not thereby be altered.
Nothing contained in this Section 9.2 is intended to modify Anchor's rights
pursuant to Section 6.7.
28
9.3 COUNTERPARTS. This Agreement may be executed in one or more facsimile
counterparts, each of which will be deemed to constitute an original. This
Agreement will become effective when one counterpart has been signed by each
Party.
9.4 GOVERNING LAW. This Agreement will be governed by, and interpreted in
accordance with, the laws of the State of South Carolina, except as federal law
may be applicable.
9.5 EXPENSES. Each Party will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated by this
Agreement.
9.6 CONFIDENTIALITY. Except as otherwise provided in Section 6.6(B), each
of the Parties and their respective agents, attorneys and accountants will
maintain the confidentiality of all information provided in connection herewith
which has not been publicly disclosed.
9.7 NOTICES. All notices, requests and other communications hereunder to a
"Party" will be in writing and will be deemed to have been duly given when
delivered by hand, telegram, certified or registered mail, overnight courier,
telecopier or telex (confirmed in writing) to such Party at its address set
forth below or such other address as such Party may specify by notice to the
Parties.
Anchor: Anchor Financial Corporation
0000 Xxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
with a copy to: Xxxxxxx & XxXxxxxx, P.C.
000 Xxxxxxxx Xxxx - Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxx X. Xxxxxxxx, Esq.
ComSouth: ComSouth Bancshares, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
with a copy to: Xxxxxxx & Xxxx, P.A.
0000 Xxxx Xxxxxx, Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Xx., Esq.
9.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement
represents the entire understanding of the Parties with reference to
transactions contemplated by this Agreement and supersedes any and all other
oral or written agreements previously made. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
29
9.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and are not part of this Agreement.
ANCHOR FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Its President and Chief Executive Officer
COMSOUTH BANKSHARES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Its President
C:\1154\6\FORM8-K
30
