Execution Copy
AGREEMENT AND PLAN
OF MERGER
BY AND BETWEEN
Fidelity Bankshares, INC.
AND
First Community Bancorp, Inc.
September 21, 2004
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS..................................................2
1.1. Certain Definitions..........................................2
ARTICLE II THE MERGER..........................................................7
2.1. Merger.......................................................7
2.2. Closing; Effective Time......................................7
2.3. Certificate of Incorporation and Bylaws......................7
2.4. Directors and Officers of Surviving Corporation..............8
2.5. Effects of the Merger........................................8
2.6. Tax Consequences.............................................8
2.7. Possible Alternative Structures..............................8
2.8. Additional Actions...........................................9
ARTICLE III CONVERSION OF SHARES...............................................9
3.1. Conversion of FCB Common Stock; Merger Consideration.........9
3.2. Fractional Shares...........................................10
3.3. Procedures for Exchange of FCB Common Stock.................11
3.4. Treatment of FCB Options....................................13
3.5. Bank Merger.................................................13
3.6. Reservation of Shares.......................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FCB..............................14
4.1. Standard....................................................14
4.2. Organization................................................15
4.3. Capitalization..............................................15
4.4. Authority; No Violation.....................................16
4.5. Consents....................................................17
4.6. Financial Statements........................................17
4.7. Taxes.......................................................18
4.8. No Material Adverse Effect..................................18
4.9. Material Contracts; Leases; Defaults........................18
4.10. Ownership of Property; Insurance Coverage...................19
4.11. Legal Proceedings...........................................20
4.12. Compliance With Applicable Law..............................21
4.13. Employee Benefit Plans......................................22
4.14. Brokers, Finders and Financial Advisors.....................25
4.15. Environmental Matters.......................................25
4.16. Loan Portfolio..............................................26
4.17. Related Party Transactions..................................28
4.18. Deposits....................................................28
4.19. Antitakeover Provisions Inapplicable; Required Vote.........28
4.20. Registration Obligations....................................28
4.21. Risk Management Instruments.................................28
4.22. Fairness Opinion............................................29
4.23. Intellectual Property.......................................29
4.24. Trust Accounts..............................................29
4.25. Labor Matters...............................................29
4.26. FCB Information Supplied....................................29
(i)
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FIDELITY BANKSHARES...............30
5.1. Standard....................................................30
5.2. Organization................................................30
5.3. Capitalization..............................................31
5.4. Authority; No Violation.....................................32
5.5. Consents....................................................32
5.6. Financial Statements........................................33
5.7. Taxes.......................................................34
5.8. No Material Adverse Effect..................................34
5.9. Ownership of Property; Insurance Coverage...................34
5.10. Legal Proceedings...........................................35
5.11. Compliance With Applicable Law..............................35
5.12. Employee Benefit Plans......................................36
5.13. Environmental Matters.......................................38
5.14. Loan Portfolio..............................................39
5.15. Securities Documents........................................40
5.16. Antitakeover Provisions Inapplicable........................40
5.17. Brokers, Finders and Financial Advisors.....................40
5.18. Fidelity Bankshares Common Stock............................40
5.19. Material Contracts; Leases, Defaults........................40
5.20. Fidelity Bankshares Information Supplied....................40
ARTICLE VI COVENANTS OF FCB...................................................41
6.1. Conduct of Business.........................................41
6.2. Current Information.........................................45
6.3. Access to Properties and Records............................46
6.4. Financial and Other Statements..............................47
6.5. Maintenance of Insurance....................................47
6.6. Disclosure Supplements......................................47
6.7. Consents and Approvals of Third Parties.....................48
6.8. All Reasonable Efforts......................................48
6.9. Failure to Fulfill Conditions...............................48
6.10. No Solicitation.............................................48
6.11. Reserves and Merger-Related Costs...........................49
6.12. Board of Directors and Committee Meetings...................50
ARTICLE VII COVENANTS OF FIDELITY BANKSHARES..................................50
7.1. Conduct of Business.........................................50
7.2. Current Information and Consultation........................50
7.3. Financial and Other Statements..............................50
7.4. Disclosure Supplements......................................51
7.5. Consents and Approvals of Third Parties.....................51
7.6. All Reasonable Efforts......................................51
7.7. Failure to Fulfill Conditions...............................51
7.8. Employee Benefits...........................................51
7.9. Directors and Officers Indemnification and Insurance........53
7.10. Stock Listing...............................................54
7.11. Stock and Cash Reserve......................................54
(ii)
7.12. Communications to FCB Employees; Training...................54
ARTICLE VIII REGULATORY AND OTHER MATTERS.....................................54
8.1. Meeting of Stockholders.....................................54
8.2. Proxy Statement-Prospectus; Merger Registration Statement...55
8.3. Regulatory Approvals........................................56
8.4. Affiliates..................................................56
ARTICLE IX CLOSING CONDITIONS.................................................56
9.1. Conditions to Each Party's Obligations under this Agreement.56
9.2. Conditions to the Obligations of Fidelity Bankshares under
this Agreement.............................................58
9.3. Conditions to the Obligations of FCB under this Agreement...59
ARTICLE X THE CLOSING.........................................................59
10.1. Time and Place..............................................59
10.2. Deliveries at the Pre-Closing and the Closing...............60
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER..................................60
11.1. Termination.................................................60
11.2. Effect of Termination.......................................64
11.3. Amendment, Extension and Waiver.............................65
ARTICLE XII MISCELLANEOUS.....................................................65
12.1. Confidentiality.............................................65
12.2. Public Announcements........................................66
12.3. Survival....................................................66
12.4. Notices.....................................................66
12.5. Parties in Interest.........................................67
12.6. Complete Agreement..........................................67
12.7. Counterparts................................................67
12.8. Severability................................................67
12.9. Governing Law...............................................67
12.10. Interpretation..............................................67
12.11. Specific Performance........................................68
12.12. Waiver of Trial by Jury.....................................68
Exhibit A Form of Voting Agreement
Exhibit B Form of Agreement and Plan of Bank Merger
Exhibit C Affiliates Agreement
(iii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
September 21, 2004, by and between Fidelity Bankshares, Inc., a Delaware
corporation ("Fidelity Bankshares"), and First Community Bancorp, Inc., a
Florida corporation ("FCB").
Recitals
1. The Board of Directors of each of Fidelity Bankshares and FCB (i) has
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of their respective
companies and stockholders and (ii) has determined that this Agreement and the
transactions contemplated hereby are consistent with and in furtherance of their
respective business strategies, and (iii) has approved this Agreement at
meetings of each of such Boards of Directors.
2. In accordance with the terms of this Agreement, FCB will merge with and
into Fidelity Bankshares (the "Merger"), and immediately thereafter First
Community Bank, which is a wholly owned subsidiary of FCB, will be merged with
and into Fidelity Federal Bank & Trust, a wholly owned subsidiary of Fidelity
Bankshares.
3. As a condition to the willingness of Fidelity Bankshares to enter into
this Agreement, each of the executive officers and directors of FCB have entered
into a Voting Agreement, substantially in the form of Exhibit A hereto, dated as
of the date hereof, with Fidelity Bankshares (the "Voting Agreement"), pursuant
to which each such executive officer and director has agreed, among other
things, to vote all shares of common stock of FCB owned by such person in favor
of the approval of this Agreement and the transactions contemplated hereby, upon
the terms and subject to the conditions set forth in such Voting Agreements.
4. The parties intend the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement be and is hereby adopted as a "plan of
reorganization" within the meaning of Sections 354 and 361 of the Code.
5. The parties desire to make certain representations, warranties and
agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
6. In consideration of the mutual covenants, representations, warranties
and agreements herein contained, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms have the following meanings
(unless the context otherwise requires, references to Articles and Sections
refer to Articles and Sections of this Agreement).
"Affiliate" means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person and any Affiliate of
such executive officer or director.
"Agreement" means this agreement, and any amendment hereto.
"Bank Merger" shall mean the merger of First Community Bank of Palm Beach
County with and into Fidelity Federal Bank & Trust, with Fidelity Federal Bank &
Trust as the surviving institution, which merger shall occur immediately
following the Merger.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the OTS, FDIC, the Department and the FRB, which
regulates Fidelity Federal Bank & Trust, First Community Bank, and their
respective holding companies or subsidiaries, as the case may be.
"Certificate" shall mean a certificate evidencing shares of FCB Common
Stock.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean the confidentiality agreement
referred to in Section 12.1 of this Agreement.
"Department" shall mean the Florida Department of Financial Services,
Office of Financial Regulation.
"DGCL" shall mean the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning set forth in Section 3.1.4.
"Dissenting Stockholder" shall have the meaning set forth in Section 3.1.4.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 as the effective time of the Merger.
"Environmental Laws" shall mean any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
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approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall mean American Stock Transfer & Trust Company, or
such other bank or trust company or other agent designated by Fidelity
Bankshares, and reasonably acceptable to FCB, which shall act as agent for
Fidelity Bankshares in connection with the exchange procedures for exchanging
Certificates for the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.3.1.
"Exchange Ratio" shall have the meaning set forth in Section 3.1.3.
"FBCA" shall mean the Florida Business Corporation Act.
"FCB" shall mean First Community Bancorp, Inc., a Florida corporation, with
its principal offices located at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000.
"FCB Common Stock" shall mean both the voting and non-voting common stock,
par value $0.10 per share, of FCB.
"FCB DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by FCB to Fidelity Bankshares specifically referring to the
appropriate section of this Agreement.
"FCB Financial Statements" shall mean (i) the audited consolidated balance
sheets (including related notes and schedules, if any) of FCB as of December 31,
2003 and 2002 and the consolidated statements of income, changes in
stockholders' equity and cash flows (including related notes and schedules, if
any) of FCB for each of the three years ended December 31, 2003, 2002 and 2001,
and (ii) the unaudited interim consolidated financial statements of FCB as of
the end of each calendar quarter following December 31, 2003 and for the periods
then ended.
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"FCB Option" shall mean an option to purchase shares of FCB Common Stock
granted pursuant to the outstanding option agreements and outstanding as of the
date hereof, as set forth in FCB DISCLOSURE SCHEDULE 4.3.1.
"FCB Regulatory Reports" means the Call Reports of First Community Bank,
and accompanying schedules (other than such schedules as are required to be kept
confidential pursuant to applicable law or regulatory requirements), as filed
with the FDIC with respect to each calendar quarter beginning with the quarter
ended September 30, 2003, through the Closing Date, and all Annual Reports on
Form FR Y-6, any Current Report on Form FR Y-6A filed with the FRB by FCB from
December 31, 2002 through the Closing Date.
"FCB Stockholders Meeting" shall have the meaning set forth in Section
8.1.1.
"FCB Subsidiary" means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by FCB or First Community Bank,
except any corporation the stock of which is held in the ordinary course of the
lending activities of First Community Bank.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of Atlanta.
"Fidelity Bankshares" shall mean Fidelity Bankshares, a Florida
corporation, with its principal executive offices located at 000 Xxxxxx Xxxxxx,
Xxxx Xxxx Xxxxx, Xxxxxxx 00000.
"Fidelity Bankshares Common Stock" shall mean the common stock, par value
$0.10 per share, of Fidelity Bankshares.
"FIDELITY BANKSHARES DISCLOSURE SCHEDULE" shall mean a written disclosure
schedule delivered by Fidelity Bankshares to FCB specifically referring to the
appropriate section of this Agreement.
"Fidelity Bankshares Stock Benefit Plans" shall mean the 2002 Incentive
Stock Benefit Plan.
"Fidelity Bankshares Financial Statements" shall mean the (i) the audited
consolidated statements of financial condition (including related notes and
schedules) of Fidelity Bankshares as of December 31, 2003 and 2002 and the
consolidated statements of income, comprehensive income, changes in
stockholders' equity and cash flows (including related notes and schedules, if
any) of Fidelity Bankshares for each of the three years ended December 31, 2003,
2002 and 2001, as set forth in Fidelity Bankshares' annual report on Form 10-K
for the year ended December 31, 2003, and (ii) the unaudited interim
consolidated financial statements of Fidelity Bankshares as of the end of each
calendar quarter following December 31, 2003, and for the periods then ended, as
filed by Fidelity Bankshares in its Securities Documents.
"Fidelity Bankshares Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly, by Fidelity
4
Bankshares or Fidelity Federal Bank & Trust, except any corporation the stock of
which is held in the ordinary course of the lending activities of Fidelity
Federal Bank & Trust.
"Fidelity Federal Bank & Trust" shall mean Fidelity Federal Bank & Trust, a
federally chartered stock savings association, with its principal offices
located at 000 Xxxxxx Xxxxxx, Xxxx Xxxx Xxxxx, Xxxxxxx 00000, which is a wholly
owned subsidiary of Fidelity Bankshares.
"First Community Bank" shall mean First Community Bank of Palm Beach
County; a Florida chartered commercial bank, with its principal offices located
at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, which is a wholly owned
subsidiary of FCB.
"FRB" shall mean the Board of Governors of the Federal Reserve System or
any successor thereto.
"GAAP" shall mean accounting principles generally accepted in the United
States of America.
"Governmental Entity" shall mean any Federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) means those facts that are known or
should have been known by the executive officers and directors of such Person,
and includes any facts, matters or circumstances set forth in any written notice
from any Bank Regulator or any other material written notice received by an
executive officer or director of that Person.
"Material Adverse Effect" shall mean, with respect to Fidelity Bankshares
or FCB, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of Fidelity Bankshares
and its Subsidiaries taken as a whole, or FCB and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of either FCB, on
the one hand, or Fidelity Bankshares, on the other hand, to perform its
obligations under this Agreement or otherwise materially impedes the
consummation of the transactions contemplated by this Agreement; provided that
"Material Adverse Effect" shall not be deemed to include the impact of (a)
changes in laws and regulations affecting banks or thrift institutions and their
holding companies generally, or interpretations thereof by courts or
governmental agencies, (b) changes in GAAP or regulatory accounting principles
generally applicable to financial institutions and their holding companies, (c)
actions and omissions of a party hereto (or any of its Subsidiaries) taken with
the prior written consent of the other party, (d) compliance with this Agreement
on the business, financial condition or results of operations of the parties and
their respective Subsidiaries, including the expenses incurred by the parties
hereto in consummating the transactions contemplated by this Agreement
(consistent with the information included in the Fidelity Bankshares Disclosure
Schedules and the FCB Disclosure Schedules), and (e) any change in the value of
5
the securities or loan portfolio of Fidelity Bankshares or FCB, respectively,
whether held as available for sale or held to maturity, resulting from a change
in interest rates generally.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of FCB with and into Fidelity Bankshares
pursuant to the terms hereof.
"Merger Consideration" shall mean the cash and shares of Fidelity
Bankshares Common Stock, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of Fidelity Bankshares Common Stock to be
offered to holders of FCB Common Stock in connection with the Merger.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq National Market.
"Option Payment" shall have the meaning set forth in Section 3.4.
"OTS" shall mean the Office of Thrift Supervision or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Proxy Statement-Prospectus" shall have the meaning set forth in Section
8.2.1.
"Regulatory Agreement" shall have the meaning set forth in Section 4.12.3.
"Regulatory Approvals" means the approval of any Bank Regulator that is
necessary in connection with the consummation of the Merger, the Bank Merger and
the related transactions contemplated by this Agreement.
"Representative" shall have the meaning set forth in Section 3.2.2.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
6
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed pursuant to
the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Termination Date" shall mean June 30, 2005.
"Treasury Stock" shall have the meaning set forth in Section 3.1.2.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1. Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time: (a) FCB shall merge with and into Fidelity Bankshares, with Fidelity
Bankshares as the resulting or surviving corporation (the "Surviving
Corporation"); and (b) the separate existence of FCB shall cease and all of the
rights, privileges, powers, franchises, properties, assets, liabilities and
obligations of FCB shall be vested in and assumed by Fidelity Bankshares. As
part of the Merger, each share of FCB Common Stock will be converted into the
right to receive the Merger Consideration pursuant to the terms of Article III.
2.2. Closing; Effective Time.
The Merger shall be effected by the filing of a certificate of merger with
the Delaware Office of the Secretary of State and the Florida Secretary of State
on the day of the Closing (the "Closing Date"), in accordance with the DGCL and
FBCA, respectively. The "Effective Time" means the date and time upon which the
certificate of merger is filed with the Delaware Office of the Secretary of
State and the Florida Secretary of State, or as otherwise stated in the
certificate of merger, in accordance with the DGCL and FBCA, respectively.
2.3. Certificate of Incorporation and Bylaws.
The Certificate of Incorporation and Bylaws of Fidelity Bankshares as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until thereafter amended
as provided therein and by applicable law.
7
2.4. Directors and Officers of Surviving Corporation.
The directors of Fidelity Bankshares immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation. Until changed in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, the officers of Fidelity
Bankshares immediately prior to the Effective Time shall be the officers of
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2.5. Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects as set
forth in the DGCL and FBCA.
2.6. Tax Consequences.
It is intended that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement shall constitute
a "plan of reorganization" as that term is used in Sections 354 and 361 of the
Code. From and after the date of this Agreement and until the Closing, each
party hereto shall use its reasonable best efforts to cause the Merger to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken which action or
failure to act would reasonably be expected to prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code. Following the
Closing, neither Fidelity Bankshares nor any of its affiliates shall knowingly
take any action, cause any action to be taken, fail to take any action or cause
any action to fail to be taken, which action or failure to act would reasonably
be expected to cause the Merger to fail to qualify as a reorganization under
Section 368(a) of the Code. Fidelity Bankshares and FCB each hereby agrees to
deliver certificates substantially in compliance with IRS published advance
ruling guidelines, with customary exceptions and modifications thereto, to
enable counsel to deliver the legal opinions contemplated by Section 9.1.6,
which certificates shall be dated as of the date of such opinions.
2.7. Possible Alternative Structures.
Notwithstanding anything to the contrary contained in this Agreement and
subject to the satisfaction of the conditions set forth in Article IX, prior to
the Effective Time Fidelity Bankshares shall be entitled to revise the structure
for effecting the Merger described in Section 2.1 or the Bank Merger including,
without limitation, by substituting a wholly owned subsidiary for Fidelity
Bankshares or Fidelity Federal Bank & Trust, as applicable, provided that (i)
any such subsidiary shall become a party to, and shall agree to be bound by, the
terms of this Agreement (ii) there are no adverse Federal or state income tax
consequences to FCB stockholders, and nothing would prevent the rendering of the
opinions in Section 9.1.6, as a result of the modification; (iii) the
consideration to be paid to the holders of FCB Common Stock under this Agreement
is not thereby changed in kind, value or reduced in amount; and (iv) such
modification will not delay materially or jeopardize receipt of any required
regulatory approvals or other consents and approvals relating to the
consummation of the Merger or otherwise cause any condition to Closing set forth
in Article IX not to be capable of being fulfilled. The parties hereto agree to
appropriately amend this Agreement and any related documents in order to reflect
any such revised structure.
8
2.8. Additional Actions.
If, at any time after the Effective Time, Fidelity Bankshares shall
consider or be advised that any further deeds, assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in Fidelity Bankshares its right, title or interest in, to
or under any of the rights, properties or assets of FCB or First Community Bank,
or (ii) otherwise carry out the purposes of this Agreement, FCB and its officers
and directors shall be deemed to have granted to Fidelity Bankshares an
irrevocable power of attorney to execute and deliver, in such official corporate
capacities, all such deeds, assignments or assurances in law or any other acts
as are necessary or desirable to (a) vest, perfect or confirm, of record or
otherwise, in Fidelity Bankshares its right, title or interest in, to or under
any of the rights, properties or assets of FCB or (b) otherwise carry out the
purposes of this Agreement, and the officers and directors of the Fidelity
Bankshares are authorized in the name of FCB or otherwise to take any and all
such action.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of FCB Common Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger and without any action on
the part of Fidelity Bankshares, FCB or the holders of any of the shares of FCB
Common Stock, the Merger shall be effected in accordance with the following
terms:
3.1.1. Each share of Fidelity Bankshares Common Stock that is issued
and outstanding immediately prior to the Effective Time shall remain issued
and outstanding following the Effective Time and shall be unchanged by the
Merger.
3.1.2. All shares of FCB Common Stock held in the treasury of FCB and
each share of FCB Common Stock owned by Fidelity Bankshares prior to the
Effective Time (other than shares held in a fiduciary capacity or in
connection with debts previously contracted) ("Treasury Stock"), shall, at
the Effective Time, cease to exist, and the certificates for such shares
shall be canceled as promptly as practicable thereafter, and no payment or
distribution shall be made in consideration therefor.
3.1.3. Each share of FCB Common Stock issued and outstanding
immediately prior to the Effective Time (other than Treasury Stock and
Dissenting Shares) shall become and be converted into the right to receive
$14.75 in cash and 0.3937 shares of Fidelity Bankshares Common Stock (the
"Exchange Ratio"). The cash and stock Consideration is referred to herein
as the "Merger Consideration."
3.1.4. Each outstanding share of FCB Common Stock, the holder of which
has perfected his right to dissent under Sections 607.1301, 1302 and 1320
of the FBCA and has not effectively withdrawn or lost such right as of the
Effective Time (the "Dissenting Shares"), shall not be converted into or
9
represent a right to receive the Merger Consideration hereunder, and the
holder thereof shall be entitled only to such rights as are granted by
Sections 607.1301, 1302 and 1320 of the FBCA. FCB shall give Fidelity
Bankshares prompt notice upon receipt by FCB of any such demands for
payment of the fair value of such shares of FCB Common Stock and of
withdrawals of such notice and any other instruments provided pursuant to
applicable law (any stockholder duly making such demand being hereinafter
called a "Dissenting Stockholder"), and Fidelity Bankshares shall have the
right to participate in all negotiations and proceedings with respect to
any such demands. FCB shall not, except with the prior written consent of
Fidelity Bankshares, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment, or waive any
failure to timely deliver a written demand for appraisal or the taking of
any other action by such Dissenting Stockholder as may be necessary to
perfect appraisal rights under the FBCA. Any payments made in respect of
Dissenting Shares shall be made by the Surviving Company.
3.1.5. If any Dissenting Stockholder withdraws or loses (through
failure to perfect or otherwise) his right to such payment at or prior to
the Effective Time, such holder's shares of FCB Common Stock shall be
converted into a right to receive the Merger Consideration in accordance
with the applicable provisions of this Agreement. If such holder withdraws
or loses (through failure to perfect or otherwise) his right to such
payment after the Effective Time, each share of FCB Common Stock of such
holder shall be entitled to receive the Merger Consideration.
3.1.6. After the Effective Time, shares of FCB Common Stock shall no
longer be outstanding and shall automatically be canceled and shall cease
to exist, and shall thereafter by operation of this Section 3.1 represent
only the right to receive the Merger Consideration and any dividends or
distributions with respect thereto or any dividends or distributions with a
record date prior to the Effective Time that were declared or made by FCB
on such shares of FCB Common Stock in accordance with the terms of this
Agreement on or prior to the Effective Time and which remain unpaid at the
Effective Time.
3.1.7. In the event Fidelity Bankshares changes (or establishes a
record date for changing) the number of, or provides for the exchange of,
shares of Fidelity Bankshares Common Stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, or similar transaction with respect to
the outstanding Fidelity Bankshares Common Stock and the record date
therefor shall be prior to the Effective Time, the Fidelity Bankshares
Common Stock portion of the Merger Consolidation shall be proportionately
and appropriately adjusted; provided, that for the avoidance of doubt the
parties acknowledge that the foregoing is not intended to result in any
such adjustment as a result of share issuances of Fidelity Bankshares
Common Stock by Fidelity Bankshares under Fidelity Bankshares Compensation
and Benefit Plans or where such issuance is pursuant to a widely
distributed stock offering for fair market value consideration.
3.2. Fractional Shares
3.2.1. No Fractional Shares. Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares
of Fidelity Bankshares Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to
Fidelity Bankshares Common Stock shall be payable on or with respect to any
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fractional share interest, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder
of Fidelity Bankshares. In lieu of the issuance of any such fractional
share, Fidelity Bankshares shall pay to each former holder of FCB Common
Stock who otherwise would be entitled to receive a fractional share of
Fidelity Bankshares Common Stock, an amount in cash, rounded to the nearest
cent and without interest, equal to the product of (i) the fraction of a
share to which such holder would otherwise have been entitled and (ii) the
average of the daily closing sales prices of a share of Fidelity Bankshares
Common Stock as reported on the Nasdaq for the five consecutive trading
days immediately preceding the Closing Date. For purposes of determining
any fractional share interest, all shares of FCB Common Stock owned by a
FCB stockholder shall be combined so as to calculate the maximum number of
whole shares of Fidelity Bankshares Common Stock issuable to such FCB
stockholder.
3.3. Procedures for Exchange of FCB Common Stock.
3.3.1. Fidelity Bankshares to Make Merger Consideration Available. No
later than the Closing Date, Fidelity Bankshares shall deposit, or shall
cause to be deposited, with the Exchange Agent for the benefit of the
holders of FCB Common Stock, for exchange in accordance with this Section
3.3, certificates representing the shares of Fidelity Bankshares Common
Stock and an aggregate amount of cash sufficient to pay the aggregate
amount of cash payable pursuant to this Article III (including the
estimated amount of cash to be paid in lieu of fractional shares of FCB
Common Stock) (such cash and certificates for shares of Fidelity Bankshares
Common Stock, together with any dividends or distributions with respect
thereto (without any interest thereon) being hereinafter referred to as the
"Exchange Fund").
3.3.2. Exchange of Certificates. Fidelity Bankshares shall take all
steps necessary to cause the Exchange Agent, within five (5) business days
after the Effective Time, to mail to each holder of a Certificate or
Certificates who has not previously surrendered such certificates with an
Election Form, a form letter of transmittal for return to the Exchange
Agent and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration and cash in lieu of
fractional shares into which the FCB Common Stock represented by such
Certificates shall have been converted as a result of the Merger, if any.
The letter of transmittal shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent. Upon proper surrender
of a Certificate for exchange and cancellation to the Exchange Agent,
together with a properly completed letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and the certificate so surrendered shall
be cancelled. No interest will be paid or accrued on any Cash Consideration
or any cash payable in lieu of fractional shares or any unpaid dividends
and distributions, if any, payable to holders of Certificates.
3.3.3. Rights of Certificate Holders after the Effective Time. The
holder of a Certificate that prior to the Merger represented issued and
outstanding FCB Common Stock shall have no rights, after the Effective
Time, with respect to such FCB Common Stock except to surrender the
Certificate in exchange for the Merger Consideration as provided in this
Agreement. No dividends or other distributions declared after the Effective
Time with respect to Fidelity Bankshares Common Stock shall be paid to the
holder of any unsurrendered Certificate until the holder thereof shall
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surrender such Certificate in accordance with this Section 3.3. After the
surrender of a Certificate in accordance with this Section 3.3, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Fidelity Bankshares Common Stock
represented by such Certificate.
3.3.4. Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the accompanying letter of
transmittal is not the record holder thereof, then it shall be a condition
of the payment of the Merger Consideration that: (i) such Certificate is
properly endorsed to such Person or is accompanied by appropriate stock
powers, in either case signed exactly as the name of the record holder
appears on such Certificate, and is otherwise in proper form for transfer,
or is accompanied by appropriate evidence of the authority of the Person
surrendering such Certificate and signing the letter of transmittal to do
so on behalf of the record holder; and (ii) the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
similar taxes required by reason of the payment to a Person other than the
registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
3.3.5. Closing of Transfer Books. From and after the Effective Time,
there shall be no transfers on the stock transfer books of FCB of the FCB
Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be exchanged for
the Merger Consideration and canceled as provided in this Section 3.3.
3.3.6. Return of Exchange Fund. At any time following the six (6)
month period after the Effective Time, Fidelity Bankshares shall be
entitled to require the Exchange Agent to deliver to it any portions of the
Exchange Fund which had been made available to the Exchange Agent and not
disbursed to holders of Certificates (including, without limitation, all
interest and other income received by the Exchange Agent in respect of all
funds made available to it), and thereafter such holders shall be entitled
to look to Fidelity Bankshares (subject to abandoned property, escheat and
other similar laws) with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither Fidelity Bankshares nor the Exchange
Agent shall be liable to any holder of a Certificate for any Merger
Consideration delivered in respect of such Certificate to a public official
pursuant to any abandoned property, escheat or other similar law.
3.3.7. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be
lost, stolen or destroyed and the posting by such person of a bond in such
amount as Fidelity Bankshares may reasonably direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof.
3.3.8. Withholding. Fidelity Bankshares or the Exchange Agent will be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement or the transactions contemplated hereby to any
holder of FCB Common Stock such amounts as Fidelity Bankshares (or any
Affiliate thereof) or the Exchange Agent are required to deduct and
withhold with respect to the making of such payment under the Code, or any
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applicable provision of U.S. federal, state, local or non-U.S. tax law. To
the extent that such amounts are properly withheld by Fidelity Bankshares
or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the FCB
Common Stock in respect of whom such deduction and withholding were made by
Fidelity Bankshares or the Exchange Agent.
3.4. Treatment of FCB Options.
FCB DISCLOSURE SCHEDULE 3.4 sets forth all of the outstanding FCB Options
as of the date hereof. At the Effective Time, and pursuant to the terms of the
FCB Option Plan, each FCB Option that is unexercised and outstanding, whether or
not then exercisable, immediately prior thereto shall, by reason of the Merger,
be cancelled and converted into the right to receive in cash an amount (subject
to required tax withholdings) equal to (i) the excess of (A) the cash value of
the Merger Consideration per share as of the date of this Agreement over (B) the
exercise price per share of each such FCB Option multiplied by (ii) the number
of shares of FCB Common Stock subject to the FCB Option (the "Option Payment").
FCB shall make the Option Payment at the Effective Time and FCB shall give
written notice to the each holder of a then outstanding FCB Option that such
holder will receive the payment described herein in exchange for such holder's
outstanding FCB Options and FCB shall obtain the written acknowledgment of each
such holder of the receipt of such notice. Prior to receipt of the Option
Payment, each holder of an FCB Option shall execute a cancellation agreement,
substantially in the form attached to FIDELITY BANKSHARES DISCLOSURE SCHEDULE
3.4.
3.5. Bank Merger.
FCB and Fidelity Bankshares shall use their reasonable best efforts to
cause the merger of First Community Bank with and into Fidelity Federal Bank &
Trust, with Fidelity Federal Bank & Trust as the surviving institution. In
addition, following the execution and delivery of this Agreement, Fidelity
Bankshares will cause Fidelity Federal Bank & Trust, and FCB will cause First
Community Bank, to execute and deliver a Plan of Bank Merger substantially in
the form attached to this Agreement as Exhibit B.
3.6. Reservation of Shares.
Fidelity Bankshares shall reserve for issuance a sufficient number of
shares of the Fidelity Bankshares Common Stock for the purpose of issuing shares
of Fidelity Bankshares Common Stock to the FCB stockholders in accordance with
this Article III.
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3.7 Adjustment of Exchange Ratio.
If the tax opinion referred to in Section 9.1.6 and to be delivered at the
Closing (the "Tax Opinion") cannot be rendered as a result of the Merger's
potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, because the aggregate value of the shares of
Fidelity Bankshares Common Stock to be issued in the Merger as of the Effective
Time is less than 40% of the value of the Aggregate Merger Consideration, based
upon the 10 day average closing price of Fidelity Bankshares Common Stock ending
5 days immediately prior to the closing date, then Fidelity Bankshares shall, in
its sole discretion have the right to increase the Exchange Ratio to the minimum
extent necessary to satisfy the requirements of Section 368(a) of the Code.
Concurrent with the increase in the Exchange Ratio, the cash consideration will
be reduced by a like dollar amount so that the Aggregate Merger Consideration
will be 40% stock and 60% cash.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FCB
FCB represents and warrants to Fidelity Bankshares that the statements
contained in this Article IV are correct as of the date of this Agreement and
will be correct as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Article IV), subject to the standard set forth in Section 4.1 and except as set
forth in the FCB DISCLOSURE SCHEDULE delivered by FCB to Fidelity Bankshares on
the date hereof, and except as to any representation or warranty which
specifically relates to an earlier date, which only need be so correct as of
such earlier date. FCB has made a good faith effort to ensure that the
disclosure on each schedule of the FCB DISCLOSURE SCHEDULE corresponds to the
section referenced herein. However, for purposes of the FCB DISCLOSURE SCHEDULE,
any item disclosed on any schedule therein is deemed to be fully disclosed with
respect to all schedules under which such item may be relevant as and to the
extent that it is reasonably clear on the face of such schedule that such item
applies to such other schedule. References to the Knowledge of FCB shall include
the Knowledge of First Community Bank.
4.1. Standard.
No representation or warranty of FCB contained in this Article IV shall be
deemed untrue or incorrect, and FCB shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of this Article IV, has had or is reasonably expected to have a
Material Adverse Effect, disregarding for these purposes (x) any qualification
or exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material", "materially", "in all material
respects", "Material Adverse Effect" or similar terms or phrases in any such
representation or warranty. The foregoing standard shall not apply to
representations and warranties contained in Sections 4.2 (other than the last
sentence of Sections 4.2.1 and 4.2.2), 4.4, 4.13.6, 4.13.7 and 4.13.9, which
shall be deemed untrue, incorrect and breached if they are not true and correct
in all material respects.
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4.2. Organization.
4.2.1. FCB is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, and is duly
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHCA"). FCB has full corporate power and authority
to carry on its business as now conducted. FCB is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of
its business requires such qualification.
4.2.2. First Community Bank is a Florida chartered commercial bank
duly organized, validly existing and in good standing under the laws of the
State of Florida. The deposits of First Community Bank are insured by the
FDIC to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid by
First Community Bank when due. First Community Bank is a member in good
standing of the FHLB and owns the requisite amount of stock therein.
4.2.3. FCB DISCLOSURE SCHEDULE 4.2.3 sets forth each FCB Subsidiary.
Each FCB Subsidiary is a corporation, limited liability company or other
legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization.
4.2.4. The respective minute books of FCB, First Community Bank and
each other FCB Subsidiary accurately records, in all material respects, all
material corporate actions of their respective stockholders and boards of
directors (including committees).
4.2.5. Prior to the date of this Agreement, FCB has made available to
Fidelity Bankshares true and correct copies of the certificate of
incorporation or charter and bylaws of FCB, First Community Bank and each
other FCB Subsidiary.
4.3. Capitalization.
4.3.1. The authorized capital stock of FCB consists of 2,500,000
shares of FCB Common Stock, of which 125,000 shares are voting common
shares $0.10 par value and 2,375,000 shares are non-voting common shares
$0.10 par value ("FCB Preferred Stock"). There are 44,608 shares of voting
common stock and 844,492 shares of non-voting common stock all of which are
validly issued and outstanding, fully paid and non-assessable and free of
preemptive rights. There are 110,900 shares of FCB Common Stock held by FCB
as treasury stock as of the date hereof. Neither FCB nor any FCB Subsidiary
has or is bound by any Rights of any character relating to the purchase,
sale or issuance or voting of, or right to receive dividends or other
distributions on any shares of FCB Common Stock, or any other security of
FCB or a FCB Subsidiary or any securities representing the right to vote,
purchase or otherwise receive any shares of FCB Common Stock or any other
security of FCB or any FCB Subsidiary, other than shares of FCB Common
Stock underlying the FCB option. FCB has granted options to acquire 42,000
shares of FCB Common Stock. FCB DISCLOSURE SCHEDULE 4.3.1 sets forth: the
name of each holder of an FCB option, identifying the number of shares each
such individual may acquire pursuant to the exercise of such options, the
grant, vesting and expiration dates, and the exercise price relating to the
options held.
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4.3.2. FCB owns all of the capital stock of First Community Bank, free
and clear of any lien or encumbrance. Except for the FCB Subsidiaries and
as set forth in FCB DISCLOSURE SCHEDULE 4.3.2, FCB does not possess,
directly or indirectly, any material equity interest in any corporate
entity, except for equity interests held in the investment portfolios of
FCB or any FCB Subsidiary (which as to any one issuer, do not exceed 5% of
such issuer's outstanding equity securities), equity interests held by FCB
Subsidiaries in a fiduciary capacity, and equity interests held in
connection with the lending activities of FCB Subsidiaries, including stock
in the FHLB. Either FCB or First Community Bank owns all of the outstanding
shares of capital stock of each FCB Subsidiary free and clear of all liens,
security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature.
4.3.3. To FCB's Knowledge, except as set forth on FCB DISCLOSURE
SCHEDULE 4.3.3, as of the date hereof no Person is the beneficial owner (as
defined in Section 13(d) of the Exchange Act) of 5% or more of the
outstanding shares of FCB Common Stock.
4.3.4. No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which FCB's stockholders may vote have been
issued by FCB and are outstanding.
4.4. Authority; No Violation.
4.4.1. FCB has full corporate power and authority to execute and
deliver this Agreement and, subject to the receipt of the Regulatory
Approvals described in Section 8.3 and the approval of this Agreement by
FCB's stockholders, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by FCB and the completion by FCB
of the transactions contemplated hereby, up to and including the Merger,
have been duly and validly approved by the Board of Directors of FCB. This
Agreement has been duly and validly executed and delivered by FCB, and
subject to approval by the stockholders of FCB and receipt of the
Regulatory Approvals and due and valid execution and delivery of this
Agreement by Fidelity Bankshares, constitutes the valid and binding
obligation of FCB, enforceable against FCB in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity.
4.4.2. Subject to compliance by Fidelity Bankshares with the terms and
conditions of this Agreement, (A) the execution and delivery of this
Agreement by FCB, (B) subject to receipt of Regulatory Approvals, and FCB's
and Fidelity Bankshares' compliance with any conditions contained therein,
and subject to the receipt of the approval of the stockholders of FCB, the
consummation of the transactions contemplated hereby, and (C) compliance by
FCB with any of the terms or provisions hereof will not (i) conflict with
or result in a breach of any provision of the Articles of Incorporation or
Bylaws of FCB or any FCB Subsidiary or the Articles of Incorporation and
Bylaws of First Community Bank; (ii) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
FCB or any FCB Subsidiary or any of their respective properties or assets;
or (iii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration or the creation of any lien, security interest, charge or
other encumbrance upon any of the properties or assets of FCB or First
Community Bank under any of the terms, conditions or provisions of any
16
note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other investment or obligation to which FCB or First Community Bank is a
party, or by which they or any of their respective properties or assets may
be bound or affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either individually or in
the aggregate, will not have a Material Adverse Effect on FCB and the FCB
Subsidiaries taken as a whole.
4.5. Consents.
Except for (a) the receipt of the Regulatory Approvals and compliance with
any conditions contained therein, (b) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and the Florida Secretary
of State, and (c) the approval of this Agreement by the requisite vote of the
stockholders of FCB, no consents, waivers or approvals of, or filings or
registrations with, any Governmental Entity or Bank Regulator are necessary,
and, to FCB's Knowledge, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(x) the execution and delivery of this Agreement by FCB, and the completion by
FCB of the Merger or (y) the execution and delivery of the Plan of Bank Merger
and the completion of the Bank Merger. FCB has no reason to believe that (i) any
required Regulatory Approvals or other required consents or approvals will not
be received or will include the imposition of any condition or requirement that
could reasonably be expected to result in a Material Adverse Effect on Fidelity
Bankshares and its Subsidiaries, taken as a whole, or that (ii) any public body
or authority having jurisdiction over the affairs of FCB or its subsidiaries,
the consent or approval of which is not required or to which a filing is not
required, will object to the completion of the transactions contemplated by this
Agreement.
4.6. Financial Statements.
4.6.1. The FCB Regulatory Reports have been prepared in all material
respects in accordance with applicable regulatory accounting principles and
practices throughout the periods covered by such statements, and fairly
present in all material respects, the consolidated financial position,
results of operations and changes in shareholders' equity of FCB as of and
for the periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
4.6.2. FCB has previously made available to Fidelity Bankshares the
FCB Financial Statements covering periods ended prior to the date hereof.
The FCB Financial Statements have been prepared in accordance with GAAP,
and (including the related notes where applicable) fairly present in each
case in all material respects (subject in the case of the unaudited interim
statements to normal year-end adjustments) the consolidated financial
position, results of operations and cash flows of FCB and the FCB
Subsidiaries on a consolidated basis as of and for the respective periods
ended on the dates thereof, in accordance with GAAP during the periods
involved.
4.6.3. At the date of each balance sheet included in the FCB Financial
Statements or in the FCB Regulatory Reports, FCB did not have any
liabilities, obligations or loss contingencies of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to be
reflected in such FCB Financial Statements or in the FCB Regulatory Reports
or in the footnotes thereto which are not fully reflected or reserved
against therein or fully disclosed in a footnote thereto, except for
17
liabilities, obligations and loss contingencies which are not material
individually or in the aggregate, and except for liabilities, obligations
and loss contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
4.7. Taxes.
FCB and the FCB Subsidiaries that are at least 80 percent owned by FCB are
members of the same affiliated group within the meaning of Code Section 1504(a).
FCB has duly filed all federal, state and material local tax returns required to
be filed by or with respect to FCB and each Subsidiary of FCB, taking into
account any extensions (all such returns, to FCB's Knowledge, being accurate and
correct in all material respects) and has duly paid or made provisions for the
payment of all material federal, state and local taxes which have been incurred
by or are due or claimed to be due from FCB and any Subsidiary of FCB by any
taxing authority or pursuant to any written tax sharing agreement, other than
taxes or other charges which (i) are not delinquent, (ii) are being contested in
good faith, or (iii) have not yet been fully determined. As of the date of this
Agreement, FCB has received no written notice of, and to FCB's Knowledge there
is no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of FCB or any of its Subsidiaries, and no
claim has been made by any taxing authority in a jurisdiction where FCB or any
of its Subsidiaries do not file tax returns that FCB or any such Subsidiary is
subject to taxation in that jurisdiction. FCB and its Subsidiaries have not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect. FCB and each
of its Subsidiaries has timely withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and FCB and
each of its Subsidiaries, to FCB's Knowledge, has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements.
4.8. No Material Adverse Effect.
FCB and the FCB Subsidiaries, taken as a whole, have not suffered any
Material Adverse Effect since June 30, 2003 and no event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on FCB and the FCB
Subsidiaries, taken as a whole.
4.9. Material Contracts; Leases; Defaults.
4.9.1. Except as set forth in FCB DISCLOSURE SCHEDULE 4.9.1, neither
FCB nor any FCB Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract with any past or present officer, director
or employee of FCB or any FCB Subsidiary, except for "at will"
arrangements; (ii) any plan or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit sharing or
similar material arrangements for or with any past or present officers,
directors or employees of FCB or any FCB Subsidiary; (iii) any collective
bargaining agreement with any labor union relating to employees of FCB or
any FCB Subsidiary; (iv) any agreement which by its terms limits or affects
18
the payment of dividends by FCB or any FCB Subsidiary; (v) any instrument
evidencing or related to indebtedness for borrowed money in excess of
$50,000, whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase, guaranty or otherwise, in
respect of which FCB or any FCB Subsidiary is an obligor to any person,
which instrument evidences or relates to indebtedness other than deposits,
FHLB advances with a term to maturity not in excess of one year, repurchase
agreements, bankers' acceptances, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" or which contains financial covenants or other material
non-customary restrictions (other than those relating to the payment of
principal and interest when due) which would be applicable on or after the
Closing Date to Fidelity Bankshares or any Fidelity Bankshares Subsidiary;
(vi) any other agreement, written or oral, which is not terminable without
cause on 60 days' notice or less without material penalty or payment, or
that obligates FCB or any FCB Subsidiary for the payment of more than
$25,000 annually or for the payment of more than $50,000 over its remaining
term; or (vii) any agreement (other than this Agreement), contract,
arrangement, commitment or understanding (whether written or oral) that
restricts or limits in any material way the conduct of business by FCB or
any FCB Subsidiary (it being understood that any non-compete or similar
provision shall be deemed material).
4.9.2. Each real estate lease that will require the consent of the
lessor or its agent as a result of the Merger or the Bank Merger by virtue
of the terms of any such lease, is listed in FCB DISCLOSURE SCHEDULE 4.9.2
identifying the section of the lease that contains such prohibition or
restriction. Subject to any consents that may be required as a result of
the transactions contemplated by this Agreement, to its Knowledge, neither
FCB nor any FCB Subsidiary is in default in any material respect under any
material 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
assets, business, or operations receive 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.
4.9.3. True and correct copies of agreements, contracts, arrangements
and instruments referred to in Section 4.9.1 and 4.9.2 have been made
available to Fidelity Bankshares on or before the date hereof, are listed
on FCB DISCLOSURE SCHEDULE 4.9.1 and are in full force and effect on the
date hereof. No plan, contract, employment agreement, termination
agreement, or similar agreement or arrangement to which FCB or any FCB
Subsidiary is a party or under which FCB or any FCB Subsidiary may be
liable contains provisions which permit an employee or independent
contractor to terminate it without cause and continue to accrue future
benefits thereunder. No such agreement, plan, contract, or arrangement (x)
provides for acceleration in the vesting of benefits or payments due
thereunder upon the occurrence of a change in ownership or control of FCB
or any FCB Subsidiary or upon the occurrence of a subsequent event; or (y)
requires FCB or any FCB Subsidiary to provide a benefit in the form of FCB
Common Stock or determined by reference to the value of FCB Common Stock.
4.10. Ownership of Property; Insurance Coverage.
4.10.1. FCB and each FCB Subsidiary has good and, as to real property,
marketable title to all material assets and properties owned by FCB or each
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FCB Subsidiary in the conduct of its businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheet contained in the most recent
FCB Financial Statements or acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of in the
ordinary course of business, since the date of such balance sheet), subject
to no material encumbrances, liens, mortgages, security interests or
pledges, except (i) those items which secure liabilities for public or
statutory obligations or any discount with, borrowing from or other
obligations to FHLB, inter-bank credit facilities, reverse repurchase
agreements or any transaction by a FCB Subsidiary acting in a fiduciary
capacity, and (ii) statutory liens for amounts not yet delinquent or which
are being contested in good faith. FCB and the FCB Subsidiaries, as lessee,
have the right under valid and existing leases of real and personal
properties used by FCB and the FCB Subsidiaries in the conduct of their
businesses to occupy or use all such properties as presently occupied and
used by each of them. Such existing leases and commitments to lease
constitute or will constitute operating leases for both tax and financial
accounting purposes and the lease expense and minimum rental commitments
with respect to such leases and lease commitments are as disclosed in all
material respects in the notes to the FCB Financial Statements.
4.10.2. With respect to all material agreements pursuant to which FCB
or any FCB Subsidiary has purchased securities subject to an agreement to
resell, if any, FCB or such FCB Subsidiary, as the case may be, has a lien
or security interest (which to FCB's Knowledge is a valid, perfected first
lien) in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of
the debt secured thereby.
4.10.3. FCB, First Community Bank, and each other Subsidiary of FCB
currently maintain insurance considered by each of them to be reasonable
for their respective operations. Neither FCB, First Community Bank, nor any
other Subsidiary of FCB, has received notice from any insurance carrier on
or before the date hereof that (i) such insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs
with respect to such policies of insurance will be substantially increased.
There are presently no material claims pending under such policies of
insurance and no notices have been given by FCB, First Community Bank, or
any other Subsidiary of FCB under such policies. All such insurance is
valid and enforceable and in full force and effect (other than insurance
that expires in accordance with its terms), and within the last three years
FCB, First Community Bank, and each other Subsidiary of FCB has received
each type of insurance coverage for which it has applied and during such
periods has not been denied indemnification for any material claims
submitted under any of its insurance policies. FCB DISCLOSURE SCHEDULE
4.10.3 identifies all policies of insurance maintained by FCB, First
Community Bank, and each Subsidiary of FCB as well as the other matters
required to be disclosed under this Section 4.10.3.
4.11. Legal Proceedings.
Neither FCB nor any FCB Subsidiary is a party to any, and there are no
pending or, to FCB's Knowledge, threatened legal, administrative, arbitration or
other proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature, (i) against FCB or any
FCB Subsidiary, (ii) to which FCB or any FCB Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of the transactions
contemplated by this Agreement, or (iv) which would reasonably be expected to
20
adversely affect the ability of FCB to perform under this Agreement, except for
any proceeding, claim, action, investigation or inquiry which, if adversely
determined, individually or in the aggregate, could not be reasonably expected
to have a Material Adverse Effect.
4.12. Compliance With Applicable Law.
4.12.1. To FCB's Knowledge, each of FCB and each FCB Subsidiary is in
compliance in all material respects with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable to it, its properties, assets and
deposits, its business, and its conduct of business and its relationship
with its employees, including, without limitation, the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (the "USA PATRIOT Act") of 2001, the Equal Credit
Opportunity Act, the Truth in Lending Act, the Real Estate Settlement
Procedures Act, the Consumer Credit Protection Act, the Fair Credit
Reporting Act, the Fair Debt Collections Act, the Fair Housing Act, the
Community Reinvestment Act of 1977 ("CRA"), the Home Mortgage Disclosure
Act, and all other applicable fair lending laws and other laws relating to
discriminatory business practices, and neither FCB nor any FCB Subsidiary
has received any written notice to the contrary.
4.12.2. Each of FCB and each FCB Subsidiary has all material permits,
licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities and
Bank Regulators that are required in order to permit it to own or lease its
properties and to conduct its business as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect and, to the Knowledge of FCB, no suspension or
cancellation of any such permit, license, certificate, order or approval is
threatened or will result from the consummation of the transactions
contemplated by this Agreement, subject to obtaining the approvals set
forth in Section 8.3.
4.12.3. Except as set forth in FCB DISCLOSURE SCHEDULE 4.12.3, for the
period beginning July 1, 2001, neither FCB nor any FCB Subsidiary has
received any written notification or, to FCB's Knowledge, any other
communication from any Bank Regulator (i) asserting that FCB or any FCB
Subsidiary is not in material compliance with any of the statutes,
regulations or ordinances which such Bank Regulator enforces; (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to FCB or any FCB Subsidiary; (iii)
requiring or threatening to require FCB or any FCB Subsidiary, or
indicating that FCB or any FCB Subsidiary may be required, to enter into a
cease and desist order, agreement or memorandum of understanding or any
other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in
the insurance of bank deposits restricting or limiting, or purporting to
restrict or limit, in any material respect the operations of FCB or any FCB
Subsidiary, including without limitation any restriction on the payment of
dividends; or (iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any material manner the operations of FCB or
any FCB Subsidiary (any such notice, communication, memorandum, agreement
or order described in this sentence is hereinafter referred to as a
"Regulatory Agreement"). Neither FCB nor any FCB Subsidiary has consented
to or entered into any Regulatory Agreement that is currently in effect.
The most recent regulatory rating given to First Community Bank as to
compliance with the CRA is satisfactory or better.
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4.13. Employee Benefit Plans.
4.13.1. FCB DISCLOSURE SCHEDULE 4.13.1 contains a descriptive list of
each compensation, consulting, employment, termination or collective
bargaining agreement, and each stock option, stock purchase, stock
appreciation right, recognition and retention, life, health, accident or
other insurance, bonus, deferred or incentive compensation, severance or
separation agreement or any agreement providing any payment or benefit
resulting from a change in control, profit sharing, retirement, or other
employee benefit plan, practice, policy or arrangement of any kind, oral or
written, covering employees, former employees, directors or former
directors of FCB or each FCB Subsidiary or their respective beneficiaries,
including, but not limited to, any employee benefit plans within the
meaning of Section 3(3) of ERISA, which FCB or any FCB Subsidiary
maintains, to which FCB or any FCB Subsidiary contributes, or under which
any employee, former employee, director or former director of FCB or any
FCB Subsidiary is covered or has benefit rights and pursuant to which any
liability of FCB or any FCB Subsidiary exists or is reasonably likely to
occur (the "Compensation and Benefit Plans"). FCB has made available for
inspection true and correct copies of the Compensation and Benefit Plans,
as well as current summary plan descriptions, trust agreements, and
insurance contracts, Internal Revenue Service Form 5500 (for the three most
recently completed plan years) and the most recent IRS determination
letters with respect thereto, and the loan agreement and related documents,
including any amendments thereto, evidencing any outstanding loan to an
employee stock ownership plan maintained by FCB or any FCB Subsidiary. FCB
neither maintains nor has entered into any Compensation and Benefit Plan or
other document, plan or agreement which contains any change in control
provisions which would cause an increase or acceleration of benefits or
benefit entitlements to employees or former employees of FCB or any FCB
Subsidiary or their respective beneficiaries, or other provisions, which
would cause an increase in the liability of FCB or any FCB Subsidiary or to
Fidelity Bankshares as a result of the transactions contemplated by this
Agreement or any related action thereafter (a "Change in Control Benefit").
The term "Compensation and Benefit Plans" as used herein refers to all
plans contemplated under the preceding sentences of this Section 4.13.1,
provided that the term "Plan" or "Plans" is used in this Agreement for
convenience only and does not constitute an acknowledgment that a
particular arrangement is an employee benefit plan within the meaning of
Section 3(3) of ERISA. Neither FCB nor any FCB Subsidiary has been notified
by any Governmental Entity to modify or limit any payments or other
compensation paid or payable by FCB or any FCB Subsidiary under this
Agreement, any Compensation and Benefit Plan or otherwise, to or for the
benefit of any employee or director of FCB or any FCB Subsidiary and to the
best knowledge of FCB, all such payments are in compliance with all
applicable rules, regulations and bulletins promulgated by the Governmental
Entities. Neither FCB nor any of its Subsidiaries has any commitment to
create any additional Compensation and Benefit Plan or to materially
modify, change or renew any existing Compensation and Benefit Plan (any
modification or change that increases the cost of such plans would be
deemed material), except as required to maintain the qualified status
thereof.
4.13.2. Each of the Compensation and Benefit Plans that is intended to
be a pension, profit sharing, stock bonus, thrift, savings or employee
stock ownership plan that is qualified under Section 401(a) of the Code
("FCB Qualified Plans") has been determined by the Internal Revenue Service
to qualify under Section 401(a) of the Code (a copy of each such
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determination letter is included on FCB DISCLOSURE SCHEDULE 4.13.2), and,
to the best knowledge of FCB, there exist no circumstances likely to
materially adversely affect the qualified status of any such FCB Qualified
Plan. All such FCB Qualified Plans established or maintained by FCB or each
FCB Subsidiary or to which FCB or any FCB Subsidiary contribute are in
compliance in all material respects with all applicable requirements of
ERISA, and are in compliance in all material respects with all applicable
requirements (including qualification and non-discrimination requirements
in effect as of the Effective Time) of the Code for obtaining the tax
benefits the Code permits with respect to such FCB Qualified Plans. No FCB
Qualified Plan is a defined benefit pension plan which is subject to Title
IV of ERISA. All accrued contributions and other payments required to be
made by FCB or each FCB Subsidiary to any Compensation and Benefit Plan
through the date hereof, have been made or reserves adequate for such
purposes as of the date hereof, have been set aside therefor and reflected
in FCB consolidated financial statements to the extent required by GAAP and
FCB and its Subsidiaries have expensed and accrued as a liability the
present value of future benefits under each applicable Compensation and
Benefit Plan for financial reporting purposes to the extent required by
GAAP. Neither FCB nor any FCB Subsidiary is in material default in
performing any of its respective contractual obligations under any of
Compensation and Benefit Plans or any related trust agreement or insurance
contract, and there are no material outstanding liabilities of any such
Plan other than liabilities for benefits to be paid to participants in such
Plan and their beneficiaries in accordance with the terms of such Plan.
Neither FCB nor any FCB Subsidiary has engaged in a transaction, or omitted
to take any action, with respect to any Compensation and Benefit Plan that
would reasonably be expected to subject FCB or any FCB Subsidiary to an
unpaid tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
4.13.3. No liability, other than PBGC premiums arising in the ordinary
course of business, has been or is expected by FCB or any of its
Subsidiaries to be incurred with respect to any FCB Compensation and
Benefit Plan which is a defined benefit plan subject to Title IV of ERISA
("FCB Defined Benefit Plan"), or with respect to any "single-employer plan"
(as defined in Section 4001(a) of ERISA) currently or formerly maintained
by FCB or any entity which is considered one employer with FCB under
Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate") (such plan hereinafter referred to as an "ERISA Affiliate
Plan"). Based upon the report of FCB's third-party actuary and plan
administrator, no FCB Defined Benefit Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as
of the last day of the end of the most recent plan year ending prior to the
date hereof. The net fair market value of the assets of each FCB Defined
Benefit Plan exceeds the actuarial present value of the accumulated plan
benefits guaranteed under Section 4022 of ERISA as of the end of the most
recent plan year ending prior to the date hereof for which FCB has
completed actuarial reports that have been filed with the Internal Revenue
Service. There is not currently pending with the PBGC any filings with
respect to any reportable event under Section 4043 of ERISA nor has any
reportable event occurred as to which a filing is required and has not been
made (other than as might be required with respect to this Agreement and
transactions contemplated thereby). Neither FCB nor any ERISA Affiliate has
contributed to any "multi-employer plan," as defined in Section 3(37) of
ERISA, on or after September 26, 1980. Neither FCB nor any of its
Subsidiaries has provided, or is required to provide, security to any FCB
Defined Benefit Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code or has taken any action, or
omitted to take any action, that has resulted, or would reasonably be
expected to result in the imposition of a lien under Section 412(n) of the
24
Code or pursuant to ERISA. Neither FCB nor any ERISA Affiliate nor any FCB
Compensation and Benefit Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection
with which any of the aforesaid persons or entities would reasonably be
expected to be subject to either a civil liability or penalty pursuant to
Section 409, 502(i) or 502(l) of ERISA or a tax imposed pursuant to Chapter
43 of the Code. There is no pending investigation or enforcement action by
any Bank Regulator with respect to any Compensation and Benefit Plan or any
ERISA Affiliate Plan. There is no pending or, to the best knowledge of FCB,
threatened litigation or pending claim (other than individual benefit
claims made in the ordinary course) by or on behalf of or against any of
Compensation and Benefit Plans (or with respect to the administration of
any of such Plans) now or heretofore maintained by FCB or any FCB
Subsidiary which allege violations of applicable state or federal law or
the terms of the Plan which are reasonably likely to result in a liability
on the part of FCB or any FCB Subsidiary or any such Plan.
4.13.4. Neither FCB nor any FCB Subsidiary has any obligations to
provide retiree health, life insurance, disability insurance, or other
retiree death benefits under any Compensation and Benefit Plan, other than
benefits mandated by Section 4980B of the Code. There has been no
communication to employees by FCB or any FCB Subsidiary that would
reasonably be expected to preclude FCB (or Fidelity Bankshares as successor
to FCB) from amending or terminating any obligations to its employees or
former employees with respect to retiree health, life insurance, disability
insurance, or other retiree death benefits.
4.13.5. All Compensation and Benefit Plans that are group health plans
have been operated in compliance with the group health plan continuation
requirements of Section 4980B of the Code and Sections 601-609 of ERISA and
with the certification of prior coverage and other requirements of Sections
701-702 and 711-713 of ERISA.
4.13.6. FCB and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering employees who are not United States residents.
4.13.7. Other than as set forth in FCB DISCLOSURE SCHEDULE 4.13.7 the
consummation of the Merger will not, directly or indirectly (including,
without limitation, as a result of any termination of employment or service
at any time prior to or following the Effective Time) (A) entitle any
employee, consultant or director to any payment or benefit (including
severance pay, change in control benefit, or similar compensation) or any
increase in compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan or (C) result in any
material increase in benefits payable under any Compensation and Benefit
Plan.
4.13.8. Neither FCB nor any FCB Subsidiary maintains any compensation
plans, programs or arrangements under which any payment is reasonably
likely to become non-deductible, in whole or in part, for tax reporting
purposes as a result of the limitations under Section 162(m) of the Code
and the regulations issued thereunder.
4.13.9. The consummation of the Merger and/or the Bank Merger will
not, directly or indirectly (including without limitation, as a result of
any termination of employment or service at any time prior to or following
the Effective Time), entitle any current or former employee, director or
independent contractor of FCB or any FCB Subsidiary to any actual or deemed
payment (or benefit) which would reasonably be expected to constitute a
"parachute payment" (as such term is defined in Section 280G of the Code).
24
4.14. Brokers, Finders and Financial Advisors.
Neither FCB nor any FCB Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder or financial
advisor in connection with the transactions contemplated by this Agreement, or
incurred any liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this Agreement except
for the retention of Austin Associates, LLC by FCB and the fee payable pursuant
thereto. A true and correct copy of the engagement agreement with Austin
Associates, LLC, setting forth the fee payable to Austin Associates, LLC for its
services rendered to FCB in connection with the Merger and transactions
contemplated by this Agreement, is attached to FCB DISCLOSURE SCHEDULE 4.14.
4.15. Environmental Matters.
4.15.1. Except as may be set forth in FCB DISCLOSURE SCHEDULE 4.15,
with respect to FCB and each FCB Subsidiary:
(A) Each of FCB and the FCB Subsidiaries and, to FCB's Knowledge,
the Participation Facilities and the Loan Properties are, and have
been, in substantial compliance with, and are not liable under, any
Environmental Laws;
(B) FCB has received no written notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FCB's Knowledge, no such
action is threatened, before any court, governmental agency or other
forum against it or any of the FCB Subsidiaries or any Participation
Facility (x) for alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the
presence of or release into the environment of any Materials of
Environmental Concern (as defined herein), whether or not occurring at
or on a site owned, leased or operated by it or any of the FCB
Subsidiaries or any Participation Facility;
(C) FCB has received no written notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FCB's Knowledge no such
action is threatened, before any court, governmental agency or other
forum relating to or against any Loan Property (or FCB or any of the
FCB Subsidiaries in respect of such Loan Property) (x) relating to
alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the presence
of or release into the environment of any Materials of Environmental
Concern, whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To FCB's Knowledge, the properties currently owned or
operated by FCB or any FCB Subsidiary (including, without limitation,
soil, groundwater or surface water on, or under the properties, and
buildings thereon) are not contaminated with and do not otherwise
contain any Materials of Environmental Concern other than as permitted
under applicable Environmental Law;
25
(E) Neither FCB nor any FCB Subsidiary has received any written
notice, demand letter, executive or administrative order, directive or
request for information from any federal, state, local or foreign
governmental entity or any third party indicating that it may be in
violation of, or liable under, any Environmental Law;
(F) To FCB's Knowledge, there are no underground storage tanks
on, in or under any properties owned or operated by FCB or any of the
FCB Subsidiaries or any Participation Facility, and to FCB's
Knowledge, no underground storage tanks have been closed or removed
from any properties owned or operated by FCB or any of the FCB
Subsidiaries or any Participation Facility; and
(G) To FCB's Knowledge, during the period of (s) FCB's or any of
the FCB Subsidiaries' ownership or operation of any of their
respective current properties or (t) FCB's or any of the FCB
Subsidiaries' participation in the management of any Participation
Facility, there has been no contamination by or release of Materials
of Environmental Concerns in, on, under or affecting such properties
that could reasonably be expected to result in material liability
under the Environmental Laws. To FCB's Knowledge, prior to the period
of (x) FCB's or any of the FCB Subsidiaries' ownership or operation of
any of their respective current properties or (y) FCB's or any of the
FCB Subsidiaries' participation in the management of any Participation
Facility, there was no contamination by or release of Materials of
Environmental Concern in, on, under or affecting such properties that
could reasonably be expected to result in material liability under the
Environmental Laws.
(H) Neither FCB nor any other FCB Subsidiary has conducted any
environmental studies during the past ten years (other than Phase I
studies which did not indicate any contamination of the environment by
Materials of Environmental Concern) with respect to any properties
owned or leased by it or any of its Subsidiaries, or with respect to
any Loan Property or any Participation Facility.
4.15.2. "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where
required by the context, includes the owner or operator of such property,
but only with respect to such property. "Participation Facility" means any
facility in which the applicable party (or a Subsidiary of it) participates
in the management (including all property held as trustee or in any other
fiduciary capacity) and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
4.16. Loan Portfolio.
4.16.1. The allowance for loan losses reflected in the notes to FCB's
audited consolidated statement of financial condition at December 31, 2003
was, and the allowance for loan losses shown in the notes to the unaudited
consolidated financial statements for periods ending after December 31,
2003 were, or will be, adequate, as of the dates thereof, under GAAP.
4.16.2. FCB DISCLOSURE SCHEDULE 4.16.2 sets forth a listing, as of
August 31, 2004, by account, of: (A) all loans (including loan
participations) of FCB or any other FCB Subsidiary that have been
accelerated during the past twelve months; (B) all loan commitments or
lines of credit of FCB or any other FCB Subsidiary which have been
terminated by FCB or any other FCB Subsidiary during the past twelve months
26
by reason of a default or adverse developments in the condition of the
borrower or other events or circumstances affecting the credit of the
borrower; (C) all loans, lines of credit and loan commitments as to which
FCB or any other FCB Subsidiary has given written notice of its intent to
terminate during the past twelve months; (D) with respect to all commercial
loans (including commercial real estate loans), all notification letters
and other written communications from FCB or any other FCB Subsidiary to
any of their respective borrowers, customers or other parties during the
past twelve months wherein FCB or any other FCB Subsidiary has requested or
demanded that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (E) each borrower, customer or
other party which has notified First Community Bank or any other FCB
Subsidiary during the past twelve months of, or has asserted against First
Community Bank, or any other FCB Subsidiary, in each case in writing, any
"lender liability" or similar claim, and, to the knowledge of FCB or any
FCB Subsidiary, each borrower, customer or other party which has given
First Community Bank, or any other FCB Subsidiary any oral notification of,
or orally asserted to or against First Community Bank, or any other FCB
Subsidiary, any such claim; and (F) all loans, (1) that are contractually
past due 90 days or more in the payment of principal and/or interest, (2)
that are on non-accrual status, (3) that as of August, 2004 are classified
as "Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Watch list" or words of
similar import, together with the principal amount of and accrued and
unpaid interest on each such Loan and the identity of the obligor
thereunder, (4) where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not interest is
still accruing or the loans are less than 90 days past due, (5) where the
interest rate terms have been reduced and/or the maturity dates have been
extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in
accordance with such initial terms, or (6) where a specific reserve
allocation exists in connection therewith; and (G) all other assets
classified by First Community Bank, or any other FCB Subsidiary as real
estate acquired through foreclosure or in lieu of foreclosure, including
in-substance foreclosures, and all other assets currently held that were
acquired through foreclosure or in lieu of foreclosure.
4.16.3. All loans receivable (including discounts) and accrued
interest entered on the books of FCB and the FCB Subsidiaries arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of FCB's or the appropriate FCB
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be. To the Knowledge of FCB, the
loans, discounts and the accrued interest reflected on the books of FCB and
the FCB Subsidiaries are subject to no defenses, set-offs or counterclaims
(including, without limitation, those afforded by usury or truth-in-lending
laws), except as may be provided by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by general principles of equity.
All such loans are owned by FCB or the appropriate FCB Subsidiary free and
clear of any liens.
4.16.4. The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
27
4.17. Related Party Transactions.
Neither FCB nor any FCB Subsidiary is a party to any transaction (including
any loan or other credit accommodation) with any Affiliate of FCB or any FCB
Subsidiary, except as set forth in FCB DISCLOSURE SCHEDULE 4.17. All such
transactions (a) were made in the ordinary course of business, (b) were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other Persons, and (c)
did not involve more than the normal risk of collectibility or present other
unfavorable features. No loan or credit accommodation to any Affiliate of FCB or
any FCB Subsidiary is presently in default or, during the three year period
prior to the date of this Agreement, has been in default or has been
restructured, modified or extended except for rate modifications pursuant to
First Community Bank's loan modification policy that is applicable to all
Persons. Neither FCB nor any FCB Subsidiary has been notified that principal or
interest with respect to any such loan or other credit accommodation will not be
paid when due or that the loan grade classification accorded such loan or credit
accommodation by FCB is inappropriate.
4.18. Deposits.
None of the deposits of any FCB Subsidiary is a "brokered deposit" as
defined in 12 C.F.R. Section 337.6(a)(2).
4.19. Antitakeover Provisions Inapplicable; Required Vote.
The Board of Directors of FCB has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of FCB) necessary to exempt Fidelity Bankshares, the Merger, this
Agreement and the transactions contemplated hereby from Sections 607.0901 and
..0902 of the FBCA. The affirmative vote of 75% of the issued and outstanding
shares of FCB Common Stock is required to approve this Agreement and the Merger
under FCB's Articles of Incorporation.
4.20. Registration Obligations.
Neither FCB nor any FCB Subsidiary is under any obligation, contingent or
otherwise, which will survive the Effective Time by reason of any agreement to
register any transaction involving any of its securities under the Securities
Act.
4.21. Risk Management Instruments.
All material interest rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements, whether
entered into for FCB's own account, or for the account of one or more of FCB's
Subsidiaries or their customers (all of which are set forth in FCB DISCLOSURE
SCHEDULE 4.21), were in all material respects entered into in compliance with
all applicable laws, rules, regulations and regulatory policies, and to the
Knowledge of FCB and each FCB Subsidiary, with counterparties believed to be
financially responsible at the time; and to FCB's and each FCB Subsidiary's
Knowledge each of them constitutes the valid and legally binding obligation of
FCB or such FCB Subsidiary, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy,
28
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither FCB nor any FCB
Subsidiary, nor, to the Knowledge of FCB, any other party thereto, is in breach
of any of its obligations under any such agreement or arrangement in any
material respect.
4.22. Fairness Opinion.
FCB has received an opinion from Austin Associates, LLC to the effect that,
subject to the terms, conditions and qualifications set forth therein, as of the
date hereof, the Merger Consideration to be received by the stockholders of FCB
pursuant to this Agreement is fair to such stockholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
4.23. Intellectual Property.
FCB and each FCB Subsidiary owns or, to FCB's Knowledge, possesses valid
and binding licenses and other rights (subject to expirations in accordance with
their terms) to use all patents, copyrights, trade secrets, trade names,
computer software, servicemarks and trademarks used in their business, each
without payment, and neither FCB nor any FCB Subsidiary has received any notice
of conflict with respect thereto that asserts the rights of others. FCB and each
Significant Subsidiary of FCB have performed all the obligations required to be
performed, and are not in default in any respect, under any contract, agreement,
arrangement or commitment relating to any of the foregoing.
4.24. Trust Accounts.
Neither FCB, nor any FCB Subsidiary conducts any trust business.
4.25. Labor Matters.
There are no labor or collective bargaining agreements to which FCB or any
FCB Subsidiary is a party. To the Knowledge of FCB, there is no union organizing
effort pending or threatened against FCB or any FCB Subsidiary. There is no
labor strike, labor dispute (other than routine employee grievances that are not
related to union employees), work slowdown, stoppage or lockout pending or, to
the Knowledge of FCB, threatened against FCB or any FCB Subsidiary. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
Knowledge of FCB, threatened against FCB or any FCB Subsidiary (other than
routine employee grievances that are not related to union employees). FCB and
each FCB Subsidiary is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice.
4.26. FCB Information Supplied
The information relating to FCB and any FCB Subsidiary to be contained in
the Merger Registration Statement, or in any other document filed with any Bank
Regulator or other Governmental Entity in connection herewith, will not contain
any untrue statement of a material
29
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not misleading. The Merger
Registration Statement will comply with the provisions of the Exchange Act and
the rules and regulations thereunder and the provisions of the Securities Act
and the rules and regulations thereunder, except that no representation or
warranty is made by FCB with respect to statements made or incorporated by
reference therein based on information supplied by Fidelity Bankshares
specifically for inclusion or incorporation by reference in the Merger
Registration Statement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FIDELITY BANKSHARES
Fidelity Bankshares represents and warrants to FCB that the statements
contained in this Article V are correct as of the date of this Agreement and
will be correct as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Article V), subject to the standard set forth in Section 5.1 and except as set
forth in the FIDELITY BANKSHARES DISCLOSURE SCHEDULE delivered by Fidelity
Bankshares to FCB on the date hereof, and except to any representation of
warranty which specifically relates to an earlier date, which only need be so
correct as of such earlier date. Fidelity Bankshares has made a good faith
effort to ensure that the disclosure on each schedule of the FIDELITY BANKSHARES
DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for
purposes of the FIDELITY BANKSHARES DISCLOSURE SCHEDULE, any item disclosed on
any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant as and to the extent that it is
reasonably clear on the face of such schedule that such item applies to such
other schedule. References to the Knowledge of Fidelity Bankshares shall include
the Knowledge of Fidelity Federal Bank & Trust.
5.1. Standard.
No representation or warranty of Fidelity Bankshares contained in this
Article V shall be deemed untrue or incorrect, and Fidelity Bankshares shall not
be deemed to have breached a representation or warranty, as a consequence of the
existence of any fact, circumstance or event unless such fact, circumstance or
event, individually or taken together with all other facts, circumstances or
events inconsistent with any paragraph of Article V, has had or is reasonably
expected to have a Material Adverse Effect, disregarding for these purposes (x)
any qualification or exception for, or reference to, materiality in any such
representation or warranty and (y) any use of the terms "material",
"materially", "in all material respects", "Material Adverse Effect" or similar
terms or phrases in any such representation or warranty. The foregoing standard
shall not apply to representations and warranties contained in Sections 5.2
(other than the last sentence of Sections 5.2.1 and 5.2.2), 5.3 and 5.4, which
shall be deemed untrue, incorrect and breached if they are not true and correct
in all material respects.
5.2. Organization.
5.2.1. Fidelity Bankshares is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
is duly registered as a savings and loan holding company under the HOLA.
Fidelity Bankshares has full corporate power and authority to carry on its
business as now conducted and is duly licensed or qualified to do
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business in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or the conduct of its business
requires such qualification.
5.2.2. Fidelity Federal Bank & Trust is a savings association duly
organized, and validly existing under Federal law. The deposits of Fidelity
Federal Bank & Trust are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Fidelity Federal Bank & Trust
is a member of the FHLB and owns the requisite amount of stock therein.
5.2.3. FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.2.3 sets forth each
Fidelity Bankshares Subsidiary. Each Fidelity Bankshares Subsidiary (other
than Fidelity Federal Bank & Trust) is a corporation or limited liability
company duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization.
5.2.4. The respective minute books of Fidelity Bankshares and each
Fidelity Bankshares Subsidiary accurately records, in all material
respects, all material corporate actions of their respective stockholders
and boards of directors (including committees).
5.2.5. Prior to the date of this Agreement, Fidelity Bankshares has
made available to FCB true and correct copies of the certificate of
incorporation or charter and bylaws of Fidelity Bankshares and Fidelity
Federal Bank & Trust and the Fidelity Bankshares Subsidiaries.
5.3. Capitalization.
5.3.1. The authorized capital stock of Fidelity Bankshares consists of
30,000,000 shares of Fidelity Bankshares Common Stock, of which 15,131,546
shares are outstanding, validly issued, fully paid and nonassessable and
free of preemptive rights, and 2,000,000 shares of preferred stock, $0.10
par value ("Fidelity Bankshares Preferred Stock"), none of which are
outstanding. There are no shares of Fidelity Bankshares Common Stock held
by Fidelity Bankshares as treasury stock. Other than as set forth at
FIDELITY BANCSHARES DISCLOSURE SCHEDULE 5.3.1, neither Fidelity Bankshares
nor any Fidelity Bankshares Subsidiary has or is bound by any Rights of any
character relating to the purchase, sale or issuance or voting of, or right
to receive dividends or other distributions on any shares of Fidelity
Bankshares Common Stock, or any other security of Fidelity Bankshares or
any securities representing the right to vote, purchase or otherwise
receive any shares of Fidelity Bankshares Common Stock or any other
security of Fidelity Bankshares, other than shares issuable under the
Fidelity Bankshares Stock Benefit Plans.
5.3.2. Fidelity Bankshares owns all of the capital stock of Fidelity
Federal Bank & Trust free and clear of any lien or encumbrance. Except as
set forth in FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.3.2, either Fidelity
Bankshares or Fidelity Federal Bank & Trust owns all of the outstanding
shares of capital stock of each Fidelity Bankshares Subsidiary free and
clear of all liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature.
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5.3.3. No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which Fidelity Bankshares' stockholders may
vote has been issued by Fidelity Bankshares and are outstanding.
5.4. Authority; No Violation.
5.4.1. Fidelity Bankshares has full corporate power and authority to
execute and deliver this Agreement and, subject to receipt of the required
Regulatory Approvals, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Fidelity Bankshares and the
completion by Fidelity Bankshares of the transactions contemplated hereby,
up to and including the Merger, have been duly and validly approved by the
Board of Directors of Fidelity Bankshares, and no other corporate
proceedings on the part of Fidelity Bankshares are necessary to complete
the transactions contemplated hereby, up to and including the Merger. This
Agreement has been duly and validly executed and delivered by Fidelity
Bankshares, and subject to the receipt of the Regulatory Approvals
described in Section 8.3 and approval by the stockholders of FCB and due
and valid execution and delivery of this Agreement by FCB, constitutes the
valid and binding obligations of Fidelity Bankshares, enforceable against
Fidelity Bankshares in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principles of
equity.
5.4.2. (A) The execution and delivery of this Agreement by Fidelity
Bankshares, (B) subject to receipt of the Regulatory Approvals, and
compliance by FCB and Fidelity Bankshares with any conditions contained
therein, and subject to the receipt of the approval of the stockholders of
FCB, the consummation of the transactions contemplated hereby, and (C)
compliance by Fidelity Bankshares with any of the terms or provisions
hereof will not (i) conflict with or result in a breach of any provision of
the certificate of incorporation or bylaws of Fidelity Bankshares or any
Fidelity Bankshares Subsidiary or the charter and bylaws of Fidelity
Federal Bank & Trust; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to
Fidelity Bankshares or any Fidelity Bankshares Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with, result in
a breach of any provisions of, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default), under,
result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration or the creation of any
lien, security interest, charge or other encumbrance upon any of the
properties or assets of Fidelity Bankshares, Fidelity Federal Bank & Trust
or any Fidelity Bankshares Subsidiary under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other investment or obligation to which any of them is
a party, or by which they or any of their respective properties or assets
may be bound or affected, except for such violations, conflicts, breaches
or defaults under clause (ii) or (iii) hereof which, either individually or
in the aggregate, will not have a Material Adverse Effect on Fidelity
Bankshares and the Fidelity Bankshares Subsidiaries taken as a whole.
5.5. Consents.
Except for (a) the receipt of the Regulatory Approvals and compliance with
any conditions contained therein, (b) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (c) the filing with the
SEC of (i) the Merger Registration
32
Statement and (ii) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of
the Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from the SEC of such orders
as may be required in connection therewith, (d) approval of the listing of
Fidelity Bankshares Common Stock to be issued in the Merger on the Nasdaq, (e)
such filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of the shares of Fidelity Bankshares Common Stock pursuant to this Agreement,
and (f) the approval of this Agreement by the requisite vote of the stockholders
of FCB, no consents, waivers or approvals of, or filings or registrations with,
any Governmental Entity or Bank Regulator are necessary, and, to the Knowledge
of Fidelity Bankshares, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(x) the execution and delivery of this Agreement by Fidelity Bankshares and the
completion by Fidelity Bankshares of the Merger or (y) the execution and
delivery of the Plan of Bank Merger and the completion of the Bank Merger.
Fidelity Bankshares has no reason to believe that (i) any Regulatory Approvals
or other required consents or approvals will not be received or will include the
imposition of any condition or requirement that could reasonably be expected by
Fidelity Bankshares to result in a Material Adverse Effect on Fidelity
Bankshares and its Subsidiaries, taken as a whole, or that (ii) any public body
or authority having jurisdiction over affairs of Fidelity Bankshares, the
consent or approval of which is not required or to which a filing is not
required, will object to the completion of the transactions contemplated by this
Agreement.
5.6. Financial Statements.
5.6.1. Fidelity Bankshares has previously made available to FCB the
Fidelity Bankshares Financial Statements covering periods ended prior to
the date hereof. The Fidelity Bankshares Financial Statements have been
prepared in accordance with GAAP, and (including the related notes where
applicable) fairly present in each case in all material respects (subject
in the case of the unaudited interim statements to normal year-end
adjustments) the consolidated financial position, results of operations and
cash flows of Fidelity Bankshares and the Fidelity Bankshares Subsidiaries
on a consolidated basis as of and for the respective periods ending on the
dates thereof, in accordance with GAAP during the periods involved, except
as indicated in the notes thereto, or in the case of unaudited statements,
as permitted by Form 10-Q.
5.6.2. At the date of each balance sheet included in the Fidelity
Bankshares Financial Statements, Fidelity Bankshares did not have any
liabilities, obligations or loss contingencies of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to be
reflected in such Fidelity Bankshares Financial Statements or in the
footnotes thereto which are not fully reflected or reserved against therein
or fully disclosed in a footnote thereto, except for liabilities,
obligations and loss contingencies which are not material individually or
in the aggregate or which are incurred in the ordinary course of business,
consistent with past practice, and except for liabilities, obligations and
loss contingencies which are within the subject matter of a specific
representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
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5.7. Taxes.
Fidelity Bankshares and the Fidelity Bankshares Subsidiaries that are at
least 80 percent owned by Fidelity Bankshares are members of the same affiliated
group within the meaning of Code Section 1504(a). Fidelity Bankshares has duly
filed all federal, state and material local tax returns required to be filed by
or with respect to Fidelity Bankshares and each Subsidiary of Fidelity
Bankshares, taking into account any extensions (all such returns, to the
Knowledge of Fidelity Bankshares, being accurate and correct in all material
respects) and has duly paid or made provisions for the payment of all federal,
state and material local taxes which have been incurred by or are due or claimed
to be due from Fidelity Bankshares and any Subsidiary of Fidelity Bankshares by
any taxing authority or pursuant to any written tax sharing agreement other than
taxes or other charges which (i) are not delinquent, (ii) are being contested in
good faith, or (iii) have not yet been fully determined. As of the date of this
Agreement, Fidelity Bankshares has received no notice of, and to the Knowledge
of Fidelity Bankshares, there is no audit examination, deficiency assessment,
tax investigation or refund litigation with respect to any taxes of Fidelity
Bankshares or any of its Subsidiaries, and no claim has been made by any taxing
authority in a jurisdiction where Fidelity Bankshares or any of its Subsidiaries
do not file tax returns that Fidelity Bankshares or any such Subsidiary is
subject to taxation in that jurisdiction. Except as set forth in FIDELITY
BANKSHARES DISCLOSURE SCHEDULE 5.7, Fidelity Bankshares and its Subsidiaries
have not executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect.
Fidelity Bankshares and each of its Subsidiaries has timely withheld and paid
all taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party, and Fidelity Bankshares and each of its Subsidiaries, to the
Knowledge of Fidelity Bankshares, has timely complied with all applicable
information reporting requirements under Part III, Subchapter A of Chapter 61 of
the Code and similar applicable state and local information reporting
requirements.
5.8. No Material Adverse Effect.
Except as disclosed in Fidelity Bankshares' Securities Documents filed on
or prior to the date hereof, Fidelity Bankshares and the Fidelity Bankshares
Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect
since December 31, 2003 and no event has occurred or circumstance arisen since
that date which, in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Fidelity Bankshares and the Fidelity Bankshares
Subsidiaries, taken as a whole.
5.9. Ownership of Property; Insurance Coverage.
5.9.1. Fidelity Bankshares and each Significant Subsidiary of Fidelity
Bankshares has good and, as to real property, marketable title to all
material assets and properties owned by Fidelity Bankshares or each
Significant Subsidiary of Fidelity Bankshares in the conduct of its
businesses, whether such assets and properties are real or personal,
tangible or intangible, including assets and property reflected in the
balance sheets contained in the Fidelity Bankshares Financial Statements or
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of in the ordinary course of business, since
the date of such balance sheets), subject to no material encumbrances,
liens, mortgages, security interests or pledges, except (i) those items
which secure liabilities for public or statutory obligations or any
34
discount with, borrowing from or other obligations to FHLB, inter-bank
credit facilities, or any transaction by a Significant Subsidiary of
Fidelity Bankshares acting in a fiduciary capacity, and (ii) statutory
liens for amounts not yet delinquent or which are being contested in good
faith. Fidelity Bankshares and the Significant Subsidiaries of Fidelity
Bankshares, as lessee, have the right under valid and subsisting leases of
real and personal properties used by Fidelity Bankshares and the
Significant Subsidiaries of Fidelity Bankshares in the conduct of their
businesses to occupy or use all such properties as presently occupied and
used by each of them.
5.9.2. Fidelity Bankshares and each Significant Subsidiary of Fidelity
Bankshares currently maintain insurance considered by Fidelity Bankshares
to be reasonable for their respective operations. Neither Fidelity
Bankshares nor any Significant Subsidiary of Fidelity Bankshares has
received notice from any insurance carrier on or before the date hereof
that such insurance will be canceled or that coverage thereunder will be
reduced or eliminated. All such insurance is valid and enforceable and in
full force and effect (other than insurance that expires in accordance with
its terms), and within the last three years Fidelity Bankshares and each
Significant Subsidiary of Fidelity Bankshares has received each type of
insurance coverage for which it has applied and during such periods has not
been denied indemnification for any material claims submitted under any of
its insurance policies.
5.10. Legal Proceedings.
Except as set forth in Fidelity Bankshares Securities Documents or as
FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.10. Neither Fidelity Bankshares nor
any Fidelity Bankshares Subsidiary is a party to any, and there are no pending
or, to the Knowledge of Fidelity Bankshares, threatened legal, administrative,
arbitration or other proceedings, claims (whether asserted or unasserted),
actions or governmental investigations or inquiries of any nature (i) against
Fidelity Bankshares or any Fidelity Bankshares Subsidiary, (ii) to which
Fidelity Bankshares or any Fidelity Bankshares Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of the transactions
contemplated by this Agreement, or (iv) which would reasonably be expected to
adversely affect the ability of Fidelity Bankshares to perform under this
Agreement, except for any proceeding, claim, action, investigation or inquiry
which, if adversely determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
5.11. Compliance With Applicable Law.
5.11.1. To the Knowledge of Fidelity Bankshares, each of Fidelity
Bankshares and each Fidelity Bankshares Subsidiary is in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its
employees, including, without limitation, the USA PATRIOT Act, the Equal
Credit Opportunity Act, the Truth in Lending Act, the Real Estate
Settlement Procedures Act, the Consumer Credit Protection Act, the Fair
Credit Reporting Act, the Fair Debt Collections Act, the Fair Housing Act,
the CRA, the Home Mortgage Disclosure Act, and all other applicable fair
lending laws and other laws relating to discriminatory business practices,
and neither Fidelity Bankshares nor any Fidelity Bankshares Subsidiary has
received any written notice to the contrary.
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5.11.2. Each of Fidelity Bankshares and each Fidelity Bankshares
Subsidiary has all material permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Entities and Bank Regulators that are required in
order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and, to the
Knowledge of Fidelity Bankshares, no suspension or cancellation of any such
permit, license, certificate, order or approval is threatened or will
result from the consummation of the transactions contemplated by this
Agreement, subject to obtaining the approvals set forth in Section 8.3.
5.11.3. For the period beginning January 1, 2002, neither Fidelity
Bankshares nor any Fidelity Bankshares Subsidiary has received any written
notification or, to the Knowledge of Fidelity Bankshares, any other
communication from any Bank Regulator (i) asserting that Fidelity
Bankshares or any Fidelity Bankshares Subsidiary is not in material
compliance with any of the statutes, regulations or ordinances which such
Bank Regulator enforces; (ii) threatening to revoke any license, franchise,
permit or governmental authorization which is material to Fidelity
Bankshares or any Fidelity Bankshares Subsidiary; (iii) requiring or
threatening to require Fidelity Bankshares or any Fidelity Bankshares
Subsidiary, or indicating that Fidelity Bankshares or any Fidelity
Bankshares Subsidiary may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other agreement with
any federal or state governmental agency or authority which is charged with
the supervision or regulation of banks or engages in the insurance of bank
deposits restricting or limiting, or purporting to restrict or limit, in
any material respect the operations of Fidelity Bankshares or any Fidelity
Bankshares Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any manner the operations of
Fidelity Bankshares or any Fidelity Bankshares Subsidiary, including
without limitation any restriction on the payment of dividends (any such
notice, communication, memorandum, agreement or order described in this
sentence is hereinafter referred to as a "Regulatory Agreement"). Neither
Fidelity Bankshares nor any Fidelity Bankshares Subsidiary has consented to
or entered into any currently effective Regulatory Agreement. The most
recent regulatory rating given to Fidelity Federal Bank & Trust as to
compliance with the CRA is satisfactory or better.
5.12. Employee Benefit Plans.
5.12.1. FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.12.1 includes a list
of all Compensation and Benefit Plans sponsored by Fidelity Bankshares or
any of its Subsidiaries. "Compensation and Benefit Plans" as used herein
shall have the same meaning as set forth in Section 4.13.1, substituting
the name of Fidelity Bankshares for FCB wherever used therein. Neither
Fidelity Bankshares nor any of its Subsidiaries has been notified by any
Governmental Entity to modify or limit any payments or other compensation
paid or payable by Fidelity Bankshares or any of its Subsidiaries under
this Agreement, any Compensation and Benefit Plan or otherwise, to or for
the benefit of any employee or director of Fidelity Bankshares or any of
its Subsidiaries and to the best knowledge of Fidelity Bankshares, all such
payments are in compliance with all applicable rules, regulations and
bulletins promulgated by the any Governmental Entities. Neither Fidelity
Bankshares nor any of its Subsidiaries has any commitment to create any
additional Compensation and Benefit Plan or to materially modify,
36
change or renew any existing Compensation and Benefit Plan (any
modification or change that increases the cost of such plans would be
deemed material), except as required to maintain the qualified status
thereof, Fidelity Bankshares has made available to FCB true and correct
copies of the Fidelity Bankshares Compensation and Benefit Plans.
5.12.2. Each of the Compensation and Benefit Plans that is intended to
be a pension, profit sharing, stock bonus, thrift, savings or employee
stock ownership plan that is qualified under Section 401(a) of the Code
("Fidelity Bankshares Qualified Plans") has been determined by the Internal
Revenue Service to qualify under Section 401(a) of the Code (a copy of each
such determination letter is included on FIDELITY BANKSHARES DISCLOSURE
SCHEDULE 5.12.2), and, to the best knowledge of Fidelity Bankshares, there
exist no circumstances likely to materially adversely affect the qualified
status of any such Fidelity Bankshares Qualified Plan. All such Fidelity
Bankshares Qualified Plans established or maintained by Fidelity Bankshares
or each Fidelity Bankshares Subsidiary or to which Fidelity Bankshares or
any Fidelity Bankshares Subsidiary contribute are in compliance in all
material respects with all applicable requirements of ERISA, and are in
compliance in all material respects with all applicable requirements
(including qualification and non-discrimination requirements in effect as
of the Effective Time) of the Code for obtaining the tax benefits the Code
permits with respect to such Fidelity Bankshares Qualified Plans. Except as
set forth on FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.12.2, no Fidelity
Bankshares Qualified Plan is a defined benefit pension plan which is
subject to Title IV of ERISA. All accrued contributions and other payments
required to be made by Fidelity Bankshares or each Fidelity Bankshares
Subsidiary to any Compensation and Benefit Plan through the date hereof,
have been made or reserves adequate for such purposes as of the date
hereof, have been set aside therefor and reflected in Fidelity Bankshares'
consolidated financial statements to the extent required by GAAP and
Fidelity Bankshares and its Subsidiaries have expensed and accrued as a
liability the present value of future benefits under each applicable
Compensation and Benefit Plan for financial reporting purposes to the
extent required by GAAP. Neither Fidelity Bankshares nor any Fidelity
Bankshares Subsidiary is in material default in performing any of its
respective contractual obligations under any Compensation and Benefit Plans
or any related trust agreement or insurance contract, and there are no
material outstanding liabilities of any such Plan other than liabilities
for benefits to be paid to participants in such Plan and their
beneficiaries in accordance with the terms of such Plan. Neither Fidelity
Bankshares nor any of its Subsidiaries has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit
Plan that would reasonably be expected to subject Fidelity Bankshares or
any of its Subsidiaries to an unpaid tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA.
5.12.3. No liability, other than PBGC premiums arising in the ordinary
course of business, has been or is expected by Fidelity Bankshares or any
of its Subsidiaries to be incurred with respect to any Compensation and
Benefit Plan which is a defined benefit plan subject to Title IV of ERISA
("Fidelity Bankshares Defined Benefit Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently
or formerly maintained by Fidelity Bankshares or any entity which is
considered one employer with Fidelity Bankshares under Section 4001(b)(1)
of ERISA or Section 414 of the Code (an "ERISA Affiliate") (such plan
hereinafter referred to as an "ERISA Affiliate Plan"). No Fidelity
Bankshares Defined Benefit Plan had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA),
37
whether or not waived, as of the last day of the end of the most recent
plan year ending prior to the date hereof. The net fair market value of the
assets of each Fidelity Bankshares Defined Benefit Plan exceeds the
actuarial present value of the accumulated plan benefits guaranteed under
Section 4022 of ERISA as of the end of the most recent plan year ending
prior to the date hereof for which Fidelity Bankshares has completed
actuarial reports that have been filed with the Internal Revenue Service.
There is not currently pending with the PBGC any filings with respect to
any reportable event under Section 4043 of ERISA nor has any reportable
event occurred as to which a filing is required and has not been made
(other than as might be required with respect to this Agreement and
transactions contemplated thereby). Neither Fidelity Bankshares nor any
ERISA Affiliate has contributed to any "multi-employer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980. Neither Fidelity
Bankshares nor any of its Subsidiaries has provided, or is required to
provide, security to any Fidelity Bankshares Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Code or has taken any action, or omitted to take any action, that
has resulted, or would reasonably be expected to result in the imposition
of a lien under Section 412(n) of the Code or pursuant to ERISA. Neither
Fidelity Bankshares nor any ERISA Affiliate nor any Fidelity Bankshares
Compensation and Benefit Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection
with which any of the aforesaid persons or entities would reasonably be
expected to be subject to either a civil liability or penalty pursuant to
Section 409, 502(i) or 502(l) of ERISA or a tax imposed pursuant to Chapter
43 of the Code. To the Knowledge of Fidelity Bankshares, there is no
pending investigation or enforcement action by any Bank Regulator with
respect to any Compensation and Benefit Plan or any ERISA Affiliate Plan.
There is no pending or, to the best knowledge of Fidelity Bankshares,
threatened litigation or pending claim (other than individual benefit
claims made in the ordinary course) by or on behalf of or against any of
Compensation and Benefit Plans (or with respect to the administration of
any of such Plans) now or heretofore maintained by Fidelity Bankshares or
any Fidelity Bankshares Subsidiary which allege violations of applicable
state or federal law or the terms of the Plan which are reasonably likely
to result in a liability on the part of Fidelity Bankshares or any of its
Subsidiaries or any such Plan.
5.12.4. All Compensation and Benefit Plans that are group health plans
have been operated in compliance with the group health plan continuation
requirements of Section 4980B of the Code and Sections 601-609 of ERISA and
with the certification of prior coverage and other requirements of Sections
701-702 and 711-713 of ERISA.
5.13. Environmental Matters.
5.13.1. To the Knowledge of Fidelity Bankshares, neither the conduct
nor operation of their business nor any condition of any property currently
or previously owned or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them
holds a lien, results or resulted in a violation of any Environmental Laws
that is reasonably likely to impose a material liability (including a
material remediation obligation) upon Fidelity Bankshares or any of
Fidelity Bankshares Subsidiary. To the Knowledge of Fidelity Bankshares, no
condition has existed or event has occurred with respect to any of them or
any such property that, with notice or the passage of time, or both, is
reasonably likely to result in any material liability to Fidelity
Bankshares or any Fidelity Bankshares Subsidiary by reason of any
Environmental Laws. Neither Fidelity Bankshares nor any Fidelity Bankshares
38
Subsidiary has received any written notice from any Person that Fidelity
Bankshares or any Fidelity Bankshares Subsidiary or the operation or
condition of any property ever owned, operated, or held as collateral or in
a fiduciary capacity by any of them are currently in violation of or
otherwise are alleged to have financial exposure under any Environmental
Laws or relating to Materials of Environmental Concern (including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any Materials of Environmental Concern at, on,
beneath, or originating from any such property) for which a material
liability is reasonably likely to be imposed upon Fidelity Bankshares or
any Fidelity Bankshares Subsidiary.
5.13.2. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
the Fidelity Bankshares' Knowledge, threatened, before any court,
governmental agency or other forum against Fidelity Bankshares or any
Fidelity Bankshares Subsidiary (x) for alleged noncompliance (including by
any predecessor) with, or liability under, any Environmental Law or (y)
relating to the presence of or release into the environment of any
Materials of Environmental Concern (as defined herein), whether or not
occurring at or on a site owned, leased or operated by any of the Fidelity
Bankshares.
5.14. Loan Portfolio.
5.14.1. The allowance for loan losses reflected in Fidelity
Bankshares' audited consolidated statement of condition at December 31,
2003 was, and the allowance for loan losses shown on the balance sheets in
Fidelity Bankshares' Securities Documents for periods ending after December
31, 2003 were or will be, adequate, as of the dates thereof, under GAAP.
5.14.2. FIDELITY BANKSHARES DISCLOSURE SCHEDULE 5.14.2 sets forth a
listing, as of the most recently available date, all loans of Fidelity
Bankshares and any Fidelity Bankshares Subsidiary (1) that are
contractually past due 90 days or more in the payment of principal and/or
interest, (2) that are on non-accrual status, (3) that as of the date of
this Agreement are classified as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Watch list" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and
the identity of the obligor thereunder, (4) where a reasonable doubt exists
as to the timely future collectibility of principal and/or interest,
whether or not interest is still accruing or the loans are less than 90
days past due, (5) where the interest rate terms have been reduced and/or
the maturity dates have been extended subsequent to the agreement under
which the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms, or (6)
where a specific reserve allocation exists in connection therewith; and all
assets classified by Fidelity Bankshares or any Fidelity Bankshares
Subsidiary as real estate acquired through foreclosure or in lieu of
foreclosure, including in-substance foreclosures, and all other assets
currently held that were acquired through foreclosure or in lieu of
foreclosure.
5.14.3. All loans receivable (including discounts) and accrued
interest entered on the books of Fidelity Bankshares and each Fidelity
Bankshares Subsidiary arose out of bona fide arm's-length transactions,
were made for good and valuable consideration in the ordinary course of
business, and the notes or other evidences of indebtedness with respect to
such loans (including discounts) are true and genuine and are what they
purport to be.
39
5.14.4. The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
5.15. Securities Documents.
Fidelity Bankshares has made available to FCB copies of its (i) annual
report on Form 10-K for the year ended December 31, 2003, (ii) quarterly report
on Form 10-Q for the quarter ended June 30, 2004 and (iii) proxy materials used
or for use in connection with its meeting of stockholders held in 2004. Such
reports and such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Securities Laws.
5.16. Antitakeover Provisions Inapplicable.
The transactions contemplated by this Agreement are not subject to the
requirements of any "moratorium," "control share," "fair price," "affiliate
transactions," "business combination" or other antitakeover laws and regulations
of any state, including the provisions of Section 203 of the DGCL applicable to
Fidelity Bankshares or any Fidelity Bankshares Subsidiary.
5.17. Brokers, Finders and Financial Advisors.
Neither Fidelity Bankshares nor any Fidelity Bankshares Subsidiary, nor any
of their respective officers, directors, employees or agents, has employed any
broker, finder or financial advisor in connection with the transactions
contemplated by this Agreement, or incurred any liability or commitment for any
fees or commissions to any such person in connection with the transactions
contemplated by this Agreement, except for the retention of Xxxx Xxxx & Co. by
Fidelity Bankshares and the fee payable pursuant thereto.
5.18. Fidelity Bankshares Common Stock
The shares of Fidelity Bankshares Common Stock to be issued pursuant to
this Agreement, when issued in accordance with the terms of this Agreement, will
be duly authorized, validly issued, fully paid and non-assessable and subject to
no preemptive rights.
5.19. Material Contracts; Leases, Defaults.
Neither Fidelity Bankshares nor any Fidelity Bankshares Subsidiary is a
party to or subject to: (i) any collective bargaining agreement with any labor
union relating to employees of Fidelity Bankshares or any Fidelity Bankshares
Subsidiary; nor (ii) any agreement which by its terms limits the payment of
dividends by Fidelity Bankshares or any Fidelity Bankshares Subsidiary.
5.20. Fidelity Bankshares Information Supplied.
The information relating to Fidelity Bankshares and any Fidelity Bankshares
Subsidiary to be contained in the Merger Registration Statement, or in any other
document filed with any Bank Regulator or other Governmental Entity in
connection herewith, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the
40
statements therein, in light of the circumstances in which they are made, not
misleading. The Merger Registration Statement will comply with the provisions of
the Exchange Act and the rules and regulations thereunder and the provisions of
the Securities Act and the rules and regulations thereunder, except that no
representation or warranty is made by Fidelity Bankshares with respect to
statements made or incorporated by reference therein based on information
supplied by FCB specifically for inclusion or incorporation by reference in the
Merger Registration Statement.
ARTICLE VI
COVENANTS OF FCB
6.1. Conduct of Business.
6.1.1. Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of
Fidelity Bankshares, which consent will not be unreasonably withheld,
conditioned or delayed, FCB will, and it will cause each FCB Subsidiary to:
operate its business only in the usual, regular and ordinary course of
business; use reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises; and
voluntarily take no action which would: (i) adversely affect the ability of
the parties to obtain the Regulatory Approvals or materially increase the
period of time necessary to obtain the Regulatory Approvals, or (ii)
adversely affect its ability to perform its covenants and agreements under
this Agreement.
6.1.2. Negative Covenants. FCB agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted
or required by this Agreement or consented to by Fidelity Bankshares in
writing (which consent shall not be unreasonably withheld, conditioned or
delayed), it will not, and it will cause each of the FCB Subsidiaries not
to:
(A) change or waive any provision of its Articles of Incorporation,
Charter or Bylaws, except as required by law;
(B) change the number of authorized or issued shares of its capital
stock, issue any shares of FCB Common Stock that are held as Treasury
Shares as of the date of this Agreement, or issue or grant any Right or
agreement of any character relating to its authorized or issued capital
stock or any securities convertible into shares of such stock, make any
grant or award under the FCB Stock Benefit Plans, or split, combine or
reclassify any shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any shares of capital stock, except that FCB may issue
shares of FCB Common Stock upon the valid exercise, in accordance with the
information set forth in FCB DISCLOSURE SCHEDULE 4.3.1, of presently
outstanding FCB Options issued under the FCB Stock Benefit Plans, and (ii)
FCB may distribute as a dividend to FCB common stockholders 100% of its
earnings, net of taxes that it may pay or which must be accrued from July
1, 2004 until the Closing Date. Such dividends may be payable on a
quarterly basis. The dividend to be paid for the period from the last
quarter end preceding the Closing Date and through the Closing Date shall
be paid no later than two weeks following the Closing Date. The payment of
dividends pursuant to (ii) will be discontinued in the event Fidelity
Bankshares reasonably concludes that such payment would result in future
liability to Fidelity
41
Bankshares, and is further subject to the continuation of normal practices
with regard to provisions for loan losses.
(C) enter into, amend in any material respect or terminate any
material contract or agreement (including without limitation any settlement
agreement with respect to litigation) except in the ordinary course of
business;
(D) Make application for the opening or closing of any, or open or
close any, branch or automated banking facility;
(E) grant or agree to pay any bonus, severance or termination to, or
enter into, renew or amend any employment agreement, severance agreement
and/or supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or
employees, except (i) as may be required pursuant to commitments existing
on the date hereof and set forth on FCB DISCLOSURE SCHEDULES 4.9.1 and
4.13.1 or as required pursuant to Section 7.8 of this Agreement, (ii) as to
non-management employees, merit pay increases, of no more than 4%
individually, in the ordinary course of business consistent with past
practices, (iii) with respect to severance or termination pay or benefits,
pursuant to terminations of employment in the ordinary course of business
consistent with past practice, (iv) the payment by FCB or First Community
Bank immediately prior to the Effective Time of bonuses for services
rendered during calendar 2004, to the extent that these bonuses are accrued
in accordance with GAAP and provided that such bonuses are consistent, as
to amount (individually and in the aggregate) and persons covered, with
past practice, and (v) as otherwise contemplated by this Agreement. Neither
FCB nor any FCB Subsidiary shall hire or promote any employee to a rank
having a title of vice president or other more senior rank or hire any new
employee at an annual rate of compensation in excess of $50,000, provided
that a FCB Subsidiary may hire at-will, non-officer employees to fill
vacancies that may from time to time arise in the ordinary course of
business;
(F) enter into or, except as may be required by law, materially modify
any pension, retirement, stock option, stock purchase, stock appreciation
right, stock grant, savings, profit sharing, deferred compensation,
supplemental retirement, 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 employees; or make any contributions to any defined
contribution or defined benefit plan not in the ordinary course of business
consistent with past practice, except (i) as may be required by applicable
law, or (ii) as otherwise contemplated by this Agreement;
(G) merge or consolidate FCB or any FCB Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of FCB or any FCB Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other Person other
than in connection with foreclosures, settlements in lieu of foreclosure,
troubled loan or debt restructuring, or the collection of any loan or
credit arrangement between FCB, or any FCB Subsidiary, and any other
Person; enter into a purchase and assumption transaction with respect to
deposits and liabilities; incur deposit liabilities, other than liabilities
incurred in the ordinary course of business consistent with past practice
and in keeping with prevailing competitive rates; permit the revocation or
surrender by any FCB Subsidiary of its
42
certificate of authority to maintain, or file an application for the
relocation of, any existing branch office, or file an application for a
certificate of authority to establish a new branch office;
(H) sell or otherwise dispose of the capital stock of FCB or sell or
otherwise dispose of any asset of FCB or of any FCB Subsidiary other than
in the ordinary course of business consistent with past practice; except
for transactions with the FHLB, subject any asset of FCB or of any FCB
Subsidiary to a lien, pledge, security interest or other encumbrance (other
than in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary
course of business, including pledges in connection with acceptance of
governmental deposits, and transactions in "federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other
than in the ordinary course of business consistent with past practice;
incur any indebtedness for borrowed money (or guarantee any indebtedness
for borrowed money), except in the ordinary course of business consistent
with past practice;
(I) take any action which would be reasonably expected to result in
any of the representations and warranties of FCB set forth in this
Agreement becoming untrue as of any date after the date hereof or in any of
the conditions set forth in Article IX hereof not being satisfied, except
in each case as may be required by applicable law;
(J) change its method, practice or principle of accounting, except as
may be required from time to time by GAAP (without regard to any optional
early adoption date) or any Bank Regulator responsible for regulating FCB
or First Community Bank or regulatory accounting principles;
(K) waive, release, grant or transfer any material rights of value or
modify or change in any material respect any existing material agreement or
indebtedness to which FCB or any FCB Subsidiary is a party;
(L) purchase any equity securities, or purchase any other securities
except securities (i) rated "A" or higher by either Standard & Poor's
Ratings Services or Xxxxx'x Investors Service, (ii) having a face amount in
the aggregate of not more than $500,000, (iii) with a weighted average life
of not more than two years and (iv) otherwise in the ordinary course of
business consistent with past practice;
(M) except as specifically provided below, and except for commitments
issued prior to the date of this Agreement which have not yet expired and
which have been disclosed on the FCB DISCLOSURE SCHEDULE 6.1.2(M), and the
renewal of existing lines of credit, make any new loan or other credit
facility commitment (including without limitation, loan participations,
lines of credit and letters of credit) to any borrower or group of
affiliated borrowers in excess of $25,000 in the aggregate for unsecured
loans and $100,000 in the aggregate for loans secured by assets other than
real estate. In addition, the following require the prior consent of
Fidelity Bankshares: a residential loan of $750,000 or greater (except for
residential loans sold as to which there is an agreement to sell on a
non-recourse basis); a construction loan of $750,000 or greater; an
unsecured loan of $25,000 or greater; a secured commercial business loan of
$100,000 or greater; and a commercial real estate loan of $750,000 or
greater; or purchase, invest in or originate any finance lease or any loan
secured by a lease of personal property;
43
(N) enter into, renew, extend or modify any other transaction (other
than a deposit transaction) with any Affiliate;
(O) enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other agreement
or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in
market rates of interest;
(P) except for the execution of this Agreement, and actions taken or
which will be taken in accordance with this Agreement and performance
thereunder, take any action that would give rise to a right of payment to
any individual under any employment agreement;
(Q) make any change in policies in existence on the date of this
Agreement with regard to: the extension of credit, or the establishment of
reserves with respect to the possible loss thereon or the charge off of
losses incurred thereon; investments; asset/liability management; or other
material banking policies in any material respect except as may be required
by changes in applicable law or regulations, GAAP or regulatory accounting
principles or by a Bank Regulator;
(R) except for the execution of this Agreement, and the transactions
contemplated therein, take any action that would give rise to an
acceleration of the right to payment to any individual under any FCB
Compensation and Benefit Plan;
(S) make any capital expenditures in excess of $25,000 individually or
$50,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair;
(T) purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practices and policies;
(U) sell any participation interest in any loan (other than sales of
loans secured by one- to four-family real estate that are consistent with
past practice unless Fidelity Federal Bank & Trust has been given the first
opportunity and a reasonable time to purchase any loan participation being
sold, or purchase any participation interest in any loan other than
purchases of participation interests from Fidelity Bankshares;
(V) undertake or enter into any lease, contract or other commitment
for its account, other than in the normal course of providing credit to
customers as part of its banking business, involving a payment by FCB or
any FCB Subsidiary of more than $10,000 annually, or containing any
financial commitment extending beyond 12 months from the date hereof;
(W) pay, discharge, settle or compromise any claim, action,
litigation, arbitration or proceeding, other than any such payment,
discharge, settlement or compromise in the ordinary course of business
consistent with past practice that involves solely money damages in the
amount not in excess of $25,000 individually or $50,000 in the aggregate,
and that does
44
not create negative precedent for other pending or potential claims,
actions, litigation, arbitration or proceedings;
(X) foreclose upon or take a deed or title to any commercial real
estate without first conducting a Phase I environmental assessment of the
property or foreclose upon any commercial real estate if such environmental
assessment indicates the presence of a Materials of Environmental Concern;
(Y) purchase or sell any mortgage loan servicing rights other than in
the ordinary course of business consistent with past practice;
(Z) issue any broadly distributed communication of a general nature to
employees (including general communications relating to benefits and
compensation) without prior consultation with Fidelity Bankshares and, to
the extent relating to post-Closing employment, benefit or compensation
information without the prior consent of Fidelity Bankshares (which shall
not be unreasonably withheld, conditioned or delayed) or issue any broadly
distributed communication of a general nature to customers without the
prior approval of Fidelity Bankshares (which shall not be unreasonably
withheld), except as required by law or for communications in the ordinary
course of business consistent with past practice that do not relate to the
Merger or other transactions contemplated hereby;
(AA) take any action to cause FCB to lose its status as a Subchapter S
Corporation.
(BB) agree to do any of the foregoing.
6.2. Current Information.
6.2.1. During the period from the date of this Agreement to the
Effective Time, FCB will cause one or more of its representatives to confer
with representatives of Fidelity Bankshares and report the general status
of its ongoing operations at such times as Fidelity Bankshares may
reasonably request. FCB will promptly notify Fidelity Bankshares of any
material change in the normal course of its business or in the operation of
its properties and, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the
threat of material litigation involving FCB or any FCB Subsidiary. Without
limiting the foregoing, senior officers of Fidelity Bankshares and FCB
shall meet on a reasonably regular basis (expected to be at least monthly)
to review the financial and operational affairs of FCB and its
Subsidiaries, in accordance with applicable law, and FCB shall give due
consideration to Fidelity Bankshares' input on such matters, with the
understanding that, notwithstanding any other provision contained in this
Agreement, neither Fidelity Bankshares nor any Fidelity Bankshares
Subsidiary shall under any circumstance be permitted to exercise control of
FCB or any FCB Subsidiary prior to the Effective Time.
6.2.2. First Community Bank and Fidelity Federal Bank & Trust shall
meet on a regular basis to discuss and plan for the conversion of data
processing and related electronic informational systems of First Community
Bank to those used by Fidelity Federal Bank & Trust, which planning shall
include, but not be limited to, discussion of the possible termination by
45
First Community Bank of third-party service provider arrangements effective
at the Effective Time or at a date thereafter, non-renewal of personal
property leases and software licenses used by First Community Bank in
connection with its systems operations, retention of outside consultants
and additional employees to assist with the conversion, and outsourcing, as
appropriate, of proprietary or self-provided system services, it being
understood that neither First Community Bank shall be obligated to take any
such action prior to the Effective Time and, unless First Community Bank
otherwise agrees and provided it is permitted by applicable law, no
conversion shall take place prior to the Effective Time. In the event that
First Community Bank takes, at the request of Fidelity Federal Bank &
Trust, any action relative to third parties to facilitate the conversion
that results in the imposition of any termination fees or charges, Fidelity
Federal Bank & Trust shall indemnify First Community Bank for any such fees
and charges, and the costs of reversing the conversion process, if for any
reason the Merger is not consummated for any reason other than a breach of
this Agreement by FCB, or a termination of this Agreement under Section
11.1.7 or 11.1.8.
6.2.3. FCB shall provide Fidelity Bankshares, within fifteen (15)
business days of the end of each calendar month, a written list of
nonperforming assets (the term "nonperforming assets," for purposes of this
subsection, means (i) loans that are "troubled debt restructuring" as
defined in Statement of Financial Accounting Standards No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructuring," (ii) loans on
nonaccrual, (iii) real estate owned, (iv) all loans ninety (90) days or
more past due) as of the end of such month and (iv) and impaired loans. On
a monthly basis, FCB shall provide Fidelity Bankshares with a schedule of
all loan approvals, which schedule shall indicate the loan amount, loan
type and other material features of the loan.
6.2.4. FCB shall promptly inform Fidelity Bankshares upon receiving
notice of any legal, administrative, arbitration or other proceedings,
demands, notices, audits or investigations (by any federal, state or local
commission, agency or board) relating to the alleged liability of FCB or
any FCB Subsidiary under any labor or employment law.
6.3. Access to Properties and Records.
Subject to Section 12.1, FCB shall permit Fidelity Bankshares access upon
reasonable notice to its properties and those of the FCB Subsidiaries, and shall
disclose and make available to Fidelity Bankshares during normal business hours
all of its books, papers and records relating to the assets, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' (other than minutes that discuss any of the transactions contemplated
by this Agreement or any other subject matter FCB reasonably determines should
be treated as confidential) and stockholders' meetings, organizational
documents, Bylaws, material contracts and agreements, filings with any
regulatory authority, litigation files, plans affecting employees, and any other
business activities or prospects in which Fidelity Bankshares may have a
reasonable interest; provided, however, that FCB shall not be required to take
any action that would provide access to or to disclose information where such
access or disclosure, in FCB's reasonable judgment, would interfere with the
normal conduct of FCB's business or would violate or prejudice the rights or
business interests or confidences of any customer or other person or would
result in the waiver by it of the privilege protecting communications between it
and any of its counsel or contravene any applicable law. FCB shall provide and
shall request its auditors to provide Fidelity Bankshares
46
with such historical financial information regarding it (and related audit
reports and consents) as Fidelity Bankshares may reasonably request for
Securities Law disclosure purposes. Fidelity Bankshares shall use commercially
reasonable efforts to minimize any interference with FCB's regular business
operations during any such access to FCB's property, books and records. FCB and
each FCB Subsidiary shall permit Fidelity Bankshares, at Fidelity Bankshares'
expense, to cause a "phase I environmental audit" and a "phase II environmental
audit" to be performed at any physical location owned or, to the extent
permitted under the applicable lease agreement, occupied by FCB or any FCB
Subsidiary.
6.4. Financial and Other Statements.
6.4.1. Promptly upon receipt thereof, FCB will furnish to Fidelity
Bankshares copies of each annual, interim or special audit of the books of
FCB and the FCB Subsidiaries made by its independent accountants and copies
of all internal control reports submitted to FCB by such accountants, or by
any other accounting firm rendering internal audit services, in connection
with each annual, interim or special audit of the books of FCB and the FCB
Subsidiaries made by such accountants.
6.4.2. As soon as reasonably available, but in no event later than
five business days after such documents are filed with the FRB, FDIC or
Department, FCB will deliver to Fidelity Bankshares the documents filed by
FCB or First Community Bank of Palm Beach County. Within 25 days after the
end of each month, FCB will deliver to Fidelity Bankshares a consolidated
balance sheet and a consolidated statement of operations, without related
notes, for such month prepared in accordance with current financial
reporting practices, as well as a month-end and year to date comparison to
budget.
6.4.3. With reasonable promptness, FCB will furnish to Fidelity
Bankshares such additional financial data that FCB possesses and as
Fidelity Bankshares may reasonably request, including without limitation,
detailed monthly financial statements and loan reports.
6.5. Maintenance of Insurance.
FCB shall use commercially reasonable efforts to maintain, and to cause the
FCB Subsidiaries to maintain, insurance in such amounts as are reasonable to
cover such risks as are customary in relation to the character and location of
its properties and the nature of its business, with such coverage and in such
amounts not less than that currently maintained by FCB and the FCB Subsidiaries
and set forth in FCB DISCLOSURE SCHEDULE 4.10.3. FCB will promptly inform
Fidelity Bankshares if FCB or any FCB Subsidiary receives notice from an
insurance carrier that (i) an insurance policy will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
any policy of insurance will be substantially increased.
6.6. Disclosure Supplements.
From time to time prior to the Effective Time, FCB will promptly supplement
or amend the FCB DISCLOSURE SCHEDULE delivered in connection herewith with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such FCB DISCLOSURE SCHEDULE
47
or which is necessary to correct any information in such FCB DISCLOSURE
SCHEDULE which has been rendered materially inaccurate thereby. No supplement or
amendment to such FCB DISCLOSURE SCHEDULE shall have any effect for the purpose
of determining satisfaction of the conditions set forth in Article IX.
Notwithstanding anything to the contrary contained herein, no failure to provide
any such supplement or amendment to the FCB DISCLOSURE SCHEDULE shall constitute
the failure of any condition set forth in Article IX to be satisfied unless the
underlying breach or inaccuracy would individually or collectively result in the
failure of a condition set forth in Article IX to be satisfied.
6.7. Consents and Approvals of Third Parties.
FCB and First Community Bank shall use all commercially reasonable efforts,
and shall cause each FCB Subsidiary to use all commercially reasonable efforts
to obtain as soon as practicable all consents and approvals of any other persons
necessary or desirable for the consummation of the transactions contemplated by
this Agreement.
6.8. All Reasonable Efforts.
Subject to the terms and conditions herein provided, FCB agrees to use, and
agrees to cause First Community Bank to use, all commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
6.9. Failure to Fulfill Conditions.
In the event that FCB or First Community Bank determines that a condition
to its obligation to complete the Merger cannot be fulfilled and that it will
not waive that condition, it will promptly notify Fidelity Bankshares.
6.10. No Solicitation.
From and after the date hereof until the termination of this Agreement,
neither FCB, nor any FCB Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents and affiliates (including, without
limitation, any investment banker, attorney or accountant retained by FCB or any
of the FCB Subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any Person
in furtherance of such inquiries or to obtain an Acquisition Proposal or agree
to or endorse any Acquisition Proposal, or authorize or permit any of its
officers, directors, or employees or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative retained
by any of its Subsidiaries to take any such action, and FCB shall notify
Fidelity Bankshares orally (within one business day) and in writing (as promptly
as practicable) of all of the relevant details relating to all inquiries and
proposals which FCB or any of its Subsidiaries or any of its officers, directors
or employees, or, to FCB's Knowledge, investment bankers, financial advisors,
attorneys, accountants or other representatives of FCB may receive relating to
any of such matters,
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provided, however, that nothing contained in this Section 6.10 shall prohibit
the Board of Directors of FCB from (i) complying with its disclosure obligations
under federal or state law; or (ii) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal, if, and only to the extent that, (A) the Board of
Directors of FCB determines in good faith (after consultation with its financial
and legal advisors), taking into account all legal, financial and regulatory
aspects of the proposal and the Person making the proposal, that such proposal,
if consummated, is reasonably likely to result in a transaction more favorable
to FCB's stockholders from a financial point of view than the Merger; (B) the
Board of Directors of FCB determines in good faith (after consultation with its
financial and legal advisors) that the failure to furnish information to or
enter into discussions with such Person would likely cause the Board of
Directors to breach its fiduciary duties to stockholders under applicable law;
(C) such Acquisition Proposal was not solicited by FCB and did not otherwise
result from a breach of this Section 6.10 by FCB (such proposal that satisfies
clauses (A), (B) and (C) being referred to herein as a "Superior Proposal"); (D)
FCB promptly notifies Fidelity Bankshares of such inquiries, proposals or offers
received by, any such information requested from, or any such discussions or
negotiations sought to be initiated or continued with FCB or any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any inquiries, proposals or
offers, and receives from such Person an executed confidentiality agreement in
form and substance identical in all material respects to the confidentiality
agreements that FCB and Fidelity Bankshares entered into; and (E) the FCB
Stockholders Meeting has not occurred. For purposes of this Agreement,
"Acquisition Proposal" shall mean any proposal or offer as to any of the
following (other than the transactions contemplated hereunder) involving FCB or
any of its Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transactions; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 25% or more of the assets of
FCB and the FCB Subsidiaries, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 25% or more
of the outstanding shares of capital stock of FCB or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
6.11. Reserves and Merger-Related Costs.
On or before the Effective Date, to the extent consistent with GAAP, and
applicable banking laws and regulations, FCB shall establish such additional
accruals and reserves as may be necessary to conform the accounting reserve
practices and methods (including credit loss practices and methods) of FCB to
those of Fidelity Bankshares (as such practices and methods are to be applied to
FCB from and after the Closing Date) and Fidelity Bankshares' plans with respect
to the conduct of the business of FCB following the Merger and otherwise to
reflect Merger-related expenses and costs incurred by FCB. No accrual or reserve
made by FCB or any FCB Subsidiary pursuant to this subsection, or any litigation
or regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 11.1.2.
49
6.12. Board of Directors and Committee Meetings.
FCB and the FCB Subsidiaries shall permit a representative of Fidelity
Bankshares to attend any meeting of their Board of Directors, and shall permit
no more than two (2) representatives of Fidelity Bankshares to attend any
meeting of their loan committee and asset liability committee, as an observer
(the "Observer"), provided that neither FCB nor any FCB Subsidiary shall be
required to permit the Observer to remain present during any confidential
discussion of this Agreement and the transactions contemplated hereby or any
third party proposal to acquire control of FCB or during any other matter that
the respective Board of Directors has been advised of by counsel that such
attendance by the Observer may violate a confidentiality obligation or fiduciary
duty or any legal or regulatory requirements.
6.13. Xxxx Xxxxxx shall enter into an employment agreement with Fidelity
Federal Bank & Trust as set forth at FIDELITY BANKSHARES DISCLOSURE SCHEDULE
7.8.3., concurrent with the date of this Agreement.
ARTICLE VII
COVENANTS OF FIDELITY BANKSHARES
7.1. Conduct of Business.
During the period from the date of this Agreement to the Effective Time,
except with the written consent of FCB, which consent will not be unreasonably
withheld, Fidelity Bankshares will, and it will cause each Fidelity Bankshares
Subsidiary to: conduct its business only in the usual, regular and ordinary
course consistent with past practices; use reasonable efforts to preserve intact
its business organization and assets and maintain its rights and franchises; and
voluntarily take no action that would: (i) adversely affect the ability of the
parties to obtain the Regulatory Approvals or materially increase the period of
time necessary to obtain such approvals; (ii) adversely affect its ability to
perform its covenants and agreements under this Agreement; or (iii) result in
the representations and warranties contained in Article V of this Agreement not
being true and correct on the date of this Agreement or at any future date on or
prior to the Closing Date or in any of the conditions set forth in Article IX
hereof not being satisfied.
7.2. Current Information and Consultation.
During the period from the date of this Agreement to the Effective Time,
Fidelity Bankshares will cause one or more of its representatives to confer with
representatives of FCB and report the general status of its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby, at such times as FCB may reasonably request.
7.3. Financial and Other Statements.
As soon as reasonably available, but in no event later than the date such
documents are filed with the SEC, Fidelity Bankshares will deliver to FCB the
Securities Documents filed by it with the SEC under the Securities Laws other
than those Securities Documents that are available publicly though the SEC's
XXXXX data base. Fidelity Bankshares will advise FCB promptly of
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the receipt of any examination report of any Bank Regulator with respect to the
condition or activities of Fidelity Bankshares or any of the Fidelity Bankshares
Subsidiaries.
7.4. Disclosure Supplements.
From time to time prior to the Effective Time, Fidelity Bankshares will
promptly supplement or amend the FIDELITY BANKSHARES DISCLOSURE SCHEDULE
delivered in connection herewith with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in such FIDELITY BANKSHARES
DISCLOSURE SCHEDULE or which is necessary to correct any information in such
FIDELITY BANKSHARES DISCLOSURE SCHEDULE which has been rendered inaccurate
thereby. No supplement or amendment to such FIDELITY BANKSHARES DISCLOSURE
SCHEDULE shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Article IX. Notwithstanding anything to the contrary
contained herein, no failure to provide any such supplement or amendment to the
FIDELITY BANKSHARES DISCLOSURE SCHEDULE shall constitute the failure of any
condition set forth in Article IX to be satisfied unless the underlying breach
or inaccuracy would individually or collectively result in the failure of a
condition set forth in Article IX to be satisfied.
7.5. Consents and Approvals of Third Parties.
Fidelity Bankshares and Fidelity Federal Bank & Trust shall use all
commercially reasonable efforts to obtain as soon as practicable all consents
and approvals of any other Persons necessary or desirable for the consummation
of the transactions contemplated by this Agreement.
7.6. All Reasonable Efforts.
Subject to the terms and conditions herein provided, Fidelity Bankshares
agrees to use and agrees to cause Fidelity Federal Bank & Trust to use all
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
7.7. Failure to Fulfill Conditions.
In the event that Fidelity Bankshares determines that a condition to its
obligation to complete the Merger cannot be fulfilled and that it will not waive
that condition, it will promptly notify FCB.
7.8. Employee Benefits.
7.8.1. Fidelity Bankshares agrees that it will honor all Compensation
and Benefit Plans in accordance with their terms as in effect immediately
before the Effective Time, subject to any amendment or termination thereof
that may be required or permitted by this Agreement. Following the
Effective Time, Fidelity Bankshares shall provide Continuing Employees (as
defined below in Section 7.8.6) with compensation and benefits under the
Fidelity
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Federal Bank & Trust's currently available tax qualified benefit plans. All
FCB Employees who become participants in a Fidelity Bankshares Compensation
and Benefit Plan shall, for purposes of determining eligibility for and for
any applicable vesting periods of such employee benefits only (and not for
benefit accrual purposes) be given credit for service as an employee of FCB
or any FCB Subsidiary or any predecessor thereto prior to the Effective
Time, provided, however, that credit for prior service shall not be given
under the Fidelity Bankshares ESOP, or to the extent that providing such
credit would result in a duplication of benefits; and provided further,
that credit for prior service with FCB or a FCB Subsidiary shall also be
given for benefit accrual purposes under any vacation policy or plan of
Fidelity Bankshares or under any severance compensation plan for employees
that Fidelity Bankshares has or may adopt in the future. This Agreement
shall not be construed to limit the ability of Fidelity Bankshares or
Fidelity Federal Bank & Trust to terminate the employment of any employee
or to review employee benefits programs from time to time, or to make such
changes as they deem appropriate, subject to the terms and conditions of
such programs, or to terminate any Compensation and Benefit Plan.
7.8.2. In the event of any termination of any FCB or First Community
Bank health plan or consolidation of any such plan with any Fidelity
Bankshares or Fidelity Federal Bank & Trust health plan or to the extent
that an employee of FCB or any FCB Subsidiary who continues employment with
Fidelity Bankshares or a Fidelity Bankshares Subsidiary ("Continuing
Employee") participates in a Fidelity Bankshares health plan, Fidelity
Bankshares shall make available to such Continuing Employees and their
dependents employer-provided health coverage (including medical, dental,
pharmaceutical and/or vision benefits) on the same basis as it provides
such coverage to Fidelity Bankshares employees. Unless a Continuing
Employee affirmatively terminates coverage under a FCB health plan prior to
the time that such Continuing Employee becomes eligible to participate in
the Fidelity Bankshares health plan, no coverage of any of the Continuing
Employees or their dependents shall terminate under any of the FCB health
plans prior to the time such Continuing Employees and their dependents
become eligible to participate in the health plans, programs and benefits
common to all employees of Fidelity Bankshares and their dependents. In the
event of a termination or consolidation of any FCB health plan, terminated
FCB employees and qualified beneficiaries will have the right to continued
coverage under group health plans of Fidelity Bankshares in accordance with
Code Section 4980B(f), consistent with the provisions below. In the event
of any termination of any FCB health plan, or consolidation of any FCB
health plan with any Fidelity Bankshares health plan, any coverage
limitation under the Fidelity Bankshares health plan due to any
pre-existing condition shall be waived by the Fidelity Bankshares health
plan to the degree that such condition was covered by the FCB health plan
and such condition would otherwise have been covered by the Fidelity
Bankshares health plan in the absence of such coverage limitation. All FCB
Employees who cease participating in an FCB health plan and become
participants in a comparable Fidelity Bankshares health plan shall receive
credit for any co-payment and deductibles paid under FCB's health plan for
purposes of satisfying any applicable deductible or out-of-pocket
requirements under the Fidelity Bankshares health plan, upon
substantiation, in a form satisfactory to Fidelity Bankshares that such
co-payment and/or deductible has been satisfied.
7.8.3. Fidelity Federal Bank & Trust shall enter into an employment
agreement with Xxxx Xxxxxx pursuant to which Xx. Xxxxxx will become a
Senior Vice President of Fidelity Federal Bank & Trust, concurrent with
this Agreement as set forth at FIDELITY
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BANKSHARES DISCLOSURE SCHEDULE 7.8.3. This employment agreement would be
effective as of the Effective Time.
7.9. Directors and Officers Indemnification and Insurance.
7.9.1. Fidelity Bankshares shall maintain, or shall cause Fidelity
Federal Bank & Trust to maintain, in effect for three years following the
Effective Time, the current directors' and officers' liability insurance
policies maintained by FCB (provided, that Fidelity Bankshares may
substitute therefor policies of at least the same coverage containing terms
and conditions which are not materially less favorable) with respect to
matters occurring prior to the Effective Time; provided, however, that in
no event shall Fidelity Bankshares be required to expend pursuant to this
Section 7.9.1 more than an amount equal to 125% of the current annual
amount expended by FCB with respect to such insurance, as set forth in FCB
DISCLOSURE SCHEDULE 7.9.1 (the "Maximum Amount"); provided, further, that
if the amount of the aggregate premium necessary to maintain or procure
such insurance coverage exceeds the Maximum Amount, Fidelity Bankshares
shall maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount. In
connection with the foregoing, FCB agrees in order for Fidelity Bankshares
to fulfill its agreement to provide directors and officers liability
insurance policies for three years to provide such insurer or substitute
insurer with such reasonable and customary representations as such insurer
may request with respect to the reporting of any prior claims.
7.9.2. In addition to Section 7.9.1, Fidelity Bankshares shall
indemnify, defend and hold harmless each person who is now, or who has been
at any time before the date hereof or who becomes before the Effective
Time, an officer or director of FCB or an FCB Subsidiary (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
attorneys' fees), liabilities or judgments or amounts that are paid in
settlement of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each a "Claim"),
in which an Indemnified Party is, or is threatened to be made, a party or
witness in whole or in part on or arising in whole or in part out of the
fact that such person is or was a director, officer or employee of FCB or a
FCB Subsidiary if such Claim pertains to any matter of fact arising,
existing or occurring before the Effective Time (including, without
limitation, the Merger and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, or after,
the Effective Time (the "Indemnified Liabilities"), to the fullest extent
permitted under Florida law (to the extent not prohibited by Federal law),
and FCB's Articles of Incorporation and Bylaws. Any Indemnified Party
wishing to claim indemnification under this Section 7.9.2 upon learning of
any Claim, shall notify Fidelity Bankshares (but the failure so to notify
Fidelity Bankshares shall not relieve it from any liability which it may
have under this Section 7.9.2, except to the extent such failure materially
prejudices Fidelity Bankshares).
7.9.3. In the event that either Fidelity Bankshares or any of its
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving bank or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Fidelity
Bankshares shall assume the obligations set forth in this Section 7.9.
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7.9.4. The obligations of Fidelity Bankshares provided under this
Section 7.9 are intended to be enforceable against Fidelity Bankshares
directly by the Indemnified Parties and their heirs and representatives and
shall be binding on all respective successors and permitted assigns of
Fidelity Bankshares. The rights of each Indemnified Party hereunder shall
be in addition to any other rights such Indemnified Party may have under
applicable law.
7.10. Stock Listing.
Fidelity Bankshares agrees to list on the Nasdaq (or such other national
securities exchange on which the shares of the Fidelity Bankshares Common Stock
shall be listed as of the Closing Date), subject to official notice of issuance,
the shares of Fidelity Bankshares Common Stock to be issued in the Merger.
7.11. Stock and Cash Reserve.
Fidelity Bankshares agrees at all times from the date of this Agreement
until the Merger Consideration has been paid in full to reserve a sufficient
number of shares of Fidelity Bankshares Common Stock and to maintain sufficient
liquid accounts or borrowing capacity to fulfill its obligations under this
Agreement.
7.12. Communications to FCB Employees; Training
Fidelity Bankshares and FCB agree that as promptly as practicable following
the execution of this Agreement, meetings with employees of FCB and First
Community Bank shall be held at such location as Fidelity Bankshares and FCB
shall mutually agree, provided that representatives of FCB shall be permitted to
attend such meetings, to announce the proposed Merger. Fidelity Bankshares and
FCB shall mutually agree as to the scope and content of all communications to
the employees of FCB and First Community Bank. At mutually agreed upon times
following execution of this Agreement, representatives of Fidelity Bankshares
shall be permitted to meet with the employees of FCB and First Community Bank to
discuss employment opportunities with Fidelity Bankshares, provided that
representatives of FCB shall be permitted to attend any such meeting. From and
after the Determination Date, Fidelity Bankshares shall also be permitted to
conduct training sessions outside of normal business hours or at other times as
FCB may agree, with the employees of FCB and First Community Bank and may
conduct such training seminars at any branch location of First Community Bank;
provided that Fidelity Bankshares will in good faith attempt to schedule such
training sessions in a manner which does not unreasonably interfere with First
Community Bank's normal business operations.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. Meeting of Stockholders.
8.1.1. FCB will (i) take all steps necessary to duly call, give notice
of, convene and hold a special meeting of its stockholders as promptly as
practicable after the Merger Registration Statement is declared effective
by the SEC, for the purpose of considering this Agreement and the Merger
(the "FCB Stockholders Meeting"), (ii) in connection with the solicitation
of proxies with respect to the FCB Stockholders Meeting, have its Board of
Directors
54
recommend approval of this Agreement to the FCB stockholders; and (iii)
cooperate and consult with Fidelity Bankshares with respect to each of the
foregoing matters. The Board of Directors of FCB may fail to make such a
recommendation referred to in clause (ii) above, or withdraw, modify or
change any such recommendation only if such Board of Directors, after
having consulted with and considered the advice of its outside financial
and legal advisors, has determined that the making of such recommendation,
or the failure so to withdraw, modify or change its recommendation, would
constitute a breach of the fiduciary duties of such directors under
applicable law.
8.2. Proxy Statement-Prospectus; Merger Registration Statement.
8.2.1. For the purposes (x) of registering Fidelity Bankshares Common
Stock to be offered to holders of FCB Common Stock in connection with the
Merger with the SEC under the Securities Act and (y) of holding the FCB
Stockholders Meeting, Fidelity Bankshares shall draft and prepare, and FCB
shall cooperate in the preparation of, the Merger Registration Statement,
including a proxy statement and prospectus satisfying all applicable
requirements of applicable state securities and banking laws, and of the
Securities Act and the Exchange Act, and the rules and regulations
thereunder (such proxy statement/prospectus in the form mailed by FCB to
the FCB stockholders, together with any and all amendments or supplements
thereto, being herein referred to as the "Proxy Statement-Prospectus").
Fidelity Bankshares shall provide FCB and its counsel with appropriate
opportunity to review and comment on the Proxy Statement-Prospectus, and
shall incorporate all appropriate comments thereto, prior to the time it is
initially filed with the SEC or any amendments are filed with the SEC.
Fidelity Bankshares shall file the Merger Registration Statement, including
the Proxy Statement-Prospectus, with the SEC. Each of Fidelity Bankshares
and FCB shall use its best efforts to have the Merger Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing, and FCB shall thereafter promptly mail the
Proxy Statement-Prospectus to its stockholders. Fidelity Bankshares shall
also use its best efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and FCB shall furnish all information
concerning FCB and the holders of FCB Common Stock as may be reasonably
requested in connection with any such action.
8.2.2. Fidelity Bankshares shall, as soon as practicable, file the
Merger Registration Statement with the SEC under the Securities Act in
connection with the transactions contemplated by this Agreement. Fidelity
Bankshares will advise FCB promptly after Fidelity Bankshares receives
notice of the time when the Merger 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 qualifications of the shares of
Fidelity Bankshares Common Stock issuable pursuant to the Merger
Registration Statement, or 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 Merger Registration Statement, or for additional
information, and Fidelity Bankshares will provide FCB with as many copies
of such Merger Registration Statement and all amendments thereto promptly
upon the filing thereof as FCB may reasonably request.
8.2.3. FCB and Fidelity Bankshares shall promptly notify the other
party if at any time it becomes aware that the Proxy Statement-Prospectus
or the Merger Registration Statement contains any untrue statement of a
material fact or omits to state a material fact
55
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. In such event, FCB shall cooperate with Fidelity Bankshares in
the preparation of a supplement or amendment to such Proxy
Statement-Prospectus that corrects such misstatement or omission, and
Fidelity Bankshares shall file an amended Merger Registration Statement
with the SEC, and each of FCB and Fidelity Bankshares shall mail an amended
Proxy Statement-Prospectus to FCB's stockholders.
8.3. Regulatory Approvals.
Each of FCB and Fidelity Bankshares will cooperate with the other and use
all reasonable efforts to promptly prepare and as soon as practicable following
the date hereof, file all necessary documentation to obtain all necessary
permits, consents, waivers, approvals and authorizations of the OTS, the FRB,
and the Department and any other third parties and governmental bodies necessary
to consummate the transactions contemplated by this Agreement. FCB and Fidelity
Bankshares will furnish each other and each other's counsel with all information
concerning themselves, their Subsidiaries, directors, officers and stockholders
and such other matters as may be necessary or advisable in connection with any
application, petition or other statement made by or on behalf of FCB or Fidelity
Bankshares to any Bank Regulator or governmental body in connection with the
Merger, Bank Merger and the other transactions contemplated by this Agreement.
FCB shall have the right to review and approve in advance all characterizations
of the information relating to FCB and any of its Subsidiaries which appear in
any filing made in connection with the transactions contemplated by this
Agreement with any governmental body. In addition, FCB and Fidelity Bankshares
shall each furnish to the other for review a copy of each such filing made in
connection with the transactions contemplated by this Agreement with any
governmental body prior to its filing.
8.4. Affiliates.
8.4.1. FCB shall use all reasonable efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of
Rule 145 under the Securities Act) of FCB to deliver to Fidelity
Bankshares, as soon as practicable after the date of this Agreement, and at
least thirty (30) days prior to the date of the FCB Stockholders Meeting, a
written agreement, in the form of Exhibit C hereto, providing that such
person will not sell, pledge, transfer or otherwise dispose of any shares
of Fidelity Bankshares Common Stock to be received by such "affiliate" as a
result of the Merger otherwise than in compliance with the applicable
provisions of the Securities Act and the rules and regulations thereunder.
ARTICLE IX
CLOSING CONDITIONS
9.1. Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, none of which may be waived:
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9.1.1. Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the stockholders of FCB.
9.1.2. Injunctions. None of the parties hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction,
and no statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any Governmental Entity or
Bank Regulator, that enjoins or prohibits the consummation of the
transactions contemplated by this Agreement.
9.1.3. Regulatory Approvals. All Regulatory Approvals required to
complete the Merger and the Bank Merger shall have been obtained and shall
remain in full force and effect and all waiting periods relating thereto
shall have expired.
9.1.4. Effectiveness of Merger Registration Statement. The Merger
Registration Statement shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Merger Registration
Statement shall have been issued, and no proceedings for that purpose shall
have been initiated or threatened by the SEC and, if the offer and sale of
Fidelity Bankshares Common Stock in the Merger is subject to the blue sky
laws of any state, shall not be subject to a stop order of any state
securities commissioner.
9.1.5. Nasdaq Listing. The shares of Fidelity Bankshares Common Stock
to be issued in the Merger shall have been authorized for listing on the
Nasdaq, subject to official notice of issuance.
9.1.6. Tax Opinions. On the basis of facts, representation and
assumptions which shall be consistent with the state of facts existing at
the Closing Date, Fidelity Bankshares shall have received an opinion of
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C., reasonably acceptable in form and
substance to Fidelity Bankshares, and FCB shall have received an opinion of
Xxxxxx & Blank, reasonably acceptable in form and substance to FCB, each
dated as of the Closing Date, substantially to the effect that, for Federal
income tax purposes:
(A) The Merger, when consummated in accordance with the terms
hereof, either will constitute a reorganization within the meaning of
Section 368(a) of the Code or will be treated as part of a
reorganization within the meaning of Section 368(a) of the Code;
(B) The Bank Merger will not adversely affect the Merger
qualifying as a reorganization within the meaning of Section 368(a) of
the Code;
(C) No gain or loss will be recognized by Fidelity Bankshares,
Fidelity Federal Bank & Trust, FCB or First Community Bank by reason
of the Merger;
(D) The exchange of Fidelity Bankshares Common Stock, to the
extent exchanged for FCB Common Stock, will not give rise to the
recognition of gain or loss for Federal income tax purposes to the
stockholders of FCB;
57
(E) The basis of the Fidelity Bankshares Common Stock to be
received (including any fractional shares deemed received for tax
purposes) by an FCB stockholder will be the same as the basis of the
FCB Common Stock surrendered pursuant to the Merger in exchange
therefor, increased by any gain recognized by such FCB stockholder as
a result of the Merger and decreased by any cash received by such FCB
stockholder in the Merger; and
(F) The holding period of the shares of Fidelity Bankshares
Common Stock to be received by a stockholder of FCB will include the
period during which the stockholder held the shares of FCB Common
Stock surrendered in exchange therefore, provided the FCB Common Stock
surrendered is held as a capital asset at the Effective Time.
9.2. Conditions to the Obligations of Fidelity Bankshares under this
Agreement.
The obligations of Fidelity Bankshares under this Agreement shall be
further subject to the satisfaction of the conditions set forth in Sections
9.2.1 through 9.2.6 at or prior to the Closing Date:
9.2.1. Representations and Warranties. Each of the representations and
warranties of FCB set forth in this Agreement shall be true and correct as
of the date of this Agreement and upon the Effective Time with the same
effect as though all such representations and warranties had been made at
the Effective Time (except to the extent such representations and
warranties speak as of an earlier date, which only need be true and correct
as of such earlier date), in any case subject to the standard set forth in
Section 4.1; and FCB shall have delivered to Fidelity Bankshares a
certificate to such effect signed by the Chief Executive Officer and the
Chief Financial Officer of FCB as of the Effective Time.
9.2.2. Agreements and Covenants. FCB shall have performed in all
material respects all obligations and complied in all material respects
with all agreements or covenants to be performed or complied with by each
of them at or prior to the Effective Time, and Fidelity Bankshares shall
have received a certificate signed on behalf of FCB by the Chief Executive
Officer and Chief Financial Officer of FCB to such effect dated as of the
Effective Time.
9.2.3. Regulatory Conditions. No Regulatory Approval required for
consummation the Merger and Bank Merger includes any condition or
requirement, excluding standard conditions that are normally imposed by the
regulatory authorities in bank merger transactions, that could reasonably
be expected by Fidelity Bankshares to result in a Material Adverse Effect
on Fidelity Bankshares and its Subsidiaries, taken as a whole.
9.2.4. Dissenting Shares. As of immediately prior to the Effective
Time, not more than 7% of the issued and outstanding shares of FCB Common
Stock shall have dissented to the Merger under the FBCA, and preserved, as
of immediately prior to the Effective Time, the right to pursue their right
of appraisal for the fair value of their shares of FCB Common Stock under
the FBCA.
9.2.5. Permits, Authorizations, Etc. FCB and the FCB Subsidiaries
shall have obtained any and all material permits, authorizations, consents,
waivers, clearances or approvals
58
required for the lawful consummation of the Merger and the Bank Merger, the
failure of which to obtain would have a Material Adverse Effect on Fidelity
Bankshares and its Subsidiaries, taken as a whole.
9.2.6. Leases. Fidelity Bankshares shall have received written
confirmation from the lessors' of First Community Bank's branch facilities
of Fidelity Bankshares' right to assume the leases on substantially the
same terms and conditions as currently exist, of First Community Bank's
branch facilities.
9.3. Conditions to the Obligations of FCB under this Agreement.
The obligations of FCB under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.5 at or
prior to the Closing Date:
9.3.1. Representations and Warranties. Each of the representations and
warranties of Fidelity Bankshares set forth in this Agreement shall be true
and correct as of the date of this Agreement and upon the Effective Time
with the same effect as though all such representations and warranties had
been made at the Effective Time (except to the extent such representations
and warranties speak as of an earlier date, which only need be true and
correct as of such earlier date), in any case subject to the standard set
forth in Section 5.1; and Fidelity Bankshares shall have delivered to FCB a
certificate to such effect signed by the Chief Executive Officer or Chief
Operating Officer and the Chief Financial Officer of Fidelity Bankshares as
of the Effective Time.
9.3.2. Agreements and Covenants. Fidelity Bankshares shall have
performed in all material respects all obligations and complied in all
material respects with all agreements or covenants to be performed or
complied with by each of them at or prior to the Effective Time, and FCB
shall have received a certificate signed on behalf of Fidelity Bankshares
by the Chief Executive Officer or Chief Operating Officer and Chief
Financial Officer of Fidelity Bankshares to such effect dated as of the
Effective Time.
9.3.3. Permits, Authorizations, Etc. Fidelity Bankshares and its
Subsidiaries shall have obtained any and all material permits,
authorizations, consents, waivers, clearances or approvals required for the
lawful consummation of the Merger and the Bank Merger, the failure of which
to obtain would have a Material Adverse Effect on Fidelity Bankshares and
its Subsidiaries, taken as a whole.
9.3.4. Payment of Merger Consideration. Fidelity Bankshares shall have
delivered the Exchange Fund to the Exchange Agent on or before the Closing
Date and the Exchange Agent shall provide FCB with a certificate evidencing
such delivery.
ARTICLE X
THE CLOSING
10.1. Time and Place.
Subject to the provisions of Articles IX and XI hereof, the Closing of the
transactions contemplated hereby shall take place at the offices of Xxxx Xxxxxx
Xxxxxxxx & Xxxxxx, 5335
00
Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, X.X. at 10:00 a.m. on the date
determined by Fidelity Bankshares, in its sole discretion, upon five (5) days
prior written notice to FCB, but in no event later than thirty days (30) after
the last condition precedent (other than those conditions that relate to actions
to be taken at the Closing, but subject to the fulfillment or waiver of those
conditions) pursuant to this agreement has been fulfilled or waived (including
the expiration of any applicable waiting period), or at such other place, date
or time upon which Fidelity Bankshares and FCB mutually agree. Notwithstanding
the foregoing, and at Fidelity Bankshares' sole discretion, such Closing may
occur on the close of business on January 7, 2005 (provided that all conditions
precedent have been fulfilled or waived, including the expiration of any
applicable waiting period). A pre-closing of the transactions contemplated
hereby (the "Pre-Closing") shall take place at the offices of Xxxx Xxxxxx
Xxxxxxxx & Xxxxxx, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, X.X. at 10:00
a.m. on the day prior to the Closing Date (the "Pre-Closing Date").
10.2. Deliveries at the Pre-Closing and the Closing.
At the Pre-Closing there shall be delivered to Fidelity Bankshares and FCB
the opinions, certificates, and other documents and instruments required to be
delivered at the Closing under Article IX hereof. At or prior to the Closing,
Fidelity Bankshares shall deliver the Merger Consideration as set forth under
Section 9.3.4 hereof.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval of the Merger by the stockholders of FCB:
11.1.1. At any time by the mutual written agreement of Fidelity
Bankshares and FCB;
11.1.2. By either party (provided, that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach by its nature cannot be cured prior
to the Termination Date or shall not have been cured within 30 days after
written notice of such breach by the terminating party to the other party
provided, however, that neither party shall have the right to terminate
this Agreement pursuant to this Section 11.1.2 unless the breach of
representation or warranty, together with all other such breaches, would
entitle the terminating party not to consummate the transactions
contemplated hereby under Section 9.2.1 (in the case of a breach of a
representation or warranty by FCB) or Section 9.3.1 (in the case of a
breach of a representation or warranty by Fidelity Bankshares);
11.1.3. By either party (provided, that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material failure to
perform or comply with any of the covenants or agreements set forth in this
Agreement on the part of the other party, which failure by its nature
60
cannot be cured prior to the Termination Date or shall not have been cured
within 30 days after written notice of such failure by the terminating
party to the other party; provided, however, that neither party shall have
the right to terminate this Agreement pursuant to this Section 11.1.3
unless the breach of covenant or agreement, together with all other such
breaches, would entitle the terminating party not to consummate the
transactions contemplated hereby under Section 9.2.2 (in the case of a
breach of covenant by FCB) or Section 9.3.2 (in the case of a breach of
covenant by Fidelity Bankshares);
11.1.4. At the election of either party, if the Closing shall not have
occurred by the Termination Date, or such later date as shall have been
agreed to in writing by Fidelity Bankshares and FCB; provided, that no
party may terminate this Agreement pursuant to this Section 11.1.4 if the
failure of the Closing to have occurred on or before said date was due to
such party's material breach of any representation, warranty, covenant or
other agreement contained in this Agreement;
11.1.5. By either party, if the stockholders of FCB shall have voted
at the FCB Stockholders Meeting on the transactions contemplated by this
Agreement and such vote shall not have been sufficient to approve and adopt
such transactions;
11.1.6. By either party if (i) final action has been taken by a Bank
Regulator whose approval is required in order to satisfy the conditions to
the parties' obligations to consummate the transactions contemplated hereby
as set forth in Article IX, which final action (x) has become unappealable
and (y) does not approve this Agreement or the transactions contemplated
hereby, or (ii) any court of competent jurisdiction or other governmental
authority shall have issued an order, decree, ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
unappealable;
11.1.7. By the Board of Directors of Fidelity Bankshares if FCB has
received a Superior Proposal and the Board of Directors of FCB has entered
into an acquisition agreement with respect to the Superior Proposal,
terminated this Agreement, withdrawn its recommendation of this Agreement,
has failed to make such recommendation or has modified or qualified its
recommendation in a manner adverse to Fidelity Bankshares.
11.1.8. By the Board of Directors of FCB if FCB has received a
Superior Proposal and the Board of Directors of FCB has made a
determination to accept such Superior Proposal; provided that FCB shall not
terminate this Agreement pursuant to this Section 11.1.8 and enter in a
definitive agreement with respect to the Superior Proposal until the
expiration of five (5) business days following Fidelity Bankshares' receipt
of written notice advising Fidelity Bankshares that FCB has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing) identifying the person making the Superior
Proposal and stating whether FCB intends to enter into a definitive
agreement with respect to the Superior Proposal. After providing such
notice, FCB shall provide a reasonable opportunity to Fidelity Bankshares
during the five-day period to make such adjustments in the terms and
conditions of this Agreement as would enable FCB to proceed with the Merger
on such adjusted terms.
61
11.1.9. By FCB, if its Board of Directors so determines by a majority
vote of the members of its entire Board, at any time during the five-day
period commencing on the Determination Date, such termination to be
effective on the 30th day following such Determination Date ("Effective
Termination Date"), if both of the following conditions are satisfied:
(i) The Fidelity Bankshares Market Value on the Determination
Date is less than $29.97; and
(ii) the number obtained by dividing the Fidelity Bankshares
Market Value on the Determination Date by the Initial Fidelity
Bankshares Market Value ($37.46) ("Fidelity Bankshares Ratio") shall
be less than the quotient obtained by dividing the Final Index Price
by the Initial Index Price minus 0.20;
subject, however, to the following three sentences. If FCB elects to
exercise its termination right pursuant to this Section 11.1.9, it shall
give prompt written notice thereof to Fidelity Bankshares. During the five
business day period commencing with its receipt of such notice, Fidelity
Bankshares shall have the option of paying additional Merger Consideration
in the form of Fidelity Bankshares Common Stock, cash, or a combination of
Fidelity Bankshares Common Stock and cash so that the Aggregate Fidelity
Bankshares Share Amount shall be valued at the lesser of (i) the product of
0.80 and the Initial Fidelity Bankshares Market Value multiplied by the
Exchange Ratio or (ii) the product obtained by multiplying the Index Ratio
by the Initial Fidelity Bankshares Market Value multiplied by the Exchange
Ratio. If within such five business day period, Fidelity Bankshares
delivers written notice to FCB that it intends to proceed with the Merger
by paying such additional consideration, as contemplated by the preceding
sentence, then no termination shall have occurred pursuant to this Section
11.1.9 and this Agreement shall remain in full force and effect in
accordance with its terms (except that the Merger Consideration shall have
been so modified).
For purposes of this Section 11.1.9, the following terms shall have
the meanings indicated below:
"Acquisition Transaction" shall mean (i) a merger or consolidation, or
any similar transaction, involving the relevant companies, (ii) a purchase,
lease or other acquisition of all or substantially all of the assets of the
relevant companies, (iii) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of the relevant companies; or
(iv) agree or commit to take any action referenced above.
"Determination Date" shall mean the first date on which all Regulatory
Approvals (and waivers, if applicable) necessary for consummation of the
Merger and the Bank Mergers have been received.
"Final Index Price" means the sum of the Final Prices for each company
comprising the Index Group multiplied by the weighting set forth opposite
such company's name in the definition of Index Group below.
62
"Final Price," with respect to any company belonging to the Index
Group, means the average of the daily closing sales prices of a share of
common stock of such company (and if there is no closing sales price on any
such day, then the mean between the closing bid and the closing asked
prices on that day), as reported on the consolidated transaction reporting
system for the market or exchange on which such common stock is principally
traded, for the ten consecutive trading days immediately preceding the
Determination Date.
"Fidelity Bankshares Market Value" shall be the average of the daily
closing sales prices of a share of Fidelity Bankshares Common Stock as
reported on the Nasdaq National Market for the ten consecutive trading days
immediately preceding the Determination Date.
"Index Group" means the financial institution holding companies or
financial institutions listed below, the common stock of all of which shall
be publicly traded and as to which there shall not have been an Acquisition
Transaction involving such company publicly announced at any time during
the period beginning on the date of this Agreement and ending on the
Determination Date. In the event that the common stock of any such company
ceases to be publicly traded or an Acquisition Proposal for such company to
be acquired, or for such company to acquire another company in transaction
with a value exceeding 25% of the acquiror's market capitalization as
reflected in the table below, is announced at any time during the period
beginning on the date of this Agreement and ending on the Determination
Date, such company will be removed from the Index Group, and the weights
attributed to the remaining companies will be adjusted proportionately for
purposes of determining the Final Index Price and the Initial Index Price.
The financial institution holding companies and financial institutions and
the weights attributed to them are as follows:
Company Name Weight (%) Index Price
------------ ---------- -----------
KNTB Bancorp, Inc. 6.40% $16.80
TrustCo Bank Corp NY 12.08% $13.05
BankAtlantic Bancorp, Inc. 12.85% $18.77
Harbor Florida Bancshares, Inc. 9.55% $32.23
First Financial Holdings, Inc. 4.70% $30.52
OceanFirst Financial Corp. 4.02% $24.36
BankUnited Financial Corporation 10.59% $28.84
Berkshire Hills Bancorp, Inc. 2.79% $38.17
First Niagara Financial Group, Inc. 14.02% $13.47
Provident Bancorp, Inc. 5.65% $11.44
Provident Financial Services, Inc. 17.34% $17.71
------
100.00%
======
"Initial Fidelity Bankshares Market Value" equals $37.46, adjusted as
indicated in the last sentence of this Section 11.1.9.
"Initial Index Price" means the sum of the per share closing sales
price of the common stock of each company comprising the Index Group
multiplied by the applicable weighting, as such prices are reported on the
consolidated transaction reporting system for the market or
63
exchange on which such common stock is principally traded for the ten
consecutive trading days immediately preceding the public announcement of
this Agreement ($20.28).
"Index Ratio" shall be the Final Index Price divided by the Initial
Index Price.
If Fidelity Bankshares or any company belonging to the Index Group declares
or effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date of
this Agreement and the Determination Date, the prices for the common stock
of such company shall be appropriately adjusted for the purposes of
applying this Section 11.1.9.
11.2. Effect of Termination.
11.2.1. In the event of termination of this Agreement pursuant to any
provision of Section 11.1, this Agreement shall forthwith become void and
have no further force, except that (i) the provisions of Sections 11.2,
12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.9, 12.10, 12.11, and any other
Section which, by its terms, relates to post-termination rights or
obligations, shall survive such termination of this Agreement and remain in
full force and effect.
11.2.2. If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(B) In the event of a termination of this Agreement because of a
willful breach of any representation, warranty, covenant or agreement
contained in this Agreement, the breaching party shall remain liable
for any and all damages, costs and expenses, including all reasonable
attorneys' fees, sustained or incurred by the non-breaching party as a
result thereof or in connection therewith or with respect to the
enforcement of its rights hereunder.
(C) As a condition of Fidelity Bankshares' willingness, and in
order to induce Fidelity Bankshares to enter into this Agreement, and
to reimburse Fidelity Bankshares for incurring the costs and expenses
related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, FCB hereby agrees to pay
Fidelity Bankshares, and Fidelity Bankshares shall be entitled to
payment of, a fee of $1,250,000 (the "Fee"), within three business
days after written demand for payment is made by Fidelity Bankshares,
following the occurrence of any of the events set forth below:
(i) FCB terminates this Agreement pursuant to Section 11.1.8
or Fidelity Bankshares terminates this Agreement pursuant to
Section 11.1.7; or
(ii) The entering into a definitive agreement by FCB
relating to an Acquisition Proposal or the consummation of an
Acquisition Proposal involving FCB within eighteen months after
the occurrence of any of the following: (i) the termination of
this Agreement by Fidelity Bankshares pursuant to Section 11.1.2
or 11.1.3 because of a willful breach by FCB or any FCB
Subsidiary after the occurrence of an Acquisition Proposal has
been
64
publicly announced or otherwise made known to FCB; or (ii) the
termination of this Agreement by Fidelity Bankshares or FCB
pursuant to Section 11.1.5 because of the failure of the
stockholders of FCB to approve this Agreement at the FCB
Stockholders Meeting after the occurrence of an Acquisition
Proposal has been publicly announced or otherwise made known to
the stockholders of FCB.
(D) If demand for payment of the Fee is made pursuant to Section
11.2.2(C) and payment is timely made, then Fidelity Bankshares will
not have any other rights or claims against FCB or its Subsidiaries,
or their respective officers and directors, under this Agreement, it
being agreed that the acceptance of the Fee under Section 11.2.2(C)
will constitute the sole and exclusive remedy of Fidelity Bankshares
against FCB and its Subsidiaries and their respective officers and
directors.
11.3. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time (whether
before or after approval thereof by the stockholders of FCB), the parties hereto
by action of their respective Boards of Directors, may (a) amend this Agreement,
(b) extend the time for the performance of any of the obligations or other acts
of any other party hereto, (c) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (d)
waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of this Agreement and the
transactions contemplated hereby by the stockholders of FCB, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or value, or changes the form of, the Merger
Consideration to be delivered to FCB's stockholders pursuant to this Agreement.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Any termination of this Agreement pursuant to this
Article XI may only be effected upon a vote of a majority of the entire Board of
Directors of the terminating party.
ARTICLE XII
MISCELLANEOUS
12.1. Confidentiality.
Except as specifically set forth herein, Fidelity Bankshares and FCB
mutually agree to be bound by the terms of the confidentiality agreement dated
June 22, 2004 (the "Confidentiality Agreement") previously executed by the
parties hereto, which Confidentiality Agreement is hereby incorporated herein by
reference, and all information furnished by either party to the other party or
its representatives pursuant hereto (including pursuant to Sections 6.2 and 6.3)
shall be subject to, and the parties shall hold such information in confidence
in accordance with, the provisions of the Confidentiality Agreement. The parties
hereto agree that such Confidentiality Agreement shall continue in accordance
with its terms, notwithstanding the termination of this Agreement.
65
12.2. Public Announcements.
FCB and Fidelity Bankshares shall cooperate with each other in the
development and distribution of all news releases and other public disclosures
with respect to this Agreement, and except as may be otherwise required by law,
neither FCB nor Fidelity Bankshares shall issue any news release, or other
public announcement or communication with respect to this Agreement unless such
news release or other public announcement or communication has been mutually
agreed upon by the parties hereto.
12.3. Survival.
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto shall expire and be terminated and
extinguished at the Effective Time, except for those covenants and agreements
contained herein which by their terms apply in whole or in part after the
Effective Time.
12.4. Notices.
All notices or other communications hereunder shall be in writing and shall
be deemed given if delivered by receipted hand delivery or mailed by prepaid
registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to FCB, to: Xxxx Xxxxxx
President and Chief Executive Officer
First Community Bancorp, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 000000
With required copies to: Xxxxxx Xxxxx, Esq.
Xxxxxx & Blank
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
If to Fidelity Bankshares, to: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Fidelity Bankshares, Inc.
000 Xxxxxx Xxxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With required copies to: Xxxx Xxxxxx, Esq.
Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C.
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
66
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party, and that (except as provided in Article III and
Section 7.8) nothing in this Agreement is intended to confer upon any other
person any rights or remedies under or by reason of this Agreement.
12.6. Complete Agreement.
This Agreement, including the Exhibits and Disclosure Schedules hereto and
the documents and other writings referred to herein or therein or delivered
pursuant hereto, and the Confidentiality Agreements referred to in Section 12.1,
contains the entire agreement and understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings (other than the Confidentiality Agreement referred to in Section
12.1) between the parties, both written and oral, with respect to its subject
matter.
12.7. Counterparts.
This Agreement may be executed in one or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original. A facsimile copy of a signature page shall be deemed to be an
original signature page.
12.8. Severability.
In the event that any one or more provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
12.9. Governing Law.
This Agreement shall be governed by the laws of Florida, without giving
effect to its principles of conflicts of laws.
12.10. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which
67
are part of the related Section (e.g., a section numbered "Section 5.5.1" would
be part of "Section 5.5" and references to "Section 5.5" would also refer to
material contained in the subsection described as "Section 5.5.1"). The table of
contents, index and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the Recitals to this Agreement. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
12.11. Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
12.12. Waiver of Trial by Jury.
The parties hereto hereby knowingly, voluntarily and intentionally waive
the right any may have to a trial by jury in respect to any litigation based
hereon, or rising out of, under, or in connection with this agreement and any
agreement contemplated to be executed in connection herewith, or any course of
conduct, course of dealing, statements (whether verbal or written) or actions of
either party in connection with such agreements.
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IN WITNESS WHEREOF, Fidelity Bankshares and FCB have caused this Agreement
to be executed under seal by their duly authorized officers as of the date first
set forth above.
Fidelity Bankshares, Inc.
Dated: September 22, 2004 By:/s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
First Community Bancorp, Inc.
Dated: September 22, 2004 By:/s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
69
