Exhibit 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into effective the 22nd day
of August, 2005, by and among HIGHLANDS BANKSHARES, INC., a West Virginia bank
holding company ("Buyer"), the individuals executing below (collectively,
"Sellers"), joined in by THE NATIONAL BANK OF XXXXX, a national banking
association ("Bank").
RECITALS:
WHEREAS, Sellers have evidenced a desire to sell shares of common
stock of the Bank (the "Shares"); and
WHEREAS, Buyer and Sellers have reached agreement with respect to
the purchase of all of each of Sellers' Shares by Buyer; and
WHEREAS, the parties wish to enter into this Agreement with respect
to the same.
NOW, THEREFORE, in consideration of the mutual promises and
understandings hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
ARTICLE I
SALE OF SHARES
1.1 Purchase of Shares. At the Closing, each of Sellers shall
transfer all of the Shares owned by each Seller to Buyer, free and clear of any
and all liens and encumbrances.
1.2 Purchase Price. Buyer will pay to each of Sellers the sum of Ten
Thousand Four Hundred Dollars ($10,400) per Share (the "Purchase Price"). The
Purchase Price shall be payable in cash at the Closing.
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1.3 Deposit of Shares. On execution of this Agreement, each Seller
shall deposit with the Bank the certificate or certificates representing the
Shares, along with the Stock Power in substantially the form of Exhibit A and
substitute Form W-9 in substantially the form of Exhibit B. The Bank shall hold
such certificates for delivery to Buyer at the Closing on receipt of a check
from Buyer representing the Purchase Price and the satisfaction of all
conditions to Closing.
ARTICLE II
CLOSING
2.1 Time and Place of Closing. The Closing shall take place at the
offices of the Bank, Xxxxxxx Avenue, Davis, West Xxxxxxxx, at such time on such
date as the parties shall agree, and shall be within thirty days of approvals of
this Agreement (including any statutory waiting periods) referred to in Section
9.1(b), (c), (d) and (e), whichever is later.
2.2 Closing Matters. The following actions shall occur at the
Closing:
a. Certificates Representing the Shares. The Bank shall
deliver to Buyer certificates representing the Shares, duly endorsed to Buyer or
accompanied with duly exercised stock powers in the Buyer's favor and substitute
Forms W-9 in substantially the forms as the attached Exhibits A and B,
respectively.
b. Other Documents. The parties shall deliver certificates,
instruments, and documents customarily delivered in connection with transactions
of the type contemplated herein.
2.3 Expenses. Sellers and Buyer shall each pay their own costs and
expenses incurred in connection with the transactions contemplated by this
Agreement. Sellers shall be responsible for any income or transfer taxes
relating to the sale of the Shares.
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ARTICLE III
NON-SOLICITATION
3.1 Non-Solicitation. Through the Closing, Sellers will not
negotiate or enter into an agreement with any other party with respect to the
sale or transfer of the Shares. Each of Sellers represents and warrants that
there are no existing agreements, arrangements, understandings or letters of
intent to which he or she is bound with respect to the sale of the Shares of the
Bank.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of Sellers makes the following representations and warranties:
4.1 Seller Ownership of Shares and Authority. Seller owns all
of his or her Shares as the legal owner thereof, with good and marketable title
free and clear of any mortgage, pledge, lien, charge, security interest, adverse
claims, demands and encumbrance whatsoever. There are no stock transfer
restrictions affecting the transfer of the Shares to Buyer. Seller has the power
and authority to enter into, to perform his obligations under, and to consummate
the transactions and other acts contemplated by, this Agreement. This Agreement
constitutes the valid and binding obligation of Seller, enforceable in
accordance with its terms except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally; (ii)
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies; and (iii) applicable law limiting indemnification
provisions. Neither the execution and delivery of this Agreement, nor the
compliance with and fulfillment of its terms and provisions will violate,
conflict with or constitute a breach of or default under the provisions
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of any agreement or other instrument which binds Seller, or result in the
imposition of any lien, charge or encumbrance on any of the assets of the Bank
or the Shares, or require any affirmative action of any creditor of Seller.
4.2 Survival. The representations and warranties contained in
Section 4.1 above shall survive the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Buyer Ownership of Shares and Authority. Subject to the receipt
of all appropriate regulatory authorities as provided in the West Virginia
Banking Act ("WVBA") and the rules and regulations of the Federal Deposit
Insurance Corporation ("FDIC"), Office of the Comptroller of the Currency
("OCC") and the Board of Governors of the Federal Reserve ("FRB"), Buyer has the
power and authority to enter into, to perform his obligations under, and to
consummate the transactions and other acts contemplated by, this Agreement. This
Agreement constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally; (ii)
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies; and (iii) applicable law limiting indemnification
provisions.
5.2 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
West Virginia and has the corporate power to own all of its properties and
assets and to carry on its business as it is now being conducted.
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5.3 Authorization of Agreement. The Board of Directors of Buyer has
authorized the execution of this Agreement as set forth herein. Subject to
approval by all appropriate regulatory authorities, each has the corporate power
to execute and deliver this Agreement, and has taken all action required by law,
its Articles of Incorporation, its Bylaws or otherwise to authorize such
execution and delivery, the consummation of the transactions contemplated
hereby, and upon its execution and delivery (and assuming due execution and
delivery by the other parties hereto) this Agreement is a valid and binding
agreement of each enforceable in accordance with its terms.
5.4 No Violation of Other Instruments. Subject to the receipt of the
authorizations set forth in Section 5.1, the execution and delivery of this
Agreement do not, and the consummation of the Merger will not, (i) violate any
provision of the Articles of Incorporation or Bylaws of Buyer, (ii) violate any
provision of, or result in the acceleration of any obligation under or in the
termination, if applicable, of, any mortgage, deed of trust, note, lien, lease,
franchise, license, permit, agreement, instrument, order, arbitration award,
judgment or decree to which Buyer is a party or by which it is bound except for
such as would not have a material adverse effect on the financial condition,
business, properties, or results of operations of Buyer or the transactions
contemplated hereby, (iii) violate or conflict with any other material
restriction of any kind or character to which Buyer is subject, or (iv) enable
any person to enjoin the transactions contemplated hereby. After approval of
this Agreement by appropriate regulatory authorities, including but not limited
to the FRB, the West Virginia Board of Banking and Financial Institutions, and
the FDIC, Buyer will have taken all action required by law and its Articles of
Incorporation and Bylaws necessary to authorize the execution and delivery of
this Agreement and to authorize the consummation of the transactions
contemplated hereby.
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5.5 Regulatory Approvals. Prior to the Closing, Buyer separately and
jointly with the Bank, shall use its reasonable best efforts in good faith to
take or cause to be taken as promptly as practicable all such steps as shall be
necessary to obtain: (i) the prior approval of the Merger by the FRB under the
Bank Holding Company Act of 1956, as amended, the FDIC, and the West Virginia
Board of Banking and Financial Institutions, and (ii) all other consents and
approvals of governmental agencies as are required by law or otherwise, and
shall do any and all things deemed by Buyer to be necessary or appropriate in
order to cause the purchase of shares to be consummated on the terms provided
herein.
5.6 No Actions, Etc. There are no actions, proceedings or
investigations pending or, to the knowledge of the executive officers or
directors of Buyer, threatened or contemplated against or relating to Buyer,
which, individually or in the aggregate, could materially and adversely affect
the ability of either to consummate the transactions contemplated hereby, and
such officers and directors do not know of any basis for any action or
proceeding. Buyer is not transacting business in violation of any applicable law
or regulation which could materially adversely affect the ability of either to
consummate the transactions contemplated hereby.
5.7 Good Faith. Buyer shall use reasonable best efforts in good
faith to take or cause to be taken all action required under this Agreement on
its part to be taken as promptly as practicable so as to permit the consummation
of this Agreement at the earliest practicable date and cooperate fully with the
other parties to that end.
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5.8 Knowledge as to Conditions. As of the date hereof, Buyer does
not know of any reason relating to Buyer why the approvals, consents and waivers
of governmental authorities referred to in Sections 9.1(b) and 9.1(c) should not
be obtained in a timely manner; nor is Buyer aware of any conditions or
provisions of any actions, reports or examinations or similar regulatory reports
or findings which is anticipated to delay or precludes either from entering into
the Agreement or obtaining prompt regulatory approval of all applications to be
filed in connection with the transactions contemplated by this Agreement,
including but not limited to compliance with applicable Community Reinvestment
Acts.
5.9 Press Release. Buyer will consult with the Bank as to the form
and substance of any press release or other public disclosure concerning matters
related thereto, and, except as required by law or within good faith, shall not
issue such release or disclosure without the consent of the Bank.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES AND AGREEMENTS OF THE BANK
Except as set forth in the disclosure schedule to be delivered by
the Bank to Buyer on or before fifteen days after the date of this Agreement
(the "Disclosure Schedule"), the Bank represents and warrants to and covenants
with the Buyer that:
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6.1 Organization and Qualification of the Bank; Subsidiaries. The
Bank is duly organized, validly existing and in good standing as a national
banking association under the laws of the United States and has the corporate
power to own all of its properties and assets and to carry on its business as it
is now being conducted. The Bank is qualified to do business in each
jurisdiction in which such qualification is required. The issued and outstanding
shares of stock of the Bank are all duly authorized, validly issued, fully paid
and non-assessable. The Bank has no direct or indirect subsidiaries, and does
not own 5% or more of the shares of stock of any other corporation.
6.2 Authorization of Agreement. The Board of Directors of the Bank
has authorized the execution of this Agreement as set forth herein, and subject
to the approval by all appropriate regulatory authorities as provided in the
National Banking Act and the rules and regulations of the FDIC, the OCC and the
FRB, the Bank is has the corporate power and is duly authorized to carry out the
transactions contemplated by this Agreement, and upon its execution and delivery
(and assuming due execution and delivery by the parties), this Agreement is a
valid and binding agreement of the Bank enforceable in accordance with its
terms.
6.3 No Violation of Other Instruments. Subject to the receipt of the
authorizations set forth in Section 6.2, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement will not: (i) violate any provisions of the Bank's Articles of
Incorporation or Bylaws, (ii) violate any provision of, or result in the
acceleration of any obligation under or in the termination, if applicable, of
any mortgage, deed of trust, note, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree to which the
Bank is a party or by which it is bound except for such as would not have a
material adverse effect on the financial condition, business,
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properties, or results of operations of the Bank, taken as a whole, or the
transactions contemplated thereby, (iii) violate or conflict with any other
material restriction of any kind or character by which the Bank is bound, or
(iv) enable any person to enjoin the transactions contemplated hereby. The Bank
has taken all action required by law, the Articles of Association of the Bank,
its Bylaws or otherwise, to authorize the execution and delivery of this
Agreement and to authorize the consummation of the transactions contemplated
hereby.
6.4 Financial Statements. The balance sheets of the Bank as of
December 31, 2004, 2003, and 2002, and its statements of income and cash flows
for each of the twelve-month periods ended on such dates, heretofore delivered
to Buyer, were prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied, and those financial statements, as
well as the unaudited balance sheet as of June 30, 2005, and the statement of
income and cash flows for the six-month period ended June 30, 2005, both of
which have been delivered to Buyer, fairly present its financial condition and
results of operations as of such date and for such period, subject to normal
year-end audit adjustments and without footnotes required by GAAP.
6.5 No Material Adverse Change. There has been no material adverse
change, or development involving a reasonably foreseeable prospective material
adverse change, in or affecting the financial condition, businesses, properties,
results of operations or prospects of the Bank, taken as a whole, since December
31, 2004.
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6.6 Reports. The Bank has filed all documents and reports required
by the OCC or any other regulatory agency with authority over the Bank or its
operations, and such reports did not contain, as of the date thereof, an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
6.7 No Actions, Etc. To the knowledge of the executive officers
and/or directors of the Bank, there are no actions, suits, claims, proceedings
or investigations pending or threatened or contemplated against or relating to
the Bank of any of its properties which, individually or in the aggregate, could
materially and adversely affect the financial condition, businesses, properties
or results of operations of the Bank, taken as a whole, or the ability of the
Bank to consummate the transactions contemplated hereby, and such officers and
directors do not know of any basis for any such action or proceeding. To the
knowledge of the executive officers and/or directors of the Bank, the Bank is
not transacting business in violation of any applicable law or regulation which
could materially adversely affect the financial condition, businesses,
properties or results of operations of the Bank, taken as a whole, or the
ability of the parties to consummate the transactions contemplated hereby.
6.8 Capitalization. The authorized capital stock of the Bank
consists of 500 shares of common stock, par value of $100 per share, all of
which shares are issued and outstanding as of the date hereof, and are duly
authorized, validly issued, fully paid and non-assessable, and have not been
issued in violation of preemptive rights. There are no options, warrants, calls,
reservations for issuance or commitments of any kind relating to, or securities
convertible into, the common stock of the Bank.
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6.9 Copies of All Contracts, Leases, Etc. The Bank has furnished or
made available or will promptly furnish or make available to Buyer true and
complete copies of all material contracts, leases and other agreements to which
the Bank is a party or by which it is bound, and has listed on the Disclosure
Schedule and will furnish to Buyer true and complete copies of all employment,
pension, retirement, stock option, employee stock option, profit sharing,
deferred compensation, consultant, bonus, group insurance or similar plans with
respect to any of the directors, officers or other employees of the Bank.
6.10 Undisclosed Liabilities. Except as previously disclosed to the
Buyer, the Bank has no material liabilities other than those liabilities
disclosed on or provided for in the balance sheet as of December 31, 2004, and
liabilities incurred since such date in the ordinary course of business
consistent with past practices.
6.11 Title to Properties. The Bank has good and marketable title to
all its property and assets set forth in its balance sheets as of December 31,
2004, except property and assets sold or otherwise disposed of since December
31, 2004, in the ordinary course of business, subject to no liens, mortgages,
pledges, encumbrances or charges of any kind except liens reflected on said
balance sheet and except liens for taxes and assessments not delinquent, pledges
to secure deposits and such other liens and encumbrances and imperfections of
title as do not materially affect the value of such property as reflected on
said balance sheet and which do not interfere with or impair its present or
continued use, and all of their material leases are in full force and effect,
and the Bank is not in default in any material respect thereunder.
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6.12 Absence of Regulatory Actions. Except as disclosed to Buyer,
the Bank is not a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, federal governmental authorities
charged with the supervision or regulation of its operations of, nor has it been
advised by any such governmental authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
6.13 Employee Benefits.
(a) For purposes of this Agreement, the following definitions
shall apply:
(1) "Employee Pension Benefit Plan" has the meaning as
set forth in ERISA ss. 3(2).
(2) "Employee Welfare Benefit Plan" has the meaning set
forth in ERISA ss. 3(1).
(3) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(4) "Multiemployer Plan" shall mean a plan described in
ss. 3(37) and/or ss. 4001(a)(3) of ERISA.
(5) "Bank Retirement Plan" shall mean any retirement
plan adopted by the Bank.
(6) "Bank Employee" means an employee of the Bank.
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(7) "Employee Benefit Plan(s)" means any one or more of
the following in which a Bank Employee is a participant in or benefits from as a
result of his employment (whether current or past): (a) Employee Pension Benefit
Plan, (b) Employee Welfare Benefit Plan, or (c) any other deferred compensation
plan, bonus plan, incentive, disability or group insurance plan, stock option
plan, employee stock purchase plan, vacation plan, severance plan, sick leave
plan or policy, holiday plan or policy, maternity leave or policy, or any other
benefit plan, program, agreement (including employment and severance
agreements), arrangements or commitments of any kind, whether or not subject to
the requirements of ERISA.
(8) "Code" means the Internal Revenue Code of 1986, as
amended.
(9) "Control Group" shall mean a controlled group of
corporations within the meaning of ss. 414(b) of the Internal Revenue Code and
entitles under common control within the meaning of ss. 414(c) of the Internal
Revenue Code.
(b) Neither currently nor at any time during the preceding
five calendar years has the Bank, or any entity which was in the same Control
Group with the Bank at any time during such five-year period, or its
subsidiaries, (i) contributed to or had any obligation to contribute to any
Multiemployer Plan; or (ii) contributed to or had any obligation to contribute
to any other plan subject to Title IV of ERISA other than, if applicable, the
Bank Retirement Plan.
(c) Each Employee Benefit Plan will be listed in the
Disclosure Schedule, and copies of such plans and accompanying Summary Plan
Descriptions, if required, have been furnished to Buyer.
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(d) Each of the Employee Benefit Plans has been administered
in all material respects in compliance with the applicable requirements of
ERISA, the Code, other federal statutes, applicable federal regulations,
applicable State law (including without limitation State insurance law) and in
accordance with its terms. Any Bank Retirement Plan has received a favorable
determination letter from the Internal Revenue Service with respect to "TRA" (as
defined in Section 1 of the Rev. Proc. 93-39), and the Bank is not aware of any
circumstances likely to result in revocation of such favorable determination
letters. All reports required by any governmental agency with respect to each
such Employee Benefit Plan has been timely and properly filed and to the extent
required, furnished to the participants in such plan. The Bank has paid all
costs, benefits, premiums, contributions and any other amounts required or
coming due in connection with the Employee Benefit Plans, and no accumulated
funding deficiency, as defined in ss. 302(a)(2) of ERISA, exists with respect to
any Employee Benefit Plan. To the best of its knowledge, neither the Bank nor
any fiduciary of any Employee Benefit Plan, has engaged in: (i) a transaction
that would subject the Bank to any tax, penalty or liability for prohibited
transactions imposed by ERISA or by ss. 4975 of the Code, or (ii) any
transaction in violation of ss. 406(a) or ss. 406(b) of ERISA (for which no
exemption exists under ss. 408 of ERISA).
(e) With the exception of Employee Pension Benefit Plans and
except as set forth in the Disclosure Schedule, none of the benefits provided
under any of the Employee Benefit Plans are vested, and the Bank retains full
authority to terminate or amend any of the Employee Benefit Plans.
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(f) Each Employee Benefit Plan, other than the Bank Retirement
Plan, is either fully insured and all premiums have been timely paid or, if not
fully insured, adequate reserves have been established on the books of the Bank
in connection with such benefits, and all required contributions have been made
to such plans.
(g) With the exception of the Bank Retirement Plan, no
Employee Benefit Plan is subject to the provisions of Title IV of ERISA. No
liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by the Bank with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of ss. 401(a)(15) of ERISA, currently
or formerly maintained by either of them, or the single-employer plan of any
entity which is or was in the same Control Group as the Bank. No notice of a
"reportable event," within the meaning of ss. 4043 of ERISA for which the
thirty-day reporting requirement has not been waived, has been required to be
filed for the Bank Retirement Plan within the twelve-month period ending on the
date hereof.
(h) The Bank represents and warrants that as of December 31,
2004, the actuarially determined present value of all "benefit liabilities,"
within the meaning of ss. 401(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Bank Retirement Plan's most recent
actuarial valuation), did not exceed the then current value of the assets of the
Bank Retirement Plan. The Bank further warrants and represents that it has taken
no action since that date by amendment of that plan or otherwise, to increase
the actuarially determined present value of the benefit liabilities of the Bank
Retirement Plan except with respect to changes in normal eligibility resulting
from increased terms of service or compensation charges.
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(i) As of the Effective Date, the Bank Retirement Plan will be
terminated. The parties agree that at a minimum, participants in the Bank
Retirement Plan will be entitled to their vested accrued benefit under that plan
as of the Effective Date plus such retirement benefits to which they shall be
entitled to for years of service with Buyer subsequent to the Effective Date
under the Retirement Plan offered by Buyer's subsidiary, The Grant County Bank
("Grant Retirement Plan"). It is specifically understood that Bank Employees
shall not be entitled to any past service for benefit accrual purposes under the
Grant Retirement Plan. It is further specifically understood that,
notwithstanding any provision hereof to the contrary, the Bank Employees shall
be employees at-will and that after the Effective Date, Buyer may alter, amend,
or terminate any of their benefit programs covering such employees, or the
employment of any of such employees.
(j) There has not been any (i) termination of the Bank
Retirement Plan, or (ii) the commencement of any proceeding to terminate such
plan pursuant to ERISA, or otherwise, or (iii) written notice given to the Bank
of the intention to commence or seek the commencement of any such proceeding.
6.14 Labor Disputes. The Bank is not directly or indirectly involved
in or to the knowledge of any of them threatened with any labor dispute or
trouble or organizational effort, including, without limitation, matters
regarding actual or alleged discrimination by reason of race, creed, sex,
disability or national origin, which might materially and adversely affect the
financial condition, assets, businesses or results of operations of the Bank.
The Bank is not a party to, nor has it ever been a party to, any collective
bargaining agreement.
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6.15 Reserve For Possible Loan Losses. The reserves for possible
loan losses shown on the balance sheet of the Bank as of December 31, 2004, and
June 30, 2005, are adequate as of the dates thereof. The reserve for possible
loan losses to be shown on the balance sheet of the Bank as of future periods,
if any, will be adequate as of the dates thereof.
6.16 Knowledge as to Conditions. As of the date hereof:
(a) The Bank knows of no reason relating to the Bank why the
approvals, consents and waivers of governmental authorities referred to in
Sections 9.1(b) and 9.1(c) should not be obtained in a timely manner and without
the imposition of a condition of the type referred to in Section 9.1(g); and
(b) The Bank is not aware of any conditions or provisions of
any actions, reports of examinations or similar regulatory reports or findings
which is anticipated to delay or precludes the Bank from entering into the
Agreement or obtaining prompt regulatory approval of all applications to be
filed in connection with the transaction contemplated by this Agreement,
including but not limited to compliance with the federal or West Virginia
Community Reinvestment Acts ("CRA").
6.17 Taxes.
(a) The Bank has filed on a timely basis all federal income
tax returns and all other federal, state, municipal and other tax returns which
it is required to file, and has paid all taxes shown to be due on such returns
and has adequately reserved for all current taxes;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against the Bank, or, to its knowledge, threatening
to assert against the Bank, any deficiency or claim for additional taxes,
interest or penalty;
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(c) There is no pending, or to the knowledge of the Bank,
threatened examination of the federal income tax returns of the Bank and, except
for tax years still subject to the assessment and collection of additional
federal income taxes under the three-year period of limitations prescribed in
ss. 6501(a) of the Internal Revenue Code, no tax year of the Bank remains open
to the assessment and collection of additional federal income taxes; and
(d) There is no pending or, to the knowledge of the Bank,
threatened examination of state tax (the "West Virginia Taxes") returns of the
Bank and, except for tax years still subject to the assessment and collection of
additional West Virginia Taxes under the applicable statutes of limitations, no
tax year of the Bank remains open to the assessment and collection of additional
taxes.
6.18 Absence of Certain Changes. Since December 31, 2004:
(a) There has not been any damage, destruction or loss by
reason of fire, flood, accident or other casualty (whether insured or not
insured) materially and adversely affecting the assets, financial condition or
operations of the Bank;
(b) Except in the ordinary course of business, the Bank has
not disposed of, or agreed to dispose of, any of its material properties or
assets, nor has it leased to others, or agreed to so lease, any of such material
properties or assets;
(c) There has not been any change in the authorized, issued or
outstanding capital stock of the Bank, or any material change in the outstanding
debt of the Bank, other than changes due to payments in accordance with the
terms of such debt and any Federal Home Loan Bank advances and reverse
repurchase agreements to meet funding needs of the Bank in the ordinary course
of business;
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(d) Except as set forth in the Disclosure Schedule, no change
has occurred in the personnel who are key personnel with respect to the
operations of the Bank, nor has there been any increase in the compensation or
fees payable by the Bank to its directors, officers or employees other than
increases in the ordinary course of business in accordance with the
personnel policies of the Bank, or any material increase in any bonus,
insurance, pension or other Employee Benefit Plan, payment or arrangement for
or with any of such directors, officers or employees, and the Bank has entered
into no employment agreements;
(e) The Bank has not made any material loan or advance other
than in the ordinary course of business;
(f) The Bank has not made any expenditure or major commitment
for the purchase, acquisition, construction or improvement of any material asset
or assets which in the aggregate would be material;
(g) The Bank has not entered into any other material
transaction, contract or lease or incurred any other material obligation or
liability;
(h) The Bank has not incurred any unusual or extraordinary
loan losses;
(i) There has not been any other event, condition or
development of any kind which materially and adversely affects the assets,
financial condition or results of operations of the Bank, taken as a whole, and
the Bank has no knowledge of any such event, condition or development which may
materially and adversely affect the assets, financial condition or operations of
the Bank, taken as a whole; and
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(j) The Bank is, and has been, in substantial compliance with
all environmental laws and regulations, and there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending, or, to the knowledge of the Bank, threatened, before any
court, governmental agency or board or other forum against the Bank for alleged
noncompliance with, or liability under, any environmental law or relating to the
release into the environment of any hazardous material or oil.
6.19 Negative Covenants. Except as otherwise expressly contemplated
hereby, between the date hereof and the Closing, or the time when this Agreement
terminates as provided herein, the Bank will not, without the prior written
consent of Buyer, which consent shall not be unreasonably withheld:
(a) Make any change in its authorized capital stock or
corporate structure;
(b) Issue any shares of its capital stock, securities
convertible into its common stock or any long-term debt securities;
(c) Issue or grant any options, warrants or other rights to
purchase shares of its capital stock;
(d) Declare or pay any dividends or other distributions on any
shares of common stock;
(e) Purchase, redeem or otherwise acquire, or agree to
purchase, redeem or acquire, for consideration any shares of its capital stock,
securities convertible into its common stock or any long-term debt securities;
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(f) Enter into or amend (except as otherwise specifically
contemplated by this Agreement or disclosed in the Disclosure Schedule) any
employment agreement or any Employee Benefit Plan, consultant, or similar plan
in respect of any of its directors, officers or other employees or increase its
contribution to any Employee Benefit Plan;
(g) Take any action materially and adversely affecting the
transactions contemplated hereby or this Agreement or the financial condition,
businesses, properties or results of operations of the Bank;
(h) Acquire any other company or acquire any branch or
deposits or, other than in the ordinary course of business, any assets of any
other company;
(i) Mortgage, pledge or subject to a lien or any other
encumbrance any of its assets, dispose of any of its assets, incur or cancel any
debts or claims or take any other action not in the ordinary course of its
business as heretofore conducted;
(j) Amend its Articles of Association or Bylaws;
(k) Sell, pledge or otherwise dispose of or encumber any of
its stock, or any of the stock of its subsidiary, or change the capital
structure of any of them;
(l) Sell any securities from its investment portfolio, except
in the ordinary course of business;
(m) Increase the compensation of or pay any benefit to any
director, officer or employee prospectively or retroactively other than in the
ordinary course of business consistent with past practices and, in any event, in
the aggregate not in excess of 5% of the total salary expense of the Bank; or
(n) Enter into any agreement to do any of the foregoing.
22
6.20 Additional Covenants. Except as otherwise contemplated
by this Agreement, the Bank covenants and agrees:
(a) That, subsequent to the date of this Agreement and prior
to the Closing, it will operate its business only in the normal course and in a
normal manner consistent with past practices;
(b) That it will take no action which would adversely affect
or delay the ability of Buyer to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transaction contemplated
hereby or to perform its covenants and agreements on a timely basis under this
Agreement;
(c) That immediately upon the execution of this Agreement it
will direct its accountants and attorneys to give Buyer access, upon reasonable
notice, to all relevant and material information, documents and working papers
pertaining to the Bank that Buyer may reasonably request;
(d) That it will use its reasonable best efforts in good faith
to take or cause to be taken all action required under this Agreement on its
part to be taken as promptly as practicable so as to permit the consummation of
the transactions contemplated herein at the earliest possible date and cooperate
fully with the other parties to that end;
(e) That neither the Bank nor its directors, officers or
representatives or agents will, directly or indirectly, take any action to
solicit, support or encourage any offer or proposal from any other person to
acquire the Bank or its assets, or shares of its common stock, or engage in
negotiations with or provide information to such person with respect to such
offer or proposal.
23
(f) That it will promptly advise Buyer of any material adverse
change in the financial condition, assets, businesses, results of operations or
prospects of the Bank, and any material breach of any representation, warranty,
covenant or agreement made by the Bank in this Agreement;
(g) That it will maintain in full force and effect adequate
fire, casualty, public liability, employer fidelity and other insurance coverage
in accordance with prudent practices to protect the Bank against losses for
which insurance can reasonably be obtained;
(h) That it will consult with Buyer as to the form and
substance of any press release or other public disclosure concerning matters
related hereto, and, except as required by law or within good faith, shall not
issue such release or disclosure without the consent of Buyer; and
(i) That it will enforce its rights under, and the provisions
of, all confidentiality agreements it has or may have with third parties.
ARTICLE VII
INVESTIGATION AND CONFIDENTIALITY
7.1 Investigation. Prior to the Closing, Buyer may directly and
through representatives, make such reasonable investigation of the assets and
business of the Bank as deemed necessary or advisable. Each party and its
representatives shall have, at reasonable times after the date of execution
hereof, during normal business hours and upon reasonable request, full access to
the premises and to all the relevant and material books and records of the other
party and its subsidiaries.
24
7.2 Confidentiality. Buyer agrees to treat as strictly confidential
and agree not to divulge to any other person, natural or corporate (other than
employees of, and attorneys and accountants for, such party) any proprietary
financial statements, schedules, contracts, agreements, instruments, papers,
documents and other information relating to the Bank by which either may come to
know or which may come into the possession of either during the course of its
investigation in connection with the transaction contemplated hereby, of the
Bank, and, if the purchase contemplated hereby are not consummated for any
reason, Buyer agree promptly to return to the Bank all written proprietary
material furnished in connection with such investigation; and thereafter all
such information shall continue to not be disclosed by Buyer and the directors,
officers, employees, or advisors of either to third parties without the written
consent of the Bank.
ARTICLE VIII
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties included or provided herein shall
not survive the Closing, except the representations and warranties contained in
Article IV hereof.
ARTICLE IX
CONDITIONS PRECEDENT; EFFECTIVE DATE
9.1 Conditions Precedent. The consummation of this Agreement
and the purchase is conditioned upon the following:
(a) The holders of at least 80% of the issued and outstanding
shares of the capital stock of the Bank shall have signed this Agreement and
sold their shares;
25
(b) No governmental authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement;
(c) The FRB, the FDIC, and the West Virginia Board of Banking
and Financial Institutions and the OCC, if applicable, shall have approved the
transactions contemplated herein;
(d) All other consents, approvals and permissions and the
satisfaction of all the requirements prescribed by law which are necessary to
the carrying out of the transactions contemplated hereby shall have been
procured;
(e) All delay periods and all periods for review, objection or
appeal of or to any of the consents, approvals or permissions required with
respect to the consummation of the transactions contemplated in this Agreement
shall have expired;
(f) Unless waived by Buyer, the approvals referred to in
subparagraphs (b), (c) and (d) hereof shall not have required the divestiture or
cessation of any significant part of the present operations conducted by Buyer
or the Bank, taken as a whole, and shall not have imposed any other condition
which Buyer reasonably deems to be materially disadvantageous or burdensome;
26
(g) Unless waived by Buyer, the representations and warranties
of the Sellers and the Bank contained in this Agreement shall be correct on and
as of the Closing in all material respects with the same effect as though made
on and as of such date, except as affected by the transactions contemplated by
this Agreement and except for changes which are not, in the aggregate, material
and adverse to the financial condition, businesses, properties or operations of
the Bank, and the Sellers and the Bank shall have performed in all material
respects all its obligations and agreements hereunder theretofore to be
performed by it or them; and Buyer shall have received at Closing an appropriate
certificate to the foregoing effect dated the Closing Date and executed on
behalf of the Bank by one or more appropriate executive officers;
(h) Unless waived by the Bank and Sellers, the representations
and warranties of Buyer contained in this Agreement shall be correct on and as
of the Closing Date in all material respects with the same effect as though made
on and as of such date, except as affected by the transactions contemplated by
this Agreement, and Buyer shall have performed in all material respects all of
its obligations and agreement hereunder theretofore to be performed by it; and
the Bank and Sellers shall have received on the Closing Date an appropriate
certificate to the foregoing effect dated the Closing Date and executed on
behalf of Buyer by one or more appropriate executive officers;
(i) Buyer shall have received from legal counsel to the Bank a
written opinion pertaining to the transactions herein provided for, dated the
Closing Date, in form and substance acceptable to counsel for Sellers and the
Bank, and the Bank shall have received from legal counsel to Buyer a customary
written opinion pertaining to the transactions herein provided for, dated the
Closing Date, in form and substance acceptable to counsel for the Bank;
27
(j) The members of the Board of Directors of the Bank shall
execute agreements agreeing to resign as directors on the request of Buyer and
waiving claims against and indemnifying the Bank and Buyer with respect to the
Employment Agreement of the Bank's current President and Chief Executive
Officer; provided, however, that Buyer will perform its obligations as set forth
in such employment agreement; and
(k) Unless waived by Buyer, Buyer shall have received an
opinion from its legal counsel with respect to the tax effects of the
transactions contemplated herein which is acceptable to Buyer, in its
discretion.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Grounds for Termination. This Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing Date:
(a) By mutual consent of the parties;
(b) By Buyer if there has been a material misrepresentation or
breach of warranty in the representations and warranties of Sellers and/or the
Bank set forth herein, or by Sellers and/or the Bank if there has been a
material misrepresentation or breach of warranty in the representations and
warranties of Buyer set forth herein, which material misrepresentation or breach
of warranty has not been cured to the satisfaction of the non-breaching party
within thirty days thereof;
(c) By any party upon written notice to the other parties, if
the Closing Date does not occur on or before midnight on December 31, 2005;
28
(d) By any party if any transaction contemplated herein shall
violate any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(e) In the event that the Disclosure Schedule or Buyer's
investigation of the Bank discloses matters which Buyer in good faith believes
either (i) to be inconsistent in any material and adverse respect with any of
the representations or warranties of Sellers or the Bank (without giving effect
to the Disclosure Schedule), or (ii) in the reasonable judgment of Buyer either
(A) to be of such significance as to materially and adversely affect the
financial condition or results of operations of the Bank, taken as a whole, or
(B) to deviate materially and adversely from the financial statements for the
year ended December 31, 2004, of the Bank, Buyer may elect to terminate this
Agreement by giving notice of termination to the parties within or at the end of
the sixty-day period following the date of the delivery by the Bank to Buyer of
the Disclosure Schedule;
(f) By Buyer, unless waived, if the holders of 20% or more of
Bank Common Stock, do not execute this Agreement.
10.2 Effect of Termination; Right to Proceed. In the event this
Agreement shall be terminated pursuant to Section 10.1, all further obligations
of the parties under this Agreement shall terminate (other than this Section
10.2 and Sections 7.2, 10.3, 17.2 and 17.3 hereof, all of which shall remain in
full force and effect) without further liability of the parties to one another,
except for any liability arising out of any uncured willful breach of any
covenant or other agreement contained in this Agreement or any fraudulent breach
of a representation or warranty.
29
10.3 Return of Documents in Event of Termination. In the event of
the termination of this Agreement for any reason, each party shall forthwith
deliver to the other all documents, work papers and other material obtained from
it relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, including information obtained pursuant to Section 7
hereof, and will take reasonable steps to have any information so obtained kept
confidential.
ARTICLE XI
BROKERS, ETC.
The Bank represents and warrants to Buyer that no broker, or finder,
or financial analyst has been employed by the Bank or is entitled to a fee,
commission or other compensation from the Bank, with respect to this Agreement
or the transactions contemplated hereby.
ARTICLE XII
GOVERNING LAW; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the State of West Virginia; (b) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that this Agreement may not be
assigned by Sellers or the Bank without the prior written consent of Buyer; (c)
may be executed in one or more counterparts, all of which shall be considered
one and the same Agreement, and shall become effective and binding when one or
more counterparts shall have been signed and delivered; and (d) embodies the
entire agreements and understandings between the parties relating to the subject
matter hereof.
30
ARTICLE XIII
EFFECT OF CAPTIONS
The captions in this Agreement are included for convenience only and
shall not in any way affect the interpretation or construction of any of the
provisions hereof.
ARTICLE XIV
SEVERABILITY
The Parties expressly agree that it is not the intention of any
party to violate any public policy, law, rule, regulation, treaty or decision of
any government or agency thereof of any state or country. If any provision of
this Agreement is judicially or administratively interpreted to be in violation
of any such provision in any state or country, such provisions, sentences,
words, clauses or combination thereof shall be inoperative in each such state or
country; and the remainder of this Agreement shall remain binding upon the
parties hereto in each such state or country with this Agreement as a whole
unaffected elsewhere.
31
ARTICLE XV
NOTICES
Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by registered mail, postage prepaid, or by
facsimile addressed as follows:
To Buyer:
Highlands Bankshares, Inc.
0 Xxxxx Xxxx Xxxxxx
P. O. Xxx 000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx, Esquire
Xxxxxxx Xxxxx PLLC
1600 Laidley Tower (Zip 25301)
P. X. Xxx 000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Fax No.: (000) 000-0000
To Sellers and the Bank:
The National Bank of Xxxxx
Xxxxxxx Avenue (Zip 26266)
X.X. Xxx 000
Xxxxx, Xxxx Xxxxxxxx 00000
Attn: X. X. Xxxxxxxx
Fax No.: (000) 000-0000
32
With copies to:
Xxxx X. Xxxxxx, Esquire
Xxxxxx Xxxxxxx & Xxxxxxx PLLC
X.X. Xxx 000 Xxxxxxx, Xxxx Xxxxxxxx 00000
Fax No.: (000) 000-0000
and
J. Xxxxx Xxxxxx, Esquire XxXxxx Highland XxXxxx & Xxxxxx
X.X. Xxxxxx 0000 Xxxxxxxxxx, Xxxx Xxxxxxxx 00000-0000
Fax No.: (000) 000-0000
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been given
as of the date so mailed or transmitted by facsimile.
ARTICLE XVI
AMENDMENTS
The Agreement may be amended by the written agreement of the parties
at any time prior to the Closing Date with respect to any of the terms contained
herein.
ARTICLE XVII
EXPENSES
17.1 General. Except as otherwise provided herein, each of the
parties hereto agrees to pay, without a right of reimbursement from the other
party and whether or not the transactions contemplated by this Agreement shall
be consummated, the costs incurred by it incident to the performance of its
obligations under this Agreement and to the consummation of the transactions
contemplated herein, including the fees and disbursements of counsel,
accountants and consultants employed by such party in connection therewith.
33
17.2 Expenses of Buyer. In addition to any other remedy provided by
law, the Bank hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated by Buyer pursuant to Section 10.1(b) or
10.1(e) as a result of a willful breach by the Bank or Sellers, the Bank shall
promptly (and in any event within ten (10) business days after such termination)
pay all Expenses of Buyer. "Expenses of Buyer" as used in this Section 17.2
shall include all reasonable in amount and reasonably incurred out-of-pocket
expenses of Buyer (including all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to Buyer) incurred by it or on its
behalf in connection with its preparations regarding the transactions
contemplated by this Agreement.
17.3 Expenses of the Bank. In addition to any other remedy provided
by law, Buyer hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated by the Bank or Sellers pursuant to Section
10.1(b) or 10.1(f) as a result of a willful breach by Buyer, Buyer shall
promptly (and in any event within ten business days after such termination) pay
all Expenses of the Bank. For purposes of this Section 17.3, the "Expenses of
the Bank" shall include all reasonable out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants of the Bank) incurred by it or on its behalf in connection with its
preparations regarding the transactions contemplated by this Agreement.
34
ARTICLE XVIII
AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS
The parties each agree to use their reasonable best efforts to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
IN WITNESS WHEREOF, the parties have each caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized all as of
the day and year first written above.
HIGHLANDS BANKSHARES, INC.
a West Virginia corporation
By: /s/ Xxxx X. Van Meter
-------------------------------------
Its: Chairman of The Board of Directors
THE NATIONAL BANK OF XXXXX,
a national banking association
By: /s/ X. X. Xxxxxxxx
---------------------------------
Its: President
----------------------------------
(signatures of individual shareholders omitted)
