1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION DATED APRIL 12, 2007
2
AGREEMENT AND PLAN OF REORGANIZATION
dated as of April 12, 2007
by and between
SUMMIT FINANCIAL GROUP, INC.
AND
GREATER ATLANTIC FINANCIAL CORP.
3
TABLE OF CONTENTS
PAGE
ARTICLE I Certain Definitions..............................................1
1.01 Certain Definitions.......................................1
ARTICLE II The Merger......................................................7
2.01 The Merger................................................7
2.02 Effective Date and Effective Time.........................7
ARTICLE III The Bank Merger................................................8
3.01 The Bank Merger...........................................8
3.02 Effective Date and Effective Time.........................8
ARTICLE IV Consideration; Exchange Procedures..............................9
4.01 Merger Consideration......................................9
4.02 Rights as Stockholders; Stock Transfers..................10
4.03 Fractional Shares........................................10
4.04 Exchange Procedures......................................10
4.05 Options..................................................12
4.06 Warrants.................................................12
4.07 Dissenters' Rights.......................................12
ARTICLE V Actions Pending the Effective Time..............................13
5.01 Forebearances of GAFC....................................13
5.02 Forebearances of Summit..................................15
ARTICLE VI Representations and Warranties.................................15
6.01 Disclosure Schedules.....................................15
6.02 Standard.................................................16
6.03 Representations and Warranties of GAFC...................16
6.04 Representations and Warranties of Summit.................25
ARTICLE VII Covenants.....................................................33
7.01 Reasonable Best Efforts..................................33
7.02 Stockholder Approval.....................................33
7.03 Registration Statement...................................33
7.04 Press Releases...........................................34
7.05 Access; Information......................................34
7.06 Acquisition Proposals....................................35
7.07 Affiliate Agreements.....................................35
7.08 Takeover Laws............................................35
7.09 Certain Policies.........................................35
7.10 Regulatory Applications..................................36
7.11 Indemnification..........................................36
7.12 Benefit Plans............................................37
7.13 Notification of Certain Matters..........................38
7.14 Current Public Information...............................38
7.15 Contractual Rights of Current Employees..................38
4
7.16 GAFC Trust Preferred Securities.............................38
7.17 Transition..................................................38
ARTICLE VIII Conditions to Consummation of the Merger........................39
8.01 Conditions to Each Party's Obligation to Effect the Merger..39
8.02 Conditions to Obligation of GAFC............................40
8.03 Conditions to Obligation of Summit..........................40
ARTICLE IX Termination.......................................................41
9.01 Termination.................................................41
9.02 Effect of Termination and Abandonment.......................42
9.03 Fees and Expenses...........................................42
ARTICLE X Miscellaneous......................................................43
10.01 Survival....................................................43
10.02 Waiver; Amendment...........................................43
10.03 Counterparts................................................43
10.04 Governing Law...............................................43
10.05 Expenses....................................................43
10.06 Notices.....................................................43
10.07 Entire Understanding; No Third Party Beneficiaries..........44
10.08 Interpretation; Effect......................................44
ANNEX A. FORM OF SUPPLEMENT FOR MERGER SUB ACCESSION
TO MERGER AGREEMENT
EXHIBIT A. FORM OF GAFC AFFILIATE LETTER
ii
5
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 12,
2007 (this "Agreement"), by and between GREATER ATLANTIC FINANCIAL CORP.
("GAFC") and SUMMIT FINANCIAL GROUP, INC. ("Summit").
RECITALS
A. GAFC. GAFC is a Delaware corporation, having its principal
----
place of business in Reston, Virginia.
B. Summit. Summit is a West Virginia corporation, having its
------
principal place of business in Charleston, West Virginia.
C. Intentions of the Parties. It is the intention of the
-------------------------
parties to this Agreement that the business combination contemplated hereby be
treated as a "reorganization" under Section 368 of the Internal Revenue Code of
1986, as amended.
D. Board Action. The respective Boards of Directors of each of
------------
Summit and GAFC have determined that it is advisable and in the best interests
of their respective companies and their stockholders to consummate the strategic
business combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements contained herein
the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this
Agreement with the meanings set forth below:
"ACQUISITION PROPOSAL" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
GAFC or any of its Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
or deposits of, GAFC or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"ADJUSTED SHAREHOLDERS' EQUITY" has the meaning set forth in
Section 4.01(c).
"ADJUSTMENT DATE" has the meaning set forth in Section
4.01(c).
"AGREEMENT" means this Agreement, as amended or modified from
time to time in accordance with Section 10.02.
"AVERAGE CLOSING PRICE" has the meaning set forth in Section
4.01(a).
"BANK MERGER" has the meaning set forth in Section 3.01(a).
6
"BANK MERGER EFFECTIVE DATE" has the meaning set forth in
Section 3.02.
"BENCHMARK EQUITY" has the meaning set forth in Section
4.01(c).
"CASH CONSIDERATION" has the meaning set forth in Section
4.01(a)
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPENSATION AND BENEFIT PLANS" has the meaning set forth in
Section 6.03(m).
"CONSULTANTS" has the meaning set forth in Section 6.03(m).
"CORE DEPOSITS" means all deposits (as defined in 12 U.S.C.
Section 1813(1)) of GAFC shown on the books and records of GAB, including but
not limited to all interest posted thereon accrued but unpaid interest and both
collected and uncollected funds (including overdrawn accounts), together with
GAB's rights and responsibilities under any customer agreement evidencing or
relating thereto, but excluding (i) deposit accounts associated with a public
body, including but not limited to any municipal, county, state or federal
government, and (ii) brokered deposits and (iii) wholesale deposits, but
including corporate sweep accounts.
"COSTS" has the meaning set forth in Section 7.11(a).
"DIRECTORS" has the meaning set forth in Section 6.03(m).
"DISCLOSURE SCHEDULE" has the meaning set forth in Section
6.01.
"DISSENTERS' SHARES" has the meaning set forth in Section
4.07.
"DGCL" means the Delaware General Corporation Law, as amended.
"DOL" means the United States Department of Labor.
"EFFECTIVE DATE" has the meaning set forth in Section 2.02(a).
"EFFECTIVE TIME" means the effective time of the Merger, as
provided for in Section 2.02(a).
"EMPLOYEES" has the meaning set forth in Section 6.03(m).
"ENVIRONMENTAL LAWS" means all applicable local, state and
federal environmental, health and safety laws and regulations, including,
without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2
7
"ERISA AFFILIATE" has the meaning set forth in Section
6.03(m)(i).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"EXCHANGE AGENT" has the meaning set forth in Sections
4.04(a).
"EXCHANGE FUND" has the meaning set forth in Section 4.04(a).
"EXCHANGE RATIO" has the meaning set forth in Section 4.01(a).
"GAB" means Greater Atlantic Bank, a federally-chartered
savings bank.
"GAAP" Means generally accepted accounting principles in the
United States.
"GAFC" has the meaning set forth in the preamble to this
Agreement.
"GAFC AFFILIATE" has the meaning set forth in Section 7.07(a).
"GAFC BOARD" means the Board of Directors of GAFC.
"GAFC BY-LAWS" means the By-laws of GAFC, as amended.
"GAFC CERTIFICATE" means the Certificate of Incorporation of
GAFC, as amended.
"GAFC COMMON STOCK" means the common stock, par value $0.01
per share, of GAFC.
"GAFC MEETING" has the meaning set forth in Section 7.02.
"GAFC STOCK OPTION" has the meaning set forth in Section 4.05.
"GAFC STOCK PLANS" has the meaning set forth in Section 4.05.
"GAFC TRUST PREFERRED SECURITIES" means preferred shares of
stock issued by Greater Atlantic Financial Corporation Capital Trust I, a second
tier business trust subsidiary of GAFC.
"GAFC WARRANT" has the meaning set forth in Section 4.06.
"GOVERNMENTAL AUTHORITY" means any court, administrative
agency or commission or other federal, state or local governmental authority or
instrumentality.
"GUARANTEE" shall mean the Guarantee executed by GAFC in
connection with the issuance of the GAFC Trust Preferred Securities.
"INDENTURE" shall mean the Trust Indenture executed by GAFC in
connection with the issuance of the GAFC Trust Preferred Securities.
3
8
"IRS" has the meaning set forth in Section 6.03(m).
"INDEMNIFIED PARTY" has the meaning set forth in Section
7.11(a).
"INSURANCE AMOUNT" has the meaning set forth in Section
7.11(b).
"LIEN" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance,
"MATERIAL ADVERSE EFFECT" means, with respect to Summit or
GAFC, any effect that (i) is material and adverse to the financial position,
results of operations or business of Summit and its Subsidiaries taken as a
whole or GAFC and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Summit or GAFC to perform its
obligations under this Agreement or otherwise materially threaten or materially
impede the consummation of the Merger and the other transactions contemplated by
this Agreement; provided, however, that Material Adverse Effect shall not be
deemed to include the impact of (a) changes in banking and similar laws of
general applicability or interpretations thereof by courts or governmental
authorities, except to the extent such changes have a disproportionate impact on
Summit or GAFC, as the case may be, relative to the overall effects on the
banking industry, (b) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and their holding
companies generally, except to the extent changes have a disproportionate impact
on Summit or GAFC, as the case may be, relative to the overall effect on the
banking industry, (c) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges taken in
connection with the Merger, in each case in accordance with generally accepted
accounting principles, (d) actions and omissions of Summit or GAFC taken with
the prior written consent of the other in contemplation of the transactions
contemplated hereby, (e) changes in economic conditions affecting financial
institutions generally, including, without limitation, changes in market
interest rates or the projected future interest rate environment, except to the
extent that such changes have a disproportionate impact on Summit or GAFC, as
the case may be, relative to the overall effect on the banking industry or (f)
direct effects of compliance with this Agreement on the financial condition and
operating performance of the parties, including, without limitation, expenses
incurred by the parties in consummating the transactions contemplated by this
Agreement.
"MERGER" has the meaning set forth in Section 2.01(b).
"MERGER CONSIDERATION" has the meaning set forth in Section
4.01(a).
"MERGER SUB" means a Delaware corporation, and/or one or more
other corporations or limited liability companies to be organized under the
corporate laws of the State of Delaware by Summit prior to the Effective Time.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s Capital Market.
"NEW CERTIFICATE" has the meaning set forth in Section
4.04(a).
"OLD CERTIFICATE" has the meaning set forth in Section
4.04(a).
4
9
"Pasadena Branch" means the branch banking office owned by
GAFC and located in Pasadena, Maryland.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" has the meaning set forth in Section 6.03(m).
"PERSON" means any individual, bank, corporation, limited
liability company, partnership, association, joint-stock company, business trust
or unincorporated organization.
"PREVIOUSLY DISCLOSED" by a party shall mean information set
forth in its Disclosure Schedule or in Summit's or GAFC's SEC Documents.
"PROXY STATEMENT" has the meaning set forth in Section
7.03(a).
"REGISTRATION STATEMENT" has the meaning set forth in Section
7.03(a).
"REGULATORY AUTHORITIES" has the meaning set forth in Section
6.03(i).
"RIGHTS" means, with respect to any Person, securities or
obligations convertible into or exercisable or exchangeable for, or giving any
person any right to subscribe for or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other instrument the
value of which is determined in whole or in part by reference to the market
price or value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"SECRETARY OF STATE" means the Secretary of State of the State
of Delaware.
"SECTION 9.03(A) FEE" has the meaning set forth in Section
9.03(a). "SECTION 9.03(B) FEE" has the meaning set forth in
Section 9.03(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"SHAREHOLDERS' EQUITY" means the total shareholders equity
presented on GAFC's balance sheet as of a given date as calculated according to
GAAP.
"STOCK CONSIDERATION" has the meaning set forth in Section
4.01(a).
"STOCK OPTION CONSIDERATION" has the meaning set forth in
Section 4.05.
"SUBSIDIARY" and "SIGNIFICANT SUBSIDIARY" have the meanings
ascribed to them in Rule 1-02 Section 210.1-(2)(w) of Regulation S-X of the SEC.
"SURVIVING CORPORATION" has the meaning set forth in Section
2.01(b).
"SUMMIT" has the meaning set forth in the preamble to this
Agreement.
5
10
"SUMMIT BANK" means Summit Community Bank, a commercial bank
chartered under the laws of the State of West Virginia.
"SUMMIT BOARD" means the Board of Directors of Summit.
"SUMMIT COMMON STOCK" means the common stock, par value $2.50
per share, of Summit.
"SUMMIT COMPENSATION AND BENEFIT PLANS" has the meaning set
forth in Section 6.04(k)(i).
"SUMMIT CONSULTANTS" has the meaning set forth in Section
6.04(k)(i).
"SUMMIT DIRECTORS" has the meaning set forth in Section
6.04(k)(i).
"SUMMIT EMPLOYEES" has the meaning set forth in Section
6.04(k)(i).
"SUMMIT ERISA AFFILIATE" has the meaning set forth in Section
6.04(k)(iii).
"SUMMIT ERISA AFFILIATE PLAN" has the meaning set forth in
Section 6.04(k)(iii).
"SUMMIT PENSION PLAN" has the meaning set forth in Section
6.04(k)(ii).
"SUMMIT'S SEC DOCUMENTS" has the meaning set forth in Section
6.04(g).
"SUPERIOR PROPOSAL" has the meaning set forth in Section
9.01(f).
"TAKEOVER LAWS" has the meaning set forth in Section 6.03(o).
"TAX" and "TAXES" means all federal, state, local or foreign
taxes, charges, fees, levies or other assessments, however denominated,
including, without limitation, all net income, gross income, gains, gross
receipts, sales, use, ad valorem, goods and services, capital, production,
transfer, franchise, windfall profits, license, withholding, payroll,
employment, disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom duties,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority whether arising before, on or after the Effective Date.
"TAX RETURNS" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"TREASURY STOCK" shall mean shares of GAFC Common Stock held
by GAFC or any of its Subsidiaries in each case other than in a fiduciary
capacity or as a result of debts previously contracted in good faith.
6
11
ARTICLE II
THE MERGER
2.01 THE MERGER. (a) Prior to the Effective Time, Summit shall
take any and all action necessary (i) duly to organize the Merger Sub for the
purpose of consummating the Merger; (ii) to cause Merger Sub to become a party
to this Agreement, to be evidenced by the execution by the Merger Sub of a
supplement to this Agreement in substantially the form of Annex A and delivery
thereof to GAFC; and (iii) to cause Merger Sub to take all actions necessary or
proper to comply with the obligations of Summit and such Merger Sub to
consummate the transactions contemplated hereby.
(b) At the Effective Time, GAFC shall merge with and into
Merger Sub (the "MERGER"), the separate corporate existence of GAFC shall cease
and Merger Sub shall survive and continue to exist as a Delaware corporation
(Merger Sub, as the surviving corporation in the Merger, sometimes being
referred to herein as the "SURVIVING CORPORATION"). Summit may at any time prior
to the Effective Time change the method of effecting the combination with GAFC
(including, without limitation, the provisions of this Article II other than
sub-sections (i), (ii), (iii) and (iv) hereof) if and to the extent it deems
such change to be necessary, appropriate or desirable; provided, however, that
no such change shall (i) cause the approval of the stockholders of Summit to be
required as a condition to the Merger, (ii) alter or change the amount or kind
of Merger Consideration (as hereinafter defined), or the relative proportions of
cash and Summit Common Stock included therein, (iii) adversely affect the tax
treatment of GAFC's stockholders as a result of receiving the Merger
Consideration or (iv) materially impede or delay consummation of the
transactions contemplated by this Agreement; and provided further, that Summit
shall provide GAFC prior written notice of such change and the reasons
therefore. Immediately following the Merger, Surviving Corporation shall merge
with and into Summit, the separate corporate existence of the Merger Sub shall
cease and Summit shall survive and continue to exist as a West Virginia
corporation.
(c) Subject to the satisfaction or waiver of the conditions
set forth in Article VIII, the Merger shall become effective upon the occurrence
of the filing in the office of the Secretary of State of a certificate of merger
in accordance with Section 252 of the DGCL or such later date and time as may be
set forth in such certificate of merger. The Merger shall have the effects
prescribed in the DGCL.
(d) The Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law.
2.02 EFFECTIVE DATE AND EFFECTIVE TIME. (a) Subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the parties
shall cause the effective date of the Merger (the "EFFECTIVE DATE") to occur on
(i) the fifth business day to occur after the last of the conditions set forth
in Article VIII shall have been satisfied or waived in accordance with the terms
of this Agreement, other than those conditions that by their nature are to be
satisfied at the closing of the Merger (or, at the election of Summit, on the
last business day of the month in which such fifth business day occurs), or (ii)
such other date to which the parties may agree in
7
12
writing. The time on the Effective Date when the Merger shall become effective
is referred to as the "EFFECTIVE TIME."
(e) Notwithstanding any other provision in this Agreement to
the contrary, if Summit shall exercise its right to delay the Effective Date
pursuant to Section 2.02(a), and a record date for any dividend or other
distribution in respect of the Summit Common Stock is taken during the period of
such delay such that the GAFC stockholders will not be entitled to participate
in such dividend, each stockholder of GAFC shall be entitled to receive, upon
surrender of the Old Certificates and compliance with the other provisions of
Article IV, a payment equal to the amount and kind of dividend or other
distribution that such holder would have received had such holder been a holder
of record of the shares of Summit Common Stock issuable to such holder in the
Merger on the record date for such dividend or other distribution.
ARTICLE III
THE BANK MERGER
3.01 THE BANK MERGER. (a) Immediately after the Effective
Time, GAB, a wholly-owned subsidiary of GAFC, shall merge with and into Summit
Bank, a wholly-owned subsidiary of Summit (the "BANK MERGER"), the separate
existence of GAB shall cease and Summit Bank shall survive and continue to exist
as a state chartered banking corporation. Summit may at any time prior to the
Effective Time, change the method of effecting the combination with GAB
(including without limitation the provisions of this Article III other than
sub-sections (i), (ii) and (iii) hereof) if and to the extent it deems such
changes necessary, appropriate or desirable; provided, however that no such
change shall (i) alter or change the amount or kind of Merger Consideration, or
the relative proportions of cash and Summit Common Stock included therein, (ii)
adversely affect the tax treatment of GAFC's stockholders as a result of
receiving the Merger Consideration or (iii) materially impede or delay
consummation of the transactions contemplated by this Agreement, and provided
further, that Summit shall provide GAFC with prior written notice of such change
and the reasons therefore.
(a) Subject to the satisfaction or waiver of the conditions
set forth in Article VIII, the Bank Merger shall become effective upon the
occurrence of the filing in the Office of the Secretary of State of West
Virginia of articles of merger in accordance with the laws of the West Virginia
or such later date and time as may be set forth in such articles and the
issuance of a certificate of merger by the Secretary of State of West Virginia.
The Bank Merger shall have the effects prescribed in the West Virginia General
Corporation Act.
3.02 EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the parties
shall cause the effective date of the Bank Merger (the "BANK MERGER EFFECTIVE
DATE") to occur on the Effective Date or such later date to which the parties
may agree in writing.
8
13
ARTICLE IV
CONSIDERATION; EXCHANGE PROCEDURES
4.01 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) Stock Consideration and Cash Consideration. Each holder of
a share of GAFC Common Stock (other than GAFC or its subsidiaries or Summit and
its subsidiaries, except for shares held by them in a fiduciary capacity, and
Dissenters' Shares) shall receive in respect thereof, subject to the limitations
set forth in this Agreement and any adjustment pursuant to Section 4.01 (c), (i)
the number of shares of Summit Stock (the "STOCK CONSIDERATION") equal to $3.22,
divided by the average closing price (the "AVERAGE CLOSING PRICE") of Summit
Common Stock reported on the NASDAQ for the twenty (20) trading days prior to
the Closing (the "EXCHANGE RATIO") and (ii) $1.38 in cash without interest (the
"CASH CONSIDERATION"). The Cash Consideration and the Stock Consideration are
sometimes referred to herein collectively as the "MERGER CONSIDERATION."
(b) Stock Collar. If the Average Closing Price is less than
$17.82, then the Exchange Ratio shall be seventy percent of the Merger
Consideration divided by $17.82. If the Average Closing Price is greater than
$24.10 then the Exchange Ratio will be seventy percent of the Merger
Consideration divided by $24.10.
(c) Adjustment to Merger Consideration for Decrease or
Increase in GAFC's Shareholder's Equity. If, as of the end of the month in which
the sale of the Pasadena Branch is consummated (the "Adjustment Date"), GAFC's
Shareholders' Equity adjusted to exclude (i) accumulated other comprehensive
income or loss, (ii) Merger restructuring charges and/or Merger-related expenses
incurred at the request of Summit on or prior to the Adjustment Date, and (iii)
employee severance charges incurred by GAB on or prior to the Adjustment Date
(excluding any charges relating to employee terminations for "cause" as defined
in GAB's Employee Severance Compensation Plan (the "Adjusted Shareholder's
Equity") is:
(i) less than Six Million Seven Hundred Thousand
Dollars ($6,700,000) (the "BENCHMARK EQUITY"), then
the aggregate value of the Merger Consideration shall be reduced one dollar for
every dollar by which the Adjusted Shareholders' Equity is less than the
Benchmark Equity; or
(ii) more than the Benchmark Equity, then the
aggregate value of the Merger Consideration shall be
increased one dollar for every dollar by which the Adjusted Shareholders' Equity
exceeds the Benchmark Equity, but only to the extent that the amount by which
the Adjusted Shareholders' Equity exceeds the Benchmark Equity is attributable
to the sale of the Pasadena Branch after deducting all Taxes, if any, due and
payable with the Tax Returns filed by GAFC for the tax year in which such sale
is consummated.
If the aggregate value of the Merger Consideration shall be
adjusted pursuant to this Section 4.01(c), then the Stock Consideration and the
Cash Consideration constituting the Merger Consideration, as so adjusted, shall
be paid in the same proportion as the Stock Consideration and the Cash
Consideration would have been paid pursuant to Section 4.01(a) without any
adjustment pursuant to this Section 4.01(c).
(d) Outstanding Summit Stock. Each share of Summit Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and unaffected by the Merger.
(e) Treasury Shares. Each share of GAFC Common Stock held as
Treasury Stock immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefore.
(f) Merger Sub. Each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and unaffected by the merger, and no consideration shall be issued
in exchange therefore.
9
14
4.02 RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective
Time, holders of GAFC Common Stock shall cease to be, and shall have no rights
as, stockholders of GAFC, other than to receive the Merger Consideration and any
dividend or other distribution with respect to such GAFC Common Stock with a
record date occurring prior to the Effective Time, the payment, if any, in lieu
of certain dividends on Summit Common Stock provided for in Section 2.02(b), and
the consideration provided under this Article IV. After the Effective Time,
there shall be no transfers on the stock transfer books of GAFC or the Surviving
Corporation of shares of GAFC Common Stock.
4.03 FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fractional shares of Summit Common Stock and no certificates or scrip
therefore, or other evidence of ownership thereof, will be issued in the Merger;
instead, Summit shall pay to each holder of GAFC Common Stock who would
otherwise be entitled to a fractional share of Summit Common Stock (after taking
into account all Old Certificates registered in the name of such holder) an
amount in cash (without interest) determined by multiplying such fraction by the
closing price of Summit Common Stock as reported by NASDAQ reporting system (as
reported in the WALL STREET JOURNAL) on the Effective Date.
4.04 EXCHANGE PROCEDURES.
(b) At or prior to the Effective Time, Summit shall deposit,
or shall cause to be deposited, with Registrar and Transfer Company or a bank or
trust company designated by Summit and reasonably satisfactory to GAFC (the
"EXCHANGE AGENT"), for the benefit of the holders of certificates formerly
representing shares of GAFC Common Stock ("OLD CERTIFICATES"), for exchange in
accordance with this Article IV, (i) certificates representing the shares of
Summit Common Stock ("NEW CERTIFICATES"), (ii) an amount of cash necessary to
pay the cash portion of the Merger Consideration and any payments required by
Section 2.02(b) and (iii) an amount of cash necessary for payments required by
Section 4.03 (the "EXCHANGE FUND"). The Exchange Fund will be distributed in
accordance with the Exchange Agent's normal and customary procedures established
in connection with merger transactions.
(c) As soon as practicable after the Effective Time, and in no
event later than five business days thereafter, Summit shall cause the Exchange
Agent to mail to each holder of
10
15
record of one or more Old Certificates a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the Old
Certificates shall pass, only upon delivery of the Old Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the Old
Certificates in exchange for New Certificates, if any, that the holders of the
Old Certificates are entitled to receive pursuant to Article IV, and the cash,
if any, that the holders of the Old Certificates are entitled to receive
pursuant to Article IV, any cash in lieu of fractional shares into which the
shares of GAFC Common Stock represented by the Old Certificates shall have been
converted pursuant to this Agreement and any payment required pursuant to
Section 2.02(b) of this Agreement. Upon proper surrender of an Old Certificate
for exchange and cancellation to the Exchange Agent, together with such properly
completed letter of transmittal, duly executed, the holder of such Old
Certificates shall be entitled to receive in exchange therefore (i) a New
Certificate representing that number of whole shares of Summit Common Stock that
such holder has the right to receive pursuant to Article IV, if any, (ii) a
check representing the amount of the cash that such holder is entitled to
receive pursuant to Article IV, if any, (iii) a check representing the amount of
any cash in lieu of fractional shares which such holder has the right to receive
in respect of the Old Certificates surrendered pursuant to the provisions of
this Article IV, and (iv) any payment required by Section 2.02(b), and the Old
Certificates so surrendered shall forthwith be cancelled.
(d) Neither the Exchange Agent, if any, nor any party hereto
shall be liable to any former holder of GAFC Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(e) No dividends or other distributions with respect to Summit
Common Stock with a record date occurring after the Effective Time shall be paid
to the holder of any unsurrendered Old Certificate representing shares of GAFC
Common Stock converted in the Merger into the right to receive shares of such
Summit Common Stock until the holder thereof shall be entitled to receive New
Certificates in exchange therefore in accordance with the procedures set forth
in this Section 4.05. After becoming so entitled in accordance with this Section
4.05, the record holder thereof also shall be entitled to receive any such
dividends or other distributions by the Exchange Agent, without any interest
thereon, which theretofore had become payable with respect to shares of Summit
Common Stock such holder had the right to receive upon surrender of the Old
Certificates.
(f) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of GAFC for twelve months after the Effective Time shall be
paid to Summit. Any stockholders of GAFC who have not theretofore complied with
this Article IV shall thereafter look only to Summit for payment of the Merger
Consideration, cash in lieu of any fractional shares and unpaid dividends and
distributions on Summit Common Stock deliverable in respect of each share of
GAFC Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
(g) In the event any Old Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Old Certificate to be lost, stolen or destroyed and, if reasonably
required by Summit or the Exchange Agent, the posting by such person of a bond
in such amount as Summit may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such Old
11
16
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Old Certificate the Merger Consideration deliverable in respect
thereof pursuant to this Agreement.
4.05 OPTIONS. At the Effective Time, each outstanding option
(each, a "GAFC STOCK OPTION") to purchase shares of GAFC Common Stock under any
and all plans of GAFC under which stock options have been granted and are
outstanding (collectively, the "GAFC STOCK PLANS") shall vest and holders of
GAFC Stock Options shall be entitled to receive cash in an amount equal to the
difference between the value of (a) the Merger Consideration and (b) the
applicable exercise price (rounded to the nearest cent) for each outstanding
GAFC Stock Option (the "STOCK OPTION CONSIDERATION"). At or prior to the
Effective Time, GAFC shall use its reasonable best efforts, including using its
reasonable best efforts to obtain any necessary consents from optionees, with
respect to the GAFC Stock Plans to permit Summit to pay the Stock Option
Consideration pursuant to this Section. At the Effective Time, Summit shall have
no obligation to make any additional grants or awards under the GAFC Stock
Plans.
4.06 WARRANTS. At the Effective Time, each outstanding warrant
(each, a "GAFC WARRANT ") to purchase shares of GAFC Common Stock under any and
all plans of GAFC under which warrants have been granted and are outstanding
(collectively, the "GAFC WARRANTS ") shall vest and holders of GAFC Warrants
shall be entitled to receive cash in an amount equal to the difference between
the value of (a) the Merger Consideration and (b) the applicable exercise price
(rounded to the nearest cent) for each outstanding GAFC Warrant (the "WARRANT
CONSIDERATION"). At or prior to the Effective Time, GAFC shall use its
reasonable best efforts, including using its reasonable best efforts to obtain
any necessary consents from optionees, with respect to the GAFC Stock Plans to
permit Summit to pay the Warrant Consideration pursuant to this Section. At the
Effective Time, Summit shall have shall have no obligation to make any
additional grants or awards under the GAFC Warrants.
4.07 DISSENTERS' RIGHTS. Notwithstanding any other provision
of this Agreement to the contrary, shares of GAFC Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who properly shall have demanded appraisal for such
shares in accordance with the DGCL (collectively, the "DISSENTERS' SHARES")
shall not be converted into or represent the right to receive the Merger
Consideration. Such stockholders instead shall be entitled to receive payment of
the appraised value of such shares held by them in accordance with the
provisions of the DGCL, except that all Dissenters' Shares held by stockholders
who shall have failed to perfect or who effectively shall have withdrawn or
otherwise lost their rights to appraisal of such shares under the DGCL shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration upon surrender in the manner provided in
Section 4.05 of the Old Certificates that, immediately prior to the Effective
Time, evidenced such shares.
12
17
ARTICLE V
ACTIONS PENDING THE EFFECTIVE TIME
5.01 FOREBEARANCES OF GAFC. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement or Previously
Disclosed, without the prior written consent of Summit, GAFC will not, and will
cause each of its Subsidiaries not to:
(h) ORDINARY COURSE. Conduct the business of GAFC and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and assets
and maintain their rights, franchises and existing relations with customers,
suppliers, employees and business associates, or take any action reasonably
likely to have an adverse affect upon GAFC's ability to perform any of its
material obligations under this Agreement.
(i) CAPITAL STOCK. Other than pursuant to Rights Previously
Disclosed and outstanding on the date hereof, (i) issue, sell or otherwise
permit to become outstanding, or authorize the creation of, any additional
shares of GAFC Common Stock or any Rights, (ii) enter into any agreement with
respect to the foregoing, or (iii) permit any additional shares of GAFC Common
Stock to become subject to new grants of employee or director stock options,
other Rights or similar stock-based employee rights.
(j) DIVIDENDS, ETC. (a) Make, declare, pay or set aside for
payment any dividend on or in respect of, or declare or make any distribution on
any shares of GAFC Common Stock, or (b) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.
(k) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into or
amend or renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of GAFC or its Subsidiaries,
or grant any salary or wage increase or increase any employee benefit (including
incentive or bonus payments), except (i) for normal individual payments of
incentives and bonuses to employees in the ordinary course of business
consistent with past practice, not to exceed $10,000 in the aggregate, (ii) for
normal individual payments of incentives and bonuses to employees under GAB's
branch incentive plan, not to exceed $30,000 per quarter in the aggregate, (iii)
for normal individual increases in compensation to employees in the ordinary
course of business consistent with past practice, (iv) for other changes that
are required by applicable law, (v) to satisfy Previously Disclosed contractual
obligations existing as of the date hereof, or (vi) for grants of awards to
newly hired employees consistent with past practice.
(l) BENEFIT PLANS. Enter into, establish, adopt or amend
(except (i) as may be required by applicable law or (ii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any director, officer or
employee of GAFC or its Subsidiaries, or take any action to accelerate the
vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder.
(m) DISPOSITIONS. Except as Previously Disclosed or in
connection with the consummation of the sale of the Pasadena Branch, sell,
transfer, mortgage, encumber or
13
18
otherwise dispose of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business and in a transaction that
is not material to it and its Subsidiaries taken as a whole.
(n) ACQUISITIONS. Except as Previously Disclosed, acquire
(other than by way of foreclosures or acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of debts previously contracted in good
faith, in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
properties of any other entity.
(o) GOVERNING DOCUMENTS. Amend the GAFC Certificate, GAFC
By-laws or the certificate of incorporation or by-laws (or similar governing
documents) of any of GAFC's Subsidiaries.
(p) ACCOUNTING METHODS. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(q) CONTRACTS. Except in the ordinary course of business
consistent with past practice, enter into or terminate any material contract (as
defined in Section 6.03(k)) or amend or modify in any material respect any of
its existing material contracts.
(r) CLAIMS. Except in the ordinary course of business
consistent with past practice, settle any claim, action or proceeding, except
for any claim, action or proceeding which does not involve precedent for other
material claims, actions or proceedings and which involve solely money damages
in an amount, individually or in the aggregate for all such settlements, that is
not material to GAFC and its Subsidiaries, taken as a whole.
(s) ADVERSE ACTIONS. (a) Take any action while knowing that
such action would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the Code; or
(b) knowingly take any action that is intended or is reasonably likely to result
in (i) any of its representations and warranties set forth in this Agreement
being or becoming untrue, subject to the standard set forth in Section 6.02, at
any time at or prior to the Effective Time, (ii) any of the conditions to the
Merger set forth in Article VIII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(t) RISK MANAGEMENT. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices; (ii) fail to follow its
existing policies or practices with respect to managing its exposure to interest
rate and other risk; or (iii) fail to use commercially reasonable means to avoid
any material increase in its aggregate exposure to interest rate risk.
(u) INDEBTEDNESS. Incur any indebtedness for borrowed money
other than in the ordinary course of business.
14
19
(v) LOANS. Make any loans in a principal amount in excess of
$750,000, or make any loans outside of the District of Columbia, Delaware,
Maryland, Pennsylvania, Virginia and West Virginia.
(w) COMMITMENTS. Agree or commit to do any of the foregoing.
5.02 FOREBEARANCES OF SUMMIT. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of GAFC, Summit will not, and will cause each of its
Subsidiaries not to:
(x) ORDINARY COURSE. Conduct the business of Summit and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and assets
and maintain their rights, franchises and existing relations with customers,
suppliers, employees and business associates, or take any action reasonably
likely to have an adverse effect upon Summit's ability to perform any of its
material obligations under this Agreement.
(y) EXTRAORDINARY DIVIDENDS. Make, declare, pay or set aside
for payment any extraordinary dividend.
(z) ADVERSE ACTIONS. (a) Take any action while knowing that
such action would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the Code; or
(b) knowingly take any action that is intended or is reasonably likely to result
in (i) any of its representations and warranties set forth in this Agreement
being or becoming untrue, subject to the standard set forth in Section 6.02, at
any time at or prior to the Effective Time, (ii) any of the conditions to the
Merger set forth in Article VIII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation; provided.
(aa) COMMITMENTS. Agree or commit to do any of the foregoing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01 DISCLOSURE SCHEDULES. On or prior to the date hereof,
Summit has delivered to GAFC a schedule and GAFC has delivered to Summit a
schedule (respectively, its "DISCLOSURE SCHEDULE") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more representations or warranties contained in
Section 6.03 or 6.04 or to one or more of its covenants contained in Article V;
provided, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a representation or warranty if its absence could
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section 6.02,
and (b) the mere inclusion of an item in a Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect on the
party making the representation. All of GAFC's
15
20
representations, warranties and covenants contained in this Agreement are
qualified by reference to the Disclosure Schedule and none thereof shall be
deemed to be untrue or breached as a result of effects arising solely from
actions taken in compliance with a written request of Summit.
6.02 STANDARD. No representation or warranty of GAFC or Summit
contained in Section 6.03 or 6.04 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 6.03 or 6.04 has had or is reasonably likely to have a
Material Adverse Effect. For purposes of this Agreement, "knowledge" shall mean
(i) with respect to Summit, actual knowledge of H. Xxxxxxx Xxxxx, III, and
Xxxxxx X. Tissue, and (ii) with respect to GAFC, actual knowledge of Xxxxxxx X.
Xxxx, Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxx and Xxxx X. Xxxxxx.
6.03 REPRESENTATIONS AND WARRANTIES OF GAFC. Subject to
Sections 6.01 and 6.02 and except as Previously Disclosed, GAFC hereby
represents and warrants to Summit:
(a) Organization and Standing. GAFC is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. GAFC is duly qualified to do business and is in good standing in the
Commonwealth of Virginia and in any foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to be
so qualified.
(b) Capitalization. As of March 31, 2007, the authorized
--------------
capital stock of GAFC consists of (i) 10,000,000 shares of GAFC Common Stock, of
which 3,024,220 shares were outstanding and no shares were held in treasury, and
(ii) 2,500,000 shares of preferred stock, $0.01 par value, none of which are
issued and outstanding or held in treasury as of the date hereof. As of the date
hereof, except pursuant to the terms of options, stock, and warrants issued
pursuant to the GAFC Stock and/or Warrant Plans, GAFC does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of GAFC Common Stock or any other equity securities of GAFC or any of its
Subsidiaries or any securities representing the right to purchase or otherwise
receive any shares of GAFC Common Stock or other equity securities of GAFC or
any of its Subsidiaries. As of March 31, 2007, GAFC has 340,171 shares of GAFC
Common Stock (with a weighted average strike price of $6.94 per share) which are
issuable and reserved for issuance upon the exercise of GAFC Stock Options and
GAFC Warrants. The outstanding shares of GAFC Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable,
and subject to no preemptive rights (and were not issued in violation of any
preemptive rights).
(c) Subsidiaries. (i) GAFC has Previously Disclosed a list of
------------
all of its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary. (A) GAFC owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries, (B) no equity
securities of any of its Subsidiaries are or may become required to be issued
(other than to it or its wholly-owned Subsidiaries) by reason of any Right or
otherwise, (C) there are no contracts, commitments, understandings or
arrangements by which any of such
16
21
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (D) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities and
(E) all the equity securities of each Subsidiary held by GAFC or its
Subsidiaries are fully paid and nonassessable and are owned by GAFC or its
Subsidiaries free and clear of any Liens.
(ii) GAFC has Previously Disclosed a list of all
equity securities, or similar interests of any Person
or any interest in a partnership or joint venture of any kind, other than its
Subsidiaries, that it beneficially owns, directly or indirectly, as of March 28,
2007.
(iii) Each of GAFC's Subsidiaries has been duly
organized and is validly existing in good standing under
the laws of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified.
(d) Corporate Power. Each of GAFC and its Subsidiaries has the
---------------
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and GAFC has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
(e) Corporate Authority. Subject to receipt of the requisite
-------------------
approval of this Agreement (including the agreement of merger set forth herein)
by the holders of a majority of the outstanding shares of GAFC Common Stock
entitled to vote thereon (which is the only vote of GAFC stockholders required
thereon), the execution and delivery of this Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action of
GAFC and the GAFC Board. Assuming due authorization, execution and delivery by
Summit, this Agreement is a valid and legally binding obligation of GAFC,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The GAFC Board of
Directors has received the written opinion of Sandler X'Xxxxx & Partners, L.P.
to the effect that as of the date hereof the consideration to be received by the
holders of GAFC Common Stock in the Merger is fair to the holders of GAFC Common
Stock from a financial point of view.
(f) Consents and Approvals; No Defaults. (i) No consents or
-----------------------------------
approvals of, or filings or registrations with, any Governmental Authority or
with any third party are required to be made or obtained by GAFC or any of its
Subsidiaries in connection with the execution, delivery or performance by GAFC
of this Agreement or to consummate the Merger except for (A) filings of
applications or notices with federal and state banking and insurance authorities
and (B) the filing of a certificate of merger with the Secretary of State
pursuant to the DGCL and the issuance of a certificate of merger in connection
therewith. As of the date hereof, GAFC is not aware of any reason why the
approvals set forth in Section 8.01(b) will not be received without the
imposition of a condition, restriction or requirement of the type described in
Section 8.01(b).
17
22
(i) Subject to receipt of the regulatory approvals referred to
in the preceding paragraph, and expiration of related waiting periods, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any acceleration
of remedies or any right of termination under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or any agreement,
indenture or instrument of GAFC or of any of its Subsidiaries or to which GAFC
or any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the GAFC Certificate or the GAFC
By-Laws, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or any
agreement, indenture or instrument.
(g) Financial Reports; Absence of Certain Changes or Events.
(i) GAFC's Annual Report on Form 10-K for the fiscal years ended September 30,
2004, 2005 and 2006, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by it or any of
its Subsidiaries subsequent to September 30, 2003, under the Securities Act or
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or
to be filed (collectively "GAFC'S SEC DOCUMENTS"), as of the date filed, (A) as
to form complied or will comply in all material respects with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets or statements of condition
of GAFC contained in or incorporated by reference into any of GAFC's SEC
Documents (including the related notes and schedules thereto) fairly presents,
or will fairly present, the financial position of GAFC and its Subsidiaries as
of its date, and each of the statements of income or results of operations and
changes in stockholders' equity and cash flows or equivalent statements of GAFC
in any of GAFC's SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the results of operations,
changes in stockholders' equity and cash flows, as the case may be, of GAFC and
its Subsidiaries for the periods to which they relate, and in each case were
prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as may be
noted therein, and subject to normal year-end audit adjustments in the case of
unaudited statements.
(ii) GAFC's Disclosure Schedule lists, and GAFC has delivered
or previously made available to Summit, copies of the documentation creating or
governing all securitization transactions and "off-balance sheet arrangements"
(as defined in Item 303(c) of Regulation S-K) effected by GAFC or its
Subsidiaries, since September 30, 2006. BDO Xxxxxxx, LLP, which has expressed
its opinion with respect to the financial statements of GAFC and its
Subsidiaries (including the related notes) included in the GAFC SEC Documents is
and has been throughout the periods covered by such financial statements (A) a
registered public accounting firm (as defined in Section 2(a)(12) of the
Xxxxxxxx-Xxxxx Act of 2002, (B) "independent" with respect to GAFC within the
meaning of Regulation S-X and C in compliance with subsection (g) through (l) of
Section 10A of the Exchange Act and the related rules of the SEC and the Public
Accounting Oversight Board.
18
23
(iii) Except as disclosed on Disclosure Schedule 6.03(g), GAFC
has on a timely basis filed all forms, reports and documents required to be
filed by it with the SEC since September 30, 2004. GAFC's Disclosure Schedule
lists, and, except to the extent available in full without redaction on the
SEC's web site through the Electronic Data Gathering, Analysis and Retrieval
System ("XXXXX") two days prior to the date of this Agreement, GAFC has
delivered or previously made available to Summit copies in the form filed with
the SEC of (A) GAFC's Annual Reports on Form 10-K for each fiscal year of the
Company beginning since September 30, 2003, (B) it Quarterly Reports on form
10-Q for each of the first three fiscal quarters in each of the fiscal years of
the GAFC referred to in clause (A) above, (C) all proxy statements relating to
GAFC's meetings of stockholders (whether annual or special) held, and all
information statements relating to stockholder consents since the beginning of
the first fiscal year referred to in clause above, (D) all certifications and
statements required by (x) the SEC's Order dated June 27, 2002, pursuant to
Section 21(a)(1) of the Exchange Act (File No. 4-460), (y) Rule 13a-14 or 15d-14
under the Exchange Act or (z) 18 U.S.C. ss.1350 (Section 906 of the
Xxxxxxxx-Xxxxx Act of 2002) with respect to any report referred to above, (E)
all other forms, reports, registration statements and other documents (other
than preliminary materials if the corresponding definitive materials have been
provided to Summit pursuant to this Section 6.03(g)(iii), filed by GAFC with the
SEC since the beginning of the first fiscal year referred above, and (E) all
comment letters received by GAFC from the Staff of the SEC since December 31,
2004, and all responses to such comment letters by or on behalf of GAFC.
(iv) Except as Previously Disclosed, GAFC maintains disclosure
controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange
Act; such controls and procedures are effective to ensure that all material
information concerning GAFC and its subsidiaries is made known on a timely basis
to the individuals responsible for the preparation of the Company's filings with
the SEC and other public disclosure documents. GAFC's Disclosure Schedule lists,
and GAFC has delivered to Summit copies of, all written descriptions of, and all
policies, manuals and other documents promulgating, such disclosure controls and
procedures. To GAFC's knowledge, each director and executive officer of GAFC has
filed with the SEC on a timely basis all statements required by Section 16(a) of
the Exchange Act and the rules and regulations thereunder since September 30,
2004. As used in this Section 6.03(q), the term "file" shall be broadly
construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the SEC.
(v) Since September 30, 2006, GAFC and its Subsidiaries have not incurred any
liability other than in the ordinary course of business consistent with past
practice or for legal, accounting, and financial advisory fees and out-of-pocket
expenses in connection with the transactions contemplated by this Agreement.
(vi) Since September 30, 2006, (A) GAFC and its Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding matters related to this Agreement and
the transactions contemplated hereby) and (B) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 6.03 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to GAFC.
19
24
(h) Litigation. No litigation, claim or other proceeding
----------
before any court or Governmental Authority is pending against GAFC or any of its
Subsidiaries and, to GAFC's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters. (i) Neither GAFC nor any of its
------------------
Subsidiaries or properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from, any federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions (or their holding companies)
or issuers of securities or engaged in the insurance of deposits (including,
without limitation, the Office of the Thrift Supervision, the Federal Reserve
Board and the Federal Deposit Insurance Corporation) or the supervision or
regulation of it or any of its Subsidiaries (collectively, the "REGULATORY
AUTHORITIES").
(ii) Except as disclosed on Disclosure Schedule 6.03(i),
neither GAFC nor any of its Subsidiaries has been advised by any Regulatory
Authority that such Regulatory Authority is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(iii) GAFC is not a financial holding company as defined by
the Xxxxx-Xxxxx-Xxxxxx Act of 1999.
(j) Compliance with Laws. Each of GAFC and its Subsidiaries:
--------------------
(i) 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 thereto or to the
employees conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to GAFC's knowledge, no suspension or cancellation
of any of them is threatened;
(iii) Except as disclosed on Disclosure Schedule 6.03(j), GAFC
has received, since December 31, 2005, no notification or communication from any
Governmental Authority (A) asserting that GAFC or any of its Subsidiaries is not
in compliance with any of the statutes, regulations, or ordinances which such
Governmental Authority enforces or (B) threatening to revoke any license,
franchise, permit, or governmental authorization (nor, to GAFC's knowledge, do
any grounds for any of the foregoing exist); and
(iv) Since July 1, 2001, is in compliance with the privacy
provisions of the Xxxxx-Xxxxx-Xxxxxx Act, and all other applicable laws relating
to consumer privacy.
20
25
(k) Material Contracts; Defaults. Except for this Agreement
----------------------------
and the definitive agreement with respect to the sale of the Pasadena Branch,
neither GAFC nor any of its Subsidiaries is a party to, bound by or subject to
any agreement, contract, arrangement, commitment or understanding (whether
written or oral) (i) that is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K or (ii) that restricts or limits in any
way the conduct of business by it or any of its Subsidiaries (including without
limitation a non-compete or similar provision). Neither GAFC nor any of its
Subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party,
by which its respective assets, business, or operations may be bound or
affected, or under which it or its respective 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.
(l) No Brokers. No action has been taken by GAFC that would
----------
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a Previously Disclosed fee to be paid
to Sandler X'Xxxxx & Partners, L.P.
(m) Employee Benefit Plans. (i) GAFC has Previously Disclosed
----------------------
a complete and accurate list of all existing bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare and fringe benefit plans, employment or severance agreements
and all similar practices, policies and arrangements in which any current or
former employee (the "EMPLOYEES"), current or former consultant (the
"CONSULTANTS") or current or former director (the "DIRECTORS") of GAFC or any of
its Subsidiaries participates or to which any such Employees, Consultants or
Directors are a party (the "COMPENSATION AND BENEFIT PLANS"). Neither GAFC nor
any of its Subsidiaries has any commitment to create any additional Compensation
and Benefit Plan or to modify or change any existing Compensation and Benefit
Plan.
Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the Exchange Act, the
Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION PLAN") and
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter or has applied for a favorable determination
letter in compliance with the Code (including a determination that the related
trust under such Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the Internal Revenue Service ("IRS"), and GAFC is not
aware of any circumstances likely to result in the revocation of any existing
favorable determination letter or in not receiving a favorable determination
letter. There is no material pending or, to the knowledge of GAFC, threatened
legal action, suit or claim relating to the Compensation and Benefit Plans other
than routine claims for benefits. Neither GAFC nor any of its Subsidiaries has
engaged in a transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan
21
26
that would reasonably be expected to subject GAFC or any of its Subsidiaries to
a tax or penalty imposed by either Section 4975 of the Code or Section 502 of
ERISA, assuming for purposes of Section 4975 of the Code that the taxable period
of any such transaction expired as of the date hereof.
(ii) No Compensation and Benefit Plans currently maintained,
or maintained within the last six years, by GAFC or any of its Subsidiaries or
any entity (and "ERISA AFFILIATE") which is considered one employer with GAFC
under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the Code is or
was subject to Title IV of ERISA or is or was a multiemployer plan under
Subtitle E of Title IV of ERISA. To the knowledge of GAFC, there is no pending
investigation or enforcement action by the PBGC, the DOL or IRS or any other
governmental agency with respect to any Compensation and Benefit Plan.
(iii) All contributions required to be made under the terms of
any Compensation and Benefit Plan or any employee benefit arrangements under any
collective bargaining agreement to which GAFC or any of its Subsidiaries is a
party have been timely made or have been reflected on GAFC's financial
statements. None of GAFC, any of its Subsidiaries or any ERISA Affiliate (x) has
provided, or would reasonably be expected to be required to provide, security to
any Pension Plan pursuant to Section 401(a)(29) of the Code, and (y) 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.
(iv) Neither GAFC nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits mandated
by Section 4980B of the Code, and each such Compensation and Benefit Plan may be
amended or terminated without incurring liability thereunder. There has been no
communication to Employees by GAFC or any of its Subsidiaries that would
reasonably be expected to promise or guarantee such Employees retiree health or
life insurance or other retiree death benefits on a permanent basis.
(v) GAFC and its Subsidiaries do not maintain any Compensation
and Benefit Plans covering foreign Employees.
(vi) With respect to each Compensation and Benefit Plan, if
applicable, GAFC has provided or made available to Summit, true and complete
copies of existing: (A) Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most recent actuarial report and financial
statement; (E) the most recent summary plan description; (F) most recent
determination letter issued by the IRS; (G) any Form 5310 or Form 5330 filed
with the IRS; and (H) most recent nondiscrimination tests performed under ERISA
and the Code (including 401(k) and 401(m) tests).
(vii) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement would not, directly or indirectly
(including, without limitation, as a result of any termination of employment
prior to or following the Effective Time) reasonably be expected to (A) entitle
any Employee, Consultant or Director to any payment
22
27
(including severance pay 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.
(viii) Neither GAFC nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(ix) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none of
Summit, GAFC or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code), without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
(n) Labor Matters. Neither GAFC nor any of its Subsidiaries is
-------------
a party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is GAFC
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel GAFC or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to GAFC's knowledge, threatened, nor is GAFC
aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) Takeover Laws. GAFC has taken all action required to be
-------------
taken by it in order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated hereby are
exempt from, the requirements of any "moratorium", "control share", "fair
price", "affiliate transaction", "business combination" or other antitakeover
laws and regulations of any state applicable to GAFC (collectively, "TAKEOVER
LAWS"), including, without limitation, Section 203 of the DGCL.
(p) Environmental Matters. To GAFC's knowledge, neither the
---------------------
conduct nor operation of GAFC or its Subsidiaries nor any condition of any
property presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on which
any of them holds a Lien, violates or violated Environmental Laws and to GAFC's
knowledge, 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 liability under Environmental Laws. To GAFC's
knowledge, neither GAFC nor any of its Subsidiaries has received any notice from
any person or entity that GAFC or its Subsidiaries or the operation or condition
of any property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise are
alleged to have liability under any Environmental Law, including, but not
limited to, responsibility (or
23
28
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on, beneath, or originating from any such property.
(q) Tax Matters. (i) All Tax Returns that are required to be
-----------
filed by or with respect to GAFC and its Subsidiaries have been duly filed, (ii)
all Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have been examined
by the Internal Revenue Service or the appropriate state, local or foreign
taxing authority or the period for assessment of the Taxes in respect of which
such Tax Returns were required to be filed has expired, (iv) all deficiencies
asserted or assessments made as a result of such examinations have been paid in
full, (v) no issues that have been raised by the relevant taxing authority in
connection with the examination of any of the Tax Returns referred to in clause
(i) are currently pending, and (vi) no waivers of statutes of limitation have
been given by or requested with respect to any Taxes of GAFC or its
Subsidiaries. GAFC has made available to Summit true and correct copies of the
United States Federal Income Tax Returns filed by GAFC and its Subsidiaries for
each of the three most recent fiscal years ended on or before December 31, 2004.
Neither GAFC nor any of its Subsidiaries has any liability with respect to
income, franchise or similar Taxes that accrued on or before December 31, 2005
in excess of the amounts accrued with respect thereto that are reflected in the
financial statements of GAFC as of December 31, 2002 for each of the three years
in the period ended December 31, 2004. As of the date hereof, neither GAFC nor
any of its Subsidiaries has any reason to believe that any conditions exist that
might prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
(i) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the transfer contemplated by this Agreement.
(r) Risk Management Instruments. Except as disclosed on.
---------------------------
Disclosure Schedule 6.03(r), neither GAFC nor any of its Subsidiaries are
parties to any interest rate swaps, caps, floors, option agreements, futures and
forward contracts and other similar risk management arrangements, whether
entered into for GAFC's own account, or for the account of one or more of GAFC's
Subsidiaries or their customers.
(s) Books and Records. The books and records of GAFC and its
-----------------
Subsidiaries have been fully, properly and accurately maintained in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein and they fairly reflect the substance of events
and transactions included therein.
(t) Insurance. GAFC Previously Disclosed all of the insurance
---------
policies, binders, or bonds maintained by GAFC or its Subsidiaries. GAFC and its
Subsidiaries are insured with insurers believed to be reputable against such
risks and in such amounts as the management of GAFC reasonably has determined to
be prudent in accordance with industry practices. All such insurance policies
are in full force and effect; GAFC and its Subsidiaries are not in material
default thereunder; and all claims thereunder have been filed in due and timely
fashion.
24
29
(u) Disclosure. The representations and warranties contained
----------
in this Section 6.03 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements and
information contained in this Section 6.03, in light of the circumstances in
which they are made, not misleading.
6.04 REPRESENTATIONS AND WARRANTIES OF SUMMIT. Subject to
Sections 6.01 and 6.02 and except as Previously Disclosed, Summit hereby
represents and warrants to GAFC:
(a) Organization and Standing. Summit is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
West Virginia. Summit is duly qualified to do business and is in good standing
in the foreign jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
(b) Capitalization. (i) As of December 31, 2006, the
--------------
authorized capital stock of Summit consists solely of 20,000,000 shares of
Summit Common Stock, of which as of March 6, 2007, 7,084,980 shares, were
outstanding, and 250,000 shares of Summit Preferred Stock, of which none are
issued and outstanding . As of the date hereof, except as set forth in its
Disclosure Schedule, Summit does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Summit Common
Stock or any other equity securities of Summit or any of its Subsidiaries or any
securities representing the right to purchase or otherwise receive any shares of
Summit Common Stock or other equity securities of Summit or any of its
Subsidiaries. As of December 31, 2006, Summit has 349,080 shares of Summit
Common Stock which are issuable and reserved for issuance upon exercise of
Summit Stock Options. The outstanding shares of Summit Common Stock have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(i) The shares of Summit Common Stock to be issued in exchange
for shares of GAFC Common Stock in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, with no personal liability attaching to the ownership
thereof, subject to no preemptive rights and authorized for trading on the
NASDAQ Capital Market.
(c) Subsidiaries. Each of Summit's Subsidiaries has been duly
------------
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and is in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and it owns, directly
or indirectly, all the issued and outstanding equity securities of each of its
Significant Subsidiaries.
(d) Corporate Power. Each of Summit and its Subsidiaries has
---------------
the corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Summit has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
25
30
(e) Corporate Authority. This Agreement and the transactions
-------------------
contemplated hereby have been authorized by all necessary corporate action of
Summit and the Summit Board. Shareholder approval of the transactions
contemplated hereby is not required. Assuming due authorization, execution and
delivery by GAFC, this Agreement is a valid and legally binding agreement of
Summit, enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(f) Consents and Approvals; No Defaults. (i) No consents or
-----------------------------------
approvals of, or filings or registrations with, any Governmental Authority or
with any third party are required to be made or obtained by Summit or any of its
Subsidiaries in connection with the execution, delivery or performance by Summit
of this Agreement or to consummate the Merger except for (A) filings of
applications and notices with the federal and state banking and insurance
authorities; (B) filings with the NASDAQ Capital Market regarding the Summit
Common Stock to be issued in the Merger; (C) the filing and declaration of
effectiveness of the Registration Statement; (D) the filing of a certificate of
merger with the Secretary of State pursuant to the DGCL and the issuance of the
related certificate of merger; (E) such filings as are required to be made or
approvals as are required to be obtained under the securities or "Blue Sky" laws
of various states in connection with the issuance of Summit Stock in the Merger;
and (F) receipt of the approvals set forth in Section 8.01(b). As of the date
hereof, Summit is not aware of any reason why the approvals set forth in Section
8.01(b) will not be received without the imposition of a condition, restriction
or requirement of the type described in Section 8.01(b).
(ii) Subject to the satisfaction of the requirements referred
to in the preceding paragraph and expiration of the related waiting periods, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any acceleration
of remedies or any right of termination under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Summit or of any of its Subsidiaries or to which
Summit or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the certificate of
incorporation or by-laws (or similar governing documents) of Summit or any of
its Subsidiaries, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Absence of Certain
-------------------------------------------------------
Changes or Events. (i) Summit's Annual Report on Form 10-K for the fiscal years
-----------------
ended December 31, 2004, 2005 and 2006, and all other reports, registration
statements, definitive proxy statements or information statements filed or to be
filed by it or any of its Subsidiaries subsequent to December 31, 2004, under
the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act in the form filed or to be filed (collectively "SUMMIT'S SEC DOCUMENTS"), as
of the date filed, (A) as to form complied or will comply in all material
respects with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (B) did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and each of the
balance sheets or statements of condition
26
31
of Summit contained in or incorporated by reference into any of Summit's SEC
Documents (including the related notes and schedules thereto) fairly presents,
or will fairly present, the financial position of Summit and its Subsidiaries as
of its date, and each of the statements of income or results of operations and
changes in stockholders' equity and cash flows or equivalent statements of
Summit in any of Summit's SEC Documents (including any related notes and
schedules thereto) fairly presents, or will fairly present, the results of
operations, changes in stockholders' equity and cash flows, as the case may be,
of Summit and its Subsidiaries for the periods to which they relate, in each
case in accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, and subject to normal year-end audit adjustments in the case of
unaudited statements. Summit's Disclosure Schedule lists, and upon request,
Summit has delivered to GAFC, copies of the documentation creating or governing
all securitization transactions and "off-balance sheet arrangements" (as defined
in Item 303(c) of Regulation S-K) effected by Summit or its Subsidiaries, since
December 31, 2006. Xxxxxx & Xxxxxx, which has expressed its opinion with respect
to the financial statements of Summit and its Subsidiaries (including the
related notes) included in the Summit SEC Documents is and has been throughout
the periods covered by such financial statements (x) a registered public
accounting firm (as defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act of
2002), (y) "independent" with respect to Summit within the meaning of Regulation
S-Y, and Z in compliance with subsection (g) through (l) of Section 10A of the
Exchange Act and the related rules of the SEC and the Public Accounting
Oversight Board.
(i) Since December 31, 2006, Summit and its Subsidiaries have
not incurred any liability other than in the ordinary course of business
consistent with past practice.
(ii) Since December 31, 2006, (A) Summit and its Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding matters related to this Agreement and
the transactions contemplated hereby) and (B) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 6.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to Summit.
(h) Litigation. Except as Previously Disclosed, no litigation,
----------
claim or other proceeding before any court or Governmental Authority is pending
against Summit or any of its Subsidiaries and, to the best of Summit's
knowledge, no such litigation, claim or other proceeding has been threatened.
(i) Regulatory Matters. (i) Neither Summit nor any of its
------------------
Subsidiaries or properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from, any Regulatory Authority.
(ii) Neither Summit nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
27
32
(j) Laws. Each of Summit and its Subsidiaries:
----
(i) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses substantially as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened;
(iii) has received, since December 31, 2004, no notification
or communication from any Governmental Authority (A) asserting that Summit or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Governmental Authority enforces or (B)
threatening to revoke any license, franchise, permit, or governmental
authorization (nor, to Summit's knowledge, do any grounds for any of the
foregoing exist); and
(iv) since July 1, 2001, is in compliance with the privacy
provisions of the Xxxxx-Xxxxx-Xxxxxx Act, and all other applicable laws relating
to consumer privacy.
(k) Employee Benefit Plans. (i) Summit's Disclosure Schedule
----------------------
contains a complete and accurate list of all existing bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare and fringe benefit plans, employment or severance agreements
and all similar practices, policies and arrangements in which any current or
former employee (the "SUMMIT EMPLOYEES"), current or former consultant (the
"SUMMIT CONSULTANTS") or current or former director (the "SUMMIT DIRECTORS") of
Summit or any of its Subsidiaries participates or to which any Summit Employees,
Summit Consultants or Summit Directors are a party (the "SUMMIT COMPENSATION AND
BENEFIT PLANS").
(v) Each Summit Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act, or
any regulations or rules promulgated thereunder, and all filings, disclosures
and notices required by ERISA, the Code, the Securities Act, the Exchange Act,
the Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "SUMMIT PENSION
PLAN") and which is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter (including a determination that
the related trust under such Summit Compensation and Benefit Plan is exempt from
tax under Section 501(a) of the Code) from the IRS, and Summit is not
28
33
aware of any circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge of
Summit, threatened legal action, suit or claim relating to the Summit
Compensation and Benefit Plans other than routine claims for benefits. Neither
Summit nor any of its Subsidiaries has engaged in a transaction, or omitted to
take any action, with respect to any Summit Compensation and Benefit Plan that
would reasonably be expected to subject Summit or any of its Subsidiaries to a
tax or penalty imposed by either Section 4975 of the Code or Section 502 of
ERISA, assuming for purposes of Section 4975 of the Code that the taxable period
of any such transaction expired as of the date hereof.
(vi) No liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by Summit or any of its
Subsidiaries with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any single-employer plan of any entity (an "SUMMIT
ERISA AFFILIATE") which is considered one employer with Summit under Section
4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an "SUMMIT ERISA
AFFILIATE PLAN"). None of Summit, any of its Subsidiaries or any Summit ERISA
Affiliate has contributed, or has been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any time since
September 26, 1980. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Summit Compensation and Benefit
Plan or by any Summit ERISA Affiliate Plan within the 12-month period ending on
the date hereof, and no such notice will be required to be filed as a result of
the transactions contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or Summit ERISA Affiliate Plan and, to
Summit's knowledge, no condition exists that presents a material risk that such
proceedings will be instituted. To the knowledge of Summit, there is no pending
investigation or enforcement action by the PBGC, the DOL or IRS or any other
governmental agency with respect to any Summit Compensation and Benefit Plan.
Under each Summit Pension Plan and Summit ERISA Affiliate Plan, as of the date
of the most recent actuarial valuation performed prior to the date of this
Agreement, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in such actuarial valuation
of such Summit Pension Plan or Summit ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Summit Pension Plan or Summit ERISA
Affiliate Plan and since such date there has been neither an adverse change in
the financial condition of such Summit Pension Plan or Summit ERISA Affiliate
Plan nor any amendment or other change to such Pension Plan or ERISA Affiliate
Plan that would increase the amount of benefits thereunder which reasonably
could be expected to change such result.
(vii) All contributions required to be made under the terms of
any Summit Compensation and Benefit Plan or Summit ERISA Affiliate Plan or any
employee benefit arrangements under any collective bargaining agreement to which
Summit or any of its Subsidiaries is a party have been timely made or have been
reflected on Summit's financial statements. Neither any Summit Pension Plan nor
any Summit ERISA Affiliate Plan has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and all required payments to the PBGC with respect to each Summit Pension
Plan or Summit ERISA Affiliate Plan have been made on or before their due
29
34
dates. None of Summit, any of its Subsidiaries or any Summit ERISA Affiliate (x)
has provided, or would reasonably be expected to be required to provide,
security to any Summit Pension Plan or to any Summit ERISA Affiliate Plan
pursuant to Section 401(a)(29) of the Code, and (y) 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.
(viii) Neither Summit nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Summit Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code, and each such Summit Compensation and
Benefit Plan may be amended or terminated without incurring liability
thereunder. There has been no communication to Employees by Summit or any of its
Subsidiaries that would reasonably be expected to promise or guarantee such
Employees retiree health or life insurance or other retiree death benefits on a
permanent basis.
(ix) Summit and its Subsidiaries do not maintain any Summit
Compensation and Benefit Plans covering foreign Employees.
(x) With respect to each Summit Compensation and Benefit Plan,
if applicable, Summit has provided or made available to GAFC, true and complete
copies of existing: (A) Summit Compensation and Benefit Plan documents and
amendments thereto; (B) trust instruments and insurance contracts; (C) two most
recent Forms 5500 filed with the IRS; (D) most recent actuarial report and
financial statement; (E) the most recent summary plan description; (F) forms
filed with the PBGC (other than for premium payments); (G) most recent
determination letter issued by the IRS; (H) any Form 5310 or Form 5330 filed
with the IRS; and (I) most recent nondiscrimination tests performed under ERISA
and the Code (including 401(k) and 401(m) tests).
(xi) The consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation, as a
result of any termination of employment prior to or following the Effective
Time) reasonably be expected to (A) entitle any Summit Employee, Summit
Consultant or Summit Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Summit Compensation and Benefit Plan or
(C) result in any material increase in benefits payable under any Summit
Compensation and Benefit Plan.
(xii) Neither Summit nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(xiii) As a result, directly or indirectly, of the
transactions contemplated by this Agreement (including, without limitation, as a
result of any termination of employment prior to or following the Effective
Time), none of Summit, GAFC or the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to make a payment that would be
30
35
characterized as an "excess parachute payment" to an individual who is a
"disqualified individual" (as such terms are defined in Section 280G of the
Code), without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(l) No Brokers. No action has been or will be taken by Summit
----------
that would give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement.
(m) Takeover Laws. Summit has taken all action required to be
-------------
taken by it in order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated hereby are
exempt from, the requirements of any Takeover Laws applicable to Summit.
(n) Environmental Matters. To Summit's knowledge, neither the
---------------------
conduct nor operation of Summit or its Subsidiaries nor any condition of any
property presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on which
any of them holds a Lien, violates or violated Environmental Laws and to
Summit's knowledge 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 liability under Environmental Laws. To
Summit's knowledge, neither Summit nor any of its Subsidiaries has received any
notice from any person or entity that Summit or its Subsidiaries or the
operation or condition of any property ever owned, leased, operated, or held as
collateral or in a fiduciary capacity by any of them are or were in violation of
or otherwise are alleged to have liability under any Environmental Law,
including, but not limited to, responsibility (or potential responsibility) for
the cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating from
any such property.
(o) Tax Matters. (i) All Tax Returns that are required to be
-----------
filed by or with respect to Summit and its Subsidiaries have been duly filed,
(ii) all Taxes shown to be due on the Tax Returns referred to in clause (i) have
been paid in full, (iii) the Tax Returns referred to in clause (i) have been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired, (iv) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, and (vi) no waivers of statutes of
limitation have been given by or requested with respect to any Taxes of Summit
or its Subsidiaries. Neither Summit nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that accrued on or
before the end of the most recent period covered by Summit's SEC Documents filed
prior to the date hereof in excess of the amounts accrued with respect thereto
that are reflected in the financial statements included in Summit's SEC
Documents filed on or prior to the date hereof. As of the date hereof, neither
Summit nor any of its Subsidiaries has any reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
31
36
(p) Books and Records. The books and records of Summit and its
-----------------
Subsidiaries have been fully, properly and accurately maintained in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present the substance of events
and transactions included therein.
(q) Insurance. Summit's Disclosure Schedule lists all of the
---------
insurance policies, binders, or bonds maintained by Summit or its Subsidiaries.
Summit and its Subsidiaries are insured with insurers believed to be reputable
against such risks and in such amounts as the management of Summit reasonably
has determined to be prudent in accordance with industry practices. All such
insurance policies are in full force and effect; Summit and its Subsidiaries are
not in material default thereunder; and all claims thereunder have been filed in
due and timely fashion.
(r) Disclosure. The representations and warranties contained
----------
in this Section 6.04 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements and
information contained in this Section 6.04, in light of the circumstances under
which they are made, not misleading.
(s) Representations and Warranties of Summit with Respect to
--------------------------------------------------------
Merger Sub.
----------
(i) ORGANIZATION, STANDING AND AUTHORITY. The Merger Sub is or
prior to the Effective Time will be duly organized and validly existing in good
standing under the laws of the state of its organization, and is or prior to the
Effective Time will be duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified. The Merger Sub will have been organized
for the purpose of the transactions contemplated by this Agreement, and no newly
chartered Merger Sub will have previously conducted any business or incurred any
liabilities.
(ii) POWER. The Merger Sub has, or prior to the Effective Time
will have, the power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
(iii) AUTHORITY. This Agreement and the transactions
contemplated hereby have been, or prior to the Effective Time will have been,
authorized by all requisite action on the part of the Merger Sub and its
respective subsidiaries or members. Upon execution and delivery of Annex A, this
Agreement will be a valid and legally binding agreement of the Merger Sub
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
32
37
ARTICLE VII
COVENANTS
7.01 REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of GAFC and Summit agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
7.02 STOCKHOLDER APPROVAL. GAFC agrees to take, in accordance
with applicable law and the GAFC Certificate and GAFC By-laws, all action
necessary to convene an appropriate meeting of its stockholders to consider and
vote upon the approval of this Agreement and any other matters required to be
approved by GAFC's stockholders for consummation of the Merger (including any
adjournment or postponement, the "GAFC MEETING"), as promptly as practicable
after the Registration Statement is declared effective. The GAFC Board will
recommend that the GAFC stockholders approve and adopt the Agreement and the
transactions contemplated hereby, provided that the GAFC Board may fail to make
such recommendation, or withdraw, modify or change any such recommendation, if
the GAFC Board, after having consulted with and considered the advice of outside
counsel, has determined that the making of such recommendation, or the failure
to withdraw, modify or change such recommendation, would be reasonably likely to
constitute a breach of the fiduciary duties of the members of the GAFC Board
under applicable law.
7.03 REGISTRATION STATEMENT. (a) Summit agrees to prepare a
registration statement on Form S-4 (the "REGISTRATION STATEMENT") to be filed by
Summit with the SEC in connection with the issuance of Summit Common Stock in
the Merger (including the prospectus of Summit and proxy solicitation materials
of GAFC constituting a part thereof (the "PROXY STATEMENT") and all related
documents). GAFC and Summit agree to cooperate, and to cause their respective
Subsidiaries to cooperate, with the other and its counsel and its accountants in
the preparation of the Registration Statement and the Proxy Statement; and
PROVIDED that GAFC and its Subsidiaries have cooperated as required above,
Summit agrees to file the Registration Statement (including the Proxy Statement
in preliminary form) with the SEC as promptly as reasonably practicable and in
any event within forty-five (45) days from the date on which the sale of the
Pasedena Branch is consummated. Each of GAFC and Summit agrees to use all
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as reasonably practicable after filing
thereof. Summit also agrees to use all reasonable efforts to obtain, prior to
the effective date of the Registration Statement, all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. GAFC agrees to furnish to Summit all information
concerning GAFC, its Subsidiaries, officers, directors and stockholders as may
be reasonably requested in connection with the foregoing and shall have the
right to review and consult with Summit and approve the form of, and any
characterization of such information included in, the Registration Statement
prior to its being filed with the SEC.
(b) Each of GAFC and Summit agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to stockholders and at the time of the GAFC Meeting, as the case may be,
contain any untrue statement of a material fact or
33
38
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or any statement which, in the light
of the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or which will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier statement in the
Proxy Statement or any amendment or supplement thereto. Each of GAFC and Summit
further agrees that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the statements in the Proxy
Statement to be false or misleading with respect to any material fact, or to
omit to state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Proxy Statement.
(c) Summit agrees to advise GAFC, promptly after Summit
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of Summit Stock for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information.
7.04 PRESS RELEASES. Each of GAFC and Summit agrees that it
will not, without the prior approval of the other party, file any material
pursuant to SEC Rules 165 or 425, or issue any press release or written
statement for general circulation relating to the transactions contemplated
hereby, except as otherwise required by applicable law or regulation or NASDAQ
rules.
7.05 ACCESS; INFORMATION. (a) Each of GAFC and Summit agrees
that upon reasonable notice and subject to applicable laws relating to the
exchange of information, it shall afford the other party and the other party's
officers, employees, counsel, accountants and other authorized representatives,
such access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax returns
and, and, subject to the consent of the independent auditors, work papers of
independent auditors), properties, personnel and to such other information as
any party may reasonably request and, during such period, it shall furnish
promptly to such other party (i) a copy of each material report, schedule and
other document filed by it pursuant to the requirements of federal or state
securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
7.05 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, each party will keep confidential, and will cause
its representatives to keep confidential, all information and documents obtained
pursuant to this Section 7.05 (as well as any other information obtained prior
to the date hereof in connection with the entering into of this Agreement)
unless such information (i) was already known to such party, (ii) becomes
available to such party from other sources not known by such party to be bound
by a confidentiality obligation, (iii) is disclosed with the prior written
approval of the party to which
34
39
such information pertains or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another party hereto
to be returned to the party which furnished the same. No investigation by either
party of the business and affairs of the other shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Agreement, or the conditions to either party's obligation to consummate the
transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the
Effective Time, each party shall promptly furnish the other with copies of all
monthly and other interim financial statements produced in the ordinary course
of business as, the same shall become available.
7.06 ACQUISITION PROPOSALS. GAFC agrees that it shall not, and
shall cause its Subsidiaries and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with any person relating
to, any Acquisition Proposal. It shall immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than Summit with respect to any of
the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal.
Notwithstanding the foregoing, if, at any time the GAFC Board determines in good
faith, after consultation with outside counsel, that failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties under
applicable law, GAFC, in response to a written Acquisition Proposal that was
unsolicited or that did not otherwise result from a breach of this Section 7.06,
may furnish non-public information with respect to GAFC to the Person who made
such Acquisition Proposal and participate in negotiations regarding such
Acquisition Proposal.
7.07 AFFILIATE AGREEMENTS. (a) Not later than the 15th day
prior to the mailing of the Proxy Statement, GAFC shall deliver to Summit a
schedule of each person that, to the best of its knowledge, is or is reasonably
likely to be, as of the date of the GAFC Meeting, deemed to be an "affiliate" of
GAFC (each, a "GAFC AFFILIATE") as that term is used in Rule 145 under the
Securities Act.
(b) GAFC shall use its reasonable best efforts to cause each
person who may be deemed to be a GAFC Affiliate to execute and deliver to Summit
on or before the date of mailing of the Proxy Statement an agreement in the form
attached hereto as Exhibit A.
7.08 TAKEOVER LAWS. No party hereto shall take any action that
would cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from any applicable Takeover
Law, as now or hereafter in effect.
7.09 CERTAIN POLICIES. Immediately prior to the Effective
Date, GAFC shall, consistent with generally accepted accounting principles and
on a basis mutually satisfactory to it and Summit, modify and change its loan,
litigation and real estate valuation policies and
35
40
practices (including loan classifications and levels of reserves) so as to be
applied on a basis that is consistent with that of Summit and shall make
appropriate accruals for any employee benefits, plans, arrangements or
obligations assumed by Summit under this Agreement; provided, however, that GAFC
shall not be obligated to take any such action pursuant to this Section 7.09
unless and until Summit acknowledges that all conditions to its obligation to
consummate the Merger have been satisfied and certifies to GAFC that Summit's
representations and warranties, subject to Section 6.02, are true and correct as
of such date and that Summit is otherwise material in compliance with this
Agreement. Summit and GAFC also shall consult with respect to the character,
amount, and timing of restructuring and Merger-related expense charges to be
taken by each of them in connection with the transactions contemplated by this
Agreement and shall take such charges in accordance with GAAP as may be mutually
agreed upon by them. GAFC's representations, warranties and covenants contained
in this Agreement shall not be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes undertaken
solely on account of this Section 7.09.
7.10 REGULATORY APPLICATIONS. (a) Summit and GAFC and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of Summit and GAFC shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to, all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other
party with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any filing, notice or application made by or on
behalf of such other party or any of its Subsidiaries to any third party or
Governmental Authority.
7.11 INDEMNIFICATION. (a) Following the Effective Date and for
a period of three (3) years thereafter, Summit shall indemnify, defend and hold
harmless the present directors, officers and employees of GAFC and its
Subsidiaries (each, an "INDEMNIFIED PARTY") against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "COSTS") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) to the fullest extent that GAFC is
permitted or required to indemnify (and advance expenses to) its directors and
officers under the laws of the State of Delaware, the GAFC Certificate, the GAFC
By-Laws and any agreement as
36
41
in effect on the date hereof; PROVIDED that any determination required to be
made with respect to whether an officer's, director's or employee's conduct
complies with the standards set forth under Delaware law, the GAFC Certificate,
the GAFC By-Laws and any agreement shall be made by independent counsel (which
shall not be counsel that provides material services to Summit) selected by
Summit and reasonably acceptable to such officer or director.
(b) Any Indemnified Party wishing to claim indemnification
under Section 7.11(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Summit thereof; PROVIDED
that the failure so to notify shall not affect the obligations of Summit under
Section 7.11(a) unless and to the extent that Summit is actually prejudiced as a
result of such failure.
(c) If Summit or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of Summit shall
assume the obligations set forth in this Section 7.11.
(bb) The provisions of this Section 7.11 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and representatives.
7.12 BENEFIT PLANS. (a) It is the intention of Summit that
within a reasonable period of time following the Effective Time (i) it will
provide employees of GAFC with employee benefit plans substantially similar in
the aggregate to those provided to similarly situated employees of Summit, (ii)
Summit shall cause any and all pre-existing condition limitations (to the extent
such limitations did not apply to a pre-existing condition under the
Compensation and Benefit Plans) and eligibility waiting periods under group
health plans to be waived with respect to such participants and their eligible
dependents, and (iii) all GAB employees will receive credit for years of service
with GAFC and its predecessors prior to the Effective Time for purposes of
eligibility and vesting and not for purposes of benefit accrual under Summit's
benefit plans. Summit shall maintain GAFC's existing employee benefit plans
until such time as Summit has provided similar plans to GAFC's employees as
contemplated in the preceding sentence. GAB employees shall not be entitled to
accrual of benefits or allocation of contributions under Summit's benefit plans
based on years of service with GAFC and its predecessors prior to the Effective
Date.
(b) Immediately prior to the Effective Date, GAFC shall take
such action as may be necessary to terminate its 401(k) plan, including accruing
the estimated expense associated with terminating the 401(k) plan. Following the
receipt of a favorable determination letter from the IRS relating to the
termination of the 401(k) plan, the assets of the plan shall be distributed to
participants as provided in the plan. Notwithstanding the foregoing, the 401(k)
plan trustee may make distributions to all non-continuing GAB employees before
the receipt of a favorable determination letter. In the event a favorable ruling
is not issued, GAFC agrees that termination of the 401(k) plan shall not occur
and the 401(k) plan shall be merged with Summit's 401(k) plan.
37
42
7.13 NOTIFICATION OF CERTAIN MATTERS. Each of GAFC and Summit
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
7.14 CURRENT PUBLIC INFORMATION. Summit agrees that it shall,
for a period of three (3) years following the Effective Time, use its best
efforts to meet the current public information requirements as set forth in
paragraph (c) of Rule 144 promulgated under the Securities Act, and will provide
those persons providing affiliate letters pursuant to Section 7.07 with such
other information as they may reasonably require and to otherwise cooperate with
such persons to facilitate any sales of Summit Common Stock issued to such
persons pursuant to this Agreement in compliance with the provisions of Rule 144
and/or Rule 145 promulgated under the Securities Act. The provisions of this
Section 7.14 shall survive the Effective Time and are intended to be for the
benefit of, and shall be enforceable by, such affiliates of GAFC.
7.15 CONTRACTUAL RIGHTS OF CURRENT EMPLOYEES. At and following
the Effective Time, Summit shall honor, and Summit shall continue to be
obligated to perform, in accordance with their terms, all benefit obligations
to, and contractual rights of, current and former employees of GAFC and its
Subsidiaries existing as of the Effective Date, as well as all employment,
severance, deferred compensation, split dollar life insurance or
"change-in-control" agreements, plans or policies of GAFC and its Subsidiaries
which are Previously Disclosed. Summit acknowledges that the consummation of the
Merger will constitute a "change-in-control" of for purposes of any employee
benefit plans, agreements and arrangements of GAFC and its Subsidiaries.
7.16 GAFC TRUST PREFERRED SECURITIES.
(a) GAFC shall cooperate with Summit to permit Summit to
assume the obligations of GAFC under the Indenture and the Guarantee and to
receive the transfer of the Common Securities, as provided in Section 2.03, and
to enable Summit to exercise the call feature of the GAFC Trust Preferred Stock,
including by causing GAFC's counsel to deliver such opinions as the Trustee may
reasonably require with respect to the assumption of the GAFC Trust Preferred
Securities.
(b) From and after the date hereof and until and including the
Closing Date, GAFC shall (i) pay, or accrue, as applicable , and cause the Trust
to pay, or accrue, as applicable, all amounts due (when and as due) and comply,
and cause each Trust to comply, with all of its obligations under the Indenture
and the Guarantee, and such other transaction documents (together the "Operative
Documents"), and (ii) not enter into any agreement (or amend, alter or agree to
amend or alter any Operative Document or other agreement) with the Trust.
7.17 TRANSITION. Commencing on the date hereof, and in all
cases subject to applicable law and regulation, GAFC shall, and shall cause its
Subsidiaries to, cooperate with Summit and its Subsidiaries to facilitate the
integration of the parties and their respective businesses effective as of the
Closing Date or such later date as may be determined by Summit.
38
43
Without limiting the generality of the foregoing, from the date hereof through
the Closing Date and consistent with the performance of their day-to-day
operations and the continuous operation of GAFC and its Subsidiaries in the
ordinary course of business, GAFC shall cause the employees and officers of GAFC
and its Subsidiaries to use their reasonable best efforts to provide support,
including support from its outside contractors and vendors, and to assist Summit
in performing all tasks, including equipment installation, reasonably required
to result in a successful integration at the Closing or such later date as may
be determined by Summit. In addition, GAFC shall cooperate with Summit in
seeking to amend certain lease arrangements of GAFC and its Subsidiaries as
specified by Summit, such amendments to be effective only upon consummation of
the Merger.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each of Summit and GAFC to consummate the
Merger is subject to the fulfillment by Summit and GAFC prior to the Effective
Time of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly
--------------------
approved by the requisite vote of the stockholders of GAFC.
(b) Regulatory Approvals. All regulatory approvals required to
--------------------
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements (other than with respect to the sale of
the Pasadena Branch) which the Summit Board reasonably determines in good faith
would either before or after the Effective Time have a Material Adverse Effect
on the Surviving Corporation and its Subsidiaries taken as a whole.
(c) No Injunction. No Governmental Authority of competent
-------------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall
----------------------
have become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(e) Blue Sky Approvals. All permits and other authorizations
------------------
under state securities laws necessary to consummate the transactions
contemplated hereby and to issue the shares of Summit Common Stock to be issued
in the Merger shall have been received and be in full force and effect.
39
44
(f) Listing. To the extent required, the shares of Summit
-------
Common Stock to be issued in the Merger shall have been approved for listing on
the NASDAQ Capital Market, subject to official notice of issuance.
8.02 CONDITIONS TO OBLIGATION OF GAFC. The obligation of GAFC
to consummate the Merger is also subject to the fulfillment or written waiver by
GAFC prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Summit set forth in this Agreement shall be true and correct,
subject to Section 6.02, as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of this
Agreement or some other date shall be true and correct as of such date), and
GAFC shall have received a certificate, dated the Effective Date, signed on
behalf of Summit by the Chief Executive Officer and the Chief Financial Officer
of Summit to such effect.
(b) Performance of Obligations of Summit. Summit shall have
------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and GAFC shall have
received a certificate, dated the Effective Date, signed on behalf of Summit by
the Chief Executive Officer and the Chief Financial Officer of Summit to such
effect.
8.03 CONDITIONS TO OBLIGATION OF SUMMIT. The obligation of
Summit to consummate the Merger is also subject to the fulfillment or written
waiver by Summit prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of GAFC set forth in this Agreement shall be true and correct,
subject to Section 6.02, as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of this
Agreement or some other date shall be true and correct as of such date) and
Summit shall have received a certificate, dated the Effective Date, signed on
behalf of GAFC by the Chief Executive Officer and the Chief Financial Officer of
GAFC to such effect.
(b) Performance of Obligations of GAFC. GAFC shall have
----------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Summit shall have
received a certificate, dated the Effective Date, signed on behalf of GAFC by
the Chief Executive Officer and the Chief Financial Officer of GAFC to such
effect.
(c) Opinion of Summit's Counsel. Summit and GAFC shall have
---------------------------
received an opinion of Hunton &Williams, special counsel to Summit, dated the
Effective Date, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (i) the Merger constitutes a
reorganization under Section 368 of the Code (ii) no gain or loss will be
recognized by stockholders of GAFC who receive shares of Summit Common Stock in
exchange for shares of GAFC Common Stock, except that gain or loss may be
recognized as to cash received as Merger Consideration and/or in lieu of
fractional share interests, and (iii) after the
40
45
Merger, Summit will be allowed to carry forward GAFC's consolidated net
operating losses under Section 382 of the Code. In rendering its opinion, Hunton
& Xxxxxxxx may require and rely upon representations contained in letters from
Summit and others.
(d) Core Deposits. The balance of Core Deposits shall not be
-------------
less than $144 million.
(e) Sale of Branch. At least forty-five (45) days prior to
--------------
consummation of the Merger, GAB shall have consummated the sale of the Pasadena
Branch.
ARTICLE IX
TERMINATION
9.01 TERMINATION. This Agreement may be terminated, and the
Merger may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time,
--------------
by the mutual consent of Summit and GAFC, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Summit
------
or GAFC (provided that the party seeking termination is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the other
party of any representation or warranty contained herein (subject to the
standard set forth in Section 6.02), which breach cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach; or (ii) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of such
breach, provided that such breach (whether under (i) or (ii)) would be
reasonably likely, individually or in the aggregate with other breaches, to
result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by Summit
-----
or GAFC, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Acquisition is not
consummated by December 31, 2007, except to the extent that the failure of the
Acquisition then to be consummated arises out of or results from the knowing
action or inaction of the party seeking to terminate pursuant to this Section
9.01(c).
(d) No Approval. By GAFC or Summit, if its Board of Directors
-----------
so determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority or
(ii) the stockholder approval required by Section 8.01(a) herein is not obtained
at the GAFC Meeting.
(e) Failure to Recommend, Etc. At any time prior to the GAFC
-------------------------
Meeting, by Summit if the GAFC Board shall have failed to make its
recommendation referred to in Section
41
46
7.02, withdrawn such recommendation or modified or changed such recommendation
in a manner adverse in any respect to the interests of Summit.
(f) Superior Proposal. By GAFC, if the GAFC Board so
-----------------
determines by a vote of the majority of the members of its entire board, at any
time prior to the GAFC Meeting, in order to concurrently enter into an agreement
with respect to an unsolicited Acquisition Proposal that was received and
considered by GAFC in compliance with Section 7.06 and that would, if
consummated, result in a transaction that is more favorable to GAFC's
stockholders from a financial point of view than the Merger (a "SUPERIOR
PROPOSAL"); provided, however, that (i) this Agreement may be terminated by GAFC
pursuant to this Section 9.01(f) only after the fifth business day following
Summit's receipt of written notice from GAFC advising Summit that GAFC is
prepared to enter into an agreement with respect to a Superior Proposal and only
if, during such five business day period Summit elects not to make an offer or
Summit does not make an offer to GAFC that the GAFC Board determines in good
faith, after consultation with its financial and legal advisors, is at least as
favorable as the Superior Proposal.
9.02 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article IX, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 9.03
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination.
9.03 FEES AND EXPENSES. (a) In the event that this Agreement
shall be terminated (i) by either party pursuant to Section 9.01(d)(ii), and, at
or prior to the time of the failure of GAFC's stockholders to approve this
Agreement and the Merger, an Acquisition Proposal shall have been made public
and not withdrawn, or (ii) by GAFC pursuant to Section 9.01(f), then GAFC shall
pay Summit in immediately available funds a fee of $750,000 (the "SECTION
9.03(A) FEE") as follows: (i) $250,000 no later than two (2) business days after
the date of termination, (ii) $100,000 on the date that is one (1) year after
the termination date, (iii) $100,000 on the date that is two (2) years after the
termination date, and (iv) $300,000 on the date that is three (3) years after
the termination date. Notwithstanding the foregoing, if GAFC consummates the
transaction that is the subject of the Acquisition Proposal, then the remaining
balance shall be due and payable no later than two (2) business days after
consummation.
(b) In the event that (i) this Agreement is terminated
pursuant to Section 9.01(e); or (ii) this Agreement is terminated by Summit
pursuant to Section 9.01(b); or (iii) this Agreement is terminated pursuant to
Section 9.01(c), then, in any such event, GAFC shall pay Summit promptly (but in
no event later than two business days after the first of such events shall have
occurred) a fee of $250,000 (the "SECTION 9.03(B) FEE"), which amount shall be
payable in immediately available funds.
(c) In the event that GAFC shall fail to pay the Section
9.03(a) Fee or the Section 9.03(b) Fee when due, the applicable fee shall be
deemed to include the costs and expenses actually incurred or accrued by Summit
(including, without limitation, fees and expenses of counsel) in connection with
the collection of the applicable fee under the enforcement of this Section 9.03,
together with interest on such applicable unpaid fee, commencing on the date
that the applicable fee became due, at a rate equal to the rate of interest
42
47
publicly announced by Citibank, N.A., from time to time, in the City of New
York, as such bank's Base Rate plus 2.00%.
(d) In no event shall GAFC be obligated to pay both the
Section 9.03(a) Fee and the Section 9.03(b) Fee.
ARTICLE X
MISCELLANEOUS
10.01 SURVIVAL. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than Sections 2.02(b), 4.04, 7.11, 7.12, 7.14, 7.15 and this Article X which
shall survive the Effective Time) or the termination of this Agreement if this
Agreement is terminated prior to the Effective Time (other than Sections
7.03(b), 7.05(b), 9.02, this Article X which shall survive such termination).
10.02 WAIVER; AMENDMENT. Prior to the Effective Time, any
provision of this Agreement may be (i) waived by the party benefited by the
provision, or (ii) amended or modified at any time, by an agreement in writing
between the parties hereto executed in the same manner as this Agreement, except
that after the GAFC Meeting, this Agreement may not be amended if it would
violate the DGCL.
10.03 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original.
10.04 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law are applicable).
10.05 EXPENSES. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that printing expenses shall be shared equally
between GAFC and Summit.
10.06 NOTICES. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to GAFC, to:
GREATER ATLANTIC FINANCIAL CORP.
00000 Xxxxxxxxx Xxxxxxxxx
Xxxxx X00
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx
President and Chief Executive Officer
43
48
With a copy to:
Xxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
If to Summit, to:
SUMMIT FINANCIAL GROUP, INC.
000 Xxxxx Xxxx Xxxxxx
P. O. Xxx 000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attn: H. Xxxxxxx Xxxxx, III
President and Chief Executive Officer
Xxxxxx X. Tissue
Chief Financial Officer
With a copy to:
Xxxxxx Rice XxXxxxx Xxxxx & Love LLP
000 Xxxxxxxx Xxxxxx
P. O. Xxx 0000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
10.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and this Agreement supersedes
any and all other oral or written agreements heretofore made. Except for
Sections 7.11 and 7.12, nothing in this Agreement expressed or implied, is
intended to confer upon any person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
10.08 INTERPRETATION; EFFECT. When a reference is made in this
Agreement to Sections, Exhibits or Disclosure Schedules, such reference shall be
to a Section of, or Exhibit or Disclosure Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require GAFC,
Summit or any of their respective Subsidiaries, affiliates or directors to take
any action which would violate applicable law (whether statutory or common law),
rule or regulation.
44
49
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in counterparts by their duly authorized officers, all
as of the day and year first above written.
GREATER ATLANTIC FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
SUMMIT FINANCIAL GROUP, INC.
By: /s/ H. Xxxxxxx Xxxxx, III
---------------------------------
H. Xxxxxxx Xxxxx, III
Title: President and Chief Executive Officer
45
50
ANNEX A
FORM OF
SUPPLEMENT FOR MERGER SUB ACCESSION
TO MERGER AGREEMENT
This SUPPLEMENT FOR MERGER SUB ACCESSION TO MERGER AGREEMENT,
dated as of the ____ day of _______, 2007 (this "SUPPLEMENT"), to the Agreement
and Plan of Reorganization, dated as of _________, 2007 (as may be amended from
time to time in accordance with the terms thereof, the "AGREEMENT"), by and
between SUMMIT FINANCIAL GROUP, INC., a West Virginia corporation ("SUMMIT") and
GREATER ATLANTIC FINANCIAL CORP., a Delaware corporation ("GAFC").
WHEREAS, terms used but not otherwise defined herein have the
meanings specified in the Agreement; and
WHEREAS, pursuant to Section 2.01 of the Agreement, Summit has
determined to consummate the Merger in part through the merger of GAFC with and
into _________________, a Delaware corporation (the "Merger Sub").
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations and warranties contained in the Agreement, the
parties agree as follows:
1. Agreement. Merger Sub agrees (i) to be bound by and subject
to the terms of the Agreement, (ii) to become a party to the Agreement, as
provided by Section 2.01 thereof, (iii) to perform all obligations and
agreements set forth therein, and (iv) to adopt the Agreement with the same
force and effect as if the undersigned were originally a party thereto.
2. Notice. Any notice required to be provided pursuant to
Section 10.06 of the Agreement shall be given to the Merger Sub at the following
address:
[Insert address and facsimile number]
IN WITNESS WHEREOF, this Supplement has been duly executed and
delivered by the undersigned, duly authorized thereunto as of the date first
hereinabove written.
[Insert name of Merger Sub ]
By:________________________________
Name:
Title:
GREATER ATLANTIC FINANCIAL CORP.
By:
---------------------------------
Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
SUMMIT FINANCIAL GROUP, INC.
By:
---------------------------------
H. Xxxxxxx Xxxxx, III
Title: President and Chief Executive Officer
51
EXHIBIT A
FORM OF GAFC AFFILIATE LETTER
______________, 2007
SUMMIT FINANCIAL GROUP, INC.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Tissue
Chief Financial Officer
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not
admit that I am, an "affiliate" of GREATER ATLANTIC FINANCIAL CORP. a Delaware
corporation ("GAFC"), as that term is defined in Rule 145 promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"). I understand that pursuant to the terms of
the Agreement and Plan of Reorganization, dated as of ______, 2007 (the
"Agreement"), by and between SUMMIT FINANCIAL GROUP, INC., a West Virginia
corporation ("Summit"), and GAFC, GAFC plans to merge with and into a
wholly-owned subsidiary of Summit (the "Merger").
I further understand that as a result of the Merger, I may
receive shares of common stock, par value $2.50 per share, of Summit ("Summit
Stock") in exchange for shares of common stock, par value $0.01 per share, of
GAFC ("GAFC Stock").
I have carefully read this letter and reviewed the Agreement
and discussed their requirements and other applicable limitations upon my
ability to sell, transfer, or otherwise dispose of Summit Stock, to the extent I
felt necessary, with my counsel or counsel for GAFC.
I represent, warrant and covenant with and to Summit that in
the event I receive any Summit Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition
of such Summit Stock unless (i) such sale, transfer or other disposition has
been registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), or (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Summit, or
under a "no-action" letter obtained by me from the staff of the SEC, such sale,
transfer or other disposition will not violate or is otherwise exempt from
registration under the Securities Act.
2. I understand that Summit is under no obligation to register
the sale, transfer or other disposition of shares of Summit Stock by me or on my
behalf under the Securities Act or to take any other action necessary in order
to make compliance with an exemption from such registration available.
52
3. I understand that stop transfer instructions will be given
to Summit's transfer agent with respect to shares of Summit Stock issued to me
as a result of the Merger and that there will be placed on the certificates for
such shares, or any substitutions therefor, a legend stating in substance:
The shares represented by this certificate were
issued in a transaction to which Rule 145 promulgated under
the Securities Act of 1933 applies. The shares represented by
this certificate may be transferred only in accordance with
the terms of a letter agreement, dated _____________, between
the registered holder hereof and SUMMIT FINANCIAL GROUP, INC.,
a copy of which agreement is on file at the principal offices
of SUMMIT FINANCIAL GROUP, INC."
4. I understand that, unless transfer by me of the Summit
Stock issued to me as a result of the Merger has been registered under the
Securities Act or such transfer is made in conformity with the provisions of
Rule 145(d) under the Securities Act, Summit reserves the right, in its sole
discretion, to place the following legend on the certificates issued to my
transferee:
The shares represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of 1933
applies. The shares have been acquired by the holder not with
a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933 and
may not be offered, sold, pledged or otherwise transferred
except in accordance with an exemption from the registration
requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth in
paragraphs (3) and (4) above shall be removed by delivery of substitute
certificates without such legends if I shall have delivered to Summit (i) a copy
of a "no action" letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Summit, to the effect that such
legend is not required for purposes of the Act, or (ii) evidence or
representations satisfactory to Summit that the Summit Stock represented by such
certificates is being or has been sold in conformity with the provisions of Rule
145(d).
I further understand and agree that this letter agreement
shall apply to all shares of Summit Stock that I am deemed to beneficially own
pursuant to applicable federal securities law.
Very truly yours,
By
--------------------------------------
Name:
Title:
53
Accepted this ____ day of ______________, 2007.
GREATER ATLANTIC FINANCIAL CORP.
By
-----------------------------------
Name:
-----------------------------------
Title: President and Chief Executive Officer
SUMMIT FINANCIAL GROUP, INC.
By
-----------------------------------
Name: H. Xxxxxxx Xxxxx, III
Title: President and Chief Executive Officer
