MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT"), dated as of the first day of
May, 2002, is by and between:
CAPITAL BANK CORPORATION, a North Carolina corporation and a holding
company registered with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended, and a North Carolina
financial holding company (the "BUYER"); and
HIGH STREET CORPORATION, a North Carolina corporation and holding
company registered with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended, and a North Carolina
bank holding company (the "COMPANY").
BACKGROUND STATEMENT
The Buyer and the Company desire to effect a merger pursuant to which
the Company will merge into the Buyer, with the Buyer being the surviving
corporation (the "MERGER"). In consideration of the Merger, the shareholders
of the Company will receive shares of common stock of the Buyer. It is
intended that the Merger qualify as a tax-free reorganization under Section
368 of the Internal Revenue Code.
STATEMENT OF AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1. DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"ACQUISITION PROPOSAL" has the meaning given to it in Section 6.1(c).
"ACQUISITION TRANSACTION" means any merger, share exchange, stock sale,
recapitalization, consolidation or other business combination involving the
Company or any of its Subsidiaries or divisions of any of the foregoing and
an unaffiliated third party, or any acquisition in any manner, directly or
indirectly, of a more than a thirty percent (30%) equity interest in, or more
than a thirty percent (30%) portion of the consolidated assets of, the
Company and its Subsidiaries, other than pursuant to the transactions
contemplated by this Agreement.
"AFFILIATE" means, with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls,
or is controlled by or under common control with, such Person. For the
purpose of this Agreement, "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the foregoing, as used with respect to the
Company, the term "AFFILIATES" includes its Subsidiaries.
"AGREEMENT" means this Merger Agreement.
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"ASSETS" means all of the assets, properties, businesses and rights of
a Person of every kind, nature, character and description, whether real,
personal or mixed, tangible or intangible, accrued or contingent, whether or
not carried on any books and records of such Person, whether or not owned in
such Person's name and wherever located.
"AVERAGE CLOSING PRICE" means the average of the closing prices for the
Buyer's Stock on the Nasdaq National Market System (or, if the Buyer's Stock
is not then approved for trading on the Nasdaq National Market System, then
on such other securities market on which Buyer's Stock is then principally
traded) for the most recent twenty (20) trading days ending on the third day
prior to the date of the Company Shareholders Meeting. For this purpose, a
"trading day" is a day on which securities are generally traded on such
market, whether or not the Buyer's Stock is traded on such day, and the
closing price for the Buyer's Stock on a trading day when it is not traded
shall be deemed to be the closing price on the most recent trading day on
which the Buyer's Stock was traded. The closing prices used for this
determination shall be the closing prices as reported by such market or, if
such reports are not available, as reported by another authoritative source
identified by the Buyer and reasonably acceptable to the Company.
"BENEFIT PLANS" means all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, restricted stock,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including without limitation "employee benefit plans"
as that term is defined in Section 3(3) of ERISA maintained by, sponsored in
whole or in part by, or contributed to by, a Person or any of its
Subsidiaries for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors,
or other beneficiaries are eligible to participate.
"BUSINESS DAY" means any day excluding (a) Saturday, (b) Sunday and (c)
any day that shall be a legal holiday in the State of North Carolina.
"BUYER" has the meaning given to it in the introductory paragraph
hereof.
"BUYER BANK" means Capital Bank, a North Carolina bank and a wholly
owned Subsidiary of the Buyer.
"BUYER FAIRNESS OPINION" has the meaning given to it in Section 5.14.
"BUYER FINANCIAL STATEMENTS" means, with respect to the Buyer and its
Subsidiaries, the consolidated audited statements of income and stockholder's
equity and cash flows for the years ended December 31, 2001, 2000 and 1999
and consolidated audited balance sheets as of December 31, 2001, 2000 and
1999, as well as the interim unaudited consolidated statements of income and
stockholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2001 and the consolidated interim balance sheet as of each
such quarter included in any Forms 10-Q filed by the Buyer with the SEC.
"BUYER SEC REPORTS" has the meaning given to it in Section 5.4.
"BUYER'S DISCLOSURE SCHEDULE" has the meaning given to it in the
preamble to ARTICLE V.
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"BUYER SHAREHOLDERS MEETING" has the meaning given to it in Section
6.2(e).
"BUYER'S STOCK" means the common stock of Capital Bank Corporation no
par value.
"CAUSE" means: (i) any act of gross negligence, misconduct,
unlawfulness or dishonesty by an employee in connection with his or her
employment which is detrimental to the Buyer's or its Subsidiaries'
interests; (ii) an employee's willful failure to comply with the employee
policies or reasonable directions of the management of the Buyer or one of
its Subsidiaries; or (iii) an employee's material breach of any agreement
between such employee and Buyer or its Subsidiaries.
"CLAIM" has the meaning given to it in Section 6.2(d).
"CLOSING" means the closing of the Merger, as identified more
specifically in ARTICLE III.
"CLOSING DATE" has the meaning given to it in Section 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of the Code shall be construed also to refer to any successor
sections.
"COMPANY" has the meaning given to it in the introductory paragraph
hereof.
"COMPANY BANK" means High Street Banking Company, a North Carolina bank
and a wholly-owned Subsidiary of Company.
"COMPANY CONTRACTS" has the meaning given to it in Section 4.14.
"COMPANY DIRECTOR STOCK PLAN" has the meaning given to it in Section
6.2(b)(iii).
"COMPANY FAIRNESS OPINION" has the meaning given to it in Section 4.25.
"COMPANY FINANCIAL STATEMENTS" means, with respect to the Company and
its Subsidiaries, the consolidated audited statements of income and
stockholder's equity and cash flows for the years ended December 31, 2001,
2000 and 1999 and consolidated audited balance sheets as of December 31,
2001, 2000 and 1999, as well as the interim unaudited consolidated statements
of income and stockholders' equity and cash flows for each of the completed
fiscal quarters since December 31, 2001 and the consolidated interim balance
sheet as of each such quarter included in any Forms 10-QSB filed by the
Company with the SEC.
"COMPANY OPTIONS" has the meaning given to it in Section 2.6.
"COMPANY SEC REPORTS" has the meaning given to it in Section 4.4.
"COMPANY SHAREHOLDERS MEETING" has the meaning given to it in Section
6.1(d).
"COMPANY SHARES" has the meaning given to it in Section 2.2(a).
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"COMPANY'S DISCLOSURE SCHEDULE" has the meaning given to it in the
preamble to ARTICLE IV.
"CONFIDENTIAL INFORMATION" has the meaning given to it in Section 7.3.
"CONSENT" means any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person given or granted with
respect to any Contract, Law, Order, or Permit.
"CONTRACT" means any agreement, warranty, indenture, mortgage,
guaranty, lease, license or other contract, agreement, arrangement,
commitment or understanding, written or oral, to which a Person is a party.
"CONVERSION RATIO" has the meaning given to it in Section 2.3(b).
"DEFAULT" means (i) any breach or violation of or default under any
Contract, Order or Permit (including any noncompliance with restrictions on
assignment, where assignment is defined to include a change of control of the
parties to this Agreement or any of their Affiliates or the merger or
consolidation of any of them with another Person), (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute such a breach or violation of or default under any Contract, Order
or Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right to
terminate or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any Liability under, any Contract, Order or
Permit.
"DIRECTOR SHARES" has the meaning given to it in Section 6.5.
"DISCLOSABLE INFORMATION" has the meaning given to it in Section 7.3.
"DISSENTING SHARES" has the meaning given to it in Section 2.7.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"EFFECTIVE TIME" has the meaning given to it in Section 2.1(e).
"EMPLOYMENT AGREEMENTS" has the meaning given to it in Section 8.3(f).
"ENVIRONMENTAL LAWS" means any federal, state or local law, statute,
ordinance, rule, regulation, permit, directive, license, approval, guidance,
interpretation, order or other legal requirement relating to the protection
of human health or the environment, including but not limited to any
requirement pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of materials that are or may
constitute a threat to human health or the environment. Without limiting the
foregoing, each of the following is an Environmental Law: the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.ss.ss.9601 et
seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C.ss.ss.1801
et seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.ss.6901 et
seq.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C.ss.ss.1251 et
seq.), the Clean Air Act (42 U.S.C.ss.ss.7401 et seq.), the Toxic Substances
Control Act (15 U.S.C.ss.ss.2601 et seq.), the Safe Drinking Water Act (42
U.S.C.ss.ss.300 et seq.) and the Occupational Safety and Health Act (29 U.S.C.
ss.ss.651 et seq.) ("OSHA"), as such laws and regulations have been or are in
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the future amended or supplemented, and each similar federal, state or local
statute, and each rule and regulation promulgated under such federal, state
and local laws.
"ERISA PLAN" means any Benefit Plan that is an "employee welfare
benefit plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA.
"EXCHANGE AGENT" has the meaning given to it in Section 2.5(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, as in effect from time to time, consistently
applied and maintained on a consistent basis for a Person throughout the
period indicated and consistent with such Person's prior financial practice.
"GOVERNMENTAL AUTHORITY" means any nation, province or state, or any
political subdivision thereof, and any agency, department, natural Person or
other entity exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, including Regulatory Authorities.
"HAZARDOUS MATERIAL" means any substance or material that either is or
contains a substance designated as a hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law or is otherwise regulated under any Environmental Law, or
the presence of which in some quantity requires investigation, notification
or remediation under any Environmental Law.
"INDEMNIFIED PARTIES" has the meaning given to it in Section 6.2(d).
"INDEMNIFIED LIABILITIES" has the meaning given to it in Section 6.2(d).
"INTELLECTUAL PROPERTY" means (a) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrights and all applications, registrations and renewals in connection
therewith, (d) all know-how, trade secrets, whether patentable or
unpatentable and whether or not reduced to practice (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production process and techniques, technical data, designs, drawings,
specifications, pricing and cost information and business and marketing plans
and proposals), (e) all computer software (including data and related
documentation) and (f) all other proprietary rights.
"JOINT PROXY STATEMENT" has the meaning given to it in Section 4.17.
"KNOWLEDGE OF THE BUYER" means the actual personal knowledge of any of
the directors and officers of the Buyer or the Buyer Bank or any of their
Subsidiaries.
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"KNOWLEDGE OF THE COMPANY" means the actual personal knowledge of any
of the directors and officers of the Company or the Company Bank or any of
their Subsidiaries.
"LAW" means any code, law, ordinance, rule, regulation, reporting or
licensing requirement, or statute applicable to a Person or its Assets,
Liabilities, business or operations promulgated, interpreted or enforced by
any Governmental Authority.
"LIABILITY" means any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency, guaranty
or endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured or otherwise.
"LIEN" means, whether contractual or statutory, any conditional sale
agreement, participation or repurchase agreement, assignment, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) liens for current property
Taxes not yet due and payable, (ii) easements, restrictions of record and
title exceptions that could not reasonably be expected to have a Material
Adverse Effect, and (iii) pledges to secure deposits, liens to secure
advances from the Federal Home Loan Bank of Atlanta and other liens incurred
in the ordinary course of the banking business.
"LITIGATION" means any action, arbitration, cause of action, complaint,
criminal prosecution, governmental investigation, hearing, or administrative
or other proceeding, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"LOAN COLLATERAL" means all of the assets, properties, businesses and
rights of every kind, nature, character and description, whether real,
personal, or mixed, tangible or intangible, accrued or contingent, owned by
whomever and wherever located, in which any Person has taken a security
interest with respect to, on which any Person has placed a Lien with respect
to, or which is otherwise used to secure, any loan made by the Person or any
note, account, or other receivable payable to the Person.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question.
"MATERIAL ADVERSE EFFECT" on a Person shall mean an event, change, or
occurrence that, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Person and its Subsidiaries, taken
as a whole, or (ii) the ability of such Person to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided 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, (b) changes in market interest rates, real estate
markets, securities markets or other market conditions applicable to banks or
thrift institutions generally, (c) changes in GAAP or regulatory accounting
principles generally applicable to banks and their holding companies, (d)
actions and omissions of a Person (or any of its Affiliates) taken with the
prior informed consent of the other Person in contemplation of the
transactions contemplated hereby, and (e) the effects of the Merger (and the
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reasonable expenses incurred in connection therewith) and compliance with the
provisions of this Agreement on the operating performance of a Person.
"MERGER CONSIDERATION" has the meaning given to it in Section 2.3(a).
"MERGER" has the meaning given to it in the Background Statement hereof.
"NORTH CAROLINA COMMISSIONER OF BANKS" means the North Carolina
Commissioner of Banks, North Carolina Department of Commerce.
"ORDER" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local, foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Governmental Authority.
"PENSION PLAN" means any ERISA Plan that also is a "defined benefit
plan" (as defined in Section 414(j) of the Code or Section 3(35) of ERISA).
"PERMIT" means any approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or right given by a Governmental
Authority to which any Person is a party or that is or may be binding upon or
inure to the benefit of any Person or its securities, Assets or business.
"PERSON" means a corporation, a company, an association, a joint
venture, a partnership, an organization, a business, an individual, a trust,
a Governmental Authority or any other legal entity.
"REAL PROPERTY" means all of the land, buildings, premises, or other
real property in which a Person has ownership or possessory rights, whether
by title, lease or otherwise (including banking facilities and any foreclosed
properties). Notwithstanding the foregoing, "Real Property", as used with
respect to any Person, does not include any Loan Collateral not yet
foreclosed and conveyed to the Person as of the date with respect to which
the term "Real Property" is being used.
"REGISTRATION STATEMENT" has the meaning given to it in Section 4.17.
"REGULATORY AUTHORITIES" means, collectively, the Federal Trade
Commission, the United States Department of Justice, the Federal Reserve
Board, the North Carolina Commissioner of Banks, the FDIC, the National
Association of Securities Dealers and the SEC, and all other regulatory
agencies having jurisdiction over the parties hereto and their respective
Affiliates.
"RESTRICTED DIRECTOR" has the meaning given to it in Section 6.4.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of
its capital stock or other Rights.
"SEC" means the Securities and Exchange Commission.
"SECURITIES DOCUMENTS" means all forms, proxy statements, registration
statements, reports, schedules and other documents filed or required to be
filed by a Person or any of its Affiliates
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with any Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" means the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisors Act of 1940, the Trust Indenture Act of 1939, each as amended, and
the rules and regulations of any Governmental Authority promulgated under
each.
"SHAREHOLDER MEETINGS" has the meaning given to it in Section 4.17.
"STOCK ADJUSTMENT" has the meaning given to it in Section 2.3(d).
"SUBSIDIARY" means, with respect to any Person, each of the Persons
that directly or indirectly, through one or more intermediaries, is
controlled by such Person.
"SUPERIOR PROPOSAL" means a bona fide, written and unsolicited proposal
or offer (including a new or solicited proposal received by the Company after
execution of this Agreement from a Person whose initial contact with the
Company may have been solicited by the Company or its representatives prior
to the execution of this Agreement) made by any Person or group (other than
an Affiliate of the Company) with respect to an Acquisition Proposal on terms
which the Board of Directors of the Company determines in good faith, after
taking into account the advice of independent financial advisors and outside
legal counsel, to be superior to the transactions contemplated hereby, taking
into consideration all elements of the transactions contemplated hereby
including, without limitation, the non-taxable element of such transactions.
"SURVIVING HOLDING COMPANY" has the meaning given to it in Section
2.1(a).
"TAX" or "TAXES" means any and all taxes, charges, fees, levies or
other assessments (whether federal, state, local or foreign), including
without limitation income, gross receipts, excise, property, estate, sales,
use, value added, transfer, license, payroll, franchise, ad valorem,
withholding, Social Security and unemployment taxes, as well as any interest,
penalties and other additions to such taxes, charges, fees, levies or other
assessments.
"TAX RETURN" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.
"TAXABLE PERIOD" shall mean any period prescribed by any Governmental
Authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1. THE MERGER.
(a) The Merger. On the terms and subject to the conditions of this
Agreement, the Plan of Merger in respect of the Merger, which shall be
substantially in the form attached hereto as EXHIBIT A, and North Carolina
Law, the Company shall merge into the Buyer, the separate existence of the
Company shall cease, and the Buyer shall be the surviving corporation (the
"SURVIVING HOLDING COMPANY").
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(b) Governing Documents. The articles of incorporation of the Buyer
in effect at the Effective Time (as defined below) of the Merger shall be the
articles of incorporation of the Surviving Holding Company until further
amended in accordance with applicable Law. The bylaws of the Buyer in effect
at such Effective Time shall be the bylaws of the Surviving Holding Company
until further amended in accordance with applicable Law.
(c) Directors and Officers. Subject to Section 6.2(b), from and after
the Effective Time of the Merger, until successors or additional directors
are duly elected or appointed in accordance with applicable law, (i) the
directors of the Buyer at such Effective Time shall be the directors of the
Surviving Holding Company, and (ii) the officers of the Buyer at such
Effective Time shall be the officers of the Surviving Holding Company.
(d) Approval. The parties hereto shall take and cause to be taken all
action necessary to approve and authorize (i) this Agreement and the other
documents contemplated hereby (including without limitation the
above-described Plan of Merger) and (ii) subject to shareholder approval, the
Merger and the other transactions contemplated hereby.
(e) Effective Time. The Merger shall become effective on the date and
at the time of filing of the related Articles of Merger, in the form required
by and executed in accordance with North Carolina Law, or at such other time
specified therein. The date and time when the Merger shall become effective
is herein referred to as the "EFFECTIVE TIME" of the Merger.
(f) Filing of Articles of Merger. On the Closing Date, the Buyer and
the Company shall cause the Articles of Merger (containing the
above-referenced Plan of Merger) in respect of the Merger to be executed and
filed with the Secretary of State of North Carolina, as required by North
Carolina Law, and shall take any and all other actions and do any and all
other things to cause the Merger to become effective as contemplated hereby.
2.2 COMPANY SHARES.
(a) Each share of the Company's common stock (the "COMPANY SHARES"),
no par value per share, issued and outstanding immediately prior to the
Effective Time of the Merger, except for Company Shares held by the Buyer and
its Affiliates (other than shares held in a fiduciary capacity or as a result
of debts previously contracted) and Dissenting Shares, shall, by virtue of
the Merger and without any action on the part of the holders thereof, be
converted at such Effective Time into shares of the Buyer's Stock in
accordance with this ARTICLE II and each holder of certificates representing
any such Company Shares shall thereafter cease to have any rights with
respect to such shares, except as provided herein.
(b) From and after the Effective Time of the Merger, there shall be
no transfers on the stock transfer books of the Surviving Holding Company of
the Company Shares that were outstanding immediately prior to the Effective
Time of the Merger. If, after such Effective Time, certificates representing
Company Shares are presented to the Surviving Holding Company, they shall be
canceled, and exchanged and converted into the Merger Consideration as
provided for herein.
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2.3 MERGER CONSIDERATION.
(a) Subject to Sections 2.2, 2.4 and 2.5, at the Effective Time of
the Merger, each outstanding Company Share, except for Company Shares held by
the Buyer and its Affiliates (other than shares held in a fiduciary capacity
or as a result of debts previously contracted) and Dissenting Shares, shall
be converted into a fraction of a share of the Buyer's Stock (the "MERGER
CONSIDERATION") equal to the Conversion Ratio determined in accordance with
Section 2.3(b).
(b) The conversion ratio upon which Company Shares will be converted
into shares of the Buyer's Stock at the Effective Time of the Merger (the
"CONVERSION RATIO") shall be equal to .747 unless the Average Closing Price
of the Buyer's Stock is less than $12.50, in which case the Conversion Ratio
shall be equal to the lesser of (i) .830 and (ii) a fraction, the numerator
of which is $9.34 and the denominator of which is the Average Closing Price,
unless, in the event the Average Closing Price is less than $11.25, the
parties mutually agree in writing to a greater Conversion Ratio (which they
shall not be obligated to do).
(c) No fractional shares of the Buyer's Stock shall be issued or
delivered in connection with the Merger. Instead, the number of shares of
Buyer's Stock to which a holder of the Company Shares is entitled to receive
pursuant to this Article II shall be rounded to the nearest whole share with
0.5 share rounded up to the nearest whole share.
(d) In the event the Buyer or Company changes the number of shares of
the Buyer's Stock or Company's Shares issued and outstanding prior to the
Effective Time of the Merger as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock (each a "STOCK
ADJUSTMENT") and the record date therefor (in the case of a stock dividend)
or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior
to such Effective Time, the Merger Consideration shall each be equitably
adjusted to reflect such change.
2.4 CLOSING PAYMENT. At the Effective Time of the Merger or as soon
thereafter as is reasonably practicable, the holders of the Company Shares
shall surrender the certificates representing such shares to the Buyer and in
exchange therefor, the Buyer shall issue and deliver to each such holder
certificates representing the number of shares of the Buyer's Stock to which
such shareholder is entitled hereunder. The Buyer shall not be obligated to
deliver any of such shares of the Buyer's Stock to a holder until such holder
either surrenders the certificates representing such holder's Company Shares
or provides any affidavits and indemnity bonds required pursuant to Section
2.5(b).
2.5 EXCHANGE PROCEDURES.
(a) Prior to the Effective Time of the Merger, the Buyer shall engage
Registrar & Transfer Company, or another bank or trust company (which may be
an Affiliate of the Buyer), to act as exchange agent in the Merger (the
"EXCHANGE AGENT") and which Exchange Agent, and the agreement entered into by
the Buyer and such Exchange Agent, shall be reasonably satisfactory to the
Company, it being agreed that Registrar & Transfer Company shall be
satisfactory to the Company. Promptly after the Effective Time of the Merger,
the Exchange Agent shall mail to the shareholders of the Company of record at
the Effective Time appropriate transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the
certificates representing Company Shares prior to such Effective Time shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
After such Effective Time, each holder of Company Shares issued and
outstanding at such Effective Time (other than any of such shares held by the
Buyer or any Affiliate thereof, except shares held in a fiduciary
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capacity or as a result of debts previously contracted, and other than any
Dissenting Shares) shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the number of shares of the Buyer's Stock to which
such holder is entitled hereunder. The Buyer shall not be obligated to deliver
any of such stock until such holder either surrenders the certificates
representing such holder's Company Shares or provides any affidavits and
indemnity bonds required pursuant to Section 2.5(b). The certificate(s) so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Agreement notwithstanding, neither the Buyer nor the Exchange
Agent shall be liable to any holder of Company Shares for any amounts paid or
properly delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
(b) In the event that any certificate representing Company Shares
shall have been lost, stolen, or destroyed, upon the making of an affidavit
of that fact by the Person claiming such certificate to be lost, stolen, or
destroyed and, if required by the Buyer, the posting by such Person of a bond
in such amount as the Buyer may reasonably direct as indemnity against any
claim that may be made against it with respect to such certificate, the
Exchange Agent shall issue in exchange for such lost, stolen, or destroyed
certificate the consideration deliverable in respect thereof pursuant to this
Agreement.
(c) To the extent permitted by applicable Law, former shareholders of
record of the Company shall be entitled to vote after the Effective Time of
the Merger at any meeting of the Buyer's shareholders the number of whole
shares of the Buyer's Stock into which their respective Company Shares are
converted pursuant to the Merger, regardless of whether such holders have
exchanged their certificates representing such Company Shares for
certificates representing the Buyer's Stock in accordance with the provisions
of this Agreement. Whenever a dividend or other distribution is declared by
the Buyer on the Buyer's Stock, the record date for which is at or after the
Effective Time of the Merger, the declaration shall include dividends or
other distributions on all shares of the Buyer's Stock issuable pursuant to
this Agreement, but beginning at such Effective Time no dividend or other
distribution payable to the holders of record of the Buyer's Stock as of any
time subsequent to such Effective Time of the Merger shall be delivered to
the holder of any certificate representing any of the Company Shares issued
and outstanding at such Effective Time until such holder surrenders such
certificate for exchange or provides any required affidavits and indemnity
bonds as provided in this Section 2.5. However, upon surrender of such
certificate(s) or provision of such affidavits and indemnity bonds, both the
certificate(s) representing the shares of the Buyer's Stock to which such
holder is entitled and any such undelivered dividends (without any interest)
shall be delivered and paid with respect to each share represented by such
certificates.
2.6 COMPANY STOCK OPTIONS.
(a) At the Effective Time of the Merger, each option or other right
to purchase Company Shares pursuant to stock options ("COMPANY OPTIONS")
granted by the Company under its Benefit Plans that are outstanding at the
Effective Time of the Merger shall be converted into and become rights with
respect to the Buyer's Stock, and the Buyer shall assume each Company Option,
in accordance with the terms of the applicable Benefit Plan of the Company
and the stock option agreement by which such Company Option is evidenced,
except that from and after such Effective Time: (i) the Buyer and/or its
compensation committee shall be substituted for the Company and the
compensation committee of its board of directors (including if applicable,
the entire Board of Directors of the Company) administering such Benefit Plan
or Plans of the Company; (ii) the Company Options assumed by the Buyer may be
exercised solely for shares of the Buyer's Stock; (iii) the number of shares
of the Buyer's Stock subject to
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such converted Company Options shall be equal to the number of Company Shares
subject to such Company Options immediately prior to the Effective Time
multiplied by the Conversion Ratio, rounded to the next highest share; and (iv)
the per-share exercise price under each such converted Company Option shall be
adjusted by dividing the exercise price of the Company Option immediately prior
to the Effective Time by the Conversion Ratio, rounded down to the nearest cent.
(b) In addition, notwithstanding clauses (ii), (iii) and (iv) of
Section 2.6(a), each assumed Company Option that is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option, within the meaning of
Section 424(h) of the Internal Revenue Code.
(c) As soon as practicable after the Effective Time of the Merger,
the Buyer shall deliver to each holder of an assumed Company Option an
appropriate notice setting forth such participant's rights pursuant thereto,
and the grants pursuant to such options shall continue in effect on
substantially the same terms and conditions (subject to the adjustments
required by the above subsection (a) after giving effect to the Merger), and
the Buyer shall comply with the terms of the assumed Company Options to
ensure, to the extent required by, and subject to the provisions of, such
options, that the Company Options that qualified as incentive stock options
prior to the Effective Time of the Merger continue to qualify as incentive
stock options after such Effective Time. At or prior to the Effective Time of
the Merger, and at all times thereafter, the Buyer shall have reserved a
sufficient number of shares of the Buyer's Stock for issuance upon exercise
of the Company Options assumed by it in accordance with this Section 2.6. The
Buyer agrees to file as promptly as practicable, and in no event later than
60 days, after the Effective Time, a registration statement on Form S-8
covering the shares of the Buyer's Stock issuable pursuant to such options
and shall use its reasonable best efforts to maintain the effectiveness of
such registration statement (and maintain the current status of the
prospectus therein) for so long as such options remain outstanding.
(d) Following the Effective Time of the Merger, in the event of any
Stock Adjustment by the Buyer, or any consolidation or merger of the Buyer
with or into any other entity, or the sale or transfer of all or
substantially all of the Buyer's assets, the rights of the holders of
outstanding Company Options shall be appropriately adjusted so that such
holders will be in substantially the same position as if their options had
been exercised immediately before such corporate action or transaction.
2.7 DISSENTING SHARES. Notwithstanding any other provision of this
Agreement to the contrary, Company Shares that are outstanding immediately
prior to the Effective Time and that are held by shareholders 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
North Carolina Law (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration.
Such shareholders instead shall be entitled to receive payment of the
appraised value of such shares held by them in accordance with the provisions
of North Carolina Law, except that all Dissenting Shares held by shareholders
who shall have failed to perfect or who effectively shall have withdrawn or
otherwise lost their rights to appraisal of such shares under North Carolina
Law 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 2.5 of the certificate or certificates that, immediately
prior to the Effective Time, evidenced such shares. The Company shall give
the Buyer (i) prompt notice of any written demands for
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appraisal of any shares of Company Shares, attempted withdrawals of such demands
for appraisal or any other instruments served pursuant to North Carolina Law and
received by the Company relating to shareholders' rights of appraisal, and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to demands under North Carolina Law consistent with the obligations of the
Company thereunder. The Company shall not, except with the prior written consent
of the Buyer, (x) make any payment with respect to such demand, (y) offer to
settle or settle any demand for appraisal or (z) waive any failure to timely
deliver a written demand for appraisal or timely take any other action to
perfect appraisal rights in accordance with North Carolina Law.
ARTICLE III
THE CLOSING
3.1 CLOSING. The Closing of the Merger shall take place at the
offices of Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P. in
Raleigh, North Carolina as soon as reasonably practical after all conditions
to Closing have been met, or on such other date or at such other location as
the Buyer and the Company may mutually agree (such date, the "CLOSING DATE").
At the Closing, the parties will execute, deliver and file all documents
necessary to effect the transactions contemplated with respect to the Merger,
including the Articles of Merger in respect of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule dated the date
hereof and delivered by the Company to the Buyer (the "COMPANY'S DISCLOSURE
SCHEDULE"), the Company represents and warrants to the Buyer that the
statements contained in this ARTICLE IV are correct and complete as of the
date of this Agreement.
4.1 ORGANIZATION, STANDING AND POWER.
(a) The Company is a bank holding company registered with the Board
of Governors of the Federal Reserve System under the Bank Holding Company Act
of 1956, as amended, and the Company Bank is a bank under North Carolina Law.
The Company Bank is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and subject to
dollar limits under such Act, all deposits in the Company Bank are fully
insured by the FDIC to the extent permitted by Law.
(b) Each of the Company and its Subsidiaries is either a bank or a
corporation, duly organized, validly existing and in good standing under the
Laws of the State of North Carolina. Each of the Company and its Subsidiaries
has the corporate or other applicable power and authority to carry on, in all
Material respects, its businesses as now conducted and to own, lease and
operate its Assets. Each of the Company and its Subsidiaries is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
the character of its Assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed could not reasonably be expected to
have a Material Adverse Effect on the Company.
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4.2 AUTHORITY; NO CONFLICTS.
(a) Subject to required regulatory and shareholder approvals, the
Company has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Subject to required regulatory and
shareholder approvals, the execution, delivery and performance of the
Company's obligations under this Agreement and the other documents
contemplated hereby and the consummation of the transactions contemplated
herein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Company.
This Agreement represents a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability
of specific performance, injunctive relief and other equitable remedies is
subject to the discretion of the court before which any proceeding may be
brought).
(b) Neither the execution and delivery of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of the articles of
incorporation, charter, bylaws or any other similar governing document of the
Company or any of its Subsidiaries, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any
Lien on any Asset of the Company or any of its Subsidiaries under, any
Contract or Permit of the Company or any of its Subsidiaries, except as could
not reasonably be expected to have a Material Adverse Effect on the Company,
or (iii) subject to obtaining the requisite Consents referred to in Section
8.1(b) of this Agreement, violate any Law or Order applicable to the Company
or any of its Subsidiaries or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws and applicable banking Laws, no notice to, filing with, or
Consent of, any Governmental Authority is necessary for the consummation by
the Company of the Merger and the other transactions contemplated in this
Agreement.
4.3 CAPITAL STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of common stock, no par value per share, of which 1,748,421
shares are issued and outstanding as of the date of this Agreement, and
except for such 1,748,421 shares of common stock, there are no shares of
capital stock or other equity securities of the Company outstanding. The
authorized capital stock of the Company Bank consists of 20,000,000 shares of
common stock, $5.00 par value per share, of which 1,748,421 shares are issued
and outstanding as of the date of this Agreement and are owned and held by
the Company, and except for such 1,748,421 shares of common stock, there are
no shares of capital stock or other equity securities of the Company Bank
outstanding. Section 4.3 of the Company's Disclosure Schedule lists all of
the Company's direct and indirect Subsidiaries other than the Company Bank as
of the date of this Agreement. The Company or one of its Subsidiaries owns
all of the issued and outstanding shares of capital stock of each such
Subsidiary.
(b) All of the issued and outstanding shares of capital stock of the
Company and its Subsidiaries are duly and validly issued and outstanding and
are fully paid and nonassessable except to the extent otherwise required by
applicable banking Laws. None of the outstanding shares of capital stock of
the Company or any of its Subsidiaries has been issued in violation of any
preemptive rights of the current or past shareholders of such Persons. Except
as set forth on Section 4.3 of the Company's
14
Disclosure Schedule, no equity securities of any Subsidiaries of the Company are
or may become required to be issued (other than to the Company or any of its
Subsidiaries) by reason of any Rights, and there are no Contracts by which the
Company or any Subsidiary of the Company is bound to issue (other than to the
Company or any of its Subsidiaries) additional shares of its capital stock or
Rights or by which the Company or any of its Subsidiaries is or may be bound to
transfer any shares of the capital stock of any Subsidiary of the Company (other
than to the Company or any of its Subsidiaries). There are no equity securities
reserved for any of the foregoing purposes, and there are no Contracts relating
to the rights of the Company or any of its Subsidiaries to vote or to dispose of
any shares of the capital stock of any Subsidiary of the Company.
4.4 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed and made available to the Buyer all forms,
reports, and documents required to be filed by the Company or any of its
Subsidiaries with the SEC or the FDIC pursuant to the Securities Exchange Act
of 1934 since December 31, 1999 (collectively, the "COMPANY SEC REPORTS").
The Company SEC Reports (i) at the time filed, complied in all Material
respects with the applicable requirements of the Securities Laws, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a Material fact or omit to
state a Material fact required to be stated in such Company SEC Reports or
necessary in order to make the statements in such Company SEC Reports, in
light of the circumstances under which they were made, not misleading. None
of the Company's Subsidiaries is required to file any forms, reports, or
other documents with the SEC pursuant to Section 13 of the Securities
Exchange Act of 1934.
(b) Each of the Company Financial Statements (including, in each
case, any related notes) contained in the Company SEC Reports, including any
Company SEC Reports filed after the date of this Agreement until the
Effective Time of the Merger, complied or will comply as to form in all
Material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared or will be prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements, or, in the case
of unaudited statements, as permitted by Form 10-QSB of the SEC), and fairly
presented or will fairly present the consolidated financial position of the
Company and its Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments that were not or are not expected to be
Material in amount or effect (except as may be indicated in such financial
statements or notes thereto).
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any Liabilities that could reasonably be expected to
have a Material Adverse Effect on the Company, except Liabilities that are
accrued or reserved against in the consolidated balance sheets of the Company
as of December 31, 2001, included in the Company Financial Statements or
reflected in the notes thereto. Neither the Company nor any of its
Subsidiaries has incurred or paid any Liability since December 31, 2001,
except for (a) such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and (b) Liabilities that
could not reasonably be expected to have a Material Adverse Effect on the
Company.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2001,
(i) there have been no events, changes, or occurrences that have had, or
could reasonably be expected to
15
have, a Material Adverse Effect on the Company or any of its Subsidiaries, and
(ii) each of the Company and its Subsidiaries has conducted in all Material
respects its respective businesses in the ordinary and usual course (excluding
the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
4.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of
Company and/or its Subsidiaries have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 2001, and, to the Knowledge of the Company,
all Tax Returns filed are complete and accurate in all Material respects. All
Tax Returns for periods ending on or before the date of the most recent
fiscal year end immediately preceding the Effective Time will be timely filed
or requests for extensions will be timely filed. All Taxes shown on filed Tax
Returns have been paid. There is no audit examination Litigation or
deficiency or refund Litigation with respect to any Taxes that could
reasonably be expected to have a Material Adverse Effect on the Company,
except to the extent reserved against in the Company Financial Statements
dated prior to the date of this Agreement. All Taxes and other Liabilities
for Taxes due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) None of the Company or its Affiliates has executed an extension
or waiver of any statute of limitations on the assessment or collection of
any Tax due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) Adequate provision for any Material Taxes due or to become due
for the Company or any of its Affiliates for the period or periods through
and including the date of the respective Company Financial Statements has
been made and is reflected on such Company Financial Statements.
(d) Each of the Company and its Subsidiaries is in compliance with,
and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local
Tax Laws, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Code, except for any such
instances of noncompliance and such omissions as could not reasonably be
expected to have a Material Adverse Effect on the Company.
(e) None of the Company and its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any contract, agreement,
or other arrangement that could obligate it to make any payments that would
be disallowed as a deduction under Section 280G or 162(m) of the Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the Company and its Subsidiaries.
(g) There has not been an ownership change, as defined in Code
Section 382(g), of the Company and its Subsidiaries that occurred during any
Taxable Period in which any of the Company and its Subsidiaries has incurred
a net operating loss that carries over to another Taxable Period ending after
December 31, 2001.
16
(h) Neither the Company nor any of its Subsidiaries has filed any
consent under Section 341(f) of the Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with
respect to Taxes will be made without the prior consent of the Buyer, which
consent will not be unreasonably withheld.
(j) Neither the Company nor any of its Subsidiaries has or has had a
permanent establishment in any foreign country, as defined in any applicable
tax treaty or convention between the United States and such foreign country.
4.8 ASSETS. Each of the Company and its Subsidiaries has good and
marketable title, free and clear of all Liens, to all of its Assets, except
for Liens to secure public deposits, repurchase agreements and borrowings
from the Federal Home Loan Bank in the ordinary course of business consistent
with past practice. Except as could not reasonably be expected to have a
Material Adverse Effect on the Company, all tangible properties used in the
businesses of the Company and its Subsidiaries are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with past practice. Except as could not reasonably be
expected to have a Material Adverse Effect on the Company, all Material
Assets held under leases or subleases by any of the Company and its
Subsidiaries are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting
the enforcement of creditors' rights generally and except that the
availability of specific performance, injunctive relief and other equitable
remedies is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and
effect. Each of the Company and its Subsidiaries currently maintain insurance
in amounts, scope, and coverage reasonably necessary for its operations. None
of the Company or its Subsidiaries has received notice from any insurance
carrier that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be increased in any Material respect. The Assets
of the Company and its Subsidiaries include all Assets required to operate in
all Material respects their businesses taken as a whole as presently
conducted.
4.9 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by the
Company or any of its Subsidiaries (whether owned of record or beneficially)
are held free and clear of all Liens that would impair the ability of the
owner thereof to dispose freely of any such security and/or otherwise to
realize the benefits of ownership thereof at any time, except for those Liens
to secure public deposits, repurchase agreements and borrowings from the
Federal Home Loan Bank in the ordinary course of business consistent with
past practice and Liens that could not reasonably be expected to have a
Material Adverse Effect on the Company. There are no voting trusts or other
agreements or undertakings to which the Company or any of its Subsidiaries is
a party with respect to the voting of any such securities. Except for
fluctuations in the market values of United States Treasury and agency or
municipal securities, since December 31, 2001, there has been no significant
deterioration or Material adverse change in the quality, or any Material
decrease in the value, of the securities portfolio of the Company and its
Subsidiaries, taken as a whole.
4.10 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, each of the Company and its
Subsidiaries, their respective facilities and properties, and their
respective Loan Collateral are, and have been, in compliance
17
with all Environmental Laws, except those violations that could not reasonably
be expected to have a Material Adverse Effect on the Company.
(b) To the Knowledge of the Company, there is no Litigation pending
or threatened before any court, governmental agency, or authority, or other
forum in which any of the Company and its Subsidiaries or any of their
respective facilities or properties has been or, with respect to threatened
Litigation, may reasonably be expected to be, named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material, whether or not occurring at, on, under, or involving a site owned,
leased, or operated by the Company or any of its Subsidiaries or any of their
facilities or properties, except for such Litigation pending or threatened
that could not reasonably be expected to have a Material Adverse Effect on
the Company.
(c) To the Knowledge of the Company, there is no Litigation pending
or threatened before any court, governmental agency or authority or other
forum in which any of its Loan Collateral (or the Company or any of its
Subsidiaries in respect of such Loan Collateral) has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a defendant
or potentially responsible party (i) for alleged noncompliance (including by
any predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring at,
on, under, or involving Loan Collateral, except for such Litigation pending
or threatened that could not reasonably be expected to have a Material
Adverse Effect on the Company.
(d) To the Knowledge of the Company, no facts exist that provide a
reasonable basis for any Litigation of a type described in subsections (b) or
(c), except such as could not reasonably be expected to have a Material
Adverse Effect on the Company.
(e) To the Knowledge of the Company, during and prior to the period
of (i) any of the Company's or its Subsidiaries' ownership or operation of
any of their respective current properties, (ii) any of the Company's or its
Subsidiaries' participation in the management of any facility or property, or
(iii) any of the Company's or Subsidiaries' holding of a security interest in
Loan Collateral, there have been no releases of Hazardous Material in, on,
under, or affecting (or potentially affecting) such properties, except such
as could not reasonably be expected to have a Material Adverse Effect on the
Company.
(f) To the Knowledge of the Company, except as could not reasonably
be expected to have a Material Adverse Effect on the Company, there is no
asbestos or asbestos-containing material at its or its Subsidiaries'
facilities or properties that is friable, capable of becoming airborne, or in
any state or condition which would render the site or building in
noncompliance with applicable laws or regulations.
(g) To the Knowledge of the Company, except as could not reasonably
be expected to have a Material Adverse Effect on the Company, there are no
above- or underground storage tanks or related equipment (including without
limitation pipes and lines) at, on or under any of its or its Subsidiaries'
facilities or properties, and that all such tanks and equipment, if any,
previously located thereat, thereon or thereunder have been removed or closed
in place in accordance with all applicable laws and regulations, including
without limitation the preparation and filing of any required closure
certification with the North Carolina Department of Environment and Natural
Resources.
18
4.11 COMPLIANCE WITH LAWS. Each of the Company and its Subsidiaries
has in effect all Permits necessary for it to own, lease, or operate its
Material Assets and to carry on, in all Material respects, its business as
now conducted, except for those Permits the absence of which could not
reasonably be expected to have a Material Adverse Effect on the Company, and
there has occurred no Default under any such Permit, other than Defaults that
could not reasonably be expected to have a Material Adverse Effect on the
Company. None of the Company or its Subsidiaries: (a) is in violation of any
Laws, Orders, or Permits applicable to its business or employees conducting
its business, except for violations that could not reasonably be expected to
have a Material Adverse Effect on the Company (provided that this clause (a)
shall not apply to Environmental Laws, which are covered in Section 4.10
above); or (b) has received any notification or communication from any agency
or department of federal, state, or local Government or any Regulatory
Authority or the staff thereof (i) asserting that any of the Company and its
Subsidiaries is not in compliance with any of the Laws or Orders that such
Governmental Authority or Regulatory Authority enforces, except where such
noncompliance could not reasonably be expected to have a Material Adverse
Effect on the Company, (ii) threatening to revoke any Permits, except where
the revocation of which could not reasonably be expected to have a Material
Adverse Effect on the Company, or (iii) requiring the Company or any of its
Subsidiaries (x) to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any board or directors resolution or similar
undertaking that restricts Materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
4.12 LABOR RELATIONS. Neither the Company nor any of its Subsidiaries
is the subject of any Litigation asserting that it has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is any of them a
party to or bound by any collective bargaining agreement, Contract, or other
agreement or understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving any of them, pending or, to
the Knowledge of the Company, threatened, or to the Knowledge of the Company,
is there any activity involving any of the Company's or its Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
4.13 EMPLOYEE BENEFIT PLANS.
(a) The Company has made available to the Buyer prior to the
execution of this Agreement correct and complete copies in each case of all
Company Benefits Plans.
(b) All Company Benefit Plans are in compliance with the applicable
terms of ERISA, the Code, and any other applicable Laws, except as could not
reasonably be expected to have a Material Adverse Effect on the Company.
(c) Neither the Company nor any of its Subsidiaries has an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3)and 3(37)(A)).
Each "employee pension benefit plan," as defined in Section 3(2) of ERISA,
ever maintained by the Company or its Subsidiaries that was intended to
qualify under Section 401(a) of the Code and with respect to which the
Company or any of its Subsidiaries has any Liability, is disclosed as such in
Section 4.13 of the Company's Disclosure Schedule.
19
(d) The Company has made available to the Buyer prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Company Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Company Benefit Plans or amendments,
all determination letters, rulings, opinion letters, information letters, or
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1994, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any Company Benefit Plan with respect to the three (3)
most recent plan years, and (iv) the most recent summary plan descriptions
and any Material modifications thereto.
(e) Each Company ERISA Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and, to the Knowledge of the Company, there is
no circumstance that will or could reasonably be expected to result in
revocation of any such favorable determination letter or in such Plan's
failure to be so qualified. Each trust created under any Company ERISA Plan
has been determined to be exempt from Tax under Section 501(a) of the Code
and the Company is not aware of any circumstance that will or could
reasonably be expected to result in revocation of such exemption. With
respect to each such Company Benefit Plan, to the Knowledge of the Company,
no event has occurred that will or could reasonably be expected to give rise
to a loss of any intended Tax consequences under the Code or to any Tax under
Section 511 of the Code that could reasonably be expected to have a Material
Adverse Effect on the Company. There is no Material Litigation pending or, to
the Knowledge of the Company, threatened relating to any Company ERISA Plan.
(f) Neither the Company nor any of its Affiliates has engaged in a
transaction with respect to any Company Benefit Plan that, assuming the
Taxable Period of such transaction expired as of the date of this Agreement,
would subject the Company or any of its Affiliates to a Material tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA
in amounts that could reasonably be expected to have a Material Adverse
Effect on the Company. Neither the Company or any of its Affiliates nor any
administrator or fiduciary of any Company Benefit Plan (or any agent of any
of the foregoing) has engaged in any transaction, or acted or failed to act
in any manner, that could subject the Company or any of its Affiliates to any
direct or indirect Liability (by indemnity or otherwise) for breach of any
fiduciary, co-fiduciary, or other duty under ERISA, where such Liability
could reasonably be expected to have a Material Adverse Effect on the
Company. No oral or written representation or communication with respect to
any aspect of the Company Benefit Plans has been made to employees of the
Company or any of its Affiliates that is not in accordance with the written
or otherwise preexisting terms and provisions of such plans, except where any
Liability with respect to such representation or disclosure could not
reasonably be expected to have a Material Adverse Effect on the Company.
(g) Neither the Company nor any of its Affiliates maintains or has
ever maintained a Company Pension Plan.
(h) Neither the Company nor any of its Affiliates has any Material
obligation for retiree health and retiree life benefits under any of the
Company Benefit Plans other than with respect to benefit coverage mandated by
applicable Law.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any Material payment (including
20
without limitation severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of the Company or it
Affiliates from the Company or any of its Affiliates under any Company Benefit
Plan or otherwise, (ii) Materially increase any benefit otherwise payable under
any Company Benefit Plan, or (iii) result in any acceleration of the time of any
Material payment or vesting of any Material benefit.
4.14 MATERIAL CONTRACTS. None of the Company or its Subsidiaries, nor
any of their respective Assets, businesses, or operations, is a party to, or
is bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting, or retirement Contract, (ii) any Contract
relating to the borrowing of money by the Company or its Subsidiaries or the
guarantee by the Company or its Subsidiaries of any such obligation (other
than Contracts evidencing deposit liabilities, purchases of federal funds,
fully-secured repurchase agreements, and Federal Reserve or Federal Home Loan
Bank advances of depository institution Subsidiaries, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), and (iii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-KSB filed by the Company with
the SEC as of the date of this Agreement that has not been filed or
incorporated by reference as an exhibit to the Company's Form 10-KSB filed
for the fiscal year ended December 31, 2001 (together with all Contracts
referred to in Sections 4.8 and 4.13(a) of this Agreement, the "COMPANY
CONTRACTS"). With respect to each Company Contract, except as could not
reasonably be expected to have a Material Adverse Effect on the Company: (i)
the Contract is in full force and effect; (ii) none of the Company or its
Subsidiaries is in Default thereunder; (iii) neither the Company nor any of
its Subsidiaries has repudiated or waived any Material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge
of the Company, in Default in any respect, or has repudiated or waived any
provision thereunder. Except for Federal Reserve and Federal Home Loan Bank
advances, all of the indebtedness of the Company and its Subsidiaries for
money borrowed (not including deposit Liabilities) is prepayable at any time
without penalty or premium.
4.15 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries, or against any Asset, employee benefit plan, interest, or
right of any of them, except as could not reasonably be expected to have a
Material Adverse Effect on the Company, nor are there any Orders of any
Regulatory Authorities, other Governmental Authorities, or arbitrators
outstanding against the Company or any of its Subsidiaries, except as could
not reasonably be expected to have a Material Adverse Effect on the Company.
There is no Litigation to which the Company or any of its Subsidiaries is a
party that names the Company or any of its Subsidiaries as a defendant or
cross-defendant and where the maximum exposure is estimated to be $25,000 or
more.
4.16 REPORTS. Since December 31, 1999, or the date of organization if
later, each of the Company and its Subsidiaries has timely filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities, except
failures to file that could not reasonably be expected to have a Material
Adverse Effect on the Company. As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied with all applicable Laws, except noncompliance
that could not reasonably be expected to have a Material Adverse Effect on
the Company.
4.17 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. Subject to the
accuracy of the representations contained in Section 5.10, the information
supplied by the Company or its Subsidiaries for inclusion in the registration
statement (the "REGISTRATION STATEMENT") covering
21
the shares of the Buyer's Stock to be issued pursuant to this Agreement shall
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, 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. The
information supplied by or on behalf of the Company and its Subsidiaries for
inclusion in the joint proxy statement/prospectus to be sent to the shareholders
of the Company and the Buyer to consider, at special meetings (the "SHAREHOLDER
MEETINGS"), the Merger (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "JOINT PROXY STATEMENT") will not, on
the date the Joint Proxy Statement is first mailed to shareholders, at the time
of each of the Shareholder Meetings and at the Effective Time of the Merger,
contain any untrue statement of a Material fact or omit to state any Material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If at any time prior to the
Effective Time of the Merger any event relating to the Company or its
Subsidiaries or any of their Affiliates, officers or directors should be
discovered by the Company or its Subsidiaries that should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, the Company will promptly inform the Buyer. The Joint Proxy Statement
shall comply in all Material respects with the requirements of the Securities
Laws and the rules and regulations thereunder. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any information
supplied by the Buyer and its Subsidiaries and Affiliates that is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Joint Proxy Statement.
4.18 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of the
Company, none of the Company or any of its Subsidiaries has taken or agreed
to take any action, that could reasonably be expected to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
Materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 8.1(b) of this Agreement.
4.19 STATE TAKEOVER LAWS. Each of the Company and its Subsidiaries has
taken all necessary action to exempt the transactions contemplated by this
Agreement from the North Carolina Shareholder Protection Act and the North
Carolina Control Share Acquisition Act.
4.20 CHARTER PROVISIONS. Each of the Company and its Subsidiaries has
taken all action so that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement do not and will not result in the grant of any rights to any Person
under the articles of incorporation, bylaws, or other governing instruments
of any of them or restrict or impair the ability of the Buyer or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder
with respect to, the capital stock of the Company or any of its Subsidiaries
that may be directly or indirectly acquired or controlled by it.
4.21 RECORDS. Complete and accurate copies of the articles of
incorporation or charter and bylaws of each of the Company and its
Subsidiaries have been made available to the Buyer. The stock book of each
such Person contains, in all Material respects, complete and accurate records
of the record share ownership of the issued and outstanding shares of stock
thereof.
4.22 DERIVATIVES. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for the account of the Company or its
Affiliates or their customers were entered into (i) in accordance with
prudent
22
business practices and all applicable Laws, and (ii) with counter parties
believed to be financially responsible.
4.23 CERTAIN REGULATED BUSINESSES. Neither the Company nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company
Act of 1940, as amended, nor is it a "public utility holding company" as
defined in the Public Utility Holding Company Act of 1935, as amended.
4.24 COMMISSIONS. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken by the
Company, any of its Subsidiaries or any of the Company's shareholders.
4.25 OPINION OF FINANCIAL ADVISOR. The Company has received from The
Xxx Group, a letter dated the date of this Agreement, to the effect that, as
of the date of this Agreement, the consideration to be received in the Merger
by the holders of the Company Shares is fair to such holders from a financial
point of view (the "COMPANY FAIRNESS OPINION"), and a complete and correct
signed copy of such opinion has been, or promptly upon receipt thereof will
be, delivered to the Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth on the Buyer's Disclosure Schedule dated the date
hereof and delivered by the Buyer to the Company (the "BUYER'S DISCLOSURE
SCHEDULE"), the Buyer represents and warrants to the Company that the
statements contained in this ARTICLE V are correct and complete as of the
date of this Agreement.
5.1 ORGANIZATION, STANDING AND POWER.
(a) The Buyer is a financial holding company registered with the
Board of Governors of the Federal Reserve System under the Bank Holding
Company Act of 1956, as amended, and/or other applicable Law, and the Buyer
Bank is a bank under North Carolina Law. The Buyer Bank is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Buyer Bank are fully insured by the FDIC to the extent
permitted by Law.
(b) Each of the Buyer and its Subsidiaries is either a corporation or
a bank duly organized, validly existing and in good standing under the Laws
of the State of North Carolina, and has the corporate power and authority to
carry on, in all Material respects, its businesses as now conducted and to
own, lease and operate its Assets. Each of the Buyer and its Subsidiaries is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed except for such jurisdiction, in
which the failure to be so qualified or licensed could not reasonably be
expected to have a Material Adverse Effect on the Buyer.
5.2 AUTHORITY; NO CONFLICTS.
(a) Subject to required regulatory and shareholder approvals, the
Buyer has the corporate power and authority necessary to execute, deliver and
perform its obligations under this Agreement and to
23
consummate the transactions contemplated hereby. Subject to the required
regulatory and shareholder approvals, the execution and delivery of and
performance of its obligations under this Agreement and the other documents
contemplated hereby, and the consummation of the transactions contemplated
herein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Buyer. This
Agreement represents a legal, valid, and binding obligation of the Buyer,
enforceable against it in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by the
Buyer, nor the consummation by the Buyer of the transactions contemplated
hereby, nor compliance by the Buyer with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of the articles of
incorporation or bylaws of the Buyer or any of its Subsidiaries, or (ii)
constitute or result in a Default under, or require any Consent pursuant to,
or result in the creation of any Lien on any Asset of the Buyer or any of its
Subsidiaries under, any Contract or Permit of the Buyer or any of its
Subsidiaries, except as could not reasonably be expected to have a Material
Adverse Effect on the Buyer, or (iii) subject to obtaining the requisite
Consents referred to in Section 8.1(b) of this Agreement, violate any Law or
Order applicable to the Buyer or any of its Subsidiaries or any of their
respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws and applicable banking Laws, no notice to, filing with, or
Consent of, any Governmental Authority is necessary for the consummation by
the Buyer of the Merger and the other transactions contemplated in this
Agreement.
5.3 BUYER'S STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Buyer consists of 20,000,000
shares of common stock, no par value per share, of which 5,368,980 shares are
issued and outstanding as of the date of this Agreement, and except for such
shares, there are no shares of capital stock of the Buyer outstanding. The
authorized capital stock of the Buyer Bank consists of 20,000,000 shares of
common stock, $5.00 par value per share, of which 2,477,651 shares are issued
and outstanding as of the date of this Agreement, and except for such shares,
there are no shares of capital stock of the Buyer Bank outstanding. The Buyer
owns all of the issued and outstanding shares of capital stock of the Buyer
Bank and its other Subsidiaries, and no shares of capital stock of the Buyer
Bank or such other Subsidiaries are owned by any other Person. Section 5.3
of the Buyer's Disclosure Schedule lists all of the Buyer's direct and
indirect Subsidiaries other than the Buyer Bank as of the date of this
Agreement. The Buyer or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each such Subsidiaries.
(b) All of the issued and outstanding shares of capital stock of the
Buyer and its Subsidiaries are duly and validly issued and outstanding and
are fully paid and nonassessable, except to the extent otherwise required by
the North Carolina General Statutes 53-42 or other applicable banking Law.
Shares of the Buyer's Stock to be issued hereunder are duly authorized and,
upon issuance, will be validly issued and outstanding and fully paid and
nonassessable, free and clear of any Liens, pledges or encumbrances. None of
the outstanding shares of capital stock of the Buyer or any of its
Subsidiaries has been issued in violation of any
24
preemptive rights of the current or past shareholders of such Persons, and none
of the shares of the Buyer's Stock to be issued pursuant to this Agreement will
be issued in violation of any preemptive rights of the current or past
shareholders of the Buyer.
5.4 SEC FILINGS; BUYER FINANCIAL STATEMENTS.
(a) The Buyer has filed and made available to the Company all forms,
reports, and documents required to be filed by the Buyer with the SEC
pursuant to the Securities and Exchange Act of 1934 since December 31, 1999
(collectively, the "BUYER SEC REPORTS"). The Buyer SEC Reports (i) at the
time filed, complied in all Material respects with the applicable
requirements of the Securities Laws, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any
untrue statement of a Material fact or omit to state a Material fact required
to be stated in such Buyer SEC Reports or necessary in order to make the
statements in such Buyer SEC Reports, in light of the circumstances under
which they were made, not misleading. None of the Buyer's Subsidiaries is
required to file any forms, reports, or other documents with the SEC pursuant
to Section 13 of the Securities Exchange Act of 1934.
(b) Each of the Buyer Financial Statements (including, in each case,
any related notes) contained in the Buyer SEC Reports, including any Buyer
SEC Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was prepared or will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements, or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC), and fairly presented or
will fairly present the consolidated financial position of the Buyer and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments that were not or are not expected to be
Material in amount or effect (except as may be indicated in such financial
statements or notes thereto).
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Buyer nor any of
its Subsidiaries has any Liabilities that could reasonably be expected to
have a Material Adverse Effect on the Buyer, except Liabilities that are
accrued or reserved against in the consolidated balance sheets of the Buyer
as of December 31, 2001, included in the Buyer Financial Statements or
reflected in the notes thereto and except for Liabilities incurred in the
ordinary course of business subsequent to December 31, 2001. Neither the
Buyer nor any of its Subsidiaries has incurred or paid any Liability since
December 31, 2001, except for (a) such Liabilities incurred or paid in the
ordinary course of business consistent with past business practice and (b)
Liabilities that could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31 2001, (i)
there have been no events, changes, or occurrences that have had, or could
reasonably be expected to have, a Material Adverse Effect on the Buyer, and
(ii) each of the Buyer and its Subsidiaries has conducted, in all Material
respects, its respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and
the transactions contemplated hereby).
5.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of
the Buyer and its Subsidiaries have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 2001, and, to the Knowledge of the Buyer, all
25
Tax Returns filed are complete and accurate in all Material respects. All Tax
Returns for periods ending on or before the date of the most recent fiscal
year end immediately preceding the Effective Time will be timely filed or
requests for extensions will be timely filed. All Taxes shown on filed Tax
Returns have been paid. There is no audit examination Litigation or
deficiency or refund Litigation with respect to any Taxes that could
reasonably be expected to have a Material Adverse Effect on the Buyer, except
to the extent reserved against in the Buyer Financial Statements dated prior
to the date of this Agreement. All Taxes and other Liabilities for Taxes due
with respect to completed and settled examinations or concluded Litigation
have been paid.
(b) None of the Buyer or its Subsidiaries has executed an extension
or waiver of any statute of limitations on the assessment or collection of
any Tax due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) Adequate provision for any Material Taxes due or to become due
for any of the Buyer or its Subsidiaries for the period or periods through
and including the date of the respective Buyer Financial Statements has been
made and is reflected on such Buyer Financial Statements.
5.8 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
or, to the Knowledge of the Buyer, threatened against the Buyer or any of its
Subsidiaries, or against any Asset, employee benefit plan, interest, or right
of any of them, except as could not reasonably be expected to have a Material
Adverse Effect on the Buyer, nor are there any Orders of any Regulatory
Authorities, other Governmental Authorities, or arbitrators outstanding
against the Buyer or any of its Subsidiaries, except as could not reasonably
be expected to have a Material Adverse Effect on the Buyer. There is no
Litigation to which the Buyer or any of its Subsidiaries is a party that
names the Buyer or any of its Subsidiaries as a defendant or cross-defendant
and where the maximum exposure is estimated to be $25,000 or more.
5.9 REPORTS. Since December 31, 1999, or the date of organization if
later, each of the Buyer and its Subsidiaries has timely filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities, except
failures to file that could not reasonably be expected to have a Material
Adverse Effect on the Buyer. As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied with all applicable Laws, except noncompliance
that could not reasonably be expected to have a Material Adverse Effect on
the Buyer.
5.10 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. Subject to the
accuracy of the representations contained in Section 4.17, the information
supplied by the Buyer and its Subsidiaries for inclusion in the Registration
Statement shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, 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. The information supplied by the Buyer and its Subsidiaries for
inclusion in the Joint Proxy Statement will not, on the date the Joint Proxy
Statement/Prospectus is first mailed to shareholders, at the time each of the
Shareholder Meetings and at the Effective Time of the Merger, contain any
untrue statement of a Material fact or omit to state any Material fact
necessary to make the statements therein, in light of circumstances under
which they were made, not misleading. If at any time prior to the Effective
Time of the Merger any event relating to the Buyer or the Buyer Bank or any
of their Affiliates, officers or directors should be discovered by the Buyer
or any of its Subsidiaries
26
that should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement, the Buyer or the Buyer Bank will
promptly inform the Company. The Joint Proxy Statement shall comply in all
Material respects with the requirements of the Securities Laws. Notwithstanding
the foregoing, the Buyer makes no representation or warranty with respect to any
information supplied by the Company and its Subsidiaries that is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Joint Proxy Statement.
5.11 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of the
Buyer, none of the Buyer or any of its Subsidiaries has taken or agreed to
take any action, that could reasonably be expected to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
Materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 8.1(b) of this Agreement.
5.12 DERIVATIVES. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for the account of the Buyer or its
Affiliates or their customers were entered into (i) in accordance with
prudent business practices and all applicable Laws, and (ii) with counter
parties believed to be financially responsible.
5.13 COMMISSIONS. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken by the Buyer,
any of its Subsidiaries or any of the Buyer's shareholders.
5.14 OPINION OF FINANCIAL ADVISOR. The Buyer has received from
Trident Securities, a division of McDonald Investments, Inc., a letter dated
effective the date of this Agreement, to the effect that, as of the date of
this Agreement, the terms of the Merger, including the Merger Consideration,
are fair, from a financial point of view, to Buyer and its shareholders (the
"BUYER FAIRNESS OPINION"), and a complete and correct copy of such signed
opinion has been, or promptly upon receipt thereof will be, delivered to the
Company.
ARTICLE VI
COVENANTS
6.1 COVENANTS OF THE COMPANY.
(a) Ordinary Conduct of Business. Except as otherwise expressly
permitted by this Agreement, the Company will, and will cause its
Subsidiaries (including the Company Bank) to, from the date of this Agreement
to the Closing, conduct its business in the ordinary course in substantially
the same manner as presently conducted and make reasonable commercial efforts
consistent with past practices to preserve its relationships with other
Persons. Additionally, except as otherwise contemplated by this Agreement or
as set forth on Section 6.1(a) of the Company's Disclosure Schedule, the
Company will not, and it will not permit its Subsidiaries (including the
Company Bank) to, do any of the following without the prior written consent
of the Buyer:
(i) amend its governing documents;
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver any stock or stock options or other
equity equivalents of any class or any other of its securities (other
27
than the issuance of any Company Shares pursuant to the exercise of
options set forth on Section 4.3 of the Company's Disclosure Schedule),
or amend any of the terms of any securities outstanding as of the date
hereof;
(iii) (A) split, combine or reclassify any shares of its capital
stock, (B) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or (C) redeem or otherwise acquire any of
its securities;
(iv) (A) incur or assume any long-term debt or issue any
long-term debt securities, other than advances from the Federal Home
Loan Bank having a maturity of one year or less, certificates of
deposit and repurchase agreements with respect to instruments sold by
the Company or its Subsidiaries, all in the ordinary course of
business, or, except under existing lines of credit and in amounts not
Material to it, incur or assume any short-term debt other than in the
ordinary course of business, (B) other than in the ordinary course of
business consistent with past practice assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other Person, (C) make any
loans, advances or capital contributions to, or investments in, any
other Person, other than in the ordinary course and consistent with
past practice up to an amount with respect to any borrower or guarantor
that would not result in the credit exposure to such borrower or
guarantor increasing by more than $750,000, pledge or otherwise
encumber shares of its capital stock, or (D) mortgage or pledge any of
its assets, tangible or intangible, or create or suffer to exist any
Lien thereupon, other than Liens permitted by the proviso clause in the
definition of Liens and Liens created or existing in the ordinary
course of business consistent with past practice;
(v) except as required by Law or as contemplated herein, adopt
or amend any Benefit Plan;
(vi) grant to any director or executive officer or employee any
stock options or increase in his or her compensation (except
compensation increases for employees who are vice presidents or below
in the ordinary course of business consistent with past practice) or
pay or agree to pay to any such Person other than in the ordinary
course of business any bonus, severance or termination payment,
specifically including any such payment that becomes payable upon the
termination of such Person by it or Buyer after the Closing;
(vii) enter into or amend any employment Contract;
(viii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business, or any other assets that in the aggregate are
Material to it, or acquire any Person (or division thereof), any equity
interest therein or the assets thereof outside the ordinary course of
business;
(ix) change or modify any of the accounting principles or practices
used by it or revalue in any Material respect any of its assets, including
without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business
consistent with past practices or as required by GAAP or any Regulatory
Authority;
(x) (A) enter into, cancel or modify any Contract (other than loans,
advances, capital contributions or investments permitted by
28
subclause (iv)(C) of this Section 6.1) other than in the ordinary
course of business consistent with past practices, but not in any event
involving an amount in excess of $10,000; (B) authorize or make any
capital expenditure or expenditures (other than expenditures for
maintenance, repair and replacement of Company Assets), that,
individually or in the aggregate, are in excess of $10,000; or (C)
enter into or amend any Contract with respect to any of the foregoing;
(xi) pay, discharge or satisfy, cancel, waive or modify any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in or contemplated by the Company
Financial Statements, or incurred in the ordinary course of business
consistent with past practices;
(xii) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(xiii) take, or agree in writing or otherwise to take, any action
that would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect or result in any of the
conditions set forth in this Agreement not being satisfied; or
(xiv) agree, whether in writing or otherwise, to do any of the
foregoing.
(b) Consents. The Company will exercise its best efforts to obtain
such Consents as may be necessary or desirable for the consummation of the
transactions contemplated hereby from the appropriate parties to those
Contracts listed on Section 4.2 of the Company's Disclosure Schedule such
that such Contracts shall survive the Merger and not be breached thereby.
(c) Acquisition Proposals. Any offer or proposal by any Person or
group concerning any tender or exchange offer, proposal for a merger, share
exchange, recapitalization, consolidation or other business combination
involving the Company or any of its Subsidiaries or divisions of any of the
foregoing, or any proposal or offer to acquire in any manner, directly or
indirectly, more than a thirty percent (30%) equity interest in, or more than
thirty percent (30%) of the consolidated assets of, the Company and its
Subsidiaries, other than pursuant to the transactions contemplated by this
Agreement, is hereby defined as an "ACQUISITION PROPOSAL". The Company shall
not, and shall not permit any of its Subsidiaries to, permit any of their
respective officers, directors, affiliates, representatives or agents to,
directly or indirectly, (a) take any action to solicit, initiate or encourage
any Acquisition Proposal, or (b) participate in any discussions or
negotiations with or encourage any effort or attempt by any other Person or
take any other action to facilitate an Acquisition Proposal. From and after
the date hereof, the Company and its Subsidiaries shall and shall cause all
of their respective officers, directors, employees , investment bankers,
attorneys and other advisors and representatives to cease doing any of the
foregoing. Notwithstanding the foregoing, the Company or any such Persons
may, directly or indirectly, subject to a confidentiality agreement
containing customary terms, furnish to any party information and access in
response to a request for information or access made incident to an
unsolicited written Acquisition Proposal setting forth a Superior Proposal
made after the date hereof and may participate in discussions and negotiate
with such party concerning any written Superior Proposal made after the date
hereof, not recommend shareholder approval of the Merger and promptly
terminate this Agreement as provided in Section 9.1(f) (provided that neither
the Company nor any such Person, after the date hereof, solicited, initiated
or encouraged such Acquisition Proposal) (prompt termination of this
Agreement in accordance
29
with Section 9.1(f) shall be required if the Board of Directors does not
recommend shareholder approval in accordance with this provision), if the board
of directors of the Company shall have determined in its good faith judgment
based upon the written opinion of outside counsel reasonably acceptable to the
Buyer (which shall in any event include Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx,
L.L.P.) that failing to take such action would violate the directors' fiduciary
duties under applicable law. The board of directors of the Company shall notify
the Buyer immediately of any inquiries or Acquisition Proposals received by, any
such information requested from, and any requests for negotiations or discussion
sought to be initiated or continued with the Company and shall in such notice
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such inquiry, Acquisition Proposal, information request,
negotiations or discussions and shall keep the Buyer promptly advised of all
Material developments that could culminate in the board of directors
withdrawing, modifying or amending its recommendation of the Merger and the
other transactions contemplated by this Agreement. Neither the Company nor any
of its Subsidiaries shall waive or modify any provisions contained in any
confidentiality agreement entered into relating to a possible acquisition
(whether by merger, stock purchase, asset purchase or otherwise) or
recapitalization of the Company or any of its Affiliates.
(d) Shareholder Approval. Subject to Section 6.1(c), the Company will, at
the earliest practicable date, hold a meeting of its shareholders for the
purpose of approving the Merger (the "COMPANY SHAREHOLDERS MEETING"). In
connection with the Company Shareholders Meeting, subject to Section 6.1(c), the
Company's board of directors will recommend to the Company's shareholders such
approval.
(e) Loan Loss Reserve. To the extent permitted by GAAP, regulatory
accounting requirements and other applicable Laws, immediately prior to the
Effective Time of the Merger, the Company shall increase its loan loss reserve
to an amount satisfactory to Buyer in its reasonable discretion, provided,
however, that such action by the Company shall not be deemed a default by the
Company of any provision of this Agreement.
(f) Expenses Prior to Effective Time. To the extent permitted by GAAP,
regulatory accounting requirements and other applicable Laws, the Company shall
establish accruals, or make payments for fees, costs and other expenses incurred
in connection with the Merger and other expenses and fees incurred by the
Company and the Company Bank immediately prior to the Effective Time of the
Merger. Such action by the Company shall not be deemed a default hereunder.
6.2 COVENANTS OF THE BUYER.
(a) Reservation of Shares of the Buyer's Stock. The Buyer shall
reserve for issuance a sufficient number of shares of the Buyer's Stock to
cover the issuances of such stock required hereby.
(b) Directors.
(i) As soon as reasonably practicable after the Effective Time
of the Merger, the Buyer shall use its reasonable best efforts to cause
Xxxx X. Xxxxxx, Xx. to be elected or appointed as a member of the board
of directors of the Buyer, conditional upon obtaining any necessary
regulatory approvals. Buyer shall include such designated individual as
a candidate for election as a director and recommend and solicit
proxies for his election at its next annual meeting of shareholders.
After such meeting, such designated Person shall be subject to the same
nomination and election procedures as the other directors on the board
of the Buyer.
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(ii) Subsequent to the Merger, if and when a merger between the
Company Bank and the Buyer Bank is effected with the Buyer Bank as the
surviving corporation, the Buyer shall cause Xxxx X. Xxxxxx, Xx. to be
elected or appointed as a member of the board of directors of the Buyer
Bank, but conditional upon any necessary regulatory approvals. After
the initial appointment or election of such designated Person, such
Person shall be subject to the same nomination and election procedures
as the other directors of the Buyer Bank's board of directors.
(iii) For service on the Company's board of directors and Company
Bank's board of directors and for all board (including advisory board)
and committee services provided to the Company and Company Bank during
the period from January 1, 2002 through December 31, 2002 and in lieu
of the options that would have been issuable pursuant to the Company's
Non-Employee Director Stock Option Plan (the "COMPANY DIRECTOR STOCK
PLAN") and any other payments in consideration for such service, the
members of the Company's board of directors shall at the Effective Time
of the Merger be paid an aggregate of $46,000 with the portion of such
aggregate amount allocable to each such board member to be determined
based on the total number of Company and Company Bank board and
committee meetings attended by such director during the period from
January 1, 2002 through the Closing Date that would have been taken
into account in determining the options issuable under the Company
Director Stock Plan for 2002. Notwithstanding any provision in the
Company Director Stock Plan to the contrary, the payments made under
this subsection shall constitute the sole compensation (excluding
reimbursed expenses) payable to such directors for serving on the board
of directors (including advisory boards) and all board committees of
the Company and the Company Bank during the period from January 1, 2002
through December 31, 2002, and, effective as of the Effective Time, the
Company Director Stock Plan shall be deemed amended to the extent
necessary to effect the foregoing.
(iv) The Buyer shall form one or two advisory boards (in Buyer's
discretion) for the Asheville and Hickory, North Carolina markets and
shall offer to each member of the Company's Board of Directors (other
than the member elected or appointed to Buyer's and/or Buyer Bank's
board of directors) at the Effective Time of the Merger membership or
emeritus status on such advisory board(s). Beginning with service
during calendar year 2003, the members of such advisory board(s) shall
receive such fees as are determined by the Buyer, which fees shall be
reasonably consistent with those paid to Buyer's other advisory board
members.
(c) Employees.
(i) Except as covered by the Employment Agreements, any and all
of the Company's and its Subsidiaries' employees ("COMPANY EMPLOYEES")
will be employed on an "at-will" basis by the Buyer or the Buyer Bank,
and nothing in this Agreement shall be deemed to constitute an
employment agreement with any such Person to obligate the Buyer or any
Affiliate thereof to employ any such Person for any specific period of
time or in any specific position, or to restrict the Buyer's or any of
its Affiliates' right to terminate the employment of any such Person at
any time and for any reason satisfactory to it.
(ii) Such Company Employees who continue employment with the
Buyer or any of its Affiliates will be eligible for benefits consistent
with those of existing employees of the Buyer or such Affiliate, with
credit for past service with the Company or the Company Bank for
purposes of participation, eligibility and vesting (including with
respect to any amounts to be
31
contributed by the Buyer or one of its Affiliates or amounts that will
vest under any Buyer Benefit Plan, but not including the calculation of
any other benefit accrual); provided, however, that any such continuing
employee will not be subject to any exclusion or penalty for pre-existing
conditions that were covered under the Company's or any of its
Subsidiaries' medical plans as of the Closing Date or any waiting period
relating to coverage under the Buyer's or any of its Affiliates' medical
plans. There shall be no waiting periods applicable to any such Company
Employees to participate in such benefits (including applicable insurance
benefits).
(iii) The Buyer or one of its Affiliates shall honor any and all
vacation accrued by the Company Employees and the Company Bank and any
sick leave up to 90 days, and any such Company Employee who is not
retained for employment by the Buyer shall be paid for all accrued but
unused vacation as of the date of termination of employment.
(iv) If any Company Employee at the Effective Time of the Merger
is terminated by the Buyer within one year after the Effective Time of
the Merger, for any reason other than Cause, death or disability, or if
any such employee shall terminate his employment after being required
and not agreeing to relocate his or her principal work location outside
of the county of his or her current principal work location or having
his or her base compensation (excluding benefits) Materially reduced
and within one year after the Effective Time of the Merger, such
Company Employee shall receive severance pay equal to two week's pay at
his or her current salary for each year of consecutive service to the
Company, the Company Bank and/or the Buyer, provided, however that such
severance pay shall not be less than four (4) weeks pay and not more
than twenty-six (26) weeks pay and provided, further, that neither any
Company Employee who is a party to an Employment Agreement nor any
Company Employee eligible for retirement who is eligible for
participation in the Buyer's retirement plan at the time of termination
shall receive such severance pay.
(v) 401(k) Plan. The Company's 401(k) Plan will be merged into
Buyer's 401(k) Plan as soon as practicable after the Effective Time in
accordance with applicable Law. The Buyer agrees to use its best
efforts to minimize the amount of any deferred sales charges payable in
respect of assets held in the Company's 401(k) Plan in connection with
such merger and, so long as it is permitted under applicable Law and
can be done without adverse tax consequences to Buyer or its 401(k)
Plan, to (i) contribute up to $15,000 to the Company's 401(k) Plan to
reimburse the participants for any such charges that are incurred in
connection with such merger (ii) pay up to $15,000 to the appropriate
asset managers or other parties for a waiver of such deferred sales
charges or (iii) take such other action as may minimize or avoid such
deferred sales charges that does not require Buyer to pay more than
$15,000. Participants in Company's 401(k) Plan will automatically
become participants in Buyer's 401(k) Plan and will automatically be
vested in their benefits.
(d) Directors' and Officers' Insurance and Indemnification.
(i) At its option, the Company may obtain or require the Buyer
to obtain and maintain, or cause the Buyer Bank to obtain and maintain,
in effect for three years from the Closing Date, if available, the
current directors' and officers' liability insurance policies
maintained by the Company or substitute policies of at least the same
coverage containing terms and conditions that are not taken as a whole
Materially less favorable to the insured with respect to matters
occurring prior to the Effective Time of the Merger. Such insurance
shall cover all
32
Persons and entities who are currently covered by the Company's existing
director's and officers' liability policy (including all existing
directors and officers of the Company and its Subsidiaries) and shall
include coverage for matters occurring prior to the Effective Time of the
Merger.
(ii) From and after the Effective Time of the Merger, the Buyer
shall, or shall cause the Buyer Bank to, indemnify, defend and hold
harmless each Person who is now, or who has been at any time before the
date hereof or who becomes before the Effective Time of the Merger, an
officer or director of the Company or any of its Subsidiaries (the
"INDEMNIFIED PARTIES") against all losses, claims, damages, costs,
expenses (including reasonable attorneys' fees), liabilities or
judgments or amounts that are paid in settlement (which settlement
shall require the prior written consent of Buyer, which consent shall
not be unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal, or
administrative (each a "CLAIM"), in which an Indemnified Person is, or
is threatened to be made, a party or witness arising in whole or in
part out of the fact that such Person is or was a director, officer or
employee of the Company or any of its Subsidiaries if such Claim
pertains to any matter or fact arising, existing or occurring before
the Effective Time (including without limitation the Merger and the
other transactions contemplated hereby), regardless of whether such
Claim is asserted or claimed before, at or after the Effective Time of
the Merger (the "INDEMNIFIED LIABILITIES"), to the fullest extent
permitted by applicable Law in effect as of the date hereof or as
amended applicable to a time before the Effective Time. Any Indemnified
Person wishing to claim indemnification under this Section 6.2(d)(ii),
upon learning of any Claim, shall notify the Buyer (but the failure so
to so notify shall not relieve the Buyer or the Buyer Bank from any
liability that it may have under this Section 6.2(d)(ii), except to the
extent such failure Materially prejudices the Buyer or its
Subsidiaries). In the event of any such Claim, whether arising before,
on or after the Effective Time of the Merger, (1) the Buyer shall have
the right to assume the defense thereof (in which event the Indemnified
Parties will cooperate in the defense of any such matter) and upon such
assumption, the Buyer shall not be liable to any Indemnified Person for
any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Person in connection with the defense
therefor, except that if the Buyer elects not to assume such defense,
or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are or may be (whether or not any have
yet actually arisen) issues that raise conflicts of interest between
the Buyer and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them, and the Buyer shall pay
the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) the Buyer shall be obligated pursuant to this paragraph to
pay for only one firm of counsel for all Indemnified Parties (unless
counsel for one or more Indemnified Parties advises his or her client
that a conflict exists between his or her client and one or more other
Indemnified Parties, in which event the fees and expenses of such
counsel shall also be paid by the Buyer) whose reasonable fees and
expenses shall be paid promptly as statements are received, (3) the
Buyer shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld), and
(4) the Buyer shall have no obligation hereunder to any Indemnified
Person when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Person in the
manner contemplated hereby is prohibited by applicable Law (it being
acknowledged by the parties hereto that in the event of any good faith
dispute about the lawfulness of such indemnification, the Buyer or the
Buyer Bank may place the amounts at issue in escrow pending the final
and nonappealable determination of such dispute). The obligations of
the Buyer and the Buyer Bank pursuant to this Section 6.2(d) are
intended to be enforceable against the Buyer and
33
the Buyer Bank directly by the Indemnified Parties. The indemnification
provided herein shall be in addition to any indemnification rights that
any Indemnified Parties may have by Law, pursuant to the articles of
incorporation or bylaws of the Company or any of its Subsidiaries or
pursuant to the terms of any employee benefit plan or trust for which any
Indemnified Party serves as a fiduciary.
(e) Shareholder Approval. The Buyer will, at the earliest
practicable date, hold a meeting of its shareholders for the purpose of
approving the Merger (the "BUYER SHAREHOLDERS MEETING"). In connection with
the Buyer Shareholders Meeting, the Buyer's board of directors will recommend
to the Buyer's shareholders such approval.
6.3 COVENANTS OF BOTH PARTIES TO THE AGREEMENT.
(a) Reorganization for Tax Purposes. Each of the parties hereto
undertakes and agrees to use its reasonable efforts to cause the Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the
Code and that it will not intentionally take any action that would cause the
Merger to fail to so qualify.
(b) Notification. Each of the parties hereto agrees to notify
promptly the other party hereto of any event, fact, or other circumstance
arising after the date hereof that would have caused any representation or
warranty herein, including, in the case of the Company, any information on
any schedule hereto, to be untrue or misleading had such event, fact, or
circumstance arisen prior to the execution of this Agreement. The parties
hereto will exercise their reasonable best efforts to ensure that no such
events, facts, or other circumstances occur, come to pass, or become true.
(c) Consummation of Agreement. Subject to Section 6.1(c), the parties
hereto each agree to use their reasonable efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by them under this
Agreement so that the transactions contemplated hereby shall be consummated.
Except for events that are the subject of specific provisions of this
Agreement, if any event should occur, either within or outside the control of
the Company, or the Buyer, that would Materially delay or prevent fulfillment
of the conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, each party will notify the
others of any such event and, subject to Section 6.1(c), the parties will use
their reasonable, diligent and good faith efforts to cure or minimize the
same as expeditiously as possible. Subject to Section 6.1(c), each party
hereto shall use its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement and to assist in the procuring or providing of all documents that
must be procured or provided pursuant to the provisions hereof.
Notwithstanding anything to the contrary contained in this Agreement, but
subject to Section 6.1(c), none of the parties hereto will take any action
that would (i) Materially affect or delay receipt of the approvals
contemplated in Section 8.1(b) from the Regulatory Authorities, or (ii)
Materially adversely affect or delay its ability to perform its covenants and
agreements made pursuant to this Agreement.
(d) Corporate Action. Subject to the terms and conditions hereof
(including Section 6.1(c)), each of the parties hereto shall, and each of
them shall cause their Subsidiaries to, take all corporate action, including
the recommendation of the Merger by their respective boards of directors to
their respective shareholders, and use each of their best efforts to cause
all shareholder action to be taken, necessary to consummate and give effect
to the Merger.
34
(e) Maintenance of Corporate Existence. Each of the parties hereto
shall, and each of them shall cause their Subsidiaries to, maintain in full
force and effect their respective corporate or legal existences.
(f) Applications and Reports. The Buyer shall prepare and file as
soon as reasonably practical after the date of this Agreement, and the
Company shall cooperate in the preparation and, where appropriate, filing of,
all applications, reports and statements with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement
seeking the requisite Consents necessary to consummate the transactions
contemplated by this Agreement. The Buyer shall use its commercially
reasonable efforts to obtain the requisite Consents of all Regulatory
Authorities as soon as practicable after the filing of the appropriate
applications. The Buyer will promptly furnish to the Company copies of
applications filed with all Regulatory Authorities and copies of Material
written communications received by the Buyer from any Regulatory Authorities
with respect to the transactions contemplated hereby.
(g) Registration Statement and Joint Proxy Statement. As soon as
reasonably practicable after the execution of the Agreement and after the
furnishing by the Company and the Company Bank of all information required to
be contained therein, the Buyer shall file with the SEC the Registration
Statement on Form S-4 (or on such other form as shall be appropriate), which
shall contain the Joint Proxy Statement. The Buyer and the Company shall each
use their reasonable best efforts to cause the Joint Proxy Statement to
comply in all Material respects with the requirements of the Securities Laws
and the rules and regulations thereunder. The Buyer and the Company shall
each use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable and take any action required to
be taken under applicable state securities laws in connection with the
issuance of the shares of Buyer's Stock upon consummation of the Merger.
Subject to Section 6.1(c), the Joint Proxy Statement shall include the
recommendation of the Boards of Directors of the Company and the Buyer in
favor of the Merger.
(h) Affiliates; Restrictive Legend. The Buyer will give stop
transfer instructions to its transfer agent with respect to any Buyer Stock
issued to "affiliates", as such term is used in Rule 145 under the Securities
Act of 1933, of the Company or Company Bank in connection with the Merger and
there will be placed on the certificates representing such Buyer Stock , or
any substitution therefor, a legend stating in substance:
"The shares represented by this certificate may not
be sold, transferred or otherwise disposed of except
or unless (1) covered by an effective registration
statement under the Securities Act of 1933, as
amended, or an exemption therefrom, (2) in accordance
with (i) Rule 145(d) (in the case of shares issued to
an individual who is not an affiliate of Capital Bank
Corporation) or (ii) Rule 144 (in the case of shares
issued to an individual who is an affiliate of
Capital Bank Corporation) of the Rules and
Regulations of such Act, or (3) in accordance with a
legal opinion satisfactory to counsel for CBC that
such sale or transfer is otherwise exempt from the
registration requirements of such Act. For avoidance
of doubt, it is understood that a legal opinion is
neither required by law nor this legend and it shall
be in Capital Bank Corporation's sole discretion
whether or not to require that a legal opinion be
delivered to it prior to any such, transfer or other
disposition."
35
(i) Closing. Subject to the terms and conditions hereof (including
Section 6.1(c)), the parties hereto shall use their reasonable best efforts
to consummate the Closing within 30 days after all conditions to the Closing
have been satisfied.
6.4 NON-COMPETITION. Each of Xxxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx,
Xx. (each a "RESTRICTED DIRECTOR") agrees, in partial consideration for the
performance by the Buyer of the transactions contemplated by this Agreement
and in recognition of the fact that such transactions reflect the acquisition
for value by the Buyer of the Company (including all shares of capital stock
of the Company held by the Restricted Directors, each of whom is a
shareholder of the Company) and its rights, assets and liabilities, that such
Restricted Director shall not, without the Buyer's written consent, from the
Effective Time until the second anniversary of the Effective Time:
(a) directly or indirectly, as an officer, director, shareholder,
owner, employee, consultant or otherwise, become or be interested in or
associated with, work for and/or assist any other banking company or proposed
banking company that has an office in Buncombe or Catawba County, North
Carolina. For purposes of this subsection (a), direct or indirect ownership
of not more than one percent (1%) of the issued and outstanding stock of a
corporation, the shares of which are publicly traded, shall not be deemed to
be a violation of the preceding sentence, nor shall direct or indirect
ownership interests of such stock to the extent such interests exist on the
date of this Agreement plus up to an additional one percent (1%) of the stock
of the same corporation or its successor acquired after the date of this
Agreement be deemed to be a violation of the preceding sentence;
(b) directly or indirectly, solicit, interfere with the Buyer's
relationships with or entice away from the Buyer any customer, supplier,
Person, firm or corporation who or which currently does, or has, at any time
during the one (1) year immediately preceding the Effective Time or the
period beginning at the Effective Time and ending on the second anniversary
of the Effective Time, done business with the Company, or offer employment to
or procure employment for any Person who currently does, or has, at any time
during the one (1) year immediately preceding the Effective Time or the
period beginning at the Effective Time and ending on the second anniversary
of the Effective Time, been employed by the Company; or
(c) use for any competitive purpose or knowingly divulge, directly or
indirectly, to any entity or Person, any Confidential Information concerning
the Company. If a Restricted Director believes that a disclosure of
Disclosable Information is required by law, such Restricted Director shall
give the Buyer such prior notice of the disclosure, and such opportunity to
limit or contest, at its own expense, the requirement for such disclosure as
may be reasonably available under the circumstances.
It is the desire and intent of the parties to this Agreement that the
provisions of this Section 6.4 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which enforcement is sought, and shall survive the Closing. If any
particular provisions or portion of this Section 6.4 shall be adjudicated to
be invalid or unenforceable, this Section shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or
unenforceable, such amendment to apply only with respect to the operation of
such Section in the particular jurisdiction in which such adjudication is
made.
The parties recognize that the performance of the obligations under
this Section 6.4 by each of the Restricted Directors is special, unique and
extraordinary in character, and that in the event of the breach by any
Restricted Director of the terms and conditions of this Section 6.4 to be
performed, the Buyer shall
36
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either in law or in equity, to obtain damages
for any breach of this Section 6.4, to enforce the specific performance thereof
by such Restricted Director or to enjoin such Restricted Director from
performing services for any such other Person, firm or corporation.
For purposes of this Section 6.4 only, the term "Buyer" shall include
the Buyer and all Affiliates of the Buyer, and the term "Company" shall
include the Company and all Affiliates of the Company. If this Agreement is
terminated prior to the Effective Time this Section 6.4 shall be of no
further force or effect.
6.5 VOTING AGREEMENT. Each Restricted Director and J. Xxxxx
XxXxxxxxx ("XXXXXXXXX") hereby revokes any and all previous proxies with
respect to the Company Shares owned by such Person ("DIRECTOR SHARES") and
irrevocably agrees to vote and otherwise act (including pursuant to written
consent) with respect to all of the Restricted Director Shares, for the
approval and the adoption of this Agreement all agreements related to the
Merger and any actions related thereto, and against any proposal or
transaction which could prevent or delay the consummation of the transactions
contemplated by this Agreement, at any meeting or meetings of the
shareholders of the Company, and at any adjournment, postponement or
continuation thereof, at which this Agreement and the other related
agreements, or such other actions are submitted for the consideration and
vote of the shareholders of the Company. The foregoing shall remain in
effect with respect to the Restricted Director Shares until the termination
of this Agreement. Each Restricted Director and XxXxxxxxx hereby agrees to
execute such additional documents as the Buyer may reasonably request to
effectuate the foregoing. The Restricted Directors and XxXxxxxxx do not make
any agreement pursuant to this Section 6.5 as an officer or director of the
Company; rather, for purposes of this Section 6.5, each Restricted Director
and XxXxxxxxx signs solely in his or her capacity as a record holder and
beneficial owner of the Restricted Director Shares, and nothing herein shall
limit or affect any actions taken in his capacity as a director of the
Company, including without limitation the exercise of his duties as a
director.
ARTICLE VII
DISCLOSURE OF ADDITIONAL INFORMATION
7.1 ACCESS TO INFORMATION. Prior to the Closing Date, the parties
hereto shall, and shall cause each of their Affiliates to:
(a) give the other and its authorized representatives reasonable
access, during normal business hours and upon reasonable notice, to its
books, records, offices and other facilities and properties; and
(b) furnish the other with such financial and operating data and
other information with respect to its business, condition (financial or
otherwise) and properties, as it may reasonably request.
7.2 ACCESS TO PREMISES. Prior to Closing, the Company shall, and
shall cause its Subsidiaries to, give the Buyer and its authorized
representatives reasonable access to all of the Company's and its
Subsidiaries' Real Property for the purpose of inspecting such property.
7.3 CONFIDENTIALITY. Prior to Closing, except as otherwise required
by Law or provided in Section 7.4, each of parties hereto shall not, and
shall not permit its Affiliates to, and each
37
shall use its best efforts to cause its and its Affiliates' respective
employees, lenders, accountants, representatives, agents, consultants and
advisors not to, discuss or disclose, or use for any purpose other than the
transactions contemplated hereby, the subject matter or transactions
contemplated by this Agreement or any Confidential Information of the other
party. For purposes of this Section, "CONFIDENTIAL INFORMATION" means any
information about the disclosing party furnished to the receiving party or its
representatives by the disclosing party or its representatives, unless (a) such
information is already known to the receiving party or its representatives or to
others not bound by a duty of confidentiality at the time it is furnished to the
receiving party or such information becomes publicly available through no fault
of the receiving party or its representatives, (b) the use of such information
is necessary or appropriate in making any filing or obtaining any Consent
necessary or desirable for the consummation of the transactions contemplated
hereby or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings to enforce the
receiving party's rights hereunder. If a receiving party believes that a
disclosure of information that would be Confidential Information but for the
exception contained in the foregoing clause (c) ("DISCLOSABLE INFORMATION") is
required by law, such receiving party shall give the disclosing party such prior
notice of the disclosure, and such opportunity to limit or contest, at its own
expense, the requirement for such disclosure as may be reasonably available
under the circumstances.
7.4 PUBLICITY. Without the prior consent of the other party, no party
hereto shall issue any news release or other public announcement or
disclosure, or any general public announcement to its employees, suppliers or
customers, regarding this Agreement or the transactions contemplated hereby,
except as may be required by Law, but in which case the disclosing party
shall provide the other party hereto with reasonable advance notice of the
timing and substance of any such disclosure.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 MUTUAL CONDITIONS. The respective obligations of each party
hereto to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by all parties hereto pursuant to Section
10.4 of this Agreement:
(a) Adverse Proceedings. Neither the Company, the Company Bank, the
Buyer, the Buyer Bank nor any shareholder of any of the foregoing shall be
subject to any order, decree or injunction of a court of competent
jurisdiction that enjoins or prohibits the consummation of this Agreement or
the Merger, and no Governmental Authority shall have instituted a suit or
proceeding that is then pending and seeks to enjoin or prohibit the
transactions contemplated hereby. Any party who is subject to any such order,
decree or injunction or the subject of any such suit or proceeding shall take
any reasonable steps within that party's control to cause any such order,
decree or injunction to be modified so as to permit the Closing and to cause
any such suit or proceeding to be dismissed.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No such Consent obtained from any Regulatory Authority shall be
conditioned or restricted in a manner (including requirements relating to the
raising of additional capital or the disposition of Assets) not reasonably
anticipated as of the date of this Agreement that in the reasonable judgment
of the Board of Directors of
38
the Buyer or the Company would so Materially adversely impact the economic or
business assumptions of the transactions contemplated by this Agreement that had
such condition or requirement been known, such party would not have entered into
this Agreement.
(c) Consents and Approvals. Each party hereto shall have obtained any
and all Consents required for consummation of the Merger or for the
preventing of any Default under any Contract or Permit of such Person,
including those Consents listed on Section 4.2 of the Company's Disclosure
Schedule, except to the extent that the failure to obtain such any such
Consents would not, individually or in the aggregate result in a Material
Adverse Effect on such Person.
(d) Effectiveness of Registration Statement. The Registration
Statement filed with the SEC covering the shares of the Buyer's Stock to be
issued pursuant hereto shall have been declared effective by the SEC, and no
stop order suspending such effectiveness shall have been initiated or, to the
Knowledge of the Buyer, threatened by the SEC.
(e) Approval. The Company's and the Buyer's shareholders shall have
approved this Agreement, the Plan of Merger and the Merger in accordance with
applicable law.
(f) Tax Opinion. On the basis of facts, representations and
assumptions that shall be consistent with the state of facts existing at the
Closing Date, the Buyer and the Company shall have received an opinion of
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P. or another
reputable tax advisor reasonably acceptable in form and substance to each of
them dated as of the Closing Date, substantially to the effect that, for
federal income tax purposes: (i) the Merger, when consummated in accordance
with the terms hereof, will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized by the
Buyer or the Company by reason of the Merger, (iii) the exchange or
cancellation of Company Shares in the Merger will not give rise to
recognition of gain for federal income tax purposes to the shareholders of
the Company to the extent such shareholders receive Buyer's Stock in exchange
for their Company Shares , (iv) shareholders of the Company who have a loss
on their Company Shares will not recognize any loss by reason of the Merger,
(v) the basis of the Buyer's Stock to be received by a shareholder of the
Company will be the same as the basis of the stock of the Company surrendered
in connection with the Merger, and (vi) the holding period of the shares of
the Buyer's Stock to be received by a shareholder of the Company will include
the period during which the shareholder held the Company Shares surrendered
in connection with the Merger, provided that the Company Shares surrendered
in connection with the Merger are held as a capital asset at the Effective
Time of such Merger. Each of the Buyer and the Company shall provide a letter
to the tax advisor setting forth such facts, assumptions and representations
as may be reasonably requested by the tax advisor and on which such tax
advisor may rely in rendering its opinion.
(g) Nasdaq Listing. As of the Effective Time, the Buyer shall have
satisfied all requirements in order for the shares of the Buyer's Stock to be
issued to shareholders of the Company in connection with the Merger to be
listed on the Nasdaq National Market System as of the Effective Time.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the transactions contemplated hereby shall be further
subject to the fulfillment of the following conditions, unless waived by such
parties pursuant to Section 10.4 of this Agreement:
(a) All representations and warranties of the Buyer contained in this
Agreement shall be true and correct in all Material respects as of the
Closing Date as though made as of such date (except for
39
representations and warranties that are made as of a specific date). The Buyer
shall have performed and complied in all Material respects with all covenants
and agreements contained in this Agreement required to be performed and complied
with by it at or prior to the Closing.
(b) All documents required to have been executed and delivered by the
Buyer to the Company at or prior to the Closing shall have been so executed
and delivered, whether or not such documents have been or will be executed
and delivered by the other parties contemplated thereby.
(c) The Company shall have received an opinion of Smith, Anderson,
Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P., counsel to the Buyer, dated as
of the Closing Date, substantially in the form attached hereto as EXHIBIT B.
(d) As of the Closing Date, the Company shall have received the
following documents with respect to the Buyer:
(i) a true and complete copy of its articles of incorporation
and all amendments thereto, certified by the jurisdiction of its
incorporation as of a recent date;
(ii) a true and complete copy of its bylaws, certified by its
Secretary or an Assistant Secretary;
(iii) a certificate from its Secretary or an Assistant Secretary
certifying that (1) its articles of incorporation or charter have not
been amended since the date of the certificate described in subsection
(ii) above, and that nothing has occurred since the date of issuance of
the certificate of existence specified in subsection (iv) below that
would adversely affect its existence, and (2) Buyer has complied with
the conditions set forth in this Section 8.2 as may be reasonably
required by the Company, including without limitation a Certificate as
to the matters set forth in Section 8.2(a);
(iv) a certificate of its corporate existence issued by the
jurisdiction of its incorporation as of a recent date and a certificate
of existence or authority as a foreign corporation issued as of a
recent date by each of the jurisdictions in which it is qualified to do
business as a foreign corporation;
(v) a true and complete copy of the resolutions of its board of
directors and shareholders authorizing the execution, delivery and
performance of this Agreement, and all instruments and documents to be
delivered in connection herewith, and the transactions contemplated
hereby, certified by its Secretary or an Assistant Secretary; and
(vi) a certificate from its Secretary or an Assistant Secretary
certifying the incumbency and signatures of its officers who will
execute documents at the Closing or who have executed this Agreement.
(e) The Company shall have received from The Xxx Group an updated
Company Fairness Opinion, dated the date of the Joint Proxy Statement, to the
effect that, as of the date of the Joint Proxy Statement, the consideration
to be received in the Merger by the holders of the Company Shares is fair to
such holders from a financial point of view.
40
8.3 CONDITIONS TO THE OBLIGATIONS OF THE BUYER. The obligations of
the Buyer to effect the transactions contemplated hereby shall be further
subject to the fulfillment of the following conditions, unless waived by the
Buyer pursuant to Section 10.4 of this Agreement:
(a) All representations and warranties of the Company contained in
this Agreement shall be true and correct in all Material respects as of the
Closing Date as though made as of such date (except for representations and
warranties that are made as of a specific date). The Company shall have
performed and complied in all Material respects with all covenants and
agreements contained in this Agreement required to be performed and complied
with by it at or prior to the Closing.
(b) Holders of Company Shares representing no more than ten percent
(10%) of the issued and outstanding Company Shares immediately prior to the
Effective Time shall have exercised dissenters' or similar rights with
respect to the Merger.
(c) All documents required to have been executed and delivered by the
Company or any third party to the Buyer at or prior to the Closing shall have
been so executed and delivered, whether or not such documents have been or
will be executed and delivered by the other parties contemplated thereby.
(d) The Buyer shall have received a legal opinion from Xxxxxxx
Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P., counsel to the Company, dated as of the
Closing Date, substantially in the form attached hereto as EXHIBIT C.
(e) Each of J. Xxxxx XxXxxxxxx, Xxxx X. Xxxxxx, and X.X. Xxxxxxxxx,
Xx. shall have executed and delivered an employment agreement (the
"EMPLOYMENT AGREEMENTS") with the Company Bank, effective as of the Effective
Time of the Merger, in the respective forms attached hereto as EXHIBIT X-0,
X-0 and D-3, respectively.
(f) As of the Closing Date, the Buyer shall have received the
following documents with respect to each of the Company and its Subsidiaries
(including the Company Bank):
(i) a certificate of its corporate existence issued by the
jurisdiction of its incorporation as of a recent date and a certificate
of existence or authority as a foreign corporation issued as of a
recent date by each of the jurisdictions in which it is qualified to do
business as a foreign corporation;
(ii) a true and complete copy of its articles of incorporation
or charter and all amendments thereto, certified by the jurisdiction of
its incorporation as of a recent date.
(iii) a true and complete copy of its bylaws, certified by its
Secretary or an Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant Secretary
certifying that (1) its articles of incorporation or charter have not
been amended since the date of the certificate described in subsection
(ii) above, and that nothing has occurred since the date of issuance of
the certificate of existence specified in subsection (i) above that
would adversely affect its existence, and (2) Company has complied with
the conditions set forth in this Section 8.3 as may be reasonably
required by the Buyer, including without limitation a Certificate as to
the matters set forth in Section 8.3(a);
(v) with respect to the Company only, a true and complete copy
of the resolutions of
41
its board of directors and shareholders authorizing the execution,
delivery and performance of this Agreement, and all instruments and
documents to be delivered in connection herewith, and the transactions
contemplated hereby, certified by its Secretary or an Assistant Secretary;
and
(vi) with respect to the Company only, a certificate from its
Secretary or an Assistant Secretary certifying the incumbency and
signatures of its officers who will execute documents at the Closing or
who have executed this Agreement.
(g) Each member of the board of directors of the Company Bank shall,
if so requested by the Buyer, have tendered his or her written resignation to
the Company Bank effective as of the Effective Time of the Merger.
(h) The Buyer shall have received from Trident Securities an updated
Buyer Fairness Opinion, dated the date of the Joint Proxy Statement, to the
effect that, as of the date of the Joint Proxy Statement, the terms of the
Merger, including the Merger Consideration, are fair, from a financial point
of view, to the Buyer and its shareholders.
ARTICLE IX
TERMINATION
9.1 TERMINATION. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time
prior to the Closing Date:
(a) By mutual written consent of the Company and the Buyer;
(b) By either the Buyer or the Company, if there shall be any Law or
regulation that makes consummation of this Agreement illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining the
Company or its shareholders or the Buyer or its shareholders from
consummating this Agreement is entered and such judgment, injunction, order
or decree shall become final and nonappealable;
(c) By either the Buyer or the Company, if the conditions to the
obligation to effect the transactions contemplated hereby of the party
seeking termination shall not have been fulfilled or waived by November 30,
2002, and if the party seeking termination is in Material compliance with all
of its obligations under this Agreement;
(d) By either the Buyer or the Company, if a condition to the
obligation to effect the transactions contemplated hereby of the party
seeking termination shall have become incapable of fulfillment
(notwithstanding the efforts of the party seeking to terminate as set forth
in Section 6.3(c)), and has not been waived;
(e) At any time on or prior to the Closing Date, by the Buyer, if the
Company has, or by the Company, if the Buyer has, in any Material respect,
breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if such
breach has not been cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing such breach or
the Closing Date;
(f) By the Company if (i) the board of directors of the Company shall
reasonably determine,
42
subject to Section 6.1(c), that an Acquisition Proposal constitutes a Superior
Proposal, provided, however, that the Company may not terminate this Agreement
pursuant to this subsection (f) unless (x) five business days shall have elapsed
after delivery to Buyer of a written notice of such determination by such board
of directors, and, during such five business day period, the Company shall have
informed Buyer of the terms and conditions of such Acquisition Proposal and the
identity of the Person or group making such an Acquisition Proposal, and (y) at
the end of such five business day period, the Board of Directors of the Company
believes that such Acquisition Proposal constitutes a Superior Proposal, and
(ii) the Company thereafter executes a definitive, binding transaction agreement
to consummate the transaction that is the subject of such Acquisition Proposal;
(g) By either the Buyer or the Company if any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority;
(h) By the Company if notwithstanding the satisfaction of its
obligations under Section 6.1(d), its shareholders do not approve this
Agreement and the Merger at the Company Shareholders Meeting or the
shareholders of the Buyer do not approve this Agreement at the Buyer
Shareholders Meeting;
(i) By the Buyer if notwithstanding the satisfaction of its
obligations under Section 6.2(e), its shareholders do not approve this
Agreement and the Merger at the Buyer Shareholders Meeting or the
shareholders of the Company do not approve this Agreement at the Company
Shareholders Meeting; and
(j) By the Company, if the Average Closing Price is less than $11.25
(or such lesser amount to which the parties shall have mutually agreed in
writing, which they shall not be obligated to do) and its board of directors
determines to terminate this Agreement and the Merger.
9.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of a
termination contemplated hereby by any party pursuant to Section 9.1, the
party seeking to terminate this Agreement shall give prompt written notice
thereof to the other party, and the transactions contemplated hereby shall be
abandoned, without further action by any party hereto. In such event:
(a) The parties hereto shall continue to be bound by (i) their
obligations of confidentiality set forth herein, and all copies of
Confidential Information provided by the Company hereunder will be returned
to the Company or destroyed immediately upon its request therefor, (ii) the
provisions set forth in Section 7.4 relating to publicity, (iii) the
provisions set forth in Section 10.1 relating to expenses and (iv) the
provisions set forth in this Article IX.
(b) All filings, applications and other submissions relating to the
transactions contemplated hereby shall, to the extent practicable, be
withdrawn from the Person to which made.
(c) Except as provided in Section 9.2(a) and except as provided
below, following the termination of this Agreement neither party shall have
any liability of any nature whatsoever hereunder or in conjunction with the
transactions contemplated hereby; provided, however, notwithstanding the
foregoing and subject to Section 9.3(d), either party shall be entitled to
seek any remedy to which such party may be entitled at law or in equity for
any uncured willful violation or breach of any agreement, covenant,
representation or warranty contained in this Agreement.
43
9.3 TERMINATION EXPENSES AND FEES.
(a) In the event Company terminates this Agreement pursuant to
Section 9.1(f), the Company shall pay within one (1) business day following
such termination, a termination fee of $250,000 payable by wire transfer of
immediately available funds to an account designated by Buyer.
(b) In the event (i) the Company or any of its Subsidiaries receives
an Acquisition Proposal, (ii) the Company's board of directors terminates
this Agreement pursuant to Section 9.1(f), and (iii) within twelve (12)
months after the date of such Acquisition Proposal, the Company consummates
an Acquisition Transaction with the party making the Acquisition Proposal,
then upon, and within one (1) business day following, the consummation of
such Acquisition Transaction, the Company shall pay the Buyer a termination
fee of $750,000 payable by wire transfer of immediately available funds to an
account designated by Buyer.
(c) In the event (i) the Company or any of its Subsidiaries receives
an Acquisition Proposal prior to May 1, 2003, (ii) the Company's board of
directors fails to recommend approval of the Merger to the Company's
shareholders or amends or withdraws its recommendation of the Merger to the
Company's shareholders in manner adverse to the Buyer and (iii) within twelve
(12) months after the date of such Acquisition Proposal, the Company
consummates an Acquisition Transaction with the party making the Acquisition
Proposal, then upon, and within one (1) business day following, the
consummation of such Acquisition Transaction, the Company shall pay the Buyer
a termination fee of $1,000,000 less any amounts paid by the Company pursuant
to Sections 9.3(a) and (b), payable by wire transfer of immediately available
funds to an account designated by Buyer; provided, however, that no
termination fee shall be payable pursuant to this subsection following the
termination of this Agreement by the Company pursuant to subsection (b), (c),
(d), (e), (g) or (j) of Section 9.1 or by the Buyer other than pursuant to
Section 9.1(e) due to the willful breach of any representation, warranty,
covenant or agreement by the Company hereunder.
(d) This Section 9.3 provides the exclusive legal remedy available to
the Buyer in connection with the Company's termination of this Agreement
pursuant to Section 9.1(f).
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, (i) the Buyer shall pay all costs and expenses incurred by
it in connection with this Agreement and the Merger and (ii) the Company
shall pay all costs and expenses incurred by it in connection with this
Agreement and the Merger.
10.2 SURVIVAL OF REPRESENTATIONS. The representations and warranties
made by the parties hereto will not survive the Closing, and no party shall
make or be entitled to make any claim based upon such representations and
warranties after the Closing Date. No warranty or representation shall be
deemed to be waived or otherwise diminished as a result of any due diligence
investigation by the party to whom the warranty or representation was made or
as a result of any actual or constructive knowledge by such party with
respect to any facts, circumstances or claims or by the actual or
constructive knowledge of such Person that any warranty or representation is
false at the time of signing or Closing.
44
10.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of all parties hereto.
10.4 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in
this Agreement, any failure of the Buyer, on one hand, and the Company, on
the other, to comply with any obligation, representation, warranty, covenant,
agreement or condition herein may be waived by the other party only by a
written instrument signed by the party granting such waiver, but such waiver
or failure to insist upon strict compliance with such obligation,
representation, warranty, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
Whenever this Agreement requires or permits consent by or on behalf of any
party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
10.4.
10.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by hand or by facsimile
transmission, one Business Day after sending by a reputable national
over-night courier service or three Business Days after mailing when mailed
by registered or certified mail (return receipt requested), postage prepaid,
to the other party in the manner provided below:
(a) Any notice to any of the Company shall be delivered to the
following addresses:
High Street Corporation
0000 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: J. Xxxxx XxXxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P.
Bank of America Corporate Center
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: X. Xxxxxxxx Xxxxxx, III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Any notice to the Buyer shall be delivered to the following
addresses:
Capital Bank Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
45
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx,
L.L.P.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: D. Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change the address to which notice is to be given by notice
given in the manner set forth above.
10.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties.
10.7 SEPARABLE PROVISIONS. If any provision of this Agreement shall be
held invalid or unenforceable, the remainder nevertheless shall remain in
full force and effect.
10.8 GOVERNING LAW. The execution, interpretation and performance of
this Agreement shall be governed by the internal laws and judicial decisions
of the State of North Carolina.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.11 ENTIRE AGREEMENT. This Agreement, including the agreements and
documents that are Schedules and Exhibits hereto, embodies the entire
agreement and understanding of the parties with respect of the subject matter
of this Agreement. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the transactions
contemplated hereby and subject matter hereof.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
HIGH STREET CORPORATION
By: /s/ J. Xxxxx XxXxxxxxx
----------------------------------
Name: J. Xxxxx XxXxxxxxx
Title: President and Chief Executive Officer
BUYER:
CAPITAL BANK CORPORATION
By: /s/ Xxxxx X. Xxxx
----------------------------------
Name: Xxxxx X. Xxxx
Title: President and Chief Executive Officer
For purposes of evidencing their assent and agreement to Sections 6.4 and
6.5, as applicable:
/s/ Xxxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx, Xx.
---------------------------------
Xxxx X. Xxxxxx, Xx.
/s/ J. Xxxxx XxXxxxxxx
---------------------------------
J. Xxxxx XxXxxxxxx
Exhibit A
FORM OF PLAN OF MERGER OF
HIGH STREET CORPORATION
INTO CAPITAL BANK CORPORATION
A. Corporations Participating in Merger.
High Street Corporation, a North Carolina corporation (the "Merging
Corporation"), will merge with and into Capital Bank Corporation, a North
Carolina corporation, which will be the surviving corporation (the "Surviving
Corporation") of such merger.
B. Name of Surviving Corporation.
After the merger, the Surviving Corporation shall have the name
"Capital Bank Corporation"
C. Merger.
The merger of the Merging Corporation into the Surviving Corporation
shall be effected pursuant to the terms and conditions of this Plan. Upon the
merger becoming effective, the corporate existence of the Merging Corporation
will cease, and the corporate existence of the Surviving Corporation will
continue. The merger shall become effective on the date and at the time of
filing of the Articles of Merger containing this Plan with the North Carolina
Secretary of State or at such other time as may be specified in such Articles
of Merger. The time when the merger becomes effective is hereinafter referred
to as the "Effective Time."
D. Conversion and Exchange of Shares.
At the Effective Time, the outstanding shares of the common stock of
the corporations participating in the merger will be converted and exchanged
as follows:
1. Merging Corporation.
(a) Each outstanding share of the common stock of the Merging
Corporation[, except for shares held by the Surviving Corporation and its
Affiliates (other than shares held in a fiduciary capacity or as a result of
debts previously contracted) and Dissenting Shares] shall at the Effective
Time be converted into a fraction of a share of the common stock of the
Surviving Corporation equal to the Conversion Ratio determined in accordance
with subsection (b) below and each holder of certificates representing any
such shares shall thereafter cease to have any rights with respect to such
shares, except as provided herein.
(b) The conversion ratio upon which shares of the common stock of the
Merging Corporation will be converted into shares of the common stock of the
Surviving Corporation at the Effective Time of the Merger (the "Conversion
Ratio") shall be equal to .747 unless the Average Closing Price is less than
$12.50, in which case the Conversion Ratio shall be equal to the lesser of
(i) .830 and (ii) a fraction, the numerator of which is $9.34 and the
denominator of which is the Average Closing Price, unless, in the event the
Average Closing Price is less than $11.25, the parties mutually agree in
writing to a greater Conversion Ratio (which they shall not be obligated to
do).
(c) "AVERAGE CLOSING PRICE" means the average of the closing prices
for the Buyer's Stock on the Nasdaq National Market System (or, if the
Buyer's Stock is not then approved for trading on the Nasdaq National Market
System, then on such other securities market on which Buyer's Stock is then
principally traded) for the most recent twenty (20) trading days ending on
the third day prior to the date of the Company shareholders meeting called to
consider the Merger. For this purpose, a "trading day" is a day on which
securities are generally traded on such market, whether or not the Buyer's
Stock is traded on such day, and the closing price for the Buyer's Stock on a
trading day when it is not traded shall be deemed to be the closing price on
the most recent trading day on which the Buyer's Stock was traded. The
closing prices used for this determination shall be the closing prices as
reported by such market or, if such reports are not available, as reported by
another authoritative source identified by the Buyer and reasonably
acceptable to the Company.
2. Surviving Corporation.
(a) Each outstanding share of the common stock of the Surviving
Corporation shall remain outstanding after the Effective Time and shall not
be affected by the merger.
(b) In the event the Surviving Corporation or the Merging Corporation
changes the number of shares of its common stock issued and outstanding prior
to the Effective Time as a result of a stock split, stock dividend, stock
repurchase, redemption or similar reorganization with respect to such stock
and the record date thereof (in the case of a stock dividend) or the
effective date thereof (in the case of a stock split, stock repurchase,
redemption or similar recapitalization for which a record date is not
established) shall be prior to such Effective Time, the per share
consideration to be exchanged for the Merging Corporation's shares shall be
equitably adjusted to reflect such change.
3. Fractional Shares. No fractional shares of the common stock of
the Surviving Corporation shall be delivered as consideration for the merger
described herein. Instead, the number of shares of the common stock of the
Surviving Corporation to which a holder of the shares of the Merging
Corporation's common stock is entitled to receive shall be rounded to the
nearest whole share.
4. Surrender of Share Certificates. Each holder of a certificate
representing shares to be converted or exchanged in the merger shall
surrender such certificate for cancellation, and after the Effective Time and
after such surrender, shall be entitled to receive in exchange therefor the
consideration to which it is entitled under this Plan. Until so surrendered,
each outstanding certificate that prior to the Effective Time represented
shares of common stock of the Merging Corporation shall be deemed for all
purposes to evidence ownership of the consideration to be issued and paid for
the conversion or exchange of such shares under this Plan.
5. No Further Transfers. From and after the Effective Time of the
merger, there shall be no further transfers on the stock transfer books of
the Merging Corporation of the shares of the Merging Corporation that were
outstanding immediately prior to the Effective Time of the merger. If after
such Effective Time, certificates representing shares of the Merging
Corporation are presented to the Surviving Corporation, they shall be
canceled, and exchanged and converted into the merger consideration as
provided for herein.
E. Abandonment.
At any time prior to the merger becoming effective, the board of
directors of the Merging Corporation or the Surviving Corporation may, in
each of their discretion (but subject to the terms of the Merger Agreement
between the corporations), abandon the merger.
Exhibit B
[FORM OF LEGAL OPINION OF SMITH, ANDERSON, BLOUNT,
DORSETT, XXXXXXXX & XXXXXXXX, L.L.P.]
_________________, 0000
Xxxx Xxxxxx Corporation
0000 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to Capital Bank Corporation, a North Carolina
corporation (the "Company"), in connection with the merger of High Street
Corporation, a North Carolina corporation ("High Street"), with and into the
Company (the "Merger") pursuant to the terms of the Merger Agreement dated
____________, 2002 (the "Agreement") between the Company and High Street.
This opinion is furnished to you pursuant to the provisions of Section 8.2(d)
of the Agreement.
We have examined originals or copies of the Agreement, the Registration
Statement on Form S-4 (Registration No. 333-73268), including the Joint Proxy
Statement/Prospectus dated _______________, 2002 constituting a part thereof
(the "Proxy Statement/Prospectus"), filed with the Securities and Exchange
Commission (the "Commission") on ____________, 2002, pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Articles of
Incorporation and Bylaws, as amended, of the Company, certificates of
officers of the Company and public officials, and such other documents,
records and matters of law as we have deemed necessary or appropriate for
purposes of rendering the opinions contained herein.
As to matters of fact on which we have relied in giving certain of the
opinions set forth below, we have relied solely upon (i) information coming
to our attention in the course of our representation of the Company in
connection with the transactions contemplated by the Agreement, or otherwise
within the Actual Knowledge of the lawyers in our firm who have given
substantive attention to such transactions, (ii) certificates and statements
of officers of the Company, (iii) the representations and warranties of the
Company set forth in the Agreement, and (iv) certifications and letters
provided to us by public officials, including a Certificate of Existence
dated ___________, 2002 issued by the North Carolina Secretary of State and
the Certification dated ___________, 2002 issued by the Federal Reserve Bank
of Richmond. We have not independently verified any factual matters in
connection with the giving of the opinions set forth below.
The opinions set forth herein are limited to the effect of the laws of
the State of North Carolina and the federal laws of the United States, and no
opinion is expressed herein as to the laws of any other jurisdiction or the
effect of any such laws on the matters addressed herein.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. The Company is a duly incorporated, validly existing corporation
under the laws of the State of North Carolina and is duly registered as a
financial holding company under the Bank Holding Company Act of 1956, as
amended, and the Company has full corporate power and authority to own its
properties and conduct its business as described in the Proxy
Statement/Prospectus.
2. The authorized capital stock of the Company consists solely of
20,000,000 shares of common stock. None of the shares of the Company's
common stock to be issued pursuant to the Agreement will be issued in
violation of the statutory preemptive rights of the current or past
shareholders of the Company.
3. The execution, delivery, and performance of the Agreement by the
Company and consummation of the transactions contemplated thereby do not and
will not conflict with any of the provisions of the Articles of Incorporation
or Bylaws of the Company.
4. The Company has full corporate power and authority to execute and
deliver, and perform its obligations under, the Agreement, and the Agreement
has been duly authorized, approved, and adopted by all requisite corporate
action of the Company and by the shareholders of the Company. The Agreement
has been duly and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms.
5. The issuance of the shares of common stock of the Company to be
issued and delivered to the shareholders of High Street pursuant to the
Agreement has been duly authorized, and when such shares are issued in
accordance with the terms of the Agreement, such shares will be validly
issued, fully paid and nonassessable.
6. As of the mailing date of the Proxy Statement/Prospectus and the
date of the special meeting of shareholders of the Company with respect to
approval of the Agreement and the Merger, the information with respect to the
Company and its subsidiaries contained in the Proxy Statement/Prospectus
(other than the financial statements and other financial and statistical
information contained therein, incorporated by reference therein or omitted
therefrom, as to which we express no opinion) complied as to form in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act and the applicable rules and regulations promulgated by the
Commission thereunder.
7. To our Actual Knowledge, no consents, approvals or waivers are
required to be obtained from any person or entity in connection with the
Company's execution and delivery of the Agreement, or the performance of its
obligations or agreements or the consummation of the transactions described
therein, except for required approvals of governmental or regulatory
authorities ("Regulatory Approvals").
8. All Regulatory Approvals required to be obtained by the Company
for the consummation of the transactions contemplated by the Agreement (other
than the filing of Articles of Merger) have been obtained, all conditions
imposed on the Company in connection with such Regulatory Approvals that are
required to be satisfied prior to consummation of such transactions have been
satisfied or waived, and, to our Actual Knowledge, all such Regulatory
Approvals are in full force and effect; and, to our Actual Knowledge, no
other consents, approvals, authorizations or other orders of any court or any
governmental agency are required to be obtained by the Company for the
consummation of the transactions contemplated by the Agreement (other than
the filing of Articles of Merger with respect to the Merger).
In giving the opinions set forth above, we have made customary
assumptions and we have specifically assumed, without independent
verification, that:
2
A. High Street is duly organized, validly existing and in good
standing as a corporation under the laws of the State of North Carolina.
High Street has the full power and authority (corporate and otherwise) to
enter into and perform its obligations under the Agreement and to consummate
the transactions described therein. The Agreement and all other documents
and instruments executed by High Street in connection therewith have been
duly and validly executed and delivered on behalf of and are enforceable in
accordance with their terms against High Street;
B. Other than persons executing documents on behalf of the Company,
the signatures of all persons signing any document or instrument delivered in
connection with the Agreement or the consummation of the transactions
described therein are genuine, and all such persons executing such documents
have been duly authorized to execute and deliver such documents and
instruments;
C. All natural persons executing any document or instrument
delivered in connection with the Agreement or the consummation of the
transactions described therein, or on whose behalf any such documents were
executed, had and continue to have legal competency to do so and to become
legally bound thereby;
D. All documents submitted to us as originals are authentic, and all
documents submitted to us as certified or photostatic copies conform to the
original documents, which are themselves authentic;
E. No event will take place subsequent to the date hereof that would
cause any action taken in connection with the Agreement or the transactions
described therein to fail to comply with any law, rule, regulation, order,
judgment, decree or duty, or that would permit any party to cancel, rescind
or otherwise avoid any act;
F. High Street has complied or will comply with all conditions of
all required approvals of regulatory authorities having jurisdiction over
High Street and the Company, and the transactions described in the Agreement;
G. The minutes of the meetings of the Board of Directors of the
Company accurately reflect the actions taken at those meetings and the
meetings were duly called and a quorum was present in each case;
H. Any certificate, representation or other document on which we
have relied that was given or dated on or prior to the date hereof continues
to remain accurate, insofar as relevant to such opinions, from such earlier
date through and including the date of this letter;
I. All certificates of public officials have been properly given and
are accurate and complete; and
J. There has been no mutual mistake of fact, fraud, duress or undue
influence in connection with the Agreement or the transactions described
therein, and the conduct of the parties to the Agreement has complied with
all requirements of good faith, fair dealing and conscionability. Each party
to the Agreement has acted without notice of any defense against the
enforcement of any rights created thereby; and there are no agreements or
understandings, or any usage of trade or course of dealing, among the parties
that, in either case, would define, supplement or qualify the terms of the
Agreement.
The opinions stated herein are subject to the following qualifications
and limitations:
(a) We do not express any opinion as to the enforceability of any
provisions contained in the Agreement that (i) purport to excuse a party for
liability for its own acts, (ii) purport to make void any act
3
done in contravention thereof, (iii) purport to authorize a party to act in its
sole discretion, (iv) require waivers or amendments to be made only in writing,
(v) purport to effect waivers of constitutional, statutory or equitable rights
or the effect of applicable laws, (vi) impose liquidated damages, penalties or
forfeiture, or (vii) purport to indemnify a party for its own negligence or
willful misconduct.
(b) We do not express any opinion as to the enforceability of any
provisions contained in the Agreement purporting to require a party thereto
to pay or reimburse attorneys' fees incurred by another party, or to
indemnify another party therefor, which may be limited by applicable statutes
and decisions relating to the collection and award of attorneys' fees,
including but not limited to North Carolina General Statutes ss.6-21.2.
(c) We do not express any opinion as to the enforceability of any
provisions contained in the Agreement relating to evidentiary standards or
other standards by which the Agreement is to be construed.
(d) We express no opinion as to the election of directors to the
board of directors of the Company or its subsidiaries, or as to provisions of
the Agreement regarding the employment of any officer or director of the
Company or its subsidiaries or the payment of compensation or the provision
of any benefits to any such person. We note that the foregoing matters are
subject to the fiduciary duties of the directors of the Company and its
subsidiaries.
(e) The opinion given in paragraph 1 as to existence is based solely
on a Certificate of Existence dated _____________, 2002 issued by the North
Carolina Secretary of State. The opinion given in paragraph 1 as to the
registration of the Company is based solely on the Certification dated
_____________, 2002 issued by the Federal Reserve Bank of Richmond.
(f) As used in any paragraph of this letter, the phrase "Actual
Knowledge" means that, in giving the opinion contained in such paragraph, we
have relied with your consent exclusively on certificates of officers of the
Company as to the existence or nonexistence of the circumstances upon which
such opinion is predicated, or various representations and warranties
contained in the Agreement (and we have not conducted any independent
investigation in this regard), and that the primary lawyer group from this
firm working on the transaction has no actual conscious awareness of any
information to the contrary. "Primary lawyer group" means any lawyer in this
firm (i) who signs this opinion letter, (ii) who is actively involved in
negotiating or documenting the transaction or (iii) solely as to information
relevant to a particular opinion or factual confirmation issue, who is
primarily responsible for providing the response concerning the particular
opinion or issue.
(g) Our opinions are limited to the matters expressly stated herein,
and no opinion may be inferred or implied beyond the matters expressly stated.
(h) The enforceability of all or various provisions of the Agreement
may be limited by (A) the effect of applicable bankruptcy, insolvency,
reorganization, receivership, moratorium or similar laws from time to time in
effect relating to or limiting the enforcement of creditors' rights generally
or the rights of creditors of a bank the deposits of which are insured by the
FDIC, (B) by legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable remedies, (C)
general principles of equity and applicable laws or court decisions limiting
the availability of specific performance, injunctive relief and other
equitable remedies (including the enforceability of indemnification
provisions, regardless of whether such enforceability is considered in a
proceeding in equity or at law), and (D) federal and/or state bank holding
company, commercial bank, savings bank and deposit insurance laws, 12 U.S.C.
ss.1818(b)(6)(D) and similar bank regulatory statutes, and rules and
regulations promulgated thereunder, and by the application of principles of
public policy.
4
(i) Certain remedial and exculpatory provisions contained in the
Agreement may be unenforceable, but the remedies provided for in the
Agreement, take as a whole, should not be inadequate for the practical
realization by High Street of the benefits intended to be afforded thereby.
(j) Except as otherwise expressly specified herein, the opinions
herein are limited to matters in existence as of the date hereof, and we
undertake no responsibility to revise or supplement this letter or the
opinions herein to reflect any change in the law or facts.
(k) Our opinions set forth above represent our professional judgment
as to the matters set forth; they are not binding upon any party, any
regulatory agency, any court or any other tribunal; and they do not
constitute a guarantee of any particular result or circumstance.
This opinion letter is furnished by us as counsel to the Company to you
solely for your benefit in connection with the transactions contemplated by
the Agreement, and as such, may be relied upon solely by you in connection
with the above-described transaction. This opinion letter may not be relied
on by you for any other purpose, and may not be relied upon by, nor may
copies thereof be provided to, any other person, firm, corporation or entity
for any purposes whatsoever without our prior written consent.
Yours truly,
SMITH, ANDERSON, BLOUNT, DORSETT,
XXXXXXXX & XXXXXXXX, L.L.P.
5
4
Exhibit C
[FORM OF LEGAL OPINION OF KENNEDY, COVINGTON,
XXXXXXX & XXXXXXX, L.L.P.]
_________________, 2002
Capital Bank Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to High Street Corporation, a North Carolina
corporation (the "Company"), in connection with the merger of the Company
with and into Capital Bank Corporation ("CBC") (the "Merger") pursuant to the
terms of the Merger Agreement dated ______________, 2002 (the "Agreement")
between CBC and the Company. This opinion letter is delivered pursuant to
Section 8.3(d) of the Agreement. All capitalized terms used herein and not
otherwise defined herein shall have the same meanings herein as are ascribed
to them in the Agreement.
As such counsel, we have examined originals or copies of the
Agreement. We have also examined the articles of incorporation and bylaws of
the Company and each of its subsidiaries, High Street Banking Company (the
"Bank") and High Street Investment Services, Inc. ("HSIS"), certified
resolutions of the Board of Directors and the shareholders of the Company
with respect to the transactions contemplated by the Agreement, certificates
of officers of the Company and public officials, and such other documents,
and have made such other investigations, as we have deemed necessary or
appropriate for the purpose of giving the opinions herein expressed. We have
also examined the Registration Statement on Form S-4 (Registration No.
____________), including the Joint Proxy Statement/Prospectus dated
_______________, 2002, constituting a part thereof (the "Proxy
Statement/Prospectus"), filed with the Securities and Exchange Commission
(the "SEC") on ______________, 2002, pursuant to the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have made customary assumptions and specifically
have assumed (a) the due authorization, execution and delivery by the parties
thereto other than the Company of the documents examined by us, (b) the
genuineness of all signatures of individuals, (c) the personal legal capacity
of all individual signatories, (d) the authenticity of all documents
presented to us as originals, (e) the conformity to the originals of all
documents presented to us as copies, (f) that no event will take place
subsequent to the date hereof that would cause any action taken in connection
with the Agreement or the transactions described therein to fail to comply
with any law, rule, regulation, order, judgment, decree or duty, or that
would permit any party to cancel, rescind or otherwise avoid any act, (g) any
certificate, representation or other document on which we have relied that
was given or dated on or prior to the date hereof continues to remain
accurate, insofar as relevant to such opinions, from such earlier date
through and including the date of this letter, and (h) there has been no
mutual mistake of fact, fraud, duress or undue influence in connection with
the Agreement or the transactions described therein, and the conduct of the
parties to the Agreement has complied with all requirements of good faith,
fair dealing and conscionability. We have also assumed that the terms of the
Agreement have not been modified, supplemented or qualified by any other
agreements or understandings (written or oral) of the parties thereto, or by
any course of dealing or trade custom or usage, in any manner affecting the
opinions expressed herein.
The opinions expressed herein are limited to matters of North Carolina
law and the federal laws of the United States of America, and no opinion is
expressed as to any matter that is governed by the laws of any other
jurisdiction or the effect of any such laws on the matters addressed herein.
We express no opinion concerning any matter respecting or affected by any
laws other than laws that a lawyer in North Carolina exercising customary
professional diligence would reasonably recognize as being applicable to the
Company and its Subsidiaries, the Merger or both.
We express no opinion herein concerning the possible application to the
Agreement, the transactions contemplated thereby, or the obligations of the
parties thereunder of Section 548 of the Bankruptcy Code, 11 U.S.C. ss.548,
Sections 39-15 through 39-22 of the North Carolina General Statutes, or other
similar laws relating to "fraudulent transfers" or "fraudulent conveyances."
Our opinions are limited to the matters expressly stated herein, and no
opinion may be inferred or implied beyond the matters expressly stated.
Opinions or statements herein given "to our knowledge" and the factual
matters on which we have relied in giving our opinions herein (except for our
opinions as to corporate matters that we have given in reliance upon
certificates of officers of the Company and public officials) are based
solely upon (a) information coming to our attention in the course of our
representation of the Company in connection with the transactions
contemplated by the Agreement, or otherwise actually known to the lawyers in
our firm who have given substantive attention to such transactions, (b) the
Company's representations and warranties contained in the Agreement, and (c)
inquiries of representatives of the Company whom we believe to be reasonably
well-informed as to the factual matters in question, but without any other
investigations made for purposes of giving such opinions or statements unless
otherwise stated herein. We have not independently verified any factual
matters in connection with the giving of the opinions herein.
Our opinions in paragraph 1 as to existence are based solely on
Certificates of Existence for the Company, the Bank and HSIS dated
____________, 2002 issued by the North Carolina Secretary of State. Our
opinion in Paragraph 1 as to the registration of the Company is based solely
on a Certification dated ___________, 2002 issued by the Federal Reserve Bank
of Richmond. Our opinions in paragraph 2 as to the number of validly issued
and outstanding shares are based solely on a certificate of the Company given
to us in connection with our rendering this opinion letter.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. The Company is a duly incorporated, validly existing corporation
under the laws of the State of North Carolina and is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended.
The Bank is a duly incorporated, validly existing bank under the laws of the
State of North Carolina. HSIS is a duly incorporated, validly existing
corporation under the laws of the State of North Carolina. Each of the
Company, the Bank and HSIS has full corporate power and authority to own its
properties and conduct its business as described in the Proxy
Statement/Prospectus.
2. The authorized capital stock of the Company consists solely of
20,000,000 shares of common stock (the "Company's Common Stock") of which, to
our knowledge, 1,748,421 shares are validly issued and outstanding, fully
paid and nonassessable. The authorized capital stock of the Bank consists
solely of 20,000,000 shares of common stock (the "Bank's Common Stock") of
which, to our knowledge, 1,748,421 shares are validly issued and outstanding,
fully paid and nonassessable. The
2
authorized capital stock of HSIS consists solely of 100,000 shares of common
stock (the "HSIS Common Stock") of which, to our knowledge, [____________]
shares are validly issued and outstanding, fully paid and nonassessable.
3. To our knowledge, except as stated in Section 4.3 of the
Company's Disclosure Schedule, there are no outstanding subscriptions,
registration rights, options, warrants, or rights to acquire or issue, or any
outstanding securities or obligations convertible into, shares of the
Company's Common Stock, the Bank's Common Stock or the HSIS Common Stock.
4. To our knowledge, (i) there are no outstanding obligations on the
part of the Company to purchase, reacquire, or redeem any shares of the
Company's Common Stock, (ii) there are no outstanding obligations on the part
of the Bank to purchase, reacquire, or redeem any shares of the Bank's Common
Stock and (iii) there are no outstanding obligations on the part of HSIS to
purchase, reacquire, or redeem any shares of the HSIS Common Stock.
5. The execution, delivery, and performance of the Agreement by the
Company and consummation of the transactions contemplated thereby do not and
will not conflict with any of the provisions of the Articles of Incorporation
or Bylaws of the Company.
6. The Company has full corporate power and authority to execute,
deliver, and perform its obligations under the Agreement, and the Agreement
has been duly authorized, approved and adopted by all requisite corporate
action of the Company and by the shareholders of the Company. The Agreement
has been duly and validly executed and delivered by the Company, and
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms.
7. As of the mailing date of the Proxy Statement/Prospectus and the
date of the special meeting of shareholders of the Company with respect to
approval of the Agreement and the Merger, the information with respect to the
Company, the Bank and HSIS contained in the Proxy Statement/Prospectus (other
than the financial statements and other financial and statistical information
contained therein, incorporated by reference therein or omitted therefrom, as
to which we express no opinion) complied as to form in all material respects
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the applicable rules and regulations
promulgated by the SEC pursuant to the Exchange Act.
The opinions expressed above are subject to the following
qualifications, exceptions and limitations in addition to those set forth
above:
(a) Enforceability of the Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar state or federal laws from
time to time in effect which affect the enforcement of creditors' rights
generally or the rights of creditors of a bank, the deposits of which are
insured by the Federal Deposit Insurance Corporation.
(b) Certain waivers and remedial provisions contained in the
Agreement (including without limitation Section 9.3) may not be enforceable;
however, we believe that the Agreement contains adequate and customary
provisions for the practical realization of the benefits and security
purported to be provided thereby.
(c) Enforceability of the Agreement may be limited by federal or
state bank holding company, commercial bank, saving bank and deposit
insurance laws, 12 U.S.C. ss.1818(b)(6)(D) and
3
similar bank regulatory statutes, and rules and regulations promulgated
thereunder, and by the application of principles of public policy.
(d) Enforceability of the Agreement is subject to general equitable
principles and to general standards of commercial reasonableness.
(e) Provisions of the Agreement purporting to require that waivers be
in writing may be ineffective to preclude oral waivers or waivers by conduct
or course of dealing.
(f) No opinion is expressed as to Sections 6.4 and 6.5 of the
Agreement.
(g) Our opinions set forth above represent our professional judgment
as to the matters set forth; they are not binding upon any party, any
regulatory agency, any court or any other tribunal; and they do not
constitute a guarantee of any particular result or circumstance.
This opinion letter is delivered solely for your benefit in connection
with the closing under the Agreement and may not be relied upon by any other
person or for any other purpose without our prior written consent. Our
opinions expressed herein are as of the date hereof, and we undertake no
obligation to advise you of any changes in applicable law or any other
matters that may come to our attention after the date hereof that may affect
our opinions expressed herein.
Sincerely yours,
KENNEDY, COVINGTON, XXXXXXX & XXXXXXX,
L.L.P.
4
Exhibit D-1
AGREEMENT
This agreement (the "Agreement") is made as of the ____ day of ______,
2002, by and between High Street Banking Company, a North Carolina banking
corporation (the "Company"), and J. Xxxxx XxXxxxxxx (the "Employee").
RECITALS:
The Company is a North Carolina-state chartered bank operating as a
full service commercial bank in Buncombe and Catawba Counties, North Carolina.
The Company is a wholly-owned subsidiary of High Street Corporation
("HSC"). HSC and Capital Bank Corporation ("CBC") have entered into a Merger
Agreement dated ___________, 2002 pursuant to which HSC is being merged with
and into CBC effective as of the date of this Agreement. Capital Bank is a
wholly-owned subsidiary of CBC. In CBC's discretion, it may elect to merge
High Street Banking Company into Capital Bank (the "Merger").
The Company wishes to continue to employ the Employee as its President
and Chief Executive Officer pending completion of the Merger, at which time
the Employee's position would become Western Regional President (Buncombe and
Catawba Counties). The Employee desires to accept such engagement pursuant
to the terms hereof.
Now, therefore, in consideration of the mutual promises and conditions
herein contained and other valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree:
1. Engagement. The Company hereby engages the Employee as President and
Chief Executive Officer, provided that after completion of the Merger,
Employee shall serve hereunder as Capital Bank's Western Regional President
(Buncombe and Catawba Counties).
2. Duties. Subject to the direction and control of the Chief Executive
Officer of CBC, or his designee, the Employee shall supervise and control the
management of the Company and shall have such duties and authority as are
normally incident to the position of chief executive officer of a banking
subsidiary of a holding company together with such other duties and authority
as may be prescribed from time to time by the Chief Executive Officer of CBC
or his designee. After completion of the Merger, the Employee shall serve as
a member of the senior management team of Capital Bank and as Western
Regional President (Buncombe and Catawba Counties) and Director of Strategic
Planning and Best Practices, and subject to the direction and control of the
Chief Executive Officer of Capital Bank, or his designee, the Employee shall
supervise and control the management of the western region of Capital Bank
and shall have such duties and authority as are normally incident to the
position of regional president together with such other duties and authority
as may be prescribed from time to time by the Chief Executive Officer of
Capital Bank or his designee. The Employee shall at all times discharge his
duties in consultation with, and under the supervision of, the Chief
Executive Officer of CBC or Capital Bank, or his designee. The Employee
shall diligently and conscientiously devote his full and exclusive business
time and attention and best efforts in discharging his duties. The Employee
shall not take any action which interferes with or detracts from the
Company's business or reputation in any way. The Employee shall not directly
or indirectly render any services of a business, commercial or professional
nature to any other person or organization, whether for compensation or
otherwise, without the prior written consent
of the Company. The Employee shall make his principal office in such place as
the Chief Executive Officer of CBC and the Employee may from time to time agree.
3. Term. This Agreement shall continue in full force and effect for a
period of one (1) year commencing on the date hereof and terminating on
______ __, 2003 unless sooner terminated as provided below. The parties may
extend the term of this Agreement by mutual written agreement.
4. Compensation. For the services to be performed hereunder, the Employee
shall be entitled to compensation as follows:
4.1 The Company shall pay to the Employee a salary of at least
One Hundred Fifty-Thousand and 00/100 Dollars ($150,000.00) per year, payable
in equal semi-monthly installments, subject to applicable withholding,
together with such performance bonuses as the Board of Directors may from
time to time determine, including, if the Board of Directors shall so
determine, a special 2002 incentive of up to twenty percent (20%) of annual
salary, payable in February 2003. The salary shall be paid in addition to
any benefits which the Company may pay to or on behalf of the Employee.
4.2 The Employee shall be entitled to group health insurance
commensurate with that provided for all employees, and to participate in
pension or profit sharing programs established for all employees.
4.3 The Company shall continue to provide the Employee the use of
the automobile that is being provided to him at the time of the merger of HSC
and CBC and, once that vehicle is retired, the Company shall provide the
Employee with a fully equipped automobile approved by the Chief Executive
Officer of CBC, consistent with CBC's policies, for his use and shall pay all
costs and expenses incurred in connection with the vehicle. The Employee
acknowledges that he will be responsible for all tax liability arising in
connection with any personal use of the vehicle. The Company shall reimburse the
Employee for reasonable lodging and meal expenses incurred in connection with
Company business upon presentation of documentation and invoices acceptable to
the Company.
4.4 The Company shall reimburse the Employee for the monthly
membership dues of the Biltmore Forest Country Club and may, at the direction
and in the discretion of the Chief Executive Officer of CBC, pay initiation
fees and membership dues at additional clubs.
4.5 The Company shall provide and pay for a life insurance
policy, previously approved by the Executive Committee of HSC, on the life of
the Employee. The policy shall be owned by the Employee and shall have a
face amount of $1,000,000.00. The Employee may increase such coverage at the
Employee's expense. The Company shall arrange for long-term disability
insurance coverage for the Employee with a benefit of $7,500.00 monthly, said
disability insurance shall be at the expense of the Employee.
4.6 The Employee shall be entitled to sick leave and vacation
days on the same basis as all other employees.
5. Non-Competition.
5.1 Restriction. The Employee, acknowledging the sufficiency
of the consideration therefor, during the term hereof and for a period of two
years after termination of
2
employment with the Company, will not, in any
manner, directly or indirectly, for himself or on behalf of any other person,
firm, partnership, corporation or other entity, as employee, agent,
independent contractor, stockholder, proprietor, partner, lender, financial
backer, or in any other capacity, engage in or finance any bank or deal in
any related services, or engage in any bank business directly or indirectly
in competition with that of the Company or any of its affiliates, within
Buncombe County, Catawba County, North Carolina, and any other counties in
North Carolina in which Capital Bank or the Company has offices and over
which the Employee has had management responsibilities, except that the
Employee may acquire up to two percent (2%) of any publicly traded bank stock.
5.2 No Interference with Clients. The Employee, acknowledging
the sufficiency of the consideration therefor, during the term hereof and for
a period of two years after termination of employment with the Company, will
not, in any manner, directly or indirectly, for himself or on behalf of any
other person, firm, partnership, corporation or other entity, as employee,
agent, independent contractor, stockholder, proprietor, partner, lender,
financial backer, or in any other capacity, (i) directly or indirectly induce
any customers or clients of the Company or its affiliates to patronize any
bank other than the Company or its affiliates; (ii) canvass, solicit, or
accept any such business from a client of the Company or its affiliates; or
directly or indirectly request or advise any client of the Company to
withdraw, curtail or cancel its business with the Company or its affiliates.
5.3 Confidential Information. The Employee acknowledges that
he will occupy a position of trust and fiduciary responsibility in the
Company and that he is or will be making use of, acquiring or adding to the
Company's or its affiliates' confidential information which includes, without
limitation, customer accounts and related information, service requirements,
contract information, memoranda, technical data, other materials or records
of a proprietary nature, and records and policy matters relating to research,
finance, accounting, sales, personnel, management, and operations (all of
such matters, collectively "Confidential Information"). The Employee
expressly acknowledges that all Confidential Information is a valuable asset
of the Company or its affiliates, developed and maintained through a
substantial investment of time, effort and expense. The Employee expressly
acknowledges that the Company or its affiliates will suffer extensive loss
and damage if, during his employment or after the termination thereof for any
reason, he should take, disclose, reveal or otherwise make known, or use,
directly or indirectly, any Confidential Information to the detriment of the
Company or its affiliates or for the benefit of competitors of the Company or
its affiliates. In order to protect the Confidential Information and to
protect other employees who depend on the Company or its affiliates for
regular employment, the Employee shall not, during or at any time after the
term of employment, in any way use any Confidential Information except in
furtherance of employment by the Company, and will not copy, reproduce, or
take the original or any copies of Confidential Information, and will not
disclose any such confidential Information to anyone. Upon termination of
employment, the Employee shall deliver all Confidential Information,
including all copies and excerpts, to the Company. The Employee expressly
acknowledges that the Confidential Information is protected under the North
Carolina Trade Secrets Act, N.C. Gen. Stat. ss.ss.66-152 et seq.
5.4 Judicial Modification. If any provision of this Paragraph
5 is held to be unenforceable by a court of competent jurisdiction, then the
parties desire that such provision be "blue-penciled" or rewritten by the
court to the extent necessary to render such provision enforceable.
3
5.5 Right to Injunction. The Employee expressly recognizes
that in the event of a breach of any covenant of this Paragraph 5 the remedy
at law would be inadequate, and that any such breach would cause such
immediate and permanent damage to the Company or its affiliates as would be
irreparable and difficult to ascertain, and that the Company shall therefore
have the right to obtain immediate temporary and permanent injunctive relief
without the necessity of proving actual damages, which remedy shall be in
addition to all other rights and remedies of the Company and not in
derogation thereof. It is further understood and agreed that should the
Company file suit to restrain and enjoin the Employee from violating the
provisions of this Paragraph, the covenants set forth above will be extended
by a period of time equivalent to the period of time during which such
litigation continues, regardless of whether a preliminary injunction is
sought, granted or denied.
5.6 Survival. The provisions of this Paragraph 5 shall survive
the termination of this Agreement.
6. Termination. This Agreement and the Employee's employment may be
terminated as follows:
6.1 The Company may terminate this Agreement immediately for
Cause by giving written notice of termination to the Employee without
prejudice to any other remedy to which the Company may be entitled at law or
in equity. For purposes of this Agreement "Cause" shall mean acts or
omissions which are disloyal, dishonest or illegal; breach of fiduciary duty;
breach of this Agreement; working under the influence of controlled
substances; violation of statutes, rules, or regulations pertaining to banks
and banking and applicable to the Company; neglect of duties or failure to
diligently and effectively perform the duties required hereunder.
6.2 This Agreement shall terminate upon the death or disability
of the Employee.
6.3 The Company may terminate the Employee's employment for
reasons other than for Cause upon ninety (90) days' notice to the Employee.
In the event of such termination without Cause, the Employee shall have no
further rights under this Agreement except to continue to receive the base
salary described in Paragraph 4.1, exclusive of bonuses, and the Company
shall continue to pay the premiums on the life insurance policy described in
Paragraph 4.5, throughout the original term of this Agreement.
7. Entire Agreement; Binding Effect and Prohibition of Assignments No
Waiver of Subsequent Breach. This Agreement contains the entire
understanding of the parties with respect to its subject matter and
supercedes the prior Agreement between the parties dated August 25, 1997
which the parties hereby agree is terminated and replaced in its entirety by
this Agreement. The provisions of this Agreement shall be binding upon the
Company and the Employee and their respective heirs, personal
representatives, successors and assigns. The rights of the Employee under
this Agreement are personal to the Employee and may not be assigned without
the Company's prior written consent. The waiver of a breach of this
Agreement shall not be construed as a waiver of any subsequent breach.
8. Governing Law. This Agreement shall be construed and enforced under
the laws of North Carolina in North Carolina courts.
4
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10. Amendments. All amendments of this Agreement shall be in writing
signed by the parties.
11. Notices. All notices, offers, acceptances, requests and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed by certified mail to the recipient at the
address indicated under the signatures to this Agreement or at such other
address as any party hereto shall designate to the other parties in writing.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date and year written above.
THE COMPANY:
HIGH STREET BANKING COMPANY
By:
---------------------------------------
Xxxxxxxx X. Xxxxxx, Chairman
0000 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
THE EMPLOYEE:
--------------------------------------------
J. Xxxxx XxXxxxxxx
000 Xxxx Xxxxx
Xxxx Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
5
Exhibit D-2
AGREEMENT
This agreement (the "Agreement") is made as of the ____ day of ______,
2002, by and between High Street Banking Company, a North Carolina banking
corporation (the "Company"), and Xxxx X. Xxxxxx (the "Employee").
RECITALS:
The Company is a North Carolina-state chartered bank operating as a
full service commercial bank in Buncombe and Catawba Counties, North Carolina.
The Company is a wholly-owned subsidiary of High Street Corporation
("HSC"). HSC and Capital Bank Corporation ("CBC") have entered into a Merger
Agreement dated ___________, 2002 pursuant to which HSC is being merged with
and into CBC effective as of the date of this Agreement. Capital Bank is a
wholly-owned subsidiary of CBC. In CBC's discretion, it may elect to merge
High Street Banking Company into Capital Bank (the "Merger").
The Company wishes to continue to employ the Employee as its Executive
Vice President and Director of Administrative Services pending completion of
the Merger, at which time the Employee's position would become Senior Vice
President and Treasurer of Capital Bank. The Employee desires to accept such
engagement pursuant to the terms hereof.
Now, therefore, in consideration of the mutual promises and conditions
herein contained and other valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree:
1. Engagement. The Company hereby engages the Employee Executive Vice
President and Director of Administrative Services, provided that after
completion of the Merger, Employee shall serve hereunder as Capital Bank's
Senior Vice President and Treasurer (or similar capacity) or in such other
capacity as the parties may mutually agree.
2. Duties. Subject to the direction and control of the Chief Executive
Officer of the Company, the Employee shall supervise and control the
management of the Company in connection with financial management, marketing,
personnel, operations and all related items and shall have such duties and
authority as are normally incident to the position of executive vice
president and administrative director of a banking subsidiary of a holding
company together with such other duties and authority as may be prescribed
from time to time by the Chief Executive Officer of the Company. After
completion of the Merger, the Employee shall serve as Senior Vice President
and Treasurer (or similar capacity) of Capital Bank and shall at all times
discharge her duties in consultation with, and under the supervision of, the
Chief Financial Officer of Capital Bank. The Employee's duties shall
include, without limitation, (i) responsibility and accountability for the
treasury/funds management function, to include Asset/Liability Management,
management of the bank's investment portfolio, development and execution of
funding strategies, (ii) serving as Capital Bank's lead person for community
involvement in the greater Hickory, North Carolina market, and (iii)
responsibility for product development and management for cash management
services. The Employee shall diligently and conscientiously devote her full
and exclusive business time and attention and best efforts in discharging her
duties. The Employee shall not take any action which interferes with or
detracts from the Company's business or reputation in any way. The Employee
shall not directly or indirectly render any services of a business,
commercial or professional nature to any other person or organization,
whether for compensation or otherwise, without the prior written consent of
the Company. The Employee shall make her principal office in such place as
the Chief Financial Officer of Capital Bank and the Employee may from time to
time agree.
3. Term. This Agreement shall continue in full force and effect for a
period of one (1) year commencing on the date hereof and terminating on
______ __, 2003 unless sooner terminated as provided below. The parties may
extend the term of this Agreement by mutual written agreement.
4. Compensation. For the services to be performed hereunder, the Employee
shall be entitled to compensation as follows:
4.1 The Company shall pay to the Employee a salary of
Ninety-Two Thousand and 00/100 Dollars ($92,000.00) per year, payable in
equal semi-monthly installments, subject to applicable withholding, together
with such performance bonuses as the Board of Directors may from time to time
determine, including, if the Board of Directors shall so determine, a special
2002 incentive of up to twenty percent (20%) of annual salary, payable in
February 2003. The salary shall be paid in addition to any benefits which
the Company may pay to or on behalf of the Employee.
4.2 The Employee shall be entitled to group health insurance
commensurate with that provided for all employees, and to participate in
pension or profit sharing programs established for all employees.
4.3 The Company shall provide and pay for a life insurance
policy, previously approved by the Executive Committee of the Company's Board
of Directors, on the life of the Employee. The policy shall be owned by the
Employee and shall have a face amount of $750,000.00. The Employee may
increase such coverage at the Employee's expense. The Company shall arrange
for long-term disability insurance coverage for the Employee on the same
basis as established for other executive employees of the Company, said
disability insurance shall be at the expense of the Employee.
4.4 The Employee shall be entitled to sick leave and vacation
days on the same basis as all other employees.
5. Non-Competition.
5.1 Restriction. The Employee, acknowledging the sufficiency
of the consideration therefor, during the term hereof and for a period of two
years after termination of employment with the Company, will not, in any
manner, directly or indirectly, for herself or on behalf of any other person,
firm, partnership, corporation or other entity, as employee, agent,
independent contractor, stockholder, proprietor, partner, lender, financial
backer, or in any other capacity, engage in or finance any bank or deal in
any related services, or engage in any bank business directly or indirectly
in competition with that of the Company or any of its affiliates, within
Buncombe County and Catawba County, North Carolina, and any other county in
North Carolina in which Capital Bank or the Company has offices and over
which the employee has had management responsibilities except that the
Employee may acquire up to two percent (2%) of any publicly traded bank stock.
2
5.2 No Interference with Clients. The Employee, acknowledging
the sufficiency of the consideration therefor, during the term hereof and for
a period of two years after termination of employment with the Company, will
not, in any manner, directly or indirectly, for herself or on behalf of any
other person, firm, partnership, corporation or other entity, as employee,
agent, independent contractor, stockholder, proprietor, partner, lender,
financial backer, or in any other capacity, (i) directly or indirectly induce
any customers or clients of the Company or its affiliates to patronize any
bank other than the Company or its affiliates; (ii) canvass, solicit, or
accept any such business from a client of the Company or its affiliates; or
directly or indirectly request or advise any client of the Company to
withdraw, curtail or cancel its business with the Company or its affiliates.
5.3 Confidential Information. The Employee acknowledges that
she will occupy a position of trust and fiduciary responsibility in the
Company and that she is or will be making use of, acquiring or adding to the
Company's or its affiliates' confidential information which includes, without
limitation, customer accounts and related information, service requirements,
contract information, memoranda, technical data, other materials or records
of a proprietary nature, and records and policy matters relating to research,
finance, accounting, sales, personnel, management, and operations (all of
such matters, collectively "Confidential Information"). The Employee
expressly acknowledges that all Confidential Information is a valuable asset
of the Company or its affiliates, developed and maintained through a
substantial investment of time, effort and expense. The Employee expressly
acknowledges that the Company or its affiliates will suffer extensive loss
and damage if, during her employment or after the termination thereof for any
reason, she should take, disclose, reveal or otherwise make known, or use,
directly or indirectly, any Confidential Information to the detriment of the
Company or its affiliates or for the benefit of competitors of the Company or
its affiliates. In order to protect the Confidential Information and to
protect other employees who depend on the Company or its affiliates for
regular employment, the Employee shall not, during or at any time after the
term of employment, in any way use any Confidential Information except in
furtherance of employment by the Company, and will not copy, reproduce, or
take the original or any copies of Confidential Information, and will not
disclose any such Confidential Information to anyone. Upon termination of
employment, the Employee shall deliver all Confidential Information,
including all copies and excerpts, to the Company. The Employee expressly
acknowledges that the Confidential Information is protected under the North
Carolina Trade Secrets Act, N.C. Gen. Stat. ss.ss.66-152 et seq.
5.4 Judicial Modification. If any provision of this Paragraph
5 is held to be unenforceable by a court of competent jurisdiction, then the
parties desire that such provision be "blue-penciled" or rewritten by the
court to the extent necessary to render such provision enforceable.
5.5 Right to Injunction. The Employee expressly recognizes
that in the event of a breach of any covenant of this Paragraph 5 the remedy
at law would be inadequate, and that any such breach would cause such
immediate and permanent damage to the Company or its affiliates as would be
irreparable and difficult to ascertain, and that the Company shall therefore
have the right to obtain immediate temporary and permanent injunctive relief
without the necessity of proving actual damages, which remedy shall be in
addition to all other rights and remedies of the Company and not in
derogation thereof. It is further understood and agreed that should the
Company file suit to restrain and enjoin the Employee from violating the
provisions of this Paragraph, the covenants set forth above will be extended
by a period of time equivalent to the period of time during which such
litigation continues, regardless of whether a preliminary injunction is
sought, granted or denied.
3
5.6 Survival. The provisions of this Paragraph 5 shall survive
the termination of this Agreement.
6. Termination. This Agreement and the Employee's employment may be
terminated as follows:
6.1 The Company may terminate this Agreement immediately for
Cause by giving written notice of termination to the Employee without
prejudice to any other remedy to which the Company may be entitled at law or
in equity. For purposes of this Agreement "Cause" shall mean acts or
omissions which are disloyal, dishonest or illegal; breach of fiduciary duty;
breach of this Agreement; working under the influence of controlled
substances; violation of statutes, rules, or regulations pertaining to banks
and banking and applicable to the Company; neglect of duties or failure to
diligently and effectively perform the duties required hereunder.
6.2 This Agreement shall terminate upon the death or disability
of the Employee.
6.3 The Company may terminate the Employee's employment for
reasons other than for Cause upon ninety (90) days' notice to the Employee.
In the event of such termination without Cause, the Employee shall have no
further rights under this Agreement except to continue to receive the base
salary described in Paragraph 4.1, exclusive of bonuses, and the Company
shall continue to pay the premiums on the life insurance policy described in
Paragraph 4.4, throughout the original term of this Agreement.
7. Entire Agreement; Binding Effect and Prohibition of Assignments No
Waiver of Subsequent Breach. This Agreement contains the entire
understanding of the parties with respect to its subject matter and
supercedes the prior Agreement between the parties dated August 25, 1997
which the parties hereby agree is terminated and replaced in its entirety by
this Agreement. The provisions of this Agreement shall be binding upon the
Company and the Employee and their respective heirs, personal
representatives, successors and assigns. The rights of the Employee under
this Agreement are personal to the Employee and may not be assigned without
the Company's prior written consent. The waiver of a breach of this
Agreement shall not be construed as a waiver of any subsequent breach.
8. Governing Law. This Agreement shall be construed and enforced under
the laws of North Carolina in North Carolina courts.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10. Amendments. All amendments of this Agreement shall be in writing
signed by the parties.
11. Notices. All notices, offers, acceptances, requests and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed by certified mail to the recipient at the
address indicated under the signatures to this Agreement or at such other
address as any party hereto shall designate to the other parties in writing.
4
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date and year written above.
THE COMPANY:
HIGH STREET BANKING COMPANY
By:
-------------------------------------
J. Xxxxx XxXxxxxxx, President
0000 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
THE EMPLOYEE:
-------------------------------------
Xxxx X. Xxxxxx
5
Exhibit D-3
AGREEMENT
This agreement (the "Agreement") is made as of the ____ day of ______,
2002, by and between High Street Banking Company, a North Carolina banking
corporation (the "Company"), and X. X. Xxxxxxxxx (the "Employee").
RECITALS:
The Company is a North Carolina-state chartered bank operating as a
full service commercial bank in Buncombe and Catawba Counties, North Carolina.
The Company is a wholly-owned subsidiary of High Street Corporation
("HSC"). HSC and Capital Bank Corporation ("CBC") have entered into a Merger
Agreement dated ___________, 2002 pursuant to which HSC is being merged with
and into CBC effective as of the date of this Agreement. Capital Bank is a
wholly-owned subsidiary of CBC. In CBC's discretion, it may elect to merge
High Street Banking Company into Capital Bank (the "Merger").
The Company wishes to continue to employ the Employee as its Executive
Vice President and Director of Risk Management pending completion of the
Merger, at which time the Employee's position would become Senior Vice
President and Western Region Senior Lending Officer of Capital Bank. The
Employee desires to accept such engagement pursuant to the terms hereof.
Now, therefore, in consideration of the mutual promises and conditions
herein contained and other valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree:
1. Engagement. The Company hereby engages the Employee as Executive Vice
President and Director of Risk Management, provided that after completion of
the Merger, Employee shall serve hereunder as Capital Bank's Senior Vice
President and Western Region Senior Lending Officer or in such other capacity
as the parties may agree.
2. Duties. Subject to the direction and control of the Chief Executive
Officer of the Company and, on certain matters, to the Chief Credit Officer
of Capital Bank, the Employee shall have such duties and authority as are
normally incident to the position of executive vice president and director of
risk management of a banking subsidiary of a holding company together with
such other duties and authority as may be prescribed from time to time by the
Chief Executive Officer of the Company. After completion of the Merger, the
Employee shall serve as Western Region Senior Lending Officer and a member of
the Credit Management Committee of Capital Bank and shall at all times
discharge his duties in consultation with, and under the supervision of, the
Western Regional President of Capital Bank. The Employee shall diligently
and conscientiously devote his full and exclusive business time and attention
and best efforts in discharging his duties. The Employee shall not take any
action which interferes with or detracts from the Company's business or
reputation in any way. The Employee shall not directly or indirectly render
any services of a business, commercial or professional nature to any other
person or organization, whether for compensation or otherwise, without the
prior written consent of the Company. The Employee shall make his principal
office in such place as the Western Regional President of Capital Bank and
the Employee may from time to time agree.
3. Term. This Agreement shall continue in full force and effect for a
period of one (1) year commencing on the date hereof and terminating on
______ __, 2003 unless sooner terminated as provided below. The parties may
extend the term of this Agreement by mutual written agreement.
4. Compensation. For the services to be performed hereunder, the Employee
shall be entitled to compensation as follows:
4.1 The Company shall pay to the Employee a salary of
Ninety-Two Thousand and 00/100 Dollars ($92,000.00) per year, payable in
equal semi-monthly installments, subject to applicable withholding, together
with such performance bonuses as the Board of Directors may from time to time
determine, including, if the Board of Directors shall so determine, a special
2002 incentive of up to twenty percent (20%) of annual salary, payable in
February 2003. The salary shall be paid in addition to any benefits which
the Company may pay to or on behalf of the Employee.
4.2 The Employee shall be entitled to group health insurance commensurate
with that provided for all employees, and to participate in pension or profit
sharing programs established for all employees.
4.3 The Company shall arrange for long-term disability insurance coverage
for the Employee, said disability insurance shall be at the expense of the
Employee.
4.4 The Employee shall be entitled to sick leave and vacation
days on the same basis as all other employees.
5. Non-Competition.
5.1 Restriction. The Employee, acknowledging the sufficiency
of the consideration therefor, during the term hereof and for a period of one
year after termination of employment with the Company, will not, in any
manner, directly or indirectly, for himself or on behalf of any other person,
firm, partnership, corporation or other entity, as employee, agent,
independent contractor, stockholder, proprietor, partner, lender, financial
backer, or in any other capacity, engage in or finance any bank or deal in
any related services, or engage in any bank business directly or indirectly
in competition with that of the Company or any of its affiliates, within
Buncombe County and Catawba County, North Carolina, and any other counties in
North Carolina in which Capital Bank or the Company has offices and over
which the Employee has had management responsibilities except that the
Employee may acquire up to two percent (2%) of any publicly traded bank stock.
5.2 No Interference with Clients. The Employee, acknowledging
the sufficiency of the consideration therefor, during the term hereof and for
a period of one year after termination of employment with the Company, will
not, in any manner, directly or indirectly, for himself or on behalf of any
other person, firm, partnership, corporation or other entity, as employee,
agent, independent contractor, stockholder, proprietor, partner, lender,
financial backer, or in any other capacity, (i) directly or indirectly induce
any customers or clients of the Company or its affiliates to patronize any
bank other than the Company or its affiliates; (ii) canvass, solicit, or
accept any such business from a client of the Company or its affiliates; or
directly or indirectly request or advise any client of the Company to
withdraw, curtail or cancel its business with the Company or its affiliates.
2
5.3 Confidential Information. The Employee acknowledges that
he will occupy a position of trust and fiduciary responsibility in the
Company and that he is or will be making use of, acquiring or adding to the
Company's or its affiliates' confidential information which includes, without
limitation, customer accounts and related information, service requirements,
contract information, memoranda, technical data, other materials or records
of a proprietary nature, and records and policy matters relating to research,
finance, accounting, sales, personnel, management, and operations (all of
such matters, collectively "Confidential Information"). The Employee
expressly acknowledges that all Confidential Information is a valuable asset
of the Company or its affiliates, developed and maintained through a
substantial investment of time, effort and expense. The Employee expressly
acknowledges that the Company or its affiliates will suffer extensive loss
and damage if, during his employment or after the termination thereof for any
reason, he should take, disclose, reveal or otherwise make known, or use,
directly or indirectly, any Confidential Information to the detriment of the
Company or its affiliates or for the benefit of competitors of the Company or
its affiliates. In order to protect the Confidential Information and to
protect other employees who depend on the Company or its affiliates for
regular employment, the Employee shall not, during or at any time after the
term of employment, in any way use any Confidential Information except in
furtherance of employment by the Company, and will not copy, reproduce, or
take the original or any copies of Confidential Information, and will not
disclose any such confidential Information to anyone. Upon termination of
employment, the Employee shall deliver all Confidential Information,
including all copies and excerpts, to the Company. The Employee expressly
acknowledges that the Confidential Information is protected under the North
Carolina Trade Secrets Act, N.C. Gen. Stat. ss.ss.66-152 et seq.
5.4 Judicial Modification. If any provision of this Paragraph
5 is held to be unenforceable by a court of competent jurisdiction, then the
parties desire that such provision be "blue-penciled" or rewritten by the
court to the extent necessary to render such provision enforceable.
5.5 Right to Injunction. The Employee expressly recognizes
that in the event of a breach of any covenant of this Paragraph 5 the remedy
at law would be inadequate, and that any such breach would cause such
immediate and permanent damage to the Company or its affiliates as would be
irreparable and difficult to ascertain, and that the Company shall therefore
have the right to obtain immediate temporary and permanent injunctive relief
without the necessity of proving actual damages, which remedy shall be in
addition to all other rights and remedies of the Company and not in
derogation thereof. It is further understood and agreed that should the
Company file suit to restrain and enjoin the Employee from violating the
provisions of this Paragraph, the covenants set forth above will be extended
by a period of time equivalent to the period of time during which such
litigation continues, regardless of whether a preliminary injunction is
sought, granted or denied.
5.6 Survival. The provisions of this Paragraph 5 shall survive
the termination of this Agreement.
3
6. Termination. This Agreement and the Employee's employment may be
terminated as follows:
6.1 The Company may terminate this Agreement immediately for
Cause by giving written notice of termination to the Employee without
prejudice to any other remedy to which the Company may be entitled at law or
in equity. For purposes of this Agreement "Cause" shall mean acts or
omissions which are disloyal, dishonest or illegal; breach of fiduciary duty;
breach of this Agreement; working under the influence of controlled
substances; violation of statutes, rules, or regulations pertaining to banks
and banking and applicable to the Company; neglect of duties or failure to
diligently and effectively perform the duties required hereunder.
6.2 This Agreement shall terminate upon the death or disability
of the Employee.
6.3 The Company may terminate the Employee's employment for
reasons other than for Cause upon ninety (90) days' notice to the Employee.
In the event of such termination without Cause, the Employee shall have no
further rights under this Agreement except to continue to receive the base
salary described in Paragraph 4.1, exclusive of bonuses.
7. Entire Agreement; Binding Effect and Prohibition of Assignments No
Waiver of Subsequent Breach. This Agreement contains the entire
understanding of the parties with respect to its subject matter. The
provisions of this Agreement shall be binding upon the Company and the
Employee and their respective heirs, personal representatives, successors and
assigns. The rights of the Employee under this Agreement are personal to the
Employee and may not be assigned without the Company's prior written
consent. The waiver of a breach of this Agreement shall not be construed as
a waiver of any subsequent breach.
8. Governing Law. This Agreement shall be construed and enforced under
the laws of North Carolina in North Carolina courts.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10. Amendments. All amendments of this Agreement shall be in writing
signed by the parties.
11. Notices. All notices, offers, acceptances, requests and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed by certified mail to the recipient at the
address indicated under the signatures to this Agreement or at such other
address as any party hereto shall designate to the other parties in writing.
4
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date and year written above.
THE COMPANY:
HIGH STREET BANKING COMPANY
By:
--------------------------------
J. Xxxxx XxXxxxxxx, President
0000 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
THE EMPLOYEE:
--------------------------------
X. X. Xxxxxxxxx
5
List and Agreement to Furnish
Omitted Schedules to Merger Agreement
Company Disclosure Schedule
Section 4.3 Capital Stock; Subsidiaries
Section 4.10 Environmental Matters
Section 4.11 Compliance with Laws
Section 4.14 Material Contracts
Section 4.15 Legal Proceedings
Section 4.24 Commissions
Section 6.1(a) Covenant Exceptions
Buyer Disclosure Schedule
Section 5.3 Buyer's Stock; Subsidiaries
Section 5.6 Absence of Certain Changes or Events
The Company hereby agrees to furnish supplementally a copy of any omitted
schedules to the Securities and Exchange Commission upon request.
