AGREEMENT AND PLAN OF REORGANIZATION
UNITED CAROLINA BANCSHARES CORPORATION
AND
SOUTHERN NATIONAL CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
THE MERGER...............................................................................................6
2.1 Merger..........................................................................................6
2.2 Filing; Plan of Merger..........................................................................6
2.3. Effective Time..................................................................................6
2.4 Closing.........................................................................................7
2.5 Effect of Merger................................................................................7
2.6 Further Assurances..............................................................................7
2.7 Merger Consideration............................................................................8
2.8 Conversion of Shares; Payment of Merger Consideration...........................................8
2.9 Dissenting Shares...............................................................................9
2.10 Conversion of Stock Options.....................................................................9
2.11 Merger of Subsidiary...........................................................................11
2.12 Anti-Dilution..................................................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UCB...................................................................11
3.1 Capital Structure..............................................................................11
3.2 Organization, Standing and Authority...........................................................12
3.3 Ownership of Subsidiaries.....................................................................12
3.4 Organization, Standing and Authority of the Subsidiaries.......................................12
3.5 Authorized and Effective Agreement.............................................................12
3.6 Securities Filings.............................................................................13
3.7 Financial Statements; Minute Books.............................................................13
3.8 Material Adverse Change........................................................................14
3.9 Absence of Undisclosed Liabilities.............................................................14
3.10 Properties.....................................................................................14
3.11 Environmental Matters..........................................................................14
3.12 Allowance for Loan Losses......................................................................15
3.13 Tax Matters....................................................................................15
3.14 Employees; Compensation; Benefit Plans.........................................................16
3.15 Certain Contracts..............................................................................20
3.16 Legal Proceedings; Regulatory Approvals........................................................20
3.17 Compliance with Laws...........................................................................21
3.18 Brokers and Finders............................................................................21
3.19 Loans..........................................................................................21
3.20 Repurchase Agreements..........................................................................21
3.21 Deposit Accounts...............................................................................22
3.22 Related Party Transactions.....................................................................22
3.23 Certain Information............................................................................22
3.24 Accounting, Tax and Regulatory Matters.........................................................22
3.25 State Takeover Laws............................................................................23
3.26 Derivatives Contracts..........................................................................23
3.27 Fairness Opinion...............................................................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SNC..................................................................................................23
4.1 Capital Structure of SNC.......................................................................23
4.2 Organization, Standing and Authority of SNC....................................................23
4.3 Authorized and Effective Agreement.............................................................24
4.4 Organization, Standing and Authority of SNC Subsidiaries and Acquisition
Subsidiary.....................................................................................24
4.5 Securities Documents...........................................................................25
4.6 Financial Statements...........................................................................25
4.7 Material Adverse Change........................................................................25
4.8 Legal Proceedings; Regulatory Approvals........................................................25
4.9 Absence of Undisclosed Liabilities.............................................................26
4.10 Allowance for Loan Losses......................................................................26
4.11 Tax Matters....................................................................................26
4.12 Compliance with Laws...........................................................................26
4.13 Certain Information............................................................................27
4.14 Accounting, Tax and Regulatory Matters.........................................................27
4.15 Share Ownership................................................................................27
ARTICLE V
COVENANTS...............................................................................................27
5.1 Shareholders' Meetings.........................................................................27
5.2 Registration Statement; Joint Proxy Statement/Prospectus.......................................28
5.3 Plan of Merger; Reservation of Shares..........................................................28
5.4 Additional Acts................................................................................29
5.5 Best Efforts...................................................................................29
5.6 Certain Accounting Matters.....................................................................29
5.7 Access to Information..........................................................................30
5.8 Press Releases.................................................................................30
5.9 Forbearances of UCB............................................................................30
5.10 Employment Agreements..........................................................................33
5.11 Affiliates.....................................................................................33
5.12 Employee Benefit Plans.........................................................................33
5.13 Directors and Officers Protection..............................................................34
5.14 Forbearances of SNC............................................................................35
5.15 Assumption of Agreement by Acquiror............................................................36
5.16 Reports........................................................................................36
5.17 Exchange Listing...............................................................................36
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................37
6.1 Conditions Precedent --SNC and UCB.............................................................37
6.2 Conditions Precedent -- UCB....................................................................38
6.3 Conditions Precedent -- SNC ...................................................................39
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT.......................................................................40
7.1 Termination....................................................................................40
7.2 Effect of Termination..........................................................................43
7.3 Survival of Representations, Warranties and Covenants..........................................43
7.4 Waiver.........................................................................................44
7.5 Amendment or Supplement........................................................................44
ARTICLE VIII
MISCELLANEOUS...........................................................................................44
8.1 Expenses.......................................................................................44
8.2 Entire Agreement...............................................................................44
8.3 No Assignment..................................................................................45
8.4 Notices........................................................................................45
8.5 Captions.......................................................................................46
8.6 Counterparts...................................................................................46
8.7 Governing Law..................................................................................46
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement"), dated as of November 1, 1996, between UNITED CAROLINA BANCSHARES
CORPORATION ("UCB"), a North Carolina corporation having its principal office at
Whiteville, North Carolina, and SOUTHERN NATIONAL CORPORATION ("SNC"), a North
Carolina corporation having its principal office at Winston-Salem, North
Carolina;
R E C I T A L S:
The parties desire that a wholly-owned subsidiary of SNC to be formed
("Acquisition Subsidiary") shall be merged with and into UCB (said transaction
being hereinafter referred to as the "Merger") pursuant to a plan of merger (the
"Plan of Merger") substantially in the form set forth in Articles of Merger
attached as Annex A hereto ("Articles of Merger"), and the parties desire to
provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Business Day" shall mean all days other than Saturdays, Sundays and
Federal Reserve holidays.
"Closing Date" shall mean the date specified pursuant to Section 2.4 as
the date on which the parties hereto shall close the transactions contemplated
herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Disclosed" shall mean disclosed in a Securities Document filed with
the Commission or in the UCB Disclosure Letter.
"Effective Time" shall mean the time specified in Section 2.3 as the
Effective Time of the Merger.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from
the presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means all applicable federal, state and local laws
and regulations, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, that relate to pollution or
protection of human health or the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Financial Statements" shall mean (a) with respect to SNC, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
SNC as of December 31, 1995, 1994, and 1993, and the related consolidated
statements of income, shareholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1995, 1994, and 1993, as filed by SNC in Securities Documents and (ii) the
consolidated balance sheets of SNC (including related notes and schedules, if
any) and the related consolidated statements of income, shareholders' equity and
cash flows (including related notes and schedules, if any) included in
Securities Documents filed by SNC with respect to periods ended subsequent to
December 31, 1995, and (b) with respect to UCB, (i) the consolidated balance
sheets (including related notes and schedules, if any) of UCB as of December 31,
1995, 1994, and 1993, and the related consolidated statements of income, changes
in shareholders' equity and cash flows (including related notes and schedules,
if any) for each of the three years ended December 31, 1995, 1994, and 1993 as
filed by UCB in Securities Documents and (ii) the consolidated balance
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sheets of UCB (including related notes and schedules, if any) and the related
consolidated statements of income, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) included in Securities
Documents filed by UCB with respect to periods ended subsequent to December 31,
1995.
"Joint Proxy Statement/Prospectus" shall mean the joint proxy statement
and prospectus, together with any supplements thereto, sent to shareholders of
UCB and the shareholders of SNC to solicit their votes in connection with this
Agreement and the Plan of Merger.
"Material Adverse Effect" on SNC or UCB shall mean an event, change, or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse effect on (i) the financial condition,
results of operations, business or business prospects of SNC and the SNC
Subsidiaries, taken as a whole, or UCB and the Subsidiaries, taken as a whole,
or (ii) the ability of SNC or UCB to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of a party (or any of its
affiliates) taken with the prior informed consent of the other party in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of the
parties, including expenses incurred by the parties in consummating the
transactions contemplated by this Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"NCBCA" shall mean the North Carolina Business Corporation Act as
amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Registration Statement" shall mean the registration statement of SNC
with respect to the SNC Common Stock to be issued in the Merger as declared
effective by the Commission under the Securities Act.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests, and stock
appreciation rights, performance units and similar stock-based rights whether or
not they obligate the issuer thereof to issue stock or other securities or to
pay cash.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws.
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"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939 as amended; and the rules and
regulations of the Commission promulgated thereunder.
"SNC Common Stock" shall mean the shares of common stock, par value
$5.00 per share, of SNC.
"SNC Option Agreement" shall mean the Option Agreement dated as of even
date herewith under which SNC has an option to purchase shares of UCB, which
shall be executed immediately following execution of this Reorganization
Agreement.
"SNC Subsidiaries" shall mean the Subsidiaries of SNC, which shall
include any corporation, bank, savings association, or other organization
acquired as a Subsidiary of SNC in the future and held as a Subsidiary by SNC at
the Effective Time.
"Stock Option Plan" shall mean, collectively or singularly, UCB's 1986
Key Employee Stock Option Plan; 1995 Stock Option and Incentive Award; Stock
Option Policy for Nonemployee Directors of Triad Bank; Triad Bank Employees'
Stock Option Plan (Non- qualified); Seaboard Savings Bank, Inc., SSB 1993
Nonstatutory Stock Option Plan for Directors; Seaboard Savings Bank, Inc., SSB
1993 Incentive Stock Option Plan; and Bank of Iredell 1987 Employee Nonqualified
Stock Option Program.
"Stock Option" shall mean, collectively, any option, granted under the
Stock Option Plan and unexercised on the date hereof, to acquire shares of UCB
Common Stock, aggregating 357,577 shares.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either owns or controls
50% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned
or controlled in a fiduciary capacity).
"TILA" shall mean the Truth in Lending Act, as amended.
"UCB Common Stock" shall mean the shares of common stock, par value
$4.00 per share, of UCB.
"UCB Disclosure Letter" shall mean the written information entitled
"UCB Disclosure Letter" dated the date of this Agreement and delivered not later
than ten days after the execution of this Agreement by UCB to SNC, and
describing in reasonable detail the matters contained therein. Each disclosure
made therein shall be in existence on the date of this Agreement and shall
specifically reference each Section of this Agreement under which such
disclosure is made.
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Information disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced.
"UCB Option Agreement" shall mean the Option Agreement dated as of even
date herewith under which UCB has an option to purchase shares of SNC, which
shall be executed immediately following execution of this Reorganization
Agreement.
"UCB Subsidiaries" shall mean the Subsidiaries of UCB, which shall
include any corporation, bank, savings association, or other organization
acquired as a Subsidiary of UCB in the future and held as a Subsidiary by UCB at
the Effective Time.
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the
following sections:
Acquisition Subsidiary Recitals
Agreement Introduction
Articles of Merger Recitals
Average Closing Price Section 7.1(i)
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7
Constituent Corporations Section 2.1
Determination Date Section 7.1(i)
Dissenting Shareholder Section 2.9
Dissenting Shares Section 2.9
Employee Section 5.12
Exchange Ratio Section 2.7
Index Group Section 7.1(i)
Maximum Amount Section 5.13(b)
Merger Recitals
Merger Consideration Section 2.7
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Reorganization Agreement Introduction
SNC Introduction
SNC Option Plan Section 2.10(c)
SNC Ratio Section 7.1(A)(2)
Surviving Corporation Section 2.1(a)
UCB Introduction
UCB-SC Section 3.4
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ARTICLE II
THE MERGER
2.1 Merger
Acquisition Subsidiary and UCB are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the NCBCA. At the
Effective Time:
(a) Acquisition Subsidiary shall be merged with and into UCB in
accordance with the applicable provisions of the NCBCA, with UCB being the
surviving corporate entity (hereinafter sometimes referred to as the "Surviving
Corporation").
(b) The separate existence of Acquisition Subsidiary shall cease and
the Merger shall in all respects have the effect provided for in Section 2.5.
(c) The Articles of Incorporation of UCB at the Effective Time shall
become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of UCB at the Effective Time shall become the Bylaws of
the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless (i) this Agreement and the
Plan of Merger are duly approved by a vote of a majority of the outstanding
shares of each of UCB (subject in the case of UCB to the provisions of Article X
of its Articles of Incorporation) and Acquisition Subsidiary entitled to be
voted, and (ii) the issuance of the shares of SNC Common Stock pursuant to the
terms of this Agreement has been approved by a vote of a majority of the votes
cast at the SNC shareholders' meeting held to consider matters related to this
Agreement; provided the total vote cast represents over 50 percent of the shares
of SNC Common Stock entitled to vote. Upon fulfillment or waiver of the
conditions specified in Article VI and provided that this Agreement has not been
terminated pursuant to Article VII, the Constituent Corporations will cause the
Articles of Merger to be executed and filed with the Office of the Secretary of
State of North Carolina. The Plan of Merger is incorporated herein by reference,
and adoption of this Agreement by the Boards of Directors of the Constituent
Corporations and approval by the shareholders of the Constituent Corporations
shall constitute adoption and approval of the Plan of Merger.
2.3. Effective Time
The Merger shall be effective at the day and hour specified in the
Articles of Merger filed with the Secretary of State of North Carolina (herein
sometimes referred to as the "Effective Time").
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2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the executive offices of SNC, BB&T Financial
Center, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx- Xxxxx, Xxxxx Xxxxxxxx, at 11:00 a.m. on
the Business Day designated by SNC which is within thirty days following the
satisfaction of the conditions to Closing set forth in Article VI, or such later
date as the parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the separate existence of
Acquisition Subsidiary shall cease, and the Surviving Corporation shall
thereupon and thereafter, to the extent consistent with its Articles of
Incorporation, possess all the rights, privileges, immunities, and franchises,
of a public as well as of a private nature, of each of the Constituent
Corporations; and all property, real, personal and mixed, and all debts due on
whatever account, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Constituent Corporations shall
be taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed; and the title to any real estate or any interest
therein vested in either of the Constituent Corporations shall not revert or be
in any way impaired by reason of the Merger. The Surviving Corporation shall
thenceforth be responsible and liable for all the liabilities, obligations and
penalties of each of the Constituent Corporations; and any claim existing or
action or proceeding, civil or criminal, pending by or against either of the
Constituent Corporations may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in its place; and any judgment
rendered against either of the Constituent Corporations may be enforced against
the Surviving Corporation. Neither the rights of creditors nor any liens upon
the property of either of the Constituent Corporations shall be impaired by
reason of the Merger.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any further deeds, assignments or assurances
in law or any other actions are necessary, desirable or proper to vest, perfect
or confirm of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Constituent Corporations acquired or to be
acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper officers
and directors shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and that the proper officers and directors of the Surviving Corporation are
fully authorized and directed in the name of the Constituent Corporations or
otherwise to take any and all such actions.
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2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the whole
shares of SNC Common Stock to be exchanged for each share of UCB Common Stock
issued and outstanding as of the Effective Time, and cash (without interest) to
be payable in exchange for any fractional share of SNC Common Stock which would
otherwise be exchanged for a share of UCB Common Stock. The number of shares of
SNC Common Stock to be issued in exchange for each issued and outstanding share
of UCB Common Stock shall be in the ratio of 1.135 shares of SNC Common Stock
for each share of UCB Common Stock issued and outstanding (subject to possible
adjustment pursuant to Section 7.1(h), the "Exchange Ratio"). The value of any
fractional share shall be determined by multiplying the fractional part of such
share of SNC Common Stock by the market value of one share of SNC Common Stock
at the Effective Time, which shall be the closing price of such common stock on
the NYSE-Composite Transactions List (as reported by THE WALL STREET JOURNAL or,
if not reported thereby, any other authoritative source selected by SNC) on the
first trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of UCB or the holders of record of UCB Common Stock, each
share of UCB Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and shall represent the right to receive,
upon surrender of the certificate representing such share of UCB Common Stock
(as provided in paragraph (d) below), the Merger Consideration.
(b) Each share of the common stock of Acquisition Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into one
share of the Surviving Corporation.
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of UCB Common Stock shall be
deemed upon the Effective Time for all purposes to represent only the right to
receive the Merger Consideration as described in this Section 2.8. No interest
will be paid or accrued on the Merger Consideration upon the surrender of the
certificate or certificates representing shares of UCB Common Stock. With
respect to any certificate for UCB Common Stock that has been lost or destroyed,
the Surviving Corporation shall pay the Merger Consideration attributable to
such certificate upon receipt of a surety bond or other adequate indemnity and
evidence reasonably satisfactory to it of ownership of the shares represented
thereby. After the Effective Time, no transfer of the shares of UCB Common Stock
outstanding immediately prior to the Effective Time shall be made on the stock
transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, UCB shall cause to be delivered
or mailed to each UCB shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any
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shares of UCB Common Stock in exchange for the Merger Consideration. Upon
surrender of such certificates, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably requested, UCB shall promptly cause the
transfer to the persons entitled thereto of the Merger Consideration.
(e) The Surviving Corporation shall pay any dividends or other
distributions with a record date prior to the Effective Time which have been
declared or made by UCB in respect of such shares of UCB Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by law, former shareholders of record of
UCB shall be entitled to vote after the Effective Time at any meeting of SNC
shareholders the number of whole shares of SNC Common Stock into which their
respective shares of UCB Common Stock are converted, regardless of whether such
holders have exchanged their certificates for certificates representing UCB
Common Stock for certificates representing SNC Common Stock in accordance with
the provisions of this Agreement. Whenever a dividend or other distribution is
declared by SNC on the SNC Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of SNC Common Stock issuable pursuant to this
Agreement, but after the Effective Time no dividend or other distribution
payable to the holders of record of SNC Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any certificate until
such holder surrenders such certificate for exchange as provided in this Section
2.8. Upon surrender of such certificate, both the SNC Common Stock certificate
and any undelivered dividends and cash payments payable hereunder (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
2.9 Dissenting Shares
Any UCB shareholder who shall have dissented from the Merger in
accordance with the NCBCA and who has properly exercised such shareholder's
rights to demand payment of the value of the Shareholder's shares (the
"Dissenting Shares") as provided in the NCBCA (the "Dissenting Shareholder")
shall thereafter have only such rights, if any, as are provided a Dissenting
Shareholder in accordance with the NCBCA and shall have no rights under Sections
2.7 and 2.8; provided, however, that if a Dissenting Shareholder shall withdraw
(in accordance with the NCBCA) the demand for such appraisal or shall become
ineligible for such appraisal, then such Dissenting Shareholder's Dissenting
Shares automatically shall cease to be Dissenting Shares and shall be converted
into and represent only the right to receive from the Surviving Corporation the
Merger Consideration provided for in Section 2.7 upon surrender of the
certificate representing the Dissenting Shares.
2.10 Conversion of Stock Options
(a) At the Effective Time, each Stock Option then outstanding, whether
or not then exercisable, shall be converted into and become rights with respect
to SNC Common Stock, and SNC shall assume each Stock Option, in accordance with
the terms of the Stock Option Plan and
9
stock option agreement, or other agreement, by which it is evidenced, except
that from and after the Effective Time (i) SNC and its Compensation Committee
shall be substituted for UCB and the Committee of UCB's Board of Directors
administering the Stock Option Plan, (ii) each Stock Option assumed by SNC may
be exercised solely for shares of SNC Common Stock, (iii) the number of shares
of SNC Common Stock subject to such Stock Option shall be the number of whole
shares of SNC (omitting any fractional share) determined by multiplying the
number of shares of UCB Common Stock subject to such Stock Option immediately
prior to the Effective Time by the Exchange Ratio, and (iv) the per share
exercise price under each such Stock Option shall be adjusted by dividing the
per share exercise price under each such Stock Option by the Exchange Ratio and
rounding up to the nearest cent. In addition, notwithstanding the provisions of
clauses (iii) and (iv) of the first sentence of this Section 2.10(a), each Stock
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Code, and the Regulations promulgated thereunder, so as to
continue as an incentive stock option under Section 424(a) of the Code, and so
as not to constitute a modification, extension, or renewal of the option, within
the meaning of Section 424(h) of the Code. SNC and UCB agree to take all
necessary steps to effectuate the foregoing provisions of this Section 2.10.
(b) As soon as practicable after the Effective Time, SNC shall deliver
to the participants in the Stock Option Plan an appropriate notice setting forth
such participant's rights pursuant thereto, and the grants pursuant to such
Stock Option Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 2.10(a) after giving effect to
the Merger). SNC shall comply with the terms of the Stock Option Plan to ensure,
to the extent required by and subject to the provisions of such Stock Option
Plan, that Stock Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, SNC shall take all corporate
action necessary to reserve for issuance sufficient shares of SNC Common Stock
for delivery upon exercise of Stock Options assumed by it in accordance with
this Section 2.10. As soon as practicable after the Effective Time, SNC shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), with respect to the shares of SNC
Common Stock subject to Stock Options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, where applicable, SNC shall administer the
Stock Option Plan assumed pursuant to this Section 2.10 in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent
necessary to preserve for such individuals the benefits of Rule 16b-3 to the
extent such benefits were available to them prior to the Effective Time. UCB
hereby represents that the Stock Option Plan in its current form complies with
Rule 16b-3 to the extent, if any, required as of November 1, 1996.
(c) Notwithstanding the foregoing provisions of this Section 2.10, SNC
may at its election substitute as of the Effective Time options under the
Southern National Corporation 1995 Omnibus Stock Incentive Plan (the "SNC Option
Plan") for all or a part of the Stock Options, subject to the following
conditions: (i) the requirements of Section 2.10(a)(iii) and (iv) shall be
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met; (ii) such substitution shall not constitute a modification, extension or
renewal of any of the Stock Options which are incentive stock options; (iii) the
substituted options shall continue in effect on the same terms and conditions as
the Stock Option Plan or other document granting the Stock Option; and (iv) each
grant of a substitute option shall have been specifically approved in advance by
the full Board of Directors of SNC or by a committee consisting solely of
"non-employee" directors as defined in Rule 16b-3. As soon as practicable
following the Effective Time, SNC shall deliver to the participants receiving
substitute options under the SNC Option Plan an appropriate notice setting forth
such participant's rights pursuant thereto. SNC has reserved under the SNC
Option Plan adequate shares of SNC Common Stock for delivery upon exercise of
any such substituted options. SNC hereby represents that the SNC Option Plan in
its current form complies with Rule 16b-3 to the extent, if any, required as of
November 1, 1996.
2.11 Merger of Subsidiary
In the event that SNC shall request, UCB shall cooperate in taking such
actions, and shall cooperate in causing the UCB Subsidiaries to take such
actions, as may be required in order to effect, at the Effective Time, the
merger of one or more of the UCB Subsidiaries with and into, in each case, one
of the SNC Subsidiaries.
2.12 Anti-Dilution
In the event SNC changes the number of shares of SNC Common Stock
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend or other similar recapitalization, and the record date thereof
(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 the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UCB
Except as otherwise Disclosed, UCB represents and warrants to SNC as
follows:
3.1 Capital Structure
The authorized capital stock of UCB consists of 40,000,000 shares of
UCB Common Stock, and 2,000,000 shares of preferred stock, par value $10.00 per
share. As of the date hereof, 24,265,175 shares of UCB Common Stock are issued
and outstanding, and no other shares of capital stock of UCB, common or
preferred, are issued and outstanding. All outstanding shares of UCB Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable. No other classes of capital stock of UCB are authorized. No
shares of capital stock have been reserved for any purpose, except for (i)
357,577 shares of UCB Common Stock in connection with the Stock Option Plan,
(ii) 4,828,960 shares of UCB Common Stock in connection with the SNC Option
Agreement, (iii) 2,500,000 shares of UCB Common Stock in
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connection with its 401(k) plan; and (iv) 900,000 shares of UCB Common Stock in
connection with its Long-Term Incentive Plan. Except as set forth herein, there
are no Rights authorized, issued or outstanding with respect to the capital
stock of UCB. Holders of UCB Common Stock do not have preemptive rights.
3.2 Organization, Standing and Authority
UCB is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina with full corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its assets. UCB is not required to be qualified to do business in any
other state of the United States or foreign jurisdiction. UCB is registered as a
bank holding company under the Bank Holding Company Act.
3.3 Ownership of Subsidiaries
Except as Disclosed in the UCB Disclosure Letter, UCB does not own,
directly or indirectly, any outstanding capital stock or other voting securities
or ownership interests of any corporation, partnership, joint venture, or other
organization which would constitute a Subsidiary, except for the UCB
Subsidiaries. The outstanding shares of capital stock of the UCB Subsidiaries
are validly issued and outstanding, fully paid and nonassessable, and all such
shares are directly or indirectly owned by UCB free and clear of all liens,
claims and encumbrances or preemptive rights of any person. No Rights are
authorized, issued or outstanding with respect to the capital stock of the UCB
Subsidiaries, and there are no agreements, understandings or commitments
relating to the right of UCB to vote or to dispose of said shares. None of the
shares of capital stock of the UCB Subsidiaries has been issued in violation of
the preemptive rights of any person.
3.4 Organization, Standing and Authority of the Subsidiaries
Each UCB Subsidiary which is an insured depository institution is a
state-chartered, non-member commercial bank. Each of the UCB Subsidiaries is
validly existing and in good standing under the laws of its state of
organization. Each of the UCB Subsidiaries has full power and authority to carry
on its business as now conducted, and is duly qualified to do business in its
state of organization. No UCB Subsidiary is required to be qualified to do
business in any other state of the United States or foreign jurisdiction other
than such UCB Subsidiary's state of organization, or is engaged in any
activities that have not been Disclosed.
3.5 Authorized and Effective Agreement
(a) UCB has all requisite corporate power and authority to enter into
and (subject to receipt of all necessary governmental approvals and the receipt
of approval of the UCB shareholders of this Agreement and the Plan of Merger) to
perform all of its obligations under this Reorganization Agreement, the Articles
of Merger, the UCB Option Agreement and the SNC Option Agreement. The execution
and delivery of this Reorganization Agreement, the Articles of Merger and said
Option Agreements, and consummation of the transactions contemplated
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hereby and thereby, have been duly and validly authorized by all necessary
corporate action in respect thereof, except in the case of this Agreement and
the Plan of Merger, the approval of UCB shareholders pursuant to and to the
extent required by applicable law. This Agreement and the Plan of Merger
constitute legal, valid and binding obligations of UCB, and each is enforceable
against UCB in accordance with its terms, in each such case subject to (i)
bankruptcy, fraudulent transfer, insolvency, moratorium, reorganization,
conservatorship, receivership, or other similar laws from time to time in effect
relating to or affecting the enforcement of rights of creditors of FDIC insured
institutions or the enforcement of creditors' rights generally; and (ii) general
principles of equity, and except that the availability of equitable remedies or
injunctive relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement, the Articles
of Merger, the UCB Option Agreement or the SNC Option Agreement, nor
consummation of the transactions contemplated hereby or thereby, nor compliance
by UCB with any of the provisions hereof or thereof, shall (i) conflict with or
result in a breach of any provision of the articles of incorporation or by-laws
of UCB or any UCB Subsidiary, (ii) subject to receipt of any required consents
or approvals, constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of UCB or
any UCB Subsidiary pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) subject to receipt of all
required governmental approvals, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to UCB or any UCB Subsidiary.
3.6 Securities Filings
UCB has timely filed all Securities Documents required by the
Securities Laws since December 31, 1993. UCB shall Disclose to SNC a true and
complete copy of each Securities Document filed by UCB with the Commission after
December 31, 1993 and prior to the date hereof, which are all of the Securities
Documents that UCB was required to file during such period. As of their
respective dates of filing, such Securities Documents complied in all material
respects with the Securities Laws as then in effect, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 Financial Statements; Minute Books
The Financial Statements of UCB fairly present or will fairly present,
as the case may be, the consolidated financial position of UCB and the UCB
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and statements of cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments that are not material in amount or effect) in
conformity with generally accepted accounting principles applicable to financial
institutions applied on a consistent basis. The minute books of UCB and each of
the UCB Subsidiaries contain or will contain at Closing
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legally sufficient records of all meetings and other corporate actions of its
shareholders and Board of Directors (including committees of its Board of
Directors).
3.8 Material Adverse Change
Since December 31, 1995, UCB and the UCB Subsidiaries have not incurred
any material liability except as disclosed in the most recent UCB Financial
Statements, or entered into any transactions with affiliates, other than in the
ordinary course of business consistent with past practices, nor has there been
any change, or any event involving a prospective change, in the business,
financial condition or results of operations of UCB and the UCB Subsidiaries
which has had, or is reasonably likely to have, a Material Adverse Effect on
UCB.
3.9 Absence of Undisclosed Liabilities
Neither UCB nor any UCB Subsidiary has any liability (contingent or
otherwise) that is material to UCB on a consolidated basis or that, when
combined with all other similar liabilities, would be material to UCB on a
consolidated basis, except as disclosed in the most recent Financial Statements
of UCB and except for liabilities made in the ordinary course of its business
since the date of UCB's most recent Financial Statements.
3.10 Properties
(a) UCB and the UCB Subsidiaries have good and marketable title, free
and clear of all liens, encumbrances, charges, defaults or equitable interests,
to all of the properties and assets, real and personal, reflected on the
consolidated balance sheet included in the Financial Statements of UCB as of
December 31, 1995 or acquired after such date, except (i) liens for current
taxes not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent, or (iv) dispositions and encumbrances for adequate
consideration in the ordinary course of business.
(b) All leases and licenses pursuant to which UCB or any UCB
Subsidiary, as lessee or licensee, leases or licenses rights to real or personal
property, are valid and enforceable in accordance with their respective terms.
3.11 Environmental Matters
Except as Disclosed:
(a) UCB and the UCB Subsidiaries are in compliance with all
Environmental Laws. Neither UCB nor any UCB Subsidiary has received any
communication alleging that UCB or the UCB Subsidiary is not in such compliance,
and there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
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(b) UCB has not received notice of any pending, and there are no
pending or, to the best of UCB's knowledge, threatened, legal, administrative,
arbitral or other proceedings, asserting Environmental Claims or other claims,
causes of action or governmental investigations of any nature, seeking to
impose, or that could result in the imposition of, any liability arising under
any Environmental Laws upon (i) UCB or any UCB Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim UCB or any UCB Subsidiary has
or may have retained or assumed, either contractually or by operation of law,
(iii) any real or personal property owned or leased by UCB or any UCB
Subsidiary, or any real or personal property which UCB or any UCB Subsidiary has
or is judged to have managed or supervised or participated in the management of,
or (iv) any real or personal property in which UCB or any UCB Subsidiary holds a
security interest securing a loan recorded on the books of UCB or any UCB
Subsidiary. Neither UCB nor any UCB Subsidiary is subject to any agreement,
order, judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any such liability.
(c) UCB and the UCB Subsidiaries are in compliance in all material
respects with all recommendations contained in any environmental audits,
analyses and surveys relating to all real and personal property owned or leased
by UCB or any UCB Subsidiary and all real and personal property which UCB or any
UCB Subsidiary has or is judged to have managed or supervised or participated in
the management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Laws against UCB or any UCB Subsidiary or against any person or entity whose
liability for any Environmental Claim UCB or any UCB Subsidiary has or may have
retained or assumed, either contractually or by operation of law.
3.12 Allowance for Loan Losses
The allowance for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of UCB is or will be in the opinion
of UCB's management adequate in all material respects as of their respective
dates, under the requirements of generally accepted accounting principles and
applicable regulatory requirements and guidelines as they apply to banks and
bank holding companies, to provide for reasonably anticipated losses on
outstanding loans net of recoveries.
3.13 Tax Matters
(a) UCB and the UCB Subsidiaries, and each of their predecessors, have
timely filed (or requests for extensions have been timely filed and any such
extensions have been granted and have not expired) all federal, state and local
(and, if applicable, foreign) tax returns required by applicable law to be filed
by them (including, without limitation, estimated tax returns, income tax
returns, information returns, and withholding and employment tax returns) and
have paid, or
15
where payment is not required to have been made, have set up an adequate reserve
or accrual for the payment of, all taxes required to be paid in respect of the
periods covered by such returns and, as of the Effective Time, will have paid,
or where payment is not required to have been made, will have set up an adequate
reserve or accrual for the payment of, all taxes for any subsequent periods
ending on or prior to the Effective Time. Neither UCB nor any UCB Subsidiary
will have any material liability for any such taxes in excess of the amounts so
paid or reserves or accruals so established.
(b) Except as Disclosed, all federal, state and local (and, if
applicable, foreign) tax returns filed by UCB and the UCB Subsidiaries are
complete and accurate in all material respects. Neither UCB nor any UCB
Subsidiary is delinquent in the payment of any tax, assessment or governmental
charge. No deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against UCB or any UCB
Subsidiary which have not been settled and paid. There are currently no
agreements in effect with respect to UCB or any UCB Subsidiary to extend the
period of limitations for the assessment or collection of any tax. No audit
examination or deficiency or refund litigation with respect to such returns is
pending.
3.14 Employees; Compensation; Benefit Plans.
(a) Compensation. UCB shall have Disclosed a complete and correct list
of the name, age, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits, whether
payable in cash or in kind, of each director, shareholder, independent
contractor, consultant and agent of UCB and of each UCB Subsidiary and each
other person (other than an employee as such) to whom UCB or any UCB Subsidiary
pays or provides, or has an obligation, agreement (written or unwritten), policy
or practice of paying or providing, retirement, health, welfare or other
benefits of any kind or description whatsoever.
(b) Employee Benefit Plans.
(i) UCB shall have Disclosed an accurate and complete
list of all Plans, as defined below, contributed to,
maintained or sponsored by UCB or any UCB Subsidiary, to which
UCB or any UCB Subsidiary is obligated to contribute or has
any liability or potential liability, whether direct or
indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of
corporations, within the meaning of Sections 414(b), 414(c),
414(m) and 414(o) of the Code, of which UCB or any UCB
Subsidiary is a member. For purposes of this Agreement, the
term "Plan" shall mean a plan, arrangement, agreement or
program described in the foregoing provisions of this Section
3.14(b)(i) and which is: (A) a profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, whether or not
funded and whether or not terminated, (B) an employment
agreement, (C) a personnel policy or fringe benefit plan,
policy, program or arrangement providing for benefits or
16
perquisites to current or former employees, officers,
directors or agents, whether or not funded, and whether or not
terminated, including without limitation benefits relating to
automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance,
or (D) any other employee benefit plan as defined in Section
3(3) of ERISA, whether or not funded and whether or not
terminated.
(ii) Except as Disclosed, neither UCB nor any UCB
Subsidiary contributes to, has an obligation to contribute to
or otherwise has any liability or potential liability with
respect to (A) any multiemployer plan as defined in Section
3(37) of ERISA, (B) any plan of the type described in Sections
4063 and 4064 of ERISA or in section 413 of the Code (and
regulations promulgated thereunder), or (C) any plan which
provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or
former employees or directors, their spouses or dependents,
other than in accordance with Section 4980B of the Code or
applicable state continuation coverage law.
(iii) Except as Disclosed, none of the Plans
obligates UCB or any UCB Subsidiary to pay separation,
severance, termination or similar- type benefits solely as a
result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as such term is
used in Section 280G of the Code (and regulations promulgated
thereunder).
(iv) Each Plan has been maintained, funded and
administered in compliance in all respects with its own terms
and in compliance in all respects with all applicable laws and
regulations, including but not limited to ERISA and the Code.
No actions, suits, claims, complaints, charges, proceedings,
hearings, examinations, investigations, audits or demands with
respect to the Plans (other than routine claims for benefits)
are pending or threatened, and there are no facts which could
give rise to or be expected to give rise to any actions,
suits, claims, complaints, charges, proceedings, hearings,
examinations, investigations, audits or demands. No Plan that
is subject to the funding requirements of Section 412 of the
Code or Section 302 of ERISA has incurred any "accumulated
funding deficiency" as such term is defined in such Sections
of ERISA and the Code, whether or not waived, and each Plan
has always fully met the funding standards required under
Title I of ERISA and Section 412 of the Code. No liability to
the Pension Benefit Guaranty Corporation ("PBGC") (except for
routine payment of premiums) has been or is expected to be
incurred with respect to any Plan that is subject to Title IV
of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect
17
to any such Plan, and the PBGC has not commenced or threatened
the termination of any Plan. None of the assets of UCB or any
UCB Subsidiary is the subject of any lien arising under
Section 302(f) of ERISA or Section 412(n) of the Code, neither
UCB nor any UCB Subsidiary has been required to post any
security pursuant to Section 307 of ERISA or Section
401(a)(29) of the Code, and there are no facts which could be
expected to give rise to such lien or such posting of
security. No event has occurred and no condition exists that
would subject UCB or any UCB Subsidiary to any tax under
Sections 4971, 4972, 4977 or 4979 of the Code or to a fine or
penalty under Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust (if any) forming a
part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification
under the Code of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the
qualification of such Plan or the tax exempt status of such
related trust.
(vi) No underfunded "defined benefit plan" (as such
term is defined in Section 3(35) of ERISA) has been, during
the five years preceding the Closing Date, transferred out of
the controlled group of corporations (within the meaning of
Sections 414(b), (c), (m) and (o) of the Code) of which UCB or
any UCB Subsidiary is a member or was a member during such
five-year period.
(vii) As of the Closing Date, the fair market value
of the assets of each Plan that is a tax qualified defined
benefit plan equals or exceeds the present value of all vested
and non-vested liabilities thereunder determined in accordance
with reasonable actuarial methods, factors and assumptions
applicable to a defined benefit plan on an ongoing basis. With
respect to each Plan that is subject to the funding
requirements of Section 412 of the Code and Section 302 of
ERISA, all required contributions for all periods ending prior
to or as of the Closing Date (including periods from the first
day of the then-current plan year to the Closing Date and
including all quarterly contributions required in accordance
with Section 412(m) of the Code) shall have been made. With
respect to each other Plan, all required payments, premiums,
contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been
made. No tax qualified Plan has any material unfunded
liabilities.
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(viii) No prohibited transaction (which shall mean
any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code,
whether by statutory, class or individual exemption) has
occurred with respect to any Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty
or other liability under Section 4975 of the Code or Section
409 or 502(i) of ERISA. Neither UCB, nor to the best knowledge
of UCB any UCB Subsidiary, nor any trustee, administrator or
other fiduciary of any Plan, nor to the best knowledge of UCB
any agent of any of the foregoing has engaged in any
transaction or acted or failed to act in a manner which could
subject UCB or any UCB Subsidiary to any material liability
for breach of fiduciary duty under ERISA or any other
applicable law.
(ix) With respect to each Plan, all reports and
information required to be filed with any government agency or
distributed to Plan participants and their beneficiaries have
been duly and timely filed or distributed.
(x) UCB and each UCB Subsidiary has been and is
presently in compliance with all of the requirements of
Section 4980B of the Code.
(xi) Neither UCB nor any UCB Subsidiary has a
liability as of December 31, 1995, under any Plan that, to the
extent disclosure is required under generally accepted
accounting principles, is not reflected on the consolidated
balance sheet included in the Financial Statements of UCB as
of December 31, 1995 or otherwise Disclosed.
(xii) Neither the consideration nor implementation of
the transactions contemplated under this Agreement will
increase (A) UCB's or any UCB Subsidiary's obligation to make
contributions or any other payments to fund benefits accrued
under the Plans as of the date of this Agreement or (B) the
benefits accrued or payable with respect to any participant
under the Plans (except to the extent benefits may be deemed
increased by accelerated vesting).
(xiii) With respect to each Plan, UCB has Disclosed
or made available true, complete and correct copies of (A) all
documents pursuant to which the Plans are maintained, funded
and administered, including summary plan descriptions, (B) the
three most recent annual reports (Form 5500 series) filed with
the Internal Revenue Service (with attachments), (C) the three
most recent actuarial reports, if any, (D) the three most
recent financial statements, (E) all governmental filings for
the last three years, including without limitation, excise tax
returns and reportable events filings, and (F) all
governmental rulings, determinations, and opinions (and
19
pending requests for governmental rulings, determinations, and
opinions) during the past three years.
3.15 Certain Contracts
(a) Except as Disclosed, neither UCB nor any UCB Subsidiary is a party
to, is bound or affected by, or receives benefits under (i) any agreement,
arrangement or commitment, the default of which would have a Material Adverse
Effect, whether or not made in the ordinary course of business (other than loans
or loan commitments made or certificates or deposits received in the ordinary
course of the banking business), or any agreement restricting its business
activities, including without limitation agreements or memoranda of
understanding with regulatory authorities, (ii) any agreement, indenture or
other instrument relating to the borrowing of money by UCB or any UCB Subsidiary
or the guarantee by UCB or any UCB Subsidiary of any such obligation, which
cannot be terminated within less than 30 days after the Closing Date by UCB or
any UCB Subsidiary (without payment of any penalty or cost, except with respect
to Federal Home Loan Bank advances), (iii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director or officer,
which cannot be terminated within less than 30 days after the Closing Date by
UCB or any UCB Subsidiary (without payment of any penalty or cost), or that
provides benefits which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving UCB of the nature
contemplated by this Agreement or the SNC Option Agreement, (iv) any contract,
agreement or understanding with a labor union, in each case whether written or
oral, or (v) any agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the SNC Option Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or the SNC Option Agreement. Each agreement,
arrangement and commitment Disclosed pursuant to this Section 3.15(a) is in full
force and effect.
(b) Neither UCB nor any UCB Subsidiary is in default, which default
would have a Material Adverse Effect or would adversely affect the transactions
contemplated herein, under any agreement, commitment, arrangement, lease,
insurance policy, or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or threatened against UCB or any UCB Subsidiary
or against any asset, interest, or right of UCB or any UCB Subsidiary, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, would reasonably be expected to have a Material Adverse
Effect. There are no actions, suits or proceedings instituted, pending or
threatened against any
20
present or former director or officer of UCB or any UCB Subsidiary that would
reasonably be expected to give rise to a claim against UCB or any UCB Subsidiary
for indemnification. There are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or in the SNC Option Agreement. To the best knowledge of
UCB, no fact or condition relating to UCB or any UCB Subsidiary exists
(including without limitation noncompliance with the CRA) that would prevent UCB
or SNC from obtaining all of the federal and state regulatory approvals
contemplated herein.
3.17 Compliance with Laws
Each of UCB and each UCB Subsidiary is in compliance in all material
respects with all statutes and regulations (including, but not limited to, the
CRA, TILA and regulations promulgated thereunder, and other consumer banking
laws) applicable and material to the conduct of its business, and neither UCB
nor any UCB Subsidiary has received notification that has not lapsed, been
withdrawn or abandoned by any agency or department of federal, state or local
government (i) asserting a violation or possible violation of any such statute
or regulation which violation would reasonably be expected to have a Material
Adverse Effect on UCB, (ii) threatening to revoke any license, franchise, permit
or government authorization, or (iii) restricting or in any way limiting its
operations. Neither UCB nor any UCB Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment, and none of them has received any communication
requesting that it enter into any of the foregoing.
3.18 Brokers and Finders
Neither UCB nor any UCB Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated herein, in the Plan of Merger or in the SNC Option
Agreement, except for fees to accountants and lawyers and an obligation to Wheat
First Butcher Singer as Disclosed for investment banking services.
3.19 Loans
To the best of UCB's knowledge, substantially all of the loans on the
books and records of the UCB Subsidiaries are valid and properly documented.
Neither the terms of such loans, nor any of the loan documentation, nor the
manner in which such loans have been administered and serviced, violates in any
material respect any federal, state or local law, rule, regulation or ordinance
applicable thereto, including without limitation, the TILA, Regulations O and Z
of the Federal Reserve Board, the CRA, the Equal Credit Opportunity Act, as
amended, and state laws, rules and regulations relating to consumer protection,
installment sales and usury.
21
3.20 Repurchase Agreements
With respect to all agreements currently outstanding pursuant to which
UCB or any UCB Subsidiary has purchased securities subject to an agreement to
resell, UCB or the UCB Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing such agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby. With respect to all agreements currently outstanding pursuant to which
UCB or any UCB Subsidiary has sold securities subject to an agreement to
repurchase, neither UCB nor the UCB Subsidiary has pledged collateral materially
in excess of the amount of the debt secured thereby. Neither UCB nor any UCB
Subsidiary has pledged collateral materially in excess of the amount required
under any interest rate swap or other similar agreement currently outstanding.
3.21 Deposit Accounts
The deposit accounts of the UCB Subsidiaries that are insured
depository institutions are insured by the FDIC to the maximum extent permitted
by federal law, and the UCB Subsidiaries have paid all premiums and assessments
and filed all reports required to have been paid or filed under the FDIA.
3.22 Related Party Transactions
UCB has Disclosed all transactions, investments and loans, including
loan guarantees, to which UCB or any UCB Subsidiary is a party with any
director, executive officer or 5% shareholder of UCB or any person, corporation,
or enterprise controlling, controlled by or under common control with any of the
foregoing. All such transactions, investments and loans are on terms no less
favorable to UCB than could be obtained from unrelated parties.
3.23 Certain Information
When the Joint Proxy Statement/Prospectus is mailed, and at the time of
the meeting of shareholders of UCB to vote upon the Plan of Merger, the Joint
Proxy Statement/Prospectus and all amendments or supplements thereto, with
respect to all information set forth therein provided by UCB, (i) shall comply
in all material respects with the applicable provisions of the Securities Laws,
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
3.24 Accounting, Tax and Regulatory Matters
Neither UCB nor any UCB Subsidiary has taken or agreed to take any
action which would or could reasonably be expected to (i) cause the business
combination contemplated hereby not to be accounted for as a
pooling-of-interests (except to the extent actions taken pursuant to the terms
of this Agreement could have such affect) or not to constitute a reorganization
under
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Section 368 of the Code, or (ii) materially impede or delay receipt of any
consents of regulatory authorities referred to in Section 5.4(b) or result in
failure of the condition in Section 6.3(b).
3.25 State Takeover Laws
UCB and each UCB Subsidiary have taken all necessary action to exempt
the transactions contemplated by this Agreement from any applicable moratorium,
fair price, business combination, control share or other anti-takeover laws
included in Sections 55-9-101 ET SEQ. and 55-9A-01 ET SEQ. of the NCBCA.
3.26 Derivatives Contracts
Neither UCB nor any UCB Subsidiary is a party to or has agreed to enter
into an exchange-traded or over-the-counter swap, forward, future, option, cap,
floor, or collar financial contract, or any other interest rate or foreign
currency protection contract not included on its balance sheets in the Financial
Statements, which is a financial derivative contract (including various
combinations thereof), except as Disclosed.
3.27 Fairness Opinion
UCB has received from Wheat First Butcher Singer an opinion that, as of
November 1, 1996, the Exchange Ratio is fair to the shareholders of UCB from a
financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SNC
SNC represents and warrants to UCB as follows:
4.1 Capital Structure of SNC
The authorized capital stock of SNC consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, of which no shares are issued and
outstanding, and (ii) 300,000,000 shares of SNC Common Stock, of which
109,112,010 shares were issued and outstanding on September 30, 1996. All
outstanding shares of SNC Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. The shares of SNC Common Stock reserved as
provided in Section 5.3 are free of any Rights and have not been reserved for
any other purpose, and such shares are available for issuance as provided
pursuant to the Plan of Merger.
Holders of SNC Common Stock do not have preemptive rights.
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4.2 Organization, Standing and Authority of SNC
SNC is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina, with full corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its assets, and is duly qualified to do business in the states of
the United States where its ownership or leasing of property or the conduct of
its business requires such qualification and where failure to so qualify would
have a Material Adverse Effect. SNC is registered as a bank holding company
under the Bank Holding Company Act.
4.3 Authorized and Effective Agreement
(a) SNC has all requisite corporate power and authority to enter into
and (subject to receipt of all necessary government approvals and receipt of
required approval of shareholders of SNC of the issuance of shares pursuant to
this Agreement) perform all of its obligations under this Agreement, the SNC
Option Agreement and the UCB Option Agreement. The execution and delivery of
this Reorganization Agreement, the Articles of Merger and said Option
Agreements, and consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of SNC, except in the case of this Agreement and
the Plan of Merger, the approval of SNC shareholders pursuant to and to the
extent required by applicable law or regulation. This Agreement and the Plan of
Merger attached hereto constitute legal, valid and binding obligations of SNC,
and each is enforceable against SNC in accordance with its terms, in each case
subject to (i) bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or other similar laws in effect from time to time
relating to or affecting the enforcement of the rights of creditors; and (ii)
general principles of equity, and except that the availability of remedies or
injunctive relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement, the SNC
Option Agreement or the UCB Option Agreement, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by SNC with any of
the provisions hereof or thereof shall (i) conflict with or result in a breach
of any provision of the articles of incorporation or bylaws of SNC or any SNC
Subsidiary, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of SNC or
any SNC Subsidiary pursuant to any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, which would have a material adverse
effect on the business, operations or financial condition of SNC and the SNC
Subsidiaries taken as a whole, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to SNC or any SNC Subsidiary.
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4.4 Organization, Standing and Authority of SNC Subsidiaries and Acquisition
Subsidiary
(a) Each of the SNC Subsidiaries is duly organized, validly existing
and in good standing under applicable laws. SNC owns, directly or indirectly,
all of the stock of each of the SNC Subsidiaries. Each of the SNC Subsidiaries
(i) has full power and authority to carry on its business as now conducted and
(ii) is duly qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification and where failure to so qualify
would have a Material Adverse Effect on SNC.
(b) SNC shall cause Acquisition Subsidiary to be duly organized and to
be validly existing and in good standing under the laws of the State of North
Carolina, with full corporate power and authority to participate in the Merger
as contemplated hereby. All of the outstanding shares of Acquisition Subsidiary
will at all times through the Effective Time be owned and controlled by SNC.
4.5 Securities Documents
SNC (and BB&T Financial Corporation prior to its merger with SNC) has
timely filed all Securities Documents required by the Securities Laws since
December 31, 1993. As of their respective dates of filing, such Securities
Documents complied in all material respects with the Securities Laws as then in
effect, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.6 Financial Statements
The Financial Statements of SNC fairly present or will fairly present,
as the case may be, the consolidated financial position of SNC and the SNC
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and changes in cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments that are not material in amount or effect) in
conformity with generally accepted accounting principles applicable to financial
institutions applied on a consistent basis.
4.7 Material Adverse Change
Since December 31, 1995, SNC and the SNC Subsidiaries have not incurred
any material liability except as disclosed on the most recent SNC Financial
Statements, or entered into any transactions with affiliates, other than in the
ordinary course of business consistent with past practices, nor has there been
any change, or any event involving a prospective change, in the business,
financial condition or results of operations of SNC and the SNC Subsidiaries
which has had, or is reasonably likely to have, a Material Adverse Effect on
SNC.
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4.8 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or threatened against SNC or any SNC Subsidiary
or against any asset, interest, or right of SNC or any SNC Subsidiary, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, would reasonably be expected to have a Material Adverse
Effect. There are no actions, suits or proceedings instituted, pending or
threatened against any present or former director or officer of SNC or any SNC
Subsidiary that would reasonably be expected to give rise to a claim against SNC
or any SNC Subsidiary for indemnification. There are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein, in the Plan of Merger or the UCB Option
Agreement. To the best knowledge of SNC, no fact or condition relating to SNC or
any SNC Subsidiary exists (including without limitation noncompliance with the
CRA) that would prevent UCB or SNC from obtaining all of the federal and state
regulatory approvals contemplated herein.
4.9 Absence of Undisclosed Liabilities
Neither SNC nor any of the SNC Subsidiaries has any liability
(contingent or otherwise) that is material to SNC on a consolidated basis or
that, when combined with all similar liabilities, would be material to SNC on a
consolidated basis, except as disclosed in the Financial Statements of SNC and
except for liabilities made in the ordinary course of its business since the
date of SNC's most recent Financial Statements.
4.10 Allowance for Loan Losses
The allowance for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of SNC is or will be in the opinion
of SNC's management adequate in all material respects as of their respective
dates, under the requirements of generally accepted accounting principles and
applicable regulatory requirements and guidelines as they apply to banks and
bank holding companies, to provide for reasonably anticipated losses on
outstanding loans net of recoveries.
4.11 Tax Matters
(a) SNC and the SNC Subsidiaries, and each of their predecessors, has
timely filed all federal, state and local (and, if applicable, foreign) tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns, and
withholding and employment tax returns) and have paid, or have set up an
adequate reserve or accrual for the payment of, all taxes required to be paid as
shown on such returns and, as of the Effective Time, will have paid, or where
payment is not required to have been made, will have set up an adequate reserve
or accrual for the payment of, all taxes for any subsequent periods ending on or
prior to the Effective Time. SNC will not, to SNC's knowledge, have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
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(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by SNC and the SNC Subsidiaries are complete and accurate in all
material respects. Neither SNC nor any SNC Subsidiary is delinquent in the
payment of any tax, assessment or governmental charge, and has not failed to
file any tax return which is currently past due. No deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against SNC or any SNC Subsidiary which have not been
settled and paid. There currently are no agreements in effect with respect to
SNC or any SNC Subsidiary to extend the period of limitations for the assessment
or collection of any tax.
4.12 Compliance with Laws
Each of SNC and the SNC Subsidiaries is in compliance with all statutes
and regulations (including, but not limited to, the CRA, TILA and regulations
promulgated thereunder and other consumer banking laws) applicable and material
to the conduct of its business, and neither SNC nor any of the SNC Subsidiaries
has received any notification that has not lapsed, been withdrawn or abandoned
from any agency or department of federal, state or local government (i)
asserting a violation or possible violation of any such statute or regulation,
and which violation would reasonably likely have a Material Adverse Effect on
SNC, (ii) threatening to revoke any license, franchise, permit or government
authorization, or (iii) restricting or in any way limiting its operations.
Neither SNC nor any of the SNC Subsidiaries is subject to any regulatory or
supervisory cease and desist order, agreement, directive or memorandum of
understanding, and none of them has received any communication requesting that
they enter into any of the foregoing.
4.13 Certain Information
When the Joint Proxy Statement/Prospectus is mailed, and at all times
subsequent to such mailing up to and including the time of the meeting of
shareholders of SNC to vote on the Merger, the Joint Proxy Statement/Prospectus
and all amendments or supplements thereto, with respect to all information set
forth therein relating to SNC, (i) shall comply in all material respects with
the applicable provisions of the Securities Laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
4.14 Accounting, Tax and Regulatory Matters
Neither SNC nor the SNC Subsidiaries have taken or agreed to take any
action which would or could reasonably be expected to (i) cause the business
combination contemplated hereby not to be accounted for as a pooling of
interests or not to constitute a reorganization under Section 368 of the Code,
or (ii) materially impede or delay receipt of any consents of regulatory
authorities referred to in Section 5.4(b) or result in failure of the condition
in Section 6.3(b).
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4.15 Share Ownership
As of the date of this Agreement, SNC does not own (except in a
fiduciary capacity) any shares of UCB Common Stock.
ARTICLE V
COVENANTS
5.1 Shareholders' Meetings
UCB shall submit this Reorganization Agreement and the Plan of Merger
to its shareholders for approval at a meeting to be held as soon as practicable,
and by approving execution of this Agreement the Board of Directors of UCB
agrees that it shall, at the time the Joint Proxy Statement/Prospectus is mailed
to the shareholders of UCB, recommend that UCB's shareholders vote for such
approval; provided, that the Board of Directors of UCB may withdraw or refuse to
make such recommendation only if the Board of Directors shall determine in good
faith that such recommendation would violate its fiduciary duty to its
shareholders following (i) the consideration of written advice of legal counsel
that making such recommendation or the failure to withdraw or modify such
recommendation would constitute a breach of the fiduciary duties of such Board
to shareholders of UCB, and (ii) the withdrawal by Wheat First Butcher Singer in
writing of its opinion referred to in Section 3.27 or delivering to the UCB
Board of Directors of written advice from Wheat First Butcher Singer that the
Exchange Ratio is not fair or is inadequate to the shareholders of UCB from a
financial point of view. SNC shall call a meeting of its shareholders for the
purpose of approving the issuance of shares of SNC Common Stock pursuant to the
terms of this Agreement, and shall recommend approval of such matter to its
shareholders.
5.2 Registration Statement; Joint Proxy Statement/Prospectus
As promptly as practicable after the date hereof, SNC shall prepare and
file the Registration Statement with the Commission. UCB will furnish to SNC the
information required to be included in the Registration Statement with respect
to its business and affairs before it is filed with the Commission and again
before any amendments are filed, and shall have the right to review and consult
with SNC on the form of, and any characterizations of such information included
in, the Registration Statement prior to the filing with the Commission. SNC
shall use its best efforts to cause such Registration Statement to be declared
effective under the Securities Act. Such Registration Statement, at the time it
becomes effective and on the Effective Time, shall in all material respects
conform to the requirements of the Securities Act and the applicable rules and
regulations of the Commission. SNC shall take all actions required to register
or obtain exemptions from such registration for the SNC Common Stock to be
issued in connection with the transactions contemplated by this Agreement and
the Plan of Merger under applicable state "Blue Sky" securities laws, as
appropriate. The Registration Statement shall include the form of Joint Proxy
Statement/Prospectus. SNC and UCB shall use their best efforts to cause the
Joint
28
Proxy Statement/Prospectus to be approved by the SEC for mailing to the UCB and
SNC shareholders, and such Joint Proxy Statement/Prospectus shall, on the date
of mailing, conform in all material respects to the requirements of the
Securities Laws and the applicable rules and regulations of the SEC thereunder.
SNC and UCB shall cause the Joint Proxy Statement/Prospectus to be mailed to
shareholders in accordance with all applicable notice requirements under the
Securities Laws and the NCBCA.
5.3 Plan of Merger; Reservation of Shares
At the Effective Time, the Merger shall be effected in accordance with
the Plan of Merger. In this connection, SNC undertakes and agrees to pay or
cause to be paid when due the number of shares of SNC Common Stock to be
distributed pursuant to Section 2.7 and any cash required to be paid for
fractional shares. SNC has reserved for issuance such number of shares of SNC
Common Stock as shall be necessary to pay the consideration to be distributed to
the UCB shareholders as contemplated in Section 2.8, required in connection with
the UCB Option Agreement, and as otherwise required herein. If at any time the
aggregate number of shares of SNC Common Stock available for issuance hereunder
shall not be sufficient to effect the Merger, SNC shall take all appropriate
action as may be required to increase the amount of the authorized SNC Common
Stock.
5.4 Additional Acts
(a) UCB agrees to cooperate in taking such actions as may be reasonably
necessary to modify the structure of, or to substitute parties to (so long as
such substitute is SNC or a SNC Subsidiary) the transactions contemplated
hereby, provided that such modifications do not adversely affect the economic
benefits of such transactions or otherwise abrogate the covenants and other
agreements contained in this Agreement.
(b) As promptly as practicable after the date hereof, SNC and UCB shall
submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board, and any other federal, state
or local government agency, department or body to which notice is required or
from which approval is required for consummation of the Merger and the other
transactions contemplated hereby. UCB and SNC each represents and warrants to
the other that all information concerning it and its directors, officers and
shareholders and concerning any SNC Subsidiary included (or submitted for
inclusion) in any such application shall be true, correct and complete in all
material respects as of the date presented.
5.5 Best Efforts
SNC and UCB shall use, and shall cause each of their respective
Subsidiaries to use, its best efforts in good faith to (i) furnish such
information as may be required in connection with and otherwise cooperate in the
preparation and filing of the documents referred to in Sections 5.2 and 5.4 or
elsewhere herein, and (ii) take or cause to be taken all action necessary or
desirable on its part to fulfill the conditions in Article VI and to consummate
the transactions herein
29
contemplated at the earliest practicable date. Neither SNC nor UCB shall take,
or cause, or to the best of its ability permit to be taken, any action that
would substantially delay or impair the prospects of completing the Merger
pursuant to this Agreement and the Plan of Merger.
5.6 Certain Accounting Matters
UCB shall cooperate with SNC concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
SNC's policies, practices and procedures), including without limitation issues
arising in connection with record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting practices.
5.7 Access to Information
UCB and the UCB Subsidiaries will keep SNC advised, and SNC and the SNC
Subsidiaries will keep UCB advised, of all material developments relevant to
their business and to consummation of the Merger. Upon reasonable notice, UCB
and the UCB Subsidiaries shall afford to representatives of SNC, and SNC and the
SNC Subsidiaries shall afford to representatives of UCB, access, during normal
business hours during the period prior to the Effective Time, to all of their
respective properties, books, contracts, commitments and records and, during
such period, shall make available all information concerning their business as
may be reasonably requested. No investigation pursuant to this Section 5.7 shall
affect or be deemed to modify any representation or warranty made by, or the
conditions to the obligations hereunder of, either party hereto. As of the date
hereof, UCB and SNC have entered into confidentiality agreements relating to the
information to be provided pursuant to this Agreement.
5.8 Press Releases
SNC and UCB shall agree with each other as to the form and substance of
any press release related to this Agreement and the Plan of Merger or the
transactions contemplated hereby and thereby, and consult with each other as to
the form and substance of other public disclosures related thereto; provided,
that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.9 Forbearances of UCB
Except with the prior written consent of SNC, between the date hereof
and the Effective Time, UCB shall not, and shall cause each of the UCB
Subsidiaries not to:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted, or establish or acquire any new Subsidiary or engage in any
new activity;
30
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, other than regularly
scheduled quarterly dividends of $.18 per share of UCB Common Stock
payable on record dates and in amounts consistent with past practices;
provided that any dividend declared or payable on the shares of UCB
Common Stock for the quarterly period during which the Effective Time
occurs shall, unless otherwise agreed upon in writing by SNC and UCB,
be declared with a record date prior to the Effective Time only if the
normal record date for payment of the corresponding quarterly dividend
to holders of SNC Common Stock is before the Effective Time;
(c) issue any shares of its capital stock, except pursuant to
the Stock Option Plan and the SNC Option Agreement;
(d) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(e) amend its articles of incorporation or bylaws; impose or
permit imposition, of any lien, charge or encumbrance on any share of
stock held by it in any UCB Subsidiary, or permit any such lien, charge
or encumbrance to exist; or waive or release any material right or
cancel or compromise any debt or claim other than in the ordinary
course of business;
(f) merge with any other entity or permit any other entity to
merge into it, or consolidate with any other entity; acquire control
over any other entity; or liquidate, sell or otherwise dispose of any
assets or acquire any assets, other than in the ordinary course of its
business consistent with past practices;
(g) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to
the conduct of its business;
(h) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus to, or provide
any other employee benefit or incentive to, any of its directors,
officers or employees, except in the ordinary course of business
consistent with past practices;
(i) enter into or substantially modify (except as may be
required by applicable law or regulation) any pension, retirement,
stock option, stock purchase, stock appreciation right, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees; provided, that this
subparagraph shall not prevent renewals of any of the foregoing
consistent with past practice, except for contemplated changes in UCB's
Flexible Benefit Plan;
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(j) solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of
all or a substantial portion of the assets of, or a substantial equity
interest in, UCB or any UCB Subsidiary or any business combination with
UCB or any UCB Subsidiary other than as contemplated by this Agreement;
or authorize any officer, director, agent or affiliate of UCB or any
UCB Subsidiary to do any of the above; or fail to notify SNC
immediately if any such inquiries or proposals are received, any such
information is requested or required, or any such negotiations or
discussions are sought to be initiated; provided, that this paragraph
(j) shall not apply to furnishing information, negotiations or
discussions following an unsolicited offer if, as a result of such
offer, UCB is advised in writing by legal counsel that the failure so
to furnish information or negotiate would constitute a breach of the
fiduciary duties of UCB's Board of Directors to its shareholders;
(k) enter into (i) any material agreement, arrangement or
commitment not made in the ordinary course of business, (ii) any
agreement, indenture or other instrument not made in the ordinary
course of business relating to the borrowing of money by UCB or a UCB
Subsidiary or guarantee by UCB or a UCB Subsidiary of any obligation,
(iii) any agreement, arrangement or commitment relating to the
employment or severance of a consultant or the employment, severance,
election or retention in office of any present or former director,
officer or employee (this clause shall not apply to the election of
directors by shareholders in the normal course, and the election of
officers by directors in the normal course terminable at will except to
the extent otherwise provided in an agreement, arrangement or
commitment Disclosed); or (iv) any contract, agreement or understanding
with a labor union;
(1) change its lending, investment or asset liability
management policies in any material respect, except as may be required
by applicable law, regulation, or directives, and except that after
approval of the Agreement and the Plan of Merger by its shareholders
UCB shall cooperate in good faith with SNC to adopt policies, practices
and procedures consistent with those utilized by SNC, effective on or
before the Closing Date;
(m) change its methods of accounting in effect at December 31,
1995, except as required by changes in generally accepted accounting
principles concurred in by SNC's independent certified public
accountants, which concurrence shall not be unreasonably withheld, or
change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of
its federal income tax returns for the year ended December 31, 1995,
except as required by changes in law or regulation;
(n) incur any commitments for capital expenditures or
obligation to make capital expenditures in excess of $250,000, for any
one expenditure, or $2,000,000, in the aggregate;
32
(o) incur any indebtedness other than deposits from customers
or otherwise in the ordinary course of business;
(p) take any action which would or could reasonably be
expected to (i) cause the business combination contemplated hereby not
to be accounted for as a pooling of interests or not to constitute a
reorganization under Section 368 of the Code, in either case as
determined by SNC, (ii) result in any inaccuracy of a representation or
warranty herein which would allow for a termination of this Agreement,
or (iii) cause any of the conditions precedent to the transactions
contemplated by this Agreement to fail to be satisfied;
(q) dispose of any material assets other than in the ordinary
course of business; or
(r) agree to do any of the foregoing.
5.10 Employment Agreements
SNC shall enter into employment agreements with those UCB employees and
on the terms as agreed by SNC and UCB prior to the date hereof, which shall
supersede presently existing employment agreements.
5.11 Affiliates
UCB shall use reasonable efforts to cause all persons who are
affiliates of UCB to deliver to SNC promptly following this Agreement a written
agreement providing that such person will not dispose of SNC Common Stock
received in the Merger except in compliance with the Securities Act and the
rules and regulations promulgated thereunder and except as consistent with
qualifying the transactions contemplated hereby for pooling of interests
accounting treatment, and in any event shall cause such affiliates to deliver to
SNC such written agreement prior to the Effective Time.
5.12 Employee Benefit Plans
(a) Each employee of UCB and UCB Subsidiaries at the Effective Time
(herein "Employee") shall become an employee of SNC or a SNC Subsidiary
immediately following the Effective Time, upon substantially the same terms and
conditions as in effect immediately preceding the Effective Time. Each Employee,
as an employee of SNC or one of the SNC Subsidiaries shall be eligible to
receive bonus or incentive, retirement, severance, group hospitalization,
medical, life, disability and other benefits comparable to those provided to
similarly situated employees of SNC or the SNC Subsidiary. For purposes of
administering all plans and benefits of SNC or a SNC Subsidiary, service with
UCB and the UCB Subsidiaries by each Employee shall be deemed to be service with
SNC or the SNC Subsidiaries for participation and vesting purposes only (subject
to paragraph (c) of this Section 5.12).
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(b) SNC shall cause the 401(k) plan of UCB to be merged with the 401(k)
plan maintained by SNC and the SNC Subsidiaries, and the account balances of the
Employees who are participants in the UCB plan shall be transferred to the
accounts of such Employees under the SNC 401(k) plan. Following such merger and
transfer, such accounts shall be governed and controlled by the terms of the SNC
401(k) plan as in effect from time to time (and subject to SNC's right to
terminate such plan).
(c) The parties anticipate that SNC shall cause the tax qualified
defined benefit pension plan of UCB to be merged with the tax qualified defined
benefit plan of SNC. If such merger occurs, the SNC pension plan will provide
future benefit accruals under the SNC pension plan for the Employees which will
not be less than the benefits which would be accrued under the "fresh start
formula without wear away" as described in Treasury Regulation ss. 1.401(a)(4)-
13(c)(4)(i) (that is, the accrued benefit of each Employee who becomes a
participant in the SNC pension plan incident to such plan merger will equal the
sum of the benefit accrued to the Effective Time under the UCB pension plan plus
the future benefit accrued under the SNC pension plan). For purposes of applying
the SNC pension plan following such merger, service with UCB of an Employee
shall be deemed to be service with SNC for the purposes of determining
eligibility and vesting, but not for the purpose of determining benefit accruals
following the Effective Time.
(d) UCB's Long Term Incentive Plan, Director Deferred Compensation Plan
and Triad Bank Long Term Incentive Plan shall be frozen as of the Effective
Time, and SNC shall assume as of the Effective Time all obligations under such
plans as then accrued. SNC shall following the Effective Time administer such
plans in accordance with their respective terms, except that no further rights
or benefits shall accrue to participants and no further employees or directors
shall be permitted to participate in either or both of such plans. SNC shall
assume and continue in effect the UCB Supplemental Retirement Plan for the
benefit of current participants therein.
5.13 Directors and Officers Protection
(a) SNC shall indemnify, defend, and hold harmless the present and
former directors, officers, employees, and agents of UCB and the UCB
Subsidiaries (each, an "Indemnified Party") against all liabilities arising out
of actions or omissions arising out of the Indemnified Party's service or
services as directors, officers, employees, or agents of UCB or, at UCB's
request, of another corporation, partnership, joint venture, trust, or other
enterprise occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the fullest extent permitted
under North Carolina Law and by UCB's Articles of Incorporation and Bylaws as in
effect on the date hereof, whether or not SNC is insured against any such
matter. Without limiting the foregoing, in any case in which approval by SNC is
required to effectuate any indemnification, SNC shall direct, at the election of
the Indemnified Party, that the determination of any such approval shall be made
by independent counsel mutually agreed upon between SNC and the Indemnified
Party.
34
(b) SNC shall use its reasonable efforts to (i) cause the directors and
officers of UCB immediately prior to the Effective Time to be covered under its
then existing directors' and officers' liability insurance policy providing full
coverage for acts occurring prior to the Effective Time; or (ii) to maintain in
effect for a period of three years after the Effective Time UCB's existing
directors' and officers' liability insurance policy (provided that SNC may
substitute therefor (A) policies of at least the same coverage and amounts
containing terms and conditions which are substantially no less advantageous or
(B) with the consent of UCB given prior to the Effective Time, any other policy)
with respect to claims arising from facts or events which occurred prior to the
Effective Time and covering persons who are currently covered by such insurance;
provided, that neither SNC nor the Surviving Corporation shall be obligated to
make annual premium payments for such three year period in respect of such
policy (or coverage replacing such policy) which exceed, for the portion related
to UCB's directors and officers, 150% of the annual premium payments on UCB's
current policy in effect as of the date of this Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, SNC shall use its reasonable
efforts to maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to the Maximum Amount.
(c) If SNC or the Surviving Corporation or any successors or assigns
shall consolidate with or merge into any other entity and shall not be the
continuing or surviving person of such consolidation or merger or shall transfer
all or substantially all of its assets to any entity, then and in each case,
proper provision shall be made so that the successor and assigns of SNC or the
Surviving Corporation shall assume the obligations set forth in this Section
5.13.
(d) The provisions of this Section 5.13 are intended to be for the
benefit of and shall be enforceable by, each indemnified director and officer
and their respective heirs and representatives.
5.14 Forbearances of SNC
Except with the prior written consent of UCB, which consent shall not
be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither SNC nor any SNC Subsidiary shall:
(a) exercise the UCB Option Agreement other than in accordance with its
terms, or dispose of the shares of UCB Common Stock issuable upon exercise of
the option rights conferred thereby other than as permitted or contemplated by
the terms thereof; or
(b) enter into a merger or other business combination transaction with
any other corporation or person in which SNC would not be the surviving or
continuing entity after the consummation thereof;
(c) sell or lease all or substantially all of the assets and business
of any SNC Subsidiary;
35
(d) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(e) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of its
business; or
(f) take any action which would or might be expected to (i) cause the
business combination contemplated hereby not to be accounted for as a
pooling-of-interest or not to constitute a reorganization under Section 368 of
the Code, (ii) result in any inaccuracy of a representation or warranty herein
which would allow for termination of this Agreement, or (iii) cause any of the
conditions precedent to the transactions contemplated by this agreement to fail
to be satisfied.
5.15 Assumption of Agreement by Acquiror
It shall be a condition precedent to SNC entering into any agreement
whereby SNC shall (i) consolidate with or merge into any other entity and shall
not be the continuing or surviving person of such consolidation or merger, or
(ii) transfer all or substantially all of its assets to any entity, that proper
provision shall be made so that the successor and assigns of SNC shall
specifically agree to assume SNC's obligations under this Agreement.
5.16 Reports
Each of UCB and SNC shall file (and shall cause the UCB Subsidiaries
and the SNC Subsidiaries, respectively, to file), between the date of this
Agreement and the Effective Time, all reports required to be filed by it with
the Commission and any other regulatory authorities having jurisdiction over
such party, and shall deliver to SNC or UCB, as the case may be, copies of all
such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the Commission, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with generally accepted accounting procedures (subject in
the case of interim financial statements to normal recurring year-end
adjustments that are not material). As of their respective dates, such reports
filed with the Commission will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to a regulatory authority other than the Commission shall be prepared in
accordance with requirements applicable to such reports.
36
5.17 Exchange Listing
SNC shall use its reasonable efforts to list, prior to the Effective
Time, on the NYSE, subject to official notice of issuance, the shares of SNC
Common Stock to be issued to the holders of UCB Common Stock pursuant to the
Merger, and SNC shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent --SNC and UCB
The respective obligations of SNC and UCB to effect the transactions
contemplated by this Agreement shall be subject to satisfaction or waiver of the
following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement and the Plan
of Merger, the UCB Option Agreement and the SNC Option Agreement, and
consummation of the transactions contemplated hereby and thereby shall
have been duly and validly taken, including without limitation the
approval of the shareholders of UCB of the Agreement and the Plan of
Merger and of the shareholders of SNC of the issuance of SNC Common
Stock, in each case as set forth in Section 2.2;
(b) The Registration Statement (including any post-effective
amendments thereto) shall be effective under the Securities Act, and
SNC shall have received all state securities or "Blue Sky" permits or
other authorizations, or confirmations as to the availability of an
exemption from registration requirements as may be necessary, and no
proceedings shall be pending or to the knowledge of SNC threatened by
the Commission or any state "Blue Sky" securities administration to
suspend the effectiveness of such Registration Statement; and the SNC
Common Stock to be issued as contemplated in the Plan of Merger shall
have either been registered or be subject to exemption from
registration under applicable state securities laws;
(c) The parties shall have received all regulatory approvals
required in connection with the transactions contemplated by this
Reorganization Agreement, all notice periods and waiting periods
required after the granting of any such approvals shall have passed,
and all such approvals shall be in effect;
(d) None of SNC, any of the SNC Subsidiaries, UCB or any of
the UCB Subsidiaries shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins
or prohibits consummation of the transactions contemplated by this
Reorganization Agreement;
37
(e) UCB and SNC shall have received an opinion of SNC's legal
counsel, in form and substance satisfactory to UCB and SNC,
substantially to the effect that the Merger will constitute one or more
reorganizations under Section 368 of the Code and that the shareholders
of UCB will not recognize any gain or loss to the extent that such
shareholders exchange shares of UCB Common Stock for shares of SNC
Common Stock;
(f) SNC shall have received letters, dated as of the date of
filing of the Registration Statement with the Commission and as of the
Effective Time, addressed to SNC, in form and substance reasonably
satisfactory to SNC, from Xxxxxx Xxxxxxxx, LLP to the effect that the
transactions contemplated herein will qualify for pooling-of-interest
accounting treatment; and
(g) The shares of SNC Common Stock issuable pursuant to the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
6.2 Conditions Precedent -- UCB
The obligations of UCB to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by UCB pursuant to
Section 7.4:
(a) All representations and warranties of SNC shall be assessed as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or consented
to in writing by UCB. The representations and warranties of SNC set forth in
Section 4.1 shall be true and correct (except for inaccuracies which are de
minimis in amount). The representations and warranties of SNC set forth in
Section 4.14 shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of SNC set forth in
this Agreement (including the representations and warranties set forth in
Sections 4.1 and 4.14) such that the aggregate effect of such inaccuracies has,
or is reasonably likely to have, a Material Adverse Effect on SNC; provided
that, for purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect"
shall be deemed not to include such qualifications;
(b) SNC shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement;
(c) SNC shall have delivered to UCB a certificate, dated the Closing
Date and signed by its Chairman or President or an Executive Vice President, to
the effect that the conditions set forth in Sections 6.1(a), 6.1(b), 6.1(c),
6.2(a) and 6.2(b), to the extent applicable to SNC, have been satisfied and that
there are no actions, suits, claims, governmental investigations or procedures
instituted, pending or, to the best of such officer's knowledge, threatened that
38
reasonably may be expected to have a Material Adverse Effect on SNC or that
present a claim to restrain or prohibit the transactions contemplated herein or
in the Plan of Merger;
(d) UCB shall have received opinions of counsel to SNC in the form
reasonably acceptable to UCB's legal counsel; and
(e) All approvals of the transactions contemplated herein from the
Federal Reserve Board and any other state or federal government agency,
department or body, the approval of which is required for the consummation of
the Merger, shall have been received and all waiting periods with respect to
such approvals shall have expired.
6.3 Conditions Precedent -- SNC
The obligations of SNC to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by SNC pursuant to
Section 7.4:
(a) All representations and warranties of UCB shall be assessed as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or consented
to in writing by SNC. The representations and warranties of UCB set forth in
Section 3.1 shall be true and correct (except for inaccuracies which are de
minimis in amount). The representations and warranties of UCB set forth in
Section 3.24 shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of UCB set forth in
this Agreement (including the representations and warranties set forth in
Sections 3.1 and 3.24) such that the aggregate effect of such inaccuracies has,
or is reasonably likely to have, a Material Adverse Effect on UCB; provided
that, for purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect"
shall be deemed not to include such qualifications;
(b) No regulatory approval shall have imposed any condition or
requirement which, in the reasonable opinion of the Board of Directors of SNC,
would so materially adversely affect the business or economic benefits to SNC of
the transactions contemplated by this Agreement as to render consummation of
such transactions inadvisable or unduly burdensome; provided, that (i) SNC has
used its reasonable efforts to cause such conditions or restrictions to be
removed or modified as appropriate; (ii) notwithstanding the foregoing, in the
event that such consent is conditioned or restricted as a result of a regulatory
or legal issue resulting from other acquisitions by SNC, whether announced
before or after the date of this Agreement, or otherwise unrelated to UCB, SNC
shall not be entitled to refuse to consummate the Merger on the basis set forth
in this sentence; and (iii) any required disposition of deposits shall be deemed
acceptable if the dollar amount of deposits required to be divested does not
exceed the upper range of estimates first disclosed to the public by SNC
following the execution of this Agreement;
39
(c) UCB shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement;
(d) UCB shall have delivered to SNC a certificate, dated the Closing
Date and signed by its Chairman or President, to the effect that the conditions
set forth in Sections 6.1(a), 6.1(c), 6.3(a) and 6.3(c), to the extent
applicable to UCB, have been satisfied and that there are no actions, suits,
claims, governmental investigations or procedures instituted, pending or, to the
best of such officer's knowledge, threatened that reasonably may be expected to
have a Material Adverse Effect on UCB or that present a claim to restrain or
prohibit the transactions contemplated herein or in the Plan of Merger;
(e) SNC shall have received opinions of counsel to UCB in the form
reasonably acceptable to SNC's legal counsel;
(f) SNC shall have received the written agreements from affiliates as
specified in Section 5.11; and
(g) The holders of no more than 9.0% of the UCB Common Stock shall have
given written notice of their intent to demand payment for their shares and
shall not have voted for the Merger, pursuant to Article 13 of the NCBCA.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in the
event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement, which
inaccuracy would provide the nonbreaching party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 6.2(a)
in the case of UCB and Section 6.3(a) in the case of SNC; and, in the case of
(i) or (ii), if such breach has not been cured by the earlier of 30 days
following written notice of such breach to the party committing such breach or
the Effective Time.
(c) At any time prior to the Effective Time, by either party hereto in
writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be satisfied or
fulfilled prior to the Closing Date, and the party
40
giving the notice is not in breach of any of its representations, warranties,
covenants or undertakings herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 are denied, and the
time period for appeals and requests for reconsideration has run.
(e) At any time, by either party hereto in writing, if the shareholders
of UCB do not approve the Agreement and the Plan of Merger or if the
shareholders of SNC do not approve the issuance of shares of SNC Common Stock as
provided herein.
(f) At any time following September 30, 1997, by either party hereto in
writing, if the Effective Time has not occurred by the close of business on such
date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein.
(g) At any time prior to 11:59 p.m. on January 10, 1997 by SNC in
writing, if SNC determines in its sole good faith judgment, through review of
information Disclosed by UCB, the performance of its due diligence or otherwise,
that the financial condition, results of operations, business or business
prospects of UCB and of the UCB Subsidiaries, taken as a whole, are materially
adversely different from SNC's reasonable expectations with respect thereto
based on information that has been Disclosed in a Securities Document filed with
the Commission since January 1, 1996 and its knowledge of the operations of
banks; provided that SNC shall inform UCB upon such termination as to the
reasons for SNC's determination; and, provided further, that this Section 7.1(g)
shall not limit in any way the due diligence investigation of UCB and the UCB
Subsidiaries which SNC may perform or otherwise affect any other rights which
SNC has after the date hereof under the terms of this Agreement.
(h) By UCB, if its board of directors determines by a vote of a
majority of the members of its entire board, at any time during the ten-day
period commencing two days after the Determination Date, if either:
(A) both of the following conditions are satisfied:
(1) the Average Closing Price shall be less than
$28.50; and
(2) (i) the quotient obtained by dividing the Average
Closing Price by $33.50 (such number being referred to herein
as the "SNC Ratio") shall be less than (ii) the quotient
obtained by dividing the Index Price on the Determination Date
by the Index Price on the Starting Date and subtracting 0.15
from the quotient in this clause (A)(2)(ii); or
41
(B) the Average Closing Price shall be less than $27.00;
SUBJECT, HOWEVER, to the following four sentences. If UCB refuses to
consummate the Merger pursuant to this Section 7.1(h), it shall give
prompt written notice thereof to SNC, which notice shall specify which
of clauses (A) or (B) is applicable (or if both would be applicable,
which clause is being invoked); provided, that such notice of election
to terminate may be withdrawn at any time within the aforementioned
ten-day period. During the five-day period commencing with its receipt
of such notice, SNC shall have the option, in the case of a failure to
satisfy the condition in clause (A), to elect to increase the Exchange
Ratio to equal the quotient obtained by dividing $32.35 by the Average
Closing Price. During such five-day period, SNC shall have the option,
in the case of a failure to satisfy the condition in clause (B), to
elect to increase the Exchange Ratio to equal the quotient obtained by
dividing $30.65 by the Average Closing Price. The election contemplated
by either of the two preceding sentences shall be made by giving notice
to UCB of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 7.1(h) and
this Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be
deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section 7.1(h).
For purposes of this Section 7.1(h), the following
terms shall have the meanings indicated:
"Average Closing Price" shall mean the average of the
daily closing sales prices per share of SNC Common Stock as
reported on the NYSE-Composite Transactions List (as reported
by THE WALL STREET JOURNAL or, if not reported thereby,
another authoritative source as chosen by SNC) for the ten
consecutive full trading days in which such shares are traded
on the NYSE ending at the close of trading on the
Determination Date.
"Determination Date" shall mean the date on which SNC
shall receive consent to the Merger from the Federal Reserve
Board.
"Index Group" shall mean the 19 bank holding
companies listed below, the common stocks of all of which
shall be publicly traded and as to which there shall not have
been, since the Starting Date and before the Determination
Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company
or companies in transactions with a value exceeding 25% of the
acquiror's market capitalization. In the event that any such
company or companies are removed from the Index Group, the
weights (which have been determined based upon the number of
shares of outstanding common stock) redistributed
proportionately for purposes of determining the Index Price.
The 19 bank holding companies and the weights attributed to
them are as follows:
42
Bank Holding Companies % Weighting
AmSouth Bancorporation 2.41
Xxxxxxx Xxxxx, Inc. 8.12
CoreStates Financial Corp 9.38
Comerica Incorporated 4.56
First Bank System, Inc. 5.75
Fifth Third Bancorp 4.50
First of America Bank Corp. 2.57
Firstar Corporation 3.19
Huntington Bancshares Inc. 6.13
Mellon Bank Corporation 5.49
Mercantile Bancorporation, Inc. 2.55
National City Corporation 9.45
Northern Trust Corporation 2.37
Regions Financial Corporation 2.66
SouthTrust Corporation 4.08
SunTrust Banks, Inc. 9.48
Summit Bancorp. 3.89
U.S. Bancorp 6.41
Wachovia Corporation 7.01
Total 100.00%
"Index Price" on a given date shall mean the
weighted average (weighted in accordance with the factors
listed above) of the closing sales prices of the companies
composing the Index Group (reported as provided with respect
to the Average Closing Price).
"Starting Date" shall mean November 1, 1996.
If any company belonging to the Index Group or SNC declares or effects
a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between the
Starting Date and the Determination Date, the prices for the common
stock of such company or SNC shall be appropriately adjusted for the
purposes of applying this Section 7.1(h).
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated
pursuant to Section 7.1, both this Agreement and the Plan of Merger shall become
void and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b)
43
shall not relieve the breaching party from liability for an uncured breach of
the covenant, agreement, understanding, representation or warranty giving rise
to such termination. The SNC Option Agreement and the UCB Option Agreement shall
be governed by their own terms.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the
Plan of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time, other than
covenants that by their terms are to be performed after the Effective Time,
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive SNC or UCB (or any director,
officer or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either SNC or UCB,
the aforesaid representations, warranties and covenants being material
inducements to consummation by SNC and UCB of the transactions contemplated
herein.
7.4 Waiver
Except with respect to any required regulatory approval, each party
hereto, by written instrument signed by an executive officer of such party, may
at any time (whether before or after approval of the Agreement and the Plan of
Merger by the UCB shareholders) extend the time for the performance of any of
the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement, the Plan of Merger or any document delivered pursuant hereto
or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the other party, or satisfaction of any of the conditions
precedent to its obligations, contained herein or in the Plan of Merger, or
(iii) the performance by the other party of any of its obligations set out
herein or therein; provided that no such extension or waiver, or amendment or
supplement pursuant to Section 7.5, executed after approval by the UCB
shareholders of this Agreement and the Plan of Merger shall reduce either the
number of shares of SNC Common Stock into which each share of UCB Common Stock
shall be converted in the Merger or the payment terms for fractional interests.
7.5 Amendment or Supplement
This Agreement or the Plan of Merger may be amended or supplemented at
any time in writing by mutual agreement of SNC and UCB, subject to the proviso
to Section 7.4.
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ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Reorganization
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel; provided, however, that the filing fees and the
printing costs incurred in connection with the Registration Statement and the
Joint Proxy Statement/Prospectus shall be borne 70% by SNC and 30% by UCB.
8.2 Entire Agreement
This Agreement, the SNC Option Agreement and the UCB Option Agreement
contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and thereunder and supersede all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein or therein, and a certain letter agreement dated
the date hereof between the parties. The terms and conditions of this Agreement
and said Option Agreements shall inure to the benefit of and be binding upon the
parties hereto and thereto and their respective successors. Nothing in this
Agreement or said Option Agreements, expressed or implied, is intended to confer
upon any party, other than the parties hereto and thereto, and their respective
successors, any rights, remedies, obligations or liabilities.
8.3 No Assignment
Neither of the parties hereto may assign any of its rights or
obligations under this Reorganization Agreement to any other person, except upon
the prior written consent of the other party.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally recognized overnight express courier or by facsimile transmission,
addressed or directed as follows:
45
If to UCB:
Xxxxxx X. Xxxxxx
Executive Vice President
Chief Financial Officer
United Carolina Bancshares
000 Xxxx Xxxxxxx Xxxxxx
Post Office Xxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax No.: 000-000-0000
With a required copy to:
Xxxxxx X. Xxxxxx, Xx.
General Counsel and Secretary
United Carolina Bancshares
000 Xxxx Xxxxxxx Xxxxxx
Post Office Xxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax No.: 000-000-0000
and
Xxxxx X. Xxxxxx, III
Xxxxxx & Bird
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Fax No.: 000-000-0000
If to SNC:
Southern National Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Fax No.: 000-000-0000
46
With a required copy to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx, XX
Fax No.: 000-000-0000
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Captions
The captions contained in this Agreement are for reference only and are
not part of this Agreement.
8.6 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina applicable to agreements made and
entirely to be performed within such jurisdiction, except to the extent federal
law may be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
SOUTHERN NATIONAL CORPORATION
By
Title:_________________________________
47
UNITED CAROLINA BANCSHARES
CORPORATION
By
Title:_________________________________
48
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of November 1, 1996, by and between UNITED CAROLINA BANCSHARES CORPORATION, a
North Carolina corporation ("Issuer"), and SOUTHERN NATIONAL CORPORATION, a
North Carolina corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Reorganization, dated this date (the "Merger Agreement"), providing for,
among other things, the merger of a wholly owned Subsidiary of Grantee with and
into Issuer, with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 4,828,960 shares (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of common stock of Issuer, $4.00 par value per share ("Issuer
Common Stock"), at a purchase price per Option Share (subject to adjustment as
set forth herein, the "Purchase Price") equal to $30.50.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event;
PROVIDED that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) subject to clause (E)
below, termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
7.1(b) thereof (but only if such termination was a result of a willful breach by
Issuer) (a "Default Termination")), (C) 12 months after a Default Termination,
(D) 12 months after any termination of the Merger Agreement (other than a
Default Termination) following the occurrence
- 1 -
of a Purchase Event or a Preliminary Purchase Event, and (E) subject to clause
(D) above, six months after termination of the Merger Agreement pursuant to
Section 7.1(e) thereof (but only in the event the shareholders of Issuer do not
approve the matter required to be aapproved thereunder); PROVIDED FURTHER, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, including initially
Grantee. The rights set forth in Section 8 shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise of
the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Subsidiary when used with respect to Issuer shall have
the meaning given that term in the Merger Agreement. As used herein, the
term Acquisition Transaction shall mean (A) a merger, consolidation or
similar transaction involving Issuer or any of its Subsidiaries (other
than transactions solely between Issuer's Subsidiaries and other
subsidiaries of Issuer), (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its Subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
Subsidiaries (other than a sale of loan receivables in a financing
transaction in the normal course of business consistent with past
practices), or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar
transaction) securities representing 15% or more of the voting power of
Issuer or any of its Subsidiaries (any of the foregoing, an "Acquisition
Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the right
to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act), other than a group of which Grantee or
any of the Subsidiaries of Grantee is a member, shall have been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 15% or more of the then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have
- 2 -
filed a registration statement under the Securities Act with respect to,
a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own
or control 15% or more of the then-outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case
after any person (other than Grantee or any Subsidiary of Grantee) shall
have (A) made, or disclosed an intention to make, a proposal to engage in
an Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether
in draft or final form, under any federal or state statute or regulation
(including a notice filed under the HSR Act and an application or notice
filed under the BHC Act, the Bank Merger Act, or the Change in Bank
Control Act of 1978) seeking the Consent to an Acquisition Transaction
from any federal or state governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 13(f)
hereof.
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(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER 1,
1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
- 4 -
necessary for Holder to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may
be issued pursuant to Section 7 upon exercise of the Option. The shares
of Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid, and
nonassessable, and shall be delivered free and clear of all liens,
claims, charges, and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any shareholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of
a stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
- 5 -
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; (iii) to permit any person, other than
Grantee or one of the Subsidiaries, to acquire all of the outstanding shares of
Issuer Common Stock pursuant to a statutory share exchange; or (iv) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then-holder or holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), Issuer in a merger in which Issuer is the continuing or
surviving person, the corporation that shall acquire all of the
outstanding shares of Issuer Common Stock pursuant to a statutory share
exchange,
- 6 -
the transferee of all or any substantial part of the Issuer's assets (or
the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee), (y) the
price per share of the Issuer Common Stock to be paid by any person
(other than the Grantee) pursuant to an agreement with Issuer, and (z)
the highest closing sales price per share of Issuer Common Stock quoted
on the Nasdaq Stock Market within the six-month period immediately
preceding the agreement; provided, that in the event of a sale of less
than all of Issuer's assets, the Assigned Value shall be the sum of the
price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in interest
of the Grantees if there shall be more than one Grantee (a "Grantee
Majority")), divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. In the event that an exchange offer
is made for the Issuer Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for the Issuer Common Stock shall be determined by a nationally
recognized investment banking firm mutually selected by Grantee and
Issuer (or if applicable, Acquiring Corporation). (If there shall be more
than one Grantee, any such selection shall be made by a Grantee
Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger, share exchange or sale in question,
but in no event higher than the closing price of the shares of the
Substitute Common Stock on the day preceding such consolidation, merger,
share exchange or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or
by any company which controls or is controlled by such merger person, as
Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority).
- 7 -
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request
of Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any
shares of Issuer Common Stock acquired by Holder pursuant to the Option
with respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender
- 8 -
to Issuer the Option and the certificates evidencing the shares of Issuer Common
Stock purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or Consent of any
governmental or regulatory agency or authority is required in connection with
the payment of all or any portion of the Section 8 Repurchase Consideration,
Holder shall have the ongoing option to revoke its request for repurchase
pursuant to Section 8, in whole or in part, or to require that Issuer deliver
from time to time that portion of the Section 8 Repurchase Consideration that it
is not then so prohibited from paying and promptly file the required notice or
Application for Consent and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or application and the
obtaining of any such Consent). If any governmental or regulatory agency or
authority disapproves of any part of Issuer's proposed repurchase pursuant to
this Section 8, Issuer shall promptly give notice of such fact to Holder. If any
governmental or regulatory agency or authority prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such agency or authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable at
the Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the preceding
sentence within five business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; PROVIDED, HOWEVER, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the
- 9 -
consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
actual ownership or control, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which shall have acquired actual ownership
or control, of 50% or more of the then-outstanding shares of Issuer Common
Stock, or (ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii) shall be consummated.
9. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; PROVIDED, that Issuer may elect
to cause any such shares not to be so registered (i) if the underwriters in good
faith object for a valid business reason, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registration of resales;
PROVIDED, FURTHER, that such election pursuant to clause (i) may be made only
one time. If some but not all the shares of Issuer Common Stock, with respect to
which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such
- 10 -
registration, Issuer shall make appropriate allocation of shares to be
registered among Selling Holders and any other person (other than Issuer or any
person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration PRO RATA in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, PROVIDED, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days PROVIDED Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (A) termination of the Merger
Agreement pursuant to Section 7.1 thereof, (B) failure to obtain the
requisite shareholder approval of the holders of Issuer Common Stock
pursuant to Section 5.1 of the Merger Agreement, and (C) a Purchase Event
or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which the
Selling Holders concerned were afforded the opportunity to register such
shares under the Securities Laws and such shares were registered as
requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after the expiration
of nine months from the effective date of such registration statement. Issuer
shall use all reasonable efforts to make any filings, and take all steps, under
all applicable state securities laws to the extent necessary to permit the sale
or other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, PROVIDED, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
- 11 -
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses, including reasonable fees and
expenses of one counsel to the Holders whose Option Shares are being registered,
printing expenses, expenses of underwriters, excluding discounts and commissions
but including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by Selling Holders) and all other
qualifications, notifications or exemptions pursuant to subparagraph (a) or (b)
above. Underwriting discounts and commissions relating to Option Shares and any
other expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Holder, or by
such underwriter, as the case may be, for all such expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement, that
was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such holder or such underwriter, as the case may be,
expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified
- 12 -
party. The indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of investigation) shall be
paid by the indemnified party unless (i) the indemnifying party agrees to pay
them, (ii) the indemnifying party fails to assume the defense of such action
with counsel satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; PROVIDED, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale at
any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the Commission from time to
time, including, without limitation, Rules 144 and 144A. Issuer shall at its
expense provide Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Laws, or required pursuant to any state securities laws or the
rules of any stock exchange.
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(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the Option on the Nasdaq
National Market or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby) is
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided in Section 9, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(B) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(C) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein
- 14 -
and therein, between Grantee and Issuer (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto (other than any
transferees of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state governmental or regulatory agency
or authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that the Option does
not permit Holder to acquire, or does not require Issuer to repurchase, the full
number of shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer to allow
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(D) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina without regard to any applicable conflicts of law rules, except to the
extent that the federal laws of the United States shall govern.
(E) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(F) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement(or
at such other address for a party as shall be specified by like notice).
(G) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(H) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
- 15 -
(I) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(J) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: UNITED CAROLINA BANCSHARES
CORPORATION
By:____________________ By: ___________________________
Secretary X. Xxxxx Xxxxxx
Chairman of the Board and
[CORPORATE SEAL] Chief Executive Officer
ATTEST: SOUTHERN NATIONAL CORPORATION
By:____________________ By: ___________________________
Secretary Xxxx X. Xxxxxxx XX
Chairman of the Board and
[CORPORATE SEAL] Chief Executive Officer
- 16 -
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of November 1, 1996, by and between SOUTHERN NATIONAL CORPORATION, a North
Carolina corporation ("Issuer"), and UNITED CAROLINA BANCSHARES CORPORATION, a
North Carolina corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Reorganization, dated this date (the "Merger Agreement"), providing
for, among other things, the merger of a wholly owned Subsidiary of Issuer with
and into Grantee, with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
(A) DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
(B) GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 10,806,121 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock of Issuer, $5.00 par value per share
("Issuer Common Stock"), at a purchase price per Option Share (subject to
adjustment as set forth herein, the "Purchase Price") equal to $34.625 per
share.
1. EXERCISE OF OPTION
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event;
PROVIDED that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) subject to clause (E)
below, termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
7.1(b) thereof (but only if such termination was a result of a willful breach by
Issuer) a "Default Termination")), (C) 12 months after a Default Termination,
(D) 12 months after any termination of the Merger Agreement (other than a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event, and
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(E) subject to clause (D) above, six months after termination of the Merger
Agreement pursuant to Section 7.1(e) thereof (but only in the event the
shareholders of Issuer do not approve the matter required to be approved
thereunder); PROVIDED FURTHER, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The term "Holder" shall mean the holder or holders of the Option from time to
time, including initially Grantee. The rights set forth in Section 8 shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement with any person
(other than Grantee or any Subsidiary of Grantee) to effect an Acquisition
Transaction (as defined below). As used herein, the term Subsidiary when used
with respect to Issuer shall mean Branch Banking and Trust Company and Branch
Banking and Trust Company of South Carolina. As used herein, the term
Acquisition Transaction shall mean (A) a merger, consolidation or similar
transaction involving Issuer or either of its Subsidiaries (other than
transactions solely between Issuer's Subsidiaries and other subsidiaries of
Issuer), (B) the disposition, by sale, lease, exchange or otherwise, of assets
of Issuer or any of its Subsidiaries representing in either case 15% or more of
the assets of Issuer or of either Subsidiary (other than a sale of loan
receivables in a financing transaction in the normal course of business
consistent with past practices), or (C) the issuance, sale or other disposition
of (including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 15% or more of the voting power of Issuer
or any of its Subsidiaries (any of the foregoing, an "Acquisition Transaction");
or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Exchange
Act), other than a group of which Grantee or either of the Subsidiaries of
Grantee is a member, shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of 15% or more of the then-outstanding
shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the Securities
Act with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such
-2-
person would own or control 15% or more of the then-outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender Offer
or filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether in
draft or final form, under any federal or state statute or regulation (including
a notice filed under the HSR Act and an application or notice filed under the
BHC Act, the Bank Merger Act, or the Change in Bank Control Act of 1978) seeking
the Consent to an Acquisition Transaction from any federal or state governmental
or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall:
(i) Holder's (taking into account all other Holders)
Total Profit (as defined below) exceed $25 million and, if it otherwise
would exceed such amount, Holder, at its sole election, shall either
(A) reduce the number of shares of Issuer Common Stock subject to the
Option, (B) deliver to Issuer for cancellation Option Shares previously
purchased by Holder, (C) pay cash to Issuer, or (D) any combination of
the foregoing, so that Holder's actually realized Total Profit shall
not exceed $25 million after taking into account the foregoing actions;
and
-3-
(ii) the Option be exercised for a number of shares
of Issuer Common Stock as would, as of the date of exercise, result in
a Notional Total Profit (as defined below) of more than $25 million;
provided, that nothing in this clause (ii) shall restrict any exercise
of the Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; (iv) any amounts
received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated person; and (v) any equivalent amount with respect to the
Substitute Option.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Holder and its affiliates as of such date, were sold for cash at
the last sale price per share of Issuer Common Stock as listed on the New York
Stock Exchange ("NYSE") (or, if Issuer Common Stock is not then listed on the
NYSE, the highest bid price per share as quoted on the principal trading market
or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) as of the close of business on the preceding
trading day (less customary brokerage commissions).
2. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
-4-
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER
1, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
3. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action
to authorize and reserve and to permit it to issue, and, at all times from the
date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common Stock necessary
for Holder to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of Issuer
Common Stock or other securities which may be issued pursuant to Section 7 upon
exercise of the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common Stock
or other securities which may be issuable pursuant to Section 7, upon issuance
pursuant thereto, shall be duly and validly issued, fully paid, and
nonassessable, and shall be delivered free and clear of all liens,
-5-
claims, charges, and encumbrances of any kind or nature whatsoever, including
any preemptive rights of any shareholder of Issuer.
4. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Laws.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a)), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 9.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement:
(i) to consolidate with or merge into any person, other than Grantee or one of
its Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer
-6-
Common Stock immediately prior to such merger shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the merged
company; (iii) to permit any person, other than Grantee or one of the
Subsidiaries, to acquire all of the outstanding shares of Issuer Common Stock
pursuant to a statutory share exchange; or (iv) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as defined below), (y) any person that controls the Acquiring Corporation, or
(z) in the case of a merger described in clause (ii), the Issuer (in each case,
such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee. The Substitute Option Issuer shall
also enter into an agreement with the then-holder or holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing
or surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), Issuer in a merger in which Issuer is the
continuing or surviving person, the corporation that shall acquire all
of the outstanding shares of Issuer Common Stock pursuant to a
statutory share exchange, the transferee of all or any substantial part
of the Issuer's assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common
stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
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(iii) "Assigned Value" shall mean the highest of (x)
the price per share of the Issuer Common Stock at which a Tender Offer
or Exchange Offer therefor has been made by any person (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid
by any person (other than the Grantee) pursuant to an agreement with
Issuer, and (z) the highest closing sales price per share of Issuer
Common Stock quoted on the NYSE within the six-month period immediately
preceding the agreement; provided, that in the event of a sale of less
than all of Issuer's assets, the Assigned Value shall be the sum of the
price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in
interest of the Grantees if there shall be more than one Grantee (a
"Grantee Majority")), divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. In the event that an
exchange offer is made for the Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration
other than cash, the value of the securities or other property issuable
or deliverable in exchange for the Issuer Common Stock shall be
determined by a nationally recognized investment banking firm mutually
selected by Grantee and Issuer (or if applicable, Acquiring
Corporation). (If there shall be more than one Grantee, any such
selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger, share exchange or sale
in question, but in no event higher than the closing price of the
shares of the Substitute Common Stock on the day preceding such
consolidation, merger, share exchange or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by Issuer, the
person merging into Issuer or by any company which controls or is
controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs
shall the Substitute Option be exercisable for more than 9.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 9.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring
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Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the shares of Substitute Common Stock are in no way
distinguishable from or have lesser economic value than other shares of common
stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 shall apply,
with appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
6. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months immediately
thereafter, Issuer shall repurchase from Holder the Option and all shares of
Issuer Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired by Holder pursuant to the
Option with respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section 7)
paid (or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by
Holder for each share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to
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Issuer the Option and the certificates evidencing the shares of Issuer Common
Stock purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or Consent of any
governmental or regulatory agency or authority is required in connection with
the payment of all or any portion of the Section 8 Repurchase Consideration,
Holder shall have the ongoing option to revoke its request for repurchase
pursuant to Section 8, in whole or in part, or to require that Issuer deliver
from time to time that portion of the Section 8 Repurchase Consideration that it
is not then so prohibited from paying and promptly file the required notice or
Application for Consent and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or application and the
obtaining of any such Consent). If any governmental or regulatory agency or
authority disapproves of any part of Issuer's proposed repurchase pursuant to
this Section 8, Issuer shall promptly give notice of such fact to Holder. If any
governmental or regulatory agency or authority prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such agency or authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable at
the Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the preceding
sentence within five business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the NYSE (or if
Issuer Common Stock is not listed on the NYSE, the highest bid price per share
as quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by Holder) during
the 60 business days preceding the Request Date; PROVIDED, HOWEVER, that in the
event of a sale of less than all of Issuer's Assets, the Applicable Price shall
be the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by an independent
nationally recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer (which determination shall be conclusive for all purposes
of this Agreement), divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale.
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If the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
actual ownership or control, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which shall have acquired actual ownership
or control, of 50% or more of the then-outstanding shares of Issuer Common
Stock, or (ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii) shall be consummated.
7. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer
shall, subject to the conditions of subparagraph (c) below, if requested by any
Holder, including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issu able to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; PROVIDED, that Issuer may elect
to cause any such shares not to be so registered (i) if the underwriters in good
faith object for a valid business reason, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registration of resales;
PROVIDED, FURTHER, that such election pursuant to clause (i) may be made only
one time. If some but not all the shares of Issuer Common Stock, with respect to
which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer
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or any person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration PRO RATA in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, PROVIDED, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days PROVIDED Issuer shall
in good faith determine that any such reg istration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall be required to register Option Shares under the Securities Laws pursuant
to subparagraph (a) above:
(i) prior to the earliest of (A) termination of the
Merger Agreement pursuant to Section 7.1 thereof, (B) failure to obtain
the requisite shareholder approval of the holders of Issuer Common
Stock pursuant to Section 5.1 of the Merger Agreement, and (C) a
Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which
the Selling Holders concerned were afforded the opportunity to register
such shares under the Securities Laws and such shares were registered
as requested; and
(v) unless a request therefor is made to Issuer by
Selling Holders holding at least 25% or more of the aggregate number of
Option Shares then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, PROVIDED, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
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(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses, including reasonable fees and
expenses of one counsel to the Holders whose Option Shares are being registered,
printing expenses, expenses of underwriters, excluding discounts and commissions
but including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by Selling Holders) and all other
qualifications, notifications or exemptions pursuant to subparagraph (a) or (b)
above. Underwriting discounts and commissions relating to Option Shares and any
other expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a)
or (b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act against all expenses,
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Holder, or by
such underwriter, as the case may be, for all such expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement, that
was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto in reliance upon, and in conformity with, information furnished in
writing to Issuer by such holder or such underwriter, as the case may be,
expressly for such use.
Promptly upon receipt by a party indemnified under this subparagraph
(e) of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this subparagraph (e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action, but
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
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other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable cost of investigation) shall
be paid by the indemnified party unless (i) the indemnifying party agrees to pay
them, (ii) the indemnifying party fails to assume the defense of such action
with counsel satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph (a) or (b)
above, Issuer and each Selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this subparagraph (e).
(f) Issuer shall comply with all reporting requirements and
will do all such other things as may be necessary to permit the expeditious sale
at any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the Commission from time to
time, including, without limitation, Rules 144 and 144A. Issuer shall at its
expense provide Holder with any information necessary in connection with the
completion and
-14-
filing of any reports or forms required to be filed by them under the Securities
Laws, or required pursuant to any state securities laws or the rules of any
stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
8. QUOTATION; LISTING. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for listing on
the NYSE or any other securities exchange or any automated quotations system
maintained by a self-regulatory organization, Issuer will promptly file an
application, if required, to authorize for listing or trading or quotation of
the shares of Issuer Common Stock or other securities to be acquired upon
exercise of the Option on the NYSE or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
9. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
is exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
10. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 8, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
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(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY;
SEVERABILITY. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option Shares
or any permitted transferee of this Agreement pursuant to Section 12(h)) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or a federal or
state governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire
the full number of shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina without regard to any applicable conflicts of law rules, except to the
extent that the federal laws of the United States shall govern.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement (or at such other address for a party as shall be specified by like
notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee (as the term Subsidiary is
defined in the Merger Agreement) and Grantee may assign its rights hereunder in
whole or in part after the occurrence of a Purchase Event. Subject to the
preceding sentence, this Agreement shall
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be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: SOUTHERN NATIONAL
CORPORATION
By:_______________________ By:_____________________________
Secretary Xxxx X. Xxxxxxx XX
Chairman of the Board and
Chief Executive Officer
ATTEST: UNITED CAROLINA BANCSHARES
CORPORATION
By:_______________________ By:_____________________________
Secretary X. Xxxxx Xxxxxx
Chairman of the Board and
Chief Executive Officer
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