AGREEMENT AND PLAN OF REORGANIZATION
between
Commerce Bank of Virginia
and
Community Bankshares Incorporated
-------------------------
December 12, 1995
TABLE OF CONTENTS
ARTICLE 1
The Reorganization and Related Matters
Page
1.1 The Reorganization .........................................................................
1.2 Management and Business of CBOV and CBI.....................................................
1.3 The Closing and Effective Date..............................................................
1.4 Definitions.................................................................................
ARTICLE 2
Basis and Manner of Exchange
2.1 Conversion of Shares........................................................................
2.2 Manner of Exchange..........................................................................
2.3 No Fractional Shares........................................................................
2.4 Dividends...................................................................................
2.5 Dissenting Shares...........................................................................
ARTICLE 3
Representations and Warranties
3.1 Representations and Warranties of CBOV......................................................
(a) Organization, Standing and Power...................................................
(b) Authority..........................................................................
(c) Capital Structure..................................................................
(d) Ownership of Stock.................................................................
(e) Financial Statements...............................................................
(f) Absence of Undisclosed Liabilities.................................................
(g) Legal Proceedings; Compliance with Laws............................................
(h) Regulatory Approvals...............................................................
(i) Labor Relations....................................................................
(j) Tax Matters........................................................................
(k) Property...........................................................................
(l) Reports............................................................................
(m) Employee Benefit Plans.............................................................
(n) Investment Securities..............................................................
(o) Certain Contacts...................................................................
Page
(p) Insurance..........................................................................
(q) Absence of Material Changes and Events.............................................
(r) Loans, OREO and Allowance for Loan Losses..........................................
(s) Statements True and Correct........................................................
(t) Brokers and Finders................................................................
(u) Repurchase Agreements..............................................................
(v) Administration of Trust Accounts...................................................
(w) Environmental Matters..............................................................
3.2 Representations and Warranties of CBI.......................................................
(a) Organization, Standing and Power...................................................
(b) Authority..........................................................................
(c) Capital Structure..................................................................
(d) Ownership of the CBI Subsidiaries; Capital Structure
of the CBI Subsidiaries; and Organization of the CBI
Subsidiaries.......................................................................
(e) Financial Statements...............................................................
(f) Absence of Undisclosed Liabilities.................................................
(g) Legal Proceedings; Compliance with Laws............................................
(h) Regulatory Approvals...............................................................
(i) Labor Relations....................................................................
(j) Tax Matters........................................................................
(k) Property...........................................................................
(l) Reports............................................................................
(m) Employee Benefit Plans.............................................................
(n) Investment Securities..............................................................
(o) Certain Contacts...................................................................
(p) Insurance..........................................................................
(q) Loans, OREO and Allowance for Loan Losses..........................................
(r) Absence of Material Changes and Events.............................................
(s) Statements True and Correct........................................................
(t) Brokers and Finders................................................................
(u) Repurchase Agreements..............................................................
(v) Administration of Trust Accounts...................................................
(w) Environmental Matters..............................................................
Page
ARTICLE 4
Conduct Prior to the Effective Date
4.1 Access to Records and Properties............................................................
4.2 Confidentiality.............................................................................
4.3 Registration Statement, Proxy Statement and Shareholder Approval............................
4.4 Operation of the Business of CBOV and CBI...................................................
4.5 Dividends...................................................................................
4.6 No Solicitation.............................................................................
4.7 Regulatory Filings..........................................................................
4.8 Public Announcements........................................................................
4.9 Notice of Breach............................................................................
4.10 Accounting Treatment........................................................................
4.11 Reorganization Consummation.................................................................
4.12 Amendment to Articles of Incorporation......................................................
4.13 Employment Contracts........................................................................
ARTICLE 5
Additional Agreements
5.1 Conversion of Stock Options.................................................................
5.2 Accounting Treatment........................................................................
5.3 Benefit Plans...............................................................................
5.4 Indemnification.............................................................................
ARTICLE 6
Conditions to the Reorganization
6.1 Conditions to Each Party's Obligations to Effect the Reorganization.........................
(a) Shareholder Approvals..............................................................
(b) Regulatory Approvals...............................................................
(c) Registration Statement.............................................................
(d) Tax Opinion........................................................................
(e) Accountant's Letter................................................................
(f) Opinions of Counsel................................................................
(g) Legal Proceedings..................................................................
(h) Employment Contracts...............................................................
6.2 Conditions to Obligations of CBI............................................................
(a) Representations and Warranties.....................................................
Page
(b) Performance of Obligations.........................................................
(c) Affiliate Letters..................................................................
(d) Investment Banking Letter..........................................................
6.3 Conditions to Obligations of CBOV...........................................................
(a) Representations and Warranties.....................................................
(b) Performance of Obligations.........................................................
(c) Investment Banking Letter..........................................................
(d) Amendment to Articles of Incorporation.............................................
ARTICLE 7
Termination
7.1 Termination.................................................................................
7.2 Effect of Termination.......................................................................
7.3 Non-Survival of Representations, Warranties and Covenants...................................
7.4 Expenses....................................................................................
ARTICLE 8
General Provisions
8.1 Entire Agreement............................................................................
8.2 Waiver and Amendment........................................................................
8.3 Descriptive Headings........................................................................
8.4 Governing Law...............................................................................
8.5 Notices.....................................................................................
8.6 Counterparts................................................................................
8.7 Severability................................................................................
8.8 Brokers and Finders.........................................................................
8.9 Subsidiaries................................................................................
Exhibit A - Plan of Share Exchange between Commerce Bank of Virginia and
Community Bankshares Incorporated
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of December 12, 1995 by and between Commerce Bank of Virginia, a
Virginia state bank with its principal office located in Richmond, Virginia
("CBOV"), and Community Bankshares Incorporated, a Virginia corporation with its
principal office located in Petersburg, Virginia ("CBI").
WITNESSETH:
WHEREAS, CBOV and CBI desire to combine their respective businesses;
and
WHEREAS, CBOV and CBI have agreed to the affiliation of their two
companies through a Share Exchange under Virginia law, as a result of which CBOV
would become a wholly-owned subsidiary of CBI and the shareholders of CBOV would
become shareholders of CBI, all as more specifically provided in this Agreement
and the Plan of Share Exchange in the form attached hereto as Exhibit A (the
"Plan"); and
WHEREAS, the respective Boards of Directors of CBOV and CBI have
resolved that the transactions described herein are in the best interests of the
parties and their respective shareholders and have authorized and approved the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
ARTICLE 1
The Reorganization and Related Matters
1.1 The Reorganization. Subject to the terms and conditions of this
Agreement, at the Effective Date as defined in Section 1.3 hereof, CBOV shall
become a wholly-owned subsidiary of CBI through the exchange of each outstanding
share of common stock of CBOV for shares of the common stock of CBI in
accordance with Section 2.1 of this Agreement and pursuant to a statutory share
exchange under Section 13.1-717 of the Virginia Stock Corporation Act (the
"Reorganization"). At the Effective Date, the Reorganization shall have the
effect provided in Section 13.1-721 of the Virginia Stock Corporation Act.
1.2 Management and Business of CBOV and CBI. The directors, officers
and employees of CBOV will not change as a result of the Reorganization. The
members of the CBOV Board shall become directors of CBI on the Effective Date.
When the CBOV directors become directors of CBI, three members of the CBOV Board
shall become members of each of the three classes of CBI Directors, as
determined by the CBOV Board. The CBOV Directors appointed to Class I shall
serve until the 1998 annual meeting of shareholders; those appointed to Class II
shall serve until the 1999 annual meeting of shareholders; and those appointed
to
Class III shall serve until the 1997 annual meeting of shareholders. The parties
anticipate that immediately before the Effective Date CBI will have ten
directors and CBOV will have nine directors. As a result of the Reorganization,
CBI will have 19 directors on and after the Effective Date. It is the intention
of CBI and CBOV that after the Effective Date, directors of CBOV, or individuals
designated by directors of CBOV, shall continue to constitute nine nineteenths
(9/19) of the Board of CBI and the parties shall use their best efforts to
maintain that ratio. The parties also acknowledge, however, that such ratio
might change as a result of unanticipated events, including, for example, the
acquisition in the future of another bank by CBI. The parties intend that after
the Effective Date, the chief executive officer of CBOV and the chief executive
officer of The Community Bank, a wholly owned subsidiary of CBI, each will
attend the meetings of the other's Board of Directors.
1.3 The Closing and Effective Date. The closing of the transactions
contemplated by this Agreement and the Plan of Reorganization shall take place
at the offices of Williams, Mullen, Christian & Xxxxxxx, 0000 Xxxx Xxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxx or at such other place as may be mutually agreed upon by the
parties. The Reorganization shall become effective on the date shown on the
Certificate of Share Exchange issued by the State Corporation Commission of
Virginia effecting the Reorganization (the "Effective Date"). Unless otherwise
agreed upon in writing by the chief executive officers of CBI and CBOV, subject
to the conditions to the obligations of the parties to effect the Reorganization
as set forth in Article 6, the parties shall use their best efforts to cause the
Effective Date to occur on the first day of the month following the month in
which the conditions set forth in Sections 6.1(a) and 6.1(b) are satisfied. All
documents required by the terms of this Agreement to be delivered at or prior to
consummation of the Reorganization will be exchanged by the parties at the
closing of the Reorganization (the "Reorganization Closing"), which shall be
held on or before the Effective Date. Prior to the Reorganization Closing, CBI
and CBOV shall execute and deliver to the Virginia State Corporation Commission
Articles of Share Exchange containing a Plan of Share Exchange in substantially
the form of Exhibit A hereto.
1.4 Definitions. Any term defined anywhere in this Agreement shall have
the meaning ascribed to it for all purposes of this Agreement (unless expressly
noted to the contrary). In addition:
(a) the term "knowledge" when used with respect to a party
shall mean the knowledge, after due inquiry, of any "Executive Officer" of such
party, as such term is defined in Regulation O, (12 C.F.R. 215);
(b) the term "Material Adverse Effect", when applied to a
party, shall mean an event, occurrence or circumstance (including without
limitation (i) the making of any provisions for possible loan and lease losses,
write-downs or other real estate and taxes and (ii) any breach of a representa-
tion or warranty by such party) which (a) has or is reasonably likely to have
a material adverse effect on the financial position, results of operations or
business of the party and its subsidiaries, taken as a whole, or (b) would
materially impair the party's ability to perform its obligations under this
Agreement or the consummation of the Reorganization and the other trans-
actions contemplated by this Agreement; provided, however, that solely for
purposes of measuring whether an event, occurrence or circumstance has a
material adverse effect on such party's results of operations, the term "results
of operations" shall mean net interest income plus non-interest income (less
securities gains) less gross expenses (excluding provisions for possible loan
and lease losses, write-downs of other real estate and taxes); and provided
further, that material adverse effect and material impairment shall not be
deemed to include the impact of (i) changes in banking and similar laws of
general applicability or interpretations thereof by courts or governmental
authorities, (ii) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and bank holding
companies generally, and (iii) the Reorganization on the operating performance
of the parties to this Agreement; and
(c) the term "Previously Disclosed" by a party shall mean
information set forth in a written disclosure letter that is delivered by that
party to the other party prior to or contemporaneously with the execution of
this Agreement and specifically designated as information "Previously Disclosed"
pursuant to this Agreement.
ARTICLE 2
Basis and Manner of Exchange
2.1 Conversion of Shares. Upon, and by reason of, the Reorganization
becoming effective pursuant to the issuance of a Certificate of Share Exchange
by the Virginia State Corporation Commission, no cash, except as set forth in
Section 2.3 below, shall be allocated to the shareholders of CBOV, and stock
shall be issued and allocated as follows:
(a) Each share of common stock, par value $3.50 per share, of
CBOV ("CBOV Common Stock") issued and outstanding immediately prior to the
Effective Date shall, by operation of law, be automatically exchanged for 1.4044
(the "Exchange Ratio") shares of common stock of CBI, par value $3.00 per share
(CBI Common Stock), plus cash for fractional shares. Each holder of a
certificate representing any shares of CBOV Common Stock upon the surrender of
his CBOV stock certificates to CBI, duly endorsed for transfer in accordance
with Section 2.2 below, will be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of CBI Common
Stock that his shares shall be converted into pursuant to the Exchange Ratio.
Each such holder of CBOV Common Stock shall have the right to receive any
dividends previously declared but unpaid as to such stock and the consideration
described in Sections 2.1 and 2.3 upon the surrender of such certificate in
accordance with Section 2.2. In the event CBI changes the number of shares of
CBI Common Stock issued and outstanding prior to the Effective Date as a result
of any stock split, stock dividends, recapitalization or similar transaction
with respect to the outstanding CBI Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
(b) Shares of CBOV Common Stock issued and outstanding shall,
by virtue of the Reorganization, continue to be issued and outstanding shares
held by CBI.
2.2 Manner of Exchange. As promptly as practicable after the Effective
Date, CBI shall cause The Community Bank, acting as the exchange agent
("Exchange Agent"), to send to each former shareholder of record of CBOV
immediately prior to the Effective Date transmittal materials for use in
exchanging such shareholder's certificates of CBOV Common Stock (other than
shares held by shareholders who perfect their dissenters' rights as provided
under Section 2.5 hereof) for the consideration set forth in Section 2.1 above
and Section 2.3 below. Any fractional share checks which a CBOV shareholder
shall be entitled to receive in exchange for such shareholder's shares of CBOV
Common Stock, and any dividends paid on any shares of CBI Common Stock that such
shareholder shall be entitled to receive prior to the delivery to the Exchange
Agent of such shareholder's certificates representing all of such shareholder's
shares of CBOV Common Stock will be delivered to such shareholder only upon
delivery to the Exchange Agent of the certificates representing all of such
shares (or indemnity satisfactory to CBI and the Exchange Agent, in their
judgement, if any of such certificates are lost, stolen or destroyed). No
interest will be paid on any such fractional share checks or dividends to which
the holder of such shares shall be entitled to receive upon such delivery.
2.3 No Fractional Shares. No certificates or scrip for fractional
shares of CBI Common Stock will be issued. In lieu thereof, CBI will pay the
value of such fractional shares in cash on the basis of the book value per share
of CBI Common Stock at the end of the calendar quarter that immediately precedes
the Effective Date.
2.4 Dividends. No dividend or other distribution payable to the holders
of record of CBI Common Stock at or as of any time after the Effective Date
shall be paid to the holder of any certificate representing shares of CBOV
Common Stock issued and outstanding at the Effective Date until such holder
physically surrenders such certificate for exchange as provided in Section 2.2
of this Agreement, promptly after which time all such dividends or distributions
shall be paid (without interest).
2.5 Dissenting Shares. Shareholders of CBOV shall have the right to
demand and receive payment of the fair value of their shares of CBOV Common
Stock pursuant to the provisions of Virginia Code ss. 13.1-729 et seq. (the
"Dissenting Shares"). If, however, a holder shall have failed to perfect his
right to dissent or shall have effectively withdrawn or lost such right, each of
his shares of CBOV Common Stock shall be deemed to have been converted into, at
the Effective Date, the right to receive the number of shares of CBI Common
Stock based on the Exchange Ratio and cash in lieu of any fractional shares
pursuant to Section 2.3 hereof.
ARTICLE 3
Representation and Warranties
3.1 Representations and Warranties of CBOV. CBOV represents
and warrants to CBI as follows:
(a) Organization, Standing and Power. (1) CBOV is a
corporation and a Virginia state bank, duly organized, validly existing and in
good standing under the laws of Virginia, and it has all requisite corporate
power and authority to carry on its business in Virginia as now being conducted
and to own and operate its assets, properties and business; CBOV has no
subsidiaries; and CBOV has the corporate power and authority to execute and
deliver this Agreement and perform the respective terms of this Agreement and
the Plan of Share Exchange. CBOV is a member of the Federal Reserve System, and
except as Previously Disclosed is in compliance in all material respects with
all rules and regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the Virginia State Corporation
Commission ("SCC") and any other relevant regulatory authority, and it has all
requisite corporate power and authority to carry on a commercial banking
business as now being conducted and to own and operate its assets, properties
and business.
(2) CBOV is an "insured bank" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder. All of the shares
of capital stock of CBOV are fully paid and nonassessable.
(b) Authority. (1) The execution and delivery of this
Agreement, the Plan of Share Exchange and the consummation of the
Reorganization, have been duly and validly authorized by all necessary corporate
action on the part of CBOV, except the approval of shareholders. The Agreement
represents the legal, valid, and binding obligations of CBOV, enforceable
against CBOV in accordance with its terms (except in all such cases as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(2) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated herein, nor compliance by CBOV
with any of the provisions hereof will: (i) conflict with or result in a breach
of any provision of CBOV's Articles of Incorporation or Bylaws; (ii) to the
knowledge of CBOV, except as Previously Disclosed, constitute or result in the
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 assets of CBOV pursuant to (A) any note, bond, mortgage, indenture,
or (B) any material license, agreement, lease, or other instrument or
obligation, to which CBOV is a party or by which any of them or any of their
properties or assets may be bound, or (iii) to the knowledge of CBOV, subject to
the receipt of the requisite approvals referred to in Section 4.7, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to CBOV
or any or its properties or assets.
(c) Capital Structure. The authorized capital stock of CBOV
consists of 1,500,000 shares of common stock, par value $3.50 per share, of
which, as of the date hereof, 501,254 shares are issued, outstanding, fully paid
and nonassessable, not subject to shareholder preemptive rights and were not
issued in violation of any agreement to which CBOV is a party
or otherwise bound, or of any registration or qualification provisions of any
federal or state securities laws. Except as Previously Disclosed, there are no
outstanding options, warrants or other rights to subscribe for or purchase from
CBOV any capital stock of CBOV or securities convertible into or exchangeable
for capital stock of CBOV.
(d) Ownership of Stock. (1) CBOV does not own, directly or
indirectly, 5% or more of the outstanding capital stock or other voting
securities of any corporation, bank or other organization actively engaged in
business except as Previously Disclosed.
(e) Financial Statements. CBOV has previously furnished to CBI
true and complete copies of its audited balance sheets and related statements of
income, statements of cash flows, and statements of stockholders' equity for the
three year period ended December 31, 1994, and its unaudited balance sheets and
related statements of income and statements of stockholders' equity for the
three month and nine month periods ending September 30, 1995 (together with the
notes thereto, the "CBOV Financial Statements"). The CBOV Financial Statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods presented, and present fairly
the financial position of CBOV as of the respective dates thereof and the
results of its operations for the three year and nine month periods then ended,
except as may be noted therein, and subject to normal and recurring year end
audit adjustments in the case of unaudited statements.
(f) Absence of Undisclosed Liabilities. At September 30, 1995,
CBOV, to its knowledge, had no obligation or liability (contingent or otherwise)
of any nature which was not reflected in the CBOV Financial Statements, except
for those which in the aggregate are immaterial or have been Previously
Disclosed.
(g) Legal Proceedings; Compliance with Laws. Except as
Previously Disclosed, there are no actions, suits or proceedings instituted or
pending or, to the best knowledge of CBOV's management, threatened against CBOV,
or against any property, asset, interest or right of CBOV, that are reasonably
expected to have, either individually or in the aggregate a material adverse
effect on the financial condition of CBOV or that are reasonably expected to
threaten or impede the consummation of the Reorganization. CBOV is not a party
to any agreement or instrument or subject to any judgment, order, writ,
injunction, decree or rule that might reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), business or prospects
of CBOV. To the best knowledge of CBOV's management, CBOV has complied in all
material respects with all laws, ordinances, requirements, regulations or orders
applicable to its business (including environmental laws, ordinances,
requirements, regulations or orders).
(h) Regulatory Approvals. CBOV knows of no reason why the
regulatory approvals referred to in Section 6.1(b) should not be
obtained without the imposition of any condition of the type referred
to in Section 6.1(b).
(i) Labor Relations. CBOV is not a party to or bound by any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor
organization, nor is it the subject of a proceeding asserting that it has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel it to bargain with any labor organization as
to wages and conditions of employment, nor is there any strike or other labor
dispute involving it, pending or, to the best of its knowledge, threatened, nor
is it aware of any activity involving its employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
(j) Tax Matters. CBOV has filed all federal, state and local
tax returns and reports required to be filed, and all taxes shown by such
returns to be due and payable have been paid or are reflected as a liability in
the CBOV Financial Statements or are being contested in good faith and have been
Previously Disclosed. Except to the extent that liabilities therefor are
specifically reflected in the CBOV Financial Statements, there are no federal,
state or local tax liabilities of CBOV other than liabilities that have arisen
since September 30, 1995, all of which have been properly accrued or otherwise
provided for on the books and records of CBOV. Except as Previously Disclosed,
no tax return or report of CBOV is under examination by any taxing authority or
the subject of any administrative or judicial proceeding, and no unpaid tax
deficiency has been asserted against CBOV by any taxing authority.
(k) Property. Except as disclosed or reserved against in the
CBOV Financial Statements, CBOV has good and marketable title free and clear of
all material liens, encumbrances, charges, defaults or equities of whatever
character to all of the material properties and assets, tangible or intangible,
reflected in the CBOV Financial Statements as being owned by CBOV as of the
dates thereof. To the best knowledge of CBOV, all buildings, and all fixtures,
equipment, and other property and assets which are material to its business,
held under leases or subleases by CBOV are held under valid instruments
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws. The buildings,
structures, and appurtenances owned, leased, or occupied by CBOV are in good
operating condition and in a state of good maintenance and repair, and to the
best knowledge of CBOV (i) comply with applicable zoning and other municipal
laws and regulations, and (ii) there are no latent defects therein.
(l) Reports. Since January 1, 1990, CBOV has filed all reports
and statements, together with any amendments required to be made with respect
thereto, that were required to be filed with the SCC, the Federal Reserve, and
to the best knowledge of CBOV, any other governmental or regulatory authority or
agency having jurisdiction over its operations.
(m) Employee Benefit Plans. (1) CBOV will deliver for CBI's
review, as soon as practicable, true and complete copies of all material
pension, retirement, profit-sharing, deferred compensation, stock option, bonus,
vacation or other material incentive plans or agreements, all material medical,
dental or other health plans, all life insurance plans and all other material
employee benefit plans or fringe benefit plans, including, without limitation,
all "employee benefit plans" as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
CBOV for the benefit of employees, retirees or other beneficiaries eligible to
participate (collectively, the "CBOV Benefit Plans").
Any of the CBOV Benefit Plans which is an "employee pension benefit plan," as
that term is defined in Section (3(2) of ERISA, is referred to herein as a "CBOV
ERISA Plan." No CBOV Benefit Plan is or has been a multi-employer plan within
the meaning of Section 3(37) of ERISA.
(2) Except as Previously Disclosed, all CBOV Benefit Plans are
in compliance with the applicable terms of ERISA and the Internal Revenue Code
of 1986, as amended (the "IRC") and any other applicable laws, rules and
regulations, the breach or violation of which could result in a material
liability to CBOV on a consolidated basis.
(3) No CBOV ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan was terminated in accordance with all applicable legal
requirements.
(n) Investment Securities. Subject to FASB 115 and except for
pledges to secure public and trust deposits and obligations under agreements
pursuant to which CBOV has sold securities subject to an obligation to
repurchase, none of the investment securities reflected in the CBOV Financial
Statements is subject to any restriction, contractual, statutory, or otherwise,
which would impair materially the ability of the holder of such investment to
dispose freely of any such investment at any time. With respect to any
agreements pursuant to which CBOV has purchased securities subject to any
agreement to resell, it has a valid, perfected first lien or security interest
in the government securities or other collateral securing such agreement, and
the value of such collateral equals or exceeds the amount of the debt secured
thereby.
(o) Certain Contracts. (1) Except as Previously Disclosed,
CBOV is not a party to, or is bound by, (i) any material agreement, arrangement
or commitment, (ii) any agreement, indenture or other instrument relating to the
borrowing of money by CBOV or the guarantee by CBOV of any such obligation,
(iii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election, retention in office or severance of any
present or former director or officer, (iv) any agreement to make loans or for
the provision, purchase or sale of goods, services or property between CBOV and
any director of officer of CBOV, or any member of the immediate family or
affiliate of any of the foregoing, or (v) any agreement between CBOV and any 5%
or more shareholder of CBOV; in each case other than agreements entered into in
the ordinary course of the banking business of CBOV consistent with past
practice.
(2) Neither CBOV nor, to the knowledge of CBOV, the other
party thereto, is in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into in
the ordinary course of business or otherwise, nor has there occurred any event
that, with the lapse of time or giving of notice or both, would constitute such
a default, other than defaults of loan agreement by borrowers from CBOV in the
ordinary course of its business.
(3) Since September 30, 1995 CBOV has not incurred or paid any
obligation or liability that would be material to CBOV, except obligations
incurred or paid in connection with transactions in the ordinary course of
business of CBOV consistent with its practice and, except as Previously
Disclosed, from September 30, 1995 to the date hereof, CBOV has not taken any
action that, if taken after the date hereof, would breach any of the covenants
contained in Section 4.4 hereof.
(p) Insurance. A complete list of all policies or binders of
fire, liability, product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of CBOV has previously been furnished to CBI and
all such policies or binders are valid and enforceable in accordance with their
terms, are in full force and effect, and insure against risks and liabilities to
the extent and in the manner customary for the industry and are deemed
appropriate and sufficient by CBOV. To its knowledge, CBOV is not in default
with respect to any provision contained in any such policy or binder and has not
failed to give any notice or present any claim under any such policy or binder
in due and timely fashion. CBOV has not received notice of cancellation or
non-renewal of any such policy or binder. CBOV has no knowledge of any
inaccuracy in any application for such policies or binders, any failure to pay
premiums when due or any similar state of facts or the occurrence of any event
that is reasonably likely to form the basis for any material claim against it
not fully covered (except to the extent of any applicable deductible) by the
policies or binders referred to above. CBOV has not received notice from any of
its insurance carriers that any insurance premiums will be increased materially
in the future or that any such insurance coverage will not be available in the
future on substantially the same terms as now in effect.
(q) Absence of Material Changes and Events. Since September
30, 1995, there has not been any material adverse change in the condition
(financial or otherwise), aggregate assets or liabilities, cash flow, earnings
or business of CBOV, and CBOV has conducted its business only in the ordinary
course consistent with past practice.
(r) Loans, OREO and Allowance for Loan Losses. (1) Except as
Previously Disclosed, and except for matters which individually or in the
aggregate do not materially adversely affect the Reorganization or the financial
condition of CBOV, to the best knowledge of CBOV, each loan reflected as an
asset in the CBOV Financial Statements (i) is evidenced by notes, agreements, or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interests which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles. All
loans and extensions of credit which are subject to regulation by the Federal
Reserve which have been made by CBOV comply therewith.
(2) The classification on the books and records of CBOV of
loans and/or non-performing assets as nonaccrual, troubled debt restructuring,
OREO or other similar classification, complies in all material respects with
generally accepted accounting principles and applicable regulatory accounting
principles.
(3) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the CBOV
Financial Statements or are not material, title to the OREO is good and
marketable, and there are no adverse claims or encumbrances on the OREO. All
title, hazard and other insurance claims and mortgage guaranty claims with
respect to the OREO have been timely filed and CBOV has not received any notice
of denial of any such claim.
(4) CBOV is in possession of all of the OREO or, if any of the
OREO remains occupied by the mortgagor, eviction or summary proceedings have
been commenced or rental arrangements providing for market rental rates have
been agreed upon and CBOV is diligently pursuing such eviction or summary
proceedings or such rental arrangements. Except as Previously Disclosed, no
legal proceeding or quasi-legal proceeding is pending or, to the knowledge of
CBOV, threatened concerning any OREO or any servicing activity or omission to
provide a servicing activity with respect to any of the OREO.
(5) Except as Previously Disclosed, all loans made by CBOV to
facilitate the disposition of OREO are performing in accordance with their
terms.
(6) The allowance for possible loan losses shown on the CBOV
Financial Statements was, and the allowance for possible loan losses shown on
the financial statements of CBOV as of dates subsequent to the execution of this
Agreement will be, in each case as of the dates thereof, adequate in all
material respects to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including accrued interest
receivable) of CBOV and other extensions of credit (including letters of credit
and commitments to make loans or extend credit) by CBOV.
(s) Statements True and Correct. None of the information
supplied or to be supplied by CBOV for inclusion in the Registration Statement
on Form S-4 (the "Registration Statement") to be filed by CBI with the SEC, the
Proxy Statement/Prospectus (as defined in Section 4.3) to be mailed to every
CBOV shareholder or any other document to be filed with the SEC, the SCC, the
Federal Reserve, or any other regulatory authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and, in the case of the Registration Statement, when it becomes
effective and with respect to the Proxy Statement/Prospectus, when first mailed
to CBOV shareholders, be false or misleading with respect to any material fact
or omit to state any material fact necessary in order to make the statements
therein not misleading, or, in the case of the Proxy Statement/Prospectus or any
supplement thereto, at the time of the CBOV Shareholders' Meeting (as defined in
Section 4.3), be false or misleading with respect to any material fact or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the CBOV
Shareholders' Meeting.
(t) Brokers and Finders. Neither CBOV nor any of its 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, except for XxXxxxxx & Company, Inc.
(u) Repurchase Agreements. With respect to all agreements
pursuant to which CBOV has purchased securities subject to an agreement to
resell, if any, CBOV has a valid, perfected first lien or security interest in
the government securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of the debt
secured thereby.
(v) Administration of Trust Accounts. CBOV has properly
administered, in all respects material and which could reasonably be expected to
be material to the business, operations or financial condition of CBOV, all
accounts for which it acts as a fiduciary including but not limited to accounts
for which they serve as trustees, agents, custodians, personal representatives,
guardians, conservators or investment advisors, in accordance with the terms of
the governing documents and applicable state and federal law and regulation and
common law. Neither CBOV nor any director, officer or employee of CBOV has
committed any breach of trust with respect to any such fiduciary account which
is material to or could reasonably be expected to be material to the business,
operations or financial condition of CBOV and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account in all material respects.
(w) Environmental Matters. (1) Except as Previously Disclosed,
to the best of CBOV's knowledge, CBOV does not own or lease any properties
affected by toxic waste, radon gas or other hazardous conditions or constructed
in part with the use of asbestos. CBOV is in substantial compliance with all
Environmental Laws applicable to real or personal properties in which it has a
direct fee ownership or, with respect to a direct interest as lessee, applicable
to the leasehold premises or, to the best knowledge of CBOV, the premises on
which the leasehold is situated. CBOV has not received any Communication
alleging that CBOV is not in such compliance and, to the best knowledge of CBOV,
there are no present circumstances (including Environmental Laws that have been
adopted but are not yet effective) that would prevent or interfere with the
continuation of such compliance.
(2) There are no legal, administrative, arbitral or other
claims, causes of action or governmental investigations of any nature, seeking
to impose, or that could result in the imposition, on CBOV of any liability
arising under any Environmental Laws pending or, to the best knowledge of CBOV,
threatened against (A) CBOV, (B) any person or entity whose liability for any
Environmental Claim CBOV has or may have retained or assumed either
contractually or by operation of law, or (C) any real or personal property which
CBOV owns or leases, or has been or is judged to have managed or to have
supervised or participated in the management of, which liability might have a
material adverse effect on the business, financial condition or results of
operations of CBOV. CBOV is not 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.
(3) To the best knowledge of CBOV, there are no legal,
administrative, arbitral or other proceedings, or Environmental Claims or other
claims, causes of action or governmental investigations of any nature, seeking
to impose, or that could result in the imposition, on CBOV of any liability
arising under any Environmental Laws pending or
threatened against any real or personal property in which CBOV holds a security
interest in connection with a loan or a loan participation which liability might
have a material adverse effect on the business, financial condition or results
of operations of CBOV. CBOV is not 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.
(4) With respect to all real and personal property owned or
leased by CBOV, other than OREO, CBOV has made available to CBI copies of any
environmental audits, analyses and surveys that have been prepared relating to
such properties. With respect to all OREO held by CBOV and all real or personal
property which CBOV has been or is judged to have managed or to have supervised
or participated in the management of, CBOV has made available to CBI the
information relating to such OREO available to CBOV. CBOV is in compliance in
all material respects with all recommendations contained in any environmental
audits, analyses and surveys relating to any of the properties, real or
personal, described in this subsection (4).
(5) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge or disposal of any Materials of Environmental
Concern, 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 currently in
effect or adopted but not yet effective against CBOV or against any person or
entity whose liability for any Environmental Claim CBOV has or may have retained
or assumed either contractually or by operation of law.
(6) For the purpose of this Agreement, the following terms
shall have the following meanings:
(i) "Communication" means a communication which is of a
substantive nature and which is made (A) in writing to CBOV on the one hand or
to CBI or any CBI Subsidiary on the other hand, or (B) orally to a senior
officer of CBOV or of CBI or any CBI Subsidiary, whether from a governmental
authority or a third party.
(ii) "Environmental Claim" means any Communication 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 on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern.
(iii) "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 (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata). This definition includes, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
(iv) "Materials of Environmental Concern" means pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
3.2 Representations and Warranties of CBI. CBI represents and warrants
to CBOV as follows:
(a) Organization, Standing and Power. (1) CBI is a corporation
duly organized, validly existing and in good standing under the laws of
Virginia. It has all requisite corporate power and authority to carry on its
business as now being conducted and to own and operate its assets, properties
and business, and CBI has the corporate power and authority to execute and
deliver this Agreement and perform the respective terms of this Agreement and
Plan of Reorganization. CBI is duly registered as a bank holding company under
the Bank Holding Company Act of 1956. The Community Bank is a wholly owned
subsidiary of CBI and is a Virginia corporation and a Virginia state bank, duly
organized, validly existing and in good standing under the laws of Virginia, is
in compliance in all material respects with all rules and regulations
promulgated by any relevant regulatory authority, and it has all requisite
corporate power and authority to carry on a commercial banking business as now
being conducted and to own and operate its assets, properties and business.
(2) CBI has Previously Disclosed its subsidiary corporations
(and the subsidiaries thereof), all of which are duly organized, validly
existing and in good standing in their respective states of incorporation and
which have all requisite corporate power and authority to carry on their
businesses as now being conducted and to own and operate their assets,
properties and business (the "CBI Subsidiaries" and, collectively with CBI, the
"CBI Companies"). Each CBI Subsidiary that is a depository institution is an
"insured bank" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. All of the shares of capital stock of the CBI
Subsidiaries held by CBI are duly and validly issued, fully paid and
nonassessable, and all such shares are owned by CBI or a CBI Subsidiary free and
clear of any claim, lien, pledge or encumbrance of any kind, and were not issued
in violation of the preemptive rights of any shareholder or in violation of any
agreement or of any registration or qualification provisions of federal or state
securities laws. Except as Previously Disclosed, none of the CBI Companies owns
any equity securities of any other corporation or entity. Except as Previously
Disclosed, each of the CBI Companies is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification and where failure to
so qualify either singly or in the aggregate would have a material adverse
effect on the financial condition, properties, businesses or results of
operations of the CBI Companies.
(b) Authority. (1) The execution and delivery of this
Agreement and the Plan of Share Exchange and the consummation of the
Reorganization have been duly and validly authorized by all necessary
corporate action on the part of CBI, except the approval of
shareholders. This Agreement represents the legal, valid, and binding obligation
of CBI, enforceable against CBI in accordance with its terms (except in all such
cases as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(2) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated herein, nor the compliance by CBI
with any of the provisions hereof will (i) conflict with or result in a breach
of any provision of the Articles of Incorporation or Bylaws of CBI, (ii) to the
knowledge of CBI, except as Previously Disclosed, constitute or result in the
breach of any term, condition or provision of, or constitute 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 assets of the CBI Companies pursuant to (A) any note, bond,
mortgage, indenture, or (B) any material license, agreement, lease or other
instrument or obligation, to which any of the CBI Companies is a party or by
which any of them or any of their properties or assets may be bound, or (iii) to
the knowledge of CBI, subject to the receipt of the requisite approvals referred
to in Section 4.7, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to any of the CBI Companies or any of their properties or
assets.
(c) Capital Structure. The authorized capital stock of CBI
consists of: 4,000,000 shares of common stock, par value $3.00 per share, of
which 1,150,000 shares are issued and outstanding, fully paid and nonassessable,
not subject to shareholder preemptive rights, and not issued in violation of any
agreement to which CBI is a party or otherwise bound, or of any registration or
qualification provisions of any federal or state securities laws. The shares of
CBI Common Stock to be issued in exchange for shares of CBOV Common Stock upon
consummation of the Reorganization will have been duly authorized and, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable and subject to no preemptive rights. Except as
Previously Disclosed, there are no outstanding understandings or commitments of
any character pursuant to which CBI and any of the CBI Companies could be
required or expected to issue shares of capital stock.
(d) Ownership of the CBI Subsidiaries; Capital Structure of
CBI Subsidiaries; and Organization of the CBI Subsidiaries. (1) CBI does not
own, directly or indirectly, 5% or more of the outstanding capital stock or
other voting securities of any corporation, bank or other organization actively
engaged in business except as Previously Disclosed (collectively the "CBI"
Subsidiaries" and each individually a "CBI Subsidiary"). The outstanding shares
of capital stock of each CBI Subsidiary have been duly authorized and are
validly issued, and are fully paid and nonassessable and all such shares are
directly or indirectly owned by CBI free and clear of all liens, claims and
encumbrances. No Rights are authorized, issued or outstanding with respect to
the capital stock of any CBI Subsidiary and there are no agreements,
understandings or commitments relating to the right of CBI to vote or to dispose
of said shares. None of the shares of capital stock of any CBI Subsidiary has
been issued in violation of the preemptive rights of any person.
(2) Each CBI Subsidiary is a duly organized corporation,
validly existing and in good standing under applicable laws. Each CBI Subsidiary
(i) has full corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted except where the
absence of such power or authority would not have a material adverse effect on
the financial condition, results of operations or business of CBI on a
consolidated basis, 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 do qualify would have a material adverse effect on the financial
condition, results of operations or business of CBI on a consolidated basis.
Each CBI Subsidiary has all federal, state, local and foreign governmental
authorizations and licenses necessary for it to own or lease its properties and
assets and to carry on its business as it is now being conducted, except where
failure to obtain such authorization or license would not have a material
adverse effect on the business of such CBI Subsidiary.
(e) Financial Statements. CBI's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and all other documents filed or to be
filed subsequent to December 31, 1994 under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), in the form filed with the SEC (in
each such case, the "CBI Financial Statements") did not and will not contain any
untrue statement of a material fact or omit to state a material face required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the CBI Financial Statements
(including the related notes and schedules thereto) fairly presents and will
fairly present the financial position of the entity or entities to which it
relates as of its date and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in the CBI
Financial Statements (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied to banks and bank holding companies during the periods
involved, except as may be noted therein, subject to normal and recurring
year-end audit adjustments in the case of unaudited statements.
(f) Absence of Undisclosed Liabilities. At September 30, 1995,
none of the CBI Companies, to their knowledge, had any obligation or liability
(contingent or otherwise) of any nature which were not reflected in the CBI
Financial Statements, except for those which in the aggregate are immaterial or
have been Previously Disclosed.
(g) Legal Proceedings; Compliance with Laws. Except as
Previously Disclosed, there are no actions, suits or proceedings instituted or
pending or, to the best knowledge of CBI's management, threatened or probable of
assertion against any of the CBI Companies, or against any property, asset,
interest or right of any of them, that are reasonably expected to have, either
individually or in the aggregate, a material adverse effect on the financial
condition of CBI on a consolidated basis or that are reasonably expected to
threaten or impede the consummation of the transactions contemplated by this
Agreement. None of the CBI
Companies is a party to any agreement or instrument or subject to any judgment,
order, writ, injunction, decree or rule that might reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
business or prospects of CBI on a consolidated basis. Except as Previously
Disclosed, as of the date of this Agreement, none of the CBI Companies nor any
of their properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, any federal or state governmental agency or authority
charged with the supervision or regulation of depository institutions or
mortgage lenders or engaged in the insurance of deposits which restricts or
purports to restrict in any material respect the conduct of the business to it
or any of its subsidiaries to properties, or in any manner relates to the
capital, liquidity, credit policies or management of it; and except as
Previously Disclosed, none of the CBI Companies has been advised by any such
regulatory authority that such authority is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter or similar
submission. To the best knowledge of CBI, the CBI Companies have complied in all
material respects with all laws, ordinances, requirements, regulations or orders
applicable to its business (including environmental laws, ordinances,
requirements, regulations or orders).
(h) Regulatory Approvals. CBI knows of no reason why the
regulatory approvals referred to in Section 6.1(b) should not be
obtained without the imposition of any condition of the type referred
to in Section 6.1(b).
(i) Labor Relations. None of the CBI Companies is a party to,
or is bound by any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor is it the subject
of a proceeding asserting that is has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it, pending or, to the
best of its knowledge, threatened, nor is it aware of any activity involving its
employees seeking to certify a collective bargaining unit or engaging in any
other organizational activity.
(j) Tax Matters. The CBI Companies have filed all federal,
state, and local tax returns and reports required to be filed, and all taxes
shown by such returns to be due and payable have been paid or are reflected as a
liability in the CBI Financial Statements or are being contested in good faith
and have been Previously Disclosed. Except to the extent that liabilities
therefor are specifically reflected in the CBI Financial Statements, there are
no federal, state or local tax liabilities of the CBI Companies other than
liabilities that have arisen since September 30, 1995, all of which have been
properly accrued or otherwise provided for on the books and records of the CBI
Companies. Except as Previously Disclosed, no tax return or report of any of the
CBI Companies is under examination by any taxing authority or the subject of any
administrative or judicial proceeding, and no unpaid tax deficiency has been
asserted against any of the CBI Companies by any taxing authority.
(k) Property. Except as disclosed or reserved against in the
CBI Financial Statements, all of the CBI Companies have good and
marketable title free and clear of all
material liens, encumbrances, charges, defaults or equities of whatever
character to all of the material properties and assets, tangible or intangible,
reflected in the CBI Financial Statements as being owned by the CBI Companies as
of the dates thereof. To the best knowledge of CBI, all buildings, and all
fixtures, equipment, and other property and assets which are material to its
business on a consolidated basis, held under leases or subleases by the CBI
Companies are held under valid instruments enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws. The buildings, structures, and appurtenances owned, leased, or
occupied by the CBI Companies are, to the best knowledge of CBI, in good
operating condition, in a state of good maintenance and repair and (i) comply
with applicable zoning and other municipal laws and regulations, and (ii) there
are no latent defects therein.
(l) Reports. Since January 1, 1990, the CBI Companies have
filed all reports and statements, together with any amendments required to be
made with respect thereto, that were required to be filed with the Securities
and Exchange Commission ("SEC"), the Federal Reserve, the SCC, and any other
governmental or regulatory authority or agency having jurisdiction over their
operations.
(m) Employee Benefit Plans. (1) CBI will deliver for CBOV's
review, as soon as practicable, true and complete copies of all material
pension, retirement, profit-sharing, deferred compensation, stock option, bonus,
vacation or other material incentive plans or agreements, all material medical,
dental or other health plans, all life insurance plans and all other material
employee benefit plans or fringe benefit plans, including, without limitation,
all "employee benefit plans" as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
CBI for the benefit of employees, retirees or other beneficiaries eligible to
participate (collectively, the "CBI Benefit Plans"). Any of the CBI Benefit
Plans which is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "CBI ERISA Plan." No CBI
Benefit Plan is or has been a multi-employer plan within the meaning of Section
3(37) of ERISA.
(2) Except as Previously Disclosed, all CBI Benefit Plans are
in compliance with the applicable terms of ERISA and the Internal Revenue Code
of 1986, as amended (the "IRC") and any other applicable laws, rules and
regulations the breach or violation of which could result in a material
liability to CBI on a consolidated basis.
(3) No CBI ERISA Plan which is a defined benefit pension plan
has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan was terminated in accordance with all applicable legal
requirements.
(n) Investment Securities. Subject to FASB 115 and except for
pledges to secure public and trust deposits and obligations under agreements
pursuant to which any of the CBI Companies has sold securities subject to an
obligation to repurchase, none of the investment
securities reflected in the CBI Financial Statements is subject to any
restriction, contractual, statutory, or otherwise, which would impair materially
the ability of the holder of such investment to dispose freely of any such
investment at any time. With respect to any agreements pursuant to which any of
the CBI Companies has purchased securities subject to any agreement to resell,
it has a valid, perfected first lien or security interest in the government
securities or other collateral securing such agreement, and the value of such
collateral equals or exceeds the amount of the debt secured thereby.
(o) Certain Contracts. (1) Except as Previously Disclosed,
neither CBI nor any CBI subsidiary is a party to, or is bound by, (i) any
material agreement, arrangement or commitment, (ii) any agreement, indenture or
other instrument relating to the borrowing of money by CBI or any CBI Subsidiary
or the guarantee by CBI or any CBI Subsidiary of any such obligation, (iii) any
agreement, arrangement or commitment relating to the employment of a consultant
or the employment, election, retention in office or severance of any present or
former director or officer, (iv) any agreement to make loans or for the
provision, purchase or sale of goods, services or property between CBI or any
CBI Subsidiary and any director or officer of CBI or any CBI Subsidiary, or any
member of the immediate family or affiliate of any of the foregoing, or (v) any
agreement between CBI or any CBI Subsidiary and any 5% or more shareholder of
CBI; in each case other than agreements entered into in the ordinary course of
the banking business of CBI or a CBI Subsidiary consistent with past practice.
(2) Neither CBI or any CBI Subsidiary, nor to the knowledge of
CBI, the other party thereto, is in default under any material agreement,
commitment, arrangement, lease, insurance policy or other instrument, whether
entered into in the ordinary course of business or otherwise, nor has there
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default, other than defaults of loan agreements by
borrowers from CBI or a CBI Subsidiary in the ordinary course of its business.
(3) Since September 30, 1995, CBI has not incurred or paid any
obligation or liability that would be material to CBI, except obligations
incurred or paid in connection with transactions in the ordinary course of
business of CBI consistent with its practice and, except as Previously
Disclosed, from September 30, 1995 to the date hereof, CBI has not taken any
action that, if taken after the date hereof, would breach any of the covenants
contained in Section 4.4 hereof.
(p) Insurance. A complete list of all policies or binders of
fire, liability, product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of the CBI Companies has previously been
furnished to CBOV and all such policies or binders are valid and enforceable in
accordance with their terms, are in full force and effect, and insure against
risks and liabilities to the extent and in the manner customary for the industry
and are deemed appropriate and sufficient by CBI. To the knowledge of CBI, the
CBI Companies are not in default with respect to any provision contained in any
such policy or binder and have not failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. None of the CBI
Companies has received notice of cancellation or non-renewal of any such policy
or binder. None of the CBI Companies has knowledge of any inaccuracy in any
application for such policies or binders, any failure to pay premiums when due
or any similar state of facts or the occurrence of any event that is reasonably
likely to form the basis for any material claim against it not fully covered
(except to the extent of any applicable deductible) by the policies or binders
referred to above. None of the CBI Companies has received notice from any of its
insurance carriers that any insurance premiums will be increased materially in
the future or that any such insurance coverage will not be available in the
future on substantially the same terms as now in effect.
(q) Loans, OREO, and Allowance for Loan Losses. (1) Except as
Previously Disclosed, and except for matters which individually or in the
aggregate, do not materially adversely affect the Reorganization or the
financial condition of CBI, to CBI's best knowledge each loan reflected as an
asset in the CBI Financial Statements (i) is evidenced by notes, agreements, or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interests which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. All loans and extensions of credit which are subject to regulation
of the Federal Reserve which have been made by CBI and the CBI Subsidiaries
comply therewith.
(2) The classification on the books and records of CBI and
each CBI Subsidiary of loans and/or non-performing assets as nonaccrual,
troubled debt restructuring, OREO or other similar classification, complies in
all material respects with generally accepted accounting principles and
applicable regulatory accounting principles.
(3) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the CBI
Financial Statements or are not material, title to the OREO is good and
marketable, and there are no adverse claims or encumbrances on the OREO. All
title, hazard and other insurance claims and mortgage guaranty claims with
respect to the OREO have been timely filed and neither CBI nor any CBI
Subsidiary has been received any notice of denial of any such claim.
(4) CBI and each CBI Subsidiary are in possession of all of
the OREO or, if any of the OREO remains occupied by the mortgagor, eviction or
summary proceedings have been commenced or rental arrangements providing for
market rental rates have been agreed upon and CBI and/or each CBI Subsidiary are
diligently pursuing such eviction of summary proceedings or such rental
arrangements. Except as Previously Disclosed, no legal proceeding or quasi-legal
proceeding is pending or, to the knowledge of CBI and each CBI Subsidiary,
threatened concerning any OREO or any servicing activity or omission to provide
a servicing activity with respect to any of the OREO.
(5) Except as Previously Disclosed, all loans made by any of
the CBI Companies to facilitate the disposition of OREO are performing in
accordance with their terms.
(6) The allowance for possible loan losses shown on the CBI
Financial Statements was, and the allowance for possible loan losses shown on
the financial statements of CBI as of dates subsequent to the execution of this
Agreement will be, in each case as of the dates thereof, adequate in all
material respects to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including accrued interest
receivable) of the CBI Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by CBI.
(r) Absence of Material Changes and Events. Since September
30, 1995, there has not been any material adverse change in the condition
(financial or otherwise), aggregate assets or liabilities, cash flow, earnings
or business or CBI, and CBI has conducted its business only in the ordinary
course consistent with past practice.
(s) Statements True and Correct. None of the information
supplied or to be supplied by CBI for inclusion in the Registration Statement,
the Proxy Statement/Prospectus or any other document to be filed with the SEC or
any other regulatory authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and, in the case
of the Registration Statement, when it becomes effective and with respect to the
Proxy Statement/Prospectus, when first mailed to CBOV shareholders, be false or
misleading with respect to any material fact or omit to state any material fact
necessary in order to make the statements therein not misleading, or, in the
case of the Proxy Statement/Prospectus or any supplement thereto, at the time of
the CBOV Shareholders' Meeting, be false or misleading with respect to any
material fact or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the CBOV Shareholders' Meeting. All documents that CBI is responsible
for filing with the SEC or any other regulatory authority in connection with the
transactions contemplated, hereby will comply as to form in all material
respects with the provisions of applicable law, including applicable provisions
of federal and state securities law.
(t) Brokers and Finders. Neither CBI nor any CBI 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, except for
the XxXxxxxx & Company, Inc.
(u) Repurchase Agreements. With respect to all agreements
pursuant to which CBI or any CBI Subsidiary has purchased securities subject to
an agreement to resell, if any, CBI or such CBI Subsidiary, as the case may be,
has a valid, perfected first lien or security interest in the government
securities or other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt secured thereby.
(v) Administration of Trust Accounts. CBI and CBI Subsidiaries
have properly administered, in all respects material and which could reasonably
be expected to be material to the business, operations or financial condition of
CBI and CBI Subsidiaries, taken as a whole, all accounts for which they act as
fiduciaries including but not limited to accounts for which they serve as
trustees, agents, custodians, personal representatives, guardians,
conservators or investment advisors, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither CBI nor a CBI Subsidiary, nor any director, officer or
employee of CBI or a CBI Subsidiary has committed any breach of trust with
respect to any such fiduciary account which is material to or could reasonably
be expected to be material to the business, operations or financial condition of
CBI, or a CBI Subsidiary, taken as a whole, and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account in all material respects.
(w) Environmental Matters. (1) Except as Previously Disclosed,
to the best of CBI's knowledge, neither CBI nor any CBI Subsidiary owns or
leases any properties affected by toxic waste, radon gas or other hazardous
conditions or constructed in part with the use of asbestos. Each of CBI and the
CBI Subsidiaries is in substantial compliance with all Environmental Laws
applicable to real or personal properties in which it has a direct fee ownership
or, with respect to a direct interest as lessee, applicable to the leasehold
premises or, to the best knowledge of CBI and the CBI Subsidiaries, the premises
on which the leasehold is situated. Neither CBI nor any CBI Subsidiary has
received any Communication alleging that CBI or such CBI Subsidiary is not in
such compliance and, to the best knowledge of CBI and the CBI Subsidiaries,
there are no present circumstances (including Environmental Laws that have been
adopted but are not yet effective) that would prevent or interfere with the
continuation of such compliance.
(2) There are no legal, administrative, arbitral or other
claims, causes of action or governmental investigations of any nature, seeking
to impose, or that could result in the imposition, on CBI and the CBI
Subsidiaries of any liability arising under any Environmental Laws pending or,
to the best knowledge of CBI and the CBI Subsidiaries, threatened against (A)
CBI or any CBI Subsidiary, (B) any person or entity whose liability for any
Environmental Claim, CBI or any CBI Subsidiary has or may have retained or
assumed either contractually or by operation of law, or (C)any real or personal
property which CBI or any CBI Subsidiary owns or leases, or has been or is
judged to have managed or to have supervised or participated in the management
of, which liability might have a material adverse effect on the business,
financial condition or results of operations of CBI. CBI and the CBI
Subsidiaries are not 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.
(3) To the best knowledge of CBI and the CBI Subsidiaries,
there are no legal, administrative, arbitral or other proceedings, or
Environmental Claims or other claims, causes of action or governmental
investigations of any nature, seeking to impose, or that could result in the
imposition, on CBI or any CBI Subsidiary of any liability arising under any
Environmental Laws pending or threatened against any real or personal property
in which CBI or any CBI Subsidiary holds a security interest in connection with
a loan or a loan participation which liability might have a material adverse
effect on the business, financial condition or results of operations of CBI. CBI
and the CBI Subsidiaries are not 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.
(4) With respect to all real and personal property owned or
leased by CBI or any CBI Subsidiary, other than OREO, CBI has made available to
CBOV copies of any environmental audits, analyses and surveys that have been
prepared relating to such properties. With respect to all OREO held by CBI or
any CBI Subsidiary and all real or personal property which CBI or any CBI
Subsidiary has been or is judged to have managed or to have supervised or
participated in the management of, CBI has made available to CBOV the
information relating to such OREO available to CBI. CBI and the CBI Subsidiaries
are in compliance in all material respects with all recommendations contained in
any environmental audits, analyses and surveys relating to any of the
properties, real or personal, described in this subsection (4).
(5) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge or disposal of any Materials of Environmental
Concern, 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 currently in
effect or adopted but not yet effective against CBI or any CBI Subsidiary or
against any person or entity whose liability for any Environmental Claim CBI or
any CBI Subsidiary has or may have retained or assumed either contractually or
by operation of law.
ARTICLE 4
Conduct Prior to the Effective Date
4.1 Access to Records and Properties. CBOV will keep CBI, and CBI will
keep CBOV advised of all material developments relevant to their respective
businesses prior to consummation of the Reorganization. Prior to the Effective
Date, CBI, on the one hand, and CBOV on the other, agree to give to the other
party reasonable access to all the premises and books and records (including tax
returns filed and those in preparation) of it and its subsidiaries and to cause
its officers to furnish the other with such financial and operating data and
other information with respect to the business and properties as the other shall
from time to time request for the purposes of verifying the warranties and
representations set forth herein; provided, however, that any such investigation
shall be conducted in such manner as not to interfere unreasonably with the
operation of the respective business of the other.
4.2 Confidentiality. Between the date of this Agreement and the
Effective Date, CBI and CBOV each will maintain in confidence, and cause its
directors, officers, employees, agents and advisors to maintain in confidence,
and not use to the detriment of the other party, any written, oral or other
information obtained in confidence from the other party or a third party in
connection with this Agreement or the transactions contemplated hereby unless
such information is already known to such party or to others not bound by a duty
of confidentiality or unless such information becomes publicly available through
no fault of such party, unless use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby or unless the
furnishing or use of such information is required by or necessary or appropriate
in connection
with legal proceedings. If the Reorganization is not consummated, each party
will return or destroy as much of such written information as may reasonably be
requested.
4.3 Registration Statement, Proxy Statement and Shareholder Approval.
The Board of Directors of CBOV, and the Board of Directors of CBI, each will
duly call and will hold a meeting of their respective shareholders as soon as
practicable for the purpose of approving the Reorganization (the "CBOV
Shareholders' Meeting" and the "CBI Shareholders' Meeting", respectively) and,
subject to the fiduciary duties of the Board of Directors of CBOV and of CBI (as
advised in writing by its counsel), CBOV and CBI each shall use its best efforts
to solicit and obtain votes of the holders of its Common Stock in favor of the
Reorganization and will comply with the provisions in their respective Articles
of Incorporation and Bylaws relating to the call and holding of a meeting of
shareholders for such purpose; each member of the Board of Directors of CBOV and
CBI shall vote all shares of CBOV Common Stock and CBI Common Stock under his
control (and not held in a fiduciary capacity) in favor of the Reorganization;
and CBOV and CBI shall, at the other's request, recess or adjourn the meeting if
such recess or adjournment is deemed by the other to be necessary or desirable.
CBI and CBOV will prepare jointly the proxy statement/prospectus to be used in
connection with the CBOV Shareholders' Meeting and the CBI Shareholders' Meeting
(the "Joint Proxy Statement"). CBI will prepare and file with the SEC the
Registration Statement, of which such Joint Proxy Statement shall be a part and
will use its best efforts to have the Registration Statement declared effective
as promptly as possible. When the Registration Statement or any post-effective
amendment or supplement thereto shall become effective, and at all times
subsequent to such effectiveness, up to and including the date of the Meeting,
such Registration Statement and all amendments or supplements thereto, with
respect to all information set forth therein furnished or to be furnished by
CBOV relating to CBOV and by CBI relating to the CBI Companies, (i) will comply
in all material respects with the provisions of the Securities Act of 1933 and
any other applicable statutory or regulatory requirements, including applicable
state blue-sky and securities laws, and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; provided, however, in no event shall any party hereto be liable for
any untrue statement of a material fact or omission to state a material fact in
the Registration Statement made in reliance upon, and in conformity with,
written information concerning another party furnished by such other party
specifically for use in the Registration Statement.
4.4 Operation of the Business of CBOV and CBI. CBOV and CBI each agrees
that from the date hereof to the Effective Date it will operate its business
substantially as presently operated and only in the ordinary course, and,
consistent with such operation, it will use its best efforts to preserve intact
its relationships with persons having business dealings with it. Without
limiting the generality of the foregoing, CBOV and CBI each agrees that it will
not, without the prior written consent of the other:
(a) Make any change in its authorized capital stock, or issue
or sell any additional shares of, securities convertible into or exchangeable
for, or options, warrants or rights to purchase, its capital stock, nor shall it
purchase, redeem or otherwise acquire any of
its outstanding shares of capital stock, provided that CBI and CBOV each may
issue shares of common stock pursuant to options granted or issued prior to the
date hereof:
(b) Voluntarily make any changes in the composition of
its officers, directors or other key management personnel;
(c) Make any change in the compensation or title of any
officer, director of key management employee or make any change in the
compensation or title of any other employee, other than permitted by current
employment policies in the ordinary course of business, any of which changes
shall be reported promptly to the other party;
(d) Enter into any bonus, incentive compensation, stock
option, deferred compensation, profit sharing, thrift, retirement, pension,
group insurance or other benefit plan or any employment or consulting agreement;
(e) Incur any obligation or liability (whether absolute or
contingent, excluding suits instituted against it), make any pledge, or encumber
any of its assets, nor dispose of any of its assets in any other manner, except
in the ordinary course of its business and for adequate value, or as otherwise
specifically permitted in this Agreement;
(f) Except as permitted by Section 4.4(a) hereof, issue or
contract to issue any shares of its Common Stock, options for shares of its
Common Stock, or securities exchangeable for or convertible into such shares;
(g) Knowingly waive any right to substantial value:
(h) Enter into material transactions otherwise than in
the ordinary course of its business;
(i) Alter, amend or repeal its Bylaws or Articles of
Incorporation; or
(j) Propose or take any other action which would make any
representation or warranty in Section 3.1 or Section 3.2 hereof untrue.
4.5 Dividends. CBI and CBOV each agree that the other may declare and
pay only regular periodic cash dividends in the ordinary course of business and
consistent with past practice from the date of this Agreement through the
Effective Date.
4.6 No Solicitation. (a) Unless and until this Agreement shall have
been terminated pursuant to its terms, neither CBOV nor any of its officers,
directors, representatives or agents shall, directly or indirectly, (i)
encourage, solicit or initiate discussions or negotiations with any person other
than CBI concerning any merger, share exchange, sale of substantial assets,
tender offer, sale of shares of capital stock or similar transaction involving
CBOV, (ii) enter into any agreement with any third party providing for a
business combination transaction, equity investment or sale of a significant
amount of assets, or (iii) furnish any information to any other
person relating to or in support of such transaction. CBOV will promptly
communicate to CBI the terms of any proposal which it may receive in respect to
any of the foregoing transactions.
(b) Unless and until this Agreement shall have been terminated pursuant
to its terms, neither CBI nor any of its officers, directors, representatives or
agents shall, directly or indirectly, (i) encourage, solicit or initiate
discussions or negotiations with any person other than CBOV concerning any
merger, share exchange, sale of substantial assets, tender offer, sale of shares
of capital stock or similar transaction involving CBI, (ii) enter into any
agreement with any third party providing for a business combination transaction,
equity investment or sale of a significant amount of assets, or (iii) furnish
any information to any other person relating to or in support of such
transaction. CBI will promptly communicate to CBOV the terms of any proposal
which it may receive in respect to any of the foregoing transactions.
4.7 Regulatory Filings. CBI and CBOV shall prepare jointly all
regulatory filings required to consummate the transactions contemplated by the
Agreement and the Plan of Share Exchange and submit the filings for approval
with the Federal Reserve Board and the SCC, and any other governing regulatory
authority, as soon as practicable after the date hereof. CBI and CBOV shall use
their best efforts to obtain approvals of such filings.
4.8 Public Announcements. Each party will consult with the other before
issuing any press release or otherwise making any public statements with respect
to the Reorganization and shall not issue any such press release or make any
such public statement prior to such consultations except as may be required by
law.
4.9 Notice of Breach. CBI and CBOV will give written notice to the
other promptly upon becoming aware of the impending or threatened occurrence of
any event which would cause or constitute a breach of any of the
representations, warranties or covenants made to the other party in this
Agreement and will use its best efforts to prevent or promptly remedy the same.
4.10 Accounting Treatment. CBI and CBOV shall each use their best
efforts to ensure that the Reorganization qualifies for pooling-of-interests
accounting treatments.
4.11 Reorganization Consummation. Subject to the terms and conditions
of this Agreement, each party shall use its best efforts in good faith to take,
or cause to be taken, all actions, and to do or cause to be done all things
necessary, proper or desirable, or advisable under applicable laws, as promptly
as practicable so as to permit consummation of the Reorganization at the
earliest possible date, consistent with Section 1.3 herein, and to otherwise
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other parties hereto to that end, and each of CBOV and CBI shall
use, and shall cause each of their respective subsidiaries to use, its best
efforts to obtain all consents (governmental or other) necessary or desirable
for the consummation of the transactions contemplated by this Agreement.
4.12 Amendment to Articles of Incorporation. At the CBI
Shareholders' Meeting, the CBI Board of Directors shall solicit the approval of
the shareholders of CBI of an
amendment to the Articles of Incorporation of CBI sufficient to permit the
appointment of all CBOV Directors to the CBI Board in accordance with Section
1.2 hereof.
4.13 Employment Contracts. CBI and CBOV each will use its best
efforts to cause all employment contracts to which it is a party to be amended
in the manner described in Section 6.1(h).
ARTICLE 5
Additional Agreements
5.1 Conversion of Stock Options. (a) On the Effective Date, all rights
with respect to CBOV Common Stock pursuant to stock options ("CBOV Options")
granted by CBOV under a CBOV stock option plan which are outstanding on the
Effective Date, whether or not they exercisable, shall be converted into and
become rights with respect to CBI Common Stock, and CBI shall assume each CBOV
Option in accordance with the terms of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From the
Effective Date forward, (i) each CBOV Option assumed by CBI may be excised
solely for shares of CBI Common Stock, (ii) the number of shares of CBI Common
Stock subject to each CBOV Option shall be equal to the number of shares of CBOV
Common Stock subject to such option immediately prior to the Effective Date
multiplied by the Exchange Ratio and (iii) the per share exercise price under
each such CBOV Option shall be adjusted by dividing the per share exercise price
under each such option by the Exchange Ratio and rounding down to the nearest
cent; provided, however, that the terms of each CBOV Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction after
the Effective Date. It is intended that the foregoing assumption shall be
undertaken in a manner that will not constitute a "modification" as defined in
Section 425 of the Code, as to any stock option which is an "incentive stock
option."
5.2 Accounting Treatment. This Reorganization shall qualify for
pooling-of-interests accounting treatment.
5.3 Benefit Plans. Upon consummation of the Reorganization, as soon as
administratively practicable and subject to CBI's best efforts, employees of
CBOV shall be entitled to participate in CBI pension, benefit, health and
similar plans on the same terms and conditions as employees of CBI and its
subsidiaries, without waiting periods or exceptions for pre-existing conditions
and giving effect to years of service with CBOV as if such service were with
CBI. Alternatively, subject to applicable law, CBOV may maintain any or all of
the CBOV employee benefit plans that currently are in effect. Provided
employment contracts are amended in the manner described in Section 6.1(h), CBI
also shall assume and honor in accordance with their terms as in effect on the
date hereof (or as amended after the date hereof with the prior written consent
of CBI), all employment, severance, consulting and other compensation contracts
and agreements Previously Disclosed and executed in writing by CBOV on the one
hand and any individual current or former director, officer or employee thereof
on the other hand, including
the CBOV Directors' deferred fee plan, copies of which have previously been
delivered by CBOV to CBI.
5.4 Indemnification. CBI agrees that following the Effective Date, it
shall indemnify and hold harmless any person who has rights to indemnification
from CBOV, to the same extent and on the same conditions as such person is
entitled to indemnification pursuant to Virginia law and CBOV's Articles of
Incorporation or Bylaws, as in effect on the date of this Agreement, to the
extent legally permitted to do so, with respect to matters occurring on or prior
to the Effective Date. CBI further agrees that any such person who has rights to
indemnification pursuant to this Section 5.4 is expressly made a third party
beneficiary of this Section 5.4 and may directly, in such person's personal
capacity, enforce such rights through an action at law or in equity or through
any other manner or means of redress allowable under Virginia law to the same
extent as if such person were a party hereto. Without limiting the foregoing, in
any case in which corporate approval may be required to effectuate any
indemnification, CBI shall direct, at the election of the party to be
indemnified, that the determination of permissibility of indemnification shall
be made by independent counsel mutually agreed upon between CBI and the
indemnified party. CBI shall use its reasonable best efforts to maintain CBOV's
existing directors' and officers' liability policy, or some other policy,
including CBI's existing policy, providing at least comparable coverage,
covering persons who are currently covered by such insurance of CBOV on terms no
less favorable than those in effect on the date hereof.
ARTICLE 6
Conditions to the Reorganization
6.1 Conditions to Each Party's Obligations to Effect the
Reorganization. The respective obligations of each of CBI and CBOV to effect the
Reorganization and the other transaction contemplated by this Agreement shall be
subject to the fulfillment or waiver at or prior to the Effective Date of the
following conditions:
(a) Shareholder Approvals. Shareholders of CBOV and of
CBI shall have approved all matters relating to this Agreement and the
Reorganization required to be approved by such shareholders in accordance with
Virginia law.
(b) Regulatory Approvals. This Agreement and the Plan of Share
Exchange shall have been approved by the Federal Reserve, the SCC, and any other
regulatory authority whose approval is required for consummation of the
transactions contemplated hereby, and such approvals shall not have imposed any
condition or requirement which would so materially adversely impact the economic
or business benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Reorganization in the reasonable
opinion of the Board of Directors of CBI or CBOV.
(c) Registration Statement. The Registration Statement
shall have been declared effective and shall not be subject to a stop order or
any threatened stop order.
(d) Tax Opinion. CBI and CBOV shall have received an opinion
of Williams, Mullen, Christian & Xxxxxxx, or other counsel reasonably
satisfactory to CBI and CBOV, to the effect that the Reorganization will
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code and that no gain or loss will be recognized by the shareholders of
CBOV to the extent they receive CBI Common Stock solely in exchange for their
CBOV Common Stock in the Reorganization.
(e) Accountants' Letter. CBI and CBOV shall have received a
letter, dated as of the Effective Date, from Xxxxxxxx, Xxxxxxx & Company,
satisfactory in form and substance to each of CBI and CBOV, that the
Reorganization will qualify for pooling-of-interests accounting treatment under
generally accepted accounting principles.
(f) Opinions of Counsel. CBOV shall have delivered to CBI and
CBI shall have delivered to CBOV opinions of counsel, dated as of the Effective
Date, as to such matters as they may each reasonably request with respect to the
transactions contemplated by this Agreement and in a form reasonably acceptable
to each of them.
(g) Legal Proceedings. Neither CBI nor CBOV shall be
subject to any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of the
Reorganization.
(h) Employment Contracts. All employment contracts of CBI and
CBOV shall have been effectively amended in order that the Reorganization shall
not be considered a change of control that would entitle any employee of CBI or
CBOV to any special severance payments after the Effective Date.
6.2 Conditions to Obligations of CBI. The obligations of CBI to effect
the Reorganization shall be subject to the fulfillment or waiver at or prior to
the Effective Date of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties contained herein of CBOV shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct as of such date, (ii) as
expressly contemplated by this Agreement, or (iii) for representations and
warranties the inaccuracies of which relate to matters that, individually or in
the aggregate, do not materially adversely affect the Reorganization and the
other transactions contemplated by this Agreement and CBI shall have received a
certificate or certificates signed by the Chief Executive Officer and Chief
Financial Officer of CBOV dated the Effective Date, to such effect.
(b) Performance of Obligations. CBOV shall have performed in
all material respects all obligations required to be performed by it under this
Agreement prior to the Effective Date, and CBI shall have received a certificate
signed by the Chief Executive Officer of CBOV to that effect.
(c) Affiliate Letters. Each shareholder of CBOV who may be
deemed by counsel for CBI to be an "affiliate" of CBOV within the meaning of
Rule 145 under the Securities Act of 1933 shall have executed and delivered a
commitment and undertaking to the effect that (1) such shareholder will dispose
of the shares of CBI Common Stock received by him in connection with the
Reorganization only in accordance with the provisions of paragraph (d) of Rule
145 and in a manner that would not prevent the Reorganization from qualifying
for pooling-of-interests accounting treatment; (2) such shareholders will not
dispose of any such shares until CBI has received an opinion of counsel
acceptable to it that such proposed disposition will not violate the provisions
of any applicable security laws; and (3) the certificates representing said
shares may bear a conspicuous legend referring to the forgoing restrictions.
(d) Investment Banking Letter. CBI shall have received a
written opinion in form and substance satisfactory to CBI from XxXxxxxx &
Company, Inc. addressed to CBI and dated the date the Proxy Statement/Prospectus
is mailed to shareholders of CBI, or in the alternative on the Effective Date,
to the effect that the terms of the Reorganization, including the Exchange
Ratio, are fair, from a financial point of view, to CBI. At its option CBI may
require that such fairness opinion be updated as of the Effective Date and, in
such event, it shall also be a condition to CBI'S obligation to consummate the
Reorganization that CBI receive such updated fairness opinion.
6.3 Conditions to Obligations of CBOV. The obligations of CBOV to
effect the Reorganization shall be subject to the fulfillment or waiver at or
prior to the Effective Date of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties contained herein of CBI shall be true and correct
as of the date of this Agreement and upon the Effective Date with the same
effect as though all such representations and warranties had been made on the
Effective date, except (i) for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, (ii) as
expressly contemplated by this Agreement, or (iii) for representations and
warranties the inaccuracies of which relate to matters that, individually or in
the aggregate, do not materially adversely affect the Reorganization and the
other transactions contemplated by this Agreement and CBOV shall have received a
certificate or certificates signed by the Chief Executive Officer and Chief
Financial Officer of CBI dated the Effective Date, to such effect.
(b) Performance of Obligations. CBI shall have performed in
all material respects all obligations required to be performed by it under this
Agreement prior to the Effective Date, and CBOV shall have received a
certificate signed by Chief Executive Officer of CBI to that effect.
(c) Investment Banking Letter. CBOV shall have received a
written opinion in form and substance satisfactory to CBOV from XxXxxxxx &
Company, Inc. addressed to CBOV and dated the date the Proxy
Statement/Prospectus is mailed to shareholders of CBOV, to the effect that the
terms of the Reorganization, including the Exchange Ratio, are fair, from a
financial point of view, to CBOV. At its option, CBOV may require that such
fairness opinion
be updated as of the Effective Date and, in such event, it shall also be a
condition to CBOV's obligation to consummate the Reorganization that CBOV
receive such updated opinion.
(d) Amendment to Articles of Incorporation. The Articles of
Incorporation of CBI shall have been amended to permit the appointment of all
CBOV Directors to the CBI Board in accordance with Section 1.2 hereof.
ARTICLE 7
Termination
7.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement and the Plan of Share
Exchange by the shareholders of CBI and CBOV, this Agreement may be terminated
and the Reorganization abandoned at any time prior to the Effective Date:
(a) By the mutual consent of the Board of Directors of
each of CBI and CBOV;
(b) By the respective Boards of Directors of CBI or CBOV
if the conditions set forth in Section 6.1 have not been met or waived by CBI
and CBOV;
(c) By the Board of Directors of CBI if the conditions
set forth in Section 6.2 have not been met or waived by CBI;
(d) By the Board of Directors of CBOV if the conditions
set forth in Section 6.3 have not been met or waived by CBOV;
(e) By the respective Boards of Directors of CBI or CBOV
if the Reorganization is not consummated by August 31, 1996.
(f)(i) By the Board of Directors of CBI if the Board of
Directors of CBOV receives a subsequent offer to acquire CBOV and does not
within fourteen (14) days after receipt of such subsequent offer confirm in
writing to CBI that each member of the Board of Directors of CBOV supports the
Reorganization, will vote his shares of CBOV Common Stock in favor of the
Reorganization, and will recommend to the shareholders of CBOV that they approve
the Reorganization.
(ii) By the Board of Directors of CBOV if the Board of
Directors of CBI receives a subsequent offer to acquire CBI and does not within
fourteen (14) days after receipt of such subsequent offer confirm in writing to
CBOV that each member of the Board of Directors of CBI supports the
Reorganization, will vote his shares of CBI Common Stock in favor of the
Reorganization, and will recommend to the shareholders of CBI that they approve
the Reorganization.
(g) By the Board of Directors of CBOV if, before the Effective
Date, CBI shall enter into any agreement or letter of intent providing for the
direct or indirect acquisition of substantially all of the assets and
liabilities or voting stock of CBI.
7.2 Effect of Termination. In the event of the termination and
abandonment of this agreement and the Reorganization pursuant to Section 7.1,
this Agreement shall become void and have no effect, except that (i) the last
sentence of Section 4.2 and all of Sections 4.8 and 7.4 shall survive any such
termination and abandonment and (ii) no party shall be relieved or released from
any liability arising out of an intentional breach of any provision of this
Agreement.
7.3 Non-Survival of Representations, Warranties and Covenants. Except
for Sections 1.2, 1.4, 2.1, 2.2, 2.3, 2.4, 5.3, 5.4 and 7.4 of this Agreement,
none of the respective representations and warranties, obligations, covenants
and agreements of the parties shall survive the Effective Date, provided that no
such representations, warranties, obligations, covenants and agreements shall be
deemed to be terminated or extinguished so as to deprive CBI or CBOV (or any
director, officer, or controlling person thereof) of any defense in law or
equity which otherwise would be available against the claims of any person,
including without limitation any shareholder or former shareholder of either CBI
or CBOV.
7.4 Expenses. The parties provide for the payment of expenses as
follows:
(a) Except as provided below, each of the parties shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated herein, including fees and expenses of its
own consultants, investment bankers, accountants and counsel.
(b) Notwithstanding the provisions of Section 7.4(a) hereof,
if for any reason the Reorganization is not approved by the shareholders of
either party as required, that party shall bear and pay 50% of the costs and
expenses incurred by the other party with respect to the fees and expenses of
accountants, counsel, printers and persons involved in the transactions
contemplated by this Agreement, including the preparation of the Registration
Statement and the Joint Proxy Statement.
(c) If this Agreement is terminated by CBI or CBOV because of
a willful and material breach by the other of any representation, warranty,
covenant, undertaking or restriction set forth herein, and provided that the
terminating party shall not have been in breach (in any material respect) of any
representation and warranty, covenant, undertaking or restriction contained
herein, then the breaching party shall bear and pay all such costs and expenses
of the other party, including fees and expenses of consultants, investment
bankers, accountants, counsel, printers, and persons involved in the
transactions contemplated by this Agreement, including the preparation of the
Registration Statement and the Joint Proxy Statement.
(d) (i) If this Agreement is terminated by CBI pursuant to
Section 7.1(f)(i), then CBOV shall pay all of the costs and expenses incurred by
CBI relating to the Reorganization including, fees and expenses of consultants,
investment bankers, accountants,
counsel, printers and persons involved in the transactions contemplated by this
Agreement, including the preparation of the Registration Statement and the Joint
Proxy Statement.
(ii) If this Agreement is terminated by CBOV pursuant to
Section 7.1(f)(ii), then CBI shall pay all of the costs and expenses incurred by
CBI relating to the Reorganization including, fees and expenses of consultants,
investment bankers, accountants, counsel, printers and persons involved in the
transactions contemplated by this Agreement, including the preparation of the
Registration Statement and the Joint Proxy Statement.
(e) Any liability to the other incurred by CBOV or CBI
pursuant to this Section 7.4 shall not exceed a total of $50,000.
(f) Final settlement with respect to the payment of such fees
and expenses by the parties shall be made within thirty (30) days after the
termination of this Agreement.
ARTICLE 8
General Provisions
8.1 Entire Agreement. This Agreement contains the entire agreement
among CBI and CBOV with respect to the Reorganization and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
8.2 Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose shareholders
are, entitled to the benefits thereof, and this Agreement may be amended or
supplemented by written instructions duly executed by the parties hereto at any
time, whether before or after the meetings of CBOV and CBI shareholders referred
to in Section 6.1(a) hereof, except statutory requirements and requisite
approvals of shareholders and regulatory authorities.
8.3 Descriptive Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning and construction of any provisions
of this Agreement.
8.4 Governing Law. Except as required otherwise or otherwise indicated
herein, this Agreement shall be construed and enforced according to the laws of
the Commonwealth of Virginia.
8.5 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:
If to CBI:
Xxxxxx X. Xxxxx, 3rd, President
Community Bankshares Incorporated
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(Tel. 000-000-0000)
Copy to:
Xxxxx X. Xxxxxxx, Xx.
Williams, Mullen, Christian & Xxxxxxx
0000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxx 00000-0000
(Tel. 000-000-0000)
If to CBOV:
Xxxxxxx X. Xxxxxxx, President
Commerce Bank of Xxxxxxxx
Xxxx Xxxxxx Xxx 00000
Xxxxxxxx, Xxxxxxxx 00000-0000
(Tel. 000-000-0000)
Copy to:
Xxx X. Xxxxx
Xxxxx, Balfour and Davidson
000 Xxxx Xxxxxxxx Xxxxxx, #0000
Xxxxxxxx, Xxxxxxxx 00000
(Tel. 000-000-0000)
8.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same agreement.
8.7 Severability. In the event any provisions of this Agreement shall
be held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provisions
hereof. Any provision of this Agreement held invalid or unenforceable only in
part or degree shall remain in full force and effect to the extent not held
invalid or unenforceable. Further, the parties agree that a court of competent
jurisdiction may reform any provision of this Agreement held invalid or
unenforceable so as to reflect the intended agreement of the parties hereto.
8.8 Brokers and Finders. Except for XxXxxxxx & Company, Inc. as to CBI
and XxXxxxxx & Company, Inc. as to CBOV, each of the parties represents and
warrants that neither it nor any of its officers, directors, employees,
affiliates, or subsidiaries has employed any broker or finder or incurred any
liability for any financial advisory fees, investment banker's fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of any claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by either CBI or CBOV, CBI or CBOV, as the case
may be, agrees to indemnify and hold the other party harmless of and from any
such claim.
8.9 Subsidiaries. All representations, warranties, and covenants
herein, where pertinent, include and shall apply to the wholly owned
subsidiaries belonging to the party making such representations, warranties, and
covenants.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in counterparts by their duly authorized officers and
their corporate seals to be affixed hereto, all as of the dates first written
above.
Community Bankshares Incorporated
By: /s/ XXXXXX X. XXXXX, 3RD
Xxxxxx X. Xxxxx, 3rd
President and Chief Executive Officer
ATTEST:
/s/ XXXXXXX X. XXXXXXXXXXX
Secretary
Commerce Bank of Virginia
By: /s/ XXXXXXX X. XXXXXXX
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
ATTEST:
/s/ XXX X. XXXXX
Secretary
Commerce Bank of Virginia
BOARD OF DIRECTORS
Each of the undersigned members of the Board of Directors of Commerce
Bank of Virginia agrees to be bound by his personal obligations as provided in
Section 4.3 and 4.6 of this Agreement.
/s/ XXX X. XXXXX
Xxx X. Xxxxx
/s/ XXXXX R. V. XXXXXX
Xxxxx X. X. Xxxxxx
/s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
/s/ XXXXX XXXXXX
Xxxxx Xxxxxx
/s/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx
/s/ XXXXX X. XXXXXXXX
Xxxxx X. Xxxxxxxx
/s/ XXXXXXXX X. XXXXXXX
Xxxxxxxx X. Xxxxxxx
/s/ XXXX X. SEAL, III
Xxxx X. Seal, III
/s/ X. X. XXXXXXX
X. X. Xxxxxxx
Community Bankshares Incorporated
BOARD OF DIRECTORS
Each of the undersigned members of the Board of Directors of Community
Bankshares Incorporated agrees to be bound by his personal obligations as
provided in Section 4.3 and 4.6 of this Agreement.
/s/ XXXXXXXX X. XXXXXXX
Xxxxxxxx X. XxXxxxx
/s/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
/s/ XXXXX X. XXXXXXXXX
Xxxxx X. Xxxxxxxxx
/s/ XXXXX X. XXXX
Xxxxx X. Xxxx
/s/ XXXXXXX X. XXXXXXXXXXX
Xx. Xxxxxxx X. Xxxxxxxxxxx
/s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
/s/ B. XXXXX XXXXXX
Dr. B. Xxxxx Xxxxxx
/s/ XXXXXX X. XXXXX, 3rd
Xxxxxx X. Xxxxx, 3rd
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
/s/ W. XXXXXXXX XXXXX
W. Xxxxxxxx Xxxxx
EXHIBIT A
to the
Agreement and Plan
of Reorganization
PLAN OF SHARE EXCHANGE
BETWEEN
Commerce Bank of Virginia
AND
Community Bankshares Incorporated
Pursuant to this Plan of Share Exchange ("Plan of Share Exchange"),
Commerce Bank of Virginia ("CBOV"), a Virginia state bank, shall become a
wholly-owned subsidiary of Community Bankshares Incorporated ("CBI"), a Virginia
corporation pursuant to a share exchange under Section 13.1-717 of the Virginia
Stock Corporation Act.
ARTICLE 1
Terms of the Share Exchange
1.1 The Share Exchange. Subject to the terms and conditions of the
Agreement and Plan of Reorganization, dated as of December 12, 1995 between CBOV
and CBI, at the Effective Date, CBOV shall become a wholly-owned subsidiary of
CBI through the exchange of each outstanding share of common stock of CBOV for
shares of the common stock of CBI in accordance with Section 2.1 of this Plan of
Share Exchange and pursuant to a share exchange under Section 13.1-717 of the
Virginia Stock Corporation Act (the "Share Exchange"). At the Effective Date,
the Share Exchange shall have the effect as provided in Section 13.1-721 of the
Virginia Stock Corporation Act.
1.2 Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of CBI in effect immediately prior to the consummation of the Share
Exchange shall remain in effect following the Effective Date until otherwise
amended or repealed.
1.3 Management and Business of CBOV and CBI. The directors, officers
and employees of CBOV will not change as a result of the Reorganization. The
members of the CBOV Board shall become directors of CBI on the Effective Date.
When the CBOV directors become directors of CBI, three members of the CBOV Board
shall become members of each of the three classes of CBI Directors, as
determined by the CBOV Board. The CBOV Directors appointed to Class I shall
serve until the 1998 annual meeting of shareholders; those appointed to Class II
shall serve until the 1999 annual meeting of shareholders; and those appointed
to Class III shall serve until the 1997 annual meeting of shareholders. The
parties anticipate that immediately before the Effective Date CBI will have ten
directors and CBOV will have nine directors. As a result of the Reorganization,
CBI will have 19 directors on and after the Effective Date. It is the intention
of CBI and CBOV that after the Effective Date, directors of
CBOV, or individuals designated by directors of CBOV, shall continue to
constitute nine nineteenths (9/19) of the Board of CBI and the parties shall use
their best efforts to maintain that ratio. The parties also acknowledge,
however, that such ratio might change as a result of unanticipated events,
including, for example, the acquisition in the future of another bank by CBI.
The parties intend that after the Effective Date, the chief executive officer of
CBOV and the chief executive officer of The Community Bank, a wholly owned
subsidiary of CBI, each will attend the meetings of the other's Board of
Directors.
ARTICLE 2
Manner of Exchanging Shares
2.1 Conversion of Shares. Upon, and by reason of, the Share Exchange
becoming effective pursuant to the issuance of a Certificate of Share Exchange
by the Virginia State Corporation Commission, no cash, except as set forth in
Section 2.3 below, shall be allocated to the shareholders of CBOV, and stock
shall be issued and allocated as follows:
(a) Each share of common stock, par value $3.50 per share, of
CBOV ("CBOV Common Stock") issued and outstanding immediately prior to the
Effective Date shall, by operation of law, be automatically exchanged for 1.4044
(the "Exchange Ratio") shares of common stock of CBI, par value $3.00 per share
(CBI Common Stock), plus cash for fractional shares. Each holder of a
certificate representing any shares of CBOV Common Stock upon the surrender of
his CBOV stock certificates to CBI, duly endorsed for transfer in accordance
with Section 2.2 below, will be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of CBI Common
Stock that his shares shall be converted into pursuant to the Exchange Ratio.
Each such holder of CBOV Common Stock shall have the right to receive any
dividends previously declared but unpaid as to such stock and the consideration
described in Sections 2.1 and 2.4 upon the surrender of such certificate in
accordance with Section 2.3. In the event CBI changes the number of shares of
CBI Common Stock issued and outstanding prior to the Effective Date as a result
of any stock split, stock dividends, recapitalization or similar transaction
with respect to the outstanding CBI Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
(b) Shares of CBOV Common Stock issued and outstanding shall,
by virtue of the Reorganization, continue to be issued and outstanding shares
held by CBI.
2.2 Conversion of Stock Options. (a) On the Effective Date, all rights
with respect to CBOV Common Stock pursuant to stock options ("CBOV Options")
granted by CBOV under a CBOV stock option plan which are outstanding on the
Effective Date, whether or not then exercisable, shall be converted into and
become rights with respect to CBI Common Stock, and CBI shall assume each CBOV
Option in accordance with the terms of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From the
Effective Date forward, (i) each CBOV Option assumed by CBI may be exercised
solely for
shares of CBI Common Stock, (ii) the number of shares of CBI Common Stock
subject to each CBOV Option shall be equal to the number of shares of CBOV
Common Stock subject to such option immediately prior to the Effective Date
multiplied by the Exchange Ratio and (iii) the per share exercise price under
each such CBOV Option shall be adjusted by dividing the per share exercise price
under each such option by the Exchange Ratio and rounding down to the nearest
cent; provided, however, that the terms of each CBOV Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction after
the Effective Date. It is intended that the forgoing assumption shall be
undertaken in a manner that will not constitute a "modification" as defined in
Section 425 of the Code, as to any stock option which is an "incentive stock
option."
(b) Pursuant to approval of this Plan of Share Exchange, the
CBI stock option plan shall be amended to increase the number of authorized
shares to cover the conversion of the CBOV Options into options to purchase CBI
common stock pursuant to Section 2.2(a) above and to otherwise provide for
conversion of the CBOV Options as described herein.
2.3 Manner of Exchange. As promptly as practicable after the Effective
Date, CBI shall cause The Community Bank, acting as the exchange agent
("Exchange Agent") to send to each former shareholder of record of CBOV
immediately prior to the Effective Date transmittal materials for use in
exchanging such shareholder's certificates of CBOV Common Stock (other than
shares held by shareholders who perfect their dissenter's rights as provided
under Section 2.5 hereof) for the consideration set forth in Section 2.1 above
and Section 2.4 below. Any fractional share checks which a CBOV shareholder
shall be entitled to receive in exchange for such shareholder's shares of CBOV
Common Stock, and any dividends paid on any shares of CBI Common Stock that such
shareholder shall be entitled to receive prior to the delivery to the Exchange
Agent of such shareholder's certificates representing all of such shareholder's
shares of CBOV Common Stock will be delivered to such shareholder only upon
delivery to the Exchange Agent of the certificates representing all of such
shares (or indemnity satisfactory to CBI and the Exchange Agent, in their
judgment, if any of such certificates are lost, stolen or destroyed). No
interest will be paid on any such fractional share checks or dividends to which
the holder of such shares shall be entitled to receive upon such delivery.
2.4 No Fractional Shares. No certificates or scrip for fractional
shares of CBI Common Stock will be issued. In lieu thereof, CBI will pay the
value of such fractional shares in cash on the basis of the book value per share
of CBI Common Stock at the end of the calendar quarter that immediately precedes
the Effective Date.
2.5 Dividends. No dividend or other distribution payable to the holders
of record of CBI Common Stock at or as of any time after the Effective Date
shall be paid to the holder of any certificate representing shares of CBOV
Common Stock issued and outstanding immediately prior to the Effective Date
until such holder physically surrenders such certificate for exchange as
provided in Section 2.3, promptly after which time all such dividends or
distributions shall be paid by CBI (without interest).
2.6 Rights of Dissenting Shareholders. Shareholders of CBOV who object
to the Share Exchange will be entitled to the dissenters' rights and remedies
set forth in sections 13.1- 729 through 13.1-741 of the Virginia Stock
Corporation Act.
ARTICLE 3
Termination
This Plan of Share Exchange may be terminated at any time prior to the
Effective Date by the parties hereto as provided in Article 7 of the Agreement
and Plan of Reorganization, dated December 12, 1995, between the parties.
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