[PG NUMBER]
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 26, 2000
Highlands Bankshares, Inc.
(Exact name of registrant as specified in its charter)
West Virginia 000-16761 55-0650743
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
P. O. Box 929
Petersburg, West Virginia 26847
(Address of principal executive offices)
(Zip Code)
(304) 257-4111
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address, and fiscal year, if changed since last report)
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Item 5. Other Events.
Effective July 26, 2000, The Stockmans Bank of Harman ("Stockmans") merged
into The Grant County Bank ("Grant"), a wholly-owned subsidiary of Highlands
Bankshares, Inc. (the "Registrant"), with Grant as the surviving corporation in
the merger. The merger was consummated pursuant to an Agreement and Plan of
Merger ("Merger Agreement") dated as of May 3, 2000, between Grant and Stockmans
and joined in by the Registrant.
Pursuant to the Merger Agreement, upon consummation of the merger on July
26, 2000 (the "Effective Time"), each share of Stockmans' issued and outstanding
common stock was converted into the right to receive $7,850. The amount of
consideration to be paid per share was based upon competitive bidding among a
number of financial institutions, and Grant paid the consideration for each
share of Stockmans' issued and outstanding common stock from Grant's working
capital.
Attached and incorporated herein by reference in its entirety as Exhibit
2.1 is a copy of the Merger Agreement.
Item 7. Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of
May 3, 2000, between The Grant County Bank
and The Stockmans Bank of Harman, and joined
in by Highlands Bankshares, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 10, 2000 HIGHLANDS BANKSHARES, INC.
(Registrant)
By /s/ Leslie A. Barr
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Name: Leslie A. Barr
Title: President and Chief
Executive Officer
CO385178
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of May 3, 2000, between The
Grant County Bank and The Stockmans Bank of Harman, and joined in by
Highlands Bankshares, Inc.
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AGREEMENT Exhibit 2.1
AND
PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), is made and entered
into as of the 3rd day of May, 2000, by and between THE GRANT COUNTY BANK, a
West Virginia banking corporation ("Grant"), and THE STOCKMANS BANK OF HARMAN, a
West Virginia banking corporation ("Stockmans"), joined in by HIGHLANDS
BANKSHARES, INC., a West Virginia bank holding company ("Highlands").
W I T N E S S E T H:
RECITALS
A. Grant is a banking corporation duly organized and validly
existing under the laws of the State of West Virginia, whose deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC").
B. Stockmans is a banking corporation duly organized and
validly existing under the laws of the State of West Virginia, whose deposits
are insured by the FDIC.
C. Highlands is a corporation duly organized and validly existing
under the laws of the State of West Virginia, is registered and operates under
the federal Bank Holding Company Act of 1956, and is the corporate parent of
Grant.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements hereinafter set forth, and in accordance with the provisions
of applicable law, the parties agree as follows:
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SECTION 1
THE PLAN OF MERGER
1.1 The Merger. On the Closing Date, a subsidiary to be formed by
Highlands shall merge with and into Stockmans, with Stockmans surviving the
merger. The survivor shall merge with and into Grant, under the Articles of
Incorporation of Grant and the title of Grant (the "Merger"). Grant shall be the
surviving corporation (hereinafter sometimes called the "Surviving
Corporation").
1.2 Effects of Merger. On the Closing Date, the corporate name and
existence of Stockmans shall cease and all of its purposes, powers and objects,
and all of its rights, assets, liabilities and obligations, shall pass to and
vest in Grant as the Surviving Corporation without any conveyance or transfer,
and Grant, as the Surviving Corporation, shall continue to be governed by the
laws of the State of West Virginia and shall also succeed to all rights, assets,
liabilities and obligations of Grant and Stockmans in accordance with the West
Virginia Corporation Act. Upon the Closing Date of the Merger, the separate
existence and corporate organization of Stockmans shall cease.
SECTION 2
ARTICLES OF INCORPORATION; BYLAWS;
BOARD OF DIRECTORS AND OFFICERS
2.1 Articles of Incorporation. The Articles of Incorporation of
Grant shall continue unchanged as the Articles of Incorporation of Grant as the
Surviving Corporation.
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From and after the Closing Date, said Articles of Incorporation, as the same may
be amended from time to time as provided by law, shall be the Articles of
Incorporation of the Surviving Corporation.
2.2 Bylaws. The Bylaws of Grant as in effect on the Closing Date
shall continue as the Bylaws of the Surviving Corporation until the same shall
thereafter be altered, amended or repealed in accordance with law, its Articles
of Incorporation or said Bylaws.
2.3 Directors and Officers. The directors and officers of Grant on
the Closing Date shall continue as the directors and officers of the Surviving
Corporation and shall hold office as prescribed in the Bylaws of the Surviving
Corporation and applicable law until their successors shall have been elected
and shall qualify.
SECTION 3
CONVERSION OF SHARES AND OPTIONS
3.1 Conversion of Shares. On the Closing Date:
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(a) Each share of common stock of Stockmans then issued and
outstanding shall be converted by the Merger into the right to receive Seven
Thousand Eight Hundred Fifty Dollars ($7,850) (the "Exchange Ratio"), except for
shares owned by Grant or Highlands, which shares shall be canceled. Shareholders
of Stockmans asserting dissenters' rights under the laws of the State of West
Virginia shall have their rights determined pursuant to W. Va. Code ss.ss.
31-1-122 and 123 and shall be entitled to cash payment pursuant to the terms and
provisions of said law with funds to be provided by Grant.
(b) From and after the Closing Date, the holders of the
certificates representing common stock of Stockmans shall cease to have any
rights with respect to such shares and their sole right shall be to receive cash
as herein provided.
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3.2 Exchange of Certificates. As soon as practicable after the
Closing Date, the certificates representing the outstanding shares of Stockmans
shall be surrendered to Grant and, upon such surrender, Grant shall issue and
deliver in substitution therefore, cash as provided above. Certificates
representing shares of Stockmans which are not surrendered shall be deemed for
all purposes to evidence the ownership only of the right to receive cash as
provided above. Grant shall have no obligation to pay interest on the cash to be
received or dividends for any share or shares of Stockmans' common stock.
3.3 Closing of Stock Transfer Books. At the close of business on the
business day immediately proceeding the Closing Date, the stock transfer books
of Stockmans shall be deemed closed, and no shares of common stock of Stockmans
shall thereafter be transferred.
SECTION 4
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF STOCKMANS
Except as set forth in the disclosure schedule to be delivered by
Stockmans to Grant on or before fifteen days after the date of this Agreement
(the "Disclosure Schedule"), Stockmans represents and warrants to and covenants
with Grant and Highlands that:
4.1 Organization and Qualification of Stockmans; Subsidiaries.
Stockmans is duly organized, validly existing and in good standing as a
corporation under the laws of the State of West Virginia and has the corporate
power to own all of its properties and assets and to carry on its business as it
is now being conducted. Stockmans is qualified to do business in each
jurisdiction in which such qualification is required. The issued and outstanding
shares of stock of Stockmans are all duly authorized, validly issued, fully paid
and nonassessable. Stockmans has no direct or indirect subsidiaries, and does
not own 5% or more of the shares of stock of any other corporation.
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4.2 Authorization of Agreement. The Board of Directors of Stockmans
has authorized the execution of this Agreement as set forth herein, and subject
to the approval of this Agreement and all appropriate regulatory authorities as
provided in the West Virginia Banking Act (the "WVBA") and the Rules and
Regulations of the FDIC and the Board of Governors of the Federal Reserve
("FRB"), Stockmans has the corporate power and is duly authorized to merge with
Grant pursuant to this Agreement, and upon its execution and delivery (and
assuming due execution and delivery by Grant and Highlands), this Agreement is a
valid and binding agreement of Stockmans enforceable in accordance with its
terms.
4.3 No Violation of Other Instruments. Subject to the receipt of the
authorizations set forth in Section 4.2, the execution and delivery of this
Agreement do not, and the consummation of the Merger in accordance with this
Agreement will not: (i) violate any provisions of Stockmans' Articles of
Incorporation or Bylaws, (ii) violate any provision of, or result in the
acceleration of any obligation under or in the termination, if applicable, of
any mortgage, deed of trust, note, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree to which
Stockmans is a party or by which it is bound except for such as would not have a
material adverse effect on the financial condition, business, properties, or
results of operations of Stockmans, taken as a whole, or the transactions
contemplated thereby, (iii) violate or conflict with any other material
restriction of any kind or character by which Stockmans is bound, or (iv) enable
any person to enjoin the transactions contemplated hereby. After the approval of
this Agreement by the shareholders of Stockmans, Stockmans will have taken all
action required by law, the Articles of Incorporation of Stockmans, its Bylaws
or otherwise, to authorize the execution and delivery of this Agreement and to
authorize the Merger of Stockmans and Grant pursuant to this Agreement and the
consummation of the transactions contemplated hereby.
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4.4 Financial Statements. The consolidated balance sheets of
Stockmans as of December 31, 1999, 1998, and 1997, and its statements of income
and cash flows for each of the twelve-month periods ended on such dates,
heretofore delivered to Grant, were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied, and those
financial statements, as well as the unaudited balance sheet as of March 31,
2000, and the statement of income and cash flows for the three-month period
ended March 31, 2000, both of which have been delivered to Grant, fairly present
its financial condition and results of operations as of such date and for such
period, subject to normal year-end audit adjustments and without footnotes
required by GAAP.
4.5 No Material Adverse Change. There has been no material adverse
change, or development involving a reasonably foreseeable prospective material
adverse change, in or affecting the financial condition, businesses, properties,
results of operations or prospects of Stockmans, taken as a whole, since
December 31, 1999.
4.6 Reports. Stockmans has filed all documents and reports required
by the FDIC or the West Virginia Commissioner or Division of Banking or any
other regulatory agency with authority over Stockmans or its operations, and
such reports did not contain, as of the date thereof, an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not misleading.
4.7 No Actions, Etc. There are no actions, suits, claims,
proceedings or investigations pending or, to the knowledge of the executive
officers or directors of Stockmans, threatened or contemplated against or
relating to Stockmans of any of its properties which, individually or in the
aggregate, could materially and adversely affect the financial condition,
businesses, properties or results of operations of Stockmans, taken as a whole,
or the ability of Stockmans to consummate the transactions contemplated hereby,
and such officers and directors do not know of any basis for any such action or
proceeding. Stockmans is not transacting business in violation of any applicable
law or regulation which could materially adversely affect the financial
condition, businesses, properties or results of operations of Stockmans, taken
as a whole, or the ability of Stockmans to consummate the transactions
contemplated hereby.
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4.8 Capitalization. The authorized capital stock of Stockmans
consists of 250 shares of common stock, par value of $100 per share, all of
which shares are issued and outstanding as of the date hereof, and are duly
authorized, validly issued, fully paid and nonassessable, and have not been
issued in violation of preemptive rights. There are no options, warrants, calls,
reservations for issuance or commitments of any kind relating to, or securities
convertible into, the common stock of Stockmans.
4.9 Copies of All Contracts, Leases, Etc. Stockmans has furnished or
made available or will promptly furnish or make available to Grant true and
complete copies of all material contracts, leases and other agreements to which
Stockmans is a party or by which it is bound, and has listed on the Disclosure
Schedule and will furnish to Grant true and complete copies of all employment,
pension, retirement, stock option, employee stock option, profit sharing,
deferred compensation, consultant, bonus, group insurance or similar plans with
respect to any of the directors, officers or other employees of Stockmans.
4.10 Undisclosed Liabilities. Stockmans has no material liabilities
other than those liabilities disclosed on or provided for in the balance sheet
as of December 31, 1999, and liabilities incurred since such date in the
ordinary course of business consistent with past practices.
4.11 Title to Properties. Stockmans has good and marketable title to
all its property and assets set forth in their balance sheets as of December 31,
1999, except property and assets sold or otherwise disposed of since December
31, 1999, in the ordinary course of business, subject to no liens, mortgages,
pledges, encumbrances or charges of any kind except liens reflected on said
balance sheet and except liens for taxes and assessments not delinquent, pledges
to secure deposits and such other liens and encumbrances and imperfections of
title as do not materially affect the value of such property as reflected on
said balance sheet and which do not interfere with or impair its present or
continued use, and all of their material leases are in full force and effect and
Stockmans is not in default in any material respect thereunder.
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4.12 Proxy Statement. The information pertaining to Stockmans which
has been or will be furnished by or on behalf of Stockmans or its management for
inclusion in the Proxy Statement referred to in Section 10 or any amendment or
supplement thereto 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, in light of the circumstances under which they
are made, not misleading.
4.13 Good Faith. Stockmans shall use its reasonable best efforts in
good faith to take or cause to be taken all action required under this Agreement
on its part to be taken as promptly as practicable so as to permit the
consummation of this Agreement at the earliest practicable date and cooperate
fully with the other parties to that end.
4.14 Absence of Regulatory Actions. Stockmans is not a party to any
cease and desist order, written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, federal governmental authorities charged with the supervision or
regulation of its operations of, nor has it been advised by any such
governmental authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
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4.15 Employee Benefits.
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(a) For purposes of this Agreement, the following
definitions shall apply:
(1) "Employee Pension Benefit Plan" has the meaning
as set forth in ERISAss.3(2).
(2) "Employee Welfare Benefit Plan" has the meaning
set forth in ERISAss.3(1).
(3) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
(4) "Multiemployer Plan" shall mean a plan
described inss. 3(37) and/orss.4001(a)(3) of ERISA.
(5) "Stockmans Retirement Plan" shall mean any
retirement plan adopted by Stockmans.
(6) "Stockmans Employee" means an employee of
Stockmans.
(7) "Employee Benefit Plan(s)" means any one or
more of the following in which a Stockmans' Employee is a participant in or
benefits from as a result of his employment (whether current or past): (a)
Employee Pension Benefit Plan, (b) Employee Welfare Benefit Plan, or (c) any
other deferred compensation plan, bonus plan, incentive, disability or group
insurance plan, stock option plan, employee stock purchase plan, vacation plan,
severance plan, sick leave plan or policy, holiday plan or policy, maternity
leave or policy, or any other benefit plan, program, agreement (including
employment and severance agreements), arrangements or commitments of any kind,
whether or not subject to the requirements of ERISA.
(8) "Code" means the Internal Revenue Code of 1986,
as amended.
(9) "Control Group" shall mean a controlled group
of corporations within the meaning of ss. 414(b) of the Internal Revenue Code
and entitles under common control within the meaning of ss. 414(c) of the
Internal Revenue Code.
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(b) Neither currently nor at any time during the preceding
five calendar years has Stockmans, or any entity which was in the same Control
Group with Stockmans at any time during such five-year period, or its
subsidiaries, contributed to or had any obligation to contribute to any
Multiemployer Plan.
(c) Each Employee Benefit Plan will be listed in the
Disclosure Schedule, and copies of such plans and accompanying Summary Plan
Descriptions, if required, have been furnished to Grant.
(d) Each of the Employee Benefit Plans has been administered
in all material respects in compliance with the applicable requirements of
ERISA, the Code, other federal statutes, applicable federal regulations,
applicable State law (including without limitation State insurance law) and in
accordance with its terms. The Stockmans' Retirement Plan has received a
favorable determination letter from the Internal Revenue Service with respect to
"TRA" (as defined in Section 1 of the Rev. Proc. 93-39), and Stockmans is not
aware of any circumstances likely to result in revocation of such favorable
determination letters. All reports required by any governmental agency with
respect to each such Employee Benefit Plan has been timely and properly filed
and to the extent required, furnished to the participants in such plan.
Stockmans has paid all costs, benefits, premiums, contributions and any other
amounts required or coming due in connection with the Employee Benefit Plans,
and no accumulated funding deficiency, as defined in ss. 302(a)(2) of ERISA,
exists with respect to any Employee Benefit Plan. To the best of its knowledge,
neither Stockmans nor any fiduciary of any Employee Benefit Plan, has engaged
in: (i) a transaction that would subject Stockmans to any tax, penalty or
liability for prohibited transactions imposed by ERISA or by ss. 4975 of the
Code, or (ii) any transaction in violation of ss. 406(a) or ss. 406(b) of ERISA
(for which no exemption exists under ss. 408 of ERISA).
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(e) With the exception of Employee Pension Benefit Plans and
except as set forth in the Disclosure Schedule, none of the benefits provided
under any of the Employee Benefit Plans are vested, and Stockmans retains full
authority to terminate or amend any of the Employee Benefit Plans.
(f) Each Employee Benefit Plan, other than the Stockmans'
Retirement Plan, is either fully insured and all premiums have been timely paid
or, if not fully insured, adequate reserves have been established on the books
of Stockmans in connection with such benefits, and all required contributions
have been made to such plans.
(g) With the exception of the Stockmans' Retirement Plan, no
Employee Benefit Plan is subject to the provisions of Title IV of ERISA. No
liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by Stockmans with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by either of them, or the single-employer plan
of any entity which is or was in the same Control Group as Stockmans. No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the thirty-day reporting requirement has not been waived, has been required to
be filed for the Stockmans' Retirement Plan within the twelve-month period
ending on the date hereof.
(h) Stockmans represents and warrants that as of December 31,
1999, the actuarially determined present value of all "benefit liabilities,"
within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in the Stockmans' Retirement Plan's most
recent actuarial valuation), did not exceed the then current value of the assets
of the Stockmans' Retirement Plan. Stockmans further warrants and represents
that it has taken no action since that date by amendment of that plan or
otherwise, to increase the actuarially determined present value of the benefit
liabilities of the Stockmans' Retirement Plan except with respect to changes in
normal eligibility resulting from increased terms of service or compensation
charges.
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(i) As of the Closing Date and at Grant's option, the
Stockmans Retirement Plan will be either: (i) terminated, (ii) amended to cease
all future benefit accruals, or (iii) merged into a Highlands retirement plan.
The parties agree that at a minimum, participants in the Stockmans Retirement
Plan will be entitled to their vested accrued benefit under that plan as of the
Closing Date plus such additional vested accrued benefit to which they shall be
entitled to for years of service with Grant subsequent to the Closing Date under
the Highlands retirement plan. It is specifically understood that Stockmans'
Employees shall not be entitled to any past service for benefit of Highlands or
Grant, except that if the Stockmans Retirement Plan and a Highlands retirement
plan are merged pursuant to this Section 4.15(i), and in connection with such
Merger, it is decided that such past service can be granted without increasing
the unfunded liability of the Highlands retirement plan in excess of such amount
described herein. It is further specifically understood that, notwithstanding
any provision hereof to the contrary, Stockmans' Employees shall be employees
at-will and that after the Closing Date, Grant and Highlands may alter, amend,
or terminate any of their benefit programs covering such employees, or the
employment of any of such employees.
(j) There has not been any (i) termination of the Stockmans
Retirement Plan, or (ii) the commencement of any proceeding to terminate such
plan pursuant to ERISA, or otherwise, or (iii) written notice given to Stockmans
of the intention to commence or seek the commencement of any such proceeding.
4.16 Labor Disputes. Stockmans is not directly or indirectly
involved in or to the knowledge of any of them threatened with any labor dispute
or trouble or organizational effort, including, without limitation, matters
regarding actual or alleged discrimination by reason of race, creed, sex,
disability or national origin, which might materially and adversely affect the
financial condition, assets, businesses or results of operations of Stockmans.
Stockmans is not a party to, nor has it ever been a party to, any collective
bargaining agreement.
4.17 Reserve For Possible Loan Losses. The reserves for possible
loan losses shown on the consolidated balance sheet of Stockmans as of December
31, 1999, and March 31, 2000, are adequate as of the dates thereof. The reserve
for possible loan losses to be shown on the consolidated balance sheet of
Stockmans as of future periods, if any, will be adequate as of the dates
thereof.
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4.18 Knowledge as to Conditions. As of the date hereof:
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(a) Stockmans knows of no reason relating to Stockmans
why the approvals, consents and waivers of governmental authorities referred to
in Sections 8.1(b) and 8.1(c) should not be obtained in a timely manner and
without the imposition of a condition of the type referred to in Section 8.1(g);
and
(b) Stockmans is not aware of any conditions or provisions of
any actions, reports of examinations or similar regulatory reports or findings
which is anticipated to delay or precludes Stockmans from entering into the
Agreement or obtaining prompt regulatory approval of all applications to be
filed in connection with the transaction contemplated by this Agreement,
including but not limited to compliance with the federal or West Virginia
Community Reinvestment Acts ("CRA").
4.19 Taxes
(a) Stockmans has filed on a timely basis all federal income
tax returns and all other federal, state, municipal and other tax returns which
it is required to file, and has paid all taxes shown to be due on such returns
and has adequately reserved for all current taxes;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against Stockmans, or, to its knowledge, threatening
to assert against Stockmans, any deficiency or claim for additional taxes,
interest or penalty;
(c) There is no pending, or to the knowledge of Stockmans,
threatened examination of the federal income tax returns of Stockmans and,
except for tax years still subject to the assessment and collection of
additional federal income taxes under the three-year period of limitations
prescribed in Section 6501(a) of the Internal Revenue Code, no tax year of
Stockmans remains open to the assessment and collection of additional federal
income taxes; and
(d) There is no pending or, to the knowledge of Stockmans,
threatened examination of state tax (the "West Virginia Taxes") returns of
Stockmans and, except for tax years still subject to the assessment and
collection of additional West Virginia Taxes under the applicable statutes of
limitations, no tax year of Stockmans remains open to the assessment and
collection of additional taxes.
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4.20 Absence of Certain Changes. Since December 31, 1999:
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(a) There has not been any damage, destruction or loss by
reason of fire, flood, accident or other casualty (whether insured or not
insured) materially and adversely affecting the assets, financial condition or
operations of Stockmans;
(b) Except in the ordinary course of business, Stockmans has
not disposed of, or agreed to dispose of, any of its material properties or
assets, nor has it leased to others, or agreed to so lease, any of such material
properties or assets;
(c) There has not been any change in the authorized, issued or
outstanding capital stock of Stockmans, or any material change in the
outstanding debt of Stockmans, other than changes due to payments in accordance
with the terms of such debt and any Federal Home Loan Bank advances and reverse
repurchase agreements to meet funding needs of Stockmans in the ordinary course
of business;
(d) No change has occurred in the personnel who are key
personnel with respect to the operations of Stockmans, nor has there been any
increase in the compensation or fees payable by Stockmans to its directors or
officers other than increases in the ordinary course of business in accordance
with the personnel policies of Stockmans, or any material increase in any bonus,
insurance, pension or other Employee Benefit Plan, payment or arrangement for or
with any of such directors or officers;
(e) Stockmans has not made any material loan or advance
other than in the ordinary course of business;
(f) Stockmans has not made any expenditure or major commitment
for the purchase, acquisition, construction or improvement of any material asset
or assets which in the aggregate would be material;
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(g) Stockmans has not entered into any other material
transaction, contract or lease or incurred any other material obligation or
liability;
(h) Stockmans has not incurred any unusual or
extraordinary loan losses;
(i) There has not been any other event, condition or
development of any kind which materially and adversely affects the assets,
financial condition or results of operations of Stockmans, taken as a whole, and
Stockmans has no knowledge of any such event, condition or development which may
materially and adversely affect the assets, financial condition or operations of
Stockmans, taken as a whole; and
(j) Stockmans is, and has been, in substantial compliance with
all environmental laws and regulations, and there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending, or, to the knowledge of Stockmans, threatened, before any
court, governmental agency or board or other forum against Stockmans for alleged
noncompliance with, or liability under, any environmental law or relating to the
release into the environment of any hazardous material or oil.
4.21 Negative Covenants. Except as otherwise expressly contemplated
hereby, between the date hereof and the Closing Date, or the time when this
Agreement terminates as provided herein, Stockmans will not, without the prior
written consent of Grant, which consent shall not be unreasonably withheld:
(a) Make any change in its authorized capital stock or
corporate structure;
(b) Issue any shares of its capital stock, securities
convertible into its common stock or any long-term debt securities;
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(c) Issue or grant any options, warrants or other rights
to purchase shares of its capital stock;
(d) Declare or pay any dividends or other distributions
on any shares of common stock;
(e) Purchase, redeem or otherwise acquire, or agree to
purchase, redeem or acquire, for consideration any shares of its capital stock,
securities convertible into its common stock or any long-term debt securities;
(f) Enter into or amend (except as otherwise specifically
contemplated by this Agreement or disclosed in the Disclosure Schedule) any
Employee Benefit Plan, consultant, or similar plan in respect of any of its
directors, officers or other employees or increase its contribution to any
Employee Benefit Plan;
(g) Take any action materially and adversely affecting the
transactions contemplated hereby or this Agreement or the financial condition,
businesses, properties or results of operations of Stockmans;
(h) Acquire any other company or acquire any branch or
deposits or, other than in the ordinary course of business, any assets of any
other company;
(i) Mortgage, pledge or subject to a lien or any other
encumbrance any of its assets, dispose of any of its assets, incur or cancel any
debts or claims or take any other action not in the ordinary course of its
business as heretofore conducted;
(j) Amend its Articles of Incorporation or Bylaws;
(k) Sell, pledge or otherwise dispose of or encumber any
of its stock, or any of the stock of its subsidiary, or change the capital
structure of any of them;
(l) Sell any securities from its investment portfolio,
except in the ordinary course of business;
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(m) Increase the compensation of or pay any benefit to any
director, officer or employee prospectively or retroactively other than in the
ordinary course of business and, in any event, in the aggregate not in excess of
5% of the total salary expense of Stockmans; or
(n) Enter into any agreement to do any of the foregoing.
4.22 Additional Covenants. Except as otherwise contemplated by
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this Agreement, Stockmans covenants and agrees:
(a) That, subsequent to the date of this Agreement and prior
to the Closing Date, it will operate its business only in the normal course and
in a normal manner consistent with past practices;
(b) That it will take no action which would adversely affect
or delay the ability of Grant or Stockmans to obtain any necessary approvals,
consents or waivers of any governmental authority required for the transaction
contemplated hereby or to perform its covenants and agreements on a timely basis
under this Agreement;
(c) That immediately upon the execution of this Agreement it
will direct its accountants and attorneys to give Grant access, upon reasonable
notice, to all relevant and material information, documents and working papers
pertaining to Stockmans that Grant may reasonably request;
(d) That it will use its reasonable best efforts in good faith
to take or cause to be taken all action required under this Agreement on its
part to be taken as promptly as practicable so as to permit the consummation of
the Merger at the earliest possible date and cooperate fully with the other
parties to that end;
(e) That neither Stockmans nor its directors, officers or
representatives or agents will, directly or indirectly, take any action to
solicit, support or encourage any offer or proposal from any other person to
acquire Stockmans or its assets, or shares of its common stock, or engage in
negotiations with or provide information to such person with respect to such
offer or proposal.
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(f) That it will promptly advise Grant of any material adverse
change in the financial condition, assets, businesses, results of operations or
prospects of Stockmans, and any material breach of any representation, warranty,
covenant or agreement made by Stockmans in this Agreement;
(g) That it will maintain in full force and effect adequate
fire, casualty, public liability, employer fidelity and other insurance coverage
in accordance with prudent practices to protect Stockmans against losses for
which insurance can reasonably be obtained;
(h) That it will consult with Grant as to the form and
substance of any press release or other public disclosure concerning matters
related hereto, and, except as required by law or within good faith, shall not
issue such release or disclosure without the consent of Grant.
(i) That it will enforce its rights under, and the
provisions of, all confidentiality agreements it has or may have with third
parties; and
(j) That it will take, in accordance with applicable law and
its Articles of Incorporation and Bylaws, all action necessary to convene an
appropriate meeting of its shareholders to consider and vote upon the approval
and adoption of this Agreement, and any other matters required to be approved by
its shareholders for consummation of the Merger (including any adjournment or
postponement) as promptly as practicable after the registration statement is
declared effective. Except to the extent that its Board of Directors concludes
after receipt of legal advice from its counsel that its fiduciary duties require
otherwise, its Board of Directors shall recommend such approval and it shall
take all reasonable, lawful action to solicit such approval by its shareholders.
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4.23 Dissenters' Rights. Stockmans will promptly notify Grant
------------------
of the exercise of dissenters' rights by any of its shareholders pursuant to
West Virginia law.
SECTION 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANT
Grant represents and warrants to and covenants with Stockmans
that:
5.1 Organization and Qualification of Grant. Grant is a corporation
duly organized, validly existing and in good standing under the laws of the
State of West Virginia and has the corporate power to own all of its properties
and assets and to carry on its business as it is now being conducted.
5.2 Authorization of Agreement. The Board of Directors of Grant has
authorized the execution of this Agreement as set forth herein. Subject to
approval by all appropriate regulatory authorities, Grant has the corporate
power to execute and deliver this Agreement, and has taken all action required
by law, its Articles of Incorporation, its Bylaws or otherwise to authorize such
execution and delivery, the Merger and the consummation of the transactions
contemplated hereby, and upon its execution and delivery (and assuming due
execution and delivery by Stockmans) this Agreement is a valid and binding
agreement of Grant enforceable in accordance with its terms.
5.3 No Violation of Other Instruments. Subject to the receipt of the
authorizations set forth in Section 5.2, the execution and delivery of this
Agreement do not, and the consummation of the Merger will not, (i) violate any
provision of the Articles of Incorporation or Bylaws of Grant, (ii) violate any
provision of, or result in the acceleration of any obligation under or in the
termination, if applicable, of, any mortgage, deed of trust, note, lien, lease,
franchise, license, permit, agreement, instrument, order, arbitration award,
judgment or decree to which Grant or Highlands is a party or by which it is
bound except for such as would not have a material adverse effect on the
financial condition, business, properties, or results of operations of Grant or
the transactions contemplated hereby, (iii) violate or conflict with any other
material restriction of any kind or character to which Grant or Highlands is
subject, or (iv) enable any person to enjoin the transactions contemplated
hereby. After approval of this Agreement by the FRB, the West Virginia Board of
Banking and Financial Institutions, and the FDIC, Grant will have taken all
action required by law and its Articles of Incorporation and Bylaws necessary to
authorize the execution and delivery of this Agreement and to authorize the
Merger of Stockmans with Grant and the consummation of the transactions
contemplated hereby.
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5.4 Regulatory Approvals. Prior to the Closing Date, Grant,
separately and jointly with Stockmans, shall use its reasonable best efforts in
good faith to take or cause to be taken as promptly as practicable all such
steps as shall be necessary to obtain: (i) the prior approval of the Merger by
the FRB under the Bank Holding Company Act of 1956, as amended, the FDIC, and
the West Virginia Board of Banking and Financial Institutions, and (ii) all
other consents and approvals of governmental agencies as are required by law or
otherwise, and shall do any and all things deemed by Grant to be necessary or
appropriate in order to cause the Merger to be consummated on the terms provided
herein.
5.5 No Actions, Etc. There are no actions, proceedings or
investigations pending or, to the knowledge of the executive officers or
directors of Grant, threatened or contemplated against or relating to Grant or
Highlands, which, individually or in the aggregate, could materially and
adversely affect the ability of Grant to consummate the transactions
contemplated hereby, and such officers and directors do not know of any basis
for any action or proceeding. Neither Grant nor Highlands is transacting
business in violation of any applicable law or regulation which could materially
adversely affect the ability of Grant to consummate the transactions
contemplated hereby.
5.6 Good Faith. Grant shall use its reasonable best efforts in good
faith to take or cause to be taken all action required under this Agreement on
its part to be taken as promptly as practicable so as to permit the consummation
of this Agreement at the earliest practicable date and cooperate fully with the
other parties to that end.
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5.7 Knowledge as to Conditions. As of the date hereof, Grant knows
of no reason relating to Grant or Highlands why the approvals, consents and
waivers of governmental authorities referred to in Sections 8.1(b) and 8.1(c)
should not be obtained in a timely manner; Grant is not aware of any conditions
or provisions of any actions, reports or examinations or similar regulatory
reports or findings which is anticipated to delay or precludes Grant from
entering into the Agreement or obtaining prompt regulatory approval of all
applications to be filed in connection with the transaction contemplated by this
Agreement, including but not limited to compliance with the CRA.
5.8 Press Release. Grant will consult with Stockmans as to the form
and substance of any press release or other public disclosure concerning matters
related thereto, and, except as required by law or within good faith, shall not
issue such release or disclosure without the consent of Stockmans.
SECTION 6
INVESTIGATION AND CONFIDENTIALITY
6.1 Investigation. Prior to the Closing Date, Grant may
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directly and through its representatives, make such reasonable investigation of
the assets and business of Stockmans as deemed necessary or advisable. Each
party and its representatives shall have, at reasonable times after the date of
execution hereof, during normal business hours and upon reasonable request, full
access to the premises and to all the relevant and material books and records of
the other party and its subsidiaries.
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6.2 Confidentiality. Grant agrees to treat as strictly confidential
and agrees not to divulge to any other person, natural or corporate (other than
employees of, and attorneys and accountants for, such party) any proprietary
financial statements, schedules, contracts, agreements, instruments, papers,
documents and other information relating to Stockmans by which it may come to
know or which may come into its possession during the course of its
investigation in connection with the transaction contemplated hereby, of
Stockmans, and, if the Merger contemplated hereby are not consummated for any
reason, Grant agrees promptly to return to Stockmans all written proprietary
material furnished in connection with such investigation; and thereafter all
such information shall continue to not be disclosed by Grant and its directors,
officers, employees, or advisors to third parties without the written consent of
Stockmans.
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SECTION 7
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties included or provided herein
shall not survive the Closing Date.
SECTION 8
CONDITIONS PRECEDENT; CLOSING DATE
8.1 Conditions Precedent. The consummation of this Agreement
--------------------
and the Merger is conditioned upon the following:
(a) The shareholders of Stockmans shall have approved this
Agreement by such vote as may be required by law or the rules of any stock
exchange;
(b) No governmental authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement;
(c) The FRB, the FDIC, and the West Virginia Board of Banking
and Financial Institutions shall have approved the Merger of Stockmans into
Grant;
(d) All other consents, approvals and permissions and the
satisfaction of all the requirements prescribed by law which are necessary to
the carrying out of the transactions contemplated hereby shall have been
procured;
(e) All delay periods and all periods for review, objection or
appeal of or to any of the consents, approvals or permissions required with
respect to the consummation of the Merger and this Agreement shall have expired;
(f) Unless waived by Grant, the approvals referred to in
subparagraphs (b), (c) and (d) hereof shall not have required the divestiture or
cessation of any significant part of the present operations conducted by Grant,
Highlands or Stockmans, taken as a whole, and shall not have imposed any other
condition which Grant reasonably deems to be materially disadvantageous or
burdensome;
26
(g) Unless waived by Grant, the representations and warranties
of Stockmans contained in this Agreement shall be correct on and as of the
Closing Date in all material respects with the same effect as though made on and
as of such date, except as affected by the transactions contemplated by this
Agreement and except for changes which are not, in the aggregate, material and
adverse to the financial condition, businesses, properties or operations of
Stockmans, and Stockmans shall have performed in all material respects all its
obligations and agreements hereunder theretofore to be performed by it; and
Grant shall have received on the Closing Date an appropriate certificate to the
foregoing effect dated the Closing Date and executed on behalf of Stockmans by
one or more appropriate executive officers;
(h) Unless waived by Stockmans, the representations and
warranties of Grant contained in this Agreement shall be correct on and as of
the Closing Date in all material respects with the same effect as though made on
and as of such date, except as affected by the transactions contemplated by this
Agreement, and Grant shall have performed in all material respects all of its
obligations and agreement hereunder theretofore to be performed by it; and
Stockmans shall have received on the Closing Date an appropriate certificate to
the foregoing effect dated the Closing Date and executed on behalf of Grant by
one or more appropriate executive officers; and
(i) Grant shall have received from legal counsel to Stockmans
a written opinion pertaining to the transactions herein provided for, dated the
Closing Date, in form and substance acceptable to counsel for Grant, and
Stockmans shall have received from legal counsel to Grant a customary written
opinion pertaining to the transactions herein provided for, dated the Closing
Date, in form and substance acceptable to counsel for Stockmans.
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8.2 Closing Date. The time and date of closing (the "Closing Date")
shall be selected by Grant and shall be within thirty days of approvals of this
Agreement by the shareholders of Stockmans or the receipt of all of the
approvals (including any statutory waiting periods) referred to in Section
8.1(b), (c), (d) and (e), whichever is later. Grant shall cause the Articles of
Merger with respect to the Merger to be filed with the Secretary of State of
West Virginia.
SECTION 9
TERMINATION OF AGREEMENT
9.1 Grounds for Termination. This Agreement and the
-----------------------
transactions contemplated hereby may be terminated at any time prior to the
Closing Date either before or after the meeting of the shareholders of
Stockmans:
(a) By mutual consent of Grant and Stockmans;
(b) By Grant if there has been a material
misrepresentation or breach of warranty in the representations and warranties of
Stockmans set forth herein, or by Stockmans if there has been a material
misrepresentation or breach of warranty in the representations and warranties of
Grant set forth herein, which material misrepresentation or breach of warranty
has not been cured to the satisfaction of the non-breaching party within thirty
days thereof;
(c) By either Grant or Stockmans upon written notice to the
other, if the Closing Date does not occur on or before midnight on December 31,
2000;
(d) By either Grant or Stockmans if the Merger shall violate
any nonappealable final order, decree or judgment of any court or governmental
body having competent jurisdiction;
(e) In the event that the Disclosure Schedule or Grant's
investigation of Stockmans discloses matters which Grant in good faith believes
either (i) to be inconsistent in any material and adverse respect with any of
the representations or warranties of Stockmans (without giving effect to the
Disclosure Schedule), or (ii) in the reasonable judgment of Grant either (A) to
be of such significance as to materially and adversely affect the financial
condition or results of operations of Stockmans, taken as a whole, or (B) to
deviate materially and adversely from the financial statements for the year
ended December 31, 1999, of Stockmans, Grant may elect to terminate this
Agreement by giving notice of termination to Stockmans within or at the end of
the sixty-day period following the date of the delivery by Stockmans to Grant of
the Disclosure Schedule;
(f) By Grant, unless waived by it, if the holders of 10% or
more of Stockmans Common Stock, exercise dissenters' rights with respect to the
Merger.
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9.2 Effect of Termination; Right to Proceed. In the event this
Agreement shall be terminated pursuant to Section 9.1, all further obligations
of Grant and Stockmans under this Agreement shall terminate (other than this
Section 9.2 and Sections 6.2, 9.3, 18.2 and 18.3 hereof, all of which shall
remain in full force and effect) without further liability of the parties to one
another, except for any liability arising out of any uncured willful breach of
any covenant or other agreement contained in this Agreement or any fraudulent
breach of a representation or warranty.
9.3 Return of Documents in Event of Termination. In the event of the
termination of this Agreement for any reason, each party shall forthwith deliver
to the other all documents, work papers and other material obtained from it
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, including information obtained pursuant to Section 6
hereof, and will take reasonable steps to have any information so obtained kept
confidential.
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SECTION 10
MEETING OF SHAREHOLDERS
Stockmans shall take all steps necessary to call and hold a special
meeting of shareholders, in accordance with applicable law and its Articles of
Incorporation and Bylaws, as soon as practicable for the purpose of submitting
this Agreement. Grant and Stockmans will prepare and send to the shareholders of
Stockmans for purposes of such meeting, a proxy statement. The Board of
Directors of Stockmans will recommend shareholder approval of this Agreement and
will not withdraw such recommendation unless such Board of Directors concludes
(after receipt of legal advice from its counsel) that the fiduciary duties such
persons owe to the shareholders of Stockmans require otherwise.
SECTION 11
JOINDER BY HIGHLANDS
Highlands, as the corporate parent owning all of the issued and
outstanding shares of capital stock of Grant, joins into this Agreement to
evidence its approval of the terms and conditions contained herein and the
transactions contemplated hereby.
SECTION 12
BROKERS, ETC.
Stockmans represents and warrants to Grant that no broker, or
finder, or financial analyst has been employed by Stockmans or is entitled to a
fee, commission or other compensation from Stockmans, with respect to this
Agreement or the transactions contemplated hereby.
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SECTION 13
GOVERNING LAW; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the State of West Virginia; (b) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that this Agreement may not be
assigned by Stockmans without Grant's prior written consent; (c) may be executed
in one or more counterparts, all of which shall be considered one and the same
Agreement, and shall become effective and binding when one or more counterparts
shall have been signed and delivered; and (d) embodies the entire agreements and
understandings between the parties relating to the subject matter hereof.
SECTION 14
EFFECT OF CAPTIONS
The captions in this Agreement are included for convenience only and
shall not in any way affect the interpretation or construction of any of the
provisions hereof.
SECTION 15
SEVERABILITY
The Parties expressly agree that it is not the intention of any
party to violate any public policy, law, rule, regulation, treaty or decision of
any government or agency thereof of any state or country. If any provision of
this Agreement is judicially or administratively interpreted to be in violation
of any such provision in any state or country, such provisions, sentences,
words, clauses or combination thereof shall be inoperative in each such state or
country; and the remainder of this Agreement shall remain binding upon the
parties hereto in each such state or country with this Agreement as a whole
unaffected elsewhere.
SECTION 16
NOTICES
Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by registered mail, postage prepaid, or by
facsimile addressed as follows:
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To Grant and Highlands:
Highlands Bankshares, Inc.
The Grant County Bank
3 North Main Street
P. O. Box 929
Petersburg, West Virginia 26847
Attention: Clarence E. Porter
Fax No.: (304) 257-4386
With a copy to:
Charles D. Dunbar, Esquire
Jackson & Kelly
1600 Laidley Tower (Zip 25301)
P. O. Box 553
Charleston, West Virginia 25322
Fax No.: (304) 340-1080
To Stockmans:
The Stockmans Bank of Harman
Main Street
P. O. Box 129
Harman, West Virginia 26270
Attention:
Fax No.: (304) 227-3642
With a copy to:
John E. Busch, Esq.
Busch & Talbott
P. O. Box 1819
High and Court Streets
Elkins, West Virginia 26241
Fax No.: (304) 636-2290
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been given
as of the date so mailed or transmitted by facsimile.
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SECTION 17
AMENDMENTS
The Agreement may be amended by the written agreement of Grant and
Stockmans and without the approval of the shareholders before or after the
meeting of shareholders at any time prior to the Closing Date with respect to
any of the terms contained herein; provided, however, that if amended after such
meeting of shareholders, no amendment shall be made to the Exchange Ratio.
SECTION 18
EXPENSES
18.1 General. Except as otherwise provided herein, each of the
parties hereto agrees to pay, without a right of reimbursement from the other
party and whether or not the transactions contemplated by this Agreement shall
be consummated, the costs incurred by it incident to the performance of its
obligations under this Agreement and to the consummation of the Merger and the
other transactions contemplated herein, including the fees and disbursements of
counsel, accountants and consultants employed by such party in connection
therewith.
18.2 Expenses of Grant. In addition to any other remedy provided by
law, Stockmans hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated by Grant pursuant to Section 9.1(b) or 9.1(e)
as a result of a willful breach by Stockmans, Stockmans shall promptly (and in
any event within ten (10) business days after such termination) pay all Expenses
of Grant. "Expenses of Grant" as used in this Section 18.2 shall include all
reasonable in amount and reasonably incurred out-of-pocket expenses of Grant
(including all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to Highlands and Grant) incurred by it or on its behalf
in connection with its preparations regarding the transactions contemplated by
this Agreement.
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18.3 Expenses of Stockmans. In addition to any other remedy provided
by law, Grant hereby agrees that if this Agreement or the transactions
contemplated hereby are terminated by Stockmans pursuant to Section 9.1(b) or
9.1(f) as a result of a willful breach by Grant, Grant shall promptly (and in
any event within ten business days after such termination) pay all Expenses of
Stockmans. For purposes of this Section 18.3, the "Expenses of Stockmans" shall
include all reasonable out-of-pocket expenses (including all fees and expenses
of counsel, accountants, investment bankers, experts and consultants of
Stockmans) incurred by it or on its behalf in connection with its preparations
regarding the transactions contemplated by this Agreement.
SECTION 19
AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS
Grant and Stockmans each agree to use their reasonable best
efforts to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
34
IN WITNESS WHEREOF, the parties have each caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized all as of
the day and year first written above.
THE GRANT COUNTY BANK,
a West Virginia banking corporation
By: /s/ C. E. Porter
Its: PRESIDENT
THE STOCKMANS BANK
OF HARMAN,
a West Virginia banking corporation
By: /s/ Robert P. Eye
Its: CHAIRMAN OF THE BOARD
Joined in by:
HIGHLAND BANKSHARES, INC.,
a West Virginia bank holding
company
By: /s/ C. E. Porter
Its: SECRETARY
CO376471