EXHIBIT 99.2
Execution Copy
- -------------------------------------------------------------------------------
MERGER AGREEMENT
AMONG
FIRST BANCORP
AND
CAROLINA COMMUNITY BANCSHARES, INC.
Dated as of July 16, 2002
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINED TERMS
1.1 Definitions..............................................................................................1
ARTICLE II
THE MERGER;
CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1 The Merger...............................................................................................7
2.2 Company Shares...........................................................................................8
2.3 Merger Consideration.....................................................................................8
2.4 Closing Payment..........................................................................................9
2.5 Exchange Procedures......................................................................................9
2.6 Dissenting Shares.......................................................................................10
2.7 Company Stock Options...................................................................................10
ARTICLE III
THE CLOSING
3.1 Closing.................................................................................................11
3.2 Deliveries by the Company...............................................................................11
3.3 Deliveries by the Buyer.................................................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization, Standing and Power........................................................................12
4.2 Authority; No Conflicts.................................................................................12
4.3 Capital Stock; Subsidiaries.............................................................................13
4.4 SEC Reports; Company Financial Statements...............................................................14
4.5 Absence of Undisclosed Liabilities......................................................................14
4.6 Absence of Certain Changes or Events....................................................................14
4.7 Tax Matters.............................................................................................14
4.8 Assets..................................................................................................15
4.9 Securities Portfolio and Investments....................................................................16
4.10 Environmental Matters...................................................................................16
4.11 Compliance with Laws....................................................................................17
4.12 Labor Relations.........................................................................................17
4.13 Employee Benefit Plans..................................................................................17
4.14 Material Contracts......................................................................................19
4.15 Legal Proceedings.......................................................................................19
i
4.16 Reports.................................................................................................19
4.17 Proxy Statement.........................................................................................19
4.18 Accounting, Tax, and Regulatory Matters.................................................................20
4.19 State Takeover Laws.....................................................................................20
4.20 Charter Provisions......................................................................................20
4.21 Records.................................................................................................20
4.22 Derivatives.............................................................................................20
4.23 Certain Regulated Businesses............................................................................20
4.24 Commissions.............................................................................................20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1 Organization............................................................................................21
5.2 Authority; No Conflicts.................................................................................21
5.3 Buyer's Stock; Subsidiaries.............................................................................22
5.4 SEC Filings; Buyer Financial Statements.................................................................22
5.5 Absence of Undisclosed Liabilities......................................................................23
5.6 Absence of Certain Changes or Events....................................................................23
5.7 Tax Matters.............................................................................................23
5.8 Assets..................................................................................................24
5.9 Securities Portfolio and Investments....................................................................24
5.10 Environmental Matters...................................................................................25
5.11 Compliance with Laws....................................................................................25
5.12 Labor Relations.........................................................................................26
5.13 Employee Benefit Plans..................................................................................26
5.14 Material Contracts......................................................................................28
5.15 Legal Proceedings.......................................................................................28
5.16 Reports.................................................................................................28
5.17 Proxy Statement.........................................................................................29
5.18 Accounting, Tax, and Regulatory Matters.................................................................29
5.19 Derivatives.............................................................................................29
5.20 Certain Regulated Businesses............................................................................29
5.21 Commissions.............................................................................................29
ARTICLE VI
COVENANTS
6.1 Covenants of the Company................................................................................29
6.2 Covenants of the Buyer..................................................................................32
6.3 Covenants of All Parties to the Agreement...............................................................34
ARTICLE VII
DISCLOSURE OF ADDITIONAL INFORMATION
7.1 Access to Information...................................................................................36
7.2 Access to Premises......................................................................................37
7.3 Environmental Survey....................................................................................37
ii
7.4 Confidentiality.........................................................................................37
7.5 Publicity...............................................................................................37
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Mutual Conditions.......................................................................................37
8.2 Conditions to the Obligations of the Company............................................................39
8.3 Conditions to the Obligations of the Buyer..............................................................40
ARTICLE IX
TERMINATION
9.1 Termination.............................................................................................41
9.2 Procedure and Effect of Termination.....................................................................43
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Expenses................................................................................................43
10.2 Survival of Representations.............................................................................43
10.3 Amendment and Modification..............................................................................44
10.4 Waiver of Compliance; Consents..........................................................................44
10.5 Notices.................................................................................................44
10.6 Assignment..............................................................................................45
10.7 Separable Provisions....................................................................................45
10.8 Governing Law...........................................................................................45
10.9 Counterparts............................................................................................45
10.10 Interpretation..........................................................................................45
10.11 Entire Agreement........................................................................................45
iii
EXHIBITS
Exhibit A Form of Plan of Merger
Exhibit B-1 Form of Employment Agreement of R. Walton Brown and
Charles R. Vance
Exhibit B-2 Form of Employment Agreement of Alton G. Greene, III and
Gerald N. Arnette, Jr.
Exhibit C Form of Affiliate Agreement
COMPANY'S DISCLOSURE SCHEDULE
Section 4.2 Authority; No Conflicts
Section 4.3 Subsidiaries
Section 4.8 Assets
Section 4.11 Compliance with Laws
Section 4.13 Employee Benefit Plans
Section 4.14 Material Contracts
BUYER'S DISCLOSURE SCHEDULE
Section 5.3 Subsidiaries
Section 5.5 Absence of Undisclosed Liabilities
Section 5.7 Tax Matters
Section 5.13 Employee Benefit Plans
Section 5.14 Material Contracts
iv
MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of the 16th day of July, 2002, is by
and between:
FIRST BANCORP, a North Carolina corporation and a holding company
registered with the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956, as amended, and a North Carolina bank holding
company (the "BUYER"); and
CAROLINA COMMUNITY BANCSHARES, INC., a South Carolina corporation and
a holding company registered with the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended, and a South
Carolina bank holding company (the "COMPANY").
BACKGROUND STATEMENT
The Buyer and the Company desire to effect a merger pursuant to which
the Company will merge into the Buyer, with the Buyer being the surviving
corporation (the "MERGER"). In consideration of the Merger, the shareholders of
the Company will receive for each share of common stock of the Company 0.8
shares of common stock of the Buyer and $20.00 in cash. It is intended that the
Merger qualify as a tax-free reorganization under Section 368 of the Internal
Revenue Code and it will be accounted for under the purchase method.
STATEMENT OF AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1 DEFINITIONS. As used in herein, the following terms have the
following meanings:
"ACQUISITION PROPOSAL" has the meaning given to it in SECTION 6.1.
"AFFILIATE" means, with respect to any Person, each of the Persons
that directly or indirectly, through one or more intermediaries, owns or
controls, or is controlled by or under common control with, such Person. For
the purpose of this Agreement, "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the foregoing, as used with respect to the Company,
the term "AFFILIATES" includes its subsidiaries.
"AGREEMENT" means this Merger Agreement.
"ASSETS" means all of the assets, properties, businesses and rights of
a Person of every kind, nature, character and description, whether real,
personal or mixed, tangible or intangible, accrued or contingent, whether or
not carried on any books and records of such Person, whether or not owned in
such Person's name and wherever located.
"AVERAGE CLOSING PRICE" has the meaning given to it in SECTION 9.1.
"BENEFIT PLANS" means all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, restricted
stock, severance pay, vacation, bonus, or other incentive plans, all other
written employee programs or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including without limitation "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, maintained by, sponsored in
whole or in part by, or contributed to by, a Person or any of its subsidiaries
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
that shall be a legal holiday in the State of North Carolina.
"BUYER" has the meaning given to it in the introductory paragraph
hereof.
"BUYER BANK" means First Bank, a North Carolina bank and a wholly
owned subsidiary of the Buyer.
"BUYER CONTRACTS" has the meaning given to it in SECTION 5.14.
"BUYER ERISA AFFILIATE" has the meaning given to it in SECTION 5.13.
"BUYER FINANCIAL STATEMENTS" means, with respect to the Buyer and its
subsidiaries, the consolidated audited statements of income and stockholders'
equity and cash flows for the years ended December 31, 2001, 2000 and 1999 and
consolidated audited balance sheets as of December 31, 2001 and 2000, as well
as the interim unaudited consolidated statements of income and stockholders'
equity and cash flows for each of the completed fiscal quarters since December
31, 2001 and the consolidated interim balance sheet as of each such quarter.
"BUYER SEC REPORTS" has the meaning given to it in SECTION 5.4.
"BUYER'S STOCK" means the common stock of First Bancorp, no par value,
as traded on the Nasdaq National Market System.
"BUYER'S STOCK PERCENTAGE CHANGE" has the meaning given to it in
SECTION 9.1.
"CLAIM" has the meaning given to it in SECTION 6.2.
"CLOSING" means the closing of the Merger, as identified more
specifically in ARTICLE III.
"CLOSING DATE" has the meaning given to it in SECTION 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed also to refer to any successor sections.
"COMPANY" has the meaning given to it in the introductory paragraph
hereof.
"COMPANY BANK" means Carolina Community Bank, N.A., a federally
chartered bank.
"COMPANY CONTRACTS" has the meaning given to it in SECTION 4.14.
2
"COMPANY FINANCIAL STATEMENTS" means, with respect to the Company and
its subsidiaries, the consolidated audited statements of income and
stockholders' equity and cash flows for the years ended December 31, 2001 and
2000 and consolidated audited balance sheets as of December 31, 2001 and 2000,
as well as the interim unaudited consolidated statements of income and
stockholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2001 and the consolidated interim balance sheet as of each
such quarter.
"COMPANY OPTIONS" has the meaning given to it in SECTION 2.7.
"COMPANY SHARES" has the meaning given to it in SECTION 2.2.
"CONSENT" means any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person given or granted with
respect to any Contract, Law, Order, or Permit.
"CONTRACT" means any agreement, warranty, indenture, mortgage,
guaranty, lease, license or other contract, agreement, arrangement, commitment
or understanding, written or oral, to which a Person is a party.
"DEFAULT" means (i) any breach or violation of or default under any
Contract, Order or Permit (including any noncompliance with restrictions on
assignment, where assignment is defined to include a change of control of the
parties to this agreement or any of their subsidiaries or the merger or
consolidation of any of them with another Person), (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute such a breach or violation of or default under any Contract, Order
or Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right to terminate
or revoke, change the current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any Contract, Order or Permit.
"DISSENTING SHARES" has the meaning given to it in SECTION 2.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor
sections.
"EFFECTIVE TIME" has the meaning given to it in SECTION 2.1.
"EMPLOYMENT AGREEMENTS" means those certain Employment Agreements to
be entered into in connection with the transactions contemplated hereby between
the Buyer and each of R. Walton Brown, Charles R. Vance, III, Alton G. Greene
and Gerald N. Arnette, Jr., substantially in the form of EXHIBIT B-1 (with
respect to Mr. Brown and Mr. Vance) or B-2 (with respect to Mr. Greene and Mr.
Arnette).
"ENVIRONMENTAL ASSESSMENT" means any and all soil and groundwater
tests, surveys, environmental assessments and other inspections, tests and
inquiries conducted by the Buyer or any agent of the Buyer and related to the
Real Property of the Company and its subsidiaries.
"ENVIRONMENTAL LAWS" means any federal, state or local law, statute,
ordinance, rule, regulation, permit, directive, license, approval, guidance,
interpretation, order or other legal requirement relating to the protection of
human health or the environment, including but not limited to any requirement
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of materials that are or may constitute a threat
to human health or the environment. Without limiting the foregoing, each of the
following is an Environmental Law: the Comprehensive Environmental Response,
Compensation, and
3
Liability Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Hazardous Material
Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the FederaL Water Pollution
Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the
Safe Drinking Water Act (42 U.S.C. ss. 300 et seq.) and the Occupational Safety
and Health Act (29 U.S.C. ss. 651 et seq.) ("OSHA"), as such laws and
regulations have been or are in the future amended or supplemented, and each
similar federal, state or local statute, and each rule and regulation
promulgated under such federal, state and local laws.
"ENVIRONMENTAL SURVEY" has the meaning given to it in SECTION 7.3.
"ERISA PLAN" means any Benefit Plan that is an "employee welfare
benefit plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA.
"EXCHANGE AGENT" has the meaning given to it in SECTION 2.4.
"EXCHANGE RATIO" means 0.8 shares of the Buyer's Stock for each
Company Share, subject to adjustment pursuant to SECTION 9.1(G) and SECTION
2.3(A).
"FDIC" means the Federal Deposit Insurance Corporation.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, as in effect from time to time, consistently
applied and maintained on a consistent basis for a Person throughout the period
indicated and consistent with such Person's prior financial practice.
"GOVERNMENTAL AUTHORITY" means any nation, province or state, or any
political subdivision thereof, and any agency, department, natural person or
other entity exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, including Regulatory Authorities.
"HAZARDOUS MATERIAL" means any substance or material that either is or
contains a substance designated as a hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law or is otherwise regulated under any Environmental Law, or the
presence of which in some quantity requires investigation, notification or
remediation under any Environmental Law.
"INDEMNIFIED PARTIES" has the meaning given to it in SECTION 6.2.
"INDEMNIFIED LIABILITIES" has the meaning given to it in SECTION 6.2.
"INDEX PERCENTAGE CHANGE" has the meaning given to it in SECTION 9.1.
"INTELLECTUAL PROPERTY" means (i) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (iii) all
copyrights and all applications, registrations and renewals in connection
therewith, (iv) all know-how, trade secrets, whether patentable or unpatentable
and whether
4
or not reduced to practice (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production process and
techniques, technical data, designs, drawings, specifications, pricing and cost
information and business and marketing plans and proposals), (v) all computer
software (including data and related documentation) and (vi) all other
proprietary rights.
"KNOWLEDGE OF THE BUYER" means the actual personal knowledge of any of
the directors and officers of the Buyer and any of its subsidiaries.
"KNOWLEDGE OF THE COMPANY" means the actual personal knowledge of any
of the directors and officers of the Company and any of its subsidiaries.
"LAW" means any code, law, ordinance, rule, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, business or operations promulgated, interpreted or enforced by any
Governmental Authority.
"LIABILITY" means any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured or otherwise.
"LIEN" means, whether contractual or statutory, any conditional sale
agreement, participation or repurchase agreement, assignment, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) easements, restrictions of record and title exceptions that
could not reasonably be expected to have a Material Adverse Effect, and (iii)
Liens to secure advances from Regulatory Authorities incurred in the ordinary
course of the banking business.
"LITIGATION" means any action, arbitration, cause of action,
complaint, criminal prosecution, governmental investigation, hearing, or
administrative or other proceeding, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
"LOAN COLLATERAL" means all of the Assets owned by whomever and
wherever located in which the Company or any of its subsidiaries has taken a
security interest with respect to, on which the Company or any of it
subsidiaries has placed a Lien with respect to, or which is otherwise used to
secure, any loan made by the Company or any of its subsidiaries or any note,
account, or other receivable payable to the Company or any of its subsidiaries.
"MARKET VALUE" of the Buyer's Stock on any date shall be the closing
price of such stock on the Nasdaq National Market System (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative
source), or if such date is not a trading day, on the last trading day
preceding that date.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
"MATERIAL ADVERSE EFFECT" on a Person shall mean an event, change, or
occurrence that, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Person and its subsidiaries, taken
as a
5
whole, or (ii) the ability of such Person to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in market interest rates, real estate markets or other market
conditions applicable to banks or thrift institutions generally, (c) changes in
GAAP or regulatory accounting principles generally applicable to banks and
their holding companies, (d) actions and omissions of a Person (or any of its
subsidiaries) taken with the prior informed consent of the other Person in
contemplation of the transactions contemplated hereby, and (e) the Merger (and
the reasonable expenses incurred in connection therewith) and compliance with
the provisions of this Agreement on the operating performance of the Persons.
"MEASUREMENT PERIOD" has the meaning given to it in SECTION 9.1.
"MERGER" has the meaning given to it in the Background Statement
hereof.
"MERGER CONSIDERATION" has the meaning given to it in SECTION 2.3.
"ORDER" means any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local, foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Governmental Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Person in question or any of its subsidiaries participates in the
management (including but not limited to participating in a fiduciary capacity)
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"PENSION PLAN" means any ERISA Plan that also is a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code or Section
3(35) of ERISA).
"PERMIT" means any approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or right given by a Governmental
Authority to which any Person is a party or that is or may be binding upon or
inure to the benefit of any Person or its securities, Assets or business.
"PERSON" means a corporation, a company, an association, a joint
venture, a partnership, an organization, a business, an individual, a trust, a
Governmental Authority or any other legal entity.
"PLAN OF MERGER" means a Plan of Merger to give effect to the Merger,
which shall be substantially in the form of EXHIBIT A hereto.
"PROXY STATEMENT" means the proxy statement prepared by the Buyer and
the Company relating to the Buyer and the Company and their respective business
operations and financial operating results and condition, soliciting approval
of the Merger by the shareholders of the Company.
"REAL PROPERTY" means all of the land, buildings, premises, or other
real property in which a Person has ownership or possessory rights, whether by
title, lease or otherwise (including banking facilities and any foreclosed
properties). Notwithstanding the foregoing, "Real Property", as used with
respect to any of the Company and its subsidiaries, does not include any Loan
Collateral not yet foreclosed and conveyed to the Company or one of its
subsidiaries as of the date with respect to which the term "Real Property" is
being used.
6
"REGULATORY AUTHORITIES" means, collectively, the Federal Trade
Commission, the United States Department of Justice, the Federal Reserve Board,
the Office of the Comptroller of the Currency, the North Carolina Commissioner
of Banks, the South Carolina State Board of Financial Institutions, the FDIC,
the National Association of Securities Dealers and the SEC, and all other
regulatory agencies having jurisdiction over the Parties and their respective
subsidiaries.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of
its capital stock or other Rights.
"SEC" means the Securities and Exchange Commission.
"SNL INDEX" has the meaning given to it in SECTION 9.1.
"SECURITIES LAWS" means the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisors Act of 1940, the Trust Indenture Act of 1939, each as amended, and the
rules and regulations of any Governmental Authority promulgated under each.
"SHAREHOLDER MEETING" has the meaning given to it in SECTION 4.17.
"STOCK ADJUSTMENT" has the meaning given to it in SECTION 2.3.
"SURVIVING COMPANY" has the meaning given to it in SECTION 2.1.
"TAX" or "TAXES" means any and all taxes, charges, fees, levies or
other assessments (whether federal, state, local or foreign), including without
limitation income, gross receipts, excise, property, estate, sales, use, value
added, transfer, license, payroll, franchise, ad valorem, withholding, Social
Security and unemployment taxes, as well as any interest, penalties and other
additions to such taxes, charges, fees, levies or other assessments.
"TAX RETURN" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.
"TAXABLE PERIOD" shall mean any period prescribed by any Governmental
Authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is required
to be filed or Tax is required to be paid.
"TRANSMITTAL LETTER" has the meaning given to it in SECTION 2.5.
ARTICLE II
THE MERGER;
CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1 THE MERGER.
(a) The Merger. On the terms and subject to the conditions of
this Agreement, the Plan of Merger, and North Carolina and South Carolina Law,
the Company shall merge into the Buyer, the separate existence of the Company
shall cease, and the Buyer shall be the surviving corporation (the "SURVIVING
COMPANY").
7
(b) Governing Documents. The articles of incorporation of the
Buyer in effect at the Effective Time shall be the articles of incorporation of
the Surviving Company until further amended in accordance with applicable law.
The bylaws of the Buyer in effect at such Effective Time shall be the bylaws of
the Surviving Company until further amended in accordance with applicable law.
(c) Directors and Officers. From and after the Effective Time,
(i) until successors or additional directors are duly elected or appointed in
accordance with applicable law, the directors of the Buyer at such Effective
Time shall be the directors of the Surviving Company, and (ii) subject to the
Employment Agreements, the officers of the Buyer at such Effective Time shall
be the officers of the Surviving Company.
(d) Approval. The parties hereto shall take and cause to be taken
all action necessary for the corporate approval and authorization of (i) this
Agreement and the other documents contemplated hereby (including without
limitation the Plan of Merger) and (ii) the Merger and the other transactions
contemplated hereby.
(e) Effective Time. The Merger shall become effective on the date
and at the time of filing of the articles of merger in respect of the Merger,
in the form required by and executed in accordance with the laws of North
Carolina and South Carolina, or at such other time specified therein. The date
and time when the Merger shall become effective is herein referred to as the
"EFFECTIVE TIME."
(f) Filing of Articles of Merger. At the Closing, the Buyer and
the Company shall cause the articles of merger (containing the Plan of Merger)
in respect of the Merger to be executed and filed with the Secretaries of State
of North Carolina and South Carolina, as required by the Laws of the States of
North Carolina and South Carolina, and shall take any and all other actions and
do any and all other things to cause the Merger to become effective as
contemplated hereby.
2.2 COMPANY SHARES.
(a) Each share of the Company's capital stock (the "COMPANY
SHARES"), $1.00 par value per share, issued and outstanding to Persons, except
for Company Shares held by the Buyer and its Affiliates immediately prior to
the Effective Time (other than shares held in a fiduciary capacity or as
collateral for outstanding loans made by the Buyer or its subsidiaries), shall,
by virtue of the Merger and without any action on the part of the holders
thereof, be canceled, retired and converted at such Effective Time into the
right to receive the Merger Consideration (as defined below) in accordance with
this ARTICLE II. Holders of such shares shall cease to have any other rights
with respect thereto.
(b) Notwithstanding anything contained in this SECTION 2.2 to the
contrary, any authorized but unissued Company Shares shall be canceled without
any conversion thereof, and no payment shall be made with respect thereto.
(c) From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Company of the Company
Shares that were outstanding immediately prior to the Effective Time. If, after
such Effective Time, certificates representing Company Shares are presented to
the Surviving Company, they shall be canceled, and exchanged and converted into
the Merger Consideration as provided for herein.
2.3 MERGER CONSIDERATION.
(a) At the Effective Time, the holders of Company Shares
outstanding at such Effective Time, other than the Buyer and its Affiliates in
the cases set forth above, shall be entitled to receive, and
8
the Buyer shall pay or issue and deliver (i) a number of shares of the Buyer's
Stock for each Company Share based on the Exchange Ratio and (ii) an amount
equal to $20.00 in cash for each such Company Share, subject to equitable
adjustment for any stock dividend, stock split or other stock payment by the
Company after the date hereof but prior to the Effective Time (such
consideration, the "MERGER CONSIDERATION."); provided, however, that the
Exchange Ratio may be increased and the amount of cash being paid as Merger
Consideration may be correspondingly decreased as necessary to qualify the
Merger as a reorganization under Section 368 of the Code, as determined by the
Company at or immediately after the Effective Time upon consultation with its
independent accountants and counsel.
(b) No fractional shares of the Buyer's Stock shall be issued or
delivered in connection with the Merger. In lieu of any such fractional share,
subject to SECTION 2.4, each holder of Company Shares who would otherwise have
been entitled to a fraction of a share of the Buyer's Stock shall be entitled
to receive cash (without interest) in an amount equal to such fraction
multiplied by the Market Value of one share of the Buyer's stock on the trading
day immediately prior to the Effective Time.
(c) In the event the Buyer changes the number of shares of the
Buyer's Stock issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend or similar recapitalization with respect to such
stock (each a "STOCK ADJUSTMENT") and the record date therefor (in the case of
a stock dividend) or the effective date thereof (in the case of a stock split
or similar recapitalization for which a record date is not established) shall
be prior to such Effective Time, the Exchange Ratio shall be equitably adjusted
to reflect such change.
2.4 CLOSING PAYMENT. At the Effective Time, the Buyer shall
deposit with an exchange and transfer agent selected by the Buyer (the
"EXCHANGE AGENT"), for the benefit of the holders of Company Shares, (i) a
certificate or certificates representing the aggregate number of shares of the
Buyer's Stock comprising the Merger Consideration, and (ii) an aggregate amount
of cash comprising the Merger Consideration and in lieu of any fractional
shares, to be issued and paid as the Merger Consideration in accordance with
the provisions of this Agreement. The Exchange Agent shall deliver the Merger
Consideration in accordance with the procedures set forth in SECTION 2.5 below.
The Exchange Agent shall invest any cash so deposited with the Buyer as
instructed by the Buyer and any interest resulting from such investment shall
be paid to the Buyer. The Buyer shall not be obligated pay any of the Merger
Consideration to any holder of Company Shares until such holder surrenders the
certificates representing such holder's Company Shares.
2.5 EXCHANGE PROCEDURES.
(a) As promptly as practicable after the Effective Time, The
Buyer shall mail, or cause the Exchange Agent to mail, to each holder of record
of a certificate or certificates that immediately prior to the Effective Time
represented outstanding Company Shares (i) a letter of transmittal (which shall
be in customary form and shall specify that delivery shall be effected, and
risk of loss and title to such certificates shall pass, only upon proper
delivery of such Certificates to the Exchange Agent) and (ii) instructions for
use in effecting the surrender of such certificates in exchange for payment of
the Merger Consideration (such materials, collectively, the "TRANSMITTAL
LETTER"). The Transmittal Letter shall be in such form as the Buyer and the
Company agree.
(b) After the Effective Time, the Buyer shall cause the Exchange
Agent to deliver the Merger Consideration in accordance with the provisions of
this Agreement to each holder of Company Shares who has properly delivered a
Transmittal Letter and surrendered its certificate or certificates representing
its shares of Company Stock to the Exchange Agent. The Buyer shall not be
obligated to deliver any of the Merger Consideration in cash or stock until
such holder properly delivers a completed Transmittal Letter and surrenders the
certificate(s) representing such holder's Company Shares. Any other provision
9
of this Agreement notwithstanding, neither the Buyer nor the Exchange Agent
shall be liable to any holder of Company Shares for any amounts paid or
properly delivered in good faith to a public official pursuant to any
applicable abandoned property Law.
(c) To the extent permitted by applicable Law, former
shareholders of record of the Company shall be entitled to vote after the
Merger Consideration has been paid to such shareholders at any meeting of the
Buyer's shareholders the number of whole shares of the Buyer's Stock into which
their respective Company Shares are converted pursuant to the Merger,
regardless of whether such holders have exchanged their certificates
representing such Company Shares for certificates representing the Buyer's
Stock in accordance with the provisions of this Agreement. Whenever a dividend
or other distribution is declared by the Buyer on the Buyer's Stock, the record
date for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of the Buyer's Stock issuable
pursuant to this Agreement, but beginning at such Effective Time no dividend or
other distribution payable to the holders of record of the Buyer's Stock as of
any time subsequent to such Effective Time shall be delivered to the holder of
any certificate representing any of the Company Shares issued and outstanding
at such Effective Time until such holder surrenders such certificate for
exchange as provided in this SECTION 2.5. However, upon surrender of such
certificate(s), both the certificate(s) representing the shares of the Buyer's
Stock to which such holder is entitled and any such undelivered dividends
(without any interest) shall be delivered and paid with respect to each share
represented by such certificates.
2.6 DISSENTING SHARES. Notwithstanding any other provision of
this Agreement to the contrary, Company Shares that are outstanding immediately
prior to the Effective Time and that are held by shareholders who shall have
not voted in favor of the Merger and who properly shall have demanded payment
for such shares in accordance with South Carolina Law (collectively, the
"DISSENTING SHARES") shall not be converted into or represent the right to
receive the Merger Consideration. Such shareholders instead shall be entitled
to receive payment of the fair value of such shares held by them, plus accrued
interest, in accordance with the provisions of South Carolina Law, except that
all Dissenting Shares held by shareholders who shall have failed to perfect or
otherwise lost their rights to appraisal of such shares under South Carolina
Law shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
provided in SECTION 2.5 of the certificate or certificates that, immediately
prior to the Effective Time, evidenced such shares. The Company shall give the
Buyer (i) prompt notice of any written demands for payment of fair value of any
Company Shares, attempted withdrawals of any such demands or any other
instruments served pursuant to South Carolina Law and received by the Company
relating to shareholders' rights to demand payment of fair value of Company
Shares, and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands under South Carolina Law consistent with
the obligations of the Company thereunder. The Company shall not, except with
the prior written consent of the Buyer, (x) make any payment with respect to
such demand, (y) offer to settle or settle any demand for appraisal or (z)
waive any failure to timely deliver a written demand for appraisal or timely
take any other action to perfect appraisal rights in accordance with South
Carolina Law.
2.7 COMPANY STOCK OPTIONS.
(a) At the Effective Time, each option or other right to purchase
Company Shares pursuant to stock options or warrants ("COMPANY OPTIONS")
granted by the Company under its Benefit Plans that are outstanding (whether or
not they are exercisable or have vested) at the Effective Time shall be
converted into and become rights with respect to the Buyer's Stock, and the
Buyer shall assume each Company Option, in accordance with the terms of the
applicable Benefit Plan of the Company and the stock option or warrant
agreement by which such Company Option is evidenced, except that from and
10
after such Effective Time: (i) the Buyer and its compensation committee shall
be substituted for the Company and the compensation committee of its board of
directors (including if applicable, the entire Board of Directors of the
Company) administering such Benefit Plan or Plans of the Company; (ii) the
Company Options assumed by the Buyer may be exercised solely for shares of the
Buyer's Stock; (iii) the number of shares of the Buyer's Stock subject to such
converted Company Options shall be equal to the number of Company Shares
subject to such Company Options immediately prior to the Effective Time
multiplied by an amount two times the Exchange Ratio, rounded to the next
highest share; and (iv) the per-share exercise price under each such converted
Company Option shall be adjusted by dividing the exercise price of the Company
Option immediately prior to the Effective Time by an amount equal to two times
the Exchange Ratio, rounded down to the nearest cent.
(b) In addition, notwithstanding clauses (ii), (iii) and (iv) of
SECTION 2.7(A), each assumed Company Option that is an "incentive stock option"
shall be adjusted as required by Section 424 of the Internal Revenue Code, and
the regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of the
Internal Revenue Code.
(c) At or prior to the Effective Time, and at all times
thereafter, the Buyer shall have reserved a sufficient number of shares of the
Buyer's Stock for issuance upon exercise of the Company Options assumed by it
in accordance with this SECTION 2.7. The Buyer agrees to file as promptly as
practicable, and in no event later than 90 days, after the Effective Time, a
registration statement on Form S-8 covering the shares of the Buyer's Stock
issuable pursuant to such options.
(d) Following the Effective Time, in the event of any Stock
Adjustment by the Buyer, or any consolidation or merger of the Buyer with or
into any other entity, or the sale or transfer or all or substantially all of
the Buyer's Assets, the rights of the holders of outstanding Company Options
shall be appropriately adjusted so that such holders will be in the same
position as if their options had been exercised immediately before such
corporate action or transaction.
ARTICLE III
THE CLOSING
3.1 CLOSING. The Closing of the Merger shall take place at the
offices of Robinson, Bradshaw & Hinson, P.A. in Charlotte, North Carolina as
soon as reasonably practical after all conditions to Closing have been met, or
on such other date or at such other location as the Buyer and the Company may
mutually agree (such date, the "CLOSING DATE"). At the Closing, the parties
will execute, deliver and file all documents necessary to effect the
transactions contemplated herein.
3.2 DELIVERIES BY THE COMPANY. At or by the Closing, the Company
shall have executed and delivered or caused to be executed and delivered the
following documents:
(a) the agreements, opinions, certificates, instruments and other
documents contemplated in SECTION 8.3;
(b) articles of merger (containing the Plan of Merger) giving
effect to the Merger;
(c) the Employment Agreements; and
11
(d) all other documents, certificates and instruments required
hereunder to be delivered to the Buyer, or as may reasonably be requested by
the Buyer at or prior to the Closing.
3.3 DELIVERIES BY THE BUYER. At or by the Closing, the Buyer
shall have executed and delivered or caused to be executed and delivered the
following documents:
(a) the agreements, opinions, certificates, instruments and other
documents contemplated in SECTION 8.2;
(b) articles of merger (containing the Plan of Merger) giving
effect to the Merger;
(c) the Employment Agreements; and
(d) all other documents, certificates and instruments required
hereunder to be delivered to the Company, or as may reasonably be requested by
the Company at or prior to the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule, the Company
represents and warrants to the Buyer that each of the statements contained in
this ARTICLE IV are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date.
4.1 ORGANIZATION, STANDING AND POWER.
(a) The Company is a bank holding company registered with the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended and the South Carolina State Board of Financial
Institutions. The Company Bank is a federally chartered bank and is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Company Bank are fully insured by the FDIC to the extent
permitted by Law.
(b) Each of the Company and its subsidiaries is either a bank or
a corporation, duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization. Each of the
Company and its subsidiaries has the corporate or other applicable power and
authority to carry on, in all Material respects, its businesses as now
conducted and to own, lease and operate its Assets. Each of the Company and its
subsidiaries is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed could not
reasonably be expected to have a Material Adverse Effect on the Company.
4.2 AUTHORITY; NO CONFLICTS.
(a) Subject to required regulatory and shareholder approvals, the
Company has the corporate power and authority necessary to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of the Company's
obligations under this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, have been duly and validly
authorized by all necessary corporate action
12
(and by Closing, all such shareholder action) in respect thereof on the part of
the Company. This Agreement represents a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of specific performance, injunctive relief and other equitable remedies is
subject to the discretion of the court before which any proceeding may be
brought).
(b) Neither the execution and delivery of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of the Company's
articles of incorporation or bylaws or any other similar governing document, or
(ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of the Company or any of
its subsidiaries under, any Contract or Permit of the Company or any of its
subsidiaries, except as could not reasonably be expected to have a Material
Adverse Effect on the Company, or (iii) subject to obtaining the requisite
Consents referred to in SECTION 8.1(B) of this Agreement, violate any Law or
Order applicable to the Company or any of its subsidiaries or any of their
Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws and banking Regulatory Authorities, no notice to, filing
with, or Consent of, any Governmental Authority is necessary for the
consummation by the Company of the Merger and the other transactions
contemplated in this Agreement.
4.3 CAPITAL STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists solely
of (i) 9,000,000 shares of common stock, no par value per share, of which
416,110 shares are issued and outstanding as of the date of this Agreement, and
(ii) 1,000,000 shares of preferred stock, $1.00 par value per share, of which
no shares are issued and outstanding. Except for such 416,110 shares of common
stock, there are no shares of capital stock or other equity securities of the
Company outstanding. The authorized capital stock of the Company Bank consists
of 2,000 shares of common stock, $250 par value per share, of which 2,000
shares are issued and outstanding as of the date of this Agreement and are
owned and held by the Company, and except for such 2,000 shares of common
stock, there are no shares of capital stock or other equity securities of the
Company Bank outstanding. SECTION 4.3 of the Company's Disclosure Schedule
lists all of the Company's direct and indirect subsidiaries other than the
Company Bank as of the date of this Agreement. The Company or one of its
subsidiaries owns all of the issued and outstanding shares of capital stock of
each such subsidiary.
(b) All of the issued and outstanding shares of capital stock of
the Company and its subsidiaries are duly and validly issued and outstanding
and are fully paid and nonassessable, except as provided in Section 55 of Title
12 of the United States Code. None of the outstanding shares of capital stock
of the Company or any of its subsidiaries has been issued in violation of any
preemptive rights of the current or past shareholders of such Persons. Except
as set forth on SECTION 4.3 of the Company's Disclosure Schedule, no equity
securities of any subsidiary of the Company are or may become required to be
issued (other than to the Company or any of its subsidiaries) by reason of any
Rights, and there are no Contracts by which any subsidiary of the Company is
bound to issue (other than to the Company or subsidiary of the Company)
additional shares of its capital stock or Rights or by which the Company or any
of its subsidiaries is or may be bound to transfer any shares of the capital
stock of any subsidiary of the Company (other than to the Company or any of its
subsidiaries). There are no equity securities reserved for any of the foregoing
purposes, and there are no Contracts relating to the rights of the
13
Company or any of its subsidiaries to vote or to dispose of any shares of the
capital stock of any subsidiary of the Company.
4.4 SEC REPORTS; COMPANY FINANCIAL STATEMENTS.
(a) Neither the Company nor any one of its subsidiaries is
required to file any forms, reports, or other documents with the SEC.
(b) Each of the Company Financial Statements (including, in each
case, any related notes) was or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements, or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), and fairly
presented or will fairly present the consolidated financial position of the
Company and its subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments that were not or are not expected to be Material
in amount or effect (except as may be indicated in such financial statements or
notes thereto).
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor
any of its subsidiaries has any Liabilities that could reasonably be expected
to have a Material Adverse Effect on the Company, except Liabilities that are
accrued or reserved against in the consolidated balance sheets of the Company
as of December 31, 2001 included in the Company Financial Statements or
reflected in the notes thereto and except for Liabilities incurred in the
ordinary course of business subsequent to December 31, 2001. Neither the
Company nor any of its subsidiaries has incurred or paid any Liability since
December 31, 2001, except for (a) such Liabilities incurred or paid in the
ordinary course of business consistent with past business practice and (b)
Liabilities that could not reasonably be expected to have a Material Adverse
Effect on the Company. No facts or circumstances exist that could reasonably be
expected to serve as the basis for any other Liabilities of the Company or any
of its subsidiaries, except as could not reasonably be expected to have a
Material Adverse Effect on the Company.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
2001, (i) there have been no events, changes, or occurrences that have had, or
could reasonably be expected to have, a Material Adverse Effect on the Company,
and (ii) each of the Company and its subsidiaries has conducted in all Material
respects its respective businesses in the ordinary and usual course (excluding
the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
4.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any
of Company and its subsidiaries have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 2001, and, to the Knowledge of the Company, all
Tax Returns filed are complete and accurate in all Material respects. All Tax
Returns for periods ending on or before the date of the most recent fiscal year
end immediately preceding the Effective Time will be timely filed or requests
for extensions will be timely filed. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes that could reasonably be expected to have a Material
Adverse Effect on the Company, except to the extent reserved against in the
Company Financial Statements dated prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
14
(b) None of the Company or its subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Adequate provision for any Material Taxes due or to become
due for any of the Company or its subsidiaries for the period or periods
through and including the date of the respective Company Financial Statements
has been made and is reflected on such Company Financial Statements.
(d) Each of the Company and its subsidiaries is in compliance
with, and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for any
such instances of noncompliance and such omissions as could not reasonably be
expected to have a Material Adverse Effect on the Company.
(e) None of the Company and its subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract,
agreement, or other arrangement that could obligate it to make any payments
that would be disallowed as a deduction under Section 280G or 162(m) of the
Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of
the Assets of the Company and its subsidiaries.
(g) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the Company and its subsidiaries that
occurred during any Taxable Period in which any of the Company and its
subsidiaries has incurred a net operating loss that carries over to another
Taxable Period.
(h) Neither the Company nor any of its subsidiaries has filed any
consent under Section 341(f) of the Internal Revenue Code concerning
collapsible corporations.
(i) After the date of this Agreement, no Material election with
respect to Taxes will be made without the prior consent of the Buyer, which
consent will not be unreasonably withheld.
(j) Neither the Company nor any of its subsidiaries has or has
had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country.
4.8 ASSETS. Each of the Company and its subsidiaries have good
and marketable title, free and clear of all Liens, to all of their respective
Assets, except for Liens to secure public deposits and advances from the
Federal Home Loan Bank in the ordinary course of business consistent with past
practice. Except as could not reasonably be expected to have a Material Adverse
Effect on the Company, all tangible properties used in the businesses of the
Company and its subsidiaries are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
each of their past practices. Except as could not reasonably be expected to
have a Material Adverse Effect on the Company, all Material Assets held under
leases or subleases by any of the Company and its subsidiaries are held under
valid Contracts enforceable in accordance with their respective terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect.
15
Each of the Company and its subsidiaries currently maintain insurance in
amounts, scope, and coverage reasonably necessary for their operations. None of
the Company or its subsidiaries has received notice from any insurance carrier
that (i) such insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be increased in any Material respect. The Assets of the Company
and its subsidiaries include all Assets required to operate in all Material
respects their businesses taken as a whole as presently conducted.
4.9 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by
the Company or any of its subsidiaries (whether owned of record or
beneficially) are held free and clear of all Liens that would impair the
ability of the owner thereof to dispose freely of any such security and/or
otherwise to realize the benefits of ownership thereof at any time, except for
those Liens to secure public deposits in the ordinary course of business
consistent with past practice and Liens that could not reasonably be expected
to have a Material Adverse Effect on the Company. There are no voting trusts or
other agreements or undertakings to which the Company or any of its
subsidiaries is a party with respect to the voting of any such securities.
Except for fluctuations in the market values of United States Treasury and
agency, municipal and corporate securities, since December 31, 2001, there has
been no significant deterioration or Material adverse change in the quality, or
any Material decrease in the value, of the securities portfolio of the Company
and its subsidiaries, taken as a whole.
4.10 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, the Participation Facilities
and Loan Collateral of the Company and it subsidiaries are, and have been, in
compliance with all Environmental Laws, except those violations that could not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) To the Knowledge of the Company, there is no Litigation
pending or threatened before any court, governmental agency, or authority, or
other forum in which any of the Company and its subsidiaries or any of its
Participation Facilities has been or, with respect to threatened Litigation,
may reasonably be expected to be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on, under, or involving a site owned, leased, or operated
by the Company or any of its subsidiaries or any of its Participation
Facilities, except for such Litigation pending or threatened that could not
reasonably be expected to have a Material Adverse Effect on the Company.
(c) To the Knowledge of the Company, there is no Litigation
pending or threatened before any court, governmental agency or authority or
other forum in which any of its Loan Collateral (or the Company or any of its
subsidiaries in respect of such Loan Collateral) has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, or involving Loan Collateral, except for such Litigation pending or
threatened that is could not reasonably be expected to have a Material Adverse
Effect on the Company.
(d) To the Knowledge of the Company, no facts exist that provide
a reasonable basis for any Litigation of a type described in subsections (b) or
(c), except such as could not reasonably be expected to have a Material Adverse
Effect on the Company.
(e) To the Knowledge of the Company, during and prior to the
period of (i) any of the Company's or its subsidiaries' ownership or operation
of any of their respective current properties, (ii) any of the Company's or its
subsidiaries' participation in the management of any Participation Facility, or
16
(iii) any of the Company's or subsidiaries' holding of a security interest in
Loan Collateral, there have been no releases of Hazardous Material in, on,
under, or affecting (or potentially affecting) such properties, except such as
could not reasonably be expected to have a Material Adverse Effect on the
Company.
4.11 COMPLIANCE WITH LAWS. Each of the Company and its
subsidiaries has in effect all Permits necessary for it to own, lease, or
operate its Material Assets and to carry on, in all Material respects, its
business as now conducted, except for those Permits the absence of which could
not reasonably be expected to have a Material Adverse Effect on the Company,
and there has occurred no Default under any such Permit, other than Defaults
that could not reasonably be expected to have a Material Adverse Effect on the
Company. None of the Company or its subsidiaries: (i) is in violation of any
Laws, Orders, or Permits applicable to its business or employees conducting its
business, except for violations that could not reasonably be expected to have a
Material Adverse Effect on the Company; and (ii) has received any notification
or communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (a) asserting that
any of the Company and its subsidiaries is not in compliance with any of the
Laws or Orders that such governmental authority or Regulatory Authority
enforces, except where such noncompliance could not reasonably be expected to
have a Material Adverse Effect on the Company, (b) threatening to revoke any
Permits, except where the revocation could not reasonably be expected to have a
Material Adverse Effect on the Company, or (c) requiring the Company or any of
its subsidiaries (x) to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any board or directors resolution or similar
undertaking that restricts Materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
4.12 LABOR RELATIONS. Neither the Company nor any of its
subsidiaries is the subject of any Litigation asserting that it has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act or comparable state Law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is any of them a
party to or bound by any collective bargaining agreement, Contract, or other
agreement or understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving any of them, pending or
threatened, or to the Knowledge of the Company, is there any activity involving
any of the Company's or its subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
4.13 EMPLOYEE BENEFIT PLANS.
(a) The Company has made available to the Buyer prior to the
execution of this Agreement correct and complete copies in each case of all
Material Company Benefits Plans.
(b) All Company Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws, except as could not reasonably be expected to have a Material Adverse
Effect on the Company.
(c) Neither the Company nor any of its subsidiaries has an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3)and 3(37)(A)).
Each "employee pension benefit plan," as defined in Section 3(2) of ERISA, ever
maintained by the Company or its subsidiaries that was intended to qualify
under Section 401(a) of the Internal Revenue Code and with respect to which the
Company or any of its subsidiaries has any Liability, is disclosed as such in
SECTION 4.13 of the Company's Disclosure Schedule.
17
(d) The Company has made available to the Buyer prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Company Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Company Benefit Plans or amendments, all
determination letters, Material rulings, Material opinion letters, Material
information letters, or Material advisory opinions issued by the Internal
Revenue Service, the United States Department of Labor, or the Pension Benefit
Guaranty Corporation after December 31, 1994, (iii) annual reports or returns,
audited or unaudited financial statements, actuarial valuations and reports,
and summary annual reports prepared for any Company Benefit Plan with respect
to the most recent plan year, and (iv) the most recent summary plan
descriptions and any Material modifications thereto.
(e) Each Company ERISA Plan that is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and, to the Knowledge
of the Company, there is no circumstance that will or could reasonably be
expected to result in revocation of any such favorable determination letter.
Each trust created under any Company ERISA Plan has been determined to be
exempt from Tax under Section 501(a) of the Internal Revenue Code and the
Company is not aware of any circumstance that will or could reasonably be
expected to result in revocation of such exemption. With respect to each such
Company Benefit Plan, to the Knowledge of the Company, no event has occurred
that will or could reasonably be expected to give rise to a loss of any
intended Tax consequences under the Internal Revenue Code or to any Tax under
Section 511 of the Internal Revenue Code that could reasonably be expected to
have a Material Adverse Effect on the Company. There is no Material Litigation
pending or, to the Knowledge of the Company, threatened relating to any Company
ERISA Plan.
(f) Neither the Company nor any of its subsidiaries has engaged
in a transaction with respect to any Company Benefit Plan that, assuming the
Taxable Period of such transaction expired as of the date of this Agreement,
would subject the Company or any of its subsidiaries to a Material tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts that could reasonably be expected to have a Material
Adverse Effect on the Company. Neither the Company or any of its subsidiaries
nor any administrator or fiduciary of any Company Benefit Plan (or any agent of
any of the foregoing) has engaged in any transaction, or acted or failed to act
in any manner, that could subject the Company or any of its subsidiaries to any
direct or indirect Liability (by indemnity or otherwise) for breach of any
fiduciary, co-fiduciary, or other duty under ERISA, where such Liability could
reasonably be expected to have a Material Adverse Effect on the Company. No
oral or written representation or communication with respect to any aspect of
the Company Benefit Plans has been made to employees of the Company or any of
its subsidiaries that is not in accordance with the written or otherwise
preexisting terms and provisions of such plans, except where any Liability with
respect to such representation or disclosure could not reasonably be expected
to have a Material Adverse Effect on the Company.
(g) Neither the Company nor any of its subsidiaries maintains or
has ever maintained a Company Pension Plan.
(h) Neither the Company nor any of its subsidiaries has any
Material obligation for retiree health and retiree life benefits under any of
the Company Benefit Plans other than with respect to benefit coverage mandated
by applicable Law.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any Material payment (including without limitation severance,
unemployment compensation, golden parachute, or otherwise) becoming due to any
director or any employee of the Company or it subsidiaries from the Company or
any of its
18
subsidiaries under any Company Benefit Plan or otherwise, (ii) Materially
increase any benefit otherwise payable under any Company Benefit Plan, or (iii)
result in any acceleration of the time of any Material payment or vesting of
any Material benefit.
4.14 MATERIAL CONTRACTS.
(a) Except as set forth on SECTION 4.14 of the Company's
Disclosure Schedule, none of the Company or its subsidiaries, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating to
the borrowing of money by the Company or its subsidiaries or the guarantee by
the Company or its subsidiaries of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Reserve advances of depository institution
subsidiaries, trade payables, and Contracts relating to borrowings or
guarantees made in the ordinary course of business), and (iii) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K or 10-Q as if required to be filed by the Company with the SEC
as of the date of this Agreement (together with all Contracts referred to in
SECTIONS 4.8 and 4.13(A) of this Agreement, the "COMPANY CONTRACTS").
(b) With respect to each Company Contract: (i) the Contract is in
full force and effect; (ii) none of the Company or its subsidiaries is in
Default thereunder, other than Defaults that could not reasonably be expected
to have a Material Adverse Effect on the Company; (iii) neither the Company nor
any of its subsidiaries has repudiated or waived any Material provision of any
such Contract; and (iv) no other party to any such Contract is, to the
Knowledge of the Company, in Default in any respect, other than Defaults that
could not reasonably be expected to have a Material Adverse Effect on the
Company, or has repudiated or waived any Material provision thereunder. Except
for Federal Home Loan Bank advances, all of the indebtedness of the Company and
its subsidiaries for money borrowed (not including deposit Liabilities) is
prepayable at any time without penalty or premium.
4.15 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of the Company, threatened against the Company or
any of its subsidiaries, or against any Asset, employee benefit plan, interest,
or right of any of them, except as could not reasonably be expected to have a
Material Adverse Effect on the Company, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any of the Company or its subsidiaries, except as could not
reasonably be expected to have a Material Adverse Effect on the Company. There
is no Litigation to which the Company or any of its subsidiaries is a party
that names the Company or any of its subsidiaries as a defendant or
cross-defendant and where the maximum exposure is estimated to be $10,000 or
more.
4.16 REPORTS. Since the date of its organization, each of the
Company and its subsidiaries has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with any Regulatory Authorities, except failures to file
that could not reasonably be expected to have a Material Adverse Effect on the
Company. As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied
with all applicable Laws, except noncompliance that could not reasonably be
expected to have a Material Adverse Effect on the Company.
4.17 PROXY STATEMENT. The information supplied by or on behalf of
the Company and its subsidiaries for inclusion in the Proxy Statement and any
prospectus (as contemplated by SECTION 6.3(G)(II) will not, on the date the
Proxy Statement or prospectus is first delivered to shareholders, at the time
of the meeting of the Company's shareholders for the purposes of obtaining the
requisite vote to consummate the Merger (the "SHAREHOLDER MEETING") and at the
Effective Time, contain any untrue
19
statement of a Material fact or omit to state any Material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the Effective Time any event
relating to the Company or its subsidiaries or any of their affiliates,
officers or directors should be discovered by the Company or its subsidiaries
that should be set forth in an amendment or supplement to the Proxy Statement
or prospectus, the Company will promptly inform the Buyer. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by the Buyer and its subsidiaries that is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Proxy Statement or prospectus.
4.18 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of
the Company, none of the Company or its subsidiaries or any Affiliate thereof
has taken or agreed to take any action, that could reasonably be expected to
(i) prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, or (ii) Materially impede or
delay receipt of any Consents of Regulatory Authorities referred to in SECTION
8.1(B) of this Agreement.
4.19 STATE TAKEOVER LAWS. Each of the Company and its subsidiaries
has taken all necessary action to exempt the transactions contemplated by this
Agreement from any applicable "moratorium," "control share," "fair price,"
"business combination," or other anti-takeover laws and regulations of the
State of South Carolina.
4.20 CHARTER PROVISIONS. Each of the Company and its subsidiaries
has taken all action so that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement do not and will not (i) result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws, or other governing
instruments of any of them, or (ii) restrict or impair the ability of the Buyer
or any of its subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, the capital stock of the Company or any of its
subsidiaries that may be directly or indirectly acquired or controlled by it.
4.21 RECORDS. Complete and accurate copies of the articles of
incorporation or charter and bylaws of each of the Company and its subsidiaries
have been made available to the Buyer. The stock book of each such Person
contains, in all Material respects, complete and accurate records of the record
share ownership of the issued and outstanding shares of stock thereof.
4.22 DERIVATIVES. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for the account of the Company or its
subsidiaries or their customers were entered into (i) in accordance with
prudent business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
4.23 CERTAIN REGULATED BUSINESSES. Neither the Company nor any of
its subsidiaries is an "investment company" as defined in the Investment
Company Act of 1940, as amended, nor is it a "public utility holding company"
as defined in the Public Utility Holding Company Act of 1935, as amended.
4.24 COMMISSIONS. Other than The Orr Group, no broker, finder or
other Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated hereby by reason of any action
taken by the Company, any of its subsidiaries or any of the Company's
shareholders.
20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as set forth on the Buyer's Disclosure Schedule, the Buyer
represents and warrants to the Company that the statements contained in this
ARTICLE V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date.
5.1 ORGANIZATION.
(a) The Buyer is a bank holding company registered with the Board
of Governors of the Federal Reserve System under the Bank Holding Company Act
of 1956, as amended and the North Carolina Commissioner of Banks. The Buyer
Bank is a bank under North Carolina Law. The Buyer Bank is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Buyer Bank are fully insured by the FDIC to the extent
permitted by Law.
(b) Each of the Buyer and the Buyer Bank is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
North Carolina, and has the corporate power and authority to carry on, in all
Material respects, its businesses as now conducted and to own, lease and
operate its Assets. Each of the Buyer and the Buyer Bank is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed.
5.2 AUTHORITY; NO CONFLICTS.
(a) Subject to required regulatory and shareholder approvals, the
Buyer has the corporate power and authority necessary to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of and performance of its
obligations under this Agreement and the other documents contemplated hereby,
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
(and by Closing, all such shareholder action) in respect thereof on the part of
the Buyer. This Agreement represents a legal, valid, and binding obligation of
the Buyer, enforceable against it in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
specific performance, injunctive relief and other equitable remedies is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by the
Buyer, nor the consummation by the Buyer of the transactions contemplated
hereby, nor compliance by the Buyer with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of the Buyer's articles of
incorporation or bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of the Buyer or any of its subsidiaries under, any Contract or Permit of
the Buyer or any of its subsidiaries, except as could not reasonably be
expected to have a Material Adverse Effect on the Buyer, or (iii) subject to
obtaining the requisite Consents referred to in SECTION 8.1(B) of this
Agreement, violate any Law or Order applicable to the Buyer or any of its
subsidiaries or any of its Assets.
21
(c) Other than in connection or compliance with the provisions of
the Securities Laws and banking Regulatory Authorities, no notice to, filing
with, or Consent of, any Governmental Authority is necessary for the
consummation by the Buyer of the Merger and the other transactions contemplated
in this Agreement.
5.3 BUYER'S STOCK; SUBSIDIARIES.
(a) The authorized capital stock of the Buyer consists of
20,000,000 shares of common stock, no par value per share, of which 9,130,654
shares are issued and outstanding as of the date of this Agreement, and except
for such shares, there are no shares of capital stock of the Buyer outstanding.
The authorized capital stock of the Buyer Bank consists of 2,500,000 shares of
common stock, $5.00 par value per share, of which 1,134,042 shares are issued
and outstanding as of the date of this Agreement, and except for such shares,
there are no shares of capital stock of the Buyer Bank outstanding. The Buyer
owns all of the issued and outstanding shares of capital stock of the Buyer
Bank, and no shares of capital stock of the Buyer Bank are owned by any other
Person. SECTION 5.3 of the Buyer's Disclosure Schedule lists all of the Buyer's
direct and indirect subsidiaries other than the Buyer Bank as of the date of
this Agreement. The Buyer or one of its subsidiaries owns all of the issued and
outstanding shares of capital stock of each such subsidiary.
(b) All of the issued and outstanding shares of capital stock of
the Buyer and its subsidiaries are duly and validly issued and outstanding and
are fully paid and nonassessable, except as provided in Section 55 of the
National Bank Act. Shares of the Buyer's Stock to be issued hereunder are duly
authorized and, upon issuance, will be validly issued and outstanding and fully
paid and nonassessable, free and clear of any Liens, pledges or encumbrances.
None of the outstanding shares of capital stock of the Buyer or any of its
subsidiaries has been issued in violation of any preemptive rights of the
current or past shareholders of such Persons, and none of the shares of the
Buyer's Stock to be issued pursuant to this Agreement will be issued in
violation of any preemptive rights of the current or past shareholders of the
Buyer.
5.4 SEC FILINGS; BUYER FINANCIAL STATEMENTS.
(a) The Buyer has filed and made available to the Company all
forms, reports, and documents required to be filed by the Buyer with the SEC
since December 31, 1998 (collectively, the "BUYER SEC REPORTS"). The Buyer SEC
Reports (i) at the time filed, complied in all Material respects with the
applicable requirements of the Securities Laws, as the case may be, and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a Material fact or omit to state a Material fact
required to be stated in such Buyer SEC Reports or necessary in order to make
the statements in such Buyer SEC Reports, in light of the circumstances under
which they were made, not misleading. None of the Buyer's subsidiaries is
required to file any forms, reports, or other documents with the SEC.
(b) Each of the Buyer Financial Statements (including, in each
case, any related notes) contained in the Buyer SEC Reports, including any
Buyer SEC Reports filed after the date of this Agreement until the Effective
Time, complied or will comply as to form in all Material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared or will be prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements, or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC), and fairly presented or will fairly present
the consolidated financial position of the Buyer and its subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements
22
were or are subject to normal and recurring year-end adjustments that were not
or are not expected to be Material in amount or effect (except as may be
indicated in such financial statements or notes thereto).
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Buyer nor any
of its subsidiaries has any Liabilities that could reasonably be expected to
have a Material Adverse Effect on the Buyer, except Liabilities that are
accrued or reserved against in the consolidated balance sheets of the Buyer as
of December 31, 2001 included in the Buyer Financial Statements or reflected in
the notes thereto and except for Liabilities incurred in the ordinary course of
business subsequent to December 31, 2001. Neither the Buyer nor any of its
subsidiaries has incurred or paid any Liability since December 31, 2001, except
for (a) such Liabilities incurred or paid in the ordinary course of business
consistent with past business practice and (b) Liabilities that could not
reasonably be expected to have a Material Adverse Effect on the Buyer. No facts
or circumstances exist that could reasonably be expected to serve as the basis
for any other Liabilities of the Buyer or any of its subsidiaries, except as
could not reasonably be expected to have a Material Adverse Effect on the
Buyer.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
2001, (i) there have been no events, changes, or occurrences that have had, or
could reasonably be expected to have, a Material Adverse Effect on the Buyer,
and (ii) each of the Buyer and its subsidiaries has conducted, in all Material
Respects, its respective businesses in the ordinary and usual course (excluding
the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
5.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any
of the Buyer and its subsidiaries have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 2001, and, to the Knowledge of the Buyer, all
Tax Returns filed are complete and accurate in all Material respects. All Tax
Returns for periods ending on or before the date of the most recent fiscal year
end immediately preceding the Effective Time will be timely filed or requests
for extensions will be timely filed. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes that could reasonably be expected to have a Material
Adverse Effect on the Buyer, except to the extent reserved against in the Buyer
Financial Statements dated prior to the date of this Agreement. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) None of the Buyer or its subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) Adequate provision for any Material Taxes due or to become
due for any of the Buyer or its subsidiaries for the period or periods through
and including the date of the respective Buyer Financial Statements has been
made and is reflected on such Buyer Financial Statements.
(d) Each of the Buyer and its subsidiaries is in compliance with,
and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for any
such instances of noncompliance and such omissions as could not reasonably be
expected to have a Material Adverse Effect on the Buyer.
23
(e) None of the Buyer and its subsidiaries has made any payments,
is obligated to make any payments, or is a party to any contract, agreement, or
other arrangement that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(f) There are no Material Liens with respect to Taxes upon any of
the Assets of the Buyer and its subsidiaries.
(g) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the Buyer and its subsidiaries that
occurred during any Taxable Period in which any of the Buyer and its
subsidiaries has incurred a net operating loss that carries over to another
Taxable Period ending after December 31, 2001.
(h) Neither the Buyer nor any of its subsidiaries has filed any
consent under Section 341(f) of the Internal Revenue Code concerning
collapsible corporations.
(i) After the date of this Agreement, no Material election with
respect to Taxes will be made without the prior consent of the Company, which
consent will not be unreasonably withheld.
(j) Neither the Buyer nor any of its subsidiaries has or has had
a permanent establishment in any foreign country, as defined in any applicable
tax treaty or convention between the United States and such foreign country.
5.8 ASSETS. Each of the Buyer and its subsidiaries have good and
marketable title, free and clear of all Liens, to all of their respective
Assets, except for Liens to secure public deposits and advances from the
Federal Reserve or the Federal Home Loan Bank in the ordinary course of
business consistent with past practice. Except as could not reasonably be
expected to have a Material Adverse Effect on the Buyer, all tangible
properties used in the businesses of the Buyer and its subsidiaries are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with each of their past practices. Except as
could not reasonably be expected to have a Material Adverse Effect on the
Buyer, all Material Assets held under leases or subleases by any of the Buyer
and its subsidiaries are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the specific performance, injunctive relief or other equitable
remedies is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. Each of
the Buyer and its subsidiaries currently maintain insurance in amounts, scope,
and coverage reasonably necessary for their operations. None of the Buyer or
its subsidiaries has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be increased in any Material respect. The Assets of the Buyer and its
subsidiaries include all Assets required to operate in all Material respects
their businesses taken as a whole as presently conducted.
5.9 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by
the Buyer or any of its subsidiaries (whether owned of record or beneficially)
are held free and clear of all Liens that would impair the ability of the owner
thereof to dispose freely of any such security and/or otherwise to realize the
benefits of ownership thereof at any time, except for those Liens to secure
public deposits in the ordinary course of business consistent with past
practice and those Liens that could not reasonably be expected to have a
Material Adverse Effect on the Buyer. There are no voting trusts or other
agreements or undertakings to which the Buyer or any of its subsidiaries is a
party with respect to the voting of any such securities. Except for
fluctuations in the market values of United States Treasury and agency,
24
municipal and corporate securities, since December 31, 2001, there has been no
significant deterioration or Material adverse change in the quality, or any
Material decrease in the value, of the securities portfolio of the Buyer and
its subsidiaries, taken as a whole.
5.10 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Buyer the Participation Facilities
and Loan Collateral of the Buyer and its subsidiaries are, and have been, in
compliance with all Environmental Laws, except those violations that could not
reasonably be expected to have a Material Adverse Effect on the Buyer.
(b) To the Knowledge of the Buyer, there is no Litigation pending
or threatened before any court, governmental agency, or authority, or other
forum in which any of the Buyer and its subsidiaries or any of its
Participation Facilities has been or, with respect to threatened Litigation,
may reasonably be expected to be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on, under, or involving a site owned, leased, or operated
by the Buyer or any of its subsidiaries or any of its Participation Facilities,
except for such Litigation pending or threatened that could not reasonably be
expected to have a Material Adverse Effect on the Buyer.
(c) To the Knowledge of the Buyer, there is no Litigation pending
or threatened before any court, governmental agency, or authority, or other
forum in which any of its Loan Collateral (or the Buyer or any of its
subsidiaries in respect of such Loan Collateral) has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, whether or not occurring at, on,
under, or involving Loan Collateral, except for such Litigation pending or
threatened that could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
(d) To the Knowledge of the Buyer, no facts exist that provide a
reasonable basis for any Litigation of a type described in subsections (b) or
(c), except such could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
(e) To the Knowledge of the Buyer, during and prior to the period
of (i) any of the Buyer's or its subsidiaries' ownership or operation of any of
their respective current properties, (ii) any of the Buyer's or its
subsidiaries' participation in the management of any Participation Facility, or
(iii) any of the Buyer's or subsidiaries' holding of a security interest in
Loan Collateral, there have been no releases of Hazardous Material in, on,
under, or affecting (or potentially affecting) such properties, except such as
could not reasonably be expected to have a Material Adverse Effect on the
Buyer.
5.11 COMPLIANCE WITH LAWS. Each of the Buyer and its subsidiaries
has in effect all Permits necessary for it to own, lease, or operate its
Material Assets and to carry on, in all Material respects, its business as now
conducted, except for those Permits the absence of which could not reasonably
be expected to have a Material Adverse Effect on the Buyer, and there has
occurred no Default under any such Permit, other than Defaults that could not
reasonably be expected to have a Material Adverse Effect on the Buyer. None of
the Buyer or its subsidiaries: (i) is in violation of any Laws, Orders, or
Permits applicable to its business or employees conducting its business, except
for violations that could not reasonably be expected to have a Material Adverse
Effect on the Buyer; and (ii) has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (a) asserting that any of the Buyer
and its subsidiaries is not in compliance with any of the Laws or Orders that
such governmental authority or Regulatory Authority enforces, except where such
noncompliance could not reasonably be expected to have a Material Adverse
25
Effect on the Buyer, (b) threatening to revoke any Permits, except where the
revocation could not reasonably be expected to have a Material Adverse Effect
on the Buyer, or (c) requiring the Buyer or any of its subsidiaries (x) to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or (y) to
adopt any board or directors resolution or similar undertaking that restricts
Materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
5.12 LABOR RELATIONS. Neither the Buyer nor any of its
subsidiaries is the subject of any Litigation asserting that it has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act or comparable state Law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is any of them a
party to or bound by any collective bargaining agreement, Contract, or other
agreement or understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving any of them, pending or
threatened, or to the Knowledge of the Buyer, is there any activity involving
any of the Buyer's or its subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.13 EMPLOYEE BENEFIT PLANS.
(a) The Buyer has made available to the Company prior to the
execution of this Agreement correct and complete copies in each case of all
Material Buyer Benefits Plans.
(b) All Buyer Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws,
except as could not reasonably be expected to have a Material Adverse Effect on
the Buyer.
(c) Neither the Buyer nor any of its subsidiaries has an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)).
(d) Each "employee pension benefit plan," as defined in Section
3(2) of ERISA, ever maintained by the Buyer or its subsidiaries that was
intended to qualify under Section 401(a) of the Internal Revenue Code and with
respect to which the Buyer or any of its subsidiaries has any Liability, is
disclosed as such in SECTION 5.13 of the Buyer's Disclosure Schedule.
(e) The Buyer has made available to the Company prior to the
execution of this Agreement correct and complete copies of the following
documents: (i) all trust agreements or other funding arrangements for such
Buyer Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Buyer Benefit Plans or amendments, all
determination letters, Material rulings, Material opinion letters, Material
information letters, or Material advisory opinions issued by the Internal
Revenue Service, the United States Department of Labor, or the Pension Benefit
Guaranty Corporation after December 31, 1996, (iii) annual reports or returns,
audited or unaudited financial statements, actuarial valuations and reports,
and summary annual reports prepared for any Buyer Benefit Plan with respect to
the most recent plan year, and (iv) the most recent summary plan descriptions
and any Material modifications thereto.
(f) Each Buyer ERISA Plan that is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and, to the Knowledge
of the Buyer, there is no circumstance that will or could reasonably be
expected to result in revocation of any such favorable determination letter.
Each trust created under any Buyer
26
ERISA Plan has been determined to be exempt from Tax under Section 501(a) of
the Internal Revenue Code and to the Knowledge of the Buyer, there is no
circumstance that will or could reasonably be expected to result in revocation
of such exemption. With respect to each such Buyer Benefit Plan, to the
Knowledge of the Buyer, no event has occurred that will or could reasonably be
expected to give rise to a loss of any intended Tax consequences under the
Internal Revenue Code or to any Tax under Section 511 of the Internal Revenue
Code that could reasonably be expected to have a Material Adverse Effect on the
Buyer. There is no Material Litigation pending or, to the Knowledge of the
Buyer, threatened relating to any Buyer ERISA Plan.
(g) Neither the Buyer nor any of its subsidiaries has engaged in
a transaction with respect to any Buyer Benefit Plan that, assuming the Taxable
Period of such transaction expired as of the date of this Agreement, would
subject the Buyer or any of its subsidiaries to a Material tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i)
of ERISA in amounts that could reasonably be expected to have a Material
Adverse Effect on the Buyer. Neither the Buyer or any of its subsidiaries nor
any administrator or fiduciary of any Buyer Benefit Plan (or any agent of any
of the foregoing) has engaged in any transaction, or acted or failed to act in
any manner, that could subject the Buyer or any of its subsidiaries to any
direct or indirect Liability (by indemnity or otherwise) for breach of any
fiduciary, co-fiduciary, or other duty under ERISA, where such Liability could
reasonably be expected to have a Material Adverse Effect on the Buyer. No oral
or written representation or communication with respect to any aspect of the
Buyer Benefit Plans has been made to employees of the Buyer or any of its
subsidiaries that is not in accordance with the written or otherwise
preexisting terms and provisions of such plans, except where any Liability with
respect to such representation or disclosure could not reasonably be expected
to have a Material Adverse Effect on the Buyer.
(h) Since the date of the most recent actuarial valuation, there
has been (i) no Material change in the financial position or funded status of
any Buyer Pension Plan, (ii) no Material change in the actuarial assumptions
with respect to any Buyer Pension Plan, and (iii) no Material increase in
benefits under any Buyer Pension Plan as a result of plan amendments or changes
in applicable Law, except as could not reasonably be expected to have a
Material Adverse Effect on the Buyer. Neither any Buyer Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by the Buyer or its subsidiaries, or the
single-employer plan of any entity that is considered one employer with the
Buyer under Section 4001 of ERISA or Section 414 of the Internal Revenue Code
or Section 302 of ERISA (whether or not waived) (a "BUYER ERISA AFFILIATE") has
an "accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. All contributions with respect
to a Buyer Pension Plan or any single-employer plan of a Buyer ERISA Affiliate
have or will be timely made and there is no Lien or expected to be a Lien under
Internal Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under
Internal Revenue Code Section 4971. Neither the Buyer nor any of its
subsidiaries has provided, or is required to provide, security to a Buyer
Pension Plan or to any single-employer plan of a Buyer ERISA Affiliate pursuant
to Section 401(a)(29) of the Internal Revenue Code. All premiums required to be
paid under ERISA Section 4006 have been timely paid by the Buyer, except to the
extent any failure that could not reasonably be expected to have a Material
Adverse Effect on the Buyer.
(i) No Liability under Title IV of ERISA has been or is expected
to be incurred by the Buyer or it subsidiaries with respect to any defined
benefit plan currently or formerly maintained by any of them or by any Buyer
ERISA Affiliate that has not been satisfied in full (other than Liability for
Pension Benefit Guaranty Corporation premiums which have been paid when due),
except to the extent any failure could not reasonably be expected to have a
Material Adverse Effect on the Buyer.
27
(j) Neither the Buyer nor any of its subsidiaries has any
Material obligation for retiree health and retiree life benefits under any of
the Buyer Benefit Plans other than with respect to benefit coverage mandated by
applicable Law.
(k) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves, (i)
result in any Material payment (including without limitation severance,
unemployment compensation, golden parachute, or otherwise) becoming due to any
director or any employee of the Buyer or it subsidiaries from the Buyer or any
of its subsidiaries under any Buyer Benefit Plan or otherwise, (ii) Materially
increase any benefit otherwise payable under any Buyer Benefit Plan, or (iii)
result in any acceleration of the time of any Material payment or vesting of
any Material benefit.
5.14 MATERIAL CONTRACTS.
(a) None of the Buyer or its subsidiaries, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating to
the borrowing of money by the Buyer or its subsidiaries or the guarantee by the
Buyer or its subsidiaries of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, and Federal Reserve or Federal Home Loan Bank advances
of depository institution subsidiaries, trade payables, and Contracts relating
to borrowings or guarantees made in the ordinary course of business), and (iii)
any other Contract or amendment thereto that would be required to be filed as
an exhibit to a Form 10-Q filed by the Buyer with the SEC as of the date of
this Agreement that has not been filed as an exhibit to the Buyer's Form 10-Q
filed for the fiscal quarter ended March 31, 2002, or in another SEC Document
and identified to the Company (together with all Contracts referred to in
SECTIONS 5.8 and 5.13 of this Agreement, the "BUYER CONTRACTS").
(b) With respect to each Buyer Contract: (i) the Contract is in
full force and effect; (ii) none of the Buyer or its subsidiaries is in Default
thereunder, other than Defaults that could not reasonably be expected to have a
Material Adverse Effect on the Buyer; (iii) neither the Buyer nor any of its
subsidiaries has repudiated or waived any Material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
the Buyer, in Default in any respect, other than Defaults that could not
reasonably be expected to have a Material Adverse Effect on the Buyer, or has
repudiated or waived any Material provision thereunder. Except for Federal
Reserve or Federal Home Loan Bank advances, all of the indebtedness of the
Buyer and its subsidiaries for money borrowed (not including deposit
Liabilities) is prepayable at any time without penalty or premium.
5.15 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of the Buyer, threatened against the Buyer or any
of its subsidiaries, or against any Asset, employee benefit plan, interest, or
right of any of them, except as could not reasonably be expected to have a
Material Adverse Effect on the Buyer, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any of the Buyer or its subsidiaries, except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer. There is
no Litigation as of the date of this Agreement to which the Buyer or any of its
subsidiaries is a party and that names the Buyer or any of its subsidiaries as
a defendant or cross-defendant and where the maximum exposure is estimated to
be $10,000 or more.
5.16 REPORTS. Since December 31, 1998, or the date of organization
if later, each of the Buyer and its subsidiaries has timely filed all reports
and statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities, except
failures to file that could not reasonably be expected to have a Material
Adverse Effect on the Buyer. As of their
28
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied with all applicable Laws,
except noncompliance that could not reasonably be expected to have a Material
Adverse Effect on the Buyer
5.17 PROXY STATEMENT. The information supplied by the Buyer and
its subsidiaries for inclusion in the Proxy Statement and any prospectus (as
contemplated by SECTION 6.3(G)(II)) will not, on the date the Proxy Statement
or prospectus is first delivered to shareholders, at the time of the
Shareholder Meeting and at the Effective Time, contain any untrue statement of
a Material fact or omit to state any Material fact necessary to make the
statements therein, in light of circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event relating to
the Buyer or its subsidiaries or any of their Affiliates, officers or directors
should be discovered by the Buyer or its subsidiaries that should be set forth
in an amendment or a supplement to the Proxy Statement or prospectus, the Buyer
will promptly inform the Company. Notwithstanding the foregoing, the Buyer
makes no representation or warranty with respect to any information supplied by
the Company and its subsidiaries that is contained or incorporated by reference
in, or furnished in connection with the preparation of, the Proxy Statement or
prospectus.
5.18 ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of
the Buyer, none of the Buyer or it subsidiaries or any Affiliate thereof has
taken or agreed to take any action, that could reasonably be expected to (i)
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, or (ii) Materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in SECTION 8.1(B)
of this Agreement.
5.19 DERIVATIVES. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for the account of the Buyer or it
subsidiaries or their customers were entered into (i) in accordance with
prudent business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
5.20 CERTAIN REGULATED BUSINESSES. Neither the Buyer nor any of
its subsidiaries is an "investment company" as defined in the Investment
Company Act of 1940, as amended, nor is it a "public utility holding company"
as defined in the Public Utility Holding Company Act of 1935, as amended.
5.21 COMMISSIONS. No broker, finder or other Person is entitled to
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken by the Buyer,
any of its subsidiaries or any of the Buyer's shareholders.
ARTICLE VI
COVENANTS
6.1 COVENANTS OF THE COMPANY.
(a) Ordinary Conduct of Business. Except as otherwise expressly
permitted by this Agreement, the Company will, and will cause its subsidiaries
to, from the date of this Agreement to the Closing, conduct its business in the
ordinary course in substantially the same manner as presently conducted and
make reasonable commercial efforts consistent with past practices to preserve
its relationships with other Persons. Additionally, except as otherwise
contemplated by this Agreement or as set forth on SECTION 6.1(A) of the
Company's Disclosure Schedule, the Company will not, and it will not permit its
subsidiaries to, do any of the following without the prior written consent of
the Buyer:
29
(i) amend its governing documents;
(ii) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver any stock or stock options
or other equity equivalents of any class or any other of its
securities (other than the issuance of any Company Shares pursuant to
the exercise of options set forth on SECTION 4.3 of the Company's
Disclosure Schedule), or amend any of the terms of any securities
outstanding as of the date hereof;
(iii) (A) split, combine or reclassify any shares of its
capital stock, (B) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or (C) redeem or otherwise
acquire any of its securities (other than the acceptance of any
Company Shares as payment of the exercise price in connection with the
exercise of options set forth on SECTION 4.3 of the Company's
Disclosure Schedule);
(iv) (A) incur or assume any long-term or short-term debt
or issue any debt securities other than in the ordinary course of
business consistent with past practice or (B) other than in the
ordinary course of business consistent with past practice assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person, (C) make any loans, advances or capital contributions to, or
investments in, any other Person, other than in the ordinary course
and consistent with past practice, but in any event not to exceed an
amount per loan of $400,000, pledge or otherwise encumber shares of
its capital stock, or (E) mortgage or pledge any of its Assets or
create or suffer to exist any Lien thereupon, other than Liens
permitted by the proviso clause in the definition of Liens and Liens
created or existing in the ordinary course of business consistent with
past practice;
(v) except as required by Law or as contemplated herein,
adopt or amend any Benefit Plan;
(vi) grant to any director or executive officer or
employee any stock options or increase in his or her compensation or
pay or agree to pay to any such person other than in the ordinary
course of business any bonus, severance, change of control or
termination payment;
(vii) enter into or amend any employment Contract;
(viii) acquire, sell, lease or dispose of any Assets
outside the ordinary course of business, or any other Assets that in
the aggregate are Material to it, or acquire any Person (or division
thereof), any equity interest therein or the Assets thereof outside
the ordinary course of business consistent with past practice;
(ix) change or modify any of the accounting principles or
practices used by it or revalue in any Material respect any of its
Assets, including without limitation writing down the value of any
asset or writing off notes or accounts receivable other than in the
ordinary course of business or as required by GAAP;
(x) enter into, cancel or modify any Contract (other
than loans, advances or capital contributions) except in the ordinary
course of business consistent with past practices, but not in any
event involving an amount in excess of $10,000;
(xi) authorize or make any capital expenditure or
expenditures that, individually or in the aggregate, are in excess of
$10,000;
30
(xii) pay, discharge or satisfy, cancel, waive or modify
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in or contemplated by the
Company Financial Statements, or incurred in the ordinary course of
business consistent with past practices;
(xiii) settle or compromise any pending or threatened suit,
action or claim in an amount greater than $10,000 per claim or $50,000
in the aggregate;
(xiv) take, or agree in writing or otherwise to take, any
action that would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or result in
any of the conditions set forth in this Agreement not being satisfied;
or
(xv) agree, whether in writing or otherwise, to do any of
the foregoing.
(b) Consents. The Company will exercise its best efforts to
obtain such Consents as may be necessary or desirable for the consummation of
the transactions contemplated hereby, including without limitation from the
appropriate Governmental Authorities and the parties to those Contracts listed
on SECTION 4.2 of the Company's Disclosure Schedule such that such Contracts
shall survive the Merger and not be breached thereby.
(c) Shareholder Approval. Subject to SECTION 6.1(D), the Company
will, at the earliest practicable date after all consents contemplated by
SECTION 8.1(B)(I) have been obtained, hold a meeting of its shareholders for
the purpose of approving the Merger and take all lawful action to solicit the
approval and adoption of this Agreement (and the related Plan of Merger) and
the Merger by the requisite vote. In connection with such shareholder meeting,
subject to SECTION 6.1(D), the Company's board of directors will recommend to
the Company's shareholders such approvals. The Company's board of directors,
subject to its fiduciary duties under applicable Law, shall recommend to the
Company's shareholders the approval of this Agreement (and the related Plan of
Merger) and the consummation of the Merger, which recommendation shall be
contained in the Proxy Statement.
(d) Acquisition Proposals. Any offer or proposal by any Person or
group concerning any tender or exchange offer, proposal for a merger, share
exchange, recapitalization, consolidation or other business combination
involving the Company or any of its subsidiaries or divisions of any of the
foregoing, or any proposal or offer to acquire in any manner, directly or
indirectly, a significant equity interest in, or a substantial portion of the
Assets of, the Company or any of its subsidiaries, other than pursuant to the
transactions contemplated by this Agreement, is hereby defined as an
"ACQUISITION PROPOSAL." From and after the date hereof, Company shall not, and
shall not permit any of its subsidiaries to, permit any of their respective
officers, directors, affiliates, representatives or agents to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal, or (ii) participate in any discussions or negotiations
with or encourage any effort or attempt by any other Person or take any other
action to facilitate an Acquisition Proposal. From and after the date hereof,
the Company and its subsidiaries and all officers, directors, employees of, and
all investment bankers, attorneys and other advisors and representatives of,
the Company and its subsidiaries shall cease doing any of the foregoing.
Notwithstanding the foregoing, the Company or any such Persons may, directly or
indirectly, subject to a confidentiality agreement containing customary terms,
furnish to any party information and access in response to a request for
information or access made incident to an Acquisition Proposal made after the
date hereof and may participate in discussions and negotiate with such party
concerning any written Acquisition Proposal made after the date hereof and not
recommend shareholder approval of the Merger (provided that neither the Company
nor any such Person, after the date hereof, solicited, initiated or encouraged
such Acquisition Proposal), if the board of directors of the Company
31
shall have determined, based upon the written advice of outside counsel and
financial advisors to the Company reasonably experienced in such matters, that
failing to take such action would violate the directors' fiduciary duties under
applicable law. The board of directors of the Company shall notify the Buyer
immediately if any Acquisition Proposal is made and shall in such notice
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such Acquisition Proposal and shall keep the Buyer promptly
advised of all Material developments that could culminate in the board of
directors withdrawing, modifying or amending its recommendation of the Merger
and the other transactions contemplated by this Agreement. Neither the Company
nor any of its subsidiaries shall waive or modify any provisions contained in
any confidentiality agreement entered into relating to a possible acquisition
(whether by merger, stock purchase, asset purchase or otherwise) or
recapitalization of the Company or any of its subsidiaries.
6.2 COVENANTS OF THE BUYER.
(a) Reservation of Shares of the Buyer's Stock. The Buyer shall
reserve for issuance a sufficient number of shares of the Buyer's Stock to
cover the issuances of such stock required hereby.
(b) Directors.
(i) As soon as reasonably practicable after the
Effective Time, the Buyer shall use its reasonable best efforts to
cause R. Walton Brown to be elected or appointed as a member of the
board of directors of the Buyer and the Buyer Bank, but conditional
upon obtaining any necessary regulatory approvals. The Buyer shall
include such designated individual as a candidate for election as a
director and recommend and solicit proxies for his election at Buyer's
next annual meeting. After such meeting, such designated person shall
be subject to same nomination and election procedures as the other
directors on the boards of the Buyer and the Buyer Bank.
(ii) Additionally, for a period of two years after the
Effective Time, each of the Company's non-employee board members at
the Effective Time who does not join the Buyer's board of directors
shall be paid $200 per month for their good faith service in promoting
the Buyer and the Buyer Bank as a member of local advisory board of
the Buyer (which advisory board the Buyer agrees to maintain for at
least two years).
(c) Employees.
(i) Except as covered by the Employment Agreements, any
and all of the Company's employees will be employed on an "at-will"
basis, and nothing in this Agreement shall be deemed to constitute an
employment agreement with any such person to obligate the Buyer or any
Affiliate thereof to employ any such person for any specific period of
time or in any specific position or to restrict the Buyer's or any of
its Affiliates' right to terminate the employment of any such person
at any time and for any reason satisfactory to it; provided, however,
that for the first 12 months after the Closing Date, the Buyer and its
Affiliates will not terminate the employment of, or substantially
change the conditions of employment of, any person who was employed by
the Company or any of its Affiliates on the Closing Date without the
consent of R. Walton Brown or Charles R. Vance; provided, further,
however, that the immediately proceeding proviso shall be applicable
only so long as either Mr. Brown or Mr. Vance remains entitled to
receive payment of his base annual salary from the Buyer under his
respective Employment Agreement.
(ii) Company employees who continue employment with the
Buyer or any of its subsidiaries will be eligible for benefits
consistent with those of existing employees of the Buyer
32
or such subsidiary, with credit for past service with the Company or
the Company Bank for purposes of participation, eligibility and
vesting (but not for the calculation of any benefit accrual under any
defined benefit plan); provided, however, that any such continuing
employee will not be subject to any exclusion or penalty for
pre-existing conditions that were covered under the Company's or any
of its subsidiaries' medical plans as of the Closing Date or any
waiting period relating to coverage under the Buyer's or any of its
subsidiaries' medical plans. There shall be no waiting periods
applicable to any such Company employees to participate in such
benefits (including applicable insurance benefits).
(iii) The Buyer or one of its subsidiaries shall honor any
and all vacation accrued by the employees of the Company and the
Company Bank and any sick leave up to 90 days.
(iv) Executive Incentive Retirement Agreements. The
Company Executive Incentive Retirement Agreements shall be terminated
as soon as practicable after the Effective Time, and in consideration
therefore, the Buyer shall use its reasonable best efforts to cause
each individual party thereto to receive cash or other consideration
acceptable to such individual and the Buyer for the termination of
such agreements.
(d) Directors and Officers Insurance and Indemnification.
(i) The Buyer shall maintain, or shall cause the Buyer
Bank to maintain, in effect for six years from the Closing Date, if
available, the current directors' and officers' liability insurance
policies maintained by the Company; provided, however, that Buyer may
substitute therefor policies of at least the same coverage containing
terms and conditions that are not, taken as a whole, Materially less
favorable to the insured with respect to matters occurring prior to
the Effective Time.
(ii) From and after the Effective Time, the Buyer shall,
or shall cause the Buyer Bank to, indemnify, defend and hold harmless
each person who is now, or who has been at any time before the date
hereof or who becomes before the Effective Time, an officer or
director of the Company or Company Bank (the "INDEMNIFIED PARTIES")
against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees), liabilities or judgments or amounts that
are paid in settlement (which settlement shall require the prior
written consent of Buyer, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, or administrative (each a
"CLAIM"), in which an Indemnified Person is, or is threatened to be
made, a party or witness arising in whole or in part out of the fact
that such person is or was an officer or director of the Company or
Company Bank if such Claim pertains to any matter or fact arising,
existing or occurring before the Effective Time (including without
limitation the Merger and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, at or
after the Effective Time (the "INDEMNIFIED LIABILITIES"), to the
fullest extent permitted by applicable Law (including without
limitation Guidance Regarding Indemnification Agreements and Payments
issued by the Board of Governors of the Federal Reserve System on July
8, 2002). Any Indemnified Person wishing to claim indemnification
under this SECTION 6.2(D)(II), upon learning of any Claim, shall
notify the Buyer (but the failure to so notify shall not relieve the
Buyer or the Buyer Bank from any liability that it may have under this
SECTION 6.2(D)(II), except to the extent such failure Materially
prejudices the Buyer or its Affiliates). In the event of any such
Claim, whether arising before, on or after the Effective Time, (i) the
Buyer shall have the right to assume the defense thereof (in which
event the Indemnified Parties will cooperate in the defense of any
such matter) and upon such assumption, the Buyer shall not be liable
to any Indemnified Person for any legal expenses of other counsel or
any other expenses subsequently incurred by any
33
Indemnified Person in connection with the defense therefor, except
that if the Buyer elects not to assume such defense, or counsel for
the Indemnified Parties reasonably advises the Indemnified Parties
that there are or may be (whether or not any have yet actually arisen)
issues that raise conflicts of interest between the Buyer and the
Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them, and the Buyer shall pay the
reasonable fees and expenses of such counsel for the Indemnified
Parties, (ii) the Buyer shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for all Indemnified Parties
(unless counsel for one or more Indemnified Parties advises his or her
client that a conflict exists between his or her client and one or
more other Indemnified Parties, in which event the fees and expenses
of such counsel shall also be paid by the Buyer) whose reasonable fees
and expenses shall be paid promptly as statements are received, (iii)
the Buyer shall not be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably
withheld), and (iv) the Buyer shall have no obligation hereunder to
any Indemnified Person when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become
final and nonappealable, that indemnification of such Indemnified
Person in the manner contemplated hereby is prohibited by applicable
Law (it being acknowledged by the parties hereto that in the event of
any good faith dispute about the lawfulness of such indemnification,
the Buyer or the Buyer Bank may place the amounts at issue in escrow
pending the final and nonappealable determination of such dispute).
The obligations of the Buyer and the Buyer Bank pursuant to this
SECTION 6.2(D) are intended to be enforceable against the Buyer and
the Buyer Bank directly by the Indemnified Parties. The
indemnification provided herein shall be in addition to any
indemnification rights that any Indemnified Parties may have by Law,
pursuant to the articles of incorporation or bylaws of the Company or
any of its subsidiaries or pursuant to the terms of any employee
benefit plan or trust for which any Indemnified Party serves as a
fiduciary.
6.3 COVENANTS OF ALL PARTIES TO THE AGREEMENT.
(a) Reorganization for Tax Purposes. Each of the parties hereto
undertakes and agrees to use its reasonable efforts to cause the Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code
and that it will not intentionally take any action that would cause the Merger
to fail to so qualify.
(b) Notification. Each of the parties hereto agrees to notify
promptly the other party hereto of any event, fact, or other circumstance
arising after the date hereof that would have caused any representation or
warranty herein, including, in the case of the Company, any information on any
schedule hereto, to be untrue or misleading had such event, fact, or
circumstance arisen prior to the execution of this Agreement. The parties
hereto will exercise their reasonable best efforts to ensure that no such
events, facts, or other circumstances occur, come to pass, or become true.
(c) Consummation of Agreement. The parties hereto each agree to
use their reasonable best efforts to perform or fulfill all conditions and
obligations to be performed or fulfilled by them under this Agreement so that
the transactions contemplated hereby shall be consummated. Except for events
that are the subject of specific provisions of this Agreement, if any event
should occur, either within or outside the control of the parties hereto, that
would Materially delay or prevent fulfillment of the conditions upon the
obligations of any party hereto to consummate the transactions contemplated by
this Agreement, each party will notify the other of any such event and the
parties will use their reasonable, diligent and good faith efforts to cure or
minimize the same as expeditiously as possible. Each party hereto shall use its
reasonable best efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement and to assist
in the procuring or providing of all documents that must be procured or
provided pursuant to the provisions hereof. Notwithstanding anything to the
contrary contained in this Agreement, none of the parties hereto will take any
action that would
34
(i) Materially affect or delay receipt of the Consents contemplated in SECTION
8.1(B), or (ii) Materially adversely affect or delay (a) its ability to perform
its covenants and agreements made pursuant to this Agreement or (b) the
fulfillment of any condition necessary to consummate the Merger.
(d) Corporate Action. Subject to the terms and conditions hereof,
each of the parties hereto shall, and each of them shall cause their
subsidiaries to, take all corporate action (including recommendation of the
Merger by the Company's board of directors to its shareholders) and use each of
their best efforts to cause all corporate and shareholder action to be taken as
is necessary to consummate and give effect to the Merger.
(e) Maintenance of Corporate Existence. Each of the parties
hereto shall, and each of them shall cause their Affiliates to, maintain in
full force and effect each their respective corporate or legal existences.
(f) Proxy Statement. As soon as reasonably practical after all
consents contemplated by SECTION 8.1(B)(I) have been obtained, the Buyer and
the Company shall prepare and the Company shall deliver by mail to the holders
of record of the Company Shares the Proxy Statement.
(g) Issuance of Securities.
(i) Each of the Company and the Buyer shall, and shall
cause their Affiliates to, use commercially reasonable efforts to
cause the shares of the Buyer's Stock to be issued as Merger
Consideration to be exempt from registration under any applicable
federal or state securities laws by filing an application with the
North Carolina Secretary of State pursuant to N.C. Gen. Stat. ss.
78A-30 requesting a hearing upon the terms and conditions of the
Merger to be held within thirty (30) days after the filing of such
application and taking all actions reasonably necessary to comply with
the requirements set forth therein. The Buyer shall pay all fees,
disbursements and expenses in connection with such compliance
including, without limitation, all fees payable to the North Carolina
Secretary of State and fees and disbursements of counsel to the Buyer.
(ii) In the event that such shares of the Buyer's Stock
shall not qualify for exemption pursuant to N.C. Gen. Stat. ss.
78A-17(16) and Section 3(a)(10) of the Securities Act, the Buyer shall
to prepare and file with the SEC a registration statement on an
appropriate form registering the shares of the Buyer's Stock
comprising the Merger Consideration under the Securities Act, and the
Company shall cooperate, and shall cause its Affiliates to cooperate,
in the timely preparation and filing of the registration statement. If
the Buyer registers such shares of the Buyer's Stock:
(A) the Company shall have the right to
postpone the Agreement termination date contemplated by
SECTION 9.1(C) so that the registration statement may be
declared effective by the SEC prior to the Closing. The Buyer
shall use commercially reasonable efforts to cause the
registration statement to become effective as promptly as
practicable;
(B) Any such registration statement shall
contain a prospectus to be delivered to the Company's
shareholders in connection with the Shareholder Meeting.
After the registration statement shall have become effective,
the Company shall as promptly as practicable mail or deliver
such prospectus to the Company's shareholders;
(C) Any such registration statement, and all
other documents that the Buyer shall be responsible for
filing with the SEC in connection with the transactions
35
contemplated herein, shall conform in all Material respects
to the requirements of all applicable federal securities laws
and regulations;
(D) The Buyer shall take all actions required
to either register such shares of the Buyer's Stock under
state securities laws or obtain exemptions from such
registration;
(E) The Buyer shall pay all fees, disbursements
and expenses in connection with any such registration
statement including, without limitation, all registration and
filing fees, printing expenses and fees and disbursements of
counsel to the Buyer;
(F) The Company shall furnish to the Buyer the
information required to be included in any such registration
statement with respect to its business and affairs before the
registration statement is filed with the SEC and again before
any amendments thereto are filed, and shall have the right to
review and consult with the Buyer on the form of, and any
characterizations of such information included in, the
registration statement prior to its filing with the SEC; and
(G) Each of the Company and the Buyer shall
cause, and shall cause their Affiliates to cause, any and all
information supplied by each such party and their Affiliates
for inclusion in any such registration statement and any
proxy statement and prospectus to be sent to the Company's
shareholders to not contain any untrue statement of Material
fact or omit to state any Material fact required to make any
statements contained therein not misleading at the time any
registration statement is declared effective by the SEC or
such proxy statement or prospectus is sent to the Company's
shareholders.
(h) Applications and Reports. The Buyer shall prepare and file as
soon as reasonably practical after the date of this Agreement, and the Company
shall cooperate in the preparation and, where appropriate, filing of, all
applications, reports and statements with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by
this Agreement.
(i) Closing. Subject to the terms and conditions hereof, the
parties hereto shall use their reasonable best efforts to consummate the
Closing within 30 days after all conditions to the Closing have been satisfied.
(j) Affiliate Agreements. Not less than 45 days prior to the
Effective Time, the Company shall deliver to the Buyer a letter identifying all
Persons who, in the judgment of the Company, may be deemed an "affiliate" of
the Company for purposes of Rule 145 under the Securities Act and applicable
SEC rules and regulations, and such list shall be updated as necessary to
reflect changes from the date of delivery thereof. The Company shall use
reasonable best efforts to cause each person identified on such list to deliver
to the Buyer not less than 10 days prior to the Effective Time, a written
agreement substantially in the form attached hereto as EXHIBIT C.
ARTICLE VII
DISCLOSURE OF ADDITIONAL INFORMATION
7.1 ACCESS TO INFORMATION. Prior to the Closing Date, the parties
hereto shall, and shall cause each of their subsidiaries to:
36
(a) give the other and its authorized representatives reasonable
access, during normal business hours and upon reasonable notice, to its books,
records, offices and other facilities and properties; and
(b) furnish the other with such financial and operating data and
other information with respect to its business, condition (financial or
otherwise) and properties, as it may reasonably request.
7.2 ACCESS TO PREMISES. Prior to Closing, the Company shall, and
shall cause its subsidiaries to, give the Buyer and its authorized
representatives reasonable access to all of the Company's and its subsidiaries'
Real Property for the purpose of inspecting such property.
7.3 ENVIRONMENTAL SURVEY. At its option, the Buyer may cause to
be conducted Phase I environmental assessments of the Real Property of the
Company and its subsidiaries, whether owned or leased, or any portion thereof,
together with such other studies, testing and intrusive sampling and analyses
as the Company shall deem necessary or desirable (collectively, the
"ENVIRONMENTAL SURVEY"). The Company shall complete all such Phase I
environmental assessments within 60 days following the date of this Agreement
and thereafter conduct and complete any such additional studies, testing,
sampling and analyses within 60 days following completion of all Phase I
environmental assessments. Subject to the breach of any representation or
warranty contained herein, the costs of the Environmental Survey shall be paid
by the Buyer.
7.4 CONFIDENTIALITY. Prior to Closing, except as otherwise
provided in SECTION 7.5, each party shall not, and shall not permit its
subsidiaries to, and each shall use its best efforts to cause its and its
subsidiaries' respective employees, lenders, accountants, representatives,
agents, consultants and advisors not to, discuss or disclose, or use for any
purpose other than the transactions contemplated hereby, the subject matter or
transactions contemplated by this Agreement or information pertaining to the
Company or any of its Subsidiaries, with any other Person without the prior
consent of the other party hereto, unless (a) such information is public other
than as a result of a violation of this Agreement, or (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
Consent necessary or desirable for the consummation of the transactions
contemplated hereby (including without limitation obtaining an exemption from
registration under the federal Securities Laws of the issuance of shares of the
Buyer's Stock as contemplated by SECTION 6.3(G)(I)).
7.5 PUBLICITY. Without the prior consent of the other party, no
party hereto shall issue any news release or other public announcement or
disclosure, or any general public announcement to its employees, suppliers or
customers, regarding this Agreement or the transactions contemplated hereby,
except as may be required by Law, but in which case the disclosing party shall
provide the other party hereto with reasonable advance notice of the timing and
substance of any such disclosure.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 MUTUAL CONDITIONS. The respective obligations of each party
hereto to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by all parties hereto pursuant to SECTION
10.4 of this Agreement:
(a) Adverse Proceedings. Neither the Company, the Buyer nor any
shareholder of the Company shall be subject to any order, decree or injunction
of a court of competent jurisdiction that
37
enjoins or prohibits the consummation of this Agreement or the Merger, and no
Governmental Authority shall have instituted a suit or proceeding that is then
pending and seeks to enjoin or prohibit the transactions contemplated hereby.
Any party who is subject to any such order, decree or injunction or the subject
of any such suit or proceeding shall take any reasonable steps within that
party's control to cause any such order, decree or injunction to be modified so
as to permit the Closing and to cause any such suit or proceeding to be
dismissed.
(b) Consents.
(i) All Consents of, filings and registrations with, and
notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full
force and effect and all waiting periods required by Law shall have
expired. No such Consent obtained from any Regulatory Authority shall
be conditioned or restricted in a manner (including requirements
relating to the raising of additional capital or the disposition of
Assets) not reasonably anticipated as of the date of this Agreement
that in the reasonable judgment of the Board of Directors of the Buyer
or the Company would so Materially adversely impact the economic or
business assumptions of the transactions contemplated by this
Agreement that had such condition or requirement been known, such
party would not, in its reasonable judgment, have entered into this
Agreement.
(ii) Each party hereto shall have obtained any and all
Consents required for consummation of the Merger or for the preventing
of any Default under any Contract, including those Consents listed on
SECTION 4.2 of the Company's Disclosure Schedule, except to the extent
that the failure to obtain such any such Consents would not,
individually or in the aggregate result in a Material Adverse Effect
on such Person.
(c) Issuance of Securities. The Buyer shall have received all
state securities permits or other authorizations or confirmations as to the
availability of an exemption from registration of the shares of the Buyer's
Stock comprising the Merger Consideration under Section 3(a)(10) of the
Securities Act, and no proceedings shall be pending, or to the knowledge of the
Buyer, threatened by any securities administrator to suspend the effectiveness
of the issuance of the such shares of the Buyer's Stock; or if the Buyer has
elected to register such shares of the Buyer's Stock pursuant to SECTION 6.3(G)
the registration statement covering such shares shall have been declared
effective by the SEC and no stop order suspending such effectiveness shall have
been initiated or, to the knowledge of the Buyer, threatened by the SEC.
(d) Approval. The Company's shareholders shall have approved this
Agreement and the Merger in accordance with applicable corporate law.
(e) Tax Opinion. On the basis of facts, representations and
assumptions that shall be consistent with the state of facts existing at the
Closing Date, the Buyer and the Company shall have received an opinion of KPMG
LLP or another tax advisor reasonably acceptable in form and substance to each
of them dated as of the Closing Date, substantially to the effect that, for
federal income tax purposes: (i) the Merger, when consummated in accordance
with the terms hereof, will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized by the
Buyer or the Company by reason of the Merger, (iii) the exchange or
cancellation of Company Shares in the Merger will not give rise to recognition
of gain or loss for federal income tax purposes to the shareholders of the
Company to the extent such shareholders receive Buyer's Stock in exchange for
their Company Shares, (iv) the basis of the Buyer's Stock to be received by a
shareholder of the Company will be the same as the basis of the stock of the
Company surrendered in connection with the Merger, and (v) the holding period
of the shares of the Buyer's Stock to be received by a shareholder of the
Company will
38
include the period during which the shareholder held the Company Shares
surrendered in connection with the Merger, provided that the Company Shares
surrendered in connection with the Merger are held as a capital asset (as
defined by the Code) at the Effective Time of such Merger. Each of the Buyer
and the Company shall provide a letter to the tax advisor setting forth the
facts, assumptions and representations on which such tax advisor may rely in
rendering its opinion.
(f) Blue Sky Approvals. The Buyer shall have received all state
securities or "Blue Sky" Permits or other authorizations or confirmations as to
the availability of exemptions from "Blue Sky" registration requirements as may
be necessary, and no stop orders or proceedings shall be pending, or to the
Knowledge of the Buyer or the Company, threatened by a state "Blue Sky"
administrator with respect to the issuance of the Buyer's Stock in the Merger.
(g) Nasdaq Listing. As of the Effective Time, the Buyer shall
have satisfied all requirements in order for the shares of the Buyer's Stock to
be issued to shareholders of the Company in connection with the Merger to be
listed on the Nasdaq National Market System as of the Effective Time.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the transactions contemplated hereby shall be further
subject to the fulfillment of the following conditions, unless waived by such
parties pursuant to SECTION 10.4 of this Agreement:
(a) All representations and warranties of the Buyer contained in
this Agreement shall be true and correct as of the Closing Date as though made
as of such date (except for representations and warranties that are made as of
a specific date). The Buyer shall have performed and complied in all Material
respects with all covenants and agreements contained in this Agreement required
to be performed and complied with by it at or prior to the Closing.
(b) All documents required to have been executed and delivered to
the Company at or prior to the Closing shall have been so executed and
delivered, whether or not such documents have been or will be executed and
delivered by the other parties contemplated thereby.
(c) The Company shall have received from The Orr Group, a letter,
dated not more than five Business Days prior to the Proxy Statement, that the
Merger Consideration is fair, from a financial point of view, to the holders of
the Company's Shares.
(d) The Company shall have received an opinion of Robinson,
Bradshaw & Hinson, P.A., counsel to the Buyer, dated as of the Closing Date, in
form and substance reasonably acceptable to the Company.
(e) As of the Closing Date, the Company shall have received the
following documents with respect to the Buyer:
(i) a certificate of its corporate existence issued by
the jurisdiction of its incorporation as of a recent date and a
certificate of existence or authority as a foreign corporation issued
as of a recent date by each of the jurisdictions in which it is
qualified to do business as a foreign corporation;
(ii) a true and complete copy of its articles of
incorporation and all amendments thereto, certified by the
jurisdiction of its incorporation as of a recent date;
(iii) a true and complete copy of its bylaws, certified by
its Secretary or an Assistant Secretary;
39
(iv) a certificate from its Secretary or an Assistant
Secretary certifying that its articles of incorporation have not been
amended since the date of the certificate described in subsection (i)
above and that nothing has occurred since such date that would
adversely affect its existence;
(v) a true and complete copy of the resolutions of its
board of directors and shareholders authorizing the execution,
delivery and performance of this Agreement, and all instruments and
documents to be delivered in connection herewith, and the transactions
contemplated hereby, certified by its Secretary or an Assistant
Secretary; and
(vi) a certificate from its Secretary or an Assistant
Secretary certifying the incumbency and signatures of its officers who
will execute documents at the Closing or who have executed this
Agreement.
(f) The Exchange Agent shall have delivered to the Company a
certificate, dated as of the Closing Date, to the effect that the Exchange
Agent has received from the Buyer appropriate instructions and authorization
for the Exchange Agent to issue a sufficient number of shares of Buyer Stock in
exchange for all of the Company Shares and to the effect that the Exchange
Agent has received the cash portion of the Merger Consideration from the Buyer
and appropriate instructions and authorization to deliver such cash Merger
Consideration as required by this Agreement.
8.3 CONDITIONS TO THE OBLIGATIONS OF THE BUYER. The obligations
of the Buyer to effect the transactions contemplated hereby shall be further
subject to the fulfillment of the following conditions, unless waived by the
Buyer pursuant to SECTION 10.4 of this Agreement:
(a) All representations and warranties of the Company contained
in this Agreement shall be true and correct as of the Closing Date as though
made as of such date (except for representations and warranties that are made
as of a specific date). The Company shall have performed and complied in all
Material respects with all covenants and agreements contained in this Agreement
required to be performed and complied with by it at or prior to the Closing.
(b) Holders of Company Shares representing no more than 10
percent (10%) of the issued and outstanding Company Shares immediately prior to
the Effective Time shall have exercised dissenters' or similar rights with
respect to the Merger.
(c) All documents required to have been executed and delivered to
the Buyer at or prior to the Closing shall have been so executed and delivered,
whether or not such documents have been or will be executed and delivered by
the other parties contemplated thereby.
(d) The Buyer shall have received a legal opinion from counsel to
the Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Buyer.
(e) As of the Closing Date, the Buyer shall have received the
following documents with respect to each of the Company and its subsidiaries:
(i) a certificate of its corporate existence issued by
the jurisdiction of its incorporation as of a recent date and a
certificate of existence or authority as a foreign corporation issued
as of a recent date by each of the jurisdictions in which it is
qualified to do business as a foreign corporation;
40
(ii) a true and complete copy of its articles of
incorporation or charter and all amendments thereto, certified by the
jurisdiction of its incorporation as of a recent date;
(iii) a true and complete copy of its bylaws, certified by
its Secretary or an Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant
Secretary certifying that its articles of incorporation or charter
have not been amended since the date of the certificate described in
subsection (ii) above, and that nothing has occurred since the date of
issuance of the certificate of existence specified in subsection (i)
above that would adversely affect its existence;
(v) with respect to the Company only, a true and
complete copy of the resolutions of its Board of Directors and
shareholders authorizing the execution, delivery and performance of
this Agreement, and all instruments and documents to be delivered in
connection herewith, and the transactions contemplated hereby,
certified by its Secretary or an Assistant Secretary; and
(vi) with respect to the Company only, a certificate from
its Secretary or an Assistant Secretary certifying the incumbency and
signatures of its officers who will execute documents at the Closing
or who have executed this Agreement.
ARTICLE IX
TERMINATION
9.1 TERMINATION. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:
(a) By mutual written consent of the Company and the Buyer;
(b) By either the Buyer or the Company, if there shall be any law
or regulation that makes consummation of this Agreement illegal or otherwise
prohibited or if any judgment, injunction, order or decree of a Governmental
Authority that is final and nonappealable prevent the Company or the Buyer from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the right
to terminate this Agreement under this SECTION 9.1(B) shall not be available to
any party whose failure to fulfill its obligations hereunder shall have been
the cause of or resulted in such law, regulation, judgment, injunction, order
or decree.
(c) By either the Buyer or the Company if the Effective Time
shall not have occurred on or before June 30, 2003; provided, however, that the
right to terminate this Agreement under this SECTION 9.1(C) shall not be
available to any party whose failure to fulfill its obligations hereunder shall
have been the cause of or resulted in the failure of the Effective Time to
occur on or before June 30, 2003;
(d) At any time on or prior to the Closing Date:
(i) by the Buyer in writing, if the Company (i) has
breached any covenant, agreement, representation or warranty contained
herein or (ii) any representation or warranty contained herein becomes
untrue, in either case such that the condition contained in SECTION
8.3(A) would not be satisfied and in either case if such breach has
not been cured by the earlier of 10 Business Days after the date on
which the Buyer gives written notice of such breach to the Company or
the Closing Date; or
41
(ii) by the Company in writing, if the Buyer (i) has
breached any covenant, agreement, representation or warranty contained
herein or (ii) any representation or warranty contained herein becomes
untrue, in either case such that the condition contained in SECTION
8.2(A) would not be satisfied and in either case if such breach has
not been cured by the earlier of 10 Business Days after the date on
which the Company gives written notice of such breach to the Buyer or
the Closing Date;
(e) By either the Buyer or the Company if: (i) the approval by
the Company's shareholders required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote
upon the taking of such vote at a duly held meeting of the Company's
shareholders or at any adjournment thereof or (ii) such approval was obtained
but holders of Company Shares representing more than 10 percent (10%) of the
issued and outstanding Company Shares immediately prior to the Effective Time
exercised dissenters' or similar rights with respect to the Merger;
(f) By the Buyer, if:
(i) the Company's board of directors shall have failed
to recommend the Merger to its shareholders at the Shareholder
Meeting, (ii) withdrawn its recommendation of the Merger to its
shareholders, (iii) modified or qualified its recommendation of the
Merger in any manner adverse to the consummation of the Merger, (iv)
failed to confirm its recommendation of the Merger within five
Business Days of the Buyer's request to do so (or resolved or proposed
to take any of the foregoing actions);
(ii) the Company shall have breached its obligation under
this Agreement by reason of a failure to timely call and hold a
meeting of its shareholders to vote on the Merger in accordance with
SECTION 6.1(C); or
(iii) a tender or exchange offer relating to securities of
the Company or any of its subsidiaries shall have been commenced by a
Person unaffiliated with the Company or its subsidiaries, and the
Company shall not have sent to its shareholders within 10 Business Days
after such tender or exchange offer is first published, sent or given,
a statement that the Company's board of directors recommends rejection
of such tender or exchange offer;
(g) By the Company, if its board of directors determines to
terminate this Agreement (and the Merger) and (i) the Average Closing Price of
the Buyer's Stock is less than $22.42 per share for the 20-trading day period
(the "MEASUREMENT PERIOD") ending three Business Days prior to the date of the
Shareholder Meeting, and (ii) the percentage (the "BUYER'S STOCK PERCENTAGE
CHANGE") by which the Average Closing Price of the Buyer's Stock during the
Measurement Period is lower than the price per share of the Buyer's Stock on
the date of this Agreement (or if the date of this Agreement is not on a
trading day, then on the immediately preceding trading day) exceeds by more
than 10 percentage points the percentage (the "INDEX PERCENTAGE CHANGE") by
which the Average Closing Price of the SNL Index during the Measurement Period
is lower than the Average Closing Price of the SNL Index on the date of this
Agreement (or if the date of this Agreement is not on a trading day, then on
the immediately preceding trading day); provided, however, that upon receipt of
notice of termination pursuant to this SECTION 9.1(G) from the Company, the
Buyer shall have the right, based on the Average Closing Price of the Buyer's
Stock during the Measurement Period, to increase the Exchange Ratio (for
purposes of this proviso clause, treating any such increase as a corresponding
increase in the Average Closing Price of the Buyer's Stock for the Measurement
Period) so that such Average Closing Price for the Measurement Period is as
close as possible to the lowest amount that would result in one of the two
conditions in subclauses (i) and (ii) above not being met, in which case the
Company shall not have the right to terminate this Agreement and the Merger.
42
For purposes of this subclause (g): "AVERAGE CLOSING PRICE" means,
with respect to the Buyer's Stock, the average of the daily closing sales price
thereof on the Nasdaq National Market System during a specified period as
reported in The Wall Street Journal and, with respect to the SNL Index , the
average of the daily closing prices of such SNL Index as reported by SNL
Securities; and "SNL INDEX" means the SNL Nationwide Bank Index ($1 billion to
$5 billion).
9.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of a termination contemplated hereby by any
party pursuant to SECTION 9.1, the party seeking to terminate this Agreement
shall give prompt written notice thereof to the other party, and the
transactions contemplated hereby shall be abandoned, without further action by
any party hereto. In such event:
(i) The parties hereto shall continue to be bound by (i)
their obligations of confidentiality set forth herein and all copies
of the information provided by the Company hereunder will be returned
to the Company or destroyed immediately upon its request therefor,
(ii) the provisions set forth in SECTION 7.4 relating to publicity and
(iii) the provisions set forth in SECTION 10.1 relating to expenses;
(ii) All filings, applications and other submissions
relating to the transactions contemplated hereby shall, to the extent
practicable, be withdrawn from the Person to which made; and
(iii) The terminating party shall be entitled to seek any
remedy to which such party may be entitled at law or in equity for the
violation or breach of any agreement, covenant, representation or
warranty contained in this Agreement.
(b) If this Agreement is terminated pursuant to SECTION
9.1(D)(I), the Company shall promptly pay to the Buyer by wire transfer of
immediately available funds an amount equal to $90,000. If (i) this Agreement
is terminated pursuant to SECTION 9.1(C), 9.1(D)(I), 9.1(E) or 9.1(F) and (ii)
an Acquisition Proposal is made with respect to the Company or any of its
Subsidiaries within 12 months following the termination of this Agreement and
such proposed transaction is subsequently consummated, the Company (and its
successors) shall promptly pay to the Buyer by wire transfer of immediately
available funds an amount equal to$450,000, less $90,000 if such amount was
previously paid to the Buyer pursuant to the first sentence of this SECTION
9.2(B).
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, (i) the Buyer shall pay all costs and expenses incurred by it
in connection with this Agreement and the Merger and (ii) the Company shall pay
all costs and expenses incurred by it in connection with this Agreement and the
Merger.
10.2 SURVIVAL OF REPRESENTATIONS. The representations and
warranties made by the parties hereto will not survive the Closing, and no
party shall make or be entitled to make any claim based upon such
representations and warranties after the Closing Date. No warranty or
representation shall be deemed to be waived or otherwise diminished as a result
of any due diligence investigation by the party to whom the warranty or
representation was made or as a result of any actual or constructive knowledge
by
43
such party with respect to any facts, circumstances or claims or by the actual
or constructive knowledge of such person that any warranty or representation is
false at the time of signing or Closing.
10.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of both parties hereto.
10.4 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided
in this Agreement, any failure of the Buyer, on one hand, and the Company, on
the other, to comply with any obligation, representation, warranty, covenant,
agreement or condition herein may be waived by the other party or parties only
by a written instrument signed by the party or parties granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this SECTION 10.4.
10.5 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered by hand or by facsimile
transmission, one Business Day after sending by a reputable national over-night
courier service or three Business Days after mailing when mailed by registered
or certified mail (return receipt requested), postage prepaid, to the parties
in the manner provided below:
(a) Any notice to any of the Company shall be delivered to the
following addresses:
Carolina Community Bancshares, Inc.
101 East Leitner Street
Latta, South Carolina
Attention: R. Walton Brown, President
Telephone: (843) 752-7139
Facsimile: (843) 752-7130
with a copy to:
Haynsworth Sinkler Boyd, P.A.
1426 Main Street
P.0. Box 11889
Columbia, South Carolina 29211
Attention: George S. King, Jr.
Telephone: (803) 540-7818
Facsimile: (803) 765-1243
(b) Any notice to the Buyer shall be delivered to the following addresses:
First Bancorp
341 North Main Street
P.O. Box 508
Troy, North Carolina 27371
Attention: James H. Garner
Telephone: (910) 576-2265
Facsimile: (910) 567-0662
44
with a copy to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: John M. Herring
Telephone: (704) 377-2536
Facsimile: (704) 378-4000
Any party may change the address to which notice is to be given by notice given
in the manner set forth above.
10.6 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties.
10.7 SEPARABLE PROVISIONS. If any provision of this Agreement
shall be held invalid or unenforceable, the remainder nevertheless shall remain
in full force and effect.
10.8 GOVERNING LAW. The execution, interpretation and performance
of this Agreement shall be governed by the internal laws and judicial decisions
of the State of North Carolina.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.11 ENTIRE AGREEMENT. This Agreement, including the agreements
and documents that are Schedules and Exhibits hereto, embodies the entire
agreement and understanding of the parties with respect of the subject matter
of this Agreement. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the transactions
contemplated hereby and subject matter hereof.
45
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as
of the date first above written.
COMPANY:
CAROLINA COMMUNITY BANCSHARES, INC.
By: /s/ R. Walton Brown
---------------------------------------
Name: R. Walton Brown
--------------------------------
Title: President
--------------------------------
BUYER:
FIRST BANCORP
By: /s/ James H. Garner
---------------------------------------
Name: James H. Garner
--------------------------------
Title: Chief Executive Officer
--------------------------------