Exhibit 99.1
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AGREEMENT AND PLAN OF MERGER
dated as of January 26, 2001
between
CENTURA BANKS, INC.
and
ROYAL BANK OF CANADA
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TABLE OF CONTENTS
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RECITALS..........................................................................................................1
ARTICLE I Certain Definitions; Interpretation
1.01 Certain Definitions..........................................................................................2
1.02 Interpretation...............................................................................................7
ARTICLE II The Merger
2.01 The Merger...................................................................................................8
2.02 Reservation of Right to Revise Structure.....................................................................9
2.03 Effective Time...............................................................................................9
ARTICLE III Consideration
3.01 Effect on Capital Stock......................................................................................9
3.02 Rights as Shareholders; Stock Transfers.....................................................................10
3.03 Exchange Procedures.........................................................................................10
3.04 Anti-Dilution Provisions....................................................................................11
3.05 Company Stock Options.......................................................................................11
ARTICLE IV Actions Pending the Merger
4.01 Forbearances of the Company.................................................................................12
4.02 Forbearances of the Acquiror................................................................................15
ARTICLE V Representations and Warranties
5.01 Disclosure Schedules........................................................................................15
5.02 Standard....................................................................................................16
5.03 Representations and Warranties of the Company...............................................................16
5.04 Representations and Warranties of the Acquiror..............................................................29
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ARTICLE VI Covenants
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6.01 Reasonable Best Efforts.....................................................................................33
6.02 Shareholder Approvals.......................................................................................33
6.03 Registration Statement......................................................................................34
6.04 Press Releases..............................................................................................35
6.05 Access; Information.........................................................................................35
6.06 Acquisition Proposals.......................................................................................36
6.07 Affiliate Agreements........................................................................................37
6.08 Takeover Laws...............................................................................................37
6.09 No Rights Triggered.........................................................................................37
6.10 NYSE Listing................................................................................................37
6.11 Regulatory Applications.....................................................................................37
6.12 Indemnification.............................................................................................38
6.13 Accountants' Letters........................................................................................40
6.14 Notification of Certain Matters.............................................................................40
6.15 Employee Benefits...........................................................................................40
6.16 Certain Adjustments.........................................................................................41
6.17 Formation of Newco..........................................................................................41
6.18 Certain Tax Matters.........................................................................................41
ARTICLE VII Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger..................................................42
7.02 Conditions to Obligation of the Company.....................................................................43
7.03 Conditions to Obligation of the Acquiror....................................................................44
ARTICLE VIII Termination
8.01 Termination.................................................................................................44
8.02 Effect of Termination and Abandonment.......................................................................46
8.03 Termination Fee.............................................................................................46
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ARTICLE IX Miscellaneous
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9.01 Survival....................................................................................................47
9.02 Waiver; Amendment...........................................................................................47
9.03 Counterparts................................................................................................48
9.04 Governing Law...............................................................................................48
9.05 Expenses....................................................................................................48
9.06 Notices.....................................................................................................48
9.07 Entire Understanding; No Third-Party Beneficiaries..........................................................49
9.08 Assignment..................................................................................................49
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EXHIBIT A Form of Stock Option Agreement
EXHIBIT B List of Persons to Execute Compensation-Related Agreements
EXHIBIT C Form of Employment Agreement
EXHIBIT D Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER, dated as of January 26, 2001 (this
"Agreement"), between Centura Banks, Inc. (the "Company") and Royal Bank of
Canada (the "Acquiror").
RECITALS
A. The Company. The Company is a North Carolina corporation, having its
principal place of business in Rocky Mount, North Carolina.
B. The Acquiror. The Acquiror is a Canadian chartered bank, having its
principal places of business in Toronto, Ontario and Montreal, Quebec, Canada.
C. The Merger. On the terms and subject to the conditions contained in
this Agreement, the parties to this Agreement intend to effect the merger of a
direct wholly owned subsidiary of the Acquiror to be organized under North
Carolina law ("Newco") with and into the Company, with the Company as the
surviving corporation in the merger.
D. Stock Option Agreement. As a condition of and inducement to the
Acquiror's willingness to enter into this Agreement, following the execution and
delivery of this Agreement, the Company is entering into a Stock Option
Agreement in substantially the form of Exhibit A (the "Stock Option Agreement"),
pursuant to which the Company is granting to the Acquiror an option to purchase,
under certain circumstances, shares of Company Common Stock.
E. Employment Agreements. Certain employees and directors of the
Company identified on Exhibit B have agreed to execute agreements related to
certain employment and compensation matters in substantially the form of Exhibit
C.
F. Intention of the Parties. It is the intention of the parties that
the business combination contemplated hereby be treated as a "reorganization"
under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
G. Board Action. The respective Boards of Directors of each of the
Company and the Acquiror have each adopted resolutions approving this Agreement,
the Merger (as defined herein), the Stock Option Agreement, and, in the case of
the Board of Directors of the Company, declaring the advisability of this
Agreement in accordance with the North Carolina Business Corporation Act, as
amended (the "NCBCA").
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions. The following terms are used in this
Agreement with the meanings assigned below:
"Acquiror" has the meaning assigned in the preamble to this
Agreement.
"Acquiror Common Stock" means the common shares, without
nominal or par value, of the Acquiror.
"Acquiror First Preferred Stock" means the first preferred
shares, without nominal or par value, of the Acquiror.
"Acquiror Ratio" has the meaning assigned in Section
8.01(f)(ii).
"Acquiror Second Preferred Stock" means the second preferred
shares, without nominal or par value, of the Acquiror.
"Acquiror Stock" means, collectively, the Acquiror Common
Stock, the Acquiror First Preferred Stock and the Acquiror Second
Preferred Stock.
"Acquisition Proposal" has the meaning assigned in Section
6.06.
"Agreement" means this Agreement, as amended or modified from
time to time in accordance with Section 9.02.
"Average Closing Price" means the average of the daily last
sale prices per share of Acquiror Common Stock as reported on the
Toronto Stock Exchange for the ten consecutive full trading days (on
which such shares are traded) ending at the close of trading on the
Determination Date.
"Closing Date" has the meaning assigned in Section 2.03.
"Code" has the meaning assigned in Recital F.
"Company" has the meaning assigned in the preamble to this
Agreement.
"Company Affiliate" has the meaning assigned in Section 6.07.
"Company Articles" means the Amended and Restated Articles of
Incorporation of the Company.
"Company Board" means the Board of Directors of the Company.
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"Company By-Laws" means the Amended and Restated By-laws of
the Company.
"Company Common Stock" means the common stock, without par
value, of the Company.
"Company IP Rights" has the meaning assigned in Section
5.03(w).
"Company Meeting" has the meaning assigned in Section 6.02.
"Company Preferred Stock" means the preferred stock, without
par value, of the Company.
"Company Reports" has the meaning assigned in Section 5.03(j).
"Company Stock" means, collectively, the Company Common Stock
and the Company Preferred Stock.
"Company Stock Option" means each option to purchase shares of
Company Common Stock outstanding under the Company Stock Plans.
"Company Stock Plans" has the meaning assigned in Section
5.03(b).
"Company's SEC Documents" has the meaning assigned in Section
5.03(g).
"Confidentiality Agreement" means the confidentiality
agreement between the Company and the Acquiror, dated January 12, 2001.
"Compensation Plans" has, with respect to any person, the
meaning assigned in Section 5.03(n).
"Consideration" has the meaning assigned in Section 3.01(a).
"Consideration Per Share" has the meaning assigned in Section
3.05.
"Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, lease or other
commitment to which such person or any of its Subsidiaries is a party
or by which any of them is bound or to which any of their properties is
subject.
"Costs" has the meaning assigned in Section 6.12(a).
"Determination Date" means the date of receipt of all
approvals of the Minister of Finance, Canada, necessary to consummate
the Merger.
"Disclosure Schedule" has the meaning assigned in Section
5.01.
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"Effective Time" means the date and time at which the Merger
becomes effective.
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, common law or agency
requirement relating to: (1) the protection or restoration of the
environment, health or safety (in each case as relating to the
environment) or natural resources; or (2) the handling, use, presence,
disposal, release or threatened release of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.03(n).
"ERISA Affiliate Plan" has the meaning assigned in Section
5.03(n).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Agent" has the meaning assigned in Section 3.03(a).
"Exchange Ratio" has the meaning assigned in Section 3.01(a).
"Governmental Authority" means any court, administrative
agency or commission or other federal, state or local governmental
authority or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substance" means any substance in any concentration
that is: (1) listed, classified or regulated pursuant to any
Environmental Law; (2) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (3) any
other substance which may be the subject of regulatory action by any
Governmental Authority pursuant to any Environmental Law.
"Indemnified Party" has the meaning assigned in Section
6.12(a).
"Indemnified Person" has the meaning assigned in Section
5.03(n).
"Index Price" means the TSE Banks & Trusts Index.
"Index Ratio" has the meaning assigned in Section 8.01(f)(ii).
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"Insurance Amount" has the meaning assigned in Section
6.12(b).
"Insurance Policies" has the meaning assigned in Section
5.03(u).
"Intellectual Property Rights" shall mean all worldwide
industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service mark
applications, copyright, copyright applications, franchises, licenses,
inventories, know-how, trade secrets, customer lists, proprietary
processes and formulae, all source and object code, algorithms,
architecture, structure, display screens, layouts, inventions,
development tools, software, databases and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records.
"IRS" means the United States Internal Revenue Service.
"knowledge of the Company" and "Company knowledge" mean the
knowledge of Cecil Sewell, Steven Goldstein, Frank Hirsch, Kel Landis,
Scott Custer, Tom Rogers, Ben Anderson and Buddy Jordon.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Loans" means loans, leases, extensions of credit, commitments
to extend credit and other assets.
"Material Adverse Effect" means, with respect to the Acquiror
or the Company, any effect that (1) is materially adverse to the
financial position, results of operations, shareholder's equity or
business of the Acquiror and its Subsidiaries taken as a whole, or the
Company and its Subsidiaries taken as a whole, respectively, other than
(A) the effects of changes in economic conditions generally (including
general levels of interest rates), except to the extent that the effect
of such change disproportionately affects the Acquiror or the Company,
respectively, as compared to depositary institutions in general in
Canada or the United States, respectively, (B) payments of expenses
associated with the Merger as contemplated by this Agreement, (C)
changes in generally accepted accounting principles applicable to bank
holding companies generally in Canada or the United States,
respectively, and (D) any changes resulting primarily from changes in
banking laws or regulations (or interpretations thereof) of general
applicability in Canada or the United States, respectively; or (2)
would materially impair the ability of either the Acquiror or the
Company to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the Merger
and the other transactions contemplated by this Agreement.
"Merger" has the meaning assigned in Section 2.01(a).
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"Multiemployer Plan" means, with respect to any person, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
"NCBCA" has the meaning assigned in Recital G.
"NCCOB" means the North Carolina Commissioner of Banks.
"New Certificates" has the meaning assigned in Section 3.03.
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning assigned in Section 3.03.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has, with respect to any person, the meaning
assigned in Section 5.03(n).
"person" means any individual, bank, savings bank,
corporation, partnership, association, joint-stock company, business
trust or unincorporated organization.
"Previously Disclosed" means, with respect to the Company or
the Acquiror, information set forth in such party's Disclosure Schedule
in a paragraph or section identified as corresponding to the provision
of this Agreement in respect of which such information has been so set
forth or has otherwise been set forth in a manner reasonably indicating
to a reader the provisions to which such information may be relevant.
"Proxy Statement" has the meaning assigned in Section 6.03.
"Registration Statement" has the meaning assigned in Section
6.03.
"representatives" means, with respect to any person, such
person's directors, officers, employees, legal or investment or
financial advisors or any representatives of such legal or financial
advisors.
"Rights" means, with respect to any person, securities or
obligations convertible into or exercisable or exchangeable for, or
giving any person any right to subscribe for or acquire, or any
options, calls or commitments relating to, or any stock appreciation
right or other instrument the value of which is determined in whole or
in part by reference to the market price or value of, shares of capital
stock of such person.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Significant Subsidiary" has the meaning assigned to it in
Rule 1-02 of Regulation S-X of the SEC.
"Starting Date" means January 26, 2001.
"Starting Price" means C$51.80.
"Stock Option Agreement" has the meaning assigned in the
preamble to this Agreement.
"Subsidiary" includes both a "subsidiary" as defined in Rule
1-02 of Regulation S-X of the SEC and a "subsidiary" as defined in
Section 2(d) of the Bank Holding Company Act of 1956.
"Superior Proposal" has the meaning assigned in Section 6.06.
"Surviving Corporation" has the meaning assigned in Section
2.01.
"Takeover Laws" has the meaning assigned in Section 5.03(e).
"Taxes" means all taxes, charges, fees, levies or other
assessments, however denominated, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods
and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, estimated,
severance, stamp, occupation, property or other taxes, custom duties,
fees, or charges of any kind whatsoever, together with any interest and
any penalties or additions to tax with respect thereto and with respect
to any information reporting requirements imposed by the Code or any
similar provision of foreign, state or local law and any interest in
respect of such additions or penalties imposed by any taxing authority
whether arising before, on or after the Closing Date.
"Tax Returns" means all reports and returns required to be
filed on or before the Closing Date with respect to the Taxes of the
Company or any of its Subsidiaries including, without limitation,
consolidated federal income tax returns and any documentation required
to be filed with any taxing authority or to be retained by the Company
or any of its Subsidiaries in respect of information reporting
requirements imposed by the Code or any similar foreign, state or local
law.
1.02 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part
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of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." No rule of construction against the draftsperson shall be
applied in connection with the interpretation or enforcement of this Agreement.
Whenever this Agreement shall require a party to take an action, such
requirement shall be deemed to constitute an undertaking by such party to cause
its Subsidiaries, and to use its reasonable best efforts to cause its other
affiliates, to take appropriate action in connection therewith. References to
"knowledge" of a person means knowledge after reasonable diligence in the
circumstances. References herein to "transaction contemplated by this Agreement"
shall be deemed to include a reference to the transactions contemplated by the
Stock Option Agreement. All references to "dollars" or "$" mean the lawful
currency of the United States, and all references to "Canadian dollars" or "C$"
mean the lawful currency of Canada, unless otherwise indicated.
ARTICLE II
The Merger
2.01 The Merger. At the Effective Time, on the terms and
subject to the conditions set forth in this Agreement, the following shall
occur:
(a) STRUCTURE AND EFFECTS OF THE MERGER. Newco shall merge
with and into the Company, and the separate corporate existence of
Newco shall thereupon cease (the "Merger"). The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of North Carolina, and the separate corporate
existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the NCBCA.
(b) ARTICLES OF INCORPORATION. The articles of incorporation
of the Surviving Corporation shall be amended to read in their entirety
the same as the articles of incorporation of Newco as in effect
immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and the NCBCA, except that the name
of the Surviving Corporation shall be changed to "RBC Centura Banks,
Inc.".
(c) BY-LAWS. The by-laws of the Surviving Corporation shall be
amended to read in their entirety the same as the by-laws of Newco as
in effect immediately prior to the Effective Time, until duly amended
in accordance with the terms thereof and the articles of incorporation
referred to in Section 2.01(b).
(d) DIRECTORS. Unless otherwise agreed by the Acquiror and the
Company, the directors of the Surviving Corporation shall be comprised
of nine individuals, five of whom shall be designated by the Acquiror
and four of whom
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shall be designated by the Company (with the reasonable consent of the
Acquiror) prior to the Effective Time, and such directors shall hold
office until such time as their successors shall be duly elected and
qualified.
2.02 Reservation of Right to Revise Structure. At the
Acquiror's election, the Merger may alternatively be structured so that (i) the
Company is merged with and into any direct or indirect wholly owned subsidiary
of the Acquiror or (ii) any other direct or indirect wholly owned subsidiary of
the Acquiror is merged with and into the Company; provided, however, that no
such change shall (a) alter or change the amount or kind of the Consideration or
the treatment of the holders of Company Stock Options, (b) prevent the parties
from obtaining the opinions of Hunton & Williams and Sullivan & Cromwell
referred to in Sections 7.02(c) and 7.03(c), respectively, or (c) materially
impede or delay consummation of the transactions contemplated by this Agreement.
In the event of such an election, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect such election.
2.03 Effective Time. The Merger shall become effective upon
the filing, in the office of the Secretary of State of the State of North
Carolina, of articles of merger in accordance with Section 55-11-05 of the
NCBCA, or at such later date and time as may be set forth in such articles.
Subject to the terms of this Agreement, the parties shall cause the Merger to
become effective (1) on the date that is the third business day to occur after
the last of the conditions set forth in Article VII (other than conditions
relating solely to the delivery of documents dated the Closing Date) shall have
been satisfied or waived in accordance with the terms of this Agreement (or, at
the election of the Acquiror, on the last business day of the month in which
such day occurs), or (2) on such date as the parties may agree in writing (the
"Closing Date").
ARTICLE III
Consideration
3.01 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company
Common Stock outstanding immediately prior to the Effective Time shall
be converted into the right to receive consideration (the
"Consideration") comprising 1.684 (the "Exchange Ratio") fully paid and
nonassessable shares of Acquiror Common Stock. At the Effective Time,
the shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and cease to exist, and from and after
the Effective Time, certificates representing Company Common Stock
immediately prior to the Effective Time shall be deemed for all
purposes to represent the number of shares of Acquiror
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Common Stock into which they were converted as part of the
Consideration pursuant to this Section 3.01(a).
(b) Newco Common Stock. Each share of Newco common stock
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
3.02 Rights as Shareholders; Stock Transfers. At the
Effective Time, holders of Company Common Stock shall cease to be, and shall
have no rights as, shareholders of the Company, other than to receive any
dividend or other distribution with respect to such Company Common Stock with a
record date occurring prior to the Effective Time and the conversion rights
provided under this Article III. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of shares of
Company Common Stock.
3.03 Exchange Procedures. (a) Promptly upon occurrence of the
Effective Time, the Acquiror shall deposit, or cause to be deposited, with the
Acquiror's transfer agent or a U.S. depository or trust institution of
recognized standing selected by the Acquiror and reasonably satisfactory to the
Company (in such capacity, the "Exchange Agent"), for the benefit of the holders
of certificates formerly representing shares of Company Common Stock ("Old
Certificates") to be exchanged in accordance with this Article III, certificates
representing the shares of Acquiror Common Stock ("New Certificates").
(b) Promptly after the Effective Time, the Acquiror shall send
or cause to be sent to each former holder of record of shares of Company Common
Stock immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for New Certificates. The
Acquiror shall cause the New Certificates and/or any check in respect of
dividends or distributions which such person shall be entitled to receive to be
delivered to such shareholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of Company Common Stock (or indemnity
reasonably satisfactory to the Acquiror and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on the cash such person shall be entitled to receive
pursuant to this Article III upon such delivery.
(c) Neither the Exchange Agent nor any party hereto shall be
liable to any former holder of Company Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) From and after the 30th day following the Effective Time,
no dividends or other distributions with respect to Acquiror Common Stock with a
record date occurring after the Effective Time shall be paid in respect of any
unsurrendered Old Certificate representing shares of Acquiror Common Stock
converted in the Merger into the right to receive shares of Acquiror Common
Stock. Upon surrender of Old Certificates (or indemnity reasonably satisfactory
to the Acquiror and the Exchange Agent, if any of such certificates are lost,
stolen or destroyed) in accordance
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with this Section 3.03, the record holder thereof shall be entitled to receive
any such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Acquiror Common Stock
such holder had the right to receive upon surrender of Old Certificates (or
delivery of such indemnity).
(e) Notwithstanding any other provision hereof, no fractional
shares of Acquiror Common Stock and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, the
Acquiror shall pay to each holder of Company Common Stock who would otherwise be
entitled to a fractional share of Acquiror Common Stock (after taking into
account all Old Certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fraction by the average of the
last reported sale prices of Acquiror Common Stock, as reported by the Toronto
Stock Exchange, for the ten Toronto Stock Exchange trading days immediately
preceding the Effective Time (with the last reported sale price for each such
trading day converted to U.S. dollars at the Bank of Canada Closing Rate in
Toronto on such trading day).
3.04 Anti-Dilution Provisions. If the Acquiror changes (or
establishes a record date for changing) the number or kind of shares of Acquiror
Common Stock issued and outstanding prior to the Effective Time as a result of a
stock split, stock dividend, recapitalization, reclassification, reorganization
or similar transaction with respect to the outstanding Acquiror Common Stock and
the record date therefor shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.05 Company Stock Options. At the Effective Time, each
Company Stock Option, whether vested or unvested, exercisable or unexercisable,
without any action on the part of the holder shall be converted into the right
to receive payment of an amount in cash equal to the product of (1) the excess
of the Consideration Per Share over the exercise price per share subject to such
Company Stock Option and (2) the number of Shares subject to such Company Stock
Option payable to the holder of such Company Stock Option at any time during the
period commencing on the date hereof and ending immediately prior to the
Effective Time; provided, that the Company shall be entitled to withhold from
such cash payment any amounts required to be withheld by applicable law. For
purposes of clarity, if the exercise price per share subject to a Company Stock
Option exceeds the Consideration Per Share (i.e., an "underwater" stock option)
then, the holder of such option shall not be entitled to any payment with
respect thereto. Each Company Stock Option to which this paragraph applies will
be cancelled and shall cease to exist by virtue of such payment. For the
purposes of this Section 3.05, "Consideration Per Share" means the product of
(x) the average of the last reported sale prices of Acquiror Common Stock, as
reported by the Toronto Stock Exchange, for the ten Toronto Stock Exchange
trading days immediately preceding the Effective Time (with the last reported
sale price for each such trading day converted to U.S. dollars at the Bank of
Canada Closing Rate in Toronto on such trading day) and (y) the Exchange Ratio.
Prior to the Effective Time the Company shall take all necessary actions,
including obtaining employee consents and resolutions of the Company Board or of
a committee established under a Company Stock Plan, if applicable, to effect the
foregoing.
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ARTICLE IV
Actions Pending the Merger
4.01 Forbearances of the Company. Until the Effective Time (or
the earlier of the termination of this Agreement), except as expressly provided
in this Agreement or the Disclosure Schedule, without the prior written consent
of the Acquiror, the Company will not, and will cause each of its Subsidiaries
not to:
(a) ORDINARY COURSE. Conduct the business of the Company and
its Subsidiaries other than in the ordinary and usual course or, to the
extent consistent therewith, fail to use reasonable efforts to preserve
intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers,
employees and business associates; or, subject to the restriction in
Section 4.01(o)(3), engage in any material new activities or lines of
business or make any material changes to their existing activities or
lines of business.
(b) CAPITAL STOCK. Other than pursuant to Rights Previously
Disclosed and outstanding on the date hereof or pursuant to the Stock
Option Agreement, (1) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of
Company Common Stock or any Rights, (2) permit any additional shares of
Company Common Stock to become subject to new grants of employee or
director stock options, or stock-based employee rights or arrangements,
(3) repurchase, redeem or otherwise acquire, directly or indirectly,
any shares of Company Common Stock, (4) effect any recapitalization,
reclassification, stock split or like change in capitalization, or (5)
enter into, or take any action to cause any holders of Company Common
Stock to enter into, any agreement, understanding or commitment
relating to the right of holders of Company Common Stock to vote any
shares of Company Common Stock, or cooperate in any formation of any
voting trust relating to such shares.
(c) DIVIDENDS, ETC. Make, declare, pay or set aside for
payment any dividend, other than (1) regular quarterly cash dividends
on Company Common Stock in an amount not to exceed $0.34 per share (or
$0.36 per share for dividends payable with respect to periods after the
first quarter of 2001); provided that the Company shall coordinate with
the Acquiror regarding the declaration and payment of any dividends in
respect of the Company Common Stock and the record dates and the
payment dates relating thereto, it being the intention of the Company
and the Acquiror that holders of Company Common Stock shall not receive
two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of Company Common Stock and/or any
shares of Acquiror Common Stock that any such holder receives in
exchange therefor pursuant to the Merger; and (2) dividends from wholly
owned Subsidiaries to the Company or to another wholly owned Subsidiary
of the
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Company, as applicable, on or in respect of, or declare or make any
distribution on any shares of its capital stock or split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.
(d) COMPENSATION; EMPLOYMENT CONTRACTS; ETC. Enter into,
amend, modify, renew or terminate any employment, consulting, severance
or similar Contracts (including the agreements entered into pursuant to
Recital E hereof) with any directors, officers, employees of, or
independent contractors with respect to, the Company or its
Subsidiaries, or grant any salary, wage or other increase or increase
any employee benefit (including incentive or bonus payments), except
(1) for changes that are required by applicable law, (2) to satisfy
Previously Disclosed Contracts existing on the date hereof (as such
Contracts are modified, as applicable, pursuant to the agreements
entered into pursuant to Recital E hereof), (3) for merit-based or
annual salary increases in the ordinary course of business and in
accordance with past practice or (4) for employment arrangements for,
or grants of awards to, newly hired non-executive employees in the
ordinary and usual course of business consistent with past practice
provided that total annual guaranteed compensation for any such newly
hired non-executive employee shall not exceed U.S. $100,000.
(e) BENEFIT PLANS. Enter into, establish, adopt, amend, modify
or terminate any pension, retirement, stock option, stock purchase,
savings, profit sharing, employee stock ownership, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare Contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of
any current or former directors, officers, employees, former employees
of, or independent contractors with respect to, the Company or its
Subsidiaries (or any dependent or beneficiary of any of the foregoing
persons), including taking any action that accelerates the vesting or
exercisability of or the payment or distribution with respect to, stock
options, restricted stock or other compensation or benefits payable
thereunder, except, in each such case, (1) as may be required by
applicable law or (2) to satisfy Previously Disclosed Contracts
existing on the date hereof.
(f) DISPOSITIONS. Except (i) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (ii) for sales of debt
securities or similar investments in the ordinary and usual course of
business consistent with past practice, sell, transfer, mortgage,
lease, encumber or otherwise dispose of or permit the creation of any
Lien (except for a Lien for Taxes not yet due and payable) in respect
of or discontinue any material portion of its assets, business or
properties.
(g) ACQUISITIONS. Except (1) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (2) by way of foreclosures in
satisfaction of debts previously contracted in good faith, in each case
in the ordinary and usual course of business consistent with past
practice, acquire any material amount, taken individually and in the
aggregate, of assets,
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properties or deposits of another person in any one transaction or a
series of related transactions.
(h) GOVERNING DOCUMENTS. Amend the Company Articles, the
Company By-laws or the articles of incorporation or by-laws (or similar
governing documents) of any of the Company's Subsidiaries.
(i) ACCOUNTING METHODS. Implement or adopt any material change
in the accounting principles, practices or methods used by the Company
and its Subsidiaries, other than as may be required by generally
accepted accounting principles.
(j) CONTRACTS. Except in the ordinary course of business
consistent with past practice, enter into or terminate any material
Contract or amend or modify in any material respect any of its existing
material Contracts.
(k) CLAIMS. Settle any claim, action or proceeding, except for
any claim, action or proceeding involving solely money damages in an
amount, individually and in the aggregate for all such settlements, not
more than U.S. $250,000 and which would not reasonably be expected to
establish an adverse precedent or reasonable basis for subsequent
settlements or require material changes in business practices.
(l) RISK MANAGEMENT. Except as required by applicable law or
regulation: (1) implement or adopt any material change in its credit
risk and interest rate risk management and hedging policies, procedures
or practices; (2) fail to follow its existing policies or practices
with respect to managing its exposure to credit and interest rate risk;
or (3) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
(m) INDEBTEDNESS. Other than in the ordinary course of
business (including by way of creation of deposit liabilities, entry
into repurchase agreements, purchases or sales of federal funds,
Federal Home Loan Bank advances, and sales of certificates of deposit)
consistent with past practice, (1) incur any indebtedness for borrowed
money, (2) assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other person or (3)
cancel, release, assign or modify any material amount of indebtedness
of any other person.
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(n) LOANS. (1) Make any loan or advance other than in the
ordinary course of business consistent with lending policies as in
effect on the date hereof or (2) make any commercial real estate loan
or advance in excess of $10,000,000, or any other loan or advance in
excess of $20,000,000; provided that the Company or any of its
Subsidiaries may make any such loan or advance in the event (A) the
Company or any of its Subsidiaries has delivered to the Acquiror or its
designated representative a notice of its intention to make such loan
or advance and such additional information as the Acquiror or its
designated representative may reasonably require and (B) the Acquiror
or its designated representative shall not have reasonably objected to
such loan or advance by giving notice of such objection within five
business days following the actual receipt by the Acquiror of the
applicable notice of intention.
(o) ADVERSE ACTIONS. (1) Take any action reasonably likely to
prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code; (2) subject to Section 6.06,
take any action that is intended or is reasonably likely to result in
(A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (B) any of the conditions to the
Merger set forth in Article VII not being satisfied or (C) a material
breach of any provision of this Agreement; except, in each case, as may
be required by applicable law, or (3) engage in any new line of
business or make any acquisition that would not be permissible for a
United States bank holding company (as defined in the Bank Holding
Company Act of 1956, as amended) or would subject the Acquiror, the
Company or any Subsidiary of either to material regulation by a
Governmental Authority that does not presently regulate such company or
to regulation by a Governmental Authority that is materially different
from current regulation.
(p) TAX ELECTIONS. Make any material election with respect to
Taxes.
(q) COMMITMENTS. Agree or commit to do, or enter into any
Contract regarding, anything that would be precluded by clauses (a)
through (p) without first obtaining the Acquiror's consent.
4.02 Forbearances of the Acquiror. From the date hereof until
the Effective Time, except as expressly contemplated by this Agreement, without
the prior written consent of the Company, the Acquiror will not, and will cause
each of its Subsidiaries not to: (1) take any action reasonably likely to
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code; or (2) take any action that is intended or
is reasonably likely to result in (A) any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect at
any time at or prior to the Effective Time, (B) any of the conditions to the
Merger set forth in Article VII not being satisfied or (C) a material breach of
any provision of this Agreement; except, in each case, as may be required by
applicable law.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, the
Company has delivered to the Acquiror and the Acquiror has delivered to the
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Company a schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
either (a) in response to an express disclosure requirement contained in a
provision hereof or (b) as an exception to one or more representations or
warranties contained in Section 5.03 or 5.04, respectively, or to one or more of
its covenants contained in Article IV; provided that the inclusion of an item in
a Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by the disclosing party that such item (or any
undisclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstance with respect to
the Company or the Acquiror, respectively.
5.02 Standard. No representation or warranty of the Company or
the Acquiror contained in Section 5.03 or 5.04 shall be deemed untrue or
incorrect, and no party hereto shall be deemed to have breached a representation
or warranty, as a consequence of the existence of any fact, event or
circumstance unless such fact, event or circumstance, (a) is not Previously
Disclosed and (b) individually or taken together with all other facts, events or
circumstances that should have been Previously Disclosed with respect to any
representation or warranty contained in Section 5.03 (other than Section
5.03(h)) or 5.04 (other than Section 5.04(h)), has had or is reasonably likely
to have a Material Adverse Effect with respect to the Company or the Acquiror,
respectively.
5.03 Representations and Warranties of the Company. Except as
Previously Disclosed, the Company hereby represents and warrants to the Acquiror
as set forth in its Disclosure Schedules and as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. The Company is duly
organized, validly existing and in good standing as a corporation under
the laws of North Carolina, and is duly qualified to do business and is
in good standing in all the jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires
it to be so qualified.
(b) COMPANY STOCK. As of the date hereof, the authorized
capital stock of the Company consists solely of 100,000,000 shares of
Company Common Stock, of which not more than 39,490,122 shares are
outstanding as of January 25, 2001, and 25,000,000 shares of Company
Preferred Stock, no shares of which are outstanding. The outstanding
shares of Company Stock have been duly authorized and are validly
issued, fully paid and nonassessable, and subject to no preemptive
rights (and were not issued in violation of any preemptive rights).
Except as Previously Disclosed, there are no shares of Company Stock
reserved for issuance, the Company does not have any Rights issued or
outstanding with respect to Company Stock, and the Company does not
have any commitment to authorize, issue or sell any Company Stock or
Rights, except pursuant to this Agreement and the Stock Option
Agreement. The Company has Previously Disclosed a list of each
Compensation Plan under which any shares of capital stock of the
Company or any Rights with respect thereto have been or may be awarded
or issued
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("Company Stock Plans"). As of January 25, 2001, the Company has
outstanding Company Stock Options representing the right to acquire no
more than 3,066,363 shares of Company Common Stock. Except as described
in the immediately preceding sentence, the Company has no Company
Common Stock authorized for issuance pursuant to any Company Stock
Plans. The shares of Company Common Stock issuable pursuant to the
Stock Option Agreement have been duly authorized for issuance by the
Company and, upon any issuance of such shares in accordance with the
terms of the Stock Option Agreement, such shares will be duly
authorized, validly issued, fully paid and nonassessable and free and
clear of any Liens. The Company does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of the
Company on any matter.
(c) SUBSIDIARIES. (1)(A) The Company has Previously Disclosed
a list of all its Subsidiaries together with the jurisdiction of
organization of each such Subsidiary, (B) the Company owns, directly or
indirectly, all the outstanding equity securities of each of its
Subsidiaries, (C) no equity securities of any of its Subsidiaries are
or may become required to be issued (other than to the Company or its
Subsidiaries), (D) there are no contracts, commitments, understandings
or arrangements by which any of such Subsidiaries is or may be bound to
sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to the Company or its Subsidiaries), (E) there
are no contracts, commitments, understandings, or arrangements relating
to its rights to vote or to dispose of such securities (other than to
the Company or its Subsidiaries), and (F) all the equity securities of
each such Subsidiary held by the Company or its Subsidiaries are fully
paid and nonassessable and are owned by the Company or its Subsidiaries
free and clear of any Liens.
(2) The Company has Previously Disclosed, as of the
date hereof, a list of all equity securities it or one of its
Subsidiaries holds involving, in the aggregate, beneficial ownership or
control by the Company or any such Subsidiary of 5% or more of any
class of the issuer's voting securities or 25% or more of any class of
the issuer's securities, including a description of any such issuer and
the percentage of the issuer's voting and/or non-voting securities and,
as of the Effective Time, no additional persons would need to be
included on such a list. The Company has Previously Disclosed a list,
as of the date hereof, of all partnerships, limited liability
companies, joint ventures or similar entities, in which it owns or
controls an equity, partnership or membership interest, directly or
indirectly, and the nature and amount of each such interest, and as of
the Effective Time, no additional persons would need to be included on
such a list.
(3) Each of the Company's Subsidiaries has been duly
organized and is validly existing and in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do
business and in good standing
-17-
in all the jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
(d) CORPORATE POWER. The Company and each of its Subsidiaries
has the requisite power and authority to carry on its business as it is
now being conducted and to own all its properties and assets; and the
Company has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby.
(e) CORPORATE AUTHORITY AND ACTION. (1) The Company has taken
all corporate action necessary in order (A) to authorize the execution
and delivery of, and performance of its obligations under, this
Agreement and the Stock Option Agreement and (B) subject only to
receipt of the approval of the plan of merger contained in this
Agreement by the holders of a majority of the outstanding shares of
Company Common Stock, to consummate the Merger. This Agreement and the
Stock Option Agreement each is a valid and legally binding obligation
of the Company, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(2) The Company has taken all action required to be
taken by it in order to exempt this Agreement, the Stock Option
Agreement and the transactions contemplated hereby from, and this
Agreement, the Stock Option Agreement and the transactions contemplated
hereby each is exempt from, the requirements of (A) any applicable
"moratorium," "control share," "fair price," or other antitakeover laws
and regulation of any state (collectively, "Takeover Laws"), including
Sections 55-9 and 55-9A of the NCBCA and (B) Sections 10.2 and 10.3 of
the Company Articles.
(3) The Company has received the opinion of Keefe,
Bruyette & Woods, Inc., dated the date of this Agreement, to the effect
that, as of the date of this Agreement, the Consideration to be
received in the Merger by the shareholders of the Company is fair to
the shareholders of the Company from a financial point of view.
(f) REGULATORY FILINGS; NO DEFAULTS. (1) No consents or
approvals of, or filings or registrations with, any Governmental
Authority or with any third party are required to be made or obtained
by the Company or any of its Subsidiaries in connection with the
execution, delivery or performance by the Company of this Agreement or
the Stock Option Agreement, or to consummate the Merger or the other
transactions contemplated hereby, except for (A) the filing with the
SEC of the Proxy Statement in definitive form, (B) the filing of
applications and notices, as applicable, with the Federal Reserve
System and the NCCOB with respect to the Merger, (C) the filing of a
notification, if required, and expiration of the related waiting period
under the HSR Act,
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(D) the filing of articles of merger with the Secretary of State of the
State of North Carolina pursuant to the NCBCA and (E) the filings of
applications and notices, as applicable, required to be made pursuant
to the Bank Act (Canada). As of the date hereof, the Company is not
aware of any reason why the approvals of all Governmental Authorities
necessary to permit consummation of the transactions contemplated by
this Agreement will not be received without the imposition of a
condition or requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals,
and expiration of the waiting periods, referred to in the preceding
paragraph and the making of required filings under federal and state
securities laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of
the Company or of any of its Subsidiaries or to which the Company or
any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Company
Articles or the Company By-laws, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or Contract.
(g) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company's Annual
Reports on Form 10-K for the fiscal years ended December 31, 1997, 1998
and 1999, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by the
Company or any of its Subsidiaries subsequent to December 31, 1999
under the Securities Act, or under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the form filed or to be filed (collectively,
the "Company's SEC Documents") with the SEC, as of the date filed, (A)
complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not (or if amended or superseded by a
filing prior to the date of this Agreement, then did not as of the date
of such filing) and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such SEC Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial position of the
Company and its Subsidiaries as of its date, and each of the statements
of income and changes in shareholders' equity and cash flows or
equivalent statements in such SEC Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in shareholders' equity and changes
in cash flows, as the case may be, of the Company and its Subsidiaries
for the periods to which they
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relate, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in
each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(h) ABSENCE OF UNDISCLOSED LIABILITIES AND CHANGES. (1) Except
as disclosed in the Company's SEC Documents filed prior to the date
hereof, none of the Company or its Subsidiaries has any obligation or
liability (contingent or otherwise), that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect with respect to the Company and, since September 30, 2000, on a
consolidated basis the Company and its Subsidiaries have not incurred
any liability other than in the ordinary course of business.
(2) Since September 30, 2000, except for execution of
this Agreement and performance of its obligations hereunder, (A) the
Company and its Subsidiaries have conducted their respective businesses
in the ordinary and usual course consistent with past practice and (B)
no event has occurred or circumstance arisen that, individually or
taken together with all other facts, events and circumstances
(described in any paragraph of Section 5.03 or otherwise), has had or
is reasonably likely to have a Material Adverse Effect with respect to
the Company.
(i) LITIGATION. Except as disclosed in the Company's SEC
Documents filed before the date hereof, no litigation, claim or other
proceeding before any court, arbitrator or Governmental Authority is
pending against the Company or any of its Subsidiaries and, to the
Company's knowledge, no such litigation, claim or other proceeding has
been threatened.
(j) COMPLIANCE WITH LAWS. (1) The Company and each of its
Subsidiaries:
(A) conducts its business in compliance with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such
businesses, including, without limitation, applicable fair
lending laws and other laws relating to discriminatory
business practices;
(B) has all permits, licenses, authorizations, orders
and approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities required in
order to permit them to own or lease their properties and to
conduct their businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the Company's
knowledge, no suspension or cancellation of any of them is
threatened;
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(C) has received, since December 31, 1998, no
notification or communication from any Governmental Authority
(i) asserting that the Company or any of its Subsidiaries is
not in compliance with any of the statutes, regulations, or
ordinances that such Governmental Authority enforces or (ii)
threatening to revoke any license, franchise, permit, or
governmental authorization (nor, to the Company's knowledge,
do grounds for any of the foregoing exist), or (iii)
restricting or disqualifying their activities (except for
restrictions generally imposed by rule, regulation or
administrative policy on banking organizations generally);
(D) is not aware of any pending or threatened
investigation, review or disciplinary proceedings by any
Governmental Authority against the Company, any of its
Subsidiaries or any officer, director or employee thereof;
(E) is not subject to any order or decree issued by,
or a party to any agreement or memorandum of understanding
with, or a party to any commitment letter or similar
undertaking to, or subject to any order or directive by, a
recipient of any supervisory letter from or has adopted any
board resolutions at the request of any Governmental
Authority, or been advised by any Governmental Authority that
it is considering issuing or requesting any such agreement or
other action; and
(F) since December 31, 1998, has timely filed all
reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were
required to be filed under any applicable law, regulation or
rule, with any applicable Governmental Authority
(collectively, the "Company Reports"). As of their respective
dates, the Company Reports complied with the applicable
statutes, rules, regulations and orders enforced or
promulgated by the regulatory authority with which they were
filed.
(2) None of the Company or its Subsidiaries has
engaged (or, with respect to First Greenboro Home Equity, Inc., has
engaged to the knowledge of the Company) in any of the practices listed
in Office of the Comptroller of the Currency Advisory Letter AL 2000-7
as "indications that an institution may be engaging in abusive lending
practices" or as practices that "may suggest the potential for fair
lending violations".
(k) MATERIAL CONTRACTS; DEFAULTS. The Company has Previously
Disclosed a complete and accurate list of all material Contracts to
which the Company or any of its Subsidiaries is a party, including the
following categories:
(1) any Contract that (A) is not terminable at will
both without cost or other liability to the Company or any of
its Subsidiaries and upon notice of ninety (90) days or less
and (B) provides for fees or other
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payments in excess of $100,000 per annum or in excess of
$100,000 for the remaining term of the Contract;
(2) any Contract with a term beyond the Effective
Time under which the Company or any of its Subsidiaries
created, incurred, assumed, or guaranteed (or may create,
incur, assume, or guarantee) indebtedness for borrowed money
(including capitalized lease obligations);
(3) any Contract to which the Company or any of its
Subsidiaries is a party, on the one hand, and under which any
affiliate, officer, director, employee or equity holder of the
Company or any of its Subsidiaries, on the other hand, is a
party or beneficiary;
(4) any Contract with respect to the employment of,
or payment to, any present or former directors, officers,
employees or consultants; and
(5) any Contract involving the purchase or sale of
assets with a book value greater than $100,000 entered into
since December 31, 1999.
Neither the Company nor any of its Subsidiaries nor, to the Company's
knowledge, any other party thereto is in default under any such
Contract and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(l) NON-COMPETITION. Neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or
any other agreement or obligation (1) which limits or purports to limit
in any respect the manner in which, or the localities in which, any
business of the Company or its affiliates is or could be conducted or
the types of business that the Company or its affiliates conducts or
may conduct or (2) which would reasonably be understood to limit or
purport to limit in any respect the manner in which, or the localities
in which, any business of the Acquiror or its affiliates is or could be
conducted or the types of business that the Acquiror or its affiliates
conducts or may conduct.
(m) PROPERTIES. Except as disclosed in the financial
statements filed in its SEC Documents on or before the date hereof, the
Company and its Subsidiaries have good and marketable title, free and
clear of all Liens (other than Liens for current taxes not yet
delinquent, mechanics liens, materialmen liens, or other inchoate
liens) to the properties and assets, tangible or intangible, reflected
in such financial statements as being owned by the Company and its
Subsidiaries as of the dates thereof. All buildings and all fixtures,
equipment, and other property and assets which are material to its
business and are held under leases or subleases by any of the Company
and
-22-
its Subsidiaries are held under valid leases or subleases enforceable
in accordance with their respective terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and to
general equity principles).
(n) EMPLOYEE BENEFIT PLANS. (1) The Company's Disclosure
Schedule contains a complete list of all bonus, vacation, deferred
compensation, commission-based, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock appreciation and stock option plans, all
employment or severance contracts, all medical, dental, disability,
severance, health and life plans, all other employee benefit and fringe
benefit plans, contracts or arrangements and any "change of control" or
similar provisions in any plan, contract or arrangement maintained or
contributed to by the Company or any of its Subsidiaries for the
benefit of current or former officers, employees or directors or the
beneficiaries or dependents of any of the foregoing (collectively, the
"Compensation Plans"), other than plans that are not currently
maintained or contributed to by the Company or any of its Subsidiaries.
(2) With respect to each Compensation Plan, if
applicable, the Company has made available to the Acquiror, true and
complete copies of the existing: (A) Compensation Plan documents and
amendments thereto; (B) trust instruments and insurance contracts; (C)
two most recent Forms 5500 filed with the IRS; (D) most recent
actuarial report and financial statement; (E) most recent summary plan
description; (F) forms filed with the PBGC (other than for premium
payments); (G) most recent determination letter issued by the IRS; (H)
any Form 5310 or Form 5330 filed with the IRS; (I) most recent
nondiscrimination tests performed under ERISA and the Code (including
401(k) and 401(m) tests); and (J) documentation relating to outstanding
loans made to the Company's employee stock ownership plan. Each Form
5500, actuarial report and financial statement referred to in the
preceding sentence accurately reflects the contributions, liabilities
and funding levels of the applicable Compensation Plan.
(3) Each of the Compensation Plans has been
administered and operated in accordance with the terms thereof and with
applicable law, including ERISA, the Code and the Securities Act. Each
of the Compensation Plans which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which
is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS, and the Company
is not aware of any circumstances that would likely result in the
revocation or denial of any such favorable determination letter. None
of the Company, any of its Subsidiaries or an Indemnified Person has
engaged in any transaction with respect to any Compensation Plan that
has subjected, or (assuming the taxable period with respect to the
transaction expired as of the date hereof) could subject the Company or
any of its Subsidiaries to a tax or penalty imposed by either Section
4975 of the Code or
-23-
Section 502 of ERISA in an amount which would be material. There is no
pending or, to the Company's knowledge, threatened litigation or
governmental audit, examination or investigation relating to the
Company's Compensation Plans. There are no outstanding loans made to
the Company's employee stock ownership plan.
(4) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of
its Subsidiaries with respect to any "single-employer plan" (within the
meaning of Section 4001 (a)(15) of ERISA) or Multiemployer Plan
currently or formerly maintained or contributed to by any of them, or
the single-employer plan or Multiemployer Plan of any entity (an "ERISA
Affiliate") which is considered one employer with the Company under
Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an
"ERISA Affiliate Plan"). No notice of a "reportable event," within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived or extended, other than pursuant to
PBGC Reg. Section 4043.66, has been required to be filed for any
Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and, to the
Company's knowledge, no condition exists that presents a material risk
that such proceedings will be instituted. The Company and its
Subsidiaries have not incurred and do not expect to incur any
withdrawal liability with respect to a Multiemployer Plan under
Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate).
(5) All contributions, premiums and payments required
to have been made under the terms of any of the Compensation Plans or
applicable law have been timely made or reflected in the Company's SEC
Documents. Neither any of the Pension Plans nor ERISA Affiliate Plans
has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. None of
the Company, any of its Subsidiaries or any ERISA Affiliate has
provided, or is required to provide, security to any Pension Plan or
any ERISA Affiliate Plan pursuant to Section 401(a)(29) or Section
412(n) of the Code.
(6) Under each Pension Plan which is a
single-employer plan, as of the last day of the most recent plan year
ended prior to the date hereof, the actuarially determined present
value of all "benefit liabilities," within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such plan by
more than $10 million. Under each of the Pension Plans, there has been
no adverse change in the financial condition of any Pension Plan (with
respect to either assets or benefits) since the last day of the most
recent plan year.
(7) No Compensation Plan provides benefits, including
death or medical benefits, with respect to any employees or former
employees of the
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Company or any of its Subsidiaries (or their spouses, beneficiaries, or
dependents) beyond the retirement or other termination of service of
any such employee other than (A) coverage mandated by Part 6 of Title I
of ERISA or Section 4980B of the Code, (B) retirement, death or
disability benefits under any Pension Plan, (C) disability benefits
under any Compensation Plan which is an employee welfare benefit plan
(as defined under Section 3(1) of ERISA) that have been fully provided
for by insurance or otherwise, or (D) benefits in the nature of
severance pay under any Compensation Plan. The Company and its
Subsidiaries may amend or terminate any Compensation Plan which
provides post-retirement or termination of employment benefits at any
time without incurring any liability thereunder (other than liability
for vested, accrued benefits under any Compensation Plan as of the date
of such amendment or termination). There has been no communication to
employees, former employees or their spouses, beneficiaries or
dependents by the Company or any of its Subsidiaries that promised or
guaranteed such employees retiree health or life insurance or other
retiree death benefits on a permanent basis or promised or guaranteed
that any such benefits could not be modified, eliminated or terminated.
(8) There has been no amendment to, announcement by
the Company or any of its Subsidiaries relating to, or change in
employee participation or coverage under, any Compensation Plan which
would increase the expense of maintaining such Plan above the level of
the expense incurred therefor for the most recent fiscal year. Neither
the execution of this Agreement, shareholder approval of this Agreement
nor the consummation of the transactions contemplated hereby will (w)
entitle any employees of the Company or any of its Subsidiaries to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (x) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of
the Compensation Plans, (y) cause the Company or any of its
Subsidiaries to record additional compensation expense on its income
statement with respect to any outstanding stock option or other
equity-based award or (z) result in payments under any of the
Compensation Plans which would not be deductible under Section 162(m)
or Section 280G of the Code.
(9) Neither the Company nor any of its Subsidiaries
maintains any compensation plans, programs or arrangements the payments
under which are or would not reasonably be expected to be deductible as
a result of the limitations under Section 162(m) of the Code and the
regulations issued thereunder.
(10) The retirement or disability benefit
historically paid pursuant to each Supplemental Executive Retirement
Agreement has been calculated based on the participant's base-salary
and annual performance
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bonuses paid to the participant, including amounts voluntarily deferred
by a participant.
(o) LABOR MATTERS. Each of the Company and its Subsidiaries is
in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including, without limitation, the Immigration Reform and
Control Act, any such laws respecting employment discrimination,
disability rights or benefits, equal opportunity, affirmative action,
workers' compensation, employee benefits, severance payments, labor
relations, employee leave issues, wage and hour standards, occupational
safety and health requirements and unemployment insurance and related
matters. Neither the Company nor any of its Subsidiaries is a party to
or is bound by any collective bargaining Contract or understanding with
a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning
of the National Labor Relations Act) or seeking to compel the Company
or any such Subsidiary to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other
labor dispute involving it or any of its Subsidiaries pending or, to
the Company's knowledge, threatened, nor is the Company aware of any
activity involving it or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other
organizational activity.
(p) ENVIRONMENTAL MATTERS. (1) The Company and each of its
Subsidiaries has complied with applicable Environmental Laws; (2) to
the Company's knowledge, no property (including buildings and any other
structures) currently or formerly owned or operated by the Company or
any of its Subsidiaries or in which the Company or any of its
Subsidiaries has a Lien, has been contaminated with, or has had any
release of, any Hazardous Substance; (3) neither the Company nor any of
its Subsidiaries could be deemed the owner or operator under any
Environmental Law of any property in connection with any Loans or in
which it has currently or formerly held a Lien or security interest;
(4) neither the Company nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any
other third-party property; (5) neither the Company nor any of its
Subsidiaries has received any notice, demand letter, claim or request
for information alleging any violation of, or liability under, any
Environmental Law; (6) neither the Company nor any of its Subsidiaries
is subject to any order, decree, injunction or other agreement with any
Governmental Authority or any third party relating to any Environmental
Law; (7) to the Company's knowledge, there are no other circumstances
or conditions involving the Company or any of its Subsidiaries, any
currently or formerly owned or operated property, or any Lien held by
the Company or any of its Subsidiaries (including the presence of
asbestos, underground storage tanks, contamination, polychlorinated
biphenyls or gas station sites) that would reasonably be expected to
result in any claims, liability or investigations or result in any
restrictions on the ownership, use, or transfer of
-26-
any property pursuant to any Environmental Law; and (8) the Company has
made available to the Acquiror copies of all environmental reports,
studies, sampling data, correspondence, filings and other environmental
information in its possession or reasonably available to it relating to
the Company, any of its Subsidiaries, any currently or formerly owned
or operated property or any property in which the Company or any of its
Subsidiaries has held a Lien.
(q) TAX MATTERS. (1) All Tax Returns that are required to be
filed with respect to the Company or any of its Subsidiaries, have been
or will be timely filed, or requests for extensions have been timely
filed and have not expired; (2) all Tax Returns filed by the Company
and its Subsidiaries are complete and accurate; (3) all Taxes shown to
be due and payable (without regard to whether such Taxes have been
assessed) on such Tax Returns (or, with respect to Tax Returns for
which an extension has been timely filed, will be required to be shown
as due and payable when such Tax Returns are filed) have been paid or
adequate reserves have been established for the payment of such Taxes;
(4) all state and federal income Tax Returns referred to in clause (1)
have been examined by the Internal Revenue Service or the appropriate
state taxing authority or the period for assessment of the Taxes for
which such return has been filed has expired; (5) no audit or
examination or refund litigation with respect to any such Tax Return is
pending or, to the Company's knowledge, has been threatened; (6) all
deficiencies asserted or assessments made as a result of any
examination of a Tax Return of the Company or any of its Subsidiaries,
have been paid in full or are being contested in good faith; (7) no
waivers of statute of limitations have been given by or requested with
respect to any Taxes of the Company or its Subsidiaries for any
currently open taxable period; (8) the Company and each of its
Subsidiaries has in its respective files all Tax Returns that it is
required to retain in respect of information reporting requirements
imposed by the Code or any similar foreign, state or local law; (9) the
Company and its Subsidiaries have never been a member of an affiliated,
combined, consolidated or unitary Tax group for purposes of filing any
Tax Return (other than a consolidated group of which the Company was
the common parent); (10) no closing agreements, private letter rulings,
technical advice memoranda or similar agreement or rulings have been
entered into or issued by any taxing authority with respect to the
Company or any of its Subsidiaries; (11) no tax is required to be
withheld pursuant to Section 1445 of the Code as a result of the
transfer contemplated by this Agreement; (12) the Company and its
Subsidiaries are not bound by any tax indemnity, tax sharing or tax
allocation agreement or arrangement; and (13) all Taxes that the
Company or any Subsidiary is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent
required by applicable law, have been paid to the proper Governmental
Authority or other person.
(r) RISK MANAGEMENT; ALLOWANCE FOR LOAN LOSSES. (1) All swaps,
caps, floors, option agreements, futures and forward contracts and
other similar risk management arrangements, whether entered into for
the Company's own account, or for the account of one or more of the
Company's Subsidiaries or
-27-
their customers, were entered into (1) in accordance with prudent
business practices and all applicable laws, rules, regulations and
regulatory policies and (2) with counterparties believed to be
financially responsible at the time; and each of them constitutes the
valid and legally binding obligation of the Company or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect. Neither
the Company nor its Subsidiaries, nor to the Company's knowledge any
other party thereto, is in breach of any of its obligations under any
such agreement or arrangement.
(2) The allowances for loan losses reflected on the
consolidated balance sheets included in the Company's SEC Documents
are, in the reasonable judgment of the Company's management, adequate
as of their respective dates under the requirements of generally
accepted accounting principles and applicable regulatory requirements
and guidelines.
(s) BOOKS AND RECORDS. The books and records of the Company
and its Subsidiaries have been properly and accurately maintained, and
there are no inaccuracies or discrepancies contained or reflected
therein.
(t) ACCOUNTING CONTROLS. Each of the Company and its
Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances, in the judgment
of the Board of Directors of the Company, that (a) all material
transactions are executed in accordance with management's general or
specific authorization; (b) all material transactions are recorded as
necessary to permit the preparation of financial statements in
conformity with generally accepted accounting principals consistently
applied with respect to any criteria applicable to such statements, (c)
access to the material property and assets of the Company and its
Subsidiaries is permitted only in accordance with management's general
or specific authorization; and (d) the recorded accountability for
items is compared with the actual levels at reasonable intervals and
appropriate action is taken with respect to any differences.
(u) INSURANCE. The Company has made available to the Acquiror
all of the insurance policies, binders, or bonds maintained by or for
the benefit of the Company or its Subsidiaries ("Insurance Policies")
or their representatives. The Company and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the
management of the Company reasonably has determined to be prudent in
accordance with industry practices. All of the Insurance Policies are
in full force and effect; the Company and its Subsidiaries are not in
default thereunder; and all claims thereunder have been filed in due
and timely fashion.
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(v) NO BROKERS. No action has been taken by the Company that
would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other, like payment with respect
to the transactions contemplated by this Agreement, except that the
Company has employed Credit Suisse First Boston Corporation and Keefe
Bruyette & Woods, Inc. in connection with this transaction on
Previously Disclosed terms.
(w) INTELLECTUAL PROPERTY. The Company and its Subsidiaries
own or have the right to use all material Intellectual Property Rights
necessary or required for the operation of their business as currently
conducted (collectively, "Company IP Rights"), and have the right to
use, license, sublicense or assign the same without material liability
to, or any requirement of consent from, any other person or party. The
Company's use of the Company IP Rights does not infringe any
Intellectual Property Rights of any person; there is no pending or, to
the knowledge of the Company, threatened litigation, adversarial
proceeding, administrative action or other challenge or claim relating
to any Company IP Rights; to the knowledge of the Company, there is
currently no infringement by any person of any Company IP Rights; and
the Company IP Rights owned, used or possessed by the Company and its
Subsidiaries are sufficient and adequate to conduct the business of the
Company and its Subsidiaries to the full extent as such business is
currently conducted.
(x) DISCLOSURE. The information Previously Disclosed or
otherwise provided to the Acquiror in connection with this Agreement,
when taken together with the representations and warranties contained
herein, does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances in
which they are being made, not misleading. The copies of all documents
furnished to the Acquiror hereunder are true and complete.
5.04 Representations and Warranties of the Acquiror. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, the Acquiror hereby represents and warrants to the
Company as set forth in its Disclosure Schedule and as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. The Acquiror is duly
organized, validly existing and in good standing under the laws of
Canada. Following its formation, Newco will be duly organized, validly
existing and in good standing under the laws of North Carolina. The
Acquiror is, and Newco will be, duly qualified to do business and in
good standing in the jurisdictions where the ownership or leasing of
property or assets or the conduct of business requires such
qualification.
-29-
(b) ACQUIROR STOCK. (1) As of the date hereof, the authorized
capital of the Acquiror consists solely of an unlimited number of
shares of Acquiror Common Stock which may be issued for a maximum
aggregate consideration of C$10,000,000,000, an unlimited number of
shares of Acquiror First Preferred Stock which may be issued for a
maximum aggregate consideration of C$5,000,000,000 and an unlimited
number of shares of Acquiror Second Preferred Stock which may be issued
for a maximum aggregate consideration of C$5,000,000,000. As of October
31, 2000 not more than 602,398,000 shares of Acquiror Common Stock, not
more than 65,500,000 shares of Acquiror First Preferred Stock and no
shares of Acquiror Second Preferred Stock were issued and outstanding.
Except as Previously Disclosed, there are no shares of Acquiror Stock
reserved for issuance, the Acquiror does not have any Rights issued or
outstanding with respect to Acquiror Stock, and the Acquiror does not
have any commitment to authorize, issue or sell any Acquiror Stock or
Rights, except pursuant to this Agreement. The number of shares of
Acquiror Common Stock which are issuable and reserved for issuance upon
exercise of any employee or director stock options to purchase shares
of Acquiror Common Stock, and the number and terms of any Rights, as of
October 31, 2000, are Previously Disclosed in the Acquiror's Disclosure
Schedule.
(2) The shares of Acquiror Common Stock to be issued
as Consideration, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(c) SUBSIDIARIES. Each of the Acquiror's Significant
Subsidiaries has been duly organized and is validly existing and in
good standing under the laws of the jurisdiction of its organization,
and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.
(d) CORPORATE POWER. The Acquiror and each of its Significant
Subsidiaries each has the requisite power and authority to carry on its
business as it is now being conducted and to own all its properties and
assets; the Acquiror has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated
hereby.
(e) CORPORATE AUTHORITY AND ACTION. The Acquiror has, and
Newco will have, taken all corporate action necessary in order to
authorize the execution and delivery of, and performance of its
obligations under, this Agreement and, in the case of the Acquiror, the
Stock Option Agreement, and to consummate the Merger. Each of this
Agreement and, in the case of the Acquiror, the Stock Option Agreement,
is a valid and legally binding agreement of the Acquiror and, upon its
execution by Newco, will be a valid and legally binding agreement of
Newco, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
-30-
reorganization, and similar laws of general applicability relating to
or affecting creditors' rights or by general equity principles).
(f) REGULATORY APPROVALS; NO DEFAULTS. (1) No consents or
approvals of, or filings or registrations with, any Governmental
Authority or with any third party are required to be made or obtained
by the Acquiror or any of its Subsidiaries in connection with the
execution, delivery or performance by the Acquiror of this Agreement or
the Stock Option Agreement or to consummate the Merger or the other
transactions contemplated hereby except for (A) the filing of
applications and notices, as applicable, with the Federal Reserve
System and the NCCOB with respect to the Merger; (B) the filing of a
notification, and expiration of the related waiting period under the
HSR Act, (C) approval of the listing on the NYSE of the Acquiror Common
Stock to be issued in the Merger; (D) the filing and declaration of
effectiveness by the SEC of the Registration Statement; (E) the filing
of articles of merger with the Secretary of State of the State of North
Carolina pursuant to the NCBCA; (F) approval by the Minister of Finance
and the Office of the Superintendent of Financial Institutions under
the Bank Act (Canada), and (G) such filings as are required to be made
or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
Acquiror Common Stock in the Merger. As of the date hereof, the
Acquiror is not aware of any reason why the approvals of all
Governmental Authorities necessary to permit consummation of the
transactions contemplated hereby will not be received without the
imposition of a condition or requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals,
and expiration of the waiting periods, referred to in the preceding
paragraph and the making of all required filings under federal and
state securities laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of
the Acquiror or of any of its Subsidiaries or to which the Acquiror or
any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the articles
of incorporation or by-laws (or similar governing documents) of the
Acquiror or any of its Subsidiaries, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Acquiror's Annual
Reports on Form 40-F for the fiscal years ended October 31, 1998, 1999
and 2000, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by the
Acquiror or any of its Subsidiaries subsequent to October 31, 1999
under the Securities Act, or
-31-
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the
form filed or to be filed (collectively, the "Acquiror's SEC
Documents") with the SEC, as of the date filed, (A) complied or will
comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case
may be, and (B) did not (or if amended or superseded by a filing prior
to the date of this Agreement, then did not as of the date of such
filing) and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such SEC Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial position of the
Acquiror and its Subsidiaries as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows
or equivalent statements in such SEC Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in shareholders' equity and changes
in cash flows, as the case may be, of the Acquiror and its Subsidiaries
for the periods to which they relate, in each case in accordance with
generally accepted accounting principles in Canada, consistently
applied during the periods involved, except in each case as may be
noted therein, subject to normal year-end audit adjustments in the case
of unaudited statements.
(h) ABSENCE OF UNDISCLOSED LIABILITIES AND CHANGES. (1) Except
as disclosed in the Acquiror's SEC Documents filed prior to the date
hereof, none of the Acquiror or its Subsidiaries has any obligation or
liability (contingent or otherwise), that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect with respect to the Acquiror.
(2) Since October 31, 2000, (A) the Acquiror and its
Subsidiaries have conducted their respective businesses in the ordinary
and usual course consistent with past practice and (B) no event has
occurred or circumstance arisen that, individually or taken together
with all other facts, events and circumstances (described in any
paragraph of Section 5.04 or otherwise), has had or is reasonably
likely to have a Material Adverse Effect with respect to the Acquiror.
(i) NO BROKERS. No action has been taken by the Acquiror that
would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other, like payment with respect to
the transactions contemplated by this Agreement, except that the Acquiror
has employed Credit Suisse First Boston Corporation in connection with
this transaction.
(j) INTERIM OPERATIONS OF NEWCO. Newco will be formed solely
for the purpose of engaging in the transactions contemplated hereby and
will not engage in any business other than in connection with the
transactions contemplated by this Agreement.
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(k) DISCLOSURE. The information Previously Disclosed or
otherwise provided to the Company in connection with this Agreement does
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein,
in the light of the circumstances in which they are being made, not
misleading. The copies of all documents furnished to the Company hereunder
are true and complete.
(l) CERTAIN TREASURY REGULATION REQUIREMENTS. The Acquiror
satisfies all the requirements of the "active trade or business test"
under Treasury Regulationss.1.367(a)-3(c)(3).
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each of the Company and the Acquiror agrees to use
its reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
(b) Without limiting the generality of Section 6.01(a), the
Company agrees to use its reasonable best efforts to obtain the consent or
approval of all persons party to a Contract with the Company or any of its
Subsidiaries, to the extent such consent or approval is required in order to
consummate the Merger or for the Surviving Corporation to receive the benefits
of such Contract; provided that in no event shall the Company be deemed to have
failed to satisfy the condition set forth in 7.03(b) solely on the basis that
such consents or approvals have not been obtained as of the Closing Date.
6.02 Shareholder Approvals. The Company agrees to take, in
accordance with applicable law, applicable stock exchange rules, the Company
Articles and the Company By-Laws, all action necessary to convene an appropriate
meeting of shareholders of the Company to consider and vote upon the approval of
this Agreement and any other matters required to be approved by the Company's
shareholders for consummation of the Merger and the transactions contemplated
hereby (including any adjournment or postponement, the "Company Meeting"), and
to solicit shareholder approval, as promptly as practicable after the date
hereof. The Company Board has adopted a resolution contemplated by NCBCA ss.
55-11-03, recommending that the shareholders approve this Agreement (and will
keep such resolution in effect) and take any other action required to permit
consummation of the transactions contemplated hereby. The obligation of the
Company to hold the Company Meeting shall not be affected by any Acquisition
Proposal or other event or circumstance.
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6.03 Registration Statement. (a The Acquiror agrees to prepare
a registration statement on Form F-4 (the "Registration Statement"), to be filed
by the Acquiror with the SEC in connection with the issuance of Acquiror Common
Stock in the Merger (including the proxy statement and prospectus and other
proxy solicitation materials of the Company constituting a part thereof (the
"Proxy Statement") and all related documents). The Company agrees to cooperate,
and to cause its Subsidiaries to cooperate, with the Acquiror, its counsel and
its accountants, in preparation of the Registration Statement and the Proxy
Statement; and, provided that the Company and its Subsidiaries have cooperated
as required above, the Acquiror agrees to file the Proxy Statement in
preliminary form with the SEC as promptly as reasonably practicable, and to file
the Registration Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Proxy Statement are resolved.
Each of the Company and the Acquiror agrees to use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof. The
Acquiror also agrees to use all reasonable best efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement. The Company agrees to furnish
to the Acquiror all information concerning the Company, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of the Company and the Acquiror agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied by
it for inclusion or incorporation by reference in (1) the Registration Statement
will, at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(2) the Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to shareholders and at the time of the Company Meeting, contain
any untrue statement which, at the time and in the light of the circumstances
under which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any earlier
statement in the Proxy Statement or any amendment or supplement thereto. Each of
the Company and the Acquiror further agrees that if it shall become aware prior
to the Effective Time of any information furnished by it that would cause any of
the statements in the Proxy Statement to be false or misleading with respect to
any material fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform the other party
thereof and to take the necessary steps to correct the Proxy Statement.
(c) The Acquiror agrees to advise the Company, promptly after
the Acquiror receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification of the
Acquiror Stock for offering or sale in any jurisdiction, of the initiation or
threat of any proceeding for any such
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purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.04 Press Releases. The initial press release concerning the
Merger and the other transactions contemplated by this Agreement and the Stock
Option Agreement shall be a joint press release in such form agreed to by the
parties, and thereafter each of the Company and the Acquiror agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby (except for any release or statement that, in the written
opinion of outside counsel to the Company or the Acquiror, as the case may be,
is required by law or regulation and as to which the Company or the Acquiror, as
the case may be, has used its best efforts to discuss with the other in advance,
provided that such release or statement has not been caused by, or is not the
result of, a previous disclosure by or at the direction of the Company or the
Acquiror, as the case may be, or any of its representatives that was not
permitted by this Agreement).
6.05 Access; Information. (a Upon reasonable notice and
subject to applicable laws relating to the exchange of information, the Company
shall afford the Acquiror and its officers, employees, counsel, accountants and
other authorized representatives, such access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, credit files, tax returns and work papers of
independent auditors), properties, personnel and to such other information as it
may reasonably request and, during such period, the Company shall furnish
promptly (1) a copy of each material report, schedule and other document filed
by it pursuant to the requirements of federal or state securities or banking
laws, and (2) all other information concerning its business, properties and
personnel as the other may reasonably request.
(b) Each of the Company and the Acquiror agrees that it will
not, and will cause its representatives not to, use any information obtained
pursuant to this Section 6.05 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. Subject to the requirements of
law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 6.05 unless such information (1) was already known to such party, (2)
becomes available to such party from other sources not known by such party to be
bound by a confidentiality obligation, (3) is disclosed with the prior written
approval of the party to which such information pertains or (4) is or becomes
readily ascertainable from published information or trade sources. In the event
that this Agreement is terminated or the transactions contemplated by this
Agreement shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto to be returned to the party which furnished the
same, or at the other party's request, destroyed.
(c) No investigation by either party of the business and
affairs of the other shall affect or be deemed to modify or waive any
representation, warranty,
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covenant or agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this Agreement.
6.06 Acquisition Proposals. The Company agrees that it shall
not, and shall cause its Subsidiaries and its and its Subsidiaries'
representatives not to, solicit or encourage inquiries or proposals with respect
to, or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating to, any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving the Company or any of its Subsidiaries or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets or deposits of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement or the
Stock Option Agreement (any of the foregoing, an "Acquisition Proposal");
provided, that nothing contained in this Agreement shall prevent the Company
Board from (i) making any disclosure to its shareholders if, in the good faith
judgment of the Company Board, failure so to disclose would be inconsistent with
its obligations under applicable law; (ii) until the date of the Company
Meeting, providing (or authorizing the provision of) information to, or engaging
in (or authorizing) such discussions or negotiations with, any person who has
made a bona fide written Acquisition Proposal received after the date hereof
which did not result from a breach of this Section 6.06; or (iii) recommending
such an Acquisition Proposal to its shareholders if and only to the extent that,
in the case of actions referred to in clause (ii) or (iii), (x) such Acquisition
Proposal is a Superior Proposal, (y) the Company Board, after having consulted
with and considered the advice of outside counsel to the Company Board,
determines in good faith that providing such information or engaging in such
negotiations or discussions, or making such recommendation is required in order
to discharge the directors' fiduciary duties in accordance with the NCBCA and
(z) the Company receives from such person a confidentiality agreement
substantially in the form of the Confidentiality Agreement. For purposes of this
Agreement, a "Superior Proposal" means any Acquisition Proposal by a third party
on terms that the Company Board determines in its good faith judgment, after
receiving the advice of its financial advisors (whose advice shall be
communicated to the Acquiror), to be more favorable from a financial point of
view to its shareholders than the Merger and the other transactions contemplated
hereby, after taking into account the likelihood of consummation of such
transaction on the terms set forth therein, taking into account all legal,
financial (including the financing terms of any such proposal), regulatory and
other aspects of such proposal and any other relevant factors permitted under
applicable law, after giving the Acquiror at least five business days to respond
to such third-party Acquisition Proposal once the Board has notified the
Acquiror that in the absence of any further action by the Acquiror it would
consider such Acquisition Proposal to be a Superior Proposal, and then taking
into account any amendment or modification to this Agreement proposed by the
Acquiror. The Company also agrees immediately to cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than the Acquiror, with respect to
any of the foregoing. The Company shall promptly (within 24 hours) advise the
Acquiror following the receipt by it of any Acquisition Proposal and the
material terms thereof (including the identity of
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the person making such Acquisition Proposal), and advise the Acquiror of any
developments (including any change in such terms) with respect to such
Acquisition Proposal promptly upon the occurrence thereof.
Nothing contained in this Section 6.06 or any other provision
of this Agreement will prohibit the Company or the Company Board from notifying
any third party that contacts the Company on an unsolicited basis after the date
hereof concerning an Acquisition Proposal of the Company's obligations under
this Section 6.06.
6.07 Affiliate Agreements. Not later than the 15th day prior
to the mailing of the Proxy Statement, the Company shall deliver to the Acquiror
a schedule of each person that, to the Company's knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an "affiliate"
of it (each, a "Company Affiliate") as that term is used in Rule 145 under the
Securities Act. The Company agrees to use its reasonable best efforts to cause
each person who may be deemed to be a Company Affiliate to execute and deliver
to the Company and the Acquiror on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit D.
6.08 Takeover Laws. No party shall knowingly take any action
that would cause the transactions contemplated by this Agreement to be subject
to requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.09 No Rights Triggered. The Company shall take all
reasonable steps necessary to ensure that the entering into of this Agreement
and the consummation of the transactions contemplated hereby and any other
action or combination of actions, or any other transactions contemplated hereby,
do not and will not result in the grant of any rights to any person (a) under
the Company Articles or the Company By-Laws or (b) under any material Contract
to which it or any of its Subsidiaries is a party except, in each case, as
contemplated by this Agreement and the Stock Option Agreement.
6.10 NYSE Listing. The Acquiror shall take all reasonable
steps necessary to ensure the listing, prior to the Effective Time, on the NYSE,
subject to official notice of issuance, the shares of Acquiror Common Stock to
be issued to the holders of Company Common Stock in the Merger.
6.11 Regulatory Applications. (a The Acquiror and the Company
and their respective Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties and Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement. The Acquiror shall have the right to review in
advance, and to the extent
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practicable to consult with the Company, subject to applicable laws relating to
the exchange of information, with respect to, all material written information
submitted to any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. The Company shall have the
right to review in advance, and to the extent practicable to consult with the
Acquiror, subject to all applicable laws relating to the exchange of
information, with respect to, all material written information submitted to any
third party or any Governmental Authority, in connection with the transactions
contemplated by this Agreement, that is not confidential. In exercising the
foregoing rights, the Acquiror and the Company agree to act reasonably and as
promptly as practicable. Each of the Acquiror and the Company agrees that it
will consult with the other party hereto with respect to the obtaining of all
material consents, registrations, approvals, permits and authorizations of all
third parties and Governmental Authorities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party will keep the
other party apprised of the status of material matters relating to completion of
the transactions contemplated hereby.
(b) Each of the Acquiror and the Company agrees, upon request,
to furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with any filing, notice or
application made by or on behalf of such other party or any of its Subsidiaries
to any third party or Governmental Authority.
6.12 Indemnification. (a) Following the Effective Time and for
a period of six years thereafter, the Acquiror shall, or shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former directors, officers and employees of the Company and its Subsidiaries
(each, an "Indemnified Party") against all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent that the Company is
permitted to indemnify its directors, officers and employees under applicable
law, the Company Articles and the Company By-Laws as in effect on the date
hereof (and the Acquiror shall, or shall cause the Surviving Corporation to,
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification); provided that any determination
required to be made with respect to whether such an officer's or director's
conduct complies with the standards set forth under the NCBCA, the Company
Articles and the Company By-Laws shall be made by independent counsel reasonably
acceptable to both the Indemnified Party and the Surviving Corporation.
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(b) For a period of three years from the Effective Time, the
Acquiror shall use its reasonable best efforts to provide (or cause the
Surviving Corporation to provide) that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers and
directors of the Company or any of its Subsidiaries (determined as of the
Effective Time) with respect to claims against such directors and officers
arising from facts or events which occurred before the Effective Time, which
insurance shall contain at least the same coverage and amounts, and contain
terms and conditions no less advantageous, as that coverage currently provided
by the Company; provided, however, that in no event shall the Acquiror be
required to expend more than twice the current amount spent by the Company (the
"Insurance Amount") to maintain or procure such directors' and officers'
insurance coverage; provided, further, that if the Acquiror is unable to
maintain or obtain the insurance called for by this Section 6.12(b), the
Acquiror shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount; provided, further, that
officers and directors of the Company or any Subsidiary may be required to make
application and provide customary representations and warranties to the
Acquiror's insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification
under Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify the Acquiror thereof;
provided that the failure so to notify shall not affect the obligations of the
Acquiror under Section 6.12(a) unless and to the extent that the Acquiror is
actually prejudiced as a result of such failure. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (1) the Acquiror or the Surviving Corporation shall have the
right to assume the defense thereof and the Acquiror shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Acquiror or the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues that raise conflicts of interest between the Acquiror or
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Acquiror or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Acquiror shall be obligated pursuant to this paragraph (c) to
pay for only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (2) the Indemnified Parties will cooperate
in the defense of any such matter and (3) the Acquiror shall not be liable for
any settlement effected without its prior written consent, which consent shall
not be unreasonably withheld; and provided, further, that the Acquiror shall not
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
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(d) If the Acquiror or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of the Acquiror shall
assume the obligations set forth in this Section 6.12.
6.13 Accountants' Letters. The Company shall use its
reasonable best efforts to cause to be delivered to the Acquiror, and the
Acquiror's directors and officers who sign the Registration Statement, letters
of PricewaterhouseCoopers LLP, independent auditors, dated a date shortly prior
to the Closing Date, and addressed to the Acquiror, and such directors and
officers, in form and substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Accounting Standards No.
72.
6.14 Notification of Certain Matters. Each of the Company and
the Acquiror shall give prompt notice to the other of any fact, event or
circumstance known to it that (1) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect with respect to it or (2) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
6.15 Employee Benefits. (a) The Acquiror agrees to permit or
cause the Company or its Subsidiaries to take appropriate action to honor all
Compensation Plans in accordance with their terms. The Acquiror agrees that,
except as otherwise specifically provided, the employee benefit plans maintained
by the Company and/or its Subsidiaries as of the date hereof, will continue
until at least December 31, 2002. Thereafter, the employees of the Company and
its Subsidiaries who are employed by the Company and its Subsidiaries on or
before the Effective Time will be provided employee pension, welfare and other
benefits, fringes, and perquisites that are generally comparable in the
aggregate to those provided by the Acquiror to similarly situated employees of
the Acquiror and its Subsidiaries. The Acquiror will cause each employee benefit
plan of the Acquiror and its Subsidiaries in which employees of the Company and
its Subsidiaries are eligible to participate to take into account for purposes
of eligibility and vesting thereunder, but not for purposes of benefit accrual,
the service of such employees with the Company and its Subsidiaries as if such
service were with the Acquiror and its Subsidiaries, to the same extent that
such service was credited under a comparable plan of the Acquiror and its
Subsidiaries. Employees of the Company and its Subsidiaries shall not be subject
to any waiting periods or pre-existing condition limitations under the medical,
dental and health plans of the Acquiror or its Subsidiaries in which they are
eligible to participate. Employees of the Company and its Subsidiaries will
retain credit for unused sick leave and vacation pay which has been accrued as
of the Effective Time and for purposes of determining the entitlement of such
employees to sick leave and vacation pay following the Effective Time, the
service of such employees with the Company and its Subsidiaries shall be treated
as if such service was with the Acquiror and its Subsidiaries.
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(b) The Company and its Subsidiaries will comply with the
terms of the relevant Compensation Plan with respect to the voting of any
Company Common Stock held by any such Plan. As mutually agreed by the Company
and the Acquiror, the Company's Employee Stock Ownership Plan feature of the
Company's 401(k) Plan may be terminated, amended, or discontinued as of the
Effective Time in accordance with the terms of the Plan and the requirements of
applicable law.
(c) As soon as practicable following the date hereof, the
Company will grant retention bonus awards to the key employees designated by the
Acquiror, on terms, in form and in amounts satisfactory to the Acquiror.
(d) The Company shall freeze additional benefit accrual in its
defined benefit pension plan by resolution of the Company Board and all
necessary plan amendments, at least fifteen days prior to the Closing Date. The
Company shall also make such other amendments as are necessary to effect the
changes set forth on Company Disclosure Schedule 401(e) with respect to
retirement plans.
(e) Prior to the Closing Date, the Company shall use its best
efforts to take the actions set forth on the Company Disclosure Schedule Section
4.01(e) with respect to Supplemental Executive Retirement Plan Agreements.
6.16 Certain Adjustments. Upon the request of the Acquiror,
the Company shall (a) consistent with generally accepted accounting principles
and regulatory accounting principles, use its best efforts to record any
accounting adjustments required to conform the loan, litigation and other
reserve and real estate valuation policies and practices (including loan
classifications and levels of reserves) of the Company and its Subsidiaries so
as to reflect consistently on a mutually satisfactory basis the policies and
practices of the Acquiror and (b) make reasonable adjustments to the corporate
structure of the Company or its direct or indirect subsidiaries and transfer
assets or liabilities between the Company and its Subsidiaries or between
Subsidiaries; provided, however, that the Company shall not be obligated to
record any such accounting adjustments (1) unless and until the Company shall be
satisfied that the conditions to the obligation of the parties to consummate the
Merger will be satisfied or waived on or before the Closing Date, and (2) in no
event until the day prior to the Closing Date.
6.17 Formation of Newco. As soon as practicable following the
date of this Agreement, the Acquiror shall cause Newco to be duly organized as a
direct wholly owned subsidiary of the Acquiror and to become a party to this
Agreement by executing and delivering a supplement hereto.
6.18 Certain Tax Matters. Each of the Acquiror and the Company
(i) shall cooperate before and after the Effective Time to assure, to the extent
feasible, compliance with Treasury Regulation ss. 1.367(a)-3(c), (ii) undertakes
and agrees to use its reasonable efforts to cause the Merger, and to take no
action that is reasonably likely to cause the Merger not, to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code for federal
income tax purposes, and (iii) for purposes of
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the tax opinions described in Section 7.02(c) and 7.03(c), shall provide
representation letters to counsel, in form and substance reasonably satisfactory
to the Acquiror, the Company and such counsel.
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each of the Acquiror and the Company to
consummate the Merger is subject to the fulfillment or written waiver by the
Acquiror and the Company prior to the Effective Time of each of the following
conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been duly
approved and adopted and a plan of merger shall have been duly approved
by the affirmative vote of the holders of the requisite number of the
outstanding shares of Company Common Stock entitled to vote thereon in
accordance with applicable law, the Company Articles and the Company
By-laws.
(b) GOVERNMENTAL AND REGULATORY CONSENTS. All approvals and
authorizations of, filings and registrations with, and notifications
to, all Governmental Authorities required for the consummation of the
Merger, and for the prevention of any termination of any material
right, privilege, license or agreement of either the Acquiror or the
Company or their respective Subsidiaries, shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by law shall have expired; provided, however, that none of the
preceding shall be deemed obtained or made if it shall be subject to
any condition or restriction the effect of which, together with any
other such conditions or restrictions, would be reasonably expected to
have a Material Adverse Effect on the Surviving Corporation or the
Acquiror or its operations in the U.S. after the Effective Time.
(c) THIRD PARTY CONSENTS. All consents or approvals of all
persons, other than Governmental Authorities, required for or in
connection with the execution, delivery and performance of this
Agreement and the consummation of the Merger shall have been obtained
and shall be in full force and effect, unless the failure to obtain any
such consent or approval is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Surviving
Corporation.
(d) NO INJUNCTION. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in
effect and prohibits consummation of the transactions contemplated by
this Agreement.
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(e) REGISTRATION STATEMENT. The Registration Statement shall
have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(f) BLUE SKY APPROVALS. All permits and other authorizations
under the federal and state securities laws (other than that referred
to in Section 7.01(e)) and other authorizations necessary to consummate
the transactions contemplated hereby and to issue the shares of
Acquiror Common Stock to be issued in the Merger shall have been
received and be in full force and effect.
(g) LISTING. The shares of Acquiror Common Stock to be issued
in the Merger shall have been approved for listing on the NYSE, subject
to official notice of issuance.
7.02 Conditions to Obligation of the Company. The obligation
of the Company to consummate the Merger is also subject to the fulfillment or
written waiver by the Company prior to the Effective Time of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Subject to the standard
set forth in Section 5.02, the representations and warranties of the
Acquiror set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some
other date shall be true and correct only as of such date), and the
Company shall have received a certificate, dated the Closing Date,
signed on behalf of the Acquiror by a senior officer of the Acquiror to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE ACQUIROR. The Acquiror
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate, dated the
Closing Date, signed on behalf of the Acquiror by a senior officer of
the Acquiror to such effect.
(c) TAX OPINION OF COMPANY'S COUNSEL. The Company shall have
received an opinion of Hunton & Williams, counsel to the Company, dated
the Closing Date, to the effect that, for federal income tax purposes,
(1) the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (2) no gain or loss will be recognized by
shareholders of the Company to the extent they receive shares of
Acquiror Common Stock as Consideration in exchange for shares of
Company Common Stock (except for cash received in lieu of a fractional
share of Acquiror Common Stock). Such opinion may note that "5%
shareholders" will qualify for such nonrecognition treatment only if
they enter into a "gain recognition agreement" under regulations
promulgated
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under Section 367 of the Code. In rendering such opinion, counsel may
require and rely upon (and may incorporate by reference) certain
representations of the Acquiror and the Company reasonably requested by
such counsel.
7.03 Conditions to Obligation of the Acquiror. The obligation
of the Acquiror to consummate the Merger is also subject to the fulfillment or
written waiver by the Acquiror prior to the Effective Time of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Subject to the standard
set forth in Section 5.02, the representations and warranties of the
Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except that representations and warranties that
by their terms speak as of the date of this Agreement or some other
date shall be true and correct only as of such date) and the Acquiror
shall have received a certificate, dated the Closing Date, signed on
behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Acquiror shall have received a certificate, dated the
Closing Date, signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(c) TAX OPINION OF THE ACQUIROR'S COUNSEL. The Acquiror shall
have received an opinion of Sullivan & Cromwell, counsel to the
Acquiror, dated the Closing Date, to the effect that, for federal
income tax purposes, the Merger constitutes a "reorganization" within
the meaning of Section 368 of the Code. In rendering such opinion,
counsel may require and rely upon (and may incorporate by reference)
certain representations of the Acquiror and the Company reasonably
requested by such counsel.
ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time,
by the mutual consent of the Acquiror and the Company, if the Board of
Directors of each so determines by vote of a majority of the members of
its entire Board.
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(b) BREACH. At any time prior to the Effective Time, by the
Acquiror or the Company, in each case if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in
the event of either: (1) a breach by the other party of any
representation or warranty contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to
the breaching party of such breach; or (2) a breach by the other party
of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach and which breach,
individually or in the aggregate with other such breaches, would cause
the conditions set forth in Section 7.03(a) or (b), in the case of a
breach or breaches by the Company, or Section 7.02(a) or (b), in the
case of a breach or breaches by the Acquiror, not to be satisfied or
would reasonably be expected to prevent, materially delay or materially
impair the ability of the Company or the Acquiror to consummate the
Merger and the other transactions contemplated by this Agreement.
(c) DELAY. At any time prior to the Effective Time, by the
Acquiror or the Company, in each case if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in
the event that the Merger is not consummated by November 30, 2001,
except to the extent that the failure of the Merger then to be
consummated arises out of or results from the action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c).
(d) NO APPROVAL. By the Company or the Acquiror, in each case
if its Board of Directors so determines by a vote of a majority of the
members of its entire Board, in the event the approval of any
Governmental Authority required for consummation of the Merger and the
other transactions contemplated by this Agreement shall have been
denied by final nonappealable action of such Governmental Authority.
(e) FAILURE TO RECOMMEND, Etc. (1) By the Acquiror, if (i) at
any time prior to the receipt of the approval of the Company's
shareholders contemplated by Section 7.01(a), the Company Board shall
not recommend that the shareholders give such approval, or (ii) the
Company Board takes any of the actions described in clause (ii) or
(iii) of the proviso to Section 6.06.
(2) By the Company if, having acted in accordance
with Sections 6.02, 6.06 and 8.03 and the Company's other obligations
hereunder, (i) the Company Board shall have determined that an
Acquisition Proposal from a third party constitutes a Superior Proposal
and authorized and directed the Company to execute a definitive
agreement with such third party to effect such Superior Proposal and
(ii) immediately upon termination the Company executes such agreement.
(f) POSSIBLE ADJUSTMENT. By the Company, if the Company Board
so determines by a vote of a majority of the members of the entire
Company
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Board, at any time during the five-day period commencing with the
Determination Date, if both of the following conditions are satisfied:
(i) The Average Closing Price on the Determination
Date of shares of Acquiror Common Stock shall be less than the
product of 0.80 and the Starting Price; and
(ii) (A) The number obtained by dividing the Average
Closing Price on the Determination Date by the Starting Price
(such number, the "Acquiror Ratio") shall be less than (B) the
number obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date and
subtracting 0.20 from the quotient in this Section 8(f)(ii)(B)
(such number, the "Index Ratio");
subject, however, to the following four sentences. If the Company
elects to exercise its termination right pursuant to this Section
8.01(f), it shall give prompt written notice to the Acquiror; provided
that such notice of election may be withdrawn at any time within the
aforementioned five-day period. During the five-day period commencing
with its receipt of such notice, the Acquiror shall have the option of
adjusting the Exchange Ratio to the lesser of (i) a number equal to a
quotient (rounded to the nearest one-thousandth), the numerator of
which is the product of 0.80, the Starting Price and the Exchange Ratio
(as then in effect) and the denominator of which is the Average Closing
Price, and (ii) a number equal to a quotient (rounded to the nearest
one-thousandth), the numerator of which is the Index Ratio multiplied
by the Exchange Ratio (as then in effect) and the denominator of which
is the Acquiror Ratio. If the Acquiror determines so to increase the
Exchange Ratio within such five-day period, it shall give prompt
written notice to the Company of its determination and the revised
Exchange Ratio, whereupon no termination shall occur pursuant to this
Section 8.01(f) and this Agreement shall remain in effect in accordance
with its terms (except as the Exchange Ratio shall have been so
modified), and any references in this Agreement to the "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 8.01(f).
8.02 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (a) as set forth in Sections 8.03
and 9.01 and (b) that termination will not relieve a breaching party from
liability for any willful breach of this Agreement giving rise to such
termination.
8.03 Termination Fee. (a) In addition to any other rights that
the Acquiror has under this Agreement, the Stock Option Agreement and/or
otherwise, if this Agreement is terminated by the Acquiror pursuant to (1)
Section 8.01(b) with respect to a breach of Section 6.01, 6.02 or 6.06 on the
part of the Company, or any knowing, or willful or intentional, breach on the
part of the Company (at a time when
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an Initial Triggering Event (as defined in the Stock Option Agreement) has
occurred and the Company is unable to terminate pursuant to such Section
8.01(b)) or (2) Section 8.01(e)(1) or 8.01(e)(2), then the Company shall pay to
the Acquiror U.S. $100,000,000 (it being understood that such fee is not
intended as liquidated damages). In addition to any other rights that either
party has under this Agreement, the Stock Option Agreement and/or otherwise,
solely for the purpose of reimbursing an amount of certain out-of-pocket costs
and expenses incurred in connection with negotiations and investigations
undertaken with respect to the transactions contemplated hereby and not as
liquidated damages, if this Agreement is terminated pursuant to Section 8.01(b):
(x) by the Company (at a time when the Acquiror is unable to terminate pursuant
to Section 8.01(b)), then the Acquiror shall pay to the Company U.S. $20,000,000
and (y) by the Acquiror (other than with respect to a breach for which a fee is
payable under the preceding sentence, at a time when the Company is unable to
terminate pursuant to Section 8.01(b)), then the Company shall pay to the
Acquiror U.S. $20,000,000.
(b) Any payment required to be made under Section 8.03(a)
shall be payable, without setoff, by wire transfer in immediately available
funds, to an account specified by the Acquiror, within three business days
following such termination.
(c) The Company acknowledges that the agreements contained in
this Section 8.03 are an integral part of the transactions contemplated by this
Agreement and are cumulative with, and not intended to limit, other remedies
that may be available, and that, without these agreements, the Acquiror would
not enter into this Agreement; accordingly, if the Company fails promptly to pay
any amount due pursuant to this Section 8.03, and, in order to obtain such
payment, the Acquiror commences a suit which results in a judgment against the
Company for the payment set forth in this Section 8.03, the Company shall pay
the Acquiror's costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on any amount due pursuant to this Section
8.03 from the date such amount becomes payable until the date of such payment at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made plus two (2) percent.
ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and
covenants contained in this Agreement (1) other than those contained in Sections
6.05(b), 8.02, and 8.03 and in this Article IX, shall survive the termination of
this Agreement if this Agreement is terminated prior to the Effective Time, or
(2) other than those contained in Sections 6.12 and in this Article IX, shall
survive the Effective Time.
9.02 Waiver; Amendment. Prior to the Effective Time, any
provision of this Agreement may be (a) waived by the party benefitted by the
provision, or
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(b) amended or modified at any time, by an agreement in writing executed by both
parties, except that, after approval of the Merger by the shareholders of the
Company, no amendment may be made which under applicable law requires further
approval of such shareholders without obtaining such required further approval.
9.03 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of North Carolina
applicable to contracts made and to be performed entirely within such State.
9.05 Expenses. Subject to Section 8.03, each party hereto will
bear all expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay printing and
postage expenses and the Acquiror shall pay SEC registration fees related to the
Registration Statement and Proxy Statement.
9.06 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given (a) on the
date of delivery, if personally delivered or telecopied (with confirmation), (b)
on the first business day following the date of dispatch, if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing, if mailed by registered or certified mail (return receipt
requested), in each case to such party at its address or telecopy number set
forth below or such other address or numbers as such party may specify by notice
to the parties hereto.
If to the Company, to:
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27804
Attention: Cecil Sewell
Chairman of the Board and Chief Executive Officer
Facsimile: (252) 977-4800
With a copy to:
Gordon F. Rainey, Jr., Esq.
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Facsimile: (804) 788-8218
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If to the Acquiror, to:
Royal Bank of Canada
200 Bay Street
Royal Bank Plaza
Toronto, Ontario
Canada M5J 2J5
Attention: Peter W. Currie
Vice-Chairman and Chief Financial Officer
Facsimile: (416) 974-0081
With a copy to:
Donald J. Toumey, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3588
9.07 Entire Understanding; No Third-Party Beneficiaries. This
Agreement (together with the Disclosure Schedules, the Stock Option Agreement
and the Exhibits hereto) represents the entire understanding of the parties
hereto with reference to all the matters encompassed or contemplated herein and
this Agreement supersedes any and all other oral or written agreements
heretofore made. Except for Section 6.12, insofar as such Section expressly
provides certain rights to the Indemnified Parties named therein, nothing in
this Agreement, expressed or implied, is intended to confer upon any person,
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated, in whole or
in part (except by operation of law), by any of the parties hereto without the
prior written consent of each other party hereto, except that the Acquiror and
Newco may assign or delegate in their sole discretion any or all of their
rights, interests or obligations under this Agreement to any direct or indirect,
wholly owned subsidiary of the Acquiror, but no such assignment shall relieve
the Acquiror of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
CENTURA BANKS, INC.
By: /s/ Cecil W. Sewell, Jr.
---------------------------------
Name: Cecil W. Sewell, Jr.
Title: Chief Executive Officer
ROYAL BANK OF CANADA
By: /s/ Peter W. Currie
---------------------------------
Name: Peter W. Currie
Title: Vice-Chairman and Chief
Financial Officer
By: /s/ James T. Rager
---------------------------------
Name: James T. Rager
Title: Vice-Chairman
Personal & Commercial Banking