SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) November 18, 2001
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-21786 57-0962375
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
7909 Parklane Road, Columbia, SC 29223
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) (803)741-3000
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On November 18, 2001, Resource Bancshares Mortgage Group, Inc., a
Delaware corporation ("RBMG"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") with NetBank, Inc. a Georgia corporation
("NetBank") and Palmetto Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of NetBank ("Merger Sub"), pursuant to which Merger
Sub will merge with and into RBMG (the "Merger"). Each share of RBMG common
stock, par value $0.01 per share ("RBMG Common Stock"), outstanding
immediately prior to the effective time of the Merger, (together with the
rights associated with such shares issued pursuant to the Rights Plan,
dated as of February 6, 1998, between RBMG and First Chicago Trust Company
of New York, as rights agent) shall be converted into the right to receive
1.1382 shares of common stock, par value $0.01 per share, of NetBank. The
Merger Agreement is filed herewith as Exhibit 2.1 and is incorporated by
reference herein.
Consummation of the Merger is subject to the satisfaction of
certain conditions, including the approval of the Merger Agreement by the
stockholders of RBMG and NetBank and the receipt of all requisite
regulatory approvals.
Following consummation of the Merger, Douglas K. Freeman,
currently RBMG's Chairman and Chief Executive Officer, will serve as Chief
Executive Officer of the combined company and T. Stephen Johnson, currently
Chairman of NetBank, will become Chairman of the combined company until the
date of NetBank's public announcement of $.25 per share or more for
operating earnings in a quarter (or at such earlier time as Mr. Johnson may
cease to serve in such role). On such date, Mr. Freeman shall become the
Chairman of the board of NetBank until December 31, 2005. Following
consummation of the Merger, the board of directors of the combined company
will consist of 11 members, which will include six directors from the
pre-merger NetBank board, four members from the pre-merger RBMG board and
one director common to both boards.
The joint press release issued by RBMG and NetBank with respect to
the Merger is filed herewith as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(c) Exhibits
The following Exhibits are filed with this Current Report on Form
8-K:
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of November 18, 2001,
by and among NetBank, Inc., Resource Bancshares Mortgage
Group, Inc. and Palmetto Acquisition Corp.
99.1 Text of press release issued by NetBank, Inc. and Resource
Bancshares Mortgage Group, Inc. on November 19, 2001.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunder duly authorized.
Dated: November 29, 2001
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By /s/ Steven F. Herbert
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Name: Steven F. Herbert
Title: Chief Financial Executive
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of November 18, 2001,
by and among NetBank, Inc., Resource Bancshares Mortgage
Group, Inc. and Palmetto Acquisition Corp.
99.1 Text of press release issued by NetBank, Inc. and Resource
Bancshares Mortgage Group, Inc. on November 19, 2001.
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NETBANK, INC.,
RESOURCE BANCSHARES MORTGAGE GROUP, INC.,
AND
PALMETTO ACQUISITION CORP.
DATED NOVEMBER 18, 2001
TABLE OF CONTENTS
Page No.
ARTICLE 1. DEFINITIONS...........................................1
1.1 DEFINITIONS...............................................1
ARTICLE 2. THE MERGER...........................................10
2.1 MERGER...................................................10
2.2 ARTICLES OR CERTIFICATES OF MERGER.......................10
2.3 EFFECTIVE TIME...........................................11
2.4 FURTHER ASSURANCES.......................................11
2.5 MERGER CONSIDERATION.....................................11
2.6 EXCHANGE OF SHARES; PAYMENT OF MERGER CONSIDERATION......11
2.7 CLOSING..................................................13
2.8 ANTI-DILUTION PROVISIONS.................................14
2.9 CONVERSION OF STOCK OPTIONS..............................14
2.10 EFFECT OF MERGER.........................................15
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF RBMG...............15
3.1 ORGANIZATION, STANDING, AND POWER OF RBMG................15
3.2 AUTHORITY OF RBMG; NO BREACH BY AGREEMENT................15
3.3 RBMG STOCK...............................................16
3.4 FINANCIAL STATEMENTS OF RBMG.............................16
3.5 MINUTE BOOKS.............................................17
3.6 SUBSIDIARIES.............................................17
3.7 ORGANIZATION, STANDING AND AUTHORITY OF THE SUBSIDIARIES.17
3.8 ABSENCE OF UNDISCLOSED LIABILITIES.......................18
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.....................18
3.10 TAX MATTERS..............................................18
3.11 ASSETS...................................................20
3.12 INTELLECTUAL PROPERTY....................................21
3.13 ENVIRONMENTAL MATTERS....................................21
3.14 COMPLIANCE WITH LAWS.....................................22
3.15 LABOR RELATIONS..........................................23
3.16 EMPLOYEES; COMPENSATION; BENEFIT PLANS...................23
3.17 MATERIAL CONTRACTS.......................................26
3.18 LEGAL AND DISCIPLINARY PROCEEDINGS.......................27
3.19 REPORTS..................................................28
3.20 ACCOUNTING, TAX AND REGULATORY MATTERS...................28
3.21 ARTICLES OF INCORPORATION PROVISIONS.....................28
3.22 STATEMENTS TRUE AND CORRECT..............................28
3.23 CONSENTS AND APPROVALS; NO VIOLATIONS....................28
3.24 LENDER AND SERVICER QUALIFICATIONS.......................29
3.25 LOAN AND MORTGAGE SERVICING PORTFOLIO....................30
3.26 NO RECOURSE..............................................32
3.27 MORTGAGE SERVICING AGREEMENTS............................33
3.28 INVESTOR COMMITMENTS AND SERVICING COMMITMENTS...........33
3.29 CUSTODIAL ACCOUNTS.......................................34
3.30 POOL CERTIFICATION.......................................34
3.31 EQUIPMENT LEASING........................................34
3.32 FAIRNESS OPINION.........................................34
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF NETBANK...........35
4.1 ORGANIZATION, STANDING, AND POWER OF NETBANK.............35
4.2 AUTHORITY OF NETBANK; NO BREACH BY AGREEMENT.............35
4.3 NETBANK STOCK............................................36
4.4 FINANCIAL STATEMENTS OF NETBANK..........................36
4.5 MINUTE BOOKS.............................................36
4.6 SUBSIDIARIES.............................................37
4.7 ORGANIZATION, STANDING AND AUTHORITY OF THE SUBSIDIARIES.37
4.8 ABSENCE OF UNDISCLOSED LIABILITIES.......................37
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.....................37
4.10 TAX MATTERS..............................................38
4.11 ASSETS...................................................39
4.12 INTELLECTUAL PROPERTY....................................40
4.13 ENVIRONMENTAL MATTERS....................................41
4.14 COMPLIANCE WITH LAWS.....................................41
4.15 LABOR RELATIONS..........................................42
4.16 EMPLOYEES; COMPENSATION; BENEFIT PLANS...................42
4.17 MATERIAL CONTRACTS.......................................46
4.18 LEGAL AND DISCIPLINARY PROCEEDINGS.......................47
4.19 REPORTS..................................................47
4.20 ACCOUNTING, TAX AND REGULATORY MATTERS...................47
4.21 ARTICLES OF INCORPORATION PROVISIONS.....................47
4.22 STATEMENTS TRUE AND CORRECT..............................47
4.23 CONSENTS AND APPROVALS; NO VIOLATIONS....................48
4.24 LENDER AND SERVICER QUALIFICATIONS.......................48
4.25 LOAN AND MORTGAGE SERVICING PORTFOLIO....................49
4.26 NO RECOURSE..............................................51
4.27 MORTGAGE SERVICING, AGREEMENTS...........................52
4.28 INVESTOR COMMITMENTS AND SERVICING COMMITMENTS...........52
4.29 CUSTODIAL ACCOUNTS.......................................53
4.30 POOL CERTIFICATION.......................................53
4.31 EQUIPMENT LEASING........................................53
4.32 FAIRNESS OPINION.........................................53
4.33 LOAN PORTFOLIO...........................................54
ARTICLE 5. COVENANTS............................................54
5.1 AFFIRMATIVE COVENANTS OF RBMG............................54
5.2 NEGATIVE COVENANTS OF RBMG...............................54
5.3 AFFIRMATIVE COVENANTS OF NETBANK.........................57
5.4 NEGATIVE COVENANTS OF NETBANK............................57
5.5 ADVERSE CHANGES IN CONDITION.............................60
5.6 REPORTS..................................................60
5.7 AFFILIATES...............................................60
ARTICLE 6. ADDITIONAL AGREEMENTS................................60
6.1 RBMG SHAREHOLDER MEETING.................................60
6.2 NETBANK SHAREHOLDER MEETING..............................61
6.3 REGULATORY MATTERS.......................................61
6.4 STOCK EXCHANGE LISTING...................................62
6.5 ACCESS TO INFORMATION....................................62
6.6 AGREEMENT AS TO EFFORTS TO CONSUMMATE....................63
6.7 SECTION 401(K) PLAN; OTHER EMPLOYEE BENEFITS.............63
6.8 CONFIDENTIALITY..........................................65
6.9 PRESS RELEASES...........................................65
6.10 EXECUTIVE OFFICERS, SUCCESSION...........................65
6.11 POST-MERGER BOARD OF DIRECTORS AND COMMITTEES............65
ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE....66
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY..................66
7.2 CONDITIONS TO OBLIGATIONS OF NETBANK.....................67
7.3 CONDITIONS TO OBLIGATIONS OF RBMG........................68
ARTICLE 8. TERMINATION..........................................69
8.1 TERMINATION..............................................69
8.2 EFFECT OF TERMINATION....................................70
ARTICLE 9. MISCELLANEOUS........................................70
9.1 EXPENSES.................................................70
9.2 BROKERS AND FINDERS......................................71
9.3 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES..............71
9.4 AMENDMENTS...............................................71
9.5 WAIVERS..................................................71
9.6 ASSIGNMENT...............................................72
9.7 NOTICES..................................................72
9.8 GOVERNING LAW............................................72
9.9 COUNTERPARTS.............................................72
9.10 CAPTIONS, ARTICLES AND SECTIONS..........................73
9.11 INTERPRETATIONS..........................................73
9.12 ENFORCEMENT OF AGREEMENT.................................73
9.13 SEVERABILITY.............................................73
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of the 18th day of November, 2001 by and among NETBANK,
INC., a Georgia corporation ("NetBank"); RESOURCE BANCSHARES MORTGAGE
GROUP, INC., a Delaware corporation ("RBMG"); and PALMETTO ACQUISITION
CORP., a Delaware corporation and a wholly-owned subsidiary of NetBank
("Merger Sub").
Recitals
A. The authorized shares of capital stock of RBMG consist of
50,000,000 shares of common stock, par value of $.01 per share, of which
16,599,864 shares are issued and outstanding as of October 31, 2001 (the
"RBMG Common Stock"); and 5,000,000 shares of preferred stock, par value of
$.01 per share, of which none are issued or outstanding (the "RBMG
Preferred Stock") (collectively, RBMG Common Stock and RBMG Preferred Stock
are referred to as the "RBMG Stock");
B. The authorized shares of capital stock of NetBank consist of
100,000,000 shares of common stock, par value of $.01 per share, of which
29,433,604 shares are issued and outstanding as of September 30, 2001 (the
"NetBank Common Stock"); and 10,000,000 shares of preferred stock, par
value of $.01 per share, of which none are issued or outstanding (the
"NetBank Preferred Stock") (collectively, NetBank Common Stock and NetBank
Preferred Stock are referred to as the "NetBank Stock");
C. The authorized shares of capital stock of Merger Sub consist of
100 shares of common stock, par value of $.01 per share, of which 100
shares are issued and outstanding (the "Merger Sub Common Stock").
D. NetBank, RBMG and Merger Sub desire that Merger Sub shall be
merged with and into RBMG, with RBMG being the surviving corporation (said
transaction being hereinafter referred to as the "Merger"), and the parties
desire to provide for certain undertakings, conditions, representations,
warranties, and covenants in connection with the transactions contemplated
hereby.
E. Certain terms used in this Agreement are defined in Article 1
of this Agreement.
NOW, THEREFORE, in consideration of the above recitals and the
mutual representations, warranties, covenants and agreements set forth in
this Agreement, the Parties to this Agreement agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms
used herein shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" with respect to a Person shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of
all of the shares or assets of, or other business combination involving the
acquisition of such Person or any of its Subsidiaries or the acquisition of
a substantial equity interest in, or a substantial portion of the assets
of, such Person or any of its Subsidiaries.
"Affiliate" of a Person shall mean any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with such Person.
"Agency" shall mean the United States Department of Housing and
Urban Development, Freddie Mac, the Government National Mortgage
Association, Fannie Mae, and the Veteran's Administration.
"Agreement" shall mean this Merger Agreement, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person or any Affiliate of
such Person and wherever located.
"Benefit Plan Determination Date" shall mean, with respect to any
Plan maintained by RBMG at the Effective Time, the date determined by
NetBank with respect to each such plan or program which shall occur
following the Effective Time but shall be not later than December 31, 2003.
"Certificate" shall have the meaning given in Section 2.6(a)
hereto.
"Closing" has the meaning given in Section 2.7 hereto.
"Closing Date" shall mean the date on which the Closing occurs as
provided for in Section 2.7 hereto.
"Confidentiality Agreements" shall mean the two confidentiality
agreements dated October 29, 2001, between RBMG and NetBank.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant
to any Contract, Law, Order, or Permit.
"Consumer Credit Law" shall mean the federal Real Estate
Settlement Procedures Act of 1974, the Flood Insurance Protection Act, the
Consumer Credit Protection Act, the Truth-in-Lending Act, the Equal Credit
Opportunity Act, and the Fair Credit Reporting Act, and all state law
equivalents of the foregoing, each as amended from time to time, and all
regulations promulgated thereunder.
"Continuing NetBank Director" has the meaning given in Section
6.11(d) hereto.
"Continuing RBMG Director" has the meaning given in Section
6.11(d) hereto.
"Contract" shall mean any written or oral agreement (provided such
oral agreement is, in any one year period, in excess of $100,000
individually, or $1,000,000 in the aggregate), arrangement, authorization,
commitment, contract, indenture, instrument, lease, obligation, plan,
practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is
binding on any Person or its capital shares, Assets or business.
"Custodial Account" has the meaning given in Section 3.29 hereto.
"Default" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, after failing to cure any such breach, violation, default,
contravention or conflict within any applicable grace or cure period (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right of any Person to
exercise any remedy or obtain any relief under, terminate or revoke,
suspend, cancel, or modify or change the current terms of, or renegotiate,
or to accelerate the maturity or performance of, or to increase or impose
any Liability under, any Contract, Law, Order, or Permit.
"Deferred Taxes" shall have the meaning given under GAAP.
"DGCL" means the General Corporation Law of the State of Delaware.
"Effective Time" has the meaning given in Section 2.3 hereto.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and other federal, state and local agencies
with jurisdiction over, and including common law in respect of, pollution
or protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
migrations, discharges, releases, or threatened releases of any Hazardous
Material, or otherwise relating to the manufacture, processing,
distribution use, treatment, storage, disposal, generation, recycling,
transport, or handling of any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital shares of a Person or by which a Person is or may be bound to
issue additional shares of its capital shares or other Equity Rights.
"Exchange Act" shall mean the Securities Exchange Act of 1933, as
amended.
"Exchange Agent" has the meaning given in Section 2.6(d) hereto.
"Exchange Fund" has the meaning given in Section 2.6(d) hereto.
"Exchange Ratio" has the meaning given in Section 2.5(a) hereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FHLMC" means Freddie Mac.
"FNMA" means Fannie Mae.
"Financial Statements of NetBank" shall mean (i) the year-end
audited financial statements (including related notes and schedules, if
any) of NetBank as of December 31, 1998, 1999 and 2000, consisting of
consolidated balance sheets and the related consolidated statements of
income, changes in the shareholders' equity, and cash flows (including
related notes and schedules, if any) for NetBank for the fiscal years ended
on such dates as reported on NetBank's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, filed with the SEC under the Exchange
Act, and (ii) the unaudited financial statements of NetBank (including
related notes and schedules, if any) consisting of consolidated balance
sheets and the related consolidated statements of income, changes in the
shareholder equity, and cash flows (including related notes and schedules,
if any) with respect to periods ended March 31, 2001, June 30, 2001 and
September 30, 2001 as reported on NetBank's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2001, June 30, 2001 and September 30,
2001, filed with the SEC under the Exchange Act.
"Financial Statements of RBMG" shall mean (i) the year-end audited
financial statements (including related notes and schedules, if any) of
RBMG as of December 31, 1998, 1999 and 2000, consisting of consolidated
balance sheets and the related consolidated statements of income, changes
in the shareholders' equity, and cash flows (including related notes and
schedules, if any) for RBMG for the fiscal years ended on such dates as
reported on RBMG's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, filed with the SEC under the Exchange Act, and (ii) the
unaudited financial statements of RBMG (including related notes and
schedules, if any) consisting of consolidated balance sheets and the
related consolidated statements of income, changes in the shareholder
equity, and cash flows (including related notes and schedules, if any) with
respect to periods ended March 31, 2001, June 30, 2001 and September 30,
2001 as reported on RBMG's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001, filed with the
SEC under the Exchange Act.
"GAAP" shall mean accounting principles generally accepted in the
United States of America, consistently applied during the periods involved.
"GNMA" means the Government National Mortgage Association.
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous constituent, hazardous waste, solid waste, special waste,
regulated substance, or toxic substance (as those terms are listed, defined
or regulated by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement. removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"HUD" means the United States Department of Housing and Urban
Development.
"Intellectual Property" shall mean copyrights, domain names,
patents, trademarks, service marks, service names, trade names,
applications therefor, and licenses, computer software (including any
source or object codes therefor or documentation relating thereto), trade
secrets, franchises, inventions, and other intellectual property rights
and, with respect to RBMG includes the RBMG Marks, and with respect to
NetBank includes the NetBank Marks.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Investor" shall mean any owner, purchaser or beneficiary (other
than an Agency) of a Mortgage Loan or of any proceeds of, or interest in or
from, a Mortgage Loan, including any owner, purchaser or beneficiary of
mortgage servicing rights with respect to a Mortgage Loan other than a
lender giving a security interest in mortgage servicing rights or Mortgage
Loans.
"Investor Commitment" means a commitment of a Person to purchase a
Mortgage Loan owned by a specified Party.
"Joint Proxy Statement-Prospectus" shall mean the joint proxy
statement-prospectus in definitive form relating to the meeting of RBMG and
NetBank shareholders to be held in connection with this Agreement and the
transactions contemplated hereby.
"Knowledge" as used with respect to a Party (including references
to being aware of a particular matter) shall mean those facts that are
known or should reasonably have been known by (a) with respect to RBMG, its
chairman and chief executive officer, chief financial executive, chief
portfolio management executive, chief strategic initiatives executive,
chief human resources executive, chief legal executive, chief audit
executive, or chief technology executive and (b) with respect to NetBank
and the NetBank Subsidiaries and each of their chairman, president, chief
financial officer, chief accounting officer, chief operating officer, chief
credit officer, or legal officer.
"Law" shall mean any code, law (including common law), ordinance,
regulation, decision, judicial interpretation, reporting or licensing
requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, or business, including, without limitation, (i) all laws and
regulations relating to occupational health and safety, equal employment
opportunities, fair employment practices, and sex, race, religious, age and
other prohibited discrimination, all other labor laws, including, without
limitation, the Family and Medical Leave Act, and (ii) all licensure,
disclosure, usury and other consumer credit laws and regulations governing
residential, mortgage lending and brokering, including, but not limited to,
all applicable rules, regulations, standards and guidelines promulgated by
the Board of Governors of the Federal Reserve System, the state agencies
and all applicable provisions of the Consumer Credit Laws, each as amended
from time to time, and all regulations promulgated thereunder.
"Liability" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii) Liens which do not
materially impair the use of or title to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, investigation hearing, criminal prosecution, governmental
or other examination or other administrative or other proceeding relating
to or affecting a Party, its business, its Assets (including Contracts
related to it), or the transactions contemplated by this Agreement,
including, without limitation, any such matter that involves any Agency or
Investor.
"Loan Document" means the files, records and documents necessary
to originate, close and/or service RBMG Loans or NetBank Loans, as
applicable, in accordance with applicable standards.
"Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of a Party or its Affiliates, taken as a
whole, or (ii) the ability of a Party or its Affiliates to perform its
obligations under this Agreement or to consummate the transactions
contemplated by this Agreement, provided that a "Material Adverse Effect"
shall not be deemed to include the impact of (a) changes in securities,
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in generally
accepted accounting principles or regulatory accounting principles
generally applicable to the affected Party, (c) actions and omissions of a
Party (or any of its Affiliates) taken with the prior informed written
Consent of the other Party in contemplation of the transactions
contemplated hereby, (d) changes in market interest rates, or (e) the
direct effects of compliance with this Agreement on the operating
performance of the Parties, including, without limitation, expenses
incurred by the Parties in consummating the transactions contemplated by
this Agreement or relating to any litigation arising as a result of the
Merger.
"Material Equipment Leases" shall mean, with respect to a Person,
each equipment lease entered into by such Person that, individually during
the remaining term of the lease as of the date of this Agreement, would
require such Person to make lease payments in excess of $100,000; provided,
however, that Material Equipment Leases shall mean all equipment leases
entered into by such Person if, during the remaining term of all such
leases as of the date of this Agreement, such Person would be required to
make lease payments in the aggregate in excess of $500,000.
"Merger" has the meaning given in Recital D hereto.
"Merger Sub Common Stock" has the meaning given in Recital C
hereto.
"Mortgage Loan" shall mean a RBMG Loan or a NetBank Loan as
determined by the context.
"NetBank Common Stock" has the meaning given in Recital B hereto.
"NetBank Contract" has the meaning given in Section 4.17(a)
hereto.
"NetBank Director" has the meaning given in Section 6.11(d)
hereto.
"NetBank Loan" shall mean any loan of the type disclosed by
NetBank in "Note 4. Loans" in "Note to Consolidated Financial Statements"
filed as a part of the Form 10-K for the year ended December 31, 2000 and
any other loan authorized for NetBank or any subsidiary to own or originate
as to which applications were accepted and processed by NetBank or a
NetBank Subsidiary or which otherwise was originated, underwritten, closed,
or funded by NetBank or a NetBank Subsidiary, or which was brokered to or
by NetBank or a NetBank Subsidiary.
"NetBank Market Value" has the meaning given in Section 2.5(b)
hereto.
"NetBank Marks" has the meaning given in Section 4.12 hereto.
"NetBank Option" has the meaning given in Section 2.9(b) hereto.
"NetBank Preferred Stock" has the meaning in Recital B hereto.
"NetBank Stock" has the meaning in Recital B hereto.
"Operating Property" shall mean any property owned, leased, or
operated by a Party or its Affiliates and, where required by the context,
includes the owner or operator of such property, but only with respect to
such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in
which a Party or its Affiliates participates in the management and, where
required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"Party" shall mean NetBank, RBMG, or Palmetto Acquisition Corp.,
as applicable.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Plan" has the meaning given in Section 3.16(b).
"RBC" shall mean Resource Bancshares Corporation.
"RBMG Common Stock" has the meaning given in Recital A hereto.
"RBMG Contract" has the meaning given in Section 3.17(a) hereto.
"RBMG Director" has the meaning given in Section 6.11(d) hereto.
"RBMG Option" has the meaning given in Section 2.9(a) hereto.
"RBMG Loan" shall mean any loan secured by a first or subordinate
lien on residential real property (including, without limitation,
individual units of condominiums and cooperatives) as to which applications
were accepted and processed by RBMG or a RBMG Subsidiary or which otherwise
was originated, underwritten, closed, or funded by RBMG or a RBMG
Subsidiary, or which was brokered to or by RBMG or a RBMG Subsidiary.
"RBMG Marks" has the meaning given in Section 3.12 hereto.
"RBMG Preferred Stock" has the meaning given in Recital A hereto.
"RBMG Stock" has the meaning given in Recital A hereto.
"Registration Statement" shall mean the registration statement on
Form S-4 (or any subsequent form adopted by the SEC to replace or supersede
Form S-4), including any pre-effective or post-effective amendments or
supplements thereto, filed with the SEC by NetBank under the 1933 Act with
respect to all the shares of NetBank Common Stock to be issued to the
holders of RBMG Stock in the transactions contemplated by this Agreement.
"Regulations" shall mean all applicable rules, regulations,
requirements, standards and guidelines promulgated by the United States
Department of Housing and Urban Development, Freddie Mac, the Government
National Mortgage Association, Fannie Mae, the Veteran's Administration, or
any Investor.
"Regulatory Authorities" shall mean, collectively, the SEC, the
Federal Trade Commission, the United States Department of Justice, the
Office of Thrift Supervision, and all other federal, state, county, local
or other governmental or regulatory agencies, authorities (including
self-regulatory authorities), instrumentalities, commissions, boards or
bodies having jurisdiction over any of the Parties or their respective
Affiliates (but shall not include any Agency).
"Representative" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged
by a Person.
"Rollover Option" has the meaning given in Section 2.9(a) hereto.
"SEC" shall mean the Securities Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed, or
required to be filed, by a Party or any of its Affiliates with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Servicing Business" shall mean, with respect to a Person, the
business of servicing mortgage loans conducted by such Person as of the
date of this Agreement, but shall not include loan servicing performed by
such Person in the ordinary course of business for the interim period
following closing of the loan and before the sale of the loan by such
Person to an Investor.
"Servicing Commitment" means a commitment by a Party or such
Party's Subsidiary to sell servicing rights with respect to such Party's
Mortgage Loans.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"Surviving Corporation" has the meaning given in Section 2.1
hereto.
"Tax" or Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital shares, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposed or required to be withheld by the United
States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed
thereon or with respect thereto.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"Transferred Employee" has the meaning given in Section 6.7(a)
hereto.
"Unexercised RBMG Options" has the meaning given in Section 2.9(a)
hereto.
"VA" means the United States Veterans' Administration.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." The use of terms like "he"
"his" "she" "hers" "it" "its" "them" and "their" shall not be construed to
limit the applicability of any provision of this Agreement to only certain
types of Persons.
ARTICLE 2.
THE MERGER
2.1 Merger. At the Effective Time and subject to the terms and
conditions of this Agreement, Merger Sub will merge with and into RBMG in
accordance with the provisions of Section 251 of the DGCL and with the
effect provided in Sections 259 and 261 of the DGCL. RBMG shall be the
surviving corporation resulting from the Merger (sometimes referred to
herein as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Delaware. The Merger shall be consummated pursuant
to the terms of this Agreement, which has been approved and adopted by the
respective boards of directors of RBMG, NetBank and Merger Sub as set forth
herein.
2.2 Filing; Certificate of Merger. To effect the Merger, the
Parties hereto shall cause a certificate of merger to be executed and filed
with the Secretary of State of Delaware on the Closing Date.
2.3 Effective Time. The Merger shall be effective at the day and
hour specified in the certificate of merger as filed as provided in Section
2.2 (herein sometimes referred to as the "Effective Time").
2.4 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other actions are necessary,
desirable or proper to vest, perfect or confirm of record or otherwise, in
the Surviving Corporation, the title to any property or rights of RBMG and
NetBank acquired or to be acquired by reason of, or as a result of, the
Merger, the Parties hereto each agree that they and their proper officers
and directors shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this
Agreement, and that the proper officers and directors of the Surviving
Corporation are fully authorized and directed in the name of RBMG and
Merger Sub or otherwise to take any and all such actions.
2.5 Merger Consideration.
(a) As used herein, the term "Merger Consideration" shall
mean the number of shares of NetBank Common Stock (rounded to the nearest
ten thousandth of a share) to be exchanged for each share of RBMG Common
Stock issued and outstanding as of the Effective Time and cash (without
interest) to be payable in exchange for any fractional share of NetBank
Common Stock which would otherwise be distributable to a RBMG shareholder
as provided in Section 2.6. Except as otherwise provided in Section 2.9,
each share (together with the rights associated with such shares issued
pursuant to the Rights Plan, dated as of February 6, 1998, between RBMG and
First Chicago Trust Company of New York, as rights agent) of RBMG Common
Stock outstanding immediately prior to the Effective Time, plus the shares
represented by the Rollover Options, shall be converted into the right to
receive 1.1382 shares of NetBank Common Stock (the "Exchange Ratio").
(b) The amount of cash payable with respect to any
fractional share of NetBank Common Stock shall be determined by multiplying
the fractional part of such share by the NetBank Market Value. The "NetBank
Market Value" shall mean the last reported sale price of NetBank Common
Stock on the Nasdaq Stock Market on the Closing Date.
(c) Each share of Merger Sub Common Stock issued and
outstanding at the Effective Time shall, without any action on the part of
the holder thereof, be converted into one share of the common stock of the
Surviving Corporation and all such shares of common stock of the Surviving
Corporation shall be owned by NetBank.
2.6 Exchange of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of RBMG or the holders of record of RBMG
Common Stock, each share of RBMG Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and shall
represent the right to receive, upon surrender of the certificate (each, a
"Certificate") representing such share of RBMG Common Stock (as provided in
subsection (d) below), the Merger Consideration.
(b) Each share of the NetBank Common Stock issued
and outstanding immediately prior to the Effective Time shall continue to
be issued and outstanding.
(c) Until surrendered, each outstanding Certificate shall
be deemed upon the Effective Time for all purposes to represent only the
right to receive the Merger Consideration. No interest will be paid or
accrued on the Merger Consideration upon the surrender of the certificate
or certificates representing shares of RBMG Common Stock.
(d) At or prior to the Effective Time, NetBank shall
deposit, or shall cause to be deposited, with a bank or trust company (the
"Exchange Agent") selected by NetBank and reasonably satisfactory to RBMG,
for the benefit of the holders of Certificates, for exchange in accordance
with this Article 2, certificates representing the shares of NetBank Common
Stock and the cash in lieu of fractional shares (such cash and certificate
for shares of RBMG Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 2.6(a) and paid pursuant
to Section 2.6(e) in exchange for outstanding shares of RBMG Common Stock.
(e) As soon as practicable after the Effective Time, and
in no event more than three business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal prepared by RBMG and NetBank (which shall that
specify delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the shares of
NetBank Common Stock and the cash in lieu of fractional shares into which
the shares of RBMG Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon
surrender of a Certificate for exchange and cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefore (x)
a certificate representing that number of whole shares of NetBank Common
Stock to which such holder of RBMG Common Stock shall have become entitled
pursuant to the provisions of this Article 2 and (y) a check representing
the amount of cash in lieu of fractional shares, if any, which such holder
has the right to receive in respect of the Certificate surrendered pursuant
to the provisions of this Article 2, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the
cash in lieu of fractional shares and unpaid dividends and distributions,
if any, payable to holders of Certificates.
(f) The Surviving Corporation shall pay any dividends or
other distributions which have been declared prior to the Effective Time or
made by RBMG in respect of shares of RBMG Common Stock in accordance with
the terms of this Agreement and which remain unpaid at the Effective Time,
subject to compliance by RBMG with Section 5.2. To the extent permitted by
law, former shareholders of record of RBMG shall be entitled to vote after
the Effective Time at any meeting of NetBank shareholders the number of
whole shares of NetBank Common Stock into which their respective shares of
RBMG Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing RBMG Common Stock for
certificates representing NetBank Common Stock in accordance with the
provisions of this Agreement.
(g) No dividends or other distributions declared after
the Effective Time with respect to NetBank Common Stock and payable to the
holders of record thereof shall be paid to the holder of any unsurrendered
Certificate until the holder thereof shall surrender such Certificate in
accordance with this Article 2. After the surrender of a Certificate in
accordance with this Article 2, 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
NetBank Common Stock represented by such Certificate.
(h) If any certificate representing shares of NetBank
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall
be properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of NetBank Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(i) After the Effective Time, there shall be no transfers
on the stock transfer books of RBMG of the shares of RBMG Common Stock
which were issued and outstanding immediately prior to the Effective Time,
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of NetBank Common Stock as
provided in this Article 2.
(j) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of RBMG for six months after the Effective
Time shall be paid to NetBank. Any stockholders of RBMG who have not
theretofore complied with this Article 2 shall thereafter look only to
NetBank for payment of their shares of NetBank Common Stock, cash in lieu
of fractional shares and unpaid dividends and distributions on the NetBank
Common Stock deliverable in respect of each share of RBMG Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of
NetBank, RBMG, the Exchange Agent or any other person shall be liable to
any former holder of shares of RBMG Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(k) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by NetBank, the posting by such person of a bond in such amount as
NetBank may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of
NetBank Common Stock and cash in lieu of fractional shares deliverable in
respect thereof pursuant to this Agreement.
2.7 Closing. The consummation of the Merger (the "Closing") shall
take place at 10:00 a.m., local time, five (5) business days after the last
of the conditions in Article 7 (other than the delivery of items to be
delivered at Closing) has been met, at the offices of Powell, Goldstein,
Frazer & Murphy LLP, 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or
at such other time, date or place as the Parties agree (the "Closing
Date"), subject to Articles 7 and 8 hereof.
2.8 Anti-Dilution Provisions. In the event NetBank changes the
number of shares of NetBank Common Stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such Common Stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a
record date is not established) prior to the Effective Time, the number of
shares of NetBank Common Stock to be issued hereunder shall be
proportionally adjusted.
2.9 Conversion of Stock Options.
(a) Prior to the Effective Time, RBMG shall cause each
employee stock option held by any Person to purchase RBMG Common Stock
(each an "RBMG Option") to become fully vested and exercisable in
accordance with its terms. Except for those RBMG Options as to which the
holder elects with the consent of RBMG to survive the Closing (the
"Rollover Options"), each RBMG Option which is not exercised prior to the
Closing Date (each an "Unexercised RBMG Option") shall be exchanged for Two
Dollars ($2.00) per share of RBMG Common Stock subject to the unexercised
portion of such option. The Parties agree that, as of the Effective Time,
all options to purchase RBMG Stock, with the exception of the Rollover
Options, shall have been terminated or exercised.
(b) As of the Effective Time, each Rollover Option shall
automatically be converted into an option to purchase the number of shares
of NetBank Common Stock (a "NetBank Option") determined by multiplying (i)
the number of shares of RBMG Common Stock subject to such Rollover Option
immediately prior to the Effective Time by (ii) the Exchange Ratio (with
the result rounded up to the nearest whole share), at an exercise price per
share of NetBank Common Stock equal to the exercise price per share of RBMG
Common Stock subject to the Rollover Option divided by the Exchange Ratio
(with the result increased to the nearest whole cent); provided, however,
that in the case of any Rollover Option to which Section 421 of the
Internal Revenue Code applies by reason of its qualification as an
incentive stock option under Section 422 of the Internal Revenue Code, the
conversion formula shall be adjusted if necessary to comply with Section
424(a) of the Internal Revenue Code. After the Effective Time, each NetBank
Option shall be exercisable upon the same terms and conditions as were
applicable to the related Rollover Option other than the changes required
by this Agreement. NetBank shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of NetBank Common Stock
for delivery upon exercise of NetBank Options pursuant to the terms set
forth in this Section 2.9(b). As soon as practicable but in any event not
later than the Effective Time, the shares of NetBank Common Stock subject
to NetBank Options will be covered by an effective registration statement
on Form S-8 (or any successor form) or another appropriate form and NetBank
shall maintain the effectiveness of such registration statement for so long
as the NetBank Options remain outstanding. As soon as practicable following
the Effective Time, NetBank shall deliver to the holders of the NetBank
Options appropriate notices setting forth such individual's rights pursuant
this Section 2.9.
2.10 Effect of Merger.
(a) The articles of incorporation and bylaws of RBMG
immediately prior to the Effective Time shall be the articles of
incorporation and bylaws of the Surviving Corporation until duly amended or
repealed.
(b) The directors of RBMG serving immediately prior to
the Effective Time together with such additional persons as may thereafter
be elected, shall serve as the directors of the Surviving Corporation from
and after the Effective Time in accordance with the bylaws of the Surviving
Corporation. The officers of RBMG in office immediately prior to the
Effective Time together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the bylaws of the Surviving
Corporation.
(c) NetBank shall continue to have its headquarters in
the Atlanta, Georgia area.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF RBMG
RBMG hereby represents and warrants to NetBank as follows:
3.1 Organization, Standing, and Power of RBMG. RBMG is duly
organized, validly existing, and in good standing under the Laws of the
State of Delaware, and has the corporate power and authority to carry on
its business as now conducted and to own, lease and operate its material
Assets. RBMG is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on RBMG or the Surviving Corporation. Attached
hereto as Schedule 3.1 are certified copies of articles and bylaws of RBMG.
3.2 Authority of RBMG; No Breach by Agreement.
(a) RBMG has all requisite corporate power and authority
necessary to execute, enter into, deliver, and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby, except for any
required approval by RBMG's shareholders in accordance with the DGCL in
connection with consummation of the Merger, have been duly and validly
authorized, to the extent required, by all necessary corporate action in
respect thereof on the part of RBMG. This Agreement represents a legal,
valid, and binding obligation of RBMG, enforceable against RBMG in
accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding may be
brought).
(b) The execution and delivery of this Agreement by RBMG,
the consummation by RBMG of the transactions contemplated hereby, and
compliance by RBMG with any of the provisions hereof, will not (i) conflict
with or result in a breach of any provision of the articles of
incorporation, bylaws or any resolution adopted by the board of directors
or shareholders of RBMG, (ii) except as disclosed in Schedule 3.2(b)
hereto, constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of RBMG
under, any Contract or Permit of RBMG, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on RBMG or the Surviving
Corporation, or (iii) subject to receipt of the requisite Consents referred
to in Sections 6.3 and 7.1(c), constitute or result in a Default under or
require any Consent pursuant to, any Law, Regulation or Order applicable to
RBMG or any Subsidiary or any of their material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and
securities Laws, and rules of the Nasdaq Stock Market, and other than
Consents required from Regulatory Authorities or Agencies, and other than
notices to or filings with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation with respect to any employee benefit plans, or
under the HSR Act, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on RBMG or the
Surviving Corporation, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by RBMG of the
transactions contemplated in this Agreement.
3.3 RBMG Stock.
(a) The authorized capital stock of RBMG consists of
50,000,000 shares of RBMG Common Stock, par value of $.01 per share, of
which 16,599,869 shares are issued and outstanding as of October 31, 2001,
and 5,000,000 shares of RBMG Preferred Stock, par value of $.01 per share,
of which none are issued and outstanding. All of the issued and outstanding
shares of RBMG Stock are duly authorized and validly issued, fully paid and
nonassessable. None of the outstanding shares of RBMG Stock has been issued
in violation of any preemptive rights of RBMG's current or past
shareholders.
(b) Except as set forth in Schedule 3.3(b) hereto, there
are no shares of capital stock or other equity securities of RBMG
outstanding, nor are there any outstanding Equity Rights relating to the
capital shares of RBMG.
3.4 Financial Statements of RBMG.
(a) (i) The Financial Statements of RBMG as of December
31, 1998, 1999 and 2000 (including, in each case, any related notes) (A)
have been prepared in accordance with GAAP, (B) have applied GAAP on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), (C) comply with the
requirements of Regulation S-X and the general rules and regulations of the
SEC under the Securities Laws, and (D) fairly present in all material
respects the financial positions of RBMG as of the respective dates and the
results of operations and cash flows for RBMG for the periods indicated.
(ii) The Financial Statements of RBMG with respect to
periods ended subsequent to December 31, 2000 have been prepared in
accordance with GAAP for interim financial information. Accordingly, they
do not include all of the information and footnotes necessary for a
comprehensive presentation of financial position, results of operations and
cash flow activity required by GAAP for complete financial results. Such
Financial Statements of RBMG do not contain any material omissions and do
not misstate any material fact and, in the opinion of RBMG, all normal
recurring adjustments necessary for a fair presentation of results have
been included.
(b) RBMG maintains a system of internal accounting
controls, policies and procedures sufficient to ensure that all
transactions relating to its business are executed in conformity in all
material respects with the applicable rules, regulations, directives and
instructions of governmental and regulatory authorities in a manner to
permit preparation of proper financial statements and maintain
accountability for RBMG's assets.
3.5 Minute Books. The minute books of RBMG contain or will contain
at Closing accurate records of all meetings and other corporate actions of
RBMG's shareholders and board of directors (including committees of the
board of directors), and the signatures contained therein are the true
signatures of the persons whose signatures they purport to be.
3.6 Subsidiaries. Schedule 3.6 lists all of the Subsidiaries of
RBMG and, with respect to each, its jurisdiction of organization,
jurisdictions in which it is qualified or otherwise licensed to conduct
business, the number of shares or ownership interests owned by RBMG
(directly or indirectly), the percentage ownership interest so owned by
RBMG and its business activities. The outstanding shares of capital stock
or other equity interests of RBMG's Subsidiaries are validly issued and
outstanding, fully paid and nonassessable, and all such shares are directly
or indirectly owned by RBMG free and clear of all liens, claims and
encumbrances or preemptive rights of any person. No Equity Rights are
authorized, issued or outstanding with respect to the capital stock or
other equity interests of RBMG's Subsidiaries, and there are no agreements,
understandings or commitments relating to the right of RBMG to own, to vote
or to dispose of said interests. None of the shares of capital stock or
other equity interests of RBMG's Subsidiaries have been issued in violation
of the preemptive rights of any person. Schedule 3.6 also lists all shares
of capital stock or other securities or ownership interests of any
corporation, partnership, joint venture, or other organization (other than
RBMG's Subsidiaries and stock or other securities held in a fiduciary
capacity) owned directly or indirectly by RBMG. RBMG is not a Subsidiary of
any Person.
3.7 Organization, Standing and Authority of the Subsidiaries. Each
of RBMG's Subsidiaries is validly existing and in good standing under the
laws of its jurisdiction of organization. Each of RBMG's Subsidiaries has
full power and authority to carry on its business as now conducted, and is
duly qualified to do business in each jurisdiction in which the nature of
the business conducted by it makes such qualifications necessary, except
for qualifications which if not obtained, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on RBMG
or the Surviving Corporation. No Subsidiary of RBMG is required to be
qualified to do business in any other State of the United States or foreign
jurisdiction, or is engaged in any type of activities that have not been
disclosed on Schedule 3.6.
3.8 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.8, RBMG has no material Liabilities, except those disclosed
Liabilities which are accrued, reserved against or disclosed in the
Financial Statements of RBMG. Except as disclosed in Schedule 3.8, RBMG has
not incurred or paid any Liability since December 31, 2000, except for such
Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice, (ii) which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on RBMG or the Surviving Corporation or (iii) in connection with the
transactions contemplated by this Agreement.
3.9 Absence of Certain Changes or Events. Since December 31, 2000,
except as disclosed in the Financial Statements of RBMG delivered prior to
the date of this Agreement or as disclosed in Schedule 3.9, there have been
no events, changes, or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
RBMG or its Assets.
3.10 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf
of RBMG and RBMG's Subsidiaries have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for such
periods, except to the extent that all such failures to file, taken
together, will not have a Material Adverse Effect on RBMG, its
Subsidiaries, or the Surviving Corporation, and all material Tax Returns
filed are complete and accurate in all material respects. All Taxes owed by
RBMG and RBMG's Subsidiaries shown on any filed Tax Return have been paid.
Neither RBMG nor any of its Subsidiaries is the beneficiary of any
extension of time within which to file any Tax Return. There is no audit,
examination, deficiency, or refund Litigation with respect to any Taxes
that will result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on RBMG or any RBMG Subsidiary or on
the Surviving Corporation, except as reserved against in the Financial
Statements of RBMG delivered prior to the date of this Agreement or as
disclosed in Schedule 3.10(a). All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation
involving RBMG or its Subsidiaries have been paid. There are no material
Liens with respect to Taxes upon any of the Assets of RBMG or its
Subsidiaries.
(b) RBMG and its Subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) Neither RBMG nor any of its Subsidiaries has executed
an extension or waiver of any statute of limitations on the assessment or
collection of any material Tax due (excluding such statutes that relate to
years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) that is currently in effect.
(d) The unpaid Taxes of RBMG and its Subsidiaries (A) did
not, as of the most recent fiscal month end, materially exceed the reserve
for Tax liability (not taking into account any reserve for deferred Taxes
established to reflect temporary differences between book and Tax income)
set forth on the face of the most recent balance sheet (other than in any
notes thereto) and (B) do not materially exceed that reserve as adjusted
for the passage of time through the Effective Time in accordance with the
past custom practice of RBMG and its Subsidiaries in filing their Tax
Returns.
(e) Deferred Taxes, if any, of RBMG and its Subsidiaries
have been provided for in accordance with GAAP.
(f) Except as disclosed in Schedule 3.10(f), neither RBMG
nor any of its Subsidiaries is a party to any Tax allocation or sharing
agreement, and neither RBMG nor any of its Subsidiaries has been a member
of an affiliated group filing a consolidated federal income Tax Return or
has any Liability for material Taxes of any Person (other than for RBMG and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law) as a transferee or
successor or by Contract or otherwise.
(g) RBMG and each of its Subsidiaries is in material
compliance with, and the records of RBMG and each of its Subsidiaries
contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply in all material respects with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section 3406
of the Internal Revenue Code.
(h) Neither RBMG nor any of its Subsidiaries has filed a
consent under Internal Revenue Code ss.341(f) concerning collapsible
corporations. Except as disclosed in Schedule 3.10(h), neither RBMG nor any
of its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under
Internal Revenue Code ss.ss.280G and 162(m). Neither RBMG nor any of its
Subsidiaries has been a United States real property holding corporation
within the meaning of Internal Revenue Code ss.897(c)(2) during the
applicable period specified in Internal Revenue Code ss.897(c)(1)(A)(ii).
(i) Exclusive of the transactions contemplated herein,
there has been no ownership change, as defined in Internal Revenue Code
Section 382(g), in RBMG or any of its Subsidiaries during or after any
Taxable Period in which RBMG or any of its Subsidiaries incurred a net
operating loss that carries over to any Taxable Period ending after
December 31, 2000.
(j) Neither RBMG nor any of its Subsidiaries has or has
had in any foreign country a permanent establishment, as defined in any
applicable tax treaty or convention between the United States and such
foreign country.
(k) RBMG and its Subsidiaries will not be required to
include any item of income in, or exclude any item of deduction from,
taxable income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any (A) change in method of accounting for a
taxable period ending on or prior to the Closing Date under Internal
Revenue Code ss.481(c) or any corresponding or similar provision of state,
local or foreign income Tax law, a listing of which is set forth in
Schedule 3.10(k)(A);(B) "closing agreement" as described in Internal
Revenue Code ss.7121 (or any corresponding or similar provision of state,
local or foreign income Tax law) executed on or prior to the Closing Date;
(C) deferred intercompany gain or any excess loss account described in
Treasury Regulations under Internal Revenue Code ss.1502 (or any
corresponding or similar provision of state, local or foreign income Tax
law); (D) installment sale or open transaction disposition made on or prior
to the Closing Date; or (E) prepaid amount received on or prior to the
Closing Date.
(l) None of RBMG or any of its Subsidiaries expects any
authority to assess any additional material Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
material Tax Liability of RBMG nor any of its Subsidiaries claimed or
raised by any authority in writing. Schedule 3.10(l) indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. RBMG has delivered to NetBank correct
and complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by RBMG and
its Subsidiaries since December 31, 1997.
(m) The RBMG consolidated group has not made the election
permitted by Treasury Regulation Section 1.1502-13(l)(3) (which regulation
was adopted and became effective on July 12, 1995 pursuant to Treasury
Decision 8597).
(n) The acquisition of all the stock of RBC by RBMG on
December 31, 1997, was not considered to be, for federal income tax
purposes, a "reverse acquisition" of all the stock of RBMG by RBC within
the meaning Treasury Regulation Section 1.1502-75(d)(3).
3.11 Assets.
(a) Except as disclosed in Schedule 3.11(a) hereto or as
disclosed or reserved against in the Financial Statements of RBMG, RBMG and
each of its Subsidiaries has good and marketable title, free and clear of
all Liens, to all of its respective Assets, other than such defects which
would not have individually or in the aggregate a Material Adverse Effect
on RBMG. All tangible properties used in the respective businesses of RBMG
and each of its Subsidiaries are usable in the ordinary course of business
consistent with RBMG's or such Subsidiary's past practices.
(b) All leases or subleases held by RBMG or any of its
Subsidiaries, which affect any of RBMG's or RBMG's Subsidiaries' Assets
material to its business, are (i) valid contracts enforceable against RBMG
or such Subsidiary (as applicable) and to the Knowledge of RBMG or any
Subsidiary no counterparty has alleged that it is not enforceable against
them (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceedings may be
brought), (ii) in full force and effect, and (iii) not subject to any
material Default. All real property or facilities leases held by RBMG or
any RBMG Subsidiary as lessee, and all Material Equipment Leases, are
listed on Schedule 3.11(b) hereto.
(c) RBMG and each of its Subsidiaries currently
maintains, and RBMG and each of its Subsidiaries will maintain through the
Closing Date (subject to changes in the ordinary course their respective
businesses), the property and casualty insurance ("P&C insurance") policies
described in Schedule 3.11(c). Neither RBMG nor any of its Subsidiaries has
received written notice from any P&C insurance carrier that (i) any policy
of insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of P&C
insurance will be substantially increased. There are presently no claims
for amounts exceeding in any individual case $100,000, or in the aggregate
exceeding $1,000,000, pending under such policies of P&C insurance and no
written notices of claims in excess of such amounts have been given by RBMG
or any of its Subsidiaries under such policies. Schedule 3.11(c) lists all
pending claims by RBMG or any of its Subsidiaries under P&C insurance
policies as of the Closing Date.
(d) The respective Assets of RBMG and of each of its
Subsidiaries include all material Assets required to operate its respective
business as presently conducted, and neither RBMG nor any of its
Subsidiaries has disposed of any Assets since December 31, 2000, other than
in the ordinary course of business except for dispositions which if not
done in the ordinary course, are not likely to have, individually or in the
aggregate, a Material Adverse Effect on RBMG.
3.12 Intellectual Property. Schedule 3.12 is a complete and
accurate list of all copyrights, patents, trademarks, service marks, trade
names, domain names, and applications therefor owned by or licensed to RBMG
or any of RBMG's Subsidiaries ("RBMG Marks"). RBMG and each of its
Subsidiaries owns or has a license to use all of the Intellectual Property
used by such entity in the ordinary course of its respective business. Each
of RBMG and its Subsidiaries is the owner of or has license to any
Intellectual Property sold or licensed by RBMG or such Subsidiary to third
parties in connection with the business operations of RBMG or such
Subsidiary (as applicable), and possesses the right to convey by sale or
license any Intellectual Property so conveyed. Neither RBMG nor any of its
Subsidiaries is in Default under any of its Intellectual Property licenses.
No proceedings have been instituted, or are pending, or, to the Knowledge
of RBMG, threatened, which challenge the rights of RBMG or any of its
Subsidiaries with respect to any Intellectual Property used, sold or
licensed by RBMG or any of its Subsidiaries in the course of the business
of RBMG or any of RBMG's Subsidiaries, nor has any person claimed or
alleged any rights to such Intellectual Property. To the Knowledge of RBMG,
no proceedings have been instituted, or are pending, or, threatened, which
challenge the rights of any licensor to any Intellectual Property licensed
by RBMG and used by RBMG in the course of the business of RBMG or any RBMG
Subsidiary, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of RBMG, the conduct of the
business of RBMG and of its Subsidiaries does not infringe on the
Intellectual Property rights of any other person. Except as disclosed in
Schedule 3.12 hereto, and except for such payments which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on RBMG, neither RBMG nor any of RBMG's Subsidiaries is obligated to pay
any recurring royalties to any Person with respect to any such Intellectual
Property.
3.13 Environmental Matters.
(a) Except as disclosed in Schedule 3.13(a) hereto, all
property owned by RBMG and each of its Subsidiaries is, and has been, in
compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge
of RBMG, threatened, before any court, governmental agency, or authority or
other forum in which RBMG or any of its Subsidiaries has been or, with
respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the emission, migration, release, discharge,
spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by RBMG or any of
its Subsidiaries or any neighboring property, nor, to the Knowledge of
RBMG, is there any reasonable basis for any Litigation of a type described
in this sentence.
(c) Except as disclosed in Schedule 3.13(c) hereto,
during the period of (i) any ownership or operation of any current Asset by
RBMG or any of its Subsidiaries, or (ii) any participation in the
management of any Participation Facility or any Operating Property by RBMG
or any of its Subsidiaries, to the Knowledge of RBMG, there have been no
emissions, migrations, releases, discharges, spillages, or disposals of
Hazardous Material in, on, at, under, adjacent to, or affecting (or
potentially affecting) such properties or any neighboring properties.
Except as disclosed in Schedule 3.13(c) hereto, prior to the period of (i)
any ownership or operation by RBMG or any of its Subsidiaries of any of its
respective current properties, (ii) any participation in the management of
any Participation Facility or any Operating Property by RBMG or an RBMG
Subsidiary, to the Knowledge of RBMG, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting
any such property, Participation Facility or Operating Property.
3.14 Compliance with Laws. Except as disclosed in Schedule 3.14
hereto, RBMG and each of its Subsidiaries:
(a) is not in Default under any of the provisions of its
articles of incorporation or bylaws (or other governing instruments); or
(b) has in effect all Permits necessary for it to own,
hold, lease, or operate its respective material Assets and to carry on its
respective businesses as now conducted; there has occurred no material
Default under any such Permit, and RBMG or its Subsidiaries (as applicable)
is not in material Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business; or
(c) since December 31, 1998, has not received any written
notification or written communication from any agency or department of
federal, state, or local government or any Regulatory Authority or the
staff thereof (1) asserting that it is not in compliance with any of the
Laws or Orders which such governmental authority or Regulatory Authority
enforces where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on RBMG and
where such matter is unresolved as of the date of this Agreement, (2)
threatening to revoke any Permits, or (3) requiring it to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
board resolution or similar undertaking, which restricts materially the
conduct of its business or in any material manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends. Copies of all material reports, correspondence, notices and
other documents relating to any inspection, audit, monitoring or other form
of review or enforcement action by a Regulatory Authority have been made
available to NetBank; or
(d) since December 31, 1998, has not received any written
notification or written communication from any Agency or the staff thereof
(1) asserting that it is not in compliance with any Regulation applicable
to RBMG or any of its Subsidiaries where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on RBMG and where such matter is unresolved as of the date of this
Agreement, or (2) threatening to revoke any authority granted to RBMG or
its Subsidiaries by such Agency where the question of the revocation of
such authority remains unresolved as of the date of this Agreement (unless
the resolution was to revoke such authority) and such revocation is
reasonably likely to have, individually or in the aggregate with similar
revocations, a Material Adverse Effect on RBMG or the Surviving
Corporation.
3.15 Labor Relations. Except as disclosed in Schedule 3.15 hereto,
neither RBMG nor any RBMG Subsidiary is the subject of any Litigation
asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, nor is RBMG or any RBMG Subsidiary a party to any
collective bargaining agreement, nor is there any strike or other labor
dispute involving RBMG or any RBMG Subsidiary pending or to the Knowledge
of RBMG threatened, nor to the Knowledge of RBMG, are there any activities
involving the employees of RBMG or of any RBMG Subsidiary who are seeking
to certify a collective bargaining unit or engaging in any other
organization activity.
3.16 Employees; Compensation; Benefit Plans.
(a) Compensation. Schedule 3.16(a) is a complete and correct list
of the name, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or other benefits that do not rise to
the level of a Plan, whether payable in cash or in kind, of each director,
shareholder, independent contractor, consultant and agent of RBMG and each
of its Subsidiaries and each other person (in each case other than as an
employee) to whom RBMG or any Subsidiary of RBMG pays or provides, or has
an obligation, agreement (written or unwritten), policy or practice of
paying or providing, retirement, health, welfare or other benefits of any
kind or description whatsoever.
(b) Employee Benefit Plans. Except as otherwise disclosed in
Schedule 3.16(b):
(i) Schedule 3.16(b) is an accurate and complete list of
all Plans, as defined below, contributed to, maintained or
sponsored by RBMG or any Subsidiary of RBMG, to which RBMG or any
of its Subsidiaries is obligated to contribute or has any
liability or potential liability, whether direct or indirect,
including all Plans contributed to, maintained or sponsored by
each member of the controlled group of corporations, within the
meaning of Sections 414(b), 414(c), 414(m) and 414(o) of the
Internal Revenue Code, of which RBMG or any of its Subsidiaries is
a member (each, an "RBMG Plan"). For purposes of this Agreement,
the term "Plan" shall mean a plan, arrangement, agreement or
program which is: (A) a profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, whether or not funded and defined
benefit pension plans, whether or not terminated, (B) an
employment agreement, (C) a material personnel policy or fringe
benefit plan, policy, program or arrangement providing for
benefits or perquisites to current or former employees, officers,
directors or agents, whether or not funded, and whether or not
terminated, including, without limitation, benefits relating to
automobiles, clubs, vacation, child care, parenting, sabbatical,
sick leave, severance, medical, dental, hospitalization, life
insurance and other types of insurance, or (D) any other employee
benefit plan as defined in Section 3(3) of ERISA, whether or not
funded and whether or not terminated.
(ii) Neither RBMG nor any of its Subsidiaries contributes
to, has an obligation to contribute to or otherwise has any
liability or potential liability with respect to (A) any
multiemployer plan as defined in Section 3(37) of ERISA, (B) any
plan of the type described in Sections 4063 and 4064 of ERISA or
in Section 413 of the Internal Revenue Code (and regulations
promulgated thereunder), or (C) any plan which provides health,
life insurance, accident or other "welfare-type" benefits to
current or future retirees or former employees or directors, their
spouses or dependents, other than in accordance with Section 4980B
of the Internal Revenue Code or applicable state continuation
coverage law.
(iii) The consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or
officer of RBMG or any of its Subsidiaries to severance pay,
unemployment compensation or any other similar compensation,
except as expressly provided in this Agreement, or (ii) accelerate
or potentially accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or
officer.
(iv) Each RBMG Plan, and all related trusts, insurance
contracts and funds, has been maintained, funded and administered
in compliance in all material respects with its own terms and in
compliance in all respects with all applicable laws and
regulations, including but not limited to ERISA and the Internal
Revenue Code. No actions, suits, claims, complaints, charges,
proceedings, hearings, examinations, investigations, audits or
demands with respect to the RBMG Plans (other than routine claims
for benefits) are pending or threatened, and there are no facts
which could reasonably be expected to give rise to or be expected
to give rise to any actions, suits, claims, complaints, charges,
proceedings, hearings, examinations, investigations, audits or
demands. No RBMG Plan that is subject to the funding requirements
of Section 412 of the Internal Revenue Code or Section 302 of
ERISA has incurred any "accumulated funding deficiency" as such
term is defined in such Sections of ERISA and the Internal Revenue
Code, whether or not waived, and each RBMG Plan has always fully
met the funding standards required under Title I of ERISA and
Section 412 of the Internal Revenue Code. No liability to the
Pension Benefit Guaranty Corporation ("PBGC") (except for routine
payment of premiums) has been or is expected to be incurred with
respect to any RBMG Plan that is subject to Title IV of ERISA, no
reportable event (as such term is defined in Section 4043 of
ERISA) has occurred with respect to any such RBMG Plan, and the
PBGC has not commenced or threatened the termination of any RBMG
Plan. None of the assets of RBMG or any of its Subsidiaries is the
subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Internal Revenue Code, neither RBMG nor any
of its Subsidiaries has been required to post any security
pursuant to Section 307 of ERISA or Section 401(a)(29) of the
Internal Revenue Code, and there are no facts which could be
expected to give rise to such lien or such posting of security. No
event has occurred and no condition exists that would subject RBMG
or any of its Subsidiaries to any tax under Sections 4971, 4972,
4976, 4977 or 4979 of the Internal Revenue Code or to a fine or
penalty under Section 502(c) of ERISA.
(v) Each RBMG Plan that is intended to be qualified under
Section 401(a) of the Internal Revenue Code, and each trust (if
any) forming a part thereof, has received a favorable
determination letter from the IRS as to the qualification under
the Internal Revenue Code of such RBMG Plan and the tax exempt
status of such related trust, and nothing has occurred since the
date of such determination letter that could reasonably be
expected to adversely affect the qualification of such RBMG Plan
or the tax exempt status of such related trust.
(vi) No underfunded "defined benefit plan" (as such term
is defined in Section 3(35) of ERISA) has been, during the five
years preceding the Closing Date, transferred out of the
controlled group of corporations (within the meaning of Sections
414(b), (c), (m) and (o) of the Internal Revenue Code) of which
RBMG or any of its Subsidiaries is a member or was a member during
such five-year period.
(vii) As of December 31, 2000, the fair market value of
the assets of each RBMG Plan that is a tax qualified defined
benefit plan equaled or exceeded, and as of the Closing Date will
equal or exceed, the present value of all vested and nonvested
liabilities thereunder determined in accordance with reasonable
actuarial methods, factors and assumptions applicable to a defined
benefit plan on an ongoing basis. With respect to each RBMG Plan
that is subject to the funding requirements of Section 412 of the
Internal Revenue Code and Section 302 of ERISA, all contributions
legally required to be made by the Closing Date for all periods
ending prior to or as of the Closing Date (including periods from
the first day of the then-current plan year to the Closing Date
and including all quarterly contributions required in accordance
with Section 412(m) of the Internal Revenue Code) shall have been
made. With respect to each other RBMG Plan, all payments,
premiums, contributions, and reimbursements required to be made by
the Closing Date for all periods ending prior to or as of the
Closing Date shall have been made.
(viii) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Internal Revenue
Code, whether by statutory, class or individual exemption) has
occurred with respect to any RBMG Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty or
other liability under Section 4975 of the Internal Revenue Code or
Section 409 or 502(i) of ERISA. Neither RBMG nor, to the best
knowledge of RBMG, any Subsidiary of RBMG, any trustee,
administrator or other fiduciary of any RBMG Plan, or any agent of
any of the foregoing has engaged in any transaction or acted or
failed to act in a manner that could subject RBMG or any of its
Subsidiaries to any liability for breach of fiduciary duty under
ERISA.
(ix) With respect to each RBMG Plan, all reports and
information required to be filed with any government agency or
distributed to RBMG Plan participants and their beneficiaries have
been duly and timely filed or distributed.
(x) RBMG and each of its Subsidiaries has been and is
presently in compliance in all material respects with all of the
requirements of Section 4980B of the Internal Revenue Code.
(xi) Neither RBMG nor any of its Subsidiaries has a
liability as of December 31, 2000 under any RBMG Plan that, to the
extent disclosure is required under GAAP, is not included on the
consolidated balance sheet or disclosed in the notes thereto
included in the Financial Statements of RBMG. With respect to any
RBMG Plan that is a self-funded group health plan, RBMG has set
aside sufficient reserves or will set aside sufficient reserves
prior to the Closing, as reflected on the Financial Statements of
RBMG, to satisfy all incurred, but unreported, claims as of the
plan's termination date were such plan to be terminated on or
prior to the Closing.
(xii) Neither the consideration nor implementation of the
transactions contemplated under this Agreement will increase (A)
RBMG's or any RBMG Subsidiary's obligation to make contributions
or any other payments to fund benefits accrued under the RBMG
Plans as of the date of this Agreement or (B) the benefits accrued
or payable with respect to any participant under the RBMG Plans
(except to the extent benefits may be deemed increased by
accelerated vesting, accelerated allocation of previously
unallocated RBMG Plan assets or by the conversion of all stock
options in accordance with Section 2.9).
(xiii) With respect to each RBMG Plan, RBMG has disclosed
or made available to NetBank, true, complete and correct copies of
(A) all documents pursuant to which the RBMG Plans are maintained,
funded and administered, including summary plan descriptions, (B)
the three most recent annual reports (Form 5500 series) filed with
the IRS (with attachments), (C) the three most recent actuarial
reports, if any, (D) the three most recent financial statements,
(E) all governmental filings for the last three years, including,
without limitation, excise tax returns and reportable events
filings, and (F) all governmental rulings, determinations, and
opinions (and pending requests for governmental rulings,
determinations, and opinions) during the past three years.
(xiv) Each of the RBMG Plans as applied to RBMG and any
of its Subsidiaries may be amended or terminated at any time by
action of RBMG's board of directors, or such RBMG Subsidiary's
board of directors, as the case may be, or a committee of such
board of directors or duly authorized officer, in each case
subject to the terms of the RBMG Plan and compliance with
applicable laws and regulations (and limited, in the case of
multiemployer plans, to termination of the participation of RBMG
or a Subsidiary of RBMG thereunder).
3.17 Material Contracts.
(a) Except as disclosed in Schedule 3.17(a) hereto, neither RBMG
nor any of its Subsidiaries (nor their respective Assets, business, or
operations) is a party to, is bound by, or receives benefits under, (i) any
employment, severance, termination, consulting, or retirement Contract
providing for aggregate payments to any Person in any calendar year in
excess of $100,000 or such a Contract providing for aggregate payments to
any single Person in a period longer than a Calendar Year in the aggregate
in excess of $500,000, (ii) any Contract or indemnity under which RBMG or
any RBMG Subsidiary has created, incurred, assumed or guaranteed debt
including without limitation any indebtedness for borrowed money, or any
capitalized lease or purchase money obligation by RBMG or any Subsidiary,
or by RBMG's or RBMG's Subsidiaries' employees, officers or directors, or
the guarantee by RBMG or a RBMG Subsidiary of any such obligation, (iii)
any Contract, including, without limitation, agreements or memoranda of
understanding with any Regulatory Authority, which prohibits or restricts
RBMG or any RBMG Subsidiary from engaging in any of its business
activities, (iv) any Contract between RBMG or any RBMG Subsidiary and (A)
any Person who directly owns 10% or greater equity or voting interest of
RBMG or any of RBMG's Subsidiaries or (B) any Affiliate (not an RBMG
Subsidiary), or any extensions of credit outstanding to clients, employees
or any third parties (excluding customers in the ordinary course of
business on terms commercially available to the general public), (v) any
Contract relating to the provision of data processing, network
communication, or other technical services provided to or by RBMG or any
RBMG Subsidiary, (vi) any exchange traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial Contract, or any
other interest rate or foreign currency protection Contract not included on
its balance sheet which is a financial derivative Contract, (vii) any
agreement (including all master commitments and loan purchase contracts)
between RBMG or any RBMG Subsidiary and any Agency or Investor pursuant to
which RBMG or any RBMG Subsidiary sold more than $10 million in principal
amount of mortgage loans since December 31, 2000, (viii) any agreement
between RBMG or any RBMG Subsidiary and any Investor pursuant to which RBMG
or RBMG Subsidiary sold more than $2.5 million in mortgage servicing rights
since December 31, 2000, and (ix) any insurance or guaranty contracts,
including contracts with any private mortgage insurer or pool insurance
provider with respect to the Mortgage Loans (the "RBMG Contracts"). All
RBMG Contracts are properly accrued for in accordance with GAAP as of the
date hereof and as of the Closing Date.
(b) With respect to RBMG Contracts and except as disclosed in
Schedule 3.17(b) hereto: (i) each RBMG Contract is a valid contract
enforceable against RBMG or a RBMG Subsidiary (as applicable) and to the
Knowledge of RBMG no counterparty has alleged that it is not enforceable
against them; (ii) neither RBMG nor any RBMG Subsidiary is in material
Default or alleged to be in material Default thereunder, (iii) neither RBMG
nor any RBMG Subsidiary has repudiated or waived any material provision of
a RBMG Contract; and (iv) no other party to a RBMG Contract is, to the
Knowledge of RBMG, in Default in any respect or has repudiated or waived
any material provision thereunder.
(c) Except as disclosed in Schedule 3.17(c) hereto, no officer,
director or employee of RBMG or a RBMG Subsidiary is party to a RBMG
Contract which restricts or prohibits such officer, director or employee
from engaging in activities competitive with RBMG or a RBMG Subsidiary.
(d) All of the indebtedness in excess of $100,000 of RBMG and of
each of its Subsidiaries for any money borrowed is prepayable at any time
without penalty or premium.
3.18 Legal and Disciplinary Proceedings. Except as disclosed in
Schedule 3.18 hereto, there is no Litigation instituted, pending or, to the
Knowledge of RBMG, threatened (or unasserted but considered likely of
assertion) against RBMG or any RBMG Subsidiary, or against any director,
employee or employee benefit plan (acting in such capacity) of RBMG or any
RBMG Subsidiary, or against any Asset, interest, or right of RBMG or a RBMG
Subsidiary, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against RBMG or any
RBMG Subsidiary that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on RBMG.
3.19 Reports. Since December 31, 1998, or the date of organization
if later, RBMG and each of its Subsidiaries has timely filed all reports
and statements, together with any amendments required to be made with
respect thereto, that were required to be filed with any Regulatory
Authority or Agency. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of
its respective date, each such report and document did not, in any material
respect, 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 made therein, in light of the circumstances under which they
were made, not misleading.
3.20 Accounting, Tax and Regulatory Matters. Neither RBMG nor any
RBMG Subsidiary has taken or agreed to take any action or has any Knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the
transactions contemplated hereunder from qualifying as a tax-free
reoganization under Section 368 of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory
Authorities or Agencies referred to in Sections 6.3 or 7.1(c) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of Section 7.1(c).
3.21 Articles of Incorporation Provisions. RBMG has taken all
action necessary so that the entering into of this Agreement and the
consummation of the transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under its articles
of incorporation, bylaws or other governing instruments.
3.22 Statements True and Correct. No written statement,
certificate, instrument or other writing furnished or to be furnished by
RBMG to NetBank pursuant to this Agreement (or any other document,
agreement or instrument referred to herein) contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. All documents that RBMG is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply in all material respects with
the provisions of applicable Law. None of the information supplied or to be
supplied by RBMG or any RBMG Subsidiary for inclusion in the Registration
Statement to be filed by NetBank with the SEC will be false or misleading
with respect to any material fact, or omit to state any material fact
necessary to make the statements therein not misleading.
3.23 Consents and Approvals; No Violations. Except for the
approval of the Office of Thrift Supervision as described in Section 6.3
hereto, and except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of,
state insurance and mortgage brokerage laws or regulations, and the filing
and acceptance for record or recordation of a merger certificate as
required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Regulatory Authority is
necessary for the execution and delivery by RBMG of this Agreement or the
consummation by RBMG of the transactions contemplated hereby and thereby,
except where the failure to obtain such permits, authorizations, consents
or approvals or to make such filings or give such notice would not have a
Material Adverse Effect on RBMG or the Surviving Corporation. Neither the
execution, delivery and performance of this Agreement by RBMG nor the
consummation by RBMG of the transactions contemplated hereby and thereby
will (i) conflict with or result in any breach of any provision of the
articles of incorporation or bylaws (or similar charter or organizational
documents) of RBMG, (ii) result in a violation or breach of or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which RBMG is a party or by which RBMG or any
of its properties or Assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to RBMG or
the Merger or any of RBMG's Subsidiaries or any of their respective
properties or Assets except, in the case of (ii) or (iii), for violations,
breaches or defaults which would not have a Material Adverse Effect on
RBMG, its Subsidiaries, or the Surviving Corporation.
3.24 Lender and Servicer Qualifications.
(a) RBMG or an appropriate RBMG Subsidiary (i) is qualified (A) by
FHA as an approved mortgagee and servicer for mortgage loans which are
insured by the FHA ("FHA Loans"), (B) by the VA as a lender and servicer
for mortgage loans guaranteed by the VA ("VA Loans"), (C) by FNMA and FHLMC
as a seller/servicer of first mortgages to FNMA and FHLMC and by FNMA under
the Delegated Underwriting and Servicing Program, and (D) by GNMA as an
authorized issuer and servicer of GNMA guaranteed mortgage-backed
securities; and (ii) has all other material Permits necessary to conduct
its current mortgage banking business, and is in good standing under all
applicable Laws, and under all applicable Regulations, as a mortgage
broker, lender and servicer. Schedule 3.24(a) lists each jurisdiction in
which RBMG or the appropriate RBMG Subsidiary has obtained or applied for a
Permit. Except as disclosed in Schedule 3.24(a), RBMG and each RBMG
Subsidiary:
(x) to the Knowledge of RBMG, is not in violation of any
Laws, Orders, or Permits applicable to its business or employees conducting
its business as interpreted by the respective courts and Agencies having
jurisdiction over RBMG or any RBMG Subsidiary as of the date of this
Agreement or the Closing Date, nor is there a reasonable probability of the
operation or practices of RBMG or any RBMG Subsidiary being held to be in
violation of such Laws, Orders or Permits; or
(y) has not received any written notification or
communication from any agency or department of federal, state, or local
government or any Agency or the staff thereof (i) asserting that RBMG or
any RBMG Subsidiary is not in compliance with any of the Laws or Orders
which such governmental authority or Agency enforces which is still
outstanding or unresolved, or (ii) threatening to revoke any Permits.
(b) Except as disclosed in Schedule 3.24(b) hereto, RBMG and its
Subsidiaries have been and are in compliance in all material respects with
all Laws (including the Regulations) and Orders of any court or
governmental authorities applicable to it, its Assets and its conduct of
business, the breach of which would require the repurchase of a RBMG Loan
or result in RBMG or a RBMG Subsidiary incurring a loss. RBMG and its
Subsidiaries have timely filed, or will have timely filed by the Closing
Date, all material reports required by any Investor, Agency or insurer or
by any Law to be filed. To the Knowledge of RBMG, neither RBMG nor its
Subsidiaries has done or caused to be done, or has failed to do or omitted
to be done, any act, the effect of which would operate to invalidate or
materially impair (i) any approvals of the FHA, VA, FNMA, FHLMC, GNMA or
HUD, (ii) any FHA insurance or commitment of the FHA to insure, (iii) any
VA guarantee or commitment of the VA to guarantee, (iv) any private
mortgage insurance or commitment of any private mortgage insurer to insure,
(v) any title insurance policy, (vi) any hazard insurance policy, (vii) any
flood insurance policy, (viii) any fidelity bond, direct surety bond, or
errors and omissions insurance policy required by HUD, GNMA, FNMA, FHA,
FHLMC, VA or private mortgage insurers, (ix) any surety or guaranty
agreement, or (x) any guaranty issued by GNMA, FNMA or FHLMC to RBMG or any
RBMG Subsidiary respecting mortgage-backed securities issued by RBMG or any
RBMG Subsidiary and other like guaranties. Except as set forth in Schedule
3.24(b), currently no Agency, Investor or private mortgage insurer has (i)
claimed that RBMG or any RBMG Subsidiary has materially violated or has not
complied with the applicable underwriting standards with respect to RBMG
Loans sold by RBMG or any RBMG Subsidiary to an Investor or Agency, or with
respect to any sale of mortgage servicing rights to an Investor, or (ii)
imposed restrictions on the activities (including commitment authority) of
RBMG or any RBMG Subsidiary.
(c) Except as set forth in Schedule 3.24(c) hereto, to the
Knowledge of RBMG, no RBMG Loan has been originated and/or serviced by RBMG
or any RBMG Subsidiary in violation of any Law or Regulation, the violation
of which could reasonably result in RBMG or any RBMG Subsidiary incurring a
loss for GAAP purposes in excess of $5,000,000 in the aggregate.
3.25 Loan and Mortgage Servicing Portfolio.
(a) Each RBMG Loan conforms to the Agency and Investor
requirements (including the Regulations), and each RBMG Loan (i) is
eligible for sale to, and insurance by, or pooling to collateralize
securities issued or guaranteed by, the applicable Investor, Agency or
insurer; or (ii) if RBMG or any RBMG Subsidiary has sold or will sell
mortgage servicing rights with respect to a RBMG Loan to an Investor, is
eligible for the sale of mortgage servicing rights to the applicable
Investor. RBMG and its Subsidiaries each have originated, underwritten,
funded, serviced and sold (as applicable) each RBMG Loan in compliance with
applicable federal, state and local legal and regulatory requirements
(including licensing statutes and regulations) and in accordance with
Agency and Investor requirements (including the Regulations) and the
related RBMG Loan documents. Each RBMG Loan (i) is, except as set forth in
Schedule 3.25(a) hereto, evidenced by a note or other evidence of
indebtedness with such terms as are customary in the business; (ii) is duly
secured by a mortgage, security deed or deed of trust (a "mortgage") with
such terms as are customary in the business and which grants the holder
thereof either a first lien on the subject property (including any
improvements thereon) with respect to loans originated as first mortgages,
and with respect to loans originated as second mortgages, a second priority
lien on the subject, and which constitutes a security interest that has
been duly perfected and maintained (or is in the process of perfection in
due course) and is in full force and effect and is insured by a title
policy issued by a company acceptable to the applicable Agency or Investor
to the extent required by the applicable Agency or Investor; (iii) is
accompanied by a hazard insurance policy covering improvements on the
premises subject to such mortgage or deed of trust, with a loss payee
clause in favor of RBMG or an RBMG Subsidiary or the assignee of RBMG or an
RBMG Subsidiary, which insurance policy or policies covers such risks as
are customarily insured against in accordance with industry practice and in
accordance with Investor or Agency requirements, and which includes flood
insurance and/or special hazard insurance where either is required by an
Investor or Agency or requested by the mortgagor. RBMG and its Subsidiaries
have complied in all material respects with all of its obligations under
the insurance policies described in this clause (iii); and (iv) except as
set forth in Schedule 3.25(a), is covered by an FHA insurance certificate,
VA guaranty certificate, or policy of private mortgage insurance, if
required by the terms of any agreement or any Law applicable to such loan.
RBMG and its Subsidiaries have substantially complied with all applicable
provisions of any such insurance or guaranty contract or policy and the
Laws related thereto, the insurance or guaranty is in full force and effect
with respect to each such loan, and there is no Default that would result
in the revocation of any such insurance or guaranty. Except as set forth in
Schedule 3.25(a), each warehouse mortgage loan is a RBMG Loan that is or is
eligible to be an FHA Loan or a VA Loan or which is a loan eligible to be
sold to FNMA or FHLMC ("Conforming Loan") or is subject to an Investor
Commitment to RBMG or a RBMG Subsidiary. To the Knowledge of RBMG or an
RBMG Subsidiary, no RBMG Loans are in Default except as reflected on the
records of RBMG or RBMG Subsidiary.
(b) To the Knowledge of RBMG, all RBMG Loans are genuine, valid
and legally binding obligations of the borrowers thereunder, have been duly
executed by a borrower of legal capacity and are enforceable in accordance
with their respective terms, except as enforcement thereof may be limited
by (i) bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding in equity or at law), (ii) state
Laws requiring creditors to proceed against the collateral before pursuing
the borrower, (iii) state Laws on deficiencies, and (iv) the matters set
forth in Schedule 3.25(b) hereto. Except as set forth in Schedule 3.25(b),
neither the operation of any of the terms of any RBMG Loan, nor the
exercise of any right thereunder, has rendered or will render the related
mortgage or note unenforceable, in whole or in part, or subject it to any
right of rescission, setoff, counterclaim or defense, and no such right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto. The Loan Documents for all RBMG Loans were in compliance in all
material respects with applicable Laws and Regulations and Investor and
Agency requirements upon origination of the underlying RBMG Loan and are
complete in all material respects.
(c) All RBMG Loans held for the account of RBMG or a RBMG
Subsidiary (whether or not for future sale or delivery to an Investor or
Agency) are owned by RBMG or such Subsidiary free and clear of any Lien
other than Liens in favor of RBMG's or such Subsidiary's lender banks
pursuant to financing arrangements. Such RBMG Loans have been duly recorded
or submitted for recordation in the appropriate filing office in the name
of RBMG or RBMG Subsidiary, as applicable, as mortgagee or, for loans
registered through Mortgage Electronic Registration Systems ("MERS"), in
the name of MERS. Neither RBMG nor any RBMG Subsidiary has, with respect to
any such RBMG Loan, released any security therefor, except upon receipt of
Investor or Agency approval, or accepted prepayment of any such RBMG Loan
which has not been promptly applied to such RBMG Loan in accordance with
the terms thereof. To the Knowledge of RBMG, there exists no physical
damage to any property securing a RBMG Loan ("Collateral"), which physical
damage is not insured against in compliance with the Regulations or would
cause any RBMG Loan to become delinquent or adversely affect the value or
marketability of any RBMG Loan, Servicing Rights or Collateral.
(d) To the Knowledge of RBMG, (i) all monies received with respect
to each RBMG Loan have been properly accounted for and applied, (ii) upon
origination, all of RBMG Loans were fully disbursed in accordance with
applicable law and regulations and (iii) all payoff and assumption
statements with respect to each RBMG Loan provided by RBMG or a RBMG
Subsidiary to borrowers or their agents were, at the time they were
provided, complete and accurate in all material respects.
(e) The responsibilities of RBMG and each RBMG Subsidiary with
respect to all applicable Taxes (including tax reporting for the period
prior to the Closing), assessments, ground rents, flood insurance premiums,
hazard insurance premiums and mortgage insurance premiums that are related
to RBMG Loans have been duly met in all material respects, both
individually or in the aggregate. All Tax identifications are correct and
complete in all material respects and comply with all applicable Laws in
all material respects, and property descriptions contained in any Loan
Document for an RBMG Loan are legally sufficient in all material respects.
(f) RBMG has provided NetBank with a copy of the internal
practices and procedures of RBMG and each RBMG Subsidiary, and RBMG, each
RBMG Subsidiary, and employees of RBMG and each RBMG Subsidiary have
complied and are in compliance with such practices and procedures. All such
practices and procedures and all form disclosures, notices, broker
agreements, notes, mortgages, instruments and agreements used in the
business of RBMG or any RBMG Subsidiary comply in all material respects
with (a) all applicable Consumer Credit Law, (b) all standards imposed by
the Agencies and Investors, to the extent applicable, and (c) any other
applicable Law or Regulation.
3.26 No Recourse.
(a) Neither RBMG nor any RBMG Subsidiary normally or ordinarily
incurs expenses such as legal fees in excess of the customary reimbursement
limits, if any, set forth in the applicable mortgage servicing agreement.
Except as set forth in Schedule 3.26(a) hereto, neither RBMG nor any RBMG
Subsidiary is a party to (i) any Contract with (or otherwise obligated to)
any Person, including an Investor, Agency or insurer, to repurchase from
any such Person any RBMG Loan, mortgaged property serviced for others or
previously disposed loans; or (ii) any Contract to reimburse, indemnify or
hold harmless any Person or otherwise assume any Liability with respect to
any loss suffered or incurred as a result of any default under or the
foreclosure or sale of any such RBMG Loan, mortgaged property, or
previously disposed loans except in either case where such recourse is
based upon a breach by RBMG or a RBMG Subsidiary of a customary
representation, warranty or undertaking. Except as set forth on Schedule
3.26(a) hereto, neither RBMG nor any RBMG Subsidiary is a party to any
Contract with (or otherwise obligated to) any Person to sell RBMG Loan
servicing to any such Person.
(b) Except as set forth in Schedule 3.26(b) hereto, there are no
pooling, participation, servicing or other Contracts to which RBMG or any
RBMG Subsidiary is a party which obligate it to make servicing advances
with respect to defaulted or delinquent RBMG Loans other than as provided
in GNMA, FNMA or FHLMC pooling and servicing agreements. The amounts that,
as of the Effective Date, have been advanced by RBMG or RBMG Subsidiary in
connection with servicing RBMG Loans (including principal, interest, taxes
and insurance premiums) and which are permitted to be paid by RBMG or RBMG
Subsidiary as the servicer of RBMG Loans pursuant to applicable Investor or
Agency requirements and the terms of the applicable mortgage servicing
agreement will be valid and existing amounts owing to RBMG or RBMG
Subsidiary, subject to the terms of the applicable mortgage servicing
agreement.
3.27 Mortgage Servicing Agreements. Schedule 3.27 hereto lists all
agreements under which RBMG or any RBMG Subsidiary services loans on behalf
of third parties (the "RBMG Mortgage Servicing Agreements") as of the date
of this Agreement. Except as set forth in Schedule 3.27, the RBMG Mortgage
Servicing Agreements set forth all the terms and conditions of RBMG's or
RBMG Subsidiary's (as applicable) rights against and obligations to the
Agencies and Investors and they have not been modified in writing to any
extent or otherwise in any material respect. All of the RBMG Mortgage
Servicing Agreements are valid and binding obligations of RBMG or a RBMG
Subsidiary and, to the Knowledge of RBMG, all of the other parties thereto
and are in full force and effect and are enforceable in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity (whether applied in a
proceeding in equity or at law). Except as set forth in Schedule 3.27
hereto, (i) to the Knowledge of RBMG there is no Default by any party under
any such RBMG Mortgage Servicing Agreement, (ii) there is no pending or, to
the Knowledge of RBMG, threatened cancellation of any RBMG Mortgage
Servicing Agreement, (iii) no material sanctions or penalties have been
imposed upon RBMG under any Mortgage Servicing Agreement or under any
applicable Regulation, and (iv) all of the RBMG Mortgage Servicing
Agreements and the rights created thereunder are owned by RBMG free and
clear of any Liens other than Liens in favor of RBMG's or such Subsidiary's
lenders pursuant to financing arrangements, and upon the consummation of
the Merger, will continue to be so owned by RBMG except upon termination by
an Investor or Agency pursuant to Contract right. Neither RBMG nor any of
its Subsidiaries is a party to any agreement under which a third party
services RBMG Loans.
3.28 Investor Commitments and Servicing Commitments.
(a) Set forth in Schedule 3.28(a) hereto is a complete and correct
list of each Investor Commitment to which RBMG or any RBMG Subsidiary was a
party as of the date of this Agreement, and RBMG has made available to
NetBank complete and correct copies of all Investor Commitments in effect
on such date. Each Investor Commitment to RBMG or an RBMG Subsidiary
constitutes a valid and binding obligation of RBMG or a RBMG Subsidiary,
and, to the Knowledge of RBMG, all of the other parties thereto,
enforceable in accordance with its terms, subject to bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a
proceeding in equity or at law). Except as set forth in Schedule 3.28(a)
hereto, each RBMG Loan or warehouse mortgage loan which is subject to an
Investor Commitment is a Conforming Loan or is otherwise readily salable in
the secondary market. No Investor Commitments are in Default.
(b) Set forth in Schedule 3.28(b) hereto is a complete and correct
list of each Servicing Commitment of RBMG and each RBMG Subsidiary as of
the date of this Agreement, and RBMG has made available to NetBank complete
and correct copies of all Servicing Commitments in effect on such date.
Each Servicing Commitment of RBMG or a RBMG Subsidiary constitutes a valid
and binding obligation of RBMG or the RBMG Subsidiary (as appliable), and,
to the Knowledge of RBMG, all of the other parties thereto, enforceable in
accordance with its terms, subject to bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity (whether applied in a proceeding in equity
or at law). No Servicing Commitments of RBMG or any RBMG Subsidiary are in
Default.
3.29 Custodial Accounts. RBMG or an appropriate RBMG Subsidiary
has full power and authority to maintain escrow accounts ("Custodial
Accounts") for certain serviced loans. Except as disclosed in Schedule 3.29
hereto, such Custodial Accounts comply in all material respects with (i)
all applicable Regulations and the payment of interest on escrows and (ii)
any terms of the mortgage loans (and mortgage servicing agreements)
relating thereto. To the Knowledge of RBMG, the Custodial Accounts contain
the amounts shown in the records of RBMG or RBMG Subsidiary (as
applicable), which amounts represent all monies received or advanced by
RBMG or RBMG Subsidiary as required by the applicable mortgage servicing
agreements, less amounts remitted by or on behalf of RBMG or RBMG
Subsidiary pursuant to applicable mortgage servicing agreements, except for
checks in process.
3.30 Pool Certification. Except as set forth in Schedule 3.30
hereto, all pools relating to RBMG Loans have been properly balanced,
reconciled, fully funded and certified, finally certified and recertified
(if required) in accordance with applicable Regulations by the applicable
Investor or Agency and have been aggregated pursuant to the requirements of
the applicable Investor or Agency. The principal balance outstanding and
owing on RBMG Loans in each pool equals or exceeds the amount owing to the
corresponding security holders of such pool. To the Knowledge of RBMG, no
event has occurred or failed to occur which would require RBMG or any RBMG
Subsidiary to repurchase any RBMG Loan from any pool, except with respect
to the obligation to repurchase from GNMA pools, FHA Loans or VA Loans that
are in the process of foreclosure (or equivalent procedure).
3.31 Equipment Leasing.
(a) All equipment leasing business of RBMG or its Affiliates is
conducted by Republic Leasing Company, Inc.
(b) Each equipment lease entered into by Republic Leasing Company,
Inc. (each a "Lease," and collectively, the "Leases") was entered into and
documented in compliance with all applicable Laws and constitutes a valid
and binding obligation of the parties thereto, enforceable in accordance
with its terms, subject to bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding in equity or at law),
except where such noncompliance is reasonably likely to have individually
or in the aggregate, a Material Adverse Effect on RBMG and where such
matter is unresolved as of the date of this Agreement.
3.32 Fairness Opinion. RBMG has received from an independent
financial advisor an opinion that, as of the date hereof, the Merger
Consideration is fair to the shareholders of RBMG from a financial point of
view.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF NETBANK
NetBank hereby represents and warrants to RBMG as follows:
4.1 Organization, Standing, and Power of NetBank. NetBank is duly
organized, validly existing, and in good standing under the Laws of the
State of Georgia, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material
Assets. NetBank is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on NetBank or the Surviving Corporation. Attached
hereto as Schedule 4.1 are certified copies of articles and bylaws of
NetBank.
4.2 Authority of NetBank; No Breach by Agreement.
(a) NetBank has all requisite corporate power and authority
necessary to execute, enter into, deliver, and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, except for any
required approval of NetBank's shareholders in accordance with applicable
Law in connection with the consummation of the Merger, have been duly and
validly authorized, to the extent required, by all necessary corporate
action in respect thereof on the part of NetBank. This Agreement represents
a legal, valid, and binding obligation of NetBank, enforceable against
NetBank in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding may be brought).
(b) The execution and delivery of this Agreement by NetBank, the
consummation by NetBank of the transactions contemplated hereby, and
compliance by NetBank with any of the provisions hereof, will not (i)
conflict with or result in a breach of any provision of the articles of
incorporation, bylaws or any resolution adopted by the board of directors
or shareholders of NetBank, or (ii) except as disclosed in Schedule 4.2(b),
constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of NetBank under,
any Contract or Permit of NetBank, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on NetBank or the Surviving
Corporation, or (iii) subject to receipt of the requisite Consents referred
to in Sections 6.3 and 7.1(c) constitute or result in a Default under, or
require any Consent pursuant to, any Law, Regulation or Order applicable to
NetBank or any NetBank Subsidiary or of any of their material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and
rules of the Nasdaq Stock Market, and other than Consents required from
Regulatory Authorities or Agencies, and other than notices to or filings
with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR
Act, and other than Consents, filings, or notifications which, if not
obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on NetBank or the Surviving
Corporation, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by NetBank of the transactions
contemplated in this Agreement.
4.3 NetBank Stock.
(a) As of the date of this Agreement, the authorized capital
shares of NetBank consists of 100,000,000 shares of NetBank Common Stock,
of which 29,433,604 shares are issued and outstanding as of September 30,
2001, and 10,000,000 shares of preferred stock, no par value, of which none
are issued and outstanding. All of the issued and outstanding shares of
NetBank Common Stock and preferred stock are duly authorized and validly
issued, fully paid and nonassessable. None of the outstanding shares of
NetBank Stock has been issued in violation of any preemptive rights of
NetBank's current or past shareholders.
(b) Except as set forth in Schedule 4.3(b) hereto, there are no
shares of capital stock or other equity securities of NetBank outstanding,
nor are there any outstanding Equity Rights relating to the capital shares
of NetBank.
4.4 Financial Statements of NetBank.
(a) (i) The Financial Statements of NetBank as of December 31,
1998, 1999 and 2000 (including, in each case, any related notes) (A) have
been prepared in accordance with GAAP, (B) have applied GAAP on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), (C) comply with the
requirements of Regulation S-X and the general rules and regulations of the
SEC under the Securities Laws, and (D) fairly present in all material
respects the financial positions of NetBank as of the respective dates and
the results of operations and cash flows for NetBank for the periods
indicated.
(ii) The Financial Statements of NetBank with respect to
periods ended subsequent to December 31, 2000 have been prepared in
accordance with GAAP for interim financial information. Accordingly, they
do not include all of the information and footnotes necessary for a
comprehensive presentation of financial position, results of operations and
cash flow activity required by GAAP for complete financial results. Such
Financial Statements of NetBank do not contain any material omissions and
do not misstate any material fact and, in the opinion of NetBank, all
normal recurring adjustments necessary for a fair presentation of results
have been included.
(b) NetBank maintains a system of internal accounting controls,
policies and procedures sufficient to ensure that all transactions relating
to its business are executed in conformity in all material respects with
the applicable rules, regulations, directives and instructions of
governmental and regulatory authorities in a manner to permit preparation
of proper financial statements and maintain accountability for NetBank's
assets.
4.5 Minute Books. The minute books of NetBank contain or will
contain at Closing accurate records of all meetings and other corporate
actions of NetBank's shareholders and board of directors (including
committees of the board of directors), and the signatures contained therein
are the true signatures of the persons whose signatures they purport to be.
4.6 Subsidiaries. Schedule 4.6 lists all of the Subsidiaries of
NetBank and, with respect to each, its jurisdiction of organization,
jurisdictions in which it is qualified or otherwise licensed to conduct
business, the number of shares or ownership interests owned by NetBank
(directly or indirectly), the percentage ownership interest so owned by
NetBank and its business activities. The outstanding shares of capital
stock or other equity interests of NetBank's Subsidiaries are validly
issued and outstanding, fully paid and nonassessable, and all such shares
are directly or indirectly owned by NetBank free and clear of all liens,
claims and encumbrances or preemptive rights of any person. No Equity
Rights are authorized, issued or outstanding with respect to the capital
stock or other equity interests of NetBank's Subsidiaries, and there are no
agreements, understandings or commitments relating to the right of NetBank
to own, to vote or to dispose of said interests. None of the shares of
capital stock or other equity interests of NetBank's Subsidiaries have been
issued in violation of the preemptive rights of any person. Schedule 4.6
also lists all shares of capital stock or other securities or ownership
interests of any corporation, partnership, joint venture, or other
organization (other than NetBank's Subsidiaries and stock or other
securities held in a fiduciary capacity) owned directly or indirectly by
NetBank. NetBank is not a Subsidiary of any Person.
4.7 Organization, Standing and Authority of the Subsidiaries.
NetBank's depository institution Subsidiary is a federally chartered
savings association with its deposits insured by the FDIC. Each of
NetBank's Subsidiaries is validly existing and in good standing under the
laws of its jurisdiction of organization. Each of NetBank's Subsidiaries
has full power and authority to carry on its business as now conducted, and
is duly qualified to do business in each jurisdiction in which the nature
of the business conducted by it makes such qualifications necessary, except
for qualifications which if not obtained are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on NetBank or
the Surviving Corporation. No Subsidiary of NetBank is required to be
qualified to do business in any other State of the United States or foreign
jurisdiction, or is engaged in any type of activities that have not been
disclosed on Schedule 4.6.
4.8 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 4.8, NetBank has no material Liabilities, except those disclosed
Liabilities which are accrued, reserved against or disclosed in the
Financial Statements of NetBank. Except as disclosed in Schedule 4.8,
NetBank has not incurred or paid any Liability since December 31, 2000,
except for such Liabilities incurred or paid (i) in the ordinary course of
business consistent with past business practice, (ii) which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on NetBank or the Surviving Corporation, or (iii) in
connection with the transactions contemplated by this Agreement.
4.9 Absence of Certain Changes or Events. Since December 31, 2000,
except as disclosed in the Financial Statements of NetBank delivered prior
to the date of this Agreement or as disclosed in Schedule 4.9, there have
been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on NetBank or its Assets.
4.10 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
NetBank and NetBank Subsidiaries have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for such
periods, except to the extent that all such failures to file, taken
together, will not have a Material Adverse Effect on NetBank, its
Subsidiaries, or the Surviving Corporation, and all material Tax Returns
filed are complete and accurate in all material respects. All Taxes owed by
NetBank and NetBank's Subsidiaries shown on any filed Tax Return have been
paid. Neither NetBank nor any of its Subsidiaries is the beneficiary of any
extension of time within which to file any Tax Return. There is no audit,
examination, deficiency, or refund Litigation with respect to any Taxes
that will result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on NetBank or any NetBank Subsidiary
or on the Surviving Corporation, except as reserved against in the
Financial Statements of NetBank delivered prior to the date of this
Agreement or as disclosed in Schedule 4.10(a). All Taxes and other
Liabilities due with respect to completed and settled examinations or
concluded Litigation involving NetBank or its Subsidiaries have been paid.
There are no material Liens with respect to Taxes upon any of the Assets of
NetBank or its Subsidiaries.
(b) NetBank and its Subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) Neither NetBank nor any of its Subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material Tax due (excluding such statutes that relate to
years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) that is currently in effect.
(d) The unpaid Taxes of NetBank and its Subsidiaries (A) did not,
as of the most recent fiscal month end, materially exceed the reserve for
Tax liability (not taking into account any reserve for deferred Taxes
established to reflect temporary differences between book and Tax income)
set forth on the face of the most recent balance sheet (other than in any
notes thereto) and (B) do not materially exceed that reserve as adjusted
for the passage of time through the Effective Time in accordance with the
past custom practice of NetBank and its Subsidiaries in filing their Tax
Returns.
(e) Deferred Taxes, if any, of NetBank and its Subsidiaries have
been provided for in accordance with GAAP.
(f) Except as disclosed in Schedule 4.10(f), neither NetBank nor
any of its Subsidiaries is a party to any Tax allocation or sharing
agreement, and neither NetBank nor any of its Subsidiaries has been a
member of an affiliated group filing a consolidated federal income Tax
Return or has any Liability for material Taxes of any Person (other than
for NetBank and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(g) NetBank and each of its Subsidiaries is in material compliance
with, and the records of NetBank and each of its Subsidiaries contain all
information and documents (including properly completed IRS Forms W-9)
necessary to comply in all material respects with, all applicable
information reporting and Tax withholding requirements under federal,
state, and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code.
(h) Neither NetBank nor any of its Subsidiaries has filed a
consent under Internal Revenue Code ss.341(f) concerning collapsible
corporations. Except as disclosed in Schedule 4.10(h), neither NetBank nor
any of its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments, that will not be deductible under
Internal Revenue Code ss.ss.280G and 162(m). Neither NetBank nor any of its
Subsidiaries has been a United States real property holding corporation
within the meaning of Internal Revenue Code ss.897(c)(2) during the
applicable period specified in Internal Revenue Code ss.897(c)(1)(A)(ii).
(i) Exclusive of the transactions contemplated herein, there has
been no ownership change, as defined in Internal Revenue Code Section
382(g), in NetBank or any of its Subsidiaries during or after any Taxable
Period in which NetBank or any of its Subsidiaries incurred a net operating
loss that carries over to any Taxable Period ending after December 31,
2000.
(j) Neither NetBank nor any of its Subsidiaries has or has had in
any foreign country a permanent establishment, as defined in any applicable
tax treaty or convention between the United States and such foreign
country.
(k) NetBank and its Subsidiaries will not be required to include
any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing
Date as a result of any (A) change in method of accounting for a taxable
period ending on or prior to the Closing Date under Internal Revenue Code
ss.481(c) or any corresponding or similar provision of state, local or
foreign income Tax law, a listing of which is set forth in Schedule
4.10(k)(A); (B) "closing agreement" as described in Internal Revenue Code
ss.7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (C)
deferred intercompany gain or any excess loss account described in Treasury
Regulations under Internal Revenue Code ss.1502 (or any corresponding or
similar provision of state, local or foreign income Tax law); (D)
installment sale or open transaction disposition made on or prior to the
Closing Date; or (E) prepaid amount received on or prior to the Closing
Date.
(l) None of NetBank or any of its Subsidiaries expects any
authority to assess any additional material Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
material Tax Liability of NetBank nor any of its Subsidiaries claimed or
raised by any authority in writing. NetBank has delivered to RBMG correct
and complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by NetBank and
its Subsidiaries since December 31, 1997.
4.11 Assets.
(a) Except as disclosed in Schedule 4.11(a) hereto or as disclosed
or reserved against in the Financial Statements of NetBank, NetBank and
each of its Subsidiaries has good and marketable title, free and clear of
all Liens, to all of its respective Assets, other than such defects which
would not have individually or in the aggregate a Material Adverse Effect
on NetBank. All tangible properties used in the respective businesses of
NetBank and each of its Subsidiaries are usable in the ordinary course of
business consistent with NetBank's or each Subsidiary's past practices.
(b) All leases or subleases held by NetBank or any of its
Subsidiaries, which affect any of NetBank's or NetBank's Subsidiaries'
Assets material to its business, are (i) valid contracts enforceable
NetBank or such Subsidiary (as applicable) and to the Knowledge of NetBank
or any Subsidiary no counterparty has alleged that it is not enforceable
against it (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting
the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceedings may be brought), (ii) in full force and effect, and (iii) not
subject to any material Default. All real property or facilities leases
held by NetBank or any NetBank Subsidiary as lessee, and all Material
Equipment Leases, are listed on Schedule 4.11(b) hereto.
(c) NetBank and each of its Subsidiaries currently maintains, and
NetBank and each of its Subsidiaries will maintain through the Closing Date
(subject to changes in the ordinary course their respective businesses),
the property and casualty insurance ("P&C insurance") policies described in
Schedule 4.11(c). Neither NetBank nor any of its Subsidiaries has received
written notice from any P&C insurance carrier that (i) any policy of
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of P&C
insurance will be substantially increased. There are presently no claims
for amounts exceeding in any individual case $100,000, or in the aggregate
exceeding $1,000,000, pending under such policies of P&C insurance and no
written notices of claims in excess of such amounts have been given by
NetBank or any of its Subsidiaries under such policies. Schedule 4.11(c)
lists all pending claims by NetBank or any of its Subsidiaries under P&C
insurance policies as of the Closing Date.
(d) The respective Assets of NetBank and of each of its
Subsidiaries include all material Assets required to operate its respective
business as presently conducted, and neither NetBank nor any of its
Subsidiaries has disposed of any Assets since December 31, 2000, other than
in the ordinary course of business except for dispositions which if not
done in the ordinary course are not likely to have, individually or in the
aggregate, a Material Adverse Effect on NetBank.
4.12 Intellectual Property. Schedule 4.12 is a complete and
accurate list of all copyrights, patents, trademarks, service marks, trade
names, domain names, and applications therefor owned by or licensed to
NetBank or any NetBank Subsidiary ("NetBank Marks"). NetBank and each of
its Subsidiaries owns or has a license to use all of the Intellectual
Property used by such entity in the ordinary course of its respective
business. Each of NetBank and its Subsidiaries is the owner of or has
license to any Intellectual Property sold or licensed by NetBank or such
Subsidiary to third parties in connection with the business operations of
NetBank or such Subsidiary (as applicable), and possesses the right to
convey by sale or license any Intellectual Property so conveyed. Neither
NetBank nor any of its Subsidiaries is in Default under any of its
Intellectual Property licenses. No proceedings have been instituted, or are
pending, or, to the Knowledge of NetBank, threatened, which challenge the
rights of NetBank or any of its Subsidiaries with respect to any
Intellectual Property used, sold or licensed by NetBank or any of its
Subsidiaries in the course of the business of NetBank or any NetBank
Subsidiary, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of NetBank, no proceedings have
been instituted, or are pending, or, threatened, which challenge the rights
of any licensor to any Intellectual Property licensed by NetBank and used
by NetBank in the course of the business of NetBank or any NetBank
Subsidiary, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of NetBank, the conduct of the
business of NetBank and of its Subsidiaries does not infringe on the
Intellectual Property rights of any other person. Except as disclosed in
Schedule 4.12 hereto, and except for such payments which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on NetBank, neither NetBank nor any NetBank Subsidiary is obligated to pay
any recurring royalties to any Person with respect to any such Intellectual
Property.
4.13 Environmental Matters.
(a) Except as disclosed in Schedule 4.13(a) hereto, all property
owned by NetBank and each of its Subsidiaries is, and has been, in
compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of
NetBank, threatened, before any court, governmental agency, or authority or
other forum in which NetBank or any of its Subsidiaries has been or, with
respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the emission, migration, release, discharge,
spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by NetBank or any
of its Subsidiaries or any neighboring property, nor, to the Knowledge of
NetBank, is there any reasonable basis for any Litigation of a type
described in this sentence.
(c) Except as disclosed in Schedule 4.13(c) hereto, during the
period of (i) any ownership or operation of any current Asset by NetBank or
any of its Subsidiaries, or (ii) any participation in the management of any
Participation Facility or any Operating Property by NetBank or any of its
Subsidiaries, to the Knowledge of NetBank, there have been no emissions,
migrations, releases, discharges, spillages, or disposals of Hazardous
Material in, on, at, under, adjacent to, or affecting (or potentially
affecting) such properties or any neighboring properties. Except as
disclosed in Schedule 4.13(c) hereto, prior to the period of (i) any
ownership or operation by NetBank or any of its Subsidiaries of any of its
respective current properties, (ii) any participation in the management of
any Participation Facility or any Operating Property by NetBank or a
NetBank Subsidiary, to the Knowledge of NetBank, there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property.
4.14 Compliance with Laws. Except as disclosed in Schedule 4.14
hereto, NetBank and each of its Subsidiaries:
(a) is not in Default under any of the provisions of its articles
of incorporation or bylaws (or other governing instruments); or
(b) has in effect all Permits necessary for it to own, hold,
lease, or operate its respective material Assets and to carry on its
respective businesses as now conducted; there has occurred no material
Default under any such Permit, and NetBank or its Subsidiaries (as
applicable) is not in material Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business; or
(c) has not entered into any written agreement with the Office of
Thrift Supervision; or
(d) since December 31, 1998, has not received any written
notification or written communication from any agency or department of
federal, state, or local government or any Regulatory Authority or the
staff thereof (1) asserting that it is not in compliance with any of the
Laws or Orders which such governmental authority or Regulatory Authority
enforces where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on NetBank, (2)
threatening to revoke any Permits, or (3) requiring it to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
board resolution or similar undertaking, which restricts materially the
conduct of its business or in any material manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends. Copies of all material reports, correspondence, notices and
other documents relating to any inspection, audit, monitoring or other form
of review or enforcement action by a Regulatory Authority have been made
available to RBMG; or
(e) since December 31, 1998, has not received any written
notification or written communication from any Agency or the staff thereof
(1) asserting that it is not in compliance with any Regulation applicable
to NetBank or any of its Subsidiaries where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on NetBank and where such noncompliance is unresolved as of
the date of this Agreement, or (2) threatening to revoke any authority
granted to NetBank or its Subsidiaries by such Agency where the question of
the revocation of such authority remains unresolved as of the date of this
Agreement (unless the resolution was to revoke such authority) and such
revocation is reasonably likely to have, individually or in the aggregate
with similar revocations, a Material Adverse Effect on NetBank or the
Surviving Corporation.
4.15 Labor Relations. Except as disclosed in Schedule 4.15 hereto,
neither NetBank nor any NetBank Subsidiary is the subject of any Litigation
asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, nor is NetBank or any NetBank Subsidiary a party
to any collective bargaining agreement, nor is there any strike or other
labor dispute involving NetBank or any NetBank Subsidiary pending or to the
Knowledge of NetBank threatened, nor to the Knowledge of NetBank are there
any activities involving the employees of NetBank or of any NetBank
Subsidiary who are seeking to certify a collective bargaining unit or
engaging in any other organization activity.
4.16 Employees; Compensation; Benefit Plans.
(a) Compensation. Schedule 4.16(a) is a complete and correct list
of the name, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or other benefits that do not rise to
the level of a Plan, whether payable in cash or in kind, of each director,
shareholder, independent contractor, consultant and agent of NetBank and
each of its Subsidiaries and each other person (in each case other than as
an employee) to whom NetBank or any Subsidiary of NetBank pays or provides,
or has an obligation, agreement (written or unwritten), policy or practice
of paying or providing, retirement, health, welfare or other benefits of
any kind or description whatsoever.
(b) Employee Benefit Plans. Except as otherwise disclosed in
Schedule 4.16(b):
(i) Schedule 4.16(b) is an accurate and complete list of
all Plans contributed to, maintained or sponsored by NetBank or
any Subsidiary of NetBank, to which NetBank or any of its
Subsidiaries is obligated to contribute or has any liability or
potential liability, whether direct or indirect, including all
Plans contributed to, maintained or sponsored by each member of
the controlled group of corporations, within the meaning of
Sections 414(b), 414(c), 414(m) and 414(o) of the Internal Revenue
Code, of which NetBank or any of its Subsidiaries is a member
(each, a "NetBank Plan").
(ii) Neither NetBank nor any of its Subsidiaries
contributes to, has an obligation to contribute to or otherwise
has any liability or potential liability with respect to (A) any
multiemployer plan as defined in Section 3(37) of ERISA, (B) any
plan of the type described in Sections 4063 and 4064 of ERISA or
in Section 413 of the Internal Revenue Code (and regulations
promulgated thereunder), or (C) any plan which provides health,
life insurance, accident or other "welfare-type" benefits to
current or future retirees or former employees or directors, their
spouses or dependents, other than in accordance with Section 4980B
of the Internal Revenue Code or applicable state continuation
coverage law.
(iii) The consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or
officer of NetBank or any of its Subsidiaries to severance pay,
unemployment compensation or any other similar compensation,
except as expressly provided in this Agreement, or (ii) accelerate
or potentially accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or
officer.
(iv) Each NetBank Plan, and all related trusts, insurance
contracts and funds, has been maintained, funded and administered
in compliance in all material respects with its own terms and in
compliance in all respects with all applicable laws and
regulations, including but not limited to ERISA and the Internal
Revenue Code. No actions, suits, claims, complaints, charges,
proceedings, hearings, examinations, investigations, audits or
demands with respect to the NetBank Plans (other than routine
claims for benefits) are pending or threatened, and there are no
facts which could reasonably be expected to give rise to or be
expected to give rise to any actions, suits, claims, complaints,
charges, proceedings, hearings, examinations, investigations,
audits or demands. No NetBank Plan that is subject to the funding
requirements of Section 412 of the Internal Revenue Code or
Section 302 of ERISA has incurred any "accumulated funding
deficiency" as such term is defined in such Sections of ERISA and
the Internal Revenue Code, whether or not waived, and each Plan
has always fully met the funding standards required under Title I
of ERISA and Section 412 of the Internal Revenue Code. No
liability to the Pension Benefit Guaranty Corporation ("PBGC")
(except for routine payment of premiums) has been or is expected
to be incurred with respect to any NetBank Plan that is subject to
Title IV of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such
NetBank Plan, and the PBGC has not commenced or threatened the
termination of any NetBank Plan. None of the assets of NetBank or
any of its Subsidiaries is the subject of any lien arising under
Section 302(f) of ERISA or Section 412(n) of the Internal Revenue
Code, neither NetBank nor any of its Subsidiaries has been
required to post any security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Internal Revenue Code, and there are no
facts which could be expected to give rise to such lien or such
posting of security. No event has occurred and no condition exists
that would subject NetBank or any of its Subsidiaries to any tax
under Sections 4971, 4972, 4976, 4977 or 4979 of the Internal
Revenue Code or to a fine or penalty under Section 502(c) of
ERISA.
(v) Each NetBank Plan that is intended to be qualified
under Section 401(a) of the Internal Revenue Code, and each trust
(if any) forming a part thereof, has received a favorable
determination letter from the IRS as to the qualification under
the Internal Revenue Code of such NetBank Plan and the tax exempt
status of such related trust, and nothing has occurred since the
date of such determination letter that could reasonably be
expected to adversely affect the qualification of such NetBank
Plan or the tax exempt status of such related trust.
(vi) No underfunded "defined benefit plan" (as such term
is defined in Section 3(35) of ERISA) has been, during the five
years preceding the Closing Date, transferred out of the
controlled group of corporations (within the meaning of Sections
414(b), (c), (m) and (o) of the Internal Revenue Code) of which
NetBank or any of its Subsidiaries is a member or was a member
during such five-year period.
(vii) As of December 31, 2000, the fair market value of
the assets of each NetBank Plan that is a tax qualified defined
benefit plan equaled or exceeded, and as of the Closing Date will
equal or exceed, the present value of all vested and nonvested
liabilities thereunder determined in accordance with reasonable
actuarial methods, factors and assumptions applicable to a defined
benefit plan on an ongoing basis. With respect to each NetBank
Plan that is subject to the funding requirements of Section 412 of
the Internal Revenue Code and Section 302 of ERISA, all
contributions legally required to be made by the Closing Date for
all periods ending prior to or as of the Closing Date (including
periods from the first day of the then-current plan year to the
Closing Date and including all quarterly contributions required in
accordance with Section 412(m) of the Internal Revenue Code) shall
have been made. With respect to each other NetBank Plan, all
payments, premiums, contributions, and reimbursements required to
be made by the Closing Date for all periods ending prior to or as
of the Closing Date shall have been made.
(viii) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Internal Revenue
Code, whether by statutory, class or individual exemption) has
occurred with respect to any NetBank Plan which would result in
the imposition, directly or indirectly, of any excise tax, penalty
or other liability under Section 4975 of the Internal Revenue Code
or Section 409 or 502(i) of ERISA. Neither NetBank nor, to the
best knowledge of NetBank, any Subsidiary of NetBank, any trustee,
administrator or other fiduciary of any NetBank Plan, or any agent
of any of the foregoing has engaged in any transaction or acted or
failed to act in a manner that could subject NetBank or any of its
Subsidiaries to any liability for breach of fiduciary duty under
ERISA.
(ix) With respect to each NetBank Plan, all reports and
information required to be filed with any government agency or
distributed to NetBank Plan participants and their beneficiaries
have been duly and timely filed or distributed.
(x) NetBank and each of its Subsidiaries has been and is
presently in compliance in all material respects with all of the
requirements of Section 4980B of the Internal Revenue Code.
(xi) Neither NetBank nor any of its Subsidiaries has a
liability as of December 31, 2000 under any NetBank Plan that, to
the extent disclosure is required under GAAP, is not included or
disclosed on the consolidated balance sheet included in the
Financial Statements of NetBank. With respect to any NetBank Plan
that is a self-funded group health plan, NetBank has set aside
sufficient reserves or will set aside sufficient reserves prior to
the Closing, as reflected on the Financial Statements of NetBank,
to satisfy all incurred, but unreported, claims as of the plan's
termination date were such plan to be terminated on or prior to
the Closing.
(xii) Neither the consideration nor implementation of the
transactions contemplated under this Agreement will increase (A)
NetBank's or any NetBank Subsidiary's obligation to make
contributions or any other payments to fund benefits accrued under
the NetBank Plans as of the date of this Agreement or (B) the
benefits accrued or payable with respect to any participant under
the NetBank Plans (except to the extent benefits may be deemed
increased by accelerated vesting or accelerated allocation of
previously unallocated NetBank Plan assets).
(xiii) With respect to each NetBank Plan, NetBank has
disclosed or made available to RBMG, true, complete and correct
copies of (A) all documents pursuant to which the NetBank Plans
are maintained, funded and administered, including summary plan
descriptions, (B) the three most recent annual reports (Form 5500
series) filed with the IRS (with attachments), (C) the three most
recent actuarial reports, if any, (D) the three most recent
financial statements, (E) all governmental filings for the last
three years, including, without limitation, excise tax returns and
reportable events filings, and (F) all governmental rulings,
determinations, and opinions (and pending requests for
governmental rulings, determinations, and opinions) during the
past three years.
(xiv) Each of the NetBank Plans as applied to NetBank and
any of its Subsidiaries may be amended or terminated at any time
by action of NetBank's board of directors, or such NetBank
Subsidiary's board of directors, as the case may be, or a
committee of such board of directors or duly authorized officer,
in each case subject to the terms of the NetBank Plan and
compliance with applicable laws and regulations (and limited, in
the case of multiemployer plans, to termination of the
participation of NetBank or a Subsidiary of NetBank thereunder).
4.17 Material Contracts.
(a) Except as disclosed in Schedule 4.17(a) hereto, neither
NetBank nor any of its Subsidiaries (nor their respective Assets, business,
or operations) is a party to, is bound by, or receives benefits under, (i)
any employment, severance, termination, consulting, or retirement Contract
providing for aggregate payments to any Person in any calendar year in
excess of $100,000 or such a Contract providing for aggregate payments to
any single Person in a period longer than a Calendar Year in the aggregate
in excess of $500,000, (ii) any Contract or indemnity under which NetBank
or any NetBank Subsidiary has created, incurred, assumed or guaranteed debt
including without limitation any indebtedness for borrowed money, or any
capitalized lease or purchase money obligation by NetBank or any NetBank
Subsidiary, or by NetBank's or NetBank's Subsidiaries' employees, officers
or directors, or the guarantee by NetBank or a NetBank Subsidiary of any
such obligation, (iii) any Contract, including, without limitation,
agreements or memoranda of understanding with any Regulatory Authority,
which prohibits or restricts NetBank or any NetBank Subsidiary from
engaging in any of its business activities, (iv) any Contract between
NetBank or any NetBank Subsidiary and (A) any Person who directly owns 10%
or greater equity or voting interest of NetBank or any of NetBank's
Subsidiaries or (B) any Affiliate, or any extensions of credit outstanding
to clients, employees or any third parties (excluding customers in the
ordinary course of business on terms commercially available to the general
public), (v) any Contract relating to the provision of data processing,
network communication, or other technical services provided to or by
NetBank or any NetBank Subsidiary, (vi) any exchange traded or
over-the-counter swap, forward, future, option, cap, floor, or collar
financial Contract, or any other interest rate or foreign currency
protection Contract not included on its balance sheet which is a financial
derivative Contract, or (vii) any agreement (including all master
commitments and loan purchase contracts) between NetBank or any NetBank
Subsidiary and any Agency or Investor pursuant to which NetBank or any
NetBank Subsidiary sold more than $10 million in principal amount of
mortgage loans since December 31, 2000, (viii) any agreement between
NetBank or any NetBank Subsidiary and any Investor pursuant to which
NetBank or NetBank Subsidiary sold more than $2.5 million in mortgage
servicing rights since December 31, 2000, and (ix) any insurance or
guaranty contracts, including contracts with any private mortgage insurer
or pool insurance provider with respect to the Mortgage Loans (the "NetBank
Contracts"). All NetBank Contracts are properly accrued for in accordance
with GAAP as of the date hereof and as of the Closing Date.
(b) With respect to the NetBank Contracts and except as disclosed
in Schedule 4.17(b) hereto: (i) each NetBank Contract is a valid contract
enforceable against NetBank or a NetBank Subsidiary (as applicable) and to
the Knowledge of NetBank no counterparty has alleged that it is not
enforceable against them; (ii) neither NetBank nor any NetBank Subsidiary
is in material Default or alleged to be in material Default thereunder,
(iii) neither NetBank nor any NetBank Subsidiary has repudiated or waived
any material provision of a NetBank Contract; and (iv) no other party to a
NetBank Contract is, to the Knowledge of NetBank, in Default in any respect
or has repudiated or waived any material provision thereunder.
(c) Except as disclosed in Schedule 4.17(c) hereto, no officer,
director or employee of NetBank or a NetBank Subsidiary is party to a
NetBank Contract which restricts or prohibits such officer, director or
employee from engaging in activities competitive with any Person, including
NetBank or a NetBank Subsidiary.
(d) All of the indebtedness in excess of $100,000 of NetBank and
of each of its Subsidiaries for any money borrowed is prepayable at any
time without penalty or premium.
4.18 Legal and Disciplinary Proceedings. Except as disclosed in
Schedule 4.18 hereto, there is no Litigation instituted, pending or, to the
Knowledge of NetBank, threatened (or unasserted but considered likely of
assertion) against NetBank or any NetBank Subsidiary, or against any
director, employee or employee benefit plan (acting in such capacity) of
NetBank or any NetBank Subsidiary, or against any Asset, interest, or right
of NetBank or any NetBank Subsidiary, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against NetBank or any NetBank Subsidiary that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on NetBank.
4.19 Reports. Since December 31, 1998, or the date of organization
if later, NetBank and each of its Subsidiaries has timely filed all reports
and statements, together with any amendments required to be made with
respect thereto, that were required to be filed with any Regulatory
Authority or Agency. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules
thereto, complied in all material respects with all applicable Laws. As of
its respective date, each such report and document did not, in any material
respect, 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 made therein, in light of the circumstances under which they
were made, not misleading.
4.20 Accounting, Tax and Regulatory Matters. Neither NetBank nor
any NetBank Subsidiary has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the transactions contemplated hereunder from qualifying as a
tax-free reorganization under Section 368 of the Internal Revenue Code, or
(ii) materially impede or delay receipt of any Consents of Regulatory
Authorities or Agencies referred to in Sections 6.3 or 7.1(c) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of Section 7.1(c).
4.21 Articles of Incorporation Provisions. NetBank has taken all
action necessary so that the entering into of this Agreement and the
consummation of the transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under its articles
of incorporation, bylaws or other governing instruments.
4.22 Statements True and Correct. No written statement,
certificate, instrument or other writing furnished or to be furnished by
NetBank to RBMG pursuant to this Agreement (or any other document,
agreement or instrument referred to herein) contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. All documents that NetBank is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply in all material respects with
the provisions of applicable Law. None of the information supplied or to be
supplied by NetBank or any NetBank Subsidiary for inclusion in the
Registration Statement to be filed by NetBank with the SEC will be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading.
4.23 Consents and Approvals; No Violations. Except for the
approval of the Office of Thrift Supervision as described in Section 6.3
hereto, and except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of,
state insurance and mortgage brokerage laws or regulations, and the filing
and acceptance for record or recordation of a merger certificate as
required by the OCGA, no filing with or notice to, and no permit,
authorization, consent or approval of, any Regulatory Authority is
necessary for the execution and delivery by NetBank of this Agreement or
the consummation by NetBank of the transactions contemplated hereby and
thereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not
have a Material Adverse Effect on NetBank or the Surviving Corporation.
Neither the execution, delivery and performance of this Agreement by
NetBank nor the consummation by NetBank of the transactions contemplated
hereby and thereby will (i) conflict with or result in any breach of any
provision of the respective certificate of incorporation or bylaws (or
similar charter or organizational documents) of NetBank, (ii) result in a
violation or breach of or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
NetBank is a party or by which any of its properties or Assets may be bound
or (iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to NetBank or the Merger or any NetBank Subsidiary or
any of their respective properties or Assets except, in the case of (ii) or
(iii), for violations, breaches or defaults which would not have a Material
Adverse Effect on NetBank, its Subsidiaries, or the Surviving Corporation.
4.24 Lender and Servicer Qualifications.
(a) NetBank or an appropriate NetBank Subsidiary (i) is qualified
(A) by FHA as an approved mortgagee and servicer for mortgage loans which
are insured by the FHA ("FHA Loans"), (B) by the VA as a lender and
servicer for mortgage loans guaranteed by the VA ("VA Loans"), (C) by FNMA
and FHLMC as a seller/servicer of first mortgages to FNMA and FHLMC and by
FNMA under the Delegated Underwriting and Servicing Program, and (D) by
GNMA as an authorized issuer and servicer of GNMA guaranteed
mortgage-backed securities; and (ii) has all other material Permits
necessary to conduct its current mortgage banking business, and is in good
standing under all applicable Laws, and under all applicable Regulations,
as a mortgage broker, lender and servicer. Schedule 4.24(a) lists each
jurisdiction in which NetBank or the appropriate NetBank Subsidiary has
obtained or applied for a Permit. Except as disclosed in Schedule 4.24(a),
NetBank and each NetBank Subsidiary:
(x) to the Knowledge of NetBank, is not in violation of
any Laws, Orders, or Permits applicable to its business or employees
conducting its business as interpreted by the respective courts and
Agencies having jurisdiction over NetBank or any NetBank Subsidiary as of
the date of this Agreement or the Closing Date, nor is there a reasonable
probability of the operation or practices of NetBank or any NetBank
Subsidiary being held to be in violation of such Laws, Orders or Permits;
or
(y) has not received any notification or communication
from any agency or department of federal, state, or local government or any
Agency or the staff thereof (i) asserting that NetBank or any NetBank
Subsidiary is not in compliance with any of the Laws or Orders which such
governmental authority or Agency enforces, or (ii) threatening to revoke
any Permits.
(b) Except as disclosed in Schedule 4.24(b) hereto, NetBank and
its Subsidiaries have been and are in compliance in all material respects
with all Laws (including the Regulations) and Orders of any court or
governmental authorities applicable to it, its Assets and its conduct of
business, the breach of which would require the repurchase of a NetBank
Loan or result in NetBank or a NetBank Subsidiary incurring a loss. NetBank
and its Subsidiaries have timely filed, or will have timely filed by the
Closing Date, all material reports required by any Investor, Agency or
insurer or by any Law to be filed. To the Knowledge of NetBank, neither
NetBank nor its Subsidiaries has done or caused to be done, or has failed
to do or omitted to be done, any act, the effect of which would operate to
invalidate or materially impair (i) any approvals of the FHA, VA, FNMA,
FHLMC, GNMA or HUD, (ii) any FHA insurance or commitment of the FHA to
insure, (iii) any VA guarantee or commitment of the VA to guarantee, (iv)
any private mortgage insurance or commitment of any private mortgage
insurer to insure, (v) any title insurance policy, (vi) any hazard
insurance policy, (vii) any flood insurance policy, (viii) any fidelity
bond, direct surety bond, or errors and omissions insurance policy required
by HUD, GNMA, FNMA, FHA, FHLMC, VA or private mortgage insurers, (ix) any
surety or guaranty agreement, or (x) any guaranty issued by GNMA, FNMA or
FHLMC to NetBank or any NetBank Subsidiary respecting mortgage-backed
securities issued by NetBank or any NetBank Subsidiary and other like
guaranties. Except as set forth in Schedule 4.24(b), since January 1, 1998,
no Agency, Investor or private mortgage insurer has (i) claimed that
NetBank or any NetBank Subsidiary has violated or has not complied with the
applicable underwriting standards with respect to NetBank Loans sold by
NetBank or any NetBank Subsidiary to an Investor or Agency, or with respect
to any sale of mortgage servicing rights to an Investor, or (ii) imposed
restrictions on the activities (including commitment authority) of NetBank
or any NetBank Subsidiary.
(c) Except as set forth in Schedule 4.24(c) hereto, to the
Knowledge of NetBank no NetBank Loan has been originated and/or serviced by
NetBank or any NetBank Subsidiary in violation of any Law or Regulation,
the violation of which could reasonably result in NetBank or any NetBank
Subsidiary incurring a loss for GAAP purposes in excess of $400,000.
4.25 Loan and Mortgage Servicing Portfolio.
(a) Each NetBank Loan conforms to the Agency and Investor
requirements (including the Regulations), and each NetBank Loan (i) is
eligible for sale to, and insurance by, or pooling to collateralize
securities issued or guaranteed by, the applicable Investor, Agency or
insurer; or (ii) if NetBank or any NetBank Subsidiary has sold or will sell
mortgage servicing rights with respect to a NetBank Loan to an Investor, is
eligible for the sale of mortgage servicing rights to the applicable
Investor. NetBank and its Subsidiaries each have originated, underwritten,
funded, serviced and sold (as applicable) each NetBank Loan in compliance
with applicable federal, state and local legal and regulatory requirements
(including licensing statutes and regulations) and in accordance with
Agency and Investor requirements (including the Regulations) and the
related NetBank Loan documents. Each NetBank Loan (i) is, except as set
forth in Schedule 4.25(a) hereto, evidenced by a note or other evidence of
indebtedness with such terms as are customary in the business; (ii) is duly
secured by a mortgage, security deed or deed of trust (a "mortgage") with
such terms as are customary in the business and which grants the holder
thereof either a first lien on the subject property (including any
improvements thereon) with respect to loans originated as first mortgages,
and with respect to loans originated as second mortgages, a second priority
lien on the subject, and which constitutes a security interest that has
been duly perfected and maintained (or is in the process of perfection in
due course) and is in full force and effect and is insured by a title
policy issued by a company acceptable to the applicable Agency or Investor
to the extent required by the applicable Agency or Investor; (iii) is
accompanied by a hazard insurance policy covering improvements on the
premises subject to such mortgage or deed of trust, with a loss payee
clause in favor of NetBank or a NetBank Subsidiary or the assignee of
NetBank or a NetBank Subsidiary, which insurance policy or policies covers
such risks as are customarily insured against in accordance with industry
practice and in accordance with Investor or Agency requirements, and which
includes flood insurance and/or special hazard insurance where either is
required by an Investor or Agency or requested by the mortgagor. NetBank
and its Subsidiaries have complied in all material respects with all of its
obligations under the insurance policies described in this clause (iii);
and (iv) except as set forth in Schedule 4.25(a), is covered by an FHA
insurance certificate, VA guaranty certificate, or policy of private
mortgage insurance, if required by the terms of any agreement or any Law
applicable to such loan. NetBank and its Subsidiaries have substantially
complied with all applicable provisions of any such insurance or guaranty
contract or policy and the Laws related thereto, the insurance or guaranty
is in full force and effect with respect to each such loan, and there is no
Default that would result in the revocation of any such insurance or
guaranty. Except as set forth in Schedule 4.25(a), each warehouse mortgage
loan is a NetBank Loan that is or is eligible to be an FHA Loan or a VA
Loan or which is a loan eligible to be sold to FNMA or FHLMC ("Conforming
Loan") or is subject to a commitment of a Person to purchase a NetBank Loan
owned by NetBank or a NetBank Subsidiary ("Investor Commitment"). To the
Knowledge of NetBank or any NetBank Subsidiary, no NetBank Loans are in
Default except as reflected on the records of NetBank or NetBank
Subsidiary.
(b) To the Knowledge of NetBank, all NetBank Loans are genuine,
valid and legally binding obligations of the borrowers thereunder, have
been duly executed by a borrower of legal capacity and are enforceable in
accordance with their respective terms, except as enforcement thereof may
be limited by (i) bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and by general principles of
equity (whether applied in a proceeding in equity or at law), (ii) state
Laws requiring creditors to proceed against the collateral before pursuing
the borrower, (iii) state Laws on deficiencies, and (iv) the matters set
forth in Schedule 4.25(b) hereto. Except as set forth in Schedule 4.25(b),
neither the operation of any of the terms of any NetBank Loan, nor the
exercise of any right thereunder, has rendered or will render the related
mortgage or note unenforceable, in whole or in part, or subject it to any
right of rescission, setoff, counterclaim or defense, and no such right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto. The Loan Documents for all NetBank Loans were in compliance in all
material respects with applicable Laws and Regulations and Investor and
Agency requirements upon origination of the underlying NetBank Loan and are
complete in all material respects.
(c) All NetBank Loans held for the account of NetBank or a NetBank
Subsidiary (whether or not for future sale or delivery to an Investor or
Agency) are owned by NetBank or such Subsidiary free and clear of any Lien
other than Liens in favor of NetBank's or such Subsidiary's lender banks
pursuant to financing arrangements. Such NetBank Loans have been duly
recorded or submitted for recordation in the appropriate filing office in
the name of NetBank or NetBank Subsidiary, as applicable, as mortgagee or,
for loans registered through MERS, in the name of MERS. Neither NetBank nor
any NetBank Subsidiary has, with respect to any such NetBank Loan, released
any security therefor, except upon receipt of Investor or Agency approval,
or accepted prepayment of any such NetBank Loan which has not been promptly
applied to such NetBank Loan in accordance with the terms thereof. To the
Knowledge of NetBank, there exists no physical damage to any property
securing a NetBank Loan ("Collateral"), which physical damage is not
insured against in compliance with the Regulations or would cause any
NetBank Loan to become delinquent or adversely affect the value or
marketability of any NetBank Loan, Servicing Rights or Collateral.
(d) To the Knowledge of NetBank, (i) all monies received with
respect to each NetBank Loan have been properly accounted for and applied,
(ii) upon origination, all of NetBank Loans were fully disbursed in
accordance with applicable law and regulations and (iii) all payoff and
assumption statements with respect to each NetBank Loan provided by NetBank
or a NetBank Subsidiary to borrowers or their agents were, at the time they
were provided, complete and accurate in all material respects.
(e) The responsibilities of NetBank and each NetBank Subsidiary
with respect to all applicable Taxes (including tax reporting for the
period prior to the Closing), assessments, ground rents, flood insurance
premiums, hazard insurance premiums and mortgage insurance premiums that
are related to the NetBank Loans have been duly met in all material
respects, both individually or in the aggregate. All Tax identifications
are correct and complete in all material aspects and comply with all
applicable Laws in all material respects, and property descriptions
contained in any Loan Document for a NetBank Loan are legally sufficient in
all material respects.
(f) NetBank has provided RBMG with a copy of the internal
practices and procedures of NetBank and each NetBank Subsidiary; and
NetBank, each NetBank Subsidiary, and employees of NetBank and each NetBank
Subsidiary have complied and are in compliance with such practices and
procedures. All such practices and procedures and all form disclosures,
notices, broker agreements, notes, mortgages, instruments and agreements
used in the business of NetBank or any NetBank Subsidiary comply in all
material respects with (a) all applicable Consumer Credit Law, (b) all
standards imposed by the Agencies and Investors, to the extent applicable,
and (c) any other applicable Law or Regulation.
4.26 No Recourse.
(a) Neither NetBank nor any NetBank Subsidiary normally or
ordinarily incurs expenses such as legal fees in excess of the customary
reimbursement limits, if any, set forth in the applicable mortgage
servicing agreement. Except as set forth in Schedule 4.26(a) hereto,
neither NetBank nor any NetBank Subsidiary is a party to (i) any Contract
with (or otherwise obligated to) any Person, including an Investor, Agency
or insurer, to repurchase from any such Person any NetBank Loan, mortgaged
property serviced for others or previously disposed loans; or (ii) any
Contract to reimburse, indemnify or hold harmless any Person or otherwise
assume any Liability with respect to any loss suffered or incurred as a
result of any default under or the foreclosure or sale of any such NetBank
Loan, mortgaged property, or previously disposed loans except in either
case where such recourse is based upon a breach by NetBank or a NetBank
Subsidiary of a customary representation, warranty or undertaking. Also
except as set forth on Schedule 4.26(a) hereto, neither NetBank nor any
NetBank Subsidiary is a party to any Contract with (or otherwise obligated
to) any Person to sell NetBank Loan servicing to any such Person.
(b) Except as set forth in Schedule 4.26(b) hereto, there are no
pooling, participation, servicing or other Contracts to which NetBank or
any NetBank Subsidiary is a party which obligate it to make servicing
advances with respect to defaulted or delinquent NetBank Loans other than
as provided in GNMA, FNMA or FHLMC pooling and servicing agreements. The
amounts that, as of the Effective Date, have been advanced by NetBank or
NetBank Subsidiary in connection with servicing the NetBank Loans
(including principal, interest, taxes and insurance premiums) and which are
permitted to be paid by NetBank or NetBank Subsidiary as the servicer of
the NetBank Loans pursuant to applicable Investor or Agency requirements
and the terms of the applicable mortgage servicing agreement will be valid
and subsisting amounts owing to NetBank or NetBank Subsidiary, subject to
the terms of the applicable mortgage servicing agreement.
4.27 Mortgage Servicing Agreements. Schedule 4.27 hereto lists all
agreements under which NetBank or any NetBank Subsidiary services loans on
behalf of third parties, or under which any third party services NetBank
Loans (the "NetBank Mortgage Servicing Agreements"), as of the date of this
Agreement. Except as set forth in Schedule 4.27, the NetBank Mortgage
Servicing Agreements set forth all the terms and conditions of NetBank's or
NetBank Subsidiary's (as applicable) rights against and obligations to the
Agencies and Investors and they have not been modified in writing to any
extent or otherwise in any material respect. All of the NetBank Mortgage
Servicing Agreements are valid and binding obligations of NetBank or a
NetBank Subsidiary and, to the Knowledge of NetBank, all of the other
parties thereto and are in full force and effect and are enforceable in
accordance with their terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law). Except as set forth in
Schedule 4.27 hereto, (i) to the Knowledge of NetBank there is no Default
by any party under any such NetBank Mortgage Servicing Agreement, (ii)
there is no pending or, to the Knowledge of NetBank, threatened
cancellation of any NetBank Mortgage Servicing Agreement, (iii) no material
sanctions or penalties have been imposed upon NetBank under any Mortgage
Servicing Agreement or under any applicable Regulation, and (iv) all of the
NetBank Mortgage Servicing Agreements and the rights created thereunder are
owned by NetBank free and clear of any Liens other than Liens in favor of
NetBank's or such Subsidiary's lender banks pursuant to financing
arrangements, and upon the consummation of the Merger, will continue to be
so owned by NetBank except upon termination by an Investor or Agency
pursuant to Contract right.
4.28 Investor Commitments and Servicing Commitments.
(a) Set forth in Schedule 4.28(a) hereto is a complete and correct
list of each Investor Commitment to which NetBank or any NetBank Subsidiary
was a party as of the date of this Agreement, and NetBank has made
available to RBMG complete and correct copies of all Investor Commitments
in effect on such date. Each Investor Commitment to NetBank or a NetBank
Subsidiary constitutes a valid and binding obligation of NetBank or a
NetBank Subsidiary, and, to the Knowledge of NetBank, all of the other
parties thereto, enforceable in accordance with its terms, subject to
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law). Except as set forth in
Schedule 4.28(a) hereto, each NetBank Loan or warehouse mortgage loan which
is subject to an Investor Commitment is a Conforming Loan or is otherwise
readily salable in the secondary market. No Investor Commitments are in
Default.
(b) Set forth in Schedule 4.28(b) hereto is a complete and correct
list of each Servicing Commitment of NetBank or any NetBank Subsidiary as
of the date of this Agreement, and NetBank has made available to RBMG
complete and correct copies of all Servicing Commitments in effect on such
date. Each Servicing Commitment of NetBank or a NetBank Subsidiary
constitutes a valid and binding obligation of NetBank or the NetBank
Subsidiary (as applicable), and, to the Knowledge of NetBank, all of the
other parties thereto, enforceable in accordance with its terms, subject to
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding in equity or at law). No Servicing Commitments of
NetBank or any NetBank Subsidiary are in Default.
4.29 Custodial Accounts. NetBank or an appropriate NetBank
Subsidiary has full power and authority to Custodial Accounts for certain
serviced loans. Except as disclosed in Schedule 4.29 hereto, such Custodial
Accounts comply in all material respects with (i) all applicable
Regulations and the payment of interest on escrows and (ii) any terms of
the mortgage loans (and mortgage servicing agreements) relating thereto. To
the Knowledge of NetBank, the Custodial Accounts contain the amounts shown
in the records of NetBank or a NetBank Subsidiary (as applicable), which
amounts represent all monies received or advanced by NetBank or a NetBank
Subsidiary as required by the applicable mortgage servicing agreements,
less amounts remitted by or on behalf of NetBank or a NetBank Subsidiary
pursuant to applicable mortgage servicing agreements, except for checks in
process.
4.30 Pool Certification. Except as set forth in Schedule 4.30
hereto, all pools relating to NetBank Loans have been properly balanced,
reconciled, fully funded and certified, finally certified and recertified
(if required) in accordance with applicable Regulations by the applicable
Investor or Agency and have been aggregated pursuant to the requirements of
the applicable Investor or Agency. The principal balance outstanding and
owing on the NetBank Loans in each pool equals or exceeds the amount owing
to the corresponding security holders of such pool. To the Knowledge of
NetBank, no event has occurred or failed to occur which would require
NetBank or any NetBank Subsidiary to repurchase any NetBank Loan from any
pool, except with respect to the obligation to repurchase from GNMA pools,
FHA Loans or VA Loans that are in the process of foreclosure (or equivalent
procedure).
4.31 Equipment Leasing. Neither NetBank nor any NetBank Subsidiary
engages in or has engaged in the business of equipment leasing as of the
date of this Agreement.
4.32 Fairness Opinion. NetBank has received from an independent
financial advisor an opinion that, as of the date hereof, the Merger
Consideration is fair to the shareholders of NetBank from a financial point
of view.
4.33 Loan Portfolio. Except as disclosed in writing to RBMG,
neither NetBank nor any NetBank Subsidiary is a party to (i) a NetBank
Loan, other than any NetBank Loan the unpaid principal balance of which
does not exceed $100,000, under the terms of which the obligor was, as of
September 30, 2001 over 90 days delinquent in payment of principal or
interest or in default of any other provision, or (ii) NetBank Loan with
any director, executive officer or five percent or greater stockholder of
NetBank or any NetBank Subsidiary, or to the knowledge of NetBank, any
person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing. Schedule 4.33 hereto sets forth
(i) all of the NetBank Loans in original principal amount in excess of
$100,000 of NetBank or any of its Subsidiaries that as of September 30,
2001, were classified by any bank examiner (whether regulatory or internal)
as "Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets",
"Concerned Loans", "Watch List" or words of similar import, together with
the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the borrower thereunder, (ii) by category of loan
(i.e., commercial consumer, etc.), all of the other NetBank Loans that as
of September 30, 2001, were classified as such, together with the aggregate
principal amount of and accrued and unpaid interest on such NetBank Loans
by category and (iii) each asset of NetBank that as of September 30, 2001,
was classified as "Other Real Estate Owned" and the book value thereof.
NetBank shall promptly inform RBMG in writing of any NetBank Loan that
becomes classified in the manner described in the previous sentence, or any
NetBank Loan the classification of which is changed, at any time after the
date of this Agreement.
ARTICLE 5.
COVENANTS
5.1 Affirmative Covenants of RBMG. From the date of this Agreement
until the earlier of the Closing Date or the termination of this Agreement,
unless the prior written consent of NetBank shall have been obtained, and
except as otherwise expressly contemplated herein, RBMG shall, in the
usual, regular, and ordinary course, (a) use its reasonable good faith
efforts to preserve intact its respective business organization and Assets
and maintain its rights and franchises; (b) take no action which would
materially adversely affect the ability of any Person to obtain any
Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the
last sentences of Section 7.1(c) or 7.1(d), or materially adversely affect
the ability of any Person to perform its covenants and agreements under
this Agreement; and (c) furnish upon request NetBank with copies of any
internal operational management reports or Litigation Management report.
5.2 Negative Covenants of RBMG. From the date of this Agreement
until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of NetBank shall have been
obtained and except as otherwise expressly contemplated herein or in the
Schedules hereto, RBMG will not, and shall cause each of its Subsidiaries
not to, do or agree or commit to do any of the following:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted,
or establish, acquire or engage in any new type of activity; or
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, other than regularly
scheduled quarterly dividends of $0.11 per share of RBMG Common Stock
payable on record dates and in amounts consistent with past practices, or
(c) except as set forth on Exhibit 5.2(c) hereto, amend its
articles of incorporation or bylaws; or
(d) except as set forth on Exhibit 5.2(d), incur any additional
debt obligation or other obligation for borrowed money in excess of an
aggregate of $100,000 except in the ordinary course of its business
consistent with past practice or impose, or suffer the imposition, on any
of its Assets any Lien or permit any such Lien to exist, except in the
ordinary course of its business; or
(e) except as set forth on Exhibit 5.2 (e) hereto, repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the
ordinary course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of its capital
shares or make any other distribution in respect of its capital shares,
other than as necessary to exchange the Unexercised RBMG Options as
provided in Section 2.9 hereto; or
(f) issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of its capital stock or any share appreciation rights, or any
option, warrant, or other Equity Right except pursuant to the exercise of
or issuance under the RBMG Employee Stock Ownership Plan, RBMG Dividend
Reinvestment Stock and Purchase Plan, and the RBMG Stock Investment Plan,
it being understood and agreed by the Parties hereto that all of the
foregoing stock plans and any other employee stock options to purchase RBMG
Common Stock, with the exception of the Rollover Options, shall be
terminated by RBMG on or prior to the Closing Date; or
(g) adjust, split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of or
in substitution for its shares of capital stock; or
(h) except as set forth on Exhibit 5.2(h) hereto: (i) merge with
any other entity or permit any other entity to merge into it, or
consolidate with any other entity; (ii) acquire control over any other
entity; or (iii) liquidate, sell, lease, mortgage, or otherwise encumber or
dispose of any Assets or acquire any Assets other than in the ordinary
course of its business consistent with past practices for reasonable and
adequate consideration; or
(i) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business, except where such failure would not, individually
or in the aggregate, have a Material Adverse Effect on RBMG; or
(j) make any material investment for its own account, either by
purchase of shares or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person, or otherwise acquire
direct or indirect control over any Person other than in the ordinary
course of business; or
(k) grant any increase in compensation or benefits to any of its
employees or officers except (i) in accordance with past practice, (ii) as
disclosed in Exhibit 5.2(k) hereto, or (iii) as required by Law; pay any
material severance or termination pay or any material bonus other than
pursuant to RBMG Plans, written policies or written Contracts in effect on
the date of this Agreement and disclosed in Exhibit 5.2(k) hereto; or
except as set forth on Exhibit 5.2(k) hereto, enter into or amend any
severance agreements with its officers; grant any material increase in fees
or other increases in compensation or other benefits to its directors
except in accordance with past practice; or voluntarily accelerate the
vesting of any employee benefits or other Equity Rights provided, however,
that nothing contained herein shall prohibit RBMG from paying 2001 bonuses
under its incentive bonus plans and provided further that RBMG shall be
entitled to extend, for a maximum of one year, the term of existing change
of control agreement between RBMG and any employee of RBMG which would
otherwise expire pursuant to its existing terms prior to the Effective
Time; or
(l) enter into or amend any employment Contract entered into with
any Person having a salary and incentive plan thereunder in excess of
$100,000 per year (unless such amendment is required by Law) that it does
not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Closing Date; or
(m) adopt any new RBMG Plan or terminate or withdraw from, or make
any material change in or to, any existing RBMG Plans other than a change
that is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or make
any distributions from such RBMG Plans, except as necessary to comply with
Law, the terms of such plans, or past practices; or
(n) except as set forth in Exhibit 5.2(n) hereto, settle any
Litigation involving any of its Liabilities or the Liabilities of any
Affiliate if such settlement would include either payment of $100,000 or an
agreement to material restrictions upon the operations of its business; or
(o) change its methods of accounting or systems of internal
accounting controls in effect at December 31, 2000, except as required by
changes in regulatory accounting requirements or GAAP concurred in by
outside auditors after 5 days' prior notice to NetBank, or change any of
its material methods of reporting income and deductions for federal income
tax purposes from those employed in the preparation of its federal income
tax returns for the year ended December 31, 2000, except (i) as required by
changes in law or regulation or (ii) which are not material and which are
taken in the ordinary and usual course of business consistent with prior
practice; or
(p) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract (including any loan Contract with
an unpaid balance exceeding $100,000) or waive, release, compromise or
assign any material rights or claims; or
(q) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, RBMG or any
RBMG Subsidiary or any business combination with RBMG or any RBMG
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of RBMG or any RBMG Subsidiary to do
any of the above; or fail to notify NetBank immediately if any such
inquiries or proposals are received, any such information is requested or
required, or any such negotiations or discussions are sought to be
initiated; provided, that this subsection (q) shall not apply to furnishing
information, negotiations or discussions following an unsolicited offer if,
as a result of such offer, RBMG is advised by legal counsel that in its
opinion the failure to so furnish information or negotiate could constitute
a breach of the fiduciary duty of RBMG's board of directors to the RBMG
shareholders;
(r) incur any commitments for capital expenditures or obligation
to make capital expenditures in excess of $100,000, for any one
expenditure, or $500,000 in the aggregate, except for expenditures
previously disclosed to NetBank, including without limitation the new loan
origination system and leasehold improvements to the new Columbia, South
Carolina headquarters and the new Jacksonville, Florida center;
(s) take any action which would or could reasonably be expected to
(i) cause the Merger not to constitute a reorganization under Section 368
of the Code, (ii) result in any inaccuracy of a representation or warranty
herein which would allow for a termination of this Agreement, or (iii)
cause any of the conditions precedent to the transactions contemplated by
this Agreement to fail to be satisfied.
5.3 Affirmative Covenants of NetBank. From the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of RBMG shall have been
obtained, and except as otherwise expressly contemplated herein, NetBank
shall, in the usual, regular, and ordinary course, (a) use its reasonable
good faith efforts to preserve intact its respective business organization
and Assets and maintain its rights and franchises; (b) take no action which
would materially adversely affect the ability of any Person to obtain any
Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the
last sentences of Section 7.1(c) or 7.1(d), or materially adversely affect
the ability of any Person to perform its covenants and agreements under
this Agreement; and (c) furnish upon request RBMG with copies of any
internal operational management reports or Litigation Management report.
5.4 Negative Covenants of NetBank. From the date of this Agreement
until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of RBMG shall have been
obtained and except as otherwise expressly contemplated herein or in the
Schedules hereto, NetBank will not, and shall cause each of its
Subsidiaries not to, do or agree or commit to do any of the following:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted,
or establish, acquire or engage in any new type of activity or materially
expand any existing activities; or
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock; or
(c) except as set forth in Exhibit 5.4(c) hereto, amend its
articles of incorporation, bylaws or other governing instruments; or
(d) except as set forth in Exhibit 5.4(d) hereto, incur any
additional debt obligation or other obligation for borrowed money in excess
of an aggregate of $100,000 except in the ordinary course of its business
consistent with past practice or impose, or suffer the imposition, on any
of its Assets any Lien or permit any such Lien to exist, except in the
ordinary course of its business; or
(e) except as set forth on Exhibit 5.4(e) hereto, repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the
ordinary course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of its capital stock
or make any other distribution in respect of its capital shares; provided,
however, that NetBank may, in its discretion, provide to NetBank Stock
option holders the right to exchange for Two Dollars ($2.00) per each share
underlying each option of any such Person to acquire NetBank Stock existing
as of the date of this Agreement and unexercised by the holder of such
option prior to the Closing Date; or
(f) issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of its capital stock or any shares appreciation rights, or any
option, warrant, or other Equity Right except pursuant to the exercise of
unexercised NetBank options outstanding as of the date hereof that were
issued under the NetBank Plans; or
(g) adjust, split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of or
in substitution for its shares of capital stock; or
(h) except as set forth on Exhibit 5.2(h) hereto: (i) merge with
any other entity or permit any other entity to merge into it, or
consolidate with any other entity; (ii) acquire control over any other
entity; or (iii) liquidate, sell, lease, mortgage, or otherwise encumber or
dispose of any Assets or acquire any Assets other than in the ordinary
course of its business consistent with past practices for reasonable and
adequate consideration; or
(i) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business, except where such failure would not, individually
or in the aggregate, have a Material Adverse Effect on NetBank;
(j) make any material investment for its own account, either by
purchase of shares or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person, or otherwise acquire
direct or indirect control over any Person other than in the ordinary
course of business; or
(k) grant any increase in compensation or benefits to any of its
employees or officers except (i) in accordance with past practice as
specifically disclosed in Exhibit 5.4(k) hereto, or (ii) as required by
Law; pay any material severance or termination pay or any material bonus
other than pursuant to NetBank Plans, written policies or written Contracts
in effect on the date of this Agreement and disclosed in Exhibit 5.4(k)
hereto; or enter into or amend any severance agreements with its officers;
grant any material increase in fees or other increases in compensation or
other benefits to its directors except in accordance with past practice as
disclosed in Exhibit 5.4(k) hereto; or voluntarily accelerate the vesting
of any employee benefits or other Equity Rights or voluntarily accelerate
the vesting of any employee benefits or other Equity Rights provided,
however, that nothing contained herein shall prohibit NetBank from paying
2001 bonuses under its incentive bonus plans consistent with past practice;
or
(l) enter into or amend any employment Contract entered into with
any Person having a salary and incentive plan thereunder in excess of
$100,000 per year (unless such amendment is required by Law) that it does
not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Closing Date; or
(m) adopt any new NetBank Plan or terminate or withdraw from, or
make any material change in or to, any existing NetBank Plans other than a
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such NetBank Plans, except as
necessary to comply with Law, the terms of such plans, or past practices;
or
(n) except as set forth in Exhibit 5.4(n) hereto, settle any
Litigation involving any of its Liabilities or the Liabilities of any
Affiliate if such settlement would include either payment of $100,000 or an
agreement to material restrictions upon the operations of its business; or
(o) change its methods of accounting or systems of internal
accounting controls in effect at December 31, 2000, except as required by
changes in regulatory accounting requirements or GAAP concurred in by
outside auditors after 5 days' prior notice to RBMG, or change any of its
material methods of reporting income and deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
returns for the year ended December 31, 2000, except (i) as required by
changes in law or regulation or (ii) which are not material and which are
taken in the ordinary and usual course of business consistent with prior
practice; or
(p) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract (including any loan Contract with
an unpaid balance exceeding $100,000) or waive, release, compromise or
assign any material rights or claim; or
(q) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, NetBank or
any NetBank Subsidiary or any business combination with NetBank or any
NetBank Subsidiary other than as contemplated by this Agreement; or
authorize any officer, director, agent or affiliate of NetBank or any
NetBank Subsidiary to do any of the above; or fail to notify NetBank
immediately if any such inquiries or proposals are received, any such
information is requested or required, or any such negotiations or
discussions are sought to be initiated; provided, that this subsection (q)
shall not apply to furnishing information, negotiations or discussions
following an unsolicited offer if, as a result of such offer, NetBank is
advised by legal counsel that in its opinion the failure to so furnish
information or negotiate could constitute a breach of the fiduciary duty of
NetBank's board of directors to the NetBank shareholders;
(r) incur any commitments for capital expenditures or obligation
to make capital expenditures in excess of $100,000, for any one
expenditure, or $500,000 in the aggregate;
(s) take any action which would or could reasonably be expected to
(i) cause the Merger not to constitute a reorganization under Section 368
of the Code, (ii) result in any inaccuracy of a representation or warranty
herein which would allow for a termination of this Agreement, or (iii)
cause any of the conditions precedent to the transactions contemplated by
this Agreement to fail to be satisfied.
5.5 Adverse Changes in Condition. Each Party agrees to give written
notice promptly to the other upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to the Party or the
Party's Affiliates which (i) is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on such Party or the Surviving
Corporation, or (ii) would cause or constitute a material breach of the
Party's representations, warranties, or covenants contained herein, and each
Party agrees to use its reasonable efforts to prevent or promptly remedy the
same.
5.6 Reports. NetBank and RBMG each shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Closing Date. If financial statements are contained in
any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the Person filing such
statements as of the dates indicated and, if applicable, the consolidated
results of operations, changes in shareholders' equity, and cash flows for
the periods then ended in accordance with GAAP (subject in the case of
interim financial statements to normal recurring year-end adjustments that
are not material). As of their respective dates, such reports filed with
the SEC will comply in all material respects with the Securities Laws and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance
with Laws applicable to such reports.
5.7 Affiliates. RBMG shall use its reasonable best efforts to
cause all persons who are Affiliates of RBMG to deliver to NetBank promptly
following this Agreement a written agreement providing that such person
will not dispose of NetBank Common Stock received in the Merger except in
compliance with the Securities Act and the rules and regulations
promulgated thereunder, and in any event shall use its reasonable best
efforts to cause such affiliates to deliver to NetBank such written
agreement prior to the Closing Date.
ARTICLE 6.
ADDITIONAL AGREEMENTS
6.1 RBMG Shareholder Meeting. RBMG shall submit this Agreement to
its shareholders for approval at a meeting to be held as soon as
practicable, and by approving execution of this Agreement, its board of
directors agrees that it shall, at the time the Joint Proxy
Statement-Prospectus is mailed to the shareholders of RBMG, recommend that
RBMG's shareholders vote for such approval; provided, that the board of
directors of RBMG may withdraw or refuse to make such recommendation only
if the board of directors shall determine in good faith that such
recommendation should not be made in light of its fiduciary duty to RBMG's
shareholders after consideration of advice of legal counsel that, such
recommendation or the failure to withdraw or modify such recommendation
could reasonably be expected to constitute a breach of the fiduciary duty
of the board of directors to the shareholders of RBMG.
6.2 NetBank Shareholder Meeting. NetBank shall submit this
Agreement to its shareholders for approval at a meeting to be held as soon
as practicable, and by approving execution of this Agreement, its board of
directors agrees that it shall, at the time the Joint Proxy
Statement-Prospectus is mailed to the shareholders of NetBank, recommend
that NetBank's shareholders vote for such approval; provided, that the
board of directors of NetBank may withdraw or refuse to make such
recommendation only if the board of directors shall determine in good faith
that such recommendation should not be made in light of its fiduciary duty
to NetBank's shareholders after consideration of advice of legal counsel
that such recommendation or the failure to withdraw or modify such
recommendation could reasonably be expected to constitute a breach of the
fiduciary duty of the board of directors to the shareholders of NetBank.
6.3 Regulatory Matters.
(a) As soon as practicable following the date of this Agreement
and no later than 28 days after the date of this Agreement, RBMG and
NetBank shall prepare and file with the SEC the Joint Proxy
Statement-Prospectus-Prospectus, and NetBank shall prepare and file with
the SEC the Registration Statement, in which the Joint Proxy
Statement-Prospectus will be included as a prospectus. Each of NetBank and
RBMG shall use reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable
after such filing and RBMG and NetBank shall thereafter mail or deliver the
Joint Proxy Statement-Prospectus to their respective shareholders. NetBank
shall also use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement, and the RBMG shall furnish
all information concerning RBMG and the holders of RBMG Common Stock as may
be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation (including, but not limited to the application required by
the HSR Act and the Notice of Acquisition of an Operating Subsidiary to be
filed with the Federal Deposit Insurance Corporation and the Office of
Thrift Supervision, each of which shall be filed no later than 28 days
after the date of this Agreement) to effect all applications, notices,
petitions and filings, to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all third parties and Regulatory
Authorities which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including, without limitation, the Merger),
and to comply with the terms and conditions of all such permits, consents,
approvals and authorizations of all such Regulatory Authorities. RBMG and
NetBank shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the
information relating to RBMG or NetBank, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any Regulatory Authority
in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Regulatory Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(c) RBMG and NetBank shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Joint Proxy
Statement-Prospectus, the Registration Statement or any other statement,
filing, notice or application made by or on behalf of RBMG, NetBank or any
of their respective Subsidiaries to any Regulatory Authority in connection
with the Merger and the other transactions contemplated by this Agreement.
(d) RBMG and NetBank shall promptly advise each other upon
receiving any communication from any Regulatory Authority or Agency whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement that causes such party to believe that there
is a reasonable likelihood that any regulatory approval will not be
obtained or that the receipt of any such approval will be materially
delayed.
6.4 Nasdaq Listing. NetBank shall use all reasonable efforts to
cause the shares of NetBank Common Stock to be issued in the Merger to be
approved for listing on the Nasdaq Stock Market, subject to official notice
of issuance, as of the Effective Time.
6.5 Access To Information.
(a) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, each of RBMG and NetBank, for the purposes
of verifying the representations and warranties of the other and preparing
for the Merger and the other matters contemplated by this Agreement, shall,
and shall cause each of their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the
other party, access, during normal business hours during the period prior
to the Effective Time, to all its properties, books, contracts, commitments
and records, and, during such period, each of RBMG and NetBank shall, and
shall cause their respective Subsidiaries to, make available to the other
party (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws
(other than reports or documents which RBMG or NetBank, as the case may be,
is not permitted to disclose under applicable law)and (ii)all other
information concerning its business, properties and personnel as such party
may reasonably request. Neither RBMG nor NetBank nor any of their
respective Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or
prejudice the rights of RBMG's or NetBank's, as the case may be, customers,
jeopardize the attorney-client privilege of the institution in possession
or control of such information or contravene any law, rule, regulation,
order, judgment, decree, fiduciary duty or binding agreement entered into
prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply.
(b) Each of RBMG and NetBank shall hold all information furnished
by or on behalf of the other Party or any of such Party's Subsidiaries or
representatives pursuant to Section 6.5(a) in confidence to the extent
required by, and in accordance with, the provisions of the Confidentiality
Agreements.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the
other set forth herein.
6.6 Agreement as to Efforts to Consummate. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause
its Affiliates to use, its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using
its reasonable efforts to lift or rescind any Order adversely affecting its
ability to consummate the transactions contemplated herein and to cause to
be satisfied the conditions referred to in Article 7; provided, that
nothing herein shall preclude either Party from exercising its rights under
this Agreement. Each Party shall use, and shall cause each of its
Affiliates to use, its reasonable best efforts to obtain all Consents
necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
6.7 Section 401(k) Plan; Other Employee Benefits.
(a) Effective on the Benefit Plan Determination Date with respect
to the 401(k) plan of RBMG, NetBank shall cause the 401(k) plan of RBMG
either to be merged with the 401(k) plan maintained by NetBank and the
NetBank Subsidiaries or terminated, provided that NetBank may elect instead
to adopt the 401(k) plan of RBMG for NetBank and the NetBank Subsidiaries,
in each case subject to the receipt of all applicable regulatory or
governmental approvals. Each employee of RBMG at the Effective Time who
becomes an employee of NetBank or a NetBank Subsidiary ("Employer Entity")
immediately following the Effective Time (a "Transferred Employee") and who
is an employee of an Employer Entity as of the Benefit Plan Determination
Date shall be eligible to participate in NetBank's 401(k) plan (subject to
complying with eligibility requirements and to NetBank's right to terminate
such plan or adopt the 401(k) plan of RBMG). Until the Benefit Plan
Determination Date, NetBank shall continue in effect for the benefit of
participating employees the Section 401(k) plan of RBMG. For purposes of
administering NetBank's 401(k) plan, service with RBMG and the RBMG's
Subsidiaries shall be deemed to be service with NetBank or the NetBank
Subsidiaries for participation and vesting purposes, but not for purposes
of benefit accrual.
(b) Following the Effective Time, the management of NetBank shall
consult with the board of directors of NetBank in order to develop employee
benefit plans, programs and arrangements to be adopted by NetBank, which
benefit plans shall be provided to NetBank Employees generally (including
Transferred Employees), and which shall be no less favorable, in the
aggregate, than those provided to the Transferred Employees immediately
prior to the Effective Time (the "Successor Plans"). Until such time as the
Successor Plans are adopted and made available to the Transferred Employees
(which may occur at different times with respect to different employees,
plans and programs) NetBank (or the applicable Employer Entity) shall cause
each RBMG Plan set forth on Schedule 6.7(b), to be continued in effect for
the benefit of such Transferred Employees. Without limiting the generality
of the foregoing, each Transferred Employee shall be eligible to
participate on terms no less favorable than similarly situated employees of
the Employer Entity in each Transferred Employee shall be eligible to
participate on terms no less favorable than similarly situated employees of
the Employer Entity in the Successor Plan. None of the Successor Plans that
are group hospitalization, medical or dental welfare benefit plans shall
have an eligibility waiting period applicable to any Transferred Employee
which would exceed the eligibility waiting period applicable to such
employees as of the Effective Time under the corresponding RBMG Plan
applicable to such employee as in effect on the Effective Time. If the
first plan year of participation in any group health plan of an Employer
Entity by a Transferred Employee is a partial year, the Employer Entity
will give such Transferred Employee and his or her dependents credit toward
deductible and out-of-pocket limitations for and eligible expenses incurred
by such persons under the RBMG group health plan during that portion of
that plan year that precedes entry into the group health plan(s) of the
Employer Entity. With respect to each NetBank Plan, or an Employer Entity
in which a Transferred Employee participates for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including
for severance benefits and vacation entitlement (but not for accrual of
pension on benefits), service with RBMG (or predecessor employers to the
extent RBMG provides past service credit) shall be treated as service with
NetBank; provided, however, that such service shall not be recognized to
the extent that such recognition would result in a duplication of benefits.
Each Successor Plan shall waive preexisting condition limitations to the
same extent that such conditions do not apply under the applicable RBMG
Plan, as of the Effective Time.
(c) Each Transferred Employee who is terminated by an Employer
Entity subsequent to the Effective Time, shall be entitled to severance pay
in accordance with the general severance policy maintained by NetBank, if
and to the extent that such employee is entitled to severance pay under
such policy. Such employee's service with RBMG or a Subsidiary of RBMG
shall be treated as service with NetBank for purposes of determining the
amount of severance pay, if any, under NetBank's severance policy, which
policy is attached hereto on Exhibit 6.7.
(d) NetBank assumes as of the Effective Date all employment
agreements, severance agreements and deferred compensation agreements that
RBMG and any Subsidiary of RBMG has with their current and former employees
and directors. Except for the agreements described in the preceding
sentence and except as otherwise provided in this Agreement, all other
employee benefit plans of RBMG shall be terminated or, in the sole
discretion of NetBank, merged into comparable plans of NetBank, effective
as NetBank shall determine in its sole discretion.
(e) RBMG and NetBank shall take all such steps as may be required
to cause the transaction contemplated by Section 2.6 and any other
dispositions of the RBMG equity securities (including derivative
securities)or acquisitions of NetBank equity securities (including
derivative securities) in connection with this Agreement by each individual
who (a) is a director or officer of the RBMG or (b) at the Effective Time,
will become a director or officer of NetBank, to be exempt under Rule 16b-3
promulgated under the Exchange Act, such steps to be taken in accordance
with the No-Action Letter dated January 12, 1999, issued by the SEC to
Skadden, Arps, Slate, Meagher & Flom LLP.
(f) Upon the Closing Date and for six months and one day after the
Closing Date, Mr. Freeman shall be able to designate Transferred Employees
and existing employees of NetBank who shall be granted stock options from
NetBank at a price equal to the market price of such option as of the date
immediately preceding such grant; provided, however, that the total of all
such grants shall not exceed 750,000 (not counting options granted to
Mssrs. Freeman, Fitzgerald and Bowers).
6.8 Confidentiality.
(a) Each Party shall comply with the terms of the Confidentiality
Agreements.
(b) Each Party agrees to give each of the other Parties notice as
soon as practicable after any determination by it of any fact or occurrence
relating to any other Party which it has discovered through the course of
its investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is reasonably
likely to have a Material Adverse Effect on such Party or the Surviving
Corporation.
6.9 Press Releases. Prior to the Closing Date, NetBank and RBMG
shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or
any transaction contemplated hereby. Nothing in this Section 6.9 shall be
deemed to prohibit any Party from making any disclosure which its counsel
deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
6.10 Executive Officers, Succession. As of the Effective Time the
executive officers of NetBank shall be Mr. Douglas K. Freeman, as Chief
Executive Officer, Mr. D. R. Grimes as Vice-Chairman, and Mr. Robert E.
Bowers, as Chief Financial Officer, and such additional persons as may
thereafter be elected. Mr. T. Stephen Johnson shall serve as Chairman of
the board of directors of NetBank. Prior to the Effective Time, NetBank
shall cause its board of directors to approve and adopt resolutions
effecting the appointment of officers contemplated by this Section 6.10.
6.11 Post-Merger Board of Directors and Committees.
(a) At the Effective Time, the total number of persons serving on
the board of directors of NetBank shall be eleven, seven of whom shall be
Continuing NetBank Directors, and four of whom shall be Continuing RBMG
Directors (as such terms are defined in subsection (c) below). The seven
persons to serve initially on the board of directors of NetBank as of the
Effective Time who are Continuing NetBank Directors shall include Robin
Kelton and such other persons as who are selected by the board of directors
of NetBank prior to the Effective Time; and the four persons to serve on
the board of directors of NetBank as of the Effective Time who are
Continuing RBMG Directors shall be selected by the board of directors of
RBMG prior to the Effective Time. Two NetBank Directors shall be assigned
to each of the three classes of the board of directors of NetBank from and
after the Effective Time, and the four Continuing RBMG Directors shall be
assigned to the three classes of the board of directors of NetBank so that
two of such classes contain one Continuing RBMG Director and one class
contains two Continuing RBMG Directors. In the event that, prior to the
Effective Time, any person so selected to serve on the board of directors
of NetBank after the Effective Time is unable or unwilling to serve in such
position, the board of directors which selected such person shall designate
another of its members to serve in such person's stead in accordance with
the provisions of the immediately preceding sentence. Prior to the
Effective Time, NetBank shall cause its board of directors to approve and
adopt resolutions effecting the Board composition contemplated by this
Section 6.11.
(b) On or before the Effective Time, all directors, other than
Donald L. Shapleigh, who were officers of NetBank at any time prior to the
Effective Time shall have resigned from the board of directors of NetBank.
(c) From and after the Effective Time, each of the committees of
the board of directors of NetBank shall be comprised of an equal number of
Continuing NetBank Directors and Continuing RBMG Directors and the
respective chairmen of such committees shall be drawn equally from the
Continuing NetBank Directors and the Continuing RBMG Directors, the
identity of the members of such committees and such chairmen to otherwise
be as mutually determined by Mr. Freeman and Mr. Johnson.
(d) The term "Continuing NetBank Director" means (i) any person
serving as a director of NetBank on the date of this Agreement who
continues as a director of NetBank at the Effective Time and (ii) any
person who becomes a director of NetBank and who is designated as such by
the Continuing NetBank Directors prior to his or her election; and the term
" Continuing RBMG Director" means (i) any person serving as a director of
RBMG on the date of this Agreement who becomes a director of NetBank at the
Effective Time and (ii) any person who becomes a Director of NetBank and
who is designated as such by the Continuing RBMG Directors prior to his or
her election.
(e) Mr. T. Stephen Johnson shall serve as Chairman of the board of
directors of NetBank until the date of NetBank's public announcement of
$.25 per share or more for operating earnings in a quarter (the "Chairman
Succession Date"). In addition, from and after the Chairman Succession
Date, Mr. Freeman shall be the Chairman of the Board of NetBank until
December 31, 2005. If, for any reason, Mr. Johnson ceases to serve as
Chairman of the NetBank board of directors prior to the Chairman Succession
Date and at such time Mr. Freeman is then serving as Chief Executive
Officer of NetBank, Mr. Freeman shall at such time become Chairman of the
board of directors of NetBank.
6.12 Form of Merger. The Parties agree that, upon the mutual
consent of the Parties, the form of the Merger shall be changed from that
set forth Recital D to a direct merger of RBMG with and into NetBank, with
NetBank as the survivor, provided that Tax Counsel for each Party is able
to deliver the opinion set forth in Section 7.1(e) based upon the change in
the form of the Merger set forth herein.
ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
7.1 Conditions to Obligations of Each Party. The respective
obligations of each Party consummate the transactions contemplated hereby
are subject to the satisfaction of the following conditions, unless waived
by both Parties pursuant to Section 9.5(a):
(a) Corporate Authorization. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
consummation of the transactions contemplated hereby, shall have been duly
and validly taken, including, without limitation, the approval of this
Agreement by the shareholders of RBMG and NetBank.
(b) Registration Statement. The Registration Statement (including
any post-effective amendments thereto) shall be effective under the
Securities Act, no proceedings shall be pending or to the knowledge of
NetBank threatened by the SEC to suspend the effectiveness of such
Registration Statement and the NetBank Common Stock to be issued as
contemplated in this Agreement shall have either been registered or be
subject to exemption from registration under applicable state securities
laws.
(c) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities and
Agencies required for consummation of the transactions contemplated hereby
shall have been obtained or made and shall be in full force and effect and
all waiting periods in respect thereof shall have expired. No Consent
obtained from any Regulatory Authority or Agency which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner such as would have a material adverse impact on the
financial condition of the Surviving Corporation.
(d) Consents and Approvals. Each Party shall have obtained any and
all material Consents, including, without limitation, Consents of all
Investors and Agencies under all existing Contracts, required for
consummation of the transactions contemplated hereby (other than those
referred to in Section 7.1(c)) or for the preventing of any Default under
any Contract or Permit of such Party. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner that has a material adverse impact on
the economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(e) Tax Opinion. RBMG and NetBank shall have received a written
opinion of its respective legal counsel ("Tax Counsel"), in a form
reasonably satisfactory to RBMG and NetBank ("Tax Opinion"), respectively,
dated the date of the Effective Time, substantially to the effect that, on
the basis of facts, representation and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368 of the Code. In rendering such Tax Opinion, Tax
Counsel may require and rely upon representation and covenants, including
those contained in certificates of NetBank, RBMG, and others, reasonably
satisfactory in form and substance to such Tax Counsel.
(f) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(g) Nasdaq Listing. The shares of NetBank Common Stock which shall
be issued to the stockholders of RBMG upon consummation of the Merger shall
have been authorized for listing on the Nasdaq Stock Market, subject to
official notice of issuance.
7.2 Conditions to Obligations of NetBank. The obligations of
NetBank to consummate the transactions contemplated hereby are subject to
the satisfaction of the following conditions, unless waived by NetBank
pursuant to Section 9.5(a):
(a) Representations and Warranties. For purposes of this Section
7.2(a), the accuracy of the representations and warranties of RBMG set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Closing Date with the same effect as though all such
representations and warranties had been made on and as of the Closing Date
(provided that representations and warranties which are confined to a
specified date shall speak only as of such date). There shall not exist
inaccuracies in the representations and warranties of RBMG set forth in
this Agreement such that the aggregate effect of such inaccuracies has, or
is reasonably likely to have, a Material Adverse Effect on RBMG, its
Subsidiaries, or the Surviving Corporation.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of RBMG to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Closing Date shall have been duly performed and complied with in all
material respects.
(c) Certificates. RBMG shall have delivered to NetBank (i) a
certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and chief financial officer that the conditions set
forth in Sections 7.2(a) and 7.2(b) have been satisfied, that there are no
actions, suits, claims, governmental investigations or procedures
instituted, pending or, to the best of such officer's Knowledge, threatened
that reasonably may be expected to have a Material Adverse Effect on RBMG
or that present a valid claim to restrain or prohibit the transactions
contemplated herein and that to best of such officer's knowledge the "Total
Stockholders' Equity" as of the Closing Date is equal to or exceeds the
Closing Requirement Amount; (ii) certified copies of resolutions duly
adopted by RBMG's board of directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated
hereby, and (iii) certified copies of resolutions duly adopted by RBMG's
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as RBMG and its counsel shall request.
(d) Stockholders' Equity. The "Total Stockholders' Equity" of RBMG
as of a month end within 63 days of the Closing Date shall not be less than
$142 million (the "Closing Requirement Amount"). The "Total Stockholders'
Equity" shall be as stated on the RBMG consolidated Balance Sheet and shall
be accompanied by the "Report of Independent Accountants" of Ernst & Young
on said Balance Sheet.
(e) Merger of RBC and RBMG. At the request and direction of
NetBank, RBMG will cause RBC to merge with and into RBMG, with RBMG as the
survivor of the merger.
7.3 Conditions to Obligations of RBMG. The obligations of RBMG to
perform this Agreement and consummate the transactions contemplated hereby
are subject to the satisfaction of the following conditions, unless waived
by RBMG pursuant to Section 9.5(a):
(a) Representations and Warranties. For purposes of this Section
7.3(a), the accuracy of the representations and warranties of NetBank set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Closing Date with the same effect as though all such
representations and warranties had been made on and as of the Closing Date
(provided that representations and warranties which are confined to a
specified date shall speak only as of such date). There shall not exist
inaccuracies in the representations and warranties of NetBank set forth in
this Agreement such that the aggregate effect of such inaccuracies has, or
is reasonably likely to have, a Material Adverse Effect on NetBank, its
Subsidiaries, or the Surviving Corporation.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of NetBank to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Closing Date shall have been duly performed and complied with
in all material respects.
(c) Certificates. NetBank shall have delivered to RBMG (i) a
certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and chief financial officer that the conditions set
forth in Sections 7.3(a) and 7.3(b) have been satisfied, and that there are
no actions, suits, claims, governmental investigations or procedures
instituted, pending or, to the best of such officer's Knowledge, threatened
that reasonably may be expected to have a Material Adverse Effect on
NetBank or that present a claim to restrain or prohibit the transactions
contemplated herein; and (ii) certified copies of resolutions duly adopted
by NetBank's board of directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as NetBank and its counsel shall
request and (iii) certified copies of resolution duly adopted by NetBank's
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as NetBank and its counsel shall request.
(d) NetBank Governing Documents. Prior to the Effective Time,
NetBank shall have caused the bylaws of NetBank to be amended as provided
in Exhibit 7.3(d).
ARTICLE 8.
TERMINATION
8.1 Termination. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated in writing and the transactions
contemplated hereby abandoned:
(a) At any time prior to the Effective Time by mutual consent of
NetBank and RBMG; or
(b) At any time prior to the Effective Time by any Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any
representation or warranty contained in this Agreement which (i) cannot be
cured prior to September 30, 2002 and (ii) would provide the terminating
Party the ability to refuse to consummate the Merger under the applicable
standards set forth Section 7.2(a) of this Agreement in the case of NetBank
and Section 7.3(a) of this Agreement in the case of RBMG; or
(c) At any time prior to the Effective Time by any Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in this Agreement which cannot be cured
prior to September 30, 2002; or
(d) At any time by any Party (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event any Consent of
any Regulatory Authority required for consummation of the transactions
contemplated hereby shall have been denied by final non-appealable action
of such authority or if any action taken by such authority is not appealed
within the time limit for appeal; or
(e) At any time following September 30, 2002, by any Party in the
event that (i) the transactions contemplated hereby shall not have been
consummated by the close of business on such date, or (ii) any condition
precedent provided for in Section 7.1 (as it relates to the non-terminating
Party) that is not otherwise waived pursuant to Section 9.5(a) is not
satisfied as of such date; or
(f) At any time by either Party if the shareholders of RBMG and
NetBank do not approve this Agreement at the meeting of such shareholders
duly called and held pursuant to Sections 6.1 and 6.2, as applicable.
8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this
Section 8.2 and Article 9 shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 8.1(b), 8.1(c),
8.1(d) and 8.1(e) shall not relieve the breaching Party from Liability for
an uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination.
ARTICLE 9.
MISCELLANEOUS
9.1 Expenses.
(a) Except as otherwise provided in this Section 9.1, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and
fees and expenses of its own Representatives; provided, however, that the
filing fees and printing costs incurred in connection with the Registration
Statement and the Joint Proxy Statement-Prospectus shall be borne 50% by
NetBank and 50% by RBMG.
(b) If this Agreement is terminated by RBMG pursuant to Sections
8.1(b) or (c), NetBank shall pay to RBMG the sum of (y) an amount of up to
$1,000,000 for all expenses incurred by RBMG for outside accounting and
legal firms directly related to RBMG's due diligence for the Merger and
Closing and for the negotiation, preparation of, and performance under this
Agreement, plus (z) $2,000,000.
(c) If this Agreement is terminated by NetBank pursuant to
Sections 8.1(b) or (c), RBMG shall pay to NetBank the sum of (y) an amount
of up to $1,000,000 for all expenses incurred by NetBank for outside
accounting and legal firms directly related to NetBank's due diligence for
the Merger and Closing and for the negotiation, preparation of, and
performance under this Agreement, plus (z) $2,000,000.
(d) If this Agreement is terminated by RBMG pursuant to Section
8.1(f), NetBank shall pay to RBMG the sum of (y)an amount of up to $1,
000,000 for all expenses incurred by RBMG for outside accounting and legal
firms directly related to RBMG's due diligence for the Merger and Closing
and for the negotiation, preparation of, and performance under this
Agreement, plus (z) $2,000,000.
(e) If this Agreement is terminated by NetBank pursuant to Section
8.1 (f), RBMG shall pay to NetBank the sum of (y) an amount of up to $l,
000,000 for al1 expenses incurred by NetBank for outside accounting and
legal firms directly related to NetBank's due diligence for the Merger and
Closing and for the negotiation, preparation of, and performance under this
Agreement, plus (z) $2, 000,000.
9.2 Brokers and Finders. Each of the Parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any Liability for
any financial advisory fees, investment bankers' fees, brokerage fees,
commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby, except for Raymond James & Associates,
Inc., on behalf of NetBank, and Sandler O'Neill & Partners, L.P. on behalf
of RBMG.
9.3 Entire Agreement; Third Party Beneficiaries. Except as
otherwise expressly provided herein, this Agreement (including the
documents and instruments referred to herein) constitutes the entire
agreement between the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with
respect thereto, written or oral. Except as otherwise provided in Sections
6.10 and 6.11, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any Person, other than
the Parties or their respective successors, any rights, or remedies hereto.
9.4 Amendments. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after board or
shareholder approval, if any, of this Agreement has been obtained.
9.5 Waivers.
(a) Prior to or at the Closing Date, any Party shall have the
right to waive any Default in the performance of any term of this Agreement
by the other Party or its Affiliates and to waive or extend the time for
the compliance or fulfillment by the other Party or its Affiliates of any
and all of their obligations under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law and would
have individually or in the aggregate a Material Adverse Effect on such
party. No such waiver shall be effective unless in writing signed by a duly
authorized officer of the party in question.
(b) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of
such Party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be
or construed as a further or continuing waiver of such condition or breach
or a waiver of any other condition or of the breach of any other term of
this Agreement.
9.6 Assignment. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective
successors and assigns.
9.7 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified
mail, postage pre-paid, or by courier or overnight carrier, to the persons
at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the
date so delivered:
RBMG: Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: Douglas K. Freeman
Copy to Counsel: Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attention: Fred B. White, III
NetBank: NetBank, Inc.
Royal Centre Three, Suite 100
and 11475 Great Oaks Parkway
Alpharetta, Georgia 30022
Merger Sub: Attention: D.R. Grimes
Copy to Counsel: Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Walter G. Moeling, IV, Esq.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without
regard to any applicable conflict of Laws doctrine or statute.
9.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
9.10 Captions, Articles and Sections. The captions contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Unless otherwise indicated, all references to particular
Articles or Sections shall mean and refer to the referenced Articles and
Sections of this Agreement.
9.11 Interpretations. The Parties acknowledge and agree that this
Agreement has been reviewed, negotiated, and accepted by all Parties and
their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes
and intentions of all Parties hereto. 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 shall not affect in any way the meaning
or interpretation of this Agreement. The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to November 18, 2001.
9.12 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or
was otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in
equity.
9.13 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
properly executed, as of the day and year first above written, intending it
to be fully effective.
NETBANK, INC.
By: /s/ T. Stephen Johnson
-----------------------------------
T. Stephen Johnson,
Chairman of the Board
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By: /s/ Douglas K. Freeman
-----------------------------------
Douglas K. Freeman, Chief Executive
Officer and Chairman of the Board
PALMETTO ACQUISITION CORP.
By: /s/ T. Stephen Johnson
------------------------------------
T. Stephen Johnson,
Chairman of the Board
LIST OF SCHEDULES
Schedule
Number Description
Schedule 3.1 RBMG Organizational Documents
Schedule 3.2(b) Required Consents regarding RBMG's Assets and
Contracts
Schedule 3.3(b) Outstanding equity rights or securities of RBMG
Schedule 3.6 RBMG Subsidiaries
Schedule 3.8 RBMG Liabilities
Schedule 3.9 Certain RBMG Changes or Events
Schedule 3.10(a) Tax audits, examinations, deficiencies, or
refund litigation of RBMG
Schedule 3.10(f) Tax allocation or sharing agreements and other
related arrangements of RBMG
Schedule 3.10(h) Nondeductible Tax Payments of RBMG
Schedule 3.10(k)(A) Deferred Intercompany Gain
Schedule 3.10(l) Audits of Tax Returns
Schedule 3.11(a) Unmarketable title or liens on Assets of RBMG
Schedule 3.11(b) Real property, facilities and Material Equipment
Leases of RBMG
Schedule 3.11(c) Insurance policies held by RBMG and any pending
claims
Schedule 3.12 Intellectual property owned by or licensed to RBMG
Schedule 3.13(a) Environmental Laws (noncompliance)
Schedule 3.13(c) Hazardous waste
Schedule 3.14 Compliance with Laws--General applicability
Schedule 3.15 Labor Litigation
Schedule 3.16(a) RBMG Compensation
Schedule 3.16(b) RBMG Plans
Schedule 3.17(a) RBMG Contracts
Schedule 3.17(b) Status of RBMG Contracts
Schedule 3.17(c) Noncompetition Contracts
Schedule 3.18 Legal and disciplinary proceedings of RBMG
Schedule 3.24(a) Jurisdictions in which Permits are held by RBMG;
Compliance with Laws--Loan servicing Regulations
Schedule 3.24(b) Compliance
Schedule 3.24(c) Compliance
Schedule 3.25(a) Evidence of Mortgage Loan indebtedness;
compliance with Mortgage Loan insurance
policies; eligibility of purchase of Warehouse
Mortgage Loans
Schedule 3.25(b) Validity and enforceability of Mortgage Loans
Schedule 3.26(a) Commitments to repurchase Mortgage Loans
and related properties, sell mortgage servicing,
or make payments resulting from foreclosures
Schedule 3.26(b) Obligations regarding servicing advances for
troubled Mortgage Loans
Schedule 3.27 Mortgage servicing agreements
Schedule 3.28(a) Investor Commitments
Schedule 3.28(b) Mortgage Loan servicing commitments
Schedule 3.29 Custodial Accounts
Schedule 3.30 Pool certification
Schedule 4.1 NetBank Organizational Documents
Schedule 4.2(b) Required Consents regarding NetBank's Assets and
Contracts
Schedule 4.3(b) Outstanding equity rights or securities of NetBank
Schedule 4.6 NetBank Subsidiaries
Schedule 4.8 NetBank Liabilities
Schedule 4.9 Certain NetBank Changes or Events
Schedule 4.10(a) Tax audits, examinations, deficiencies, or
refund litigation of NetBank
Schedule 4.10(f) Tax allocation or sharing agreements and other
related arrangements of NetBank
Schedule 4.10(h) Nondeductible Tax Payments of NetBank
Schedule 4.10(k)(A) Deferred Intercompany Gain
Schedule 4.10(l) Audits of Tax Returns
Schedule 4.11(a) Unmarketable title or liens on Assets of NetBank
Schedule 4.11(b) Real property, facilities and Material Equipment
Leases of NetBank
Schedule 4.11(c) Insurance policies held by NetBank and any
pending claims
Schedule 4.12 Intellectual property owned by or licensed to NetBank
Schedule 4.13(a) Environmental Laws (noncompliance)
Schedule 4.13(c) Hazardous waste
Schedule 4.14 Compliance with Laws--General applicability
Schedule 4.16(b) NetBank Plans
Schedule 4.17(a) NetBank Contracts
Schedule 4.17(b) Status of NetBank Contracts
Schedule 4.17(c) Noncompetition Contracts
Schedule 4.18 Legal and disciplinary proceedings of NetBank
Schedule 4.24(a) Jurisdictions in which Permits are held by
NetBank; Compliance with Laws--Loan servicing
Regulations
Schedule 4.24(b) Compliance
Schedule 4.24(c) Compliance
Schedule 4.25(a) Evidence of Mortgage Loan indebtedness;
compliance with Mortgage Loan insurance
policies; eligibility of purchase of Warehouse
Mortgage Loans
Schedule 4.25(b) Validity and enforceability of Mortgage Loans
Schedule 4.26(a) Commitments to repurchase Mortgage Loans
and related properties, sell mortgage servicing,
or make payments resulting from foreclosures
Schedule 4.26(b) Obligations regarding servicing advances for
troubled Mortgage Loans
Schedule 4.27 Mortgage servicing agreements
Schedule 4.28(a) Investor Commitments
Schedule 4.28(b) Mortgage Loan servicing commitments
Schedule 4.29 Custodial Accounts
Schedule 4.30 Pool certification
LIST OF EXHIBITS
Exhibit
Number Description
Exhibit 5.2(c) Amendment to Articles and/or Bylaws
Exhibit 5.2(d) Additional RBMG Obligations
Exhibit 5.2(e) Permitted Stock Transactions
Exhibit 5.2(h) Permitted Mergers, Acquisitions and Asset
Transactions
Exhibit 5.2(k) Compensation or benefits to RBMG employees
Exhibit 5.2(n) Settlement of litigation by RBMG
Exhibit 5.4(k) Compensation or benefits to NetBank employees
Exhibit 5.4(n) Settlement of litigation by NetBank
Exhibit 99.1
For Immediate Release
NetBank Contact:
Matthew Shepherd
678-942-2683
mshepherd@netbank.com
RBMG Contact:
Jerri Franz
904-306-9222, ext. 2
jfranz@marketingsynergies.com
NetBank, Inc. Reaches Definitive Agreement
To Acquire Resource Bancshares Mortgage Group, Inc.
Combination Will Create a Diversified Financial Services Powerhouse
That Leverages Technology to Create Greater Customer and Shareholder Value
ATLANTA -- (November 19, 2001) -- NetBank, Inc. (Nasdaq: NTBK), the holding
company for the country's largest independent Internet bank, NetBank(R)
(www.netbank.com), Member FDIC and Equal Housing Lender, today announced a
definitive agreement to acquire Resource Bancshares Mortgage Group, Inc.
(Nasdaq: RBMG; www.rbmg.com), a wholesale mortgage banking company and
financial intermediary focused on the purchase, sales and servicing of
residential, single-family first mortgage loans through a nationwide
network of mortgage brokers and correspondent banks. Terms of the agreement
call for common shareholders of RBMG to receive 1.1382 shares of NetBank
common stock in exchange for each share of RBMG common stock.
The acquisition is part of the bank's investment strategy and builds on its
purchase earlier this year of Market Street Mortgage, a direct-to-consumer
mortgage lender based in Clearwater, Florida, with 42 offices in 10 states.
RBMG's conforming mortgage business will operate as a wholly owned
subsidiary of the bank. Based on third quarter results of this year, the
combined company will have assets totaling $3.6 billion and approximately
1,950 employees. The combined company's stock will trade on Nasdaq under
the NetBank name and ticker symbol. The acquisition is expected to close
within the first half of 2002, possibly by the end of the first quarter,
and is subject to normal shareholder and regulatory approval.
The two companies have complementary strengths that when combined represent
greater earnings opportunities and exceptional business synergies,
including:
o A lower-cost source of funding for the mortgage business
through the bank's proven efficiency in attracting deposits
on the Internet;
o Improved means for the bank to deploy deposits into sound,
higher-yield assets;
o Further diversification of the bank's income stream,
including increased fee income;
o Greater cross-selling opportunities, whether the customer
relationship begins on the mortgage or banking side of the
business; and
o Further depth of management that mixes the asset-generation
experience of the mortgage business with the technology and
new media marketing expertise of the bank.
"This acquisition is particularly significant," said D.R. Grimes, CEO,
NetBank. "In many ways, it will complete our transition from a start-up
retail bank into a sizeable, diversified financial services institution.
Over the past year, we have talked about our effort to strategically build
out the asset side of the bank's balance sheet to create greater value for
our shareholders. With Market Street Mortgage, we were able to enter the
retail lending business with a seasoned management team and increase our
overall earnings immediately. RBMG represents the same opportunity on a
larger scale within the wholesale industry."
"Beyond the operational synergies that exist between the companies, we
share a customer-centric corporate culture and a focus on continually
growing our core profitability," said Douglas K. Freeman, CEO, RBMG. "Both
companies share a reputation for being an innovator in leveraging
technology across their business to improve internal efficiencies and
better serve their customers. Together, we will have tremendous
intellectual capital and skill sets to build on."
Following the successful completion of the acquisition, T. Stephen Johnson
and Grimes will continue as Chairman and Vice Chairman of the combined
company. Freeman will serve as CEO. The board of directors will consist of
11 members -- 6 from the NetBank board, 4 from the RBMG board and one
member who currently serves on both boards. Existing management teams will
oversee the respective businesses.
A conference call with analysts has been scheduled for 11 a.m. ET today.
Johnson, Grimes and Freeman will discuss the integration of the two
businesses and answer analyst questions. Individual investors may submit
their questions via e-mail to investorrelations@netbank.com until 10 a.m.
Interested parties can listen to the call by dialing 877-918-3008 (or
712-271-0618 from outside of the U.S.) When asked, individuals must
identify the conference call leader as D.R. Grimes and the password as
NetBank. The speakers will work from a presentation highlighting the
inherent opportunities of the transaction. The presentation is posted on
the Web sites of both companies, in the Investor Relations areas at
www.netbank.com and www.rbmg.com.
The call will also be available through an audiocast on both sites in the
above-referenced areas. Individuals should log on 10 minutes before the
call begins in case they need to download any necessary software
application. Or, individuals may call 800-388-4923 to hear a replay of the
discussion. The replay number will be active immediately afterward through
November 26.
About NetBank(R)
NetBank, Inc. (Nasdaq: NTBK) is a financial services company that has
recorded 14 consecutive quarters of profitability to date. Its wholly owned
subsidiary, NetBank, Member FDIC, currently has $2.5 billion in assets and
serves customers in all 50 states and 20 foreign countries. NetBank shares
the operational cost savings of its branchless business model with
customers through high interest rates on deposit accounts and reduced- or
no-fee banking services. The bank offers a comprehensive line of banking,
brokerage and lending products along with innovative services. Customers
enjoy free interest-bearing checking with an ATM or Visa(R) Check Card,
free unlimited online bill payment and presentment, wireless account access
and an account consolidation service that allows them to review their
online accounts at other institutions through the NetBank Web site. Readers
of Worth honored NetBank as a top online bank in the magazine's 2000 and
2001 "Readers' Choice Awards." For more information, visit NetBank at
www.netbank.com, or call 1-888-BKONWEB (256-6932).
About Resource Bancshares Mortgage Group, Inc.
Resource Bancshares Mortgage Group, Inc. (Nasdaq: RBMG) is a financial
services company primarily engaged in the business of mortgage banking.
Through its wholly owned subsidiaries, RBMG works with correspondent
lenders and brokers to purchase, sell and service agency-eligible and
subprime residential, single-family first-mortgage loans and to purchase
and sell servicing rights associated with agency-eligible loans. More
information about RBMG can be found at www.rbmg.com.
###
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, (i) statements about the benefits of a
merger between NetBank and RBMG, including a lower-cost source of funding
for RBMG, access to higher-yield assets for NetBank, further
diversification of NetBank's income stream and greater cross-selling
opportunities for both businesses; (ii) statements with respect to
NetBank's and RBMG's plans, objectives, expectations and intentions and
other statements that are not historical facts, including the proposed
management structure of the combined company; and (iii) other statements
identified by words such as "believes", "expects", "anticipates",
"estimates", "intends", "plans", "targets", "projects" and similar
expressions. These statements are based upon the current beliefs and
expectations of NetBank's and RBMG's management and are subject to
significant risks and uncertainties. Actual results may differ from those
set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in
the forward-looking statements: (1) the businesses of NetBank and RBMG may
not be integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) NetBank may not attract
sufficient deposits to provide RBMG greater liquidity for loan funding;(3)
RBMG may not generate a consistent volume of varied loan products for
NetBank to retain as investments; (4) unexpected changes in existing senior
management teams of either company before the merger is complete; (5)
revenues following the merger may be lower than expected; (6) deposit
attrition, operating costs, customer loss and business disruption,
including, without limitation, difficulties in maintaining relationships
with employees, customers, clients or suppliers, may be greater than
expected following the merger; (7) the regulatory approvals required for
the merger may not be obtained on the proposed terms or on the anticipated
schedule; (8) the failure of NetBank's and RBMG's shareholders to approve
the merger; (9) competitive pressures among financial services institutions
may increase significantly and may have an effect on pricing, spending,
third-party relationships and revenues; (10) the strength of the United
States economy in general and the strength of the local economies in which
the combined company will conduct operations may be different than
expected, resulting in, among other things, a deterioration in credit
quality, including the resultant effect on the combined company's loan
portfolio and allowance for loan losses; (11) changes in the U.S. and
foreign legal and regulatory framework; and (12) adverse conditions in the
stock market, the public debt market and other capital markets (including
changes in interest rate conditions) and the impact of such conditions on
the combined company's capital markets. Additional factors that could cause
NetBank's and RBMG's results to differ materially from those described in
the forward-looking statements can be found in NetBank's and RBMG's reports
(such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K) filed with the Securities and Exchange
Commission and available at the SEC's Internet site (www.sec.gov). All
subsequent written and oral forward-looking statements concerning the
proposed transaction or other matters attributable to NetBank or RBMG or
any person acting on its behalf are expressly qualified in their entirety
by the cautionary statements above. NetBank and RBMG do not undertake any
obligation to update any forward-looking statement to reflect circumstances
or events that occur after the date the forward-looking statements are
made.
The proposed transaction will be submitted to NetBank's and RBMG's
shareholders for their consideration, and NetBank and RBMG will file a
registration statement, of which a joint proxy statement/prospectus will
form a part and other relevant documents concerning the proposed
transaction with the SEC. Shareholders are urged to read the registration
statement and the joint proxy statement/prospectus regarding the proposed
transaction when it becomes available and any other relevant documents
filed with the SEC, as well as any amendments or supplements to those
documents, because they will contain important information. You will be
able to obtain a free copy of the joint proxy statement/prospectus, as well
as other filings containing information about NetBank and RBMG, at the
SEC's Internet site (www.sec.gov). Copies of the joint proxy
statement/prospectus and the SEC filings that will be incorporated by
reference in the joint proxy statement/prospectus can also be obtained,
without charge, by directing a request to NetBank, Inc., Investor
Relations, Royal Centre Three, Suite 100, 11475 Great Oaks Parkway,
Alpharetta, GA 30022, 770-343-6006, or to Resource Bancshares Mortgage
Group, Inc., Investor Relations, 7909 Parklane Road, Columbia, SC 29223,
803-741-3000.
NetBank and RBMG, and their respective directors and executive officers,
may be deemed to be participants in the solicitation of proxies from the
shareholders of NetBank and RBMG in connection with the merger. Information
about the directors and executive officers of NetBank and their ownership
of NetBank common stock is set forth in the proxy statement, dated March
26, 2001, for NetBank's 2001 annual meeting of shareholders, as filed with
the SEC on a Schedule 14A. Information about the directors and executive
officers of RBMG and their ownership of RBMG common stock is set forth in
the proxy statement, dated April 6, 2001, for RBMG's 2001 annual meeting of
shareholders, as filed with the SEC on a Schedule 14A. Additional
information regarding the interests of those participants may be obtained
by reading the joint proxy statement/prospectus regarding the proposed
transaction when it becomes available.