EXHIBIT 99(ii)
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May 31, 2001
R. Steve Aaron
President and CEO
Catawba Valley Bank
Catawba Valley Bancshares, Inc.
Post Office Box 2328
Hickory, North Carolina 28603-2328
W. Alex Hall
President and CEO
First Gaston Bank of North Carolina
Post Office Box 1478
Gastonia, North Carolina 28053-1478
This Letter of Intent, when countersigned by each of the Presidents named above,
will confirm our tentative agreement as set forth below. This Letter of Intent
supersedes all previous written and oral proposals made by either of us to each
other.
Structure of the proposed transaction
Catawba Valley Bancshares, Inc. ("CVB"), the parent company of Catawba Valley
Bank ("Catawba"), will be the resulting bank holding company from the proposed
transaction. In the transaction, the shareholders of CVB will approve a name
change to a name more generically recognized and mutually agreed to by the
undersigned. First Gaston Bank of North Carolina ("First Gaston") will, together
with Catawba, become wholly-owned subsidiaries of CVB.
To effect the reorganization as described above, the shareholders of First
Gaston will exchange their shares of common stock for shares of common stock of
CVB. Shareholders of CVB will retain their issued and outstanding shares. The
exchange ratio of the shares of First Gaston for shares of the common stock of
CVB will be .8934 shares of CVB common stock for each share of First Gaston
common stock.
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Directors
The Board of Directors of CVB will consist of four (4) representatives from each
of CVB and First Gaston which will include Messrs. Aaron and Hall. The existing
Boards of Directors of CVB and First Gaston will remain unchanged. The names of
Catawba and First Gaston will remain unchanged.
Officers
The officers of CVB will consist of the following:
President Steve Aaron
Executive Vice President Alex Hall
Chief Financial Officer Susan Mikels
Corporate Secretary G. Marvin Lowder
Assistant Secretary One or more to be
appointed in Gastonia and
Hickory, NC
Messrs. Aaron and Hall will remain as President respectively, of Catawba and
First Gaston. All other officer positions within each of the subsidiary banks
will be determined by the respective boards of directors of each bank.
Definitive Agreement
We mutually agree to proceed in good faith toward negotiation and execution of a
definitive agreement (the "Agreement") which shall provide for the
reorganization as described above and contain representations, covenants and
conditions as are typical for transactions of this type. Such Agreement must be
finalized and executed by the parties hereto by the close of business on June
29, 2001 or the proposal as set forth herein shall expire. Conditions to the
closing of the reoganization, to be more fully set forth in the Agreement, will
include, without limitation, the following:
1. Requisite approval of the reorganization by the Boards of Directors
and shareholders of each of CVB, Catawba and First Gaston;
2. Approval of such federal, state and other regulatory agencies and
authorities as necessary or advisable to effect the reorganization;
3. Receipt of an opinion of a tax advisor mutually acceptable to the
parties hereto, in form and substance that is satisfactory to each of
the parties hereto, that the
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reorganization constitutes a tax free reorganization pursuant to the
appropriate provisions of the Internal Revenue Code;
4. The accuracy of various representations and warranties and the
performance of covenants of each of the parties hereto as set forth in
the Agreement;
5. The receipt by each of the parties hereto of an opinion from its
financial advisor that the reorganization is fair, from a financial
point of view, to its shareholders;
6. The effectiveness of a registration statement filed with the
Securities and Exchange Commission for the shares of CVB to be
exchanged for the shares of common stock of First Gaston; and
7. The exercise of dissenters rights pursuant to Article 13 of Chapter 55
of the North Carolina General Statutes by the holders of no more than
10% of the shares of common stock of either CVB or First Gaston.
DUE DILIGENCE
This Letter of Intent is, and the Agreement will be, subject to a satisfactory
due diligence by the parties hereto of their respective books, records, business
and affairs of the other party hereto. To that end, both parties shall provide
to the other and their employees, accountants, counsel or other representatives,
access to all of their books, records, files and other information (whether
maintained electronically or otherwise), to all of their business properties and
facilities, as well as to all of their employees, accountants, counsel and
consultants as is necessary and appropriate for proper due diligence
investigation. Both of the parties hereto mutually agree to maintain the
confidentiality of information received from the other in such due diligence
investigation and shall not use any such information except in furtherance of
the proposed reorganization. If either of the parties hereto notifies the other
party in writing that it does not wish to continue with discussions leading to
the reorganization, the other party shall promptly return or destroy all
documents, copies and work papers containing confidential information received
from the other party.
NO SOLICITATION
Until the earlier of (i) the execution of the Agreement; (ii) written notice
from the other that it does not intend to continue discussions outlined herein;
or (iii) June 29, 2001, the parties hereto shall deal exclusively with each
other in connection with any merger or sale and neither party hereto nor any of
their officers, employees, agents or representatives will, directly or
indirectly, without the prior written consent of each of the other, solicit,
encourage or initiate any offer or proposal from, or engage in any discussion or
negotiation with, or provide any information to, any party or entity other than
the other party hereto and their representatives, regarding the sale or merger
of their institution. If any party hereto receives any unsolicited proposal
with respect to the foregoing, he will immediately communicate to the other
party hereto the terms of such proposal.
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PUBLIC ANNOUNCEMENT
Each of the parties hereto agrees that it will not issue any press release or
otherwise disclose the fact that negotiations are taking place between the
parties hereto without approval of the other party hereto unless, in the good
faith opinion of securities counsel for the disclosing party, such disclosure is
required by law.
Except for the confidentiality provisions stated above, the nonsolicitation
provisions stated above, and the provisions relating to public announcements,
this Letter of Intent represents only our current good faith intention to
negotiate and enter into the Agreement pursuant to the terms discussed herein
and is not intended to be a binding agreement between either of the parties
hereto.
CATAWBA VALLEY BANCSHARES, INC.
By: /s/ R. Steve Aaron
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R. Steve Aaron, President and CEO
CATAWBA VALLEY BANK
By: /s/ R. Steve Aaron
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R. Steve Aaron, President and CEO
FIRST GASTON BANK OF NORTH CAROLINA
By: /s/ W. Alex Hall
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W. Alex Hall, President and CEO
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