EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ROCK MERGER SUBSIDIARY, INC.
Pursuant to (S)55-2-02 of the General Statutes of North Carolina, the
undersigned person does hereby submit these Articles of Incorporation for the
purpose of forming a business corporation.
1. The name of the corporation is Rock Merger Subsidiary, Inc.
2. The number of shares the corporation is authorized to issue is 1,000 shares
of common stock. These shares shall be all of one class, designated as
common stock.
3. The street address and county of the initial registered office of the
corporation is 225 Hillsborough Street, Raleigh, North Carolina 27603, Wake
County. The name of the initial registered agent at that address is CT
Corporation System.
4. The name and address of the incorporator is Kevin R. West, c/o Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004-2498.
5. To the fullest extent permitted by the North Carolina Business Corporation
Act as it now exists or may hereafter be amended, no person who is serving
or who has served as a director of the corporation shall be personally
liable to the corporation or any of its shareholders for monetary damages
for breach of duty as a director. No amendment or repeal of this article,
nor the adoption of any provision to these Articles of Incorporation
inconsistent with this article, shall eliminate or reduce the protection
granted herein with respect to any matter that occurred prior to such
amendment, repeal or adoption.
This the 7th day of February, 2001
/s/ Kevin R. West
-----------------------------------
Kevin R. West
Incorporator
ARTICLES OF AMENDMENT
OF
ROCK MERGER SUBSIDIARY, INC.
Pursuant to (S)55-10-06 of the General Statutes of North Carolina, Rock
Merger Subsidiary, Inc. (the "Corporation") does hereby submit these Articles of
Amendment for the purpose of amending its Articles of Incorporation, dated
February 7, 2001, to increase the authorized capital of the Corporation.
1. The name of the corporation is Rock Merger Subsidiary, Inc.
2. The text of the amendment is as follows:
Article 2 of the Articles of Incorporation of the Corporation is
hereby amended to read as follows:
The number of shares the corporation is authorized to issue is
2,500,000,000 shares of common stock. These shares shall be all of
one class, designated as common stock.
3. The foregoing amendment was duly approved by the sole shareholder
of the Corporation on May 31, 2001, and such shareholder approval
was obtained as required by Chapter 55 of the North Carolina
General Statutes.
4. These Articles of Amendment will be effective upon filing.
This, the 31st day of May, 2001.
ROCK MERGER SUBSIDIARY, INC.
By: /s/ Antonio Fratianni
--------------------------
Name: Antonio Fratianni
Title: Secretary
State of North Carolina
Department of the Secretary of State
ARTICLES OF MERGER
BUSINESS CORPORATION
Pursuant to (S)55-11-05 of the General Statutes of North Carolina, the
undersigned corporation does hereby submit the following Articles of Merger as
the surviving corporation in a merger between two domestic business
corporations.
1. The name of the surviving corporation is Centura Banks, Inc., a corporation
organized under the laws of North Carolina; the name of the merged
corporation is Rock Merger Subsidiary, Inc., a corporation organized under
the law of North Carolina, a direct wholly-owned subsidiary of Royal Bank
of Canada.
2. Attached is a copy of the Plan of Merger that was duly approved in the
manner prescribed by law by each of the corporations participating in the
merger.
3. With respect to the surviving corporation (check either a or b, as
applicable):
a. Shareholder's approval was not required for the merger.
-----
b. X Shareholder approval was required for the merger, and the plan of
----- merger was approved by the shareholders as required by Chapter 55
of the North Carolina General Statutes.
4. With respect to the merged corporation (check either a or b, as
applicable):
a. Shareholder's approval was not required for the merger.
-----
b. X Shareholder approval was required for the merger, and the plan of
----- merger was approved by the shareholders as required by Chapter 55
of the North Carolina General Statutes.
5. These articles will be effective at 11:59 p.m. on June 5, 2001.
This is the 1st day of June, 2001
CENTURA BANKS, INC.
-----------------------------------------
Name of Corporation
/s/ Frank H. Hirsch, Jr.
-----------------------------------------
Signature
General Counsel/Corporate Secretary
-----------------------------------------
Type or Print Name and Title
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 26, 2001
BETWEEN
CENTURA BANKS, INC.
AND
ROYAL BANK OF CANADA
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- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
RECITALS.......................................................... A-3
ARTICLE I
CERTAIN DEFINITIONS; INTERPRETATION
1.01 Certain Definitions......................................... A-3
1.02 Interpretation.............................................. A-7
ARTICLE II
THE MERGER
2.01 The Merger.................................................. A-7
2.02 Reservation of Right to Revise Structure.................... A-8
2.03 Effective Time.............................................. A-8
ARTICLE III
CONSIDERATION
3.01 Effect on Capital Stock..................................... A-8
3.02 Rights as Shareholders; Stock Transfers..................... A-9
3.03 Exchange Procedures......................................... A-9
3.04 Anti-Dilution Provisions.................................... A-9
3.05 Company Stock Options....................................... A-10
ARTICLE IV
ACTIONS PENDING THE MERGER
4.01 Forbearances of the Company................................. A-10
4.02 Forbearances of the Acquiror................................ A-12
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules........................................ A-13
5.02 Standard.................................................... A-13
5.03 Representations and Warranties of the Company............... A-13
5.04 Representations and Warranties of the Acquiror.............. A-22
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts..................................... A-24
6.02 Shareholder Approvals....................................... A-25
6.03 Registration Statement...................................... A-25
6.04 Press Releases.............................................. A-26
6.05 Access; Information......................................... A-26
6.06 Acquisition Proposals....................................... A-26
6.07 Affiliate Agreements........................................ A-27
6.08 Takeover Laws............................................... A-27
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6.09 No Rights Triggered......................................... A-27
6.10 NYSE Listing................................................ A-27
6.11 Regulatory Applications..................................... A-27
6.12 Indemnification............................................. A-28
6.13 Accountants' Letters........................................ A-29
6.14 Notification of Certain Matters............................. A-29
6.15 Employee Benefits........................................... A-29
6.16 Certain Adjustments......................................... A-30
6.17 Formation of Newco.......................................... A-30
6.18 Certain Tax Matters......................................... A-30
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-30
7.02 Conditions to Obligation of the Company..................... A-31
7.03 Conditions to Obligation of the Acquiror.................... A-32
ARTICLE VIII
TERMINATION
8.01 Termination................................................. A-32
8.02 Effect of Termination and Abandonment....................... A-33
8.03 Termination Fee............................................. A-34
ARTICLE IX
MISCELLANEOUS
9.01 Survival.................................................... A-34
9.02 Waiver; Amendment........................................... A-34
9.03 Counterparts................................................ A-34
9.04 Governing Law............................................... A-34
9.05 Expenses.................................................... A-34
9.06 Notices..................................................... A-35
9.07 Entire Understanding; No Third-Party Beneficiaries.......... A-35
9.08 Assignment.................................................. A-35
AGREEMENT AND PLAN OF MERGER, dated as of January 26, 2001 (this
"Agreement"), between Centura Banks, Inc. (the "Company") and Royal Bank of
Canada (the "Acquiror").
RECITALS
A. The Company. The Company is a North Carolina corporation, having its
principal place of business in Rocky Mount, North Carolina.
B. The Acquiror. The Acquiror is a Canadian chartered bank, having its
principal places of business in Toronto, Ontario and Montreal, Quebec, Canada.
C. The Merger. On the terms and subject to the conditions contained in
this Agreement, the parties to this Agreement intend to effect the merger of a
direct wholly owned subsidiary of the Acquiror to be organized under North
Carolina law ("Newco") with and into the Company, with the Company as the
surviving corporation in the merger.
D. Stock Option Agreement. As a condition of and inducement to the
Acquiror's willingness to enter into this Agreement, following the execution and
delivery of this Agreement, the Company is entering into a Stock Option
Agreement in substantially the form of Exhibit A (the "Stock Option Agreement"),
pursuant to which the Company is granting to the Acquiror an option to purchase,
under certain circumstances, shares of Company Common Stock.
E. Employment Agreements. Certain employees and directors of the Company
identified on Exhibit B have agreed to execute agreements related to certain
employment and compensation matters in substantially the form of Exhibit C.
F. Intention of the Parties. It is the intention of the parties that the
business combination contemplated hereby be treated as a "reorganization" under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
G. Board Action. The respective Boards of Directors of each of the Company
and the Acquiror have each adopted resolutions approving this Agreement, the
Merger (as defined herein), the Stock Option Agreement, and, in the case of the
Board of Directors of the Company, declaring the advisability of this Agreement
in accordance with the North Carolina Business Corporation Act, as amended (the
"NCBCA").
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS; INTERPRETATION
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings assigned below:
"Acquiror" has the meaning assigned in the preamble to this Agreement.
"Acquiror Common Stock" means the common shares, without nominal or
par value, of the Acquiror.
"Acquiror First Preferred Stock" means the first preferred shares,
without nominal or par value, of the Acquiror.
"Acquiror Ratio" has the meaning assigned in Section 8.01(f)(ii).
"Acquiror Second Preferred Stock" means the second preferred shares,
without nominal or par value, of the Acquiror.
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"Acquiror Stock" means, collectively, the Acquiror Common Stock, the
Acquiror First Preferred Stock and the Acquiror Second Preferred Stock.
"Acquisition Proposal" has the meaning assigned in Section 6.06.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Average Closing Price" means the average of the daily last sale
prices per share of Acquiror Common Stock as reported on the Toronto Stock
Exchange for the ten consecutive full trading days (on which such shares
are traded) ending at the close of trading on the Determination Date.
"Closing Date" has the meaning assigned in Section 2.03.
"Code" has the meaning assigned in Recital F.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Affiliate" has the meaning assigned in Section 6.07.
"Company Articles" means the Amended and Restated Articles of
Incorporation of the Company.
"Company Board" means the Board of Directors of the Company.
"Company By-Laws" means the Amended and Restated By-laws of the
Company.
"Company Common Stock" means the common stock, without par value, of
the Company.
"Company IP Rights" has the meaning assigned in Section 5.03(w).
"Company Meeting" has the meaning assigned in Section 6.02.
"Company Preferred Stock" means the preferred stock, without par
value, of the Company.
"Company Reports" has the meaning assigned in Section 5.03(j).
"Company Stock" means, collectively, the Company Common Stock and the
Company Preferred Stock.
"Company Stock Option" means each option to purchase shares of Company
Common Stock outstanding under the Company Stock Plans.
"Company Stock Plans" has the meaning assigned in Section 5.03(b).
"Company's SEC Documents" has the meaning assigned in Section 5.03(g).
"Confidentiality Agreement" means the confidentiality agreement
between the Company and the Acquiror, dated January 12, 2001.
"Compensation Plans" has, with respect to any person, the meaning
assigned in Section 5.03(n).
"Consideration" has the meaning assigned in Section 3.01(a).
"Consideration Per Share" has the meaning assigned in Section 3.05.
"Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, lease or other
commitment to which such person or any of its Subsidiaries is a party or by
which any of them is bound or to which any of their properties is subject.
"Costs" has the meaning assigned in Section 6.12(a).
"Determination Date" means the date of receipt of all approvals of the
Minister of Finance, Canada, necessary to consummate the Merger.
"Disclosure Schedule" has the meaning assigned in Section 5.01.
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"Effective Time" means the date and time at which the Merger becomes
effective.
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, common law or agency
requirement relating to: (1) the protection or restoration of the
environment, health or safety (in each case as relating to the environment)
or natural resources; or (2) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.03(n).
"ERISA Affiliate Plan" has the meaning assigned in Section 5.03(n).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning assigned in Section 3.03(a).
"Exchange Ratio" has the meaning assigned in Section 3.01(a).
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hazardous Substance" means any substance in any concentration that
is: (1) listed, classified or regulated pursuant to any Environmental Law;
(2) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (3) any other substance which may be the subject of
regulatory action by any Governmental Authority pursuant to any
Environmental Law.
"Indemnified Party" has the meaning assigned in Section 6.12(a).
"Indemnified Person" has the meaning assigned in Section 5.03(n).
"Index Price" means the TSE Banks & Trusts Index.
"Index Ratio" has the meaning assigned in Section 8.01(f)(ii).
"Insurance Amount" has the meaning assigned in Section 6.12(b).
"Insurance Policies" has the meaning assigned in Section 5.03(u).
"Intellectual Property Rights" shall mean all worldwide industrial and
intellectual property rights, including, without limitation, patents,
patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyright, copyright
applications, franchises, licenses, inventories, know-how, trade secrets,
customer lists, proprietary processes and formulae, all source and object
code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools, software, databases and all documentation
and media constituting, describing or relating to the above, including,
without limitation, manuals, memoranda and records.
"IRS" means the United States Internal Revenue Service.
"knowledge of the Company" and "Company knowledge" mean the knowledge
of Cecil Sewell, Steven Goldstein, Frank Hirsch, Kel Landis, Scott Custer,
Tom Rogers, Ben Anderson and Buddy Jordon.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Loans" means loans, leases, extensions of credit, commitments to
extend credit and other assets.
"Material Adverse Effect" means, with respect to the Acquiror or the
Company, any effect that (1) is materially adverse to the financial
position, results of operations, shareholder's equity or
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business of the Acquiror and its Subsidiaries taken as a whole, or the
Company and its Subsidiaries taken as a whole, respectively, other than (A)
the effects of changes in economic conditions generally (including general
levels of interest rates), except to the extent that the effect of such
change disproportionately affects the Acquiror or the Company,
respectively, as compared to depositary institutions in general in Canada
or the United States, respectively, (B) payments of expenses associated
with the Merger as contemplated by this Agreement, (C) changes in generally
accepted accounting principles applicable to bank holding companies
generally in Canada or the United States, respectively, and (D) any changes
resulting primarily from changes in banking laws or regulations (or
interpretations thereof) of general applicability in Canada or the United
States, respectively; or (2) would materially impair the ability of either
the Acquiror or the Company to perform its obligations under this Agreement
or otherwise materially threaten or materially impede the consummation of
the Merger and the other transactions contemplated by this Agreement.
"Merger" has the meaning assigned in Section 2.01(a).
"Multiemployer Plan" means, with respect to any person, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
"NCBCA" has the meaning assigned in Recital G.
"NCCOB" means the North Carolina Commissioner of Banks.
"New Certificates" has the meaning assigned in Section 3.03.
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning assigned in Section 3.03.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has, with respect to any person, the meaning assigned
in Section 5.03(n).
"person" means any individual, bank, savings bank, corporation,
partnership, association, joint-stock company, business trust or
unincorporated organization.
"Previously Disclosed" means, with respect to the Company or the
Acquiror, information set forth in such party's Disclosure Schedule in a
paragraph or section identified as corresponding to the provision of this
Agreement in respect of which such information has been so set forth or has
otherwise been set forth in a manner reasonably indicating to a reader the
provisions to which such information may be relevant.
"Proxy Statement" has the meaning assigned in Section 6.03.
"Registration Statement" has the meaning assigned in Section 6.03.
"representatives" means, with respect to any person, such person's
directors, officers, employees, legal or investment or financial advisors
or any representatives of such legal or financial advisors.
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Significant Subsidiary" has the meaning assigned to it in Rule 1-02
of Regulation S-X of the SEC.
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"Starting Date" means January 26, 2001.
"Starting Price" means C$51.80.
"Stock Option Agreement" has the meaning assigned in the preamble to
this Agreement.
"Subsidiary" includes both a "subsidiary" as defined in Rule 1-02 of
Regulation S-X of the SEC and a "subsidiary" as defined in Section 2(d) of
the Bank Holding Company Act of 1956.
"Superior Proposal" has the meaning assigned in Section 6.06.
"Surviving Corporation" has the meaning assigned in Section 2.01.
"Takeover Laws" has the meaning assigned in Section 5.03(e).
"Taxes" means all taxes, charges, fees, levies or other assessments,
however denominated, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, custom duties, fees, or charges of any
kind whatsoever, together with any interest and any penalties or additions
to tax with respect thereto and with respect to any information reporting
requirements imposed by the Code or any similar provision of foreign, state
or local law and any interest in respect of such additions or penalties
imposed by any taxing authority whether arising before, on or after the
Closing Date.
"Tax Returns" means all reports and returns required to be filed on or
before the Closing Date with respect to the Taxes of the Company or any of
its Subsidiaries including, without limitation, consolidated federal income
tax returns and any documentation required to be filed with any taxing
authority or to be retained by the Company or any of its Subsidiaries in
respect of information reporting requirements imposed by the Code or any
similar foreign, state or local law.
1.02 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No rule of construction against the
draftsperson shall be applied in connection with the interpretation or
enforcement of this Agreement. Whenever this Agreement shall require a party to
take an action, such requirement shall be deemed to constitute an undertaking by
such party to cause its Subsidiaries, and to use its reasonable best efforts to
cause its other affiliates, to take appropriate action in connection therewith.
References to "knowledge" of a person means knowledge after reasonable diligence
in the circumstances. References herein to "transaction contemplated by this
Agreement" shall be deemed to include a reference to the transactions
contemplated by the Stock Option Agreement. All references to "dollars" or "$"
mean the lawful currency of the United States, and all references to "Canadian
dollars" or "C$" mean the lawful currency of Canada, unless otherwise indicated.
ARTICLE II
THE MERGER
2.01 The Merger. At the Effective Time, on the terms and subject to the
conditions set forth in this Agreement, the following shall occur:
(a) Structure and Effects of the Merger. Newco shall merge with and
into the Company, and the separate corporate existence of Newco shall
thereupon cease (the "Merger"). The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of
the State of North Carolina, and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and
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franchises shall continue unaffected by the Merger. The Merger shall have
the effects specified in the NCBCA.
(b) Articles of Incorporation. The articles of incorporation of the
Surviving Corporation shall be amended to read in their entirety the same
as the articles of incorporation of Newco as in effect immediately prior to
the Effective Time, until duly amended in accordance with the terms thereof
and the NCBCA, except that the name of the Surviving Corporation shall be
changed to "RBC Centura Banks, Inc.".
(c) By-Laws. The by-laws of the Surviving Corporation shall be
amended to read in their entirety the same as the by-laws of Newco as in
effect immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and the articles of incorporation
referred to in Section 2.01(b).
(d) Directors. Unless otherwise agreed by the Acquiror and the
Company, the directors of the Surviving Corporation shall be comprised of
nine individuals, five of whom shall be designated by the Acquiror and four
of whom shall be designated by the Company (with the reasonable consent of
the Acquiror) prior to the Effective Time, and such directors shall hold
office until such time as their successors shall be duly elected and
qualified.
2.02 Reservation of Right to Revise Structure. At the Acquiror's election,
the Merger may alternatively be structured so that (i) the Company is merged
with and into any direct or indirect wholly owned subsidiary of the Acquiror or
(ii) any other direct or indirect wholly owned subsidiary of the Acquiror is
merged with and into the Company; provided, however, that no such change shall
(a) alter or change the amount or kind of the Consideration or the treatment of
the holders of Company Stock Options, (b) prevent the parties from obtaining the
opinions of Hunton & Williams and Sullivan & Cromwell referred to in Sections
7.02(c) and 7.03(c), respectively, or (c) materially impede or delay
consummation of the transactions contemplated by this Agreement. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
2.03 Effective Time. The Merger shall become effective upon the filing, in
the office of the Secretary of State of the State of North Carolina, of articles
of merger in accordance with Section 55-11-05 of the NCBCA, or at such later
date and time as may be set forth in such articles. Subject to the terms of this
Agreement, the parties shall cause the Merger to become effective (1) on the
date that is the third business day to occur after the last of the conditions
set forth in Article VII (other than conditions relating solely to the delivery
of documents dated the Closing Date) shall have been satisfied or waived in
accordance with the terms of this Agreement (or, at the election of the
Acquiror, on the last business day of the month in which such day occurs), or
(2) on such date as the parties may agree in writing (the "Closing Date").
ARTICLE III
CONSIDERATION
3.01 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock outstanding immediately prior to the Effective Time shall be
converted into the right to receive consideration (the "Consideration")
comprising 1.684 (the "Exchange Ratio") fully paid and nonassessable shares
of Acquiror Common Stock. At the Effective Time, the shares of Company
Common Stock shall no longer be outstanding and shall automatically be
cancelled and cease to exist, and from and after the Effective Time,
certificates representing Company Common Stock immediately prior to the
Effective Time shall be deemed for all purposes to represent the number of
shares of Acquiror Common Stock into which they were converted as part of
the Consideration pursuant to this Section 3.01(a).
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(b) Newco Common Stock. Each share of Newco common stock issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of common stock of the Surviving Corporation.
3.02 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of Company Common Stock shall cease to be, and shall have no rights as,
shareholders of the Company, other than to receive any dividend or other
distribution with respect to such Company Common Stock with a record date
occurring prior to the Effective Time and the conversion rights provided under
this Article III. After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of shares of Company Common
Stock.
3.03 Exchange Procedures. (a) Promptly upon occurrence of the Effective
Time, the Acquiror shall deposit, or cause to be deposited, with the Acquiror's
transfer agent or a U.S. depository or trust institution of recognized standing
selected by the Acquiror and reasonably satisfactory to the Company (in such
capacity, the "Exchange Agent"), for the benefit of the holders of certificates
formerly representing shares of Company Common Stock ("Old Certificates") to be
exchanged in accordance with this Article III, certificates representing the
shares of Acquiror Common Stock ("New Certificates").
(b) Promptly after the Effective Time, the Acquiror shall send or
cause to be sent to each former holder of record of shares of Company
Common Stock immediately prior to the Effective Time transmittal materials
for use in exchanging such shareholder's Old Certificates for New
Certificates. The Acquiror shall cause the New Certificates and/or any
check in respect of dividends or distributions which such person shall be
entitled to receive to be delivered to such shareholder upon delivery to
the Exchange Agent of Old Certificates representing such shares of Company
Common Stock (or indemnity reasonably satisfactory to the Acquiror and the
Exchange Agent, if any of such certificates are lost, stolen or destroyed)
owned by such shareholder. No interest will be paid on the cash such person
shall be entitled to receive pursuant to this Article III upon such
delivery.
(c) Neither the Exchange Agent nor any party hereto shall be liable to
any former holder of Company Common Stock for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(d) From and after the 30th day following the Effective Time, no
dividends or other distributions with respect to Acquiror Common Stock with
a record date occurring after the Effective Time shall be paid in respect
of any unsurrendered Old Certificate representing shares of Acquiror Common
Stock converted in the Merger into the right to receive shares of Acquiror
Common Stock. Upon surrender of Old Certificates (or indemnity reasonably
satisfactory to the Acquiror and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) in accordance with this Section
3.03, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Acquiror Common
Stock such holder had the right to receive upon surrender of Old
Certificates (or delivery of such indemnity).
(e) Notwithstanding any other provision hereof, no fractional shares
of Acquiror Common Stock and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, the
Acquiror shall pay to each holder of Company Common Stock who would
otherwise be entitled to a fractional share of Acquiror Common Stock (after
taking into account all Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction
by the average of the last reported sale prices of Acquiror Common Stock,
as reported by the Toronto Stock Exchange, for the ten Toronto Stock
Exchange trading days immediately preceding the Effective Time (with the
last reported sale price for each such trading day converted to U.S.
dollars at the Bank of Canada Closing Rate in Toronto on such trading day).
3.04 Anti-Dilution Provisions. If the Acquiror changes (or establishes a
record date for changing) the number or kind of shares of Acquiror Common Stock
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend, recapitalization, reclassification, reorganization or similar
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transaction with respect to the outstanding Acquiror Common Stock and the record
date therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.05 Company Stock Options. At the Effective Time, each Company Stock
Option, whether vested or unvested, exercisable or unexercisable, without any
action on the part of the holder shall be converted into the right to receive
payment of an amount in cash equal to the product of (1) the excess of the
Consideration Per Share over the exercise price per share subject to such
Company Stock Option and (2) the number of Shares subject to such Company Stock
Option payable to the holder of such Company Stock Option at any time during the
period commencing on the date hereof and ending immediately prior to the
Effective Time; provided, that the Company shall be entitled to withhold from
such cash payment any amounts required to be withheld by applicable law. For
purposes of clarity, if the exercise price per share subject to a Company Stock
Option exceeds the Consideration Per Share (i.e., an "underwater" stock option)
then, the holder of such option shall not be entitled to any payment with
respect thereto. Each Company Stock Option to which this paragraph applies will
be cancelled and shall cease to exist by virtue of such payment. For the
purposes of this Section 3.05, "Consideration Per Share" means the product of
(x) the average of the last reported sale prices of Acquiror Common Stock, as
reported by the Toronto Stock Exchange, for the ten Toronto Stock Exchange
trading days immediately preceding the Effective Time (with the last reported
sale price for each such trading day converted to U.S. dollars at the Bank of
Canada Closing Rate in Toronto on such trading day) and (y) the Exchange Ratio.
Prior to the Effective Time the Company shall take all necessary actions,
including obtaining employee consents and resolutions of the Company Board or of
a committee established under a Company Stock Plan, if applicable, to effect the
foregoing.
ARTICLE IV
ACTIONS PENDING THE MERGER
4.01 Forbearances of the Company. Until the Effective Time (or the earlier
of the termination of this Agreement), except as expressly provided in this
Agreement or the Disclosure Schedule, without the prior written consent of the
Acquiror, the Company will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of the Company and its
Subsidiaries other than in the ordinary and usual course or, to the extent
consistent therewith, fail to use reasonable efforts to preserve intact
their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates; or, subject to the restriction in Section 4.01(o)(3),
engage in any material new activities or lines of business or make any
material changes to their existing activities or lines of business.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof or pursuant to the Stock Option
Agreement, (1) issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of Company Common Stock or
any Rights, (2) permit any additional shares of Company Common Stock to
become subject to new grants of employee or director stock options, or
stock-based employee rights or arrangements, (3) repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of Company Common
Stock, (4) effect any recapitalization, reclassification, stock split or
like change in capitalization, or (5) enter into, or take any action to
cause any holders of Company Common Stock to enter into, any agreement,
understanding or commitment relating to the right of holders of Company
Common Stock to vote any shares of Company Common Stock, or cooperate in
any formation of any voting trust relating to such shares.
(c) Dividends, Etc. Make, declare, pay or set aside for payment any
dividend, other than (1) regular quarterly cash dividends on Company Common
Stock in an amount not to exceed $0.34 per share (or $0.36 per share for
dividends payable with respect to periods after the first quarter of 2001);
provided that the Company shall coordinate with the Acquiror regarding the
declaration and payment of any dividends in respect of the Company Common
Stock and the record dates and the
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payment dates relating thereto, it being the intention of the Company and
the Acquiror that holders of Company Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of Company Common Stock and/or any shares of
Acquiror Common Stock that any such holder receives in exchange therefor
pursuant to the Merger; and (2) dividends from wholly owned Subsidiaries to
the Company or to another wholly owned Subsidiary of the Company, as
applicable, on or in respect of, or declare or make any distribution on any
shares of its capital stock or split, combine, redeem, reclassify, purchase
or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Contracts; Etc. Enter into, amend,
modify, renew or terminate any employment, consulting, severance or similar
Contracts (including the agreements entered into pursuant to Recital E
hereof) with any directors, officers, employees of, or independent
contractors with respect to, the Company or its Subsidiaries, or grant any
salary, wage or other increase or increase any employee benefit (including
incentive or bonus payments), except (1) for changes that are required by
applicable law, (2) to satisfy Previously Disclosed Contracts existing on
the date hereof (as such Contracts are modified, as applicable, pursuant to
the agreements entered into pursuant to Recital E hereof), (3) for
merit-based or annual salary increases in the ordinary course of business
and in accordance with past practice or (4) for employment arrangements
for, or grants of awards to, newly hired non-executive employees in the
ordinary and usual course of business consistent with past practice
provided that total annual guaranteed compensation for any such newly hired
non-executive employee shall not exceed U.S. $100,000.
(e) Benefit Plans. Enter into, establish, adopt, amend, modify or
terminate any pension, retirement, stock option, stock purchase, savings,
profit sharing, employee stock ownership, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare Contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any current or former
directors, officers, employees, former employees of, or independent
contractors with respect to, the Company or its Subsidiaries (or any
dependent or beneficiary of any of the foregoing persons), including taking
any action that accelerates the vesting or exercisability of or the payment
or distribution with respect to, stock options, restricted stock or other
compensation or benefits payable thereunder, except, in each such case, (1)
as may be required by applicable law or (2) to satisfy Previously Disclosed
Contracts existing on the date hereof.
(f) Dispositions. Except (i) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (ii) for sales of debt securities
or similar investments in the ordinary and usual course of business
consistent with past practice, sell, transfer, mortgage, lease, encumber or
otherwise dispose of or permit the creation of any Lien (except for a Lien
for Taxes not yet due and payable) in respect of or discontinue any
material portion of its assets, business or properties.
(g) Acquisitions. Except (1) pursuant to Previously Disclosed
Contracts existing on the date hereof, or (2) by way of foreclosures in
satisfaction of debts previously contracted in good faith, in each case in
the ordinary and usual course of business consistent with past practice,
acquire any material amount, taken individually and in the aggregate, of
assets, properties or deposits of another person in any one transaction or
a series of related transactions.
(h) Governing Documents. Amend the Company Articles, the Company
By-laws or the articles of incorporation or by-laws (or similar governing
documents) of any of the Company's Subsidiaries.
(i) Accounting Methods. Implement or adopt any material change in the
accounting principles, practices or methods used by the Company and its
Subsidiaries, other than as may be required by generally accepted
accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material Contract or amend
or modify in any material respect any of its existing material Contracts.
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(k) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually and in the aggregate for all such settlements, not more than
U.S. $250,000 and which would not reasonably be expected to establish an
adverse precedent or reasonable basis for subsequent settlements or require
material changes in business practices.
(l) Risk Management. Except as required by applicable law or
regulation: (1) implement or adopt any material change in its credit risk
and interest rate risk management and hedging policies, procedures or
practices; (2) fail to follow its existing policies or practices with
respect to managing its exposure to credit and interest rate risk; or (3)
fail to use commercially reasonable means to avoid any material increase in
its aggregate exposure to interest rate risk.
(m) Indebtedness. Other than in the ordinary course of business
(including by way of creation of deposit liabilities, entry into repurchase
agreements, purchases or sales of federal funds, Federal Home Loan Bank
advances, and sales of certificates of deposit) consistent with past
practice, (1) incur any indebtedness for borrowed money, (2) assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other person or (3) cancel, release, assign or
modify any material amount of indebtedness of any other person.
(n) Loans. (1) Make any loan or advance other than in the ordinary
course of business consistent with lending policies as in effect on the
date hereof or (2) make any commercial real estate loan or advance in
excess of $10,000,000, or any other loan or advance in excess of
$20,000,000; provided that the Company or any of its Subsidiaries may make
any such loan or advance in the event (A) the Company or any of its
Subsidiaries has delivered to the Acquiror or its designated representative
a notice of its intention to make such loan or advance and such additional
information as the Acquiror or its designated representative may reasonably
require and (B) the Acquiror or its designated representative shall not
have reasonably objected to such loan or advance by giving notice of such
objection within five business days following the actual receipt by the
Acquiror of the applicable notice of intention.
(o) Adverse Actions. (1) Take any action reasonably likely to prevent
or impede the Merger from qualifying as a reorganization within the meaning
of Section 368 of the Code; (2) subject to Section 6.06, take any action
that is intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in
Article VII not being satisfied or (C) a material breach of any provision
of this Agreement; except, in each case, as may be required by applicable
law, or (3) engage in any new line of business or make any acquisition that
would not be permissible for a United States bank holding company (as
defined in the Bank Holding Company Act of 1956, as amended) or would
subject the Acquiror, the Company or any Subsidiary of either to material
regulation by a Governmental Authority that does not presently regulate
such company or to regulation by a Governmental Authority that is
materially different from current regulation.
(p) Tax Elections. Make any material election with respect to Taxes.
(q) Commitments. Agree or commit to do, or enter into any Contract
regarding, anything that would be precluded by clauses (a) through (p)
without first obtaining the Acquiror's consent.
4.02 Forbearances of the Acquiror. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of the Company, the Acquiror will not, and will cause each
of its Subsidiaries not to: (1) take any action reasonably likely to prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (2) take any action that is intended or is
reasonably likely to result in (A) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (B) any of the conditions to the Merger
set forth in
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Article VII not being satisfied or (C) a material breach of any provision of
this Agreement; except, in each case, as may be required by applicable law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, the Company has
delivered to the Acquiror and the Acquiror has delivered to the Company a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (a) in
response to an express disclosure requirement contained in a provision hereof or
(b) as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04, respectively, or to one or more of its covenants contained
in Article IV; provided that the inclusion of an item in a Disclosure Schedule
as an exception to a representation or warranty shall not be deemed an admission
by the disclosing party that such item (or any undisclosed item or information
of comparable or greater significance) represents a material exception or fact,
event or circumstance with respect to the Company or the Acquiror, respectively.
5.02 Standard. No representation or warranty of the Company or the
Acquiror contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect,
and no party hereto shall be deemed to have breached a representation or
warranty, as a consequence of the existence of any fact, event or circumstance
unless such fact, event or circumstance, (a) is not Previously Disclosed and (b)
individually or taken together with all other facts, events or circumstances
that should have been Previously Disclosed with respect to any representation or
warranty contained in Section 5.03 (other than Section 5.03(h)) or 5.04 (other
than Section 5.04(h)), has had or is reasonably likely to have a Material
Adverse Effect with respect to the Company or the Acquiror, respectively.
5.03 Representations and Warranties of the Company. Except as Previously
Disclosed, the Company hereby represents and warrants to the Acquiror as set
forth in its Disclosure Schedules and as follows:
(a) Organization, Standing and Authority. The Company is duly
organized, validly existing and in good standing as a corporation under the
laws of North Carolina, and is duly qualified to do business and is in good
standing in all the jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(b) Company Stock. As of the date hereof, the authorized capital
stock of the Company consists solely of 100,000,000 shares of Company
Common Stock, of which not more than 39,490,122 shares are outstanding as
of January 25, 2001, and 25,000,000 shares of Company Preferred Stock, no
shares of which are outstanding. The outstanding shares of Company Stock
have been duly authorized and are validly issued, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). Except as Previously Disclosed, there
are no shares of Company Stock reserved for issuance, the Company does not
have any Rights issued or outstanding with respect to Company Stock, and
the Company does not have any commitment to authorize, issue or sell any
Company Stock or Rights, except pursuant to this Agreement and the Stock
Option Agreement. The Company has Previously Disclosed a list of each
Compensation Plan under which any shares of capital stock of the Company or
any Rights with respect thereto have been or may be awarded or issued
("Company Stock Plans"). As of January 25, 2001, the Company has
outstanding Company Stock Options representing the right to acquire no more
than 3,066,363 shares of Company Common Stock. Except as described in the
immediately preceding sentence, the Company has no Company Common Stock
authorized for issuance pursuant to any Company Stock Plans. The shares of
Company Common Stock issuable pursuant to the Stock Option Agreement have
been duly authorized for issuance by the Company and, upon any issuance of
such shares in accordance with the terms of the Stock Option Agreement,
such shares will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of any Liens. The Company does not have
outstanding any bonds, debentures, notes or other obligations the holders
of which have the right to vote (or which are
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convertible into or exercisable for securities having the right to vote)
with the shareholders of the Company on any matter.
(c) Subsidiaries. (1)(A) The Company has Previously Disclosed a list
of all its Subsidiaries together with the jurisdiction of organization of
each such Subsidiary, (B) the Company owns, directly or indirectly, all the
outstanding equity securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to the Company or its Subsidiaries), (D) there are no
contracts, commitments, understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to the Company or its
Subsidiaries), (E) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such
securities (other than to the Company or its Subsidiaries), and (F) all the
equity securities of each such Subsidiary held by the Company or its
Subsidiaries are fully paid and nonassessable and are owned by the Company
or its Subsidiaries free and clear of any Liens.
(2) The Company has Previously Disclosed, as of the date hereof, a
list of all equity securities it or one of its Subsidiaries holds
involving, in the aggregate, beneficial ownership or control by the Company
or any such Subsidiary of 5% or more of any class of the issuer's voting
securities or 25% or more of any class of the issuer's securities,
including a description of any such issuer and the percentage of the
issuer's voting and/or non-voting securities and, as of the Effective Time,
no additional persons would need to be included on such a list. The Company
has Previously Disclosed a list, as of the date hereof, of all
partnerships, limited liability companies, joint ventures or similar
entities, in which it owns or controls an equity, partnership or membership
interest, directly or indirectly, and the nature and amount of each such
interest, and as of the Effective Time, no additional persons would need to
be included on such a list.
(3) Each of the Company's Subsidiaries has been duly organized and is
validly existing and in good standing under the laws of the jurisdiction of
its organization, and is duly qualified to do business and in good standing
in all the jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
(d) Corporate Power. The Company and each of its Subsidiaries has the
requisite power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and the Company has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby.
(e) Corporate Authority and Action. (1) The Company has taken all
corporate action necessary in order (A) to authorize the execution and
delivery of, and performance of its obligations under, this Agreement and
the Stock Option Agreement and (B) subject only to receipt of the approval
of the plan of merger contained in this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock, to consummate
the Merger. This Agreement and the Stock Option Agreement each is a valid
and legally binding obligation of the Company, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
(2) The Company has taken all action required to be taken by it in
order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby from, and this Agreement, the Stock Option
Agreement and the transactions contemplated hereby each is exempt from, the
requirements of (A) any applicable "moratorium," "control share," "fair
price," or other antitakeover laws and regulation of any state
(collectively, "Takeover Laws"), including Sections 55-9 and 55-9A of the
NCBCA and (B) Sections 10.2 and 10.3 of the Company Articles.
(3) The Company has received the opinion of Keefe, Bruyette & Woods,
Inc., dated the date of this Agreement, to the effect that, as of the date
of this Agreement, the Consideration to be received
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in the Merger by the shareholders of the Company is fair to the
shareholders of the Company from a financial point of view.
(f) Regulatory Filings; No Defaults. (1) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by the Company or any of
its Subsidiaries in connection with the execution, delivery or performance
by the Company of this Agreement or the Stock Option Agreement, or to
consummate the Merger or the other transactions contemplated hereby, except
for (A) the filing with the SEC of the Proxy Statement in definitive form,
(B) the filing of applications and notices, as applicable, with the Federal
Reserve System and the NCCOB with respect to the Merger, (C) the filing of
a notification, if required, and expiration of the related waiting period
under the HSR Act, (D) the filing of articles of merger with the Secretary
of State of the State of North Carolina pursuant to the NCBCA and (E) the
filings of applications and notices, as applicable, required to be made
pursuant to the Bank Act (Canada). As of the date hereof, the Company is
not aware of any reason why the approvals of all Governmental Authorities
necessary to permit consummation of the transactions contemplated by this
Agreement will not be received without the imposition of a condition or
requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals, and expiration of
the waiting periods, referred to in the preceding paragraph and the making
of required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or Contract of the Company or of any of its Subsidiaries or to
which the Company or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
Company Articles or the Company By-laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or Contract.
(g) SEC Documents; Financial Statements. The Company's Annual Reports
on Form 10-K for the fiscal years ended December 31, 1997, 1998 and 1999,
and all other reports, registration statements, definitive proxy statements
or information statements filed or to be filed by the Company or any of its
Subsidiaries subsequent to December 31, 1999 under the Securities Act, or
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form
filed or to be filed (collectively, the "Company's SEC Documents") with the
SEC, as of the date filed, (A) complied or will comply in all material
respects as to form with the applicable requirements under the Securities
Act or the Exchange Act, as the case may be, and (B) did not (or if amended
or superseded by a filing prior to the date of this Agreement, then did not
as of the date of such filing) and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of the
balance sheets contained in or incorporated by reference into any such SEC
Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of the Company and
its Subsidiaries as of its date, and each of the statements of income and
changes in shareholders' equity and cash flows or equivalent statements in
such SEC Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of operations, changes
in shareholders' equity and changes in cash flows, as the case may be, of
the Company and its Subsidiaries for the periods to which they relate, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as
may be noted therein, subject to normal year-end audit adjustments in the
case of unaudited statements.
(h) Absence of Undisclosed Liabilities and Changes. (1) Except as
disclosed in the Company's SEC Documents filed prior to the date hereof,
none of the Company or its Subsidiaries has any obligation or liability
(contingent or otherwise), that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect with respect to
the Company and, since
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September 30, 2000, on a consolidated basis the Company and its
Subsidiaries have not incurred any liability other than in the ordinary
course of business.
(2) Since September 30, 2000, except for execution of this Agreement
and performance of its obligations hereunder, (A) the Company and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice and (B) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, events and circumstances (described in any paragraph of Section 5.03
or otherwise), has had or is reasonably likely to have a Material Adverse
Effect with respect to the Company.
(i) Litigation. Except as disclosed in the Company's SEC Documents
filed before the date hereof, no litigation, claim or other proceeding
before any court, arbitrator or Governmental Authority is pending against
the Company or any of its Subsidiaries and, to the Company's knowledge, no
such litigation, claim or other proceeding has been threatened.
(j) Compliance with Laws. (1) The Company and each of its
Subsidiaries:
(A) conducts its business in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
applicable fair lending laws and other laws relating to discriminatory
business practices;
(B) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities required in order to permit them to own or
lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the Company's
knowledge, no suspension or cancellation of any of them is threatened;
(C) has received, since December 31, 1998, no notification or
communication from any Governmental Authority (i) asserting that the
Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations, or ordinances that such Governmental Authority
enforces or (ii) threatening to revoke any license, franchise, permit,
or governmental authorization (nor, to the Company's knowledge, do
grounds for any of the foregoing exist), or (iii) restricting or
disqualifying their activities (except for restrictions generally
imposed by rule, regulation or administrative policy on banking
organizations generally);
(D) is not aware of any pending or threatened investigation, review
or disciplinary proceedings by any Governmental Authority against the
Company, any of its Subsidiaries or any officer, director or employee
thereof;
(E) is not subject to any order or decree issued by, or a party to
any agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or subject to any order or
directive by, a recipient of any supervisory letter from or has adopted
any board resolutions at the request of any Governmental Authority, or
been advised by any Governmental Authority that it is considering
issuing or requesting any such agreement or other action; and
(F) since December 31, 1998, has timely filed all reports,
registrations and statements, together with any amendments required to
be made with respect thereto, that were required to be filed under any
applicable law, regulation or rule, with any applicable Governmental
Authority (collectively, the "Company Reports"). As of their respective
dates, the Company Reports complied with the applicable statutes, rules,
regulations and orders enforced or promulgated by the regulatory
authority with which they were filed.
(2) None of the Company or its Subsidiaries has engaged (or, with
respect to First Greenboro Home Equity, Inc., has engaged to the knowledge
of the Company) in any of the practices listed in Office of the Comptroller
of the Currency Advisory Letter AL 2000-7 as "indications that an
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institution may be engaging in abusive lending practices" or as practices
that "may suggest the potential for fair lending violations".
(k) Material Contracts; Defaults. The Company has Previously
Disclosed a complete and accurate list of all material Contracts to which
the Company or any of its Subsidiaries is a party, including the following
categories:
(1) any Contract that (A) is not terminable at will both without
cost or other liability to the Company or any of its Subsidiaries and
upon notice of ninety (90) days or less and (B) provides for fees or
other payments in excess of $100,000 per annum or in excess of $100,000
for the remaining term of the Contract;
(2) any Contract with a term beyond the Effective Time under which
the Company or any of its Subsidiaries created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness for
borrowed money (including capitalized lease obligations);
(3) any Contract to which the Company or any of its Subsidiaries is
a party, on the one hand, and under which any affiliate, officer,
director, employee or equity holder of the Company or any of its
Subsidiaries, on the other hand, is a party or beneficiary;
(4) any Contract with respect to the employment of, or payment to,
any present or former directors, officers, employees or consultants; and
(5) any Contract involving the purchase or sale of assets with a
book value greater than $100,000 entered into since December 31, 1999.
Neither the Company nor any of its Subsidiaries nor, to the Company's
knowledge, any other party thereto is in default under any such Contract
and there has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default.
(l) Non-Competition. Neither the Company nor any of its Subsidiaries
is a party to or bound by any non-competition agreement or any other
agreement or obligation (1) which limits or purports to limit in any
respect the manner in which, or the localities in which, any business of
the Company or its affiliates is or could be conducted or the types of
business that the Company or its affiliates conducts or may conduct or (2)
which would reasonably be understood to limit or purport to limit in any
respect the manner in which, or the localities in which, any business of
the Acquiror or its affiliates is or could be conducted or the types of
business that the Acquiror or its affiliates conducts or may conduct.
(m) Properties. Except as disclosed in the financial statements filed
in its SEC Documents on or before the date hereof, the Company and its
Subsidiaries have good and marketable title, free and clear of all Liens
(other than Liens for current taxes not yet delinquent, mechanics liens,
materialmen liens, or other inchoate liens) to the properties and assets,
tangible or intangible, reflected in such financial statements as being
owned by the Company and its Subsidiaries as of the dates thereof. All
buildings and all fixtures, equipment, and other property and assets which
are material to its business and are held under leases or subleases by any
of the Company and its Subsidiaries are held under valid leases or
subleases enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and to general equity principles).
(n) Employee Benefit Plans. (1) The Company's Disclosure Schedule
contains a complete list of all bonus, vacation, deferred compensation,
commission-based, pension, retirement, profit sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock,
stock appreciation and stock option plans, all employment or severance
contracts, all medical, dental, disability, severance, health and life
plans, all other employee benefit and fringe benefit plans, contracts or
arrangements and any "change of control" or similar provisions in any plan,
contract or arrangement maintained or contributed to by the Company or any
of its Subsidiaries for the benefit of current or former officers,
employees or directors or the beneficiaries or dependents of any of the
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foregoing (collectively, the "Compensation Plans"), other than plans that
are not currently maintained or contributed to by the Company or any of its
Subsidiaries.
(2) With respect to each Compensation Plan, if applicable, the Company
has made available to the Acquiror, true and complete copies of the
existing: (A) Compensation Plan documents and amendments thereto; (B) trust
instruments and insurance contracts; (C) two most recent Forms 5500 filed
with the IRS; (D) most recent actuarial report and financial statement; (E)
most recent summary plan description; (F) forms filed with the PBGC (other
than for premium payments); (G) most recent determination letter issued by
the IRS; (H) any Form 5310 or Form 5330 filed with the IRS; (I) most recent
nondiscrimination tests performed under ERISA and the Code (including
401(k) and 401(m) tests); and (J) documentation relating to outstanding
loans made to the Company's employee stock ownership plan. Each Form 5500,
actuarial report and financial statement referred to in the preceding
sentence accurately reflects the contributions, liabilities and funding
levels of the applicable Compensation Plan.
(3) Each of the Compensation Plans has been administered and operated
in accordance with the terms thereof and with applicable law, including
ERISA, the Code and the Securities Act. Each of the Compensation Plans
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the IRS, and the Company is not aware of any circumstances that would
likely result in the revocation or denial of any such favorable
determination letter. None of the Company, any of its Subsidiaries or an
Indemnified Person has engaged in any transaction with respect to any
Compensation Plan that has subjected, or (assuming the taxable period with
respect to the transaction expired as of the date hereof) could subject the
Company or any of its Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA in an amount which would
be material. There is no pending or, to the Company's knowledge, threatened
litigation or governmental audit, examination or investigation relating to
the Company's Compensation Plans. There are no outstanding loans made to
the Company's employee stock ownership plan.
(4) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any "single-employer plan" (within the meaning of Section
4001 (a)(15) of ERISA) or Multiemployer Plan currently or formerly
maintained or contributed to by any of them, or the single-employer plan or
Multiemployer Plan of any entity (an "ERISA Affiliate") which is considered
one employer with the Company under Section 4001(a)(14) of ERISA or Section
414(b) or (c) of the Code (an "ERISA Affiliate Plan"). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived or extended, other
than pursuant to PBGC Reg. Section 4043.66, has been required to be filed
for any Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and, to the Company's
knowledge, no condition exists that presents a material risk that such
proceedings will be instituted. The Company and its Subsidiaries have not
incurred and do not expect to incur any withdrawal liability with respect
to a Multiemployer Plan under Subtitle E of Title IV of ERISA (regardless
of whether based on contributions of an ERISA Affiliate).
(5) All contributions, premiums and payments required to have been
made under the terms of any of the Compensation Plans or applicable law
have been timely made or reflected in the Company's SEC Documents. Neither
any of the Pension Plans nor ERISA Affiliate Plans has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA. None of the Company, any of its
Subsidiaries or any ERISA Affiliate has provided, or is required to
provide, security to any Pension Plan or any ERISA Affiliate Plan pursuant
to Section 401(a)(29) or Section 412(n) of the Code.
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(6) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities," within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
plan by more than $10 million. Under each of the Pension Plans, there has
been no adverse change in the financial condition of any Pension Plan (with
respect to either assets or benefits) since the last day of the most recent
plan year.
(7) No Compensation Plan provides benefits, including death or medical
benefits, with respect to any employees or former employees of the Company
or any of its Subsidiaries (or their spouses, beneficiaries, or dependents)
beyond the retirement or other termination of service of any such employee
other than (A) coverage mandated by Part 6 of Title I of ERISA or Section
4980B of the Code, (B) retirement, death or disability benefits under any
Pension Plan, (C) disability benefits under any Compensation Plan which is
an employee welfare benefit plan (as defined under Section 3(1) of ERISA)
that have been fully provided for by insurance or otherwise, or (D)
benefits in the nature of severance pay under any Compensation Plan. The
Company and its Subsidiaries may amend or terminate any Compensation Plan
which provides post-retirement or termination of employment benefits at any
time without incurring any liability thereunder (other than liability for
vested, accrued benefits under any Compensation Plan as of the date of such
amendment or termination). There has been no communication to employees,
former employees or their spouses, beneficiaries or dependents by the
Company or any of its Subsidiaries that promised or guaranteed such
employees retiree health or life insurance or other retiree death benefits
on a permanent basis or promised or guaranteed that any such benefits could
not be modified, eliminated or terminated.
(8) There has been no amendment to, announcement by the Company or any
of its Subsidiaries relating to, or change in employee participation or
coverage under, any Compensation Plan which would increase the expense of
maintaining such Plan above the level of the expense incurred therefor for
the most recent fiscal year. Neither the execution of this Agreement,
shareholder approval of this Agreement nor the consummation of the
transactions contemplated hereby will (w) entitle any employees of the
Company or any of its Subsidiaries to severance pay or any increase in
severance pay upon any termination of employment after the date hereof, (x)
accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or trigger any other material obligation
pursuant to, any of the Compensation Plans, (y) cause the Company or any of
its Subsidiaries to record additional compensation expense on its income
statement with respect to any outstanding stock option or other
equity-based award or (z) result in payments under any of the Compensation
Plans which would not be deductible under Section 162(m) or Section 280G of
the Code.
(9) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which are
or would not reasonably be expected to be deductible as a result of the
limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(10) The retirement or disability benefit historically paid pursuant
to each Supplemental Executive Retirement Agreement has been calculated
based on the participant's base-salary and annual performance bonuses paid
to the participant, including amounts voluntarily deferred by a
participant.
(o) Labor Matters. Each of the Company and its Subsidiaries is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
including, without limitation, the Immigration Reform and Control Act, any
such laws respecting employment discrimination, disability rights or
benefits, equal opportunity, affirmative action, workers' compensation,
employee benefits, severance payments, labor relations, employee leave
issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters. Neither the
Company nor any of its
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Subsidiaries is a party to or is bound by any collective bargaining
Contract or understanding with a labor union or labor organization, nor is
the Company or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or
seeking to compel the Company or any such Subsidiary to bargain with any
labor organization as to wages or conditions of employment, nor is there
any strike or other labor dispute involving it or any of its Subsidiaries
pending or, to the Company's knowledge, threatened, nor is the Company
aware of any activity involving it or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(p) Environmental Matters. (1) The Company and each of its
Subsidiaries has complied with applicable Environmental Laws; (2) to the
Company's knowledge, no property (including buildings and any other
structures) currently or formerly owned or operated by the Company or any
of its Subsidiaries or in which the Company or any of its Subsidiaries has
a Lien, has been contaminated with, or has had any release of, any
Hazardous Substance; (3) neither the Company nor any of its Subsidiaries
could be deemed the owner or operator under any Environmental Law of any
property in connection with any Loans or in which it has currently or
formerly held a Lien or security interest; (4) neither the Company nor any
of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any other third-party property; (5) neither
the Company nor any of its Subsidiaries has received any notice, demand
letter, claim or request for information alleging any violation of, or
liability under, any Environmental Law; (6) neither the Company nor any of
its Subsidiaries is subject to any order, decree, injunction or other
agreement with any Governmental Authority or any third party relating to
any Environmental Law; (7) to the Company's knowledge, there are no other
circumstances or conditions involving the Company or any of its
Subsidiaries, any currently or formerly owned or operated property, or any
Lien held by the Company or any of its Subsidiaries (including the presence
of asbestos, underground storage tanks, contamination, polychlorinated
biphenyls or gas station sites) that would reasonably be expected to result
in any claims, liability or investigations or result in any restrictions on
the ownership, use, or transfer of any property pursuant to any
Environmental Law; and (8) the Company has made available to the Acquiror
copies of all environmental reports, studies, sampling data,
correspondence, filings and other environmental information in its
possession or reasonably available to it relating to the Company, any of
its Subsidiaries, any currently or formerly owned or operated property or
any property in which the Company or any of its Subsidiaries has held a
Lien.
(q) Tax Matters. (1) All Tax Returns that are required to be filed
with respect to the Company or any of its Subsidiaries, have been or will
be timely filed, or requests for extensions have been timely filed and have
not expired; (2) all Tax Returns filed by the Company and its Subsidiaries
are complete and accurate; (3) all Taxes shown to be due and payable
(without regard to whether such Taxes have been assessed) on such Tax
Returns (or, with respect to Tax Returns for which an extension has been
timely filed, will be required to be shown as due and payable when such Tax
Returns are filed) have been paid or adequate reserves have been
established for the payment of such Taxes; (4) all state and federal income
Tax Returns referred to in clause (1) have been examined by the Internal
Revenue Service or the appropriate state taxing authority or the period for
assessment of the Taxes for which such return has been filed has expired;
(5) no audit or examination or refund litigation with respect to any such
Tax Return is pending or, to the Company's knowledge, has been threatened;
(6) all deficiencies asserted or assessments made as a result of any
examination of a Tax Return of the Company or any of its Subsidiaries, have
been paid in full or are being contested in good faith; (7) no waivers of
statute of limitations have been given by or requested with respect to any
Taxes of the Company or its Subsidiaries for any currently open taxable
period; (8) the Company and each of its Subsidiaries has in its respective
files all Tax Returns that it is required to retain in respect of
information reporting requirements imposed by the Code or any similar
foreign, state or local law; (9) the Company and its Subsidiaries have
never been a member of an affiliated, combined, consolidated or unitary Tax
group for purposes of filing any Tax Return (other than a consolidated
group of which the Company was the common parent); (10) no closing
agreements,
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private letter rulings, technical advice memoranda or similar agreement or
rulings have been entered into or issued by any taxing authority with
respect to the Company or any of its Subsidiaries; (11) no tax is required
to be withheld pursuant to Section 1445 of the Code as a result of the
transfer contemplated by this Agreement; (12) the Company and its
Subsidiaries are not bound by any tax indemnity, tax sharing or tax
allocation agreement or arrangement; and (13) all Taxes that the Company or
any Subsidiary is or was required by law to withhold or collect have been
duly withheld or collected and, to the extent required by applicable law,
have been paid to the proper Governmental Authority or other person.
(r) Risk Management; Allowance for Loan Losses. (1) All swaps, caps,
floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for the Company's own
account, or for the account of one or more of the Company's Subsidiaries or
their customers, were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (2) with counterparties believed to be financially responsible
at the time; and each of them constitutes the valid and legally binding
obligation of the Company or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and are in full force
and effect. Neither the Company nor its Subsidiaries, nor to the Company's
knowledge any other party thereto, is in breach of any of its obligations
under any such agreement or arrangement.
(2) The allowances for loan losses reflected on the consolidated
balance sheets included in the Company's SEC Documents are, in the
reasonable judgment of the Company's management, adequate as of their
respective dates under the requirements of generally accepted accounting
principles and applicable regulatory requirements and guidelines.
(s) Books and Records. The books and records of the Company and its
Subsidiaries have been properly and accurately maintained, and there are no
inaccuracies or discrepancies contained or reflected therein.
(t) Accounting Controls. Each of the Company and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient
to provide reasonable assurances, in the judgment of the Board of Directors
of the Company, that (a) all material transactions are executed in
accordance with management's general or specific authorization; (b) all
material transactions are recorded as necessary to permit the preparation
of financial statements in conformity with generally accepted accounting
principals consistently applied with respect to any criteria applicable to
such statements, (c) access to the material property and assets of the
Company and its Subsidiaries is permitted only in accordance with
management's general or specific authorization; and (d) the recorded
accountability for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any differences.
(u) Insurance. The Company has made available to the Acquiror all of
the insurance policies, binders, or bonds maintained by or for the benefit
of the Company or its Subsidiaries ("Insurance Policies") or their
representatives. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices. All of the Insurance Policies are in full force and
effect; the Company and its Subsidiaries are not in default thereunder; and
all claims thereunder have been filed in due and timely fashion.
(v) No Brokers. No action has been taken by the Company that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other, like payment with respect to the
transactions contemplated by this Agreement, except that the Company has
employed Credit Suisse First Boston Corporation and Keefe Bruyette & Woods,
Inc. in connection with this transaction on Previously Disclosed terms.
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(w) Intellectual Property. The Company and its Subsidiaries own or
have the right to use all material Intellectual Property Rights necessary
or required for the operation of their business as currently conducted
(collectively, "Company IP Rights"), and have the right to use, license,
sublicense or assign the same without material liability to, or any
requirement of consent from, any other person or party. The Company's use
of the Company IP Rights does not infringe any Intellectual Property Rights
of any person; there is no pending or, to the knowledge of the Company,
threatened litigation, adversarial proceeding, administrative action or
other challenge or claim relating to any Company IP Rights; to the
knowledge of the Company, there is currently no infringement by any person
of any Company IP Rights; and the Company IP Rights owned, used or
possessed by the Company and its Subsidiaries are sufficient and adequate
to conduct the business of the Company and its Subsidiaries to the full
extent as such business is currently conducted.
(x) Disclosure. The information Previously Disclosed or otherwise
provided to the Acquiror in connection with this Agreement, when taken
together with the representations and warranties contained herein, does not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein,
in the light of the circumstances in which they are being made, not
misleading. The copies of all documents furnished to the Acquiror hereunder
are true and complete.
5.04 Representations and Warranties of the Acquiror. Except as Previously
Disclosed in a paragraph of its Disclosure Schedule corresponding to the
relevant paragraph below, the Acquiror hereby represents and warrants to the
Company as set forth in its Disclosure Schedule and as follows:
(a) Organization, Standing and Authority. The Acquiror is duly
organized, validly existing and in good standing under the laws of Canada.
Following its formation, Newco will be duly organized, validly existing and
in good standing under the laws of North Carolina. The Acquiror is, and
Newco will be, duly qualified to do business and in good standing in the
jurisdictions where the ownership or leasing of property or assets or the
conduct of business requires such qualification.
(b) Acquiror Stock. (1) As of the date hereof, the authorized capital
of the Acquiror consists solely of an unlimited number of shares of
Acquiror Common Stock which may be issued for a maximum aggregate
consideration of C$10,000,000,000, an unlimited number of shares of
Acquiror First Preferred Stock which may be issued for a maximum aggregate
consideration of C$5,000,000,000 and an unlimited number of shares of
Acquiror Second Preferred Stock which may be issued for a maximum aggregate
consideration of C$5,000,000,000. As of October 31, 2000 not more than
602,398,000 shares of Acquiror Common Stock, not more than 65,500,000
shares of Acquiror First Preferred Stock and no shares of Acquiror Second
Preferred Stock were issued and outstanding. Except as Previously
Disclosed, there are no shares of Acquiror Stock reserved for issuance, the
Acquiror does not have any Rights issued or outstanding with respect to
Acquiror Stock, and the Acquiror does not have any commitment to authorize,
issue or sell any Acquiror Stock or Rights, except pursuant to this
Agreement. The number of shares of Acquiror Common Stock which are issuable
and reserved for issuance upon exercise of any employee or director stock
options to purchase shares of Acquiror Common Stock, and the number and
terms of any Rights, as of October 31, 2000, are Previously Disclosed in
the Acquiror's Disclosure Schedule.
(2) The shares of Acquiror Common Stock to be issued as Consideration,
when issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
(c) Subsidiaries. Each of the Acquiror's Significant Subsidiaries has
been duly organized and is validly existing and in good standing under the
laws of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified.
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(d) Corporate Power. The Acquiror and each of its Significant
Subsidiaries each has the requisite power and authority to carry on its
business as it is now being conducted and to own all its properties and
assets; the Acquiror has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby.
(e) Corporate Authority and Action. The Acquiror has, and Newco will
have, taken all corporate action necessary in order to authorize the
execution and delivery of, and performance of its obligations under, this
Agreement and, in the case of the Acquiror, the Stock Option Agreement, and
to consummate the Merger. Each of this Agreement and, in the case of the
Acquiror, the Stock Option Agreement, is a valid and legally binding
agreement of the Acquiror and, upon its execution by Newco, will be a valid
and legally binding agreement of Newco, enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults. (1) No consents or approvals
of, or filings or registrations with, any Governmental Authority or with
any third party are required to be made or obtained by the Acquiror or any
of its Subsidiaries in connection with the execution, delivery or
performance by the Acquiror of this Agreement or the Stock Option Agreement
or to consummate the Merger or the other transactions contemplated hereby
except for (A) the filing of applications and notices, as applicable, with
the Federal Reserve System and the NCCOB with respect to the Merger; (B)
the filing of a notification, and expiration of the related waiting period
under the HSR Act, (C) approval of the listing on the NYSE of the Acquiror
Common Stock to be issued in the Merger; (D) the filing and declaration of
effectiveness by the SEC of the Registration Statement; (E) the filing of
articles of merger with the Secretary of State of the State of North
Carolina pursuant to the NCBCA; (F) approval by the Minister of Finance and
the Office of the Superintendent of Financial Institutions under the Bank
Act (Canada), and (G) such filings as are required to be made or approvals
as are required to be obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of Acquiror Common Stock in
the Merger. As of the date hereof, the Acquiror is not aware of any reason
why the approvals of all Governmental Authorities necessary to permit
consummation of the transactions contemplated hereby will not be received
without the imposition of a condition or requirement described in Section
7.01(b).
(2) Subject to receipt of the regulatory approvals, and expiration of
the waiting periods, referred to in the preceding paragraph and the making
of all required filings under federal and state securities laws, the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or Contract of the Acquiror or of any of its Subsidiaries or to
which the Acquiror or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
articles of incorporation or by-laws (or similar governing documents) of
the Acquiror or any of its Subsidiaries, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) SEC Documents; Financial Statements. The Acquiror's Annual
Reports on Form 40-F for the fiscal years ended October 31, 1998, 1999 and
2000, and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by the Acquiror
or any of its Subsidiaries subsequent to October 31, 1999 under the
Securities Act, or under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, in the form filed or to be filed (collectively, the "Acquiror's SEC
Documents") with the SEC, as of the date filed, (A) complied or will comply
in all material respects as to form with the applicable requirements under
the Securities Act or the Exchange Act, as the case may be, and (B) did not
(or if amended or superseded by a filing prior to the date of this
Agreement, then did not as of the date of such filing) and will not contain
any untrue statement of a
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material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of the
balance sheets contained in or incorporated by reference into any such SEC
Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of the Acquiror
and its Subsidiaries as of its date, and each of the statements of income
and changes in shareholders' equity and cash flows or equivalent statements
in such SEC Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of operations, changes
in shareholders' equity and changes in cash flows, as the case may be, of
the Acquiror and its Subsidiaries for the periods to which they relate, in
each case in accordance with generally accepted accounting principles in
Canada, consistently applied during the periods involved, except in each
case as may be noted therein, subject to normal year-end audit adjustments
in the case of unaudited statements.
(h) Absence of Undisclosed Liabilities and Changes. (1) Except as
disclosed in the Acquiror's SEC Documents filed prior to the date hereof,
none of the Acquiror or its Subsidiaries has any obligation or liability
(contingent or otherwise), that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect with respect to
the Acquiror.
(2) Since October 31, 2000, (A) the Acquiror and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice and (B) no event has occurred or circumstance
arisen that, individually or taken together with all other facts, events
and circumstances (described in any paragraph of Section 5.04 or
otherwise), has had or is reasonably likely to have a Material Adverse
Effect with respect to the Acquiror.
(i) No Brokers. No action has been taken by the Acquiror that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other, like payment with respect to the
transactions contemplated by this Agreement, except that the Acquiror has
employed Credit Suisse First Boston Corporation in connection with this
transaction.
(j) Interim Operations of Newco. Newco will be formed solely for the
purpose of engaging in the transactions contemplated hereby and will not
engage in any business other than in connection with the transactions
contemplated by this Agreement.
(k) Disclosure. The information Previously Disclosed or otherwise
provided to the Company in connection with this Agreement does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements contained therein, in the light
of the circumstances in which they are being made, not misleading. The
copies of all documents furnished to the Company hereunder are true and
complete.
(l) Certain Treasury Regulation Requirements. The Acquiror satisfies
all the requirements of the "active trade or business test" under Treasury
Regulation sec.1.367(a)-3(c)(3).
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each of the Company and the Acquiror agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
(b) Without limiting the generality of Section 6.01(a), the Company agrees
to use its reasonable best efforts to obtain the consent or approval of all
persons party to a Contract with the Company or any of its Subsidiaries, to the
extent such consent or approval is required in order to consummate the Merger or
for the Surviving Corporation to receive the benefits of such Contract; provided
that in no event shall the
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Company be deemed to have failed to satisfy the condition set forth in 7.03(b)
solely on the basis that such consents or approvals have not been obtained as of
the Closing Date.
6.02 Shareholder Approvals. The Company agrees to take, in accordance with
applicable law, applicable stock exchange rules, the Company Articles and the
Company By-Laws, all action necessary to convene an appropriate meeting of
shareholders of the Company to consider and vote upon the approval of this
Agreement and any other matters required to be approved by the Company's
shareholders for consummation of the Merger and the transactions contemplated
hereby (including any adjournment or postponement, the "Company Meeting"), and
to solicit shareholder approval, as promptly as practicable after the date
hereof. The Company Board has adopted a resolution contemplated by NCBCA ss.
55-11-03, recommending that the shareholders approve this Agreement (and will
keep such resolution in effect) and take any other action required to permit
consummation of the transactions contemplated hereby. The obligation of the
Company to hold the Company Meeting shall not be affected by any Acquisition
Proposal or other event or circumstance.
6.03 Registration Statement. (a) The Acquiror agrees to prepare a
registration statement on Form F-4 (the "Registration Statement"), to be filed
by the Acquiror with the SEC in connection with the issuance of Acquiror Common
Stock in the Merger (including the proxy statement and prospectus and other
proxy solicitation materials of the Company constituting a part thereof (the
"Proxy Statement") and all related documents). The Company agrees to cooperate,
and to cause its Subsidiaries to cooperate, with the Acquiror, its counsel and
its accountants, in preparation of the Registration Statement and the Proxy
Statement; and, provided that the Company and its Subsidiaries have cooperated
as required above, the Acquiror agrees to file the Proxy Statement in
preliminary form with the SEC as promptly as reasonably practicable, and to file
the Registration Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Proxy Statement are resolved.
Each of the Company and the Acquiror agrees to use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof. The
Acquiror also agrees to use all reasonable best efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement. The Company agrees to furnish
to the Acquiror all information concerning the Company, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of the Company and the Acquiror agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (1) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (2) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to shareholders and at the time of the Company Meeting, contain any
untrue statement which, at the time and in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any earlier
statement in the Proxy Statement or any amendment or supplement thereto. Each of
the Company and the Acquiror further agrees that if it shall become aware prior
to the Effective Time of any information furnished by it that would cause any of
the statements in the Proxy Statement to be false or misleading with respect to
any material fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform the other party
thereof and to take the necessary steps to correct the Proxy Statement.
(c) The Acquiror agrees to advise the Company, promptly after the Acquiror
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of the Acquiror Stock for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
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6.04 Press Releases. The initial press release concerning the Merger and
the other transactions contemplated by this Agreement and the Stock Option
Agreement shall be a joint press release in such form agreed to by the parties,
and thereafter each of the Company and the Acquiror agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby (except for any release or statement that, in the written
opinion of outside counsel to the Company or the Acquiror, as the case may be,
is required by law or regulation and as to which the Company or the Acquiror, as
the case may be, has used its best efforts to discuss with the other in advance,
provided that such release or statement has not been caused by, or is not the
result of, a previous disclosure by or at the direction of the Company or the
Acquiror, as the case may be, or any of its representatives that was not
permitted by this Agreement).
6.05 Access; Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall
afford the Acquiror and its officers, employees, counsel, accountants and other
authorized representatives, such access during normal business hours throughout
the period prior to the Effective Time to the books, records (including, without
limitation, credit files, tax returns and work papers of independent auditors),
properties, personnel and to such other information as it may reasonably request
and, during such period, the Company shall furnish promptly (1) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (2) all other
information concerning its business, properties and personnel as the other may
reasonably request.
(b) Each of the Company and the Acquiror agrees that it will not, and will
cause its representatives not to, use any information obtained pursuant to this
Section 6.05 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, each party
will keep confidential, and will cause its representatives to keep confidential,
all information and documents obtained pursuant to this Section 6.05 unless such
information (1) was already known to such party, (2) becomes available to such
party from other sources not known by such party to be bound by a
confidentiality obligation, (3) is disclosed with the prior written approval of
the party to which such information pertains or (4) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, each party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
another party hereto to be returned to the party which furnished the same, or at
the other party's request, destroyed.
(c) No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation, warranty,
covenant or agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this Agreement.
6.06 Acquisition Proposals. The Company agrees that it shall not, and
shall cause its Subsidiaries and its and its Subsidiaries' representatives not
to, solicit or encourage inquiries or proposals with respect to, or engage in
any negotiations concerning, or provide any confidential information to, or have
any discussions with, any person relating to, any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving the
Company or any of its Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
or deposits of, the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement or the Stock Option Agreement (any
of the foregoing, an "Acquisition Proposal"); provided, that nothing contained
in this Agreement shall prevent the Company Board from (i) making any disclosure
to its shareholders if, in the good faith judgment of the Company Board, failure
so to disclose would be inconsistent with its obligations under applicable law;
(ii) until the date of the Company Meeting, providing (or authorizing the
provision of) information to, or engaging in (or authorizing) such discussions
or negotiations with, any person who has made a bona fide written Acquisition
Proposal received after the date hereof which did not result from a breach of
this Section 6.06; or (iii) recommending such an Acquisition Proposal to its
shareholders if and only to the extent that, in the case of actions referred to
in clause (ii) or (iii), (x) such Acquisition Proposal is a Superior Proposal,
(y) the Company Board, after having consulted with and considered the advice of
outside counsel to the Company Board, determines in
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good faith that providing such information or engaging in such negotiations or
discussions, or making such recommendation is required in order to discharge the
directors' fiduciary duties in accordance with the NCBCA and (z) the Company
receives from such person a confidentiality agreement substantially in the form
of the Confidentiality Agreement. For purposes of this Agreement, a "Superior
Proposal" means any Acquisition Proposal by a third party on terms that the
Company Board determines in its good faith judgment, after receiving the advice
of its financial advisors (whose advice shall be communicated to the Acquiror),
to be more favorable from a financial point of view to its shareholders than the
Merger and the other transactions contemplated hereby, after taking into account
the likelihood of consummation of such transaction on the terms set forth
therein, taking into account all legal, financial (including the financing terms
of any such proposal), regulatory and other aspects of such proposal and any
other relevant factors permitted under applicable law, after giving the Acquiror
at least five business days to respond to such third-party Acquisition Proposal
once the Board has notified the Acquiror that in the absence of any further
action by the Acquiror it would consider such Acquisition Proposal to be a
Superior Proposal, and then taking into account any amendment or modification to
this Agreement proposed by the Acquiror. The Company also agrees immediately to
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than the
Acquiror, with respect to any of the foregoing. The Company shall promptly
(within 24 hours) advise the Acquiror following the receipt by it of any
Acquisition Proposal and the material terms thereof (including the identity of
the person making such Acquisition Proposal), and advise the Acquiror of any
developments (including any change in such terms) with respect to such
Acquisition Proposal promptly upon the occurrence thereof.
Nothing contained in this Section 6.06 or any other provision of this
Agreement will prohibit the Company or the Company Board from notifying any
third party that contacts the Company on an unsolicited basis after the date
hereof concerning an Acquisition Proposal of the Company's obligations under
this Section 6.06.
6.07 Affiliate Agreements. Not later than the 15th day prior to the
mailing of the Proxy Statement, the Company shall deliver to the Acquiror a
schedule of each person that, to the Company's knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an "affiliate"
of it (each, a "Company Affiliate") as that term is used in Rule 145 under the
Securities Act. The Company agrees to use its reasonable best efforts to cause
each person who may be deemed to be a Company Affiliate to execute and deliver
to the Company and the Acquiror on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit D.
6.08 Takeover Laws. No party shall knowingly take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.09 No Rights Triggered. The Company shall take all reasonable steps
necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions, or any other transactions contemplated hereby, do not
and will not result in the grant of any rights to any person (a) under the
Company Articles or the Company By-Laws or (b) under any material Contract to
which it or any of its Subsidiaries is a party except, in each case, as
contemplated by this Agreement and the Stock Option Agreement.
6.10 NYSE Listing. The Acquiror shall take all reasonable steps necessary
to ensure the listing, prior to the Effective Time, on the NYSE, subject to
official notice of issuance, the shares of Acquiror Common Stock to be issued to
the holders of Company Common Stock in the Merger.
6.11 Regulatory Applications. (a) The Acquiror and the Company and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. The
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Acquiror shall have the right to review in advance, and to the extent
practicable to consult with the Company, subject to applicable laws relating to
the exchange of information, with respect to, all material written information
submitted to any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. The Company shall have the
right to review in advance, and to the extent practicable to consult with the
Acquiror, subject to all applicable laws relating to the exchange of
information, with respect to, all material written information submitted to any
third party or any Governmental Authority, in connection with the transactions
contemplated by this Agreement, that is not confidential. In exercising the
foregoing rights, the Acquiror and the Company agree to act reasonably and as
promptly as practicable. Each of the Acquiror and the Company agrees that it
will consult with the other party hereto with respect to the obtaining of all
material consents, registrations, approvals, permits and authorizations of all
third parties and Governmental Authorities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party will keep the
other party apprised of the status of material matters relating to completion of
the transactions contemplated hereby.
(b) Each of the Acquiror and the Company agrees, upon request, to furnish
the other party with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with any filing, notice or application made
by or on behalf of such other party or any of its Subsidiaries to any third
party or Governmental Authority.
6.12 Indemnification. (a) Following the Effective Time and for a period of
six years thereafter, the Acquiror shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless the present and former
directors, officers and employees of the Company and its Subsidiaries (each, an
"Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company is permitted to indemnify its
directors, officers and employees under applicable law, the Company Articles and
the Company By-Laws as in effect on the date hereof (and the Acquiror shall, or
shall cause the Surviving Corporation to, also advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification);
provided that any determination required to be made with respect to whether such
an officer's or director's conduct complies with the standards set forth under
the NCBCA, the Company Articles and the Company By-Laws shall be made by
independent counsel reasonably acceptable to both the Indemnified Party and the
Surviving Corporation.
(b) For a period of three years from the Effective Time, the Acquiror shall
use its reasonable best efforts to provide (or cause the Surviving Corporation
to provide) that portion of director's and officer's liability insurance that
serves to reimburse the present and former officers and directors of the Company
or any of its Subsidiaries (determined as of the Effective Time) with respect to
claims against such directors and officers arising from facts or events which
occurred before the Effective Time, which insurance shall contain at least the
same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by the Company; provided,
however, that in no event shall the Acquiror be required to expend more than
twice the current amount spent by the Company (the "Insurance Amount") to
maintain or procure such directors' and officers' insurance coverage; provided,
further, that if the Acquiror is unable to maintain or obtain the insurance
called for by this Section 6.12(b), the Acquiror shall use its reasonable best
efforts to obtain as much comparable insurance as is available for the Insurance
Amount; provided, further, that officers and directors of the Company or any
Subsidiary may be required to make application and provide customary
representations and warranties to the Acquiror's insurance carrier for the
purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify the Acquiror thereof; provided that the
failure so to notify shall not affect the obligations of the Acquiror under
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Section 6.12(a) unless and to the extent that the Acquiror is actually
prejudiced as a result of such failure. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (1) the Acquiror or the Surviving Corporation shall have the right to
assume the defense thereof and the Acquiror shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Acquiror or the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues that raise conflicts of interest between the Acquiror or
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Acquiror or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Acquiror shall be obligated pursuant to this paragraph (c) to
pay for only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest, (2) the Indemnified Parties will cooperate
in the defense of any such matter and (3) the Acquiror shall not be liable for
any settlement effected without its prior written consent, which consent shall
not be unreasonably withheld; and provided, further, that the Acquiror shall not
have any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(d) If the Acquiror or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of the Acquiror shall assume the
obligations set forth in this Section 6.12.
6.13 Accountants' Letters. The Company shall use its reasonable best
efforts to cause to be delivered to the Acquiror, and the Acquiror's directors
and officers who sign the Registration Statement, letters of
PricewaterhouseCoopers LLP, independent auditors, dated a date shortly prior to
the Closing Date, and addressed to the Acquiror, and such directors and
officers, in form and substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Accounting Standards No.
72.
6.14 Notification of Certain Matters. Each of the Company and the Acquiror
shall give prompt notice to the other of any fact, event or circumstance known
to it that (1) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (2) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.15 Employee Benefits. (a) The Acquiror agrees to permit or cause the
Company or its Subsidiaries to take appropriate action to honor all Compensation
Plans in accordance with their terms. The Acquiror agrees that, except as
otherwise specifically provided, the employee benefit plans maintained by the
Company and/or its Subsidiaries as of the date hereof, will continue until at
least December 31, 2002. Thereafter, the employees of the Company and its
Subsidiaries who are employed by the Company and its Subsidiaries on or before
the Effective Time will be provided employee pension, welfare and other
benefits, fringes, and perquisites that are generally comparable in the
aggregate to those provided by the Acquiror to similarly situated employees of
the Acquiror and its Subsidiaries. The Acquiror will cause each employee benefit
plan of the Acquiror and its Subsidiaries in which employees of the Company and
its Subsidiaries are eligible to participate to take into account for purposes
of eligibility and vesting thereunder, but not for purposes of benefit accrual,
the service of such employees with the Company and its Subsidiaries as if such
service were with the Acquiror and its Subsidiaries, to the same extent that
such service was credited under a comparable plan of the Acquiror and its
Subsidiaries. Employees of the Company and its Subsidiaries shall not be subject
to any waiting periods or pre-existing condition limitations under the medical,
dental and health plans of the Acquiror or its Subsidiaries in which they are
eligible to participate. Employees of the Company and its Subsidiaries will
retain credit for unused sick leave and vacation pay which has been accrued as
of the Effective Time and for purposes of determining
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the entitlement of such employees to sick leave and vacation pay following the
Effective Time, the service of such employees with the Company and its
Subsidiaries shall be treated as if such service was with the Acquiror and its
Subsidiaries.
(b) The Company and its Subsidiaries will comply with the terms of the
relevant Compensation Plan with respect to the voting of any Company Common
Stock held by any such Plan. As mutually agreed by the Company and the Acquiror,
the Company's Employee Stock Ownership Plan feature of the Company's 401(k) Plan
may be terminated, amended, or discontinued as of the Effective Time in
accordance with the terms of the Plan and the requirements of applicable law.
(c) As soon as practicable following the date hereof, the Company will
grant retention bonus awards to the key employees designated by the Acquiror, on
terms, in form and in amounts satisfactory to the Acquiror.
(d) The Company shall freeze additional benefit accrual in its defined
benefit pension plan by resolution of the Company Board and all necessary plan
amendments, at least fifteen days prior to the Closing Date. The Company shall
also make such other amendments as are necessary to effect the changes set forth
on Company Disclosure Schedule 401(e) with respect to retirement plans.
(e) Prior to the Closing Date, the Company shall use its best efforts to
take the actions set forth on the Company Disclosure Schedule Section 4.01(e)
with respect to Supplemental Executive Retirement Plan Agreements.
6.16 Certain Adjustments. Upon the request of the Acquiror, the Company
shall (a) consistent with generally accepted accounting principles and
regulatory accounting principles, use its best efforts to record any accounting
adjustments required to conform the loan, litigation and other reserve and real
estate valuation policies and practices (including loan classifications and
levels of reserves) of the Company and its Subsidiaries so as to reflect
consistently on a mutually satisfactory basis the policies and practices of the
Acquiror and (b) make reasonable adjustments to the corporate structure of the
Company or its direct or indirect subsidiaries and transfer assets or
liabilities between the Company and its Subsidiaries or between Subsidiaries;
provided, however, that the Company shall not be obligated to record any such
accounting adjustments (1) unless and until the Company shall be satisfied that
the conditions to the obligation of the parties to consummate the Merger will be
satisfied or waived on or before the Closing Date, and (2) in no event until the
day prior to the Closing Date.
6.17 Formation of Newco. As soon as practicable following the date of this
Agreement, the Acquiror shall cause Newco to be duly organized as a direct
wholly owned subsidiary of the Acquiror and to become a party to this Agreement
by executing and delivering a supplement hereto.
6.18 Certain Tax Matters. Each of the Acquiror and the Company (i) shall
cooperate before and after the Effective Time to assure, to the extent feasible,
compliance with Treasury Regulation sec.1.367(a)-3(c), (ii) undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
that is reasonably likely to cause the Merger not, to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code for federal
income tax purposes, and (iii) for purposes of the tax opinions described in
Section 7.02(c) and 7.03(c), shall provide representation letters to counsel, in
form and substance reasonably satisfactory to the Acquiror, the Company and such
counsel.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the Acquiror and the Company to consummate the
Merger is subject to the fulfillment or written waiver by the Acquiror and the
Company prior to the Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly
approved and adopted and a plan of merger shall have been duly approved by
the affirmative vote of the holders of the requisite
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number of the outstanding shares of Company Common Stock entitled to vote
thereon in accordance with applicable law, the Company Articles and the
Company By-laws.
(b) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications to,
all Governmental Authorities required for the consummation of the Merger,
and for the prevention of any termination of any material right, privilege,
license or agreement of either the Acquiror or the Company or their
respective Subsidiaries, shall have been obtained or made and shall be in
full force and effect and all waiting periods required by law shall have
expired; provided, however, that none of the preceding shall be deemed
obtained or made if it shall be subject to any condition or restriction the
effect of which, together with any other such conditions or restrictions,
would be reasonably expected to have a Material Adverse Effect on the
Surviving Corporation or the Acquiror or its operations in the U.S. after
the Effective Time.
(c) Third Party Consents. All consents or approvals of all persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement and the consummation
of the Merger shall have been obtained and shall be in full force and
effect, unless the failure to obtain any such consent or approval is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Surviving Corporation.
(d) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(f) Blue Sky Approvals. All permits and other authorizations under
the federal and state securities laws (other than that referred to in
Section 7.01(e)) and other authorizations necessary to consummate the
transactions contemplated hereby and to issue the shares of Acquiror Common
Stock to be issued in the Merger shall have been received and be in full
force and effect.
(g) Listing. The shares of Acquiror Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
7.02 Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 5.02, the representations and warranties of the Acquiror set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
true and correct only as of such date), and the Company shall have received
a certificate, dated the Closing Date, signed on behalf of the Acquiror by
a senior officer of the Acquiror to such effect.
(b) Performance of Obligations of the Acquiror. The Acquiror shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
the Company shall have received a certificate, dated the Closing Date,
signed on behalf of the Acquiror by a senior officer of the Acquiror to
such effect.
(c) Tax Opinion of Company's Counsel. The Company shall have received
an opinion of Hunton & Williams, counsel to the Company, dated the Closing
Date, to the effect that, for federal income tax purposes, (1) the Merger
constitutes a "reorganization" within the meaning of Section 368 of the
Code and (2) no gain or loss will be recognized by shareholders of the
Company to the extent they receive shares of Acquiror Common Stock as
Consideration in exchange for shares
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of Company Common Stock (except for cash received in lieu of a fractional
share of Acquiror Common Stock). Such opinion may note that "5%
shareholders" will qualify for such nonrecognition treatment only if they
enter into a "gain recognition agreement" under regulations promulgated
under Section 367 of the Code. In rendering such opinion, counsel may
require and rely upon (and may incorporate by reference) certain
representations of the Acquiror and the Company reasonably requested by
such counsel.
7.03 Conditions to Obligation of the Acquiror. The obligation of the
Acquiror to consummate the Merger is also subject to the fulfillment or written
waiver by the Acquiror prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 5.02, the representations and warranties of the Company set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
true and correct only as of such date) and the Acquiror shall have received
a certificate, dated the Closing Date, signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of the Company
to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and the
Acquiror shall have received a certificate, dated the Closing Date, signed
on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to such effect.
(c) Tax Opinion of the Acquiror's Counsel. The Acquiror shall have
received an opinion of Sullivan & Cromwell, counsel to the Acquiror, dated
the Closing Date, to the effect that, for federal income tax purposes, the
Merger constitutes a "reorganization" within the meaning of Section 368 of
the Code. In rendering such opinion, counsel may require and rely upon (and
may incorporate by reference) certain representations of the Acquiror and
the Company reasonably requested by such counsel.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated and the Merger may be
abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of the Acquiror and the Company, if the Board of Directors
of each so determines by vote of a majority of the members of its entire
Board.
(b) Breach. At any time prior to the Effective Time, by the Acquiror
or the Company, in each case if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event of
either: (1) a breach by the other party of any representation or warranty
contained herein, which breach cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of such
breach; or (2) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party of
such breach and which breach, individually or in the aggregate with other
such breaches, would cause the conditions set forth in Section 7.03(a) or
(b), in the case of a breach or breaches by the Company, or Section 7.02(a)
or (b), in the case of a breach or breaches by the Acquiror, not to be
satisfied or would reasonably be expected to prevent, materially delay or
materially impair the ability of the Company or the Acquiror to consummate
the Merger and the other transactions contemplated by this Agreement.
(c) Delay. At any time prior to the Effective Time, by the Acquiror
or the Company, in each case if its Board of Directors so determines by
vote of a majority of the members of its entire Board,
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in the event that the Merger is not consummated by November 30, 2001,
except to the extent that the failure of the Merger then to be consummated
arises out of or results from the action or inaction of the party seeking
to terminate pursuant to this Section 8.01(c).
(d) No Approval. By the Company or the Acquiror, in each case if its
Board of Directors so determines by a vote of a majority of the members of
its entire Board, in the event the approval of any Governmental Authority
required for consummation of the Merger and the other transactions
contemplated by this Agreement shall have been denied by final
nonappealable action of such Governmental Authority.
(e) Failure to Recommend, Etc. (1) By the Acquiror, if (i) at any
time prior to the receipt of the approval of the Company's shareholders
contemplated by Section 7.01(a), the Company Board shall not recommend that
the shareholders give such approval, or (ii) the Company Board takes any of
the actions described in clause (ii) or (iii) of the proviso to Section
6.06.
(2) By the Company if, having acted in accordance with Sections 6.02,
6.06 and 8.03 and the Company's other obligations hereunder, (i) the
Company Board shall have determined that an Acquisition Proposal from a
third party constitutes a Superior Proposal and authorized and directed the
Company to execute a definitive agreement with such third party to effect
such Superior Proposal and (ii) immediately upon termination the Company
executes such agreement.
(f) Possible Adjustment. By the Company, if the Company Board so
determines by a vote of a majority of the members of the entire Company
Board, at any time during the five-day period commencing with the
Determination Date, if both of the following conditions are satisfied:
(i) The Average Closing Price on the Determination Date of shares
of Acquiror Common Stock shall be less than the product of 0.80 and the
Starting Price; and
(ii)(A) The number obtained by dividing the Average Closing Price
on the Determination Date by the Starting Price (such number, the
"Acquiror Ratio") shall be less than (B) the number obtained by dividing
the Index Price on the Determination Date by the Index Price on the
Starting Date and subtracting 0.20 from the quotient in this Section
8(f)(ii)(B) (such number, the "Index Ratio");
subject, however, to the following four sentences. If the Company elects to
exercise its termination right pursuant to this Section 8.01(f), it shall
give prompt written notice to the Acquiror; provided that such notice of
election may be withdrawn at any time within the aforementioned five-day
period. During the five-day period commencing with its receipt of such
notice, the Acquiror shall have the option of adjusting the Exchange Ratio
to the lesser of (i) a number equal to a quotient (rounded to the nearest
one-thousandth), the numerator of which is the product of 0.80, the
Starting Price and the Exchange Ratio (as then in effect) and the
denominator of which is the Average Closing Price, and (ii) a number equal
to a quotient (rounded to the nearest one-thousandth), the numerator of
which is the Index Ratio multiplied by the Exchange Ratio (as then in
effect) and the denominator of which is the Acquiror Ratio. If the Acquiror
determines so to increase the Exchange Ratio within such five-day period,
it shall give prompt written notice to the Company of its determination and
the revised Exchange Ratio, whereupon no termination shall occur pursuant
to this Section 8.01(f) and this Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified), and any references in this Agreement to the "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 8.01(f).
8.02 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to any
other party hereunder except (a) as set forth in Sections 8.03 and 9.01 and (b)
that termination will not relieve a breaching party from liability for any
willful breach of this Agreement giving rise to such termination.
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8.03 Termination Fee. (a) In addition to any other rights that the
Acquiror has under this Agreement, the Stock Option Agreement and/or otherwise,
if this Agreement is terminated by the Acquiror pursuant to (1) Section 8.01(b)
with respect to a breach of Section 6.01, 6.02 or 6.06 on the part of the
Company, or any knowing, or willful or intentional, breach on the part of the
Company (at a time when an Initial Triggering Event (as defined in the Stock
Option Agreement) has occurred and the Company is unable to terminate pursuant
to such Section 8.01(b)) or (2) Section 8.01(e)(1) or 8.01(e)(2), then the
Company shall pay to the Acquiror U.S.$100,000,000 (it being understood that
such fee is not intended as liquidated damages). In addition to any other rights
that either party has under this Agreement, the Stock Option Agreement and/or
otherwise, solely for the purpose of reimbursing an amount of certain
out-of-pocket costs and expenses incurred in connection with negotiations and
investigations undertaken with respect to the transactions contemplated hereby
and not as liquidated damages, if this Agreement is terminated pursuant to
Section 8.01(b)(x) by the Company (at a time when the Acquiror is unable to
terminate pursuant to Section 8.01(b)), then the Acquiror shall pay to the
Company U.S.$20,000,000 and (y) by the Acquiror (other than with respect to a
breach for which a fee is payable under the preceding sentence, at a time when
the Company is unable to terminate pursuant to Section 8.01(b)), then the
Company shall pay to the Acquiror U.S.$20,000,000.
(b) Any payment required to be made under Section 8.03(a) shall be payable,
without setoff, by wire transfer in immediately available funds, to an account
specified by the Acquiror, within three business days following such
termination.
(c) The Company acknowledges that the agreements contained in this Section
8.03 are an integral part of the transactions contemplated by this Agreement and
are cumulative with, and not intended to limit, other remedies that may be
available, and that, without these agreements, the Acquiror would not enter into
this Agreement; accordingly, if the Company fails promptly to pay any amount due
pursuant to this Section 8.03, and, in order to obtain such payment, the
Acquiror commences a suit which results in a judgment against the Company for
the payment set forth in this Section 8.03, the Company shall pay the Acquiror's
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on any amount due pursuant to this Section 8.03 from the
date such amount becomes payable until the date of such payment at the prime
rate of Citibank N.A. in effect on the date such payment was required to be made
plus two (2) percent.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement (1) other than those contained in Sections 6.05(b),
8.02, and 8.03 and in this Article IX, shall survive the termination of this
Agreement if this Agreement is terminated prior to the Effective Time, or (2)
other than those contained in Sections 6.12 and in this Article IX, shall
survive the Effective Time.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision, or (b)
amended or modified at any time, by an agreement in writing executed by both
parties, except that, after approval of the Merger by the shareholders of the
Company, no amendment may be made which under applicable law requires further
approval of such shareholders without obtaining such required further approval.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of North Carolina applicable to
contracts made and to be performed entirely within such State.
9.05 Expenses. Subject to Section 8.03, each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that the Company shall
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pay printing and postage expenses and the Acquiror shall pay SEC registration
fees related to the Registration Statement and Proxy Statement.
9.06 Notices. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given (a) on the date of
delivery, if personally delivered or telecopied (with confirmation), (b) on the
first business day following the date of dispatch, if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing, if mailed by registered or certified mail (return receipt requested),
in each case to such party at its address or telecopy number set forth below or
such other address or numbers as such party may specify by notice to the parties
hereto.
If to the Company, to:
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27804
Attention: Cecil Sewell
Chairman of the Board and Chief Executive Officer
Facsimile: (252) 977-4800
With a copy to:
Gordon F. Rainey, Jr., Esq.
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Facsimile: (804) 788-8218
If to the Acquiror, to:
Royal Bank of Canada
200 Bay Street
Royal Bank Plaza
Toronto, Ontario
Canada M5J 2J5
Attention: Peter W. Currie
Vice-Chairman and Chief Financial Officer
Facsimile: (416) 974-0081
With a copy to:
Donald J. Toumey, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3588
9.07 Entire Understanding; No Third-Party Beneficiaries. This Agreement
(together with the Disclosure Schedules, the Stock Option Agreement and the
Exhibits hereto) represents the entire understanding of the parties hereto with
reference to all the matters encompassed or contemplated herein and this
Agreement supersedes any and all other oral or written agreements heretofore
made. Except for Section 6.12, insofar as such Section expressly provides
certain rights to the Indemnified Parties named therein, nothing in this
Agreement, expressed or implied, is intended to confer upon any person, other
than the parties hereto or their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.08 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned or delegated, in whole or in part
(except by operation of law), by any of the parties
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hereto without the prior written consent of each other party hereto, except that
the Acquiror and Newco may assign or delegate in their sole discretion any or
all of their rights, interests or obligations under this Agreement to any direct
or indirect, wholly owned subsidiary of the Acquiror, but no such assignment
shall relieve the Acquiror of any of its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by, the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CENTURA BANKS, INC.
By: /s/ CECIL W. SEWELL, JR.
------------------------------------
Name: Cecil W. Sewell, Jr.
Title: Chief Executive Officer
ROYAL BANK OF CANADA
By: /s/ PETER W. CURRIE
------------------------------------
Name: Peter W. Currie
Title: Vice-Chairman & Chief
Financial Officer
By: /s/ JAMES T. RAGER
------------------------------------
Name: James T. Rager
Title: Vice-Chairman Personal &
Commercial Banking
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