EXHIBIT 2
AGREEMENT OF ACQUISITION
THIS AGREEMENT OF ACQUISITION ("AGREEMENT"), is made as of the 13th day of
January, 2004, by and between Rock Bancshares, Inc., an Arkansas corporation
("RBI") and HCB Bancshares, Inc., an Oklahoma corporation ("HCB").
ARTICLE I
RECITALS
Section 1.01 RBI. RBI has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Arkansas, with its
principal executive offices located in Little Rock, Arkansas.
Section 1.02 HCB. HCB has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Oklahoma, with its
principal executive offices located in Camden, Arkansas. HCB is registered as a
savings and loan holding company with the Office of Thrift Supervision ("OTS")
under the Home Owners' Loan Act. As of the date hereof, HCB has 25,000,000
shares of authorized capital stock, of which 20,000,000 are shares of common
stock, par value $0.01 per share ("HCB STOCK"), of which 1,447,013 shares are
outstanding as of January 13, 2004, and 5,000,000 are shares of serial preferred
stock, par value $.01 per share, none of which are outstanding. No other class
of capital stock being authorized.
Section 1.03 Bank. Heartland Community Bank ("BANK") has been duly
incorporated and is a validly existing saving bank association in good standing
under the laws of the United States of America, with its principal executive
offices located in Camden, Arkansas. As of the date hereof, the Bank has
25,000,000 shares of authorized capital stock, of which 20,000,000 are shares of
common stock, par value $.01 per share ("BANK STOCK"), of which 100,000 shares
are outstanding as of December 31, 2003, and 5,000,000 are shares of serial
preferred stock, par value $.01 per share, none of which are outstanding, no
other class of capital stock being authorized. All of the outstanding shares of
the Bank stock are owned by HCB.
Section 1.04 COMPENSATORY STOCK OPTIONS. HCB has reserved 191,764 shares of
HCB Stock ("OPTION STOCK") for issuance pursuant to the terms of the stock
option grants under its existing stock option plan ("OPTION PLAN"), of which
options for 168,387 shares have been granted to various officers and directors
of HCB and its subsidiaries, as shown on Schedule 1.04, and are currently
outstanding. As of execution of this Agreement, all outstanding options for
shares of HCB Stock shall become exercisable.
Section 1.05 RESTRICTED STOCK. HCB has 12,652 shares of HCB Stock issued
and outstanding, reserved for distribution and held by a grantor trust pursuant
to the terms of the HCB Bancshares, Inc. Management Recognition Plan ("MRP"),
all of which shares have been awarded to various officers, directors and one
former director of HCB and its subsidiaries as shown on Schedule 1.05. As of the
date of this Agreement, all awarded shares shall become vested and be
distributed immediately.
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Section 1.06 RIGHTS; VOTING DEBT. Except for (i) the Option Plan and the
MRP and (ii) the transactions contemplated under this Agreement, HCB does not
have any shares of its capital stock reserved for issuance, any outstanding
option, call or commitment relating to shares of its capital stock or any
outstanding securities, obligations or agreements convertible into or
exchangeable for, or giving any person any right (including, without limitation,
preemptive rights) to subscribe for or acquire from it, any shares of its
capital stock (collectively, "RIGHTS"). Neither HCB nor any of its subsidiaries
have any bonds, debentures, notes or other indebtedness issued and outstanding,
having the right to vote, or convertible into securities having the right to
vote, on any matters on which shareholders may vote ("VOTING DEBT").
Section 1.07 MATERIALITY. Unless the context otherwise requires, any
reference in this Agreement to materiality with respect to either party shall,
as to HCB, be deemed to be with respect to HCB and its wholly owned subsidiary,
the Bank, taken as a whole.
Any reference in this Agreement to Material Adverse Change or Material
Adverse Effect shall mean, with respect to any party, any change, circumstance,
development, condition, or occurrence or effect which, individually or in the
aggregate with all other changes, circumstances, developments, conditions,
occurrences, and effects (including all breaches of a representation or warranty
set forth in this Agreement), or occurrence has, or would be reasonably likely
to have, a material adverse effect on (a) the business, results of operations or
financial condition of such party and its subsidiaries, taken as a whole, or (b)
such party's ability to perform its obligations under this Agreement or
consummate the transactions contemplated hereby; provided, however, that in
determining whether a Material Adverse Effect has occurred there shall be
excluded any effect on the referenced party the primary cause of which is (i)
any change in banking or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental authorities,
(ii) any change in GAAP or regulatory accounting requirements applicable to
financial institutions or their holding companies generally, (iii) changes in
conditions, including interest rates, in the banking industry or in the global
or United States economy or financial markets; which respect to clauses (i),
(ii) or (iii), to the extent that such a change does not materially affect the
referenced party to a materially different extent than other similarly situated
banking organizations, and (iv) any action or omission of the referenced party
or any of its Subsidiaries taken with the prior written consent of the other
party to this Agreement in contemplation of the Share Acquisition.
Section 1.08 SHARE ACQUISITION. The Board of Directors of RBI and the Board
of Directors of HCB have each determined that it is desirable and in the best
interests of their respective companies and theirs shareholders that HCB acquire
all of the outstanding shares of HCB ("SHARE ACQUISITION") on the terms and
subject to the conditions set forth in this Agreement.
In consideration of their mutual promises and obligations hereunder, and
intending to be legally bound hereby, RBI and HCB adopt and make this Agreement
and prescribe the terms and conditions hereof and the manner and basis of
carrying it into effect, which shall be as follows:
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ARTICLE II
SHARE ACQUISITION
Section 2.01 SHARE ACQUISITION. On the Effective Date, as defined in
Section 8.01, RBI will acquire all of the outstanding HCB Stock pursuant to the
provisions of, and with the effects provided in, the Oklahoma General
Corporation Act. No changes will be made to the certificate of incorporation of
HCB or the Articles of Incorporation of HCB by reason of the consummation of
this transaction. At the Effective Time, the terms of directors of HCB shall
terminate and their successors shall be designated by RBI; the terms of the
Officers of HCB shall terminate and their successors shall be elected by the
newly designated board of directors of HCB; HCB and RBI shall each continue to
possess all of the rights, privileges and franchises possessed by each prior to
this transaction; Each of HCB and RBI shall continue to be responsible for all
of their respective liabilities and obligations; and the Share Acquisition shall
not affect or impair the rights of the creditors or of any persons dealing with
RBI or HCB.
Section 2.02 THE CLOSING.
(a) A "Closing" shall take place at a place mutually agreed upon by the
parties, at a time and on a date to be specified by RBI, promptly after the
satisfaction or, except in the case of receipt of the approvals of HCB's
stockholders and regulatory authorities described in Sections 6.01(a) and (b),
waiver of all of the conditions set forth in Sections 6.01 and 6.02 to this
Agreement (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment of those conditions), or at such
other times and date as HCB and RBI may agree (the "CLOSING DATE"). At the
Closing, (a) RBI and HCB shall each provide to the other such proof or
indication of satisfaction of the conditions set forth in Sections 6.01 and 6.02
as the other may have reasonably requested; (b) the certificates, letters, and
opinions required by Sections 6.01(f) and (g) and Sections 6.02(f) and (g) shall
be delivered; (c) RBI and HCB shall cause the Certificate of Acquisition to be
filed with the Secretary of State of the State of Oklahoma, (d) HCB shall
certify to RBI (i) its Equity Capital (as defined in Section 2.03(d) below) and
(ii) the number of shares of HCB Stock then outstanding, and (e) RBI and HCB
shall execute and deliver to each other all other instruments and assurances,
and do all things, reasonably necessary and proper to effect the Share
Acquisition and other transactions contemplated hereby.
(b) The Share Acquisition shall become effective at 6:01 p.m. on the date
that the Certificate of Acquisition is filed with the Secretary of State of the
State of Oklahoma, unless a later time is agreed to in writing by RBI and HCB
and so specified in the Certificate of Acquisition. The date and time at which
the Share Acquisition shall become effective is referred to in this Agreement as
the "EFFECTIVE TIME."
(c) From and after the Effective Time, the effect of the Share Acquisition
shall be as provided in this Agreement and in the applicable provisions of the
Oklahoma General Corporation Act. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the rights,
privileges, powers of ownership in the HCB Stock shall vest in RBI, and the
rights of the HCB shareholders shall be converted into the right to receive the
Share Acquisition Consideration.
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Section 2.03 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Share Acquisition and without any action on the part of RBI, HCB or the
holders of any of the following securities:
(a) Each share of HCB Stock issued and outstanding immediately prior to the
Effective Time (excluding any Dissenting Shares, as defined in Section 2.06)
shall be converted into the right to receive the amount in cash set forth below
("SHARE ACQUISITION PRICE"), subject to adjustment as set forth in Section 2.03
(d) below:
(i) $18.61 per share of HCB Stock, if the Effective Time, is on or
prior to June 30, 2004;
(ii) $18.62 per share of HCB Stock, if the Effective Time, is after
June 30, 2004 but on or prior to July 31, 2004; or
(iii) $18.63 per share of HCB Stock, if the Effective Time, is after
July 31, 2004 but on or prior to August 31, 2004.
HCB represents that, as of the date of this Agreement, 1,447,013 shares of HCB
Stock are outstanding. If between the date of this Agreement and the Effective
Time, the outstanding shares of HCB Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
issuance, stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, the Share Acquisition Price shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares. No
adjustment of the Share Acquisition Price shall occur by reason of issuance or
cancellation of any Option Shares under the Option Plan. At the Effective Time,
all such shares of HCB Stock shall be owned by RBI and each certificate
previously evidencing any such shares shall thereafter represent the right to
receive the Share Acquisition Consideration (as defined in Section 2.04(b)). The
holders of such certificates previously evidencing such shares of HCB Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of HCB Stock except as otherwise provided
herein or by law.
(b) (i) Each share of HCB Stock held in the treasury of HCB and each share
of HCB Stock owned by the HCB Bancshares, Inc. 1998 Stock Option Plan Trust
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
(ii) To the extent participants in the Heartland Community Bank Directors'
Retirement Plan (the "DRP") consent to the termination of the DRP and receive
payment of their entire account balances at the Closing pursuant to Section 3.07
hereof, any shares of HCB Stock held immediately prior to the Effective Time by
the Executive Officers' Grantor Trust or the Non-Employee Directors' Grantor
Trust associated with the DRP and attributable to the account balances of such
participants shall be cancelled and extinguished without any conversion thereof
and no payment shall be made with respect thereto; any shares of HCB Stock held
immediately prior to the Effective Date by the Executive Officers' Grantor Trust
or the Non-Employee Directors' Grantor Trust associated with the
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DRP and attributable to the account balances of such participants who have not
consented to termination of the DRP and elect to receive payment of their
account balances after the Closing shall be converted into the right to receive
the Share Acquisition Price pursuant to Section 2.03(a) hereof.
(c) Prior to the Closing, each exercisable Stock Option shall be canceled
and each option holder shall be entitled to receive, in lieu of each share of
HCB Common Stock that would otherwise have been issuable upon the exercise
thereof, a cash payment equal to the Share Acquisition Price less the per share
exercise price applicable to such Stock Option. The cash payment to each holder
of the Stock Options shall be paid by HCB to each holder prior to the Closing
and shall be subject to all applicable federal and state tax withholding
obligations. The outstanding Stock Options to be canceled in exchange for
payment pursuant to the immediately preceding sentence shall not be deemed to be
Stock Options issued and outstanding immediately prior to the Effective Time.
(d) In the event that HCB's Equity Capital (as defined below) on the last
day of the calendar month immediately preceding the Closing Date shall be less
than $26,500,000 ("MINIMUM EQUITY"), the aggregate Share Acquisition
Consideration paid pursuant to Sections 2.03(a), 2.03(b) and 2.03(c) will be
reduced by an amount equal to the amount by which the Minimum Equity exceeds
HCB's Equity Capital on the last day of the calendar month immediately preceding
the Closing Date. For purposes of this Agreement, "EQUITY CAPITAL" shall equal
the sum of the capital stock, capital surplus and retained earnings of HCB.
Except as specifically provided herein, Equity Capital shall be determined
pursuant to generally accepted accounting principles ("GAAP"). For purposes of
the definition of Equity Capital, the amount of Equity Capital shall not be
reduced by adjustments (unless in excess of the specified criteria) made for
certain extraordinary items related to this Agreement and the Share Acquisition,
including, but not limited to, adjustments for (i) legal fees, accounting fees,
fees and commissions payable to any broker, finder or investment banking firm in
connection with this Agreement and the transactions contemplated hereby, all
such fees and commissions not to exceed $600,000, (ii) any adjustment to the
equity of HCB by reason of any unrealized loss in available for sale securities;
and (iii) all costs for the acquisition and cancellation of all outstanding
stock options issued by HCB and all payments to employees or former employees of
HCB or the Bank or other costs and expenses to HCB or the Bank related to
benefit plans, bonus plans, change in control agreements and covenants payable
by HCB or the Bank or their successors which are incurred or accelerated, in
whole or in part, by reason of the change in control or otherwise payable under
any employment agreement, employee benefit plan, bonus plan, recognition plan,
non-competition agreement or other plan or agreement adopted and maintained by
HCB or the Bank, as more fully described and estimated on Schedule 2.03(d)
hereof.
Section 2.04 PAYMENT OF CONSIDERATION. (a) Prior to the Closing, RBI shall
deposit, or shall cause to be deposited, with Registrar and Transfer Company
("TRANSFER AGENT"), for the benefit of the holders of shares of HCB Stock, for
payment of the Share Acquisition Consideration in accordance with this Article
II, through the Transfer Agent, cash in an amount equal to the product of (i)
the Share Acquisition Price multiplied by (ii) the number of shares of HCB Stock
outstanding, less any Dissenting Shares ("SHARE ACQUISITION FUND"). HCB shall
pay over to the Transfer Agent the Deposit, as defined in Section 7.04, to be
held and distributed as part of the Share Acquisition and RBI shall receive a
credit for such amount.
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(b) Promptly after the Effective Time, RBI will instruct the Transfer Agent
to mail, within five days after the Effective Time, to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
evidenced outstanding shares of HCB Stock (other than Dissenting Shares)
("CERTIFICATES"), (1) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Transfer Agent and shall be
in such form and have such other provisions as RBI may reasonably specify) and
(2) instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Share Acquisition Consideration, as defined below.
Upon surrender of a Certificate for cancellation to the Transfer Agent together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a sum in cash
equal to the Share Acquisition Price multiplied by then number of shares of HCB
Stock evidenced by the Certificate ("SHARE ACQUISITION CONSIDERATION") and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of HCB Stock which is not registered in the
transfer records of HCB, the Share Acquisition Consideration may be paid in
accordance with this Article II to a transferee if the Certificate evidencing
such shares of HCB Stock is presented to the Transfer Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.03, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Share Acquisition Consideration.
(c) The Transfer Agent shall invest any cash included in the Share
Acquisition Fund as directed by RBI, provided that such investments shall be
solely in (a) marketable obligations of, or obligations guaranteed by, the
United States of America, and/or (b) interests in any open-end or closed-end
management type investment company or investment trust registered under the
Investment Company Act of 1940, the portfolio of which is limited to obligations
of, or obligations guaranteed by, the United States or any agency thereof
("Federal Obligations") and to agreements to repurchase Federal Obligations that
are at least 100% collateralized by Federal Obligations marked to market on a
daily basis. Any interest and other income resulting from such investments shall
promptly be paid to RBI
(d) The Share Acquisition Consideration shall not be paid to any such
holder, until the holder of such Certificate shall surrender such Certificate.
(e) The Share Acquisition Consideration paid for the shares of HCB Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of HCB Stock.
(f) Any portion of the Share Acquisition Fund which remains undistributed
to the holders of HCB Stock on the date twelve (12) months following the
Effective Time shall be delivered to RBI, upon demand, and any holders of HCB
Stock who have not theretofore complied with this Article II shall thereafter
look directly to RBI for the Share Acquisition Consideration to which they are
entitled.
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(g) RBI shall not be liable to any holder of shares of HCB Stock for any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) RBI shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of HCB
Stock such amounts as HCB is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
RBI, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of HCB Stock in respect of which
such deduction and withholding was made by RBI.
Section 2.05 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of HCB shall be closed and there shall be no further registration
of transfers of shares of HCB Stock thereafter on the records of HCB. On or
after the Effective Time, any certificates presented to the Transfer Agent or
RBI for any reason shall be converted into the Share Acquisition Consideration.
Section 2.06 DISSENTING SHARES. Notwithstanding any other provisions of
this Agreement to the contrary, shares of HCB Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Share Acquisition or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
shares (collectively, the "DISSENTING SHARES") in accordance with Section 1091
of the Oklahoma General Corporation Act (12 O.S. ss.1091) shall not be converted
into or represent the right to receive the Share Acquisition Consideration. Such
stockholders shall be entitled to receive payment of the fair value of such
shares of HCB Stock held by them in accordance with such provisions of such
statute, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to judicial determination of the value of the shares of HCB Stock under such
statute shall have been converted into and to have become exchangeable, as of
the Effective Time, for the right to receive, without any interest thereon, the
Share Acquisition Consideration, as if such shares of HCB Stock, upon surrender,
in the manner provided in Section 2.04, of the certificate or certificates that
formerly evidenced such shares of HCB Stock.
Section 2.07 LOST HCB STOCK CERTIFICATES. In the event any Certificate for
HCB Stock shall have been lost, stolen or destroyed, upon receipt of appropriate
evidence as to such loss, theft or destruction and to the ownership of such
Certificate by the person claiming such Certificate to be lost, stolen or
destroyed and the receipt by RBI of appropriate and customary indemnification,
RBI will pay (or direct the Transfer Agent to pay) the Share Acquisition
Consideration for the shares of HCB Stock evidenced by such lost, stolen or
destroyed Certificate, payable in respect thereof as determined in accordance
with this Article II.
Section 2.08 OPTIONS AND RIGHTS. Other than pursuant to the terms of the
Option Plan and the MRP, there are no options or rights granted by HCB to
purchase shares of HCB Stock, which are outstanding and unexercised and there
are no outstanding securities issued by HCB, or any other party, convertible
into HCB Stock.
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ARTICLE III
ACTIONS PENDING SHARE ACQUISITION
Section 3.01 REQUIRED ACTIONS PENDING SHARE ACQUISITION. HCB hereby
covenants and agrees with RBI that prior to the Effective Time, unless the prior
written consent of RBI shall have been obtained, and except as otherwise
contemplated herein, HCB will and will cause each of its subsidiaries to:
(a) use reasonable efforts to preserve intact their business organization
and assets, maintain their rights and franchises, retain the services of their
officers and key employees, except that they shall have the right to lawfully
terminate the employment of any officer or key employee if such termination is
in accordance with HCB's existing employment procedures;
(b) use reasonable efforts to maintain and keep their properties in as good
repair and condition as at present, except for depreciation due to ordinary wear
and tear;
(c) use reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained;
(d) perform in all material respects all obligations required to be
performed by them under all material contracts, leases, and documents relating
to or affecting their assets, properties, and business; and
(e) give RBI notice of all board of directors meetings of HCB and each of
its subsidiaries, provide RBI with all written materials and communications
provided to such directors in connection with such meetings, and allow RBI to
have a non-voting representative at each such meeting, provided, however, such
representative shall be subject to exclusion from any portion of any such
meeting during any discussion or action, and will not be entitled to receive
written materials or other communications, concerning the Share Acquisition or
to the extent that HCB's legal counsel advises the directors that permitting
RBI's presence, or the receipt of written materials or other communications,
would constitute a breach of their fiduciary duties.
Section 3.02 PROHIBITED ACTIONS PENDING SHARE ACQUISITION. Except as
specifically contemplated by this Agreement, from the date hereof until the
earlier of the termination of the Agreement or the Effective Time, HCB shall not
do, and HCB will cause each of its subsidiaries not to do, without the prior
written consent of RBI which consent shall not be unreasonably withheld, any of
the following:
(a) make, declare or pay any dividend on HCB Stock, other than dividends
consistent with historic practices or declare or make any distribution on, or
directly or indirectly combine, redeem, reclassify, purchase or otherwise
acquire, any share of its capital stock (other than in a fiduciary capacity or
in respect of a debt previously contracted in good faith) or authorize the
creation or issuance of or issue or sell or permit any subsidiary to issue or
sell any additional shares of HCB's capital stock or the capital stock of any
subsidiary (except for shares issued pursuant to the exercise
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of the Stock Options and the vesting and distribution of restricted stock awards
made under the MRP), or any options, calls or commitments relating to its
capital stock or the capital stock of any subsidiary, or any securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire, shares of its capital stock or the
capital stock of any of its subsidiaries, except that HCB may repurchase shares
from the Executive Officers' Grantor Trust or the Non-Employee Directors'
Grantor Trust, or both, associated with the DRP in the connection with any
payment by the DRP to a DRP participant of all or any portion of his or her DRP
account balance;
(b) hire any additional staff, except for personnel hired at an hourly rate
to fill vacancies or for seasonal part time staff in accordance with past
practices;
(c) enter into or permit any subsidiary to enter into any employment
contracts with, pay any bonus to, or increase the rate of compensation of, any
of its directors, officers or employees, except in the ordinary course of
business consistent with the past practice or existing agreements or plans;
(d) except as directed by RBI consistent with the terms of this Agreement,
or as otherwise required or permitted under this Agreement, enter into or modify
or permit any subsidiary to enter into or modify (except as may be required by
applicable law and except for the renewal of any existing plan or arrangement in
the ordinary course of business consistent with past practice) any pension,
retirement, stock option, bonus retention, change in control, stock purchase,
savings, profit sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of its
directors, officers or other employees;
(e) except as contemplated by Section 5.01(j), substantially modify the
manner in which it and its subsidiaries have heretofore conducted their
business, taken as a whole, or amend its articles of incorporation or by-laws;
(f) except in the ordinary course of business, acquire any assets or
business or take any other action, that considered as a whole is material to HCB
on a consolidated basis;
(g) acquire any investment securities other than U.S. Treasury Securities,
Arkansas municipal securities, U.S. Agency securities which are traditional
fixed rate debt securities or floating rate mortgage-backed securities;
(h) except in their fiduciary capacities, purchase any shares of HCB Stock;
(i) except as contemplated by Section 5.01(j), change any method of
accounting in effect at June 30, 2003, or change any method of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending June
30, 2003, except as may be required by law or generally accepted accounting
principles;
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(j) knowingly take any action which would or is reasonably likely to (1)
adversely affect the ability of either of RBI or HCB to obtain any necessary
approvals of governmental authorities required for the transactions contemplated
hereby; (2) adversely affect HCB's ability to perform its covenants and
agreements under this Agreement; or (3) result in any of the conditions to the
Share Acquisition set forth herein not being satisfied;
(k) make any new single loan or series of loans to one borrower or a
related group of borrowers in an aggregate amount greater than $250,000.00,
unless approved by RBI provided that the failure of RBI to respond to any
request for the approval of such a loan within twenty-four (24) hours shall be
deemed to be an approval;
(l) sell or dispose of any real estate or other assets having a value in
excess of $75,000.00, other than properties acquired in foreclosure or otherwise
in the ordinary collection of indebtedness to HCB or its subsidiaries; or
(m) directly or indirectly agree to take any of the foregoing actions.
Section 3.03 CONDUCT OF HCB TO DATE. Except as contemplated by this
Agreement or as disclosed on Schedule 3.03, from and after June 30, 2003 through
the date of this Agreement:
(a) HCB and the Bank have carried on their respective businesses in the
ordinary and usual course consistent with past practices,
(b) neither HCB nor the Bank have issued or sold any capital stock or
issued or sold any corporate debt securities which would be classified as long
term debt on the balance sheet of HCB or the Bank,
(c) all dividends declared or paid by HCB have been in accordance with past
practices,
(d) neither HCB nor the Bank have incurred any material obligation or
liability (absolute or contingent), except normal trade or business obligations
or liabilities incurred in the ordinary course of business, or in conjunction
with this Agreement, or mortgaged, pledged, or subjected to lien, claim,
security interest, charge, encumbrance or restriction any of its assets or
properties,
(e) neither HCB nor the Bank have discharged or satisfied any material
lien, mortgage, pledge, claim, security interest, charges, encumbrance, or
restriction or paid any material obligation or liability (absolute or
contingent), other than in the ordinary course of business,
(f) neither HCB nor the Bank have, since June 30, 2003, sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its properties
or assets other than for a fair consideration in the ordinary course of
business,
(g) except as disclosed to RBI in the Disclosure Letter, neither HCB nor
the Bank increased the rate of compensation of, or paid any bonus to, any of its
directors, officers, or other employees, except merit or promotion increases, in
accordance with existing policy; entered into any new, or amended or
supplemented any existing, employment, management, consulting, deferred
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compensation, severance, or other similar contract; adopted, entered into,
terminated, amended or modified any employee benefit plan in respect of any of
present or former directors, officers or other employees; or agreed to do any of
the foregoing,
(h) neither HCB nor the Bank has suffered any material damage, destruction,
or loss, whether as the result of flood, fire, explosion, earthquake, accident,
casualty, labor trouble, requisition or taking of property by any government or
any agency of any government, windstorm, embargo, riot, act of God, or other
similar or dissimilar casualty or event or otherwise, whether or not covered by
insurance,
(i) except as disclosed to RBI in the Disclosure Letter, neither HCB nor
the Bank has canceled or compromised any debt owed to it or any of its
subsidiaries, to an extent exceeding $50,000.00 or any claim asserted by HCB or
any of its subsidiaries in any judicial or other official government forum, to
an extent exceeding $50,000.00,
(j) neither HCB nor the Bank has entered into any transaction, contract, or
commitment outside the ordinary course of its business,
(k) neither HCB nor the Bank has entered, or agreed to enter, into any
agreement or arrangement granting any preferential right to purchase any of its
material assets, properties or rights or requiring the consent of any party to
the transfer and assignment of any such material assets, properties or rights,
(l) there has not been any change in the method of accounting or accounting
practices of HCB or any of its subsidiaries, except as required by generally
accepted accounting principles, and
(m) HCB and the Bank have kept all records substantially in accordance with
its record retention policy and has not received any comment, notice or
criticism by any bank regulatory agency which would lead a reasonable person to
believe that such policy is not substantially in compliance with regulatory and
statutory requirements and customary industry standards and have retained such
records for the periods required by its policy.
3.04 NO SOLICITATION. (a) From and after the date of this Agreement until
the Effective Time or termination of this Agreement pursuant to Article VII, HCB
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Competing Acquisition Proposal (as defined
below), (ii) participate in any discussions or negotiations regarding, or
furnish to any person any non-public information with respect to, or take any
other action to facilitate any inquiring or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Competing Acquisition
Proposal, (iii) engage in discussions with any person with respect to any
Competing Acquisition Proposal or (v) enter into any contract relating to any
Competing Acquisition Transaction (as defined below); provided, however, this
Section 3.04(a) shall not prohibit HCB or its Board of Directors from (A)
furnishing information regarding HCB and its subsidiaries to, entering into a
customary confidentiality agreement with or
11
entering into discussions with, any person or group in response to a Superior
Offer submitted by such person or group (and not withdrawn), (B) taking the
actions described in Section 3.05(c) as permitted thereby, (C) recommending a
Superior Offer to HCB's shareholders or (D) terminating this Agreement pursuant
to Section 7.01(h) in order to immediately thereafter enter into a definitive
agreement with respect to such Superior Offer, if in the case of either (A),
(B), (C) or (D), (1) neither HCB nor any representative of HCB and its
Subsidiaries shall have violated any of the restrictions set forth in this
Section 3.04, (2) the Board of Directors of HCB concludes in good faith, after
consultation with its outside legal counsel, that such action is necessary in
order for the Board of Directors of HCB to comply with its fiduciary obligations
to HCB's shareholders under applicable law, (3) within one business day of
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such person or group, HCB gives RBI written notice of the
identity of such person or group and of HCB's decision to furnish nonpublic
information to, or enter into discussions or negotiations with, such person or
group and HCB receives from such person or group an executed confidentiality
agreement containing customary limitations on the use and disclosure of all
written and oral information furnished to such person or group by or on behalf
of HCB, and (4) contemporaneously with furnishing any such information to such
person or group, HCB furnishes such information to RBI (to the extent such
information has not been previously furnished by HCB to RBI). Nothing in this
Section 3.04(a) shall prevent HCB or its Board of Directors from complying with
Rules 14e-2 and 14d-9 promulgated under the Exchange Act with regard to a
Competing Acquisition Proposal with respect to which no violation of this
Section 3.04 shall have occurred. HCB and its subsidiaries will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Competing Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding two sentences by any officer or director
of HCB or any of its subsidiaries or any investment banker, attorney or other
advisor or representative of HCB or any of its subsidiaries shall be deemed to
be a breach of this Section 3.04 by HCB.
For purposes of this Agreement, "Competing Acquisition Proposal" shall mean
any offer or proposal (other than an offer or proposal by RBI) relating to any
Competing Acquisition Transaction. For the purposes of this Agreement,
"Competing Acquisition Transaction" shall mean any transaction or series of
related transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from HCB by any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of HCB or any of its subsidiaries or any tender offer or exchange
offer that if consummated would result in any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 15% or more of the total outstanding voting
securities of HCB or any of its subsidiaries, or any merger, consolidation,
business combination or similar transaction involving HCB pursuant to which the
shareholders of HCB immediately preceding such transaction hold less than 85% of
the equity interests in the surviving or resulting entity of such transaction;
(B) any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 15% of the assets of HCB; or (C) any liquidation or
dissolution of HCB.
12
(b) In addition to the obligations of HCB set forth in paragraph (a) of
Section 3.04, HCB, as promptly as practicable, shall advise RBI orally and in
writing of any request received by HCB for information which HCB reasonably
believes would lead to a Competing Acquisition Proposal or of any Competing
Acquisition Proposal, or any inquiry received by HCB with respect to, or which
HCB reasonably believes would lead to any Competing Acquisition Proposal, the
material terms and conditions of such request, Competing Acquisition Proposal or
inquiry, and the identity of the person or group making any such request,
Competing Acquisition Proposal or inquiry. HCB will keep RBI informed in all
material respects of the status and details (including material amendments or
proposed amendments) of any such request, Competing Acquisition Proposal or
inquiry.
Section 3.05. HCB SHAREHOLDER MEETING. (a) Promptly after the execution of
this Agreement, HCB shall commence to take such actions as may be necessary to
obtain adoption and approval of this Agreement by shareholders of HCB,
including, without limitation, the calling of such meeting to be held on or
before June 25, 2004, and the preparation of preliminary proxy materials for the
special meeting of shareholders of HCB ("PROXY STATEMENT"). RBI will furnish to
HCB any information which HCB may reasonably request in connection with the
preparation and filing with the SEC of such preliminary proxy materials. HCB
shall notify RBI promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and shall supply RBI with
copies of all correspondence between HCB or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. Upon completion of preparation by HCB of such preliminary Proxy
Statement, HCB will furnish to RBI copies of such preliminary proxy materials
which HCB proposes to send to its shareholders. HCB shall use its reasonable
efforts to cause the Proxy Statement to be mailed to HCB's shareholders as
promptly as practicable after filing with the SEC, including by responding as
promptly as practicable to any comments of the SEC with respect to the Proxy
Statement.
If at any time after the mailing of proxy solicitation materials and before
the Effective Time (i) any information relating to HCB, RBI or any of their
respective affiliates, officers or directors, should be discovered by HCB or RBI
which should be set forth in an amendment or supplement to the proxy statement,
so that the proxy statement shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, the party which discovered such
information shall promptly notify the other parties thereto or (ii) any event
shall have occurred as a result of which, in the opinion of counsel for HCB, a
resolicitation of proxies from the shareholders of HCB or the preparation of
amended or supplemented proxy solicitation materials is necessary or advisable,
the parties shall promptly prepare, in accordance with the procedures provided
for above, and distribute to the shareholders of HCB an appropriate amendment or
supplement to the proxy solicitation materials previously distributed.
Notwithstanding the foregoing, prior to filing the proxy statement, or any
amendment or supplement thereto, or prior to responding to any comments of the
SEC with respect thereto, HCB shall provide RBI with a reasonable opportunity to
review and comment on such document or response.
Unless HCB's Board of Directors has withdrawn its recommendation of this
Agreement and the Share Acquisition in compliance with Section 3.05(c), subject
to all applicable federal securities
13
laws, HCB shall use commercially reasonable efforts to solicit from its
shareholders proxies in favor of the approval of this Agreement and the Share
Acquisition pursuant to the Proxy Statement and shall take all other action
necessary or advisable to secure the vote or consent of shareholders as required
by the Oklahoma General Corporation Act or applicable NASDAQ requirements to
obtain such approval. Unless HCB's Board of Directors has withdrawn its
recommendation of this Agreement and the Share Acquisition in compliance with
Section 3.05(c), HCB and RBI shall take all other action reasonably necessary or
advisable to promptly and expeditiously secure any vote or consent of
shareholders required by applicable law and such party's Articles of
Incorporation and Bylaws to effect the Share Acquisition. HCB's obligation to
call, give notice of, convene and hold the HCB Shareholders' Meeting in
accordance with this Section 3.05(a) shall not be limited to or otherwise
affected by the commencement, disclosure, announcement or submission to HCB of
any Competing Acquisition Proposal or any changes in the Board of Directors'
recommendation regarding the Share Acquisition.
(b) Subject to subsection (c) of this Section 3.05 and subject to the
exercise by the Board of Directors of HCB of their fiduciary duties: (i) the
Board of Directors of HCB shall recommend that HCB's shareholders vote in favor
of and adopt and approve this Agreement and the Share Acquisition at the HCB
Shareholders' Meeting; (ii) the Proxy Statement shall include a statement to the
effect that the Board of Directors of HCB has recommended that HCB's
shareholders vote in favor of and adopt and approve this Agreement and the Share
Acquisition at the HCB Shareholders' Meeting; and (iii) neither the Board of
Directors of HCB nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify in a manner adverse to RBI, the
recommendation of the Board of Directors of HCB that HCB's shareholders vote in
favor of and adopt and approve this Agreement and the Share Acquisition.
(c) Nothing in this Agreement shall prevent the Board of Directors of HCB
from, prior to a favorable vote of the Shareholders of HCB, withholding,
withdrawing, amending or modifying its recommendation in favor of adopting and
approving this Agreement and the Share Acquisition or from not including its
recommendation in favor of adopting and approving this Agreement and the Share
Acquisition in the Proxy Statement if (i) a Superior Offer (as defined below) is
made to HCB and not withdrawn, (ii) neither HCB nor any of its representatives
shall have violated any of the restrictions set forth in Section 3.04 and HCB is
not then in breach of this Agreement, (iii) the Board of Directors of HCB
concludes in good faith, after consultation with and receiving advice from its
outside counsel, that, in light of such Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is necessary in
order for the Board of Directors of HCB to comply with its fiduciary obligations
to HCB's shareholders under applicable law; and (iv) HCB complies with the
requirements of Section 7.01(h); provided, however, that prior to any
commencement thereof, HCB shall have given RBI at least forty-eight (48) hours
notice thereof and the opportunity to meet with HCB and its counsel. Nothing
contained in this Section 3.05 shall limit HCB's obligation to hold and convene
the HCB Shareholders' Meeting (regardless of whether the recommendation of the
Board of Directors of HCB shall have been withdrawn, amended or modified). For
purposes of this Agreement, "Superior Offer" shall mean an unsolicited, bona
fide written offer made by a third party to consummate any of the following
transactions: (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving HCB
pursuant to which those shareholders of HCB immediately preceding such
14
transaction will hold less than 51% of the equity interest in the surviving or
resulting entity of such transaction, (ii) a sale or other disposition by HCB of
substantially all of its assets, or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by HCB),
directly or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 35% of the voting power of the
then outstanding shares of capital stock of HCB, in each case on terms that the
Board of Directors of HCB determines, in its reasonable judgment to be more
favorable and provide higher value to HCB shareholders (taking into account all
terms and conditions and the likelihood of consummation) than the terms of the
Share Acquisition (after receipt and consideration of written advice of its
financial advisor).
Section 3.06 TERMINATION OF HCB ESOP. As soon as practicable after the
execution of this Agreement, HCB shall take such actions as may be necessary or
appropriate to terminate the HCB Bancshares, Inc. Employee Stock Ownership Plan
("ESOP") as of the Effective Time. Between the date hereof and the Effective
Time, the existing ESOP loan indebtedness shall be paid in accordance with the
terms of the ESOP and the applicable provisions of the Code to fund such loan
payments. Any indebtedness of the ESOP that remains as of the Effective Time
shall be repaid from the ESOP's related trust in accordance with Section 17.3 of
the ESOP. Upon the repayment of the ESOP loan, all remaining funds in the ESOP's
suspense account will be allocated to ESOP participants in accordance with the
terms of the ESOP. HCB is authorized to submit, as soon as possible after the
execution of this Agreement, a determination application with the Internal
Revenue Service regarding the tax-qualification of the ESOP upon its
termination. Subject to the conditions described herein and the receipt of a
favorable Internal Revenue Service determination letter, as soon as practicable
after the Effective Time and the repayment of the ESOP loan, participants in the
ESOP shall be entitled to elect to have the amounts in their ESOP accounts
either distributed to them in a cash lump sum or rolled over in cash to a
tax-qualified plan maintained by RBI or to an individual retirement account. The
actions by HCB relating to termination of the ESOP will be subject to the
consummation of the Share Acquisition. As of and following the Effective Time,
RBI shall carry out the termination of the ESOP through distribution of its
assets in accordance with this Section 3.06 and as otherwise required by the
terms of the ESOP and applicable law.
Section 3.07 DIRECTORS' RETIREMENT PLAN. As soon as practicable after the
execution of this Agreement, the Bank will take such actions as are necessary or
appropriate to terminate the DRP. Subject to the consummation of this Agreement
and the written consent of each participant of the DRP, the Bank shall pay to
each participant listed in Schedule 3.07 his or her entire account balance under
the DRP in a single sum at the Closing. Notwithstanding anything in this Section
3.07 to the contrary, if a participant of the DRP does not consent to a single
sum payment of his or her account balance, the grantor trust that was
established in connection with the DRP shall remain in existence and shall be
maintained in accordance with its terms as in effect on the date of this
Agreement until such participant's entire account balance under the DRP has been
distributed to the participant in accordance with his or her election form, If
such grantor trust is required to remain in existence after the Effective Time
and if the current trustees of the trust resign or are removed after the
Effective Time, such resigning or removed trustees shall appoint as their
successor a third party financial institution that has trust powers and that is
independent of RBI, subject to the consent of the remaining participants of the
DRP who are entitled to receive benefits under the DRP.
15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 REPRESENTATIONS AND WARRANTIES. Except as disclosed in the
Disclosure Letter, RBI represents and warrants to HCB, and HCB and the Bank
represent and warrant to RBI, that:
(a) The facts set forth in Article I of this Agreement with respect to it
are true and correct.
(b) All of the outstanding shares of its capital stock are duly authorized,
validly issued and outstanding, fully paid and non-assessable, and are subject
to no preemptive rights.
(c) In the case of HCB, the shares of capital stock of each of its
subsidiaries are owned by HCB free and clear of all liens, claims, encumbrances
and restrictions on transfer and there are no Rights with respect to such
capital stock.
(d) Each has the power and authority, and is duly qualified in all
jurisdictions, except for such qualifications the absence of which will not have
a Material Adverse Effect, as hereinafter defined, where such qualification is
required, to carry on its business as it is now being conducted and to own all
its material properties and assets, and it has all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted,
except for such powers and authorizations the absence of which, either
individually or in the aggregate, would not have a Material Adverse Effect.
(e) The Board of Directors of each RBI and HCB have, by all appropriate
action, approved this Agreement and the Share Acquisition. Subject to the
receipt of approval of shareholders of HCB and, subject to receipt of required
regulatory approvals, this Agreement is a valid and binding agreement of each,
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(f) The execution, delivery and performance of this Agreement by it does
not, and the consummation of the transactions contemplated hereby by it will
not, constitute (1) a breach or violation of, or a default under, any law, rule
or regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or its subsidiaries, if any, or to
which it or its subsidiaries, if any, (or any of their respective properties) is
subject, which breach, violation or default is reasonably likely to have a
Material Adverse Effect, or enable any person to enjoin any of the transactions
contemplated hereby or (2) a breach or violation of, or a default under, its
articles of incorporation or by-laws or those of its subsidiaries, if any; and
the consummation of the transactions contemplated hereby will not require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture or instrument, other than the required
approvals of applicable regulatory authorities referred to in Sections 6.01(b)
and 6.02(b), the
16
approval of the shareholders of HCB and RBI referred to in Sections 3.05 and
4.01(e) and any consents and approvals the absence of which will not have a
Material Adverse Effect.
(g) In the case of HCB, as of their respective dates, neither its Annual
Report on form 10-K for the fiscal year ended June 30, 2003, nor any other
document filed subsequent to June 30, 2003 under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"), each
in the form, including exhibits, filed with the SEC, and the Statements of
Condition filed on behalf of its subsidiaries with the state and federal banking
agencies during 2001, 2002 and 2003, (collectively, the "HCB REPORTS"), did 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 made therein,
in light of the circumstances under which they were made, not misleading. Each
of the balance sheets in or incorporated by reference into the HCB Reports,
including the related notes and schedules, fairly presents the financial
position of the entity or entities to which it relates as of its date and each
of the statements of operations and retained earnings and of cash flow and
changes in financial position or equivalent statements in or incorporated by
reference into the HCB Reports, including any related notes and schedules,
fairly presents the results of operations, retained earnings and cash flows and
changes in financial position, as the case may be, of the entity or entities to
which it relates for the periods set forth therein, subject, in the case of
unaudited interim statements or reports to normal year-end audit adjustments
that are not material in amount or effect, in each case in accordance with
generally accepted accounting principles applicable to savings and loan holding
companies consistently applied during the periods involved, except as may be
noted therein. It has no material obligations or liabilities, contingent or
otherwise, except as disclosed in the HCB Reports, and its consolidated
allowance for loan and lease losses, as shown on its most recent balance sheet
or statement of condition contained in the HCB Reports was adequate, as of the
date thereof, within the meaning of generally accepted accounting principles and
safe and sound banking practices.
(h) Since June 30, 2000, HCB has timely filed all reports required to be
filed by it pursuant to the Exchange Act.
(i) Since June 30, 2003, in the case of HCB,, there has been no Material
Adverse Change in the financial condition of HCB and its subsidiaries, taken as
a whole.
(j) All material federal, state, local, and foreign tax returns required to
be filed by or on behalf of it or its subsidiaries, if any, have been timely
filed or requests for extensions have been timely filed and any such extension
shall have been granted and not have expired, and all such returns filed, as
amended, are complete and accurate in all material respects. All taxes shown on
returns filed by it have been paid in full or adequate provision has been made
for any such taxes on its balance sheet in accordance with generally accepted
accounting principles. As of the date of this Agreement, there is no audit
examination, deficiency, or refund litigation with respect to any taxes of it
that would result in a determination that would have a Material Adverse Effect.
All taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded litigation relating to it have been paid in
full or adequate provision has been made for any such taxes on its balance sheet
in accordance with generally accepted accounting principles. It has not executed
an extension or
17
waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect.
(k) (1) No material litigation, proceeding or controversy before any court
or governmental agency is pending, and there is no pending claim, action or
proceeding against it or its subsidiaries, if any, which in its reasonable
judgment is likely to have a Material Adverse Effect or to prevent consummation
of the transactions contemplated hereby, and, to the best of its knowledge, no
such litigation, proceeding, controversy, claim or action has been threatened or
is contemplated, and (2) neither it nor any of its subsidiaries is subject to
cease and desist order, written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of, federal or
state governmental authorities charged with the supervision or regulation of
thrifts or and savings and loan holding companies or engaged in the insurance of
thrift deposits ("BANK REGULATORS"), nor has it been advised by any Bank
Regulator that it is contemplating issuing or requesting, or is considering the
appropriateness of issuing or requesting, any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolution or similar understanding.
(l) Except for this Agreement, and arrangements made in the ordinary course
of business, neither HCB nor the Bank is bound by any material contract, as
defined in Item 601(b)(10)(i) and (ii) of Regulation S-K, to be performed after
the date hereof that has not been disclosed to RBI or disclosed as an exhibit to
the HCB Reports.
(m) All "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that cover any of its
or its subsidiaries' employees, comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws; neither it
nor any of its subsidiaries has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any
such plan which is likely to result in any material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code; no material liability to
the Pension Benefit Guaranty Corporation has been or is expected by it or them
to be incurred with respect to any such plan which is subject to Title IV of
ERISA ("pension plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA) currently or formerly maintained by it,
them or any entity which is considered one employer with it under Section 4001
of ERISA or Section 414 of the Code; no pension plan had an "accumulated funding
deficiency," as defined in Section 302 of ERISA (whether or not waived), as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each pension plan exceeds the
present value of the "benefit liabilities," as defined in Section 4001(a)(16) of
ERISA, under such pension plan as of the end of the most recent plan year with
respect to the respective plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such pension plan as of the date hereof; no notice of a
"reportable event," as defined in Section 4043 of ERISA, for which the 30-day
reporting requirement has not been waived has been required to be filed for any
pension plan within the 12-month period ending on the date hereof; neither it
nor any of its subsidiaries has provided, or is required to provide, security to
any pension plan pursuant to Section 401(a)(29) of the Code; it and its
subsidiaries have not contributed to a "multiemployer plan," as defined in
Section 3(37) of
18
ERISA, on or after September 26, 1980; and it and its subsidiaries, if any, do
not have any obligations for retiree health and life benefits under any benefit
plan, contract or arrangement.
(n) In the case of HCB, it and its subsidiaries, have good title to its
properties and assets, other than property as to which it is lessee, free and
clear of any liens, security interests, claims, charges, options or other
encumbrances not set forth in the HCB Reports, except such defects in title
which would not, in the aggregate, have a Material Adverse Effect and in the
case of HCB substantially all of the buildings and equipment in regular use by
HCB and each of its subsidiaries have been reasonably maintained and are in good
and serviceable condition, reasonable wear and tear excepted.
(o) It knows of no reason why the regulatory approvals referred to in
Sections 6.01(b) and 6.02(b) should not be obtained without the imposition of
any condition of the type referred to in the proviso contained in such
subsections.
(p) It and its subsidiaries, if any, have all permits, licenses,
certificates of authority, orders, and approvals of, and have made all filings,
applications, and registrations with, federal, state, local, and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted and the absence of which
would have a Material Adverse Effect; all such permits, licenses, certificates
of authority, orders, and approvals are in full force and effect, and to the
best knowledge of it no suspension or cancellation of any of them is threatened.
(q) Neither it nor its subsidiaries, if any, is a party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
subsidiaries the subject of a proceeding asserting that it or any such
subsidiary has committed an unfair labor practice or seeking to compel it or
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries pending or threatened.
(r) Except for the advisors disclosed in the Disclosure Letter, neither it,
its subsidiaries, if any, nor any of their respective officers, directors, or
employees, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for it or any of its
subsidiaries, in connection with this Agreement or the transactions contemplated
hereby.
(s) The information to be supplied by it for inclusion in the Proxy
Statement together with any Form 8-K and/or such other form(s) as may be
appropriate to be filed under the Securities Exchange Act of 1934 ("EXCHANGE
ACT") will not at the time any such Form 8-K is filed and, in the case of the
Proxy Statement, at the time it is mailed and at the time of the meeting of
stockholders contemplated under this Agreement, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(t) For purposes of this section, the following terms shall have the
indicated meaning:
19
"Environmental Law" means any federal, state or local laws statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
plant and animal life or any other natural resource), and/or (2) the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. The term Environmental Law includes without limitation (1) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. 9601, et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901, et seq., the Clean Air Act, as amended, 42
U.S.C. 7401, et seq., the Federal Water Pollution Control Act, as amended,
33 U.S.C. 1251, et seq., the Toxic Substances Control Act, as amended, 15
U.S.C. 9601, et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. 11001, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f,
et seq., all comparable state and local laws, and (2) any common law,
including without limitation common law that may impose strict liability,
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a
component. Hazardous Substances include without limitation petroleum or any
derivative or by-product thereof, asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties" means those properties
owned or operated by HCB or the Bank.
In the case of HCB and the Bank:
(1) To its best knowledge, neither HCB nor the Bank is in violation of or
liable under any Environmental Law, except any such violations or
liabilities which would not reasonably be expected to singly or in the
aggregate have a Material Adverse Effect;
(2) To its best knowledge, none of the Loan Portfolio Properties and Other
Properties owned by HCB or the Bank is in violation of any Environmental
Law, except any such violations which singly or in the aggregate will not
have a Material Adverse Effect; and
(3) To its best knowledge, there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened relating to the
liability of the Loan Portfolio Properties and Other Properties owned by
HCB or the Bank under any Environmental Law, including without limitation
any notices, demand letters or
20
requests for information from any federal or state environmental agency
relating to any such liabilities under or violations of Environmental Law,
except such which will not have, result in or relate to a Material Adverse
Effect.
(u) In the case of HCB, it and its subsidiaries, if any, have complied in
all materials respects with the provisions of the Community Reinvestment Act
("CRA") and the rules and regulations thereunder, has a CRA rating of not less
than "satisfactory," and has received no material criticism from regulators with
respect to discriminatory lending practices.
(v) In the case of RBI, it will have at the Effective Time sufficient cash
funds to pay the aggregate Share Acquisition Consideration.
(w) In the case of RBI, neither it nor any of its Affiliates or Associates
(as such terms are defined in Rule 12b-2 of the Securities Exchange Act of 1934,
as amended) know of any fact or circumstance involving the operating or
financial condition of RBI or the background or credentials of any of its
Affiliates or Associates that would prevent it from consummating the
transactions contemplated by this Agreement or from obtaining the regulatory
approvals necessary for the consummation of the transactions contemplated by
this Agreement.
(x) In the case of RBI, it shall have delivered to HCB copies of any
offering materials or private placement memorandum with respect to the offer and
sale of any share of its capital stock or debt securities, provided that HCB and
its officer, agents, attorneys and other advisors have agreed to maintain the
confidentiality of such offering materials and private placement memorandum,
unless disclosure thereof is required by law.
Section 4.02 REPRESENTATIONS AND WARRANTIES OF HCB. Except as disclosed in
writing in the Disclosure Letter and except for imperfections in documentation
which when considered as a whole would not have a Material Adverse Effect on HCB
and the subsidiaries taken as a whole, HCB and the Bank represent and warrant to
RBI that:
(a) All loans outstanding as of the date hereof were made in the normal and
ordinary course of business, and the notes and other evidences of indebtedness
and any loan agreements or security documents executed in connection therewith
are true and genuine and constitute the valid and legally binding obligations of
the borrowers to whom the loans were made and are legally enforceable against
such borrowers in accordance with their terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar debtor relief laws from time
to time in effect, as well as general principles of equity applied by a court of
proper jurisdiction, regardless of whether such enforceability is considered in
a proceeding in equity or at law;
(b) The amount represented to RBI (i) on HCB's quarterly Report on Form
10-Q for the quarter ended September 30, 2003 as the aggregate balances owing on
the loans and (ii) on the general ledger and other accounting records of the
Bank as the balances owing on the loans are the materially correct amounts
actually and unconditionally owing, are undisputed, and are not subject to any
offsets, credits, deductions or counterclaims which in the aggregate would have
a Material Adverse Effect;
21
(c) The collateral securing each loan as referenced in the Bank's loan
files, loan officer worksheet, loan summary report or similar interoffice loan
documentation is in fact the collateral held by HCB or the Bank to secure each
loan;
(d) HCB or its subsidiaries have possession of all loan document files and
credit files for all loans held by them containing promissory notes and other
relevant evidences of indebtedness with original signatures of their borrowers
and guarantors, except where the failure to hold or possess such documents would
not have a Material Adverse Effect on HCB and its subsidiaries taken as a whole;
(e) HCB or its subsidiaries hold validly perfected liens or security
interests in the collateral granted to them to secure all loans as referenced in
the loan officer worksheets, loan summary reports or similar interoffice loan
documentation and the loan or credit files contain the original security
agreements, mortgages, or other lien creation and perfection documents unless
originals of such documents are filed of public record, except where the failure
to hold or possess such documents would not have a Material Adverse Effect on
HCB and its subsidiaries taken as a whole;
(f) Each lien or security interest of HCB or its subsidiaries in the
collateral held for each loan is properly perfected in the priority described as
being held by HCB or its subsidiaries in the loan officer worksheets, loan
summary reports or similar interoffice loan documentation contained in the loan
document or credit files, except where the failure to hold or possess such
documents would not have a Material Adverse Effect on HCB and its subsidiaries
taken as a whole;
(g) HCB and its subsidiaries are in possession of all collateral that the
loan document files or credit files indicate they have in their possession,
except where the failure to hold or possess such documents would not have a
Material Adverse Effect on HCB and its subsidiaries taken as a whole;
(h) All guaranties granted to HCB or its subsidiaries to insure payment of
loans constitute the valid and legally binding obligations of the guarantors and
are enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar debtor relief
laws from time to time in effect, as well as general principles of equity
applied by a court of proper jurisdiction, regardless of whether in a proceeding
in equity or at law, except where the failure to hold or possess such documents
would not have a Material Adverse Effect on HCB and its subsidiaries taken as a
whole;
(i) With respect to any loans in which HCB or any of its subsidiaries have
sold participation interests to another bank or financial institution, none of
the buyers of such participation interests are in default under any
participation agreements.
ARTICLE V
COVENANTS
Section 5.01 COVENANTS. RBI hereby covenants with and to HCB, and HCB
hereby covenants with and to RBI, that:
22
(a) It shall use its best efforts in good faith to take or cause to be
taken all action necessary or desirable under this Agreement on its part as
promptly as practicable so as to permit the consummation of the transactions
contemplated by this Agreement at the earliest reasonable date and cooperate
fully with the other party hereto to that end;
(b) It shall (1) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders for the purpose of approving this
Agreement as soon as is reasonably practicable; (2) in each case subject to the
fiduciary duties of its directors, its Board shall recommend, by at least
majority vote to its shareholders that they approve this Agreement and use its
best efforts to obtain such approval; (3) in the case of HCB, distribute to its
shareholders the Proxy Statement in accordance with applicable federal and state
law; and (4) cooperate and consult with each other with respect to each of the
foregoing matters;
(c) HCB and RBI will cooperate in the preparation and filing of the Proxy
Statement in order to consummate the transactions contemplated by this Agreement
as soon as is reasonably practicable;
(d) Subject to its disclosure obligations imposed by law, unless approved
by the other party hereto in advance, it will not issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby;
(e) It shall promptly furnish the other party with copies of written
communications received by it, or any of its respective subsidiaries, Affiliates
or Associates, (as such terms are defined in Rule 12b-2 under the Exchange Act
as in effect on the date hereof), from, or delivered by any of the foregoing to,
any governmental body or agency in connection with or material to the
transactions contemplated hereby;
(f) (1) Upon reasonable notice, it shall, and shall cause its
subsidiaries, if any, to, afford the other party hereto, and its officers,
employees, counsel, accountants and other authorized representatives
(collectively, such party's "REPRESENTATIVES") access, during normal business
hours, to all of its and its subsidiaries' properties, books, contracts,
commitments and records, except for Board minutes related to the Share
Acquisition and the Board process resulting in the Share Acquisition; it shall
enable the other party's Representatives to discuss its business affairs,
condition, financial and otherwise, assets and liabilities with such third
persons, including, without limitation, its directors, officers, employees,
accountants, counsel and creditors, as the other party considers necessary or
appropriate; and it shall, and it shall cause each of its subsidiaries to,
furnish promptly to the other party hereto (a) a copy of each report, schedule
and other document filed by it pursuant to the requirements of federal or state
securities or banking laws since June 30, 2003, and (b) all other information
concerning its business properties and personnel as the other party hereto may
reasonably request, provided that no investigation pursuant to this Paragraph
(f) shall affect or be deemed to modify any representation or warranty made by,
or the conditions to the obligations to consummate this Agreement of, the other
party hereto; (2) it will, upon request, furnish the other party with all
information concerning it, its subsidiaries, if any, directors, officers,
partners and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement or any other statement or
application made by or on behalf of HCB, RBI or their respective subsidiaries,
if any, to any governmental body or agency in connection with or material to the
Share Acquisition and the other transactions contemplated by this Agreement; and
(3) it will not
23
use any information obtained pursuant to this Paragraph (f) for any purpose
unrelated to the consummation of the transactions contemplated by this Agreement
and, if this Agreement is not consummated, it will hold all information and
documents obtained pursuant to this Paragraph (f) in confidence unless and until
such time as such information or documents otherwise become publicly available
or as it is advised by counsel that any such information or document is required
by law to be disclosed, and in the event of the termination of this Agreement,
it will deliver to the other party hereto all documents so obtained by it and
any copies thereof;
(g) It shall notify the other party hereto as promptly as practicable of
(1) any material breach of any of its warranties, representations or agreements
contained herein and (2) any change in its condition (financial or otherwise),
properties, business, results of operations or prospects that could have a
Material Adverse Effect;
(h) It shall cooperate and use its best efforts to promptly prepare and
file all documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, approvals and authorizations of all third parties and governmental
agencies, including, in the case of RBI, submission of applications for approval
of this Agreement and the transactions contemplated herein to the OTS in
accordance with the provisions of the Home Owners' Loan Act, and to any other
regulatory agencies as required by law, and RBI shall provide HCB with a
reasonable opportunity to review and comment on any such documentation. RBI
shall file all applications required for approval of this Agreement and the
transactions contemplated herein with the OTS within forty five (45) days after
the date of this Agreement;
(i) It shall (1) permit the other to review in advance and, to the extent
practicable, will consult with the other party on all characterizations of the
information relating to the other party and any of its respective subsidiaries,
which appear in any filing made with, or written materials submitted to, any
third party or any governmental body or agency in connection with the
transactions contemplated by this Agreement; and (2) consult with the other with
respect to obtaining all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies or agencies
necessary or advisable to consummate the transactions contemplated by this
Agreement and will keep the other party informed of the status of matters
relating to completion of the transactions contemplated herein;
(j) Prior to the Effective Date, HCB shall, consistent with generally
accepted accounting principles and applicable laws and regulations, cause the
Bank to modify and change its loan, litigation and real estate valuation
policies and practices, including loan classifications and levels of reserves
and other pertinent accounting entries, so as to be applied on a satisfactory
basis to RBI; provided, however, that no such action pursuant to this subsection
(j) need be taken unless and until RBI and HCB acknowledge that all conditions
to their respective obligations to consummate the Share Acquisition have been
satisfied and no such accrual or other adjustment made by HCB pursuant to the
provisions of this subsection (j) shall constitute an acknowledgment by HCB or
create any implication for any purpose, that such accrual or other adjustment
was necessary for any purpose other than to comply with the provisions of this
subsection (j).
Section 5.02 EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL PROTECTIVE
AGREEMENTS.
24
(a) As of the Effective Time, RBI agrees that the respective Employment
Agreements between each of HCB and the Bank and Charles Black and Vida Lampkin
and the respective Change in Control Protective Agreements between each of HCB
and the Bank and Scott Swain, Paula Bergstrom and Henry Pryor shall be
terminated by HCB and Bank. In connection with the termination of their
respective Employment Agreements, Mr. Black shall be entitled to receive payment
as contemplated in Sections 12(b) and 12(d) of his Employment Agreement with the
Bank and Sections 12(b) and 12(c) of his Employment Agreement with HCB, and Ms.
Lampkin shall be entitled to receive payment as contemplated in Section 12(b) of
her Employment Agreements with HCB and the Bank. In connection with the
termination of their respective Change in Control Protective Agreements, Mr.
Swain and Ms. Bergstrom shall be entitled to receive payments as contemplated in
Sections 3 and 5 of their respective Change in Control Protective Agreement with
HCB and the Bank. Mr. Pryor shall be entitled to receive payment as contemplated
in Section 3 of his Change in Control Protective Agreements with HCB and the
Bank.
(b) Except as otherwise provided in this Agreement, RBI shall honor and
cause its subsidiaries to honor all employment, severance, change in control,
retention bonus and other contractual agreements as between HCB, its successor
in interest, or the Bank and any current or former officer, employee or
director.
ARTICLE VI
CONDITIONS TO CONSUMMATION
Section 6.01 CONDITIONS FOR RBI. The obligation of RBI to effect the Share
Acquisition shall be subject to the satisfaction prior to the Effective Time of
the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite votes of the shareholders of HCB in accordance with
applicable law;
(b) The approval of this Agreement and the transactions contemplated hereby
by the OTS and the expiration of any statutory waiting periods; provided,
however, that no approval or consent described in this Section 6.01(b) shall be
deemed to have been received if it shall include any conditions or requirements
which would reduce the benefits of the transactions contemplated hereby to such
a degree that RBI or HCB would not have entered into this Agreement had such
conditions or requirements been known at the date hereof;
(c) The satisfaction of all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Agreement;
(d) No party hereto shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Share Acquisition; and
(e) No statute, rule, regulation, order, injunction or decree shall have
been enacted entered, promulgated or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Share
Acquisition; and
25
(f) RBI shall have received an opinion, dated the Effective Date, of HCB's
counsel in the form set forth in Exhibit A;
(g) Each of the representations, warranties and covenants herein of HCB
shall, in all material respects, be true on, or complied with by, the Effective
Date as if made on such date, or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date, except
as otherwise contemplated by this Agreement, and RBI shall have received a
certificate signed by the President and the Chief Financial Officer of HCB,
dated the Effective Date, to such effect;
(h) Phase I environmental audits of all real property owned by HCB or any
of its subsidiaries shall have been conducted at RBI's expense, or waived, and
shall, to RBI's reasonable satisfaction, reflect no material problems under
Environmental Laws, which would result in a Material Adverse Effect on HCB and
its subsidiaries taken as a whole;
(i) No litigation or proceeding is pending which (1) has been brought
against RBI or HCB or their subsidiaries, if any, by any governmental agency
seeking to prevent consummation of the transactions contemplated hereby or (2)
in the reasonable judgment of the Board of Directors of RBI is likely to have a
Material Adverse Effect on RBI or HCB;
Section 6.02 CONDITIONS FOR HCB. The obligation of HCB to effect the Share
Acquisition shall be subject to the satisfaction prior to the Effective Time of
the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite votes of the shareholders of HCB in accordance with
applicable law;
(b) The approval of this Agreement and the transactions contemplated hereby
by the OTS and the expiration of any statutory waiting periods; provided,
however, that no approval or consent described in this Section 6.02(b) shall be
deemed to have been received if it shall include any conditions or requirements
which would reduce the benefits of the transactions contemplated hereby to such
a degree that RBI or HCB would not have entered into this Agreement had such
conditions or requirements been known at the date hereof;
(c) The satisfaction of all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Agreement;
(d) No party hereto shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Share Acquisition;
(e) No statute, rule, regulation, order, injunction or decree shall have
been enacted entered, promulgated or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Share
Acquisition; and
(f) HCB shall have received an opinion, dated the Effective Date, of RBI's
counsel in the form attached as Exhibit B;
26
(g) Each of the representations, warranties and covenants contained herein
of RBI shall, in all material respects, be true on, or complied with by, the
Effective Date as if made on such date, or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date,
except as otherwise specifically contemplated by this Agreement, and HCB shall
have received a certificate signed by the President of RBI, dated the Effective
Date, to such effect;
(h) No litigation or proceeding is pending which (1) has been brought
against RBI or HCB or their subsidiaries, if any, by any governmental agency,
seeking to prevent consummation of the transactions contemplated hereby or (2)
in the reasonable judgment of the Board of Directors of HCB is likely to have a
Material Adverse Effect on HCB;
(i) The Transfer Agent shall have delivered to HCB a certificate to the
effect that it has received a wire transfer of the aggregate Share Acquisition
Consideration from RBI and the Transfer Agent shall have agreed to disburse such
monies to the shareholders of HCB in accordance with the terms and provisions of
the Agreement subsequent to the consummation of the Share Acquisition.
Section 6.03 EFFECT OF REQUIRED ADJUSTMENTS. Any effect on HCB as a result
of action taken by HCB pursuant to Sections 3.01(a) and 5.01(j) shall be
disregarded for purposes of determining the truth or correctness of any
representation or warranty of HCB and for purposes of determining whether any
conditions or covenants are satisfied.
ARTICLE VII
TERMINATION
Section 7.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the requisite approval of
the shareholders of HCB:
(a) by mutual written consent duly authorized by the Boards of Directors of
RBI and HCB;
(b) by either HCB or RBI, if the Share Acquisition shall not have been
consummated on or before August 31, 2004; unless extended by the Boards of
Directors of HCB and RBI for any reason; provided, however, that the right to
terminate this Agreement under this Section 7.01(b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Share Acquisition to occur on or before such date
if such action or failure to act constitutes a breach of this Agreement;
(c) by either HCB or RBI if a Bank Regulator shall have issued an Order, or
taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Share Acquisition, which
Order shall have become final and nonappealable;
(d) by either HCB or RBI if either: (i) the HCB Shareholders' Meeting
(including any adjournments thereof) shall have been held and completed and the
shareholders of HCB shall have taken a final vote on a proposal to adopt this
Agreement and (ii) the required approval of the shareholders of HCB contemplated
by this Agreement shall not have been obtained; provided,
27
however, that the right to terminate this Agreement under this Section 7.01(d)
shall not be available to HCB where the failure to obtain HCB shareholder
approval shall have been caused by the action or failure to act of HCB, and such
action or failure to act constitutes a breach by HCB, of this Agreement;
(e) by HCB, upon a material breach of any covenant or agreement on the part
of RBI set forth in this Agreement, or if any representation or warranty of RBI
shall have been untrue when made or shall have become untrue, in either case
such that the conditions set forth in Section 6.02 would not be satisfied as of
the time of such breach or as of the time such representation or warranty shall
have become untrue, if such breach would prevent RBI from consummating the
Closing or the transactions contemplated hereby, provided, that if such
inaccuracy in RBI 's representations and warranties or breach by RBI is curable
by RBI through exercise of commercially reasonable efforts, then HCB may not
terminate this Agreement pursuant to this Section 7.01(e) for thirty (30) days
after delivery of written notice from HCB to RBI of such breach, provided, that
RBI continues to exercise commercially reasonable efforts to cure such breach
(it being understood that HCB may not terminate this Agreement pursuant to this
Section 7.01(e) if such breach by RBI is cured during such thirty-day period);
(f) by RBI, upon a material breach of any covenant or agreement on the part
of HCB set forth in this Agreement, or if any representation or warranty of HCB
shall have been untrue when made or shall have become untrue, in either case
such that the conditions set forth in Section 6.01 would not be satisfied as of
the time of such breach or as of the time such representation or warranty shall
have become untrue, provided, that if such inaccuracy in HCB's representations
and warranties or breach by HCB is curable by HCB through exercise of its
commercially reasonable efforts, then RBI may not terminate this Agreement
pursuant to this Section 7.01(f) of thirty (30) days after delivery of written
notice from RBI or HCB of such breach, provided, that HCB continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
RBI may not terminate this Agreement pursuant to this Section 7.01(f) if such
breach by HCB is cured during such thirty-day period);
(g) by RBI if a Triggering Event (as defined below) shall have occurred.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to have
occurred if: (i) the Board of Directors of HCB or any committee thereof shall
for any reason have withheld, withdrawn or refrained from making or shall have
modified, amended or changed in a manner adverse to RBI its recommendation in
favor of the adoption of this Agreement or the approval of the Share
Acquisition; (ii) HCB shall have failed to include in the Proxy Statement the
recommendation of the Board of Directors of HCB in favor of the adoption of this
Agreement and the approval of the Share Acquisition; (iii) the Board of
Directors of HCB fails to confirm in writing to RBI its intention to proceed
with the transaction contemplated by this Agreement within fifteen (15) business
days after RBI requests in writing that such recommendations be confirmed at any
time following the public announcement and during the pendency of a Competing
Acquisition Proposal; (iv) the Board of Directors of HCB or any committee
thereof shall have recommended to the shareholders of HCB or approved any
Competing Acquisition Proposal; (v) HCB shall have entered into any agreement or
contract accepting any Competing Acquisition Proposal;(vi) HCB shall have
breached any of the provisions of Section 3.05(c) of this Agreement or (vii) a
tender or exchange offer relating to not less than 15% of the then
28
outstanding shares of capital stock of HCB shall have been commenced by a person
unaffiliated with RBI and HCB shall not have sent to its security holders
pursuant to Rule 14e-2 promulgated under the Securities Act, within ten (10)
business days after such tender or exchange offer is first published sent or
given, a statement disclosing that HCB recommends rejection of such tender or
exchange offer.
(h) (i) by HCB, prior to the vote of the shareholders of HCB on the
Agreement, if, after receiving a Superior Offer and in the absence of any prior
breach of the provisions of this Agreement, the Board of Directors of HCB
determines in good faith, after consulting with outside legal counsel, that such
action is necessary to comply with the fiduciary duties of the Board of
Directors of HCB under applicable law; provided, however, that HCB may not
terminate this Agreement pursuant to this subsection (h) until two (2) days have
elapsed following delivery to RBI of written notice of such determination of HCB
(which written notice will inform RBI of the material terms and conditions of
the Superior Offer; provided, further, that such determination and the right to
terminate under this Section 7.01(h) shall not be effective until (X) HCB has
made payment to RBI of the amounts required to be paid pursuant to Section
7.03(b)(ii) and (Y) the occurrence of the earliest of HCB executing an agreement
related the Superior Offer or the consummation of the Superior Offer.
(ii) Upon receipt of a Competing Acquisition Proposal, in the absence
of any prior breach of the provisions of this Agreement, HCB may, by giving
written notice to RBI suspend this Agreement while it evaluates the Competing
Acquisition Proposal. In the event of any such suspension, any deadlines or time
periods contained in the Agreement shall be tolled and, if HCB revokes the
suspension and expresses its intent to consummate the transactions contemplated
by this Agreement, all deadlines and time periods set forth in the Agreement
shall be extended by the number of days the suspension was in effect.
(i) by RBI
(i) if any of the conditions to the obligations of RBI set forth in
Article 6.01 have not been satisfied or waived by RBI at closing or RBI
reasonably determines that the timely satisfaction of any condition set forth in
Article 6.01 has become impossible (other than as a result of any failure on the
part of RBI to comply with or perform any covenant or obligation of RBI set
forth in this Agreement), provided that is such breach of a covenant or
obligation is curable by HCB through exercise of its commercially reasonable
efforts, then RBI may not terminate this Agreement pursuant to this Section
7.01(i) until thirty (30) days after delivery of written notice from RBI of such
breach, provided, that HCB continues to exercise commercially reasonable efforts
to cure such breach (it being understood that RIB may not terminate this
Agreement pursuant to this Section 7.01(i) if such breach by HCB is cured during
such 30-day period); or
(ii) in the event there has been a Material Adverse Effect on HCB.
(j) By HCB if any of the conditions to the obligations of HCB set forth in
Article VI have not been satisfied or waived by HCB at closing or HCB reasonably
determines that the timely satisfaction of any condition set forth in Section
6.02 has become impossible (other than as a result
29
of any failure on the part of HCB to comply with or perform any covenant or
obligation of HCB set forth in this Agreement) but only if the failure to
satisfy the condition would prevent RBI from consummating the Closing or the
transactions contemplated hereby, provided that is such breach of a covenant or
obligation is curable by RBI through exercise of its commercially reasonable
efforts, then HCB may not terminate this Agreement pursuant to this Section
7.01(j) until thirty (30) days after delivery of written notice from HCB of such
breach, provided, that RBI continues to exercise commercially reasonable efforts
to cure such breach (it being understood that HCB may not terminate this
Agreement pursuant to this Section 7.01(j) if such breach by RBI is cured during
such thirty (30) day period);
Section 7.02 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination
of this Agreement under Section 7.01 will be effective immediately upon (or if
termination is pursuant to Section 7.01(e); 7.01(f); 7.01(i) or 7.01(j) and the
proviso therein is applicable, thirty (30) days after) the delivery of written
notice thereof by the terminating party to the other Parties. In the event of
termination of this Agreement as provided in Section 7.01, this Agreement shall
be of no further force or effect, with no liability of Party to the other
Parties, except (i) the provisions set forth in Section, 5.01(f)(3), Section
7.02, Section 7.03, Section 7.04, Section 9.04 and Section 9.05 shall survive
the termination of this Agreement, and (ii) nothing herein shall relieve any
party from liability for any intentional or willful breach of this Agreement.
Section 7.03 FEES AND EXPENSES. (a) Except as set forth in this Article
VII, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
and expenses whether or not the Share Acquisition is consummated.
(b)(i) If after the receipt by HCB, and during the pendency, of a Competing
Acquisition Proposal, this Agreement is terminated by RBI pursuant to Section
7.01(g)(i), 7.01(g)(ii) or 7.01(g)(iii) or the Agreement is suspended by HCB
pursuant to Section 7.01(h)(ii), HCB shall pay to RBI in immediately available
funds, within one (1) business day after demand by RBI an amount equal to the
greater of (X) $350.000.00, or (Y) the actual out of pocket costs of RBI
incurred in connection with the transactions contemplated by this Agreement, not
to exceed $500,000.00.
(ii) If this Agreement is terminated by RBI pursuant to Section 7.01(g) for
reasons not described in subsection 7.03(b)(i) above, or by HCB pursuant to
Section 7.01(h)(i), HCB shall pay to RBI in immediately available funds, within
one (1) business day after demand by RBI an amount equal to $1,075,000.00 (the
"Termination Fee"), less any sums previously paid under subsection 7.03(b)(i)
above.
(iii) If (A) this Agreement is terminated by RBI or HCB, as applicable,
pursuant to Sections 7.03(b)(i) or 7.01(d), (B) prior to such termination a HCB
shall have received a Competing Acquisition Proposal and (C) within twelve (12)
months following the termination of this Agreement, an HCB Acquisition (as
defined below) is consummated or HCB enters into an agreement or binding letter
of intent providing for an HCB Acquisition, then HCB shall pay RBI in
immediately available funds upon the earlier of the execution of an agreement
relating to the HCB
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Acquisition or the consummation of the HCB Acquisition, an amount equal to the
Termination Fee less any sums previously paid under subsection 7.03(b)(i) above.
(iv) Each of HCB and RBI acknowledges that the agreements contained in this
Section 7.03(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, RBI would not enter into this
Agreement; accordingly, if HCB fails to pay in a timely manner the amounts due
pursuant to this Section 7.03(b) and, in order to obtain such payment, RBI makes
a claim that results in a judgment against HCB for the amounts set forth in this
Section 7.03(b), HCB shall pay to RBI its reasonable costs and expenses
(including reasonable attorneys' fees and expenses) in connection with such
suit, together with interest on the amounts set forth in this Section 7.03(b) at
the Wall Street Journal prime rate in effect on the date such payment was
required to be made.
(v) For the purposes of this Agreement, "HCB Acquisition" shall mean any of
the following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving HCB pursuant to which
those shareholders of HCB immediately preceding such transaction will hold less
than 35% of the aggregate equity interests in the surviving or resulting entity
of such transaction, (ii) a sale or other disposition by HCB of assets
representing in excess of 35% of the aggregate fair market value of HCB's
business immediately prior to such sale or (iii) the acquisition by any person
or group (including by way of a tender offer or an exchange offer or issuance by
HCB), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 35% of the voting power
of the then outstanding shares of capital stock of HCB.
(vi) Notwithstanding anything in this Section 7.03 to the contrary, if the
Agreement is terminated under circumstances that entitle HCB to retain the
Deposit, as defined below, pursuant to the terms of Section 7.04, then RBI shall
not be entitled to receive any sums under Section 7.03(b)(i) or the Termination
Fee; provided that RBI shall have no obligation to reimburse any funds received
under Section 7.03(b)(i) as result of a suspension.
Section 7.04 DISPOSITION OF EARNEST MONEY DEPOSIT. Upon the execution of
this Agreement, RBI has deposited the sum of Seven Hundred Fifty Thousand
Dollars ($750,000.00) with HCB as an earnest money deposit ("DEPOSIT"). On the
Closing Date, the Deposit shall be applied in payment of the aggregate Share
Acquisition Consideration payable to HCB shareholders. In the event that the
transactions contemplated by this Agreement are not consummated in accordance
with the terms of this Agreement, the Deposit shall be treated as set forth
below.
(a) If the Agreement is terminated under Sections 7.01(a), 7.01(c),
7.01(f), 7.01(g) or 7.01(h), then the Deposit shall be immediately returned to
RBI, provided, however, if this Agreement is terminated under Section 7.01(c) in
the case of an Order or action specifically applicable to RBI or its directors
or executive offices rather than of general applicability to banks or savings
associations and/or their holding companies or directors or executive officers
then the deposit shall be retained by HCB;
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(b) If the Agreement is properly terminated by HCB or RBI under 7.01(b),
the Deposit shall be retained by HCB, provided however, that if the Agreement is
terminated by RBI and the reason for such termination is action or failure to
act by HCB which is a breach of this Agreement and the principal cause of or
resulted in the failure of the Share Acquisition to occur on or before the date
specified in Section 7.01(b), then the Deposit shall be immediately returned to
RBI.
(c) If the Agreement is terminated by HCB under 7.01(d), then the Deposit
shall be immediately returned to RBI;
(d) If the Agreement is terminated under Section 7.01(e) then the Deposit
shall be retained by HCB;
(e) If the Agreement is terminated under Section 7.01(i), pursuant to
7.01(i)(i) for a failure of the conditions specified in 6.01(a), 6.01(c),
6.01(d), 6.01(e), 6.01(f), 6.01(g), 6.01(h) or 6.01(i) or pursuant to
7.01(i)(ii), then the Deposit shall be immediately returned to RBI, provided,
however, if this Agreement is terminated under Section 7.01(i) for failure of
the conditions specified in Section 6.01(d), Section 6.01(e) or Section 6.01(i)
in the case of a legal requirement, an order, decree or injunction, or a
statute, rule, regulation, order, injunction or decree, or litigation or
proceeding specifically applicable to RBI or its directors or executive offices
rather than of general applicability to banks or savings associations and/or
their holding companies or directors or executive officers than the deposit
shall be retained by HCB. If the Agreement is terminated under Section 7.01(i),
pursuant to 7.01(i)(i) for a failure of the conditions specified in 6.01(b) then
the Deposit shall be retained by HCB.
(f) If the Agreement is terminated under Section 7.01(j), for a failure of
the conditions specified in 6.02(a), 6.02(c), 6.02(d), 6.02(e) or 6.01(h), then
the Deposit shall be immediately returned to RBI, provided, however, if this
Agreement is terminated under Section 7.01(j) for failure of the conditions
specified in Section 6.01(c), Section 6.02(d), Section 6.02(e) or Section
6.02(h), in the case of a legal requirement, an order, decree or injunction, a
statute, rule, regulation, order, injunction or decree, or litigation or
proceeding specifically applicable to RBI or its directors or executive officers
rather than of general applicability to banks or savings associations and/or
their holding companies or directors or executive officers then the deposit
shall be retained by HCB. If the Agreement is terminated under Section 7.01(j),
for a failure of the conditions specified in 6.02(b), 6.02(f), 6.02(g) or
6.02(i), then the Deposit shall be retained by HCB.
ARTICLE VIII
EFFECTIVE DATE AND EFFECTIVE TIME
Section 8.01 EFFECTIVE DATE AND EFFECTIVE TIME. On the last business day of
the month during which the expiration of all applicable waiting periods in
connection with governmental approvals occurs and all conditions to the
consummation of this Agreement are satisfied or waived, or on such earlier or
later date as may be agreed by the parties, Certificate of Acquisition shall be
executed in accordance with all appropriate legal requirements and shall be
filed as required by law, and the Share Acquisition provided for herein shall
become effective upon such filing or on such date as may be specified in such
Certificate of Acquisition, herein called the "EFFECTIVE DATE." The
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"EFFECTIVE TIME" of the Share Acquisition shall be 6:01 P.M. in the State of
Oklahoma on the Effective Date, or such other time on the Effective Date as may
be agreed by the parties.
ARTICLE IX
OTHER MATTERS
Section 9.01 AMENDMENT; MODIFICATION; WAIVER. Prior to the Effective Date,
any provision of this Agreement may be waived by the party benefitted by the
provision or by both parties or amended or modified at any time, including the
structure of the transaction by an agreement in writing between the parties
hereto approved by their respective Boards of Directors, to the extent allowed
by law, except that, after the vote by the shareholders of HCB, Sections
2.03(a)-(d) shall not be amended or revised.
Section 9.02 COUNTERPARTS. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
Section 9.03 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arkansas.
Section 9.04 EXPENSES. Whether or not the Share Acquisition is consummated,
all costs and expenses incurred in connection with this Agreement and the Share
Acquisition and the other transactions contemplated by this Agreement shall be
paid by the party incurring such expense except to the extent specifically
stated otherwise in this Agreement.
Section 9.05 DISCLOSURE. Each of the parties and its respective agents,
attorneys and accountants will maintain the confidentiality of all information
provided in connection herewith which has not been publicly disclosed unless it
is advised by counsel that any such information is required by law to be
disclosed.
Section 9.06 NOTICES. All notices, acknowledgments, requests and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto:
If to HCB and
the Bank, to: HCB Bancshares, Inc.
Attn: Charles Black
P. O. Box 878
Camden, Arkansas 71701
Facsimile: (870) 836-7125
With a Copy to: Stradley Ronon Stevens & Young, LLP
Attention: Mr. Gary R. Bronstein
33
1220 19th Street, N.W., Suite 600
Washington, DC 20036
Facsimile: (202) 822-0140
If to RBI, to: Rock Bancshares, Inc.
Attention: L. Walter Quinn, President
2222 Cottondale Lane
Little Rock, Arkansas 72202
Facsimile: (501) 663-8753
With a Copy to: Quattlebaum, Grooms, Tull & Burrow PLLC
Attention: Patrick A. Burrow
111 Center St., Suite 1900
Little Rock, Arkansas 72201
Facsimile: (501) 379-1701
Section 9.07 NO THIRD PARTY BENEFICIARIES. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as expressly provided
for herein, nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 9.08 ENTIRE AGREEMENT. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made.
Section 9.09 ASSIGNMENT. This Agreement may not be assigned by any party
hereto without the written consent of the other parties.
ARTICLE X
EXPENSES, INDEMNIFICATION, INSURANCE
Section 10.01 INDEMNIFICATION. In the event the Share Acquisition is
consummated, HCB and RBI shall indemnify and hold harmless each present and
former director and officer of HCB and of the Bank against any costs or expenses
(including reasonable attorney's fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding, or investigation made against them resulting from their service as
such prior to the Effective Time to the fullest extent permitted by the Articles
of Incorporation and Bylaws of HCB in effect on the date of this Agreement,
subject to the limitations and qualifications hereinafter set forth.
(a) The aggregate obligation of RBI and HCB for indemnification for any
costs or expenses (including reasonable attorney's fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with or due to any
actions, omissions to act, or events occurring prior to June
34
1, 2002 shall not exceed the sum of $5,000,000.00. HCB shall make reasonable
efforts to increase the aggregate limit of its directors and officers liability
insurance coverage. In the event the aggregate limit of such insurance is
increased and the increased limit is applicable to a claim described in this
subsection (a), the foregoing limit of indemnification shall be reduced by an
amount equal to the amount by which the increased limit applies to such claim.
(b) HCB and RBI shall have no obligation to indemnify for any costs or
expenses (including reasonable attorney's fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with or due to:
(i) any actions, omissions to act, or events which resulted in the
delisting of the HCB Stock from the National Association of Securities
Dealers Automatic Quotation system on or about February 2, 1999,
(ii) the delisting of the HCB Stock from the National Association of
Securities Dealers Automatic Quotation system on or about February 2, 1999,
(iii) any reports or filings actually made, or reports or filings required
to be made, whether or not such reports were timely made or filed, to the
Securities and Exchange Commission for the period commencing on February 2,
1999 and ending with the filing of the Form 10-Q for the period ended
December 31, 1999,
(iv) any filed claim or overtly threatened claim received by HCB in writing
based upon actions, omissions to act, or events known to any officers or
directors of HCB, but not disclosed to RBI, on written certifications as of
the Effective Time,
(c) The limitation set forth in subsection (b) above shall not limit,
restrict or affect any liability insurance coverage otherwise available to the
officers and directors for any such claims. Notwithstanding any limitation on
indemnification otherwise applicable hereunder, RBI and HCB shall be obligated
to pay (or reimburse any officer or director for) the deductible amount related
to any losses or expenses under any director's and officer liability insurance
policy.
(d) HCB shall use its best efforts to cause each of its officers and
directors to certify to RBI any facts, circumstances or events known to them
which are the basis for (i) a filed claim against HCB, or (ii) any overtly
threatened claims received in writing against HCB known to them.
(e) RBI shall advance expenses as incurred provided the person to whom
expenses are advanced provides a satisfactory undertaking to repay such advances
if it is ultimately determined that such person is not entitled to
indemnification. RBI shall not be obligated to advance any expenses related to
(i) matters described in subsection (b) above, or (ii) matters described in
subsection (a), if the applicable indemnification limit has been reached,
provided that nothing in this subsection (e) shall impair or limit the
obligation of RBI under subsection (c) above to advance expenses not in excess
of the applicable deductible for the directors and officer's liability
insurance.
Section 10.02 D&O INSURANCE. For a period of six (6) years after the
Effective Date, directors and officers liability insurance for acts and
omissions occurring prior to the Effective Date
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will be continued through existing policies or policies obtained by RBI after
the Effective Date in an amount and containing terms and conditions not less
than the coverage provided by HCB prior to the consummation of the Share
Acquisition. Coverage for acts and omissions occurring after the Effective Date,
will be provided to directors and officers of the Bank as determined by RBI and
the Bank. Sections 10.01 and 10.02 shall be construed as an agreement as to
which the directors and officers of HCB and the Bank are intended to be third
party beneficiaries and shall be enforceable by such persons and their heirs and
representatives.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers as of the day and
year first above written.
ROCK BANCSHARES, INC.
By /s/ L. Walter Quinn
--------------------------------------
L. Walter Quinn, President
HCB BANCSHARES, INC.
By /s/ Charles Black
--------------------------------------
Charles Black, President
37