AGREEMENT AND PLAN
OF SHARE EXCHANGE
BY AND AMONG
CATAWBA VALLEY BANK,
CATAWBA VALLEY BANCSHARES, INC.
AND
FIRST ▇▇▇▇▇▇ BANK OF NORTH CAROLINA
June 29, 2001
TABLE OF CONTENTS
ARTICLE I - THE EXCHANGE
1.01 Names Of Exchanging Corporations
1.02 The Exchange
1.03 Exchange Of Shares
A. Closing Of First ▇▇▇▇▇▇'▇ Stock Transfer Books
B. Exchange Procedures
C. Treatment Of Fractional Shares
D. Surrender Of Certificates
E. Anti-Dilutive Adjustments
F. Dissenters
G. Lost Certificates
H. Treatment Of First ▇▇▇▇▇▇'▇ Stock Options
1.04 Closing; Articles Of Share Exchange; Effective Time
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF FIRST ▇▇▇▇▇▇
2.01 Organization; Standing; Power
2.02 First ▇▇▇▇▇▇'▇ Capital Stock
2.03 Subsidiaries
2.04 Convertible Securities, Options, Etc.
2.05 Authorization And Validity Of Agreement
2.06 Validity Of Transactions; Absence Of Required Consents Or Waivers
2.07 First ▇▇▇▇▇▇'▇ Books And Records
2.08 First ▇▇▇▇▇▇ Reports
2.09 First ▇▇▇▇▇▇ Financial Statements
2.10 Tax Returns And Other Tax Matters
2.11 Absence Of Material Adverse Changes Or Certain Other Events
2.12 Absence Of Undisclosed Liabilities
2.13 Compliance With Existing Obligations
2.14 Litigation And Compliance With Law
2.15 Real Properties
2.16 Loans, Accounts, Notes And Other Receivables
2.17 Securities Portfolio And Investments
2.18 Personal Property And Other Assets
2.19 Environmental Matters
2.20 Absence Of Brokerage Or Finders Commissions
2.21 Material Contracts
2.22 Employment Matters; Employee Relations
2.23 Employment Agreements; Employee Benefit Plans
2.24 Insurance
2.25 Insurance Of Deposits
2.26 Affiliates
2.27 Obstacles To Regulatory Approval, Accounting Treatment, Or Tax Treatment
2.28 Disclosure
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CATAWBA AND BANCSHARES
3.01 Organization; Standing; Power
3.02 Bancshares' Capital Stock
3.03 Subsidiaries
3.04 Convertible Securities, Options, Etc.
3.05 Authorization And Validity Of Agreement
3.06 Validity Of Transactions; Absence Of Required Consents Or Waivers
3.07 Catawba's and Bancshares' Books And Records
3.08 Reports
3.09 Financial Statements
3.10 Tax Returns And Other Tax Matters
3.11 Absence Of Material Adverse Changes Or Certain Other Events
3.12 Absence Of Undisclosed Liabilities
3.13 Compliance With Existing Obligations
3.14 Litigation And Compliance With Law
3.15 Real Properties
3.16 Loans, Accounts, Notes And Other Receivables
3.17 Securities Portfolio And Investments
3.18 Personal Property And Other Assets
3.19 Environmental Matters
3.20 Absence Of Brokerage Or Finders Commissions
3.21 Material Contracts
3.22 Employment Matters; Employee Relations
3.23 Employment Agreements; Employee Benefit Plans
3.24 Insurance
3.25 Insurance Of Deposits
3.26 Affiliates
3.27 Obstacles To Regulatory Approval, Accounting Treatment, Or Tax Treatment
3.28 Disclosure
ARTICLE IV - COVENANTS OF FIRST ▇▇▇▇▇▇
4.01 Affirmative Covenants Of First ▇▇▇▇▇▇
▇. "Affiliates" Of First ▇▇▇▇▇▇
▇. Notice Of Certain Changes Or Events
C. Further Action; Instruments Of Transfer, Etc.
4.02. Negative Covenants Of First ▇▇▇▇▇▇
▇. Amendments To Articles Of Incorporation Or Bylaws
B. Change In Capital Stock
C. Options, Warrants, And Rights
D. Dividends
E. Employment, Benefit, Or Retirement Agreements Or Plans
F. Accounting Practices
G. Changes In Business Practices
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ARTICLE V - COVENANTS OF CATAWBA AND BANCSHARES
5.01 Affirmative Covenants Of Catawba and Bancshares
A. "Affiliates"
B. Notice Of Certain Changes Or Events
C. Further Action; Instruments Of Transfer, Etc.
5.02. Negative Covenants Catawba and Bancshares
A. Amendments To Articles Of Incorporation Or Bylaws
B. Change In Capital Stock
C. Options, Warrants, And Rights
D. Dividends
E. Employment, Benefit, Or Retirement Agreements Or Plans
F. Accounting Practices
G. Changes In Business Practices
H. Reconstitution of Bancshares' Board of Directors
ARTICLE VI - MUTUAL AGREEMENTS
6.01 Shareholders' Approvals; Registration Statement; Proxy Statement/
Prospectus - Listing -Application
A. Meetings Of Shareholders
B. Registration Statement
C. Preparation And Distribution Of Joint Proxy Statement/Prospectus
D. Recommendation Of First ▇▇▇▇▇▇'▇ Board Of Directors
E. Information For Proxy Statement/Prospectus And Registration Statement
F. Listing Application
6.02 Regulatory Approvals
6.03 Access
6.04 Costs
6.05 Confidentiality
6.06 Reorganization For Tax Purposes
6.07 Accounting Treatment
ARTICLE VII - CONDITIONS PRECEDENT TO EXCHANGE
7.01 Conditions To All Parties' Obligations
A. Approval By Governmental Or Regulatory Authorities; No Disadvantageous
B. Effectiveness Of Registration Statement; Compliance With Securities And
Other "Blue Sky" Requirements
C. Adverse Proceedings. Injunction. Etc.
D. Approval By Boards Of Directors And Shareholders
E. Approval of Charter Amendment
F. Fairness Opinions
G. Tax Opinion
H. Listing of Bancshares' Stock
I. No Termination Or Abandonment
7.02 Additional Conditions To First ▇▇▇▇▇▇'▇ Obligations
A. Material Adverse Change
B. Compliance With Laws
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C. Catawba's And Bancshares' Representations And Warranties And Performance
Of Agreements; Officers' Certificate
D. Legal Opinion Of Catawba's And Bancshares' Counsel
E. Other Documents And Information From Catawba And Bancshares
F. Acceptance By First ▇▇▇▇▇▇'▇ Counsel
G. Exercise of Dissenters' Rights
H. Accounting Treatment
I.Affiliates Agreements
7.03 Additional Conditions To Catawba's And Bancshares' Obligations
A. Material Adverse Change
B. Compliance With Laws
C. First ▇▇▇▇▇▇'▇ Representations And Warranties And Performance Of
Agreements; Officers' Certificate
D. Legal Opinion Of First ▇▇▇▇▇▇'▇ Counsel
E. Other Documents And Information From First ▇▇▇▇▇▇
▇. Acceptance By Catawba's And Bancshares' Counsel
G. Exercise Of Dissenters Rights
H. Accounting Treatment
I. Affiliates' Agreements
ARTICLE VIII - TERMINATION; BREACH
8.01 Mutual Termination
8.02 Unilateral Termination
ARTICLE IX - MISCELLANEOUS PROVISIONS
9.01 "Previously Disclosed" Information; "Material Adverse Effect" And "Material
Adverse Change"
9.02 Waiver
9.03 Amendment
9.04 Notices
9.05 Further Assurances
9.06 Headings And Captions
9.07 Entire Agreement
9.08 Severability Of Provisions
9.09 Assignment
9.10 Enforcement
9.11 Counterparts
9.12 Governing Law
9.13 Survival Of Representations, Warranties, And Other Agreements
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EXHIBIT 2
AGREEMENT AND PLAN OF SHARE EXCHANGE
BY AND AMONG CATAWBA VALLEY BANK,
CATAWBA VALLEY BANCSHARES, INC.
AND FIRST ▇▇▇▇▇▇ BANK OF NORTH CAROLINA
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (hereinafter called "Agreement")
entered into as of the 29th day of June 2001, by and among Catawba Valley Bank
("Catawba"), Catawba Valley Bancshares, Inc. ("Bancshares") and First ▇▇▇▇▇▇
Bank of North Carolina ("First ▇▇▇▇▇▇").
WHEREAS, Catawba is a North Carolina commercial bank with its principal
office and place of business located in Hickory, North Carolina; and,
WHEREAS, Bancshares is a North Carolina corporation with its principal
office and place of business located in Hickory, North Carolina and is the owner
of all the outstanding shares of common stock of Catawba; and,
WHEREAS, First ▇▇▇▇▇▇ is a North Carolina commercial bank with its
principal office and place of business located in Gastonia, North Carolina; and,
WHEREAS, Bancshares, Catawba and First ▇▇▇▇▇▇ have agreed that it is in
their mutual best interests and in the best interests of the respective
shareholders for Bancshares and First ▇▇▇▇▇▇ to consummate a share exchange
whereby each of the outstanding shares of First ▇▇▇▇▇▇'▇ common stock would be
exchanged for shares of Bancshares' common stock, all in the manner and upon the
terms and conditions contained in this Agreement; and,
WHEREAS, to effectuate the foregoing, Bancshares, Catawba and First ▇▇▇▇▇▇
desire to adopt this Agreement as a plan of reorganization in accordance with
the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended (the "Code"); and,
WHEREAS, the respective Boards of Directors of each of First ▇▇▇▇▇▇,
Bancshares and Catawba have determined that it is in the best interests of their
respective companies and their shareholders to consummate the transactions
provided for herein; and,
WHEREAS, the parties intend that the transactions contemplated herein
qualify for treatment as a pooling of interests pursuant to APB Opinion No. 16;
and
NOW, THEREFORE, in consideration of the premises, the mutual benefits to be
derived from this Agreement, and of the representations, warranties, conditions,
covenants, and promises herein contained, and subject to the terms and
conditions hereof, First ▇▇▇▇▇▇, Bancshares and Catawba hereby adopt and make
this Agreement and mutually agree as follows:
ARTICLE I
THE EXCHANGE
1.01 NAMES OF EXCHANGING CORPORATIONS. The name of the corporation whose
--------------------------------
shares will be acquired is "First ▇▇▇▇▇▇ Bank of North Carolina" and the name of
the acquiring corporation is "Catawba Valley Bancshares, Inc."
1.02 THE EXCHANGE. At the "Effective Time" (as defined in Paragraph 1.04
------------
below), upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the North Carolina Business Corporation Act,
as amended (the "Act"), each share of the $5.00 par value common stock of First
▇▇▇▇▇▇ ("First ▇▇▇▇▇▇ Stock") (other than any shares to which rights of dissent
and appraisal are properly exercised as provided below) shall be exchanged (the
"Exchange") for 0.8934 (the "Exchange Rate") newly issued shares of Bancshares'
$1.00 par value common stock, rounded to the nearest whole share ("Bancshares
Stock"). The Exchange shall have the effects set forth in Section 55-11-06 of
the Act.
1.03 EXCHANGE OF SHARES.
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A. CLOSING OF FIRST ▇▇▇▇▇▇'▇ STOCK TRANSFER BOOKS. At the Effective
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Time, and without any action by First ▇▇▇▇▇▇ or Bancshares, First ▇▇▇▇▇▇'▇ stock
transfer books shall be closed as to holders of First ▇▇▇▇▇▇ Stock immediately
prior to the Effective Time and, thereafter, no transfer of First ▇▇▇▇▇▇ Stock
by any such holder may be made or registered; and the holders of shares of First
▇▇▇▇▇▇ Stock shall cease to be, and shall have no further rights as,
shareholders of First ▇▇▇▇▇▇ other than as provided herein. Following the
Effective Time, certificates representing shares of First ▇▇▇▇▇▇ Stock
outstanding at the Effective Time (herein sometimes referred to as "Old
Certificates") shall evidence only the right of the registered holder thereof to
receive, and may be exchanged for, (1) certificates for the number of whole
shares of Bancshares Stock to which such holders shall have become entitled on
the basis set forth above (herein sometimes referred to as "New Certificates"),
or (ii) in the case of shares as to which rights of dissent and appraisal are
properly exercised (as provided below), cash as provided in Article 13 of the
Act.
B. EXCHANGE PROCEDURES. As soon as reasonably practicable, but in
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any event no more than twenty (20) days following the Effective Time, Bancshares
shall cause First Citizens Bank and Trust Company, Raleigh, North Carolina, the
transfer agent for Bancshares Stock (the "Exchange Agent"), to mail to each
former shareholder of First ▇▇▇▇▇▇ of record immediately prior to the Effective
Time ("First ▇▇▇▇▇▇ Record Holder") written instructions and transmittal
materials (including, without limitation, a return mailing envelope addressed to
the Exchange Agent (collectively, a "Transmittal Letter") for use in
surrendering Old Certificates to the Exchange Agent. All Transmittal Letters
shall be sent by United States mail to the First ▇▇▇▇▇▇ Record Holders at the
addresses set forth on a certified shareholder list to be delivered by First
▇▇▇▇▇▇ to Bancshares at the "Closing" (as defined in Paragraph 1.04) and shall
also be made available at the offices of the Exchange Agent. As soon as
reasonably practicable thereafter, the First ▇▇▇▇▇▇ Record Holders of all of the
outstanding shares of First ▇▇▇▇▇▇ Stock, shall deliver, or cause to be
delivered, by United States Postal Service, hand delivery or any other means of
delivery selected by such First ▇▇▇▇▇▇ Record Holders, to the
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Exchange Agent, pursuant to the Transmittal Letters, the Old Certificates, and
the Exchange Agent shall take prompt action to process such Old Certificates
received by it (including the prompt return of any defective submissions with
instructions as to those actions which may be necessary to remedy any defects).
Upon the proper delivery to the Exchange Agent (in accordance with the above
instructions, and accompanied by a properly completed Transmittal Letter) by a
First ▇▇▇▇▇▇ Record Holder of his or her Old Certificates, the Exchange Agent
shall register in the name of such First ▇▇▇▇▇▇ Record Holder the shares of
Bancshares Stock and deliver New Certificates to the First ▇▇▇▇▇▇ Record Holder
entitled thereto upon and in exchange for the surrender and delivery to the
Exchange Agent by said individual First ▇▇▇▇▇▇ Record Holder of his or her Old
Certificates.
C. TREATMENT OF FRACTIONAL SHARES. No scrip or certificates
------------------------------
representing fractional shares of Bancshares Stock will be issued in connection
with the Exchange, and First ▇▇▇▇▇▇'▇ former shareholders shall have no right to
vote or receive any dividend or other distribution on, or any other right with
respect to, any fraction of a share of Bancshares Stock resulting from the
Exchange.
D. SURRENDER OF CERTIFICATES. Subject to Paragraph 1.03.F. below, no
-------------------------
certificate for any shares of Bancshares Stock shall be delivered to any former
shareholder of First ▇▇▇▇▇▇ unless and until such shareholder shall have
properly surrendered to the Exchange Agent the Old Certificates formerly
representing his or her shares of First ▇▇▇▇▇▇ Stock, together with a properly
completed Transmittal Letter in such form as shall be provided to the
shareholder by the Exchange Agent for that purpose. Further, until such Old
Certificates are so surrendered, no dividend or other distribution payable to
holders of record of Bancshares Stock as of any date subsequent to the Effective
Time shall be delivered to the holder of such Old Certificates. However, upon
the proper surrender of such Old Certificates, the Exchange Agent shall pay to
the registered holder of the shares of Bancshares Stock represented by such Old
Certificates the amount of any such cash, dividends or distributions which have
accrued but remain unpaid with respect to such shares. Neither Bancshares, First
▇▇▇▇▇▇, nor the Exchange Agent, shall have any obligation to pay any interest on
any such cash, dividends or distributions for any period prior to such payment.
Further, and notwithstanding any other provision of this Agreement, neither
Bancshares, First ▇▇▇▇▇▇, nor the Exchange Agent shall be liable to a former
holder of First ▇▇▇▇▇▇ Stock for any amount paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
E. ANTI-DILUTIVE ADJUSTMENTS. If, following the date of this
-------------------------
Agreement, Bancshares shall change the number of outstanding shares of
Bancshares Stock as a result of a dividend payable in shares of Bancshares
Stock, a stock split, a reclassification or other subdivision or combination of
outstanding shares, and if the record date of such event occurs prior to the
Effective Time, then an appropriate and proportionate adjustment shall be made
to the Exchange Rate so as to appropriately and proportionately increase or
decrease the number of shares of Bancshares Stock to be issued in exchange for
each of the shares of First ▇▇▇▇▇▇ Stock.
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F. DISSENTERS.
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(i) Any shareholder of First ▇▇▇▇▇▇ who has and properly
exercises the right of dissent and appraisal with respect to the Exchange as
provided in Article 13 of the Act ("Dissenters Rights") shall be entitled to
receive cash payment of the fair value of all of his or her shares of First
▇▇▇▇▇▇ Stock from the Escrow Fund (defined below) in the manner and pursuant to
the procedures provided therein, subject further to the conditions set forth in
Paragraph 7.03.G. Shares of First ▇▇▇▇▇▇ Stock held by persons who exercise
Dissenters Rights shall not be exchanged for Bancshares Stock as provided in
Paragraph 1.03.A. above. However, if any shareholder of First ▇▇▇▇▇▇ who
exercises Dissenters Rights shall fail to perfect his or her right to receive
cash payment as provided above, or effectively shall waive or lose such right,
then each of his or her shares of First ▇▇▇▇▇▇ Stock shall be deemed to have
been converted into the right to receive Bancshares Stock as of the Effective
Time as provided in Paragraph 1.03.A. above.
(ii) Upon its receipt of any notice of a First ▇▇▇▇▇▇
shareholder's intent to assert Dissenters Rights pursuant to the Act, First
▇▇▇▇▇▇ shall establish an escrow fund (the "Escrow Fund") with an independent
third party reasonably satisfactory to Bancshares (the "Escrow Agent"), from
which the Escrow Agent shall make all payments, whether before or after the
Effective Time, necessary with respect to the exercise of such Dissenters
Rights. Neither Bancshares nor Catawba shall, directly or indirectly, contribute
any funds to the Escrow Fund. First ▇▇▇▇▇▇ shall deposit in the Escrow Fund an
amount, subject to Catawba's and Bancshares' approval, that First ▇▇▇▇▇▇
reasonably believes is sufficient to pay fully the claims of all First ▇▇▇▇▇▇
shareholders asserting Dissenters Rights, and shall make additional deposits to
the Escrow Fund as First ▇▇▇▇▇▇ or Bancshares may reasonably determine to be
necessary to satisfy such claims. In the event funds remain in the Escrow Fund
after all claims for payment pursuant to Dissenters Rights have finally expired,
terminated, or have been finally satisfied or settled, then any balance
remaining in the Escrow Fund shall be returned to First ▇▇▇▇▇▇.
G. LOST CERTIFICATES. Any First ▇▇▇▇▇▇ shareholder whose certificate
-----------------
evidencing shares of First ▇▇▇▇▇▇ Stock has been lost, destroyed, stolen or
otherwise is missing shall be entitled to receive a certificate representing the
shares of Bancshares Stock to which he or she is entitled in accordance with and
upon compliance with conditions imposed by the Exchange Agent or Bancshares
pursuant to the provisions of N.C. Gen. Stat. (S) 25-8-405 and N.C. Gen. Stat.
(S) 25-8-104 (including without limitation a requirement that the shareholder
provide a lost instruments indemnity or surety bond in form, substance and
amount satisfactory to the Exchange Agent and Bancshares).
H. TREATMENT OF FIRST ▇▇▇▇▇▇'▇ STOCK OPTIONS.
-----------------------------------------
(i) At the Effective Time, each option or other right to
purchase shares of First ▇▇▇▇▇▇ Stock pursuant to stock options ("First ▇▇▇▇▇▇
Options") granted by First ▇▇▇▇▇▇ under its 1995 Stock Option Plan, 1999
Nonqualified Stock Option Plan, and 1999 Incentive Stock Option Plan (as
amended, collectively referred to herein as the "First ▇▇▇▇▇▇ Stock Plans"),
which are outstanding at the Effective Time, whether or not exercisable shall be
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converted into and become rights with respect to Bancshares Stock, and
Bancshares shall assume each First ▇▇▇▇▇▇ Option, in accordance with the terms
of the First ▇▇▇▇▇▇ Stock Plans and stock option agreement by which it is
evidenced, except that from and after the Effective Time (A) Bancshares and its
Executive Committee shall be substituted for First ▇▇▇▇▇▇ and the Committee of
First ▇▇▇▇▇▇'▇ Board of Directors (including, if applicable, the entire Board of
Directors of First ▇▇▇▇▇▇) administering the First ▇▇▇▇▇▇ Stock Plans, (B) each
First ▇▇▇▇▇▇ Option assumed by Bancshares may be exercised solely for shares of
Bancshares Stock, (C) the number of shares of Bancshares Stock subject to such
First ▇▇▇▇▇▇ Option shall be equal to the number of shares of First ▇▇▇▇▇▇ Stock
subject to such First ▇▇▇▇▇▇ Option immediately prior to the Effective Time
multiplied by the Exchange Rate and rounded to the nearest whole share, and (D)
the per share exercise price under each such First ▇▇▇▇▇▇ Option shall be
adjusted by dividing the per share exercise price under each such First ▇▇▇▇▇▇
Option by the Exchange Rate and rounded to the nearest cent.
(ii) As soon as practicable after the Effective Time, Bancshares
shall deliver to the participants in the First ▇▇▇▇▇▇ Stock Plans an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
pursuant to the First ▇▇▇▇▇▇ Stock Plans shall continue in effect on the same
terms and conditions (subject to the adjustments required by Paragraph 1.03.H(i)
after giving effect to the Exchange). At or prior to the Effective Time,
Bancshares shall take all corporate action necessary to reserve for issuance
sufficient shares of Bancshares Stock for delivery upon exercise of First ▇▇▇▇▇▇
Options assumed by it in accordance with this Paragraph 1.03.H. As soon as
practicable after the Effective Time, Bancshares shall file a registration
statement on Form S-8 (or any successor or other appropriate form), with respect
to the shares of Bancshares Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
(iii) All restrictions or limitations on transfer with respect to
First ▇▇▇▇▇▇ Stock awarded under the First ▇▇▇▇▇▇ Stock Plans or any other plan,
program, or arrangement of First ▇▇▇▇▇▇, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plans, program, or arrangement, shall remain in full force and
effect with respect to shares of First ▇▇▇▇▇▇ Stock into which such restricted
stock is converted pursuant to this Agreement.
(iv) First ▇▇▇▇▇▇ agrees to cooperate with Bancshares to insure
the implementation of this Paragraph 1.03.H.
1.04 CLOSING; ARTICLES OF SHARE EXCHANGE; EFFECTIVE TIME. The closing of
---------------------------------------------------
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Bancshares in Hickory, North Carolina, or at such other place
as Bancshares and First ▇▇▇▇▇▇ shall mutually designate, on a date specified by
Bancshares and First ▇▇▇▇▇▇ (the "Closing Date") after the expiration of any and
all required waiting periods following the effective date of required approvals
of the Exchange by governmental or regulatory authorities. At the Closing, First
▇▇▇▇▇▇, Bancshares and Catawba shall take such actions (including, without
limitation, the delivery of certain closing documents) as are required herein
and as shall otherwise be required by law to consummate the Exchange and cause
it to become effective, and
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shall execute Articles of Share Exchange under North Carolina law which shall
contain a "Plan of Exchange" substantially in the form attached as Exhibit A
hereto.
Subject to the terms and conditions set forth herein (including, without
limitation, the receipt of all required approvals of governmental and regulatory
authorities), the Exchange shall be effective on the date and at the time (the
"Effective Time") the Articles of Share Exchange are filed with the North
Carolina Secretary of State in accordance with law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST ▇▇▇▇▇▇
Except as otherwise specifically provided herein or as "Previously
Disclosed" (as defined in Paragraph 9.01 below) to Catawba and Bancshares, First
▇▇▇▇▇▇ hereby makes the following representations and warranties to Catawba and
Bancshares:
2.01 ORGANIZATION; STANDING; POWER. First ▇▇▇▇▇▇ (i) is duly organized and
-----------------------------
incorporated, validly existing, and in good standing under the laws of North
Carolina; (ii) has all requisite power and authority (corporate and other) to
own, lease, and operate its properties and to carry on its business as now being
conducted; (iii) is duly qualified to do business and is in good standing in
each other jurisdiction in which the character of the properties owned, leased,
or operated by it therein or in which the transaction of its business makes such
qualification necessary, except where failure so to qualify would not have a
Material Adverse Effect on First ▇▇▇▇▇▇, and (iv) is not transacting business or
operating any properties owned or leased by it in violation of any provision of
federal or state law or any rule or regulation promulgated thereunder, which
violation would have a Material Adverse Effect on First ▇▇▇▇▇▇.
2.02 FIRST ▇▇▇▇▇▇'▇ CAPITAL STOCK. First ▇▇▇▇▇▇'▇ authorized capital
----------------------------
stock consists of 20,000,000 shares of common stock, $5.00 par value per share.
As of May 31, 2001, 1,262,350 shares of First ▇▇▇▇▇▇ Stock were issued and
outstanding, which constitute First ▇▇▇▇▇▇'▇ only issued and outstanding
securities.
Each outstanding share of First ▇▇▇▇▇▇ Stock (i) has been duly authorized
and is validly issued and outstanding, and is fully paid and, except to the
extent set forth in N.C.G.S. 53-42, nonassessable, (ii) has not been issued in
violation of the preemptive rights of any shareholder, and (iii) his been issued
pursuant to and in compliance with the requirement of a registration statement
or an applicable exemption from the registration requirements under the
Securities Act of 1933, as amended (the "1933 Act").
2.03 SUBSIDIARIES.
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A. (i) Schedule 2.03 hereto is a list of all of First ▇▇▇▇▇▇'▇
Subsidiaries (defined below) together with the jurisdiction of organization of
each such Subsidiary, (ii) First ▇▇▇▇▇▇ owns, directly or indirectly, all the
issued and outstanding equity securities of each of its Subsidiaries, (iii) no
equity securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by reason of any
contractual right or obligation or otherwise, (iv) there are no contracts,
commitments, understandings or
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arrangements by which any of such Subsidiaries are or may be bound to sell or
otherwise transfer any equity securities of any such Subsidiaries (other than to
it or its wholly-owned Subsidiaries), (v) there are no contracts, commitments,
understandings, or arrangements relating to its rights to vote or to dispose of
such securities; (vi) all of the equity securities of each Subsidiary held by
First ▇▇▇▇▇▇ or its Subsidiaries are fully paid and nonassessable, are owned by
First ▇▇▇▇▇▇ or its Subsidiaries free and clear of any liens, charges,
encumbrances or security interests, have been duly authorized, and are validly
issued and outstanding; (vii) none of the equity securities of any Subsidiary
held by First ▇▇▇▇▇▇ have been issued in violation of the preemptive rights of
any shareholder, and all such securities have been issued pursuant to a valid
and effective registration statement or pursuant to and in compliance with the
requirement of an applicable exemption from the registration requirements under
the 1933 Act.
B. As used in this Agreement, "Subsidiary" shall have the meaning as
described to that term in Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission ("SEC").
C. First ▇▇▇▇▇▇ does not own beneficially, directly or indirectly,
any equity securities or similar interests of any entity, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
D. Each of First ▇▇▇▇▇▇'▇ Subsidiaries is duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except where the failure to so qualify
would not have a Material Adverse Effect on First ▇▇▇▇▇▇.
2.04 CONVERTIBLE SECURITIES, OPTIONS, ETC. With the exception of options
------------------------------------
to purchase an aggregate of 235,497 shares of First ▇▇▇▇▇▇ Stock which have been
issued and are outstanding under the First ▇▇▇▇▇▇ Stock Plans. First ▇▇▇▇▇▇ does
not have any outstanding (1) securities or other obligations (including
debentures or other debt instruments) which are convertible into shares of First
▇▇▇▇▇▇ Stock or any other securities of First ▇▇▇▇▇▇; (ii) options, warrants,
rights, calls, or other commitments of any nature which entitle any person to
receive or acquire any shares of First ▇▇▇▇▇▇ Stock or any other securities of
First ▇▇▇▇▇▇; or (iii) plan, agreement or other arrangement pursuant to which
shares of First ▇▇▇▇▇▇ Stock or any other securities of First ▇▇▇▇▇▇, or
options, warrants, rights, calls, or other commitments of any nature pertaining
thereto, have been or may be issued.
2.05 AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
---------------------------------------
duly and validly approved by First ▇▇▇▇▇▇'▇ Board of Directors in the manner
required by law and subject only to approval of this Agreement by the
shareholders of First ▇▇▇▇▇▇ in the manner required by law (as contemplated by
Paragraph 6.01.A. below) and by the applicable regulatory authorities (as
contemplated by Paragraph 6.02 below), (i) First ▇▇▇▇▇▇ has the corporate power
and authority to execute and deliver this Agreement and to perform its
obligations and agreements and carry out the transactions described herein, (ii)
all corporate action required to authorize First ▇▇▇▇▇▇ to enter into this
Agreement and to perform its obligations and agreements and carry out the
transactions described herein has been duly and
7
properly taken, and (iii) this Agreement has been duly executed on behalf of
First ▇▇▇▇▇▇, and (assuming due authorization, execution and delivery by
Bancshares and Catawba) constitutes a valid and binding agreement of First
▇▇▇▇▇▇, enforceable in accordance with its terms (except to the extent
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect which
affect creditors' rights generally; and (b) by legal and equitable limitations
on the availability of injunctive relief, specific performance, and other
equitable remedies), and (c) general principles of equity and applicable laws or
court decisions limiting the enforceability of indemnification provisions).
2.06 VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
-----------------------------------------------------------------
Except where the same would not have a Material Adverse Effect on First ▇▇▇▇▇▇,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions described herein, nor compliance by First ▇▇▇▇▇▇ with any of
its obligations or agreements contained herein, will: (1) conflict with or
result in a breach of the terms and conditions of, or constitute a default or
violation under any provision of, First ▇▇▇▇▇▇'▇ Articles of Incorporation or
Bylaws, or any contract, agreement, lease, mortgage, note, bond, indenture,
license, or obligation or understanding (oral or written) to which First ▇▇▇▇▇▇
is bound or by which it, its business, capital stock, or any properties or
assets may be affected; (ii) result in the creation or imposition of any lien,
claim, interest, charge, restriction, or encumbrance upon any of First ▇▇▇▇▇▇'▇
properties or assets; (iii) violate any applicable federal or state statute,
law, rule, or regulation, or any judgment, order, writ, injunction, or decree of
any court, administrative or regulatory agency, or governmental body; (iv)
result in the acceleration of any obligation or indebtedness of First ▇▇▇▇▇▇; or
(v) interfere with or otherwise adversely affect First ▇▇▇▇▇▇'▇ ability to carry
on its business as presently conducted.
No consents, approvals, or waivers are required to be obtained from any
person or entity in connection with First ▇▇▇▇▇▇'▇ execution and delivery of
this Agreement, or the performance of its obligations or agreements or the
consummation of the transactions described herein, except for required approvals
of First ▇▇▇▇▇▇'▇ shareholders as described in Paragraph 7.01.D. below and of
governmental or regulatory authorities as described in Paragraph 7.01.A. below,
and other consents or approvals, the failure of which to obtain would not have a
Material Adverse Effect on First ▇▇▇▇▇▇ or its ability to consummate the
Exchange.
2.07 FIRST ▇▇▇▇▇▇'▇ BOOKS AND RECORDS. First ▇▇▇▇▇▇'▇ books of account
--------------------------------
and business records have been maintained in material compliance with all
applicable legal and accounting requirements and in accordance with good
business practices, and such books and records are complete and reflect
accurately in all material respects First ▇▇▇▇▇▇'▇ items of income and expense
and all of its assets, liabilities, and stockholders' equity. The minute books
of First ▇▇▇▇▇▇ accurately reflect in all material respects the corporate
actions which its shareholders and Board of Directors, and all committees
thereof, have taken during the time periods covered by such minute books. All
such minute books have been or will be made available to Catawba, Bancshares,
and their representatives.
8
2.08 FIRST ▇▇▇▇▇▇ REPORTS. First ▇▇▇▇▇▇ has filed all reports,
--------------------
registrations, and statements, together with any amendments required to be made
with respect thereto, that were required to be filed with (i) the Federal
Deposit Insurance Corporation ("FDIC"), (ii) the North Carolina Commissioner of
Banks (the "Commissioner"), and (iii) any other governmental or regulatory
authorities having jurisdiction over First ▇▇▇▇▇▇. All such reports,
registrations, and statements filed by First ▇▇▇▇▇▇ with the FDIC, the
Commissioner, or other such regulatory authority are collectively referred to
herein as the "Reports." As of their respective dates, each Report complied in
all material respects with all the statutes, rules, and regulations enforced or
promulgated by the regulatory authority with which it was filed and 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 therein, in
light of the circumstances under which they were made, not misleading; and First
▇▇▇▇▇▇ has not been notified by any such governmental or regulatory authority
that any such Report was deficient in any material respect as to form or
content. Following the date of this Agreement, First ▇▇▇▇▇▇ shall deliver to
Bancshares, simultaneous with the filing thereof, a copy of each Report.
2.09 FIRST ▇▇▇▇▇▇ FINANCIAL STATEMENTS. First ▇▇▇▇▇▇ has delivered to
---------------------------------
Bancshares (1) a copy of its audited balance sheets as of December 31, 2000 and
1999, and its audited statements of operations, changes in stockholders' equity
and cash flows for the years ended December 31, 2000 and 1999, together with
notes thereto (the "First ▇▇▇▇▇▇ Financial Statements"), and (ii) a copy of its
unaudited balance sheet as of March 31, 2001 and its unaudited statement of
operations for the three months ended March 31, 2001 (the "First ▇▇▇▇▇▇ Interim
Financial Statements"). Following the date of this Agreement, First ▇▇▇▇▇▇
promptly will deliver to Bancshares and Catawba all other annual or interim
financial statements prepared by or for First ▇▇▇▇▇▇. The First ▇▇▇▇▇▇ Financial
Statements and the First ▇▇▇▇▇▇ Interim Financial Statements (including any
related notes and schedules thereto) (i) are in accordance with First ▇▇▇▇▇▇'▇
books and records, and (ii) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated and present fairly in all material respects First ▇▇▇▇▇▇'▇
financial condition, assets and liabilities, results of operations, changes in
stockholders' equity, and changes in cash flows as of the dates indicated and
for the periods specified therein. The First ▇▇▇▇▇▇ Financial Statements have
been audited and certified by First ▇▇▇▇▇▇'▇ independent certified public
accountants, ▇▇▇▇▇▇▇ & Company, PLC.
2.10 TAX RETURNS AND OTHER TAX MATTERS. (i) First ▇▇▇▇▇▇ has timely filed
---------------------------------
or caused to be filed all federal, state, and local tax returns and reports
which are required by law to have been filed, and to the best knowledge of
management of First ▇▇▇▇▇▇, all such returns and reports were true, correct, and
complete in all material respects and contained all material information
required to be contained therein; (ii) all federal, state, and local income,
profits, franchise, sales, use occupation, property, excise, and other taxes
(including interest and penalties), charges and assessments which have become
due from or been assessed or levied against First ▇▇▇▇▇▇ or its property have
been fully paid, and, to the best knowledge of management of First ▇▇▇▇▇▇, with
respect to any such taxes to become due from First ▇▇▇▇▇▇ for any period or
periods through and including March 31, 2001, adequate provision has been made
for the payment of all such taxes and such provision is reflected in the First
▇▇▇▇▇▇ Financial Statements; (iii) First ▇▇▇▇▇▇ has not received any indication
of the pendency of any audit or
9
examination in connection with any tax return or report and has no knowledge
that any such return or report is subject to adjustment; and (iv) First ▇▇▇▇▇▇
has not executed any waiver or extended the statute of limitations (or been
asked to execute a waiver or extend a statute of limitation) with respect to any
tax year, the audit of any tax return or report or the assessment or collection
of any tax. Any deferred taxes of First ▇▇▇▇▇▇ have been provided for in the
First ▇▇▇▇▇▇ Financial Statements in all material respects.
2.11 ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER EVENTS.
-----------------------------------------------------------
(i) Since December 31, 2000, First ▇▇▇▇▇▇ has conducted its business
only in the ordinary course and there has been no Material Adverse Change, and
there has occurred no event or development and there currently exists no
condition or circumstance to the best knowledge of management of First ▇▇▇▇▇▇
which, with the lapse of time or otherwise, is reasonably likely to cause,
create, or result in a Material Adverse Change, in or affecting First ▇▇▇▇▇▇'▇
financial condition or results of operations, prospects, business, assets, loan
portfolio, investments, properties, or operations.
(ii) Since December 31, 2000, and other than in the ordinary course
of its business including its normal salary review for 2001, all as Previously
Disclosed to Bancshares and Catawba, First ▇▇▇▇▇▇ has not incurred any material
liability or engaged in any material transaction or entered into any material
agreement, increased the salaries, compensation, or general benefits payable to
its employees, suffered any loss, destruction, or damage to any of its
properties or assets, or made a material acquisition or disposition of any
assets or entered into any material contract or lease.
2.12 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed,
----------------------------------
First ▇▇▇▇▇▇ has no liabilities or obligations, whether known or unknown,
matured or unmatured, accrued, absolute, contingent, or otherwise, whether due
or to become due (including, without limitation, tax liabilities or unfunded
liabilities under employee benefit plans or arrangements), other than (i) those
reflected in the First ▇▇▇▇▇▇ Financial Statements or the First ▇▇▇▇▇▇ Interim
Financial Statements, (ii) obligations or liabilities incurred in the ordinary
course of its business since March 31, 2001, or (iii) obligations or liabilities
which are not reasonably likely to, individually or in the aggregate, cause a
Material Adverse Change in First ▇▇▇▇▇▇.
2.13 COMPLIANCE WITH EXISTING OBLIGATIONS. First ▇▇▇▇▇▇ has performed in
------------------------------------
all material respects all obligations required to be performed by it under, and
it is not in default in any material respect under, or in violation in any
material respect of, the terms and conditions of its Articles of Incorporation
or Bylaws, and/or any contract, agreement, lease, mortgage, note, bond,
indenture, license, obligation, understanding, or other undertaking (whether
oral or written) to which First ▇▇▇▇▇▇ is bound or by which it, its business,
capital stock, or any of its properties or assets may be affected, which default
or violation would have a Material Adverse Effect on First ▇▇▇▇▇▇.
10
2.14 LITIGATION AND COMPLIANCE WITH LAW.
----------------------------------
(i) There are no actions, suits, arbitrations, controversies, or
other proceedings or investigations (or, to the best knowledge and belief of
management of First ▇▇▇▇▇▇, any facts or circumstances which reasonably could
result in such), including, without limitation, any such action by any
governmental or regulatory authority, which currently exists or is ongoing,
pending, or, to the best knowledge and belief of management of First ▇▇▇▇▇▇,
threatened, contemplated, or probable of assertion, against, relating to, or
otherwise affecting First ▇▇▇▇▇▇ or any of its properties or assets which, if
determined adversely, could result in liability on the part of First ▇▇▇▇▇▇ for,
or subject it to, monetary damages, fines, or penalties, or an injunction, and
which could have a Material Adverse Effect on First ▇▇▇▇▇▇'▇ financial
condition, results of operations, prospects, business, assets, loan portfolio,
investments, properties, or operations or on the ability of First ▇▇▇▇▇▇ to
consummate the Exchange;
(ii) First ▇▇▇▇▇▇ has all licenses, permits, orders,
authorizations, or approvals ("First ▇▇▇▇▇▇ Permits") of any federal, state,
local, or foreign governmental or regulatory body that are material to or
necessary for the conduct of its business or to own, lease, and operate its
properties, all such First ▇▇▇▇▇▇ Permits are in full force and effect, except
where the failure to be in force and effect would not have a Material Adverse
Effect on First ▇▇▇▇▇▇; no violations are or have been recorded in respect of
any such First ▇▇▇▇▇▇ Permits; and no proceeding is pending or, to the best
knowledge of management of First ▇▇▇▇▇▇, threatened or probable of assertion to
suspend, cancel, revoke, or limit any First ▇▇▇▇▇▇ Permit;
(iii) First ▇▇▇▇▇▇ is not subject to any supervisory agreement,
enforcement order, writ, injunction, capital directive, supervisory directive,
memorandum of understanding, or other similar agreement, order, directive,
memorandum, or consent of, with or issued by any regulatory or other
governmental authority (including, without limitation, the FDIC or the
Commissioner) relating to its financial condition, directors or officers,
operations, capital, regulatory compliance, or otherwise; there are no
judgments, orders, stipulations, injunctions, decrees, or awards against First
▇▇▇▇▇▇ which in any manner limit, restrict, regulate, enjoin, or prohibit any
present or past business or practice of First ▇▇▇▇▇▇; and First ▇▇▇▇▇▇ has not
been advised that any regulatory or other governmental authority or any court is
contemplating, threatening, or requesting the issuance of any such agreement,
order, injunction, directive, memorandum, judgment, stipulation, decree, or
award; and,
(iv) First ▇▇▇▇▇▇ is not in violation or default in any material
respect under, and First ▇▇▇▇▇▇ has complied in all material respects with, all
laws, statutes, ordinances, rules, regulations, orders, writs, injunctions, or
decrees of any court or federal, state, municipal, or other governmental or
regulatory authority having jurisdiction or authority over it or its business
operations, properties, or assets (including, without limitation, all provisions
of North Carolina law relating to usury, the Consumer Credit Protection Act, and
all other laws and regulations applicable to extensions of credit by First
▇▇▇▇▇▇) and, to the best knowledge of management of First ▇▇▇▇▇▇, there is no
basis for any claim by any person or authority for compensation, reimbursement,
or damages or otherwise for any violation of any of the foregoing that would
have any Material Adverse Effect on the financial condition of First ▇▇▇▇▇▇.
11
2.15 REAL PROPERTIES. First ▇▇▇▇▇▇ has Previously Disclosed to Catawba and
---------------
Bancshares a listing of all real property owned or leased by First ▇▇▇▇▇▇ and
its Subsidiaries (including, without limitation, banking facilities and all
other real estate or foreclosed properties owned by First ▇▇▇▇▇▇) (the "First
▇▇▇▇▇▇ Real Property") and all leases, if any, pertaining to any such First
▇▇▇▇▇▇ Real Property to which First ▇▇▇▇▇▇ is a party (the "First ▇▇▇▇▇▇ Real
Property Leases"). With respect to all First ▇▇▇▇▇▇ Real Property owned by First
▇▇▇▇▇▇, First ▇▇▇▇▇▇ has good and marketable title to such First ▇▇▇▇▇▇ Real
Property and owns the same free and clear of all mortgages, liens, leases,
encumbrances, title defects, and exceptions to title other than (i) the lien of
current taxes not yet due and payable, and (ii) such imperfections of title and
restrictions, covenants and easements (including utility easements) which do not
affect materially and adversely affect the value of the First ▇▇▇▇▇▇ Real
Property and which do not and will not materially detract from, interfere with,
or restrict the present or future use of the properties subject thereto or
affected thereby. With respect to each First ▇▇▇▇▇▇ Real Property Lease (i) such
lease is valid and enforceable in accordance with its terms, (ii) there
currently exists no circumstance or condition which constitutes an event of
default by First ▇▇▇▇▇▇ or their lessor or which, with the passage of time or
the giving of required notices, will or could constitute such an event of
default, and (iii) the execution and delivery of this Agreement does not
constitute an event of default thereunder.
To the best knowledge of management of First ▇▇▇▇▇▇, the First ▇▇▇▇▇▇ Real
Property complies in all material respects with all applicable federal, state,
and local laws, regulations, ordinances, or orders of any governmental
authority, including those relating to zoning, building and use permits, and the
First ▇▇▇▇▇▇ Real Property may be used under applicable zoning ordinances for
commercial banking facilities as a matter of right rather than as a conditional
or nonconforming use.
All improvements and fixtures included in or on the First ▇▇▇▇▇▇ Real
Property are in good condition and repair, ordinary wear and tear excepted, and
there does not exist any condition which materially interferes with First
▇▇▇▇▇▇'▇ use or materially and adversely affects the economic value thereof.
2.16 LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES.
--------------------------------------------
(i) All loans, accounts, notes and other receivables reflected
as assets on First ▇▇▇▇▇▇'▇ books and records (a) have resulted from bona fide
business transactions in the ordinary course of First ▇▇▇▇▇▇'▇ operations, (b)
in all material respects were made in accordance with First ▇▇▇▇▇▇'▇ customary
loan policies and procedures, and (c) are owned by First ▇▇▇▇▇▇ free and clear
of all liens, encumbrances, assignments, participation or repurchase agreements,
or other exceptions to title or to the ownership or collection rights of any
other person or entity.
(ii) All records of First ▇▇▇▇▇▇ regarding all outstanding loans,
accounts, notes, and other receivables, and all other real estate owned, are
accurate in all material respects, and, with respect to each loan which First
▇▇▇▇▇▇'▇ loan documentation indicates is secured by any real or personal
property or property rights ("First ▇▇▇▇▇▇ Loan Collateral"), such loan is
secured by valid, perfected, and enforceable liens on all such First ▇▇▇▇▇▇ Loan
Collateral having the priority described in First ▇▇▇▇▇▇'▇ records of such loan.
12
(iii) Each loan reflected as an asset on First ▇▇▇▇▇▇'▇ books, and
each guaranty therefor, is the legal, valid, and binding obligation of the
obligor or guarantor thereon, and to the best knowledge of management of First
▇▇▇▇▇▇ no defense, offset, or counterclaim has been asserted with respect to any
such loan or guaranty.
(iv) First ▇▇▇▇▇▇ has Previously Disclosed to Bancshares a
listing of (a) each loan, extension of credit, or other asset of First ▇▇▇▇▇▇
which, as of May 31, 2001, is classified by the FDIC, the Commissioner, or by
First ▇▇▇▇▇▇ as "Loss", "Doubtful", "Substandard", or "Special Mention" (or
otherwise by words of similar import), or which First ▇▇▇▇▇▇ has designated as a
special asset or for special handling or placed on any "watch list" because of
concerns regarding the ultimate collectibility or deteriorating condition of
such asset or any obligor or Loan Collateral therefor, and (b) each loan or
extension of credit of First ▇▇▇▇▇▇ which, as of May 31, 2001, was past due
thirty (30) days or more as to the payment of principal and/or interest, or as
to which any obligor thereon (including the borrower or any guarantor) otherwise
was in default, is the subject of a proceeding in bankruptcy, or otherwise has
indicated any inability or intention not to repay such loan or extension of
credit. Each such listing is accurate and complete as of the date indicated.
(v) To the best knowledge of management of First ▇▇▇▇▇▇, each of
First ▇▇▇▇▇▇'▇ loans and other extensions of credit (with the exception of those
loans and extensions of credit specified in the written listings described in
Subparagraph (iv) above) is collectible in the ordinary course of First ▇▇▇▇▇▇'▇
business in an amount which is not less than the amount at which it is carried
on First ▇▇▇▇▇▇'▇ books and records.
2.17 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by First
------------------------------------
▇▇▇▇▇▇ (whether owned of record or beneficially) are held free and clear of all
mortgages, liens, pledges, encumbrances, or any other restriction or rights of
any other person or entity, whether contractual or statutory, which would
materially impair the ability of First ▇▇▇▇▇▇ to dispose freely of any such
security and/or otherwise to realize the benefits of ownership thereof at any
time (other than pledges of securities in the ordinary course of First ▇▇▇▇▇▇'▇
business to secure public funds deposits and in connection with repurchase
agreements with customers and Federal Home Loan Bank borrowings). There are no
voting trusts or other agreements or undertakings to which First ▇▇▇▇▇▇ is a
party with respect to the voting of any such securities.
Except for fluctuations in the market values of United States Treasury and
agency securities, municipal securities, or other debt securities since May 31,
2001, there has been no material deterioration or Material Adverse Change in the
quality, or any material decrease in the value, of First ▇▇▇▇▇▇'▇ securities
portfolio.
2.18 PERSONAL PROPERTY AND OTHER ASSETS. All assets of First ▇▇▇▇▇▇
----------------------------------
(including, without limitation, all banking equipment, data processing
equipment, vehicles, and all other personal property located in or used in the
operation of each office of First ▇▇▇▇▇▇ or otherwise used by First ▇▇▇▇▇▇ in
the operation of its business) are owned by First ▇▇▇▇▇▇ free and clear of all
liens, leases, encumbrances, title defects, or exceptions to title. All of First
13
▇▇▇▇▇▇'▇ banking and other equipment is in good operating condition and repair,
ordinary wear and tear excepted.
2.19 ENVIRONMENTAL MATTERS. First ▇▇▇▇▇▇ has Previously Disclosed and
---------------------
provided to Catawba and Bancshares copies of all written reports,
correspondence, notices, or other materials, if any, in its possession
pertaining to environmental reports, surveys, assessments, notices of violation,
notices of regulatory requirements, penalty assessments, claims, actions, or
proceedings, past or pending, of the First ▇▇▇▇▇▇ Real Property or any of its
First ▇▇▇▇▇▇ Loan Collateral and any improvements thereon, or to any violation
of Environmental Laws (as defined below) on, affecting or otherwise involving
the First ▇▇▇▇▇▇ Real Property, any First ▇▇▇▇▇▇ Loan Collateral, or otherwise
involving First ▇▇▇▇▇▇.
To the knowledge of management of First ▇▇▇▇▇▇:
(i) There has been no presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
reporting, testing, processing, emission, discharge, release, threatened
release, control, or clean-up, in a reportable or regulated quantity, of any
hazardous, toxic, or otherwise regulated materials, substances, or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, oil or other petroleum products or byproducts, asbestos or materials
containing (or presumed to contain) asbestos, polychlorinated biphenols, or
radioactive materials, and/or any hazardous, toxic, regulated or dangerous
waste, substance, or material defined as such by the United States Environmental
Protection Agency or any other federal, state, or local government or agency or
political subdivision thereof, or for the purpose of any Environmental Laws (as
defined herein), as may now or hereafter (through the Effective Time) be defined
or in effect ("Hazardous Substances") by any person on, from, or relating to any
parcel of the First ▇▇▇▇▇▇ Real Property;
(ii) First ▇▇▇▇▇▇ has not violated any federal, state, or local
law, rule, regulation, order, permit, or other requirement relating to health,
safety, or the environment or imposing liability, responsibility, or standards
of conduct applicable to environmental conditions (all such laws, rules,
regulations, orders, and other requirements being herein collectively referred
to as "Environmental Laws"), and, there has been no violation of any
Environmental Laws (including any violation with respect to or relating to any
First ▇▇▇▇▇▇ Loan Collateral) by any other person or entity for whose liability
or obligation with respect to any particular matter or violation First ▇▇▇▇▇▇ is
or may be responsible or liable;
(iii) First ▇▇▇▇▇▇ is not subject to any pending claims, demands,
causes of action, suits, proceedings, losses, damages, penalties, liabilities,
obligations, costs, or expenses of any kind and nature which arise out of,
under, or in connection with, or which result from or are based upon the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control, or clean-up of any
Hazardous Substances on, from, or relating to the First ▇▇▇▇▇▇ Real Property or
any First ▇▇▇▇▇▇ Loan Collateral, by First ▇▇▇▇▇▇ or any other person or entity;
and;
14
(iv) No facts, events, or conditions relating to the First ▇▇▇▇▇▇
Real Property or any First ▇▇▇▇▇▇ Loan Collateral, or the operations of First
▇▇▇▇▇▇ at any of their respective office locations, will prevent, hinder or
limit continued compliance with Environmental Laws, or give rise to any
investigatory, remedial, or corrective actions, obligations, or liabilities
(whether accrued, absolute, contingent, unliquidated, or other-wise) pursuant to
Environmental Laws.
For purposes of this Agreement, "Environmental Laws" shall include:
(i) all federal, state, and local statutes, regulations,
ordinances, orders, decrees, and similar provisions having the force or effect
of law,
(ii) all contractual agreements, and
(iii) all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including,
without limitation, all standards of conduct and bases of obligations relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, reporting, testing,
processing, discharge, release, threatened release, control, or clean-up of any
Hazardous Substances (including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Superfund Amendment
and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances
Control Act, the Oil Pollutant Act, the Coastal Zone Management Act, any
"Superfund" or "Superlien" law, the North Carolina Oil Pollution and Hazardous
Substances Control Act, the North Carolina Water and Air Resources Act, and the
North Carolina Occupational Safety and Health Act, including any amendments
thereto from time to time) as such may now or hereafter (through the Effective
Time) be defined or in effect.
2.20 ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. All negotiations
-------------------------------------------
relative to this Agreement and the transactions described herein have been
carried on by First ▇▇▇▇▇▇ directly with Catawba and Bancshares; no person or
firm has been retained by or has acted on behalf of, pursuant to any agreement,
arrangement or understanding with, or under the authority of, First ▇▇▇▇▇▇ or
its Board of Directors, as a broker, finder, or agent or has performed similar
functions or otherwise is or may be entitled to receive or claim a brokerage fee
or other commission in connection with the transactions described herein; and
First ▇▇▇▇▇▇ has not agreed to pay any brokerage fee or other commission to any
person or entity in connection with the transactions described herein.
2.21 MATERIAL CONTRACTS. Except as Previously Disclosed, First ▇▇▇▇▇▇
------------------
is not a party to or bound by any agreement involving money or other property in
an amount or with a value in excess of $25,000 (i) which is material to First
▇▇▇▇▇▇ and was not entered into in the ordinary course of business, (ii) which
involves hedging, options, or any similar trading activity, or interest rate
exchanges or swaps, (iii) which commits First ▇▇▇▇▇▇ to extend any loan or
credit (with the exception of letters of credit, lines of credit, and loan
commitments extended in the ordinary course of First ▇▇▇▇▇▇'▇ business), (iv)
which involves the purchase or sale of any assets of First ▇▇▇▇▇▇, or the
purchase, sale, issuance, redemption, or transfer of any capital stock or
15
other securities issued by First ▇▇▇▇▇▇, or (v) with any director or officer of
First ▇▇▇▇▇▇ (including, without limitation, any employment or consulting
agreement, but not including any agreement relating to loans or other banking
services which were made in the ordinary course of First ▇▇▇▇▇▇'▇ business and
on substantially the same terms and conditions as were prevailing at that time
for similar agreements with unrelated persons).
First ▇▇▇▇▇▇ is not in default in any material respect, and there has not
occurred any event which with the lapse of time or giving of notice or both
would constitute a default, under any contract, lease, insurance policy,
commitment, or arrangement to which it is a party or by which it or its property
is or may be bound or affected or under which it or its property receives
benefits, where the consequences of such default would have a Material Adverse
Effect on the financial condition, results of operations, prospects, business,
assets, loan portfolio, investments, properties, or operations of First ▇▇▇▇▇▇.
2.22 EMPLOYMENT MATTERS; EMPLOYEE RELATIONS. First ▇▇▇▇▇▇ (i) has paid
--------------------------------------
in full to or accrued on behalf of all its directors, officers, and employees
all wages, salaries, commissions, bonuses, fees, sick pay, severance pay, all
other amounts promised to the extent required by law or when First ▇▇▇▇▇▇ has a
policy of making such payments and other direct compensation for all services
performed by them to the date of this Agreement and (ii) is in compliance with
all federal, state, and local laws, statutes, rules, and regulations with regard
to employment and employment practices, terms and conditions, and wages and
hours, and other compensation matters; and no person has, to the best knowledge
of management of First ▇▇▇▇▇▇, asserted that First ▇▇▇▇▇▇ is liable in any
amount for any arrearages in wages or employment taxes or for any penalties for
failure to comply with any of the foregoing.
There is no action, suit, or proceeding by any person pending or, to the
best knowledge of management of First ▇▇▇▇▇▇, threatened, against First ▇▇▇▇▇▇
(or any of its employees), involving employment discrimination, sexual
harassment, wrongful discharge, or similar claims.
First ▇▇▇▇▇▇ is not a party to or bound by any collective bargaining
agreement with any of its employees, any labor union, or any other collective
bargaining unit or organization. There is no pending or threatened labor
dispute, work stoppage, or strike involving First ▇▇▇▇▇▇ and any of its
employees, or any pending or threatened proceeding in which it is asserted that
First ▇▇▇▇▇▇ has committed an unfair labor practice; and management of First
▇▇▇▇▇▇ is not aware of any activity involving it or any of its employees seeking
to certify a collective bargaining unit or engaging in any other labor
organization activity.
16
2.23 EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS
---------------------------------------------
(i) Neither First ▇▇▇▇▇▇ nor any its Subsidiaries is a party to
or bound by any employment agreements with any of their respective directors,
officers, or employees, except for the employment agreements between First
▇▇▇▇▇▇ and W. ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), dated November 30, 1998, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
dated March 15, 2000, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, dated September 6, 2000. First ▇▇▇▇▇▇
also has a deferred compensation agreement with Hall dated February 27, 1996.
(ii) First ▇▇▇▇▇▇ has Previously Disclosed and has delivered or
made available to Catawba and Bancshares prior to the execution of this
Agreement copies, in each case, of all pension, stock ownership, severance pay,
vacation, bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
programs, arrangements or agreements, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including "employee benefit
plans" as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by First ▇▇▇▇▇▇ for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "Benefit Plans"). Schedule 2.23
identifies each such First ▇▇▇▇▇▇ Benefit Plan, and further identifies each
person who receives benefits under, or is or may become eligible to receive
benefits under, each such Benefit Plan. Without limiting the foregoing, Schedule
2.23 also identifies each person for whom First ▇▇▇▇▇▇ has agreed to provide
"lifetime" health benefits and describes the extent of First ▇▇▇▇▇▇'▇
obligations in that regard. Any of the First ▇▇▇▇▇▇ Benefit Plans which is an
"employee pension benefit plan", as that term is defined in Section 3(2) of
ERISA, is referred to herein as an "ERISA Plan". No ERISA Plan is also a
"defined benefit plan" (as defined in Section 414(j) of the Code) or is or has
been a multi-employer plan within the meaning of Section 3(37) of ERISA, except
as described on Schedule 2.23. Neither First ▇▇▇▇▇▇ nor any affiliate of First
▇▇▇▇▇▇ has ever been required to contribute to a multi-employer plan, as defined
in Section 3(37) of ERISA.
(iii) All First ▇▇▇▇▇▇ Benefit Plans are in compliance in all
material respects with the applicable terms of ERISA, the Code, and any other
applicable laws, rules, or regulations, the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First ▇▇▇▇▇▇. Each ERISA Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and management of First ▇▇▇▇▇▇ is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. To the best knowledge of management of First ▇▇▇▇▇▇, First ▇▇▇▇▇▇ has
not engaged in a transaction with respect to any First ▇▇▇▇▇▇ Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject First ▇▇▇▇▇▇ to a tax imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First ▇▇▇▇▇▇.
17
(iv) First ▇▇▇▇▇▇ has no liability for retiree health and life
benefits under any of the First ▇▇▇▇▇▇ Benefit Plans and there are no
restrictions on the rights of First ▇▇▇▇▇▇ to amend or terminate any such Plan
without incurring any liability thereunder, except as set forth on Schedule
2.23.
(v) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of First ▇▇▇▇▇▇ from
First ▇▇▇▇▇▇ under any First ▇▇▇▇▇▇ Benefit Plan or otherwise, (b) increase any
benefits otherwise payable under any First ▇▇▇▇▇▇ Benefit Plan or otherwise, or
(c) result in any acceleration of the time of payment or vesting of any such
benefit, except as set forth on Schedule 2.23.
(vi) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of First ▇▇▇▇▇▇ and its beneficiaries have been fully reflected
on the First ▇▇▇▇▇▇ Financial Statements to the extent required by and in
accordance with GAAP. Any adjustments necessary will be made prior to the
earlier of Closing and December 31, 2001.
2.24 INSURANCE. First ▇▇▇▇▇▇ has in effect such policies of general
---------
liability, casualty, directors and officers liability, employee fidelity, errors
and omissions, and other property and liability insurance (including without
limitation a "banker's blanket bond") as have been Previously Disclosed to
Catawba and Bancshares (the " First ▇▇▇▇▇▇ Policies"). The First ▇▇▇▇▇▇ Policies
provide coverage in such amounts and against such liabilities, casualties,
losses, or risks as is customary or reasonable for entities engaged in First
▇▇▇▇▇▇'▇ businesses or as is required by applicable law or regulation; and, in
the reasonable opinion of management of First ▇▇▇▇▇▇, the insurance coverage
provided under the First ▇▇▇▇▇▇ Policies is reasonable and adequate in all
respects for First ▇▇▇▇▇▇. Each of the First ▇▇▇▇▇▇ Policies is in full force
and effect and is valid and enforceable in accordance with its terms, and is
underwritten by an insurer of recognized financial responsibility and which is
qualified to transact business in North Carolina, and First ▇▇▇▇▇▇ has taken all
requisite actions (including the giving of required notices) under each such
Policy in order to preserve all rights thereunder with respect to all matters.
First ▇▇▇▇▇▇ is not in default under the provisions of, has received notice of
cancellation or nonrenewal of or any material premium increase on, or has any
knowledge of any failure to pay any premium on or any inaccuracy in any
application for any First ▇▇▇▇▇▇ Policy. There are no pending claims with
respect to any First ▇▇▇▇▇▇ Policy (and there are no facts which would form the
basis of any such claim), and First ▇▇▇▇▇▇ has no knowledge of any state of
facts or of the occurrence of any event that is reasonably likely to form the
basis for any such claim.
2.25 INSURANCE OF DEPOSITS. All deposits of First ▇▇▇▇▇▇ are insured by
---------------------
the Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from First ▇▇▇▇▇▇ to the FDIC have been paid in
full in a timely fashion, and no proceedings have been commenced or, to the best
knowledge of management of First ▇▇▇▇▇▇, are contemplated by the FDIC or
otherwise to terminate such insurance.
18
2.26 AFFILIATES. First ▇▇▇▇▇▇ has Previously Disclosed to Catawba and
----------
Bancshares a listing of those persons deemed by First ▇▇▇▇▇▇ as of the date of
this Agreement to be "Affiliates" of First ▇▇▇▇▇▇ (as that term is defined in
Rule 405 promulgated under the 1933 Act), including persons, trusts, estates,
corporations, or other entities related to persons deemed to be Affiliates of
First ▇▇▇▇▇▇.
2.27 OBSTACLES TO REGULATORY APPROVAL, ACCOUNTING TREATMENT, OR TAX
--------------------------------------------------------------
TREATMENT. To the best knowledge of management of First ▇▇▇▇▇▇, there exists no
---------
fact or condition (including First ▇▇▇▇▇▇'▇ record of compliance with the
Community Reinvestment Act) relating to First ▇▇▇▇▇▇ that may reasonably be
expected to (i) prevent or materially impede or delay Bancshares or First ▇▇▇▇▇▇
from obtaining the regulatory approvals required in order to consummate the
transactions described herein, (ii) prevent the Exchange from qualifying to be a
reorganization under Section 368(a)(1)(B) of the Code, or (iii) prevent the
Exchange from being treated as a "pooling-of-interests" for accounting purposes;
and, if any such fact or condition becomes known to First ▇▇▇▇▇▇, First ▇▇▇▇▇▇
shall promptly (and in any event within three days after obtaining such
knowledge) communicate such fact or condition to Catawba and Bancshares in
writing.
2.28 DISCLOSURE. To the best knowledge of management of First ▇▇▇▇▇▇, no
----------
written statement, certificate, schedule, list, or other written information
furnished by or on behalf of First ▇▇▇▇▇▇ to Catawba or Bancshares in connection
with this Agreement (including, without limitation, information "Previously
Disclosed" by First ▇▇▇▇▇▇), when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by First ▇▇▇▇▇▇ to Catawba or Bancshares
is or will be a true and complete copy of such document, unmodified except by
another document delivered by First ▇▇▇▇▇▇.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CATAWBA AND BANCSHARES
Except as otherwise specifically described herein or as "Previously
Disclosed" (as defined in Paragraph 9.01 below) to First ▇▇▇▇▇▇, Catawba and
Bancshares hereby make the following representations and warranties to First
▇▇▇▇▇▇:
3.01 ORGANIZATION; STANDING; POWER. Catawba and Bancshares each (i) is
-----------------------------
duly organized and incorporated, validly existing, and in good standing under
the laws of North Carolina; (ii) has all requisite power and authority
(corporate and other) to own, lease, and operate their respective properties and
to carry on their respective business as now being conducted; (iii) is duly
qualified to do business and is in good standing in each other jurisdiction in
which the character of the properties owned, leased, or operated by it therein
or in which the transaction of its business makes such qualification necessary,
except where failure so to qualify would not have a Material Adverse Effect on
Catawba or Bancshares, and (iv) is not transacting business or operating any
properties owned or leased by it in violation of any provision of federal
19
or state law or any rule or regulation promulgated thereunder, which violation
would have a Material Adverse Effect on Catawba or Bancshares.
3.02 BANCSHARES' CAPITAL STOCK. Bancshares authorized capital stock
-------------------------
consists of 9,000,000 shares of common stock, $1.00 par value per share and
1,000,000 shares of preferred stock, no par value per share. As of May 31, 2001,
1,644,886 shares of Bancshares Stock were issued and outstanding, which
constitute Bancshares' only issued and outstanding securities.
Each outstanding share of Bancshares Stock (i) has been duly authorized and
is validly issued and outstanding, and is fully paid and nonassessable, (ii) has
not been issued in violation of the preemptive rights of any shareholder, and
(iii) his been issued pursuant to and in compliance with the requirement of a
registration statement or an applicable exemption from registration requirements
under the 1933 Act.
3.03 SUBSIDIARIES.
------------
A. (i) Schedule 3.03 hereto is a list of all of Catawba's and
Bancshares' Subsidiaries (defined below) together with the jurisdiction of
organization of each such Subsidiary, (ii) Catawba and Bancshares own, directly
or indirectly, all the issued and outstanding equity securities of each of their
respective Subsidiaries, (iii) no equity securities of any of their respective
Subsidiaries are or may become required to be issued (other than to Catawba,
Bancshares or their respective wholly-owned Subsidiaries) by reason of any
contractual right or obligation or otherwise, (iv) there are no contracts,
commitments, understandings or arrangements by which any of such Subsidiaries
are or may be bound to sell or otherwise transfer any equity securities of any
such Subsidiaries (other than to Catawba, Bancshares or their respective wholly-
owned Subsidiaries), (v) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities;
(vi) all of the equity securities of each Subsidiary held by Catawba,
Bancshares, or their respective Subsidiaries are fully paid and nonassessable
(except to the extent the common stock of Catawba is assessable as set forth in
N.C.G.S. 53-42), are owned by Catawba, Bancshares, or their respective
Subsidiaries free and clear of any liens, charges, encumbrances or security
interests, have been duly authorized, and are validly issued and outstanding;
(vii) none of the equity securities of any Subsidiary held by Catawba or
Bancshares have been issued in violation of the preemptive rights of any
shareholder, and all such securities have been issued pursuant to a valid and
effective registration statement or pursuant to and in compliance with the
requirement of an applicable exemption from the registration requirements under
the 1933 Act.
B. As used in this Agreement, "Subsidiary" shall have the meaning
as described to that term in Rule 1-02 of Regulation S-X of the SEC.
C. Catawba and Bancshares do not own beneficially, directly or
indirectly, any equity securities or similar interests of any entity, or any
interest in a partnership or joint venture of any kind, other than their
respective Subsidiaries.
20
D. Each of Catawba's and Bancshares' Subsidiaries is duly
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect on Catawba or
Bancshares.
3.04 CONVERTIBLE SECURITIES, OPTIONS, ETC. With the exception of options
------------------------------------
to purchase an aggregate of 233,657 shares of Bancshares Stock which have been
issued and are outstanding under the 1996 Incentive Stock Option Plan and the
1996 Nonqualified Stock Option Plan (collectively the "Bancshares Stock Plans"),
neither Catawba nor Bancshares have any outstanding (1) securities or other
obligations (including debentures or other debt instruments) which are
convertible into shares of Bancshares Stock or any other securities of Catawba
or Banchshares; (ii) options, warrants, rights, calls, or other commitments of
any nature which entitle any person to receive or acquire any shares of
Bancshares Stock or any other securities of Catawba or Bancshares; or (iii)
plan, agreement or other arrangement pursuant to which shares of Bancshares
Stock or any other securities of Catawba or Bancshares, or options, warrants,
rights, calls, or other commitments of any nature pertaining thereto, have been
or may be issued.
3.05 AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
---------------------------------------
duly and validly approved by Catawba's and Bancshares' Boards of Directors in
the manner required by law and subject only to approval of this Agreement by the
shareholders of Catawba and Bancshares in the manner required by law (as
contemplated by Paragraph 6.01.A. below) and by the applicable regulatory
authorities (as contemplated by Paragraph 6.02 below), (i) Catawba and
Bancshares have the corporate power and authority to execute and deliver this
Agreement and to perform its obligations and agreements and carry out the
transactions described herein, (ii) all corporate action required to authorize
Catawba and Bancshares to enter into this Agreement and to perform its
obligations and agreements and carry out the transactions described herein has
been duly and properly taken, and (iii) this Agreement has been duly executed on
behalf of Catawba and Bancshares, and (assuming due authorization, execution and
delivery by Bancshares and Catawba) constitutes a valid and binding agreement of
Catawba and Bancshares, enforceable in accordance with its terms (except to the
extent enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect which
affect creditors' rights generally; and (b) by legal and equitable limitations
on the availability of injunctive relief, specific performance, and other
equitable remedies), and (c) general principles of equity and applicable laws or
court decisions limiting the enforceability of indemnification provisions).
3.06 VALIDITY OF TRANSACTIONS, ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
-----------------------------------------------------------------
Except where the same would not have a Material Adverse Effect on Catawba or
Bancshares, neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by Catawba or
Bancshares with any of its obligations or agreements contained herein, will: (1)
conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, Catawba's or
Bancshares' Articles of Incorporation or Bylaws, or any contract, agreement,
lease, mortgage, note, bond, indenture, license, or obligation or understanding
(oral or written) to which Catawba or Bancshares is bound or by which it, its
business, capital stock, or any properties or assets may
21
be affected; (ii) result in the creation or imposition of any lien, claim,
interest, charge, restriction, or encumbrance upon any of Catawba's or
Bancshares' properties or assets; (iii) violate any applicable federal or state
statute, law, rule, or regulation, or any judgment, order, writ, injunction, or
decree of any court, administrative or regulatory agency, or governmental body;
(iv) result in the acceleration of any obligation or indebtedness of Catawba or
Bancshares; or (v) interfere with or otherwise adversely affect Catawba's or
Bancshares' ability to carry on its business as presently conducted.
No consents, approvals, or waivers are required to be obtained from any
person or entity in connection with Catawba's or Bancshares' execution and
delivery of this Agreement, or the performance of its obligations or agreements
or the consummation of the transactions described herein, except for required
approvals of Bancshares' shareholders as described in Paragraph 7.01.D. below
and of governmental or regulatory authorities as described in Paragraph 7.01.A.
below, and other consents or approvals, the failure of which to obtain would not
have a Material Adverse Effect on Catawba or Banchshares or their respective
abilities to consummate the Exchange.
3.07 CATAWBA'S AND BANCSHARES' BOOKS AND RECORDS. Catawba's and
-------------------------------------------
Bancshares' respective books of account and business records have been
maintained in material compliance with all applicable legal and accounting
requirements and in accordance with good business practices, and such books and
records are complete and reflect accurately in all material respects Catawba's
or Bancshares' respective items of income and expense and all of its assets,
liabilities, and stockholders' equity. The minute books of Catawba and
Bancshares accurately reflect in all material respects the corporate actions
which their shareholders and Boards of Directors, and all committees thereof,
have taken during the time periods covered by such minute books. All such minute
books have been or will be made available to First ▇▇▇▇▇▇ and its
representatives.
3.08 REPORTS. Catawba and Bancshares have filed all reports,
-------
registrations, and statements, together with any amendments required to be made
with respect thereto, that were required to be filed with (i) the FDIC, (ii) the
Commissioner, (iii) the SEC, (iv) the Board of Governors of the Federal Reserve
System (the "Federal Reserve"), and (v) any other governmental or regulatory
authorities having jurisdiction over Catawba or Bancshares. All such reports,
registrations, and statements filed by Catawba or Bancshares with the FDIC, the
Commissioner, the SEC, the Federal Reserve, or other such regulatory authority
are collectively referred to herein as the "Catawba Reports." As of their
respective dates, each Catawba Report complied in all material respects with all
the statutes, rules, and regulations enforced or promulgated by the regulatory
authority with which it was filed and 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 therein, in light of the circumstances under
which they were made, not misleading; and neither Catawba nor Bancshares has
been notified by any such governmental or regulatory authority that any such
Catawba Report was deficient in any material respect as to form or content.
Following the date of this Agreement, Catawba and Bancshares shall deliver to
First ▇▇▇▇▇▇, simultaneous with the filing thereof, a copy of each Catawba
Report.
22
3.09 FINANCIAL STATEMENTS. Bancshares has delivered to First ▇▇▇▇▇▇ (1) a
--------------------
copy of its audited consolidated balance sheets as of December 31, 2000 and
1999, and its audited consolidated statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 2000 and
1999, together with notes thereto (the "Catawba Financial Statements"), and (ii)
a copy of its unaudited consolidated balance sheet as of March 31, 2001 and its
unaudited statement of operations for the three months ended March 31, 2001 (the
"Catawaba Interim Financial Statements"). Following the date of this Agreement,
Bancshares promptly will deliver to First ▇▇▇▇▇▇ all other annual or interim
financial statements prepared by or for Bancshares. The Catawba Financial
Statements and the Catawba Interim Financial Statements (including any related
notes and schedules thereto) (i) are in accordance with Bancshares' books and
records, and (ii) were prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated and present fairly in all material
respects Bancshares' consolidated financial condition, assets and liabilities,
results of operations, changes in stockholders' equities, and changes in cash
flows as of the dates indicated and for the periods specified therein. The
Catawba Financial Statements have been audited and certified by Bancshares'
independent certified public accountants, ▇▇▇▇▇ ▇▇▇▇ PLLC.
3.10 TAX RETURNS AND OTHER TAX MATTERS. (i) Catawba and Bancshares have
---------------------------------
timely filed or caused to be filed all federal, state, and local tax returns and
reports which are required by law to have been filed, and to the best knowledge
of management of Catawba and Bancshares, all such returns and reports were true,
correct, and complete in all material respects and contained all material
information required to be contained therein; (ii) all federal, state, and local
income, profits, franchise, sales, use, occupation, property, excise, and other
taxes (including interest and penalties), charges and assessments which have
become due from or been assessed or levied against Catawba or Bancshares or
their respective property have been fully paid, and, to the best knowledge of
management of Catawba and Bancshares, with respect to any such taxes to become
due from Catawba or Bancshares for any period or periods through and including
March 31, 2001, adequate provision has been made for the payment of all such
taxes and such provision is reflected in the Catawba Financial Statements; (iii)
Catawba and Bancshares have not received any indication of the pendency of any
audit or examination in connection with any tax return or report and have no
knowledge that any such return or report is subject to adjustment; and (iv)
Catawba and Bancshares have not executed any waiver or extended the statute of
limitations (or been asked to execute a waiver or extend a statute of
limitation) with respect to any tax year, the audit of any tax return or report
or the assessment or collection of any tax. Any deferred taxes of Catawba or
Bancshares have been provided for in the Catawba Financial Statements in all
material respects.
3.11 ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER EVENTS.
-----------------------------------------------------------
(i) Since December 31, 2000, Catawba and Bancshares have conducted
their business only in the ordinary course and there has been no Material
Adverse Change, and there has occurred no event or development and there
currently exists no condition or circumstance to the best knowledge of
management of Catawba or Bancshares which, with the lapse of time or otherwise,
is reasonably likely to cause, create, or result in a Material Adverse Change,
in or
23
affecting Bancshares' consolidated financial condition or results of operations,
prospects, business, assets, loan portfolio, investments, properties, or
operations.
(ii) Since December 31, 2000, and other than in the ordinary course
of its business including its normal salary review for 2001, all as Previously
Disclosed to First ▇▇▇▇▇▇, Catawba and Bancshares have not incurred any material
liability or engaged in any material transaction or entered into any material
agreement, increased the salaries, compensation, or general benefits payable to
their employees, suffered any loss, destruction, or damage to any of their
properties or assets, or made a material acquisition or disposition of any
assets or entered into any material contract or lease.
3.12 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed,
----------------------------------
Catawba and First ▇▇▇▇▇▇ have no liabilities or obligations, whether known or
unknown, matured or unmatured, accrued, absolute, contingent, or otherwise,
whether due or to become due (including, without limitation, tax liabilities or
unfunded liabilities under employee benefit plans or arrangements), other than
(i) those reflected in the Catawba Financial Statements or the Catawba Interim
Financial Statements, (ii) obligations or liabilities incurred in the ordinary
course of its business since March 31, 2001, or (iii) obligations or liabilities
which are not reasonably likely to, individually or in the aggregate, cause a
Material Adverse Change in Catawba or Bancshares.
3.13 COMPLIANCE WITH EXISTING OBLIGATIONS. Catawba and Bancshares have
------------------------------------
performed in all material respects all obligations required to be performed by
them under, and they are not in default in any material respect under, or in
violation in any material respect of, the terms and conditions of their Articles
of Incorporation or Bylaws, and/or any contract, agreement, lease, mortgage,
note, bond, indenture, license, obligation, understanding, or other undertaking
(whether oral or written) to which Catawba or Bancshares is bound or by which
they, their business, capital stock, or any of their properties or assets may be
affected, which default or violation would have a Material Adverse Effect on
Catawba or Bancshares.
3.14 LITIGATION AND COMPLIANCE WITH LAW.
----------------------------------
(i) There are no actions, suits, arbitrations, controversies, or
other proceedings or investigations (or, to the best knowledge and belief of
management of Catawba and Bancshares, any facts or circumstances which
reasonably could result in such), including, without limitation, any such action
by any governmental or regulatory authority, which currently exists or is
ongoing, pending, or, to the best knowledge and belief of management of Catawba
and Bancshares, threatened, contemplated, or probable of assertion, against,
relating to, or otherwise affecting Catawba or Bancshares or any of their
respective properties or assets which, if determined adversely, could result in
liability on the part of Catawba or Bancshares for, or subject it to, monetary
damages, fines, or penalties, or an injunction, and which could have a Material
Adverse Effect on Catawba's or Bancshare's financial condition, results of
operations, prospects, business, assets, loan portfolio, investments,
properties, or operations or on the ability of Bancshares to consummate the
Exchange;
24
(ii) Catawba and Bancshares have all licenses, permits, orders,
authorizations, or approvals ("Catawba Permits") of any federal, state, local,
or foreign governmental or regulatory body that are material to or necessary for
the conduct of their business or to own, lease, and operate its properties, all
such Catawba Permits are in full force and effect, except where the failure to
be in force and effect would not have a Material Adverse Effect on Catawba or
Bancshares; no violations are or have been recorded in respect of any such
Catawba Permits; and no proceeding is pending or, to the best knowledge of
management of Catawba or Bancshares, threatened or probable of assertion to
suspend, cancel, revoke, or limit any Catawba Permit;
(iii) Catawba and Bancshares are not subject to any supervisory
agreement, enforcement order, writ, injunction, capital directive, supervisory
directive, memorandum of understanding, or other similar agreement, order,
directive, memorandum, or consent of, with or issued by any regulatory or other
governmental authority (including, without limitation, the FDIC or the
Commissioner) relating to its financial condition, directors or officers,
operations, capital, regulatory compliance, or otherwise; there are no
judgments, orders, stipulations, injunctions, decrees, or awards against Catawba
or Bancshares which in any manner limit, restrict, regulate, enjoin, or prohibit
any present or past business or practice of Catawba or Bancshares; and neither
Catawba nor Bancshares has been advised that any regulatory or other
governmental authority or any court is contemplating, threatening, or requesting
the issuance of any such agreement, order, injunction, directive, memorandum,
judgment, stipulation, decree, or award; and,
(iv) Neither Catawba nor Bancshares is in violation or default in
any material respect under, and Catawba and Bancshares have complied in all
material respects with, all laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions, or decrees of any court or federal, state,
municipal, or other governmental or regulatory authority having jurisdiction or
authority over it or its business operations, properties, or assets (including,
without limitation, all provisions of North Carolina law relating to usury, the
Consumer Credit Protection Act, and all other laws and regulations applicable to
extensions of credit by Catawba or Bancshares) and, to the best knowledge of
management of Catawba and Bancshares, there is no basis for any claim by any
person or authority for compensation, reimbursement, or damages or otherwise for
any violation of any of the foregoing that would have any Material Adverse
Effect on the financial condition of Catawba or Bancshares.
3.15 REAL PROPERTIES. Catawba and Bancshares have Previously Disclosed to
---------------
First ▇▇▇▇▇▇ a listing of all real property owned or leased by Catawba or
Bancshares and their respective Subsidiaries (including, without limitation,
banking facilities and all other real estate or foreclosed properties owned by
Catawba or Bancshares) (the "Catawba Real Property") and all leases, if any,
pertaining to any such Catawba Real Property to which Catawba or Bancshares is a
party (the "Catawba Real Property Leases"). With respect to all Catawba Real
Property owned by Catawba or Bancshares, Catawba and Bancshares have good and
marketable title to such Catawba Real Property and owns the same free and clear
of all mortgages, liens, leases, encumbrances, title defects, and exceptions to
title other than (i) the lien of current taxes not yet due and payable, and (ii)
such imperfections of title and restrictions, covenants and easements (including
utility easements) which do not affect materially and adversely affect the value
of the
25
Catawba Real Property and which do not and will not materially detract from,
interfere with, or restrict the present or future use of the properties subject
thereto or affected thereby. With respect to each Catawba Real Property Lease
(i) such lease is valid and enforceable in accordance with its terms, (ii) there
currently exists no circumstance or condition which constitutes an event of
default by Catawba or Bancshares or their lessor or which, with the passage of
time or the giving of required notices, will or could constitute such an event
of default, and (iii) the execution and delivery of this Agreement does not
constitute an event of default thereunder.
To the best knowledge of management of Catawba or Bancshares, the Catawba
Real Property complies in all material respects with all applicable federal,
state, and local laws, regulations, ordinances, or orders of any governmental
authority, including those relating to zoning, building and use permits, and the
Catawba Real Property may be used under applicable zoning ordinances for
commercial banking facilities as a matter of right rather than as a conditional
or nonconforming use.
All improvements and fixtures included in or on the Catawba Real Property
are in good condition and repair, ordinary wear and tear excepted, and there
does not exist any condition which materially interferes with Catawba's or
Bancshares' use or materially and adversely affects the economic value thereof.
3.16 LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES.
--------------------------------------------
(i) All loans, accounts, notes and other receivables reflected as
assets on Catawba's or Bancshares' books and records (a) have resulted from bona
fide business transactions in the ordinary course of Catawba's or Bancshares'
operations, (b) in all material respects were made in accordance with Catawba's
or Bancshares' customary loan policies and procedures, and (c) are owned by
Catawba or Bancshares free and clear of all liens, encumbrances, assignments,
participation or repurchase agreements, or other exceptions to title or to the
ownership or collection rights of any other person or entity.
(ii) All records of Catawba and Bancshares regarding all
outstanding loans, accounts, notes, and other receivables, and all other real
estate owned, are accurate in all material respects, and, with respect to each
loan which Catawba's or Bancshares' loan documentation indicates is secured by
any real or personal property or property rights ("Catawba Loan Collateral"),
such loan is secured by valid, perfected, and enforceable liens on all such
Catawba Loan Collateral having the priority described in Catawba's or
Bancshares' records of such loan.
(iii) Each loan reflected as an asset on Catawba's and Bancshares'
books, and each guaranty therefor, is the legal, valid, and binding obligation
of the obligor or guarantor thereon, and to the best knowledge of management of
Catawba and Bancshares no defense, offset, or counterclaim has been asserted
with respect to any such loan or guaranty.
(iv) Catawba and Bancshares has Previously Disclosed to First
▇▇▇▇▇▇ a listing of (a) each loan, extension of credit, or other asset of
Catawba or Bancshares which, as of May 31, 2001, is classified by the FDIC, the
Commissioner, or by Catawba or Bancshares as "Loss", "Doubtful", "Substandard",
or "Special Mention" (or otherwise by words of similar import), or
26
which Catawba or Bancshares has designated as a special asset or for special
handling or placed on any "watch list" because of concerns regarding the
ultimate collectibility or deteriorating condition of such asset or any obligor
or Loan Collateral therefor, and (b) each loan or extension of credit of Catawba
or Bancshares which, as of May 31, 2001, was past due thirty (30) days or more
as to the payment of principal and/or interest, or as to which any obligor
thereon (including the borrower or any guarantor) otherwise was in default, is
the subject of a proceeding in bankruptcy, or otherwise has indicated any
inability or intention not to repay such loan or extension of credit. Each such
listing is accurate and complete as of the date indicated.
(v) To the best knowledge of management of Catawba or Bancshares,
each of Catawba's or Bancshares' loans and other extensions of credit (with the
exception of those loans and extensions of credit specified in the written
listings described in Subparagraph (iv) above) is collectible in the ordinary
course of Catawba's or Bancshares' business in an amount which is not less than
the amount at which it is carried on Catawba's or Bancshares' books and records.
3.17 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by
------------------------------------
Catawba and Bancshares (whether owned of record or beneficially) are held free
and clear of all mortgages, liens, pledges, encumbrances, or any other
restriction or rights of any other person or entity, whether contractual or
statutory, which would materially impair the ability of Catawba or Bancshares to
dispose freely of any such security and/or otherwise to realize the benefits of
ownership thereof at any time (other than pledges of securities in the ordinary
course of Catawba's or Bancshares' business to secure public funds deposits and
in connection with repurchase agreements with customers and Federal Home Loan
Bank borrowings). There are no voting trusts or other agreements or undertakings
to which Catawba or Bancshares is a party with respect to the voting of any such
securities.
Except for fluctuations in the market values of United States Treasury and
agency securities, municipal securities, or other debt securities since May 31,
2001, there has been no material deterioration or Material Adverse Change in the
quality, or any material decrease in the value, of Catawba's or Bancshares'
securities portfolio.
3.18 PERSONAL PROPERTY AND OTHER ASSETS. All assets of Catawba and
----------------------------------
Bancshares (including, without limitation, all banking equipment, data
processing equipment, vehicles, and all other personal property located in or
used in the operation of each office of Catawba or Bancshares or otherwise used
by Catawba or Bancshares in the operation of its business) are owned by Catawba
or Bancshares free and clear of all liens, leases, encumbrances, title defects,
or exceptions to title. All of Catawba's or Bancshares' banking and other
equipment is in good operating condition and repair, ordinary wear and tear
excepted.
3.19 ENVIRONMENTAL MATTERS. Catawba and Bancshares have Previously
---------------------
Disclosed and provided to First ▇▇▇▇▇▇ copies of all written reports,
correspondence, notices, or other materials, if any, in its possession
pertaining to environmental reports, surveys, assessments, notices of violation,
notices of regulatory requirements, penalty assessments, claims, actions, or
proceedings, past or pending, of the Catawba Real Property or any of its Loan
Collateral and any improvements thereon, or to any violation of Environmental
Laws (as defined
27
below) on, affecting or otherwise involving the Catawba Real Property, any Loan
Collateral, or otherwise involving Catawba or Bancshares.
To the knowledge of management of Catawba and Bancshares:
(i) There has been no presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
reporting, testing, processing, emission, discharge, release, threatened
release, control, or clean-up, in a reportable or regulated quantity, of any
hazardous, toxic, or otherwise regulated materials, substances, or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, oil or other petroleum products or byproducts, asbestos or materials
containing (or presumed to contain) asbestos, polychlorinated biphenols, or
radioactive materials, and/or any hazardous, toxic, regulated or dangerous
waste, substance, or material defined as such by the United States Environmental
Protection Agency or any other federal, state, or local government or agency or
political subdivision thereof, or for the purpose of any Environmental Laws (as
defined herein), as may now or hereafter (through the Effective Time) be defined
or in effect ("Hazardous Substances") by any person on, from, or relating to any
parcel of the Catawba Real Property;
(ii) Catawba and Bancshares have not violated any federal, state, or
local law, rule, regulation, order, permit, or other requirement relating to
health, safety, or the environment or imposing liability, responsibility, or
standards of conduct applicable to environmental conditions (all such laws,
rules, regulations, orders, and other requirements being herein collectively
referred to as "Environmental Laws"), and, there has been no violation of any
Environmental Laws (including any violation with respect to or relating to any
Loan Collateral) by any other person or entity for whose liability or obligation
with respect to any particular matter or violation Catawba or Bancshares is or
may be responsible or liable;
(iii) Catawba and Bancshares are not subject to any pending claims,
demands, causes of action, suits, proceedings, losses, damages, penalties,
liabilities, obligations, costs, or expenses of any kind and nature which arise
out of, under, or in connection with, or which result from or are based upon the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, reporting, testing, processing,
emission, discharge, release, threatened release, control, or clean-up of any
Hazardous Substances on, from, or relating to the Catawba Real Property or any
Catawba Loan Collateral, by Catawba or Bancshares or any other person or entity;
and;
(iv) No facts, events, or conditions relating to the Catawba Real
Property or any Catawba Loan Collateral, or the operations of Catawba or
Bancshares at any of their respective office locations, will prevent, hinder or
limit continued compliance with Environmental Laws, or give rise to any
investigatory, remedial, or corrective actions, obligations, or liabilities
(whether accrued, absolute, contingent, unliquidated, or otherwise) pursuant to
Environmental Laws.
28
For purposes of this Agreement, "Environmental Laws" shall include:
(i) all federal, state, and local statutes, regulations,
ordinances, orders, decrees, and similar provisions having the force or effect
of law,
(ii) all contractual agreements, and
(iii) all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including,
without limitation, all standards of conduct and bases of obligations relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, reporting, testing,
processing, discharge, release, threatened release, control, or clean-up of any
Hazardous Substances (including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Superfund Amendment
and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances
Control Act, the Oil Pollutant Act, the Coastal Zone Management Act, any
"Superfund" or "Superlien" law, the North Carolina Oil Pollution and Hazardous
Substances Control Act, the North Carolina Water and Air Resources Act, and the
North Carolina Occupational Safety and Health Act, including any amendments
thereto from time to time) as such may now or hereafter (through the Effective
Time) be defined or in effect.
3.20 ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. All negotiations
-------------------------------------------
relative to this Agreement and the transactions described herein have been
carried on by Catawba and Bancshares directly with First ▇▇▇▇▇▇; no person or
firm has been retained by or has acted on behalf of, pursuant to any agreement,
arrangement or understanding with, or under the authority of, Catawba or
Bancshares or their Boards of Directors, as a broker, finder, or agent or has
performed similar functions or otherwise is or may be entitled to receive or
claim a brokerage fee or other commission in connection with the transactions
described herein; and neither Catawba nor Bancshares have agreed to pay any
brokerage fee or other commission to any person or entity in connection with the
transactions described herein.
3.21 MATERIAL CONTRACTS. Except as Previously Disclosed, neither Catawba
------------------
nor Bancshares is a party to or bound by any agreement involving money or other
property in an amount or with a value in excess of $25,000 (i) which is material
to Catawba or Bancshares and was not entered into in the ordinary course of
business, (ii) which involves hedging, options, or any similar trading activity,
or interest rate exchanges or swaps, (iii) which commits Catawba or Bancshares
to extend any loan or credit (with the exception of letters of credit, lines of
credit, and loan commitments extended in the ordinary course of Catawba's or
Bancshares' business), (iv) which involves the purchase or sale of any assets of
Catawba or Bancshares, or the purchase, sale, issuance, redemption, or transfer
of any capital stock or other securities issued by Catawba or Bancshares, or (v)
with any director or officer of Catawba or Bancshares (including, without
limitation, any employment or consulting agreement, but not including any
agreement relating to loans or other banking services which were made in the
ordinary course of Catawba's or Bancshare's business and on substantially the
same terms and conditions as were prevailing at that time for similar agreements
with unrelated persons).
29
3.22 EMPLOYMENT MATTERS; EMPLOYEE RELATIONS. Catawba and Bancshares (i)
--------------------------------------
have paid in full to or accrued on behalf of all its directors, officers, and
employees all wages, salaries, commissions, bonuses, fees, sick pay, severance
pay, all other amounts promised to the extent required by law or when Catawba or
Bancshares have a policy of making such payments and other direct compensation
for all services performed by them to the date of this Agreement and (ii) is in
compliance with all federal, state, and local laws, statutes, rules, and
regulations with regard to employment and employment practices, terms and
conditions, and wages and hours, and other compensation matters; and no person
has, to the best knowledge of management of Catawba and Bancshares, asserted
that Catawba or Bancshares is liable in any amount for any arrearages in wages
or employment taxes or for any penalties for failure to comply with any of the
foregoing.
There is no action, suit, or proceeding by any person pending or, to the
best knowledge of management of Catawba and Bancshares, threatened, against
Catawba or Bancshares (or any of its employees), involving employment
discrimination, sexual harassment, wrongful discharge, or similar claims.
Neither Catawba nor Bancshares is a party to or bound by any collective
bargaining agreement with any of its employees, any labor union, or any other
collective bargaining unit or organization. There is no pending or threatened
labor dispute, work stoppage, or strike involving Catawba or Bancshares and any
of its employees, or any pending or threatened proceeding in which it is
asserted that Catawba or Bancshares has committed an unfair labor practice; and
management of Catawba and Bancshares is not aware of any activity involving them
or any of their employees seeking to certify a collective bargaining unit or
engaging in any other labor organization activity.
3.23 EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS.
---------------------------------------------
(i) Neither Catawba nor Bancshares is a party to or bound by any
employment agreements with any of their respective directors, officers, or
employees, except for the employment agreement between Catawba and R. ▇▇▇▇▇
▇▇▇▇▇ ("▇▇▇▇▇"), dated January 1, 1999.
(ii) Catawba and Bancshares have Previously Disclosed and have
delivered or made available to First ▇▇▇▇▇▇ prior to the execution of this
Agreement copies, in each case, of all pension, stock ownership, severance pay,
vacation, bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
programs, arrangements or agreements, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by Catawba or
Bancshares for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the "Catawba
Benefit Plans"). Schedule 3.23 identifies each such Catawba Benefit Plan, and
further identifies each person who receives
30
benefits under, each such Catawba Benefit Plan. Without limiting the foregoing,
Schedule 3.23 also identifies each person for whom Catawba or Bancshares has
agreed to provide "lifetime" health benefits and describes the extent of
Catawba's or Bancshares' obligations in that regard. Any of the Catawba Benefit
Plans which is an "employee pension benefit plan", as that term is defined in
Section 3(2) of ERISA, is referred to herein as an "ERISA Plan." No ERISA Plan
is also a "defined benefit plan" (as defined in Section 414(j) of the Code) or
is or has been a multi-employer plan within the meaning of Section 3(37) of
ERISA, except as described on Schedule 3.23. Neither Catawba nor Bancshares has
ever been required to contribute to a multi-employer plan, as defined in Section
3(37) of ERISA.
(iii) All Catawba Benefit Plans are in compliance in all material
respects with the applicable terms of ERISA, the Code, and any other applicable
laws, rules, or regulations, the breach or violation of which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Catawba or Bancshares. Each ERISA Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and management of Catawba and Bancshare is not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. To the best knowledge of management of Catawba and
Bancshares, neither Catawba nor Bancshares has engaged in a transaction with
respect to any Catawba Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject Catawba or Bancshares
to a tax imposed by either Section 4975 of the Code or Section 502(i) of ERISA
in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Catawba or Bancshares.
(iv) Neither Catawba nor Bancshares has liability for retiree
health and life benefits under any of the Catawba Benefit Plans and there are no
restrictions on the rights of Catawba or Bancshares to amend or terminate any
such Plan without incurring any liability thereunder, except as set forth on
Schedule 3.23.
(v) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of Catawba or Bancshares
from Catawba or Bancshares under any Catawba Benefit Plan or otherwise, (b)
increase any benefits otherwise payable under any Catawba Benefit Plan or
otherwise, or (c) result in any acceleration of the time of payment or vesting
of any such benefit, except as set forth on Schedule 3.23.
(vi) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of Catawba or Bancshares and its beneficiaries have been fully
reflected on the Catawba Financial Statements to the extent required by and in
accordance with GAAP. Any adjustments necessary will be made prior to the
earlier of Closing and December 31, 2001.
31
3.24 INSURANCE. Catawba and Bancshares have in effect such policies of
---------
general liability, casualty, directors and officers liability, employee
fidelity, errors and omissions, and other property and liability insurance
(including without limitation a "banker's blanket bond") as have been Previously
Disclosed to First ▇▇▇▇▇▇ (the "Catawba Policies"). The Catawba Policies provide
coverage in such amounts and against such liabilities, casualties, losses, or
risks as is customary or reasonable for entities engaged in Catawba's or
Bancshares' businesses or as is required by applicable law or regulation; and,
in the reasonable opinion of management of Catawba or Bancshares, the insurance
coverage provided under the Catawba Policies is reasonable and adequate in all
respects for Catawba or Bancshares. Each of the Policies is in full force and
effect and is valid and enforceable in accordance with its terms, and is
underwritten by an insurer of recognized financial responsibility and which is
qualified to transact business in North Carolina, and Catawba and Bancshares
have taken all requisite actions (including the giving of required notices)
under each such Catawba Policy in order to preserve all rights thereunder with
respect to all matters. Neither Catawba nor Bancshares is in default under the
provisions of, has received notice of cancellation or nonrenewal of or any
material premium increase on, or has any knowledge of any failure to pay any
premium on or any inaccuracy in any application for any Catawba Policy. There
are no pending claims with respect to any Catawba Policy (and there are no facts
which would form the basis of any such claim), and neither Catawba nor
Bancshares has any knowledge of any state of facts or of the occurrence of any
event that is reasonably likely to form the basis for any such claim.
3.25 INSURANCE OF DEPOSITS. All deposits of Catawba are insured by the
---------------------
Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from Catawba to the FDIC have been paid in full
in a timely fashion, and no proceedings have been commenced or, to the best
knowledge of management of Catawba, are contemplated by the FDIC or otherwise to
terminate such insurance.
3.26 AFFILIATES. Catawba and Bancshares have Previously Disclosed to
----------
First ▇▇▇▇▇▇ a listing of those persons deemed by Catawba and Bancshares as of
the date of this Agreement to be "Affiliates" of Catawba or Bancshares (as that
term is defined in Rule 405 promulgated under the 1933 Act), including persons,
trusts, estates, corporations, or other entities related to persons deemed to be
Affiliates of Catawba or Bancshares.
3.27 OBSTACLES TO REGULATORY APPROVAL, ACCOUNTING TREATMENT, OR TAX
--------------------------------------------------------------
TREATMENT. To the best knowledge of management of Catawba and Bancshares, there
---------
exists no fact or condition (including Catawba's record of compliance with the
Community Reinvestment Act) relating to Catawba or Bancshares that may
reasonably be expected to (i) prevent or materially impede or delay Catawba,
Bancshares or First ▇▇▇▇▇▇ from obtaining the regulatory approvals required in
order to consummate transactions described herein, (ii) prevent the Exchange
from qualifying to be a reorganization under Section 368(a)(1)(B) of the Code,
or (iii) prevent the Exchange from being treated as a "pooling-of-interests" for
accounting purposes; and, if any such fact or condition becomes known to Catawba
or Bancshares, Catawba or Bancshares shall promptly (and in any event within
three days after obtaining such knowledge) communicate such fact or condition to
First ▇▇▇▇▇▇ in writing.
32
3.28 DISCLOSURE. To the best knowledge of management of Catawba and
----------
Bancshares, no written statement, certificate, schedule, list, or other written
information furnished by or on behalf of Catawba or Bancshares to First ▇▇▇▇▇▇
in connection with this Agreement (including, without limitation, information
"Previously Disclosed" by Catawba or Bancshares), when considered as a whole,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading. Each document delivered or to be delivered by Catawba or Bancshares
to First ▇▇▇▇▇▇ is or will be a true and complete copy of such document,
unmodified except by another document delivered by Catawba or Bancshares.
ARTICLE IV
COVENANTS OF FIRST ▇▇▇▇▇▇
4.01 AFFIRMATIVE COVENANTS OF FIRST ▇▇▇▇▇▇. First ▇▇▇▇▇▇ hereby covenants
-------------------------------------
and agrees as follows with Catawba and Bancshares:
A. "AFFILIATES" OF FIRST ▇▇▇▇▇▇. First ▇▇▇▇▇▇ will use its best
----------------------------
efforts to cause each person who is an Affiliate of First ▇▇▇▇▇▇ (as defined in
Paragraph 2.26 above), to execute and deliver to Catawba and Bancshares at least
five (5) days prior to the Closing a written agreement (the "Affiliates'
Agreement") relating to restrictions on shares of Bancshares Stock to be
received by such Affiliates pursuant to this Agreement and which Affiliates'
Agreement shall be in form and content reasonably satisfactory to Catawba and
Bancshares. Certificates for the shares of Bancshares Stock issued to Affiliates
of First ▇▇▇▇▇▇ shall bear a restrictive legend (substantially in the form as
shall be set forth in the Affiliates' Agreement) with respect to the
restrictions applicable to such shares.
B. NOTICE OF CERTAN CHANGES OR EVENTS. Following the execution of
----------------------------------
this Agreement and up to the Effective Time, First ▇▇▇▇▇▇ promptly will notify
Catawba and Bancshares in writing of and provide to them such information as
either of them shall request regarding (1) any Material Adverse Change or of the
actual or prospective occurrence of any condition or event which, with the lapse
of time or otherwise, is reasonably likely to cause, create or result in any
such Material Adverse Change, or (ii) the actual or prospective existence or
occurrence of any condition or event which, with the lapse of time or
otherwise, has caused or may or could cause any statement, representation, or
warranty of First ▇▇▇▇▇▇ herein, or any information that has been Previously
Disclosed by First ▇▇▇▇▇▇ to Catawba or Bancshares, to be or become materially
inaccurate, misleading, or incomplete, or which has resulted or may or could
cause, create, or result in the material breach or violation of any of First
▇▇▇▇▇▇'▇ covenants or agreements contained herein or in the failure of any of
the conditions described in Paragraphs 7.01 or 7.03 below.
C. FURTHER ACTION; INSTRUMENTS OF TRANSFER, ETC. First ▇▇▇▇▇▇
--------------------------------------------
covenants and agrees with Catawba and Bancshares that it (i) will use its
reasonable best efforts in good faith to take or cause to be taken all action
reasonably required of it hereunder as promptly as practicable so as to permit
the consummation of the transactions described herein at
33
the earliest possible date, (ii) shall perform all acts and execute and deliver
to Catawba and Bancshares all documents or instruments reasonably required
herein or as otherwise shall be reasonably necessary or useful to or reasonably
requested by either of them in consummating such transactions, and, (iii) will
cooperate with Catawba and Bancshares in every reasonable way in carrying out,
and will pursue diligently the expeditious completion of, such transactions.
4.02. NEGATIVE COVENANTS OF FIRST ▇▇▇▇▇▇. First ▇▇▇▇▇▇ hereby covenants
----------------------------------
and agrees that, between the date hereof and the Effective Time, neither First
▇▇▇▇▇▇ nor any First ▇▇▇▇▇▇ Subsidiary will do any of the following things or
take any of the following actions without the prior written consent and
authorization of Catawba and Bancshares:
A. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS. First ▇▇▇▇▇▇
-------------------------------------------------
will not amend its Articles of Incorporation or Bylaws (except as may be
required by applicable law or regulation).
B. CHANGE IN CAPITAL STOCK. First ▇▇▇▇▇▇ will not (1) make any
-----------------------
change in its authorized capital stock, or create any other or additional
authorized capital stock or other securities, or (ii) issue, sell, purchase,
redeem, retire, reclassify, combine, or split any shares of its capital stock or
other securities issued by First ▇▇▇▇▇▇, other than the issuance of shares upon
the exercise of stock options which are outstanding as of the date of this
Agreement (including securities convertible into capital stock), or enter into
any agreement or understanding with respect to any such action.
C. OPTIONS, WARRANTS, AND RIGHTS. First ▇▇▇▇▇▇ will not grant or
-----------------------------
issue any options, warrants, calls, puts, or other rights of any kind relating
to the purchase, redemption, or conversion of shares of its capital stock or any
other securities (including securities convertible into capital stock) or enter
into any agreement or understanding with respect to any such action.
D. DIVIDENDS. First ▇▇▇▇▇▇ will not declare or pay any dividends
---------
or make any other distributions on or in respect of any shares of its capital
stock or otherwise to its shareholders.
E. EMPLOYMENT, BENEFIT, OR RETIREMENT AGREEMENTS OR PLANS. Except
------------------------------------------------------
as required by law, First ▇▇▇▇▇▇ will not (i) enter into or become bound by any
contract, agreement, or commitment for the employment or compensation of any
officer, employee, or consultant which is not immediately terminable by First
▇▇▇▇▇▇ without cost or other liability on no more than thirty (30) days notice;
(ii) adopt, enter into, or become bound by any new or additional profit-sharing,
bonus, incentive, change in control, or "golden parachute," stock option, stock
purchase, pension, retirement, insurance (hospitalization, life, or other), or
similar contract, agreement, commitment, understanding, plan, or arrangement
(whether formal or informal) with respect to or which provides for benefits for
any of its current or former directors, officers, employees, or consultants; or
(iii) enter into or become bound by any contract with or commitment to any labor
or trade union or association or any collective bargaining group.
34
F. ACCOUNTING PRACTICES. Neither First ▇▇▇▇▇▇ nor any First ▇▇▇▇▇▇
--------------------
Subsidiary will make any changes in its accounting methods, practices, or
procedures or in depreciation or amortization policies, schedules, or rates
heretofore applied (except as required by GAAP or governmental regulations).
G. CHANGES IN BUSINESS PRACTICES. Except as may be required by the
-----------------------------
FDIC, the Commissioner, or any other governmental or other regulatory agency or
as shall be required by applicable law, regulation, or this Agreement, neither
First ▇▇▇▇▇▇ nor any First ▇▇▇▇▇▇ Subsidiary will (i) change in any material
respect the nature of its business or the manner in which it conducts its
business, (ii) discontinue any material portion or line of its business, or
(iii) change in any material respect its lending, investment, asset-liability
management, or other material banking or business policies (except to the extent
required by Paragraph 4.01.C. above).
ARTICLE V
COVENANTS OF CATAWBA AND BANCSHARES
5.01 AFFIRMATIVE COVENANTS OF CATAWBA AND BANCSHARES. Catawba and
-----------------------------------------------
Bancshares hereby covenant and agree as follows with First ▇▇▇▇▇▇:
A. "AFFILIATES". Catawba and Bancshares will use their best
------------
efforts to cause each person who is an Affiliate of Catawba or Bancshares (as
defined in Paragraph 3.26 above), to execute and deliver to Catawba or
Bancshares at least five (5) days prior to the Closing a written agreement (the
"Affiliates' Agreement") relating to restrictions on shares of Bancshares Stock
to be received by such Affiliates pursuant to this Agreement and which
Affiliates' Agreement shall be in form and content reasonably satisfactory to
First ▇▇▇▇▇▇. Certificates for the shares of Bancshares Stock issued to
Affiliates of Catawba or Bancshares shall bear a restrictive legend
(substantially in the form as shall be set forth in the Affiliates' Agreement)
with respect to the restrictions applicable to such shares.
B. NOTICE OF CERTAN CHANGES OR EVENTS. Following the execution of
----------------------------------
this Agreement and up to the Effective Time, Catawba and Bancshares promptly
will notify First ▇▇▇▇▇▇ in writing of and provide to them such information as
either of them shall request regarding (1) any Material Adverse Change in
Catawba's or Bancshares' and each of their respecive Subsidiary's financial
condition, results of operations, prospects, business, assets, loan portfolio,
investments, properties, or operations, or of the actual or prospective
occurrence of any condition or event which, with the lapse of time or otherwise,
is reasonably likely to cause, create or result in any such Material Adverse
Change, or (ii) the actual or prospective existence or occurrence of any
condition or event which, with the lapse of time or otherwise, has caused or may
or could cause any statement, representation, or warranty of Catawba or
Bancshares herein, or any information that has been Previously Disclosed by
Catawba or Bancshares to First ▇▇▇▇▇▇, to be or become materially inaccurate,
misleading, or incomplete, or which has resulted or may or could cause, create,
or result in the material breach or violation of any of Catawba's or Bancshares'
covenants or agreements contained herein or in the failure of any of the
conditions described in Paragraphs 7.01 or 7.03 below.
35
C. FURTHER ACTION; INSTRUMENTS OF TRANSFER, ETC. Catawba and
--------------------------------------------
Bancshares covenant and agree with First ▇▇▇▇▇▇ that they (i) will use their
reasonable best efforts in good faith to take or cause to be taken all action
reasonably required of them hereunder as promptly as practicable so as to permit
the consummation of the transactions described herein at the earliest possible
date, (ii) shall perform all acts and execute and deliver to First ▇▇▇▇▇▇ all
documents or instruments reasonably required herein or as otherwise shall be
reasonably necessary or useful to or reasonably requested by either of them in
consummating such transactions, and, (iii) will cooperate with First ▇▇▇▇▇▇ in
every reasonable way in carrying out, and will pursue diligently the expeditious
completion of, such transactions.
D. RECONSTITUTION OF BANCSHARES' BOARD OF DIRECTORS. Bancshares
------------------------------------------------
agrees to cause its Board of Directors, effective immediately after the
Effective Time, to be reconstituted and to be comprised of eight (8)
individuals, four (4) of whom shall be current members of the Board of Directors
of Bancshares (with R. ▇▇▇▇▇ ▇▇▇▇▇ being one of such four individuals) and four
(4) of whom shall be current members of the Board of Directors of First ▇▇▇▇▇▇
(with W. ▇▇▇▇ ▇▇▇▇ being one of the four individuals). Bancshares shall cause
such resignations from its current Board of Directors so as to fulfill this
covenant and such remaining Directors shall appoint the four (4) First ▇▇▇▇▇▇
Directors to fill the vacancies so created. Bancshares' directors and
shareholders shall take the appropriate actions to achieve the amendment of
Bancshares' bylaws to reduce the minimum number of directors from nine (9) to
eight (8).
5.02. NEGATIVE COVENANTS OF CATAWBA AND BANCSHARES. Catawba and
--------------------------------------------
Bancshares hereby covenant and agree that, between the date hereof and the
Effective Time, neither Catawba nor Bancshares will do any of the following
things or take any of the following actions without the prior written consent
and authorization of First ▇▇▇▇▇▇:
A. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS. Neither
-------------------------------------------------
Catawba nor Bancshares will amend its Articles of Incorporation or Bylaws
(except as required under Paragraph 7.01.D. of this agreement or may be required
by applicable law or regulation).
B. CHANGE IN CAPITAL STOCK. Neither Catawba nor Bancshares will
-----------------------
(1) make any change in its authorized capital stock, or create any other or
additional authorized capital stock or other securities, or (ii) issue, sell,
purchase, redeem, retire, reclassify, combine, or split any shares of its
capital stock or other securities issued by Catawba or Bancshares or any Catawba
or Bancshares Subsidiary, other than the issuance of shares upon the exercise of
stock options which are outstanding as of the date of this Agreement (including
securities convertible into capital stock), or enter into any agreement or
understanding with respect to any such action.
C. OPTIONS, WARRANTS, AND RIGHTS. Neither Catawba nor Bancshares
-----------------------------
will grant or issue any options, warrants, calls, puts, or other rights of any
kind relating to the purchase, redemption, or conversion of shares of its
capital stock or any other securities (including securities convertible into
capital stock) or enter into any agreement or understanding with respect to any
such action.
36
D. DIVIDENDS. Neither Catawba nor Bancshares will declare or pay
---------
any dividends or make any other distributions on or in respect of any shares of
its capital stock or otherwise to its shareholders other than the $0.06 per
share dividend scheduled for payment to Bancshares' shareholders in November
2001.
E. EMPLOYMENT, BENEFIT, OR RETIREMENT AGREEMENTS OR PLANS. Except
------------------------------------------------------
as required by law, neither Catawba nor Bancshares will (i) enter into or become
bound by any contract, agreement, or commitment for the employment or
compensation of any officer, employee, or consultant which is not immediately
terminable by Catawba or Bancshares without cost or other liability on no more
than thirty (30) days notice; (ii) adopt, enter into, or become bound by any new
or additional profit-sharing, bonus, incentive, change in control, or "golden
parachute," stock option, stock purchase, pension, retirement, insurance
(hospitalization, life, or other), or similar contract, agreement, commitment,
understanding, plan, or arrangement (whether formal or informal) with respect to
or which provides for benefits for any of its current or former directors,
officers, employees, or consultants; or (iii) enter into or become bound by any
contract with or commitment to any labor or trade union or association or any
collective bargaining group.
F. ACCOUNTING PRACTICES. Neither Catawba nor Bancshares will make
--------------------
any changes in its accounting methods, practices, or procedures or in
depreciation or amortization policies, schedules, or rates heretofore applied
(except as required by GAAP or governmental regulations).
G. CHANGES IN BUSINESS PRACTICES. Except as may be required by the
-----------------------------
FDIC, the Commissioner, the SEC, the Federal Reserve, or any other governmental
or other regulatory agency or as shall be required by applicable law,
regulation, or this Agreement, neither Catawba nor Bancshares will (i) change in
any material respect the nature of its business or the manner in which it
conducts its business, (ii) discontinue any material portion or line of its
business, or (iii) change in any material respect its lending, investment,
asset-liability management, or other material banking or business policies
(except to the extent required by Paragraph 5.01.C. above).
37
ARTICLE VI
MUTUAL AGREEMENTS
6.01 SHAREHOLDER APPROVALS; REGISTRATION STATEMENT; PROXY
----------------------------------------------------
STATEMENT/PROSPECTUS; LISTING APPLICATION.
-----------------------------------------
A. MEETINGS OF SHAREHOLDERS. First ▇▇▇▇▇▇ shall cause a special
------------------------
meeting of its shareholders (the "First ▇▇▇▇▇▇ Shareholder Meeting") to be held
for the purpose of First ▇▇▇▇▇▇'▇ shareholders voting on the approval of this
Agreement and the transactions contemplated hereby. Bancshares shall cause a
special meeting of its shareholders (the "Bancshares Shareholder Meeting") to be
held for the purposes of voting on the Agreement including changing Bancshares'
name to "United Community Banks, Inc." In connection with the call and conduct
of and all other matters relating to the First ▇▇▇▇▇▇ Shareholder Meeting and
the Catawba Shareholder Meeting (including the solicitation of proxies), First
▇▇▇▇▇▇ and Catawba shall fully comply with all provisions of applicable law and
regulations and with their respective Articles of Incorporation and Bylaws.
B. REGISTRATION STATEMENT. As soon as practicable following the
----------------------
execution of this Agreement, Catawba, Bancshares, and First ▇▇▇▇▇▇ shall in
consultation with each other prepare, and Bancshares shall file with the SEC, a
registration statement on Form S-4 (or on such other form as Bancshares shall
determine to be appropriate) (the "Registration Statement") covering the
Bancshares Stock to be issued to shareholders of First ▇▇▇▇▇▇ pursuant to this
Agreement, and will use their respective reasonable best efforts in good faith
to see that the Registration Statement is declared effective by the SEC under
the 1933 Act. Additionally, Bancshares and First ▇▇▇▇▇▇ shall in consultation
with each other take all such other actions, if any, as shall be required by
applicable state securities or "blue sky" laws (i) to cause the Bancshares Stock
to be issued upon consummation of the Exchange, at the time of the issuance
thereof, to be duly qualified or registered (unless exempt) under such laws,
(ii) to cause all conditions to any exemptions from qualification or
registration under such laws to have been satisfied, and (iii) to obtain any and
all required approvals or consents to the issuance of such stock.
C. PREPARATION AND DISTRIBUTION OF JOINT PROXY
-------------------------------------------
STATEMENT/PROSPECTUS. Bancshares and First ▇▇▇▇▇▇ jointly will prepare a
--------------------
"Proxy Statement/Prospectus" for distribution to both First ▇▇▇▇▇▇'▇ and
Bancshares shareholders as the proxy statement relating to their solicitation of
proxies for use at the First ▇▇▇▇▇▇ Shareholder Meeting, the Bancshares
Shareholder Meeting, and as Bancshares' prospectus relating to the offer and
distribution of Bancshares Stock as described herein. The Proxy
Statement/Prospectus shall be in such form and shall contain or be accompanied
by such information regarding the First ▇▇▇▇▇▇ Shareholder Meeting, the
Bancshares Sharesholders Meeting, and this Agreement, the parties hereto, and
the transactions described or contemplated herein as is required by applicable
law and regulations and otherwise as shall be agreed upon by First ▇▇▇▇▇▇ and
Bancshares. Bancshares shall include the Proxy Statement/Prospectus as the
prospectus in the Registration Statement. First ▇▇▇▇▇▇ shall cause the Proxy
Statement/Prospectus to be filed with the FDIC for review; and each party hereto
will cooperate with the others in good faith and will
38
use its respective reasonable best efforts in good faith to respond to any
comments of the FDIC or the SEC thereon.
First ▇▇▇▇▇▇ and Bancshares will mail the Proxy Statement/Prospectus
to its shareholders as soon as practicable following the date on which it is
cleared by the FDIC and the Registration Statement is declared effective by the
SEC.
D. RECOMMENDATION OF FIRST ▇▇▇▇▇▇'▇ AND BANCSHARES' BOARDS OF
----------------------------------------------------------
DIRECTORS. Unless, due to a material change in circumstances or for any other
---------
reason either First ▇▇▇▇▇▇'▇ or Bancshares' Board of Directors reasonably
believes, based on a written opinion of outside counsel, that such a
recommendation would violate the directors' duties or obligations as such to
First ▇▇▇▇▇▇, Bancshares, or to their respective shareholders under applicable
law, including, without limitation, the Act, First ▇▇▇▇▇▇'▇ and Bancshares'
Boards of Directors will recommend to and actively encourage their respective
shareholders that they vote their shares of First ▇▇▇▇▇▇ Stock and Bancshares
Stock at the First ▇▇▇▇▇▇ Shareholder Meeting and the Bancshares Shareholders
Meeting to approve and adopt this Agreement and the Exchange, and the Proxy
Statement/Prospectus mailed to First ▇▇▇▇▇▇'▇ and Bancshares' shareholders will
so indicate and state that First ▇▇▇▇▇▇'▇ and Bancshares' Boards of Directors
considers the Exchange to be advisable and in the best interests of First
▇▇▇▇▇▇, Bancshares and their respective shareholders.
E. INFORMATION FOR PROXY STATEMENT/PROSPECTUS AND REGISTRATION
-----------------------------------------------------------
STATEMENT. Bancshares, Catawba, and First ▇▇▇▇▇▇ each agrees to respond
---------
promptly, and to use its reasonable best efforts to cause its directors,
officers, counsel, accountants, and affiliates to respond promptly to requests
by any other party or its counsel for information for inclusion in the various
applications for regulatory approvals and in the Proxy Statement/Prospectus and
the Registration Statement. Bancshares, Catawba, and First ▇▇▇▇▇▇ each hereby
covenant that none of the information provided by it for inclusion in the Proxy
Statement/Prospectus will, at the time of its mailing, contain any untrue
statement of a material fact or omit any material fact required to be stated
therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not false or misleading; and,
at all times following such mailing up to and including the Effective Time, none
of such information contained in the Proxy Statement/Prospectus, as it may be
amended or supplemented, will contain an untrue statement of a material fact or
omit any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
they were made, not false or misleading.
F. LISTING APPLICATION. Bancshares shall use its reasonable best
-------------------
efforts to cause the shares of Bancshares Stock to be issued pursuant to this
Agreement in the Exchange to be included in the Nasdaq SmallCap Market.
6.02 REGULATORY APPROVALS. Promptly following the date of this Agreement,
--------------------
Bancshares, Catawba, and First ▇▇▇▇▇▇ each shall use their respective reasonable
best efforts in good faith to (i) prepare and file, or cause to be prepared and
filed, all applications for regulatory approvals and actions as may be required
of them, respectively, by applicable law and regulations with respect to the
transactions described herein (including applications to the
39
Federal Reserve, and to any other applicable federal or state banking,
securities, or other regulatory authority as may be required), and (ii) obtain
all necessary regulatory approvals required for consummation of the transactions
described herein. The parties shall cooperate in the preparation of all
applications to regulatory authorities and, upon request, promptly shall furnish
all documents, information, financial statements, or other material that may be
required by the other party to complete any such application; and, before the
filing thereof, each party to this Agreement (and its counsel) shall have the
right to review and comment on the form and content of any such application to
be filed by the other party. Should the appearance of any of the officers,
directors, employees, or counsel of any of the parties hereto be requested by
any other party or by any governmental agency at any hearing in connection with
any such application, such party shall promptly use its best efforts to arrange
for such appearance.
6.03 ACCESS. Following the date of this Agreement and to and including
------
the Effective Time, First ▇▇▇▇▇▇, Bancshares, and Catawba shall provide, and
shall cause each of its Subsidiaries to provide, to each other and their
employees, accountants, and counsel, access to all their respective books,
records, files, and other information (whether maintained electronically or
otherwise), to all their respective properties and facilities, and to all their
respective employees, accountants, counsel, and consultants, for purposes of the
conduct of such reasonable investigation and review as First ▇▇▇▇▇▇, Catawba,
and Bancshares and their employees, accountants, and counsel shall, in their
sole discretion, consider to be necessary or appropriate; provided, however,
that any such review conducted by First ▇▇▇▇▇▇, Bancshares, or Catawba shall be
performed in such a manner as will not interfere unreasonably with First
▇▇▇▇▇▇'▇, Bancshares', or Catawba's normal operations, or with First ▇▇▇▇▇▇'▇,
Bancshares', or Catawba's relationship with its customers or employees, and
shall be conducted in accordance with procedures established by the parties
having due regard for the foregoing.
6.04 COSTS. Whether or not this Agreement shall be terminated or the
-----
Exchange shall be consummated, First ▇▇▇▇▇▇, Bancshares and Catawba each shall
pay its own legal, accounting, and financial advisory fees and all its other
costs and expenses incurred or to be incurred in connection with the execution
and performance of its obligations under this Agreement or otherwise in
connection with this Agreement and the transactions described herein (including,
without limitation all accounting fees, legal fees, filing fees, printing costs,
travel expenses, and, in the case of First ▇▇▇▇▇▇, all fees owed to ▇▇▇▇▇
Capital, Inc. for the cost of First ▇▇▇▇▇▇'▇ fairness opinion described in
Paragraph 7.01.E. below, and, in the case of Bancshares, all fees owed to The
▇▇▇ Group for the cost of Bancshares' fairness opinion described in Paragraph
7.01E. below). All costs incurred in connection with the printing and mailing of
the Proxy Statement/Prospectus shall be deemed to be incurred and shall be paid
fifty percent (50%) by First ▇▇▇▇▇▇ and fifty percent (50%) by Bancshares.
6.05 CONFIDENTIALITY. Catawba, Bancshares, and First ▇▇▇▇▇▇ each agrees
---------------
that it will treat as confidential and not disclose to any unauthorized person
any documents or other information obtained from or learned about the others
during the course of the negotiation of this Agreement and the carrying out of
the events and transactions described herein (including any information obtained
during the course of any due diligence investigation or review provided for
herein or otherwise) and which documents or other information relates in any way
to the business, operations, personnel, customers, or financial condition of
such other parties; and that it
40
will not use any such documents or other information for any purpose except for
the purposes for which such documents and information were provided to it and in
furtherance of the transactions described herein. However, the above obligations
of confidentiality shall not prohibit the disclosure of any such document or
information by any party to this Agreement to the extent (1) such document or
information is then available generally to the public or is already known to the
person or entity to whom disclosure is proposed to be made (other than through
the previous actions of such party in violation of this Paragraph 6.05), (ii)
such document or information was available to the disclosing party on a
nonconfidential basis prior to the same being obtained pursuant to this
Agreement, (iii) disclosure is required by subpoena or order of a court or
regulatory authority of competent jurisdiction, or by the SEC, FDIC or other
regulatory authorities in connection with the transactions described herein, or
(iv) to the extent that, in the reasonable opinion of legal counsel to such
party, disclosure otherwise is required by law. Catawba, Bancshares, and First
▇▇▇▇▇▇ shall cause their respective Subsidiaries and affiliates, and all of
their respective officers, directors, employees and agents to comply with the
provisions of this Paragraph 6.08.
In the event this Agreement is terminated for any reason, each of the
parties hereto immediately shall return to the other parties all copies of any
and all documents or other written materials or information of or relating to
such other parties which were obtained from them or their Subsidiaries or
affiliates during the course of the negotiation of this Agreement and the
carrying out of the events and transactions described herein (whether during the
course of any due diligence investigation or review provided for herein or
otherwise) and which documents or other information relates in any way to the
business, operations, personnel, customers, or financial condition of such other
parties.
The parties' obligations of confidentiality under this Paragraph 6.05 shall
survive and remain in effect following any termination of this Agreement.
6.06 REORGANIZATION FOR TAX PURPOSES. Catawba, Bancshares, and First
-------------------------------
▇▇▇▇▇▇ each undertakes and agrees to use its reasonable best efforts to cause
the Exchange to qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code, and that it will not intentionally take any action
that would cause the Exchange to fail to so qualify.
6.07 ACCOUNTING TREATMENT. Catawba, Bancshares, and First ▇▇▇▇▇▇ each
--------------------
undertakes and agrees to use its reasonable best efforts to cause the Exchange
to qualify to be treated as a "pooling-of-interests" for accounting purposes and
that it will not intentionally take any action that would cause the Exchange to
fail to so qualify.
ARTICLE VII
CONDITIONS PRECEDENT TO EXCHANGE
7.01 CONDITIONS TO ALL PARTIES' OBLIGATIONS. Notwithstanding any other
--------------------------------------
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date:
41
A. APPROVAL BY GOVERNMENTAL OR REGULATORY AUTHORITIES; NO
------------------------------------------------------
DISADVANTAGEOUS CONDITIONS. (i) The Exchange and the other transactions
--------------------------
described herein shall have been approved, to the extent required by law, by the
Federal Reserve and by all other governmental or regulatory agencies or
authorities having jurisdiction over such transaction, (ii) no governmental or
regulatory agency or authority shall have withdrawn its approval of such
transactions or imposed any condition on such transactions or conditioned its
approval thereof, which condition is reasonably deemed by Catawba, Bancshares,
or First ▇▇▇▇▇▇ to be materially disadvantageous or burdensome or to impact so
adversely the economic or business benefits of this Agreement as to render it
inadvisable for such party to consummate the transactions contemplated herein;
(iii) all waiting periods required following necessary approvals by governmental
or regulatory agencies or authorities shall have expired, and, in the case of
any waiting period imposed by law or regulation following approval by the
Federal Reserve, or other governmental or regulatory authority, no unwithdrawn
objection to the transactions contemplated herein shall have been raised by the
U.S. Department of Justice; and (iv) all other consents, approvals, and
permissions, and the satisfaction of all of the requirements prescribed by law
or regulation, necessary to the carrying out of the transactions contemplated
herein shall have been procured.
B. EFFECTIVENESS OF REGISTRATION STATEMENT, COMPLIANCE WITH
--------------------------------------------------------
SECURITIES AND OTHER "BLUE SKY" REQUIREMENTS. The Registration Statement shall
--------------------------------------------
be effective under the 1933 Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC. Bancshares shall
have taken all such actions, if any, as required by applicable state securities
laws (i) to cause the Bancshares Stock to be issued upon consummation of the
Exchange, at the time of the issuance thereof, to be duly qualified or
registered (unless exempt) under such laws, (ii) to cause all conditions to any
exemptions from qualification or registration under such laws to have been
satisfied, and (iii) to obtain any and all required approvals or consents with
respect to the issuance of such stock, and any such required approvals or
consents shall have been obtained and shall remain in effect.
C. ADVERSE PROCEEDINGS, INJUNCTION, ETC. There shall not be (i) any
------------------------------------
order, decree, or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Exchange or any of the other transactions
described herein or any of the parties hereto from consummating any such
transaction, (ii) any pending or threatened investigation of the Exchange or any
of such other transactions contemplated herein by the U.S. Department of
Justice, or any actual or threatened litigation under federal antitrust laws
relating to the Exchange or any other such transactions, or (iii) any suit,
action, or proceeding by any person (including any governmental, administrative,
or regulatory agency), pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit First ▇▇▇▇▇▇, Bancshares,
or Catawba from consummating the transactions contemplated herein or carrying
out any of the terms or provisions of this Agreement, or (iv) any other suit,
claim, action, or proceeding pending or threatened against First ▇▇▇▇▇▇,
Bancshares, or Catawba or any of their officers or directors which shall
reasonably be considered by First ▇▇▇▇▇▇, Bancshares, or Catawba to be
materially burdensome in relation to the proposed transactions or materially
adverse in relation to the financial condition of such corporation, and which
has not been dismissed, terminated, or
42
resolved to the satisfaction of all parties hereto within ninety (90) days of
the institution or threat thereof
D. APPROVAL BY BOARDS OF DIRECTORS AND SHAREHOLDERS. The Boards of
------------------------------------------------
Directors of First ▇▇▇▇▇▇, Catawba, and Bancshares shall have duly approved and
adopted this Agreement by appropriate resolutions and the shareholders of First
▇▇▇▇▇▇ and Bancshares shall have duly approved, ratified, and confirmed this
Agreement and the transactions contemplated herein, all to the extent required
by and in accordance with the provisions of this Agreement, applicable law, and
applicable provisions of their respective Articles of Incorporation and Bylaws.
E. APPROVAL OF CHARTER AMENDMENT. Bancshares' Board of Directors and
-----------------------------
shareholders shall have approved an amendment to Bancshares' Articles of
Incorporation to authorize the name change of (i) Bancshares to "United
Community Banks, Inc.", and that amendment should have been effected through
filing of appropriate Articles of Amendment with the North Carolina Secretary of
State, and (ii) an amendment to the bylaws of Bancshares to reduce the minimum
number of directors from nine (9) to eight (8).
F. FAIRNESS OPINIONS. First ▇▇▇▇▇▇ shall have received from ▇▇▇▇▇
-----------------
Capital, Inc. a written opinion, in form and substance satisfactory to First
▇▇▇▇▇▇ and its counsel, dated as of a date at least five (5) days prior to the
mailing of materials to First Gaston's shareholders calling for a special
meeting to vote on the Agreement, to the effect that the terms of the
transactions contemplated herein are fair, from a financial point of view, to
First ▇▇▇▇▇▇ and its shareholders. Bancshares shall have received from The ▇▇▇
Group a written opinion, in form and substance satisfactory to Bancshares and
counsel, dated as of a similar date to Bancshares' shareholders, to the effect
that the terms of the transactions contemplated herein are fair, from a
financial point of view, to Bancshares' shareholders.
G. TAX OPINION. The parties shall have received, in form and
-----------
substance satisfactory to Catawba, Bancshares and First ▇▇▇▇▇▇, an opinion of
▇▇▇▇▇ ▇▇▇▇ PLLC substantially to the effect that: (1) for federal income tax,
purposes, consummation of the Exchange will constitute a "reorganization" as
defined in (S) 368(a)(1)(B) of the Code; (ii) that no taxable gain will be
recognized by a shareholder of First ▇▇▇▇▇▇ upon such shareholder's receipt of
Bancshares Stock in exchange for his or her First ▇▇▇▇▇▇ Stock; (iii) that the
basis of the Bancshares Stock received by the shareholder in the Exchange will
be the same as his or her First ▇▇▇▇▇▇ Stock surrendered in exchange therefor;
and (iv) that, if First ▇▇▇▇▇▇ Stock is a capital asset in the hands of the
shareholder at the Effective Time, then the holding period of the Bancshares
Stock received by the shareholder in the Exchange will include the holding
period of First ▇▇▇▇▇▇ Stock surrendered in exchange therefor. In rendering its
opinion, ▇▇▇▇▇ ▇▇▇▇ PLLC may rely on representations contained in certificates
of officers of First ▇▇▇▇▇▇, Bancshares, and Catawba.
43
H. LISTING OF BANCSHARES' STOCK. Bancshares Stock shall have been
----------------------------
approved for inclusion in the Nasdaq SmallCap Market effective as of the
Effective Time.
I. NO TERMINATION OR ABANDONMENT. This Agreement shall not have been
-----------------------------
terminated by any party hereto.
7.02 ADDITIONAL CONDITIONS TO FIRST GASTON'S OBLIGATIONS. Notwithstanding
---------------------------------------------------
any other provision of this Agreement to the contrary, First Gaston's
obligations to consummate the transactions described herein shall be conditioned
upon the satisfaction of each of the following conditions precedent on or prior
to the Closing Date:
A. MATERIAL ADVERSE CHANGE. There shall not have been any Material
-----------------------
Adverse Change in the financial condition or results of operations of Catawba or
Bancshares, and there shall not have occurred any event or development and there
shall not exist any condition or circumstance which, with the lapse of time or
otherwise, is reasonably likely to cause, create, or result in any such Material
Adverse Change.
B. COMPLIANCE WITH LAWS. Catawba and Bancshares shall have complied
--------------------
in all material respects with all federal and state laws and regulations
applicable to the transactions described herein and where the violation of or
failure to comply with any such law or regulation is reasonably likely to have a
Material Adverse Effect on the financial condition or results of operations of
Catawba or Bancshares.
C. CATAWBA'S AND BANCSHARES' REPRESENTATIONS AND WARRANTIES AND
------------------------------------------------------------
PERFORMANCE OF AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in writing by
------------------------------------------------
First ▇▇▇▇▇▇ as provided in Paragraph 9.02 below, each of the representations
and warranties of Catawba and Bancshares contained in this Agreement shall have
been true and correct as of the date hereof and shall remain true and correct in
all material respects on and as of the Effective Time with the same force and
effect as though made on and as of such date, except (i) representations and
warranties that speak as of a specific date, (ii) for changes which are not, in
the aggregate, material and adverse to the financial condition and results of
operations of Catawba or Bancshares, and (iii) as otherwise contemplated by this
Agreement; and Catawba and Bancshares shall have performed in all material
respects all their respective obligations, covenants, and agreements hereunder
to be performed by them on or before the Closing Date.
First ▇▇▇▇▇▇ shall have received a certificate dated as of the Closing
Date and executed by Catawba's and Bancshares' President and Chief Financial
Officer to the foregoing effect and as to any other matter as First ▇▇▇▇▇▇ may
reasonably request.
D. LEGAL OPINION OF CATAWBA'S AND BANCSHARES' COUNSEL. First ▇▇▇▇▇▇
--------------------------------------------------
shall have received from Catawba's and Bancshares' counsel, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
P.A., Raleigh, North Carolina, a written opinion, dated as of the Closing Date
and in form and substance reasonably satisfactory to First ▇▇▇▇▇▇.
44
E. OTHER DOCUMENTS AND INFORMATION FROM CATAWBA AND BANCSHARES.
-----------------------------------------------------------
Catawba and Bancshares shall have provided to First ▇▇▇▇▇▇ correct and complete
copies of their respective Bylaws, Articles of Incorporation, and board and
shareholder resolutions (all certified by their respective secretaries),
together with a certificate of the incumbency of its officers and such other
closing documents and information as may be reasonably requested by First ▇▇▇▇▇▇
or its counsel.
F. ACCEPTANCE BY FIRST GASTON'S COUNSEL. The form and substance of
------------------------------------
all legal matters described herein or related to the transactions contemplated
herein shall be reasonably acceptable to First Gaston's legal counsel, ▇▇▇▇▇ &
▇▇▇ ▇▇▇▇▇, PLLC, Charlotte, North Carolina.
G. EXERCISE OF DISSENTERS RIGHTS. The aggregate number of shares of
-----------------------------
Bancshares Stock as to which cash is required to be paid as the result of the
exercise of any dissenters rights pursuant to the Act, when coupled with any
other shares of Bancshares Stock and First ▇▇▇▇▇▇ Stock deemed tainted for
"pooling-of-interest" purposes, shall not exceed 10% of the total number of
shares of Bancshares Stock outstanding at the date of this Agreement or at the
Effective Time.
H. ACCOUNTING TREATMENT. (i) First ▇▇▇▇▇▇ shall have received
--------------------
assurances from ▇▇▇▇▇▇▇ & Company, in form and content satisfactory to it, to
the effect that the Exchange will qualify to be treated as a "pooling-of-
interests" for accounting purposes; (ii) if requested by First ▇▇▇▇▇▇, Catawba's
and Bancshares' independent public accountants shall have delivered to First
▇▇▇▇▇▇ a letter in form and content satisfactory to them to the effect that such
accountants are not aware of any fact or circumstance that might cause the
Exchange not to qualify for such treatment; (iii) it shall not have come to the
attention of management of First ▇▇▇▇▇▇ that any event has occurred or that any
condition or circumstance exists that makes it likely that the Exchange may not
so qualify.
I. AFFILIATES' AGREEMENTS. First ▇▇▇▇▇▇ shall have received an
----------------------
Affiliates Agreement executed by each person who is an Affiliate of Catawba or
Bancshares (as defined in Paragraph 3.26 above) at least five (5) days prior to
the Closing in form and content reasonably satisfactory to First ▇▇▇▇▇▇.
7.03 ADDITIONAL CONDITIONS TO CATAWBA'S AND BANCSHARES' OBLIGATION.
-------------------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, Catawba's
and Bancshares' obligation to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date:
A. MATERIAL ADVERSE CHANGE. There shall not have occurred any
-----------------------
Material Adverse Change in the financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties, or
operations of First ▇▇▇▇▇▇, and there shall not have occurred any event or
development and there shall not exist any condition or circumstance
45
which, with the lapse of time or otherwise, is reasonably likely to cause,
create, or result in any such Material Adverse Change.
B. COMPLIANCE WITH LAWS. First ▇▇▇▇▇▇ shall have complied in all
--------------------
material respects with all federal and state laws and regulations applicable to
the transactions described herein and where the violation of or failure to
comply with any such law or regulation is reasonably likely to have a Material
Adverse Effect on First ▇▇▇▇▇▇.
C. FIRST GASTON'S REPRESENTATIONS AND WARRANTIES AND PERFORMANCE OF
----------------------------------------------------------------
AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in writing by Catawba or
---------------------------------
Bancshares as provided in Paragraph 9.02 below, each of the representations and
warranties of First ▇▇▇▇▇▇ contained in this Agreement shall have been true and
correct in all material respects as of the date hereof and shall remain true and
correct in all material respects on and as of the Effective Time with the same
force and effect as though made on and as of such date, except (i)
representations and warranties that speak as of a specific date, (ii) for
changes which do not, in the aggregate, result in a Material Adverse Effect on
First ▇▇▇▇▇▇, and (iii) as otherwise contemplated by this Agreement; and First
▇▇▇▇▇▇ shall have performed in all material respects all its obligations,
covenants, and agreements hereunder to be performed by it on or before the
Closing Date.
Catawba and Bancshares shall have received a certificate dated as of
the Closing Date and executed by First Gaston's President and Chief Financial
Officer to the foregoing effect and as to such other matters as may be
reasonably requested by Catawba or Bancshares.
D. LEGAL OPINION OF FIRST GASTON'S COUNSEL. Bancshares shall have
---------------------------------------
received from First Gaston's counsel, ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇, PLLC, Charlotte, North
Carolina, a written opinion, dated as of the Closing Date and in the form and
substance reasonably satisfactory to Bancshares.
E. OTHER DOCUMENTS AND INFORMATION FROM FIRST ▇▇▇▇▇▇. First ▇▇▇▇▇▇
-------------------------------------------------
shall have provided to Catawba and Bancshares correct and complete copies of its
Articles of Incorporation, Bylaws, and board and shareholder resolutions (all
certified by First Gaston's Secretary), together with certificates of the
incumbency of First Gaston's officers and such other closing documents and
information as may be reasonably requested by Catawba, Bancshares or their
counsel.
F. ACCEPTANCE BY FIRST GASTON'S COUNSEL. The form and substance of
------------------------------------
all legal matters described herein or related to the transactions contemplated
herein shall be reasonably acceptable to Catawba's and Bancshares' legal
counsel, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, PA, Raleigh, North Carolina.
G. EXERCISE OF DISSENTERS RIGHTS. The aggregate number of shares of
-----------------------------
First ▇▇▇▇▇▇ Stock as to which cash is required to be paid as the result of the
exercise of any dissenters rights pursuant to the Act, when coupled with any
other shares of Bancshares Stock and First ▇▇▇▇▇▇ Stock deemed tainted for
"pooling-of-interest" purposes, shall not exceed 10%
46
of the total number of shares of First ▇▇▇▇▇▇ Stock outstanding at the date of
this Agreement or at the Effective Time.
H. ACCOUNTING TREATMENT. (i) Catawba and Bancshares shall have
--------------------
received assurances from ▇▇▇▇▇ ▇▇▇▇ PLLC, in form and content satisfactory to
them, to the effect that the Exchange will qualify to be treated as a "pooling-
of-interests" for accounting purposes; (ii) if requested by Catawba or
Bancshares, First Gaston's independent public accountants shall have delivered
to Catawba and Bancshares a letter in form and content satisfactory to them to
the effect that such accountants are not aware of any fact or circumstance that
might cause the Exchange not to qualify for such treatment; (iii) it shall not
have come to the attention of management of Catawba or Bancshares that any event
has occurred or that any condition or circumstance exists that makes it likely
that the Exchange may not so qualify.
I. AFFILIATES' AGREEMENTS. Catawba and Bancshares shall have
----------------------
received an Affiliates Agreement executed by each person who is an Affiliate of
First ▇▇▇▇▇▇ (as defined in Paragraph 2.26 above) at least five (5) days prior
to the Closing in form and content reasonably satisfactory to Catawba and
Bancshares.
ARTICLE VIII
TERMINATION; BREACH
8.01 MUTUAL TERMINATION. At any time prior to the Effective Time (and
------------------
whether before or after approval hereof by the shareholders of Catawba or First
▇▇▇▇▇▇), this Agreement may be terminated by the mutual agreement of Bancshares
and First ▇▇▇▇▇▇. Upon any such mutual termination, all obligations of Catawba,
Bancshares, and First ▇▇▇▇▇▇ hereunder shall terminate and each party shall pay
costs and expenses as provided in Paragraph 6.04 above.
8.02 UNILATERAL TERMINATION. This Agreement may be terminated by either
----------------------
Bancshares or First ▇▇▇▇▇▇ (whether before or after approval hereof by First
Gaston's or Catawba's shareholders) upon written notice to the other party.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 "PREVIOUSLY DISCLOSED" INFORMATION; "MATERIAL ADVERSE EFFECT" AND
-----------------------------------------------------------------
"MATERIAL ADVERSE CHANGE".
-------------------------
A. "Previously Disclosed" shall mean, as to First ▇▇▇▇▇▇, Catawba or
Bancshares, the disclosure of information in a letter delivered by such party to
the others prior or subsequent to the date of this Agreement and which
specifically refers to this Agreement and is arranged in paragraphs
corresponding to the Paragraphs, subparagraphs, and items of this Agreement
applicable thereto, all of which documents are incorporated herein by reference.
Information disclosed in any party's letter described above shall be
deemed to have been Previously Disclosed by such party for the purpose of any
given Paragraph, subparagraph, or item of this Agreement only to the extent that
information is expressly set forth
47
in such Party's letter described above and that, in connection with such
disclosure, a specific reference is made in the letter to that Paragraph,
subparagraph, or item,
B. Where used in this Agreement, the terms "Material Adverse Effect"
and "Material Adverse Change" shall mean an event, matter, item or circumstance
(other than as a result of (i) changes in GAAP, (ii) changes in banking and
similar laws of general application or interpretations thereof by courts or
governmental authorities, or (iii) any non-recurring unregulated expense of any
kind) that in and of itself, or when combined with all similar events, matters,
items or circumstances, reasonably would be expected to have, now or in the
future, a material adverse effect on the business, financial condition,
operations, results of operations or prospects of either party.
9.02 WAIVER. Any term or condition of this Agreement may be waived (except
------
as to matters of regulatory approvals and approvals required by law), either in
whole or in part, at any time by the party which is, and whose shareholders are,
entitled to the benefits thereof; provided, however, that any such waiver shall
be effective only upon a determination by the waiving party (through action of
its Board of Directors) that such waiver would not adversely affect the
interests of the waiving party or its shareholders; and, provided further, that
no waiver of any term or condition of this Agreement by any party shall be
effective unless such waiver is in writing and signed by the waiving party, or
be construed to be a waiver of any succeeding breach of the same term or
condition. No failure or delay of any party to exercise any power, or to insist
upon a strict compliance by any other party of any obligation, and no custom or
practice at variance with any terms hereof, shall constitute a waiver of the
right of any party to demand a full and complete compliance with such terms.
9.03 AMENDMENT. This Agreement may be amended, modified, or supplemented at
---------
any time or from time to time prior to the Effective Time, and either before or
after its approval by the shareholders of First ▇▇▇▇▇▇, by an agreement in
writing approved by a majority of the Board of Directors of Bancshares, Catawba,
and First ▇▇▇▇▇▇ executed in the same manner as this Agreement; provided,
however, that, except with the further approval of First Gaston's shareholders
of that change or as otherwise provided herein, following approval of this
Agreement by the shareholders of First ▇▇▇▇▇▇ no change may be made in the
number of shares of Bancshares Stock into which each share of First ▇▇▇▇▇▇ Stock
will be converted.
9.04 NOTICES. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if delivered personally or
by courier, or mailed by certified mail, postage prepaid, as follows:
A. If to First ▇▇▇▇▇▇, to:
First ▇▇▇▇▇▇ Bank of North Carolina
Post Office Box 1478
Gastonia, North Carolina 28053-1478
Attention: Mr. W. ▇▇▇▇ ▇▇▇▇
48
With copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
B. If to Bancshares or Catawba, to:
Catawba Valley ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. R. ▇▇▇▇▇ ▇▇▇▇▇
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.05 FURTHER ASSURANCES. First ▇▇▇▇▇▇, Bancshares, and Catawba each agree
------------------
to furnish to the others such further assurances with respect to the matters
contemplated herein and their respective agreements, covenants, representations,
and warranties contained herein, including the opinion of legal counsel, as such
other parties may reasonably request.
9.06 HEADINGS AND CAPTIONS. Headings and captions of the articles,
---------------------
sections, and paragraphs of this Agreement have been inserted for convenience of
reference only and do not constitute a part hereof.
9.07 ENTIRE AGREEMENT. This Agreement (including all schedules and exhibits
----------------
attached hereto and all documents incorporated herein by reference) contains the
entire agreement of the parties with respect to the transactions described
herein and supersedes any and all other oral or written agreement(s) heretofore
made, and there are no representations or inducements by or to, or any
agreements between, any of the parties hereto other than those contained herein
in writing.
9.08 SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of any
--------------------------
term, phrase, clause, paragraph, restriction, covenant, agreement, or other
provision hereof shall in no way affect the validity or enforceability of any
other provision or part hereof.
9.09 ASSIGNMENT. This Agreement may not be assigned by any party hereto
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except with the prior written consent of the other parties hereto.
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9.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
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the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court located in the State of
North Carolina, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.11 COUNTERPARTS. Any number of counterparts of this Agreement may be
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signed and delivered, each of which shall be considered an original and which
together shall constitute one agreement.
9.12 GOVERNING LAW. This Agreement is made in and shall be construed and
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enforced in accordance with the internal laws (and not the laws of conflict) of
the State of North Carolina.
9.13 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND OTHER AGREEMENTS. None of
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the representations, warranties or agreements herein shall survive the
effectiveness of the Exchange, and no party shall have any right after the
Effective Time to recover damages or other relief from any other party to this
Agreement by reason of any breach of representation or warranty, any
nonfulfillment or nonperformance of any agreement contained herein, or
otherwise.
[remainder of page intentionally left blank; signatures appear on next page]
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IN WITNESS WHEREOF, First ▇▇▇▇▇▇, Catawba and Bancshares have each caused
this Agreement to be executed in its name by its duly authorized officers as of
the date first above written.
CATAWBA VALLEY BANK
BY: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇
------------------
R. ▇▇▇▇▇ ▇▇▇▇▇, President and CEO
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Secretary
[CORPORATE SEAL]
CATAWBA VALLEY BANCSHARES, INC.
BY: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇
------------------
R. ▇▇▇▇▇ ▇▇▇▇▇, President and CEO
ATTEST:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Secretary
[CORPORATE SEAL]
FIRST ▇▇▇▇▇▇ BANK OF NORTH CAROLINA
BY: /s/ W. ▇▇▇▇ ▇▇▇▇
----------------
W. ▇▇▇▇ ▇▇▇▇, President and CEO
ATTEST:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Secretary
[CORPORATE SEAL]
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EXHIBIT A
to Agreement and Plan of Share Exchange
dated June 29, 2001
PLAN OF EXCHANGE BETWEEN
CATAWBA VALLEY BANK, CATAWBA VALLEY BANCSHARES, INC. AND
FIRST ▇▇▇▇▇▇ BANK OF NORTH CAROLINA
A. Names of Exchange Corporations. The name of the corporation whose
------------------------------
shares will be acquired is "First ▇▇▇▇▇▇ Bank of North Carolina", a North
Carolina commercial bank ("First ▇▇▇▇▇▇"), and the name of the acquiring
corporation is "Catawba Valley Bancshares, Inc.", a North Carolina corporation
("Bancshares").
B. Nature of Transaction. Subject to the provisions of this Plan of
----------------------
Exchange, all of the outstanding shares of First Gaston's common stock (other
than any shares held by Catawba or as to which rights of dissent and appraisal
are properly exercised) shall be exchanged for newly issued shares of Bancshares
common stock pursuant to N.C. GEN. STAT. Section 55-11-02 (the "Exchange") and
with the effect provided under N.C. GEN. STAT. Section 55-11-06.
C. Terms and Conditions of the Exchange and Manner and Basis of
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Exchanging Shares.
-----------------
1. The Exchange shall be effected pursuant to the terms and
conditions of this Plan of Exchange and of the Agreement and Plan Share Exchange
dated as of June 29, 2001, by and among First ▇▇▇▇▇▇, Bancshares and Catawba
Valley Bank (the "Agreement").
2. Each outstanding share of First ▇▇▇▇▇▇ common stock ($5.00 par
value) will be exchanged for 0.8934 newly issued shares of Bancshares' $1.00 par
value common stock, rounded to the nearest whole share.
3. No fractional shares will be issued to the First ▇▇▇▇▇▇
shareholders. Bancshares' shares to be issued as a result of the Exchange will
be rounded to the nearest whole share and any shareholder of First ▇▇▇▇▇▇ who
would otherwise be entitled to receive five-tenths (.5) or more of a share will
instead receive an additional whole share; and any shareholder who would
otherwise be entitled to receive less than five-tenths (.5) of a share will not
receive any consideration for such fractional interest.
4. Each holder of a certificate representing shares to be exchanged
in the Exchange will surrender such certificate and after the Effective Time
will be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares to which he is entitled under this Plan. Until
so surrendered, each outstanding certificate that prior to the Effective Time
represented shares of First ▇▇▇▇▇▇ will be deemed for all purposes to evidence
ownership of the consideration to be issued for such shares under this Plan;
provided, however, that no holder of any such outstanding certificate shall be
entitled to the payment of dividends or other distributions on the shares
represented by such certificate until the surrender of such
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certificate, but upon surrender of such certificate as provided in the
Agreement, Bancshares' exchange agent shall pay to the registered holder of the
shares of Bancshares' stock represented by such certificate the amount of any
such cash, dividends or distributions which have accrued but remain unpaid with
respect to such shares. Neither Bancshares, its exchange agent, nor First ▇▇▇▇▇▇
shall have any obligation to pay any interest on any such cash, dividends or
distributions for any period prior to such payment.
5. The outstanding shares of Bancshares will not be converted,
exchanged, or altered in any manner as a result of the Exchange and will remain
outstanding as shares of Bancshares.
D. Abandonment. This Plan of Exchange may be terminated and the Exchange
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may be abandoned at any time prior to the Effective Time upon termination of the
Agreement as provided therein.
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