EXHIBIT 10-1
SOUTHCOAST FINANCIAL CORPORATION
4,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PURCHASE AGREEMENT
May 3, 2002
Bayview Financial Trading Group, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Southcoast Financial Corporation, Inc., a South Carolina corporation
(the "Company"), and its financing subsidiary, Southcoast Capital Trust I, a
Delaware Business Trust (the "Trust," and hereinafter together with the Company,
the "Offerors"), hereby confirm their agreement with you, a Delaware limited
partnership, as the purchaser (the "Purchaser"), as follows:
Section 1. Issuance and Sale of Securities.
1.1. Introduction. The Offerors propose to issue and sell at the
Closing (as defined in Section 2.4.1 hereof) 4,000 of the Trust's Floating Rate
Capital Securities, with a liquidation amount of $1,000.00 per capital security
(the "Capital Securities"), to you pursuant to the terms of this Purchase
Agreement (the "Agreement"). The Capital Securities shall be offered and sold by
the Trust directly to the Purchaser without registration of any of the Capital
Securities, the Debentures or the Guarantee under the Securities Act of 1933, as
amended (the "Securities Act"), or any other applicable securities laws in
reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors and the Purchaser have
entered into this Agreement to set forth their understanding as to their
relationship and their respective rights, duties and obligations.
1.2. Operative Agreements. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
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"Guarantee Agreement"), to be dated as of the Closing Date (as defined in
Section 2.4.1 hereof) and executed and delivered by the Company and ▇▇▇▇▇ Fargo
Bank, National Association ("▇▇▇▇▇ Fargo"), as trustee (the "Guarantee
Trustee"), for the benefit from time to time of the holders of the Capital
Securities. The entire proceeds from the sale by the Trust to the holders of the
Capital Securities shall be combined with the entire proceeds from the sale by
the Trust to the Company of its common securities (the "Common Securities"), and
shall be used by the Trust to purchase $4,125,000 in principal amount of the
Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Debentures") of the Company. The Capital Securities and the Common Securities
for the Trust shall be issued pursuant to an Amended and Restated Declaration of
Trust among ▇▇▇▇▇ Fargo, as institutional trustee (the "Institutional Trustee"),
▇▇▇▇▇ Fargo Delaware Trust Company, as Delaware trustee (the "Delaware
Trustee"), the Administrative Trustees named therein, and the Company, to be
dated as of the Closing Date and in substantially the form heretofore delivered
to the Purchaser (the "Trust Agreement"). The Debentures shall be issued
pursuant to an Indenture (the "Indenture"), to be dated as of the Closing Date,
between the Company and ▇▇▇▇▇ Fargo, as indenture trustee (the "Indenture
Trustee"). The documents identified in this Section 1.2 are referred to herein
as the "Operative Documents."
1.3. Legends. Upon original issuance thereof, and until such time as
the same is no longer required under the applicable requirements of the
Securities Act, the Capital Securities and Debentures certificates shall each
contain a legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities and Fees and Expenses.
2.1. Purchase Price. From the date hereof until the Closing Date (which
date may be extended by mutual agreement of the Offerors and the Purchaser), the
Offerors hereby grant to the Purchaser the exclusive right to purchase the
Capital Securities at a purchase price of $970 per Capital Security.
2.2. Costs and Expenses. Whether or not this Agreement is terminated or
the sale of the Capital Securities is consummated, the Company hereby covenants
and agrees that it shall directly pay or cause to be paid all reasonable costs
and expenses incident to the performance of the obligations of the Offerors
under this Agreement, including all fees, expenses and disbursements of counsel
and accountants for the Offerors; the reasonable costs and charges of any
trustee, transfer agent or registrar and the fees and disbursements of counsel
to any trustee, transfer agent or registrar attributable to the Debentures and
the Capital Securities; all reasonable expenses incurred by the Offerors
incident to the preparation, execution and delivery of the Trust Agreement, the
Indenture, and the Guarantee; and all other reasonable costs and expenses
incident to the performance of the obligations of the Company hereunder and
under the Trust Agreement and the Indenture.
2.3. Failure to Close. If any of the conditions to the Closing
specified in this Agreement shall not have been fulfilled to the satisfaction of
the Purchaser or if the Closing shall not have occurred on or before 10:00 a.m.
(Virginia time) on May 31, 2002, then each party hereto, notwithstanding
anything to the contrary in this Agreement, shall be relieved of all further
obligations under this Agreement without thereby waiving any rights it may have
by reason of such nonfulfillment or failure; provided, however, that the
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obligations of the parties under Sections 2.2 and 9 shall not be so relieved and
shall continue in full force and effect.
2.4. Closing and Delivery of Payment.
2.4.1. Closing; Closing Date. The sale and purchase of the
Capital Securities by the Offerors to the Purchaser shall take place at
a closing (the "Closing") at the offices of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP,
at 10:00 a.m. (Virginia time) on May 3, 2002, or such other business
day as may be agreed upon by the Offerors and the Purchaser (the
"Closing Date"). Payment by the Purchaser shall be payable in
immediately available funds and shall be made prior to or on the
Closing Date.
2.4.2. Delivery. The certificate for the Capital Securities
shall be in definitive form, registered in the name of the Purchaser or
its nominee and in the aggregate amount of the Capital Securities
purchased by the Purchaser.
2.4.3. Transfer Agent. The Offerors shall deposit the
certificate representing the Capital Securities with the Institutional
Trustee or other appropriate party prior to the Closing Date.
Section 3. Closing Conditions. The obligations of the parties hereto on the
Closing Date shall be subject to the accuracy, at and as of the Closing Date, of
the representations and warranties contained in this Agreement, to the accuracy,
at and as of the Closing Date, of the statements of the Offerors made in any
certificates pursuant to this Agreement, to the performance by the Offerors of
their respective obligations under this Agreement, to compliance, at and as of
the Closing Date, by the Offerors with their respective agreements herein
contained, and to the following further conditions:
3.1. Opinions of Counsel. On the Closing Date, the Purchaser shall have
received the following favorable opinions, each dated as of the Closing Date:
(a) from Haynsworth ▇▇▇▇▇▇▇ ▇▇▇▇, P.A., counsel for the Offerors and addressed
to the Purchaser in substantially the form set forth on Exhibit A-l attached
hereto and incorporated herein by this reference, (b) from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Finger, special Delaware counsel to the Offerors and addressed to the Purchaser
and the Offerors, in substantially the form set forth on Exhibit A-2 attached
hereto and incorporated herein by this reference and (c) from ▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇ LLP, special tax counsel to the Offerors, and addressed to the Purchaser
and the Offerors, in substantially the form set forth on Exhibit A-3 attached
hereto and incorporated herein by this reference, subject to the receipt by
▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP of a representation letter from the Company in the form
set forth in Exhibit A-3 completed in a manner reasonably satisfactory to ▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇ LLP (collectively, the "Offerors' Counsel Opinions"). In rendering
the Offerors' Counsel Opinions, counsel to the Offerors may rely as to factual
matters upon certificates or other documents furnished by officers, directors
and trustees of the Offerors (copies of which shall be delivered to the
Purchaser) and by government officials, and upon such other documents as counsel
to the Offerors may, in their reasonable opinion, deem appropriate as a basis
for the Offerors' Counsel Opinions. Counsel to the Offerors may specify the
jurisdictions in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction. Such Offerors' Counsel Opinion shall not state that they
are to be governed or qualified by, or that they are otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
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including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
3.2. Officer's Certificate. At the Closing Date, the Purchaser shall
have received certificates from the Chief Executive Officer of the Company,
dated as of the Closing Date, stating that (i) the representations and
warranties of the Offerors set forth in Section 5 hereof are true and correct as
of the Closing Date and that the Offerors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or prior
to the Closing Date, (ii) since the date of this Agreement, the Offerors have
not incurred any liability or obligation, direct or contingent, or entered into
any material transactions, other than in the ordinary course of business, which
is material to the Offerors, and (iii) covering such other matters as the
Purchaser may reasonably request.
3.3. Administrative Trustee's Certificate. At the Closing Date, the
Purchaser shall have received a certificate of one or more Administrative
Trustees of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment. The
purchase of and payment for the Capital Securities shall (a) not be prohibited
by any applicable law or governmental regulation, (b) not subject the Purchaser
to any penalty or, in the reasonable judgment of the Purchaser, other onerous
conditions under or pursuant to any applicable law or governmental regulation,
and (c) be permitted by the laws and regulations of the jurisdictions to which
the Purchaser is subject.
3.5. Consents and Permits. The Company and the Trust shall have
received all consents, permits and other authorizations, and made all such
filings and declarations, as may be required from any person or entity pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree to which the Company or the Trust is
a party or to which either is subject, in connection with the transactions
contemplated by this Agreement.
3.6. Information. Prior to or on the Closing Date, the Offerors shall
have furnished to the Purchaser such further information, certificates, opinions
and documents addressed to the Purchaser, which the Purchaser may reasonably
request, including, without limitation, a complete set of the Operative
Documents or any other documents or certificates required by this Section 3; and
all proceedings taken by the Offerors in connection with the issuance, offer and
sale of the Capital Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Purchaser.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates referenced above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Purchaser, this Agreement
may be terminated by the Purchaser by notice to the Offeror at any time at or
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prior to the Closing Date. Notice of such termination shall be given to the
Offerors in writing or by telephone or facsimile confirmed in writing.
Section 4. Conditions to the Offerors' Obligations. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Purchaser contained in Section 6 of this Agreement and to the following further
conditions:
4.1. Executed Agreement. The Offerors shall have received from the
Purchaser an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations. The Purchaser shall have
fulfilled all of its other obligations and duties required to be fulfilled under
this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. The Offerors jointly
and severally represent and warrant to the Purchaser as of the date hereof and
as of the Closing Date as follows:
5.1. Securities Law Matters.
(a) Neither the Company nor the Trust, nor any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D")), nor any person acting on any of their
behalf has, directly or indirectly, made offers or sales of any
security, or solicited offers to buy any security, under circumstances
that would require the registration of any of the Capital Securities,
the Guarantee and the Debentures or any other securities to be issued
or which may be issued by the Purchaser (collectively, the
"Securities") under the Securities Act.
(b) Except as contemplated herein, neither the Company nor the
Trust, nor any of their Affiliates, nor any person acting on its or
their behalf has (i) offered for sale or solicited offers to purchase
the Securities or (ii) engaged in any form of offering, general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving
effect to the offering and sale of the Capital Securities and the
consummation of the transactions described in this Agreement, neither
the Company nor the Trust will be, an "investment company" or an entity
"controlled" by an "investment company," in each case within the
meaning of Section 3(a) of the Investment Company Act of 1940, as
amended (the "Investment Company Act") without regard to Section 3(c)
of the Investment Company Act.
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(e) Neither the Company nor the Trust has paid or agreed to
pay to any person or entity any compensation for soliciting another to
purchase any of the Securities.
5.2. Organization, Standing and Qualification of the Trust. The Trust
has been duly created and is validly existing in good standing as a Business
Trust under Chapter 38 of Title 12 of the Delaware Code (the "Business Trust
Act") with the power and authority to own property and to conduct the business
it transacts and proposes to transact and to enter into and perform its
obligations under the Operative Documents. The Trust is duly qualified to
transact business as a foreign entity and is in good standing in each
jurisdiction in which such qualification is necessary, except where the failure
to so qualify or be in good standing would not have a material adverse effect on
the Trust. The Trust is not a party to or otherwise bound by any agreement other
than the Operative Documents. The Trust is and will, under current law, be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation.
5.3. Trust Agreement. The Trust Agreement has been duly authorized by
the Company and, on the Closing Date, will have been duly executed and delivered
by the Company and the Administrative Trustees, and, assuming due authorization,
execution and delivery by the Institutional Trustee and the Delaware Trustee,
will be a valid and binding obligation of the Company and such Administrative
Trustees, enforceable against them in accordance with its terms, subject to (a)
applicable bankruptcy, insolvency, moratorium, receivership, reorganization,
liquidation and other laws relating to or affecting creditors' rights generally,
and (b) general principles of equity (regardless of whether considered and
applied in a proceeding in equity or at law) ("Bankruptcy and Equity"). Each of
the Administrative Trustees is an employee or a director of the Company or of a
financial institution subsidiary of the Company and has been duly authorized by
the Company to execute and deliver the Trust Agreement.
5.4. Guarantee Agreement and the Indenture. Each of the Guarantee and
the Indenture has been duly authorized by the Company and, on the Closing Date,
will have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities. The Capital Securities
and the Common Securities have been duly authorized by the Trust Agreement and,
when issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.
5.6. Debentures. The Debentures have been duly authorized by the
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture, and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute valid and binding
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obligations of the Company entitled to the benefits of the Indenture enforceable
against the Company in accordance with their terms, subject to Bankruptcy and
Equity.
5.7. Power and Authority. This Agreement has been duly authorized,
executed and delivered by the Company and the Trust and constitutes the valid
and binding obligation of the Company and the Trust, enforceable against the
Company and the Trust in accordance with its terms, subject to Bankruptcy and
Equity.
5.8. No Defaults. The Trust is not in violation of the Trust Agreement
or, to the knowledge of the Administrative Trustees, any provision of the
Business Trust Act. The execution, delivery and performance by the Company or
the Trust of the Operative Documents to which it is a party, and the
consummation of the transactions contemplated herein or therein and the use of
the proceeds therefrom, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any property or assets of the Trust, the Company or any
of the Company's subsidiaries pursuant to any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Trust, the Company
or any of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of any of them is subject,
except for a conflict, breach, default, lien, charge or encumbrance which could
not reasonably be expected to have a Material Adverse Effect nor will such
action result in any violation of the Trust Agreement or the Business Trust Act
or require the consent, approval, authorization or order of any court or
governmental agency or body. As used herein, the term "Material Adverse Effect"
means any effect that is material and adverse to the Offerors' ability to
consummate the transactions contemplated herein or in the Operative Documents
or any effect that is material and adverse to the condition (financial or
otherwise), earnings, affairs, business, prospects or results of operations of
the Company and its subsidiaries taken as whole, whether or not occurring in
the ordinary course of business.
5.9. Organization, Standing and Qualification of the Company. The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of South Carolina, with all requisite corporate
power and authority to own its properties and conduct the business it transacts
and proposes to transact, and is duly qualified to transact business and is in
good standing as a foreign corporation in each jurisdiction where the nature of
its activities requires such qualification, except where the failure of the
Company to be so qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
5.10. Subsidiaries of the Company. Each of the Company's significant
subsidiaries (as defined in Section l-02 of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit B attached hereto
and incorporated herein by this reference. Each Significant Subsidiary has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction in which it is chartered or organized, with all requisite
power and authority to own its properties and conduct the business it transacts
and proposes to transact, and is duly qualified to transact business and is in
good standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiaries to be so qualified would not, singly or in the
aggregate, have a Material Adverse Effect.
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5.11. Permits. The Company and each of its Significant Subsidiaries
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not have a Material
Adverse Effect, and neither the Company nor any of the Significant Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such authorizations, approvals, orders, licenses,
certificates or permits which, singly or in the aggregate, if the failure to be
so licensed or approved is the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect; and the Company and its
Significant Subsidiaries are in compliance with all applicable laws, rules,
regulations and orders and consents, the violation of which would have a
Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals. Except as previously
disclosed to the Purchaser in writing, neither the Company nor any of the
Significant Subsidiaries is in violation of its respective charter or by-laws
or similar organizational documents or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument to which either the Company or any of the Significant
Subsidiaries is a party, or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of the Significant
Subsidiaries is subject, the effect of which violation or default in
performance or observance would have a Material Adverse Effect.
5.13. Holding Company Registration and Deposit Insurance. The Company
is duly registered (i) as a bank holding company or financial holding company
under the Bank Holding Company Act of 1956, as amended, and the regulations of
the Board of Governors of the Federal Reserve System or (ii) as a savings and
loan holding company under the Home Owners' Loan Act of 1933, as amended, and
the regulations of the Office of Thrift Supervision, and the deposit accounts of
the Company's subsidiary depository institutions are insured by the Federal
Deposit Insurance Corporation ("FDIC") to the fullest extent permitted by law
and the rules and regulations of the FDIC, and no proceedings for the
termination of such insurance are pending or threatened.
5.14. Financial Statements.
(a) The audited consolidated balance sheets of the Company and
all of its subsidiaries as of December 31, 2000 and December 31, 2001 and
related consolidated income statements and statements of changes in
shareholders' equity for the three years ended December 31, 2001 together with
the notes thereto, copies of each of which have been provided to the Purchaser
(together, the "Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be disclosed therein) and fairly present in all material respects the
financial position and the results of operations and changes in shareholders'
equity of the Company and all of its subsidiaries as of the dates and for the
periods indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which shall be material). The
books and records of the Company and all of its subsidiaries have been, and are
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being, maintained in all material respect in accordance with generally accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.
(b) The Company's report on FRY-9C dated December 31, 2002
(the "FRY-9C") previously provided to the Purchaser is the most recent available
such report and the information therein fairly presents in all material respects
the financial position of the Company and all of its subsidiaries.
(c) Since the respective dates of the Financial Statements and
the FRY-9C, there has been no material adverse change or development with
respect to the financial condition or earnings of the Company and all of its
subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its
subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.15. Regulatory Enforcement Matters. Except as previously disclosed
to the Purchaser in writing, neither the Company nor any of its subsidiaries is
subject or is party to, or has received any notice or advice that any of them
may become subject or party to, any investigation with respect to, any
cease-and-desist order, agreement, consent agreement, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been since January 1, 1999, a recipient of
any supervisory letter from, or since January 1, 1999, has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their management or their business (each, a "Regulatory Agreement"),
nor has the Company or any of its subsidiaries been advised since January 1,
1999 by any Regulatory Agency that it is considering issuing or requesting any
such Regulatory Agreement. There is no material unresolved violation, criticism
or exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of the Company or any of its subsidiaries. As used
herein, the term "`Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of depository institutions, bank, financial
or savings and loan holding companies, or engaged in the insurance of
depository institution deposits, or any court, administrative agency or
commission or other governmental agency, authority or instrumentality having
supervisory or regulatory authority with respect to the Company or any of its
Significant Subsidiaries.
5.16. No Material Change. Except as previously disclosed to the
Purchaser in writing, since December 31, 2001, there has been no material
adverse change or development with respect to the condition (financial or
otherwise), earnings, affairs, business, prospects or results of operations of
the Offerors on a consolidated basis.
5.17. No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
9
due, including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the Financial Statements, (ii) normal fluctuation
in the amount of the liabilities referred to in clause (i) above occurring in
the ordinary course of business of the Company and all of its subsidiaries
since the date of the most recent balance sheet included in the Financial
Statements, and (iii) as may be specifically disclosed in writing to the
Purchaser.
5.18. Litigation. Except as previously disclosed to the Purchaser in
writing, no charge, investigation, action, suit or proceeding is pending or, to
the knowledge of the Offerors, threatened, against or affecting the Offerors or
any of their respective properties before or by any courts or any regulatory,
administrative or governmental official, commission, board, agency or other
authority or body, or any arbitrator, wherein an unfavorable decision, ruling
or finding could have a Material Adverse Effect.
5.19. Deferral of Interest Payments on Debentures. The Company has no
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on
the Debentures as provided in the Indenture at any time during which the
Debentures are outstanding is remote because of the restrictions that would be
imposed on the Company's ability to declare or pay dividends or distributions
on, or to redeem, purchase, acquire or make a liquidation payment with respect
to, any of the Company's capital stock and on the Company's ability to make any
payments of principal, interest or premium on, or repay, repurchase or redeem,
any of its debt securities that rank pari passu in all respects with, or junior
in interest to, the Debentures.
Section 6. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Offerors as of the date hereof and as of the
Closing Date as follows:
6.1. Organization, Standing and Qualification. The Purchaser is a
Delaware limited partnership, duly organized, validly existing and in good
standing under the laws of the State of Florida, with full power and authority
to own, lease and operate its properties and conduct its business as currently
being conducted. The Purchaser is duly qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction in which
it owns or leases property or conducts its business so as to require such
qualification and in which the failure to so qualify would, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), earnings, business, prospects or results of operations of the
Purchaser.
6.2. Power and Authority. The Purchaser has all requisite power and
authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Purchaser and constitutes the
legal, valid and binding agreement of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to Bankruptcy and Equity, and
except as any indemnification or contribution provisions thereof may be limited
under applicable securities laws.
6.3 Certain Additional Representations.
10
6.3.1. Private Issuance. The Purchaser understands and
acknowledges that neither the Capital Securities, the Debentures nor
the Guarantee have been registered under the Securities Act or any
other applicable securities law, are being offered for sale by the
Trust in transactions not requiring registration under the Securities
Act, and may not be offered, sold, pledged or otherwise transferred by
the Purchaser except in compliance with the registration requirements
of the Securities Act or any other applicable securities laws, pursuant
to an exemption therefrom or in a transaction not subject thereto.
6.3.2. Investment Intention. The Purchaser represents and
warrants that it is purchasing the Capital Securities for its own
account, for investment, and not with a view to, or for offer or sale
in connection with, any distribution thereof in violation of the
Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times
within its control and subject to its ability to resell such Capital
Securities pursuant to an effective registration statement under the
Securities Act or under Rule 144A or any other exemption from
registration available under the Securities Act or any other applicable
securities law.
6.3.3. Financial Experience. The Purchaser, whose business
includes acquiring the Capital Securities and other similar securities,
represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of purchasing the Capital Securities and is aware that
it may be required to bear the economic risk of an investment in the
Capital Securities. The Purchaser also represents that it is an
"accredited investor" within the meaning of Rule 501(a) under the
Securities Act.
6.3.4. No Further Actions. The Purchaser represents and
warrants that no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any
governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is
necessary or required for the performance by the Purchaser of its
obligations under this Agreement or to consummate the transactions
contemplated herein.
6.3.5. No Violations. The Purchaser represents and warrants
that (i) the Purchaser is not in violation or default of any term of
its Agreement of Limited Partnership, of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is a
party or by which it is bound or of any judgment, decree, order, writ
or, to its knowledge, any statute, rule or regulation applicable to the
Purchaser which would prevent the Purchaser from performing any
material obligation set forth in this Agreement, and (ii) the
execution, delivery and performance of and compliance with this
Agreement, and the consummation of the transactions contemplated
herein, will not, with or without the passage of time or giving of
notice, result in any such material violation, or be in conflict with
or constitute a default under any such term, or the suspension,
revocation, impairment, forfeiture or non-renewal of any permit,
license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would
prevent the Purchaser from performing any material obligations set
forth in this Agreement.
6.3.6. Reliance. The Purchaser understands and acknowledges
that the Company will rely upon the truth and accuracy of the foregoing
acknowledgments, representations, warranties and agreements and agrees
that, if any of the acknowledgments, representations, warranties or
agreements deemed to
11
have been made by it by its purchase of the Capital Securities are no
longer accurate, it shall promptly notify the Company.
6.3.7. No Public Market. The Purchaser understands that no
public market exists for any of the Capital Securities, and that it is
unlikely that a public market will ever exist for the Capital
Securities
Section 7. Covenants of the Offerors. The Offerors covenant and agree with the
Purchaser as follows:
7.1. Compliance with Representations and Warranties. During the period
from the date of this Agreement to the Closing Date, the Offerors shall use
their best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.
7.2. Sale and Registration of Securities. The Offerors and their
Affiliates shall not nor shall any of them permit any person acting on their
behalf, to directly or indirectly (i) sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would or could be integrated with the sale of the Capital
Securities in a manner that would require the registration under the Securities
Act of the Capital Securities, the Debentures or the Guarantee or (ii) make
offers or sales of any such security, or solicit offers to buy any such
security, under circumstances that would require the registration of any of such
securities under the Securities Act.
7.3. Use of Proceeds. The Trust shall use the proceeds from the sale of
the Capital Securities to purchase the Debentures from the Company.
7.4. Investment Company. The Offerors shall not engage, or permit any
subsidiary to engage, in any activity which would cause it or any subsidiary to
be an "investment company" under the provisions of the Investment Company Act.
7.5. Reimbursement of Expenses. If the sale of the Capital Securities
provided for herein is either consummated or is not consummated because any
condition set forth in Section 3 hereof is not satisfied, or because of any
refusal, inability or failure on the part of the Company or the Trust to perform
any agreement herein or comply with any provision hereof other than by reason of
a breach by the Purchaser, the Company shall reimburse the Purchaser upon demand
for all of its out-of pocket expenses (including reasonable fees and
disbursements of counsel) in an amount not to exceed $15,000 that shall have
been incurred by it in connection with the proposed purchase of the Capital
Securities. Notwithstanding the foregoing, the Company shall have no obligation
to reimburse the Purchaser for its out-of-pocket expenses if the sale of the
Capital Securities fails to occur because the Purchaser fails to fulfill a
condition set forth in Section 4.
7.6. Directed Selling Efforts, Solicitation and Advertising. In
connection with any offer or sale of any of the Securities, the Offerors shall
not, nor shall either of them permit any of their Affiliates or any person
acting on their behalf to, (i) engage in any "directed selling efforts" within
12
the meaning of Regulation S, or (ii) engage in any form of general solicitation
or general advertising (as defined in Regulation D).
7.7. Compliance with Rule 144A(d)(4) under the Securities Act. So long
as any of the Capital Securities are outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Offerors
will, during any period in which they are not subject to and in compliance with
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the Offerors are not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser in connection with any proposed
transfer, any information required to be provided by Rule 144A(d)(4) under the
Securities Act, if applicable. This covenant is intended to be for the benefit
of the holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities. The information provided by the
Offerors pursuant to this Section 7.7 will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
7.8. Quarterly Reports. Within 50 days of the end of each calendar year
quarter and within 100 days of the end of each calendar year during which the
Debentures are issued and outstanding, the Offerors shall submit to the
Purchaser and any third party that may be designated in writing by the Purchaser
a completed quarterly report in the form attached hereto as Exhibit C.
Section 8. Covenants of the Purchaser. The Purchaser covenants and agrees with
the Offerors that, during the period from the date of this Agreement to the
Closing Date, the Purchaser shall use its best efforts and take all action
necessary or appropriate to cause its representations and warranties contained
in Section 6 to be true as of Closing Date, after giving effect to the
transactions contemplated by this Agreement, as if made on and as of the Closing
Date.
13
Section 9. Indemnification.
9.1. Indemnification Obligation. The Offerors shall jointly and
severally indemnify and hold harmless the Purchaser and its agents, employees,
officers and directors and each person that controls the Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and agents, employees, officers and directors or any such controlling person
of the Purchaser (each such person or entity, an "Indemnified Party") from and
against any and all losses, claims, damages, judgments, liabilities or
expenses, joint or several, to which such Indemnified Party may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written consent of the
Offerors), insofar as such losses, claims, damages, judgments, liabilities or
expenses (or actions in respect thereof) arise out of, or are based upon, or
relate to, in whole or in part, (a) any untrue statement or alleged untrue
statement of a material fact contained in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Purchaser by the Offerors, or (b) any omission or alleged omission to state in
any information (whether written or oral) or documents executed in favor of,
furnished or made available to the Purchaser by the Offerors, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Indemnified Party for any legal and other
expenses as such expenses are reasonably incurred by such Indemnified Party in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, judgments, liability, expense or action described in
this Section 9.1. In addition to their other obligations under this Section 9,
the Offerors hereby agree that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of,
or based upon, or related to the matters described above in this Section 9.1,
they shall reimburse each Indemnified Party on a quarterly basis for all
reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, each Indemnified Party shall promptly return such amounts to the
Offerors together with interest, determined on the basis of the prime rate (or
other commercial lending rate for borrowers of the highest credit standing)
announced from time to time by ▇▇▇▇▇ Fargo (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Indemnified Party
within 30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
9.2. Conduct of Indemnification Proceedings. Promptly after receipt by
an Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to
the extent that they may wish, to assume the defense thereof with counsel
reasonably satisfactory to such Indemnified Party; provided, however, if the
defendants in any such action include both the Indemnified Party and the
Offerors and the Indemnified Party shall have reasonably concluded that there
14
may be a conflict between the positions of the Offerors and the Indemnified
Party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other Indemnified Parties which are different
from or additional to those available to the Offerors, the Indemnified Party
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
Indemnified Party. Upon receipt of notice from the Offerors to such Indemnified
Party of their election to so assume the defense of such action and approval by
the Indemnified Party of counsel, the Offerors shall not be liable to such
Indemnified Party under this Section 9 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (i) the Indemnified Party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
in the preceding sentence (it being understood, however, that the Offerors
shall not be liable for the expenses of more than one separate counsel
representing the Indemnified Parties who are parties to such action), or (ii)
the Offerors shall not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel of such Indemnified Party shall be at the expense of the
Offerors.
9.3. Additional Remedies. The indemnity agreement contained in this
Section 9 is in addition to any liability that the Offerors may otherwise have
to any Indemnified Party.
9.4. Additional Indemnification. The Company shall indemnify and hold
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.3 hereof.
Section 10. Miscellaneous.
10.1. Notices. Prior to the Closing, and thereafter with respect to
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Purchaser, to:
Bayview Financial Trading Group, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
15
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
if to the Offerors, to:
Southcoast Financial Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: L. ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Hansworth ▇▇▇▇▇▇▇ ▇▇▇▇ P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Esq.
All such notices and communications shall be deemed to have been duly
given (i) at the time delivered by hand, if personally delivered, (ii) five
business days after being deposited in the mail, postage prepaid, if mailed,
(iii) when answered back, if telexed, (iv) the next business day after being
telecopied, or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The
Purchaser, the Company, and their respective counsel, may change their
respective notice addresses from time to time by written notice to all of the
foregoing persons.
10.2. Parties in Interest, Successors and Assigns. Except as expressly
set forth herein, this Agreement is made solely for the benefit of the Purchaser
and the Offerors and any person controlling the Purchaser, the Offerors and
their respective successors and assigns; and no other person shall acquire or
have any right under or by virtue of this Agreement. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties.
16
10.3. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
10.4. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the laws pertaining to conflicts
of laws) of the State of Florida. In the event of the institution of any action,
suit or proceeding, each of the parties hereto hereby consents to the exclusive
jurisdiction and venue of the courts of the State of Florida located in Miami
Dade County, Florida and the United States District Court in and for the
Southern District of Florida with respect to any matter relating to this
Agreement and the performance of the parties' obligations hereunder and each of
the parties hereto hereby further consents to the personal jurisdiction of such
courts. Any action, suit or proceeding brought by or on behalf of any of the
parties hereto relating to such matters shall be commenced, pursued, defended
and resolved only in such courts and any appropriate appellate court having
jurisdiction to hear an appeal from any judgment entered in such courts. The
parties hereby agree that service of process may be made in any manner permitted
by the rules of such courts and the laws of the State of Florida.
10.6. Entire Agreement. This Agreement, together with the other
Operative Documents and the other documents delivered in connection with the
transactions contemplated by this Agreement, is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, together with the other Operative Documents,
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
10.7. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Purchaser's rights and privileges shall be
enforceable to the fullest extent permitted by law.
10.8. Survival. The Purchaser and the Offerors, respectively, agree
that the representations, warranties and agreements made by each of them in this
Agreement and in any certificate or other instrument delivered pursuant hereto
shall remain in full force and effect and shall survive the delivery of, and
payment for, the Capital Securities.
[Signatures and Attachments Omitted]
17
