EXHIBIT 2.11
Conformed Copy
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MERGER AGREEMENT
among
FNB CORP.,
DOVER MORTGAGE COMPANY
the Company,
and
THE SHAREHOLDERS OF
DOVER MORTGAGE COMPANY
Dated as of February 20, 2003
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TABLE OF CONTENTS
ARTICLE I DEFINED TERMS .......................................................1
1.1 Definitions ..............................................................1
ARTICLE II MERGER .............................................................5
2.1 Merger ...................................................................5
2.2 Articles of Incorporation ................................................5
2.3 Bylaws ...................................................................5
2.4 Directors and Officers ...................................................5
2.5 Effect of the Merger .....................................................5
2.6 Effective Time ...........................................................6
2.7 Further Assurances .......................................................6
ARTICLE III CONVERSION AND EXCHANGE OF SHARES .................................6
3.1 Company Shares ...........................................................6
3.2 Merger Sub Shares ........................................................6
3.3 Merger Price .............................................................6
3.4 Payment of the Merger Price ..............................................9
3.5 Earn-out Payment .........................................................9
ARTICLE IV CLOSING ...........................................................11
4.1 Closing .................................................................11
4.2 Deliveries by the Shareholders and the Company ..........................11
4.3 Deliveries by FNB .......................................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY .12
5.1 The Company .............................................................12
5.2 Shareholders ............................................................14
5.3 Assets ..................................................................14
5.4 Interests in Real Property ..............................................14
5.5 Absence of Undisclosed Liabilities ......................................15
5.6 Contracts ...............................................................15
5.7 Intellectual Property Rights ............................................16
5.8 Financial Statements ....................................................16
5.9 Loans, Accounts, Notes and Other Receivables ............................16
5.10 Securities Portfolio and Investments ....................................17
5.11 Legal Compliance ........................................................18
5.12 Taxes and Tax Returns ...................................................18
5.13 Litigation ..............................................................19
5.14 Labor and Employment Matters ............................................19
5.15 Employee Benefit Plans; ERISA ...........................................20
5.16 Insurance ...............................................................22
5.17 Transactions with Affiliates ............................................22
5.18 Environmental Matters ...................................................23
5.19 Absence of Changes or Events ............................................23
5.20 Bank Accounts ...........................................................24
5.21 Corporate and Personnel Data ............................................24
5.22 Licenses and Permits ....................................................24
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5.23 Investment ..............................................................24
5.24 Certain Regulated Businesses ............................................25
5.25 Commissions .............................................................25
5.26 Full Disclosure .........................................................25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF FNB .............................25
6.1 Organization ............................................................25
6.2 Authority Relative to this Agreement ....................................26
6.3 Consents and Approvals, No Violations ...................................26
6.4 Issuance of Shares of the FNB's Stock ...................................26
6.5 Reports .................................................................26
6.6 FNB's Financial Statements ..............................................26
6.7 Absence of Changes ......................................................27
6.8 Commissions .............................................................27
6.9 Full Disclosure .........................................................27
ARTICLE VII AFFIRMATIVE COVENANTS ............................................27
7.1 Ordinary Conduct ........................................................27
7.2 Covenants of the Shareholders ...........................................29
7.3 Covenants of FNB ........................................................30
7.4 Sale of Investment Securities ...........................................30
7.5 Tax Matters .............................................................30
7.6 Consummation of Agreement ...............................................30
7.7 Schedules to Agreement ..................................................31
7.8 Corporate Action ........................................................31
7.9 Maintenance of Corporate Existenc .......................................31
7.10 No Solicitation .........................................................31
7.11 Qualified Plans .........................................................31
7.12 Employment ..............................................................31
7.13 Employee Benefits .......................................................32
7.14 Retention Bonus .........................................................32
7.15 Noncompetition ..........................................................33
7.16 Termination of Guaranties ...............................................34
7.17 Vehicle Lease ...........................................................35
ARTICLE VIII DISCLOSURE OF ADDITIONAL INFORMATION ............................35
8.1 Access to Information ...................................................35
8.2 Access to Premises ......................................................35
8.3 Confidentiality .........................................................35
8.4 Publicity ...............................................................35
ARTICLE IX CONDITIONS TO CLOSING .............................................35
9.1 Mutual Conditions .......................................................35
9.2 Conditions to the Obligations of the Company and the Shareholders .......36
9.3 Conditions to the Obligations of FNB ....................................37
ARTICLE X TERMINATION ........................................................39
10.1 Termination .............................................................39
10.2 Procedure and Effect of Termination .....................................39
ARTICLE XI INDEMNIFICATION ...................................................40
11.1 Survival of Representations .............................................40
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11.2 Shareholders' Agreement to Indemnify ...................................40
11.3 FNB's Agreement to Indemnify ...........................................41
11.4 Indemnification Procedure ..............................................42
ARTICLE XII MISCELLANEOUS PROVISIONS .........................................43
12.1 Expenses ...............................................................43
12.2 Action by Shareholders .................................................43
12.3 Amendment and Modification .............................................43
12.4 Waiver of Compliance; Consents .........................................43
12.5 Notices ................................................................44
12.6 Assignment; Third Party Beneficiaries ..................................45
12.7 Separable Provisions ...................................................45
12.8 Governing Law ..........................................................45
12.9 Counterparts ...........................................................45
12.10 Interpretation .........................................................45
12.11 Entire Agreement .......................................................45
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement"), dated as of February 20,
2003, by and among FNB Corp., a North Carolina corporation ("FNB"), Dover
Mortgage Company, a North Carolina corporation (the "Company"), and J. ▇▇▇▇▇▇
▇▇▇▇, ▇▇., J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (hereinafter collectively
referred to as the "Shareholders" and individually as a "Shareholder").
Background Statement
FNB and the Company desire to effect a merger pursuant to which the
Company will merge with and into DMC Acquisition Corp., a corporation to be
organized under the laws of the State of North Carolina as a wholly owned
subsidiary of FNB ("Merger Sub"), and Merger Sub will be the surviving
corporation. The Shareholders, who own all of the issued and outstanding shares
of capital stock of the Company will receive common stock of FNB and cash, as
provided herein, as consideration for the merger.
Statement of Agreement
In consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Affiliate" means, with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls, or
is controlled by or under common control with, such Person. For the purpose of
this Agreement, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Merger Agreement.
"Applicable Law" means, as to any Person, all applicable statutes,
codes, laws, ordinances, rules, orders, decrees and regulations of any
Governmental Authority.
"Articles of Merger" has the meaning given to it in Section 2.6.
"Assets" means all of the assets, rights, interests and properties of
the Company of any nature whatsoever, whether real, personal, tangible or
intangible.
"Average Closing Price" means the simple average of the daily last sale
prices of the FNB Shares on the Nasdaq Stock Market, Inc. National Market System
for the ten consecutive full trading days ending at the close of trading on the
fifth business day prior to the Closing Date.
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"Business Day" means any day excluding Saturday, Sunday and any day
that shall be a legal holiday in North Carolina.
"Cash" means cash and cash equivalents (including only bank accounts
and money market funds).
"Cash Consideration" has the meaning given to it in Section 3.3.
"Closing" means the closing of the Merger, as identified more
specifically in Article IV.
"Closing Date" has the meaning given to it in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed also to refer to any successor sections.
"Company" means Dover Mortgage Company, a North Carolina corporation.
"Company Shares" means all of the shares of capital stock of the
Company issued and outstanding immediately prior to the Effective Time.
"Contract" means any agreement, warranty, indenture, mortgage,
guaranty, lease, license or other contract, agreement, arrangement, commitment
or understanding, written or oral.
"Earn-Out Cap" has the meaning given to it in Section 3.5.
"Effective Time" has the meaning given to it in Section 2.6.
"Environmental Assessment" means any and all soil and groundwater
tests, surveys, environmental assessments and other inspections, tests and
inquiries conducted by FNB or any agent of FNB and related to the Real Property.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, permit, directive, license, approval, guidance,
interpretation, order or other legal requirement relating to the protection of
human health or the environment, including, but not limited to, any requirement
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of materials that are or may constitute a threat to
human health or the environment. Without limiting the foregoing, each of the
following is an Environmental Law: the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ▇▇.▇▇. 9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. ▇▇.▇▇. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ▇▇.▇▇. 6901 et seq.) ("RCRA"),
the Federal Water Pollution Control Act (33 U.S.C. ▇▇.▇▇. 1251 et seq.), the
Clean Air Act (42 U.S.C. ▇▇.▇▇. 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. ▇▇.▇▇. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. ▇▇.▇▇.
300 et seq.) and the Occupational Safety and Health Act (29 U.S.C. ▇▇.▇▇. 651 et
seq.) ("OSHA"), as such laws and regulations have been or are in the future
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amended or supplemented, and each similar federal, state or local statute, and
each rule and regulation promulgated under such federal, state and local laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.
"Estimated Reserve" has the meaning given it in Section 3.3(a)(i).
"Financial Statements" means, on a consolidated basis, the Company's
audited statements of income and stockholders' equity for the years ended
December 31, 2001, 2000 and 1999 and audited balance sheets as of December 31,
2001, 2000 and 1999, as well as the unaudited interim statements of income and
stockholders' equity for each of the months subsequent to December 31, 2001
through the month-end on or immediately prior to Closing and the unaudited
interim balance sheet as of the end of each month subsequent to December 31,
2001 through the month-end on or immediately prior to Closing.
"First National" means First National Bank and Trust Company, a
national banking association and wholly owned subsidiary of FNB.
"FNB" means FNB Corp., a North Carolina corporation.
"FNB Affiliates" has the meaning given to it in Section 11.2.
"FNB Shares" means shares of the common stock of FNB Corp., par value
$2.50 per share.
"Generally Accepted Accounting Principles" means accounting principles
generally accepted in the United States of America as recognized by the American
Institute of Certified Public Accountants, as in effect from time to time.
"Governmental Authority" means any nation, province, state or other
political subdivision thereof, and any agency, natural person or other entity
exercising executive, legislative, regulatory or administrative functions of or
pertaining to government.
"Hazardous Material" means any substance or material meeting any one or
more of the following criteria: (a) it is or contains a substance designated as
a hazardous waste, hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law or is otherwise
regulated under any Environmental Law; or (b) its presence at some quantity
requires investigation, notification or remediation under any Environmental Law.
"Intellectual Property" means (a) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations,
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adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (c) all copyrights and all applications, registrations and
renewals in connection therewith, (d) all know-how, trade secrets, whether
patentable or unpatentable and whether or not reduced to practice (including
ideas, research and development, know-how, formulas, compositions, manufacturing
and production process and techniques, technical data, designs, drawings,
specifications, pricing and cost information and business and marketing plans
and proposals), (e) all computer software (including data and related
documentation) and (f) all other proprietary rights.
"Merger" means the merger of the Company with and into Merger Sub, as
more specifically described herein.
"Merger Price" has the meaning set forth in Section 3.3.
"Merger Sub" means DMC Acquisition Corp., a corporation to be organized
under the laws of the State of North Carolina as a wholly owned subsidiary of
FNB.
"Permitted Liens" has the meaning given to it in Section 5.3.
"Person" means a corporation, a company, an association, a joint
venture, a partnership, an organization, a business, an individual, a trust or a
government or political subdivision thereof or any government agency or any
other legal entity.
"Plan" means, with respect to the Company, any employee pension,
retirement, profit-sharing, stock bonus, incentive, deferred compensation, stock
option, employee stock ownership, hospitalization, medical, dental, vacation,
insurance, sick pay, disability, severance or other plan, fund, program, policy,
contract or arrangement, whether arrived at through collective bargaining or
otherwise, providing employee benefits (including but not limited to any
"employee benefit plan" as that term is defined in Section 3(3) of ERISA and any
employee benefit plan that is a "cafeteria plan" as described in Section 125 of
the Code), currently maintained or previously maintained at any time in the last
five years by, sponsored in whole or in part by, or contributed to by the
Company, for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries, whether created in writing,
through an employee manual or similar document, or orally.
"Plan of Merger" means the Plan of Merger among FNB, Merger Sub, and
the Company, substantially in the form attached as Exhibit A.
"Real Property" means any land, building or premises in which the
Company has ownership or possessory rights, whether by title, lease or
otherwise.
"Reserve" means the Company's reserves at the time of the Closing for
loan losses and contingent liabilities of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders" means J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇., J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇.
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"Surviving Corporation" has the meaning given to it in Section 2.1.
"Taxes" means all taxes, charges, fees, levies or other assessments
(whether federal, state, local or foreign), including without limitation income,
gross receipts, excise, property, estate, sales, use, value added transfer,
license, payroll, franchise, ad valorem, withholding, Social Security and
unemployment taxes, as well as any interest, penalties and other additions to
such taxes, charges, fees, levies or other assessments.
"Tax Return" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.
ARTICLE II
MERGER
2.1 Merger. On the terms and subject to the provisions of this
Agreement and the Plan of Merger, as of the Effective Time the Company shall be
merged with and into Merger Sub, the separate existence of the Company shall
cease, and the corporate existence of Merger Sub, as the surviving corporation
in the Merger, shall continue under the laws of the State of North Carolina.
Merger Sub, as the surviving corporation in the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation."
2.2 Articles of Incorporation. The articles of incorporation of Merger
Sub in effect at the Effective Time shall be the articles of incorporation of
the Surviving Corporation as may be amended by the Articles of Merger filed
pursuant to this Agreement until further amended in accordance with applicable
law.
2.3 Bylaws. The bylaws of Merger Sub in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.
2.4 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed in accordance with applicable law, the
directors of Merger Sub at the Effective Time shall be the directors of the
Surviving Corporation and the officers of Merger Sub at the Effective Time shall
be the officers of the Surviving Corporation. Promptly after the Closing, FNB
shall cause J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. to be duly appointed as President of the
Surviving Corporation.
2.5 Effect of the Merger. At the Effective Time and by reason of the
Merger, and in accordance with applicable law, all of the property, assets and
rights of every kind and character of Merger Sub and of the Company including,
without limitation, all real, personal or mixed property, all debts due on
whatever account, all other choses in action and every other interest of or
belonging to or due to the Company, whether tangible or intangible, shall vest
in the Surviving Corporation, and the Surviving Corporation shall succeed to all
the rights, privileges, immunities, powers, purposes and franchises of a public
or private nature of the Company and Merger Sub, all without any conveyance,
assignment or further act or deed; and the Surviving Corporation shall become
responsible for all of the liabilities, duties and obligations of every kind,
nature and description of the Company and Merger Sub as of the Effective Time.
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2.6 Effective Time. Subject to satisfaction or waiver of all conditions
precedent set forth in this Agreement, the Merger shall become effective (the
"Effective Time") on the date and at the time on which Articles of Merger
containing the Plan of Merger and the other provisions required by, and executed
in accordance with, applicable law shall have been accepted for filing by the
Secretary of State of the State of North Carolina (or such later time as may be
specified in the Articles of Merger).
2.7 Further Assurances. If at any time after the Effective Time FNB
shall consider or be advised that any further deeds, assignments or assurances
in law or any other actions are necessary, desirable or proper to vest, perfect
or confirm of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Company acquired or to be acquired by reason of,
or as a result of, the Merger, the Company and its officers and directors shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Surviving Corporation and otherwise to carry
out the purpose of this Agreement, and that the officers and directors of FNB
are fully authorized and directed in the name of the Company or otherwise to
take any and all such actions.
Article III. CONVERSION AND EXCHANGE OF SHARES
3.1 Company Shares. At the Effective Time, all rights of the Company's
shareholders with respect to all then outstanding Company Shares shall cease to
exist, the holders of such Company Shares shall cease to be, and shall have no
further rights as, shareholders of the Company. At the Effective Time, each such
outstanding Company Share shall be converted, without any action on the part of
the holder of such Company Shares, into the right to receive the Merger Price
(as defined below in Section 3.3) in accordance with this Article III. Following
the Effective Time, certificates representing Company Shares outstanding at the
Effective Time shall evidence only the right of the registered holders thereof
to receive, and may be exchanged for, the Merger Price. From and after the
Effective Time, there shall be no transfers on the stock transfer books of the
Surviving Corporation of the Company Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing Company Shares are presented to the Surviving Corporation, they
shall be cancelled.
3.2 Merger Sub Shares. The authorized number of shares of all classes
of capital stock of Merger Sub immediately prior to the Effective Time shall be
the authorized number of shares of the classes of capital stock of the Surviving
Corporation from and after the Effective Time. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
continue to be an issued and outstanding share of common stock of the Surviving
Corporation from and after the Effective Time.
3.3 Merger Price. At the Effective Time, each outstanding Company Share
shall cease to represent any interest (equity, shareholder or otherwise) in the
Company and shall automatically be converted exclusively into the right to
receive the Closing Cash Consideration (as defined below), the Closing Stock
Consideration (as defined below) and the Post-Closing Consideration (as defined
below):
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(a) Closing Cash Consideration. In addition to being converted
into the right to receive the Closing Stock Consideration and the
Post-Closing Consideration, each such issued and outstanding Company
Share shall also be converted into the right to receive the following
amount of cash, without interest (the "Closing Cash Consideration"):
(i) the "Gross Cash Consideration," which shall be
equal to fifty percent (50%) of the sum of (A) $4,270,000,
plus (B) the amount of the Company's consolidated retained
earnings at December 31, 2002 determined in accordance with
Generally Accepted Accounting Principles, plus (C) the amount
of the Company's recorded reserves at December 31, 2002 of
$195,954, but only to the extent such amount is not included
within the Company's consolidated retained earnings at
December 31, 2002, minus (D) the amount of all distributions
made to the shareholders of the Company at any time after
December 31, 2002, and minus (E) the "Estimated Reserve" of
$250,000, divided by
(ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time.
(b) Closing Stock Consideration. In addition to being
converted into the right to receive the Closing Cash Consideration and
the Post-Closing Consideration, each such issued and outstanding
Company Share shall also be converted into the right to receive the
following amount of FNB Shares (the "Closing Stock Consideration"):
(i) the lesser of (A) the number of FNB Shares with a
value, based on the Average Closing Price, of the Gross Cash
Consideration, and (B) the quotient obtained by dividing the
Gross Cash Consideration by $17.50, divided by
(ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time.
(c) Post-Closing Cash Consideration. In addition to being
converted into the right to receive the Closing Cash Consideration, the
Closing Stock Consideration and the Post-Closing Stock Consideration
(as defined below), each such issued and outstanding Company Share
shall also be converted into the right to receive the following amount
of cash, without interest (the "Post-Closing Cash Consideration"):
(i) the "Post-Closing Gross Cash Consideration,"
which shall be equal to fifty percent (50%) of the sum of (A)
the amount of the Company's consolidated net income for the
period from January 1, 2003 through the day immediately prior
to the date on which the Effective Time occurs, plus (B) the
amount obtained by subtracting (x) the amount of the Reserve
from (y) the Estimated Reserve (such net income and Reserve to
be determined as provided in this Section 3.3), divided by
(ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time.
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(d) Post-Closing Stock Consideration. In addition to being
converted into the right to receive the Closing Cash Consideration, the
Closing Stock Consideration and the Post-Closing Cash Consideration,
each such issued and outstanding Company Share shall also be converted
into the right to receive the following amount of FNB Shares (the
"Post-Closing Stock Consideration"):
(i) the lesser of (A) the number of FNB Shares with a
value, based on the Average Closing Price, of the Post-Closing
Gross Cash Consideration, and (B) the quotient obtained by
dividing the Post-Closing Gross Cash Consideration by $17.50,
divided by
(ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time.
The sum of the Post-Closing Cash Consideration and the Post-Closing
Stock Consideration as determined pursuant to this Section 3.3 is referred to
herein as the "Post-Closing Consideration." The sum of the Post-Closing
Consideration, the Closing Cash Consideration and the Closing Stock
Consideration as determined pursuant to this Section 3.3 is referred to herein
as the "Merger Price."
Prior to the Closing, the chief executive officer and the chief
financial officer of the Company shall deliver to FNB a certificate in form and
substance satisfactory to FNB and the Shareholders, setting forth in reasonable
detail the calculation of the Gross Cash Consideration pursuant to Section
3.3(a) above. FNB and its auditors shall have the right to verify and confirm
the amounts and calculations set forth in such certificate and shall have the
right to review all workpapers and procedures used to calculate Gross Cash
Consideration.
Within 15 days after the Closing, the Shareholders shall cause to be
prepared and delivered to FNB a statement of the Company's consolidated net
income for the period from January 1, 2003 through the day immediately prior to
the date on which the Effective Time occurs ("2003 Net Income"). The 2003 Net
Income shall be determined in accordance with Generally Accepted Accounting
Principles, consistently applied, and, notwithstanding the foregoing, shall
include deductions for the costs and expenses, including legal and accounting
fees and the fees of The ▇▇▇ Group, Inc., incurred by the Company in connection
with the transactions contemplated by this Agreement. FNB shall have the right
to review all work papers and procedures used to prepare the statement of 2003
Net Income and shall have 15 days from the date on which it receives such
statement to approve or disapprove it. If FNB does not deliver written notice to
the Shareholders of FNB's disapproval of the statement of 2003 Net Income within
such 15-day period, the statement of 2003 Net Income shall be conclusively
deemed approved by FNB. If, however, FNB does notify the Shareholders in writing
of FNB's disapproval of the statement of 2003 Net Income within such 15-day
period (stating with reasonable specificity the nature of the disapproval and
the basis therefor), FNB and the Shareholders shall promptly attempt to resolve
their differences. If they are unable to do so within 20 days, then the
determination of the 2003 Net Income shall be conclusively made by ▇▇▇▇▇ ▇▇▇▇
PLLC.
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Within 15 days after the Closing, FNB shall cause to be prepared and
delivered to the Shareholders a statement setting forth the Reserve. The
Shareholders shall have the right to review all work papers and procedures used
to prepare the statement of the Reserve and shall have 15 days from the date on
which it receives such statement to approve or disapprove it. If the
Shareholders do not deliver written notice to FNB of their disapproval of the
statement of the Reserve within such 15-day period, the Reserve as set forth by
FNB shall be conclusively deemed approved by the Shareholders. If, however, the
Shareholders do notify FNB in writing of their disapproval of the statement of
the Reserve within such 15-day period (stating with reasonable specificity the
nature of the disapproval and the basis therefor), FNB and the Shareholders
shall promptly attempt to resolve their differences. If they are unable to do so
within 20 days, then the determination of the Reserve shall be conclusively made
by ▇▇▇▇▇ ▇▇▇▇ PLLC.
Whenever, and by whichever of the foregoing methods, the 2003 Net
Income and the Reserve are determined, the amount of the Post-Closing
Consideration, if greater than zero, shall be issued in accordance with Section
3.4 as promptly as practicable following such determination. If the amount of
the Post-Closing Consideration is not greater than zero, then the Shareholders
shall pay to FNB the amount thereof promptly following such determination;
provided that FNB may elect, in its sole discretion, to deduct the amount of the
Post-Closing Consideration from the earn-out payments to be paid by the Company
pursuant to Section 3.5. The charges of ▇▇▇▇▇ ▇▇▇▇ PLLC shall be borne one half
by FNB and one half by the Shareholders. If for any reason ▇▇▇▇▇ ▇▇▇▇ PLLC is
unwilling to act under this Section 3.3, then FNB and the Shareholders shall
jointly instruct it to choose another nationally recognized accounting firm that
will agree so to act.
No fractional FNB Shares will be issued and delivered in the Merger.
Each holder of Company Shares who would otherwise be entitled to receive a
fraction of a FNB Share shall receive, in lieu thereof, cash in an amount equal
to such fractional part of a FNB Share multiplied by the Average Closing Price.
3.4 Payment of the Merger Price. At and after the Effective Time and
upon the proper surrender of certificate(s) representing Company Shares to FNB,
the holder of such certificate(s) shall be entitled to receive in exchange
therefor the number of FNB Shares and the cash to which such holder is entitled
under Sections 3.1 and 3.3 (including any cash payments to which such holder is
entitled hereunder in respect of rights to receive fractional shares), subject
to any required withholding of applicable taxes. FNB shall not be obligated to
deliver any of such payments in cash or stock until such holder surrenders the
certificate(s) representing such holder's Company Shares and, with respect to
the Post-Closing Consideration, until the amount of the Post-Closing
Consideration is finally determined in accordance with Section 3.3. The
certificate(s) so surrendered shall be duly endorsed in blank, or accompanied by
stock powers duly endorsed in blank.
3.5 Earn-out Payment. In addition to the Merger Price and in further
consideration of the transactions contemplated by this Agreement, the
Shareholders shall be eligible to receive earn-out payments over the four-year
period following the Effective Time to be paid by the Surviving Corporation in
cash and in an amount equal to 17.64% of the Surviving Corporation's Pre-Tax Net
Income over the period commencing on the first day of the month following the
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Effective Time and ending on the last day of the month in which the fourth
anniversary of the Effective Time occurs but in no event shall the aggregate
earn-out payments payable hereunder exceed $800,000 (the "Earn-Out Cap").
Subject to the Earn-Out Cap, FNB shall cause the Surviving Corporation to pay
the earn-out payments as follows:
(a) on or before January 31, 2004, the Surviving Corporation
shall pay to the Shareholders 17.64% of the Surviving Corporation's
Pre-Tax Net Income for the period commencing on the first day of the
month following the Closing Date and ending at the close of business on
December 31, 2003;
(b) on or before January 31, 2005, the Surviving Corporation
shall pay to the Shareholders 17.64% of the Surviving Corporation's
Pre-Tax Net Income for calendar year 2004;
(c) on or before January 31, 2006, the Surviving Corporation
shall pay to the Shareholders 17.64% of the Company's Pre-Tax Net
Income for calendar year 2005;
(d) on or before January 31, 2007, the Surviving Corporation
shall pay to the Shareholders 17.64% of the Company's Pre-Tax Net
Income for calendar year 2006; and
(e) on or before the last day of the month following the month
in which the fourth anniversary of the Closing Date occurs, the
Surviving Corporation shall pay to the Shareholders 17.64% of the
Company's Pre-Tax Net Income for the period commencing on January 1,
2007, and ending at the close of business on the last day of the month
in which the fourth anniversary of the Closing Date occurs.
The portion of each earn-out payment payable to each Shareholder shall
be equal to the amount of the earn-out payment multiplied by a fraction, the
numerator of which is the number of Company Shares owned by such Shareholder
immediately prior to the Effective Time as shown on Exhibit B and the
denominator of which is the total number of Company Shares issued and
outstanding immediately prior to the Effective Time.
The purposes of this Section 3.5, "Pre-Tax Net Income" for any period
means the Surviving Corporation's aggregate earnings net of losses from
operations, calculated as though the Surviving Corporation operated as a
separate and independent corporation, after deduction of all appropriate
expenses, charges and reserves, but before adjustment for federal and state
income taxes. Pre-Tax Net Income shall be determined in accordance with
Generally Accepted Accounting Principles consistently applied as determined by
FNB or the firm of independent certified public accountants engaged by FNB for
purposes of its own audit. In determining such Pre-Tax Net Income:
(i) Pre-Tax Net Income shall be computed without
regard to "extraordinary items" of gain or loss as that term
shall be defined by Generally Accepted Accounting Principles;
(ii) Pre-Tax Net Income shall not include any gains,
profits or losses realized from the sale of any assets other
than in the ordinary course of business;
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(iii) Pre-Tax Net Income shall include a deduction
for (x) the allocation of reasonable and appropriately
documented direct overhead expenses, (y) payment of salaries
and bonuses for officers and employees of the Company,
including any accruals for the retention bonuses contemplated
by Section 7.14(b) hereof but excluding any accruals for the
retention bonuses contemplated by Section 7.14(a) hereof, and
(z) interest charged in any loans or advances made by FNB or
any of its Affiliates to the Company in connection with its
business operations; provided that such interest charges shall
not exceed those that FNB or such Affiliate would charge to
similarly situated third parties in arm's-length transactions
and provided further that the Company shall not be obligated
to satisfy its borrowing needs from FNB or any of its
Affiliates but may borrow from third-party lenders; and
(iv) Pre-Tax Net Income shall not include any income
or expenses related to the acquisition, disposition or
operation of any other mortgage brokerage, mortgage banking or
lending business subsequent to the Closing but shall include
any income or expenses related to the expansion of the
Company's business through the opening and operation by the
Company of any de novo loan origination offices.
For purposes of clause (iii) above, following the Closing and upon the
request of the Company, FNB shall use its reasonable efforts to assist the
Company in efforts to lower the Company's cost of funds.
ARTICLE IV
CLOSING
4.1 Closing. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C. in Greensboro, North Carolina, or at such other place
as FNB shall designate, on a date mutually agreeable to Shareholders and FNB
(the "Closing Date") after the expiration of any and all required waiting
periods following the effective date of all required approvals of the Merger by
the Board of Governors of the Federal Reserve System and any other governmental
or regulatory authorities (as soon as practicable, but in no event to be more
than 60 days following the expiration of all such required waiting periods). At
the Closing, FNB, the Company and Shareholders shall take such actions
(including, without limitation, the delivery of certain closing documents and
the execution and filing of Articles of Merger under North Carolina law) as are
required herein and as otherwise shall be required by law to consummate the
Merger and cause it to become effective.
4.2 Deliveries by the Shareholders and the Company. At or by the
Closing, the Shareholders and the Company shall have caused the following
documents to be executed and delivered to FNB:
(a) canceled certificates representing the Company Shares;
(b) the opinions, certificates, instruments and other
documents contemplated in Section 9.3; and
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(c) all other documents, certificates and instruments required
hereunder to be delivered by the Shareholders and the Company, or as
may reasonably be requested by FNB at or prior to the Closing.
4.3 Deliveries by FNB. At or by the Closing (except with respect to the
stock certificates in subclause (a), which shall be issued and delivered to the
Shareholders as soon as reasonably practicable after the Closing), FNB shall
have caused the following documents to be executed and delivered to the
Shareholders:
(a) stock certificates representing the FNB Shares to be
issued to the Shareholders hereunder;
(b) the opinions, certificates, instruments and other
documents contemplated in Section 9.2; and
(c) all other documents, certificates and instruments required
hereunder to be delivered by FNB, or as may reasonably be requested by
the Shareholders or the Company at or prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY
Except as otherwise specifically provided herein or as "Previously
Disclosed" to FNB, the Shareholders and the Company jointly and severally
represent and warrant to FNB that the statements contained in this Article V are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. ("Previously Disclosed" shall mean, as to the
Shareholders and the Company, the disclosure of information in a letter
delivered by the Shareholders and the Company to FNB specifically referring to
this Agreement and arranged in sections corresponding to the sections,
subsections and items of this Agreement applicable thereto, and which letter has
been delivered prior to the execution of this Agreement. Information shall be
deemed Previously Disclosed for the purpose of a given section, subsection or
item of this Agreement only to the extent that a specific reference thereto is
made in connection with disclosure of such information at the time of such
delivery.)
5.1 The Company.
(a) Organization; Foreign Qualifications; Authority. The
Company is a corporation duly organized and validly existing under the
laws of the State of North Carolina and is duly qualified to transact
business as a foreign corporation in, and is in good standing under the
laws of, those jurisdictions where the failure to be so qualified would
result in a material adverse effect to the Company. The Company has no
offices or employees in any state other than North Carolina. The
Company has all requisite power and authority to own, lease or
otherwise hold its properties and assets and to carry on its business
as presently conducted.
(b) Capitalization. The Company has an authorized capital
consisting solely of 250,000 shares of common stock, par value $1.00
per share, of which 100,000 shares are
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issued and outstanding. All of such issued and outstanding
Company Shares of the Company are duly authorized, validly
issued, fully paid and nonassessable, have not been issued in
violation of the preemptive rights of any shareholder and have
been issued pursuant to and in compliance with an applicable
exemption under the Securities Act. There are no other
securities of the Company of any class issued, reserved for
issuance or outstanding. There are no outstanding warrants,
options, agreements, convertible or exchangeable securities,
calls, puts or rights with respect to any securities of the
Company or any other commitments or arrangements to issue,
sell, purchase, return or redeem any securities of the
Company.
(c) Records. Complete and accurate copies of the Company's
articles of incorporation, bylaws and stock book have been delivered to
FNB. The stock book of the Company contains complete and accurate
records of the record share ownership of the issued and outstanding
shares of stock of the Company.
(d) Subsidiaries and Affiliates. Except as Previously
Disclosed, the Company does not own, directly or indirectly, any
capital stock of or any other equity interests in any Person. The
Company has Previously Disclosed to FNB all Affiliates of the Company.
(e) Authority Relative to this Agreement. The Company has the
power and authority under applicable corporate law to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company, the performance of its
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency or other laws of
general applicability affecting creditors' rights and by general
principles of equity that may limit the specific performance of
particular provisions).
(f) Consents and Approvals, No Violations. (i) Except
Previously Disclosed, there is no requirement (other than the filing of
the Articles of Merger) applicable to the Company or the Shareholders
to make any filing with, or to obtain any permit, authorization,
consent or approval of, any Governmental Authority as a condition to
the lawful consummation of the transactions contemplated hereby. (ii)
Except as Previously Disclosed, the execution, delivery and performance
of this Agreement by the Company and its compliance with the terms
hereof will not (A) conflict with any provisions of the articles of
incorporation or bylaws of the Company, (B) violate or result in a
default or breach (or, by its terms, give rise to any liens or right of
termination, cancellation or acceleration), or require the consent of a
third party to continue in full force and effect after Closing,
pursuant to the terms of any Contract to which the Company is a party
and which is required to be disclosed pursuant to Section 5.6, or (C)
violate any Applicable Law.
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5.2 Shareholders.
(a) Ownership of Company Shares. The Shareholders collectively
own all of the issued and outstanding shares of capital stock of the
Company, free and clear of any Claims except as Previously Disclosed.
Each Shareholder is the sole holder of record and beneficial owner of
such number of Company Shares as Previously Disclosed.
(b) Authority Relative to this Agreement. Each of the
Shareholders has the legal right, power, authority and capacity to
execute and deliver this Agreement, to perform his obligations
hereunder and to consummate the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of each
of the Shareholders, enforceable against him in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency or other laws of general applicability affecting
creditors' rights and by general principles of equity that may limit
the specific performance of particular provisions).
5.3 Assets. The Company has good, valid and marketable title to, or
valid leasehold interests in, all of its Assets free and clear of all mortgages,
liens, security interests or encumbrances of any nature whatsoever except
"Permitted Liens," which means (i) liens for current taxes not yet due and
payable, (ii) liens in favor of carriers, warehousemen, mechanics, landlords and
materialmen imposed by mandatory provisions of law and incurred in the ordinary
course of business for sums not yet due and payable, and (iii) those liens
Previously Disclosed. The Company has Previously Disclosed to FNB a listing of
each lease and any amendments thereto pursuant to which the Company leases or
licenses Assets other than Real Property from any other Person providing for
rentals of $2,500 per year or greater. Except for such leased or licensed Assets
and except for the Real Property leased by the Company as Previously Disclosed,
there are no Assets (other than Assets that in the aggregate do not have a value
in excess of $2,000) used by the Company in the operation of its business that
are not owned by the Company. The Assets owned, licensed and leased by the
Company constitute all of the Assets sufficient to conduct the business of the
Company as presently conducted and are in a good state of repair in all material
respects, ordinary wear and tear excepted, and usable by the Company for their
intended purposes.
5.4 Interests in Real Property. The Company's leasehold interests in
the offices Previously Disclosed to FNB comprise all of the Real Property in
which the Company has any interest (other than any interest arising out of the
ordinary course of its mortgage lending activities), and each such leasehold
interest is valid and subsisting. The Company has Previously Disclosed to FNB a
listing of all leases and any amendments thereto pursuant to which the Company
leases Real Property. Each such lease is valid and enforceable in accordance
with its terms (except as its enforceability may be limited by applicable
bankruptcy, insolvency or other laws of general applicability affecting
creditors' rights and by general principles of equity that may limit the
specific performance of particular provisions), there currently exists no
circumstance or condition that constitutes an event of default by the Company
or, to the knowledge of the Company and the Shareholders, its lessor or that,
with the passage of time or the giving of notice or both, will or could
constitute such an event of default, and subject to any required consent of the
Company's lessor, each such lease may be assigned to FNB and the execution and
delivery of this Agreement does not constitute an event of default thereunder.
- 14 -
None of the Shareholders or the Company has any knowledge of any type of pending
or threatened legal action affecting the Company's interest in or use of such
Real Property, including, without limitation, any condemnation action. Except as
Previously Disclosed, to the knowledge of the Company and the Shareholders, the
conduct of business by the Company within such Real Property complies with all
applicable legal requirements relating to such Real Property, including, without
limitation, requirements under the applicable zoning ordinances, building code
requirements and any requirements under applicable private restrictions. The
Company's leasehold improvements and fixtures in or on the Real Property are in
good condition.
5.5 Absence of Undisclosed Liabilities. Except as Previously Disclosed,
the Company has no liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due) other than
(a) liabilities or obligations reserved against or otherwise disclosed in the
Financial Statements, (b) liabilities or obligations under Contracts listed on
the Schedules to this Agreement or under Contracts that are not required to be
disclosed thereon (but not liabilities for breaches thereof), and (c)
liabilities and obligations incurred after December 31, 2001 in the ordinary
course of business consistent (in amount and kind) with past practice. Except as
Previously Disclosed, no facts or circumstances exist that would reasonably be
expected to serve as the basis for any other liabilities or obligations of the
Company.
5.6 Contracts.
(a) The Company has Previously Disclosed to FNB a listing of
each Contract (other than those arising directly out of the Company's
mortgage lending activities) to which the Company is party or by which
it or its properties or assets is bound that (i) involves obligations
to or by the Company in the future exceeding $2,500; (ii) has a future
term (excluding any portion subject to a cancelable right exercisable
without penalty) of one year or more; (iii) contains or pursuant to
which the Company made warranties of its services that continue in
effect; (iv) involves hedging, options or any similar trading activity,
or any interest rate exchanges or swaps (with the exception of letters
of credit, lines of credit and loan commitments extended in the
ordinary course of the Company's business); (v) involves the purchase
or sale of any Assets of the Company in excess of $5,000 in the
aggregate; or (vi) is otherwise material to the Company.
(b) Complete copies (or, if oral, full written descriptions)
of all Contracts Previously Disclosed to FNB, including all amendments
thereto, have been delivered to FNB. Each of such Contracts is legal,
valid, binding, enforceable (except as its enforceability may be
limited by applicable bankruptcy, insolvency or other laws of general
applicability affecting creditors' rights and by general principles of
equity that may limit the specific performance of particular
provisions) and in full force and effect against the Company and, to
the knowledge of the Shareholders and the Company, the other parties
thereto.
(c) (i) The Company has not committed an uncured event of
default (unless permanently waived) under any Contract, and no facts or
circumstances exist that with the passage of time or the giving of
notice or both would constitute any such event of default. Neither the
Shareholders nor the Company has received notice (whether oral or
- 15 -
written) that the Company is in default under any Contract or of the
termination thereof. (ii) To the knowledge of the Shareholders and the
Company, (A) no other party to any Contract has committed an uncured
event of default (unless permanently waived) under any Contract, and
(B) no facts or circumstances exist that with the passage of time or
the giving of notice or both would constitute any such event of
default. The Company has not given notice to the other party to any
such Contract that such other party is in default thereunder or of the
termination thereof.
5.7 Intellectual Property Rights. (a) The Company owns or has the right
to use (pursuant to license, sublicense, agreement or permission) all
Intellectual Property necessary to conduct its business as currently conducted.
All registered trademarks and patents owned or used by the Company (together
with any application therefor) and all trade names, copyrights and processes
material to the Company's operations have been Previously Disclosed to FNB.
Except Previously Disclosed, the Company has not pledged, mortgaged, assigned,
licensed, granted permission with respect to or otherwise transferred any such
Intellectual Property to any third party. No such item of Intellectual Property
is subject to any outstanding injunction, judgment, order, decree, ruling or
charge, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of the Shareholders
and the Company, is threatened that challenges the legality, validity, use or
enforceability of any such item of Intellectual Property. Except as Previously
Disclosed, the Company owns all right, title and interest in each such item of
Intellectual Property, free and clear of any encumbrance, lien or other
restriction. None of the Company's rights with respect to any such Intellectual
Property will be terminated, limited or otherwise affected by its execution of
this Agreement or its consummation of the transactions contemplated by this
Agreement.
5.8 Financial Statements. Except as Previously Disclosed, the Financial
Statements have been prepared in accordance with Generally Accepted Accounting
Principles, consistently applied. The Financial Statements fairly present the
results of operations and financial position of the Company for the periods and
as of the dates set forth therein.
5.9 Loans, Accounts, Notes and Other Receivables.
(a) Except as Previously Disclosed, all loans, accounts, notes
and other receivables reflected as assets on the Company's books and
records (i) have resulted from bona fide business transactions in the
ordinary course of the Company's operations, (ii) were made in
accordance with the Company's standard loan policies and procedures,
and (iii) are owned by the Company free and clear of all liens,
encumbrances, assignments, participation or repurchase agreements or
other exceptions to the title or to the ownership or collection rights
of any other person or entity.
(b) All records of the Company 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 the Company's loan documentation indicates is secured by any
real or personal property or property rights ("Loan Collateral"), such
loan is secured by valid, perfected and enforceable liens on all such
Loan Collateral having the priority described in the Company's records
of such loan (except as such enforceability may be limited by
applicable bankruptcy, insolvency or
- 16 -
other laws of general applicability affecting creditors' rights and by
general principles of equity that may limit the specific performance of
particular provisions). For purposes of making the representation in
this Section 5.9(b) regarding loans secured by real property, the
determination as to rights in and to any such real property may be made
based solely on title insurance policies issued with respect to such
property, which policies are in full force and effect, valid and
enforceable in accordance with their terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency or
other laws of general applicability affecting creditors' rights and by
general principles of equity that may limit the specific performance of
particular provisions) and underwritten by an insurer qualified to
transact business in the jurisdiction in which such real property
collateral is located.
(c) To the knowledge of the Shareholders and the Company, each
loan reflected as an asset on the Company's books, and each guaranty
therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon. No defense, offset or counterclaim has been asserted
with respect to any such loan guaranty.
(d) Except as Previously Disclosed, neither the Company nor
any Shareholder has reason to believe that any of the Company's loans
and other extensions of credit is not collectible in the ordinary
course of the Company's business in an amount that is at least the
amount at which it is carried on the Company's books and records.
(e) The Company maintains a reserve for possible loan losses
and contingent liabilities, which reserve has been established in
conformity with Generally Accepted Accounting Principles, sound lending
practices and Applicable Law and, in the judgment of the Company and
the Shareholders, is reasonable in view of the size and character of
its loan portfolio, current economic conditions and other relevant
factors, and is adequate to provide for losses relating to, or the risk
of loss inherent in, its loan portfolio or its obligations to
repurchase loans. At December 31, 2002, the Company's reserve for
possible loan losses and contingent liabilities was $195,954.
5.10 Securities Portfolio and Investments. All securities owned by the
Company (whether owned of record or beneficially) have been Previously Disclosed
to FNB and, except as Previously Disclosed, 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 impair
the ability of the Company to dispose freely of any such security or otherwise
to realize the benefits of ownership thereof at any time (other than in
connection with any repurchase agreements with customers). There are no voting
trusts or other agreements or undertakings to which the Company is a party with
respect to the voting of any such securities. With respect to all "repurchase
agreements" to which the Company has "repurchased" securities under agreement to
resell (if any), the Company has a valid, perfected first lien or security
interest in the government securities or other collateral securing the
repurchase agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt owed to the
Company which is secured by such collateral.
- 17 -
Except for fluctuations in the market values of its investment
securities, since December 31, 2001, there has been no significant deterioration
or material adverse change in the quality, or any material decrease in the
value, of the Company's securities portfolio.
5.11 Legal Compliance. Except as Previously Disclosed, the Company is
in compliance in all material respects with all Applicable Laws, and no facts or
circumstances exist that, with or without the passing of time or the giving of
notice or both, would reasonably be expected to serve as the basis for any claim
that the Company is not in compliance in any material respect with an Applicable
Law. Except as Previously Disclosed, the Company has not received any written
communication from a Governmental Authority that remains pending alleging its
noncompliance with any Applicable Law.
5.12 Taxes and Tax Returns.
(a) The Company has duly and timely filed (including within
any applicable extension periods) all Tax Returns required to be filed
by it prior to the date hereof and has duly paid such taxes that are
due. All such Tax Returns are true, correct and complete in all
material respects. Except as Previously Disclosed, since December 31,
1996, the Company has not incurred any liability for Taxes other than
in the ordinary course of business. The Company has Previously
Disclosed to FNB all periods since December 31, 1996 for which the
federal income tax returns of the Company has been examined by the
Internal Revenue Service, and all deficiencies asserted as a result of
such examinations (or as a result of any examination of such returns
for earlier fiscal years) have been paid or finally settled. There are
no disputes pending in respect of or claims asserted for Taxes, nor are
there any pending or, to the knowledge of the Shareholders and the
Company, threatened audits or investigations or outstanding matters
under discussion with any taxing authorities with respect to the
payment of Taxes or the Company's Tax Returns, nor has the Company
given or been requested to give any currently effective waivers
extending the statutory period of limitation applicable to any Taxes
for any period. Except as Previously Disclosed, no issues that have
been raised by any taxing authority in connection with any Taxes or Tax
Returns of the Company are of a recurring nature that would apply to
Taxes or such Tax Returns after the Closing. All required declarations
of estimated income taxes related to the operations of the Company have
been made, and all Taxes required to be shown on such declarations have
been paid. Copies of all Income Tax Returns relating to the operations
of the Company for all periods since December 31, 1996 have been
delivered to the FNB.
(b) No facts exist or have existed that would reasonably be
expected to constitute grounds for the assessment of Taxes against the
Company beyond the reserves for Taxes shown on the Financial
Statements.
(c) There are no liens with respect to Taxes (except for liens
for taxes, assessments or other governmental charges not yet
delinquent) upon any of the Company's Assets.
(d) Since January 1, 1987, the Company has had in effect a
valid election under Section 1362(a)(1) of the Code to be taxed as a
"Subchapter S" corporation under
- 18 -
Section 1361(a)(1) of the Code. In no year has the Company incurred any
tax liability under Section 1374 or 1375 of the Code.
(e) The Company has not been and will not be liable for the
tax of any Person relating to conduct or operations prior to the
Closing Date under Section 1.1502-6 of the Treasury Regulations
promulgated pursuant to the Code (or any similar provision of state,
local or foreign law) as a transferee or successor, by contract or
otherwise.
5.13 Litigation. There are no lawsuits, claims, or legal,
administrative or arbitration proceedings or investigations pending or, to the
knowledge of the Shareholders and the Company, threatened by or against or
affecting the Company or any of the Company's Assets, operations or business.
5.14 Labor and Employment Matters.
(a) The Company has delivered to FNB complete and accurate
copies (or, if oral, full written descriptions) of each employment,
consulting and similar agreement to which the Company is a party, all
of which have been Previously Disclosed. Except as Previously
Disclosed, the Company is not a party to or bound by any agreement, any
employment manual, employment handbook, employment practice or policy
constituting a contractual obligation, or any consent decree, court
order or statutory obligation: (i) for the employment of any
individual, or the provision of services by any individual, who is not
terminable by the Company without penalty upon thirty days' notice or
less; (ii) with any labor union; or (iii) relating to the payment of
any severance or termination payment, bonus or death benefit to any
employee or former employee or his or her estate or designated
beneficiary.
(b) The Company is not a party to any collective bargaining
agreement, and has not recognized or received a demand for recognition
of any collective bargaining representative with respect thereto; and
during the past three years there have been no material labor strikes,
disputes or work stoppages nor, to the knowledge of the Shareholders
and the Company, are any such actions threatened against the Company.
(c) Except as Previously Disclosed, there are no loans or
other obligations payable or owing to any officers, directors or
employees of the Company, except salaries, wages, bonuses and salary
advances and reimbursement of expenses incurred and accrued in the
ordinary course of business, nor are any loans or debts payable or
owing by any such persons or their Affiliates to the Company, nor has
the Company guaranteed any of their loans or obligations.
(d) The Company is in compliance in all material respects with
all laws and other obligations relating to employment, denial of
employment or employment opportunity and termination of employment.
(e) There is no material controversy pending or, to the
knowledge of the Company and the Shareholders, threatened between the
Company and any of its present or former officers, directors,
supervisory personnel or any group of its employees.
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5.15 Employee Benefit Plans; ERISA.
(a) The Company has Previously Disclosed each Plan by name and
ERISA plan number, if any. The Company does not have a formal plan or
commitment, and it has not made an announcement of its intentions,
whether or not legally binding, to create any additional Plan or modify
or change any existing Plan. A true and complete copy of each of the
following has been made available to FNB with respect to the Company:
(i) a copy of each written Plan (including all
amendments thereto);
(ii) a copy of the annual returns or reports
(including, without limitation, reports on the Form 5500
series, including all attachments thereto), if required under
ERISA or the Code, with respect to each Plan for the three
most recent plan years with filing deadlines prior to the date
of the Agreement or for which returns have actually been
prepared or filed prior to the date of the Agreement and a
copy of each summary annual report with respect to each such
annual report;
(iii) a copy of the most recent summary plan
description, together with each subsequent summary of material
modifications, required under ERISA with respect to each Plan
and all other material employee communications relating to
each Plan;
(iv) a copy of all written rules, regulations,
procedures and interpretations for each Plan;
(v) if a Plan is funded through a trust or other
funding arrangement, including insurance contracts, a copy of
the trust or other funding agreement (including all amendments
thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Plans with respect
to which it may have any liability, including, without
limitation, insurance contracts, investment management
agreements, subscription and participation agreements,
administration agreements and record keeping agreements;
(vii) the most recent determination letter received
from the Internal Revenue Service that covers the entire Plan
with respect to each Plan that is intended to be qualified
under Section 401(a) of the Code, each subsequent
determination letter with respect to each such Plan, and
complete copies of the determination letter applications
(including attachments and cover letters) for each such
determination letter; and
(viii) all rulings, opinion letters, information
letters or advisory opinions issued by the Internal Revenue
Service or the United States Department of Labor with respect
to each Plan within the ten-year period prior to the date of
this Agreement.
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(b) Prohibited Transactions. Except as Previously Disclosed,
no prohibited transaction (as defined in Section 4975 of the Code or
Section 406 of ERISA) or transaction that would violate Section 404 of
ERISA has occurred with respect to any Plan which is an "employee
benefit plan" as defined in Section 3(3) of ERISA in connection with
which the Company or any of its officers, directors or employees would
be subject, directly or indirectly, to any tax, penalty or liability to
any person for prohibited transactions or breach of fiduciary
responsibility under ERISA or the Code (including, without limitation,
liability for a breach of fiduciary responsibility by a cofiduciary
pursuant to Section 405 of ERISA).
(c) Funding. Except as Previously Disclosed, full payment has
been made of all amounts that the Company is required to pay under the
terms of each Plan and applicable law (including any employee salary
deferral contributions described in Section 125 or 401(k) of the Code).
Except as Previously Disclosed, the Company will make contributions to
the Plans required to be made before the Closing Date for the current
plan year and for any prior year through the Closing Date, or if any
such contributions are not due before the Closing Date, will make
adequate provisions for reserves therefor.
(d) Compliance with Applicable Law. (i) Each Plan that is
subject to Title I of ERISA conforms to, and its administration is in
compliance with, applicable federal laws, including but not limited to
ERISA; (ii) each Plan that is intended to be qualified under Section
401(a) of the Code meets all of the applicable operational requirements
for qualification and meets all of the plan document requirements for
qualification that are required to be included in the plan document as
of the Closing Date, and either a favorable determination letter has
been received or has been applied for, and nothing has occurred since
the most recent favorable determination letter that would adversely
affect such qualification; (iii) each Plan that includes a cash or
deferred arrangement described in Section 401(k) of the Code has been
administered in accordance with all applicable requirements of Section
401(k) and the Treasury Regulations issued thereunder; and (iv) each
Plan that includes a cafeteria plan described in Section 125 of the
Code has been administered in accordance with all applicable
requirements of Section 125 and the Treasury Regulations issued
thereunder. There is no pending or threatened action, claim or
proceeding against or with respect to any Plan by the Internal Revenue
Service, the Department of Labor, the Equal Employment Opportunity
Commission, or any participant, beneficiary or any other person or
entity involving any aspect of the Plans (other than routine benefit
claims), nor are there any facts that could form the basis for any such
action, claim or proceeding. The Company has fully complied with the
reporting and disclosure requirements of the Code and ERISA, the
bonding requirements of ERISA, and other provisions applicable to the
Plans.
(e) Multiemployer Plans; Pension Plans. The Company does not
participate in or contribute to, and never has participated in or
contributed to, any Multiemployer Plan. The Company does not maintain
and has never maintained an "employee pension benefit plan" as defined
in Section 3(2) of ERISA that is subject to Title IV of ERISA.
(f) Effect of Agreement. Except as Previously Disclosed, the
execution and performance of this Agreement will not result in any (i)
payment (whether retirement
- 21 -
benefits, severance pay, unemployment compensation or otherwise)
becoming due from the Company to any employee, former employee or
director of the Company, (ii) increase in benefits otherwise payable
under any Plan, or (iii) acceleration of the time of payment or vesting
of any such benefits. No amounts payable to any officer, employee or
director of the Company under any Plan in connection with the
transactions contemplated hereby will fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code.
(g) Benefits for Former Employees. Except as Previously
Disclosed, no Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to
current or former employees beyond retirement or other termination of
service other than (i) coverage mandated by Section 4980B of the Code,
Part 6 of Subtitle B of Title I of ERISA and Title XXII of the Public
Health Service Act (collectively, "COBRA"), (ii) death benefits or
retirement benefits under any Plan qualified under Section 401(a) of
the Code, (iii) disability benefits under any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) that have been fully
provided for by insurance or otherwise, (iv) deferred compensation
benefits accrued as liabilities on the books of the Company, or (v)
benefits for which the full cost is borne by the current or former
employee (or his or her beneficiary). Each Plan that is subject to the
provisions of COBRA has been, and as of the Closing Date will have
been, maintained in compliance with the provisions of COBRA.
5.16 Insurance. The Company has Previously Disclosed to FNB a listing
of all of the insurance policies ("Policies") maintained by the Company as of
the date hereof, and for each indicates the insurer's name, policy number,
expiration date and amount and type of coverage. All such Policies are currently
in effect. In addition, the coverage of such Policies shall not be restricted as
a result of the transactions contemplated hereby. These Policies provide
coverage in such amounts and against such liabilities, casualties, losses or
risks as is required by applicable law or regulations, and in the reasonable
opinion of the Shareholders and the Company, the insurance coverage provided
under these Policies is reasonable and adequate in all respects for the Company.
Each of the Policies is in full force and effect and is valid and enforceable in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency or other laws of general applicability
affecting creditors' rights and by general principles of equity that may limit
the specific performance of particular provisions) and is underwritten by an
insurer qualified to transact business in North Carolina. The Company has taken
all requisite actions (including the giving of required notices) under each such
policy to preserve all rights thereunder with respect to all matters. The
Company is not in default under the provisions of, has not received notice of
cancellation or nonrenewal of or any premium increase on, or has any knowledge
of any failure to pay any premium on or any inaccuracy in any application for
any Policy. There are no pending claims with respect to any policy, and neither
the Shareholders nor the Company 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.
5.17 Transactions with Affiliates. Except as Previously Disclosed, none
of the Shareholders or any other officer or director of the Company, nor any
Affiliate of such Persons, has any agreement, arrangement or understanding with
the Company (including employment
- 22 -
agreements) or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the business of the Company.
5.18 Environmental Matters.
(a) To the knowledge of the Shareholders and the Company,
without independent investigation, the Real Property (including,
without limitation, the improvements thereon and the soil and
groundwater thereunder): (i) does not contain and is not contaminated
by any Hazardous Material; and (ii) has never been the subject of a
remedial action for an environmental problem.
(b) The Company: (i) has never sent a Hazardous Material to a
site that is contaminated by any Hazardous Material or that, pursuant
to any Environmental Law, (1) has been placed on the "National
Priorities List", the "CERCLIS" list, or any similar state or federal
list, or (2) is subject to or the source of a claim, an administrative
order or other request to take "removal", "remedial", "corrective" or
any other "response" action, as defined in any Environmental Law, or to
pay for the costs of any such action at the site; (ii) is in compliance
in all material respects with all Environmental Laws in all of its
activities and operations; (iii) has timely filed every report required
to be filed, acquired all necessary certificates, approvals and permits
(all of which have been Previously Disclosed and none of which shall be
lost or materially modified as a result of this transaction), and
generated and maintained all required data, documentation and records
under all Environmental Laws; and (iv) will be able to comply with any
prospective requirement adopted or promulgated prior to the date hereof
under any Environmental Law and to be applicable to the Company in the
future without material cost or change in the operations of the
Company.
(c) The Company is not involved in any suit or proceeding and
has not received any notice or request for information from any
Governmental Authority or other third party with respect to a release
or threatened release of any Hazardous Material or a violation or
alleged violation of any Environmental Law, and has not received notice
of any claims from any person or entity relating to property damage or
to personal injuries from exposure to any Hazardous Material.
5.19 Absence of Changes or Events. Except as Previously Disclosed or as
otherwise expressly contemplated by this Agreement, since December 31, 2001, the
Company has not: (a)issued any shares of capital stock or declared, set aside or
paid any dividend or distribution with respect to shares of capital stock; (b)
made any form of material changes in any Plan; (c) granted or made any
commitments with respect to any increases in any form of compensation to its
employees except in the ordinary course of business consistent with past
practices; (d) granted or made any commitments with respect to any increases in
any form of compensation to the Shareholders; (e) entered into any Contract or
conducted its business other than in the ordinary course of business consistent
with past practices; or (f) except as a result of the consummation of the
transactions contemplated by this Agreement, incurred any material adverse
change in the business, assets, condition or results of operations of the
Company, provided, however, that the Company may make or has made: (i) the sale
and liquidation of its investment securities contemplated by Section 7.4, and
(ii) the engagement of, and payment of fees to, The ▇▇▇ Group,
- 23 -
Inc., and (iii) the engagement of, and payment of legal and accounting fees to,
legal counsel and accountants for the Company in connection with this
transaction. Except for changes occurring in the ordinary course of business and
the distributions and payments described in this Section 5.19, the balance sheet
of the Company upon Closing (including cash balances and other working capital
items) will not be materially and adversely changed from the most recent balance
sheet of the Company comprising part of the Financial Statements.
5.20 Bank Accounts. The Company has Previously Disclosed to FNB a
listing of all bank accounts and safe deposit boxes of the Company, all powers
of attorney in connection with such accounts and the names of all persons
authorized to draw thereon or to have access thereto.
5.21 Corporate and Personnel Data. The Company has Previously Disclosed
to FNB a listing of the names, salary rates, and the date of last raise of all
the employees of the Company as of a date within five days prior to the date
hereof.
5.22 Licenses and Permits. The Company has Previously Disclosed to FNB
a listing of all the licenses, permits, authorizations, and registrations issued
by any Governmental Authority to the Company. No other licenses, permits,
authorizations, or registrations are necessary to enable the Company to own,
lease or otherwise hold its properties or to enable the Company to carry on its
business as presently conducted. Except as Previously Disclosed, no such
license, permit, authorization or registration will be violated or made void or
be affected in any way adverse to the Company by the consummation of the
transactions contemplated by this Agreement.
5.23 Investment.
(a) In connection with the acceptance by the Shareholders of
FNB Shares under this Agreement, each Shareholder acknowledges that he
is familiar with the operations of FNB to the extent of the information
furnished by FNB in its published reports (including documents filed
with the Securities and Exchange Commission or other information
required to be prepared pursuant to federal securities laws); that each
Shareholder has had an opportunity to inspect FNB's most recent
financial information (including annual and quarterly reports on Form
10-K and 10-Q, respectively and any interim press releases, whether or
not contained in a Form 8-K) and to ask questions of management
concerning FNB; that each Shareholder has received adequate information
to enable him to make an informed decision with respect to his
ownership of the FNB Shares acquired in connection with the Merger.
(b) Each Shareholder: (i) is an "accredited investor" within
the meaning of Rule 501 under the Securities Act or (ii) has sufficient
knowledge and experience in investing in companies similar to FNB so as
to be able to evaluate the risks and merits of an investment in FNB and
is able financially to bear the risks of such investment;
(c) Each Shareholder is a resident of, and is domiciled in,
the states of North Carolina or South Carolina;
(d) The FNB Shares acquired by each Shareholder in connection
with the Merger are being acquired for his or its own account, for
investment, and not with a view
- 24 -
to or for sale in connection with any unregistered distribution thereof
in violation of the Securities Act or any state securities act; and
(e) Each Shareholder understands that (i) FNB Shares acquired
in connection with the Merger must be held for any applicable holding
period under Rule 144 of the Securities Act, or any successor rule or
regulation, unless a disposition thereof is registered under the
Securities Act or is exempt from such registration, (ii) the
certificates representing such FNB Shares shall bear a legend to such
effect, and (iii) FNB will make or cause to be made a notation on its
transfer books to such effect.
5.24 Certain Regulated Businesses. The Company is neither an
"investment company" as defined in the Investment Company Act of 1940, as
amended, nor a "public utility holding company" as defined in the Public Utility
Holding Company Act of 1935, as amended.
5.25 Commissions. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Shareholders or the
Company other than the Company's payment of fees to The ▇▇▇ Group, Inc.
5.26 Full Disclosure. Neither the representations and warranties of the
Company and the Shareholders set forth in this Agreement, nor those stated in a
certificate or document to be delivered hereunder at or prior to Closing by the
Shareholders or the Company, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was, is or will be made, in order to
avoid statements herein or therein being misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FNB
Except as otherwise specifically provided herein or as "Previously
Disclosed" to the Company, FNB represents and warrants to the Company and the
Shareholders that the statements contained in this Article V are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date. ("Previously Disclosed" shall mean, as to FNB, the disclosure
of information in a letter delivered by FNB to the Company and the Shareholders
specifically referring to this Agreement and arranged in sections corresponding
to the sections, subsections and items of this Agreement applicable thereto, and
which letter has been delivered prior to the execution of this Agreement.
Information shall be deemed Previously Disclosed for the purpose of a given
section, subsection or item of this Agreement only to the extent that a specific
reference thereto is made in connection with disclosure of such information at
the time of such delivery.)
6.1 Organization. FNB is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. FNB is
duly qualified to transact business as a foreign corporation in, and is in good
standing under the laws of, those jurisdictions where the failure to be so
qualified would result in a material adverse effect to FNB. FNB has all
requisite power and authority to own, lease or otherwise hold its properties and
assets and to carry on its business as presently conducted.
- 25 -
6.2 Authority Relative to this Agreement. FNB has the power and
authority under applicable corporate law to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by FNB, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of FNB. This Agreement has been duly
executed and delivered by FNB and constitutes the legal, valid and binding
obligation of FNB, enforceable against FNB in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy, insolvency or
other laws of general applicability affecting creditors' rights and by general
principles of equity that may limit the specific performance of particular
provisions).
6.3 Consents and Approvals, No Violations.
(a) Except as Previously Disclosed, there is no requirement
applicable to FNB to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Governmental Authority as a
condition to the lawful consummation of the transactions contemplated
hereby.
(b) The execution, delivery and performance of this Agreement
by FNB and its compliance with the terms hereof will not: (i) conflict
with any provisions of its articles of incorporation or bylaws, (ii)
violate or result in a default or breach (or give rise to any right of
termination, cancellation or acceleration or liens) pursuant to the
terms of any Contract to which it is a party, or (iii) violate any
Applicable Law.
6.4 Issuance of Shares of the FNB's Stock. The FNB Shares to be issued
to the Shareholders hereunder are duly authorized and, when so issued to the
Shareholders, will be validly issued and outstanding and fully paid and
nonassessable, free and clear of any liens, pledges, encumbrances or preemptive
rights.
6.5 Reports. Since December 31, 1999, FNB has filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with: (i)the Securities and Exchange Commission,
including, without limitation, Forms 10-K, Forms 10-Q and proxy statements; (ii)
the Federal Reserve Board; and (iii) any applicable state securities or banking
authorities (collectively, the "Reports"). As of their respective dates, the
Reports comply in all material respects with all of the rules and regulations
promulgated by the Securities and Exchange Commission, the Federal Reserve Board
and any applicable state securities or banking authorities, as the case may be,
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 in order to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading.
6.6 FNB's Financial Statements. On a consolidated basis, FNB's audited
statements of income and stockholders' equity for the years ended December 31,
2001, 2000, and 1999 and audited balance sheets as of December 31, 2001, 2000
and 1999, together with the notes thereto (as included in the FNB's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001 filed with the
Securities and Exchange Commission), have been prepared in accordance with
Generally Accepted Accounting Principles consistently applied and fairly present
the results
- 26 -
of operations and financial position of the FNB for the periods and as of the
dates set forth therein.
6.7 Absence of Changes. Since December 31, 2001, except as a result of
the consummation of the transactions contemplated by this Agreement, FNB, on a
consolidated basis with its subsidiaries and taken as a whole, has not incurred
a material adverse change in its business, financial condition or results of
operations.
6.8 Commissions. Other than ▇▇▇▇ ▇▇▇▇ & Co., no broker, finder or other
Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated hereby by reason of any action
taken by FNB.
6.9 Full Disclosure. Neither the representations and warranties of FNB
set forth in this Agreement, nor those stated in a certificate or document to be
delivered hereunder at or prior to Closing by FNB, contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was, is or will be
made, in order to avoid statements herein or therein being misleading.
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1 Ordinary Conduct. Except as otherwise contemplated by this
Agreement, the Company will, and the Shareholders will cause the Company to,
from the date of this Agreement to the Closing, conduct its business in the
ordinary course in substantially the same manner as presently conducted and will
make reasonable commercial efforts consistent with past practices to preserve
its relationships with its clients, suppliers and others with whom the Company
has dealt and to keep available the services of each of its officers.
Additionally, except as otherwise contemplated by this Agreement, the Company
will not do, and the Shareholders shall cause the Company not to do, any of the
following without the prior written consent of FNB:
(a) amend its articles of incorporation or bylaws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver any stock or equity equivalents of any
class or any other of its securities, or amend any of the terms of any
securities outstanding as of the date hereof;
(c) (i) split, combine or reclassify any shares of its capital
stock, (ii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or (iii) redeem or otherwise
acquire any of its securities;
(d) (i) incur or assume any long-term debt or issue any debt
securities or, except under existing lines of credit and in amounts not
material to it, incur or assume any short-term debt other than in the
ordinary course of business, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other Person except in the
ordinary course of business consistent with past practice, (iii) make
any loans, advances or capital contributions to, or investments in, any
other Person except for the Company's mortgage
- 27 -
lending activities occurring in the ordinary course of its business
consistent with past practice, (iv) pledge or otherwise encumber shares
of its capital stock, or (v) mortgage or pledge any of its assets,
tangible or intangible, or create or suffer to exist any lien
thereupon, other than Permitted Liens;
(e) adopt or amend any Plan;
(f) grant to any director, executive officer or employee any
increase in his or her compensation or pay or agree to pay to any such
person other than in the ordinary course of business any bonus,
severance or termination payment, specifically including any such
payment that becomes payable upon the termination of such person by it
after the Closing; provided, however, that the Company may pay to the
employees Previously Disclosed to FNB bonuses in the amounts Previously
Disclosed to FNB prior to the Closing;
(g) (i) acquire, sell, lease or dispose of any assets outside
the ordinary course of business, or any other assets that in the
aggregate are material to it, or (ii) enter into any Contract or
transaction outside the ordinary course of business consistent with
past practice;
(h) (i) change or modify any of the accounting principles or
practices used by it or (ii) revalue in any material respect any of its
assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business;
(i) (i) acquire any Person (or division thereof), any equity
interest therein or the assets thereof; (ii) enter into, cancel or
modify any Contract other than in the ordinary course of business
consistent with past practices; (iii) enter into, cancel or modify any
Contract involving an amount in excess of $5,000; (iv) authorize any
new capital expenditure or expenditures that, individually or in the
aggregate, are in excess of $5,000; or (v) enter into or amend any
Contract with respect to any of the foregoing;
(j) pay, discharge or satisfy, cancel, waive or modify any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in, or contemplated by, the Financial
Statements or on Schedule 5.5 or incurred in the ordinary course of
business consistent with past practice;
(k) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby;
(l) take, or agree in writing or otherwise to take, any action
that would make any of the representations or warranties of the
Shareholders contained in this Agreement untrue or incorrect or would
result in any of the conditions set forth in this Agreement not being
satisfied;
(m) change its existing loan underwriting guidelines, policies
or procedures except as may be required by law; or
- 28 -
(n) agree, whether in writing or otherwise, to do any of the
foregoing.
7.2 Covenants of the Shareholders.
(a) Transfer of Shares. Between the date hereof and the
earlier of the Closing or the date on which this Agreement is
terminated, each Shareholder shall not transfer, pledge, hypothecate or
otherwise encumber any of the Company Shares owned by him or grant to
any Person any right to purchase any of the Company Shares other than
the rights granted to FNB hereunder.
(b) Restricted Stock. The FNB Shares to be issued in
connection with the Merger have not been registered under the
Securities Act, and each Shareholder will not offer, sell, pledge or
otherwise transfer any of such FNB Shares except pursuant to an
effective registration statement or in accordance with an applicable
exemption from the registration requirements of the Securities Act and
in accordance with any applicable securities laws of any state of the
United States or any other jurisdiction. FNB shall have the right to
require the delivery of an opinion of counsel in form and substance
reasonably satisfactory to FNB, prior to any transfer in accordance
with an exemption from the registration requirements of the Securities
Act, to the effect that such transfer is exempt from such registration
requirements.
(c) Release. Each Shareholder (in his capacity as employee,
shareholder, officer or director, or otherwise) hereby releases and
forever discharges the Company, FNB, Surviving Corporation and their
Affiliates, and each of their shareholders, directors, officers,
employees, agents and successors and assigns (all of such parties,
collectively, the "Released Parties"), from any and all claims,
demands, proceedings, causes of action, orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown,
fixed or contingent, both at law and in equity, other than as may arise
under and are brought in connection with this Agreement, that such
Shareholder has, ever had or may hereafter have against any of the
Released Parties based on facts, circumstances, events or omissions
occurring prior to the Closing, whether or not relating to claims
pending on or asserted after the Closing; provided, however, that this
Section 7.2(c) shall become effective only upon the Closing. Each
Shareholder hereby covenants to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to
be commenced, any proceeding of any kind against any Released Party
based upon any matters purported to be released hereby. Notwithstanding
the foregoing, the release set forth in this Section 7.2(c) shall not
(i) apply to any claims or rights that any Shareholder may have against
a Released Party with respect to which proceeds have been paid under an
insurance policy held by or on behalf of the Surviving Corporation,
(ii) affect employment-related benefits to which the Company has
committed prior to Closing or is required by law to provide, or (iii)
affect director and officer indemnity and advancement rights to which
any Shareholder would otherwise have a right under applicable corporate
law or the Company's governing charter documents. Further,
notwithstanding anything to the contrary contained in this Section
7.2(c), the release set forth herein shall not apply to any claims or
rights that any Shareholder may have against any other Shareholder of
any kind or nature whatsoever.
- 29 -
7.3 Covenants of FNB.
(a) Merger Sub Organization. FNB shall organize Merger Sub
under the laws of the State of North Carolina prior to the Effective
Time. The outstanding capital stock of Merger Sub shall consist of
1,000 shares of common stock, all of which will be owned by FNB. Prior
to the Effective Time, Merger Sub shall not (i) conduct any business
operations whatsoever or (ii) enter into any contract or agreement of
any kind, acquire any assets, or incur any liability, except as may be
expressly contemplated by this Agreement or the Plan of Merger or as
FNB and Company may otherwise agree. FNB, as the sole shareholder of
Merger Sub, shall vote prior to the Effective Time the shares of common
stock of Merger Sub in favor of the Plan of Merger and shall take all
such other actions as shall be necessary for Merger Sub to consummate
the transactions described herein. At the Effective Time, Merger Sub
shall be a corporation duly organized and validly existing under the
laws of the State of North Carolina with the corporate power and
authority necessary to consummate the transactions contemplated by the
Plan of Merger.
(b) Listing of Additional Shares. FNB will notify the Nasdaq
Stock Market of the listing of the shares of the FNB Shares to be
issued in connection with the Merger as soon as practicable following
the Closing Date.
(c) Compliance with Rule 144. For a period of two years after
the Closing Date, FNB will use its reasonable best efforts to comply
with the requirements of Rule 144, promulgated by the Securities and
Exchange Commission pursuant to the Securities Act, necessary for the
Shareholders to sell the FNB Shares received hereunder under Rule 144
after the expiration of any applicable holding period thereunder.
(d) Registration Rights. In connection with any underwritten
public offering of the FNB Shares in respect of which a registration
statement has been filed under the Securities Act on Form S-1 or S-3,
at the option of the underwriter(s) thereof, the sale of the FNB Shares
received by the Shareholders hereunder shall be covered by such
registration statement.
7.4 Sale of Investment Securities. Prior to the Closing, the Company
shall sell and liquidate its investment securities, converting them solely into
Cash.
7.5 Tax Matters. Each of the parties hereto shall use its reasonable
best efforts to cause the Merger to qualify as a "reorganization" within the
meaning of Section 368(a)(2)(D) of the Code and shall not intentionally take any
action that would cause the Merger to fail to so qualify. All items of income,
loss, deduction and credit of the Company from January 1, 2003 to the Effective
Time shall be allocated to the Shareholders. The Shareholders and Company shall
execute such tax returns and elections as may be reasonably required by FNB to
effect such allocations.
7.6 Consummation of Agreement. The Company, the Shareholders, and FNB
shall use their reasonable best efforts to perform or fulfill all conditions and
obligations to be performed or fulfilled by them under this Agreement so that
the transactions contemplated
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hereby shall be consummated. Except for events that are the subject of specific
provisions of this Agreement, if any event should occur, either within or
outside the control of the Company, the Shareholders, or FNB that would
materially delay or prevent fulfillment of the conditions upon the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement, each party will notify the others of any such event and the parties
will use their reasonable, diligent and good faith efforts to cure or minimize
the same as expeditiously as possible.
7.7 Schedules to Agreement. Each party will promptly notify the other
parties of any event, fact or other circumstance arising after the date hereof
that would have caused the representations or warranties, or the disclosure
schedules delivered under this Agreement to be untrue or misleading had such
event, fact or circumstance arisen prior to the delivery of such schedules or
the making of such representation.
7.8 Corporate Action. The Company and FNB will, and FNB shall cause
Merger Sub to, take all corporate action necessary to consummate this Agreement
and the Merger. The Shareholders as shareholders of the Company shall take all
action necessary for the Company to consummate and give effect to the Merger.
7.9 Maintenance of Corporate Existence. The Company and FNB shall, and
the Shareholders shall cause the Company through Closing to, maintain in full
force and effect their respective corporate existences.
7.10 No Solicitation. In recognition of the time that will be expended
and the expense which will be incurred by FNB in connection with the
transactions contemplated hereby, the Company and the Shareholders will not, and
the Company will cause its officers, employees and agents not to, directly or
indirectly or through agents, brokers or otherwise, until this Agreement is
closed or is terminated as provided in this Agreement, encourage, solicit,
engage in negotiations or discussions with or provide information with respect
to any inquiries or proposals relating to (a) the possible direct or indirect
acquisition of all or a portion of the Company's capital stock or its assets or
(b) any business combination with the Company. Additionally, the Shareholders
and the Company shall promptly notify FNB upon receipt of any inquiries by a
third Person relating to the foregoing subclauses (a) and (b).
7.11 Qualified Plans. The Company shall take all appropriate action as
shall be necessary to maintain the Dover Mortgage Company 401(k) Profit Sharing
Plan (the "Dover 401(k) Plan") as a qualified plan for purposes of ERISA. The
Company and the Shareholders acknowledge that FNB intends that the Dover 401(k)
Plan will be merged into FNB's Section 401(k) Savings Plan (the "FNB 401(k)
Plan") as soon as practicable after the Closing. The Company shall take all such
actions with respect to such plan as shall be necessary to accomplish such
intent and, until the Closing, will not take any other extraordinary actions
with respect to such plan without the written consent of FNB.
7.12 Employment.
(a) J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. Provided he remains employed as
President of the Company as of the time of the Closing, the Surviving
Corporation shall enter into an
- 31 -
employment agreement with J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. as of the Closing, which
shall contain substantially the same terms and conditions and be in
substantially the same form as is attached hereto as Exhibit B1.
(b) ▇▇▇▇▇▇ ▇▇▇▇▇ III. Provided he remains employed as Chief
Accounting Officer of the Company as of the time of the Closing, the
Surviving Corporation shall enter into an employment agreement with
▇▇▇▇▇▇ ▇▇▇▇▇ III as of the Closing, which shall contain substantially
the same terms and conditions and be in substantially the same form as
is attached hereto as Exhibit B2.
7.13 Employee Benefits.
(a) Generally. Except as otherwise provided herein and to the
extent permitted by contribution and deduction limitations of ERISA and
the Code with respect to FNB's qualified plans, any employee of the
Company who continues employment with the Surviving Corporation, FNB or
an Affiliate of FNB at the time of the Closing (a "New Employee") shall
become entitled to receive all employee benefits and to participate in
all benefit plans provided by FNB or First National, on the same basis
and subject to the same eligibility and vesting requirements, and to
the same conditions, restrictions and limitations, as generally are in
effect and applicable to other newly hired employees of FNB or First
National. However, each New Employee shall be given credit for his or
her full years of service with the Company for purposes of (i)
entitlement to vacation and sick leave and for participation in all FNB
or First National welfare, insurance and other fringe benefit plans,
and (ii) eligibility for participation and vesting in the FNB 401(k)
Plan and in FNB's defined benefit pension plan (the "FNB Pension
Plan"). Notwithstanding any provision herein to the contrary, FNB will
not be required to take any action that could adversely affect the
continuing qualification of the FNB 401(k) Plan or the FNB Pension
Plan. FNB will grant to each New Employee a pro rata amount of sick
leave and vacation leave, in accordance with FNB's standard leave
policies, for the period between the Closing Date and the end of the
calendar year during which the Closing Date occurs. Each New Employee
will be permitted to carry over accrued and unused sick leave and
vacation leave earned at the Company but shall thereafter be subject to
FNB's leave policies.
(b) Health Insurance. Each New Employee shall be entitled to
participate in First National's group health insurance plan at a cost
equal to the cost for any First National employee and such
participation shall be without regard to pre-existing condition
requirements under First National's group health insurance plan, to the
extent any such condition at the time of the Closing would have been
covered under the health insurance plans of the Company.
7.14 Retention Bonus.
(a) One Year Bonus. FNB shall cause the Surviving Corporation
to pay to each employee of the Company identified in writing by FNB and
the Company prior to the Closing a retention bonus in the amount
likewise agreed upon in writing by FNB and the Company before the
Closing as soon as practicable following the first anniversary of
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the Closing Date provided he or she remains employed by the Surviving
Corporation from the Closing through the first anniversary of the
Closing Date. The aggregate amount of retention bonuses payable by the
Surviving Corporation at such time should all such identified employees
satisfy the retention requirement set forth in this Section 7.14(a)
shall be equal to $180,000.
(b) Three-Year Bonus. FNB shall cause the Surviving
Corporation to pay to each employee of the Company identified in
writing by FNB and the Company prior to the Closing a retention bonus
in the amount likewise agreed upon in writing by FNB and the Company
before the Closing as soon as practicable following the third
anniversary of the Closing Date provided he or she remains employed by
the Surviving Corporation from the Closing through the third
anniversary of the Closing Date. The aggregate amount of retention
bonuses payable by the Surviving Corporation at such time should all
such identified employees satisfy the retention requirement set forth
in this Section 7.14(b) shall be equal to $600,000.
(c) No Employment Contract. This Section 7.14 shall not be
deemed a contract of employment and each such employee's employment
with the Company following the Closing will be on an "at will" basis.
7.15 Noncompetition.
(a) Period and Conduct. As further consideration for the
Merger and the transactions contemplated by this Agreement, during the
five-year period following the Closing Date, the Shareholders (other
than J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇., who is entering into a similar covenant
pursuant to the employment agreement referred to in Section 7.12(a))
shall not:
(i) compete with the Surviving Corporation or FNB in
the business of mortgage banking, including originating,
processing, underwriting or closing mortgage loans;
(ii) solicit or accept business of any kind relating
to mortgage banking or the origination, processing,
underwriting or closing of mortgage loans from any customer,
former customer or active prospect of the Surviving
Corporation or FNB;
(iii) solicit any employee of the Surviving
Corporation or FNB to terminate his or her employment with the
Surviving Corporation or FNB; or
(iv) incorporate or otherwise create any business
organization utilizing any name which uses the word "Dover" or
which is confusingly similar to "Dover."
(b) Territory. Each Shareholder shall refrain from engaging in
the activities described in this Section 7.15 during the period
specified in Section 7.15(a) hereof in North Carolina and South
Carolina.
- 33 -
(c) Definition. Each Shareholder shall be deemed to be
competing with the Surviving Corporation or FNB if he is engaged or
participates in any business or businesses described in Section
7.15(a), directly or indirectly, whether for his own account or for
that of any other person, firm or corporation, public or private, and
whether as a shareholder, partner or investor possessing an ownership
interest exceeding 1% in any such entity or as principal, agent,
representative, proprietor, partner, officer, director, employee or
consultant or in any other capacity.
(d) Reasonableness. The Shareholders have reviewed the scope,
duration and geographical scope of the covenants made in this Section
7.15 and acknowledge that they are reasonable and necessary to protect
the legitimate business interests of the Surviving Corporation and FNB.
(e) Remedies. Inasmuch as any breach of, or failure to comply
with, this Section 7.15 will cause serious and substantial damage to
the Surviving Corporation and FNB if any Shareholder should in any way
breach, or fail to comply with, the terms of this Section 7.15, FNB and
the Surviving Corporation shall be entitled to an injunction
restraining such Shareholder from such breach or failure. All remedies
expressly provided for herein are cumulative of any and all other
remedies now existing at law or in equity. FNB and the Surviving
Corporation shall, in addition to the remedies herein provided, be
entitled to avail themselves itself of all such other remedies as may
now or hereafter exist at law or in equity for compensation, and for
the specific enforcement of the covenants contained herein. Resort to
any remedy provided for hereunder or provided for by law shall not
prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies, or preclude the recovery by the
Surviving Corporation and the Company of monetary damages and
compensation.
(f) Subsidiaries, Divisions and Affiliates. For the purposes
of this Section 7.15, "FNB" and "the Surviving Corporation" shall
include their respective subsidiaries, divisions and Affiliates as they
may exist from time to time.
(g) Enforceability. The Shareholders, the Surviving
Corporation and FNB intend that this Section 7.15 be enforced as
written. However, if one or more of the provisions contained in this
Section 7.15 shall for any reason be held to be unenforceable because
of the duration or scope of such provision or the area covered thereby,
the parties agree that the court making such determination shall have
the power to reform the duration, scope and/or area of such provision
and in its reformed form such provision shall then be enforceable and
shall be binding on the parties.
7.16 Termination of Guaranties. FNB shall cooperate with the
Shareholders to obtain the termination as of the Effective Time of (i) the
Guaranty Agreements, dated as of September 22, 1997, given by each of the
Shareholders to Bank of America, N.A. (formerly NationsBank, N.A.), and (ii) the
Pledge and Security Agreement, dated as of September 22, 1997, among the
Shareholders and Bank of America, N.A., permitting the release of the
certificates representing the Company Shares pledged thereunder.
- 34 -
7.17 Vehicle Lease. Following the Closing, FNB shall indemnify and hold
harmless J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. from any loss, cost or damage he may incur by
reason of his obligations under the Unconditional Guaranty (By Individual) given
by him to BB&T Leasing Corporation and dated December 6, 2002, which was given
in connection with the Fixed Term Motor Vehicle Lease of the same date for the
lease of a 2003 GMC Envoy SLE.
ARTICLE VIII
DISCLOSURE OF ADDITIONAL INFORMATION
8.1 Access to Information. Prior to the Closing Date, the Company and
the Shareholders shall: (a) give FNB and its authorized representatives
reasonable access, during normal business hours and upon reasonable notice, to
the books, records, offices and other facilities and properties of the Company;
and (b) furnish FNB with such financial and operating data and other information
with respect to the business operations of the Company including, but not
limited to, information relating to Taxes as FNB may from time to time
reasonably request.
8.2 Access to Premises. Prior to the Closing, the Company and the
Shareholders shall give the FNB and its authorized representatives reasonable
access, during normal business hours and upon reasonable notice, to all property
leased by the Company for the purpose of inspecting such property.
8.3 Confidentiality. Prior to Closing, except as otherwise provided in
Section 7.4, the parties hereto shall not discuss or disclose, and each will use
its best efforts to cause its employees, lenders, accountants, representatives,
agents, consultants and advisors not to discuss or disclose, or use for any
purpose other than the transactions contemplated hereby, the subject matter or
transactions contemplated by this Agreement or information pertaining to the
Company, with any other Person without the prior consent of the other parties
hereto, unless (a) such information is public other than as a result of a
violation of this Agreement or (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby.
8.4 Publicity. Without the prior consent of the other parties, no party
hereto shall issue any news release or other public announcement or disclosure,
or any general public announcement to its employees, suppliers or customers,
regarding this Agreement or the transactions contemplated hereby, except as may
be required by law, but in which case the disclosing party shall provide the
other parties hereto with reasonable advance notice of the timing and substance
of any such disclosure.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Mutual Conditions. The obligations of all the parties hereto to
effect the transaction contemplated hereby shall be subject to the fulfillment
of the following conditions, any of which may be waived by all of the parties
hereto:
(a) Adverse Proceedings. The Company, any Shareholder, or FNB
shall not be subject to any order, decree or injunction of a court of
competent jurisdiction that enjoins or prohibits the consummation of
this Agreement and no Governmental Authority
- 35 -
shall have instituted a suit or proceeding that is then pending and
seeks to enjoin or prohibit the transactions contemplated hereby. Any
party who is subject to any such order, decree or injunction or the
subject of any such suit or proceeding shall take any steps within that
party's control to cause any such order, decree or injunction to be
modified so as to permit the Closing and to cause any such suit or
proceeding to be dismissed.
(b) Consents. All permits, authorizations, consents and
approvals of Governmental Authorities necessary for the consummation of
the transactions contemplated hereby have been obtained and Bank of
America, N.A. shall have provided the terminations and releases
contemplated by Section 7.16.
(c) Tax Opinion. The Company, the Shareholders and FNB shall
have received an opinion, dated the Closing Date, of ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C. or another tax advisor in form and substance
satisfactory to the Company and FNB, substantially to the effect that,
for federal income tax purposes: (i) consummation of the Merger will
constitute a "reorganization" as defined in Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the Company or FNB by reason
of the Merger; and (iii) the exchange or cancellation of the Company
Shares in the Merger will not give rise to recognition of gain or loss
for federal income tax purposes to the shareholders of the Company to
the extent such shareholders receive FNB Shares in exchange for their
Company Shares (except with respect to cash in lieu of fractional
shares). ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C. or such other
tax advisor will require and rely on representations by officers of FNB
and the Company and will be entitled to make reasonable assumptions.
9.2 Conditions to the Obligations of the Company and the Shareholders.
The obligation of the Company and the Shareholders to effect the transactions
contemplated hereby shall be further subject to the fulfillment of the following
conditions, any one or more of which may be waived by the Company and the
Shareholders:
(a) All representations and warranties of FNB contained in
this Agreement shall be true and correct in all material respects as of
the Closing Date as though made as of such date (except for
representations and warranties that are made as of a specific date).
FNB shall have performed and complied in all material respects with all
covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing. The
Shareholders shall have received a certificate dated the Closing Date
to the matters set forth in this Section 9.2 and executed by the chief
executive officer and chief financial officer of FNB.
(b) All documents required to have been executed and delivered
by FNB, on behalf of itself or Merger Sub, to the Company or to the
Shareholders at or prior to the Closing shall have been so executed and
delivered, whether or not such documents have been or will be executed
and delivered by the other parties contemplated thereby.
(c) The Company shall have received a legal opinion from
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C., counsel to FNB, dated as
of the Closing Date,
- 36 -
containing opinions in form and substance customary for transaction of
this nature and otherwise reasonably acceptable to the Company.
(d) As of the Closing Date, the Shareholders shall have
received the following documents with respect to Merger Sub:
(i) a true and complete copy of its articles of
incorporation and all amendments thereto, certified by the
jurisdiction of its incorporation as of a recent date;
(ii) a true and complete copy of its bylaws,
certified by its Secretary or an Assistant Secretary;
(iii) a certificate from its Secretary or an
Assistant Secretary certifying that its articles of
incorporation have not been amended since the date of the
certificate described in subsection (ii) above, and that
nothing has occurred since the date of issuance of the
certificate of existence specified in subsection (i) above
that would adversely affect its existence;
(iv) a true and complete copy of the resolutions of
its Board of Directors and shareholders authorizing the
execution, delivery and performance of this Agreement, and all
instruments and documents to be delivered in connection
herewith, and the transactions contemplated hereby, certified
by its Secretary or an Assistant Secretary; and
(v) a certificate from its Secretary or an Assistant
Secretary certifying the incumbency and signatures of its
officers who will execute documents at the Closing or who have
executed this Agreement.
9.3 Conditions to the Obligations of FNB. The obligations of the FNB to
effect the transactions contemplated hereby shall be further subject to the
fulfillment of the following conditions, any one or more of which may be waived
by FNB:
(a) FNB will have completed its financial, operations, legal
and other due diligence review of the Company and will be satisfied in
its sole discretion with the results of such review.
(b) The Company and the Shareholders shall have obtained all
consents of third parties contemplated by Sections 5.1(f) and 5.2 and
their corresponding schedules.
(c) All representations and warranties of the Shareholders and
the Company contained in this Agreement shall be true and correct in
all material respects as of the Closing Date as though made as of such
date (except for representations and warranties that are made as of a
specific date). The Company and the Shareholders shall have performed
and complied in all material respects with all covenants and agreements
contained in this Agreement required to be performed and complied with
by them at or prior to the Closing. FNB shall have received
certificates dated the Closing Date to the
- 37 -
matters set forth in this Section 9.3 and executed by the chief
executive officer and chief financial officer of the Company and by the
Shareholders.
(d) The Company and the Shareholders shall have delivered to
FNB the Company's audited statement of income and stockholders' equity
for the year ended December 31, 2002 and audited balance sheet as of
December 31, 2002, as well as reports on internal controls and
compliance with certain laws and regulations prepared in accordance
with Government Auditing Standards and other reports and schedules
required by the Consolidated Audit Guide for Audits of HUD Programs,
accompanied by a certificate executed by the chief executive officer
and chief financial officer of the Company and by the Shareholders to
the effect that such financial statements (i) have been prepared in
accordance with Generally Accepted Accounting Principles, consistently
applied, and (ii) fairly present the results of operations and
financial position of the Company for the period and as of the date set
forth therein.
(e) All documents required to have been executed and delivered
by the Shareholders, the Company or any third party to FNB at or prior
to the Closing shall have been so executed and delivered, whether or
not such documents have been or will be executed and delivered by FNB
or Merger Sub if so contemplated thereby.
(f) FNB shall have received a legal opinion from ▇▇▇▇▇▇
Tackabery ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ P.A., counsel to the Company and the
Shareholders, dated as of the Closing Date, containing opinions in form
and substance customary for transactions of this nature and otherwise
reasonably acceptable to FNB.
(g) FNB shall have received the certificate referred to in
Section 3.3 setting forth the calculation of the Gross Cash
Consideration and shall be satisfied, in its sole discretion, with the
form and substance of such certificate.
(h) As of the Closing Date, FNB shall have received the
following documents with respect to the Company:
(i) a long-form certificate of its corporate
existence issued by the jurisdiction of its incorporation as
of a recent date;
(ii) a true and complete copy of its articles of
incorporation and all amendments thereto, certified by the
jurisdiction of its incorporation as of a recent date;
(iii) a true and complete copy of its bylaws,
certified by its Secretary or an Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant
Secretary certifying that its articles of incorporation have
not been amended since the date of the certificate described
in subsection (ii) above, and that nothing has occurred since
the date of issuance of the certificate of existence specified
in subsection (i) above that would adversely affect its
existence;
- 38 -
(v) a true and complete copy of the resolutions of
its Board of Directors and shareholders authorizing the
execution, delivery and performance of this Agreement, and all
instruments and documents to be delivered in connection
herewith, and the transactions contemplated hereby, certified
by its Secretary or an Assistant Secretary;
(vi) a certificate from its Secretary or an Assistant
Secretary certifying the incumbency and signatures of its
officers who will execute documents at the Closing or who have
executed this Agreement; and
(vii) the results of a search of the appropriate
state offices as of a recent date reflecting the filing of
Uniform Commercial Code financing statements against it and
any pending litigation involving and outstanding judgments
against it.
ARTICLE X
TERMINATION
10.1 Termination. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:
(a) By mutual written consent of the Company and FNB;
(b) By either FNB or the Company, if there shall be any law or
regulation that makes consummation of this Agreement illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining the Company, the Shareholders, FNB, or Merger Sub from
consummating this Agreement is entered and such judgment, injunction,
order or decree shall become final and non-appealable;
(c) By either FNB or the Company, if the conditions to the
obligation to effect the transactions contemplated hereby of the party
seeking termination shall not have been fulfilled or waived by April
30, 2003, and if the party seeking termination is in material
compliance with all of its obligations under this Agreement; and
(d) By either FNB or the Company, if a condition to the
obligation to effect the transactions contemplated hereby of the party
seeking termination shall have become incapable of fulfillment
(notwithstanding the reasonable best efforts of the party seeking to
terminate as set forth in Section 7.6) and has not been waived; and
(e) By FNB upon a breach by any Shareholder, the Company or
any officer, employer or agent of the Company of the provisions of
Section 7.10.
10.2 Procedure and Effect of Termination. In the event of a termination
contemplated hereby by any party pursuant to Section 10.1, the party seeking to
terminate this Agreement shall give prompt written notice thereof to the other
party, and the transactions contemplated hereby shall be abandoned, without
further action by any party hereto. In such event:
- 39 -
(a) The parties hereto shall continue to be bound by their
obligations of confidentiality set forth in Section 8.3, and all copies
of the information provided by the Company hereunder will be returned
to the Company or destroyed immediately upon its request therefor.
(b) All filings, applications and other submissions relating
to the transactions contemplated hereby shall, to the extent
practicable, be withdrawn from the Person to which made.
(c) The terminating party shall be entitled to seek any remedy
to which such party may be entitled at law or in equity for the
violation or breach of any agreement, covenant, representation or
warranty contained in this Agreement.
(d) Notwithstanding anything contained in this Agreement to
the contrary, if either the Company and the Shareholders, on the one
hand, or FNB, on the other hand, breaches this Agreement by willfully
or intentionally failing to perform or violating any of its
obligations, agreements or covenants contained in this Agreement, such
party shall be obligated to pay all expenses of the other party
described in Section 12.1, together with all other damages recoverable
at law or in equity. In addition, if FNB terminates this Agreement
pursuant to Section 10.1(e) hereof, then the Company and the
Shareholders shall be jointly and severally obligated to pay all such
expenses of FNB and a break-up fee to FNB in the amount of $250,000,
together with all other damages recoverable at law or in equity.
ARTICLE XI
INDEMNIFICATION
11.1 Survival of Representations. All representations, warranties,
covenants and agreements made in this Agreement or in any exhibit, statement,
certificate, instrument or document delivered pursuant hereto or in connection
herewith will survive the Closing and remain in effect for a period of two years
after the Closing Date and shall thereupon terminate and be of no further force
or effect; provided, however, notwithstanding the foregoing, the representations
and warranties under:
(a) Sections 5.1, 5.2 and the first sentence of Section 5.3
shall survive without limitation;
(b) Section 5.12 shall survive for the applicable statute of
limitations, and
(c) Sections 5.15 and 5.18 shall survive for a period of five
years after the Closing Date.
Those covenants that contemplate or may involve actions to be taken or
obligations in effect after the Closing shall survive in accordance with their
terms. No warranty or representation shall be deemed to be waived or otherwise
diminished as a result of any due diligence investigation by the party to whom
the warranty or representation was made.
11.2 Shareholders' Agreement to Indemnify.
- 40 -
(a) Subject to the limitations set forth in this Section 11.2,
the Shareholders hereby agree jointly and severally to indemnify,
defend and hold harmless FNB, the Surviving Corporation, and any of
their Affiliates, and all officers, directors, equity holders,
employees and agents thereof (all of such parties, collectively, the
"FNB Affiliates"), from and against all demands, claims, actions,
losses, damages, liabilities, costs and expenses (including, without
limitation, settlement costs, arbitration costs and any reasonable
legal and other expenses for investigating or defending any action or
threatened action) incurred by any of the FNB Affiliates arising out of
or in connection with or resulting from (i) a breach of any covenant,
agreement, representation or warranty of the Company or any Shareholder
contained in this Agreement or in any agreement or instrument executed
and delivered pursuant to this Agreement on or prior to the Closing or
(ii) Taxes that are assessed on or incurred by the Surviving
Corporation or the Shareholders (or any successor thereof) on the basis
of action, facts, circumstances, events or omissions occurring prior to
the Closing (collectively, "FNB's Damages").
(b) Notwithstanding the foregoing, with respect to FNB's
Damages arising from breaches of representations and warranties (except
those made in Sections 5.1(a) through (e), 5.2, 5.12 and 5.15 and the
first sentence of Section 5.3, to which this Section 11.2(b) shall not
apply): (i) the Shareholders, jointly and severally, shall be obligated
to indemnify the FNB Affiliates in the aggregate only up to the amount
of the Gross Cash Consideration plus the amount of any earn-out
payments as may be paid to the Shareholders pursuant to Section 3.5;
(ii) a FNB Affiliate must have given the Shareholders written notice of
any such breaches within the applicable survival period as set forth in
Section 11.1; and (iii) the Shareholders will not be liable for any
such FNB's Damages unless and until the aggregate amount of such FNB's
Damages exceeds $50,000 (at which time the Shareholders will be
obligated to pay only those sums in excess of such initial $50,000).
Further notwithstanding the foregoing, the Shareholders will have no
liability with respect to FNB's Damages to the extent of any insurance
proceeds received by, or direct tax benefits available to, the
Surviving Corporation or FNB in connection therewith; provided,
however, that any such insurance proceeds received or tax benefits
available shall not be taken into account and shall not reduce FNB's
Damages for the purpose of determining whether the threshold of $50,000
(as described above) has been met. (c) This Section 11.2 and FNB's
rights to indemnification shall be FNB's sole and exclusive remedy for
a breach of the representations and warranties made by the Company or
the Shareholders and contained in this Agreement or any document or
Schedule delivered in connection herewith; provided, however, that FNB
shall be entitled to set-off any FNB's Damages against any earn-out
payments owing under Section 3.5 upon compliance with the
indemnification procedure set forth in Section 11.4.
11.3 FNB's Agreement to Indemnify. Subject to the limitations set forth
in this Section 11.3, FNB hereby agrees to indemnify, defend and hold harmless
the Shareholders from and against all demands, claims, actions, losses, damages,
liabilities, costs and expenses (including, without limitation, settlement
costs, arbitration costs and any reasonable legal and other expenses for
investigating or defending any action or threatened action) incurred by the
Shareholders arising out of or in connection with or resulting from a breach of
any covenant, agreement,
- 41 -
representation or warranty of the FNB contained in this Agreement or in any
agreement or instrument executed and delivered pursuant to this Agreement on or
prior to the Closing to the extent that such representation, warranty or
covenant survives the Closing and a claim therefor is presented to FNB in
accordance with this Agreement before the expiration of the applicable survival
period as set forth in Section 11.1. This Section 11.3 shall and Shareholders'
rights to indemnification shall be the Shareholders' sole and exclusive remedy
for a breach of FNB's representations and warranties contained in this Agreement
or any document delivered in connection herewith.
11.4 Indemnification Procedure.
(a) Notice. Each indemnified party shall give the indemnifying
party prompt written notice of any action, claim, demand, discovery of
fact, proceeding or suit (collectively, "Demands" and each notice, a
"Demand Notice") for which such indemnified party intends to assert a
right to indemnification under this Agreement, including Demands for
which the indemnified party would intend to assert a right to
indemnification but for the de minimis amount contemplated by Section
11.2(b) hereof. Each Demand Notice shall set forth in reasonable detail
the nature and amount of the damages sought. The indemnifying party
shall, within 30 days of receipt of a Demand Notice, pay to the
indemnified party the amount set forth in such Demand Notice or, if the
indemnifying party disputes in good faith the Demand or the amount
thereof, deliver to the indemnified party a written objection setting
forth the basis for disputing the Demand or payment. If within 30 days
after receipt by an indemnified party of the objection notice to a
Demand Notice the parties shall not have reached agreement as to the
Demand or amount in question, the claim for indemnification shall be
submitted to one arbitrator selected from the panel of arbitrators of
the American Arbitration Association, or if FNB and the Shareholders
cannot agree on the arbitrator, by three arbitrators selected from such
panel, one of whom shall be chosen by FNB, one of whom shall be chosen
by the Shareholders and the third of whom shall be chosen by the two
arbitrators so chosen. If either FNB or the Shareholders shall not have
designated such an arbitrator within 20 days after submission by the
American Arbitration Association of the list of names of arbitrators
selected from its panel, the resolution of the contested Demand Notice
shall be made by the arbitrator chosen by the other party. Arbitration
will be held in Asheboro, North Carolina, or such other location in
North Carolina as the parties may agree, and shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. The decision of the
arbitrator(s), including the awarding to the prevailing party of its
costs and expenses incurred in connection with such arbitration
proceedings, shall be final and binding upon the parties. Any such
arbitrator's decision and satisfaction thereof may be enforced by the
party entitled thereto in any court having jurisdiction over the
subject matter or the parties. In addition, any such arbitrator's
decision may be satisfied by means of set-off against any amounts
otherwise owing by the indemnified party to the indemnifying party. J.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇. shall be entitled to act on behalf of the Shareholders
for purposes of this Section 11.4 and FNB shall be entitled to rely on
the acts of J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. as being the acts of all of the
Shareholders hereunder.
- 42 -
(b) Third Party Claims. The indemnifying party shall have the
right to participate jointly with the indemnified party in the
indemnified party's defense, settlement or other disposition of any
Demand that arises from any claim or assertion made by a third party.
With respect to any such Demand relating solely to the payment of money
damages and which will not result in the indemnified party's becoming
subject to injunctive or other relief or otherwise adversely affect the
business of the indemnified party in any manner, and as to which the
indemnifying party shall have acknowledged in writing the obligation to
indemnify the indemnified party hereunder, the indemnifying party shall
have the sole right to defend, settle or otherwise dispose of such
Demand, on such terms as the indemnifying party, in its sole
discretion, shall deem appropriate. The indemnifying party shall obtain
the written consent of the indemnified party, which shall not be
unreasonably withheld, prior to ceasing to defend, settling or
otherwise disposing of any such Demand if as a result thereof, the
indemnified party would become subject to injunctive or other equitable
relief or the business of the indemnified party would be adversely
affected in any manner.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, FNB shall pay all fees, costs and expenses incurred by it and
Merger Sub in connection with this Agreement and the transactions contemplated
hereby and the Shareholders and the Company shall pay all fees, costs and
expenses incurred by each of them in connection with this Agreement and the
transactions contemplated hereby.
12.2 Action by Shareholders. Except as otherwise expressly provided in
this Agreement, any act or decision of the Shareholders hereunder (including
without limitation any decision relating to termination, waiver of conditions
and indemnification) shall require the consent or approval of the Shareholders
who then hold a majority of the Company Shares (if prior to Closing) or who held
a majority of the Company Shares immediately prior to Closing (if at or
subsequent to Closing), and any act or decision approved or consented to by such
Shareholders shall be binding upon all of the Shareholders.
12.3 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the Company, the
Shareholders and FNB.
12.4 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of FNB, on one hand, and the Company or the
Shareholders, on the other, to comply with any obligation, representation,
warranty, covenant, agreement or condition herein may be waived by the other
party or parties only by a written instrument signed by the party or parties
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 12.4.
- 43 -
12.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by hand or by facsimile
transmission, one Business Day after sending by a reputable national over-night
courier service or three Business Days after mailing when mailed by registered
or certified mail (return receipt requested), postage prepaid, to the parties in
the manner provided below:
(a) Any notice to the Company or the Shareholders shall be
delivered to the following addresses:
Dover Mortgage Company
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 704/▇▇▇-▇▇▇▇
Facsimile: 704/331-9897
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ P.A.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
P.O. Drawer 25008 (27114-5008)
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 336/▇▇▇-▇▇▇▇
Facsimile: 336/761-1530
(b) Any notice to FNB shall be delivered to the following
addresses:
FNB Corp.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (P.O. Box 1328)
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 336/▇▇▇-▇▇▇▇
Facsimile: 336/626-8374
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 336/▇▇▇-▇▇▇▇
- 44 -
Facsimile: 336/370-8830
Any party may change the address to which notice is to be given by
notice given in the manner set forth above.
12.6 Assignment; Third Party Beneficiaries. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties, except that FNB may assign its rights and
obligations under this Agreement to any Affiliate of FNB. If such assignment is
made, the assignee shall be entitled to all of the rights and shall assume all
the obligations of FNB hereunder, but FNB shall not be released from liability
for the performance of the obligations of such assignee under this Agreement.
This Agreement shall not be deemed to confer upon any third party beneficiaries
or other Persons, including any employees of the Company, any rights or remedies
hereunder.
12.7 Separable Provisions. If any provision of this Agreement shall be
held invalid or unenforceable, the remainder nevertheless shall remain in full
force and effect.
12.8 Governing Law. This Agreement is made in and shall be governed by
and construed in accordance with the internal substantive laws of the State of
North Carolina.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
12.11 Entire Agreement. This Agreement, including the Schedules and any
exhibits hereto, embodies the entire agreement and understanding of the parties
with respect of the subject matter of this Agreement. This Agreement supersedes
all prior agreements and understandings between the parties with respect to the
transactions contemplated hereby. 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.
- 45 -
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FNB CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and President
/s/ J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
---------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
/s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
DOVER MORTGAGE COMPANY
By /s/ J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
Title: President
- 46 -
Exhibit A
PLAN OF MERGER
OF
DOVER MORTGAGE COMPANY
WITH AND INTO
DMC ACQUISITION CORP.
A. Parties to Merger. The parties to the proposed merger are Dover Mortgage
Company, a North Carolina corporation ("Dover"), FNB Corp., a North Carolina
corporation ("FNB"), and DMC Acquisition Corp., a North Carolina corporation and
wholly owned subsidiary of FNB (the "Merger Subsidiary").
B. Nature of Transaction. Subject to the provisions of this Plan of Merger,
Dover shall be merged with and into the Merger Subsidiary (the "Merger") with
the effect provided in the North Carolina Business Corporation Act.
C. Surviving Corporation. The Merger Subsidiary shall be the surviving
corporation in the Merger. At the Effective Time (as hereinafter defined) of the
Merger, the name of the surviving corporation shall be changed to "Dover
Mortgage Company."
D. Effective Time. This Plan of Merger shall be effective upon the filing
of Articles of Merger with respect hereto with the North Carolina Secretary of
State (the "Effective Time"). At the Effective Time, the separate corporate
existence of Dover shall cease and the corporate existence of the Merger
Subsidiary shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger.
E. Conversion and Exchange of Shares.
1. Each share of Common Stock, par value $2.50 per share, of FNB ("FNB
Stock") issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding and shall not be affected by the Merger.
2. Each share of capital stock of the Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall continue to be an
issued and outstanding share of the Merger Subsidiary, as the surviving
corporation, from and after the Merger.
3. Except as otherwise provided herein, at the Effective Time, all
rights of Dover's shareholders with respect to all then outstanding shares of
the common stock of Dover, no par value ("Dover Stock"), shall cease to exist,
and the holders of Dover Stock shall cease to be, and shall have no further
rights as, shareholders of Dover. At the Effective Time, each outstanding share
of Dover Stock shall be converted, without any action of the part of the holders
of such shares, into the right to receive the Closing Cash Consideration (as
defined below), the Closing Stock Consideration (as defined below) and the
Post-Closing Consideration (as defined below):
(a) Closing Cash Consideration. In addition to being converted into
the right to receive the Closing Stock Consideration and the
Post-Closing Consideration, each such issued and outstanding share of
Dover Stock shall also be converted into the right to receive $________
in cash, without interest (the "Closing Cash Consideration"). [This
amount is to be calculated in accordance with Section 3.3(a) of the
Merger Agreement among FNB, Dover and the shareholders of Dover and
reflected in this Plan of Merger prior to filing with the North Carolina
Secretary of State.]
(b) Closing Stock Consideration. In addition to being converted into
the right to receive the Closing Cash Consideration and the Post-Closing
Consideration, each such issued and outstanding share of Dover Stock
shall also be converted into the right to receive _________ shares of
FNB Stock (the "Closing Stock Consideration"). [This amount is to be
determined in accordance with Section 3.3(b) of the Merger Agreement
among FNB, Dover and the shareholders of Dover and reflected in this
Plan of Merger prior to filing with the North Carolina Secretary of
State.]
(c) Post-Closing Cash Consideration. In addition to being converted
into the right to receive the Closing Cash Consideration, the Closing
Stock Consideration and the Post-Closing Stock Consideration (as defined
below), each such issued and outstanding shares of Dover Stock shall
also be converted into the right to receive the following amount of
cash, without interest (the "Post-Closing Cash Consideration"):
(i) the "Post-Closing Gross Cash Consideration," which shall be
equal to fifty percent (50%) of the sum of (A) the 2003 Net Income
(as hereinafter defined), plus (B) the amount obtained by subtracting
(x) the amount of the Reserve (as hereinafter defined) from (y)
$250,000, divided by
(ii) the number of shares of Dover Stock issued and outstanding
immediately prior to the Effective Time.
(d) Post-Closing Stock Consideration. In addition to being converted
into the right to receive the Closing Cash Consideration, the Closing
Stock Consideration and the Post-Closing Cash Consideration, each such
issued and outstanding share of Dover Stock shall also be converted into
the right to receive the following amount of FNB Shares (the
"Post-Closing Stock Consideration"):
(i) the lesser of (A) the number of FNB Shares with a value,
based on the Average Closing Price (as hereinafter defined), of the
Post-Closing Gross Cash Consideration, and (B) the quotient obtained
by dividing the Post-Closing Gross Cash Consideration by $17.50,
divided by
(ii) the number of shares of Dover Stock issued and outstanding
immediately prior to the Effective Time.
2
For purposes of this Plan of Merger, the following terms have the following
meanings:
"Average Closing Price" means the simple average of the daily last sale
prices of the FNB Stock on the Nasdaq Stock Market, Inc. National Market System
for the ten consecutive full trading days ending at the close of trading on the
fifth business day prior to the date upon which the Effective Time occurs.
"Generally Accepted Accounting Principles" means accounting principles
generally accepted in the United States of America as recognized by the American
Institute of Certified Public Accountants, as in effect from time to time.
"Post-Closing Consideration" means the sum of the Post-Closing Cash
Consideration and the Post-Closing Stock Consideration.
"Reserve" means Dover's reserves at the Effective Time for loans losses and
contingent liabilities.
"2003 Net Income" means Dover's consolidated net income for the period from
January 1, 2003 through the day immediately prior to the date on which the
Effective Time occurs determined in accordance with Generally Accepted
Accounting Principles, less the amount of the costs and expenses, including
legal, accounting and investment banking fees, incurred by Dover in connection
with the Merger.
4. Notwithstanding any other provision of this Plan of Merger, each
holder of shares of Dover Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of FNB Stock
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of FNB Stock multiplied by the Average Closing Price.
No such holder will be entitled to dividends, voting rights, or any other rights
as a shareholder in respect of any fractional shares.
5. Each holder of a certificate representing shares to be converted or
exchanged in the Merger shall surrender such certificate and after the Effective
Time shall be entitled to receive in exchange for such certificate the amount of
cash and the number of shares of FNB Stock to which it is entitled under this
Plan of Merger. Until so surrendered, each outstanding certificate that prior to
the Effective Time represented shares of Dover Stock will be deemed for all
purposes to evidence only the right of the holder thereof to receive the
consideration to be issued and paid for such shares under this Plan of Merger.
F. Abandonment. This Plan of Merger may be terminated and the Merger may be
abandoned at any time prior to the Effective Time upon termination of the Merger
Agreement, dated as of February 20, 2003, by and among FNB, Dover and the
shareholders of Dover.
3
Exhibit B1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the ______day of ____________, 2003, by and between DOVER MORTGAGE COMPANY, a
North Carolina corporation (the "Company"), and J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. (the
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Merger Agreement dated as of February 20, 2003 (the
"Merger Agreement"), by and among FNB Corp. a North Carolina corporation
("FNB"), the Company, and all of the holders of shares of capital stock of the
Company, FNB has acquired the Company and the Company is now a wholly owned
subsidiary of FNB;
WHEREAS, the Employee was a 40% shareholder of the Company, and has been
employed as President of the Company, with significant policy-making and
operational responsibilities in the conduct of the Company's business; and
WHEREAS, the Company desires to continue to employ the Employee, the
Employee desires to accept employment with the Company, and each desires to
enter into this agreement embodying the terms of such employment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
hereby accepts employment with the Company, for the term set forth in Section 2
below, in the position and with the duties and responsibilities set forth in
Section 3 below, and upon the other terms and conditions hereinafter stated.
2. Term. The term of this Agreement shall commence as of the date hereof
and, unless otherwise terminated as hereinafter provided, shall continue for a
term of four years.
3. Position and Responsibilities. The Employee shall serve as the President
and Chief Executive Officer of the Company, or in such other appropriate
position and with such duties as the Company or its parent, FNB may in the
future designate. In such capacity, the Employee shall at all times report to,
and his activities shall at all times be subject to the direction and control
of, the Board of Directors of the Company. The Employee shall devote
substantially all of his business time, attention and services to discharge
faithfully and diligently his duties and responsibilities under this Agreement
and to use his best efforts for both the successful operation of the Company's
business and the successful implementation of the policies established by the
Company or FNB. The Employee shall not be required to relocate more than 35
miles from Charlotte, North Carolina. FNB shall cause the Employee to be elected
to the Board of Directors of the Company.
4. Compensation and Benefits. During the term of this Agreement, the
Company shall provide to the Employee the following compensation and benefits:
(a) Salary. In consideration of the services to be rendered by the
Employee to the Company and the Employee's covenants hereunder, the Company
shall pay to the Employee a base salary at the rate of $200,000 per annum (such
salary as it may be increased from time to time being hereinafter referred to as
the "Base Salary"). The Employee shall be eligible to receive additional
compensation in amounts approved by the Company's Board of Directors for
mortgages he originates on behalf of the Company. The Employee shall receive
from the Company a formal review of Employee's performance at least as
frequently as annually, and Employee may be considered for merit increases to
his Base Salary in accordance with the Company's policies and practices for
employee compensation as established or modified from time to time. Except as
may otherwise be agreed, the Base Salary shall be payable in accordance with the
Company's policies and practices for employee compensation as established or
modified from time to time; provided that the Base Salary shall be payable not
less frequently than monthly. Salary payments shall be subject to all applicable
federal and state withholding, payroll and other taxes.
(b) Group Benefit Plans and Programs. The Employee will be entitled to
participate, in accordance with the provisions thereof, in any group health,
disability and life insurance, and any pension, retirement and other employee
benefit plans and programs made available by the Company or FNB to their
employees generally.
(c) Vacation. The Employee will be entitled to five weeks vacation leave
each year and such other leave as may be provided by the Company or FNB to their
employees in similar positions generally.
(d) Business Expenses. The Company shall reimburse the Employee for any
reasonable out-of-pocket business and travel expenses incurred by the Employee
in the ordinary course of performing his duties for the Company upon
presentation by the Employee, from time to time, of appropriate documentation
therefor and in accordance with the Company's policies and practices as
established or modified from time to time.
(e) Bonus. The Employee shall be entitled to receive a bonus equal to
15% of the Company's Pre-Tax Net Income (as defined in Section 3.5 of the Merger
Agreement except that Pre-Tax Net Income shall not include for purposes of this
Agreement a deduction for the bonus provided hereunder or the bonus payable to
▇▇▇▇▇▇ ▇▇▇▇▇ III pursuant to Section 4(e) of the Employment Agreement of even
date herewith between ▇▇▇▇▇▇ ▇▇▇▇▇ III and the Company). Such bonus shall be
payable for the periods and at the times as the earn-out payments provided for
in Section 3.5 of the Merger Agreement shall be payable.
5. Termination. The Employee's term of employment under this Agreement may
be terminated before the end of the initial term or any extension thereof as
follows:
(a) Death. In the event of the death of the Employee during his
employment under this Agreement, this Agreement shall be terminated as of the
date of death. In such event, the Company shall pay the Employee's Base Salary,
at the rate in effect at the time of his death
-2-
and through the last day of the calendar month in which such death occurs, to
the Employee's designated beneficiary, or, in the absence of such designation,
to the estate or other legal representative of the Employee. Any rights and
benefits the Employee's estate or any other person may have under employee
benefit plans and programs of the Company or FNB in the event of the Employee's
death shall be determined in accordance with the terms of such plans and
programs.
(b) Long-Term Disability. If the Employee suffers any disability while
employed under this Agreement that prevents him from performing his duties under
this Agreement for a period of 90 consecutive days, then, unless otherwise then
agreed in writing by the parties hereto, the employment of the Employee under
this Agreement shall, at the election of the Company, be terminated effective as
of the ninetieth day of such period. Upon termination of the Employee's
employment by reason of disability under this Section 5(b), the Employee shall
be entitled to receive his Base Salary, at the rate in effect on the date of
such termination, less any disability insurance payments paid to the Employee on
a policy maintained for the benefit of the Employee by the Company or FNB,
through the end of the then current term of this Agreement. Any rights and
benefits the Employee may have under employee benefit plans and programs of the
Company or FNB in the event of the Employee's disability shall be determined in
accordance with the terms of such plans and programs.
For purposes of this Agreement, "disability" shall mean the inability,
by reason of bodily injury or physical or mental disease, or any combination
thereof, of the Employee to perform his customary or other comparable duties
with the Company. In the event that the Employee and the Company are unable to
agree as to whether the Employee is suffering a disability, the Employee and the
Company shall each select a physician and the two physicians so chosen shall
make the determination or, if they are unable to agree, they shall select a
third physician, and the determination as to whether the Employee is suffering a
disability shall be based upon the determination of a majority of the three
physicians. The Company shall pay the reasonable fees and expenses of all
physicians selected pursuant to this Section 5(b).
(c) Termination for Cause. Nothing herein shall prevent the Company from
terminating the Employee's employment at any time for Cause (as hereinafter
defined). Upon termination for Cause, the Employee shall receive his Base Salary
only through the date that such termination becomes effective. Neither the
Employee nor any other person shall be entitled to any further payments from the
Company, for salary or any other amounts except for any amounts owing under the
Merger Agreement. Notwithstanding the foregoing, any rights and benefits the
Employee may have under employee benefit plans and programs of the Company or
FNB following a termination of the Employee's employment for Cause shall be
determined in accordance with the terms of such plans, agreements and programs.
For purposes of this Agreement, termination for Cause shall mean termination by
the Company of the Employee's employment as a result of (i) an intentional,
willful and continued failure by the Employee to perform his duties in the
capacities indicated above (other than due to disability); (ii) an intentional,
willful and material breach by the Employee of his fiduciary duties of loyalty
and care to the Company; (iii) an intentional, willful and knowing violation by
the Employee of any provision of this Agreement; (iv) a conviction of, or the
entering of a plea of nolo contendere by the Employee for any felony or any
crime involving fraud or dishonesty, or (v) a willful and knowing violation of
any material federal or state law or regulation applicable to the Company or
-3-
the occurrence of any act or event as a result of which the Employee becomes
unacceptable to, or is removed, suspended or prohibited from participating in
the conduct of the Company's affairs by any regulatory authority having
jurisdiction over the Company or FNB.
(d) Termination Other Than For Cause. The Company may terminate the
Employee's employment under this Agreement at any time upon 90 days written
notice to the Employee for whatever reason it deems appropriate, or for no
reason. In the event such termination by the Company occurs and is not due to
death as provided in Section 5(a) above or for Cause as provided in Section 5(c)
above, the Company shall continue the Employee's Base Salary, at the rate in
effect at the time of such termination through the end of the then current term
of this Agreement. Such salary continuation shall be subject to all applicable
federal and state withholding taxes. Any rights and benefits the Employee may
have under employee benefit plans and programs of the Company or FNB following a
termination of the Employee's employment other than for Cause shall be
determined in accordance with the terms of such plans, agreements and programs.
In addition to and notwithstanding the foregoing, in the event of a termination
pursuant to this Section 5(d), the Company shall continue to provide to the
Employee either the benefits to which the Employee is entitled under this
Agreement or the economic equivalent thereof for the remainder of the term of
this Agreement.
(e) At the Employee's Option. The Employee may terminate his employment
at any time upon at least 60 days advance written notice to the Company;
provided, however, that the Company, in its discretion, may cause such
termination to be effective at any time during such notice period. In the event
of such a voluntary termination of employment, the Employee will be entitled to
receive only any earned but unpaid Base Salary and the other benefits of this
Agreement through the date on which the Employee's termination becomes
effective. Notwithstanding the foregoing, any rights and benefits the Employee
may have under employee benefit plans and programs of the Company or FNB
following a voluntary termination of the Employee's employment shall be
determined in accordance with the terms of such plans, agreements and programs.
6. No Solicitation of Change in Control. The Employee will not solicit,
counsel or encourage any acquisition, merger or other change in control of FNB
or the Company without the prior written approval of the Board of Directors of
the Company or FNB. A violation of this Section 6 shall be deemed to constitute
a forfeiture by the Employee of all of his rights under Section 5(d) hereof.
7. Noncompetition Covenant; Nonsolicitation. For purposes of this Section 7
and the following Sections 8 through 12, "Company" shall mean the Company, FNB
and/or any of its subsidiaries.
(a) In consideration of this Agreement and the acquisition by FNB of the
Employee's shares of capital stock of the Company pursuant to the Merger
Agreement, for a period commencing on the date hereof and continuing until the
later of (X) the fifth anniversary of the date of this Agreement and (Y) one
year after (i) the date of expiration of the term hereof (as such term may be
extended by the mutual agreement in writing of the parties) or the date that any
termination of the Employee's employment under this Agreement becomes effective
or (ii) the last day of the period after the date that any termination of the
Employee's employment
-4-
under this Agreement becomes effective in which the Employee is entitled to
receive any Base Salary pursuant to Section 5 hereof, whichever is later, the
Employee will not, directly or indirectly:
(i) own any interest in, manage, operate, control, be employed by,
render consulting or advisory services to, or participate in or be
connected with the management or control of any business that is then
engaged or proposes to engage in the operation of mortgage lending,
mortgage brokering or mortgage banking activities, or such other
activities as the Employee may be engaged in the course of his
employment with the Company, and that conducts any of its operations
within North Carolina or South Carolina; provided, however, that the
Employee may, without violating this Agreement, own as a passive
investment not in excess of three percent (3%) of the outstanding
capital stock of any such business whose stock is publicly traded or
quoted on the NASDAQ over-the-counter market, the New York Stock
Exchange, the American Stock Exchange, the National Daily Quotation
System "Pink Sheets" or the OTC Bulletin Board;
(ii) influence or attempt to influence any customer of the Company
to discontinue its use of the Company's services or to divert such
business to any other person, firm or corporation;
(iii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company and any of
its respective customers, suppliers, principals, distributors, lessors
or licensors; and
(iv) solicit any officer or employee of the Company, whose base
annual salary at the time of the Employee's termination was $25,000 or
more, to work for any other person, firm or corporation.
(b) The Employee and the Company intend that Section 7 of this Agreement
be enforced as written. However, if one or more of the provisions contained in
Section 7 shall for any reason be held to be unenforceable because of the
duration or scope of such provision or the area covered thereby, the Employee
and the Company agree that the court making such determination shall have the
power to reform the duration, scope and/or area of such provision and in its
reformed form such provision shall then be enforceable and shall be binding on
the parties.
8. Confidentiality. The Employee hereby acknowledges and agrees that (i) in
the course of his service as an employee of the Company, he will gain
substantial knowledge of and familiarity with the Company's customers and its
dealings with them, and other information concerning the business of the
Company, all of which constitute valuable assets and privileged information that
is particularly sensitive due to the fiduciary responsibilities inherent in the
banking business; and (ii) to protect the interest in and to assure the benefit
of the business of the Company, it is reasonable and necessary to place certain
restrictions on the Employee's ability to disclose information about the
business and customers of the Company. For that purpose, and in consideration of
the agreements contained herein, the Employee covenants and agrees that any and
all data, figures, projections, estimates, lists, files, records, documents,
manuals or other such
-5-
materials or information (financial or otherwise) relating to the Company and
its business, regulatory examinations, financial results and condition, lending
and deposit operations, customers (including lists of the customers and
information regarding their accounts and business dealings with the Company),
policies and procedures, computer systems and software, shareholders, employees,
officers and directors (herein referred to as "Confidential Information") are
proprietary to the Company and are valuable, special and unique assets of the
business to which the Employee will have access during his employment hereunder.
The Employee shall consider, treat and maintain all Confidential Information as
the confidential, private and privileged records and information of the Company.
Further, at all times during the term of his employment and following the
termination of his employment under this Agreement for any reason, and except as
shall be required by law or court order (after notice to the Company) or in the
course of the performance by the Employee of his duties on behalf of the Company
or otherwise pursuant to the direct, written authorization of the Company, the
Employee will not divulge any Confidential Information to any other person,
firm, corporation, bank, savings and loan association or similar financial
institution, remove any such Confidential Information in written or other
recorded form from the Company's premises, or make any use of the Confidential
Information for his own purposes or for the benefit of any person, firm,
corporation, bank, savings and loan association or similar financial institution
other than the Company. However, following the termination of the Employee's
employment with the Company, this Section 8 shall not apply to any Confidential
Information which then is in the public domain (provided that the Employee was
not responsible, directly or indirectly, for permitting such Confidential
Information to enter the public domain without the Company's consent), or which
is obtained by the Employee from a third party which or who is not obligated
under an agreement of confidentiality with respect to such information.
9. Remedies Upon Breach. Each party agrees that any breach of this
Agreement by either party could cause irreparable damage to the other party and
that in the event of such breach the other party shall have, in addition to any
and all remedies of law, the right to an injunction, specific performance or
other equitable relief to prevent the violation of the obligations of the
breaching party hereunder, without the necessity of posting a bond, plus the
recovery of any and all costs and expenses incurred by the enforcing party,
including reasonable attorneys' fees in connection with the enforcement of this
Agreement, provided that the enforcing party shall have been successful on the
merits or otherwise in any proceeding related to the enforcement thereof.
10. Acknowledgments. The Employee hereby acknowledges that the enforcement
of Sections 7 and 8 of this Agreement is necessary to ensure the preservation,
protection and continuity of the business, trade secrets and goodwill of the
Company, and that the restrictions set forth in Sections 7 and 8 of this
Agreement are reasonable as to time, scope and territory and in all other
respects.
11. Tolling Period. In the event the Employee breaches any of the
provisions contained herein and the Company seeks compliance with such
provisions by judicial proceedings, the time period during which the Employee is
restricted by such provisions shall be extended by the time during which the
Employee has actually competed with the Company or been in violation of any such
provision and any period of litigation required to enforce the Employee's
obligations under this Agreement.
-6-
12. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.
13. Consent and Waiver by Third Parties. The Employee hereby represents and
warrants that his employment with the Company on the terms and conditions set
forth herein and his execution and performance of this Agreement do not
constitute a breach or violation of any other agreement, obligation or
understanding with any third party. The Employee represents that he is not bound
by any agreement or any other existing or previous business relationship which
conflicts with, or may conflict with, the performance of his obligations
hereunder or prevents the full performance of his duties and obligations
hereunder.
14. Waivers and Modifications. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 14. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
sets forth all of the terms of the understandings between the parties with
reference to the subject matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought.
15. Assignment. The Employee acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Employee may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
The Company shall have the right to assign this Agreement to FNB or any of its
subsidiaries or to its successors under law, and the rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the Company.
16. Notices. All notices hereunder shall be (i) delivered by hand, (ii)
sent by first-class certified mail, postage prepaid, return receipt requested,
(iii) delivered by overnight commercial courier, or (iv) transmitted by telecopy
or facsimile machine, to the following address of the party to whom such notice
is to be made, or to such other address as such party may designate in the same
manner provided herein:
If to the Company:
FNB Corp.
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With copy to:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-7-
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Employee, to his last address as shown on the personnel records
of the Company.
With copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ P.A.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
P.O. Drawer 25008 (27114-5008)
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
17. Survival of Obligations. The Employee's obligations under Sections 7
through 12 of this Agreement shall survive the termination of his employment
with the Company regardless of the manner of such termination and shall be
binding upon his heirs, executors and administrators. The existence of any claim
or cause of action by Employee against the Company or FNB shall not constitute
and shall not be asserted as a defense to the enforcement by the Company of this
Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DOVER MORTGAGE COMPANY
By___________________________
Title: ____________________
_____________________________(SEAL)
J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
-8-
Exhibit B2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") made and entered into as of
the _____ day of ____________, 2003, by and between DOVER MORTGAGE COMPANY, a
North Carolina corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇ III (the
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Employee, the Employee desires
to accept employment with the Company, and each desires to enter into an
agreement embodying the terms of such employment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
hereby accepts employment with the Company, for the term set forth in Section 2
below, in the position and with the duties and responsibilities set forth in
Section 3 below, and upon the other terms and conditions hereinafter stated.
2. Term. The term of this Agreement shall commence as of the date hereof
and, unless otherwise terminated as hereinafter provided, shall continue for a
term of three years.
3. Position and Responsibilities. The Employee shall serve as the Chief
Financial Officer of the Company, or in such other appropriate position and with
such duties as the Company or its parent, FNB Corp. ("FNB"), may in the future
designate. In such capacity, the Employee shall at all times report to, and his
activities shall at all times be subject to the direction and control of, the
Board of Directors and the President of the Company. The Employee shall devote
substantially all of his business time, attention and services to discharge
faithfully and diligently his duties and responsibilities under this Agreement
and to use his best efforts for both the successful operation of the Company's
business and the successful implementation of the policies established by the
Company or FNB. The Employee shall not be required to relocate more than 35
miles from Charlotte, North Carolina.
4. Compensation and Benefits. During the term of this Agreement, the
Company shall provide to the Employee the following compensation and benefits:
(a) Salary. In consideration of the services to be rendered by the
Employee to the Company and the Employee's covenants hereunder, the Company
shall pay to the Employee a base salary at the rate of $70,000 per annum (such
salary as it may be increased from time to time being hereinafter referred to as
the "Base Salary"). The Employee shall receive from the Company a formal review
of Employee's performance at least as frequently as annually, and Employee may
be considered for merit increases to his Base Salary in accordance with the
Company's policies and practices for employee compensation as established or
modified from time to time. Except as may otherwise be agreed, the Base Salary
shall be payable in accordance with the Company's policies and practices for
employee compensation as established or modified from time to time; provided
that the Base Salary shall be payable not less frequently than monthly. Salary
payments shall be subject to all applicable federal and state withholding,
payroll and other taxes.
(b) Group Benefit Plans and Programs. The Employee will be entitled to
participate, in accordance with the provisions thereof, in any group health,
disability and life insurance, and any pension, retirement and other employee
benefit plans and programs made available by the Company or FNB to their
employees generally.
(c) Vacation. The Employee shall be entitled to such vacation and other
leave as may be provided by the Company or FNB to their employees in similar
positions generally; provided, however, that, to the extent that the amount of
vacation and other leave to which the Employee is entitled is related to the
Employee's years of service to the Company or FNB, the Employee shall be given
credit for each year of service as an employee of the Company.
(d) Business Expenses. The Company shall reimburse the Employee for any
reasonable continuing education (CPE) and out-of-pocket business and travel
expenses incurred by the Employee in the ordinary course of performing his
duties for the Company upon presentation by the Employee, from time to time, of
appropriate documentation therefor and in accordance with the Company's policies
and practices as established or modified from time to time.
(e) Bonus. The Employee shall be entitled to receive a bonus each year
calculated as a percentage of the Company's Pre-Tax Net Income (as defined in
Exhibit A attached hereto and made a part hereof) for the immediately preceding
calendar year (but excluding Pre-Tax Net Income attributable to any periods
prior to the date hereof). Such bonus shall be equal to 3.0% of the Company's
Pre-Tax Net Income up to $1,800,000 and 1.5% of the Company's Pre-Tax Net Income
in excess of $1,800,000 but less than or equal to $2,500,000 in a year. The
Employee shall not be entitled to a bonus with respect to Pre-Tax Net Income in
excess of $2,500,000. The bonus shall be payable within 31 days of calendar
year-end. This Section 4(e) shall not preclude the Employee from being eligible
to receive such other bonuses as the Board of Directors of the Company in its
sole discretion may approve.
5. Termination. The Employee's term of employment under this Agreement may
be terminated before the end of the initial term or any extension thereof as
follows:
(a) Death. In the event of the death of the Employee during his
employment under this Agreement, this Agreement shall be terminated as of the
date of death. In such event, the Company shall pay the Employee's Base Salary,
at the rate in effect at the time of his death and through the last day of the
calendar month in which such death occurs, to the Employee's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Employee. Any rights and benefits the Employee's
estate or any other person may have under employee benefit plans and programs of
the Company or FNB in the
2
event of the Employee's death shall be determined in accordance with the terms
of such plans and programs.
(b) Long-Term Disability. If the Employee suffers any disability while
employed under this Agreement that prevents him from performing his duties under
this Agreement for a period of 90 consecutive days, then, unless otherwise then
agreed in writing by the parties hereto, the employment of the Employee under
this Agreement shall, at the election of the Company, be terminated effective as
of the ninetieth day of such period. Upon termination of the Employee's
employment by reason of disability under this Section 5(b), the Employee shall
be entitled to receive his Base Salary, at the rate in effect on the date of
such termination, less any disability insurance payments paid to the Employee on
a policy maintained for the benefit of the Employee by the Company or FNB,
through the end of the then current term of this Agreement. Any rights and
benefits the Employee may have under employee benefit plans and programs of the
Company or FNB in the event of the Employee's disability shall be determined in
accordance with the terms of such plans and programs.
For purposes of this Agreement, "disability" shall mean the inability,
by reason of bodily injury or physical or mental disease, or any combination
thereof, of the Employee to perform his customary or other comparable duties
with the Company. In the event that the Employee and the Company are unable to
agree as to whether the Employee is suffering a disability, the Employee and the
Company shall each select a physician and the two physicians so chosen shall
make the determination or, if they are unable to agree, they shall select a
third physician, and the determination as to whether the Employee is suffering a
disability shall be based upon the determination of a majority of the three
physicians. The Company shall pay the reasonable fees and expenses of all
physicians selected pursuant to this Section 5(b).
(c) Termination for Cause. Nothing herein shall prevent the Company from
terminating the Employee's employment at any time for Cause (as hereinafter
defined). Upon termination for Cause, the Employee shall receive his Base Salary
only through the date that such termination becomes effective. Neither the
Employee nor any other person shall be entitled to any further payments from the
Company, for salary or any other amounts. Notwithstanding the foregoing, any
rights and benefits the Employee may have under employee benefit plans and
programs of the Company or FNB following a termination of the Employee's
employment for Cause shall be determined in accordance with the terms of such
plans, agreements and programs. For purposes of this Agreement, termination for
Cause shall mean termination by the Company of the Employee's employment as a
result of (i) an intentional, willful and continued failure by the Employee to
perform his duties in the capacities indicated above (other than due to
disability); (ii) an intentional, willful and material breach by the Employee of
his fiduciary duties of loyalty and care to the Company; (iii) an intentional,
willful and knowing violation by the Employee of any provision of this
Agreement; (iv) a conviction of, or the entering of a plea of nolo contendere by
the Employee for any felony or any crime involving fraud or dishonesty, or (v) a
willful and knowing violation of any material federal or state law or regulation
applicable to the Company or the occurrence of any act or event as a result of
which the Employee becomes unacceptable to, or is removed, suspended or
prohibited from participating in the conduct of the Company's affairs by any
regulatory authority having jurisdiction over the Company or FNB.
3
(d) Termination Other Than For Cause. The Company may terminate the
Employee's employment under this Agreement at any time upon 90 days written
notice to the Employee for whatever reason it deems appropriate, or for no
reason. In the event such termination by the Company occurs and is not due to
death as provided in Section 5(a) above or for Cause as provided in Section 5(c)
above, the Company shall continue the Employee's Base Salary, at the rate in
effect at the time of such termination through the end of the then current term
of this Agreement. Such salary continuation shall be subject to all applicable
federal and state withholding taxes. Any rights and benefits the Employee may
have under employee benefit plans and programs of the Company or FNB following a
termination of the Employee's employment other than for Cause shall be
determined in accordance with the terms of such plans, agreements and programs.
(e) At the Employee's Option. The Employee may terminate his employment
at any time upon at least 60 days advance written notice to the Company;
provided, however, that the Company, in its discretion, may cause such
termination to be effective at any time during such notice period. In the event
of such a voluntary termination of employment, the Employee will be entitled to
receive only any earned but unpaid Base Salary and the other benefits of this
Agreement through the date on which the Employee's termination becomes
effective. Notwithstanding the foregoing, any rights and benefits the Employee
may have under employee benefit plans and programs of the Company or FNB
following a voluntary termination of the Employee's employment shall be
determined in accordance with the terms of such plans, agreements and programs.
6. No Solicitation of Change in Control. The Employee will not solicit,
counsel or encourage any acquisition, merger or other change in control of FNB
or the Company without the prior written approval of the Board of Directors of
the Company or FNB. A violation of this Section 6 shall be deemed to constitute
a forfeiture by the Employee of all of his rights under Section 5(d) hereof.
7. Noncompetition Covenant; Nonsolicitation. For purposes of this Section 7
and the following Sections 8 through 12, "Company" shall mean the Company, FNB
and/or any of its subsidiaries.
(a) For a period commencing on the date hereof and continuing until (i)
one year after the date of expiration of the term hereof (as such term may be
extended by the mutual agreement in writing of the parties) or the date that any
termination of the Employee's employment under this Agreement becomes effective
or (ii) the last day of the period after the date that any termination of the
Employee's employment under this Agreement becomes effective in which the
Employee is entitled to receive any Base Salary pursuant to Section 5 hereof,
whichever is later, the Employee will not, directly or indirectly:
(i) own any interest in, manage, operate, control, be employed by,
render consulting or advisory services to, or participate in or be
connected with the management or control of any business that is then
engaged or proposes to engage in the operation of mortgage lending,
mortgage brokering or mortgage banking activities, or such other
activities as the Employee may be engaged in the course of his
employment with the Company, and that conducts any of its
4
operations within North Carolina or South Carolina; provided, however,
that the Employee may, without violating this Agreement, own as a
passive investment not in excess of three percent (3%) of the
outstanding capital stock of any such business whose stock is publicly
traded or quoted on the NASDAQ over-the-counter market, the New York
Stock Exchange, the American Stock Exchange, the National Daily
Quotation System "Pink Sheets" or the OTC Bulletin Board;
(ii) influence or attempt to influence any customer of the Company
to discontinue its use of the Company's services or to divert such
business to any other person, firm or corporation;
(iii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company and any of
its respective customers, suppliers, principals, distributors, lessors
or licensors; and
(iv) solicit any officer or employee of the Company, whose base
annual salary at the time of the Employee's termination was $25,000 or
more, to work for any other person, firm or corporation.
(b) It is expressly agreed that the provisions and covenants in this
Section 7 shall not apply and shall be of no force or effect in the event that
the Company fails to honor its obligations hereunder.
(c) The Employee and the Company intend that Section 7 of this
Agreement be enforced as written. However, if one or more of the provisions
contained in Section 7 shall for any reason be held to be unenforceable because
of the duration or scope of such provision or the area covered thereby, the
Employee and the Company agree that the court making such determination shall
have the power to reform the duration, scope and/or area of such provision and
in its reformed form such provision shall then be enforceable and shall be
binding on the parties.
8. Confidentiality. The Employee hereby acknowledges and agrees that (i) in
the course of his service as an employee of the Company, he will gain
substantial knowledge of and familiarity with the Company's customers and its
dealings with them, and other information concerning the business of the
Company, all of which constitute valuable assets and privileged information that
is particularly sensitive due to the fiduciary responsibilities inherent in the
Companying business; and (ii) to protect the interest in and to assure the
benefit of the business of the Company, it is reasonable and necessary to place
certain restrictions on the Employee's ability to disclose information about the
business and customers of the Company. For that purpose, and in consideration of
the agreements contained herein, the Employee covenants and agrees that any and
all data, figures, projections, estimates, lists, files, records, documents,
manuals or other such materials or information (financial or otherwise) relating
to the Company and its business, regulatory examinations, financial results and
condition, lending and deposit operations, customers (including lists of the
customers and information regarding their accounts and business dealings with
the Company), policies and procedures, computer systems and software,
shareholders, employees, officers and directors (herein referred to as
"Confidential Information") are proprietary to the Company and are valuable,
special and unique assets of the
5
business to which the Employee will have access during his employment hereunder.
The Employee shall consider, treat and maintain all Confidential Information as
the confidential, private and privileged records and information of the Company.
Further, at all times during the term of his employment and following the
termination of his employment under this Agreement for any reason, and except as
shall be required by law or court order (after notice to the Company) or in the
course of the performance by the Employee of his duties on behalf of the Company
or otherwise pursuant to the direct, written authorization of the Company, the
Employee will not divulge any Confidential Information to any other person,
firm, corporation, Company, savings and loan association or similar financial
institution, remove any such Confidential Information in written or other
recorded form from the Company's premises, or make any use of the Confidential
Information for his own purposes or for the benefit of any person, firm,
corporation, Company, savings and loan association or similar financial
institution other than the Company. However, following the termination of the
Employee's employment with the Company, this Section 8 shall not apply to any
Confidential Information which then is in the public domain (provided that the
Employee was not responsible, directly or indirectly, for permitting such
Confidential Information to enter the public domain without the Company's
consent), or which is obtained by the Employee from a third party which or who
is not obligated under an agreement of confidentiality with respect to such
information.
9. Remedies Upon Breach. Each party agrees that any breach of this
Agreement by either party could cause irreparable damage to the other party and
that in the event of such breach the other party shall have, in addition to any
and all remedies of law, the right to an injunction, specific performance or
other equitable relief to prevent the violation of the obligations of the
breaching party hereunder, without the necessity of posting a bond, plus the
recovery of any and all costs and expenses incurred by the enforcing party,
including reasonable attorneys' fees in connection with the enforcement of this
Agreement, provided that the enforcing party shall have been successful on the
merits or otherwise in any proceeding related to the enforcement thereof.
10. Acknowledgments. The Employee hereby acknowledges that the enforcement
of Sections 7 and 8 of this Agreement is necessary to ensure the preservation,
protection and continuity of the business, trade secrets and goodwill of the
Company, and that the restrictions set forth in Sections 7 and 8 of this
Agreement are reasonable as to time, scope and territory and in all other
respects.
11. Tolling Period. In the event the Employee breaches any of the
provisions contained herein and the Company seeks compliance with such
provisions by judicial proceedings, the time period during which the Employee is
restricted by such provisions shall be extended by the time during which the
Employee has actually competed with the Company or been in violation of any such
provision and any period of litigation required to enforce the Employee's
obligations under this Agreement.
12. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.
6
13. Consent and Waiver by Third Parties. The Employee hereby represents and
warrants that his employment with the Company on the terms and conditions set
forth herein and his execution and performance of this Agreement do not
constitute a breach or violation of any other agreement, obligation or
understanding with any third party. The Employee represents that he is not bound
by any agreement or any other existing or previous business relationship which
conflicts with, or may conflict with, the performance of his obligations
hereunder or prevents the full performance of his duties and obligations
hereunder.
14. Waivers and Modifications. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 14. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
sets forth all of the terms of the understandings between the parties with
reference to the subject matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought.
15. Assignment. The Employee acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Employee may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
The Company shall have the right to assign this Agreement to FNB or any of its
subsidiaries or to its successors under law, and the rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the Company.
16. Notices. All notices hereunder shall be (i) delivered by hand, (ii)
sent by first-class certified mail, postage prepaid, return receipt requested,
(iii) delivered by overnight commercial courier, or (iv) transmitted by telecopy
or facsimile machine, to the following address of the party to whom such notice
is to be made, or to such other address as such party may designate in the same
manner provided herein:
If to the Company:
FNB Corp.
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With copy to:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ P.L.L.C.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
7
If to the Employee, to his last address as shown on the personnel records
of the Company.
With copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ P.A.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
P.O. Drawer 25008 (27114-5008)
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
17. Survival of Obligations. The Employee's obligations under Sections 7
through 12 of this Agreement shall survive the termination of his employment
with the Company regardless of the manner of such termination and shall be
binding upon his heirs, executors and administrators. The existence of any claim
or cause of action by Employee against the Company or FNB shall not constitute
and shall not be asserted as a defense to the enforcement by the Company of this
Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DOVER MORTGAGE COMPANY
By___________________________
Title: ________________________
_____________________________(SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇ III
8
EXHIBIT A
to the
Employment Agreement
dated as of ______________,
between
Dover Mortgage Company and ▇▇▇▇▇▇ ▇▇▇▇▇ III
"Pre-Tax Net Income" for any period means the Company's aggregate earnings
net of losses from operations, calculated as though the Company operated as a
separate and independent corporation, after deduction of all appropriate
expenses, charges and reserves, but before adjustment for federal and state
income taxes. Pre-Tax Net Income shall be determined in accordance with
Generally Accepted Accounting Principles (as defined below) consistently applied
as determined by FNB or the firm of independent certified public accountants
engaged by FNB for purposes of its own audit. In determining such Pre-Tax Net
Income:
(i) Pre-Tax Net Income shall be computed without regard to "extraordinary
items" of gain or loss as that term shall be defined by Generally
Accepted Accounting Principles;
(ii) Pre-Tax Net Income shall not include any gains, profits or losses
realized from the sale of any assets other than in the ordinary
course of business;
(iii) Pre-Tax Net Income shall include a deduction for (x) the allocation
of reasonable and appropriately documented direct overhead expenses,
(y) payment of salaries and bonuses for officers and employees of the
Company, excluding any accruals for the retention bonuses
contemplated by Section 7.14 of the Merger Agreement dated as of
February 20, 2003 among FNB, the Company and the shareholders of the
Company (the "Merger Agreement"), the bonus to the Employee provided
for in this Agreement, and the bonus payable to J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.
pursuant to Section 4(e) of the Employment Agreement dated as of
____________, 2003 between the Company and J. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇., and
(z) interest charged in any loans or advances made by FNB or any of
its Affiliates to the Company in connection with its business
operations; provided that such interest charges shall not exceed
those that FNB or its Affiliates would charge to similarly situated
third party's in arm's-length transactions, and provided further that
the Company shall not be obligated to satisfy its borrowing needs
from FNB or any of its Affiliates but may borrow from third-party
lenders; and
(iv) Pre-Tax Net Income shall not include any income or expenses related
to the acquisition, disposition or operation of any other mortgage
brokerage, mortgage banking or lending business subsequent to the
closing of the transactions contemplated by the Merger Agreement but
shall include any income or expenses related to the expansion of the
Company's business through the opening and operation by the Company
of any de novo loan origination offices.
9
"Generally Accepted Accounting Principles" means accounting principles
generally accepted in the United States of America as recognized by the American
Institute of Certified Public Accountants, as in effect from time to time.
10