AGREEMENT AND PLAN OF MERGER by and between PrivateBancorp, Inc. and Piedmont Bancshares, Inc. Dated as of August 2, 2006

ARTICLE I	THE MERGER	1
Section 1.1	The Merger	1
Section 1.2	Effective Time	2
Section 1.3	Effect of the Merger	2
Section 1.4	Conversion of Shares upon the Merger	2
Section 1.5	Stock Options and Warrants	3
Section 1.6	Merger Consideration	4
Section 1.7	The Closing	8
ARTICLE II	EXCHANGE OF CERTIFICATES	9
Section 2.1	Exchange of Piedmont Common Stock	9
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF PIEDMONT	10
Section 3.1	Corporate Organization	11
Section 3.2	Capitalization and Shareholders	12
Section 3.3	Authority	14
Section 3.4	Conflicts	14
Section 3.5	Financial Statements	14
Section 3.6	Absence of Certain Changes or Events	15
Section 3.7	Undisclosed Liabilities	15
Section 3.8	Consents and Approvals	16
Section 3.9	Reports	16
Section 3.10	Broker’s Fees; Other Transaction Fees	17
Section 3.11	Legal Proceedings; Defaults	17
Section 3.12	Taxes and Tax Returns	18
Section 3.13	Employee Benefit Plans	18
Section 3.14	Compliance with Applicable Law	21
Section 3.15	Material Contracts	22
Section 3.16	Investment Securities	24
Section 3.17	Insurance	24
Section 3.18	Allowance for Loan Losses	25
Section 3.19	Title to Properties; Leases	25
Section 3.20	Environmental Matters	26
Section 3.21	Approval Delays	28
Section 3.22	Tax	28
Section 3.23	Participation Loans	28
Section 3.24	Fairness Opinion	28
Section 3.25	Loan Portfolio	28
Section 3.26	Interest Rate Risk Management Arrangements	29
Section 3.27	Indemnification	29
Section 3.28	Insider Interests	30

 

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TABLE OF CONTENTS

(continued)

 

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Section 3.29	Vote Required	30
Section 3.30	Antitakeover Provisions Inapplicable	30
Section 3.31	Internal Controls	30
Section 3.32	Accuracy of All Representations	31
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PRIVATE	31
Section 4.1	Corporate Organization	32
Section 4.2	Authority	32
Section 4.3	Consents and Approvals	33
Section 4.4	Financial Resources	33
Section 4.5	Approval Delays	33
Section 4.6	Capitalization	33
Section 4.7	Private Financial Statements; Material Changes	34
Section 4.8	Private Reports	34
Section 4.9	Absence of Certain Changes or Events	34
Section 4.10	Compliance with Applicable Law	35
Section 4.11	Tax	35
ARTICLE V	ADDITIONAL AGREEMENTS	35
Section 5.1	Conduct of Business	35
Section 5.2	Negative Covenants	35
Section 5.3	Conduct of Business by Private Until the Effective Time	37
Section 5.4	Access to Information and Due Diligence	38
Section 5.5	Regulatory Filings	39
Section 5.6	Reasonable Efforts	39
Section 5.7	No Conduct Inconsistent with this Agreement	39
Section 5.8	Board of Directors’ Notices, Minutes, Etc	40
Section 5.9	Untrue Representations and Warranties	40
Section 5.10	Indemnification; Directors’ and Officers’ Insurance	41
Section 5.11	Resolution of Piedmont Plans	41
Section 5.12	Certain Consents	42
Section 5.13	Accounting and Other Adjustments	43
Section 5.14	List of Piedmont Shareholders	43
Section 5.15	Affiliate Letters	43
Section 5.16	Registration Statement; Shareholder Approval	43
Section 5.17	Financial Statements and Reports	44
Section 5.18	Delivery of Supplements to Disclosure Schedules	44
Section 5.19	Noncompetition, Nondisclosure and Nonsolicitation Agreements	44
Section 5.20	Tax Opinion	44
Section 5.21	Bonuses and Other Awards	45
Section 5.22	Other Actions; Further Assurances; Form of Transaction	45

 

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TABLE OF CONTENTS

(continued)

 

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ARTICLE VI	Conditions Precedent	46
Section 6.1	Conditions Precedent to Obligations of Private	46
Section 6.2	Conditions Precedent to Obligations of Piedmont	47
ARTICLE VII	TERMINATION, EXPENSES AND AMENDMENT	48
Section 7.1	Termination	48
Section 7.2	Termination Fee	51
Section 7.3	Effect of Termination	52
Section 7.4	Amendment	52
Section 7.5	Extension; Waiver	52
ARTICLE VIII	GENERAL PROVISIONS	53
Section 8.1	Non-Survival of Representations, Warranties and Agreements	53
Section 8.2	Notices	53
Section 8.3	Interpretation	54
Section 8.4	Counterparts	54
Section 8.5	Entire Agreement	54
Section 8.6	Governing Law	54
Section 8.7	Severability	54
Section 8.8	Publicity	55
Section 8.9	Assignment; Third Party Beneficiaries	55
Section 8.10	Transaction Expenses	55

 

Exhibits
Exhibit A	Form of Certificate of Amendment of Certificate of Designation of Series A Convertible Preferred Stock
Exhibit B	Form of Affiliate Letter and Voting Agreement
Exhibit C	Form of Opinion of Piedmont’s Counsel
Exhibit D	Form of Opinion of Private’s Counsel

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of the 2nd day of August, 2006, by and among PrivateBancorp, Inc., a Delaware corporation (“Private”), and Piedmont Bancshares, Inc., a Georgia corporation (“Piedmont”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of Private deems it advisable and in the best interests of its stockholders that Piedmont be merged with and into Private in accordance with the Delaware General Corporation Law (“DGCL”), the Georgia Business Corporation Code (“GBCC”) and this Agreement;

 

WHEREAS, the Board of Directors of Piedmont, in connection with the Merger (as defined herein) and the other transactions contemplated herein, has determined that this Agreement, the Merger and the other transactions contemplated herein are in the best interests of Piedmont and its shareholders after giving due consideration to all relevant factors, including the short-term and long-term social and economic interests of the employees, customers, shareholders and other constituents of Piedmont and the Bank (as defined below), the communities within which Piedmont and the Bank operate and the consideration offered by Private in relation to the current value of Piedmont available in other freely-negotiated transactions and in relation to the Piedmont’s Board of Directors’ estimate of the future value of Piedmont as an independent entity, and therefore, has unanimously approved the Merger, this Agreement and the plan of merger contained in this Agreement;

 

WHEREAS, immediately following the merger of Piedmont with and into Private (the “Merger”), Private and Piedmont intend that Piedmont Bank of Georgia, a Georgia state-chartered bank and a wholly-owned subsidiary of Piedmont (the “Bank”), shall become a wholly-owned subsidiary of Private;

 

WHEREAS, Private and Piedmont intend the Merger to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (“Code”); and

 

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and the Merger.

 

NOW THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, agreements and conditions herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I

 

THE MERGER

 

Section 1.1 The Merger. (a) Surviving Corporation. Subject to the terms and conditions of this Agreement, the separate existence of Piedmont shall cease and Piedmont shall be merged with and into Private at the Effective Time (as defined below) in accordance with the

 

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DGCL and the GBCC, with Private being the continuing and surviving corporation (the “Surviving Corporation”). At the Effective Time, the title to all real estate and other property, or any interest therein, owned by each of Piedmont and Private shall be vested in the Surviving Corporation without reversion or impairment, the Surviving Corporation shall thenceforth be responsible and liable for all the liabilities and obligations of each of Piedmont and Private, any claim existing or action or proceeding pending by or against Piedmont or Private may be continued as if the Merger did not occur or the Surviving Corporation may be substituted in the proceeding for Piedmont or Private, as may be appropriate, and neither the rights of creditors nor any liens upon the property of Piedmont or Private shall be impaired by the Merger.

 

(b) Certificate of Incorporation. The Certificate of Incorporation of Private shall be the Certificate of Incorporation of the Surviving Corporation until amended in accordance with the provisions thereof and the DGCL.

 

(c) Bylaws. The Bylaws of Private in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until altered, amended or repealed as provided therein, or in accordance with the Certificate of Incorporation of the Surviving Corporation and the DGCL.

 

(d) Directors and Officers. The directors of the Surviving Corporation shall be the persons who were directors of Private immediately prior to the Effective Time. The officers of the Surviving Corporation shall be the persons who were officers of Private immediately prior to the Effective Time.

 

Section 1.2 Effective Time. As promptly as practicable on the Closing Date (as hereinafter defined), the parties shall cause the Merger to be consummated by filing the Certificates of Merger (the “Certificates of Merger”) with the respective Secretaries of State of the States of Delaware and Georgia (the “Secretaries of State”) with respect to the Merger, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL and the GBCC. The Merger shall become effective at such time as the Certificates of Merger are duly filed with the Secretaries of State (such time as the Merger becomes effective being hereinafter referred to as the “Effective Time”).

 

Section 1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL and the GBCC.

 

Section 1.4 Conversion of Shares upon the Merger. At the Effective Time, by virtue of the Merger and without any action on the part of Private, Piedmont or the holders of Private Common Stock (as defined below) or Piedmont Common Stock (as defined below), the following shall occur:

 

(a) Private Common Stock. Each share of the common stock, no par value, of Private (“Private Common Stock”) issued and outstanding or held in treasury immediately prior to the Effective Time shall remain issued and outstanding or treasury shares of Private Common Stock and shall be unchanged following the Merger.

 

(b) Piedmont Common Stock. Subject to Section 1.4(c), Section 1.4(e) and Section 2.1(c) and after giving effect to the conversion of preferred stock in accordance with

 

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Section 1.4(d), each share of the common stock, par value $1.00 per share, of Piedmont (“Piedmont Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Merger Consideration, as defined in, and pursuant to, Section 1.6.

 

(c) Piedmont Common Stock Held by Piedmont or Private. All shares of Piedmont Common Stock (other than shares of Piedmont Common Stock held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties) that are (i) owned by Piedmont as treasury stock, (ii) owned directly or indirectly by Piedmont or the Bank, or (iii) owned directly or indirectly by Private or any of its wholly-owned subsidiaries, shall be cancelled and no Merger Consideration or other consideration shall be delivered in exchange therefor.

 

(d) Piedmont Preferred Stock. After the execution of this Agreement and prior to the Effective Time, pursuant to the provisions of the Certificate of Designation of Series A Convertible Preferred Stock of Piedmont (the “Certificate of Designation”), as amended pursuant to the Certificate of Amendment (as defined in Section 3.29), each share of Series A Convertible Preferred Stock of Piedmont (the “Piedmont Preferred Stock”) shall be converted into one share of Piedmont Common Stock. Thereafter, such shares of Piedmont Common Stock shall be converted into and become the right to receive the consideration provided in this Agreement.

 

(e) Dissenting Shares. Each outstanding share of Piedmont Common Stock the holder of which has perfected appraisal rights under Section 14-2-1301 of the GBCC and has not effectively withdrawn or lost such rights as of the Effective Time (the “Dissenting Shares”) shall not be converted into or represent a right to receive the Merger Consideration hereunder, and the holder thereof shall be entitled only to such rights as are granted by the GBCC. Piedmont shall give Private prompt notice upon receipt by Piedmont of any such demands for payment of the fair value of such shares of Piedmont Common Stock and of withdrawals of such notice and any other instruments provided pursuant to applicable law (any shareholder duly making such demand being hereinafter called a “Dissenting Shareholder”), and Private shall have the right to participate in all negotiations and proceedings with respect to any such demands. Piedmont shall not, except with the prior written consent of Private, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment, or waive any failure to timely deliver a written demand for appraisal or the taking of any other action by such Dissenting Shareholder as may be necessary to perfect appraisal rights under the GBCC. Any payments made in respect of Dissenting Shares shall be made by the Surviving Corporation. If after the Effective Time a dissenting shareholder of Piedmont fails to perfect, or effectively withdraws or loses, his right to appraisal and payment for his shares of Piedmont Common Stock, Private shall issue and deliver the Merger Consideration to which such holder of Piedmont Common Stock is entitled under this Agreement (without interest) upon surrender by such holder of the certificate or certificates representing the shares of Piedmont Common Stock for which payment is being made.

 

Section 1.5 Stock Options and Warrants. Immediately prior to the Effective Time, each option and warrant granted by Piedmont to purchase shares of Piedmont Common Stock (each an “Option” or “Warrant,” and collectively, “Options” or “Warrants,” as the case may be),

 

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which is outstanding and unexercised immediately prior to the Effective Time, shall terminate effective as of the Effective Time and, in consideration therefore, the holder shall receive shares of Private Common Stock (rounded down to the next whole share), with a value, based on the Private Closing Price (as defined below), equal to the excess of the Piedmont Per Share Amount (as defined below) over the exercise price per share of Piedmont Common Stock under such Option or Warrant multiplied by the number of shares of Piedmont Common Stock covered by such Option or Warrant. The number of shares of Private Common Stock issued shall be reduced by the number of such shares having a value equal to the applicable withholding taxes.

 

Section 1.6 Merger Consideration. (a) Subject to the provisions of this Section 1.6, each share of Piedmont Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c) and Dissenting Shares) shall be converted at the election of the holder thereof, subject to and in accordance with the procedures set forth in this Agreement, into either:

 

(i) the right to receive in cash from Private, without interest, an amount equal to $29.68 (the “Piedmont Per Share Amount”) (the “Cash Consideration”); or

 

(ii) the right to receive from Private that number of validly issued, fully paid and nonassessable shares of Private Common Stock equal to the Exchange Ratio (as defined below) (the “Stock Consideration”). The “Exchange Ratio” is determined by dividing (x) the Piedmont Per Share Amount, by (y) the Private Closing Price (as defined below); or

 

(iii) the right to receive a combination of the foregoing in accordance with the procedures set forth in this Agreement.

 

(b) “Aggregate Cash Consideration” shall mean the result of the Cash Consideration multiplied by the number of shares of Piedmont Common Stock for which the Cash Consideration is received.

 

(c) “Aggregate Merger Consideration” shall mean the sum of the Aggregate Cash Consideration and Aggregate Stock Consideration paid by Private pursuant to the terms of this Agreement.

 

(d) “Aggregate Stock Consideration” shall mean the result of the Stock Consideration multiplied by the number of shares of Piedmont Common Stock for which the Stock Consideration is received.

 

(e) “Private Closing Price” shall mean the average of the last reported sales price on The Nasdaq Global Select Market (“Nasdaq”) of Private Common Stock for each of the ten (10) trading days next preceding (the first of such ten (10) days herein referred to as the “Pricing Commencement Date”), but not including, the fifth day prior to the Closing Date. Private shall not, within five (5) days of the Pricing Commencement Date and through the Effective Time, declare or establish a record date for a stock split, stock dividend, recapitalization, reclassification, or similar transaction with respect to the outstanding Private Common Stock; provided however, that if the Private Closing Price as calculated above is less

 

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than $39.60, the Private Closing Price shall be deemed, for purposes of determining the number of shares of Private Common Stock to be issued by Private pursuant to this Section 1.6, to be $39.60; and further provided, that if the Private Closing Price as calculated above is greater than $48.40, the Private Closing Price shall be deemed, for purposes of determining the number of shares of Private Common Stock to be issued by Private pursuant to this Section 1.6, to be $48.40. Notwithstanding any provision to the contrary, if the conditions in Section 7.1(h)(i) and (ii) are satisfied, Piedmont shall have the right to terminate this Agreement in accordance with the terms of Section 7.1(h).

 

(f) “Merger Consideration” means the Stock Consideration, the Cash Consideration or any combination thereof, in each case as determined in accordance with the election and proration procedures set forth in this Section 1.6.

 

(g) Maximum Conversion Numbers. (i) The total number of shares of Piedmont Common Stock to be converted into the right to receive Cash Consideration for such shares (including any such shares subject to the cash portion of a Mixed Election (as defined below)), shall be 40% of the number of shares of Piedmont Common Stock outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c) but including Dissenting Shares) (the “Cash Conversion Number”); (ii) the total number of shares of Piedmont Common Stock to be converted into the right to receive Stock Consideration for such shares (including any such shares subject to the stock portion of a Mixed Election) shall be 60% of the number of shares of Piedmont Common Stock outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c) but including Dissenting Shares) (the “Stock Conversion Number”); and (iii) the maximum number of shares of Private Common Stock which may be issued as Stock Consideration will be equal to the Exchange Ratio multiplied by the Stock Conversion Number and the maximum amount of cash which will be paid as Cash Consideration will be equal to the Cash Consideration multiplied by the Cash Conversion Number.

 

(h) Adjustments for Dilution and Other Matters. If, between the date of this Agreement and the Effective Time, each of the outstanding shares of Private Common Stock shall have been changed into a different number of shares or into a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the $39.60 and $48.40 amounts set forth in Section 1.6(e) above shall be adjusted appropriately to provide the holders of Piedmont Common Stock the same economic effect as contemplated by this Agreement prior to such event.

 

(i) Election Procedures.

 

(i) All elections contemplated by Section 1.6(a) shall be made on a form designed for that purpose prepared by Private and reasonably acceptable to Piedmont (an “Election Form”). Holders of record of shares of Piedmont Common Stock who hold such shares as nominees, trustees or in other representative capacities (“Representatives”) may submit multiple Election Forms, provided that such Representative certifies that each such Election Form covers all the shares of Piedmont Common Stock held by each such Representative for a particular beneficial owner. References in this Section 1.6(i) to shares of Piedmont Common Stock shall also include

 

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shares of Piedmont Preferred Stock to be converted into Piedmont Common Stock as described in Section 1.4(d) above.

 

(ii) The Election Form shall be mailed on the same date as the date on which the Proxy Statement (as defined in Section 5.16) is mailed to all holders of record of shares of Piedmont Common Stock or Piedmont Preferred Stock as of the record date of the Shareholders’ Meeting (as defined below). Thereafter Piedmont and Private shall each use reasonable efforts to (i) mail the Election Form to all persons who become record holders of shares of Piedmont Common Stock during the period between the record date for the Shareholders’ Meeting and 5:00 p.m., Atlanta, Georgia Time, on the day five (5) business days prior to the date of the Shareholders’ Meeting and (ii) make the Election Form available to all persons who become holders of shares of Piedmont Common Stock subsequent to such day and no later than the close of business on the day prior to the Shareholders’ Meeting. In order to be effective, an Election Form must be received by the Exchange Agent (as defined below), on or before 5:00 p.m., Atlanta, Georgia Time, on the business day prior to the Shareholders’ Meeting (or such other time and date as Private and Piedmont may mutually agree) (the “Election Deadline”); provided, however that the Election Deadline may not occur on or after the Closing Date. An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more certificates theretofore representing Piedmont Common Stock (“Certificate(s)”) (or customary affidavits and, if required by Private pursuant to Section 2.1(a), indemnification regarding the loss or destruction of such Certificates or the guaranteed delivery of such Certificates) representing all shares of Piedmont Common Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. Subject to the terms of this Agreement and the Election Form, the Exchange Agent shall have reasonable discretion to determine whether any election has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive. All elections will be revocable until the Election Deadline and thereafter shall be irrevocable.

 

(iii) Each Election Form shall entitle the holder of shares of Piedmont Common Stock (or the beneficial owner through appropriate and customary documentation and instructions) to (i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”), (ii) elect to receive the Stock Consideration for all of such holder’s shares (a “Stock Election”), (iii) elect to receive the Cash Consideration with respect to some of such holder’s shares and the Stock Consideration with respect to such holder’s remaining shares (a “Mixed Election”), or (iv) make no election or indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a “Non-Election”). Shares of Piedmont Common Stock as to which a valid Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” The aggregate number of shares of Piedmont Common Stock as to which a valid Cash Election is made is referred to herein as the “Cash Election Number.” Shares of Piedmont Common Stock as to which a valid Stock Election has been made (including pursuant to a Mixed Election)

 

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are referred to herein as “Stock Election Shares.” The aggregate number of shares of Piedmont Common Stock as to which a valid Stock Election is made is referred to herein as the “Stock Election Number.” Shares of Piedmont Common Stock as to which a Non-Election is deemed in effect are referred to as “Non-Election Shares.” All shares of Piedmont Common Stock of a holder whose properly completed Election Form is not received by the Exchange Agent prior to the Election Deadline shall be deemed to be Non-Election Shares. If the Exchange Agent shall have determined that any purported election was not properly made, such purported election shall be deemed to be of no force and effect and the shares of Piedmont Common Stock subject to such purported election shall for purposes hereof be deemed to be Non-Election Shares.

 

(j) Proration Procedures. As soon as practicable after the Election Deadline, Private shall cause the Exchange Agent to effect the allocation among holders of Piedmont Common Stock of rights to receive the Cash Consideration and the Stock Consideration as follows:

 

(i) If the Stock Election Number exceeds the Stock Conversion Number, then:

 

(A) all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and

 

(B) each holder of Stock Election Shares shall have the right to receive:

 

(1) the number of shares of Private Common Stock equal to the product obtained by multiplying (a) the number of Stock Election Shares held by such holder by (b) the Exchange Ratio by (c) a fraction (rounded to four decimal places) the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number (the “Stock Proration Factor”), and

 

(2) cash in an amount equal to the product obtained by multiplying (a) the number of Stock Election Shares held by such holder by (b) the Cash Consideration by (c) one minus the Stock Proration Factor.

 

(ii) If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the Non-Election Shares and Cash Election Shares shall be treated in the following manner:

 

(A) if the Shortfall Number is less than or equal to the number of Non-Election Shares, then:

 

(1) all Cash Election Shares shall be converted into the right to receive the Cash Consideration; and

 

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(2) each holder of Non-Election Shares shall have the right to receive (a) the number of shares of Private Common Stock equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) the Exchange Ratio by (z) a fraction (rounded to four decimal places) the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares (the “Non-Election Proration Factor”) and (b) cash in an amount equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) the Cash Consideration by (z) one minus the Non-Election Proration Factor; or

 

(B) if the Shortfall Number exceeds the number of Non-Election Shares, then:

 

(1) all Non-Election Shares shall be converted into the right to receive the Stock Consideration; and

 

(2) each holder of Cash Election Shares shall have the right to receive (a) the number of shares of Private Common Stock equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) the Exchange Ratio by (z) a fraction (rounded to four decimal places) the numerator of which is the amount by which the Shortfall Number exceeds the number of Non-Election Shares and the denominator of which is the Cash Election Number (the “Cash Proration Factor”) and (b) cash in an amount equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) the Cash Consideration by (z) one minus the Cash Proration Factor.

 

(iii) Notwithstanding the foregoing, but subject to Section 5.22(d), Private may, in its sole discretion, direct at any time prior to the Effective Time that the proration procedures provided in this subsection (e) not be implemented.

 

Section 1.7 The Closing. Consummation of the transactions contemplated by this Agreement shall take place at a closing (the “Closing”) to be held upon the satisfaction or waiver of all of the conditions to the Merger set forth herein, which Closing shall take place at 10:00 a.m., local time, at the office of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on a date mutually agreeable to the parties hereto, but in no event later than the five (5) business day after all of the conditions to the Merger set forth herein have been satisfied or waived, unless the parties mutually agree to another date (hereinafter referred to as the “Closing Date”).

 

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ARTICLE II

 

EXCHANGE OF CERTIFICATES

 

Section 2.1 Exchange of Piedmont Common Stock. (a) Surrender of Certificates. As soon as practicable after the Effective Time but in no event later than five (5) business days following the Effective Time, LaSalle Bank, N.A. or such other firm selected by Private and reasonably acceptable to Piedmont (the “Exchange Agent”), pursuant to documentation reasonably acceptable to Private and Piedmont consistent with the terms hereof, shall mail to each holder of record of a Certificate who did not previously submit a properly completed Election Form together with duly executed transmittal materials prior to the Election Deadline: (i) a form letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or a lost certificate affidavit and bond in a form reasonably acceptable to the Exchange Agent) to the Exchange Agent; and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration (in the form or forms determined in accordance with the provisions of Section 1.6). Upon surrender of a Certificate for cancellation to the Exchange Agent (or a lost certificate affidavit and bond in a form reasonably acceptable to the Exchange Agent), together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive, in exchange therefor, (i) a certificate evidencing the whole number of shares of Private Common Stock into which the shares of Piedmont Common Stock, theretofore represented by the Certificate so surrendered, shall have been converted pursuant to the provisions of Section 1.6, if any, plus (ii) a check for the aggregate amount of cash, without interest, which such holder would be entitled to receive pursuant to Section 1.6, if any, including any cash amount payable in lieu of fractional shares in accordance with Section 2.1(c). Certificates so surrendered shall be cancelled. Private shall direct the Exchange Agent to make such deliveries within five (5) business days of the receipt of all required documentation. If any Private Common Stock to be exchanged for shares of Piedmont Common Stock is to be delivered in a name other than that in which the Certificate surrendered for exchange is registered, it shall be a condition to the exchange that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer, that all signatures shall be guaranteed by a member firm of any national securities exchange in the United States or the National Association of Securities Dealers, Inc., or by a commercial bank or trust company or other financial institution acceptable to Private having an office in the United States, and that the person requesting the payment shall either (a) pay to the Exchange Agent any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or (b) establish to the satisfaction of the Exchange Agent that such taxes have been paid or are not payable. From and after the Effective Time, there shall be no transfers on the stock transfer books of Piedmont of any shares of Piedmont Common Stock outstanding immediately prior to the Effective Time and any such shares of Piedmont Common Stock presented to the Exchange Agent shall be cancelled in exchange for the Merger Consideration payable with respect thereto as provided in Section 1.6 above.

 

(b) Failure to Exchange Piedmont Common Stock. No dividends or other distributions declared after the Effective Time with respect to Private Common Stock payable to the holders of record thereof after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to Private Common Stock represented thereby and no cash

 

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payment in lieu of fractional shares shall be paid to any holder until the holder of record shall surrender such Certificate. Subject to the effect, if any, of applicable law, after the subsequent surrender and exchange of a Certificate, the holder thereof shall be entitled to receive any such dividends or distributions, without interest thereon, which theretofore became payable with respect to the Private Common Stock represented by such Certificate. All dividends or other distributions declared on or after the Effective Time with respect to the Private Common Stock and payable to the holders of record thereof on or after the Effective Time which are payable to the holder of a Certificate not theretofore surrendered and exchanged for Private Common Stock pursuant to this Section 2.1(b) shall be paid or delivered by Private to the Exchange Agent, in trust, for the benefit of such holders. All such dividends and distributions held by the Exchange Agent for payment or delivery to the holders of unsurrendered Certificates unclaimed at the end of one (1) year from the Effective Time shall be repaid or redelivered by the Exchange Agent to Private after which time any holder of Certificates who has not theretofore surrendered such Certificates to the Exchange Agent, subject to applicable law, shall look only to Private for payment or delivery of such dividends or distributions, as the case may be. Any shares of Private Common Stock or other consideration delivered or made available to the Exchange Agent pursuant to this Section 2.1(b) and not exchanged for Certificates within one (1) year after the Effective Time shall be returned by the Exchange Agent to Private which shall thereafter act as exchange agent subject to the rights of holders of unsurrendered Certificates hereunder.

 

(c) Fractional Shares. No certificates or scrip representing fractional shares of Private Common Stock shall be issued upon the surrender or exchange of Certificates, no dividend or distribution of Private shall relate to any fractional share, and such fractional share interests will not entitle the owner thereof to vote or assert any rights of a stockholder of Private. In lieu of any fractional share of Private Common Stock, Private shall cause to be paid to each holder of shares of Piedmont Common Stock who otherwise would be entitled to receive a fractional share of Private Common Stock an amount of cash, rounded to the nearest cent (without interest), equal to the product of such fraction multiplied by the Private Closing Price.

 

(d) Escheat. Notwithstanding anything in this Agreement to the contrary, neither the Exchange Agent nor any party hereto shall be liable to a former holder of Piedmont Common Stock for any consideration delivered to a public official pursuant to applicable escheat or abandoned property laws.

 

 

(e) Exchange Fund. On the date the Effective Time occurs, Private shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of the holders of Piedmont Common Stock, for exchange in accordance with the terms of this Agreement, an aggregate amount of cash, sufficient to pay the aggregate Cash Consideration payable pursuant to Section 1.6 of this Agreement (plus an additional amount of cash sufficient to cover amounts payable in lieu of any fractional shares of Piedmont Common Stock) (the “Exchange Fund”).

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF PIEDMONT

 

Except as disclosed in the disclosure schedule (the “Piedmont Disclosure Schedule”) delivered by Piedmont to Private prior to the execution of this Agreement (which schedule sets

 

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forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article III, or to one or more of Piedmont’s covenants contained herein, provided, however, the mere inclusion of an item in such schedule as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would be reasonably likely to have a Material Adverse Effect (as defined in Section 3.1) on Piedmont), Piedmont represents and warrants to Private that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Effective Date (as though made then and as though the Effective Date were substituted for the date of this Agreement throughout this Article III), subject to the standard set forth below in this paragraph, and except as to any representation or warranty which specifically relates to a specified date, which only need be so correct as of such specified date. No representation or warranty of Piedmont contained in this Article III shall be deemed not complete, untrue or incorrect, and Piedmont shall not be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances has had, or is reasonably likely to have, a Material Adverse Effect with respect to Piedmont, disregarding for these purposes (x) any qualification or exception for, or reference to, materiality in any such representation or warranty and (y) any use of the terms “material”, “materially”, “in all material respects”, “Material Adverse Effect” or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply (a) as of the date of this Agreement to representations and warranties contained in Sections 3.1(a) (except as to the licensing and qualification in other jurisdictions), 3.1(b), 3.1(c) (except as to the licensing and qualification in other jurisdictions), 3.2 (except as provided in subparagraphs (c) and (d)), 3.4(a), 3.5, 3.6, 3.13(c)(ii) and (viii), 3.13(f), 3.13(g), 3.15(a) and 3.20(a), which representations and warranties shall be deemed not complete, untrue, incorrect and breached only if they are not complete, true and correct in all material respects as of such date based upon the standards and qualifications contained therein and (b) at any time to the representations and warranties under Sections 3.2 (as to outstanding shares of Piedmont Common Stock, shares of Piedmont Preferred Stock, options and warrants), 3.3, 3.10, 3.24 and 3.30, which representations and warranties shall be true and correct in all material respects at all times.

 

Section 3.1 Corporate Organization.

 

(a) Piedmont is a corporation organized and validly existing under the laws of the State of Georgia. Piedmont has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect (as defined below) on Piedmont or the Bank. Piedmont is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”). True and complete copies of the Articles of Incorporation and Bylaws of Piedmont, as in effect as of the date of this Agreement have been provided to Private. As used in this Agreement, the term “Material Adverse Effect” means with respect to Piedmont and the Bank, any effect that (1) is or is reasonably likely to be material and adverse to the financial

 

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condition, business or results of operations of Piedmont and the Bank taken as a whole or (2) would prevent or materially impair the ability of such person to perform its obligations under this Agreement or to consummate the transactions contemplated hereby in accordance with the terms of this Agreement; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (i) changes in banking and other laws of general applicability or interpretations thereof by courts or Governmental Authorities (as defined below), (ii) changes in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally, (iii) this Agreement and the transactions contemplated hereby and the announcement hereof, (iv) actions or omissions of Piedmont taken with the prior written consent of Private, (v) changes attributable to or resulting from changes in general economic conditions affecting similarly situated banks, saving institutions or their holding companies generally and (vi) any modifications or changes to valuation policies and practices of Piedmont or any of its subsidiaries in connection with the Merger or restructuring charges, in each case taken with the prior written approval of Private, in connection with the Merger, in each case in accordance with GAAP.

 

(b) As of the date of this Agreement, the Bank is Piedmont’s sole wholly-owned, direct subsidiary. The Bank has no subsidiaries. Except as set forth in Schedule 3.1(b) of the Piedmont Disclosure Schedules, Piedmont does not own or hold any options, warrants, calls or commitments of any character relating to, any voting or non-voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, other than the Bank.

 

(c) The Bank is duly organized and validly existing as a banking corporation under the laws of the State of Georgia. The Bank is an “insured depository institution” as defined in the Federal Deposit Insurance Act (the “FDI Act”) and applicable regulations thereunder, the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”) through the Bank Insurance Fund to the full extent permitted under applicable laws. The Bank (i) is qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified except where the failure to be so qualified would not have a Material Adverse Effect on Piedmont or the Bank, and (ii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. Except as set forth in Schedule 3.1(c) of the Piedmont Disclosure Schedules, the Bank does not own, or hold any options, warrants, calls or commitments of any character relating to, any voting or non-voting stock or equity securities of any bank, corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated.

 

Section 3.2 Capitalization and Shareholders. (a) As of the date hereof, the authorized, issued and outstanding capital stock of Piedmont consists of the following:

 

Class of Stock	Par Value	Authorized	Issued	Outstanding	Treasury
Common	$1.00	10,000,000	1,073,000	1,073,000	0
Preferred	1.00	5,000,000	260,870	260,870	0

(b) All of the issued and outstanding shares of Piedmont Common Stock and Piedmont Preferred Stock have been duly and validly authorized and issued, and are fully paid

 

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and non-assessable. None of the outstanding shares of Piedmont Common Stock and Piedmont Preferred Stock were issued in violation of any preemptive rights of the current or past shareholders of Piedmont, and, there exist no prior rights of any party to acquire such shares. All of the issued and outstanding shares of Piedmont Common Stock as of the relevant record date will be entitled to vote to adopt the Agreement and Certificate of Amendment, and all of the issued and outstanding shares of Piedmont Preferred Stock as of the relevant record date will be permitted to vote to adopt the Certificate of Amendment.

 

(c) As of the date hereof, Piedmont has 315,000 shares of Piedmont Common Stock reserved for issuance under the stock option plans for the benefit of employees and directors of Piedmont and the Bank (the “Piedmont Option Plans”) pursuant to which options covering an aggregate of 267,500 shares of Piedmont Common Stock are outstanding as of the date hereof with an average exercise price of $11.57 per share. As of the date hereof, all of the shares of Piedmont Common Stock authorized to be issued under the Piedmont Option Plans have been awarded, vested and distributed, except as set forth on Schedule 3.2(c) of the Piedmont Disclosure Schedule. As of the date hereof, there were warrants to purchase an aggregate of 110,000 shares of Piedmont Common Stock outstanding at a price of $10.00 per share. Except as set forth in Section 3.2(a), this Section 3.2(c) and Schedule 3.2(c) of the Piedmont Disclosure Schedule, there are no shares of capital stock or other equity securities of Piedmont outstanding and no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of Piedmont, or contracts, commitments, understandings, or arrangements by which Piedmont is or may be bound to issue additional shares of its capital stock or options, warrants, or rights to purchase or acquire any additional shares of its capital stock. Each outstanding option and warrant is exercisable or will be exercisable as of the date set forth on Schedule 3.2(c) of the Piedmont Disclosure Schedule and has an exercise price in the amount set forth on Schedule 3.2(c) of the Piedmont Disclosure Schedule.

 

(d) Schedule 3.2(d) of the Piedmont Disclosure Schedule accurately identifies the names and addresses of all of the shareholders who, to Piedmont’s knowledge (as defined below), beneficially own more than 5% of the outstanding shares of Piedmont Common Stock or the right to acquire more than 5% of the outstanding shares of Piedmont Common Stock and/or of shares of Piedmont Preferred Stock, and the number of shares of Piedmont Common Stock and Piedmont Preferred Stock held by each such shareholder and by each director and senior officer of Piedmont. From the date hereof until the Effective Time, Piedmont shall, upon request, provide Private with (i) a complete list of all of its shareholders of record, including the names, addresses and number of shares of Piedmont Common Stock and Piedmont Preferred Stock held by each shareholder, and (ii) any correspondence between Piedmont and any shareholder of Piedmont.

 

(e) Except as set forth on Schedule 3.2(e) of the Piedmont Disclosure Schedules, no capital stock of the Bank is or may become required to be issued (other than to Piedmont) by reason of any options, warrants, scrip, rights to subscribe to, calls, or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of the Bank. There are no contracts, commitments, understandings or arrangements relating to the rights of Piedmont to vote or to dispose of shares

 

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of the capital stock of the Bank. All of the shares of capital stock of the Bank held by Piedmont have been duly and validly authorized and issued, are fully paid and non-assessable, and are owned by Piedmont free and clear of any claim, lien or encumbrance.

 

Section 3.3 Authority. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby have been duly approved and authorized by Piedmont’s Board of Directors, and all necessary corporate action on the part of Piedmont (except for the Requisite Shareholder Approval) has been taken. This Agreement has been duly executed and delivered by Piedmont and, subject to the approval of the shareholders of Piedmont and any federal or state governmental authority or regulatory agency as may be required by applicable law (the “Governmental Authorities”), will constitute the valid and binding obligations of Piedmont, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles and doctrines. Except as set forth on Schedule 3.3 of the Piedmont Disclosure Schedules, neither the Articles of Incorporation nor the Bylaws of Piedmont will need to be amended to effectuate the transactions contemplated by this Agreement.

 

Section 3.4 Conflicts. The execution and delivery of this Agreement by Piedmont does not, and the consummation of the transactions contemplated hereby will not (a) conflict with or result in any violation of the respective Articles of Incorporation or Bylaws of Piedmont or the Bank, or (b) conflict with or result in any violation, breach or termination of, or default or loss of a material benefit under, or permit the acceleration of, any obligation or result in the creation of any material lien, charge or encumbrance on any of the property or assets under any provision of any mortgage, indenture, lease, agreement or other instrument, permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Piedmont or the Bank or their respective properties, other than any such conflicts, violations or defaults which (i) individually or in the aggregate do not have a Material Adverse Effect on Piedmont or the Bank, or (ii) will be cured, by valid amendment or otherwise, or waived prior to the Effective Time. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required by or with respect to Piedmont or the Bank in connection with the execution and delivery of this Agreement, or the consummation by Piedmont or the Bank of the transactions contemplated hereby, the absence of which would have a Material Adverse Effect, except for those relating to: any application or notice with the Governmental Authorities; the Private’s Registration Statement to be filed with the SEC; the filing of the Certificates of Merger with the Secretaries of State; and any antitrust filings, consents, waivers or approvals.

 

Section 3.5 Financial Statements. True, correct and complete copies of the following financial statements (collectively referred to as the “Piedmont Financial Statements”) have been provided to Private:

 

(a) the audited consolidated Balance Sheet of Piedmont for the fiscal years ended December 31, 2005 and 2004, and the related consolidated Statements of Income, Statements of Comprehensive Income, Statements of Stockholders’ Equity, and Statements of Cash Flows for the fiscal years then ended;

 

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(b) the Bank’s Call Report for the twelve month period ended December 31, 2005;

 

(c) Piedmont’s FR-Y9 as of December 31, 2005 as filed with the FRB (as hereafter defined); and

 

(d) unaudited consolidated Statement of Income of Piedmont for the period commencing January 1, 2006 and ending June 30, 2006 and an unaudited consolidated balance sheet as of such period end.

 

The financial statements described in clause (a) have been prepared in conformity with United States generally accepted accounting principles (“GAAP”) consistently applied and fairly present the consolidated financial condition and results of operations of Piedmont and the Bank at the date and for the period presented. The financial statements described in clauses (b) and (c) above have been prepared on a basis consistent with Piedmont’s past accounting practices and as required by applicable rules and regulations. The financial statements described in clause (d) have been prepared in conformity with GAAP applied on a basis consistent with the preparation of the Piedmont Financial Statements described in clauses (a) through (c) above, subject to normal audit and year-end adjustments and need not include notes; provided that such Statement of Income shall reflect adjustments so as to exclude the effects of expenses attributable to this Agreement and the transactions contemplated hereby.

 

Section 3.6 Absence of Certain Changes or Events.

 

(a) Except as set forth in Schedule 3.6(a) of the Piedmont Disclosure Schedules, since December 31, 2005, no event has occurred which has had a Material Adverse Effect on Piedmont or the Bank or, to Piedmont’s “knowledge” (as defined below), no event has occurred which is reasonably likely to have a Material Adverse Effect on Piedmont or the Bank.

 

(b) For purposes of this Agreement, “Piedmont’s knowledge”, “knowledge of Piedmont” or words of similar effect means the actual knowledge, after due inquiry, of any one of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.

 

(c) Except as set forth in Schedule 3.6(c) of the Piedmont Disclosure Schedules, since December 31, 2005, Piedmont and the Bank have conducted their respective businesses in all material respects in the ordinary and usual course consistent with past practice and, since the date of this Agreement, consistent with the restrictions set forth in Section 5.2.

 

Section 3.7 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the audited Consolidated Balance Sheet of Piedmont for the fiscal year ended December 31, 2005, liabilities disclosed in Schedule 3.7 of the Piedmont Disclosure Schedules, liabilities less than $50,000 individually or $100,000 in the aggregate, and liabilities incurred in the ordinary course of business consistent with past practice, since December 31, 2005, Piedmont and the Bank, to the knowledge of Piedmont, have not incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due).

 

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Section 3.8 Consents and Approvals. Except as set forth on Schedule 3.8 of the Piedmont Disclosure Schedules, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other Governmental Authority are necessary in connection with the execution and delivery by Piedmont of this Agreement and the consummation by Piedmont of the Merger and the other transactions contemplated hereby except for (a) the filing of applications with the Board of Governors of the Federal Reserve System or the appropriate Federal Reserve Bank (the “FRB”), the Securities and Exchange Commission (“SEC”) and the Georgia Department of Banking and Finance (“GDBF”) and the approval of such applications by the FRB, SEC and GDBF (the “Regulatory Applications”), and (b) the filing of the Certificates of Merger with the Secretaries of State under the DGCL and the GBCC.

 

Section 3.9 Reports. (a) Piedmont and the Bank have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file during the five (5) years preceding the date hereof with (i) the FRB, (ii) the FDIC, (iii) the GDBF, (iv) any state regulatory authority, and (v) any self-regulatory organization with jurisdiction over any of the activities of Piedmont or the Bank, and all other reports and statements required to be filed by them, including, without limitation, any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, or any Governmental Authority (the “Piedmont Reports”), and have paid all fees and assessments due and payable in connection therewith, except where the failure to file such report, registration or statement or to pay such fees and assessments will not have a Material Adverse Effect on Piedmont or the Bank. As of their respective filing dates, each of the Piedmont Reports (after giving effect to any amendments thereto), including the financial statements, exhibits, and schedules thereto, complied in all material respects with the applicable provisions of the statutes, rules, and regulations enforced or promulgated by the Governmental Authority with which they were filed. To the knowledge of Piedmont, none of the Piedmont Reports contained any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Neither Piedmont nor the Bank is subject to any cease-and-desist or other similar order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by any Governmental Authority that currently restricts the conduct of its business or that relates to its capital adequacy, compliance with laws, its credit policies, its management or its business (each a “Piedmont Regulatory Agreement”), and neither Piedmont nor the Bank has been advised during the five (5) years preceding the date hereof by any Governmental Authority that it is considering issuing or requesting any such Piedmont Regulatory Agreement.

 

(b) Except for examinations or reviews conducted by the Regulatory Agencies in the ordinary course of the business of Piedmont or the Bank, no federal, state or local governmental agency, commission or other entity has initiated any proceeding or, to the knowledge of Piedmont, investigation into the business or operations of Piedmont or the Bank within the past five (5) years nor, to the knowledge of Piedmont, has any such proceedings or investigation been threatened or is currently pending. Except as disclosed in Schedule 3.9(b) of the Piedmont Disclosure Schedules, there is no unresolved violation, criticism or exception noted by any Governmental Authority with respect to any Piedmont Report other than those that have

 

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not had and are not expected to have a Material Adverse Effect on the business of Piedmont or the Bank that is subject to the Governmental Authority.

 

Section 3.10 Broker’s Fees; Other Transaction Fees. (a) Other than the financial advisory services performed for Piedmont by FIG Partners, neither Piedmont nor the Bank, nor any of their respective shareholders, officers, directors, employees or agents, has employed a broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions, or finder’s fees, and no broker or finder has acted directly or indirectly for Piedmont or the Bank in connection with this Agreement or the transactions contemplated hereby. A copy of Piedmont’s agreement with FIG Partners has been made available to Private and the fee payable under such agreement is included in Schedule 3.10 of the Piedmont Disclosure Schedules. No other action has been taken by Piedmont or the Bank that would give rise to any claim by any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated by this Agreement.

 

(b) There are no fees and expenses paid, incurred or expected to be incurred by Piedmont or the Bank for legal, investment banking, accounting and other professional services received in connection with this Agreement or any of the transactions contemplated hereby, except (i) the fees set forth in Section 3.10(a) above, (ii) the reasonable accounting fees of ▇▇▇▇▇ ▇▇▇▇▇▇ PLLC, and (iii) the reasonable legal fees of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC billed at an hourly rate.

 

Section 3.11 Legal Proceedings; Defaults. Except as set forth on Schedule 3.11 of the Piedmont Disclosure Schedules: