Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 15, 2009
BY AND AMONG
MIDATLANTIC BANCORP, INC.
GAF MERGER CORP.
AND
GREATER ATLANTIC FINANCIAL CORP.
TABLE OF CONTENTS
Page Nos.
Introductory Statement 1
Article I Definitions.........................................................1
Article II The Merger..........................................................5
2.1 The Merger...................................................5
2.2 Closing......................................................5
2.3 Effective Time...............................................5
2.4 Effects of the Merger........................................5
2.5 Effect on Outstanding Shares of GAFC Common Stock............5
2.6 Payment Procedures...........................................6
2.7 Reserved.....................................................7
2.8 Directors of Surviving Corporation After Effective Time......7
2.9 Certificate of Incorporation and Bylaws......................7
2.10 Dissenters' Rights...........................................7
2.11 Alternative Structure........................................8
2.12 Absence of Control...........................................8
2.13 Treatment of Stock Options...................................8
Article III Representations and Warranties....................................8
3.1 Disclosure Letters...........................................8
3.2 Representations and Warranties of GAFC.......................8
3.3 Representations and Warranties of Acquisition Corp..........20
Article IV Conduct Pending the Merger........................................22
4.1 Forbearances by GAFC........................................22
4.2 Forbearances by Acquisition Corp............................24
Article V Covenants.........................................................24
5.1 Acquisition Proposals.......................................26
5.2 Advice of Changes...........................................25
5.3 Access and Information......................................25
5.4 Applications; Consents......................................26
5.5 Antitakeover Provisions.....................................26
5.6 Additional Agreements.......................................27
5.7 Publicity...................................................27
5.8 Stockholder Meeting.........................................27
5.9 Proxy Statement.............................................27
5.10 Notification of Certain Matters.............................28
5.11 Employee Benefit Matters....................................28
5.12 D&O Liability Coverage......................................28
5.13 Cooperation.................................................28
5.14 Greater Atlantic Capital Trust I............................28
5.15 Reston Branch Lease.........................................29
Article VI Conditions to Consummation........................................29
6.1 Conditions to Each Party's Obligations......................29
i
6.2 Conditions to the Obligations of Acquisition Cor............29
6.3 Conditions to the Obligations of GAFC.......................30
Article VII Termination.......................................................31
7.1 Termination.................................................31
7.2 Termination Fee.............................................31
7.3 Breach; Remedies............................................32
Article VIII Certain Other Matters...........................................32
8.1 Interpretation..............................................32
8.2 Survival....................................................33
8.3 Waiver; Amendment...........................................33
8.4 Counterparts................................................33
8.5 Governing Law...............................................33
8.6 Expenses....................................................33
8.7 Notices.....................................................33
8.8 Entire Agreement; etc.......................................34
8.9 Successors and Assigns; Assignment..........................34
Exhibits
A Form of Voting Agreement
ii
Agreement and Plan of Merger
This is an Agreement and Plan of Merger, dated as of the 15th day of June, 2009
("Agreement"), by and among MidAtlantic Bancorp, Inc., a Virginia corporation
("Acquisition Corp."), GAF Merger Corp., a Virginia corporation ("Acquisition
Sub") and Greater Atlantic Financial Corp., a Delaware corporation ("GAFC").
Introductory Statement
The Board of Directors of each of Acquisition Corp. and GAFC have determined
that this Agreement and the business combination and related transactions
contemplated hereby are advisable and in the best interests of Acquisition Corp.
or GAFC, as the case may be, and in the best long-term interests of the
stockholder of Acquisition Corp. or the stockholders of GAFC, as the case may
be.
Acquisition Corp. and GAFC each desire to make certain representations,
warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe various conditions to
such transactions.
As a condition and inducement to Acquisition Corp.'s willingness to enter into
this Agreement, each of the members of the Board of Directors of GAFC have
entered into an agreement dated as of the date hereof in the form of Exhibit A
pursuant to which he (or she) will vote his (or her) shares of GAFC Common Stock
in favor of this Agreement and the transactions contemplated hereby.
Acquisition Corp. and Acquisition Sub have been formed solely for the purpose of
effectuating the transactions contemplated by this Agreement.
In consideration of their mutual promises and obligations hereunder, the parties
hereto adopt and make this Agreement and prescribe the terms and conditions
hereof and the manner and basis of carrying it into effect, which shall be as
follows:
Article I
Definitions
For purposes of this Agreement:
Acquisition Proposal means any proposal or offer with respect to any of the
following (other than the transactions contemplated hereunder): (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction involving GAFC or any of its Subsidiaries; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 50% or more of
GAFC's consolidated assets in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 50% or more of the outstanding
shares of GAFC's capital stock or the filing of a registration statement under
the Securities Act of 1933, as amended, in connection therewith; or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in an any of the foregoing.
Acquisition Sub shall have the meaning given to that term in the preamble.
Acquisition Sub Common Stock means the common stock, par value $.01 per share of
Acquisition Sub.
1
Agreement means this Agreement, as amended, modified or amended and restated
from time to time in accordance with its terms.
Articles of Merger shall have the meaning given to that term in Section 2.3.
Certificate shall have the meaning given to that term in Section 2.6(b).
Closing shall have the meaning given to that term in Section 2.2.
Closing Date shall have the meaning given to that term in Section 2.2.
Confidentiality Agreement shall have the meaning given to that term in Section
5.1(a).
Continuing Employee shall have the meaning given to that term in Section
5.11(a).
CRA means the Community Reinvestment Act.
DGCL shall have the meaning given to that term in Section 2.1.
Disclosure Letter shall have the meaning given to that term in Section 3.1.
Dissenters' Shares shall have the meaning given to that term in Section 2.10.
Effective Time shall have the meaning given to that term in Section 2.3.
Environmental Consultant shall have the meaning given to that term in Section
5.13.
Environmental Law means any federal, state or local law, statute, ordinance,
rule, regulation, code, license, permit, authorization, approval, consent,
order, directive, executive or administrative order, judgment, decree,
injunction, or agreement with any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, soil, surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety as it relates to Hazardous
Materials, or (ii) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970 as it relates to Hazardous Materials, the Federal
Hazardous Substances Transportation Act, the Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water Act, the Endangered Species Act, the
National Environmental Policy Act, the Rivers and Harbors Appropriation Act or
any so-called "Superfund" or "Superlien" law, each as amended and as now in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate means any entity that is considered one employer with GAFC under
Section 4001(b)(1) of ERISA or Section 414 of the IRC.
2
Excluded Shares shall consist of (i) Dissenters' Shares and (ii) shares held
directly or indirectly by Acquisition Corp. (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted).
FDIA means the Federal Deposit Insurance Act, as amended.
FDIC means the Federal Deposit Insurance Corporation.
GAAP means generally accepted accounting principles.
GAF Acquisition Corp. shall have the meaning given to that term in the preamble.
GAF Merger Sub shall have the meaning given to that term in the preamble.
GAFC shall have the meaning given to that term in the preamble.
GAFC Bank shall have the meaning given to that term in Section 3.2(b)(iv).
GAFC Common Stock means the common stock, par value $1.00 per share, of GAFC.
GAFC Employee Plans shall have the meaning given to that term in Section
3.2(r)(i).
GAFC Property shall have the meaning given to that term in Section 5.13.
GAFC Qualified Plan shall have the meaning given to that term in Section
3.2(r)(iv).
GAFC's Reports shall have the meaning given to that term in Section 3.2(g).
GAFC Stock Option Plans shall have the meaning given to that term in Section
2.13.
Government Regulator means any federal or state governmental authority charged
with the supervision or regulation of depository institutions or depository
institution holding companies or engaged in the insurance of bank deposits.
Governmental Entity means any court, administrative agency or commission or
other governmental authority or instrumentality.
Hazardous Material means any substance (whether solid, liquid or gas) which is
or could be detrimental to human health or safety or to the environment,
currently or hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
HOLA means the Home Owners' Loan Act, as amended.
Intellectual Property shall have the meaning given to that term in Section
3.2(p).
IRC means the Internal Revenue Code of 1986, as amended.
3
IRS means the Internal Revenue Service.
knowledge means, with respect to a party hereto, actual knowledge of the members
of the Board of Directors of that party or any officer of that party with the
title ranking not less than senior vice president.
Letter of Transmittal shall have the meaning given to that term in Section
2.6(a).
Lien means any charge, mortgage, pledge, security interest, claim, lien or
encumbrance.
Loan means a loan, lease, advance, credit enhancement, guarantee or other
extension of credit.
Loan Property means any property in which the applicable party (or a subsidiary
of it) holds a security interest and, where required by the context, includes
the owner or operator of such property, but only with respect to such property.
Material Adverse Effect means an effect which is material and adverse to the
business, financial condition or results of operations of GAFC or Acquisition
Corp., as the context may dictate, and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from any (i) changes in laws,
rules or regulations or generally accepted accounting principles or regulatory
accounting requirements or interpretations thereof that apply to Acquisition
Corp. or GAFC, or to financial and/or depository institutions generally, (ii)
changes in economic conditions affecting financial institutions generally,
including but not limited to, changes in the general level of market interest
rates, (iii) actions and omissions of Acquisition Corp. or GAFC taken with the
prior written consent of the other or (iv) direct effects of compliance with
this Agreement on the operating performance of the parties, including expenses
incurred by the parties in consummating the transactions contemplated by this
Agreement, shall not be considered in determining if a Material Adverse Effect
has occurred.
Merger shall have the meaning given to that term in Section 2.1.
Merger Consideration shall have the meaning given to that term in Section
2.5(a).
OTS means the Office of Thrift Supervision.
Participation Facility means any facility in which the applicable party (or a
Subsidiary of it) participates in the management (including all property held as
trustee or in any other fiduciary capacity) and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
Paying Agent shall have the meaning given to that term in Section 2.6(c).
person means an individual, corporation, limited liability company, partnership,
association, trust, unincorporated organization or other entity.
Proxy Statement shall have the meaning given to that term in Section 5.9(a).
SEC means the U.S. Securities and Exchange Commission.
Stockholder Meeting shall have the meaning given to that term in Section 5.8.
4
Subsidiary means a corporation, partnership, joint venture or other entity in
which GAFC or Acquisition Corp., as the case may be, has, directly or
indirectly, an equity interest representing 50% or more of any class of the
capital stock thereof or other equity interests therein.
Surviving Corporation shall have the meaning given to that term in Section 2.1.
Taxes means all income, franchise, gross receipts, real and personal property,
real property transfer and gains, wage and employment taxes.
Article II
The Merger
2.1 The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, Acquisition Sub will merge with and into GAFC (the "Merger") at the
Effective Time. At the Effective Time, the separate corporate existence of
Acquisition Sub shall cease. GAFC shall be the surviving corporation
(hereinafter sometimes referred to in such capacity as the "Surviving
Corporation") in the Merger and shall continue to be governed by the Delaware
General Corporation Law ("DGCL") and its separate corporate existence, with all
of its rights, privileges, immunities, powers and franchises, shall continue
unaffected by the Merger.
2.2 Closing. The closing of the Merger (the "Closing") will take place by the
electronic (PDF), facsimile or overnight courier exchange of executed documents
or at a location and at a time as agreed to by the parties hereto on the date
designated by Acquisition Corp. following satisfaction or waiver of the
conditions to Closing set forth in Article VI (other than those conditions that
by their nature are to be satisfied at the Closing).
2.3 Effective Time. In connection with the Closing, Acquisition Sub and GAFC
shall duly execute and deliver articles of merger (the "Articles of Merger") to
the Delaware Secretary of State for filing pursuant to the DGCL. The parties
will make all other filings or recordings required under the laws of Delaware.
The Merger shall become effective at such time as the Articles of Merger are
duly filed or at such later date or time as Acquisition Corp. and GAFC agree and
specify in the Articles of Merger (the date and time the Merger becomes
effective being the "Effective Time").
2.4 Effects of the Merger. The Merger will have the effects set forth in the
DGCL. Without limiting the generality of the foregoing, and subject thereto,
from and after the Effective Time, Acquisition Sub shall possess all of the
properties, rights, privileges, powers and franchises of GAFC and be subject to
all of the debts, liabilities and obligations of GAFC.
2.5 Effect on Outstanding Shares of GAFC Common Stock.
(a) By virtue of the Merger, automatically and without any action on the
part of the holder thereof, each share of GAFC Common Stock issued and
outstanding at the Effective Time, other than Excluded Shares, shall become and
be converted into the right to receive $0.10 in cash without interest (the
"Merger Consideration").
(b) As of the Effective Time, each Excluded Share, other than Dissenters'
Shares, shall be canceled and retired and shall cease to exist, and no payment
shall be made with respect thereto. All shares of GAFC Common Stock that are
held by Acquisition Corp., if any, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted, shall be canceled
and shall constitute authorized but unissued shares. In addition, no Dissenters'
Shares shall be converted into the Merger Consideration but instead shall be
treated in accordance with the provisions set forth in Section 2.10 of this
Agreement.
5
2.6 Payment Procedures.
(a) Appropriate transmittal materials ("Letter of Transmittal") in a form
satisfactory to Acquisition Corp. and GAFC shall be mailed as soon as
practicable after the Effective Time to each holder of record of GAFC Common
Stock as of the Effective Time. A Letter of Transmittal will be deemed properly
completed only if accompanied by certificates representing all shares of GAFC
Common Stock to be converted thereby.
(b) At and after the Effective Time, each certificate ("Certificate")
previously representing shares of GAFC Common Stock (except as specifically set
forth in Section 2.5) shall represent only the right to receive the Merger
Consideration.
(c) Prior to the Effective Time, Acquisition Corp. shall deposit, or cause
to be deposited, with a bank, trust company, transfer agent and registrar or
other similar entity selected by Acquisition Corp. and consented to by GAFC,
whose consent shall not unreasonably be withheld, which shall act as paying
agent (the "Paying Agent") for the benefit of the holders of shares of GAFC
Common Stock, for exchange in accordance with this Section 2.6, an amount of
cash sufficient to pay the aggregate Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent, (ii) be in a form and contain
any other provisions as Acquisition Corp. may reasonably determine and (iii)
include instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon the proper surrender of the
Certificates to the Paying Agent, together with a properly completed and duly
executed Letter of Transmittal, the holder of such Certificates shall be
entitled to receive in exchange therefor a check in the amount equal to the cash
that such holder has the right to receive pursuant to Section 2.5. Certificates
so surrendered shall forthwith be canceled. As soon as practicable following
receipt of the properly completed Letter of Transmittal and any necessary
accompanying documentation, the Paying Agent shall distribute the Merger
Consideration as provided herein. If there is a transfer of ownership of any
shares of GAFC Common Stock not registered in the transfer records of GAFC, the
Merger Consideration shall be issued to the transferee thereof if the
Certificates representing such GAFC Common Stock are presented to the Paying
Agent, accompanied by all documents required, in the reasonable judgment of
Acquisition Corp. and the Paying Agent, to evidence and effect such transfer and
to evidence that any applicable stock transfer Taxes have been paid.
(e) The stock transfer books of GAFC shall be closed immediately upon the
Effective Time and from and after the Effective Time there shall be no transfers
on the stock transfer records of GAFC of any shares of GAFC Common Stock. If,
after the Effective Time, Certificates are presented to Acquisition Corp., they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 2.6.
(f) Any portion of the aggregate amount of cash to be paid pursuant to
Section 2.5 or any proceeds from any investments thereof that remains unclaimed
by the stockholders of GAFC for six months after the Effective Time shall be
repaid by the Paying Agent to Acquisition Corp. upon the written request of
Acquisition Corp. After such request is made, any stockholders of GAFC who have
not theretofore complied with this Section 2.6 shall look only to Acquisition
Corp. for the Merger Consideration deliverable in respect of each share of GAFC
Common Stock such stockholder holds, as determined pursuant to Section 2.5 of
this Agreement, without any interest thereon. If outstanding Certificates are
not surrendered prior to the date on which such payments would otherwise escheat
to or become the property of any governmental unit or agency, the unclaimed
items shall, to the extent permitted by any abandoned property, escheat or other
applicable laws, become the property of Acquisition Corp. (and, to the extent
6
not in its possession, shall be paid over to it), free and clear of all claims
or interest of any person previously entitled to such claims. Notwithstanding
the foregoing, neither the Paying Agent nor any party to this Agreement (or any
affiliate thereof) shall be liable to any former holder of GAFC Common Stock for
any amount delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) Acquisition Corp. and the Paying Agent shall be entitled to rely upon
GAFC's stock transfer books to establish the identity of those persons entitled
to receive the Merger Consideration, which books shall be conclusive with
respect thereto. In the event of a dispute with respect to ownership of stock
represented by any Certificate, Acquisition Corp. and the Paying Agent shall be
entitled to deposit any Merger Consideration represented thereby in escrow with
an independent third party and thereafter be relieved with respect to any claims
thereto.
(h) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Paying Agent or Acquisition
Corp., the posting by such person of a bond in such amount as the Paying Agent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof pursuant to Section 2.5.
2.7 Reserved
2.8 Directors of Surviving Corporation After Effective Time. Immediately after
the Effective Time, until their respective successors are duly elected or
appointed and qualified, the directors of the Surviving Corporation shall
consist of the directors of Acquisition Sub serving immediately prior to the
Effective Time.
2.9 Articles of Incorporation and Bylaws. The articles of incorporation of
Acquisition Sub, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation of GAFC until thereafter amended in accordance
with applicable law. The bylaws of GAFC, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law.
2.10 Dissenters' Rights. Notwithstanding any other provision of this Agreement
to the contrary, shares of GAFC Common Stock that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
not voted in favor of the Merger and who shall have filed with GAFC a written
objection to the Merger at or before the Stockholder Meeting (collectively, the
"Dissenters' Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled to
receive payment of the fair value of such shares held by them in accordance with
the provisions of the Delaware General Corporation Law ("DGCL"), except that all
Dissenters' Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or otherwise lost their rights to payment of
the fair value of such shares under the DGCL shall thereupon be deemed to have
been converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Merger Consideration
upon surrender, in the manner provided in Section 2.6 of the GAFC Certificate(s)
that, immediately prior to the Effective Time, evidenced such shares. GAFC shall
give Acquisition Corp. (i) prompt notice of any written objections to the
Merger, attempted withdrawals of demands for payment and any other instruments
served pursuant to the DGCL and received by GAFC relating to Dissenters' Shares,
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to demands under the DGCL consistent with the obligations of GAFC
thereunder. GAFC shall not, except with prior written consent of Acquisition
Corp., (x) make any payment with respect to such demand, (y) offer to settle or
7
settle any demand for payment or (z) waive any failure to timely deliver a
written objection to the Merger or timely take any other action to perfect
dissenters' rights in accordance with the DGCL.
2.11 Alternative Structure. Notwithstanding anything to the contrary contained
in this Agreement, prior to the Effective Time, Acquisition Corp. may specify
that the structure of the transactions contemplated by this Agreement be revised
and the parties shall enter into such alternative transactions as Acquisition
Corp. may reasonably determine to effect the purposes of this Agreement;
provided, however, that such revised structure shall not (i) alter or change the
amount or kind of the Merger Consideration or (ii) adversely impede or delay the
receipt of any regulatory approval referred to in, or the consummation of the
transactions contemplated by, this Agreement. In the event that Acquisition
Corp. elects to make such a revision, the parties agree to execute appropriate
documents to reflect the revised structure.
2.12 Absence of Control. Subject to any specific provisions of this Agreement,
it is the intent of the parties hereto that Acquisition Corp. by reason of this
Agreement shall not be deemed (until consummation of the transactions
contemplated hereby) to control, directly or indirectly, GAFC or to exercise,
directly or indirectly, a controlling influence over the management or policies
of GAFC.
2.13 Treatment of Stock Options. Prior to the Effective Time, GAFC shall take
all action necessary to terminate each stock option plan of GAFC (the "GAFC
Stock Option Plans") and use its reasonable best efforts to obtain from each
stock option holder an agreement cancelling such person's outstanding stock
options as of the Effective Time.
Article III
Representations and Warranties
3.1 Disclosure Letters. Prior to the execution and delivery of this Agreement,
Acquisition Corp. and GAFC have each delivered to the other a letter (each, its
"Disclosure Letter") setting forth, among other things, facts, circumstances and
events the disclosure of which is required or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more of their respective representations and warranties (and
making specific reference to the Section of this Agreement to which they
relate).
3.2 Representations and Warranties of GAFC. GAFC represents and warrants to
Acquisition Corp. that, except as disclosed in GAFC's Disclosure Letter:
(a) Organization and Qualification. GAFC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is registered with the OTS as a savings and loan holding company. GAFC has
all requisite corporate power and authority to own, lease and operate its
properties and to conduct the business currently being conducted by it. GAFC is
duly qualified or licensed as a foreign corporation to transact business and is
in good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Affect on GAFC. GAFC engages only in activities (and holds properties only of
the types) permitted to savings and loan holding companies by the HOLA and the
rules and regulations of the OTS promulgated thereunder.
(b) Subsidiaries.
(i) GAFC's Disclosure Letter sets forth with respect to each of GAFC's
direct and indirect Subsidiaries its name, its jurisdiction of incorporation,
GAFC's percentage ownership, the number of shares of stock owned or controlled
8
by GAFC and the name and number of shares held by any other person who owns any
stock of the Subsidiary. GAFC owns of record and beneficially all the capital
stock of each of its Subsidiaries free and clear of any Liens. There are no
contracts, commitments, agreements or understandings relating to GAFC's right to
vote or dispose of any equity securities of its Subsidiaries. GAFC's ownership
interest in each of its Subsidiaries is in compliance with all applicable laws,
rules and regulations relating to equity investments by savings and loan holding
companies or federally chartered savings banks.
(ii) Each of GAFC's Subsidiaries is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and to conduct the business currently being conducted by it and is duly
qualified or licensed as a foreign corporation to transact business and is in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Effect on such Subsidiary.
(iii) The outstanding shares of capital stock of each Subsidiary have been
validly authorized and are validly issued, fully paid and nonassessable. No
shares of capital stock of any Subsidiary of GAFC are or may be required to be
issued by virtue of any options, warrants or other rights, no securities exist
that are convertible into or exchangeable for shares of such capital stock or
any other debt or equity security of any Subsidiary, and there are no contracts,
commitments, agreements or understandings of any kind for the issuance of
additional shares of capital stock or other debt or equity security of any
Subsidiary or options, warrants or other rights with respect to such securities.
(iv) No Subsidiary of GAFC other than Greater Atlantic Bank ("GAFC Bank")
is an "insured depository institution" as defined in the FDIA and the applicable
regulations thereunder. GAFC Bank's deposits are insured by the FDIC through the
Deposit Insurance Fund to the fullest extent permitted by law. GAFC Bank is a
member in good standing of the Federal Home Loan Bank of Atlanta.
(c) Capital Structure.
(i) The authorized capital stock of GAFC consists of 10,000,000 shares of
GAFC Common Stock and 2,500,000 shares of preferred stock.
(ii) As of the date of this Agreement:
(A) 3,024,220 shares of GAFC Common Stock are issued and outstanding, all
of which are validly issued, fully paid and nonassessable and were issued in
full compliance with all applicable laws and not in violation of any preemptive
rights and no shares of preferred stock are issued and outstanding.
(B) No shares of GAFC Common Stock are held in treasury by GAFC or
otherwise directly or indirectly owned by GAFC.
(C) 192,666 shares are reserved for issuance upon the exercise of options
outstanding under the GAFC Stock Option Plans or warrants to acquire GAFC Common
Stock.
(iii) No bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which stockholders of GAFC may vote are issued or
outstanding.
(iv) Except as set forth in this Section 3.2(c), as of the date of this
Agreement, (A) no shares of capital stock or other voting securities of GAFC are
issued, reserved for issuance or outstanding and (B) neither GAFC nor any of its
9
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, rights, convertible securities, commitments or agreements of
any character obligating GAFC or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional shares of capital
stock of GAFC or obligating GAFC or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, right, convertible security,
commitment or agreement. As of the date hereof, there are no outstanding
contractual obligations of GAFC or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of GAFC or any of its
Subsidiaries.
(d) Authority. GAFC has all requisite corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate actions
on the part of GAFC's Board of Directors, and no other corporate proceedings on
the part of GAFC are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement other than the approval and adoption
of this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of GAFC Common Stock. This Agreement has been duly and
validly executed and delivered by GAFC and constitutes a valid and binding
obligation of GAFC, enforceable against GAFC in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity.
(e) No Violations. The execution, delivery and performance of this
Agreement by GAFC do not, and the consummation of the transactions contemplated
by this Agreement will not, (i) assuming all required governmental approvals
have been obtained and the applicable waiting periods have expired, violate any
law, rule or regulation or any judgment, decree, order, governmental permit or
license to which GAFC or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) violate the certificate of incorporation or bylaws
of GAFC or the similar organizational documents of any of its Subsidiaries or
(iii) constitute a breach or violation of, or a default under (or an event
which, with due notice or lapse of time or both, would constitute a default
under), or result in the termination of, accelerate the performance required by,
or result in the creation of any Lien upon any of the properties or assets of
GAFC or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which GAFC or any of its Subsidiaries is
a party, or to which any of their respective properties or assets may be
subject.
(f) Consents and Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Entity or any third party are required to
be made or obtained in connection with the execution and delivery by GAFC of
this Agreement or the consummation by GAFC of the Merger and the other
transactions contemplated by this Agreement, except for filings of applications
and notices with, receipt of approvals or nonobjections from, and expiration of
the related waiting period required by, federal and state banking authorities.
As of the date hereof, GAFC has no knowledge of any reason pertaining to GAFC
why any of the approvals referred to in this Section 3.2(f) should not be
obtained without the imposition of any material condition or restriction
described in Section 6.1(b).
(g) Governmental Filings. GAFC and each of its Subsidiaries has filed all
reports, schedules, registration statements and other documents that it has been
required to file since September 30, 2006 with the SEC, OTS, the FDIC, or any
other Governmental Regulator (collectively, "GAFC's Reports"). No administrative
actions have been taken or, to the knowledge of GAFC, threatened or orders
issued in connection with any of GAFC's Reports. As of their respective dates,
each of GAFC's Reports complied in all material respects with all laws or
regulations under which it was filed (or was amended so as to be in compliance
promptly following discovery of such noncompliance). Any financial statement
10
contained in any of GAFC's Reports fairly presented in all material respects the
financial position of GAFC on a consolidated basis, GAFC alone or each of GAFC's
Subsidiaries alone, as the case may be, and was prepared in all material
respects in accordance with GAAP or applicable regulations.
(h) Financial Statements. GAFC's Disclosure Letter contains copies of (i)
the audited consolidated balance sheet of GAFC and its Subsidiaries as of
September 30, 2008 and 2007 and related consolidated statements of income for
each of the years in the two-year period ended September 30, 2008 and (ii) the
unaudited consolidated balance sheet of GAFC and its Subsidiaries as of March
31, 2009 and the related unaudited consolidated statement of income for the
three and six months ended March 31, 2009. Such financial statements were
prepared from the books and records of GAFC and its Subsidiaries, fairly present
the consolidated financial position of GAFC and its Subsidiaries in each case at
and as of the dates indicated and the consolidated results of operations of GAFC
and its Subsidiaries for the periods indicated, and were prepared in accordance
with GAAP consistently applied throughout the periods covered thereby; provided,
however, that the unaudited financial statements for interim periods are subject
to normal year-end adjustments (which will not be material individually or in
the aggregate.
(i) Undisclosed Liabilities. Neither GAFC nor any of its Subsidiaries has
incurred any debt, liability or obligation of any nature whatsoever (whether
accrued, contingent, absolute or otherwise and whether due or to become due)
other than liabilities reflected on or reserved against in the consolidated
balance sheet of GAFC as of September 30, 2008, except for (i) liabilities
incurred since September 30, 2008 in the ordinary course of business consistent
with past practice that, either alone or when combined with all similar
liabilities, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on GAFC and (ii) liabilities incurred for legal,
accounting, financial advisory fees and out-of-pocket expenses in connection
with the transactions contemplated by this Agreement.
(j) Absence of Certain Changes or Events. Since September 30, 2008:
(i) GAFC and its Subsidiaries have conducted their respective businesses
only in the ordinary and usual course of such businesses consistent with their
past practices;
(ii) there has not been any event or occurrence that has had, or is
reasonably expected to have, a Material Adverse Effect on GAFC; (iii) GAFC has
not declared, paid or set aside any dividends or distributions with respect to
the GAFC Common Stock other than as expressly permitted by this Agreement;
(iv) except for supplies or equipment purchased in the ordinary course of
business, neither GAFC nor any of its Subsidiaries have made any capital
expenditures exceeding individually or in the aggregate $25,000;
(v) there has not been any write-down by GAFC Bank in excess of $25,000
with respect to any individual Loan or other real estate owned;
(vi) there has not been any sale, assignment or transfer of any assets by
GAFC or any of its Subsidiaries in excess of $25,000 other than in the ordinary
course of business or pursuant to a contract or agreement disclosed in GAFC's
Disclosure Letter;
(vii) there has been no increase in the salary, compensation, pension or
other benefits payable or to become payable by GAFC or any of its Subsidiaries
to any of their respective directors, officers or employees, other than in
conformity with the policies and practices of such entity in the usual and
ordinary course of its business;
11
(viii) neither GAFC nor any of its Subsidiaries has paid or made any
accrual or arrangement for payment of bonuses or special compensation of any
kind or any severance or termination pay to any of their directors, officers or
employees other than as expressly permitted by this Agreement; and
(ix) there has been no change in any accounting principles, practices or
methods of GAFC or any of its Subsidiaries.
(k) Litigation. There are no suits, actions or legal, administrative or
arbitration proceedings pending or, to the knowledge of GAFC, threatened against
or affecting GAFC or any of its Subsidiaries or any property or asset of GAFC or
any of its Subsidiaries that (i) is seeking damages or declaratory relief
against GAFC or any of its Subsidiaries or (ii) challenge the validity or
propriety of the transactions contemplated by this Agreement. There are no
judgments, decrees, injunctions, orders or rulings of any Governmental Entity or
arbitrator outstanding against GAFC or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on GAFC.
(l) Absence of Regulatory Actions. Since September 30, 2006, neither GAFC
nor any of its Subsidiaries has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment letter
or similar undertaking to, or has been subject to any action, proceeding, order
or directive by any Government Regulator, or has adopted any board resolutions
at the request of any Government Regulator, or has been advised by any
Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, written agreement, memorandum of understanding,
commitment letter, board resolutions or similar undertaking. There are no
unresolved violations, criticisms or exceptions by any Government Regulator with
respect to any report or statement relating to any examinations of GAFC or its
Subsidiaries.
(m) Compliance with Laws. GAFC and each of its Subsidiaries conducts its
business in compliance with all statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable to it or the employees conducting such
business, except where noncompliance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on GAFC.
GAFC and each of its Subsidiaries has all permits, licenses, certificates of
authority, orders and approvals of, and has made all filings, applications and
registrations with, all Governmental Entities that are required in order to
permit it to carry on its business in all material respects as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and no suspension or cancellation of any
of them is, to the knowledge of GAFC, threatened. Neither GAFC nor any of its
Subsidiaries has been given written notice or been charged with any violation
of, any law, ordinance, regulation, order, writ, rule, decree or condition to
approval of any Governmental Entity which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on GAFC.
(n) Taxes. All federal, state, local and foreign tax returns required to be
filed by or on behalf of GAFC or any of its Subsidiaries have been timely filed
or requests for extensions have been timely filed and any such extension shall
have been granted and not have expired, and all such filed returns are complete
and accurate in all material respects. All Taxes shown on such returns, all
Taxes required to be shown on returns for which extensions have been granted and
all other Taxes required to be paid by GAFC or any of its Subsidiaries have been
paid in full or adequate provision has been made for any such Taxes on GAFC's
balance sheet (in accordance with GAAP). There is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any Taxes of GAFC or any of its Subsidiaries, and no claim has been made in
writing by any authority in a jurisdiction where GAFC or any of its Subsidiaries
do not file tax returns that GAFC or any such Subsidiary is subject to taxation
in that jurisdiction. All Taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation relating
12
to GAFC or any of its Subsidiaries have been paid in full or adequate provision
has been made for any such Taxes on GAFC's balance sheet (in accordance with
GAAP). GAFC and its Subsidiaries have not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect. GAFC and each of its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party, and GAFC and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar applicable state and local information
reporting requirements. Neither GAFC nor any of its Subsidiaries is a party to
any agreement, contract, arrangement or plan that has resulted or would result,
individually or in the aggregate, in connection with this Agreement in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the IRC and neither GAFC nor any of its Subsidiaries has made any payment and is
not a party to any agreement, and does not maintain any plan, program or
arrangement, that could require it to make any payment that would not be fully
deductible by reason of Section 162(m) of the IRC.
(o) Agreements.
(i) GAFC has previously delivered to Acquisition Corp., and GAFC's
Disclosure Letter lists, any contract, arrangement, commitment or understanding
(whether written or oral) to which GAFC or any of its Subsidiaries is a party or
is bound:
(A) with any executive officer or other key employee of GAFC or any of its
Subsidiaries the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving GAFC or any
of its Subsidiaries of the nature contemplated by this Agreement;
(B) with respect to the employment of any directors, officers, employees or
consultants;
(C) any of the benefits of which will be increased, or the vesting or
payment of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement (including any stock option plan, phantom stock
or stock appreciation rights plan, restricted stock plan or stock purchase
plan);
(D) containing covenants that limit the ability of GAFC or any of its
Subsidiaries to compete in any line of business or with any person, or that
involve any restriction on the geographic area in which, or method by which,
GAFC (including any successor thereof) or any of its Subsidiaries may carry on
its business (other than as may be required by law or any regulatory agency);
(E) pursuant to which GAFC or any of its Subsidiaries may become obligated
to invest in or contribute capital to any entity;
(F) that relates to borrowings of money (or guarantees thereof) by GAFC or
any of its Subsidiaries in excess of $50,000;
(G) which is a lease or license with respect to any property, real or
personal, whether as landlord, tenant, licensor or licensee, involving a
liability or obligation as obligor in excess of $25,000 on an annual basis; or
13
(H) the termination of which would require payment by GAFC or any of its
Subsidiaries in excess of $25,000.
(ii) Neither GAFC nor any of its Subsidiaries is in default under (and no
event has occurred which, with due notice or lapse of time or both, would
constitute a default under) or is in violation of any provision of any note,
bond, indenture, mortgage, deed of trust, loan agreement, lease or other
agreement to which it is a party or by which it is bound or to which any of its
respective properties or assets is subject and, to the knowledge of GAFC, no
other party to any such agreement (excluding any loan or extension of credit
made by GAFC or any of its Subsidiaries) is in default in any respect
thereunder.
(iii) GAFC's Disclosure Letter lists each agency or brokerage contract
pursuant to which GAFC or any of its Subsidiaries is authorized to represent an
insurer or place insurance through another agency. Neither GAFC nor any of its
Subsidiaries have received written notice of termination of any existing agency
or brokerage contract and, to the knowledge of GAFC, no insurer or agency has
threatened to terminate or is contemplating terminating its agency or brokerage
contract with GAFC or any of its Subsidiaries. There exists no dispute between
GAFC or any of its Subsidiaries and any insurer or agency with respect to either
GAFC's or any of its Subsidiaries or the insurer's or agency's performance under
the agency or brokerage contract between GAFC or any of its Subsidiaries and the
insurer or agency.
(p) Intellectual Property. GAFC and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use (in the manner and
the geographic areas in which they are currently used) without payment all
patents, copyrights, trade secrets, trade names, service marks and trademarks
material to its business. GAFC's Disclosure Letter sets forth a complete and
correct list of all material trademarks, trade names, service marks and
copyrights owned by or licensed to GAFC or any of its Subsidiaries for use in
its business, and all licenses and other agreements relating thereto and all
agreements relating to third party intellectual property that GAFC or any of its
Subsidiaries is licensed or authorized to use in its business, including without
limitation any software licenses but excluding any so-called "shrink-wrap"
license agreements and other similar computer software licensed in the ordinary
course of business and/or otherwise resident on desktop computers (collectively,
the "Intellectual Property"). With respect to each item of Intellectual Property
owned by GAFC or any of its Subsidiaries, the owner possesses all right, title
and interest in and to the item, free and clear of any Lien. With respect to
each item of Intellectual Property that GAFC or any of its Subsidiaries is
licensed or authorized to use, the license, sublicense or agreement covering
such item is legal, valid, binding, enforceable and in full force and effect.
Neither GAFC nor any of its Subsidiaries has received any charge, complaint,
claim, demand or notice alleging any interference, infringement,
misappropriation or violation with or of any intellectual property rights of a
third party (including any claims that GAFC or any of its Subsidiaries must
license or refrain from using any intellectual property rights of a third
party). To the knowledge of GAFC, neither GAFC nor any of its Subsidiaries has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of third parties and no third party has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of GAFC or any of its Subsidiaries.
(q) Labor Matters. GAFC and its Subsidiaries are in material compliance
with all applicable laws respecting employment, retention of independent
contractors, employment practices, terms and conditions of employment, and wages
and hours. Neither GAFC nor any of its Subsidiaries is or has ever been a party
to, or is or has ever been bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization with respect to its employees, nor is GAFC or any of its
Subsidiaries the subject of any proceeding asserting that it has committed an
14
unfair labor practice or seeking to compel it or any such Subsidiary to bargain
with any labor organization as to wages and conditions of employment nor, to the
knowledge of GAFC, has any such proceeding been threatened, nor is there any
strike, other labor dispute or organizational effort involving GAFC or any of
its Subsidiaries pending or, to the knowledge of GAFC, threatened.
(r) Employee Benefit Plans.
(i) GAFC's Disclosure Letter contains a complete and accurate list of all
pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other benefit plans, contracts, agreements
and arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of ERISA, incentive and welfare policies, contracts,
plans and arrangements and all trust agreements related thereto with respect to
any present or former directors, officers or other employees of GAFC or any of
its Subsidiaries (hereinafter referred to collectively as the "GAFC Employee
Plans"). GAFC has previously delivered or made available to Acquisition Corp.
true and complete copies of each agreement, plan and other documents referenced
in GAFC's Disclosure Letter, along with, where applicable, copies of the IRS
Form 5500 or 5500-C for the most recently completed year. There has been no
announcement or commitment by GAFC or any of its Subsidiaries to create an
additional GAFC Employee Plan, or to amend any GAFC Employee Plan, except for
amendments required by applicable law which do not materially increase the cost
of such GAFC Employee Plan.
(ii) There is no pending or, to the knowledge of GAFC, threatened
litigation, administrative action or proceeding relating to any GAFC Employee
Plan. All of the GAFC Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws. There has
occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the IRC) with respect to the GAFC Employee Plans that is likely
to result in the imposition of any penalties or Taxes upon GAFC or any of its
Subsidiaries under Section 502(i) of ERISA or Section 4975 of the IRC.
(iii) No liability to the Pension Benefit Guarantee Corporation has been or
is expected by GAFC or any of its Subsidiaries to be incurred with respect to
any GAFC Employee Plan which is subject to Title IV of ERISA ("GAFC Pension
Plan"), or with respect to any "single-employer plan" (as defined in Section
4001(a) of ERISA) currently or formerly maintained by GAFC or any ERISA
Affiliate. No GAFC Pension Plan had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, as of the last day of
the end of the most recent plan year ending prior to the date hereof; the fair
market value of the assets of each GAFC Pension Plan exceeds the present value
of the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under
such GAFC Pension Plan as of the end of the most recent plan year with respect
to the respective GAFC Pension Plan ending prior to the date hereof, calculated
on the basis of the actuarial assumptions used in the most recent actuarial
valuation for such GAFC Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
GAFC Pension Plan within the 12-month period ending on the date hereof. Neither
GAFC nor any of its Subsidiaries has provided, or is required to provide,
security to any GAFC Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the IRC. Neither GAFC, its
Subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980.
(iv) Each GAFC Employee Plan that is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to be qualified under
Section 401(a) of the IRC (a "GAFC Qualified Plan") has received a favorable
determination letter from the IRS, and, to the knowledge of GAFC, there are no
circumstances likely to result in revocation of any such favorable determination
letter. Each GAFC Qualified Plan that is an "employee stock ownership plan" (as
15
defined in Section 4975(e)(7) of the IRC) has satisfied all of the applicable
requirements of Sections 409 and 4975(e)(7) of the IRC and the regulations
thereunder in all material respects and any assets of any such GAFC Qualified
Plan that, as of the end of the plan year, are not allocated to participants'
individual accounts are pledged as security for, and may be applied to satisfy,
any securities acquisition indebtedness.
(v) No GAFC Employee Plan is a "multiple employer plan" (as defined in
Section 4063 of ERISA).
(vi) Neither GAFC nor any of its Subsidiaries has any obligations for
post-retirement or post-employment benefits under any GAFC Employee Plan that
cannot be amended or terminated upon 60 days' notice or less without incurring
any liability thereunder, except for coverage required by Part 6 of Title I of
ERISA or Section 4980B of the IRC, or similar state laws, the cost of which is
borne by the insured individuals.
(vii) All contributions required to be made with respect to any GAFC
Employee Plan by applicable law or regulation or by any plan document or other
contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any GAFC Employee Plan, for any period through the
date hereof have been timely made or paid in full, or to the extent not required
to be made or paid on or before the date hereof, have been fully reflected in
the financial statements of GAFC. Each GAFC Employee Plan that is an employee
welfare benefit plan under Section 3(1) of ERISA either (A) is funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the IRC or (B) is unfunded.
(s) Properties.
(i) A list and description of all real property owned or leased by GAFC or
a Subsidiary of GAFC is set forth in GAFC's Disclosure Letter. GAFC and each of
its Subsidiaries has good and marketable title to all real property owned by it
(including any property acquired in a judicial foreclosure proceeding or by way
of a deed in lieu of foreclosure or similar transfer), in each case free and
clear of any Liens except (i) liens for Taxes not yet due and payable and (ii)
such easements, restrictions and encumbrances, if any, as are not material in
character, amount or extent, and do not materially detract from the value, or
materially interfere with the present use of the properties subject thereto or
affected thereby. Each lease pursuant to which GAFC or any of its Subsidiaries
as lessee, leases real or personal property is valid and in full force and
effect and neither GAFC nor any of its Subsidiaries, nor, to GAFC's knowledge,
any other party to any such lease, is in default or in violation of any material
provisions of any such lease. GAFC has previously delivered to Acquisition Corp.
a complete and correct copy of each such lease. All real property owned or
leased by GAFC or any of its Subsidiaries are in all material respects in a good
state of maintenance and repair (normal wear and tear excepted), conform with
all applicable ordinances, regulations and zoning laws and are considered by
GAFC to be adequate for the current business of GAFC and its Subsidiaries. To
the knowledge of GAFC, none of the buildings, structures or other improvements
located on any real property owned or leased by GAFC or any of its Subsidiaries
encroaches upon or over any adjoining parcel or real estate or any easement or
right-of-way.
(ii) GAFC and each of its Subsidiaries has good and marketable title to all
tangible personal property owned by it, free and clear of all Liens except such
Liens, if any, that are not material in character, amount or extent, and that do
not materially detract from the value, or materially interfere with the present
use of the properties subject thereto or affected thereby. With respect to
personal property used in the business of GAFC and its Subsidiaries that is
leased rather than owned, neither GAFC nor any of its Subsidiaries is in default
under the terms of any such lease.
16
(t) Reserved
(u) Fees. Other than for financial advisory services performed for GAFC by
Sandler ▇'▇▇▇▇▇ & Partners L.P. pursuant to an agreement dated January 30, 2006,
a true and complete copy of which is attached as an exhibit to GAFC's Disclosure
Letter, neither GAFC nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for GAFC or any of its Subsidiaries in connection with this Agreement
or the transactions contemplated hereby.
(v) Environmental Matters.
(i) Each of GAFC and its Subsidiaries, the Participation Facilities, and,
to the knowledge of GAFC, the Loan Properties are, and have been, in compliance
with all Environmental Laws.
(ii) There is no suit, claim, action, demand, executive or administrative
order, directive, investigation or proceeding pending or, to the knowledge of
GAFC, threatened, before any court, governmental agency or board or other forum
against GAFC or any of its Subsidiaries or any Participation Facility (A) for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by GAFC or any of its Subsidiaries or any
Participation Facility.
(iii) To the knowledge of GAFC, there is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum relating to or against any Loan Property (or GAFC or any of its
Subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at a Loan
Property.
(iv) Neither GAFC nor any of its Subsidiaries has received any notice,
demand letter, executive or administrative order, directive or request for
information from any Governmental Entity or any third party indicating that it
may be in violation of, or liable under, any Environmental Law.
(v) There are no underground storage tanks at any properties owned or
operated by GAFC or any of its Subsidiaries or any Participation Facility.
Neither GAFC nor any of its Subsidiaries nor, to the knowledge of GAFC, any
other person or entity, has closed or removed any underground storage tanks from
any properties owned or operated by GAFC or any of its Subsidiaries or any
Participation Facility.
(vi) During the period of (A) GAFC's or its Subsidiary's ownership or
operation of any of their respective current properties or (B) GAFC's or its
Subsidiary's participation in the management of any Participation Facility,
there has been no release of Hazardous Materials in, on, under or affecting such
properties except for releases of Hazardous Materials in quantities below the
level at which they are regulated under any Environmental Law. To the knowledge
of GAFC, prior to the period of (A) GAFC's or its Subsidiary's ownership or
operation of any of their respective current properties or (B) GAFC's or its
Subsidiary's participation in the management of any Participation Facility,
there was no contamination by or release of Hazardous Material in, on, under or
affecting such properties except for releases of Hazardous Materials in
quantities below the level at which they are regulated under any Environmental
Law. (w) Loan Portfolio; Allowance for Loan Losses.
17
(i) With respect to each Loan owned by GAFC or its Subsidiaries in whole or
in part:
(A) The note and the related security documents are each legal, valid and
binding obligations of the maker or obligor thereof, enforceable against such
maker or obligor in accordance with their terms and the rights of GAFC with
respect to each Loan would not be adversely affected by the consummation of the
transactions contemplated by this Agreement;
(B) neither GAFC nor any of its Subsidiaries, nor any prior holder of a
Loan, has modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any of the
related security documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) GAFC or a Subsidiary of GAFC is the sole holder of legal and beneficial
title to each Loan (or GAFC's or its Subsidiary's applicable participation
interest, as applicable), except as otherwise referenced on the books and
records of GAFC or a Subsidiary of GAFC;
(D) each Loan file is complete in all material respects and includes the
original note and the related security documents, and copies of any documents in
the Loan files are true and correct copies of the documents they purport to be
and have not been suspended, amended, modified, canceled or otherwise changed
except as otherwise disclosed by documents in the applicable Loan file; and
(E) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(ii) Neither the terms of any Loan, any of the documentation for any Loan,
the manner in which any Loans have been administered and serviced, nor GAFC's
practices of approving or rejecting Loan applications, violate in any material
respect any federal, state, or local law, rule or regulation applicable thereto,
including, without limitation, the Truth In Lending Act, Regulations O and Z of
the Federal Reserve Board, the CRA, the Equal Credit Opportunity Act, and any
state laws, rules and regulations relating to consumer protection, installment
sales and usury.
(iii) The allowance for loan losses reflected in GAFC's unaudited balance
sheet at March 31 2009 was, and the allowance for loan losses shown on the
balance sheets in GAFC's Reports for periods ending after such date, in the
opinion of management, was or will be adequate, as of the dates thereof.
(x) Anti-takeover Provisions Inapplicable. GAFC and its Subsidiaries have
taken all actions required to exempt Acquisition Corp., the Agreement and the
Merger from any provisions of an anti-takeover nature contained in their
organizational documents, and the provisions of any federal or state
"anti-takeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations.
(y) Material Interests of Certain Persons. Except for deposit and loan
relationships entered into in the ordinary course of business, no current or
former officer or director of GAFC, or any family member or affiliate of any
such person, has any material interest, directly or indirectly, in any contract
or property (real or personal), tangible or intangible, used in or pertaining to
the business of GAFC or any of its Subsidiaries.
18
(z) Insurance. In the opinion of management, GAFC and its Subsidiaries are
presently insured for amounts deemed reasonable by management against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. GAFC's Disclosure Letter contains a
list of all policies of insurance carried and owned by GAFC or any of GAFC's
Subsidiaries showing the name of the insurance company and agent, the nature of
the coverage, the policy limit, the annual premiums and the expiration date. All
of the insurance policies and bonds maintained by GAFC and its Subsidiaries are
in full force and effect, GAFC and its Subsidiaries are not in default
thereunder, all premiums and other payments due under any such policy have been
paid and all material claims thereunder have been filed in due and timely
fashion.
(aa) Investment Securities; Derivatives.
(i) Except for restrictions that exist for securities that are classified
as "held to maturity," none of the investment securities held by GAFC or any of
its Subsidiaries is subject to any restriction (contractual or statutory) that
would materially impair the ability of the entity holding such investment freely
to dispose of such investment at any time.
(ii) Neither GAFC nor any of its Subsidiaries is a party to or has agreed
to enter into an exchange-traded or over-the-counter equity, interest rate,
foreign exchange or other swap, forward, future, option, cap, floor or collar or
any other contract that is a derivative contract (including various combinations
thereof) or owns securities that (A) are referred to generically as "structured
notes," "high risk mortgage derivatives," "capped floating rate notes" or
"capped floating rate mortgage derivatives" or (B) are likely to have changes in
value as a result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes.
(bb) Indemnification. Except as provided in the certificate of
incorporation or bylaws of GAFC and the similar organizational documents of its
Subsidiaries, neither GAFC nor any of its Subsidiaries is a party to any
agreement that provides for the indemnification of any of its present or former
directors, officers or employees, or other persons who serve or served as a
director, officer or employee of another corporation, partnership or other
enterprise at the request of GAFC and, to the knowledge of GAFC, there are no
claims for which any such person would be entitled to indemnification under the
certificate of incorporation or bylaws of GAFC or the similar organizational
documents of any of its Subsidiaries, under any applicable law or regulation or
under any indemnification agreement.
(cc) Corporate Documents and Records. GAFC's Disclosure Letter includes a
complete and correct copy of the certificate of incorporation, bylaws and
similar organizational documents of GAFC and each of GAFC's Subsidiaries, as in
effect as of the date of this Agreement. Neither GAFC nor any of GAFC's
Subsidiaries is in violation of its certificate of incorporation, bylaws or
similar organizational documents. The minute books of GAFC and each of GAFC's
Subsidiaries constitute a complete and correct record of all actions taken by
their respective boards of directors (and each committee thereof) and their
stockholders. GAFC and each of its Subsidiaries maintains accounting records
that fairly and accurately reflect, in all material respects, its transactions,
and accounting controls exist sufficient to provide reasonable assurances that
such transactions are, in all material respects, (i) executed in accordance with
management's general or specific authorization and (ii) recorded as necessary to
permit the preparation of financial statements in accordance with GAAP.
(dd) GAFC Information. The information regarding GAFC and its Subsidiaries
included in the Proxy Statement, and all amendments and supplements thereto,
will not contain any untrue statement of a material fact or omit to state any
19
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The information supplied, or to be supplied, by GAFC for inclusion
in applications to Governmental Entities to obtain all permits, consents,
approvals and authorizations necessary or advisable to consummate the
transactions contemplated by this Agreement shall be accurate in all material
respects.
(ee) CRA, Anti-Money Laundering, OFAC and Customer Information Security.
GAFC Bank has received a rating of "Satisfactory" in its most recent examination
or interim review with respect to the CRA. GAFC does not have knowledge of any
facts or circumstances that would cause GAFC Bank or any other Subsidiary of
GAFC: (i) to be deemed not to be in satisfactory compliance in any material
respect with the CRA, and the regulations promulgated thereunder, or to be
assigned a rating for CRA purposes by federal or GAFC Bank regulators of lower
than "satisfactory"; or (ii) to be deemed to be operating in violation in any
material respect of the Bank Secrecy Act, the USA PATRIOT Act, any order issued
with respect to anti-money laundering by the U.S. Department of the Treasury's
Office of Foreign Assets Control, or any other applicable anti-money laundering
statute, rule or regulation; or (iii) to be deemed not to be in satisfactory
compliance in any material respect with the applicable privacy of customer
information requirements contained in any federal and sate privacy laws and
regulations, including without limitation, in Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act of 1999 and the regulations promulgated thereunder, as well as the
provisions of the information security program adopted by GAFC Bank. To the
knowledge of GAFC, no non-public customer information has been disclosed to or
accessed by an unauthorized third party in a manner which would cause either
GAFC or of its Subsidiaries to undertake any remedial action. The board of
directors of GAFC Bank (or where appropriate of any other Subsidiary of GAFC)
has adopted, and GAFC Bank (or such other Subsidiary of GAFC) has implemented,
an anti-money laundering program that contains adequate and appropriate customer
identification verification procedures that comply with Section 326 of the USA
PATRIOT Act and such anti-money laundering program meets the requirements in all
material respects of Section 352 of the USA PATRIOT Act and the regulations
thereunder, and GAFC Bank (or such other Subsidiary of GAFC) has complied in all
material respects with any requirements to file reports and other necessary
documents as required by the USA PATRIOT Act and the regulations thereunder.
3.3 Representations and Warranties of Acquisition Corp. Acquisition Corp.
represents and warrants to GAFC that, except as set forth in Acquisition Corp.'s
Disclosure Letter:
(a) Organization and Qualification. Acquisition Corp. is a corporation duly
organized and validly existing under the laws of Virginia. Acquisition Sub is a
corporation duly organized and validly existing under the laws of the Virginia.
Acquisition Corp. has all requisite corporate power and authority to own, lease
and operate its properties and to conduct the business currently being conducted
by it. Acquisition Corp. is duly qualified or licensed as a foreign corporation
to transact business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed and in good standing would not have a
Material Adverse Effect on Acquisition Corp..
(b) Subsidiaries. Acquisition Corp. owns of record and beneficially all the
capital stock of Acquisition Sub free and clear of any Liens. Acquisition Sub is
a Virginia corporation duly organized and validly existing under the laws of
Virginia, has all requisite corporate power and authority to own, lease and
operate its properties and to conduct the business currently being conducted by
it and is duly qualified or licensed as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except where the failure to
be so qualified or licensed and in good standing would not have a Material
Adverse Effect on Acquisition Corp.
20
(c) Authority. Each of Acquisition Corp. and Acquisition Sub has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate actions on the part of Acquisition Corp.'s
and Acquisition Sub's Board of Directors, and no other corporate proceedings on
the part of Acquisition Corp. or Acquisition Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by Acquisition Corp.
and Acquisition Sub and constitutes a valid and binding obligation of
Acquisition Corp. and Acquisition Sub, enforceable against Acquisition Corp. and
Acquisition Sub in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally
and to general principles of equity, whether applied in a court of law or a
court of equity.
(d) No Violations. The execution, delivery and performance of this
Agreement by Acquisition Corp. do not, and the consummation of the transactions
contemplated by this Agreement will not, (i) assuming all required governmental
approvals have been obtained and the applicable waiting periods have expired,
violate any law, rule or regulation or any judgment, decree, order, governmental
permit or license to which Acquisition Corp. or any of its Subsidiaries (or any
of their respective properties) is subject, (ii) violate the charter or bylaws
of Acquisition Corp. or the similar organizational documents of any of its
Subsidiaries or (iii) constitute a breach or violation of, or a default under
(or an event which, with due notice or lapse of time or both, would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any Lien upon any of the properties or
assets of Acquisition Corp. or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which Acquisition
Corp. or any of its Subsidiaries is a party, or to which any of their respective
properties or assets may be subject except, in the case of (iii), for any such
breaches, violations or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on Acquisition Corp.
(e) Consents and Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Entity or any third party are required to
be made or obtained in connection with the execution and delivery by Acquisition
Corp. of this Agreement or the consummation by Acquisition Corp. of the Merger
and the other transactions contemplated by this Agreement, except for filings of
applications and notices with, receipt of approvals or nonobjections from, and
expiration of the related waiting period required by, federal and state banking
authorities. Neither Acquisition Corp. nor any shareholder, officer or director
of Acquisition Corp. is aware of any fact or event that would preclude
regulatory approval of the Merger, and Acquisition Corp. is not aware of
anything in the proposed structure and ownership of Acquisition Corp. or its
affiliates that would preclude them from owning or controlling the shares of the
Surviving Corporation following the Merger. As of the date hereof, Acquisition
Corp. knows of no reason pertaining to Acquisition Corp. why any of the
approvals referred to in this Section 3.3(e) should not be obtained without the
imposition of any material condition or restriction described in Section 6.1(b).
(f) Acquisition Corp. Information. The information regarding Acquisition
Corp. and its Subsidiaries to be supplied by Acquisition Corp. for inclusion in
the Proxy Statement will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The information supplied, or to be supplied, by
Acquisition Corp. for inclusion in applications to Governmental Entities to
obtain all permits, consents, approvals and authorizations necessary or
advisable to consummate the transactions contemplated by this Agreement shall be
accurate in all material respects.
21
(g) Availability of Funds. Acquisition Corp. has and will have available to
it at the Effective Time, sources of funds sufficient to pay the aggregate
Merger Consideration and to pay any other amounts payable pursuant to this
Agreement and to effect the transactions contemplated hereby.
Article IV
Conduct Pending the Merger
4.1 Forbearances by GAFC. Except as expressly contemplated or permitted by this
Agreement or disclosed in GAFC's Disclosure Letter, and except to the extent
required by law or regulation or any Governmental Entity during the period from
the date of this Agreement to the Effective Time, GAFC shall not, nor shall GAFC
permit any of its Subsidiaries to, without the prior written consent of
Acquisition Corp.:
(a) conduct its business other than in the regular, ordinary and usual
course consistent with past practice; fail to use reasonable efforts to maintain
and preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the services of its officers and
key employees; or take any action that would adversely affect or delay its
ability to perform its obligations under this Agreement or to consummate the
transactions contemplated hereby;
(b) (i) incur, modify, extend or renegotiate any indebtedness for borrowed
money, or assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, other than (A) the creation of deposit liabilities in the ordinary
course of business consistent with past practice and (B) advances from the
Federal Home Loan Bank of Atlanta with a maturity of not more than one year;
(ii) prepay any indebtedness or other similar arrangements so as to cause
GAFC to incur any prepayment penalty thereunder; or
(iii) purchase any brokered certificates of deposit;
(c) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other distribution on
its capital stock;
(iii) grant any stock appreciation rights or any limited rights under the
GAFC Employee Plans or grant any individual, corporation or other entity any
right to acquire any shares of its capital stock;
(iv) issue any additional shares of capital stock or any securities or
obligations convertible or exercisable for any shares of its capital stock; or
(v) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock;
(d) sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets to any individual, corporation or other entity
other than a Subsidiary, or cancel, release or assign any indebtedness to any
such person or any claims held by any such person, except in the ordinary course
of business consistent with past practice or pursuant to contracts or agreements
in force at the date of this Agreement;
22
(e) except pursuant to contracts or agreements in force at the date of or
permitted by this Agreement, make any equity investment, either by purchase of
stock or securities, contributions to capital, property transfers, or purchase
of any property or assets of any other individual, corporation or other entity;
(f) enter into, renew, amend or terminate any contract or agreement, or
make any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $5,000 per annum and other than
contracts or agreements covered by Section 4.1(g);
(g) make, renegotiate, renew, increase, extend, modify or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except (i)
in conformity with existing lending practices in amounts not to exceed $250,000
or (ii) loans or advances as to which GAFC has a binding obligation as of the
date hereof;
(h) make or increase any loan or other extension of credit, or commit to
make or increase any such loan or extension of credit, to any director or
executive officer of GAFC or GAFC Bank, or any entity controlled, directly or
indirectly, by any of the foregoing, other than renewals of existing loans or
commitments to loan;
(i) (i) increase in any manner the compensation, bonuses or other fringe
benefits of any of its employees or directors, or pay any bonus, pension,
retirement allowance or contribution not required by any existing plan or
agreement to any such employees or directors;
(ii) become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee or director;
(iii) voluntarily accelerate the vesting of, or the lapsing of restrictions
with respect to, any stock options or other stock-based compensation; or
(iv) elect to any senior executive office any person who is not a member of
its senior executive officer team as of the date of this
Agreement or elect to its Board of Directors any person who is not a member of
its Board of Directors as of the date of this Agreement, or hire any employee
with annual compensation in excess of $25,000;
(j) settle any claim, action or proceeding (i) involving payment by it of
money damages in excess of $5,000 or (ii) which would impose any material
restriction on its operations or the operations of any of its Subsidiaries;
(k) amend its certificate of incorporation or bylaws, or similar governing
documents;
(l) restructure or materially change its investment securities portfolio or
its interest rate risk position, through purchases, sales or otherwise, or in
the manner in which the portfolio is classified;
(m) make any investment in any debt security, including mortgage-backed and
mortgage-related securities, other than U.S. government and U.S. government
agency securities with final maturities no greater than one year;
23
(n) make any capital expenditures other than pursuant to binding
commitments existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair or to make payment of necessary Taxes;
(o) establish or commit to the establishment of any new branch or other
office facilities or file any application to relocate or terminate the operation
of any banking office;
(p) take any action that is intended or expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VI not being satisfied
or in a violation of any provision of this Agreement;
(q) implement or adopt any change in its accounting principles, practices
or methods, other than as may be required by GAAP or regulatory guidelines; or
(r) agree to take, make any commitment to take, or adopt any resolutions of
its board of directors in support of, any of the actions prohibited by this
Section 4.1.
Any request by GAFC or response thereto by Acquisition Corp. shall be made
in accordance with the notice provisions of Section 8.7 and shall note that it
is a request pursuant to this Section 4.1.
4.2 Forbearances by Acquisition Corp. Except as expressly contemplated or
permitted by this Agreement, and except to the extent required by law or
regulation or any Governmental Entity, during the period from the date of this
Agreement to the Effective Time, Acquisition Corp. shall not, nor shall
Acquisition Corp. permit any of its Subsidiaries to, without the prior written
consent of GAFC, which shall not unreasonably be withheld:
(a) take any action that would adversely affect or delay its ability to
perform its obligations under this Agreement or to consummate the transactions
contemplated hereby;
(b) take any action that is intended to or expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Article VI not being satisfied
or in a violation of any provision of this Agreement; or
(c) agree to take, make any commitment to take, or adopt any resolutions of
its Board of Directors in support of, any of the actions prohibited by this
Section 4.2.
Article V
Covenants
5.1 Acquisition Proposals.
(a) GAFC shall not, and shall not authorize or permit any of its Subsidiaries or
any of its Subsidiaries' officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other representative retained
by GAFC or any of its Subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries, discussions or the making
of any proposal that constitutes or could reasonably be expected to lead to an
Acquisition Proposal, (ii) participate in any discussions or negotiations, or
otherwise communicate in any way with any person (other than Acquisition Corp.),
regarding an Acquisition Proposal or (iii) enter into or consummate any
24
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the transactions contemplated hereby. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director or employee of GAFC or any of
the Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by GAFC or any of its Subsidiaries
shall be deemed to be a breach of this Section 5.1 by GAFC.
(b) GAFC will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to the
date of this Agreement with respect to any of the foregoing. GAFC will take the
necessary steps to inform the appropriate individuals or entities referred to in
the first sentence of Section 5.1(a) of the obligations undertaken in this
Section 5.1. GAFC will promptly request each person (other than Acquisition
Corp.) that has executed a confidentiality agreement in the 12 months prior to
the date hereof in connection with its consideration of a business combination
with GAFC or any of its Subsidiaries to return or destroy all confidential
information previously furnished to such person by or on behalf of GAFC or any
of its Subsidiaries. GAFC shall not release any third party from, or waive any
provisions of, any confidentiality agreements or standstill agreement to which
it or any of its Subsidiaries is a party.
5.2 Advice of Changes. Prior to the Closing, each party shall promptly
advise the other party orally and in writing to the extent that it has knowledge
of (i) any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect or (ii) the failure by it
to comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.3 Access and Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, GAFC shall (and shall cause GAFC's Subsidiaries to)
afford Acquisition Corp. and its representatives (including, without limitation,
officers and employees of Acquisition Corp. and its affiliates and counsel,
accountants and other professionals retained by Acquisition Corp.) such
reasonable access during normal business hours throughout the period prior to
the Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), contracts, properties,
personnel and to such other information relating to GAFC and GAFC's Subsidiaries
as Acquisition Corp. may reasonably request; provided, however, that no
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty made by GAFC in this Agreement and provided,
further, that such access shall be subject to permissions from such Governmental
Entities as may be required. Neither GAFC nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties will make appropriate and reasonable substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) From the date hereof until the Effective Time, GAFC shall, and shall
cause GAFC's Subsidiaries to, promptly provide Acquisition Corp. with (i) a copy
of each report filed with a Government Regulator, (ii) a copy of each periodic
report to its senior management and all materials relating to its business or
operations furnished to its Board of Directors, (iii) a copy of each press
release made available to the public and (iv) all other information concerning
its business, properties and personnel as Acquisition Corp. may reasonably
request.
25
(c) Acquisition Corp. will not, and will cause its representatives not to,
use any information obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of applicable law and the Confidentiality
Agreement, Acquisition Corp. will keep confidential, and will cause its
representatives to keep confidential, all information and documents obtained
pursuant to this Section 5.3 unless such information (i) was already known to
Acquisition Corp. or an affiliate of Acquisition Corp., other than pursuant to a
confidentiality agreement or other confidential relationship, (ii) becomes
available to Acquisition Corp. or an affiliate of Acquisition Corp. from other
sources not known by such party to be bound by a confidentiality agreement or
other obligation of secrecy, (iii) is disclosed with the prior written approval
of GAFC or (iv) is or becomes readily ascertainable from published information
or trade sources.
(d) GAFC shall give notice, and shall cause GAFC Bank to give notice, to a
designee of Acquisition Corp., and shall invite such person to attend all
regular and special meetings of the Board of Directors of GAFC and GAFC Bank and
all meetings of the Loan Committee of GAFC Bank. Such designees shall have no
right to vote and shall not attend sessions of board and committees during which
there is being discussed (i) matters involving this Agreement, (ii) information
or material that GAFC or GAFC Bank is required or obligated to maintain as
confidential under applicable laws or regulations or policies or procedures of
GAFC or GAFC Bank, or (iii) pending or threatened litigation or investigations
if, in the opinion of counsel to GAFC, the presence of such designees would or
might adversely affect the confidential nature of or any privilege relating to
the matters being discussed.
5.4 Applications; Consents.
(a) The parties hereto shall cooperate with each other and shall use their
reasonable best efforts to prepare and file as soon as practicable after the
date hereof all necessary applications, notices and filings to obtain all
permits, consents, approvals and authorizations of all Governmental Entities
that are necessary or advisable to consummate the transactions contemplated by
this Agreement. GAFC and Acquisition Corp. shall furnish each other with all
information concerning themselves, their respective subsidiaries, and their
respective subsidiaries' directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with any
application, notice or filing made by or on behalf of Acquisition Corp., GAFC or
any of their respective subsidiaries to any Governmental Entity in connection
with the transactions contemplated by this Agreement. Acquisition Corp. and GAFC
shall have the right to review in advance, and to the extent practicable each
will consult with the other on, all the information relating to Acquisition
Corp. and GAFC, as the case may be, and any of their respective subsidiaries,
that appears in any filing made with, or written materials submitted to, any
Governmental Entity pursuant to this Section 5.4(a).
(b) As soon as practicable after the date hereof, each of the parties
hereto shall, and they shall cause their respective subsidiaries to, use its
best efforts to obtain any consent, authorization or approval of any third party
that is required to be obtained in connection with the transactions contemplated
by this Agreement.
5.5 Antitakeover Provisions. GAFC and its Subsidiaries shall take all steps
required by any relevant federal or state law or regulation or under any
relevant agreement or other document to exempt or continue to exempt Acquisition
Corp., Acquisition Sub, the Agreement, and the Merger from any provisions of an
antitakeover nature in GAFC's or its Subsidiaries' certificate of incorporation
and bylaws, or similar organizational documents, and the provisions of any
federal or state antitakeover laws.
5.6 Additional Agreements. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts to take
promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable under
26
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable Governmental
Entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and regulatory approvals.
5.7 Publicity. The initial press release announcing this Agreement shall be a
joint press release and shall occur only after GAFC has informed its staff of
the Merger. Thereafter GAFC and Acquisition Corp. shall consult with each other
and mutually agree prior to issuing any press releases or otherwise making
public statements (including any written communications to stockholders) with
respect to the Merger and any other transaction contemplated hereby and in
making any filings with any Governmental Entity; provided, however, that nothing
in this Section 5.7 shall be deemed to prohibit any party from making any
disclosure which its counsel deems necessary in order to satisfy such party's
disclosure obligations imposed by law.
5.8 Stockholder Meeting. GAFC will submit to its stockholders this Agreement and
any other matters required to be approved or adopted by stockholders in order to
carry out the intentions of this Agreement. In furtherance of that obligation,
GAFC will, as promptly as practicable after the execution of this Agreement,
take, in accordance with applicable law and its certificate of incorporation and
bylaws, all action necessary to call and give notice of a meeting of its
stockholders (the "Stockholder Meeting") and mail the Proxy Statement, and
convene and hold the Stockholder Meeting. GAFC's Board of Directors will use all
reasonable best efforts to obtain from GAFC's stockholders a vote approving this
Agreement. Subject to the exercise of their fiduciary duties, GAFC's Board of
Directors shall recommend to GAFC's stockholders approval of this Agreement, the
Proxy Statement shall include a statement to the effect that GAFC's Board of
Directors has recommended that GAFC's stockholders vote in favor of the approval
of this Agreement and neither GAFC's Board of Directors nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify, the recommendation of GAFC's Board of Directors that GAFC's
stockholders vote in favor of approval of this Agreement or make any statement
in connection with the Stockholder Meeting inconsistent with such
recommendation.
5.9 Proxy Statement. GAFC shall prepare a proxy statement and related materials
relating to the matters to be submitted to the GAFC stockholders at the
Stockholder Meeting (such proxy statement and related materials and any
amendments or supplements thereto, the "Proxy Statement"). Upon request,
Acquisition Corp. will furnish to GAFC the information required to be included
in the Proxy Statement with respect to its business and affairs and shall have
the right to review and consult with GAFC and approve the form of, and any
characterizations of such information included in, the Proxy Statement prior to
its being mailed to stockholders. GAFC shall provide Acquisition Corp. and its
counsel a reasonable opportunity for review and comment on the Proxy Statement
prior to its being mailed to stockholders. If at any time prior to the Effective
Time any information relating to Acquisition Corp. or GAFC, or any of their
respective affiliates, officers or directors, should be discovered by
Acquisition Corp. or GAFC which should be set forth in an amendment or
supplement to the Proxy Statement so that such document would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party that discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly disseminated to the stockholders of GAFC.
5.10 Notification of Certain Matters. Each party shall give prompt notice to the
other of: (i) any event or notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
27
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results of operations of each
party and its Subsidiaries taken as a whole to which each party or any
Subsidiary is a party or is subject; and (ii) any event, condition, change or
occurrence which individually or in the aggregate has, or which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in a Material Adverse Effect. Each of GAFC and Acquisition Corp. shall
give prompt notice to the other party of any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this
Agreement.
5.11 Employee Benefit Matters. All persons who are employees of GAFC Bank
immediately prior to the Effective Time (a "Continuing Employee") shall, at the
Effective Time, continue as employees of GAFC Bank. All of the Continuing
Employees shall be employed at the will of GAFC Bank and no contractual right to
employment shall inure to such employees because of this Agreement.
5.12 D&O Liability Coverage. Acquisition Corp. will use its reasonable best
efforts to obtain coverage under Acquisition Corp.'s director's and officers
liability policy for a period of three years for claims made against the
directors and officers of GAFC and its subsidiaries related to matters existing
prior to the Effective Time, provided that the premium cost of such coverage, if
obtainable, shall not exceed $100,000, and provided, further, that if the amount
of the premiums for such coverage exceeds $100,000, Acquisition Corp. will use
its reasonable best efforts to obtain such coverage as may be available for such
amount.
5.13 Cooperation. GAFC agrees that it shall, and shall cause GAFC Bank and the
other GAFC Subsidiaries, to: (i) make any accounting adjustments or entries to
its books of account and other financial records; (ii) make adjustments to GAFC
Bank's loan loss reserve; (iii) sell or transfer any investment securities held
by it; (iv) charge-off any Loan; (v) create any new reserve account or make
additional provisions to any other existing reserve account; (vi) make changes
in any accounting method; (vii) accelerate, defer or accrue any anticipated
obligation, expense or income item; and (viii) make any other adjustments which
would affect the financial reporting of the Surviving Corporation, on a
consolidated basis after the Effective Time, in each case as Acquisition Corp.
shall reasonably request, provided that neither GAFC nor GAFC Bank shall be
obligated to take any such requested action until immediately prior to the
Closing and at such time as all conditions precedent to GAFC's obligations under
this Agreement (except for the completion of actions to be taken at the Closing)
have been satisfied, and that no such adjustment which GAFC or GAFC Bank would
not have been required to make but for the provisions of this Section 5.13 in
and of itself shall result in a breach of any warranty or representation made
herein, change the amount of the Merger Consideration to be paid to the holders
of GAFC Common Stock, or delay the Closing or Acquisition Corp.'s receipt of the
Regulatory Approvals.
5.14 Greater Atlantic Capital Trust I. Immediately upon the execution of this
Agreement, GAFC shall take such steps as may be necessary under applicable law
to commence a tender offer for all of the convertible trust preferred securities
issued under Greater Atlantic Capital Trust I held by shareholders other than
GAFC. GAFC agrees that consummation of the tender offer shall be conditioned on
the receipt of (i) irrevocable tenders for at least 816,627 of the convertible
trust preferred securities outstanding as of the date of this Agreement and (ii)
all regulatory approvals of any Governmental Entity required to permit the
consummation of the transactions contemplated by this Agreement and the approval
of this Agreement by the GAFC stockholders. Notwithstanding anything in this
Agreement to the contrary, GAFC further agrees that the aggregate consideration
28
to be paid for securities tendered in such offer (assuming 100 percent of such
securities are tendered) shall be $688,558 (which amount shall be prorated based
on the actual number of securities tendered), provided, however, that the
allocation of the aggregate consideration among the holders of tendered
securities may be determined by GAFC in accordance with the terms of the tender
offer and applicable law. GAFC shall consult with Acquisition Corp. regarding
the timing of the tender offer and the timing of payment for the tendered
securities and provide to Acquisition Corp. for review and comment copies of all
materials related to the tender offer which are to be filed with the SEC and/or
provided to holders.
5.15 Reston Branch Lease. GAFC shall use its reasonable best efforts to obtain
such modifications to the terms of the GAFC Bank's Reston, Virginia branch lease
as may be requested by Acquisition Corp. GAFC shall act in consultation with
Acquisition Corp. with respect to such lease modifications and, if requested,
shall allow representatives of Acquisition Corp. to participate in or otherwise
hold direct discussions with the landlord.
Article VI
Conditions to Consummation
6.1 Conditions to Each Party's Obligations. The respective obligations of each
party to effect the Merger shall be subject to the satisfaction of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved by the
requisite vote of GAFC's stockholders in accordance with applicable laws and
regulations.
(b) Regulatory Approvals. All approvals, consents or waivers of any
Governmental Entity required to permit consummation of the transactions
contemplated by this Agreement shall have been obtained and shall remain in full
force and effect, and all statutory waiting periods shall have expired;
provided, however, that none of such approvals, consents or waivers shall
contain any condition or requirement that would so materially and adversely
impact the economic or business benefits to Acquisition Corp. of the
transactions contemplated hereby that, had such condition or requirement been
known, Acquisition Corp. would not, in its reasonable judgment, have entered
into this Agreement.
(c) No Injunctions or Restraints; Illegality. No party hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger and no
Governmental Entity shall have instituted any proceeding for the purpose of
enjoining or prohibiting the consummation of the Merger or any transactions
contemplated by this Agreement. No statute, rule or regulation shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits or makes illegal consummation of the Merger.
(d) Third Party Consents. Acquisition Corp. and GAFC shall have obtained
the consent or approval of each person (other than the governmental approvals or
consents referred to in Section 6.1(b)) whose consent or approval shall be
required to consummate the transactions contemplated by this Agreement, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Acquisition
Corp. (after giving effect to the consummation of the transactions contemplated
hereby).
6.2 Conditions to the Obligations of Acquisition Corp. The obligations of
Acquisition Corp. to effect the Merger shall be further subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived by Acquisition Corp.:
(a) GAFC's Representations and Warranties. Each of the representations and
warranties of GAFC contained in this Agreement and in any certificate or other
writing delivered by GAFC pursuant hereto shall be true and correct in all
material respects at and as of the Closing Date as though made at and as of the
Closing Date, except that those representations and warranties that address
matters only as of a particular date need only be true and correct as of such
date.
29
(b) Performance of GAFC's Obligations. GAFC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time.
(c) Officers' Certificate. Acquisition Corp. shall have received a
certificate signed by the chief executive officer and the chief financial or
principal accounting officer of GAFC to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect with respect to GAFC.
(e) Dissenters Rights. The aggregate number of shares of GAFC Common Stock
with respect to which the holders thereof have exercised their dissenters'
rights shall not exceed 10% of the outstanding shares of GAFC Common Stock as of
the record date for the Stockholder Meeting.
(f) Greater Atlantic Capital Trust I. GAFC shall have received the
irrevocable tender of at least 816,827 of the convertible trust preferred
securities outstanding under the Great Atlantic Capital Trust I.
(g) Cease and Desist Order, Etc. The OTS shall have agreed that, upon the
consummation of the transactions contemplated by this Agreement, (i) the Cease
and Desist Order issued in writing to GAFC Bank (Order SE-08-05, effective April
25, 2008) and the Prompt Corrective Action Order (Order SE-09-028, effective May
22, 2009) are terminated or modified or replaced with commitments that are
satisfactory to Acquisition Corp., in its sole discretion; and (ii) GAFC Bank's
"troubled" bank designation is lifted.
(h) Certain Employee Matters. GAFC shall have (i) terminated the Employee
Severance Plans dated March 31, 2000 and October 2, 2006, (ii) terminated the
employment agreement dated November 1, 1997 with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and (iii)
terminated the GAFC stock option plans and obtained the cancellation of all
stock options outstanding thereunder or a number of stock options satisfactory
to Acquisition Corp. in its sole discretion.
6.3 Conditions to the Obligations of GAFC. The obligations of GAFC to effect the
Merger shall be further subject to the satisfaction of the following additional
conditions, any one or more of which may be waived by GAFC:
(a) Acquisition Corp.'s Representations and Warranties. Each of the
representations and warranties of Acquisition Corp. contained in this Agreement
and in any certificate or other writing delivered by Acquisition Corp. pursuant
hereto shall be true and correct in all material respects at and as of the
Closing Date as though made at and as of the Closing Date, except that those
representations and warranties that address matters only as of a particular date
need only be true and correct as of such date.
(b) Performance of Acquisition Corp.'s Obligations. Acquisition Corp. shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time.
(c) Officers' Certificate. GAFC shall have received a certificate signed by
the chief executive officer and the chief financial or principal accounting
officer of Acquisition Corp. to the effect that the conditions set forth in
Sections 6.3(a) and (b) have been satisfied.
30
Article VII
Termination
7.1 Termination. This Agreement may be terminated, and the Merger abandoned, at
any time prior to the Effective Time, by action taken or authorized by the Board
of Directors of the terminating party, either before or after any requisite
stockholder approval:
(a) by the mutual written consent of Acquisition Corp. and GAFC; or
(b) by either Acquisition Corp. or GAFC, in the event of the failure of
GAFC's stockholders to approve the Agreement at the Stockholder Meeting;
provided, however, that GAFC shall only be entitled to terminate the Agreement
pursuant to this clause if it has complied in all material respects with its
obligations under Section 5.8; or
(c) by either Acquisition Corp. or GAFC, if either (i) any approval,
consent or waiver of a Governmental Entity required to permit consummation of
the transactions contemplated by this Agreement shall have been denied or (ii)
any Governmental Entity of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; or
(d) by either Acquisition Corp. or GAFC, in the event that the Merger is
not consummated by September 30, 2009, unless the failure to so consummate by
such time is due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party set forth
herein; or
(e) by either Acquisition Corp. or GAFC (provided that the party seeking
termination is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), in the event of a breach of any
covenant or agreement on the part of the other party set forth in this
Agreement, or if any representation or warranty of the other party shall have
become untrue, in either case such that the conditions set forth in Sections
6.2(a) and (b) or Sections 6.3(a) and (b), as the case may be, would not be
satisfied and such breach or untrue representation or warranty has not been or
cannot be cured within thirty (30) days following written notice to the party
committing such breach or making such untrue representation or warranty; or
(f) by Acquisition Corp., (i) if GAFC shall have materially breached its
obligations under Section 5.1 or Section 5.8 or (ii) if the Board of Directors
of GAFC does not publicly recommend in the Proxy Statement that stockholders
approve and adopt this Agreement or if, after recommending in the Proxy
Statement that stockholders approve and adopt this Agreement, the Board of
Directors of GAFC withdraws, qualifies or revises such recommendation or takes
any action in any respect materially adverse to Acquisition Corp.; or
(g) by Acquisition Corp., if there is imposed on Acquisition Corp. by any
Governmental Entity a condition to the consummation of the transactions
contemplated by this Agreement requiring Acquisition Corp. to increase the
capital of GAFC Bank by an amount greater than $15,000,000.
7.2 Termination Fee.
(a) In the event of termination of this Agreement by Acquisition Corp.
pursuant to Section 7.1(f), so long as at the time of such termination
Acquisition Corp. is not in material breach of any representation, warranty or
material covenant contained herein, GAFC shall make payment to Acquisition Corp.
of a termination fee in the amount of $50,000.
31
(b) Notwithstanding anything in this Agreement to the contrary, in the
event of a termination of this Agreement by either party pursuant to Section
7.1(b) or by Acquisition Corp. pursuant to Section 7.1(e) if the breach giving
rise to such termination was knowing or intentional, or pursuant to Section
7.1(f), then so long as (i) at the time of such termination Acquisition Corp. is
not in material breach of any representation, warranty or material covenant
contained herein, (ii) prior to the Stockholder Meeting (in the case of
termination pursuant to Section 7.1(b)) or the date of termination (in the case
of termination pursuant to Sections 7.1(e) or (f)), an Acquisition Proposal has
been publicly announced, disclosed or communicated and (iii) within 12 months of
such termination GAFC shall consummate or enter into any agreement with respect
to an Acquisition Proposal, GAFC shall make payment to Acquisition Corp. of a
termination fee equal to the lesser of (i) $250,000 or (ii) $50,000 plus 25
percent of the amount by which the total consideration paid or payable to the
GAFC stockholders and the holders of Greater Atlantic Capital Trust I trust
preferred securities (by way of a tender offer or otherwise) in connection with
such Acquisition Proposal exceeds $990,980
(c) Any fee payable pursuant to this Section 7.2 shall be made by wire
transfer of immediately available funds within two days after notice of demand
for payment.
7.3 Breach; Remedies.
(a) Except as provided in Section 7.2(b), in the event of any termination
of this Agreement by Acquisition Corp. or GAFC as provided in Section 7.1(e) due
to a willful failure by other party to perform any of its obligations,
agreements or covenants contained in Articles IV or V of this Agreement, then
the breaching party shall be obligated to pay the non-breaching party $50,000.
(b) Notwithstanding anything contained in this Agreement to the contrary,
the payment of the termination fee pursuant to the provisions of Section 7.2 or
this Section 7.3 is intended by the parties to be, and shall constitute,
liquidated damages and shall be the sole and exclusive remedy and shall be in
lieu of any and all claims that the party terminating this Agreement that is
entitled to such fee and its officers, directors and stockholders have, or might
have against the other parties and their respective officers, directors and
stockholders for any claims arising from, or relating in any way to, this
Agreement or the Merger, and the party terminating this Agreement that is
entitled to such termination fee and its officers, directors and stockholders
shall not have any other rights or claims against the other parties and their
respective officers, directors and stockholders.
Article VIII
Certain Other Matters
8.1 Interpretation. When a reference is made in this Agreement to Sections or
Exhibits such reference shall be to a Section of, or Exhibit to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Any reference to gender
in this Agreement shall be deemed to include any other gender.
8.2 Survival. Only those agreements and covenants of the parties that are by
their terms applicable in whole or in part after the Effective Time, including
Section 5.12 of this Agreement, shall survive the Effective Time. All other
representations, warranties, agreements and covenants shall be deemed to be
conditions of the Agreement and shall not survive the Effective Time.
32
8.3 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be: (i) waived in writing by the party benefited by the provision
or (ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto except that,
after the vote by the stockholders of GAFC, no amendment or modification may be
made that would reduce the amount or alter or change the kind of consideration
to be received by holders of GAFC Common Stock or that would contravene any
provision of Virginia law or the DGCL or the applicable state and federal
banking laws, rules and regulations.
8.4 Counterparts. This Agreement may be executed in counterparts each of which
shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument. A facsimile or electronic copy of a
signature page shall be deemed to be an original signature page.
8.5 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of Virginia, without regard to conflicts of laws
principles.
8.6 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
8.7 Notices. All notices, requests, acknowledgments and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, overnight courier or facsimile transmission to
such party at its address or facsimile number set forth below or such other
address or facsimile transmission as such party may specify by notice (in
accordance with this provision) to the other party hereto.
If to Acquisition Corp: MidAtlantic Bancorp, Inc..
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 900, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
If to GAFC, to: Greater Atlantic Financial Corp.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
33
With copies to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
8.8 Entire Agreement; etc. This Agreement, together with the Disclosure Letters,
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. All terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Except for Section 5.12, which confers
rights on the parties described therein, nothing in this Agreement is intended
to confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
8.9 Successors and Assigns; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by either
party hereto without the written consent of the other party.
[Signature page follows]
34
In Witness Whereof, the parties hereto have caused this Agreement and Plan of
Merger to be executed by their duly authorized officers as of the date first
above written.
MIDATLANTIC BANCORP, INC.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
President
GAF Merger Corp.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
President
Greater Atlantic Financial Corp.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
President and Chief Executive Officer
35