MERGER AGREEMENT between FIRST BANCORP and GREAT PEE DEE BANCORP, INC. Dated as of July 12, 2007
between
FIRST
BANCORP
and
GREAT
PEE DEE BANCORP, INC.
Dated
as
of July 12, 2007
TABLE
OF CONTENTS
Page
ARTICLE
I
DEFINED
TERMS
ARTICLE
II
THE
MERGER; CONVERSION AND EXCHANGE OF COMPANY
SHARES
|
ARTICLE
I
|
||
|
DEFINED
TERMS
|
||
|
ARTICLE
II
|
||
|
THE
MERGER; CONVERSION AND EXCHANGE OF COMPANY
SHARES
|
||
|
2.1
|
The
Merger.
|
1
|
|
2.2
|
Company
Shares.
|
2
|
|
2.3
|
Merger
Consideration.
|
2
|
|
2.4
|
Closing
Payment
|
3
|
|
2.5
|
Exchange
Procedures.
|
3
|
|
2.6
|
Dissenting
Shares
|
4
|
|
2.7
|
Company
Stock Options.
|
4
|
|
ARTICLE
III
|
||
|
THE
CLOSING
|
||
|
3.1
|
Closing
|
5
|
|
3.2
|
Deliveries
by the Company
|
5
|
|
3.3
|
Deliveries
by the Buyer
|
5
|
|
ARTICLE
IV
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
||
|
4.1
|
Organization,
Standing and Power.
|
6
|
|
4.2
|
Authority;
No Conflicts.
|
6
|
|
4.3
|
Capital
Stock; Subsidiaries.
|
7
|
|
4.4
|
SEC
Reports; Company Financial Statements.
|
7
|
|
4.5
|
Absence
of Undisclosed Liabilities
|
8
|
|
4.6
|
Absence
of Certain Changes or Events
|
8
|
|
4.7
|
Tax
Matters.
|
8
|
|
4.8
|
Assets
|
9
|
|
4.9
|
Real
Property.
|
10
|
|
4.1
|
Securities
Portfolio and Investments
|
10
|
|
4.11
|
Environmental
Matters.
|
11
|
|
4.12
|
Compliance
with Laws
|
11
|
|
4.13
|
Labor
Relations
|
12
|
|
4.14
|
Employee
Benefit Plans.
|
12
|
|
4.15
|
Material
Contracts.
|
13
|
|
4.16
|
Legal
Proceedings.
|
14
|
|
4.17
|
Proprietary
Rights.
|
14
|
i
|
4.18
|
Reports
|
15
|
|
4.19
|
Registration
Statement; Proxy Statement
|
15
|
|
4.2
|
Accounting,
Tax, and Regulatory Matters
|
15
|
|
4.21
|
State
Takeover Laws
|
15
|
|
4.22
|
Charter
Provisions
|
16
|
|
4.23
|
Records
|
16
|
|
4.24
|
Derivatives
|
16
|
|
4.25
|
Certain
Regulated Businesses
|
16
|
|
4.26
|
Commissions
|
16
|
|
ARTICLE
V
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
|
||
|
5.1
|
Organization.
|
16
|
|
5.2
|
Authority;
No Conflicts.
|
17
|
|
5.3
|
Buyer’s
Stock; Subsidiaries.
|
17
|
|
5.4
|
SEC
Filings; Buyer Financial Statements.
|
18
|
|
5.5
|
Absence
of Undisclosed Liabilities
|
18
|
|
5.6
|
Absence
of Certain Changes or Events
|
18
|
|
5.7
|
Tax
Matters.
|
19
|
|
5.8
|
Assets
|
20
|
|
5.9
|
Real
Property
|
20
|
|
5.1
|
Securities
Portfolio and Investments
|
21
|
|
5.11
|
Environmental
Matters.
|
21
|
|
5.12
|
Compliance
with Laws
|
22
|
|
5.13
|
Labor
Relations
|
22
|
|
5.14
|
Employee
Benefit Plans.
|
22
|
|
5.15
|
Material
Contracts.
|
24
|
|
5.16
|
Legal
Proceedings
|
24
|
|
5.17
|
Proprietary
Rights
|
25
|
|
5.18
|
Reports
|
25
|
|
5.19
|
Registration
Statement; Proxy Statement
|
25
|
|
5.2
|
Accounting,
Tax, and Regulatory Matters
|
26
|
|
5.21
|
Derivatives
|
26
|
|
5.22
|
Certain
Regulated Businesses
|
26
|
|
5.23
|
Commissions
|
26
|
|
ARTICLE
VI
|
||
|
COVENANTS
|
||
|
6.1
|
Covenants
of the Company.
|
27
|
|
6.2
|
Covenants
of the Buyer.
|
31
|
|
6.3
|
Covenants
of All Parties to the Agreement.
|
35
|
|
ARTICLE
VII
|
||
|
DISCLOSURE
OF ADDITIONAL INFORMATION
|
||
|
7.1
|
Access
to Information
|
37
|
ii
|
7.2
|
Access
to Premises
|
37
|
|
7.3
|
Environmental
Survey
|
37
|
|
7.4
|
Confidentiality
|
38
|
|
7.5
|
Publicity
|
38
|
|
ARTICLE
VIII
|
||
|
CONDITIONS
TO CLOSING
|
||
|
8.1
|
Mutual
Conditions
|
38
|
|
8.2
|
Conditions
to the Obligations of the Company
|
39
|
|
8.3
|
Conditions
to the Obligations of the Buyer
|
41
|
|
ARTICLE
IX
|
||
|
TERMINATION
|
||
|
9.1
|
Termination
|
42
|
|
9.2
|
Procedure
and Effect of Termination.
|
44
|
|
9.3
|
Termination
Fee; Expenses.
|
44
|
|
ARTICLE
X
|
||
|
MISCELLANEOUS
PROVISIONS
|
||
|
10.1
|
Expenses
|
45
|
|
10.2
|
Survival
of Representations
|
45
|
|
10.3
|
Amendment
and Modification
|
45
|
|
10.4
|
Waiver
of Compliance; Consents
|
45
|
|
10.5
|
Notices
|
45
|
|
10.6
|
Assignment;
Third Party Beneficiaries
|
46
|
|
10.7
|
Separable
Provisions
|
46
|
|
10.8
|
Governing
Law
|
46
|
|
10.9
|
Counterparts
|
47
|
|
10.1
|
Interpretation
|
47
|
|
10.11
|
Entire
Agreement
|
47
|
iii
|
EXHIBITS
|
|
|
Exhibit
A
|
Form
of Plan of Merger
|
|
Exhibit
B
|
Form
of Employment Agreement
|
|
Exhibit
C
|
Form
of Affiliate Agreement
|
|
COMPANY’S
DISCLOSURE SCHEDULE
|
|
|
Section
4.2(b)
|
No
Conflicts
|
|
Section
4.3
|
Subsidiaries
|
|
Section
4.4
|
SEC
Reports, Company Financial Statements
|
|
Section
4.10
|
Investments
|
|
Section
4.12
|
Compliance
with Laws
|
|
Section
4.14
|
Employee
Benefit Plans
|
|
Section
4.15
|
Material
Contracts
|
|
Section
6.1
|
Ordinary
Course
|
|
Section
6.2(c)
|
Severance
Payments
|
|
BUYER’S
DISCLOSURE SCHEDULE
|
|
|
Section
5.3
|
Subsidiaries
|
|
Section
5.5
|
Absence
of Undisclosed Liabilities
|
|
Section
5.14
|
Employee
Benefit Plans
|
|
Section
5.15
|
Material
Contracts
|
iv
THIS
MERGER AGREEMENT, dated as of the 12th
day of July, 2007,
is by and between:
First
Bancorp, a North Carolina corporation registered as a bank holding
company with the Board of Governors of the Federal Reserve System under the
Bank
Holding Company Act of 1956, as amended (the “Buyer”);
and
Great
Pee Dee Bancorp, Inc., a Delaware corporation
registered as a savings and loan holding company with the Office of Thrift
Supervision under the Home Owners’ Loan Act, as amended (the
“Company”).
Background
Statement
The
Buyer
and the Company desire to effect a merger pursuant to which the Company will
merge with and into the Buyer, with the Buyer being the surviving corporation
(the “Merger”). In consideration of the Merger, the
shareholders of the Company will receive shares of common stock of the
Buyer. It is intended that the Merger qualify as a reorganization
under Section 368(a) of the Internal Revenue Code.
Statement
of Agreement
In
consideration of the premises and the mutual representations, warranties,
covenants, agreements and conditions contained herein, the parties hereto agree
as follows:
ARTICLE
I
DEFINED
TERMS
Capitalized
terms used herein shall have the meanings set forth in Appendix
1.
ARTICLE
II
THE
MERGER; CONVERSION AND
EXCHANGE
OF COMPANY SHARES
2.1 The
Merger.
(a) The
Merger. On the terms and subject to the conditions of this
Agreement, the Plan of Merger, and the Laws of North Carolina and Delaware,
the
Company shall merge into the Buyer, the separate existence of the Company shall
cease, and the Buyer shall be the surviving corporation (the “Surviving
Company”).
(b) Governing
Documents. The articles of incorporation of the Buyer in effect
at the Effective Time (as defined below) shall be the articles of incorporation
of the Surviving Company until further amended in accordance with applicable
law. The bylaws of the Buyer in effect at the Effective Time shall be
the bylaws of the Surviving Company until further amended in accordance with
applicable law.
(c) Directors
and Officers. From and after the Effective Time, (i) subject to
Section 6.2(b)(i), until successors or additional directors are
duly elected or appointed in accordance with
applicable
law, the directors of the Buyer at the Effective Time shall be the directors
of
the Surviving Company, and (ii) the officers of the Buyer at the Effective
Time
shall be the officers of the Surviving Company.
(d) Approval. The
parties hereto shall take and cause to be taken all action necessary for the
corporate approval and authorization of (i) this Agreement and the other
documents contemplated hereby (including without limitation the Plan of Merger)
and (ii) the Merger and the other transactions contemplated hereby.
(e) Effective
Time. The Merger shall become effective on the date and at the
time of filing of the articles of merger in respect of the Merger, in the form
required by and executed in accordance with the Laws of North Carolina and
Delaware, or at such other time specified therein. The date and time
when the Merger shall become effective is herein referred to as the
“Effective Time.”
(f) Filing
of Articles of Merger. At the Closing, the Buyer and the Company
shall cause the articles of merger (containing the Plan of Merger) in respect
of
the Merger to be executed and filed with the Secretary of State of North
Carolina and the Secretary of the State of Delaware, as required by the Laws
of
North Carolina and Delaware, and shall take any and all other actions and do
any
and all other things to cause the Merger to become effective as contemplated
hereby.
2.2 Company
Shares.
(a) Each
share of the Company’s common stock (the “Company Shares”), par
value $0.01 per share, issued and outstanding, except for Company Shares held
by
the Buyer and its Affiliates immediately prior to the Effective Time (other
than
shares held in a fiduciary capacity or as collateral for outstanding loans
made
by the Buyer or its subsidiaries), shall, by virtue of the Merger and without
any action on the part of the holders thereof, be canceled, retired and
converted at the Effective Time into the right to receive the Merger
Consideration (as defined below) in accordance with this Article
II. Each holder of certificates representing any such
Company Shares shall thereafter cease to have any rights with respect to such
shares, except for the right to receive the Merger Consideration.
(b) Notwithstanding
anything contained in this
Section 2.2 to the contrary, any
Company Shares held in the treasury of the Company immediately prior to the
Effective Time shall be canceled without any conversion thereof, and no payment
shall be made with respect thereto.
(c) From
and after the Effective Time, there shall be no transfers on the stock transfer
books of the Company or the Surviving Company of the Company Shares that were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Company Shares are presented to the
Surviving Company, they shall be canceled, and exchanged and converted into
the
Merger Consideration as provided for herein.
2.3 Merger
Consideration.
(a) Subject
to Sections 2.4, 2.5 and
9.1(h), at the Effective Time,
the holders of Company Shares
outstanding at the Effective Time, other than the Buyer and its Affiliates
in
the cases set forth above, shall be entitled to receive, and the Buyer shall
issue and deliver, a number of shares of the Buyer’s Stock representing 1.15
shares of the Buyer’s Stock for each Company Share (the “Per Share Stock
Consideration”). The foregoing consideration, collectively
and in the aggregate, shall be referred to herein as the “Merger
Consideration.”
2
(b) In
the event the Buyer changes the number of shares of the Buyer’s Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or similar recapitalization with respect to such stock (each such
event, a “Stock Adjustment”) and the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of
a
stock split or similar recapitalization for which a record date is not
established) is prior to such Effective Time, the Exchange Ratio shall be
appropriately and proportionately adjusted to reflect such change.
(c) No
fractional shares of the Buyer’s Stock shall be issued or delivered in
connection with the Merger. In lieu of any such fractional share,
each holder of Company Shares who would otherwise have been entitled to a
fraction of a share of the Buyer’s Stock shall be entitled to receive cash
(without interest) in an amount equal to such fraction multiplied by the Market
Value of one share of the Buyer’s Stock on the trading day immediately prior to
the Effective Time.
2.4 Closing
Payment. No
later than the Effective Time, the Buyer shall deposit with an exchange and
transfer agent selected by the Buyer and reasonably acceptable to the Company
(the “Exchange Agent”), for the benefit of the holders of
Company Shares, a certificate or certificates representing the aggregate number
of shares of the Buyer’s Stock to be issued and paid as the Merger Consideration
in accordance with the provisions of this Agreement. The Exchange
Agent shall deliver the Merger Consideration in accordance with the procedures
set forth in Section 2.5 below.
2.5 Exchange
Procedures.
(a) As
promptly as practicable after the Effective Time, but in no event later than
10
Business Days after the Effective Time, the Buyer shall mail, or cause the
Exchange Agent to mail, to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding Company Shares (i) a letter of transmittal (which shall be in
customary form and shall specify that delivery shall be effected, and risk
of
loss and title to such certificates shall pass, only upon proper delivery of
such certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of such certificates in exchange for payment of the
Merger Consideration (such materials, collectively, the “Transmittal
Letter”). The Transmittal Letter shall be in such form as
the Buyer and the Company agree.
(b) After
the Effective Time, the Buyer shall cause the Exchange Agent to deliver the
Merger Consideration in accordance with the provisions of this Agreement to
each
holder of Company Shares who has properly delivered a Transmittal Letter and
surrendered its certificate or certificates representing its shares of Company
Stock to the Exchange Agent. The Buyer shall not be obligated to
deliver any of the Merger Consideration until such holder properly delivers
a
completed Transmittal Letter and surrenders the certificate(s) representing
such
holder’s Company Shares (or executes such documentation as appropriate in
connection with lost or otherwise misplaced certificates). Any other
provision of this Agreement notwithstanding, neither the Buyer nor the Exchange
Agent shall be liable to any holder of Company Shares for any amounts paid
or
properly delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
(c) To
the extent permitted by applicable Law, after the Effective Time, former
shareholders of record of the Company shall be entitled to vote at any meeting
of the Buyer’s shareholders the number of whole shares of the Buyer’s Stock into
which their respective Company Shares are converted pursuant to the Merger,
regardless of whether such holders have exchanged their certificates
representing such Company Shares for certificates representing the Buyer’s Stock
in accordance with the provisions of this Agreement. Whenever a
dividend or other distribution is declared by the Buyer on the Buyer’s Stock,
the record date for which is at or after the
3
Effective
Time, the declaration shall include dividends or other distributions on all
shares of the Buyer’s Stock issuable pursuant to this Agreement, but beginning
at such Effective Time, no dividend or other distribution payable to the holders
of record of the Buyer’s Stock as of any time subsequent to such Effective Time
shall be delivered to the holder of any certificate representing any of the
Company Shares issued and outstanding at such Effective Time until such holder
surrenders such certificate for exchange as provided in this Section
2.5. However, upon surrender of such certificate(s), both
the certificate(s) representing the shares of the Buyer’s Stock to which such
holder is entitled and any such undelivered dividends (without any interest)
shall be delivered and paid with respect to each share represented by such
certificates.
2.6 Dissenting
Shares. Notwithstanding
any other provision of this Agreement to the contrary, Company Shares that
are
outstanding immediately prior to the Effective Time and that are held by
shareholders who shall have not voted in favor of the Merger and who properly
shall have demanded payment for such shares in accordance with Delaware Law
(collectively, the “Dissenting Shares”) shall not be converted
into or represent the right to receive the Merger Consideration. Such
shareholders instead shall be entitled to receive payment of the fair value
of
such shares held by them, plus accrued interest, in accordance with the
provisions of Delaware Law, except that all Dissenting Shares held by
shareholders who shall have failed to perfect or otherwise lost their rights
to
appraisal of such shares under Delaware Law 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 2.5 of
the certificate or certificates that, immediately prior to the Effective Time,
evidenced such shares. The Company shall give the Buyer (i) prompt
notice of any written demands for payment of fair value of any Company Shares,
attempted withdrawals of any such demands or any other instruments served
pursuant to Delaware Law and received by the Company relating to shareholders’
rights to demand payment of fair value of Company Shares, and (ii) the
opportunity to participate in all negotiations and proceedings with respect
to
demands under Delaware Law consistent with the obligations of the Company
thereunder. The Company shall not, except with the prior written
consent of the Buyer, (x) make any payment with respect to such demand, (y)
offer to settle or settle any demand for appraisal or (z) waive any failure
to
timely deliver a written demand for appraisal or timely take any other action
to
perfect appraisal rights in accordance with Delaware Law.
2.7 Company
Stock Options.
(a) At
the Effective Time, each right to purchase Company Shares pursuant to stock
options (“Company Options”) granted by the Company under the
Company Option Plan that are outstanding at the Effective Time of the Merger
shall be converted into and become rights with respect to the Buyer’s Stock, and
the Buyer shall assume each Company Option, in accordance with the terms of
the
Company Option Plan and the stock option agreement by which such Company Option
is evidenced, except that from and after such Effective
Time: (i) the Buyer and its compensation committee shall be
substituted for the Company and the compensation committee of its board of
directors (including if applicable, the entire Board of Directors of the
Company) administering the Company Option Plan; (ii) the Company Options
assumed by the Buyer may be exercised solely for shares of the Buyer’s Stock;
(iii) the number of shares of the Buyer’s Stock subject to such converted
Company Options shall be equal to the number of Company Shares subject to such
Company Options immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded to the next highest share; and (iv) the per-share
exercise price under each such converted Company Option shall be adjusted by
dividing the exercise price of the Company Option immediately prior to the
Effective Time by the Exchange Ratio, rounded down to the nearest
cent.
(b) In
addition, notwithstanding clauses (ii), (iii) and (iv) of
Section 2.7(a), each assumed Company Option that is an
“incentive stock option” shall be adjusted as required by Section 424 of
the Internal Revenue Code, and the regulations promulgated thereunder, so as
not
to constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code.
4
(c) As
soon as practicable after the Effective Time, the Buyer shall deliver to the
participants in the Company Option Plan an appropriate notice setting forth
such
participant’s rights pursuant thereto, and the grants pursuant to such Company
Option Plan shall continue in effect on substantially the same terms and
conditions (subject to the adjustments required by the above subsection
(a) after giving effect to the Merger), and the Buyer shall comply with the
terms of the Company Option Plan to ensure, to the extent required by, and
subject to the provisions of, the Company Option Plan, that the Company Options
that qualified as incentive stock options prior to the Effective Time continue
to qualify as incentive stock options after such Effective Time. At
or prior to the Effective Time, and at all times thereafter, the Buyer shall
have reserved a sufficient number of shares of the Buyer’s Stock for issuance
upon exercise of the Company Options assumed by it in accordance with this
Section 2.7. The Buyer agrees to file as promptly as
practicable, and in no event later than 45 days, after the Effective Time,
a
registration statement on Form S-8 covering the shares of the Buyer’s Stock
issuable pursuant to the Company Options.
ARTICLE
III
THE
CLOSING
3.1 Closing. The
Closing of the Merger shall take place at the offices of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A. in Charlotte, North Carolina as soon as
reasonably practical after all conditions to Closing have been met, or on such
other date or at such other location as the Buyer and the Company may mutually
agree (such date, the “Closing Date”). At the
Closing, the parties will execute, deliver and file all documents necessary
to
effect the transactions contemplated herein.
3.2 Deliveries
by the Company. At
or by the Closing, the Company shall have executed and delivered or caused
to be
executed and delivered the following documents:
(a) the
agreements, opinions, certificates, instruments and other documents contemplated
in Section 8.3;
(b) articles
of merger (containing the Plan of Merger) giving effect to the Merger;
and
(c) all
other documents, certificates and instruments required hereunder to be delivered
to the Buyer, or as may reasonably be requested by the Buyer at or prior to
the
Closing.
3.3 Deliveries
by the Buyer. At
or by the Closing, the Buyer shall have executed and delivered or caused to
be
executed and delivered the following documents:
(a) the
agreements, opinions, certificates, instruments and other documents contemplated
in Section 8.2;
(b) articles
of merger (containing the Plan of Merger) giving effect to the
Merger;
(c) the
Employment Agreement; and
(d) all
other documents, certificates and instruments required hereunder to be delivered
to the Company, or as may reasonably be requested by the Company at or prior
to
the Closing.
5
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth on the Company’s Disclosure Schedule, the Company represents and
warrants to the Buyer that each of the statements contained in this
Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date.
4.1 Organization,
Standing and Power.
(a) The
Company is a savings and loan holding company registered with the Office of
Thrift Supervision. The Company Bank is a federal savings association
organized under the laws of the United States of America and is an “insured
institution” as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Company Bank are fully insured by the FDIC to the extent
permitted by Law.
(b) Each
of the Company and its subsidiaries is either a federal savings association
or a
corporation, duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization. Each
of the Company and its subsidiaries has the corporate or other applicable power
and authority to carry on, in all Material respects, its businesses as now
conducted and to own, lease and operate its Assets. Each of the
Company and its subsidiaries is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the United States
and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed.
4.2 Authority;
No Conflicts.
(a) Subject
to required regulatory and shareholder approvals, the Company has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of the Company’s
obligations under this Agreement and the other documents contemplated hereby,
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
(and by Closing, all such shareholder action) in respect thereof on the part
of
the Company. This Agreement represents a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting the enforcement of creditors’ rights generally and except that the
availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceeding may be
brought).
(b) Except
as set forth on Section 4.2(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby,
nor
compliance by the Company with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of the Company’s
certificate of incorporation or bylaws or any other similar governing document,
or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of the Company
or any of its subsidiaries under, any Contract or Permit of the Company or
any
of its subsidiaries, except as could not reasonably be expected to have a
Material Adverse Effect on the Company, or (iii) violate any Law or Order
applicable to the Company or any of its subsidiaries or any of their
Assets.
6
(c) Other
than in connection or compliance with the provisions of the Securities Laws
and
banking Regulatory Authorities, no notice to, filing with, or Consent of, any
Governmental Authority is necessary for the consummation by the Company of
the
Merger and the other transactions contemplated in this Agreement.
4.3 Capital
Stock; Subsidiaries.
(a) The
authorized capital stock of the Company consists solely of (i) 3,600,000 shares
of common stock, par value $0.01 per share, of which 1,789,981 shares are issued
and outstanding as of the date of this Agreement and (ii) 400,000 shares of
preferred stock, par value $0.01 per share, of which no shares are issued and
outstanding as of the date of this Agreement. Except for such shares,
there are no shares of capital stock or other equity securities of the Company
outstanding. The authorized capital stock of the Company Bank
consists of 20,000,000 shares of common stock, $1.00 par value per share, of
which 100 shares are issued and outstanding as of the date of this Agreement
and
are owned and held by the Company, and except for such shares, there are no
shares of capital stock or other equity securities of the Company Bank
outstanding. Section 4.3 of the Company’s
Disclosure Schedule lists all of the Company’s direct and indirect subsidiaries
other than the Company Bank as of the date of this Agreement. The
Company or one of its subsidiaries owns all of the issued and outstanding shares
of capital stock of each such subsidiary.
(b) All
of the issued and outstanding shares of capital stock of the Company and its
subsidiaries are duly and validly issued and outstanding and are fully paid
and
nonassessable. None of the outstanding shares of capital stock of the
Company or any of its subsidiaries has been issued in violation of any
preemptive rights of the current or past shareholders of such
Persons. Except as set forth on Section 4.3 of
the Company’s Disclosure Schedule, no equity securities of any subsidiary of the
Company are or may become required to be issued (other than to the Company
or
any of its subsidiaries) by reason of any Rights, and there are no Contracts
by
which any subsidiary of the Company is bound to issue (other than to the Company
or subsidiary of the Company) additional shares of its capital stock or Rights
or by which the Company or any of its subsidiaries is or may be bound to
transfer any shares of the capital stock of any subsidiary of the Company (other
than to the Company or any of its subsidiaries). There are no equity
securities reserved for any of the foregoing purposes, and there are no
Contracts relating to the rights of the Company or any of its subsidiaries
to
vote or to dispose of any shares of the capital stock of any subsidiary of
the
Company.
4.4 SEC
Reports; Company Financial Statements.
(a) The
Company has filed and made available to the Buyer all forms, reports, and
documents required to be filed by the Company with the SEC since December 31,
2003 (collectively, the “Company
SEC Reports”). Except as set forth on Section 4.4
of the Company Disclosure Schedule, the Company
SEC Reports (i) at the
time filed, complied in all Material respects with the applicable requirements
of the Securities Laws, as the case may be, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of
a
Material fact or omit to state a Material fact required to be stated in such
Company SEC Reports or necessary in order to make the statements in such Company
SEC Reports, in light of the circumstances under which they were made, not
misleading. None of the Company’s subsidiaries is required to file
any forms, reports, or other documents with the SEC.
(b) Each
of the Company Financial Statements (including, in each case, any related notes)
contained in the Company SEC Reports, including any Company SEC Reports filed
after the date of this Agreement until the Effective Time, complied or will
comply as to form in all Material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared or will be
7
prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements,
or, in the case of unaudited statements, as permitted by Form 10-QSB of the
SEC), and fairly presented or will fairly present the consolidated financial
position of the Company and its subsidiaries as at the respective dates and
the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject
to
normal and recurring year-end adjustments that were not or are not expected
to
be Material in amount or effect (except as may be indicated in such financial
statements or notes thereto).
4.5 Absence
of Undisclosed Liabilities. Neither
the Company nor any of its subsidiaries has any Liabilities that could
reasonably be expected to have a Material Adverse Effect on the Company, except
Liabilities that are accrued or reserved against in the consolidated balance
sheets of the Company as of June 30, 2006 included in the Company Financial
Statements or reflected in the notes thereto and except for Liabilities incurred
in the ordinary course of business subsequent to June 30,
2006. Neither the Company nor any of its subsidiaries has incurred or
paid any Liability since June 30, 2006, except for (a) such Liabilities incurred
or paid in the ordinary course of business consistent with past business
practice and (b) Liabilities that could not reasonably be expected to have
a
Material Adverse Effect on the Company. No facts or circumstances
exist that could reasonably be expected to serve as the basis for any other
Liabilities of the Company or any of its subsidiaries, except as could not
reasonably be expected to have a Material Adverse Effect on the
Company.
4.6 Absence
of Certain Changes or Events. Since
June 30, 2006, (i) there have been no events, changes, or occurrences that
have
had, or could reasonably be expected to have, a Material Adverse Effect on
the
Company, and (ii) each of the Company and its subsidiaries has conducted in
all
Material respects its respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and
the
transactions contemplated hereby).
4.7 Tax
Matters.
(a) All
Tax Returns required to be filed by or on behalf of any of the Company and
its
subsidiaries have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before June 30,
2006, and, to the Knowledge of the Company, all Tax Returns filed are complete
and accurate in all Material respects. All Tax Returns for periods
ending on or before the date of the most recent fiscal year end immediately
preceding the Effective Time will be timely filed
or
requests for extensions will be timely filed. All Taxes shown on
filed Tax Returns have been paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that could reasonably
be expected to have a Material Adverse Effect on the Company, except to the
extent reserved against in the Company Financial Statements dated prior to
the
date of this Agreement. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have
been
paid.
(b) None
of the Company or its subsidiaries has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate
provision for any Material Taxes due or to become due for any of the Company
or
its subsidiaries for the period or periods through and including the date of
the
respective Company Financial Statements has been made and is reflected on such
Company Financial Statements.
8
(d) Each
of the Company and its subsidiaries is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for any such instances
of noncompliance and such omissions as could not reasonably be expected to
have
a Material Adverse Effect on the Company.
(e) None
of the Company and its subsidiaries has made any payments, is obligated to
make
any payments, or is a party to any contract, agreement, or other arrangement
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(f) There
are no Material Liens with respect to Taxes upon any of the Assets of the
Company and its subsidiaries.
(g) There
has not been an ownership change, as defined in Internal Revenue Code Section
382(g), of the Company and its subsidiaries that occurred during any Taxable
Period in which any of the Company and its subsidiaries has incurred a net
operating loss that carries over to another Taxable Period ending after June
30,
2006.
(h) After
the date of this Agreement, no Material election with respect to Taxes will
be
made without the prior consent of the Buyer, which consent will not be
unreasonably withheld.
(i) Neither
the Company nor any of its subsidiaries has or has had a permanent establishment
in any foreign country, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
4.8 Assets. Each
of the Company and its subsidiaries have good and marketable title, free and
clear of all Liens, to all of their respective Assets, except for Liens to
secure public deposits in the ordinary course of business consistent with past
practice. Except as could not reasonably be expected to have a
Material Adverse Effect on the Company, all tangible properties used in the
businesses of the Company and its subsidiaries are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with each of their past practices. Except as could not
reasonably be expected
to have a Material Adverse Effect on the Company, all Assets held under leases
or subleases by any of the Company and its subsidiaries are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors’ rights generally and except that the availability of specific
performance, injunctive relief and other equitable remedies is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. Each of the Company and
its subsidiaries currently maintain insurance in amounts, scope, and coverage
reasonably necessary for their operations. None of the Company or its
subsidiaries has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be increased in any Material respect. The Assets of the Company
and its subsidiaries include all Assets required to operate in all Material
respects their businesses taken as a whole as presently conducted.
4.9 Real
Property.
9
(a) The
Company has valid, good and marketable fee simple title to all Real Property
owned, leased or operated in whole or in part by the Company (the
“Company Real Property”), free and clear of all Liens other
than Permitted Real Property Encumbrances.
(b) The
Company Real Property, and the improvements, buildings and structures thereon
(the “Company Improvements”), (i) constitute all of the
Real Property used or operated by the Company and (ii) may continue to be
used for the operation of its business as currently operated by the Company
after the Closing. The current and anticipated use of the Company
Real Property and the Company Improvements is not a pre-existing, nonconforming
use, and no notice of the violation of any Law or legal requirement has been
received by the Company.
(c) There
are no pending, or, to the knowledge of the Company, threatened, or contemplated
condemnation, expropriation or other proceedings (nor is there any basis for
any
such action) affecting the Company Real Property, or any part thereof, or of
any
assessments made or threatened with respect to the Company Real Property or
any
part thereof, or of any sales or other disposition of the Company Real Property,
or any part thereof, in lieu of condemnation.
(d) The
Company does not own or hold, and is not obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell or dispose of the Company Real Property, or any portion thereof or interest
therein.
(e) To
the Knowledge of the Company, no Company Improvement encroaches upon any other
property, and there are no encroachments by other buildings or improvements
onto
the Company Real Property.
4.10 Securities
Portfolio and Investments. All
securities owned by the Company or any of its subsidiaries (whether owned of
record or beneficially) are held free and clear of all Liens that would impair
the ability of the owner thereof to dispose freely of any such security and/or
otherwise to realize the benefits of ownership thereof at any time, except
for
those Liens to secure public deposits in the ordinary course of business
consistent with past practice and Liens that could not reasonably be expected
to
have a Material Adverse Effect on the Company. There are no voting
trusts or other agreements or undertakings to which the Company or any of its
subsidiaries is a party with respect to the voting of any such
securities. Except for fluctuations in the market values of United
States Treasury and agency or municipal securities and except as set forth
on
Section
4.10 of the Company Disclosure Schedule, since June 30, 2006, there has
been no significant deterioration or Material adverse change in the quality,
or
any Material decrease in the value, of the securities portfolio of the Company
and its subsidiaries, taken as a whole.
4.11 Environmental
Matters.
(a) To
the Knowledge of the Company, the Participation Facilities and Loan Collateral
of the Company and it subsidiaries are, and have been, in compliance with all
Environmental Laws, except those violations that could not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) To
the Knowledge of the Company, there is no Litigation pending or threatened
before any court, governmental agency, or authority, or other forum in which
any
of the Company and its subsidiaries or any of its Participation Facilities
has
been or, with respect to threatened Litigation, may reasonably be expected
to be
named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the
environment of any Hazardous Material, whether or not occurring at, on, under,
or involving a site owned, leased, or operated by the Company or any of its
subsidiaries or any of its Participation Facilities, except for such Litigation
10
pending
or threatened that could not reasonably be expected to have a Material Adverse
Effect on the Company.
(c) To
the Knowledge of the Company, there is no Litigation pending or threatened
before any court, governmental agency or authority or other forum in which
any
of its Loan Collateral (or the Company or any of its subsidiaries in respect
of
such Loan Collateral) has been or, with respect to threatened Litigation, may
reasonably be expected to be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material, whether or not occurring at, on, under, or involving Loan
Collateral, except for such Litigation pending or threatened that is could
not
reasonably be expected to have a Material Adverse Effect on the
Company.
(d) To
the Knowledge of the Company, no facts exist that provide a reasonable basis
for
any Litigation of a type described in subsections (b) or (c), except such as
could not reasonably be expected to have a Material Adverse Effect on the
Company.
(e) To
the Knowledge of the Company, during and prior to the period of (i) any of
the
Company’s or its subsidiaries’ ownership or operation of any of their respective
current properties, (ii) any of the Company’s or its subsidiaries’ participation
in the management of any Participation Facility, or (iii) any of the Company’s
or subsidiaries’ holding of a security interest in Loan Collateral, there have
been no releases of Hazardous Material in, on, under, or affecting (or
potentially affecting) such properties, except such as could not reasonably
be
expected to have a Material Adverse Effect on the Company.
4.12 Compliance
with Laws. Each
of the Company and its subsidiaries has in effect all Permits necessary for
it
to own, lease, or operate its Material Assets and to carry on, in all Material
respects, its business as now conducted, except for those Permits the absence
of
which could not reasonably be expected to have a Material Adverse Effect on
the
Company, and there has occurred no Default under any such Permit, other than
Defaults that could not reasonably be expected to have a Material Adverse Effect
on the Company. None of the Company or its subsidiaries: (i) is in
violation of any Laws, Orders, or Permits applicable to its business or
employees conducting its business, except for violations that could not
reasonably be expected to have a Material Adverse Effect on the Company; and
(ii) has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (a) asserting that any of the Company
and its subsidiaries is not in compliance with any of the Laws or Orders that
such governmental authority or Regulatory Authority enforces, except where
such
noncompliance could not reasonably be expected to have a Material Adverse Effect
on the Company, (b) threatening to revoke any Permits, except where the
revocation of which could not reasonably be expected to have a Material Adverse
Effect on the Company, or (c) requiring the Company or any of its subsidiaries
(x) to enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or (y) except
as set forth on Section 4.12 of the Company Disclosure
Schedule, to adopt any board or directors resolution or similar undertaking
that
restricts Materially the conduct of its business, or in any manner relates
to
its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
4.13 Labor
Relations. Neither
the Company nor any of its subsidiaries is the subject of any Litigation
asserting that it has committed an unfair labor practice (within the meaning
of
the National Labor Relations Act or comparable state Law) or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is any of them a party to or bound by any collective bargaining
agreement, Contract, or other agreement or understanding with a labor union
or
labor organization, nor is there any strike or other labor dispute involving
any
of them, pending or
11
threatened,
or to the Knowledge of the Company, is there any activity involving any of
the
Company’s or its subsidiaries’ employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
4.14 Employee
Benefit Plans.
(a) The
Company has made available to the Buyer prior to the execution of this Agreement
correct and complete copies of all Benefit Plans of the Company.
(b) Except
as set forth on Section 4.14(b) of the Company Disclosure
Schedule, all Benefit Plans of the Company are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws, except
as could not reasonably be expected to have a Material Adverse Effect on the
Company.
(c) Neither
the Company nor any of its subsidiaries has an “obligation to contribute” (as
defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)). Each “employee pension benefit
plan,” as defined in Section 3(2) of ERISA, ever maintained by the Company or
its subsidiaries that was intended to qualify under Section 401(a) of the
Internal Revenue Code and with respect to which the Company or any of its
subsidiaries has any Liability, is disclosed as such in Section
4.14(c) of the Company’s Disclosure
Schedule.
(d) The
Company has made available to the Buyer prior to the execution of this Agreement
correct and complete copies of the following documents: (i) all trust agreements
or other funding arrangements for such Company Benefit Plans (including
insurance contracts), and all amendments thereto, (ii) with respect to any
such
Company Benefit Plans or amendments, all determination letters, Material
rulings, Material opinion letters, Material information letters, or Material
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after June
30,
2002, (iii) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any Company Benefit Plan with respect to the most recent plan
year,
and (iv) the most recent summary plan descriptions and any Material
modifications thereto.
(e) Each
Company ERISA Plan that is intended to be qualified under Section 401(a) of
the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and, to the Knowledge of the Company, there is no
circumstance that will or could reasonably be expected to result in revocation
of any such favorable determination letter. Each trust created under
any Company ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and the Company is not aware of any
circumstance that will or could reasonably be expected to result in revocation
of such exemption. With respect to each such Company Benefit Plan, to
the Knowledge of the Company, no event has occurred that will or could
reasonably be expected to give rise to a loss of any intended Tax consequences
under the Internal Revenue Code or to any Tax under Section 511 of the Internal
Revenue Code that could reasonably be expected to have a Material Adverse Effect
on the Company. There is no Material Litigation pending or, to the
Knowledge of the Company, threatened relating to any Company ERISA
Plan.
(f) Neither
the Company nor any of its subsidiaries has engaged in a transaction with
respect to any Company Benefit Plan that, assuming the Taxable Period of such
transaction expired as of the date of this Agreement, would subject the Company
or any of its subsidiaries to a Material tax or penalty imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts
that could reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company or any of its subsidiaries nor any
administrator or fiduciary of any Company Benefit Plan (or any agent of
12
any
of
the foregoing) has engaged in any transaction, or acted or failed to act in
any
manner, that could subject the Company or any of its subsidiaries to any direct
or indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA, where such Liability could reasonably
be expected to have a Material Adverse Effect on the Company. No oral
or written representation or communication with respect to any aspect of the
Company Benefit Plans has been made to employees of the Company or any of its
subsidiaries that is not in accordance with the written or otherwise preexisting
terms and provisions of such plans, except where any Liability with respect
to
such representation or disclosure could not reasonably be expected to have
a
Material Adverse Effect on the Company.
(g) Neither
the Company nor any of its subsidiaries maintains or has ever maintained a
Company Pension Plan.
(h) Neither
the Company nor any of its subsidiaries has any Material obligation for retiree
health and retiree life benefits under any of the Company Benefit Plans other
than with respect to benefit coverage mandated by applicable Law.
(i) Except
as set forth in Section 4.14(i) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
Material payment (including without limitation severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director
or
any employee of the Company or it subsidiaries from the Company or any of its
subsidiaries under any Company Benefit Plan or otherwise, (ii) Materially
increase any benefit otherwise payable under any Company Benefit Plan, or (iii)
result in any acceleration of the time of any Material payment or vesting of
any
Material benefit.
4.15 Material
Contracts.
(a) Except
as set forth on Section 4.15 of the
Company’s Disclosure Schedule, none of the Company or its subsidiaries, nor any
of their respective Assets, businesses, or operations, is a party to, or is
bound or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating
to
the borrowing of money by the Company or its subsidiaries or the guarantee
by
the Company or its subsidiaries of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully secured
repurchase agreements, and Federal Reserve or Federal Home Loan Bank advances
of
depository institution subsidiaries, trade payables, and Contracts relating
to
borrowings or guarantees made in the ordinary course of business), and (iii)
any
other Contract or amendment thereto that would be required to be filed as an
exhibit to a Form 10-QSB filed by the Company with the SEC as of the date of
this Agreement that has not been filed as an exhibit to the Company’s Form
10-QSB filed for the fiscal quarter ended March 31, 2007, or in another SEC
document (together with all Contracts referred to in
Sections 4.8 and 4.14 of
this Agreement, the “Company Contracts”).
(b) With
respect to each Company Contract: (i) the Contract is in full force and effect;
(ii) none of the Company or its subsidiaries is in Default hereunder, other
than
Defaults that could not reasonably be expected to have a Material Adverse Effect
on the Company; (iii) neither the Company nor any of its subsidiaries has
repudiated or waived any Material provision of any such Contract; and (iv)
no
other party to any such Contract is, to the Knowledge of the Company, in Default
in any respect, other than Defaults that could not reasonably be expected to
have a Material Adverse Effect on the Company, or has repudiated or waived
any
Material provision thereunder. Except for Federal Reserve or Federal
Home Loan Bank advances, all of the indebtedness of the Company and its
subsidiaries for money borrowed (not including deposit Liabilities) is
prepayable at any time without penalty or premium.
13
4.16 Legal
Proceedings.
There
is no Litigation instituted or pending, or, to the Knowledge of the Company,
threatened against the Company or any of its subsidiaries, or against any Asset,
employee benefit plan, interest, or right of any of them, except as could not
reasonably be expected to have a Material Adverse Effect on the Company, nor
are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any the Company or its subsidiaries, except
as could not reasonably be expected to have a Material Adverse Effect on the
Company. There is no Litigation to which the Company or any of its
subsidiaries is a party that names the Company or any of its subsidiaries as
a
defendant or cross-defendant and where the maximum exposure is estimated to
be
$25,000 or more.
4.17 Proprietary
Rights.
(a) Ownership
and Right to Use. The Company owns, has been granted a license to
use or otherwise has the right to use all of the Intellectual Property that
it
uses, or holds for use, in its business (the “Company Proprietary
Rights”).
(b) Trade
Secrets. The Company has taken efforts that are reasonable under
the circumstances to prevent unauthorized disclosure to any other Person of
such
portions of the Company’s trade secrets that would enable such Person to compete
with the Company within the scope of the Company’s business as now conducted and
as presently proposed to be conducted.
(c) No
Infringement. The Company has not interfered with, infringed upon
or misappropriated the Intellectual Property of any other Person and the
continued operation of the Company’s business by the Buyer, in the manner that
such business is currently conducted or proposed to be conducted, will not
interfere with, infringe upon or misappropriate the Intellectual Property of
any
other Person. To the Knowledge of the Company, no Person is
interfering with, infringing upon or misappropriating any Company Proprietary
Right. No claim has been asserted against the Company by any
Person: (i) that such Person has any right, title or interest in
or to any of the Company Proprietary Rights; (ii) that such Person has the
right to use any of the Company Proprietary Rights; (iii) to the effect
that any past, present or projected act or omission by the Company infringes
the
Intellectual Property of such Person; or (iv) that challenges the Company’s
right to use any of the Company Proprietary Rights. No
facts
or circumstances exist that, with or without the passing of time or the giving
of notice or both, might reasonably serve as the basis for any such
claim.
4.18 Reports. Since
the date of its organization, each of the Company and its subsidiaries has
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with any
Regulatory Authorities, except failures to file that could not reasonably be
expected to have a Material Adverse Effect on the Company. As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied with all
applicable Laws, except noncompliance that could not reasonably be expected
to
have a Material Adverse Effect on the Company.
4.19 Registration
Statement; Proxy Statement. Subject
to the accuracy of the representations contained in Section
5.19, the information supplied by the Company or its subsidiaries for
inclusion in the registration statement (the “Registration
Statement”) covering the shares of the Buyer’s Stock to be issued
pursuant to this Agreement shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by
the
SEC, contain any untrue statement of a Material fact or omit to state any
Material fact required to be stated therein or necessary to make the statements
therein not misleading. The information supplied by or on behalf of
the Company and its subsidiaries for inclusion in the proxy statement/prospectus
to be sent to the shareholders of the Company to consider, at a special meeting
(the “Shareholder Meeting”), the Merger (such proxy
14
statement/prospectus
as amended or supplemented is referred to herein as the “Proxy
Statement”) will not, on the date the Proxy Statement is first mailed
to shareholders, at the time of the Shareholder Meeting and at the Effective
Time, contain any untrue statement of a Material fact or omit to state any
Material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any
time prior to the Effective Time any event relating to the Company or its
subsidiaries or any of their affiliates, officers or directors should be
discovered by the Company or its subsidiaries that should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
the Company will promptly inform the Buyer and, at the Buyer’s request, assist
in the preparation of an amendment for filing with the SEC. The Proxy
Statement shall comply in all Material respects with the requirements of the
Securities Laws and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by the
Buyer
and its subsidiaries, including information that is contained or incorporated
by
reference in, or furnished in connection with the preparation of, the
Registration Statement or the Proxy Statement.
4.20 Accounting,
Tax, and Regulatory Matters. To
the Knowledge of the Company, none of the Company or its subsidiaries or any
Affiliate thereof has taken or agreed to take any action, that could reasonably
be expected to (i) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or
(ii) Materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 8.1(b) of this
Agreement.
4.21 State
Takeover Laws. Each
of the Company and its subsidiaries has taken all necessary action to exempt
the
transactions contemplated by this Agreement from any applicable “moratorium,”
“control share,” “fair price,” “business combination,” or other anti-takeover
laws and regulations of the State of Delaware.
4.22 Charter
Provisions. Each
of the Company and its subsidiaries has taken all action so that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the certificate of incorporation,
bylaws, or other governing instruments of any of them or restrict or impair
the
ability of the Buyer or any of its subsidiaries to vote, or otherwise to
exercise the rights of a shareholder with respect to, the capital stock of
the
Company or any of its subsidiaries that may be directly or indirectly acquired
or controlled by it.
4.23 Records. Complete
and accurate copies of the articles of incorporation or charter and bylaws
of
each of the Company and its subsidiaries have been made available to the
Buyer. The stock book of each such Person contains, in all Material
respects, complete and accurate records of the record share ownership of the
issued and outstanding shares of stock thereof.
4.24 Derivatives. All
interest rate swaps, caps, floors, option agreements, futures and forward
contracts, and other similar risk management arrangements, whether entered
into
for the account of the Company or it subsidiaries or their customers were
entered into (i) in accordance with prudent business practices and all
applicable Laws, and (ii) with counterparties believed to be financially
responsible.
4.25 Certain
Regulated Businesses. Neither
the Company nor any of its subsidiaries is an “investment company” as defined in
the Investment Company Act of 1940, as amended.
4.26 Commissions. Other
than ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc., no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder’s fees in connection with
the transactions contemplated hereby by reason of any action taken by the
Company, any of its subsidiaries or any of the Company’s
shareholders.
15
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
Except
as
set forth on the Buyer’s Disclosure Schedule, the Buyer represents and warrants
to the Company that each of the statements contained in this
Article V are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date.
5.1 Organization.
(a) The
Buyer is a bank holding company registered with the Board of Governors of the
Federal Reserve System under the Bank Holding Company Act of 1956, as amended
and the North Carolina Commissioner of Banks. The Buyer Bank is a
state chartered bank incorporated under North Carolina Law and is an “insured
institution” as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and subject to dollar limits under such Act, all
deposits in the Buyer Bank are fully insured by the FDIC to the extent permitted
by Law.
(b) Each
of the Buyer and the Buyer Bank is a corporation duly organized, validly
existing and in good standing under the Laws of the State of North Carolina,
and
has the corporate power and authority to carry on, in all Material respects,
its
businesses as now conducted and to own, lease and operate its
Assets. Each of the Buyer and the Buyer Bank is duly qualified or
licensed to transact business as a foreign corporation in good standing in
the
States of the United States and foreign jurisdictions where the character of
its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed.
5.2 Authority;
No Conflicts.
(a) Subject
to required regulatory and shareholder approvals, the Buyer has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of and performance of the Buyer’s
obligations under this Agreement and the other documents contemplated hereby,
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
(and by Closing, all such shareholder action) in respect thereof on the part
of
the Buyer. This Agreement represents a legal, valid, and binding
obligation of the Buyer, enforceable against it in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
the
enforcement of creditors’ rights generally and except that the availability of
specific performance, injunctive relief and other equitable remedies is subject
to the discretion of the court before which any proceeding may be
brought).
(b) Neither
the execution and delivery of this Agreement by the Buyer, nor the consummation
by the Buyer of the transactions contemplated hereby, nor compliance by the
Buyer with any of the provisions hereof will (i) conflict with or result in
a breach of any provision of the Buyer’s articles of incorporation or bylaws or
any similar governing documents, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any
Lien
on any Asset of the Buyer or any of its subsidiaries under, any Contract or
Permit of the Buyer or any of its subsidiaries, except as could not reasonably
be expected to have a Material Adverse Effect on the Buyer, or
(iii) subject to obtaining the requisite Consents referred to in
Section 8.1(b) of this Agreement, violate any Law or Order
applicable to the Buyer or any of its subsidiaries or any of their respective
Assets.
16
(c) Other
than in connection or compliance with the provisions of the Securities Laws
and
banking Regulatory Authorities, no notice to, filing with, or Consent of, any
Governmental Authority is necessary for the consummation by the Buyer of the
Merger and the other transactions contemplated in this Agreement.
5.3 Buyer’s
Stock; Subsidiaries.
(a) The
authorized capital stock of the Buyer consists of 20,000,000 shares of common
stock, no par value per share, of which 14,392,803 shares are issued and
outstanding as of the date of this Agreement, and except for such shares, there
are no shares of capital stock or other equity securities of the Buyer
outstanding. The authorized capital stock of the Buyer Bank consists
of 2,500,000 shares of common stock, $5.00 par value per share, of which
1,134,042 shares are issued and outstanding as of the date of this Agreement
and
are owned and held by the Buyer, and except for such shares, there are no shares
of capital stock of the Buyer Bank
outstanding. Section 5.3 of the Buyer’s
Disclosure Schedule lists all of the Buyer’s direct and indirect subsidiaries
other than the Buyer Bank as of the date of this Agreement. Except
as set forth on Section 5.3 of the Buyer’s Disclosure
Schedule, the Buyer or one of its subsidiaries owns all of the issued and
outstanding shares of capital stock of each such subsidiary.
(b) All
of the issued and outstanding shares of capital stock of the Buyer and its
subsidiaries are duly and validly issued and outstanding and are fully paid
and
nonassessable. Shares of the Buyer’s Stock to be issued hereunder are
duly authorized and, upon issuance, will be validly issued and outstanding
and
fully paid and nonassessable, free and clear of any Liens, pledges or
encumbrances. None of the outstanding shares of capital stock of the
Buyer or any of its subsidiaries has been issued in violation of any preemptive
rights of the current or past shareholders of such Persons, and none of the
shares of the Buyer’s Stock to be issued pursuant to this Agreement will be
issued in violation of any preemptive rights of the current or past shareholders
of the Buyer.
5.4 SEC
Filings; Buyer Financial Statements.
(a) The
Buyer has filed and made available to the Company all forms, reports, and
documents required to be filed by the Buyer with the SEC since December 31,
2003
(collectively, the “Buyer SEC Reports”). The Buyer
SEC Reports (i) at the time filed, complied in all Material respects with the
applicable requirements of the Securities Laws, as the case may be, and (ii)
did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a Material fact or omit to state a Material fact required
to
be stated in such Buyer SEC Reports or necessary in order to make the statements
in such Buyer SEC Reports, in light of the circumstances under which they were
made, not misleading. None of the Buyer’s subsidiaries is required to
file any forms, reports, or other documents with the SEC.
(b) Each
of the Buyer Financial Statements (including, in each case, any related notes)
contained in the Buyer SEC Reports, including any Buyer SEC Reports filed after
the date of this Agreement until the Effective Time, complied or will comply
as
to form in all Material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared or will be prepared
in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements,
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
and fairly presented or will fairly present the consolidated financial position
of the Buyer and its subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject
to
normal and recurring year-end adjustments that were not or are not expected
to
be Material in amount or effect (except as may be indicated in such financial
statements or notes thereto).
17
5.5 Absence
of Undisclosed Liabilities. Except
as set forth in Section 5.5 of the Buyer’s Disclosure
Schedule, neither the Buyer nor any of its subsidiaries has any Liabilities
that
could reasonably be expected to have a Material Adverse Effect on the Buyer,
except Liabilities that are accrued or reserved against in the consolidated
balance sheets of the Buyer as of December 31, 2006 included in the Buyer
Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to December
31, 2006. Neither the Buyer nor any of its subsidiaries has incurred
or paid any Liability since December 31, 2006, except for (a) such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and (b) Liabilities that could not reasonably be expected
to
have a Material Adverse Effect on the Buyer. No facts or
circumstances exist that could reasonably be expected to serve as the basis
for
any other Liabilities of the Buyer or any of its subsidiaries, except as could
not reasonably be expected to have a Material Adverse Effect on the
Buyer.
5.6 Absence
of Certain Changes or Events. Since
December 31, 2006, (i) there have been no events, changes, or occurrences that
have had, or could reasonably be expected to have, a Material Adverse Effect
on
the Buyer, and (ii) each of the Buyer and its subsidiaries has conducted, in
all
Material Respects, its respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and
the
transactions contemplated hereby).
5.7 Tax
Matters.
(a) All
Tax Returns required to be filed by or on behalf of any of the Buyer and its
subsidiaries have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December
31,
2006, and, to the Knowledge of the Buyer, all Tax Returns filed are complete
and
accurate in all Material respects. All Tax Returns for periods ending
on or before the date of the most recent fiscal year end immediately preceding
the Effective Time will be timely filed or requests for extensions will be
timely filed. All Taxes shown on filed Tax Returns have been
paid. There is no audit examination, deficiency, or refund Litigation
with respect to any Taxes that could reasonably be expected to have a Material
Adverse Effect on the Buyer, except to the extent reserved against in the Buyer
Financial Statements dated prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) None
of the Buyer or its subsidiaries has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate
provision for any Material Taxes due or to become due for any of the Buyer
or
its subsidiaries for the period or periods through and including the date of
the
respective Buyer Financial Statements has been made and is reflected on such
Buyer Financial Statements.
(d) Each
of the Buyer and its subsidiaries is in compliance with, and its records contain
all information and documents (including properly completed IRS Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for any such instances
of noncompliance and such omissions as could not reasonably be expected to
have
a Material Adverse Effect on the Buyer.
(e) None
of the Buyer and its subsidiaries has made any payments, is obligated to make
any payments, or is a party to any contract, agreement, or other arrangement
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue
Code.
18
(f) There
are no Material Liens with respect to Taxes upon any of the Assets of the Buyer
and its subsidiaries.
(g) There
has not been an ownership change, as defined in Internal Revenue Code Section
382(g), of the Buyer and its subsidiaries that occurred during any Taxable
Period in which any of the Buyer and its subsidiaries has incurred a net
operating loss that carries over to another Taxable Period ending after December
31, 2006.
(h) After
the date of this Agreement, no Material election with respect to Taxes will
be
made without the prior consent of the Company, which consent will not be
unreasonably withheld.
(i) Neither
the Buyer nor any of its subsidiaries has or has had a permanent establishment
in any foreign country, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
5.8 Assets. Each
of the Buyer and its subsidiaries have good and marketable title, free and
clear
of all Liens, to all of their respective Assets. Except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer, all
tangible properties used in the businesses of the Buyer and its subsidiaries
are
in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with each of their past
practices. Except as could not reasonably be expected to have a
Material Adverse Effect on the Buyer, all Assets held under leases or subleases
by any of the Buyer and its subsidiaries are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors’ rights generally and
except that the availability of the specific performance, injunctive relief
or
other equitable remedies is subject to the discretion of the court before which
any proceedings may be brought), and each such Contract is in full force and
effect. Each of the Buyer and its subsidiaries currently maintain
insurance in amounts, scope, and coverage reasonably necessary for their
operations. None of the Buyer or its subsidiaries has received notice
from any insurance carrier that (i) such insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be increased in any Material
respect. The Assets of the Buyer and its subsidiaries include all
Assets required to operate in all Material respects their businesses taken
as a
whole as presently conducted.
5.9 Real
Property.
(a) The
Buyer has valid, good and marketable fee simple title to all Real Property
owned, leased or operated in whole or in part by the Buyer (the “Buyer
Real Property”), free and clear of all Liens other than Permitted Real
Property Encumbrances.
(b) The
Buyer Real Property, and the improvements, buildings and structures thereon
(the
“Buyer Improvements”), (i) constitute all of the real
property used or operated by the Buyer and (ii) may continue to be used for
the operation of its business as currently operated by the Buyer after the
Closing. The current and anticipated use of the Buyer Real Property
and the Buyer Improvements is not a pre-existing, nonconforming use, and no
notice of the violation of any Law or legal requirement has been received by
the
Buyer.
19
(c) There
are no pending, or to the Knowledge of the Buyer, threatened or contemplated
condemnation, expropriation or other proceedings (nor is there any basis for
any
such action) affecting the Buyer Real Property, or any part thereof, or of
any
assessments made or threatened with respect to the Buyer Real Property or any
part thereof, or of any sales or other disposition of the Buyer Real Property,
or any part thereof, in lieu of condemnation.
(d) The
Buyer does not own or hold, and is not obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell or dispose of the Buyer Real Property, or any portion thereof or interest
therein.
(e) To
the Knowledge of the Buyer, no Buyer Improvement encroaches upon any other
property, and there are no encroachments by other buildings or improvements
onto
the Buyer Real Property.
5.10 Securities
Portfolio and Investments. All
securities owned by the Buyer or any of its subsidiaries (whether owned of
record or beneficially) are held free and clear of all Liens that would impair
the ability of the owner thereof to dispose freely of any such security and/or
otherwise to realize the benefits of ownership thereof at any time, except
for
those Liens to secure public deposits in the ordinary course of business
consistent with past practice and those Liens that could not reasonably be
expected to have a Material Adverse Effect on the Buyer. There are no
voting trusts or other agreements or undertakings to which the Buyer or any
of
its subsidiaries is a party with respect to the voting of any such
securities. Except for fluctuations in the market values of United
States Treasury and agency or municipal securities, since December 31, 2006,
there has been no significant deterioration or Material adverse change in the
quality, or any Material decrease in the value, of the securities portfolio
of
the Buyer and its subsidiaries, taken as a whole.
5.11 Environmental
Matters.
(a) To
the Knowledge of the Buyer, the Participation Facilities and Loan Collateral
of
the Buyer and its subsidiaries are, and have been, in compliance with all
Environmental Laws, except those violations that could not reasonably be
expected to have a Material Adverse Effect on the Buyer.
(b) To
the Knowledge of the Buyer, there is no Litigation pending or threatened before
any court, governmental agency, or authority, or other forum in which any of
the
Buyer and its subsidiaries or any of its Participation Facilities has been
or,
with respect to threatened Litigation, may reasonably be expected to be named
as
a defendant (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the environment
of
any Hazardous Material, whether or not occurring at, on, under, or involving
a
site owned, leased, or operated by the Buyer or any of its subsidiaries or
any
of its Participation Facilities, except for such Litigation pending or
threatened that could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
(c) To
the Knowledge of the Buyer, there is no Litigation pending or threatened before
any court, governmental agency, or authority, or other forum in which any of
its
Loan Collateral (or the Buyer or any of its subsidiaries in respect of such
Loan
Collateral) has been or, with respect to threatened Litigation, may reasonably
be expected to be named as a defendant or potentially responsible party
(i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of
any Hazardous Material, whether or not occurring at, on, under, or involving
Loan Collateral, except for such Litigation pending or threatened that could
not
reasonably be expected to have a Material Adverse Effect on the
Buyer.
20
(d) To
the Knowledge of the Buyer, no facts exist that provide a reasonable basis
for
any Litigation of a type described in subsections (b) or (c), except such could
not reasonably be expected to have a Material Adverse Effect on the
Buyer.
(e) To
the Knowledge of the Buyer, during and prior to the period of (i) any of
the Buyer’s or its subsidiaries’ ownership or operation of any of their
respective current properties, (ii) any of the Buyer’s
or its subsidiaries’ participation in the management of any Participation
Facility, or (iii) any of the Buyer’s or subsidiaries’ holding of a
security interest in Loan Collateral, there have been no releases of Hazardous
Material in, on, under, or affecting (or potentially affecting) such properties,
except such as could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
5.12 Compliance
with Laws. Each
of the Buyer and its subsidiaries has in effect all Permits necessary for it
to
own, lease, or operate its Material Assets and to carry on, in all Material
respects, its business as now conducted, except for those Permits the absence
of
which could not reasonably be expected to have a Material Adverse Effect on
the
Buyer, and there has occurred no Default under any such Permit, other than
Defaults that could not reasonably be expected to have a Material Adverse Effect
on the Buyer. None of the Buyer or its subsidiaries: (i) is in
violation of any Laws, Orders, or Permits applicable to its business or
employees conducting its business, except for violations that could not
reasonably be expected to have a Material Adverse Effect on the Buyer; and
(ii) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority
or
the staff thereof (a) asserting that any of the Buyer and its subsidiaries
is not in compliance with any of the Laws or Orders that such governmental
authority or Regulatory Authority enforces, except where such noncompliance
could not reasonably be expected to have a Material Adverse Effect on the Buyer,
(b) threatening to revoke any Permits, except where the revocation of which
could not reasonably be expected to have a Material Adverse Effect on the Buyer,
or (c) requiring the Buyer or any of its subsidiaries (x) to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
board or directors resolution or similar undertaking that restricts Materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of
dividends. The most recent regulatory rating given to the Buyer as to
compliance with the Community Reinvestment Act was “satisfactory” or
better.
5.13 Labor
Relations. Neither
the Buyer nor any of its subsidiaries is the subject of any Litigation asserting
that it has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state Law) or seeking to compel
it to
bargain with any labor organization as to wages or conditions of employment,
nor
is any of them a party to or bound by any collective bargaining agreement,
Contract, or other agreement or understanding with a labor union or labor
organization, nor is there any strike or other labor dispute involving any
of
them, pending or threatened, or to the Knowledge of the Buyer, is there any
activity involving any of the Buyer’s or its subsidiaries’ employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
5.14 Employee
Benefit Plans.
(a) The
Buyer has made available to the Company prior to the execution of this Agreement
correct and complete copies in each case of all Buyer Benefit
Plans.
(b) All
Buyer Benefit Plans are in compliance with the applicable terms of ERISA, the
Internal Revenue Code, and any other applicable Laws, except as could not
reasonably be expected to have a Material Adverse Effect on the
Buyer.
21
(c) Neither
the Buyer nor any of its subsidiaries has an “obligation to contribute” (as
defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)). Each “employee pension benefit
plan,” as defined in Section 3(2) of ERISA, ever maintained by the Buyer or its
subsidiaries that was intended to qualify under Section 401(a) of the Internal
Revenue Code
and
with respect to which the Buyer or any of its subsidiaries has any Liability,
is
disclosed as such in Section 5.14 of the Buyer’s
Disclosure Schedule.
(d) The
Buyer has made available to the Company prior to the execution of this Agreement
correct and complete copies of the following documents: (i) all trust agreements
or other funding arrangements for such Buyer Benefit Plans (including insurance
contracts), and all amendments thereto, (ii) with respect to any such Buyer
Benefit Plans or amendments, all determination letters, Material rulings,
Material opinion letters, Material information letters, or Material advisory
opinions issued by the Internal Revenue Service, the United States Department
of
Labor, or the Pension Benefit Guaranty Corporation after December 31, 2001,
(iii) annual reports or returns, audited or unaudited financial statements,
actuarial valuations and reports, and summary annual reports prepared for any
Buyer Benefit Plan with respect to the most recent plan year, and (iv) the
most
recent summary plan descriptions and any Material modifications
thereto.
(e) Each
Buyer ERISA Plan that is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and, to the Knowledge of the Buyer, there is no
circumstance that will or could reasonably be expected to result in revocation
of any such favorable determination letter. Each trust created under
any Buyer ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and to the Knowledge of
the Buyer, there is no circumstance that will or could
reasonably be expected to result in revocation of such
exemption. With respect to each such Buyer Benefit Plan, to the
Knowledge of the Buyer, no event has occurred that will or could reasonably
be
expected to give rise to a loss of any intended Tax consequences under the
Internal Revenue Code or to any Tax under Section 511 of the Internal Revenue
Code that could reasonably be expected to have a Material Adverse Effect on
the
Buyer. There is no Material Litigation pending or, to the Knowledge
of the Buyer, threatened relating to any Buyer ERISA Plan.
(f) Neither
the Buyer nor any of its subsidiaries has engaged in a transaction with respect
to any Buyer Benefit Plan that, assuming the Taxable Period of such transaction
expired as of the date of this Agreement, would subject the Buyer or any of
its
subsidiaries to a Material tax or penalty imposed by either Section 4975 of
the
Internal Revenue Code or Section 502(i) of ERISA in amounts
that could reasonably be expected to have a Material Adverse Effect
on the Buyer. Neither the Buyer or any of its subsidiaries nor any
administrator or fiduciary of any Buyer Benefit Plan (or any agent of any of
the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner, that could subject the Buyer or any of its subsidiaries to any direct
or
indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA, where such Liability could reasonably
be expected to have a Material Adverse Effect on the Buyer. No oral
or written representation or communication with respect to any aspect of the
Buyer Benefit Plans has been made to employees of the Buyer or any of its
subsidiaries that is not in accordance with the written or otherwise preexisting
terms and provisions of such plans, except where any Liability with respect
to
such representation or disclosure could not reasonably be expected to have
a
Material Adverse Effect on the Buyer.
(g) Since
the date of the most recent actuarial valuation, there has been (i) no Material
change in the financial position or funded status of any Buyer Pension Plan,
(ii) no Material change in the actuarial assumptions with respect to any Buyer
Pension Plan, and (iii) no Material increase in benefits under any Buyer Pension
Plan as a result of plan amendments or changes in applicable Law, except as
could not reasonably be expected to have a Material Adverse Effect on the
Buyer. Neither any Buyer
22
Pension
Plan nor any “single-employer plan,” within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by the Buyer or its subsidiaries,
or
the single-employer plan of any entity that is considered one employer with
the
Buyer under Section 4001 of ERISA or Section 414 of the Internal Revenue Code
or
Section 302 of ERISA (whether or not waived) (a “Buyer ERISA
Affiliate”) has an “accumulated funding deficiency” within the meaning
of Section 412 of the Internal Revenue Code or Section 302 of
ERISA. All contributions with respect to a Buyer Pension Plan or any
single-employer plan of a Buyer ERISA Affiliate have or will be timely made
and
there is no Lien or expected to be a Lien under Internal Revenue Code Section
412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section
4971. Neither the Buyer nor any of its subsidiaries has provided, or
is required to provide, security to a Buyer Pension Plan or to any
single-employer plan of a Buyer ERISA Affiliate pursuant to Section 401(a)(29)
of the Internal Revenue Code. All premiums required to be paid under
ERISA Section 4006 have been timely paid by the Buyer, except to the extent
any
failure that could not reasonably be expected to have a Material Adverse Effect
on the Buyer.
(h) No
Liability under Title IV of ERISA has been or is expected to be incurred by
the
Buyer or it subsidiaries with respect to any defined benefit plan currently
or
formerly maintained by any of them or by any Buyer ERISA Affiliate that has
not
been satisfied in full (other than Liability for Pension Benefit Guaranty
Corporation premiums which have been paid when due), except to the extent any
failure could not reasonably be expected to have a Material Adverse Effect
on
the Buyer.
(i) Neither
the Buyer nor any of its subsidiaries has any Material obligation for retiree
health and retiree life benefits under any of the Buyer Benefit Plans other
than
with respect to benefit coverage mandated by applicable Law.
(j) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, by themselves, (i) result in any Material
payment (including without limitation severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any employee
of
the Buyer or it subsidiaries from the Buyer or any of its subsidiaries under
any
Buyer Benefit Plan or otherwise, (ii) Materially increase any benefit otherwise
payable under any Buyer Benefit Plan, or (iii) result in any acceleration of
the
time of any Material payment or vesting of any Material benefit.
5.15 Material
Contracts.
(a) Except
as set forth on Section 5.15 of the Buyer’s Disclosure
Schedules, none of the Buyer or its subsidiaries, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by,
or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract, (ii) any Contract relating to the borrowing of money
by
the Buyer or its subsidiaries or the guarantee by the Buyer or its subsidiaries
of any such obligation (other than Contracts evidencing deposit liabilities,
purchases of federal funds, fully secured repurchase agreements, and Federal
Reserve or Federal Home Loan Bank advances of depository institution
subsidiaries, trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), and (iii) any other Contract or
amendment thereto that would be required to be filed as an exhibit to a Form
10-Q filed by the Buyer with the SEC as of the date of this Agreement that
has
not been filed as an exhibit to the Buyer’s Form 10-Q filed for the fiscal
quarter ended March 31, 2007, or in another SEC document (together with all
Contracts referred to in
Sections 5.8 and 5.14 of
this Agreement, the “Buyer Contracts”).
(b) With
respect to each Buyer Contract: (i) the Contract is in full force and effect;
(ii) none of the Buyer or its subsidiaries is in Default hereunder, other than
Defaults that could not reasonably be expected to have a Material Adverse Effect
on the Buyer; (iii) neither the Buyer nor any of its subsidiaries
23
has
repudiated or waived any Material provision of any such Contract; and (iv)
no
other party to any such Contract is, to the Knowledge of the Buyer, in Default
in any respect, other than Defaults that could not reasonably be expected to
have a Material Adverse Effect on the Buyer, or has repudiated or waived any
Material provision thereunder. Except for Federal Reserve or Federal
Home Loan Bank advances, all of the indebtedness of the Buyer and its
subsidiaries for money borrowed (not including deposit Liabilities) is
prepayable at any time without penalty or premium.
5.16 Legal
Proceedings.
There
is no Litigation instituted or pending, or, to the Knowledge of the Buyer,
threatened against the Buyer or any of its subsidiaries, or against any Asset,
employee benefit plan, interest, or right of any of them, except as could not
reasonably be expected to have a Material Adverse Effect on the Buyer, nor
are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any the Buyer or its subsidiaries, except
as
could not reasonably be expected to have a Material Adverse Effect on the
Buyer. There is no Litigation as of the date of this Agreement to
which the Buyer or any of its subsidiaries is a party and that names the Buyer
or any of its subsidiaries as a defendant or cross-defendant and where the
maximum exposure is estimated to be $250,000 or more.
5.17 Proprietary
Rights.
(a) Ownership
and Right to Use. The Buyer owns, has been granted a license to
use or otherwise has the right to use all of the Intellectual Property that
it
uses, or holds for use, in its business (the “Buyer Proprietary
Rights”).
(b) Trade
Secrets. The Buyer has taken efforts that are reasonable under
the circumstances to prevent unauthorized disclosure to any other Person of
such
portions of the Buyer’s trade secrets that would enable such Person to compete
with the Buyer within the scope of the Buyer’s business as now conducted and as
presently proposed to be conducted.
(c) No
Infringement. The Buyer has not interfered with, infringed upon
or misappropriated the Intellectual Property of any other Person and the
continued operation of the Buyer’s business by the Company, in the manner that
such business is currently conducted or proposed to be conducted, will not
interfere with, infringe upon or misappropriate the Intellectual Property of
any
other Person. To the Knowledge of the Buyer, no Person is interfering
with, infringing upon or misappropriating any Buyer Proprietary
Right. No claim has been asserted against the Buyer by any
Person: (i) that such Person has any right, title or interest in
or to any of the Buyer Proprietary Rights; (ii) that such Person has the
right to use any of the Buyer Proprietary Rights; (iii) to the effect that
any past, present or projected act or omission by the Buyer infringes the
Intellectual Property of such Person; or (iv) that challenges the Buyer’s
right to use any of the Buyer Proprietary Rights. No facts or
circumstances exist that, with or without the passing of time or the giving
of
notice or both, might reasonably serve as the basis for any such
claim.
5.18 Reports. Since
the date of its organization, each of the Buyer and its subsidiaries has timely
filed all reports and statements, together with any amendments required to
be
made with respect thereto, that it was required to file with any Regulatory
Authorities, except failures to file that could not reasonably be expected
to
have a Material Adverse Effect on the Buyer. As of their respective
dates, each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied with all applicable Laws, except
noncompliance that could not reasonably be expected to have a Material Adverse
Effect on the Buyer.
5.19 Registration
Statement; Proxy Statement. Subject
to the accuracy of the representations contained in Section
4.19, the Registration Statement covering the shares of the Buyer’s
24
stock
to
be issued pursuant to this Agreement shall not, at the time the Registration
Statement (including any amendments or supplements thereto) is declared
effective by the SEC, contain any untrue statement of a Material fact or omit
to
state any Material fact required to be stated therein or necessary to make
the
statements therein not misleading. Subject to the accuracy of the
representations contained in Section 4.19, the Proxy Statement
to be sent to the shareholders of the Company to consider, at the Shareholder
Meeting, the Merger, will not, on the date the Proxy Statement is first mailed
to shareholders, at the time of the Shareholder Meeting and at the Effective
Time, contain any untrue statement of a Material fact or omit to state any
Material fact necessary to make the statements therein, in light of
circumstances under which they were made, not misleading. If at any
time prior to the Effective Time any event relating to the Buyer or the Buyer
Bank or any of their affiliates, officers or directors should be discovered
by
the Buyer or the Buyer Bank that should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, the Buyer or
the
Buyer Bank will promptly inform the Company and prepare an amendment for filing
with the SEC, subject to review and approval of the Company, which approval
shall not be unreasonably withheld or delayed. The Proxy Statement
shall comply in all Material respects with the requirements of the Securities
Laws and the rules and regulations thereunder. Notwithstanding the
foregoing, the Buyer makes no representation or warranty with respect to any
information supplied by the Company and its subsidiaries that is contained
or
incorporated by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Proxy Statement.
5.20 Accounting,
Tax, and Regulatory Matters. To
the Knowledge of the Buyer, none of the Buyer or it subsidiaries or any
Affiliate thereof has taken or agreed to take any action, that could reasonably
be expected to (i) prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, or (ii) Materially
impede or delay receipt of any Consents of Regulatory Authorities referred
to in
Section 8.1(b) of this
Agreement.
5.21 Derivatives. All
interest rate swaps, caps, floors, option agreements, futures and forward
contracts, and other similar risk management arrangements, whether entered
into
for the account of the Buyer or it subsidiaries or their customers were entered
into (i) in accordance with prudent business practices and all applicable Laws,
and (ii) with counterparties believed to be financially
responsible.
5.22 Certain
Regulated Businesses. Neither
the Buyer nor any of its subsidiaries is an “investment company” as defined in
the Investment Company Act of 1940, as amended.
5.23 Commissions. Other
than ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder’s fees in connection with
the transactions contemplated hereby by reason of any action taken by the Buyer,
any of its subsidiaries or any of the Buyer’s shareholders.
ARTICLE
VI
COVENANTS
6.1 Covenants
of the Company.
(a) Ordinary
Conduct of Business. Except as otherwise expressly permitted by
this Agreement, the Company will, and will cause each of its subsidiaries to,
from the date of this Agreement to the Closing, conduct its business in the
ordinary course in substantially the same manner as presently conducted and
make
reasonable commercial efforts consistent with past practices to preserve its
relationships with other Persons. Additionally, except as otherwise
contemplated by this Agreement or as set forth on
Section 6.1(a) of the Company’s Disclosure Schedule, the
Company will not, and it will not permit its subsidiaries to, do any of the
following without the prior written consent of the Buyer, which consent will
not
be unreasonably withheld or delayed:
25
(i) amend
its governing documents;
(ii) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
any stock or stock options (including the grant of reload options in connection
with the exercise of existing stock options) or other equity equivalents of
any
class or any other of its securities, or amend any of the terms of any
securities outstanding as of the date hereof; provided that nothing in
this Section 6.1(a)(ii) shall preclude the holders of
Company stock options that have vested in accordance with their terms and the
terms of the plan or plans under which such stock options were issued from
exercising such stock options for the purchase of Company common stock, and
provided further that any such permitted exercise shall not result
in the grant of any reload options;
(iii) (A)
split, combine or reclassify any shares of its capital stock, (B) declare,
set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock,(except
for
regular quarterly cash dividends paid in accordance with past practice at the
rate of $0.64 per share per annum, including the payment of any quarterly
portion thereof as is necessary to prevent the Company’s shareholders from
failing to receive a quarterly dividend from either the Company or the Buyer
during any particular calendar quarter), or (C) redeem or otherwise acquire
any of its securities;
(iv) (A) incur
or assume any long-term or short-term debt or issue any debt securities other
than in the ordinary course of business consistent with past practice or
(B) other than in the ordinary course of business consistent with past
practice assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person, (C) make any loans, advances or capital contributions to, or
investments in, any other Person, other than in the ordinary course and
consistent with past practice, but in any event not to exceed an amount per
loan
of $400,000, pledge or otherwise encumber shares of its capital stock,
(D) mortgage or pledge any of its assets, tangible or intangible, or create
or suffer to exist any Lien thereupon, other than Liens permitted by the proviso
clause in the definition of Liens and Liens created or existing in the ordinary
course of business consistent with past practice or (E) prepay or accelerate
amortization of any outstanding Company ESOP indebtedness;
(v) except
as required by Law or as contemplated herein, adopt or amend any Benefit
Plan;
(vi) except
as provided in Section 6.2(c), grant to any director or
executive officer or employee any stock options or increase in his or her
compensation or pay or agree to pay to any such person other than in the
ordinary course of business consistent with past practices any bonus, severance,
change of control or termination payment, specifically including any such
payment that becomes payable upon termination of such Person by it after the
Closing;
(vii) enter
into or amend any employment Contract;
26
(viii) acquire,
sell, lease or dispose of any assets outside the ordinary course of business,
or
any other assets that in the aggregate are Material to it, or acquire any Person
(or division thereof), any equity interest therein or the assets thereof outside
the ordinary course of business consistent with past practice;
(ix) change
or modify any of the accounting principles or practices used by it
or revalue in any Material respect any of its assets, including
without limitation writing down the value of inventory or writing off notes
or
accounts receivable other than in the ordinary course of business or as required
by GAAP;
(x) (A)
enter into, cancel or modify any Contract other than in the ordinary course
of
business consistent with past practices, but not in any event involving an
amount in excess of $10,000; (B) authorize or make any capital
expenditure or expenditures that, individually or in the aggregate, are in
excess of $25,000; or (C) enter into or amend any Contract with respect to
any
of the foregoing;
(xi) pay,
discharge or satisfy, cancel, waive or modify any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in or
contemplated by the Company Financial Statements, or incurred in the ordinary
course of business consistent with past practices;
(xii) settle
or compromise any pending or threatened suit, action or claim in an amount
greater than $10,000 per claim or $50,000 in the aggregate;
(xiii) take,
or agree in writing or otherwise to take, any action that would make any of
the
representations or warranties of the Company contained in this Agreement untrue
or incorrect or result in any of the conditions set forth in this Agreement
not
being satisfied; or
(xiv) agree,
whether in writing or otherwise, to do any of the foregoing.
(b) Consents. The
Company will exercise its best efforts to obtain such Consents as may be
necessary or desirable for the consummation of the transactions contemplated
hereby, including without limitation from the appropriate Governmental
Authorities and the parties to those Contracts listed on
Section 4.2 of the Company’s Disclosure Schedule such that
such Contracts shall survive the Merger and not be breached
thereby.
(c) Shareholder
Approval. Subject to Section 6.1(d),
the Company will, at the earliest practicable
date, hold the
Shareholder Meeting and take all lawful action to solicit the approval and
adoption of this Agreement (and the related Plan of Merger) and the Merger
by
the requisite vote. In connection with such shareholder meeting,
subject to Section 6.1(d), the Company’s board of directors
will recommend to the Company’s shareholders such approvals. Such
recommendation shall be contained in the Proxy Statement.
(d) Acquisition
Proposals.
(i) The
Company shall not, and shall not permit any of its subsidiaries or any of the
respective Affiliates, representatives, advisers or agents of the Company and
its subsidiaries to, directly or indirectly, (x) take any action to
solicit, initiate or encourage any Acquisition Proposal, or (y) participate
in any discussions or negotiations
27
with
or
encourage any effort or attempt by any other Person or take any other action
to
facilitate an Acquisition Proposal. From and after the date hereof,
the Company shall, and shall cause its subsidiaries and the Affiliates,
representatives, advisers and agents of the Company and its subsidiaries to,
cease doing any of the foregoing.
(ii) Notwithstanding
the foregoing, in the event of the receipt by the Company or any of its
subsidiaries of an Acquisition Proposal and (x) the Company’s board of directors
concludes in good faith that there is a reasonably likelihood that such
Acquisition Proposal constitutes or is reasonably likely to result in a Superior
Proposal, and (y) neither the Company nor any of its subsidiaries or any of
the
respective Affiliates, representatives, advisers or agents of the Company and
its subsidiaries solicited, initiated or encouraged such Acquisition Proposal,
the Company may furnish to any party information and access in response to
a
request for information or access made incident to such Acquisition Proposal
and
may participate in discussions and negotiate with such party concerning its
Acquisition Proposal to the extent that the Company’s board of directors shall
have determined, based upon the advice of outside counsel experienced in such
matters, that failing to take such action would violate the directors’ fiduciary
duties under applicable Law; provided, however, that prior to
providing any nonpublic information permitted to be provided by this subsection
(ii), the Company and its subsidiaries shall have entered into a confidentiality
agreement with such third party on terms no less favorable to them than
contained in the Confidentiality Agreements.
(iii) Unless
this Agreement has been terminated in accordance with the provisions hereof,
the
board of directors of the Company shall notify the Buyer immediately of any
and
all communications regarding or in anticipation of an Acquisition Proposal
and
of any Acquisition Proposals that are made, and shall in such notice indicate
in
reasonable detail, to the extent reasonably possible, the identity of the
offeror and the terms and conditions of such Acquisition Proposal and shall
keep
the Buyer promptly advised of all developments relating thereto or that could
culminate in the board of directors withdrawing, modifying or amending its
recommendation of the Merger and the other transactions contemplated by this
Agreement. Unless this Agreement has been terminated, neither the Company nor
any of its subsidiaries shall waive or modify any provisions contained in any
confidentiality agreement entered into relating to a possible acquisition
(whether by merger, stock purchase, asset purchase or otherwise) or
recapitalization of the Company or any of its subsidiaries.
(e) Employee
Benefit Plans.
(i) The
Company shall, prior to the Effective Time, in accordance with applicable law
and the terms of the relevant plan documents, (A) take all actions as may be
necessary to satisfy or pay in full all obligations of the Company or its
subsidiaries under the following plans (to the extent due and payable prior
to
the Effective Time) and to terminate such plans: the 1998 Recognition and
Retention Plan, the 2003 Long-Term Incentive Stock Benefit Plan, and the First
Federal Savings and Loan Association of Cheraw Non-Qualified Supplemental Plan;
(B) comply with the applicable provisions of Code Section 409A and the
regulations promulgated thereunder and IRS Notice 2005-1, including amending
such plans if required, such that no interest or additional tax is payable
under
Section 409A(a)(1)(B) of the Code; (C) with respect to the First Federal Savings
and Loan Association of Cheraw Non-Qualified Supplemental Plan, obtain from
each
participant receiving payment thereunder an acknowledgment acknowledging the
payment of the amounts due and releasing the Buyer, Buyer Bank, the Company
and
28
Company
Bank from any further obligations thereunder; and (D) provide to the Buyer
written evidence, in form reasonably acceptable to the Buyer, that the Company
has complied with the provisions of this paragraph.
(ii) With
respect to the First Federal Savings and Loan Association of Cheraw Restated
Non-Qualified Deferred Compensation Plan, the Company and Company Bank shall,
prior to the Effective Time, comply with the applicable provisions of Code
Section 409A and the regulations promulgated thereunder and IRS Notice 2005-1,
including amending such Plan if required, such that no interest or additional
tax is payable under Section 409A(a)(1)(B) of the Code. As of the
Effective Time, the Buyer shall assume and honor Company and Company Bank’s
obligations under such Plan.
(iii) With
respect to the Great Pee Dee Bancorp, Inc. and First Federal Savings and Loan
Association of Cheraw Deferred Compensation Plan for Directors (the
“2002 Plan”) and the Great Pee Dee Bancorp and Sentry Bank
& Trust 2005 Deferred Compensation Plan for Directors (the
“2005
Plan”), Company and Company Bank shall, prior to the Effective Time, in
accordance with applicable law and the terms of the Plan documents and such
that
no interest or additional tax is payable under Section 409A(a)(1)(B) of the
Code, (A) comply with the applicable provisions of Code Section 409A and the
regulations promulgated thereunder and IRS Notice 2005-1, including amending
such Plans if required; and (B) terminate the 2002 Plan and provide for payments
of Plan benefits due to participants. As of the Effective Time, the
Buyer shall assume and honor the Company and Company Bank’s obligations under
such Plans. The Plans shall provide for the following benefit
distributions, which shall not trigger interest or additional tax payable under
Section 409A(a)(1)(B) of the Code: with respect to the 2005 Plan, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Jr. shall receive distributions under the elections
described later in this paragraph, and all participants in the 2002 Plan shall
receive distributions in three equal annual installments commencing at the
later
of January 1, 2008 or the Effective Time. With respect to the 2005
Plan, prior to the Effective Time and in any event prior to December 31, 2007
(the end of the transition period under Section 409A of the Code), ▇▇. ▇▇▇▇▇
shall execute and deliver to the Company and to the Buyer an election form
indicating that he shall receive a single lump sum payment of his account
balance, and ▇▇. ▇▇▇▇▇ shall execute and deliver to the Company and to the
Buyer
an election form indicating that he shall receive his account balance in equal
monthly or annual installments over a three (3) year
period. Distributions under the 2005 Plan shall commence at the later
of January 1, 2008, or the Effective
Time. Following the distribution of all assets held thereunder, the
2005 Plan shall be terminated.
(iv) Concurrently
with the execution and delivery of this Agreement, the Company and Company
Bank
shall prepare an acknowledgement in the form attached as Section
6.1(e) of the Company Disclosure Schedule (an “Acknowledgement
Agreement”), which shall, in a manner consistent with the Plans (as
amended, if applicable) that are the subject of paragraphs (ii) and (iii) above,
set forth the manner in which each participant’s rights under such Plans will be
assumed and honored by the Buyer.
(v) The
Company and Company Bank may, prior to the Effective Time, amend such rabbi
trusts that hold assets in the (A) First Federal Savings and Loan Association
of
Cheraw Restated Non-Qualified Deferred Compensation Plan, (B) the 2002 Plan,
(C)
the 2005 Plan, and (D) the First Federal Savings and Loan Association of
29
Cheraw
Non-Qualified Supplemental Plan, in order to consolidate assets from such plans
within a single rabbi trust or more than one rabbi trust as it deems necessary
or appropriate to provide for an orderly distribution of benefits to
participants in such Plans. Following the distribution of all plan
assets held thereunder, the rabbi trusts shall be terminated.
(vi) After
the date of this Agreement, the 2005 Plan shall be frozen, and neither the
Company nor the Company Bank shall make or permit to be made any additional
contributions or deferrals under any plan that is a “nonqualified deferred
compensation plan” under Treas. Reg. § 1.409A-1(a).
6.2 Covenants
of the Buyer.
(a) Reservation
of Shares of the Buyer’s Stock. The Buyer shall reserve for
issuance a sufficient number of shares of the Buyer’s Stock to cover the
issuances of such stock required hereby.
(b) Directors.
(i) Effective
at the Effective Time, the Buyer shall cause ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to be elected
or
appointed as a member of the board of directors of the Buyer and the Buyer
Bank;
provided that ▇▇. ▇▇▇▇▇▇▇▇ meets the independence requirements of the Nasdaq
Global Select Market. If ▇▇. ▇▇▇▇▇▇▇▇ does not meet the independence
requirements of the Nasdaq Global Select Market, the Buyer shall cause to
elected or appointed as a member of the board of directors of the Buyer and
Buyer Bank another member of the board of directors of the Company and the
Company Bank who meets the independence requirements of the Nasdaq Global Select
Market. The Buyer shall include such designated individual as a
candidate for election as director and recommend and solicit proxies for his
or
her election at such next annual meeting. After such meeting, such
designated person shall be subject to the same nomination and election
procedures as the other directors on the boards of the Buyer and the Buyer
Bank.
(ii) The
Company’s directors at the Effective Time who do not join the Buyer’s board of
directors will have the option to participate on a local advisory board of
the
Buyer (which advisory board the Buyer agrees to establish and maintain for
at
least three years). Each former Company director who joins such
advisory board shall be paid a fee of $1,000 per month for his or her good
faith
service in promoting the Buyer and the Buyer
Bank as a member of such advisory board for the three year period beginning
on
the Effective Date and ending on the third anniversary of the Effective
Date. After the third anniversary of the Effective Date, participants
on the local advisory board shall be paid Buyer’s normal advisory board fee for
service as a member of such advisory board.
(c) Employees.
(i) Except
as covered by the Employment Agreement and any existing employment agreements
of
Company set forth on Section 4.15(a) of the Company Disclosure
Schedule, any and all of the Company’s employees will be employed on an
“at-will” basis, and nothing in this Agreement shall be deemed to constitute an
employment agreement with any such person to obligate the Buyer or any Affiliate
thereof to employ any such person for any specific period of time or in any
specific position or to restrict the Buyer’s or any of its Affiliates’ right to
terminate the employment of any such person at any time and for any reason
satisfactory to it.
30
(ii) Company
employees who continue employment with the Buyer or any of its subsidiaries
will
be eligible for benefits consistent with those of existing employees of the
Buyer or such subsidiary, with credit for past service with the Company or
the
Company Bank for purposes of participation, eligibility and vesting (but not
for
the calculation of any benefit accrual under any defined benefit plan);
provided, however, in the event of any termination or
consolidation of any Company or Company Bank health plan with any Buyer or
Buyer
Bank health plan, the Buyer or Buyer Bank shall make available to employees
of
the Company or Company Bank who continue employment with the Buyer or Buyer
Bank
(“Continuing Employees”) and their dependents employer-provided
health coverage on the same basis as it provides such coverage to employees
of
the Buyer and Buyer Bank. Unless a Continuing Employee affirmatively
terminates coverage under a Company or Company Bank health plan prior to the
time that such Continuing Employee becomes eligible to participate in the Buyer
or Buyer Bank health plan, no coverage of any of the Continuing Employees or
their dependents shall terminate under any of the Company or Company Bank health
plans prior to the time such Continuing Employees and their dependents become
eligible to participate in the health plans, programs and benefits common to
all
employees of Buyer and Buyer Bank and their dependents. In the event
of any termination of any Company or Company Bank health plan, or consolidation
of any Company or Company Bank health plan with any Buyer Bank health plan,
any
coverage limitation under the Buyer Bank health plan due to any pre-existing
condition shall be waived by the Buyer Bank health plan to the degree that
such
condition was covered by the Company or Company Bank health plan and such
condition would otherwise have been covered by the Buyer Bank health plan in
the
absence of such coverage limitation. All Continuing Employees who
cease participating in a Company Bank health plan and become participants in
a
comparable Buyer Bank health plan (i) shall receive credit for any co-payment
and deductibles paid under Company Bank’s health plan for purposes of satisfying
any applicable deductible or out-of-pocket requirements under the Buyer Bank
health plan, upon substantiation, in a form satisfactory to Buyer Bank that
such
co-payment and/or deductible has been satisfied, and (ii) will not be subject
to
any exclusion or penalty for preexisting conditions that were covered under
the
Company or Company Bank’s health plans as of the Closing Date or any waiting
period relating to coverage under the Buyer or Buyer Bank’s health
plans. There shall be no waiting periods applicable to any Company or
Company Bank employees to participate in such benefits (including applicable
insurance benefits).
(iii) The
Buyer or one of its subsidiaries shall honor any and all vacation accrued by
the
employees of the Company and the Company Bank and any sick leave up to 30
days.
(iv) The
Buyer shall provide severance to any employees of the Company that
are terminated in connection with the Merger, at the rate of two (2) weeks
of
base salary per year of service with the Company, with a minimum of three (3)
months of severance. In addition, the Buyer shall offer outplacement
services for Company employees terminated in connection with the
Merger.
(v) Except
as otherwise provided herein, the Buyer will honor the existing employment
agreements and other Company Contracts set forth on
Section 4.15(a) of the Company Disclosure
Schedule.
(vi) Immediately
prior to the Effective Time, the Company shall transfer to ▇▇. ▇▇▇▇ the title
to
the Company vehicle that ▇▇. ▇▇▇▇ currently drives.
31
(vii) The
Company and Company Bank may amend or restate the employment agreement by and
between Company Bank and ▇▇▇▇ ▇▇▇▇ and the severance agreements by and between
Company Bank and each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ by no later than the
earlier of the Closing Date or December 31, 2007, in order to cause a “change in
control” to be a triggering event for distributions (without the necessity of
separation from service) and to require the amounts due to ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ to be paid in a lump sum, and the amounts due to ▇▇▇▇▇▇ ▇▇▇▇▇ to be
paid in three (3) annual installments, in a manner that is consistent with
Section 409A of the Code. Company Bank shall pay such amounts, which
are set forth in Section 6.2(c) of the Company Disclosure
Schedule (such amounts shall not be increased in the event the Effective Time
occurs in 2008 rather than 2007), commencing on the later of January 1, 2008
or
the Effective Time; provided that in no event will the Company Bank be obligated
to pay any amounts that would be disallowed as a deduction under Section 280G
of
the Internal Revenue Code. Prior to the Effective Time, Company Bank
shall obtain an agreement (a “Settlement Agreement”) in the
form attached to Section 6.2(c) of the Company Disclosure
Schedule, from each of ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, to accept
in
full settlement of his or her rights under the employment or severance agreement
the amounts and benefits set forth in the Settlement Agreements. Section
6.2(c) of the Company Disclosure Schedule sets forth the maximum safe
harbor amounts payable to each of ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
within the meaning of Section 280G of the Code.
(viii) In
exchange for their willingness to remain in the employ of the Company Bank
following the Effective Time and provided they do not voluntarily terminate
their employment prior to the earlier to occur of (A) ninety (90) days following
the Effective Time or (b) the date of the data processing conversion with
respect to the merger of Company Bank into Buyer Bank, ▇▇▇▇ ▇▇▇▇ shall receive
a
retention bonus cash payment of $70,000 and ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
shall each receive a retention bonus cash payment of $25,000, all upon the
earlier to occur of ninety (90) days following the Effective Time or the date
of
the data processing conversion.
(d) Directors
and Officers Insurance and Indemnification.
(i) The
Buyer shall maintain, or shall cause the Buyer Bank to maintain, in effect
for
six (6) years from the Closing Date, if available, the current directors’ and
officers’ liability insurance policies maintained by the Company;
provided, however, that Buyer may substitute therefor policies of
at least the same coverage containing terms and conditions that are not taken
as
a whole Materially less favorable to the insured with respect to matters
occurring prior to the Effective Time.
(ii) From
and after the Effective Time, the Buyer shall, or shall cause the Buyer Bank
to,
indemnify (including the advancement of expenses), defend and hold harmless
each
person who is now, or who has been at any time before the date hereof or who
becomes before the Effective Time, an officer or director of the Company or
Company Bank (the “Indemnified Parties”) against all losses,
claims, damages, costs, expenses (including reasonable attorneys’ fees),
liabilities or judgments or amounts that are paid in settlement (which
settlement shall require the prior written consent of Buyer, which consent
shall
not be unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, or administrative (each
a
“Claim”), in which an Indemnified Person is, or is threatened
to be made, a party or witness arising in whole or in part out of the fact
that
such person is or was a director,
32
officer
or employee of the Company Bank or any of its subsidiaries if such Claim
pertains to any matter or fact arising, existing or occurring before the
Effective Time (including without limitation the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is asserted
or claimed before, at or after the Effective Time (the “Indemnified
Liabilities”), to the fullest extent required or permitted by the
Company’s Certificate of Incorporation (or as to the Company Bank, its charter)
and permitted by applicable Law in effect as of the date hereof or as amended
applicable to a time before the Effective Time. Any Indemnified
Person wishing to claim indemnification under this Section
6.2(d)(ii), upon learning of any Claim, shall notify the Buyer (but the
failure so to so notify shall not relieve the Buyer or the Buyer Bank from
any
liability that it may have under this Section 6.2(d)(ii),
except to the extent such failure Materially prejudices the Buyer or its
Affiliates). In the event of any such Claim, whether arising before,
on or after the Effective Time, (i) the Buyer shall have the right to
assume the defense thereof (in which event the Indemnified Parties will
cooperate in the defense of any such matter) and upon such assumption, the
Buyer
shall not be liable to any Indemnified Person for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Person
in
connection with the defense therefor, except that if the Buyer elects not to
assume such defense, or counsel for the Indemnified Parties reasonably advises
the Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues that raise conflicts of interest between the Buyer
and
the Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them, and the Buyer shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (ii) the Buyer shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for
all
Indemnified Parties (unless counsel for one or more Indemnified Parties advises
his or her client that a conflict exists between his or her client and one
or
more other Indemnified Parties, in which event the fees and expenses of such
counsel shall also be paid by the Buyer) whose reasonable fees and expenses
shall be paid promptly as statements are received, (iii) the Buyer shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld), and (iv) the Buyer
shall have no obligation hereunder to any Indemnified Person when and if a
court
of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Person in the manner contemplated hereby
is
prohibited by applicable Law (it being acknowledged by the parties hereto that
in the event of any good faith dispute about the lawfulness of such
indemnification, the Buyer or the Buyer Bank may place the amounts at issue
in
escrow pending the final and nonappealable determination of such
dispute). The obligations of the Buyer and the Buyer Bank pursuant to
this Section 6.1(d)(i)(d) are intended to be enforceable
against the Buyer and the Buyer Bank directly by the Indemnified
Parties. The indemnification provided herein shall be in addition to
any indemnification rights that any Indemnified Parties may have by Law,
pursuant to the certificate of incorporation or bylaws of the Company or any
of
its subsidiaries or pursuant to the terms of any employee benefit plan or trust
for which any Indemnified Party serves as a fiduciary.
6.3 Covenants
of All Parties to the Agreement.
(a) Reorganization
for Tax Purposes. Each of the parties hereto undertakes and
agrees to use its reasonable efforts to cause the Merger to qualify as a
“reorganization” within the meaning of Section 368(a) of the Code and
agrees that it will not intentionally take any action that would cause the
Merger to fail to so qualify.
33
(b) Notification. Each
of the parties hereto agrees to notify promptly the other parties hereto of
any
event, fact, or other circumstance arising after the date hereof that would
have
caused any representation or warranty herein, including any information on
any
schedule hereto, to be untrue or misleading had such event, fact, or
circumstance arisen prior to the execution of this Agreement. The
parties hereto will exercise their reasonable best efforts to ensure that no
such events, facts, or other circumstances occur, come to pass, or become
true.
(c) Consummation
of Agreement. The parties hereto each agree to use their
reasonable efforts to perform or fulfill all conditions and obligations to
be
performed or fulfilled by them under this Agreement so that the transactions
contemplated hereby shall be consummated. Except for events that are
the subject of specific provisions of this Agreement, if any event should occur,
either within or outside the control of the parties hereto, that would
Materially delay or prevent fulfillment of the conditions upon the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement, each party will notify the others of any such event and the parties
will use their reasonable, diligent and good faith efforts to cure or minimize
the same as expeditiously as possible. Each party hereto shall use
its reasonable efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement and to assist
in
the procuring or providing of all documents that must be procured or provided
pursuant to the provisions hereof. Notwithstanding anything to the
contrary contained in this Agreement, none of the parties hereto will take
any
action that would (i) adversely affect or Materially delay receipt of the
Consents contemplated in Section 8.1(b), (ii) adversely
affect or Materially delay its ability to perform its covenants and agreements
made pursuant to this Agreement or (iii) adversely affect the ability of any
party to obtain a required approval from any Regulatory Authority.
(d) Corporate
Action. Subject to the terms and conditions hereof, each of the
parties hereto shall, and each of them shall cause their subsidiaries to, take
all corporate action (including the Company’s recommendation of the Merger by
its board of directors to its shareholders) and use each of their best efforts
to cause all corporate and shareholder action to be taken as is necessary to
consummate and give effect to the Merger.
(e) Maintenance
of Corporate Existence. Each of the parties hereto shall, and
each of them shall cause their Affiliates to, maintain in full force and effect
each their respective corporate or legal existences.
(f) Registration
Statement and Proxy Statement. As soon as reasonably practicable
after the execution of the Agreement and after the furnishing by the Company
and
the Company Bank of all information required to be contained therein, the Buyer
shall file with the SEC the Registration Statement on Form S-4 (or on such
other
form as shall be appropriate), which shall contain the Proxy
Statement. As soon as reasonably practicable after all consents
contemplated by Section 8.1(b) have been obtained, the
Buyer and the Company shall prepare, and the Company shall deliver by mail
to
the holders of record of the Company Shares, the Proxy Statement. The
Buyer and the Company shall each use their reasonable best efforts to cause
the
Proxy Statement to comply in all Material respects with the requirements of
the
Securities Laws and the rules and regulations thereunder. The Buyer
and the Company shall each use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as
practicable. Subject to Section 6.1(d), the Proxy
Statement shall include the recommendation of the Boards of Directors of the
Company in favor of the Merger.
(g) Applications
and Reports. The Buyer shall prepare and file as soon
as reasonably practical after the date of this Agreement, and the Company shall
cooperate in the preparation and, where appropriate, filing of, all
applications, reports and statements with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by
this
Agreement.
34
(h) Closing. Subject
to the terms and conditions hereof, the parties hereto shall use their
reasonable best efforts to consummate the Closing within 30 days after all
conditions to the Closing have been satisfied.
(i) Affiliate
Agreements. Not less than 30 days prior to the Effective Time,
the Buyer shall deliver to the Company a letter identifying all Persons who,
in
the judgment of the Buyer, may be deemed an “affiliate” of the
Company for purposes of Rule 145 under the Securities Act and applicable SEC
rules and regulations, and such list shall be updated as necessary to reflect
changes from the date of delivery thereof. The Company shall use
reasonable best efforts to cause each person identified on such list to deliver
to the Buyer not less than 10 days prior to the Effective Time, a written
agreement substantially in the form attached hereto as Exhibit
C.
(j) Section
16(b) Exemption. Assuming that the Company delivers to the Buyer
the Company Section 16 Information (as defined below) in a timely fashion
prior to the Effective Time, the Board of Directors of the Buyer, or a committee
of non-employee directors thereof (as such term is defined for purposes of
Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter
and in any event prior to the Effective Time adopt a resolution providing in
substance that the receipt by the Company Insiders (as defined below) of the
Buyer Common Stock in exchange for shares of the Company Common Stock, pursuant
to the transactions contemplated hereby and to the extent such securities are
listed in the Company Section 16 Information, are intended to be exempt
from liability pursuant to Section 16(b) under the Exchange Act to the
fullest extent permitted by applicable Law. The “Company
Section 16 Information” shall mean information accurate in all material
respects regarding the Company Insiders and the number of shares of the Company
Common Stock held by each such Company Insider and expected to be exchanged
for
the Buyer Common Stock in the Merger. The “Company Insiders” shall
mean those officers and directors of the Company who are subject to the
reporting requirements of Section 16(a) of the Exchange Act and who are
expected to be subject to Section 16(a) of the Exchange Act with respect to
the
Buyer Common Stock subsequent to the Effective Time.
(k) Company
ESOP. The Company ESOP shall be terminated as of, or immediately
prior to, the Effective Time (all shares held by the Company ESOP shall be
converted into the right to receive the Merger Consideration), all outstanding
Company ESOP indebtedness shall be repaid from the Merger Consideration in
the
unallocated stock fund, and the balance shall be allocated as earnings of the
Company ESOP and distributed to Company ESOP participants (subject to the
receipt of a favorable determination letter from the IRS), as provided for
in
the Company ESOP and unless otherwise required by applicable Law. In
accordance herewith, the Company and Company Bank shall amend the Company ESOP
to cause all account balances to be distributed in the form of lump sum
distributions following the receipt of a favorable determination letter from
the
IRS on the termination of the Company ESOP. Prior to the Effective
Time, the Company and Company Bank, and following the Effective Time, Buyer
and
Buyer Bank shall use their respective best efforts in good faith to obtain
such
favorable determination letter (including, but not limited to, making such
changes to the Company ESOP and the proposed allocations as may be requested
by
the IRS as a condition to its issuance of a favorable determination
letter). The Company and Company Bank, and following the Effective
Time, Buyer and Buyer Bank, will adopt such amendments to the Company ESOP
as
may be reasonably required by this Section 6.3(k) in order to
facilitate termination of the Company ESOP or by the IRS as a condition to
granting such favorable determination letter on termination. Until
receipt of a favorable determination letter on termination from the IRS, neither
the Company nor Company Bank, or following the Effective Time, the Buyer or
Buyer Bank shall make any distribution from the Company ESOP relating to the
termination of the Company ESOP except as may be required by applicable
Law. In the case of a conflict between the terms of this
Section 6.3(k) and the terms of the Company ESOP, the terms of
the Company ESOP shall control; however, in the event of any such conflict,
the
Company and Company Bank before the Merger,
35
and
Buyer
and Buyer Bank after the Merger, shall use their best efforts to cause the
Company ESOP to be amended to conform to the requirements of this
Section 6.3(k).
ARTICLE
VII
DISCLOSURE
OF ADDITIONAL INFORMATION
7.1 Access
to Information. Prior
to the Closing Date, the parties hereto shall, and shall cause each of their
subsidiaries to:
(a) give
the other and its authorized representatives reasonable access, during normal
business hours and upon reasonable notice, to its books, records, offices and
other facilities and properties; and
(b) furnish
the other with such financial and operating data and other information with
respect to its business, condition (financial or otherwise) and properties,
as
it may reasonably request.
7.2 Access
to Premises. Prior
to Closing, the Company shall, and shall cause its subsidiaries to, give the
Buyer and its authorized representatives reasonable access to all of the
Company’s and its subsidiaries’ Real Property for the purpose of inspecting such
property.
7.3 Environmental
Survey. At
its option, the Buyer may cause to be conducted Phase I environmental
assessments of the Real Property of the Company and its subsidiaries, whether
owned or leased, or any portion thereof, together with such other studies,
testing and intrusive sampling and analyses as the Company shall deem
necessary
or desirable (collectively, the “Environmental
Survey”). The Buyer shall complete all such Phase I
environmental assessments within 45 days following the date of this Agreement
and thereafter conduct and complete any such additional studies, testing,
sampling and analyses within 45 days following completion of all Phase I
environmental assessments. Subject to the breach of any
representation or warranty contained herein, the costs of the Environmental
Survey shall be paid by the Buyer.
7.4 Confidentiality. The
parties hereto acknowledge that each of the Buyer and the Company have
previously executed a separate agreement (the “Confidentiality
Agreement”) dated May 23, 2007 in contemplation of negotiations
regarding the Merger and agree that such agreement shall continue in full force
and effect in accordance with its terms.
7.5 Publicity. Without
the prior consent of the other parties, no party hereto shall issue any news
release or other public announcement or disclosure, or any general public
announcement to its employees, suppliers or customers, regarding this Agreement
or the transactions contemplated hereby, except as may be required by Law,
but
in which case the disclosing party shall provide the other parties hereto with
reasonable advance notice of the timing and substance of any such
disclosure.
ARTICLE
VIII
CONDITIONS
TO CLOSING
8.1 Mutual
Conditions. The
respective obligations of each party hereto to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by all parties
hereto pursuant to Section 10.4 of this
Agreement:
36
(a) Adverse
Proceedings. Neither the Company nor the Buyer nor any
shareholder thereof shall be subject to any order, decree or injunction of
a
court of competent jurisdiction that enjoins or prohibits the consummation
of
this Agreement or the Merger, and no Governmental Authority shall have
instituted a suit or proceeding that is then pending and seeks to enjoin or
prohibit the transactions contemplated hereby. Any party who is
subject to any such order, decree or injunction or the subject of any such
suit
or proceeding shall take any reasonable steps within that party’s control to
cause any such order, decree or injunction to be modified so as to permit the
Closing and to cause any such suit or proceeding to be dismissed.
(b) Consents.
(i) Regulatory
Approval. All Consents of, filings and registrations with, and
notifications to, all Regulatory Authorities required for consummation of the
Merger shall have been obtained or made and shall be in full force and effect
and all waiting periods required by Law shall have expired. No such
Consent obtained from any Regulatory Authority shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) not reasonably anticipated
as
of the date of this Agreement that in the reasonable judgment of the Board
of
Directors of the Buyer or the Company would so Materially adversely impact
the
economic or business assumptions of the transactions contemplated by this
Agreement that had such condition or requirement been known, such party would
not, in its reasonable judgment, have entered into this Agreement.
(ii) Consents
and Approvals. Each party hereto shall have obtained any and all
Consents required for consummation of the Merger or for the preventing of any
Default under any Contract, including those Consents listed on
Section 4.2 of the Company’s Disclosure Schedule, except
to the extent that the failure to obtain such any such Consents would not,
individually or in the aggregate result in a Material Adverse Effect on such
Person.
(c) Effectiveness
of Registration Statement. The Registration Statement filed with the SEC
covering the shares of the Buyer’s Stock to be issued pursuant hereto shall have
been declared effective by the SEC, and no stop order suspending such
effectiveness shall have been initiated or, to the Knowledge of the Buyer
Parties, threatened by the SEC.
(d) Approval. The
Company’s shareholders shall have approved this Agreement and the Merger in
accordance with applicable corporate law.
(e) Tax
Opinion. On the basis of facts, representations and assumptions
that shall be consistent with the state of facts existing at the Closing Date,
the Buyer and the Company shall have received an opinion of an acceptable tax
advisor, reasonably acceptable in form and substance to each of them dated
as of
the Closing Date, substantially to the effect that, for federal income tax
purposes: (i) the Merger, when consummated in accordance with
the terms hereof, will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) no gain or loss will be recognized by the Buyer or
the Company by reason of the Merger, (iii) the exchange or cancellation of
Company Shares in the Merger will not give rise to recognition of gain or loss
for federal income tax purposes to the shareholders of the Company to the extent
such shareholders receive Buyer’s Stock in exchange for their Company Shares,
(iv) the basis of the Buyer’s Stock to be received by a shareholder
of the Company will be the same as the basis of the stock of the
Company surrendered in connection with the Merger, and (v) the holding
period of the shares of the Buyer’s Stock to be received by a shareholder of the
Company will include the period during which the shareholder held the Company
Shares surrendered in connection with the
37
Merger,
provided that the Company Shares surrendered in connection with the
Merger are held as a capital asset at the Effective Time of such
Merger. Each of the Buyer and the Company shall provide a letter to
the tax advisor setting forth the facts, assumptions and representations on
which such tax advisor may rely in rendering its opinion.
(f) Blue
Sky Approvals. The Buyer shall have received all state securities
or “Blue Sky” Permits or other authorizations or confirmations as to the
availability of exemptions from “Blue Sky” registration requirements as may be
necessary, and no stop orders or proceedings shall be pending, or to the
Knowledge of the Buyer or the Company, threatened by a state “Blue Sky”
administrator with respect to the issuance of the Buyer’s Stock in the
Merger.
(g) Nasdaq
Listing. As of the Effective Time, the Buyer shall have satisfied
all requirements in order for the shares of the Buyer’s Stock to be issued to
shareholders of the Company in connection with the Merger to be listed on the
Nasdaq Global Select Market as of the Effective Time.
8.2 Conditions
to the Obligations of the Company. The
obligation of the Company to effect the transactions contemplated hereby shall
be further subject to the fulfillment of the following conditions, unless waived
by such parties pursuant to
Section 10.4 of this
Agreement:
(a) All
representations and warranties of the Buyer contained in this Agreement shall
be
true and correct in all Material respects as of the Closing Date as though
made
as of such date (except for representations and warranties that are made as
of a
specific date and except for representations and warranties expressly qualified
by “Materiality” or that constitute a breach only if they have a “Material
Adverse Effect” or similar materiality qualifier, which must be accurate in all
respects as of the Closing Date). The Buyer shall have performed and
complied with all covenants and agreements contained in this Agreement required
to be performed and complied with by it at or prior to the Closing.
(b) All
documents required to have been executed and delivered to the Company at or
prior to the Closing shall have been so executed and delivered, whether or
not
such documents have been or will be executed and delivered by the other parties
contemplated thereby.
(c) The
Company shall have received from ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc., a
letter, dated not more than five Business Days prior to the Proxy Statement,
that the Merger Consideration is fair, from a financial point of view, to the
holders of the Company’s Shares.
(d) As
of the Closing Date, the Company shall have received the following documents
with respect to the Buyer:
(i) a
certificate of its corporate existence issued by the jurisdiction of its
incorporation as of a recent date and a certificate of existence or authority
as
a foreign corporation issued as of a recent date by each of the jurisdictions
in
which it is qualified to do business as a foreign corporation;
(ii) a
true and complete copy of its certificate of incorporation and all amendments
thereto, certified by the jurisdiction of its incorporation as of a recent
date;
(iii) a
true and complete copy of its bylaws, certified by its Secretary or an Assistant
Secretary;
(iv) a
certificate from its Secretary or an Assistant Secretary certifying that its
articles of incorporation have not been amended since the date of the
certificate described in subsection (i) above and that nothing has occurred
since such date that would adversely affect its existence;
38
(v) a
true and complete copy of the resolutions of its board of directors and
shareholders authorizing the execution, delivery and performance of this
Agreement, and all instruments and documents to be delivered in connection
herewith, and the transactions contemplated hereby, certified by its Secretary
or an Assistant Secretary;
(vi) a
certificate from its Secretary or an Assistant Secretary certifying the
incumbency and signatures of its officers who will execute documents at the
Closing or who have executed this Agreement; and
(vii) evidence
of Buyer’s compliance with Section 6.2(b) and the
penultimate sentence of Section 2.7(c).
(e) The
Exchange Agent shall have delivered to the Company a certificate, dated as
of
the Closing Date, to the effect that the Exchange Agent has received from the
Buyer appropriate instructions and authorization for the Exchange Agent to
issue
a sufficient number of shares of Buyer Stock in exchange for all of the Company
Shares.
8.3 Conditions
to the Obligations of the Buyer. The
obligations of the Buyer to effect the transactions contemplated hereby shall
be
further subject to the fulfillment of the following conditions, unless waived
by
the Buyer pursuant to Section 10.4 of this
Agreement:
(a) All
representations and warranties of the Company contained in this Agreement shall
be true and correct in all Material respects as of the Closing Date as though
made as of such date (except for representations and warranties that are made
as
of a specific date and except for representations and warranties expressly
qualified by “Materiality” or that constitute a breach only if they have a
“Material Adverse Effect” or similar materiality qualifier, which must be
accurate in all respects as of the Closing Date). The Company shall have
performed and complied with all covenants and agreements contained in this
Agreement required to be performed and complied with by it at or prior to the
Closing.
(b) Holders
of Company Shares representing no more than ten percent (10%) of the issued
and
outstanding Company Shares immediately prior to the Effective Time shall have
exercised dissenters’ or similar rights with respect to the Merger.
(c) Holders
of Company Options that include “Dividend Equivalent Rights” (as defined in the
Option Plan) shall have delivered written waivers of such Dividend Equivalent
Rights, which waivers shall be in form and substance reasonably satisfactory
to
the Buyer.
(d) The
Buyer shall have received a copy of a favorable determination letter issued
by
the Internal Revenue Service with respect to the termination of the Company
ESOP.
(e) All
documents required to have been executed and delivered to the Buyer at or prior
to the Closing shall have been so executed and delivered, whether or not such
documents have been or will be executed and delivered by the other parties
contemplated thereby.
(f) As
of the Closing Date, the Buyer shall have received the following documents
with
respect to each of the Company and its subsidiaries:
39
(i) a
certificate of its corporate existence issued by the jurisdiction of its
incorporation as of a recent date and a certificate of existence or authority
as
a foreign corporation issued as of a recent date by each of the jurisdictions
in
which it is qualified to do business as a foreign corporation;
(ii) a
true and complete copy of its articles of incorporation or charter and all
amendments thereto, certified by the jurisdiction of its incorporation as of
a
recent date;
(iii) a
true and complete copy of its bylaws, certified by its Secretary or an Assistant
Secretary;
(iv) a
certificate from its Secretary or an Assistant Secretary certifying that its
articles of incorporation or charter have not been amended since the date of
the
certificate described in subsection (ii) above, and that nothing has
occurred since the date of issuance of the certificate of existence specified
in
subsection (i) above that would adversely affect its
existence;
(v) with
respect to the Company only, a true and complete copy of the resolutions of
its
Board of Directors and shareholders authorizing the execution, delivery and
performance of this Agreement, and all instruments and documents to be delivered
in connection herewith, and the transactions contemplated hereby, certified
by
its Secretary or an Assistant Secretary; and
(vi) with
respect to the Company only, a certificate from its Secretary or an Assistant
Secretary certifying the incumbency and signatures of its officers who will
execute documents at the Closing or who have executed this
Agreement.
ARTICLE
IX
TERMINATION
9.1 Termination. The
obligations of the parties hereunder may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing
Date:
(a) By
mutual written consent of the Company and the Buyer;
(b) By
either the Buyer or the Company, if there shall be any law or regulation that
makes consummation of this Agreement illegal or otherwise prohibited or if
any
judgment, injunction, order or decree enjoining the Company or the Buyer from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however,
that the right to terminate this Agreement under this
Section 9.1(b) shall not be available to the party whose
failure to fulfill its obligations hereunder shall have been the cause of or
resulted in such law, regulation, judgment, injunction, order or
decree;
(c) By
either the Buyer or the Company if the Effective Time shall not have occurred
on
or before June 30, 2008; provided, however, that the right to
terminate this Agreement under this
Section 9.1(c) shall not be
available to any party whose failure to fulfill in any Material respect any
obligation under this Agreement has been the cause of or resulted in the failure
of the Effective Time to occur on or before June 30, 2008;
40
(d) By
either the Buyer or the Company, if a condition to the obligation to effect
the
transactions contemplated hereby of the party seeking termination shall have
become incapable of fulfillment (notwithstanding the efforts of the party
seeking to terminate as set forth in Section 6.3(c)), and
has not been waived;
(e) At
any time on or prior to the Closing Date, by the Buyer in writing, if the
Company has, or by the Company, if the Buyer has, in any Material respect,
breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if such breach
has not been cured by the earlier of 10 Business Days after the date on which
written notice of such breach is given to the party committing such breach
or
the Closing Date;
(f) By
either the Buyer or the Company if the approval by the Company’s shareholders
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote upon the taking of such vote
at a duly held meeting of the Company’s shareholders or at any adjournment
thereof;
(g) By
the Buyer, if:
(i) the
Company’s board of directors shall have failed to recommend the Merger to its
shareholders at the Shareholder Meeting, (ii) withdrawn its recommendation
of
the Merger to its shareholders or (iii) modified or qualified its recommendation
of the Merger in any manner adverse to the consummation of the
Merger;
(ii) the
Company shall have breached its obligation under this Agreement by reason of
a
failure to timely call and hold the Shareholder Meeting in accordance with
Section 6.1(c); or
(iii) a
tender or exchange offer relating to securities of the Company or any of its
subsidiaries shall have been commenced by a Person unaffiliated with the Company
or its subsidiaries, and the Company shall not have sent to its shareholders
within 10 Business Days after such tender or exchange offer is first published,
sent or given, a statement that the Company’s board of directors recommends
rejection of such tender or exchange offer;
(h) by
the Company, by written notice to the Buyer within five Business Days of the
Measurement Date (as hereinafter defined), if the Average Closing Price of
the
Buyer’s Stock is less than $16.50 per share (adjusted for any Stock Adjustments)
as of the Measurement Date; provided, however, that upon receipt
of notice of termination pursuant to this Section
9.1(h) from the Company, the Buyer shall have five Business Days
to provide written notice to the Company of the Buyer’s agreement to increase
the Exchange Ratio and/or pay cash to the shareholders of the Company, such
that
the sum of the increased Exchange Ratio multiplied by the Average Closing Price
of the Buyer’s Stock, plus any cash paid per share, is at least
$18.975. If the Buyer so provides timely written notice that it
agrees to increase the Merger Consideration as described above, the Company’s
notice of termination shall be void and of no further force and
effect.
For
purposes of this subclause (h): “Measurement Date” means the
later to occur of (i) the date of shareholder approval of this Agreement by
the
Company’s shareholders, or (ii) the date of the last Consent from a Regulatory
Authority required for consummation of the Merger (without giving effect to
any
required waiting periods in such Consent).
41
For
purposes of this subclause (h): “Average Closing
Price” means, with respect to the Buyer’s Stock, the average of the
daily closing sales price thereof on the Nasdaq Global Select Market, as
reported in The Wall Street Journal, for the 20 trading days ending
three Business Days prior to the Measurement Date.
(i) by
the Company, if (i) the board of directors of the Company shall have determined,
based upon the advice of outside counsel experienced in such matters, that
an
Acquisition Proposal constitutes a Superior Proposal; provided,
however, that the Company may not terminate this Agreement pursuant
to
this Section 9.1(i) unless, after giving the Buyer at
least five Business Days notice to respond to such Acquisition Proposal (and
after giving the Buyer notice of the latest Material terms and conditions
comprising such Acquisition Proposal), and then taking into account any
amendment or modification to this Agreement proposed by the Buyer, the Company’s
board of directors believes, based upon the advice of outside counsel
experienced in such matters, that such Acquisition Proposal constitutes a
Superior Proposal, and (ii) the Company thereafter executes a definitive,
binding transaction agreement to consummate an Acquisition Transaction in
furtherance of such Acquisition Proposal.
9.2 Procedure
and Effect of Termination.
(a) In
the event of a termination contemplated hereby by either party pursuant to
Section 9.1, the party seeking to terminate this Agreement
shall give prompt written notice thereof to the other party, and the
transactions contemplated hereby shall be abandoned, without further action
by
either party hereto. In such event:
(i) the
parties hereto shall continue to be bound by (a) their obligations of
confidentiality set forth in the Confidentiality Agreements,
and all copies of the information provided by the a party hereto to the other
party will be returned or destroyed immediately upon its request therefor,
(b) the provisions set forth in Section 7.5 relating
to publicity, and (c) the provisions set forth in
Section 10.1 relating to expenses;
(ii) all
filings, applications and other submissions relating to the transactions
contemplated hereby shall, to the extent practicable, be withdrawn from the
Person to which made; and
(iii) if
the termination is pursuant to
Section 9.1(e) or Section
9.1(g), the terminating party shall be entitled to seek any remedy to
which such party may be entitled at law or in equity for the violation or breach
of any agreement, covenant, representation or warranty contained in this
Agreement.
9.3 Termination
Fee; Expenses.
(a) If
(i) this Agreement is terminated by the Company pursuant to Section
9.1(i), or (ii) the Company or any of its subsidiaries receives an
Acquisition Proposal and the Company’s board of directors fails to recommend or
continue recommending approval of the Merger to the Company’s shareholders or
amends or withdraws its recommendation of the Merger to the Company’s
shareholders, and the Company’s shareholders do not approve the Merger at the
Shareholder Meeting, then the Company shall pay to the Buyer, within one
Business Day following the termination of this Agreement or the Shareholder
Meeting, as applicable, the amount of $1,200,000 (the “Termination
Fee”). Notwithstanding anything in this Agreement to the
contrary, if the Termination Fee is paid pursuant to this Section
9.3(a), then the Buyer will not have any other rights or claims against
the Company, Company Bank, their Affiliates or their respective officers and
directors arising from the termination of
42
this
Agreement, it being agreed that the acceptance of the Termination Fee will
constitute the Buyer’s sole and exclusive remedy for such termination.
(b) If
this Agreement is terminated by the Company pursuant to Section
9.1(e), the Buyer shall reimburse the Company’s Costs within one
Business Day of the date of termination.
(c) If
this Agreement is terminated by the Buyer pursuant to Section
9.1(e), the Company shall reimburse the Buyer’s Costs within one
Business Day of the date of termination.
(d) All
amounts payable pursuant to this
Section 9.3 shall be payable by wire
transfer of immediately available funds to an account designated by the
recipient.
ARTICLE
X
MISCELLANEOUS
PROVISIONS
10.1 Expenses. Except
as provided in Section 9.3, whether or not the transactions
contemplated hereby are consummated, (i) the Buyer shall pay all costs and
expenses incurred by it in connection with this Agreement and the Merger and
(ii) the Company shall pay all costs and expenses incurred by it in
connection with this Agreement and the Merger.
10.2 Survival
of Representations. The
representations and warranties made by the parties hereto will not survive
the
Closing, and no party shall make or be entitled to make any claim based upon
such representations and warranties after the Closing Date. No
warranty or representation shall be deemed to be waived or otherwise diminished
as a result of any due diligence investigation by the party to whom the warranty
or representation was made or as a result of any actual or constructive
knowledge by such party with respect to any facts, circumstances or claims
or by
the actual or constructive knowledge of such person that any warranty or
representation is false at the time of signing or Closing.
10.3 Amendment
and Modification. This
Agreement may be amended, modified or supplemented only by written agreement
of
both parties hereto.
10.4 Waiver
of Compliance; Consents. Except
as otherwise provided in this Agreement, any failure of the Buyer, on one hand,
and the Company, on the other, to comply with any obligation, representation,
warranty, covenant, agreement or condition herein may be waived by the other
party or parties only by a written instrument signed by the party or parties
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to,
any
subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be
given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 10.4.
10.5 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given when delivered by hand or by facsimile transmission, one Business
Day after sending by a reputable national over-night courier service or three
Business Days after mailing when mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties in the manner provided
below:
(a) Any
notice to any of the Company shall be delivered to the following
addresses:
43
Great
Pee
Dee Bancorp, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇
President
and Chief Executive
Officer
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
(b) Any
notice to the Buyer shall be delivered to the following addresses:
First
Bancorp
▇▇▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
Post
Office Box 508
Troy,
North Carolina 27371-0508
Attention: Chief
Executive Officer
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Any
party
may change the address to which notice is to be given by notice given in the
manner set forth above.
10.6 Assignment;
Third Party Beneficiaries. This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
parties. This Agreement shall not be deemed to confer upon any third
party beneficiaries or other Persons, including any employees of the Company,
any rights or remedies hereunder, except as expressly set forth
herein.
10.7 Separable
Provisions. If
any provision of this Agreement shall be held invalid or unenforceable, the
remainder nevertheless shall remain in full force and effect.
44
10.8 Governing
Law. The
execution, interpretation and performance of this Agreement shall be governed
by
the internal laws and judicial decisions of the State of North
Carolina.
10.9 Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
10.10 Interpretation. The
article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall
not
in any way affect the meaning or interpretation of this Agreement.
10.11 Entire
Agreement. This
Agreement, including the agreements and documents that are Schedules and
Exhibits hereto, embodies the entire agreement and understanding of the parties
with respect of the subject matter of this Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to the transactions contemplated hereby and subject matter hereof,
except as explicitly provided herein.
45
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
|
COMPANY:
|
|||
|
GREAT
PEE DEE BANCORP, INC.
|
|||
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇ | ||
|
Name:
|
▇▇▇▇ ▇. ▇▇▇▇ | ||
|
Title:
|
President & CEO | ||
|
BUYER:
|
|||
|
FIRST
BANCORP
|
|||
|
By:
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||
|
Name:
|
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||
|
Title:
|
President & CEO | ||
Appendix
1
“Acquisition
Proposal” means any offer or proposal by any Person concerning any
tender or exchange offer, proposal for a merger, share exchange,
recapitalization, consolidation or other business combination involving the
Company or any of its subsidiaries or any divisions of any of the foregoing,
or
any proposal or offer to acquire in any manner, directly or indirectly, a 10%
or
more equity interest in, or 10% or more of the assets, business or deposits
of,
the Company or any of its subsidiaries, other than pursuant to the transactions
contemplated by this Agreement.
“Acquisition
Transaction” means the consummation of any merger, share exchange,
recapitalization, consolidation or other business combination involving the
Company or any of its subsidiaries or any divisions of the foregoing, or the
acquisition in any manner, directly or indirectly, of a 10% or more equity
interest in, or 10% or more of the assets, business or deposits of, the Company
or any of its subsidiaries, other than pursuant to the transactions contemplated
by this Agreement.
“Affiliate”
means, with respect to any Person, each of the Persons that directly or
indirectly, through one or more intermediaries, owns or controls, or is
controlled by or under common control with, such Person. For the
purpose of this Agreement, “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies, whether through the ownership of voting securities,
by
contract or otherwise. Without limiting the foregoing, as used with
respect to the Company, the term “Affiliates” includes its
subsidiaries.
“Agreement”
means this Merger Agreement.
“Assets”
means all of the assets, properties, businesses and rights of a Person of every
kind, nature, character and description, whether real, personal or mixed,
tangible or intangible, accrued or contingent, whether or not carried on any
books and records of such Person, whether or not owned in such Person’s name and
wherever located.
“Average
Closing Price” has the meaning given to it
in Section 9.1(h).
“Benefit
Plans” means all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, restricted stock,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including without limitation “employee benefit plans” as that
term is defined in Section 3(3) of ERISA maintained by, sponsored in whole
or in
part by, or contributed to by, a Person or any of its subsidiaries for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate.
“Business
Day” means any day excluding Saturday, Sunday and any day that shall be
a legal holiday in the State of North Carolina.
“Buyer”
has the meaning given to it in the introductory paragraph hereof.
“Buyer
Bank” means First Bank, a North Carolina bank and a wholly owned
subsidiary of the Buyer.
“Buyer
Contracts” has the meaning given to it in Section
5.15.
1
“Buyer
ERISA Affiliate” has the meaning given to it in Section
5.14.
“Buyer
Financial Statements” means, with respect to the Buyer and its
subsidiaries, the consolidated audited statements of income and stockholder’s
equity and cash flows for the years ended December 31, 2006, 2005 and 2004
and consolidated audited balance sheets as of December 31, 2006 and 2005, as
well as the interim unaudited consolidated statements of income and
stockholders’ equity and cash flows for the fiscal quarter ended March 31, 2007
and the consolidated interim balance sheet as of March 31, 2007.
“Buyer
Improvements” has the meaning given to it in Section
5.9(b).
“Buyer
Proprietary Rights” has the meaning given to it in Section
5.17(a).
“Buyer
Real Property” has the meaning given to it in Section
5.9(a).
“Buyer
SEC Reports” has the meaning given to it in Section
5.4.
“Buyer’s
Stock” means the common stock of First Bancorp, no par value, as traded
on the Nasdaq Global Select Market.
“Claim”
has the meaning given to it in Section 6.2(d)(ii).
“Closing”
means the closing of the Merger, as identified more specifically in
Article III.
“Closing
Date” has the meaning given to it in Section
3.1.
“Code”
means the Internal Revenue Code of 1986, as amended, and any successor statute
of similar import, together with the regulations thereunder, in each case as
in
effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
“Company”
has the meaning given to it in the introductory paragraph hereof.
“Company
Bank” means Sentry Bank & Trust, a federal savings association and
a wholly owned subsidiary of the Company.
“Company
Contracts” has the meaning given to it in Section
4.15.
“Company
ERISA Affiliate” has the meaning given to it in Section
4.14.
“Company
ESOP” means the Company’s Employee Stock Ownership Plan and
Trust.
“Company
Financial Statements” means, with respect to the Company and its
subsidiaries, the consolidated audited statements of operations, stockholders’
equity and cash flows for the years ended June 30, 2006, 2005 and 2004 and
consolidated audited statements of financial condition as of June 30, 2006
and
2005, as well as the interim unaudited consolidated statements of operations
and
stockholders’ equity and cash flows for the periods ended September 30, 2006,
December 31, 2006 and March 31, 2007 and the consolidated interim statements
of
financial condition as of September 30, 2006, December 31, 2006 and March 31,
2007.
“Company
Improvements” has the meaning given to it in Section
4.9(b).
“Company
Options” has the meaning given to it in Section
2.7.
2
“Company
Pension Plan” means any Pension Plan operated or maintained at any time
by the Company, the Company Bank, or any of their subsidiaries.
“Company
Proprietary Rights” has the meaning given to it in Section
4.17.
“Company
Real Property” has the meaning given to it in Section
4.9(a).
“Company
Shares” has the meaning given to it in Section
2.2(a).
“Confidentiality
Agreements” has the meaning given to it in Section
7.4.
“Consent”
means any consent, approval, authorization, clearance, exemption, waiver, or
similar affirmation by any Person given or granted with respect to any Contract,
Law, Order, or Permit.
“Continuing
Employees” has the meaning given to it in Section
6.2(c).
“Contract”
means any agreement, warranty, indenture, mortgage, guaranty, lease, license
or
other contract, agreement, arrangement, commitment or understanding, written
or
oral, to which a Person is a party.
“Costs”
means the legal, accounting, investment banking, printing, mailing and other
out-of-pocket fees and expenses incurred by the Company and it subsidiaries
or
the Buyer and its subsidiaries, as the case may be, in connection with this
Agreement and the transactions contemplated herein.
“Default”
means (i) any breach or violation of or default under any Contract, Order
or Permit (including any noncompliance with restrictions on assignment, where
assignment is defined to include a change of control of the parties to this
agreement or any of their subsidiaries or the merger or consolidation of any
of
them with another Person), (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute such a breach
or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
“Dissenting
Shares” has the meaning given to it in Section
2.6.
“Effective
Time” has the meaning given to it in
Section 2.1(e).
“Employment
Agreement” means that certain Employment Agreement to be entered into
between the Buyer and ▇▇▇▇ ▇▇▇▇ in connection with the
transactions contemplated hereby, substantially in the form of Exhibit
B.
“Environmental
Assessment” means any and all soil and groundwater tests, surveys,
environmental assessments and other inspections, tests and inquiries conducted
by the Buyer or any agent of the Buyer and related to the Real Property of
the
Company and its subsidiaries.
“Environmental
Laws” means any federal, state or local law, statute, ordinance, rule,
regulation, permit, directive, license, approval, guidance, interpretation,
order or other legal requirement relating to the protection of human health
or
the environment, including but not limited to any requirement pertaining to
the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of materials that are or may constitute a threat to human health
or
the environment. Without limiting the foregoing, each of
the
3
following
is an Environmental Law: the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), the
Hazardous Material Transportation Act (49 U.S.C. § 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et
seq.) (“RCRA”), the Federal Water Pollution Control Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. § 300 et seq.) and the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.)
(“OSHA”), as such laws and regulations have been or are in the future amended or
supplemented, and each similar federal, state or local statute, and each rule
and regulation promulgated under such federal, state and local
laws.
“Environmental
Survey” has the meaning given to it in Section
7.3.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor
sections.
“ERISA
Plan” means any Benefit Plan that is an “employee welfare benefit
plan,” as that term is defined in Section 3(l) of ERISA, or an “employee pension
benefit plan,” as that term is defined in Section 3(2) of ERISA.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
“Exchange
Agent” has the meaning given to it in Section
2.4.
“Exchange
Ratio” means 1.15 shares of the Buyer’s Stock for each Company Share,
subject to adjustment pursuant to Section 9.1(h).
“FDIC”
means the Federal Deposit Insurance Corporation.
“FHLB”
means the Federal Home Loan Bank of Atlanta.
“Generally
Accepted Accounting Principles” or “GAAP” means
generally accepted accounting principles as recognized by the American Institute
of Certified Public Accountants, as in effect from time to time, consistently
applied and maintained on a consistent basis for a Person throughout the period
indicated and consistent with such Person’s prior financial
practice.
“Governmental
Authority” means any nation, province or state, or any political
subdivision thereof, and any agency, department, natural person or other entity
exercising executive, legislative, regulatory or administrative functions of
or
pertaining to government, including Regulatory Authorities.
“Hazardous
Material” means any substance or material that either is or contains a
substance designated as a hazardous waste, hazardous substance, hazardous
material, pollutant, contaminant or toxic substance under any Environmental
Law
or is otherwise regulated under any Environmental Law, or the presence of which
in some quantity requires investigation, notification or remediation under
any
Environmental Law.
“Indemnified
Parties” has the meaning given to it in Section
6.2(d)(ii).
“Indemnified
Liabilities” has the meaning given to it in Section
6.2(d)(ii).
4
“Intellectual
Property” means (i) all inventions and discoveries (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof,
(ii) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (iii) all
copyrights and all applications, registrations and renewals in connection
therewith, (iv) all know-how, trade secrets, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
process and techniques, technical data, designs, drawings, specifications,
pricing and cost information and business and marketing plans and proposals),
(v) all computer software (including data and related documentation) and
(vi) all other proprietary rights.
“Knowledge
of the Buyer” means the actual personal knowledge of any of the
directors and officers of the Buyer and any of its subsidiaries.
“Knowledge
of the Company” means the actual personal knowledge of any of the
directors and officers of the Company and any of its subsidiaries.
“Law”
means any code, law, ordinance, rule, regulation, reporting or licensing
requirement, rule, or statute applicable to a Person or its Assets, Liabilities,
business or operations promulgated, interpreted or enforced by any Governmental
Authority.
“Liability”
means any direct or indirect, primary or secondary, liability, indebtedness,
obligation, penalty, cost or expense (including costs of investigation,
collection and defense), claim, deficiency, guaranty or endorsement of or by
any
Person (other than endorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated, matured
or
unmatured or otherwise.
“Lien”
means, whether contractual or statutory, any conditional sale agreement,
participation or repurchase agreement, assignment, default of title, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge or claim of any nature
whatsoever of, on, or with respect to any property or property interest, other
than (i) Liens for current property Taxes not yet due and payable, (ii)
easements, restrictions of record and title exceptions that could not reasonably
be expected to have a Material Adverse Effect, and (iii) Liens to secure
advances and other borrowings from Regulatory Authorities incurred in the
ordinary course of the banking business.
“Litigation”
means any action, arbitration, cause of action, complaint, criminal prosecution,
governmental investigation, hearing, or administrative or other proceeding,
but
shall not include regular, periodic examinations of depository institutions
and
their Affiliates by Regulatory Authorities.
“Loan
Collateral” means all of the assets, properties, businesses and rights
of every kind, nature, character and description, whether real, personal, or
mixed, tangible or intangible, accrued or contingent, owned by whomever and
wherever located, in which the Company or any of its subsidiaries has taken
a
security interest with respect to, on which the Company or any of it
subsidiaries has placed a Lien with respect to, or which is otherwise used
to
secure, any loan made by the Company or any of its subsidiaries or any note,
account, or other receivable payable to the Company or any of its
subsidiaries.
5
“Market
Value” of the Buyer’s Stock on any date shall be the closing price of
such stock on the Nasdaq Global Select Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative
source), or if such date is not a trading day, on the last trading day preceding
that date.
“Material”
for purposes of this Agreement shall be determined in light of the facts and
circumstances of the matter in question; provided that any specific monetary
amount stated in this Agreement shall determine materiality in that
instance.
“Material
Adverse Effect” on a Person shall mean an event, change, or occurrence
that, individually or together with any other event, change, or occurrence,
has
a Material adverse impact on (i) the financial condition, results of
operations, or business of such Person and its subsidiaries, taken as a whole,
or (ii) the ability of such Person to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated
by
this Agreement, provided that “Material Adverse Effect” shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in market interest rates, real estate markets or other market
conditions applicable to banks or thrift institutions generally, (c) changes
in
GAAP or regulatory accounting principles generally applicable to banks or
thrifts and their holding companies, (d) actions and omissions of a Person
(or
any of its subsidiaries) taken with the prior informed consent of the other
Person in contemplation of the transactions contemplated hereby, or (e) the
Merger (and the reasonable expenses incurred in connection therewith) and
compliance with the provisions of this Agreement on the operating performance
of
the Persons.
“Measurement
Date” has the meaning given to it in
Section 9.1(h).
“Merger”
has the meaning given to it in the Background Statement hereof.
“Merger
Consideration” has the meaning given to it in Section
2.3(a).
“Option
Plan” means the 2003 Long-Term Incentive Stock Benefit
Plan.
“Order”
means any administrative decision or award, decree, injunction, judgment, order,
quasi-judicial decision or award, ruling, or writ of any federal, state, local,
foreign or other court, arbitrator, mediator, tribunal, administrative agency
or
Governmental Authority.
“Participation
Facility” shall mean any facility or property in which the Person in
question or any of its subsidiaries participates in the management (including
but not limited to participating in a fiduciary capacity) and, where required
by
the context, said term means the owner or operator of such facility or property,
but only with respect to such facility or property.
“Pension
Plan” means any ERISA Plan that also is a “defined benefit plan” (as
defined in Section 414(j) of the Internal Revenue Code or Section 3(35) of
ERISA).
“Permit”
means any approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right given by a Governmental Authority to which
any
Person is a party or that is or may be binding upon or inure to the benefit
of
any Person or its securities, Assets or business.
“Permitted
Real Property Encumbrances” means (i) minor imperfections of
title, if any, none of which materially detracts from the value or impairs
the
present or anticipated use of the Real Property subject thereto, or impairs
the
present or anticipated operations of the Company and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use
of
the Real Property subject thereto.
6
“Person”
means a corporation, a company, an association, a joint venture, a partnership,
an organization, a business, an individual, a trust, a Governmental Authority
or
any other legal entity.
“Per
Share Stock Consideration” has the meaning given to in Section
2.3(a).
“Plan
of Merger” means a Plan of Merger to give effect to the Merger, which
shall be substantially in the form of Exhibit A
hereto.
“Proxy
Statement” has the meaning given to it in Section
4.19.
“Real
Property” means all of the land, buildings, premises, or other real
property in which a Person has ownership or possessory rights, whether by title,
lease or otherwise (including banking facilities and any foreclosed
properties). Notwithstanding the foregoing, “Real Property,” as used
with respect to any of the Company and its subsidiaries, does not include any
Loan Collateral not yet foreclosed and conveyed to the Company or one of its
subsidiaries as of the date with respect to which the term “Real Property” is
being used.
“Registration
Statement” has the meaning given to it in Section
4.19.
“Regulatory
Authorities” means, collectively, the Federal Trade Commission, the
United States Department of Justice, the Federal Reserve Board, the Office
of
the Comptroller of the Currency, the Office of Thrift Supervision, the North
Carolina Commissioner of Banks, the South Carolina Board of Financial
Institutions, the FDIC, the FHLB, the National Association of Securities Dealers
and the SEC, and all other regulatory agencies having jurisdiction over the
Parties and their respective subsidiaries.
“Rights”
shall mean all arrangements, calls, commitments, Contracts, options, rights
to
subscribe to, scrip, understandings, warrants, or other binding obligations
of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of a Person or by which a
Person is or may be bound to issue additional shares of its capital stock or
other Rights.
“SEC”
means the Securities and Exchange Commission.
“Securities
Laws” means the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Company Act of 1940, the Investment Advisors Act of 1940
and the Trust Indenture Act of 1939, each as amended, and the rules and
regulations of any Governmental Authority promulgated under each.
“Settlement
Agreement” has the meaning given to it in Section
6.2(c).
“Shareholder
Meeting” has the meaning given to it in Section
4.19.
“Stock
Adjustment” has the meaning given to it in Section
2.3(b).
“Superior
Proposal” means a bona fide written unsolicited Acquisition Proposal
(including a new or solicited proposal received by the Company or any of its
subsidiaries after execution of this Agreement from a party whose initial
contact with the Company may have been solicited prior to the execution of
this
Agreement) that the Company’s board of directors concludes in good faith to be
more favorable from a financial point of view to the Company’s shareholders than
the Merger and the other transactions contemplated hereby, (i) based on the
advice of its financial advisors (which shall be reasonably acceptable to the
Buyer), (ii) after taking into account the likelihood of consummation of such
transaction on the terms set forth therein (as compared to, and with due regard
for, the terms herein), and (iii) after taking into account all legal (with
the
advice of outside counsel reasonably acceptable to the Buyer), financial
(including the financing terms of any such proposal), regulatory and other
aspects of such proposal and any other relevant factors permitted under
applicable Law.
7
“Surviving
Company” has the meaning given to it in Section
2.1(a).
“Tax”
or “Taxes” means any and all taxes, charges, fees, levies or
other assessments (whether federal, state, local or foreign), including without
limitation income, gross receipts, excise, property, estate, sales, use, value
added, transfer, license, payroll, franchise, ad valorem, withholding, Social
Security and unemployment taxes, as well as any interest, penalties and other
additions to such taxes, charges, fees, levies or other
assessments.
“Tax
Return” means any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.
“Taxable
Period” shall mean any period prescribed by any Governmental Authority,
including the United States or any state, local, or foreign government or
subdivision or agency thereof for which a Tax Return is required to be filed
or
Tax is required to be paid.
“Termination
Fee” has the meaning given to it in Section
9.3(a).
“Transmittal
Letter” has the meaning given to it in Section
2.5(a).
8