AGREEMENT AND PLAN OF MERGER by and between PrivateBancorp, Inc. and Piedmont Bancshares, Inc. Dated as of August 2, 2006
Exhibit
2.1
EXECUTION
COPY
by
and
between
PrivateBancorp,
Inc.
and
Piedmont
Bancshares, Inc.
Dated
as
of August 2, 2006
TABLE
OF CONTENTS
Page
ARTICLE
I
|
THE
MERGER
|
1
|
Section
1.1
|
The
Merger
|
1
|
Section
1.2
|
Effective
Time
|
2
|
Section
1.3
|
Effect
of the Merger
|
2
|
Section
1.4
|
Conversion
of Shares upon the Merger
|
2
|
Section
1.5
|
Stock
Options and Warrants
|
3
|
Section
1.6
|
Merger
Consideration
|
4
|
Section
1.7
|
The
Closing
|
8
|
ARTICLE
II
|
EXCHANGE
OF CERTIFICATES
|
9
|
Section
2.1
|
Exchange
of Piedmont Common Stock
|
9
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF PIEDMONT
|
10
|
Section
3.1
|
Corporate
Organization
|
11
|
Section
3.2
|
Capitalization
and Shareholders
|
12
|
Section
3.3
|
Authority
|
14
|
Section
3.4
|
Conflicts
|
14
|
Section
3.5
|
Financial
Statements
|
14
|
Section
3.6
|
Absence
of Certain Changes or Events
|
15
|
Section
3.7
|
Undisclosed
Liabilities
|
15
|
Section
3.8
|
Consents
and Approvals
|
16
|
Section
3.9
|
Reports
|
16
|
Section
3.10
|
Broker’s
Fees; Other Transaction Fees
|
17
|
Section
3.11
|
Legal
Proceedings; Defaults
|
17
|
Section
3.12
|
Taxes
and Tax Returns
|
18
|
Section
3.13
|
Employee
Benefit Plans
|
18
|
Section
3.14
|
Compliance
with Applicable Law
|
21
|
Section
3.15
|
Material
Contracts
|
22
|
Section
3.16
|
Investment
Securities
|
24
|
Section
3.17
|
Insurance
|
24
|
Section
3.18
|
Allowance
for Loan Losses
|
25
|
Section
3.19
|
Title
to Properties; Leases
|
25
|
Section
3.20
|
Environmental
Matters
|
26
|
Section
3.21
|
Approval
Delays
|
28
|
Section
3.22
|
Tax
|
28
|
Section
3.23
|
Participation
Loans
|
28
|
Section
3.24
|
Fairness
Opinion
|
28
|
Section
3.25
|
Loan
Portfolio
|
28
|
Section
3.26
|
Interest
Rate Risk Management Arrangements
|
29
|
Section
3.27
|
Indemnification
|
29
|
Section
3.28
|
Insider
Interests
|
30
|
i
TABLE
OF CONTENTS
(continued)
Page
Section
3.29
|
Vote
Required
|
30
|
Section
3.30
|
Antitakeover
Provisions Inapplicable
|
30
|
Section
3.31
|
Internal
Controls
|
30
|
Section
3.32
|
Accuracy
of All Representations
|
31
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF PRIVATE
|
31
|
Section
4.1
|
Corporate
Organization
|
32
|
Section
4.2
|
Authority
|
32
|
Section
4.3
|
Consents
and Approvals
|
33
|
Section
4.4
|
Financial
Resources
|
33
|
Section
4.5
|
Approval
Delays
|
33
|
Section
4.6
|
Capitalization
|
33
|
Section
4.7
|
Private
Financial Statements; Material Changes
|
34
|
Section
4.8
|
Private
Reports
|
34
|
Section
4.9
|
Absence
of Certain Changes or Events
|
34
|
Section
4.10
|
Compliance
with Applicable Law
|
35
|
Section
4.11
|
Tax
|
35
|
ARTICLE
V
|
ADDITIONAL
AGREEMENTS
|
35
|
Section
5.1
|
Conduct
of Business
|
35
|
Section
5.2
|
Negative
Covenants
|
35
|
Section
5.3
|
Conduct
of Business by Private Until the Effective Time
|
37
|
Section
5.4
|
Access
to Information and Due Diligence
|
38
|
Section
5.5
|
Regulatory
Filings
|
39
|
Section
5.6
|
Reasonable
Efforts
|
39
|
Section
5.7
|
No
Conduct Inconsistent with this Agreement
|
39
|
Section
5.8
|
Board
of Directors’ Notices, Minutes, Etc
|
40
|
Section
5.9
|
Untrue
Representations and Warranties
|
40
|
Section
5.10
|
Indemnification;
Directors’ and Officers’ Insurance
|
41
|
Section
5.11
|
Resolution
of Piedmont Plans
|
41
|
Section
5.12
|
Certain
Consents
|
42
|
Section
5.13
|
Accounting
and Other Adjustments
|
43
|
Section
5.14
|
List
of Piedmont Shareholders
|
43
|
Section
5.15
|
Affiliate
Letters
|
43
|
Section
5.16
|
Registration
Statement; Shareholder Approval
|
43
|
Section
5.17
|
Financial
Statements and Reports
|
44
|
Section
5.18
|
Delivery
of Supplements to Disclosure Schedules
|
44
|
Section
5.19
|
Noncompetition,
Nondisclosure and Nonsolicitation Agreements
|
44
|
Section
5.20
|
Tax
Opinion
|
44
|
Section
5.21
|
Bonuses
and Other Awards
|
45
|
Section
5.22
|
Other
Actions; Further Assurances; Form of Transaction
|
45
|
ii
TABLE
OF CONTENTS
(continued)
Page
ARTICLE
VI
|
Conditions
Precedent
|
46
|
Section
6.1
|
Conditions
Precedent to Obligations of Private
|
46
|
Section
6.2
|
Conditions
Precedent to Obligations of Piedmont
|
47
|
ARTICLE
VII
|
TERMINATION,
EXPENSES AND AMENDMENT
|
48
|
Section
7.1
|
Termination
|
48
|
Section
7.2
|
Termination
Fee
|
51
|
Section
7.3
|
Effect
of Termination
|
52
|
Section
7.4
|
Amendment
|
52
|
Section
7.5
|
Extension;
Waiver
|
52
|
ARTICLE
VIII
|
GENERAL
PROVISIONS
|
53
|
Section
8.1
|
Non-Survival
of Representations, Warranties and Agreements
|
53
|
Section
8.2
|
Notices
|
53
|
Section
8.3
|
Interpretation
|
54
|
Section
8.4
|
Counterparts
|
54
|
Section
8.5
|
Entire
Agreement
|
54
|
Section
8.6
|
Governing
Law
|
54
|
Section
8.7
|
Severability
|
54
|
Section
8.8
|
Publicity
|
55
|
Section
8.9
|
Assignment;
Third Party Beneficiaries
|
55
|
Section
8.10
|
Transaction
Expenses
|
55
|
Exhibits
|
|
Exhibit
A
|
Form
of Certificate of Amendment of Certificate of Designation of Series A
Convertible Preferred Stock
|
Exhibit
B
|
Form
of Affiliate Letter and Voting Agreement
|
Exhibit
C
|
Form
of Opinion of Piedmont’s Counsel
|
Exhibit
D
|
Form
of Opinion of Private’s Counsel
|
iii
THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made and entered into as of the 2nd day of August, 2006, by and among
PrivateBancorp, Inc., a Delaware corporation (“Private”),
and
Piedmont Bancshares, Inc., a Georgia corporation (“Piedmont”).
W
I T N E S S E T H:
WHEREAS,
the
Board of Directors of Private deems it advisable and in the best interests
of
its stockholders that Piedmont be merged with and into Private in accordance
with the Delaware General Corporation Law (“DGCL”),
the
Georgia Business Corporation Code (“GBCC”)
and
this Agreement;
WHEREAS,
the
Board of Directors of Piedmont, in connection with the Merger (as defined
herein) and the other transactions contemplated herein, has determined that
this
Agreement, the Merger and the other transactions contemplated herein are in
the
best interests of Piedmont and its shareholders after giving due consideration
to all relevant factors, including the short-term and long-term social and
economic interests of the employees, customers, shareholders and other
constituents of Piedmont and the Bank (as defined below), the communities within
which Piedmont and the Bank operate and the consideration offered by Private
in
relation to the current value of Piedmont available in other freely-negotiated
transactions and in relation to the Piedmont’s Board of Directors’ estimate of
the future value of Piedmont as an independent entity, and therefore, has
unanimously approved the Merger, this Agreement and the plan of merger contained
in this Agreement;
WHEREAS,
immediately following the merger of Piedmont with and into Private (the
“Merger”),
Private and Piedmont intend that Piedmont Bank of Georgia, a Georgia
state-chartered bank and a wholly-owned subsidiary of Piedmont (the
“Bank”),
shall
become a wholly-owned subsidiary of Private;
WHEREAS,
Private
and Piedmont intend the Merger to qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended
(“Code”);
and
WHEREAS,
the
parties hereto desire to make certain representations, warranties, covenants
and
agreements in connection with this Agreement and the Merger.
NOW
THEREFORE,
in
consideration of the premises and the mutual representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto
covenant and agree as follows:
ARTICLE
I
THE
MERGER
Section
1.1 The
Merger.
(a)
Surviving
Corporation.
Subject
to the terms and conditions of this Agreement, the separate existence of
Piedmont shall cease and Piedmont shall be merged with and into Private at
the
Effective Time (as defined below) in accordance with the
DGCL
and
the GBCC, with Private being the continuing and surviving corporation (the
“Surviving
Corporation”).
At
the Effective Time, the title to all real estate and other property, or any
interest therein, owned by each of Piedmont and Private shall be vested in
the
Surviving Corporation without reversion or impairment, the Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of each of Piedmont and Private, any claim existing or action or
proceeding pending by or against Piedmont or Private may be continued as if
the
Merger did not occur or the Surviving Corporation may be substituted in the
proceeding for Piedmont or Private, as may be appropriate, and neither the
rights of creditors nor any liens upon the property of Piedmont or Private
shall
be impaired by the Merger.
(b) Certificate
of Incorporation.
The
Certificate of Incorporation of Private shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
the
provisions thereof and the DGCL.
(c) Bylaws.
The
Bylaws of Private in effect immediately prior to the Effective Time shall be
the
Bylaws of the Surviving Corporation until altered, amended or repealed as
provided therein, or in accordance with the Certificate of Incorporation of
the
Surviving Corporation and the DGCL.
(d) Directors
and Officers.
The
directors of the Surviving Corporation shall be the persons who were directors
of Private immediately prior to the Effective Time. The officers of the
Surviving Corporation shall be the persons who were officers of Private
immediately prior to the Effective Time.
Section
1.2 Effective
Time.
As
promptly as practicable on the Closing Date (as hereinafter defined), the
parties shall cause the Merger to be consummated by filing the Certificates
of
Merger (the “Certificates
of Merger”)
with
the respective Secretaries of State of the States of Delaware and Georgia (the
“Secretaries
of State”)
with
respect to the Merger, in such form as required by, and executed in accordance
with, the relevant provisions of the DGCL and the GBCC. The Merger shall become
effective at such time as the Certificates of Merger are duly filed with the
Secretaries of State (such time as the Merger becomes effective being
hereinafter referred to as the “Effective
Time”).
Section
1.3 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the DGCL and the GBCC.
Section
1.4 Conversion
of Shares upon the Merger.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
Private, Piedmont or the holders of Private Common Stock (as defined below)
or
Piedmont Common Stock (as defined below), the following shall
occur:
(a) Private
Common Stock.
Each
share of the common stock, no par value, of Private (“Private
Common Stock”)
issued
and outstanding or held in treasury immediately prior to the Effective Time
shall remain issued and outstanding or treasury shares of Private Common Stock
and shall be unchanged following the Merger.
(b) Piedmont
Common Stock.
Subject
to Section 1.4(c),
Section 1.4(e)
and
Section 2.1(c)
and
after giving effect to the conversion of preferred stock in accordance with
2
Section 1.4(d),
each
share of the common stock, par value $1.00 per share, of Piedmont (“Piedmont
Common Stock”)
issued
and outstanding immediately prior to the Effective Time shall be converted
into
the right to receive the Merger Consideration, as defined in, and pursuant
to,
Section 1.6.
(c) Piedmont
Common Stock Held by Piedmont or Private.
All
shares of Piedmont Common Stock (other than shares of Piedmont Common Stock
held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties) that are (i) owned by Piedmont as treasury stock, (ii) owned
directly or indirectly by Piedmont or the Bank, or (iii) owned directly or
indirectly by Private or any of its wholly-owned subsidiaries, shall be
cancelled and no Merger Consideration or other consideration shall be delivered
in exchange therefor.
(d) Piedmont
Preferred Stock.
After
the execution of this Agreement and prior to the Effective Time, pursuant to
the
provisions of the Certificate of Designation of Series A Convertible
Preferred Stock of Piedmont (the “Certificate
of Designation”),
as
amended pursuant to the Certificate of Amendment (as defined in Section
3.29),
each
share of Series A Convertible Preferred Stock of Piedmont (the
“Piedmont
Preferred Stock”)
shall
be converted into one share of Piedmont Common Stock. Thereafter, such shares
of
Piedmont Common Stock shall be converted into and become the right to receive
the consideration provided in this Agreement.
(e) Dissenting
Shares.
Each
outstanding share of Piedmont Common Stock the holder of which has perfected
appraisal rights under Section 14-2-1301 of the GBCC and has not
effectively withdrawn or lost such rights as of the Effective Time (the
“Dissenting
Shares”)
shall
not be converted into or represent a right to receive the Merger Consideration
hereunder, and the holder thereof shall be entitled only to such rights as
are
granted by the GBCC. Piedmont shall give Private prompt notice upon receipt
by
Piedmont of any such demands for payment of the fair value of such shares of
Piedmont Common Stock and of withdrawals of such notice and any other
instruments provided pursuant to applicable law (any shareholder duly making
such demand being hereinafter called a “Dissenting
Shareholder”),
and
Private shall have the right to participate in all negotiations and proceedings
with respect to any such demands. Piedmont shall not, except with the prior
written consent of Private, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment, or waive any failure
to
timely deliver a written demand for appraisal or the taking of any other action
by such Dissenting Shareholder as may be necessary to perfect appraisal rights
under the GBCC. Any payments made in respect of Dissenting Shares shall be
made
by the Surviving Corporation. If after the Effective Time a dissenting
shareholder of Piedmont fails to perfect, or effectively withdraws or loses,
his
right to appraisal and payment for his shares of Piedmont Common Stock, Private
shall issue and deliver the Merger Consideration to which such holder of
Piedmont Common Stock is entitled under this Agreement (without interest) upon
surrender by such holder of the certificate or certificates representing the
shares of Piedmont Common Stock for which payment is being made.
Section
1.5 Stock
Options and Warrants.
Immediately prior to the Effective Time, each option and warrant granted by
Piedmont to purchase shares of Piedmont Common Stock (each an “Option”
or
“Warrant,”
and
collectively, “Options”
or
“Warrants,”
as
the
case may be),
3
which
is
outstanding and unexercised immediately prior to the Effective Time, shall
terminate effective as of the Effective Time and, in consideration therefore,
the holder shall receive shares of Private Common Stock (rounded down to the
next whole share), with a value, based on the Private Closing Price (as defined
below), equal to the excess of the Piedmont Per Share Amount (as defined below)
over the exercise price per share of Piedmont Common Stock under such Option
or
Warrant multiplied by the number of shares of Piedmont Common Stock covered
by
such Option or Warrant. The number of shares of Private Common Stock issued
shall be reduced by the number of such shares having a value equal to the
applicable withholding taxes.
Section
1.6 Merger
Consideration.
(a)
Subject to the provisions of this Section 1.6,
each
share of Piedmont Common Stock issued and outstanding immediately prior to
the
Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c)
and
Dissenting Shares) shall be converted at the election of the holder thereof,
subject to and in accordance with the procedures set forth in this Agreement,
into either:
(i) the
right
to receive in cash from Private, without interest, an amount equal to $29.68
(the “Piedmont
Per Share Amount”)
(the
“Cash
Consideration”);
or
(ii) the
right
to receive from Private that number of validly issued, fully paid and
nonassessable shares of Private Common Stock equal to the Exchange Ratio (as
defined below) (the “Stock
Consideration”).
The
“Exchange
Ratio”
is
determined by dividing (x) the Piedmont Per Share Amount, by (y) the
Private Closing Price (as defined below); or
(iii) the
right
to receive a combination of the foregoing in accordance with the procedures
set
forth in this Agreement.
(b) “Aggregate
Cash Consideration”
shall
mean the result of the Cash Consideration multiplied by the number of shares
of
Piedmont Common Stock for which the Cash Consideration is received.
(c) “Aggregate
Merger Consideration”
shall
mean the sum of the Aggregate Cash Consideration and Aggregate Stock
Consideration paid by Private pursuant to the terms of this
Agreement.
(d) “Aggregate
Stock Consideration”
shall
mean the result of the Stock Consideration multiplied by the number of shares
of
Piedmont Common Stock for which the Stock Consideration is
received.
(e) “Private
Closing Price”
shall
mean the average of the last reported sales price on The Nasdaq Global Select
Market (“Nasdaq”)
of
Private Common Stock for each of the ten (10) trading days next preceding (the
first of such ten (10) days herein referred to as the “Pricing
Commencement Date”),
but
not including, the fifth day prior to the Closing Date. Private shall not,
within five (5) days of the Pricing Commencement Date and through the Effective
Time, declare or establish a record date for a stock split, stock dividend,
recapitalization, reclassification, or similar transaction with respect to
the
outstanding Private Common Stock; provided however, that if the Private Closing
Price as calculated above is less
4
than
$39.60, the Private Closing Price shall be deemed, for purposes of determining
the number of shares of Private Common Stock to be issued by Private pursuant
to
this Section 1.6,
to be
$39.60; and further provided, that if the Private Closing Price as calculated
above is greater than $48.40, the Private Closing Price shall be deemed, for
purposes of determining the number of shares of Private Common Stock to be
issued by Private pursuant to this Section 1.6,
to be
$48.40. Notwithstanding any provision to the contrary, if the conditions in
Section 7.1(h)(i)
and
(ii) are
satisfied, Piedmont shall have the right to terminate this Agreement in
accordance with the terms of Section 7.1(h).
(f) “Merger
Consideration”
means
the Stock Consideration, the Cash Consideration or any combination thereof,
in
each case as determined in accordance with the election and proration procedures
set forth in this Section 1.6.
(g) Maximum
Conversion Numbers.
(i) The total number of shares of Piedmont Common Stock to be converted
into the right to receive Cash Consideration for such shares (including any
such
shares subject to the cash portion of a Mixed Election (as defined below)),
shall be 40% of
the
number of shares of Piedmont Common Stock outstanding immediately prior to
the
Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c)
but
including Dissenting Shares) (the “Cash
Conversion Number”);
(ii) the total number of shares of Piedmont Common Stock to be converted
into the right to receive Stock Consideration for such shares (including any
such shares subject to the stock portion of a Mixed Election) shall be 60%
of
the number of shares of Piedmont Common Stock outstanding immediately prior
to
the Effective Time (excluding shares to be cancelled pursuant to Section 1.4(c)
but
including Dissenting Shares) (the “Stock
Conversion Number”);
and
(iii) the maximum number of shares of Private Common Stock which may be
issued as Stock Consideration will be equal to the Exchange Ratio multiplied
by
the Stock Conversion Number and the maximum amount of cash which will be paid
as
Cash Consideration will be equal to the Cash Consideration multiplied by the
Cash Conversion Number.
(h) Adjustments
for Dilution and Other Matters.
If,
between the date of this Agreement and the Effective Time, each of the
outstanding shares of Private Common Stock shall have been changed into a
different number of shares or into a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or
exchange of shares, the $39.60 and $48.40 amounts set forth in Section 1.6(e)
above
shall be adjusted appropriately to provide the holders of Piedmont Common Stock
the same economic effect as contemplated by this Agreement prior to such
event.
(i) Election
Procedures.
(i) All
elections contemplated by Section 1.6(a)
shall be
made on a form designed for that purpose prepared by Private and reasonably
acceptable to Piedmont (an “Election
Form”).
Holders of record of shares of Piedmont Common Stock who hold such shares as
nominees, trustees or in other representative capacities (“Representatives”)
may
submit multiple Election Forms, provided that such Representative certifies
that
each such Election Form covers all the shares of Piedmont Common Stock held
by
each such Representative for a particular beneficial owner. References in this
Section 1.6(i)
to
shares of Piedmont Common Stock shall also include
5
shares
of
Piedmont Preferred Stock to be converted into Piedmont Common Stock as described
in Section 1.4(d)
above.
(ii) The
Election Form shall be mailed on the same date as the date on which the Proxy
Statement (as defined in Section 5.16)
is
mailed to all holders of record of shares of Piedmont Common Stock or Piedmont
Preferred Stock as of the record date of the Shareholders’ Meeting (as defined
below). Thereafter Piedmont and Private shall each use reasonable efforts to
(i) mail the Election Form to all persons who become record holders of
shares of Piedmont Common Stock during the period between the record date for
the Shareholders’ Meeting and 5:00 p.m., Atlanta, Georgia Time, on the day
five (5) business days prior to the date of the Shareholders’ Meeting and
(ii) make the Election Form available to all persons who become holders of
shares of Piedmont Common Stock subsequent to such day and no later than the
close of business on the day prior to the Shareholders’ Meeting. In order to be
effective, an Election Form must be received by the Exchange Agent (as defined
below), on or before 5:00 p.m., Atlanta, Georgia Time, on the business day
prior to the Shareholders’ Meeting (or such other time and date as Private and
Piedmont may mutually agree) (the “Election
Deadline”);
provided,
however
that the
Election Deadline may not occur on or after the Closing Date. An election shall
have been properly made only if the Exchange Agent shall have actually received
a properly completed Election Form by the Election Deadline. An Election Form
shall be deemed properly completed only if accompanied by one or more
certificates theretofore representing Piedmont Common Stock (“Certificate(s)”)
(or
customary affidavits and, if required by Private pursuant to Section 2.1(a),
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of Piedmont
Common Stock covered by such Election Form, together with duly executed
transmittal materials included with the Election Form. Subject to the terms
of
this Agreement and the Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any election has been properly or timely made
and to disregard immaterial defects in any Election Form, and any good faith
decisions of the Exchange Agent regarding such matters shall be binding and
conclusive. All elections will be revocable until the Election Deadline and
thereafter shall be irrevocable.
(iii) Each
Election Form shall entitle the holder of shares of Piedmont Common Stock (or
the beneficial owner through appropriate and customary documentation and
instructions) to (i) elect to receive the Cash Consideration for all of
such holder’s shares (a “Cash
Election”),
(ii) elect to receive the Stock Consideration for all of such holder’s
shares (a “Stock
Election”),
(iii) elect to receive the Cash Consideration with respect to some of such
holder’s shares and the Stock Consideration with respect to such holder’s
remaining shares (a “Mixed
Election”),
or
(iv) make no election or indicate that such holder has no preference as to
the receipt of the Cash Consideration or the Stock Consideration (a
“Non-Election”).
Shares of Piedmont Common Stock as to which a valid Cash Election has been
made
(including pursuant to a Mixed Election) are referred to herein as “Cash
Election Shares.”
The
aggregate number of shares of Piedmont Common Stock as to which a valid Cash
Election is made is referred to herein as the “Cash
Election Number.”
Shares
of Piedmont Common Stock as to which a valid Stock Election has been made
(including pursuant to a Mixed Election)
6
are
referred to herein as “Stock
Election Shares.”
The
aggregate number of shares of Piedmont Common Stock as to which a valid Stock
Election is made is referred to herein as the “Stock
Election Number.”
Shares
of Piedmont Common Stock as to which a Non-Election is deemed in effect are
referred to as “Non-Election
Shares.”
All
shares of Piedmont Common Stock of a holder whose properly completed Election
Form is not received by the Exchange Agent prior to the Election Deadline shall
be deemed to be Non-Election Shares. If the Exchange Agent shall have determined
that any purported election was not properly made, such purported election
shall
be deemed to be of no force and effect and the shares of Piedmont Common Stock
subject to such purported election shall for purposes hereof be deemed to be
Non-Election Shares.
(j) Proration
Procedures.
As soon
as practicable after the Election Deadline, Private shall cause the Exchange
Agent to effect the allocation among holders of Piedmont Common Stock of rights
to receive the Cash Consideration and the Stock Consideration as
follows:
(i) If
the
Stock Election Number exceeds the Stock Conversion Number, then:
(A) all
Cash
Election Shares and all Non-Election Shares shall be converted into the right
to
receive the Cash Consideration, and
(B) each
holder of Stock Election Shares shall have the right to receive:
(1) the
number of shares of Private Common Stock equal to the product obtained by
multiplying (a) the number of Stock Election Shares held by such holder by
(b) the Exchange Ratio by (c) a fraction (rounded to four decimal
places) the numerator of which is the Stock Conversion Number and the
denominator of which is the Stock Election Number (the “Stock
Proration Factor”),
and
(2) cash
in
an amount equal to the product obtained by multiplying (a) the number of
Stock Election Shares held by such holder by (b) the Cash Consideration by
(c) one minus the Stock Proration Factor.
(ii) If
the
Stock Election Number is less than the Stock Conversion Number (the amount
by
which the Stock Conversion Number exceeds the Stock Election Number being
referred to herein as the “Shortfall
Number”),
then
all Stock Election Shares shall be converted into the right to receive the
Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A) if
the
Shortfall Number is less than or equal to the number of Non-Election Shares,
then:
(1) all
Cash
Election Shares shall be converted into the right to receive the Cash
Consideration; and
7
(2) each
holder of Non-Election Shares shall have the right to receive (a) the
number of shares of Private Common Stock equal to the product obtained by
multiplying (x) the number of Non-Election Shares held by such holder by
(y) the Exchange Ratio by (z) a fraction (rounded to four decimal
places) the numerator of which is the Shortfall Number and the denominator
of
which is the total number of Non-Election Shares (the “Non-Election
Proration Factor”)
and
(b) cash in an amount equal to the product obtained by multiplying
(x) the number of Non-Election Shares held by such holder by (y) the
Cash Consideration by (z) one minus the Non-Election Proration Factor;
or
(B) if
the
Shortfall Number exceeds the number of Non-Election Shares, then:
(1) all
Non-Election Shares shall be converted into the right to receive the Stock
Consideration; and
(2) each
holder of Cash Election Shares shall have the right to receive (a) the
number of shares of Private Common Stock equal to the product obtained by
multiplying (x) the number of Cash Election Shares held by such holder by
(y) the Exchange Ratio by (z) a fraction (rounded to four decimal
places) the numerator of which is the amount by which the Shortfall Number
exceeds the number of Non-Election Shares and the denominator of which is the
Cash Election Number (the “Cash
Proration Factor”)
and
(b) cash in an amount equal to the product obtained by multiplying
(x) the number of Cash Election Shares held by such holder by (y) the
Cash Consideration by (z) one minus the Cash Proration Factor.
(iii) Notwithstanding
the foregoing, but subject to Section 5.22(d),
Private
may, in its sole discretion, direct at any time prior to the Effective Time
that
the proration procedures provided in this subsection (e) not be
implemented.
Section
1.7 The
Closing.
Consummation of the transactions contemplated by this Agreement shall take
place
at a closing (the “Closing”)
to be
held upon the satisfaction or waiver of all of the conditions to the Merger
set
forth herein, which Closing shall take place at 10:00 a.m., local time, at
the office of Vedder, Price, Xxxxxxx & Kammholz, P.C., 000 Xxxxx
XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 on a date mutually agreeable to the
parties hereto, but in no event later than the five (5) business day after
all
of the conditions to the Merger set forth herein have been satisfied or waived,
unless the parties mutually agree to another date (hereinafter referred to
as
the “Closing
Date”).
8
ARTICLE
II
EXCHANGE
OF CERTIFICATES
Section
2.1 Exchange
of Piedmont Common Stock.
(a)
Surrender
of Certificates.
As soon
as practicable after the Effective Time but in no event later than five
(5) business days following the Effective Time, LaSalle Bank, N.A. or such
other firm selected by Private and reasonably acceptable to Piedmont (the
“Exchange
Agent”),
pursuant to documentation reasonably acceptable to Private and Piedmont
consistent with the terms hereof, shall mail to each holder of record of a
Certificate who did not previously submit a properly completed Election Form
together with duly executed transmittal materials prior to the Election
Deadline: (i) a form letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall
pass, only upon delivery of the Certificates (or a lost certificate affidavit
and bond in a form reasonably acceptable to the Exchange Agent) to the Exchange
Agent; and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration (in the form or forms
determined in accordance with the provisions of Section 1.6).
Upon
surrender of a Certificate for cancellation to the Exchange Agent (or a lost
certificate affidavit and bond in a form reasonably acceptable to the Exchange
Agent), together with such letter of transmittal, duly executed, the holder
of
such Certificate shall be entitled to receive, in exchange therefor, (i) a
certificate evidencing the whole number of shares of Private Common Stock into
which the shares of Piedmont Common Stock, theretofore represented by the
Certificate so surrendered, shall have been converted pursuant to the provisions
of Section 1.6,
if any,
plus (ii) a check for the aggregate amount of cash, without interest, which
such holder would be entitled to receive pursuant to Section 1.6,
if any,
including any cash amount payable in lieu of fractional shares in accordance
with Section 2.1(c).
Certificates so surrendered shall be cancelled. Private shall direct the
Exchange Agent to make such deliveries within five (5) business days of the
receipt of all required documentation. If any Private Common Stock to be
exchanged for shares of Piedmont Common Stock is to be delivered in a name
other
than that in which the Certificate surrendered for exchange is registered,
it
shall be a condition to the exchange that the Certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer, that all
signatures shall be guaranteed by a member firm of any national securities
exchange in the United States or the National Association of Securities Dealers,
Inc., or by a commercial bank or trust company or other financial institution
acceptable to Private having an office in the United States, and that the person
requesting the payment shall either (a) pay to the Exchange Agent any
transfer or other taxes required by reason of the payment to a person other
than
the registered holder of the Certificate surrendered, or (b) establish to
the satisfaction of the Exchange Agent that such taxes have been paid or are
not
payable. From and after the Effective Time, there shall be no transfers on
the
stock transfer books of Piedmont of any shares of Piedmont Common Stock
outstanding immediately prior to the Effective Time and any such shares of
Piedmont Common Stock presented to the Exchange Agent shall be cancelled in
exchange for the Merger Consideration payable with respect thereto as provided
in Section 1.6
above.
(b) Failure
to Exchange Piedmont Common Stock.
No
dividends or other distributions declared after the Effective Time with respect
to Private Common Stock payable to the holders of record thereof after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with
respect to Private Common Stock represented thereby and no cash
9
payment
in lieu of fractional shares shall be paid to any holder until the holder of
record shall surrender such Certificate. Subject to the effect, if any, of
applicable law, after the subsequent surrender and exchange of a Certificate,
the holder thereof shall be entitled to receive any such dividends or
distributions, without interest thereon, which theretofore became payable with
respect to the Private Common Stock represented by such Certificate. All
dividends or other distributions declared on or after the Effective Time with
respect to the Private Common Stock and payable to the holders of record thereof
on or after the Effective Time which are payable to the holder of a Certificate
not theretofore surrendered and exchanged for Private Common Stock pursuant
to
this Section 2.1(b)
shall be
paid or delivered by Private to the Exchange Agent, in trust, for the benefit
of
such holders. All such dividends and distributions held by the Exchange Agent
for payment or delivery to the holders of unsurrendered Certificates unclaimed
at the end of one (1) year from the Effective Time shall be repaid or
redelivered by the Exchange Agent to Private after which time any holder of
Certificates who has not theretofore surrendered such Certificates to the
Exchange Agent, subject to applicable law, shall look only to Private for
payment or delivery of such dividends or distributions, as the case may be.
Any
shares of Private Common Stock or other consideration delivered or made
available to the Exchange Agent pursuant to this Section 2.1(b)
and not
exchanged for Certificates within one (1) year after the Effective Time
shall be returned by the Exchange Agent to Private which shall thereafter act
as
exchange agent subject to the rights of holders of unsurrendered Certificates
hereunder.
(c) Fractional
Shares.
No
certificates or scrip representing fractional shares of Private Common Stock
shall be issued upon the surrender or exchange of Certificates, no dividend
or
distribution of Private shall relate to any fractional share, and such
fractional share interests will not entitle the owner thereof to vote or assert
any rights of a stockholder of Private. In lieu of any fractional share of
Private Common Stock, Private shall cause to be paid to each holder of shares
of
Piedmont Common Stock who otherwise would be entitled to receive a fractional
share of Private Common Stock an amount of cash, rounded to the nearest cent
(without interest), equal to the product of such fraction multiplied by the
Private Closing Price.
(d) Escheat.
Notwithstanding anything in this Agreement to the contrary, neither the Exchange
Agent nor any party hereto shall be liable to a former holder of Piedmont Common
Stock for any consideration delivered to a public official pursuant to
applicable escheat or abandoned property laws.
(e) Exchange
Fund.
On the
date the Effective Time occurs, Private shall deposit, or cause to be deposited,
with the Exchange Agent for the benefit of the holders of Piedmont Common Stock,
for exchange in accordance with the terms of this Agreement, an aggregate amount
of cash, sufficient to pay the aggregate Cash Consideration payable pursuant
to
Section 1.6
of this
Agreement (plus an additional amount of cash sufficient to cover amounts payable
in lieu of any fractional shares of Piedmont Common Stock) (the “Exchange
Fund”).
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PIEDMONT
Except
as
disclosed in the disclosure schedule (the “Piedmont
Disclosure Schedule”)
delivered by Piedmont to Private prior to the execution of this Agreement (which
schedule sets
10
forth,
among other things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties contained
in this Article III, or to one or more of Piedmont’s covenants contained
herein, provided,
however,
the
mere inclusion of an item in such schedule as an exception to a representation
or warranty shall not be deemed an admission that such item represents a
material exception or material fact, event or circumstance or that such item
has
had or would be reasonably likely to have a Material Adverse Effect (as defined
in Section 3.1)
on
Piedmont), Piedmont represents and warrants to Private that the statements
contained in this Article III are correct and complete as of the date of
this Agreement and will be correct and complete as of the Effective Date (as
though made then and as though the Effective Date were substituted for the
date
of this Agreement throughout this Article III), subject to the standard set
forth below in this paragraph, and except as to any representation or warranty
which specifically relates to a specified date, which only need be so correct
as
of such specified date. No representation or warranty of Piedmont contained
in
this Article III shall be deemed not complete, untrue or incorrect, and
Piedmont shall not be deemed to have breached a representation or warranty,
as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances has had, or is reasonably likely to have, a
Material Adverse Effect with respect to Piedmont, disregarding for these
purposes (x) any qualification or exception for, or reference to,
materiality in any such representation or warranty and (y) any use of the
terms “material”, “materially”, “in all material respects”, “Material Adverse
Effect” or similar terms or phrases in any such representation or warranty. The
foregoing standard shall not apply (a) as of the date of this Agreement to
representations and warranties contained in Sections 3.1(a)
(except
as to the licensing and qualification in other jurisdictions), 3.1(b),
3.1(c)
(except
as to the licensing and qualification in other jurisdictions), 3.2
(except
as provided in subparagraphs (c) and (d)), 3.4(a),
3.5,
3.6,
3.13(c)(ii)
and
(viii),
3.13(f),
3.13(g),
3.15(a)
and
3.20(a),
which
representations and warranties shall be deemed not complete, untrue, incorrect
and breached only if they are not complete, true and correct in all material
respects as of such date based upon the standards and qualifications contained
therein and (b) at any time to the representations and warranties under
Sections 3.2
(as to
outstanding shares of Piedmont Common Stock, shares of Piedmont Preferred Stock,
options and warrants), 3.3,
3.10,
3.24
and
3.30,
which
representations and warranties shall be true and correct in all material
respects at all times.
Section
3.1 Corporate
Organization.
(a) Piedmont
is a corporation organized and validly existing under the laws of the State
of
Georgia. Piedmont has the corporate power and authority to own or lease all
of
its properties and assets and to carry on its business as it is now being
conducted, and is licensed or qualified to do business in each jurisdiction
in
which the nature of the business conducted by it or the character or location
of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect (as defined below) on Piedmont or
the
Bank. Piedmont is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (“BHCA”).
True
and complete copies of the Articles of Incorporation and Bylaws of Piedmont,
as
in effect as of the date of this Agreement have been provided to Private. As
used in this Agreement, the term “Material
Adverse Effect”
means
with respect to Piedmont and the Bank, any effect that (1) is or is
reasonably likely to be material and adverse to the financial
11
condition,
business or results of operations of Piedmont and the Bank taken as a whole
or
(2) would prevent or materially impair the ability of such person to
perform its obligations under this Agreement or to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement; provided,
however,
that
Material Adverse Effect shall not be deemed to include the impact of
(i) changes in banking and other laws of general applicability or
interpretations thereof by courts or Governmental Authorities (as defined
below), (ii) changes in GAAP or regulatory accounting requirements
applicable to banks and their holding companies generally, (iii) this
Agreement and the transactions contemplated hereby and the announcement hereof,
(iv) actions or omissions of Piedmont taken with the prior written consent
of Private, (v) changes attributable to or resulting from changes in
general economic conditions affecting similarly situated banks, saving
institutions or their holding companies generally and (vi) any
modifications or changes to valuation policies and practices of Piedmont or
any
of its subsidiaries in connection with the Merger or restructuring charges,
in
each case taken with the prior written approval of Private, in connection with
the Merger, in each case in accordance with GAAP.
(b) As
of the
date of this Agreement, the Bank is Piedmont’s sole wholly-owned, direct
subsidiary. The Bank has no subsidiaries. Except as set forth in Schedule 3.1(b)
of the
Piedmont Disclosure Schedules, Piedmont does not own or hold any options,
warrants, calls or commitments of any character relating to, any voting or
non-voting stock or equity securities of any bank, corporation, partnership,
limited liability company, or other organization, whether incorporated or
unincorporated, other than the Bank.
(c) The
Bank
is duly organized and validly existing as a banking corporation under the laws
of the State of Georgia. The Bank is an “insured depository institution” as
defined in the Federal Deposit Insurance Act (the “FDI
Act”)
and
applicable regulations thereunder, the deposits of which are insured by the
Federal Deposit Insurance Corporation (“FDIC”)
through the Bank Insurance Fund to the full extent permitted under applicable
laws. The Bank (i) is qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership
or
leasing of property or the conduct of its business requires it to be so
qualified except where the failure to be so qualified would not have a Material
Adverse Effect on Piedmont or the Bank, and (ii) has all requisite
corporate power and authority to own or lease its properties and assets and
to
carry on its business as now conducted. Except as set forth in Schedule 3.1(c)
of the
Piedmont Disclosure Schedules, the Bank does not own, or hold any options,
warrants, calls or commitments of any character relating to, any voting or
non-voting stock or equity securities of any bank, corporation, partnership,
limited liability company, or other organization, whether incorporated or
unincorporated.
Section
3.2 Capitalization
and Shareholders.
(a) As of the date hereof, the authorized, issued and outstanding capital
stock of Piedmont consists of the following:
Class
of Stock
|
Par
Value
|
Authorized
|
Issued
|
Outstanding
|
Treasury
|
Common
|
$1.00
|
10,000,000
|
1,073,000
|
1,073,000
|
0
|
Preferred
|
1.00
|
5,000,000
|
260,870
|
260,870
|
0
|
(b) All
of
the issued and outstanding shares of Piedmont Common Stock and Piedmont
Preferred Stock have been duly and validly authorized and issued, and are fully
paid
12
and
non-assessable. None of the outstanding shares of Piedmont Common Stock and
Piedmont Preferred Stock were issued in violation of any preemptive rights
of
the current or past shareholders of Piedmont, and, there exist no prior rights
of any party to acquire such shares. All of the issued and outstanding shares
of
Piedmont Common Stock as of the relevant record date will be entitled to vote
to
adopt the Agreement and Certificate of Amendment, and all of the issued and
outstanding shares of Piedmont Preferred Stock as of the relevant record date
will be permitted to vote to adopt the Certificate of Amendment.
(c) As
of the
date hereof, Piedmont has 315,000 shares of Piedmont Common Stock reserved
for
issuance under the stock option plans for the benefit of employees and directors
of Piedmont and the Bank (the “Piedmont
Option Plans”)
pursuant to which options covering an aggregate of 267,500 shares of Piedmont
Common Stock are outstanding as of the date hereof with an average exercise
price of $11.57 per share. As of the date hereof, all of the shares of Piedmont
Common Stock authorized to be issued under the Piedmont Option Plans have been
awarded, vested and distributed, except as set forth on Schedule 3.2(c)
of the
Piedmont Disclosure Schedule. As of the date hereof, there were warrants to
purchase an aggregate of 110,000 shares of Piedmont Common Stock outstanding
at
a price of $10.00 per share. Except as set forth in Section 3.2(a),
this
Section 3.2(c)
and
Schedule 3.2(c)
of the
Piedmont Disclosure Schedule, there are no shares of capital stock or other
equity securities of Piedmont outstanding and no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of Piedmont, or contracts, commitments,
understandings, or arrangements by which Piedmont is or may be bound to issue
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. Each outstanding
option and warrant is exercisable or will be exercisable as of the date set
forth on Schedule 3.2(c)
of the
Piedmont Disclosure Schedule and has an exercise price in the amount set
forth on Schedule 3.2(c)
of the
Piedmont Disclosure Schedule.
(d) Schedule 3.2(d)
of the
Piedmont Disclosure Schedule accurately identifies the names and addresses
of all of the shareholders who, to Piedmont’s knowledge (as defined below),
beneficially own more than 5% of the outstanding shares of Piedmont Common
Stock
or the right to acquire more than 5% of the outstanding shares of Piedmont
Common Stock and/or of shares of Piedmont Preferred Stock, and the number of
shares of Piedmont Common Stock and Piedmont Preferred Stock held by each such
shareholder and by each director and senior officer of Piedmont. From the date
hereof until the Effective Time, Piedmont shall, upon request, provide Private
with (i) a complete list of all of its shareholders of record, including
the names, addresses and number of shares of Piedmont Common Stock and Piedmont
Preferred Stock held by each shareholder, and (ii) any correspondence
between Piedmont and any shareholder of Piedmont.
(e) Except
as
set forth on Schedule 3.2(e)
of the
Piedmont Disclosure Schedules, no capital stock of the Bank is or may become
required to be issued (other than to Piedmont) by reason of any options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of the Bank. There are no contracts,
commitments, understandings or arrangements relating to the rights of Piedmont
to vote or to dispose of shares
13
of
the
capital stock of the Bank. All of the shares of capital stock of the Bank held
by Piedmont have been duly and validly authorized and issued, are fully paid
and
non-assessable, and are owned by Piedmont free and clear of any claim, lien
or
encumbrance.
Section
3.3 Authority.
The
execution, delivery and performance of this Agreement, and the consummation
of
the transactions contemplated hereby have been duly approved and authorized by
Piedmont’s Board of Directors, and all necessary corporate action on the part of
Piedmont (except for the Requisite Shareholder Approval) has been taken. This
Agreement has been duly executed and delivered by Piedmont and, subject to
the
approval of the shareholders of Piedmont and any federal or state governmental
authority or regulatory agency as may be required by applicable law (the
“Governmental
Authorities”),
will
constitute the valid and binding obligations of Piedmont, except to the extent
that enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles and
doctrines. Except as set forth on Schedule 3.3
of the
Piedmont Disclosure Schedules, neither the Articles of Incorporation nor the
Bylaws of Piedmont will need to be amended to effectuate the transactions
contemplated by this Agreement.
Section
3.4 Conflicts.
The
execution and delivery of this Agreement by Piedmont does not, and the
consummation of the transactions contemplated hereby will not (a) conflict
with or result in any violation of the respective Articles of Incorporation
or
Bylaws of Piedmont or the Bank, or (b) conflict with or result in any
violation, breach or termination of, or default or loss of a material benefit
under, or permit the acceleration of, any obligation or result in the creation
of any material lien, charge or encumbrance on any of the property or assets
under any provision of any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Piedmont
or
the Bank or their respective properties, other than any such conflicts,
violations or defaults which (i) individually or in the aggregate do not
have a Material Adverse Effect on Piedmont or the Bank, or (ii) will be
cured, by valid amendment or otherwise, or waived prior to the Effective Time.
No consent, approval, order or authorization of, or registration, declaration
or
filing with, any Governmental Authority is required by or with respect to
Piedmont or the Bank in connection with the execution and delivery of this
Agreement, or the consummation by Piedmont or the Bank of the transactions
contemplated hereby, the absence of which would have a Material Adverse Effect,
except for those relating to: any application or notice with the Governmental
Authorities; the Private’s Registration Statement to be filed with the SEC; the
filing of the Certificates of Merger with the Secretaries of State; and any
antitrust filings, consents, waivers or approvals.
Section
3.5 Financial
Statements.
True,
correct and complete copies of the following financial statements (collectively
referred to as the “Piedmont
Financial Statements”)
have
been provided to Private:
(a) the
audited consolidated Balance Sheet of Piedmont for the fiscal years ended
December 31, 2005 and 2004, and the related consolidated Statements of
Income, Statements of Comprehensive Income, Statements of Stockholders’ Equity,
and Statements of Cash Flows for the fiscal years then ended;
14
(b) the
Bank’s Call Report for the twelve month period ended December 31,
2005;
(c) Piedmont’s
FR-Y9 as of December 31, 2005 as filed with the FRB (as hereafter defined);
and
(d) unaudited
consolidated Statement of Income of Piedmont for the period commencing
January 1, 2006 and ending June 30, 2006 and an unaudited consolidated
balance sheet as of such period end.
The
financial statements described in clause (a) have been prepared in
conformity with United States generally accepted accounting principles
(“GAAP”)
consistently applied and fairly present the consolidated financial condition
and
results of operations of Piedmont and the Bank at the date and for the period
presented. The financial statements described in clauses (b) and (c) above
have been prepared on a basis consistent with Piedmont’s past accounting
practices and as required by applicable rules and regulations. The financial
statements described in clause (d) have been prepared in conformity with
GAAP applied on a basis consistent with the preparation of the Piedmont
Financial Statements described in clauses (a) through (c) above, subject to
normal audit and year-end adjustments and need not include notes; provided
that
such Statement of Income shall reflect adjustments so as to exclude the effects
of expenses attributable to this Agreement and the transactions contemplated
hereby.
Section
3.6 Absence
of Certain Changes or Events.
(a) Except
as
set forth in Schedule 3.6(a)
of the
Piedmont Disclosure Schedules, since December 31, 2005, no event has
occurred which has had a Material Adverse Effect on Piedmont or the Bank or,
to
Piedmont’s “knowledge” (as defined below), no event has occurred which is
reasonably likely to have a Material Adverse Effect on Piedmont or the
Bank.
(b) For
purposes of this Agreement, “Piedmont’s knowledge”, “knowledge of Piedmont” or
words of similar effect means the actual knowledge, after due inquiry, of any
one of Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxx Xxxxx and Xxxxxx
Xxxxxx.
(c) Except
as
set forth in Schedule 3.6(c)
of the
Piedmont Disclosure Schedules, since December 31, 2005, Piedmont and the
Bank have conducted their respective businesses in all material respects in
the
ordinary and usual course consistent with past practice and,
since the date of this Agreement, consistent with the restrictions set forth
in
Section 5.2.
Section
3.7 Undisclosed
Liabilities.
Except
for those liabilities that are fully reflected or reserved against on the
audited Consolidated Balance Sheet of Piedmont for the fiscal year ended
December 31, 2005, liabilities disclosed in Schedule 3.7
of the
Piedmont Disclosure Schedules, liabilities less than $50,000 individually or
$100,000 in the aggregate, and liabilities incurred in the ordinary course
of
business consistent with past practice, since December 31, 2005, Piedmont
and the Bank, to the knowledge of Piedmont, have not incurred any liability
of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due).
15
Section
3.8 Consents
and Approvals.
Except
as set forth on Schedule 3.8
of the
Piedmont Disclosure Schedules, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
Governmental Authority are necessary in connection with the execution and
delivery by Piedmont of this Agreement and the consummation by Piedmont of
the
Merger and the other transactions contemplated hereby except for (a) the
filing of applications with the Board of Governors of the Federal Reserve System
or the appropriate Federal Reserve Bank (the “FRB”),
the
Securities and Exchange Commission (“SEC”)
and
the Georgia Department of Banking and Finance (“GDBF”)
and
the approval of such applications by the FRB, SEC and GDBF (the “Regulatory
Applications”),
and
(b) the filing of the Certificates of Merger with the Secretaries of State
under the DGCL and the GBCC.
Section
3.9 Reports.
(a)
Piedmont and the Bank have timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file during the five (5) years preceding
the
date hereof with (i) the FRB, (ii) the FDIC, (iii) the GDBF,
(iv) any state regulatory authority, and (v) any self-regulatory
organization with jurisdiction over any of the activities of Piedmont or the
Bank, and all other reports and statements required to be filed by them,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, any state,
or
any Governmental Authority (the “Piedmont
Reports”),
and
have paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement or
to
pay such fees and assessments will not have a Material Adverse Effect on
Piedmont or the Bank. As of their respective filing dates, each of the Piedmont
Reports (after giving effect to any amendments thereto), including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with the applicable provisions of the statutes, rules, and regulations enforced
or promulgated by the Governmental Authority with which they were filed. To
the
knowledge of Piedmont, none of the Piedmont Reports contained any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Neither Piedmont nor the Bank is subject
to any cease-and-desist or other similar order issued by, or is a party to
any
written agreement, consent agreement or memorandum of understanding with, or
is
a party to any commitment letter or similar undertaking to, or is subject to
any
order or directive by any Governmental Authority that currently restricts the
conduct of its business or that relates to its capital adequacy, compliance
with
laws, its credit policies, its management or its business (each a “Piedmont
Regulatory Agreement”),
and
neither Piedmont nor the Bank has been advised during the five (5) years
preceding the date hereof by any Governmental Authority that it is considering
issuing or requesting any such Piedmont Regulatory Agreement.
(b) Except
for examinations or reviews conducted by the Regulatory Agencies in the ordinary
course of the business of Piedmont or the Bank, no federal, state or local
governmental agency, commission or other entity has initiated any proceeding
or,
to the knowledge of Piedmont, investigation into the business or operations
of
Piedmont or the Bank within the past five (5) years nor, to the knowledge of
Piedmont, has any such proceedings or investigation been threatened or is
currently pending. Except as disclosed in Schedule 3.9(b)
of the
Piedmont Disclosure Schedules, there is no unresolved violation, criticism
or
exception noted by any Governmental Authority with respect to any Piedmont
Report other than those that have
16
not
had and are not expected to have a Material Adverse Effect on the
business of Piedmont or the Bank that is subject to the Governmental
Authority.
Section
3.10 Broker’s
Fees; Other Transaction Fees.
(a)
Other than the financial advisory services performed for Piedmont by FIG
Partners, neither Piedmont nor the Bank, nor any of their respective
shareholders, officers, directors, employees or agents, has employed a broker
or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder’s fees, and no broker or finder has acted directly
or indirectly for Piedmont or the Bank in connection with this Agreement or
the
transactions contemplated hereby. A copy of Piedmont’s agreement with FIG
Partners has been made available to Private and the fee payable under such
agreement is included in Schedule 3.10
of the
Piedmont Disclosure Schedules. No other action has been taken by Piedmont or
the
Bank that would give rise to any claim by any party hereto for a brokerage
commission, finder’s fee or other like payment with respect to the transactions
contemplated by this Agreement.
(b) There
are
no fees and expenses paid, incurred or expected to be incurred by Piedmont
or
the Bank for legal, investment banking, accounting and other professional
services received in connection with this Agreement or any of the transactions
contemplated hereby, except (i) the fees set forth in Section 3.10(a)
above,
(ii) the reasonable accounting fees of Xxxxx Xxxxxx PLLC, and
(iii) the reasonable legal fees of Xxxxxx Xxxxxxx Xxxxxxxxx &
Xxxx, PLLC billed at an hourly rate.
Section
3.11 Legal
Proceedings; Defaults.
Except
as set forth on Schedule 3.11
of the
Piedmont Disclosure Schedules:
(a) There
is
no pending or, to the knowledge of Piedmont, threatened litigation or other
legal, administrative, arbitration or other proceeding, claim, action or
investigation of any nature against Piedmont or the Bank or which is seeking
to
enjoin consummation of the transactions provided for herein or to obtain other
relief in connection with this Agreement or the transactions contemplated
hereby, having, or which would have in the future, any such
effect;
(b) There
is
no injunction, order, judgment, decree, or regulatory restriction (other than
regulatory restrictions that apply to similarly situated bank holding companies
or banks) imposed upon Piedmont, the Bank or the assets of Piedmont or the
Bank;
and
(c) To
the
knowledge of Piedmont there has not been any default, or the occurrence of
an
event which with notice or lapse of time or both would constitute a default,
in
any obligation to be performed by Piedmont or the Bank under any contract,
commitment, or other material obligation to which Piedmont, the Bank or their
respective properties is subject, and neither Piedmont nor the Bank has waived
any right under any contract or commitment, except in each case where any such
default or waiver, singly or in the aggregate with any other such defaults
or
waivers, would not have a Material Adverse Effect on the business of Piedmont
or
the Bank. To the knowledge of Piedmont, no other party to any such material
contract or commitment is in default in any material obligation to be performed
by such party.
17
Section
3.12 Taxes
and Tax Returns.
(a) Except
as
set forth on Schedule 3.12
of the
Piedmont Disclosure Schedules, Piedmont, the Bank and each other company
(including any limited liability company) or joint venture where Piedmont or
the
Bank owns more than 50% of the equity interest of such company or venture
measured by vote and value (a “Tax
Subsidiary”)
have
filed all federal, state, county, foreign and local Tax Returns (as defined
in
Section 3.12(c))
required to be filed (all such Tax Returns being accurate and complete in all
material respects). All Taxes (as defined in Section 3.12(c))
required to be shown on such Tax Returns have been paid when due. Except as
set
forth on Schedule 3.12
of the
Piedmont Disclosure Schedules, no application for an extension of time for
filing a Tax Return or consent to any extension of the period of limitations
applicable to the assessment or collection of any Tax is in effect with respect
to Piedmont, the Bank or any Tax Subsidiary. Except as set forth in Schedule 3.12,
none of
Piedmont, the Bank or any Tax Subsidiary is delinquent in the payment of any
Taxes. Adequate reserves for Taxes (including any penalties and interest)
payable by Piedmont, the Bank or any Tax Subsidiary have been made on the books
of Piedmont and on the most recent Piedmont Financial Statements. No taxing
authority has asserted any claims for, Taxes or assessments which remain unpaid
upon Piedmont, the Bank or any Tax Subsidiary or notified Piedmont, the Bank
or
any Tax Subsidiary of any audit. Except as set forth in Schedule 3.12,
none of
Piedmont, the Bank or any Tax Subsidiary has received any written notice of
a
proposed audit or proposed deficiency for any Tax which remains unpaid. In
addition, proper and accurate amounts have been withheld by Piedmont, the Bank
and each Tax Subsidiary from each of their employees, partners, members,
shareholders or holders of deposit accounts for all prior periods in compliance
in all material respects with the Tax withholding provisions of applicable
federal, state, foreign and local laws. There are no Tax liens upon any property
or assets of Piedmont, the Bank or any Tax Subsidiary, except for liens for
Taxes not yet past due.
(b) Piedmont
has not filed any consolidated federal income tax return with an “affiliated
group” (within the meaning of Section 1504 of the Code) where Piedmont was
not the common parent of the group. Neither Piedmont, nor the Bank or any Tax
Subsidiary is, or has been, a party to a tax allocation agreement or arrangement
pursuant to which it has any contingent or outstanding Tax liability to anyone
other than Piedmont, the Bank or any Tax Subsidiary.
(c) As
used
in this Agreement, the term “Tax”
or
“Taxes”
means
any and all taxes, charges, fees, levies or other assessments, including but
not
limited to all federal, state, county, local, and foreign income, excise, gross
receipts, gross income, ad valorem, profits, gains, property, capital, sales,
transfer, use, payroll, employment, severance, withholding, duties, intangibles,
franchise, backup withholding, and other taxes, charges, levies or like
assessments together with all penalties and additions to tax and interest
thereon. “Tax
Return”
shall
mean any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect
to
Taxes.
Section
3.13 Employee
Benefit Plans.
(a) (i) Piedmont
Plan.
The
term, “Piedmont
Plan”
includes each bonus, deferred compensation, pension, retirement, profit sharing,
thrift savings, employee stock
18
ownership,
stock bonus, stock purchase, stock appreciation right, restricted stock and
stock option plan, each employment, consulting, severance contract or
recognition and retention, each other material employee benefit plan, any
applicable “change in control” or similar provisions in any plan, program,
policy, contract or arrangement, and each other benefit plan, contract, program,
policy or arrangement, oral or written, including but not limited to, each
employee benefit plan, as defined in Section 3(3) of ERISA (other than a
Piedmont Multiemployer Plan and including any terminated Piedmont Plans)
that
currently or since January 1, 2002: (1) is or has been maintained for
directors, former directors, employees and former employees of Piedmont or
of
any Piedmont Control Group member or (2) to which Piedmont or any Piedmont
Control Group member made or was required to make
contributions.
(ii) Piedmont
Qualified Plan.
The
term “Piedmont
Qualified Plan”
means
any Piedmont Plan which is an employee pension benefit plan as defined in
Section 3(2) of ERISA and which is intended to meet the qualification
requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the “Code”).
(iii) Piedmont
Title IV Plan.
The
term “Piedmont
Title IV Plan”
means
any Piedmont Qualified Plan that is a defined benefit plan (as defined in
Section 3(35) of ERISA) and is subject to Title IV of
ERISA.
(iv) Piedmont
Multiemployer Plan.
The
term “Piedmont
Multiemployer Plan”
means
any employee benefit plan that is a “multiemployer plan” within the meaning of
Section 3(37) of ERISA and to which Piedmont or any Piedmont Control
Group member has or had any obligation to contribute.
(v) Piedmont
Control Group.
The
term “Piedmont
Control Group”
means
a
controlled group of corporations of which Piedmont or the Bank is a member
within the meaning of Section 414(b) of the Code, any group of
corporations or entities under common control with Piedmont or the Bank within
the meaning of Section 414(c) of the Code, or any affiliated service
group of which Piedmont or the Bank is a member within the meaning of
Section 414(m) of the Code.
(vi) ERISA.
The
term “ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
(b) All
Piedmont Plans are listed in Schedule 3.13(b)
of the
Piedmont Disclosure Schedules.
(c) (i) Each
Piedmont Plan has been administered in material compliance with its terms and
with all filing, reporting, disclosure and other requirements of all applicable
statutes (including but not limited to ERISA and the Code), regulations or
interpretations thereunder.
(ii) Neither
Piedmont nor any Piedmont Control Group member currently or at any time
maintains or maintained, or contributes or contributed to, or is required to
contribute to, any Piedmont Title IV Plan or any Piedmont Multiemployer
Plan.
19
(iii) Neither
Piedmont nor any Piedmont Control Group member, nor any of their respective
employees, directors, or any fiduciaries, nor any Piedmont Plan has been a
party
to or has engaged in any transaction, including the execution and delivery
of
this Agreement and other agreements, instruments and documents for which
execution and delivery by Piedmont is contemplated herein, in violation of
Section 406(a) or (b) of ERISA or any “prohibited transaction” (as defined
in Section 4975(c)(1) of the Code) for which no exemption exists under
Section 408(b) of ERISA or Section 4975(d) of the Code or for which no
administrative exemption has been granted under Section 408(a) of
ERISA.
(iv) Each
Piedmont Qualified Plan is the subject of a favorable Internal Revenue Service
determination with respect to qualification (a copy of the most recent favorable
determination letter has been made available to Private) and, except as
disclosed on Schedule 3.13(c)(iv)
of the
Piedmont Disclosure Schedules, no event has occurred which will or could give
rise to disqualification of such Piedmont Plan under Section 401(a) or
501(a) of the Code or to a material liability under Section 511 of the
Code.
(v) No
matter
is pending relating to any Piedmont Plan before any court or Governmental
Authority.
(vi) None
of
the payments contemplated by Piedmont, the Bank or by or under any Piedmont
Plan
will constitute excess parachute payments as defined in Section 280G of the
Code.
(vii) All
group
health plans of Piedmont and the Bank (including any plans of current and former
affiliates of Piedmont and the Bank which must be taken into account under
Section 4980B of the Code or Sections 601-609, 701-702 and 711-713 of
ERISA) have been operated in material compliance with the group health plan
continuation coverage requirements of Section 4980B of the Code and
Section 601 of ERISA, to the extent such requirements are
applicable.
(viii) There
have been no acts or omissions by Piedmont or the Bank which have given rise
to
or may give rise to any material fines, penalties, taxes or related charges
under Sections 502(c), 502(i), 502(l) or 4071 of ERISA or Chapter 43
of the Code, for which Piedmont, the Surviving Corporation or the Bank may
be
liable.
(d) (i) Complete
and correct copies of all current and prior documents, including all amendments
thereto, with respect to each Piedmont Plan, have been provided to Private.
These documents include, but are not limited to, the following: employment,
severance and other individual agreements, Piedmont plan documents, trust
agreements, insurance contracts, annuity contracts, summary plan descriptions,
filings with governmental agencies, investment manager and investment adviser
contracts, and actuarial reports, audit reports, financial statements and annual
reports (Form 5500) for the most recent three plan years ending before the
date of this Agreement.
20
(ii) All
contributions payable to each Piedmont Plan for all benefits earned and other
liabilities accrued through the date of this Agreement, determined in accordance
with the terms and conditions of such Piedmont Plan, ERISA and the Code, have
been paid or otherwise provided for, and to the extent unpaid are reflected
in
the Consolidated Statement of Financial Condition of Piedmont as of the date
of
this Agreement.
(e) There
is
no pending or, to the knowledge of Piedmont, threatened litigation or pending
claim (other than individual benefit claims made in the ordinary course) by
or
on behalf of or against any of the Piedmont Plans (or with respect to the
administration of any of such Plans) now or heretofore maintained by Piedmont
or
the Bank which allege violations of applicable state or federal law or the
terms
of the Plan which are reasonably likely to result in any material liability
on
the part of Piedmont or the Bank or any such Plan.
(f) Neither
Piedmont nor the Bank is a party to or bound by any collective bargaining
agreement and, to Piedmont’s knowledge, no labor union claims to or is seeking
to represent any employees of Piedmont or the Bank.
(g) There
are
no obligations of Piedmont or the Bank under any Piedmont Plan or otherwise
to
provide severance or other post-termination compensation or post-employment
health or welfare benefits to any present or former employees, directors or
their dependents (other than rights under any Piedmont Plan listed on
Schedule 3.13(b)
of the
Piedmont Disclosure Schedules, or Section 4980B of the Code or
Section 601 of ERISA relating to COBRA).
Section
3.14 Compliance
with Applicable Law.
(a) The businesses of Piedmont and the Bank are not being conducted in
violation of any applicable federal and state laws, ordinances and regulations
of any Governmental Authority, including, without limitation, the FDI Act,
any
laws affecting financial institutions (including the Bank Secrecy Act, the
USA
Patriot Act, and those pertaining to the investment of funds, the lending of
money, the collection of interest and the extension of credit), federal and
state securities laws, laws and regulations relating to financial statements
and
reports, truth-in-lending, truth-in-savings, fair debt collection practices,
usury, fair credit reporting, consumer protection, occupational safety, fair
employment practices, fair labor standards and laws and regulations relating
to
employee benefits, and any statutes or ordinances relating to the properties
occupied or used by Piedmont or the Bank, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect on
Piedmont or the Bank.
(b) The
policies, programs and practices of Piedmont and the Bank relating to wages,
hours of work, and other terms and conditions of employment are in compliance
in
all material respects with applicable laws, orders, regulations, public policies
and ordinances governing employment and terms and conditions of employment.
There are no disputes, claims, or charges, pending or, to Piedmont’s knowledge,
threatened, against Piedmont or the Bank alleging breach of any express or
implied employment contract or commitment, or material breach of any applicable
law, order, regulation, public policy or ordinance relating to employment or
terms and conditions of employment, and, to the knowledge of Piedmont, there
is
no basis for any valid claim or charge with regard to such matters.
21
(c) No
investigation or review by any Governmental Authority with respect to Piedmont
or the Bank is pending or, to the knowledge of Piedmont, threatened, nor has
any
Governmental Authority indicated to Piedmont an intention to conduct the same,
other than normal bank regulatory examinations.
Section
3.15 Material
Contracts.
(a)
Except as set forth in Schedule 3.15
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank is a party to
or
bound by:
(i) any
contract, arrangement, commitment or understanding (whether written or oral)
in
an amount in excess of $50,000 per annum with respect to the employment,
severance, termination or compensation of any directors, officers or employees
that is not terminable without liability on thirty (30) days’ (or less)
notice;
(ii) any
contract, arrangement, commitment or understanding (whether written or oral)
which, upon the consummation of the transactions contemplated by this Agreement,
will (either alone or upon the occurrence of any additional acts or events)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due from Piedmont, the
Bank, Private, the Surviving Corporation, or any
of
their respective subsidiaries to any officer, director or employee thereof
or to
the trustee under any “rabbi trust” or similar arrangement;
(iii) any
contract, arrangement, commitment or understanding (whether written or oral),
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased or be required to be paid, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of the transactions contemplated by this
Agreement;
(iv) any
agreement of indemnification or guaranty between Piedmont or the Bank and any
of
their officers or directors;
(v) any
agreement, contract or commitment currently in force relating to the disposition
or acquisition of any of Piedmont’s or the Bank’s assets or business (other than
dispositions or acquisitions made in the ordinary course or dispositions or
acquisitions less than $100,000);
(vi) any
voting agreement, voting trust, shareholder agreement or other similar agreement
which restricts the voting or disposition of Piedmont Common Stock;
(vii) any
partnership, limited liability company, joint venture or other similar agreement
or arrangement, or any options or rights to acquire from any person any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of such person;
22
(viii) any
agreement that restricts or contains limitations on the ability of Piedmont
or
the Bank to compete in any line of business (including geographic limitations),
to solicit customers or to solicit or hire employees;
(ix) any
agreement which relates to funded indebtedness owed by Piedmont or the Bank,
or
the guarantee thereof (other than contracts evidencing deposit liabilities,
purchases of federal funds, repurchase agreements, trade payables and contracts
relating to borrowings or guarantees made in the ordinary course of
business);
(x) any
mortgage, pledge, indenture or security agreement or similar agreement (whether
incurred, assumed, guaranteed, secured by any asset or otherwise) constituting
a
lien upon the assets or properties of Piedmont or the Bank;
(xi) any
agreement for the sale or purchase of personal property having a value
individually, with respect to all sales or purchases thereunder, in excess
of
$250,000, other than in the ordinary course of business;
(xii) any
agreement involving intellectual property or relating to the provision of data
processing, network communication or other technical services to or by Piedmont
or the Bank, other than agreements entered into in the ordinary course of
business;
(xiii) any
lease
or license of personal property (whether tangible or intangible, including
intellectual property and software), whether as licensor or licensee involving
payments or receipts in excess of $50,000 per annum;
(xiv) contract
or commitment for the performance of services involving an amount in excess
of
$50,000 per annum; or
(xv) any
other
agreement, if the performance remaining thereunder involves aggregate
consideration to or by Piedmont or the Bank in excess of $250,000 per annum,
and
such agreement is not cancelable, without material penalty, by Piedmont or
the
Bank on 180 days’ or less notice.
Each
contract, arrangement, commitment or understanding of the type described in
this
Section 3.15(a)
and set
forth on Schedule 3.15(a)
of the
Piedmont Disclosure Schedules is referred to herein as a “Piedmont
Contract,”
and
a
copy of each Piedmont Contract has been made available to Private. To the
knowledge of Piedmont, Piedmont and the Bank are not in breach of any Piedmont
Contract and is unaware of and has received no written notice of any breach
of
any Piedmont Contract by any of the parties thereto and neither Piedmont nor
the
Bank has waived any material right under any Piedmont Contract.
(b) (i) Each
Piedmont Contract is valid and binding on Piedmont or the Bank, as the case
may
be, and is in full force and effect,
(ii) Piedmont
and the Bank have each performed all material obligations required to be
performed by it to date under each Piedmont Contract to which
23
it
is a
party, except where such noncompliance, individually or in the aggregate, would
not give rise to remedies under the applicable Piedmont Contract,
and
(iii) To
the
knowledge of Piedmont, no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of Piedmont or the Bank under any such Piedmont Contract, except where
any
such default would not give rise to remedies under the applicable Piedmont
Contract, and
(iv) Except
as
disclosed on Schedule 3.15
of the
Piedmont Disclosure Schedules, none of the Piedmont Contracts contains an
express prohibition against a change of control of Piedmont or the Bank (or
requires written consent or notice to the other party), or contains any other
provision which would preclude Private from exercising and enjoying all of
the
rights, remedies and obligations of Piedmont or the Bank, as the case may be,
under such Piedmont Contracts.
Section
3.16 Investment
Securities.
(a)
Each of Piedmont and the Bank has good and marketable title to all securities
held by it (except as set forth on Schedule 3.16(a)
of the
Piedmont Disclosure Schedules or held in any fiduciary capacity), free and
clear
of any lien. Except as otherwise disclosed on Schedule 3.16(a)
of the
Piedmont Disclosure Schedules, none of the investments reflected in Piedmont
Financial Statements and none of the investments made by Piedmont or the Bank
since June 30, 2006, is subject to any restriction, whether contractual or
statutory, which materially impairs the ability of Piedmont or the Bank freely
to dispose of such investment at any time. With respect to all material
repurchase agreements to which Piedmont or the Bank is a party, Piedmont or
the
Bank has a valid, perfected first lien or security interest in the government
securities or other collateral securing each such repurchase agreement, and
the
value of the collateral securing each such repurchase agreement equals or
exceeds the amount of the debt secured by such collateral under such agreement.
Except as set forth on Schedule 3.16(a)
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank has sold or
otherwise disposed of any assets in a transaction in which the acquiror of
such
assets or other person has the right, either conditionally or absolutely, to
require Piedmont or the Bank to repurchase or otherwise reacquire any such
assets. Set forth on Schedule 3.16(a)
of the
Piedmont Disclosure Schedules is a complete and accurate list as of
June 30, 2006, of each investment and debt security, mortgage-backed and
related securities, marketable equity securities and securities purchased under
agreements to resell owned by Piedmont or the Bank, showing the carrying values
and estimated fair values of investment and debt securities, the gross carrying
value and estimated fair value of the mortgage-backed and related securities
and
the cost and estimated fair value of the marketable equity
securities.
(b) All
United States Treasury securities, obligations of other United States government
agencies and corporations, obligations of States of the United States and their
political subdivisions, and other investment securities classified as “held to
maturity,” “available for sale” and “trading” held by Piedmont or the Bank, as
reflected in the Piedmont Financial Statements were classified and accounted
for
in accordance with S.F.A.S. 115 and the intentions of
management.
Section
3.17 Insurance.
Schedule 3.17
of the
Piedmont Disclosure Schedules describes all policies of insurance in which
Piedmont or the Bank is named as a primary insured party or
24
which
otherwise relate to or cover any assets or properties of Piedmont or the Bank
and copies of all such policies have previously been made available by Piedmont
to Private. Piedmont and the Bank each maintain insurance with an insurer,
which
in the reasonable judgment of management of Piedmont is sound and reputable,
on
their respective assets, and upon their respective businesses and operations,
against loss or damage, risks, hazards and liabilities of the kinds customarily
insured against by prudent corporations engaged in the same or similar
businesses. Piedmont and the Bank maintain in effect all insurance required
to
be carried by law or by any agreement by which they are bound. All material
claims under all policies of insurance maintained by Piedmont and the Bank
have
been filed in due and timely fashion. Each of such policies is in full force
and
effect, and the coverage provided under such policies complies with the
requirements of any contracts binding on Piedmont or the Bank relating to such
assets or properties. Except as set forth in Schedule 3.17
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank has received any
notice of cancellation or termination with respect to any material insurance
policy applicable to Piedmont or the Bank.
Section
3.18 Allowance
for Loan Losses.
The
allowance for loan losses set forth in the Piedmont Financial Statements is
reasonably adequate in all material respects under applicable regulatory
requirements to provide for possible losses, net of recoveries relating to
loans
previously charged off, on loans outstanding (including accrued interest
receivable) as of June 30, 2006, and based on GAAP. Except as set forth in
Schedule 3.18
of the
Piedmont Disclosure Schedules, the aggregate loan balances of the Bank at such
date in excess of such allowance are, to the knowledge of Piedmont, collectible
in accordance with their terms.
Section
3.19 Title
to Properties; Leases.
(a) Schedule 3.19
of the
Piedmont Disclosure Schedules sets forth a list of all real property owned
or
leased by Piedmont or the Bank, including but not limited to the Bank’s owned
real estate (“REO”),
and a
description of the size, use and location thereof. Copies of all leases
referenced therein have been made available to Private by Piedmont. Except
as
set forth on Schedule 3.19(a)
of the
Piedmont Disclosure Schedules, Piedmont or the Bank, as applicable, is the
owner
of good and marketable title to all real properties and is the owner of good
title to all other property and assets, tangible and intangible, that it claims
or otherwise purports to own to the extent it claims or otherwise purports
to
own them (including, without limitation, all of its assets reflected in the
Piedmont Financial Statements for the fiscal year ended December 31, 2005
or that it purports to have acquired since December 31, 2005), free and
clear of any liens, except for (the following collectively referred to as
“Permitted
Exceptions”)
(i) pledges and liens given to secure deposits and other banking
liabilities arising in the ordinary course of business, (ii) liens for
current taxes not yet due and payable, (iii) all easements, covenants,
conditions, assignments, defects, restrictions, exceptions, reservations and
other encumbrances, which do not materially interfere with the use or operation
of the property as the same is being currently used and operated, or render
title to any material portion of any material asset unmarketable, (iv) all
leases, subleases and any memoranda thereof and any non-disturbance agreements
with tenants, subtenants or other occupants of any property as reflected on
Schedule 3.19(a)
of the
Piedmont Disclosure Schedules or (v) any liens, encumbrances, objections or
other matters which are
caused or created by or on behalf of Private or the Surviving
Corporation.
25
(b) Each
lease under which Piedmont or the Bank is the lessee of any real or personal
property is and will be, upon consummation of the Merger, in full force and
effect, and Piedmont or the Bank has been in peaceable possession of the
property covered thereby since the commencement of the original term of such
lease. Except as set forth in Schedule 3.19(b)
of the
Piedmont Disclosure Schedules, no right of approval or consent on the part
of
the lessor under any such lease exists or will be required to be obtained in
connection with consummation of the transactions contemplated by this Agreement.
No waiver, indulgence or postponement of Piedmont’s or the Bank’s obligations
under any such lease has been granted by the lessor thereunder, or of such
lessor’s obligations by Piedmont or the Bank and neither Piedmont nor the Bank
nor, to the knowledge of Piedmont, the lessor under any such lease has violated,
in any material respect, any of the terms or conditions of such lease, and
all
of the material covenants to be performed by Piedmont or the Bank and the lessor
as of the date hereof have been fully performed in all material
respects.
Section
3.20 Environmental
Matters.
(a)
Except as set forth in Schedule 3.20
of the
Piedmont Disclosure Schedules:
(i) Piedmont
and the Bank have obtained all material licenses, permits, authorizations,
approvals and consents required under any applicable Environmental Law in
respect of its business or operations (“Environmental
Permits”).
Each
of such Environmental Permits is in full force and effect and Piedmont and
the
Bank is in compliance with the terms and conditions of all such Environmental
Permits and with any applicable Environmental Law.
(ii) Neither
Piedmont nor the Bank has received oral or written notice of proceedings, claims
or losses related to alleged violations of any Environmental Law relating to:
(A) any property owned, occupied or leased by Piedmont or the Bank or
operations thereon; (B) disposal or shipments of Hazardous Substances from
any property owned, occupied or leased by Piedmont or the Bank; or (C) the
presence, discharge, Release or disposal of Hazardous Substances on any property
owned, occupied or leased by Piedmont or the Bank, or any property adjoining
or
adjacent to any property owned, occupied or leased by Piedmont or the
Bank.
(iii) Neither
Piedmont nor the Bank has received notice as a potentially responsible party
for
any facility, site or location pursuant to CERCLA or other similar Environmental
Law relating to any property owned, occupied or leased by Piedmont or the Bank
or business or operations related thereto.
(iv) No
oral
or written notification of a Release of a Hazardous Substances has been filed
by
or on behalf of Piedmont or the Bank and Piedmont has received no written or
oral notice that any site or facility now or previously owned, operated, or
leased by Piedmont or the Bank is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, or on any similar State or
local
list of sites requiring investigation or clean-up.
(v) Piedmont
and the Bank are and have been in compliance in all material respects with
all
applicable limitations, restrictions, conditions, standards,
26
prohibitions,
requirements and obligations established under the requirements of Environmental
Law relating to any property owned, occupied or leased by Piedmont or the Bank
and Piedmont business or operations.
(vi) Neither
Piedmont nor the Bank has ever caused any Hazardous Substances (above levels
that exceed remediation standards based on regulations, guidance or risk-based
criteria or Environmental Law warranting studies or remediation) to be disposed
onto or into soils or groundwater of any property owned, occupied or leased
by
Piedmont or the Bank which constitute a violation of any Environmental
Law.
(vii) To
the
knowledge of Piedmont, there are no underground storage tanks, active or
abandoned, on or under any property owned, occupied or leased by Piedmont or
the
Bank. Any underground storage tanks, previously active or abandoned, on or
under
any property owned, occupied or leased by Piedmont or the Bank have been removed
together with any associated contaminated media in accordance with applicable
requirements at the time of such removal.
(viii) Neither
Piedmont nor the Bank has arranged for the transportation, treatment or disposal
of any waste from any property owned, occupied or leased by Piedmont or the
Bank
or in connection or related to the business or operations of Piedmont or the
Bank that was disposed of, Released or treated at any site listed on any federal
CERCLA or state list or other lists of hazardous substance sites.
(b) As
used
herein, the following terms shall have the following meanings:
(i) “Environmental
Law”
shall
mean any and all federal, international, state or local statutes, laws,
regulations, ordinances, orders, policies, or decrees and the like, whether
now
existing or subsequently enacted or amended, relating to public health or
safety, worker health or safety, pollution or protection of human health or
the
environment, including natural resources, including but not limited to the
Clean
Air Act, 42 U.S.C. § 7401 et seq.,
the
Clean Water Act, 33 U.S.C. § 1251 et seq.,
the
Resource Conservation Recovery Act (“RCRA”),
42 U.S.C. § 6901 et seq.,
the
Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.,
and
the Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”),
42 U.S.C. § 9601 et seq.
and any
similar or implementing state or local law, or any common law, which governs:
(A) the existence, clean-up, removal and/or remedy of contamination or
threat of contamination on or about real property; (B) the emission,
discharge, Release or threatened release, of Hazardous Substances or
contaminants into the environment; (C) the control of Hazardous Substances
or contaminants; or (D) the use, generation, or transport, treatment,
storage, disposal, removal, recycling, handling, or recovery of Hazardous
Substances.
(ii) “Hazardous
Substances”
shall
mean any substances or substance: (A) which is or becomes defined as a
“hazardous substance”, “pollutant”, “contaminant”, “hazardous substances”,
“hazardous waste”, “extremely hazardous waste”, “restricted hazardous waste”,
“infectious waste”, “toxic substance” or any other formulation intended to
define, list or classify substances by reason of deleterious property, such
as
27
ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
“TCLP
Toxicity”, or “EP Toxicity” or words of similar import or effect, under or
pursuant to CERCLA, or other Environmental Law, and amendments thereto and
regulations promulgated thereunder; (B) containing gasoline, oil, diesel
fuel or other petroleum products, or fractions thereof; (C) which is or
becomes defined as a “hazardous waste” pursuant to RCRA and amendments thereto
and regulations promulgated thereunder; (D) containing polychlorinated
biphenyls; (E) containing asbestos in any form that is or could become
friable; (F) which is radioactive; (G) which is biologically
hazardous; (H) the presence of which is regulated by or subject to, or
requires investigation or remediation under, any federal, international, state,
or local statute, regulation, ordinance, policy or other Environmental Law;
(I) which is defined as a “hazardous waste”, “hazardous substance”,
“pollutant” or “contaminant” or other such term used to defined a substance
having an adverse affect on the environment under Environmental Laws; or
(J) any toxic, explosive, dangerous, corrosive or otherwise hazardous
substance, substances or waste, which is regulated by any federal,
international, state or local governmental authority.
(iii) “Release”
shall
mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
ejecting, injecting, escaping, leaching, migrating, dumping or disposing into
the indoor or outdoor environment, including without limitation the abandonment
or discarding or disposal of barrels, drums, containers, tanks and other
receptacles containing or previously containing any Hazardous Substances, and
shall include threatened release.
Section
3.21 Approval
Delays.
Piedmont knows of no reason why any of the regulatory approvals referenced
in
Section 6.1(c)
and
Section 6.2(c)
may be
denied or unduly delayed.
Section
3.22 Tax.
To the
knowledge of Piedmont, neither Piedmont nor the Bank has engaged in any act
that
would preclude or adversely affect the Merger from qualifying as a tax-free
reorganization under Section 368(a) of the Code.
Section
3.23 Participation
Loans.
Except
as set forth in Schedule 3.23
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank has any
participation loans outstanding.
Section
3.24 Fairness
Opinion.
Piedmont has received the opinion of FIG Partners (the “Piedmont
Fairness Opinion”),
dated
as of the date hereof, to the effect that as of such date, the Merger
Consideration is fair to Piedmont and its shareholders from a financial point
of
view. Piedmont will provide to Private a copy of such written opinion as soon
as
possible after the date hereof.
Section
3.25 Loan
Portfolio.
(a) All
loans shown in the Piedmont Financial Statements, or which were entered into
after December 31, 2005, but before the Closing Date, were and will be made
in all material respects for good, valuable and adequate consideration in the
ordinary course of the business of Piedmont or the Bank, in accordance in all
material respects with sound banking practices, and to the knowledge of Piedmont
are not subject to any material defenses, setoffs or counterclaims, including
without limitation any such as are afforded by usury or truth
28
in
lending laws. To the knowledge of Piedmont, the notes or other evidences of
indebtedness evidencing such loans and all forms of pledges, mortgages and
other
collateral documents and security agreements are, and will be, enforceable,
valid, true and genuine and what they purport to be, except to the extent that
the enforceability thereof may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors’
rights and remedies and (ii) general principles of equity. Piedmont and the
Bank have not sold, purchased or entered into any loan participation arrangement
except where such participation is on a pro rata basis according to the
respective contributions of the participants to such loan amount. Piedmont
has
no knowledge that any condition of property in which Piedmont or the Bank has
an
interest as collateral to secure a loan violates the Environmental Laws or
obligates Piedmont or the Bank or the owner or operator of such property to
remedy, stabilize, neutralize or otherwise alter the environmental condition
of
such property.
(b) Except
as
set forth in Schedule 3.25(b)
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank had any loan in
excess of $20,000 that has been classified by regulatory examiners or management
of Piedmont or the Bank as “Substandard,” “Doubtful” or “Loss” or in excess of
$20,000 that has been identified by accountants or auditors (internal or
external) as having a significant risk of uncollectability. As of the date
hereof, the most recent loan watch list of Piedmont or the Bank and a list
of
all loans in excess of $20,000 that Piedmont or the Bank has determined to
be
ninety (90) days or more past due with respect to principal or interest payments
or has placed on nonaccrual status are set forth in Schedule 3.25(b)
of the
Piedmont Disclosure Schedules.
(c) Except
as
otherwise disclosed on Schedule 3.25(c)
of the
Piedmont Disclosure Schedules, all guarantees of indebtedness owed to Piedmont
or the Bank including but not limited to those of the Federal Housing
Administration, Small Business Administration, and other state and federal
agencies, are valid and enforceable, except to the extent enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting creditors rights generally or equitable
principles or doctrines.
(d) Except
as
otherwise disclosed on Schedule 3.25(d)
of the
Piedmont Disclosure Schedules, in originating, purchasing, underwriting,
servicing, and discharging loans, mortgages, land contracts, and contractual
obligations relating thereto, either for their own account or for the account
of
others, Piedmont and the Bank have complied in all material respects with all
applicable terms and conditions of such obligations and with all applicable
laws, regulations, rules, contractual requirements, and procedures with respect
to such activities.
Section
3.26 Interest
Rate Risk Management Arrangements.
Except
as set forth on Schedule 3.26
of the
Piedmont Disclosure Schedules, neither Piedmont nor the Bank is a party to
any,
nor is any property of Piedmont or the Bank bound by, any interest rate swaps,
caps, floors and option agreements or other interest rate risk management
arrangements.
Section
3.27 Indemnification.
To the
knowledge of Piedmont, no action or failure to take action by any director,
officer, employee or agent of Piedmont or the Bank has occurred which would
give
rise to a claim by any such person for indemnification from Piedmont or the
29
Bank
under the Certificate of Incorporation, Charter, Bylaws, or any indemnification
agreement of Piedmont or the Bank in effect on the date of this
Agreement.
Section
3.28 Insider
Interests.
All
outstanding loans and other contractual arrangements (including deposit
relationships) between Piedmont or the Bank and any officer, director or
employee of Piedmont or the Bank conform to the applicable rules and regulations
and requirements of all applicable Governmental Authorities, which were in
effect when such loans and other contractual arrangements were entered into.
Except as set forth on Schedule 3.28
of the
Piedmont Disclosure Schedules, no officer, director or employee of Piedmont
or
the Bank has any material interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of Piedmont or the
Bank.
Section
3.29 Vote
Required.
The
adoption of this Agreement by a vote of the majority of the issued and
outstanding shares of Piedmont Common Stock and the adoption of the proposal
to
amend the Articles of Incorporation of Piedmont to change certain rights of
the
holders of Piedmont Preferred Stock pursuant to the Certificate of Amendment
substantially in the form attached hereto as Exhibit A
(the
“Certificate
of Amendment”)
by a
majority of the issued and outstanding shares of Piedmont Common Stock and
of
Piedmont Preferred Stock, each voting as a separate class, (respectively, the
“Requisite Shareholder Approval”) are the only votes of the holders of any class
or series of the capital stock of Piedmont required for the transactions
contemplated by this Agreement.
Section
3.30 Antitakeover
Provisions Inapplicable.
No
“business combination,” “moratorium,” “control share” or other state
antitakeover statute or regulation, nor any provision in Piedmont’s Articles of
Incorporation or Bylaws, (i) prohibits or restricts Piedmont’s ability to
perform its obligations under this Agreement, or its ability to consummate
the
transactions contemplated hereby and thereby, (ii) would have the effect of
invalidating or voiding this Agreement, or any provision hereof or thereof,
or
(iii) would subject Private to any impediment or condition in connection
with the exercise of any of its rights under this Agreement.
Section
3.31 Internal
Controls.
(a) The
management of Piedmont has designed disclosure controls and procedures to ensure
that material information relating to Piedmont and the Bank is made known to
the
management of Piedmont by others within Piedmont and the Bank. To Piedmont’s
knowledge, there are no significant deficiencies or material weaknesses in
the
design or operation of internal controls which could adversely affect the
ability of Piedmont to record, process, summarize and report financial data;
and
there has been no fraud, whether or not material, that involves management
or
other employees who have a significant role in Piedmont’s or the Bank’s internal
controls. Piedmont and the Bank maintain a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
30
(b) None
of
Piedmont, the Bank, or, to Piedmont’s knowledge, any employee of Piedmont or the
Bank has received or otherwise had or obtained knowledge of any complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of
Piedmont or the Bank, insofar as it relates to Piedmont’s or the Bank’s
businesses or Piedmont’s or the Bank’s internal accounting controls, including
any complaint, allegation, assertion or claim that Piedmont or the Bank has
engaged in questionable accounting or auditing practices insofar as it relates
to Piedmont’s or the Bank’s businesses.
Section
3.32 Accuracy
of All Representations.
The
representations and warranties made by Piedmont in this Agreement do not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained in such representations and
warranties not misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PRIVATE
Except
as
disclosed in the disclosure schedule (the “Private
Disclosure Schedule”)
delivered by Private to Piedmont prior to the execution of this Agreement (which
schedule sets forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more
representations or warranties contained in this Article IV, or to one or
more of Private’s covenants contained herein, provided,
however,
the
mere inclusion of an item in such schedule as an exception to a representation
or warranty shall not be deemed an admission that such item represents a
material exception or material fact, event or circumstance or that such item
has
had or would be reasonably likely to have a Material Adverse Effect (as defined
in Section 4.1)
on
Private,) Private represents and warrants to Piedmont that 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 Effective Date (as
though made then and as though the Effective Date were substituted for the
date
of this Agreement throughout this Article IV), subject to the standard set
forth below in this paragraph, and except as to any representation or warranty
which specifically relates to a specified date, which only need be so correct
as
of such specified date. No representation or warranty of Private contained
in
this Article IV shall be deemed not complete, untrue or incorrect, and
Private shall not be deemed to have breached a representation or warranty,
as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances has had, or is reasonably likely to have, a
Material Adverse Effect with respect to Private, disregarding for these purposes
(x) any qualification or exception for, or reference to, materiality in any
such representation or warranty and (y) any use of the terms “material”,
“materially”, “in all material respects”, “Material Adverse Effect” or similar
terms or phrases in any such representation or warranty. The foregoing standard
shall not apply (a) as of the date of this Agreement to representations and
warranties contained in Sections 4.1(a), 4.7,
4.8
and
4.9,
which
representations and warranties shall be deemed not complete, untrue, incorrect
and breached only if they are not complete, true and correct in all material
respects as of such date based upon the standards and qualifications contained
therein and (b) at any time to the
31
representations
and warranties under Sections 4.2,
4.6(a)
and
4.10,
which
representations and warranties shall be true and correct in all material
respects at all times.
Section
4.1 Corporate
Organization.
(a) Private
is a corporation organized and validly existing under the laws of the State
of
Delaware. Private has the corporate power and authority to own or lease all
of
its properties and assets and to carry on its business as it is now being
conducted and is licensed or qualified to do business in each jurisdiction
in
which the nature of the business conducted by it or the character or location
of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect (as defined below) on Private. As
used
in this Agreement, the term “Material
Adverse Effect”
means
with respect to Private, any effect that (1) is or is reasonably likely to
be material and adverse to the financial condition, business or results of
operations of Private and the Private Subsidiaries, taken as a whole, or
(2) would prevent or materially impair the ability of Private to perform
its obligations under this Agreement or to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement; provided,
however,
that
Material Adverse Effect shall not be deemed to include the impact of
(i) changes in banking and other laws of general applicability or
interpretations thereof by courts or Governmental Authorities (as defined
below), (ii) changes in GAAP or regulatory accounting requirements
applicable to banks and their holding companies generally, (iii) this
Agreement and the transactions contemplated hereby and the announcement hereof,
(iv) actions or omissions of Private taken with the prior written consent
of Piedmont, (v) changes attributable to or resulting from changes in
general economic conditions affecting similarly situated banks, saving
institutions or their holding companies generally and (vi) any
modifications or changes to valuation policies and practices of Private or
any
of its subsidiaries in connection with the Merger or restructuring charges,
in
connection with the Merger, in each case in accordance with GAAP. Private is
duly registered as a bank holding company under the BHCA.
(b) Each
of
The PrivateBank and Trust Company, The PrivateBank (St. Louis) and The
PrivateBank (Michigan) (each a “Private
Subsidiary”
and
collectively, the “Private
Subsidiaries”)
is
duly organized and validly existing as a banking corporation or federal savings
bank, as the case may be, under the banking laws of the jurisdiction of its
organization. Each Private Subsidiary is an “insured depository institution” as
defined in the FDI Act and applicable regulations thereunder, the deposits
of
which are insured by the FDIC to the full extent permitted under applicable
laws. Each Private Subsidiary (i) is qualified to do business and in good
standing in each jurisdiction (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires
it
to be so qualified except where the failure to be so qualified would not have
a
Material Adverse Effect on Private or the Private Subsidiaries, and
(ii) has all requisite corporate or banking power and authority to own or
lease its properties and assets and to carry on its business as now
conducted.
Section
4.2 Authority.
Private
has the corporate power and authority to execute and deliver this Agreement
and,
subject to regulatory approvals, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved
and
authorized by the Board of Directors of Private. No other corporate proceedings
on the part of Private are
32
necessary
to approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Private and,
assuming due authorization, execution and delivery by Piedmont, constitutes
a
valid and binding obligation of Private, enforceable against Private in
accordance with its terms, except as many be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
creditors’ rights, or equitable principles of law.
Section
4.3 Consents
and Approvals.
No
consents or approvals of or filings or registrations with any Governmental
Authority or with any third party are necessary in connection with the execution
and delivery by Private of this Agreement and the consummation of the Merger
and
the other transactions contemplated hereby except for (a) the filing of the
Regulatory Applications and the approval of the Regulatory Applications, and
(b) the filing of the Certificates of Merger with the Secretaries of State
under the DGCL and the GBCC.
Section
4.4 Financial
Resources.
Private
has the financial wherewithal, whether by using its internal funds, external
financing, or both, to perform its obligations under this Agreement. Private
and
Private Subsidiaries will comply in all material respects with applicable
capital and debt criteria of each Governmental Authority having jurisdiction
over them.
Section
4.5 Approval
Delays.
Private
knows of no reason why any of the regulatory approvals referred to in
Section 6.1(c)
and
Section 6.2(c)
should
be denied or unduly delayed.
Section
4.6 Capitalization.
(a) As
of June 30, 2006, the authorized, issued and outstanding capital stock of
Private consists of the following:
Class
of Stock
|
Par
Value
|
Authorized
|
Issued
|
Outstanding
|
Treasury
|
Common
|
None
|
39,000,000
|
21,198,759
|
21,198,759
|
93,670
|
Preferred
|
None
|
1,000,000
|
0
|
0
|
0
|
All
of
the issued and outstanding shares of Private Common Stock have been, and all
of
the shares of Private Common Stock to be issued in the Merger will be at the
Effective Time, duly and validly authorized and issued, and are, or upon
issuance in the Merger will be, as the case may be, fully paid and
nonassessable. None of the outstanding shares of Private Common Stock has been
issued in violation of any preemptive rights and none of the outstanding shares
of Private Common Stock is or will be entitled to any preemptive rights in
respect of the Merger or any of the other transactions contemplated by this
Agreement. Private has reserved, and will at the Effective Time have, a number
of authorized but unissued shares of Private Common Stock or shares of Private
Common Stock held in treasury sufficient to pay the Stock Consideration of
the
aggregate Merger Consideration in accordance with Section 1.4
hereof.
(b) As
of
June 30, 2006, Private has 610,180 shares of Private Common Stock reserved
for issuance under its Incentive Compensation Plan for the benefit of the
directors and certain officers and employees of Private and the Private
Subsidiaries pursuant to which options to purchase an aggregate of 1,316,725
shares and an aggregate of 418,900 restricted shares of Private Common Stock
were outstanding as of such date.
33
Section
4.7 Private
Financial Statements; Material Changes.
Private
has previously delivered or made available to Piedmont true, correct and
complete copies of its audited consolidated financial statements for the years
ended December 31, 2005, 2004 and 2003, and the unaudited consolidated
financial statements for the six months ended June 30, 2006 (collectively,
the “Private
Financial Statements”).
The
Private Financial Statements (x) have been prepared in accordance with GAAP
consistently applied during the periods involved (except as may be indicated
in
the notes thereto and, in the case of the unaudited consolidated financial
statements, except for the absence of footnotes and for normal and recurring
year-end adjustments which are not material); and (y) fairly present in all
material respects the consolidated statement of financial condition of Private
and the Private Subsidiaries as of the dates thereof and the related
consolidated statement of operations, changes in stockholders’ equity and cash
flows for the periods then ended.
Section
4.8 Private
Reports.
(a) Since January 1, 2003, each of Private and the Private
Subsidiaries has timely filed all reports, together with any amendments required
to be made with respect thereto, that were required to be filed since such
date
with (i) the SEC, (ii) the FRB, (iii) the FDIC, (iv) any
applicable state banking, insurance, securities, or other regulatory authorities
(except filings which are not material), and (v) Nasdaq (collectively, the
“Private
Reports”).
Private has previously made available to Piedmont true and complete copies
of
the Private Reports requested by Piedmont. As of their respective filing dates,
each of such reports and documents (after giving effect to any amendments
thereto), including the financial statements, exhibits, and schedules thereto,
complied in all material respects with the applicable provisions of the
statutes, rules, and regulations enforced or promulgated by the authority with
which they were filed and did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) Except
for examinations or reviews conducted in the regular course of the business
of
Private or the Private Subsidiaries by the SEC, Internal Revenue Service,
Department of Labor, state, and local taxing authorities, FRB, any applicable
state banking, insurance, securities or other regulatory authorities, the Office
of Thrift Supervision (the “OTS”) or the FDIC, no Federal, state or local
governmental agency, commission or other entity has initiated any proceeding
or,
to the knowledge of Private, investigation into the business or operations
of
Private or the Private Subsidiaries within the past three years. None of Private
or any Private Subsidiary is subject to a written agreement with the FRB, the
OTS, any state banking, insurance or other regulatory authority or the
FDIC.
Section
4.9 Absence
of Certain Changes or Events.
(a) Except
as
disclosed in the Private Reports, since December 31, 2005, no event has
occurred which has had a Material Adverse Effect on Private or the Private
Subsidiaries or, to Private’s knowledge, no event has occurred which is
reasonably likely to have a Material Adverse Effect on Private or the Private
Subsidiaries.
(b) Since
December 31, 2005, Private has conducted its businesses in all material
respects in the ordinary and usual course consistent with past
practice.
34
Section
4.10 Compliance
with Applicable Law.
The
businesses of Private and the Private Subsidiaries are not being conducted
in
violation of any applicable federal and state laws, ordinances and regulations
of any Governmental Authority, including, without limitation, the FDI Act,
any
laws affecting financial institutions (including the Bank Secrecy Act, the
USA
Patriot Act, and those pertaining to the investment of funds, the lending of
money, the collection of interest and the extension of credit), federal and
state securities laws, laws and regulations relating to financial statements
and
reports, truth-in-lending, truth-in-savings, fair debt collection practices,
usury, fair credit reporting, consumer protection, occupational safety, fair
employment practices, fair labor standards and laws and regulations relating
to
employee benefits, and any statutes or ordinances relating to the properties
occupied or used by Private or the Private Subsidiaries, except for possible
violations which either singly or in the aggregate do not have a Material
Adverse Effect on Private or the Private Subsidiaries.
(a) No
investigation or review by any Governmental Authority with respect to Private
or
the Private Subsidiaries is pending or, to the knowledge of Private, threatened,
nor has any Governmental Authority indicated to Private an intention to conduct
the same, other than normal bank regulatory examinations.
Section
4.11 Tax.
To the
best of the knowledge of Private, neither Private nor any Private Subsidiary
has
engaged in any act that would preclude or adversely affect the Merger from
qualifying as a tax-free reorganization under Section 368(a) of the
Code.
ARTICLE
V
ADDITIONAL
AGREEMENTS
Section
5.1 Conduct
of Business.
Between
the date hereof and the Closing Date, Piedmont and the Bank shall conduct their
respective businesses in the usual and ordinary course consistent in all
material respects with prudent banking practices.
Section
5.2 Negative
Covenants.
Between
the date hereof and the Closing Date, and subject to the provisions of
Section 5.12
of this
Agreement, without the prior written consent of Private, which consent shall
not
be unreasonably withheld:
(a) Piedmont
shall, and shall cause the Bank to, make no changes in its respective charters
or bylaws except for any changes required by applicable law or regulation or
as
contemplated by this Agreement;
(b) Piedmont
shall, and shall cause the Bank to, not issue any additional shares of Piedmont
Common Stock, Piedmont Preferred Stock or other equity securities or any
securities which are convertible into shares of capital stock of Piedmont or
the
Bank or grant any rights, options or similar agreements with respect thereto
or
permit the imposition of any lien on any shares of Piedmont Common Stock by
Piedmont or the Bank, other than in connection with the conversion of Piedmont
Preferred Stock contemplated by Section 1.4(d)
or the
exercise of Options or Warrants outstanding on the date hereof;
35
(c) Except
as
contemplated by Section
5.21
of this
Agreement, Piedmont shall, and shall cause the Bank to, not grant any increase
in the compensation of its directors, officers or employees or pay any bonuses
to any of its directors, officers or employees;
(d) Piedmont
shall, and shall cause the Bank to, make no loan for $3.0 million or more or,
if
less, the Bank’s legal lending limit (net of participations);
(e) Piedmont
shall not declare or pay any stock dividend, cash dividend or other similar
distribution, other than cash dividends payable on the Piedmont Preferred Stock
pursuant to the Certificate of Designation and consistent with past
practices;
(f) Piedmont
shall, and shall cause the Bank to use its reasonable efforts to maintain its
present insurance coverage in respect to their respective properties and
businesses;
(g) Piedmont
shall, and shall cause the Bank to, make no significant changes in the general
nature of the business conducted by Piedmont and the Bank, including but not
limited to the investment or use of their assets, the liabilities they incur,
or
the facilities they operate;
(h) Piedmont
shall, and shall cause the Bank to, not take any action that would result in
an
amendment, modification, termination, partial termination, curtailment,
discontinuance or merger into another plan or trust, of any Piedmont Plan,
or
adopt any new Piedmont Plan, except as contemplated by this
Agreement;
(i) Piedmont
shall, and shall cause the Bank to, timely file all required Tax Returns with
all applicable taxing authorities and pay all Taxes due;
(j) except
as
already reflected in the Piedmont Financial Statements referred to in
Section 3.5
of this
Agreement, Piedmont shall, and shall cause the Bank to, not make any expenditure
for fixed assets in excess of $50,000 for any single item, or $100,000 in the
aggregate, or enter into any lease of fixed assets, if the monthly rental
payment under such lease exceeds $5,000;
(k) Piedmont
shall, and shall cause the Bank to, not incur any liabilities or obligations,
make any commitments or disbursements, acquire or dispose of any property or
asset, dispose of real estate owned, make any contract or agreement, or engage
in any transaction, except in the ordinary course consistent in all material
respects with prudent banking practices;
(l) Piedmont
shall, and shall cause the Bank to, not do or fail to do anything that will
cause a material breach of, or material default under, any material contract,
agreement, commitment, obligation, appointment, plan, trust or other arrangement
to which Piedmont or the Bank is a party or by which Piedmont or the Bank is
otherwise bound that would give rise to remedies to other parties to such
agreement;
(m) Piedmont
shall, and shall cause the Bank to, make no changes in its accounting
procedures, methods, policies or practices or the manner in which it conducts
its businesses and maintains its records unless required by applicable law
or
regulation;
36
(n) Piedmont
shall, and shall cause the Bank to, comply in all material respects with all
material laws applicable to the conduct of its business;
(o) Piedmont
shall, and shall cause the Bank to, use its reasonable efforts to preserve
its
business organization intact, to keep available the services of its present
officers and employees and to preserve the goodwill of its customers and others
having business relations with it;
(p) Piedmont
shall, and shall cause the Bank to, not make any borrowings, except for
borrowings of Fed Funds and borrowings from the Federal Home Loan Bank utilized
in the ordinary course of business;
(q) Piedmont
shall, and shall cause the Bank to, not nominate or appoint any new directors
or
executive officers of Piedmont or the Bank, as the case may be, except for
replacements of existing directors or executive officers;
(r) Except
as
required by applicable law or regulation, Piedmont (i) will not, and will
not permit the Bank to, implement or adopt any material change in its interest
rate and other risk management policies, procedures or practices, and
(ii) will, and will cause the Bank to, follow its existing policies and
practices with respect to managing its exposure to interest rate and other
risk
and to use commercially reasonable means to avoid any material increase in
its
aggregate exposure to interest risk;
(s) Neither
Piedmont, nor the Bank, will file any application to close, open or relocate
operations from their existing locations;
(t) Neither
Piedmont, nor the Bank, will settle any litigation or claims against them unless
settlement does not require Piedmont or the Bank to pay any monies in excess
of $50,000, incur any obligation or admit any wrongdoing or liability;
and
(u) Neither
Piedmont, nor the Bank, will take any action which would, or fail to take any
action contemplated by this Agreement if such failure would, disqualify the
Merger as a tax-free reorganization under Section 368(a) of the
Code.
Section
5.3 Conduct
of Business by Private Until the Effective Time.
During
the period commencing on the date hereof and continuing until the Effective
Time, Private agrees (except as expressly contemplated by this Agreement or
to
the extent that Piedmont shall otherwise consent in writing, which consent
shall
not be unreasonably withheld or delayed) that:
(a) Except
as
contemplated by this Agreement, Private and the Private Subsidiaries will
maintain their respective books in accordance with GAAP, conduct their
respective businesses and operations only in accordance with safe and sound
banking and business practices and will use reasonable efforts to comply in
all
material respects with all applicable federal and state laws, and, to the extent
consistent with such businesses, use all reasonable efforts to preserve intact
their present business organizations, to generally keep available the services
of their present officers and employees and to preserve their relationships
with
customers, suppliers and others having business dealings with them to the end
that their respective goodwill and going businesses shall be unimpaired at
the
Effective Time.
37
(b) Private
will, and will cause the Private Subsidiaries to, use their reasonable efforts
to obtain (and to cooperate with Piedmont in obtaining) any consent,
authorization or approval of, or any exemption by, any governmental authority
or
agency, or other third party, required to be obtained or made by any of them
in
connection with the Merger or the taking of any action contemplated hereby;
provided,
however,
that if
Private shall reasonably determine that acceptance of nonstandard conditions
or
restrictions would have a materially adverse effect on Private, Private shall
have no further obligations under this Section 5.3(b).
Private
will not, nor will it permit any of the Private Subsidiaries to, knowingly
or
willfully take any action that would materially delay the ability of Private
or
Piedmont to obtain any necessary approvals of any governmental authorities
or
adversely affect their ability to perform their obligations under this
Agreement.
(c) The
Private agrees to list on Nasdaq (or such other national securities exchange
on
which the shares of Private Common Stock shall be listed as of the date of
consummation of the Merger), subject to official notice of issuance, the shares
of the Private Common Stock to be issued in the Merger.
(d) Private
will not take any action, or knowingly fail to take any action, which action
nor
failure to act is reasonably likely to prevent the Merger from qualifying as
a
reorganization within the meaning of Section 368(a) of the Code.
(e) Private
will not take any action that is intended or may reasonably be expected to
result in any of the conditions to the Merger set forth in Article VI not
being satisfied or take any action that would be reasonably expected to prevent,
materially impede or materially delay the consummation of the transactions
contemplated by this Agreement.
(f) Private
will not declare, set aside, make or pay any extraordinary or special dividends
on its Common Stock or make any other extraordinary or special distributions
in
respect of any of its capital stock unless an appropriate adjustment to amounts
set forth in Section 1.6(e)
are made
to provide the holders of Piedmont Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
Section
5.4 Access
to Information and Due Diligence.
(a) Upon
reasonable notice and subject to applicable laws relating to the exchange of
information and privacy rights, Piedmont shall, and shall cause the Bank to,
afford to the officers, employees, accountants, counsel and other
representatives of Private, access, during normal business hours during the
period before the Effective Time, to its employees, properties, books,
contracts, commitments and records and, during such period, Piedmont shall,
and
shall cause the Bank to, make available to Private (i) a copy of each
report, schedule, registration statement and other document filed or received
by
it during such period pursuant to the requirements of federal or state
securities laws or federal or state banking, insurance or similar laws relating
to Piedmont and the Bank, and (ii) all other information concerning its
business, properties and personnel as Private may reasonably request;
provided,
however,
the
activities of Private pursuant to this Section shall be carried out in a manner
that does not unreasonably interfere with the conduct of the business of
Piedmont and the Bank. Neither Piedmont nor the Bank shall be required to
provide access to or to disclose information where
38
such
access or disclosure would (A) violate or prejudice the rights of
Piedmont’s customers or employees, or contravene any law, rule, regulation,
order, judgment, decree, fiduciary duty or binding agreement entered into before
the date of this Agreement, or (B) impair any attorney-client privilege of
the disclosing party. The parties hereto shall use their reasonable efforts
to
make appropriate substitute disclosure arrangements under circumstances in
which
the restrictions of the preceding sentence apply.
(b) Private
and its officers, directors, employees, advisors and representatives shall
hold
all information furnished by or on behalf of Piedmont or the Bank or their
representatives pursuant to Section 5.4(a)
in
confidence and, if the transactions contemplated hereby shall not take place,
shall immediately return all documents containing any information concerning
the
properties, business and assets of such parties that may have been obtained
in
the course of negotiations or examination of the affairs of Piedmont or the
Bank
either before or after the execution of this Agreement (other than such
information as shall be in the public domain or otherwise ascertainable from
public sources) and shall destroy any information, analyses or the like derived
from such confidential information and provide a certificate signed by an
executive officer of Private attesting to such destruction. Private shall use
such information solely for the purpose of conducting business, legal and
financial reviews of the Piedmont and for such other purposes as may be related
to this Agreement.
Section
5.5 Regulatory
Filings.
Private, at its sole cost and expense and as soon as is reasonably practical,
but in no event later than the 30th day following the date of this Agreement,
shall make all appropriate filings necessary to obtain the regulatory approvals
referred to in Section 6.1(c)
hereof,
and Piedmont will cooperate fully in the process of obtaining all such
approvals.
Section
5.6 Reasonable
Efforts.
The
parties to this Agreement agree to use their reasonable efforts in good faith
to
satisfy the various conditions to Closing and to consummate the Merger as soon
as practicable. None of the parties hereto shall intentionally take or
intentionally permit to be taken any action that would be in breach of the
terms
or provisions of this Agreement or that would cause any of the representations
and warranties contained herein to be or to become untrue.
Section
5.7 No
Conduct Inconsistent with this Agreement.
(a) Piedmont agrees that it shall not, and shall not permit the Bank to,
nor shall it encourage or authorize any individual, corporation or other entity
to, during the term of this Agreement, solicit, encourage or authorize any
individual, corporation or other entity to solicit from any third party any
inquiries or proposals (each an “Acquisition Proposal”) relating to the
disposition of its business or assets, or the acquisition of its capital stock,
or the merger of it or the Bank with any corporation or other entity other
than
as provided by this Agreement except pursuant to a written direction from a
regulatory authority; or negotiate with or entertain any proposal (each an
“Acquisition Proposal”) from any other person for any such transaction wherein
the business, assets or capital stock of it or the Bank would be acquired,
directly or indirectly, by any party other than as provided in this Agreement.
Piedmont shall, and shall cause the Bank to, (i) reject in writing any such
proposal and (ii) notify Private of all of the relevant details relating to
all inquiries and proposals that it may receive after the date hereof relating
to any proposed disposition of its business or assets, or the acquisition of
its
capital stock, or the merger of it or the Bank with any corporation or other
39
entity
other than as provided by this Agreement and shall keep Private informed of
the
status and details of any such inquiry or proposal. Notwithstanding the
foregoing, upon receipt of a bona fide, written proposal or offer unsolicited
after the date hereof made by any person or group (other than Private or any
of
its affiliates) with respect to an Acquisition Transaction (as defined below)
that the Board of Directors of Piedmont determines, in good faith, could result
in a Superior Proposal (as defined below), Piedmont may provide information
at
the request of, or enter into negotiations with a third party with respect
to
such Acquisition Transaction, and provided,
further,
that
Piedmont shall provide to Private concurrently any information it provides
to
such third party which it has not previously provided to Private. Piedmont
shall
promptly notify Private orally and in writing in the event it receives any
such
inquiry or proposal and shall provide reasonable detail of all relevant facts
relating to such inquiries.
(b) “Acquisition
Transaction”
shall,
with respect to Piedmont, mean any of the following: (i) a merger or
consolidation, or any similar transaction (other than the Merger) of any company
with either Piedmont or any significant subsidiary (as defined in Rule 1.2
of Regulation S-X of the SEC) (a “Significant
Subsidiary”)
of
Piedmont; (ii) a purchase, lease or other acquisition of all or
substantially all the assets of either Piedmont or any Significant Subsidiary
of
Piedmont; (iii) a purchase or other acquisition of “beneficial ownership”
by any “person” or “group” (as such terms are defined in Section 13(d)(3)
of the Securities Exchange Act) (including by way of merger, consolidation,
share exchange or otherwise) which would cause such person or group to become
the beneficial owner of securities representing 10% or more of the voting power
of either Piedmont or any Significant Subsidiary of Piedmont; (iv) a tender
or exchange offer to acquire securities representing 15% or more of the voting
power of Piedmont; (v) a public proxy or consent solicitation made to
shareholders of Piedmont seeking proxies in opposition to any proposal relating
to any of the transactions contemplated by this Agreement that has been
recommended by the Board of Directors of Piedmont; (vi) the filing of an
application or notice with the GDBF, FDIC or any other federal or state
regulatory authority seeking approval to engage in one or more of the
transactions referenced in clauses (i) through (iv) above; or
(vii) the making of a bona fide proposal to Piedmont or its shareholders,
by public announcement or written communication, that is or becomes the subject
of public disclosure, to engage in one or more of the transactions referenced
in
clauses (i) through (v) above.
Section
5.8 Board
of Directors’ Notices, Minutes, Etc.
Piedmont shall give reasonable notice to Private of all meetings of the Board
of
Directors and Board committees of Piedmont and the Bank and the agenda, if
any,
for or business to be discussed at such meeting. Private may have a
representative present at each of Piedmont’s and Bank’s Board of Directors
meetings as Piedmont may permit; provided,
however,
Piedmont shall not be required to permit such representative of Private to
attend any portion of a meeting as Piedmont’s Board of Directors may reasonably
determine. Piedmont shall transmit to Private, promptly, copies of all notices,
minutes, consents and other materials that Piedmont or the Bank provides to
its
directors to the extent permissible under law, other than materials relating
to
any proposed acquisition of Piedmont or the Bank. Private agrees to hold in
confidence and trust and to act in a fiduciary manner with respect to such
information.
Section
5.9 Untrue
Representations and Warranties.
Subject
to the requirements of Section 5.18,
during
the term of this Agreement, if a party hereto becomes aware of any facts or
of
the occurrence or impending occurrence of any event that would cause one or
more
of such
40
party’s
representations and warranties contained in this Agreement to be or to become
untrue as of the Closing Date, then such party shall immediately give detailed
written notice thereof to the other party.
Section
5.10 Indemnification;
Directors’ and Officers’ Insurance.
(a) From
and
after the Effective Time, Private shall cause the Surviving Corporation and
any
successor to fulfill and honor in all respects the obligations of Piedmont
and
the Bank pursuant to any indemnification agreements for the benefit of directors
and officers existing prior to the date hereof. Furthermore, for a period
following the Effective Time during which any claim could be asserted, Private
agrees to indemnify and hold harmless those directors and officers of Piedmont
and the Bank entitled to indemnification under, and to the fullest extent
permitted by, the charters and bylaws of Piedmont and the Bank as they existed
immediately prior to the Effective Time and as if the charters and bylaws were
still in effect without amendment; provided,
however,
that
all rights to indemnification in respect of any claim asserted or made within
such period shall continue until the final disposition of such claim. Private
shall also acquire a tail coverage for directors and officers indemnification
insurance at not less than the current coverage levels maintained by Piedmont
for a term of five (5) years following the Effective Time; provided,
however,
that
Private shall not be required to pay a premium amount in excess of 175% the
most
recent annual premium paid by Piedmont for such insurance (the “Insurance
Amount”),
provided
further that
if
Private is unable to maintain such policy (or substitute policy) as a result
of
the preceding provisions, Private shall obtain as much comparable insurance
as
is available for the Insurance Amount. The provisions of this Section
5.10
shall
survive the Effective Time and are intended to be for the benefit of, and shall
be enforceable by, each indemnified party and his or her heirs and
representatives.
Section
5.11 Resolution
of Piedmont Plans.
Piedmont and Private shall cooperate in effecting the following treatment of
the
Piedmont Plans, except as mutually agreed upon by Private and Piedmont prior
to
the Effective Time:
(a) At
the
Effective Time, Private (or a Private Subsidiary) shall be substituted for
Piedmont or the Bank as the sponsoring employer under those Piedmont Plans
with
respect to which Piedmont or the Bank is a sponsoring employer immediately
prior
to the Effective Time, and shall assume and be vested with all of the powers,
rights, duties, obligations and liabilities previously vested in Piedmont or
the
Bank with respect to each such plan. Except as otherwise provided herein, each
such plan and any Piedmont Plan sponsored by Piedmont or the Bank shall be
continued in effect by Private or any applicable Private Subsidiary after the
Effective Time without a termination or discontinuance thereof as a result
of
the Merger, subject to the power reserved to Private or any applicable Private
Subsidiary under each such plan to subsequently amend or terminate the plan,
which amendments or terminations shall comply with applicable law. Piedmont
and
Private will use reasonable efforts (i) to effect said substitutions and
assumptions, and take such other actions contemplated under this Agreement,
and
(ii) to amend such plans as to the extent necessary to provide for said
substitutions and assumptions, and such other actions contemplated under this
Agreement.
(b) At
or as
promptly as practicable after the Effective Time, and in no event later than
January 1, 2008, provided such date is after the Closing Date, as Private
shall
41
reasonably
determine, Private shall provide, or cause any Private Subsidiary to provide,
to
each employee of Piedmont and the Bank as of the Effective Time (“Piedmont
Employees”)
the
opportunity to participate in each employee benefit plan and program maintained
by Private or the Private Subsidiaries for similarly situated employees (the
“Private
Benefit Plans”);
provided,
however,
that
with respect to such Private Benefit Plans, Piedmont Employees shall be given
credit for service with Piedmont and the Bank in determining eligibility for
and
vesting in benefits thereunder, but not for purposes of benefit accrual;
provided,
further,
that
Piedmont Employees shall not be subject to any waiting periods or pre-existing
condition exclusions under the Private Benefit Plans to the extent that such
periods are longer or restrictions impose a greater limitation than the periods
or limitations imposed under the Piedmont Plans; provided,
further,
that to
the extent that the initial period of coverage for Piedmont Employees under
any
Private Benefit Plan that is an “employee welfare benefit plan” as defined in
Section 3(1) of ERISA is not a full 12-month period of coverage, Piedmont
Employees shall be given credit under the applicable Private Benefit Plans
for
any deductibles and co-insurance payments made by such Piedmont Employees under
the Piedmont Plans during the balance of such 12-month period of coverage;
provided,
further,
that
Piedmont Employees shall receive any contribution to the Piedmont Qualified
Plans for the portion of the plan years during which such Piedmont Qualified
Plans are maintained by Piedmont or Private. Nothing in the preceding sentence
shall obligate Private to provide or cause to be provided any benefits
duplicative of those provided under any Piedmont Plan continued pursuant to
subparagraph (a) above, including, but not limited to, extending
participation in any Private Benefit Plan which is an “employee pension benefit
plan” under ERISA with respect to any year during which allocations are made to
Piedmont Employees under the Piedmont Qualified Plans. Except as otherwise
provided in this Agreement, the power of Private or any Private Subsidiary
to
amend or terminate any benefit plan or program, including any Piedmont Plan,
shall not be altered or affected. Moreover, this Agreement shall not confer
upon
any Piedmont Employee any rights or remedies hereunder and shall not constitute
a contract of employment or create the rights, to be retained or otherwise,
in
employment with Private or any Private Subsidiary.
(c) Prior
to
or concurrently with the Effective Time, Private shall have entered into
employment agreements (the “Employment
Agreements”)
with
each of Xxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxx,
substantially in the form provided to such individuals prior to execution of
this Agreement.
(d) As
promptly as possible after the execution of this Agreement, Piedmont shall
have
amended the Piedmont Stock Option Plans and related Option agreements and each
Warrant agreement to effectuate Section 1.5.
(e) Immediately
prior to the Effective Time, all outstanding shares of Piedmont Preferred Stock
shall be converted into shares of Piedmont Common Stock, pursuant to the
provisions of the Certificate of Designation, as amended by the Certificate
of
Amendment.
Section
5.12 Certain
Consents.
In the
event of a request by Piedmont for written consent from Private for purposes
of
Section 5.2
hereof,
Private shall use reasonable efforts to respond to such request promptly and
Piedmont shall be entitled to rely, for purposes of any of such section, on
a
written consent given on behalf of Private by the Chief Executive Officer or
Chief Financial Officer of Private.
42
Section
5.13 Accounting
and Other Adjustments.
Prior
to the Effective Time, Piedmont agrees that it shall, and shall cause the Bank
to: (a) make any accounting adjustments or entries to its books of account
and other financial records; (b) make additional provisions to any
allowance for loan losses; (c) sell or transfer any investment securities
held by it; (d) charge-off any loan or lease; (e) create any new
reserve account or make additional provisions to any other existing reserve
account; (f) make changes in any accounting method; (g) accelerate,
defer or accrue any anticipated obligation, expense or income item; and
(h) make any other adjustments as Private shall reasonably request,
provided,
however,
that
neither Piedmont nor the Bank shall be obligated to take any such requested
action until immediately prior to the Effective Time and at such time as
Piedmont shall have received reasonable assurances that all conditions precedent
to Piedmont’s and Private’s obligations under this Agreement (except for the
completion of actions to be taken at the Closing) have been satisfied and;
provided,
further,
no such
adjustment which Piedmont or the Bank would not have been required to make
but
for the provisions of this Section shall be taken into account for purposes
of determining satisfaction by Piedmont of the conditions set forth in
Section 6.1(g)
of this
Agreement.
Section
5.14 List
of Piedmont Shareholders.
At the
Effective Time, Piedmont shall deliver to Private a list of holders of record
of
the outstanding Piedmont Common Stock as of the most recent reasonably
practicable date, and the accuracy of such list shall be certified by an
authorized officer of Piedmont.
Section
5.15 Affiliate
Letters.
Piedmont shall obtain and deliver to Private on the date hereof a signed
representation letter as to certain restrictions on resale substantially in
the
form of Exhibit B
hereto
from each executive officer and director of Piedmont and each shareholder of
Piedmont who may reasonably be deemed an “affiliate” of Piedmont within the
meaning of such term as used in Rule 145 under the Securities Act, and
shall obtain and deliver to Private a signed representation letter substantially
in the form of Exhibit B
from any
person who becomes an executive officer or director of Piedmont or any
shareholder who becomes such an “affiliate” after the date hereof as promptly as
practicable after (and shall use its reasonable efforts to obtain and deliver
within five (5) business days after) such person achieves such status. The
letter described in this Section 5.15
shall
include certain provisions pursuant to which such individuals will agree to
vote
in favor of the Merger and the Certificate of Amendment.
Section
5.16 Registration
Statement; Shareholder Approval.
As soon
as reasonably practicable after the date hereof, Private shall prepare and
file
with the SEC a Registration Statement on Form S-4 covering the Private
Common Stock to be issued to holders of Piedmont Common Stock in the Merger,
which Registration Statement shall include the proxy statement (the
“Proxy
Statement”)
for
use in soliciting proxies for the special meeting of shareholders (the
“Shareholders’
Meeting”)
to be
held by Piedmont for purposes of approving the Merger, and Private and Piedmont
shall use reasonable efforts to cause the Registration Statement to become
effective under the Securities Act. Piedmont shall furnish all information
concerning Piedmont and the holders of its capital stock as Private may
reasonably request in connection with the preparation and filing of the
Registration Statement and Proxy Statement and related actions. Piedmont shall
call the Shareholders’ Meeting to be held as soon as reasonably practicable, and
in no event later than forty-five (45) days after the effective date of the
Registration Statement for the purpose of voting upon this Agreement and the
Merger and the Certificate of Amendment. In connection with the Shareholders’
Meeting, (a) Private and Piedmont shall
43
jointly
prepare the Proxy Statement as part of the Registration Statement, and Piedmont
shall mail the Proxy Statement to its shareholders, on a date mutually
acceptable to the parties hereto (the “Mailing
Date”);
(b) the Board of Directors of Piedmont shall, subject to the exercise of
its fiduciary duties, unanimously recommend to its shareholders the approval
of
this Agreement and the Merger and the Certificate of Amendment, and (c) the
Board of Directors of Piedmont shall otherwise use reasonable efforts to the
extent consistent with its fiduciary duty to obtain such shareholder
approval.
Section
5.17 Financial
Statements and Reports.
From
the date of this Agreement and prior to the Effective Time: (a) Piedmont
will deliver to Private, as soon as reasonably available, but in no event later
than five (5) days after filing, all reports filed by it or any of the Bank
with
any Governmental Authority subsequent to the date hereof including all financial
reports filed with the FRB, the FDIC and the GDBF, which shall be prepared
in
accordance with the rules and regulations of such Governmental Authority;
(b) Piedmont will deliver to Private, as soon as reasonably available, but
in no event later than thirty (30) days after the end of each fiscal quarters,
all quarterly financial statement of Piedmont and the Bank prepared with respect
to period ending subsequent to June 30, 2006 and prepared in conformity
with GAAP; and (c) Piedmont will deliver to Private, as soon as practicable
after the end of each month, monthly financial statements of Piedmont and the
Bank as requested by Private.
Section
5.18 Delivery
of Supplements to Disclosure Schedules.
Five
(5) business days prior to the Effective Time, Piedmont will supplement or
amend
the Piedmont Disclosure Schedules with respect to any matter hereafter arising
which, if existing or occurring at or prior to the date of this Agreement,
would
have been required to be set forth or described in such Piedmont Disclosure
Schedule or which is necessary to correct any information in the Piedmont
Disclosure Schedule or would have caused or constituted a breach of any
representation or warranty made by Piedmont had such representation or warranty
been made at the time of the occurrence of such event or condition; provided,
however,
that in
order to determine the fulfillment of the conditions set forth in Section 6.1(a)
hereof
as of the Effective Time, the Piedmont Disclosure Schedules shall be deemed
to
include only the information contained therein on the date hereof; provided,
however,
that
delivery of such supplements containing information which causes any
representation or warranty of either Piedmont to be false or materially
misleading will not cure any breach hereunder of such representations or
warranties, unless expressly consented to by Private.
Section
5.19 Noncompetition,
Nondisclosure and Nonsolicitation Agreements.
Prior
to or concurrently with the execution of this Agreement, Private shall have
received executed Noncompetition, Nondisclosure and Nonsolicitation Agreements
from those persons identified on Schedule 5.19
to the
Piedmont Disclosure Schedule.
Section
5.20 Tax
Opinion.
Private
shall obtain a written opinion (“Tax
Opinion”)
of
Vedder, Price, Xxxxxxx & Kammholz, P.C. addressed to Private and to
Piedmont, dated the Closing Date, subject to customary representations to be
made by Private and Piedmont relating to the Merger and assumptions referred
to
therein, and substantially to the effect that (a) the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a)
of the Code and Private and Piedmont will each be a party to such
reorganization, (b) the exchange in the Merger of Private Common Stock and
cash for Piedmont Common Stock will not give rise to
44
the
recognition of any income, gain or loss to Private, Piedmont, or the
shareholders of Piedmont with respect to such exchange except, with respect
to
the shareholders of Piedmont, to the extent of any Cash Consideration received
in the Merger and any cash received in lieu of fractional shares, (c) the
adjusted tax basis of Private Common Stock received by the shareholders of
Piedmont in the Merger will equal the adjusted tax basis of the Piedmont Common
Stock exchanged therefore decreased by the amount of money received in the
exchange and increased by the amount of gain recognized in the exchange,
(d) the holding period of the Private Common Stock received in the Merger
will include the period during which the shares of Piedmont Common Stock
surrendered in exchange therefore were held, provided such shares of Piedmont
Common Stock were held as a capital asset at the Effective Time, (e) the
adjusted tax basis of the assets of Piedmont in the hands of Private will be
the
same as the adjusted tax basis of such assets in the hands of Piedmont
immediately prior to the exchange, and (f) the holding period of the assets
of Piedmont transferred to Private will include the period during which such
assets were held by Piedmont prior to the exchange.
Section
5.21 Bonuses
and Other Awards.
(a) Prior to or concurrently with the execution of this Agreement, Piedmont
shall have entered into Retention Bonus Agreements with those persons listed
on
Schedule 5.21(a)
of the
Piedmont Disclosure Schedules providing for retention bonuses in the amount
of
up to $700,000 in the aggregate.
(b) Prior
to
the Effective Time, Piedmont shall determine and award incentive bonuses for
calendar year 2006 in accordance with the provisions of Schedule 5.21(b)
of the
Piedmont Disclosure Schedules.
(c) Private
shall award, or shall permit Piedmont to award, incentive compensation in
accordance with the provisions of Schedule
5.21(c)
of the
Piedmont Disclosure Schedules.
Section
5.22 Other
Actions; Further Assurances; Form of Transaction.
(a) At
Private’s request, the parties will use all reasonable efforts and cooperate in
all reasonable respects with each other to obtain any consents or waivers from
third parties under any contract or agreement to which Piedmont or the Bank
is a
party in order to prevent any breach or default from arising thereunder as
a
result of the consummation of the Merger.
(b) In
case
at any time after the Effective Time any further action is necessary or
desirable to carry out the contemplated purposes and intent of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all
such necessary action.
(c) If
necessary to expedite the Closing of the Merger or any other transactions
contemplated by this Agreement, the parties agree that each will take or perform
any additional reasonably necessary or advisable steps to restructure the
transactions contemplated hereby; provided,
however,
that
any such restructuring will not result in any change in the Merger
Consideration, or result in any adverse consequences to the Private, Piedmont
or
the shareholders of Piedmont, and will not jeopardize the receipt of approvals
required from Governmental Authorities or other consents and approvals relating
to the consummation of the
45
Merger
or
otherwise cause any condition to Closing set forth in Article VI
not to
be capable of being fulfilled.
(d) Neither
Piedmont, the Bank, Private nor any of their respective affiliates, shall
voluntarily take any action which would cause the Merger to fail to qualify
as a
tax-free reorganization under Section 368(a) of the Code; additionally,
Private and Piedmont agree to take any and all necessary or advisable steps
to
restructure or modify the terms of the transaction contemplated hereby, if
such
steps are necessary or advisable to qualify the transaction contemplated hereby
as a tax-free reorganization under Section 368(a) of the Code.
ARTICLE
VI
CONDITIONS
PRECEDENT
Section
6.1 Conditions
Precedent to Obligations of Private.
Unless
the conditions are waived in writing by Private, all obligations of Private
under this Agreement are subject to the fulfillment, before or at the Closing,
of each of the following conditions:
(a) Representations
and Warranties; Performance of Agreements.
The
representations and warranties of Piedmont contained in Article III of this
Agreement, or in any documents, certificates, schedules or exhibits delivered
by, or on behalf of, Piedmont to Private pursuant to this Agreement shall be
true and correct in all material respects as of this date (except for
representations and warranties expressly stated to relate to a specific date,
in
which case such representations and warranties shall be true and correct as
of
such earlier date) and shall be true and correct in all material respects as
of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties expressly stated to relate to a specific date,
in
which case such representations and warranties shall be true and correct as
of
such earlier date). Piedmont shall have performed in all material respects
all
agreements herein required to be performed by it on or before the Closing
Date.
(b) Closing
Certificate.
Private
shall have received a certificate signed by the Chief Executive Officer of
Piedmont, dated as of the Closing Date, certifying as to the fulfillment of
the
conditions to the obligations of Private as set forth in this Agreement and
required to be fulfilled by Piedmont on or before the Closing Date.
(c) Regulatory
and Other Approvals.
Private
shall have obtained the approval of all required Governmental Authorities
(including, without limitation, the approval of the FRB, SEC and GDBF) of the
transactions contemplated by this Agreement, all required regulatory waiting
periods shall have expired, and there shall have been no motion for rehearing
or
appeal from such approval.
(d) Piedmont
Shareholder Approval.
This
Agreement and the Certificate of Amendment shall each have been duly adopted
and
approved by the requisite vote of the Common and/or Preferred shareholders
of
Piedmont, as the case may be, at a meeting of Piedmont’s
shareholders.
(e) No
Litigation with Respect to Transactions.
No suit
or other legal proceeding shall have been instituted or threatened against
Piedmont, the Bank or Private
46
seeking
to enjoin the consummation of the transactions contemplated hereby, which
reasonably could be expected to result in the issuance of a court order
enjoining such transactions, or which seeks substantial damages in respect
thereof.
(f) No
Adverse Changes.
Between
the date of
this
Agreement and the Closing Date, the business of Piedmont and the Bank shall
have
been conducted in the ordinary course consistent in all respects with prudent
banking practices, and no action shall have been taken or event shall have
occurred that is reasonably likely to result in a Material Adverse Effect on
Piedmont or the Bank.
(g) Consents.
Piedmont and the Bank shall have obtained all written consents, permissions
and
approvals as required under any material agreements, contracts, appointments,
indentures, plans, trusts or other arrangements with third parties, including,
but not limited to, leases listed on Schedule 3.19
of the
Piedmont Disclosure Schedules, required to effect the transactions contemplated
by this Agreement.
(h) Resignations.
Piedmont shall have either (a) procured and delivered to Private the
resignations of each of the directors of the Bank as Private requests, or
(b) removed all such directors from office immediately prior to the
Effective Time.
(i) Legal
Opinion.
Private
shall have received an opinion of Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx,
PLLC, counsel for Piedmont, substantially in the form of Exhibit C.
(j) Private
shall have received the Tax Opinion (as contemplated in Section 5.20
above).
Section
6.2 Conditions
Precedent to Obligations of Piedmont.
Unless
the conditions are waived in writing by Piedmont, all obligations of Piedmont
under this Agreement in writing are subject to the fulfillment, before or at
the
Closing, of each of the following conditions:
(a) Representations
and Warranties; Performance of Agreements.
The
representations and warranties of Private contained in Article IV of this
Agreement, or in any documents, certificates or exhibits delivered by them,
or
on their behalf to Piedmont pursuant to this Agreement shall be true and correct
in all material respects as of this date (except for representations and
warranties expressly stated to relate to a specific date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date) and shall be true and correct as of the
Closing Date as though made on and as of the Closing Date (except for
representations and warranties expressly stated to relate to a specific date,
in
which case such representations and warranties shall be true and correct as
of
such earlier date), except where the failure of such representations and
warranties to be so true and correct would not have a material adverse effect
on
Private. Private shall have performed in all material respects all agreements
herein required to be performed by it on or before the Closing
Date.
(b) Closing
Certificate.
Piedmont shall have received a certificate signed by the Chief Executive Officer
of Private, dated as of the Closing Date, certifying in such detail as Piedmont
may reasonably request, as to the fulfillment of the conditions to the
obligations of
47
Piedmont
as set forth in this Agreement and required to be fulfilled by Private on or
before the Closing.
(c) Regulatory
and Other Approvals.
Private
shall have obtained the approval of all appropriate Governmental Authorities
(including, without limitation, the approval of the FRB, SEC and GDBF) of the
transactions contemplated by this Agreement, all required regulatory waiting
periods shall have expired, and there shall have been no motion for rehearing
or
appeal from such approval.
(d) No
Litigation with Respect to Transactions.
No suit
or other legal proceeding shall have been instituted or threatened against
Piedmont, the Bank or Private seeking to enjoin the consummation of the
transactions contemplated hereby, which reasonably could be expected to result
in the issuance of a court order enjoining such transactions, or which seeks
substantial changes in respect hereof.
(e) No
Adverse Changes.
Between
the date of
this
Agreement and the Closing Date, no action shall have been taken or event shall
have occurred that is reasonably likely to result in a Material Adverse Effect
on Private or the Private Subsidiaries.
(f) Legal
Opinion.
Piedmont shall have received an opinion of Vedder, Price, Xxxxxxx &
Kammholz, P.C., counsel for Private, substantially in the form of Exhibit D.
(g) Paying
Agent Certification.
Piedmont shall have received a certificate from the Paying Agent certifying
that
it has received the Exchange Fund in immediately available funds and that it
is
holding the Exchange Fund for the benefit of the holders of the Piedmont Common
Stock.
(h) Tax
Opinion.
Piedmont shall have received the Tax Opinion of Vedder, Price,
Xxxxxxx & Kammholz, P.C. pursuant to Section 5.20
hereof.
ARTICLE
VII
TERMINATION,
EXPENSES AND AMENDMENT
Section
7.1 Termination.
This
Agreement may be terminated at any time before the Effective Time:
(a) by
mutual
written consent of the boards of directors of Private and Piedmont;
(b) by
Private or Piedmont, (i) if there shall have been a final judicial or
regulatory determination (as to which all periods for appeal shall have expired
and no appeal shall be pending) that any material provision of this Agreement
is
illegal, invalid or unenforceable (unless the enforcement thereof is waived
by
the affected party) or denying any regulatory approval of the transactions
contemplated by this Agreement, the approval of which is a condition precedent
to either party’s obligations hereunder; or (ii) the Piedmont shareholders
fail to adopt this Agreement and the Certificate of Amendment at the
Shareholders’ Meeting and approve the Merger;
48
(c) by
either
Private or Piedmont in the event of the material breach by the other party
of
any representation, warranty, covenant or agreement contained herein or in
any
document delivered pursuant hereto (other than as a result of the failure of
the
other party to comply with its obligations under this Agreement), which breach
would result in the failure to satisfy the closing conditions set forth in
Section 6.1
hereof,
in the case of Private, or Section 6.2
hereof,
in the case of Piedmont; provided,
however,
the
breaching party shall be given a reasonable opportunity, not to exceed ten
(10)
days, to cure such breach;
(d) by
either
Private or Piedmont if any of the conditions in Section 6.1
hereof,
in the case of Private, and Section 6.2
hereof,
in the case of Piedmont, has not been satisfied as of the Closing Date or if
satisfaction of such condition is or becomes impossible (other than through
the
failure of the other party to comply with its obligations under this
Agreement);
(e) by
either
Private or Piedmont if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply in all
material respects with its obligations under this Agreement) by January 31,
2007, or such later date as the parties may agree;
(f) by
Piedmont, if (i) Piedmont has complied with the provisions of Section 5.7,
(ii) any corporation, partnership, person, other entity or group, as
defined in the Securities Exchange Act (other than Private or any affiliate
of
Private), shall have commenced, made or proposed an Acquisition Transaction,
(iii) Piedmont’s Board of Directors shall have determined, in its good
faith judgment, after consultation with its independent financial advisors,
that
such offer or proposal is more favorable to Piedmont’s shareholders than the
Merger (a “Superior
Proposal”),
and
(iv) Piedmont’s Board of Directors shall have determined, in good faith,
that if it failed to recommend or accept such Superior Proposal then such
failure would be determined to result in a breach of the directors’ fiduciary
duties; provided,
however,
that
Piedmont may not terminate this Agreement pursuant to this Section 7.1(f)
until
the expiration of five (5) business days after written notice of any such
Superior Proposal referenced in this Section 7.1(f)
has been
delivered to Private, together with a summary of the terms and conditions of
any
such Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing). After providing such notice, Piedmont shall
provide a reasonable opportunity to Private during the five-day period to make
such adjustments in the terms and conditions of this Agreement as would enable
Piedmont to proceed with the Merger on such adjusted terms;
(g) by
the
Board of Directors of Private if Piedmont has (i) received a Superior
Proposal, and the Board of Directors of Piedmont has entered into an acquisition
agreement with respect to the Superior Proposal, terminated this Agreement,
or
withdraws, modifies or amends in any respect adverse to Private its approval
of
this Agreement or the transactions contemplated hereby, or (ii) fails to
call its Shareholders’ Meeting in accordance with Section 5.16,
withdraws or fails to make a unanimous recommendation that shareholders of
Piedmont vote in favor of the Merger and the Certificate of Amendment, or
modifies or qualifies such recommendation or takes any other action with respect
thereto which is in a manner adverse to Private, or (iii) the Board of
Directors of Piedmont has resolved to do any of the foregoing; or
49
(h) by
Piedmont at any time prior to the close of business on the business day after
establishment of the Private Closing Price, such termination to be effective
immediately following the expiration of the three (3) business day period
specified in Section 7.1(h)(ii)
below
(“Effective
Termination Date”),
if
both of the following conditions are satisfied:
(i) the
Private Closing Price is less than $37.40; and
(ii) the
number obtained by dividing the Private Closing Price by the Initial Private
Market Value (“Private
Ratio”)
shall
be less than the quotient obtained by dividing the Final Index Amount by the
Initial Index Amount, minus 0.15; subject, however, to the following sentences.
If Piedmont elects to exercise its termination right pursuant to this
Section 7.1(h),
it
shall give prompt written notice thereof to Private as specified above and
Private shall, for a period of three (3) business days after its receipt of
such
notice, have the option of paying (i) additional Stock Consideration (based
on the actual Private Closing Price); (ii) additional Cash Consideration;
or (iii) a combination of additional Stock Consideration and Cash
Consideration (the “Additional
Consideration”)
in
compliance with the following sentence. Specifically, Private shall pay such
Additional Consideration so that the value of the Aggregate Stock Consideration
(prior to adjustment for the Additional Consideration) together with the
Additional Consideration (whether in cash or stock) shall be valued at an amount
which is no less than the lesser of (i) the product of 0.85 and the Initial
Private Market Value multiplied by the Aggregate Stock Consideration (prior
to
adjustment for the Additional Consideration) or (ii) the product of the
Index Ratio and the Initial Private Market Value multiplied by the Aggregate
Stock Consideration (prior to adjustment for the Additional Consideration).
If
within such three (3) business day period, Private delivers written notice
to
Piedmont that it intends to proceed by paying the Additional Consideration,
as
contemplated by the preceding sentence, then no termination shall occur pursuant
to this Section 7.1(h)
and this
Agreement shall remain in full force and effect in accordance with its terms
(except that the Aggregate Merger Consideration shall have been so
modified).
For
purposes of this Section 7.1(h),
the
following terms shall have the meanings indicated below:
“Final
Index Amount”
means
the reported closing index amount for the Index Group on the sixth day prior
to
the Closing Date.
“Index
Group”
means
the NASDAQ Bank Index.
“Index
Ratio”
shall
be the Final Index Amount divided by the Initial Index Amount.
“Initial
Index Amount”
means
the reported closing index amount of 3,213.09 for the Index Group for
August 1, 2006.
“Initial
Private Market Value”
means
$44.00, adjusted as indicated in the last sentence of this Section 7.1(h)
below.
If
Private or any company belonging to the Index Group declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange
of
shares or similar
50
transaction
between the date of this Agreement and the Determination Date, the prices for
the common stock of such company shall be appropriately adjusted for the
purposes of applying this Section 7.1(h).
Section
7.2 Termination
Fee.
(a) In
consideration of the expenses and forgone opportunities of Private, as a
condition and inducement to Private’s willingness to enter into and perform this
Agreement, Piedmont shall pay to Private immediately upon demand a fee of
$1,500,000 plus all reasonable actual expenses incurred by Private in connection
with the transactions contemplated by this Agreement (the “Termination
Fee”)
upon
the earliest to occur of the following:
(i) Private
terminates this Agreement pursuant to Section 7.1(c)
or
(d)
and
(A) the Board of Directors of Piedmont (1) shall have withdrawn,
modified or amended in any respect its approval or recommendation of this
Agreement or the transactions contemplated hereby, (2) shall not at the
appropriate time have unanimously recommended or shall have withdrawn, modified
or amended in any respect its recommendation that its shareholders vote in
favor
of the adoption of this Agreement, or (3) shall not have included such
recommendation in the Proxy Statement, or (B) the Board of Directors of
Piedmont shall have resolved to do any of the foregoing; provided,
however,
no
Termination Fee is payable under this Section 7.2(a)(i)
unless
(1) prior to such termination, an Acquisition Proposal with respect to
Piedmont was commenced, publicly proposed or publicly disclosed (or an
Acquisition Proposal was received); and (2) within 18 months after such
termination, Piedmont shall have entered into a definitive written agreement
relating to an Acquisition Transaction or any Acquisition Transaction shall
have
been consummated; or
(ii) Private
terminates this Agreement pursuant to Section 7.1(g);
provided,
however,
no
Termination Fee is payable under this Section 7.2(a)(ii)
unless
(1) prior to such termination, an Acquisition Proposal with respect to
Piedmont was commenced, publicly proposed or publicly disclosed (or an
Acquisition Proposal was received); and (2) within 18 months after such
termination, Piedmont shall have entered into a definitive written agreement
relating to an Acquisition Transaction or any Acquisition Transaction shall
have
been consummated; or
(iii) Piedmont
shall have (A) terminated this Agreement pursuant to Section 7.1(f),
and
(B) entered into an agreement with a party other than Private or an
affiliate of Private providing for an Acquisition Transaction described in
Section 5.7(b)(i)
through
(iv)
prior to
the termination date of this Agreement; or
(iv) a
tender
or exchange offer for 10% or more of the outstanding shares of Piedmont Common
Stock is commenced (other than by Private or an affiliate thereof) and
Piedmont’s Board of Directors recommends that shareholders of Piedmont tender
their shares in such tender offer or fails to recommend that shareholders reject
such tender offer within the ten (10) business day period specified in
Rule 14e-2(a) under the Exchange Act; provided,
however,
no
Termination Fee is payable under this Section 7.2(a)(iv)
in the
event this Agreement shall have been terminated pursuant to Section 7.1(a)
or
(b).
51
(b) In
the
event this Agreement is terminated prior to the Effective Time for any reason
other than (i) mutual agreement of the parties pursuant to Section 7.1(a),
(ii) a valid termination by either party pursuant to Section 7.1(b),
or
(iii) a valid termination by Piedmont pursuant to Section 7.1(d),
the
Termination Fee, unless previously paid pursuant to Section 7.2(a),
shall
continue to be payable by Piedmont to Private upon the consummation of any
Acquisition Transaction that is entered into or announced during the 18-month
period from and after the date of such termination; provided,
however,
that if
the termination is pursuant to Section 7.1(e),
the
Termination Fee shall be payable only if such Acquisition Transaction is with
a
party (or an affiliate of a party) that had delivered a written proposal for,
or
otherwise engaged in activities relating to, an Acquisition Transaction prior
to
the termination date of this Agreement.
(c) Upon
payment of the fee described in this Section 7.2,
Piedmont shall have no further liability to Private at law or in equity with
respect to such termination, or with respect to Piedmont’s Board of Director’s
failure to take action to convene the Shareholders’ Meeting and/or recommend
that Piedmont’s shareholders adopt this Agreement and the Certificate of
Amendment.
(d) Piedmont
acknowledges that the agreements contained in this Section 7.2
are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Private would not enter into this Agreement.
Accordingly, if Piedmont fails to pay timely any amount due pursuant to this
Section 7.2
and, in
order to obtain such payment, Private commences a suit that results in a
judgment against Piedmont for the amount payable to Private pursuant to this
Section 7.2,
Piedmont shall pay to Private its reasonable, out-of-pocket costs and expenses
(including attorneys’ fees and expenses) in connection with such suit, together
with interest on the amount so payable at the applicable Federal Funds
rate.
Section
7.3 Effect
of Termination.
In the
event of termination of this Agreement by either Piedmont or Private as provided
in Section 7.1,
this
Agreement shall forthwith become void and have no effect, and none of Piedmont,
Private, any of their respective subsidiaries or any of the officers or
directors of any of them shall have any liability of any nature whatsoever
under
this Agreement, or in connection with the transactions contemplated by this
Agreement, except that (i) Sections 5.4(b),
7.2,
7.3,
and
8.8
shall
survive any termination of this Agreement and (ii) neither Piedmont nor
Private shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Agreement. Each party’s right
of termination under Section 7.1
is in
addition to any other rights it may have under this Agreement or otherwise,
and
the exercise of such right of termination will not be an election of
remedies.
Section
7.4 Amendment.
Subject
to compliance with applicable law, this Agreement may be amended in writing
only
by the parties hereto; provided,
however,
that
there may not be, without further approval of Piedmont’s shareholders, any
amendment of this Agreement that changes the amount or the form of the
consideration to be delivered to the holders of Piedmont Common Stock as
contemplated by this Agreement. This Agreement may not be amended except by
an
instrument in writing signed on behalf of each of the parties
hereto.
Section
7.5 Extension;
Waiver.
At any
time before the Effective Time, the parties hereto may, to the extent legally
allowed, (a) extend the time for the performance of any of the
52
obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein; provided however,
that
there may not be, without further approval of Piedmont’s shareholders, any
waiver under this Agreement which reduces the amount or, except as expressly
contemplated by Section 1.4,
changes
the form of the consideration to be delivered to the holders of Piedmont Common
Stock as contemplated by this Agreement. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in
a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE
VIII
GENERAL
PROVISIONS
Section
8.1 Non-Survival
of Representations, Warranties and Agreements.
None of
the representations, warranties, covenants and agreements in this Agreement
(or
in any instrument delivered pursuant to this Agreement, which shall terminate
in
accordance with its terms) shall survive the Effective Time, except for those
covenants and agreements contained herein which by their terms apply in whole
or
in part after the Effective Time.
Section
8.2 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (with confirmation), mailed
by
registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
If
to Private addressed to:
|
PrivateBancorp,
Inc.
00
Xxxx Xxxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxx
X. Xxxxxxx
Chairman,
President and Chief Executive Officer
Telephone: (000)
000-0000
Facsimile:
(000)
000-0000
|
with
a copy to:
|
Vedder,
Price, Xxxxxxx & Kammholz, P.C.
000
Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx
X. Xxxxxxx, Esq.
Xxxxxxxx
Xxxxxx Xxxx, Esq.
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
|
53
If
to Piedmont, addressed to:
|
Piedmont
Bancshares, Inc.
0000
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
Attention:
Xxxxx
X. Xxxxxxx
President
and Chief Executive Officer
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
|
with
a copy to:
|
Xxxxxx
Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
One
Atlantic Center, Suite 3500
0000
Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx 00000
Attention:
Xxxxxx
X. Xxxxxxxx, Esq.
Xxxxx
Xxxxxx Xxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile:
(000)
000-0000
|
Section
8.3 Interpretation.
When a
reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a section of or exhibit or schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in
this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.”
Section
8.4 Counterparts.
This
Agreement may be executed in counterparts, all of which shall be considered
one
and the same agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart. A signature
page
of this Agreement executed and transmitted via electronic means shall be deemed
an original for all purposes.
Section
8.5 Entire
Agreement.
This
Agreement (including the documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto with respect
to
the subject matter hereof.
Section
8.6 Governing
Law.
This
Agreement and the exhibits attached hereto shall be governed and construed
in
accordance with the laws of the State of Illinois, without regard to any
applicable conflicts of law.
Section
8.7 Severability.
Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If, however, any provision of this Agreement is declared
invalid or unenforceable by a court of competent jurisdiction, then the
54
parties
hereto shall in good faith amend this Agreement to include an alternative
provision that accomplishes a similar result.
Section
8.8 Publicity.
Except
as otherwise required by applicable law or the rules of any applicable
securities exchange, neither Piedmont nor Private shall, nor shall Piedmont
or
Private permit the Bank or any subsidiary of Private, respectively, to issue
or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
Section
8.9 Assignment;
Third Party Beneficiaries.
Neither
this Agreement nor any of the rights, interests or obligations of the parties
under this Agreement shall be assigned by any of the parties hereto (whether
by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties and their
respective successors and assigns. Except as otherwise specifically provided
in
Section 5.10,
this
Agreement (including the documents and instruments referred to herein) shall
not
confer upon any person other than the parties hereto (or thereto) any rights
or
remedies hereunder.
Section
8.10 Transaction
Expenses.
Except
as set forth in Section 7.2,
and
except with respect to costs and expenses of printing and mailing the Proxy
Statement and all filing and other fees paid to the SEC in connection with
the
Merger, which shall be borne equally by Piedmont and Private, whether or not
the
Merger is consummated, all fees and expenses incurred by Piedmont or Private,
as
applicable, in connection with the Merger, including all legal, accounting,
financial advisory, fairness opinion, consulting and all other fees and expenses
of third parties incurred by Piedmont or Private, as applicable, in connection
with the negotiation and effectuation of the transactions contemplated by this
Agreement shall be the obligations of either Piedmont or Private, to the extent
such party incurred such fees and expenses.
[SIGNATURE
PAGE FOLLOWS]
55
IN
WITNESS WHEREOF,
Private
and Piedmont have executed this Agreement as of the day and year hereinabove
first written.
PRIVATEBANCORP,
INC.
|
By: | /s/ Xxxxx X. Xxxxxxx |
Name: | Xxxxx X. Xxxxxxx | |
Title: | Chairman, President and Chief Executive Officer |
PIEDMONT
BANCSHARES, INC.
|
By: | /s/ Xxxxx X. Xxxxxxx |
Name: | Xxxxx X. Xxxxxxx | |
Title: | President and Chief Executive Officer |
56