Exhibit 2.1
AGREEMENT AND PLAN OF MERGER BY AND BETWEEN TSFG AND GULF WEST BANKS, INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 21,
2002, between The South Financial Group, Inc., a South Carolina corporation
("Parent"), and Gulf West Banks, Inc., a Florida corporation (the "Company").
WHEREAS, the Boards of Directors of Parent and the Company have determined
that it is in the best interests of their respective companies and their
shareholders to consummate the business combination transaction provided for
herein in which the Company will, subject to the terms and conditions set forth
herein, merge (the "Merger") with and into Parent;
WHEREAS, as soon as practicable after the execution and delivery of this
Agreement, Citrus Bank, a Florida-chartered commercial bank and a wholly-owned
subsidiary of Parent ("Parent Bank") and Mercantile Bank, a Florida-chartered
commercial bank and a wholly-owned subsidiary of the Company (the "Company
Bank"), will enter into an Agreement and Plan of Merger (the "Bank Merger
Agreement"), pursuant to which the Company Bank shall merge with the Parent Bank
(the "Bank Merger"), and it is intended that the Bank Merger be consummated
immediately following the consummation of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Florida Business Corporation Act (the "FBCA") and the South
Carolina Business Corporation Act ("SCBCA"), at the Effective Time (as defined
in Section 1.2 hereof), the Company shall merge with and into Parent. Parent
shall be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of the State of South Carolina. The name of the Surviving Corporation
shall continue to be "The South Financial Group, Inc." Upon consummation of the
Merger, the separate corporate existence of the Company shall terminate.
1.2 Effective Time. Subject to the provisions of this Agreement, articles
of merger complying with the FBCA (the "Florida Articles of Merger") shall be
duly prepared, executed and delivered for filing by the Department of State of
the State of Florida (the "Florida Department") as provided in the FBCA, and
articles of merger complying with the SCBA (the "South Carolina Articles of
Merger") shall be duly prepared, executed and delivered for filing by the
Secretary of State of the State of South Carolina (the "South Carolina
Secretary"), in each case on the Closing Date. The Merger shall become effective
at such time (the "Effective Time") as the later of the following has occurred:
(i) the Florida Articles of Merger are filed by the Florida Department, (ii) the
South Carolina Articles of Merger are filed by the South Carolina Secretary; or
(iii) at such time specified in the Florida Articles of Merger and/or the South
Carolina Articles of Merger.
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1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the FBCA and the SCBCA.
1.4 Conversion of Company Common Stock.
(a) At the Effective Time, subject to the other provisions of this
Article I, and Sections 2.2(e) and 9.1(h) hereof, each share of common stock,
par value $1.00 per share, of the Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock held directly or indirectly by Parent or the Company or any
of their respective Subsidiaries (as defined below) (except for Trust Account
Shares and DPC Shares, as such terms are defined in Section 1.4(d) hereof))
shall, by virtue of this Agreement and without any action on the part of the
holder thereof, be converted into and exchangeable for the right to receive, at
the election of the holder thereof as provided in and subject to the provisions
of Section 1.5, either (i) a number of shares of common stock, par value $1.00
per share, of Parent ("Parent Common Stock") (together with the number of Parent
Rights (as defined in Section 5.2 hereof) associated therewith) equal to the Per
Share Stock Consideration or (ii) cash in an amount equal to the Per Share
Consideration (the "Per Share Cash Consideration"; the Per Share Stock
Consideration and the Per Share Cash Consideration are referred to herein
collectively as the "Merger Consideration").
For purposes of this Section 1.4(a):
"Per Share Stock Consideration" shall mean the quotient, rounded to the
nearest ten-thousandth, obtained by dividing the Per Share Consideration by the
Final Parent Stock Price.
"Per Share Consideration" shall mean the quotient, rounded to the
nearest ten-thousandth, obtained by dividing the Aggregate Consideration by the
Common Stock Deemed Outstanding.
"Aggregate Consideration" shall mean the sum of (x) the Total Stock
Consideration and (y) the Total Cash Amount.
"Total Stock Consideration" shall mean the product obtained by
multiplying (x) the Total Stock Amount and (y) the Final Parent Stock Price.
"Total Stock Amount" shall mean the product of (i) 0.6950 and (ii)
6,424,664.
"Total Cash Amount" shall mean an amount equal to $32,400,178.
"Total Outstanding Options" shall mean the number of shares of Company
Common Stock issuable upon exercise of all options granted by the Company to
purchase shares of Company Common Stock pursuant to the Company 1995
Nonstatutory Stock Option Plan and outstanding as of the close of business on
the Determination Date.
"Common Stock Deemed Outstanding" shall mean the sum of (x) the total
number of shares of Company Common Stock outstanding as of the close of business
on the Determination Date and (y) the Total Outstanding Options.
"Final Parent Stock Price" shall mean the average of the closing sale
prices of Parent Common Stock as reported on the Nasdaq Stock Market's National
Market (the "NASDAQ/NMS") during the Valuation Period.
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"Valuation Period" shall mean the ten consecutive trading days during
which the shares of Parent Common Stock are traded on the NASDAQ/NMS ending on
the third calendar day immediately prior to the Effective Time (such day, the
"Determination Date").
(b) All of the shares of Company Common Stock converted into the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each holder of a
certificate (each a "Certificate") previously representing any such shares of
Company Common Stock shall thereafter cease to have any rights with respect to
such securities, except the right to receive (i) the Merger Consideration, (ii)
any dividends and other distributions in accordance with Section 2.2(b) hereof,
and (iii) any cash to be paid in lieu of any fractional share of Parent Common
Stock in accordance with Section 2.2(e) hereof.
(c) If, between the date of this Agreement and the Effective Time, the
shares of Parent Common Stock shall be changed into a different number or class
of shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within such period, appropriate adjustments
shall be made to the Per Share Cash Consideration and the Per Share Stock
Consideration.
(d) At the Effective Time, all shares of Company Common Stock that are
owned directly or indirectly by Parent or the Company or any of their respective
Subsidiaries (other than shares of Company Common Stock (x) held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity for the benefit of third parties (any such shares, and
shares of Parent Common Stock which are similarly held, whether held directly or
indirectly by Parent or the Company, as the case may be, being referred to
herein as "Trust Account Shares") and (y) held by Parent or the Company or any
of their respective Subsidiaries in respect of a debt previously contracted (any
such shares of Company Common Stock, and shares of Parent Common Stock which are
similarly held, whether held directly or indirectly by Parent or the Company,
being referred to herein as "DPC Shares")) shall be cancelled and shall cease to
exist and no stock of Parent, cash or other consideration shall be delivered in
exchange therefor. All shares of Parent Common Stock that are owned by the
Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Parent.
(e) The calculations required by Section 1.4(a) shall be prepared
jointly by Parent and the Company prior to the Closing Date.
1.5 Election Procedures.
(a) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Company Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent) in such form as Parent and the Company shall mutually agree (the
"Election Form") shall be mailed thirty-five days prior to the anticipated
Effective Date or on such other date as the Company and Parent shall mutually
agree (the "Mailing Date") to each holder of record of Company Common Stock as
of the close of business on the fifth business day prior to the Mailing Date
(the "Election Form Record Date").
(b) Each Election Form shall permit the holder (or the beneficial owner
through appropriate and customary documentation and instructions) to elect to
receive (i) the Per Share Stock Consideration in respect of all of such holder's
Company Common Stock ("Stock Election Shares"), (ii) the Per Share Cash
Consideration in respect of all of such holder's Company Common Stock ("Cash
Election Shares"), (iii) the Per Share Stock Consideration in respect of that
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portion of such holder's shares of Company Common Stock equal to the Stock
Percentage (as defined below), rounded to the nearest whole share (the "Mixed
Stock Shares"), and the Per Share Cash Consideration in respect of that portion
of such holder's shares of Company Common Stock equal to the Cash Percentage (as
defined below), rounded to the nearest whole share (the "Mixed Cash Shares," and
together with the Mixed Stock Shares, the "Mixed Election Shares"), or to make
no election with respect to such holder's Company Common Stock ("No Election
Shares"). Any Company Common Stock with respect to which the Exchange Agent has
not received an effective, properly completed Election Form on or before 5:00
p.m., on the 33rd day following the Mailing Date (or such other time and date as
Parent and the Company may mutually agree) (the "Election Deadline") shall also
be deemed to be "No Election Shares." "Cash Percentage" shall mean the quotient,
rounded to the nearest thousandth, obtained by dividing (A) the quotient
obtained by dividing the Total Cash Amount by the Per Share Consideration, by
(B) the total number of shares of Company Common Stock outstanding as of the
close of business on the Determination Date. "Stock Percentage" shall mean the
amount equal to one (1) minus the Cash Percentage.
(c) Parent shall make available one or more Election Forms as may
reasonably be requested from time to time by all persons who become holders (or
beneficial owners) of Company Common Stock between the Election Form Record Date
and the close of business on the business day prior to the Election Deadline,
and the Company shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
(d) Any such 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 (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of Company
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Company Common Stock represented by such
Election Form shall become No Election Shares and Parent shall cause the
certificates representing Company Common Stock to be promptly returned without
charge to the Person submitting the Election Form upon written request to that
effect from the holder who submitted the Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of Parent regarding such matters
shall be binding and conclusive. Neither Parent nor the Exchange Agent shall be
under any obligation to notify any person of any defect in an Election Form.
(e) Within ten business days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, Parent shall cause the Exchange Agent to effect the allocation
among the holders of Company Common Stock of rights to receive Parent Common
Stock or cash in the Merger in accordance with the Election Forms as follows:
(i) Cash Election Shares and Mixed Cash Shares More Than Total
Cash Amount. If the aggregate cash amount that would be paid upon the
conversion in the Merger of the Cash Election Shares and the Mixed Cash
Shares is greater than the Total Cash Amount, then:
(A) all Mixed Stock Shares, Stock Election Shares and No
Election Shares shall be converted into the right to receive the Per
Share Stock Consideration,
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(B) the Exchange Agent shall then select from among the Cash
Election Shares, by a pro rata selection process, a sufficient number
of shares ("Stock Designated Shares") such that the aggregate cash
amount that will be paid in the Merger equals as closely as practicable
the Total Cash Amount, and all Stock Designated Shares shall be
converted into the right to receive the Per Share Stock Consideration,
and
(C) the Cash Election Shares that are not Stock Designated
Shares and all Mixed Cash Shares will be converted into the right to
receive the Per Share Cash Consideration.
(ii) Cash Election Shares Plus Mixed Cash Shares Less Than
Total Cash Amount. If the aggregate cash amount that would be paid upon
conversion in the Merger of the Cash Election Shares and the Mixed Cash
Shares is less than the Total Cash Amount, then:
(A) all Cash Election Shares and Mixed Cash Shares shall be
converted into the right to receive the Per Share Cash Consideration,
(B) the Exchange Agent shall then select first from among the
No Election Shares and then (if necessary) from among the Stock
Election Shares, by a pro rata selection process, a sufficient number
of shares ("Cash Designated Shares") such that the aggregate cash
amount that will be paid in the Merger equals as closely as practicable
the Total Cash Amount, and all Cash Designated Shares shall be
converted into the right to receive the Per Share Cash Consideration,
and
(C) the Stock Election Shares and the No Election shares that
are not Cash Designated Shares and all Mixed Stock Shares shall be
converted into the right to receive the Per Share Stock Consideration.
(iii) Cash Election Shares and Mixed Cash Shares Equal to
Total Cash Amount. If the aggregate cash amount that would be paid upon
conversion in the Merger of the Cash Election Shares and the Mixed Cash
Shares is equal or nearly equal (as determined by the Exchange Agent)
to the Total Cash Amount, then subparagraphs (i) and (ii) above shall
not apply and all Cash Election Shares and Mixed Cash Shares shall be
converted into the right to receive the Per Share Cash Consideration
and all Stock Election Shares, Mixed Stock Shares and No Election
Shares shall be converted into the right to receive the Per Share Stock
Consideration.
(f) The pro rata selection process to be used by the Exchange
Agent shall consist of such equitable pro ration processes as shall be
mutually determined by Parent and the Company.
1.6 Stock Options. (a) At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock, other than options granted
under the ESPP (as defined in Section 4.2) (each a "Company Option"), which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Company Common Stock and shall be converted
automatically into a fully-vested option to purchase shares of Parent Common
Stock in an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company's 1995 Nonstatutory Stock Option
Plan, as amended (the "Company Option Plan"), the agreements evidencing grants
thereunder and any other agreements between the Company and an optionee
regarding Company Options):
(1) the number of shares of Parent Common Stock to be subject
to the new option shall be equal to the product of the number of shares
of Company Common Stock subject to the original option and the Per
Share Stock Consideration, provided that any fractional shares of
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Parent Common Stock resulting from such multiplication shall be rounded
down to the nearest whole share; and
(2) the exercise price per share of Parent Common Stock under
the new option shall be equal to the exercise price per share of
Company Common Stock under the original option divided by the Per Share
Stock Consideration, provided that such exercise price shall be rounded
up to the nearest cent.
(b) Prior to the Effective Time, Parent shall reserve for issuance the
number of shares of Parent Common Stock necessary to satisfy Parent's
obligations under this Section 1.6. Parent shall file with the Securities and
Exchange Commission (the "SEC"), no later than two business days after the
Effective Time, a registration statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Parent Common Stock subject to options to acquire Parent Common Stock
issued pursuant to Section 1.6(a) hereof, and shall use its best efforts to
maintain the current status of the prospectus contained therein, as well as
comply with applicable state securities or "blue sky" laws, for so long as such
options remain outstanding; provided, however, that Parent shall only be
required to file and maintain the effectiveness of such registration statement
with respect to options that are eligible to be registered on a Form S-8.
(c) Prior to the Effective Time, Parent and the Company shall take all
such steps as may be required to cause any acquisitions of Parent equity
securities (including derivative securities with respect to any Parent equity
securities) and dispositions of Company equity securities (including derivative
securities with respect to any Company equity securities) resulting from the
transactions contemplated by this Agreement by each individual who is
anticipated to be subject to the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") with
respect to Parent or who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company, to be exempt under Rule
16b-3 promulgated under the Exchange Act.
1.7 Parent Common Stock. Except for shares of Parent Common Stock owned by
the Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares), which shall be converted into treasury stock of Parent as contemplated
by Section 1.4 hereof, the shares of Parent Common Stock issued and outstanding
immediately prior to the Effective Time shall be unaffected by the Merger and
such shares shall remain issued and outstanding.
1.8 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Parent, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation.
1.9 Bylaws. At the Effective Time, the Bylaws of Parent, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.10 Directors and Officers.
(a) At and after the Effective Time, the directors of Parent shall
consist of all of the directors of Parent serving immediately prior to the
Effective Time and the additional person who shall become a director of Parent
in accordance with Section 7.12 hereof, each to hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
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(b) The officers of Parent immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
1.11 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and that this Agreement shall constitute a plan
of reorganization for the purposes of Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares and Cash Available. At or prior to the Effective
Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust
company (which may be a Subsidiary of Parent) (the "Exchange Agent") selected by
Parent and reasonably satisfactory to the Company, for the benefit of the
holders of Certificates, for exchange in accordance with this Article II, (i)
certificates representing the shares of Parent Common Stock to be issued
pursuant to Section 1.4 and Section 2.2(a) in exchange for outstanding shares of
Company Common Stock, (ii) such cash as shall be necessary to pay the Per Share
Cash Consideration in accordance with Section 1.4 and 2.2(a) hereof, and (iii)
the cash in lieu of fractional shares to be paid in accordance with Section
2.2(e) hereof. Such cash and certificates for shares of Parent Common Stock,
together with any dividends or distributions with respect thereto, are
hereinafter referred to as the "Exchange Fund."
2.2 Exchange of Shares. (a) As soon as practicable after the Effective
Time, and in no event more than five business days thereafter, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates who
theretofore has not submitted such holder's Certificate or Certificates with an
Election Form, 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 to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. The Company shall have the right to review both the letter
of transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. After completion of the allocation procedure set
forth in Section 1.5 and upon surrender of a Certificate or Certificates for
exchange and cancellation to the Exchange Agent, together with a properly
executed letter of transmittal or Election Form, as the case may be, the holder
of such Certificate or Certificates shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of Parent
Common Stock which such holder of Company Common Stock became entitled to
receive pursuant to the provisions of Article I hereof and/or (y) a check
representing the aggregate Per Share Cash Consideration and/or the amount of
cash in lieu of fractional shares, if any, which such holder has the right to
receive in respect of the Certificate or Certificates surrendered pursuant to
the provisions of Article I, and the Certificate or Certificates so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the Per
Share Cash Consideration, the cash in lieu of fractional shares or the unpaid
dividends and distributions, if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to Parent Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II, the
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record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Parent Common Stock represented by such
Certificate.
(c) If any certificate representing shares of Parent Common Stock is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or required
for any other reason, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Parent Common Stock or cash or both, as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of
Parent. In lieu of the issuance of any such fractional share, Parent shall pay
to each former stockholder of the Company who otherwise would be entitled to
receive a fractional share of Parent Common Stock an amount in cash determined
by multiplying (i) the average of the closing sale prices of Parent Common Stock
on the NASDAQ/NMS as reported by The Wall Street Journal for the five trading
days immediately preceding the date on which the Effective Time shall occur by
(ii) the fraction of a share of Parent Common Stock which such holder would
otherwise be entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for twelve months after the Effective Time shall be
paid to Parent. Any stockholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of the Merger Consideration, the cash in lieu of fractional shares and/or the
unpaid dividends and distributions on the Parent Common Stock deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Parent, the Company, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Company Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in respect thereof
pursuant to this Agreement.
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ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules. Prior to the execution and delivery of this
Agreement, the Company has delivered to Parent, and Parent has delivered to the
Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Parent, the "Parent Disclosure Schedule") setting
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 of such party's
representations or warranties contained in Article IV, in the case of the
Company, or Article V, in the case of Parent, or to one or more of such party's
covenants contained in Article VI; provided, however, that notwithstanding
anything in this Agreement to the contrary (a) no such item is required to be
set forth in the Disclosure Schedule as an exception to a representation or
warranty if its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard established by
Section 3.2, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or material fact, event
or circumstance or that such item has had or would have a Material Adverse
Effect (as defined herein) with respect to either the Company or Parent,
respectively.
3.2 Standards. (a) No representation or warranty of the Company contained
in Article IV or of Parent contained in Article V shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached a representation or warranty for any purpose under this
Agreement, in any case as a consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
when taken together with all other facts, circumstances or events inconsistent
with any representations or warranties contained in Article IV, in the case of
the Company, or Article V, in the case of Parent, has had a Material Adverse
Effect with respect to the Company or Parent, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Parent or the Company, as the case may be, a material adverse
effect on (i) the business, results of operations or financial condition of such
party and its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (v) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (w) any change in GAAP (as defined herein)
or regulatory accounting principles applicable to banks, thrifts or their
holding companies generally, (x) changes attributable to or resulting from
changes in general economic conditions, including changes in the prevailing
level of interest rates, (y) any action or omission of the Company or Parent or
any Subsidiary of either of them taken with the prior written consent of the
other party hereto, or (z) any expenses incurred by such party in connection
with this Agreement or the transactions contemplated hereby or (ii) the ability
of such party and its Subsidiaries to consummate the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and warrants to
Parent as follows:
4.1 Corporate Organization. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. The Company has the corporate power and authority to own or lease all
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of its properties and assets and to carry on its business as it is now being
conducted, and is duly 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. The Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The Articles of Incorporation and Bylaws of the Company, copies of which have
previously been made available to Parent, are true and correct copies of such
documents as in effect as of the date of this Agreement. As used in this
Agreement, the word "Subsidiary" when used with respect to any party means any
corporation, partnership or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial reporting
purposes.
(b) The Company Bank is a Florida-chartered stock commercial bank duly
organized, validly existing and in good standing under the laws of Florida. The
deposit accounts of the Company Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Savings Association Insurance
Fund or the Bank Insurance Fund to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due. Each of the Company's other Subsidiaries is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the Company's Subsidiaries 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 duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or the location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
Except as may be set forth on Section 4.1(b) of the Company Disclosure Schedule,
the articles of incorporation, bylaws and similar governing documents of each
Subsidiary of the Company, copies of which have previously been made available
to Parent, are true and correct copies of such documents as in effect as of the
date of this Agreement.
(c) The minute books of the Company and each of its Subsidiaries contain
true and correct records of all meetings and other corporate actions held or
taken since December 31, 1999 of their respective stockholders and Boards of
Directors (including committees of their respective Boards of Directors).
4.2 Capitalization. (a) The authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock, and 1,000,000 shares of
Class A Preferred stock, par value $5.00 per share (the "Company Preferred
Stock"). As of the date of this Agreement, there were 7,941,221 shares of
Company Common Stock issued and outstanding (including 9,046 shares held in
escrow by the Company's transfer agent representing shares to be issued to
former stockholders of Citizens National Bank and Trust Company ("Citizens") in
connection with the Amended and Restated Agreement and Plan of Merger, dated
October 16, 1997, by and among the Company, the Company Bank and Citizens), no
shares of Company Common Stock held by the Company as treasury stock and no
shares of Company Preferred Stock issued or outstanding. As of the date of this
Agreement, there were no shares of Company Common Stock reserved for issuance
upon exercise of outstanding stock options or otherwise except for (x) 865,809
shares of Company Common Stock reserved pursuant to the Company Option Plan, and
(y) 22,000 shares of Company Common Stock reserved pursuant to the Company's
employee stock purchase plan ("ESPP"). All of the issued and outstanding shares
of Company Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except as referred to above or
reflected in Section 4.2(a) of the Company Disclosure Schedule, the Company does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Company Common Stock or any other equity security of
the Company or any securities representing the right to purchase or otherwise
receive any shares of Company Common Stock or any other equity security of the
Company. The names of the optionees, the date of each option to purchase Company
10
Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, and the price at which each such option may
be exercised under the Company Option Plan are set forth in Section 4.2(a) of
the Company Disclosure Schedule.
(b) Section 4.2(b)of the Company Disclosure Schedule sets forth a true
and correct list of all of the Subsidiaries of the Company. Except as set forth
in Section 4.2(b) of the Company Disclosure Schedule, the Company owns, directly
or indirectly, all of the issued and outstanding shares of the capital stock of
each of such Subsidiaries, free and clear of all liens, charges, encumbrances
and security interests whatsoever, and all of such shares are duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No
Subsidiary of the Company has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
4.3 Authority; No Violation. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company. The Board of
Directors of the Company has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company's stockholders for approval at a
meeting of such stockholders and, except for the adoption of this Agreement by
the requisite vote of the Company's stockholders, no other corporate proceedings
on the part of the Company are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Except as may be set forth in Section 4.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions
hereof, will (i) violate any provision of the Articles of Incorporation or
Bylaws of the Company or the articles of incorporation, bylaws or similar
governing documents of any of its Subsidiaries, or (ii) assuming that the
consents and approvals referred to in Section 4.4 hereof are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to the Company or any of its Subsidiaries, or
any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets
may be bound or affected.
4.4 Consents and Approvals. Except for (a) the filing with the SEC of a
proxy statement in definitive form relating to the meeting of the Company's
stockholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Proxy Statement"), (b) the approval of this Agreement
11
by the requisite vote of the stockholders of the Company, (c) the filing of
applications and notices, as applicable, with the FDIC under the Bank Merger
Act, Federal Deposit Insurance Act and the rules and regulations of the FDIC,
and approval of such applications and notices, (d) the filing of such
applications, filings, authorizations, orders and approvals as may be required
under applicable state law (the "State Banking Approvals"), and (e) such
filings, authorizations or approvals as may be set forth in Section 4.4 of the
Company Disclosure Schedule, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or with
any third party are required to be made by the Company in connection with (1)
the execution and delivery by the Company of this Agreement and (2) the
consummation by the Company of the Merger and the other transactions
contemplated hereby.
4.5 SEC Reports. The Company has previously made available to Parent a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 1999 by the
Company with the SEC pursuant to the Securities Act or the Exchange Act (the
"Company Reports") and (b) communication mailed by the Company to its
shareholders since December 31, 1999, and no such Company Report (when filed and
at their respective effective time, if applicable) or communication (when
mailed) contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading, except that information as of a later date shall be deemed to
modify information as of an earlier date. The Company has timely filed all
Company Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act since December 31, 1999, and, as of their
respective dates, all Company Reports complied with the published rules and
regulations of the SEC with respect thereto.
4.6 Regulatory Reports. The Company and each of its Subsidiaries 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 since December 31, 1999 with (i) the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), (ii) the FDIC, (iii) the Office of
the Comptroller of the Currency (the "OCC"), (iv) any state banking commissions
or any other state bank regulatory authority (each a "State Regulator") and (v)
any other self-regulatory organization ("SRO") (collectively, the "Regulatory
Agencies"), and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of the Company and its Subsidiaries, and
except as may be set forth in Section 4.6 of the Company Disclosure Schedule, no
Regulatory Agency has initiated any proceeding or, to the knowledge of the
Company, investigation into the business or operations of the Company or any of
its Subsidiaries since December 31, 1999. There is no unresolved violation,
criticism, or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Company or any of its
Subsidiaries.
4.7 Financial Statements. The Company has previously made available to
Parent copies of the consolidated balance sheets of the Company and its
Subsidiaries as of December 31 for the fiscal years 2000 and 2001, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for the fiscal years 1999 through 2001, inclusive, as reported in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001 filed
with the SEC under the Exchange Act, accompanied by the audit report of Hacker,
▇▇▇▇▇▇▇ & ▇▇▇▇▇ PA, independent public accountants with respect to the Company.
The December 31, 2001 consolidated balance sheet of the Company (including the
related notes, where applicable) fairly presents the consolidated financial
position of the Company and its Subsidiaries as of the date thereof, and the
other financial statements referred to in this Section 4.7 (including the
related notes, where applicable) fairly present, and the financial statements to
be filed with the SEC after the date hereof will fairly present (subject, in the
case of the unaudited statements, to recurring audit adjustments normal in
nature and amount), the results of the consolidated operations and consolidated
financial position of the Company and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
12
(including the related notes, where applicable) complies, and the financial
statements to be filed with the SEC after the date hereof will comply, with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been, and the financial statements to be
filed with the SEC after the date hereof will be, prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC. The books and
records of the Company and its Subsidiaries have been, and are being, maintained
in accordance with GAAP and any other applicable legal and accounting
requirements.
4.8 Broker's Fees. Neither the Company nor any Subsidiary of the Company
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement,
except that the Company has engaged, and will pay a fee or commission to,
Sandler ▇'▇▇▇▇▇ & Partners, L.P. ("Sandler ▇'▇▇▇▇▇") in accordance with the
terms of a letter agreement between Sandler ▇'▇▇▇▇▇ and the Company, a true and
correct copy of which has been previously made available by the Company to
Parent.
4.9 Absence of Certain Changes or Events. (a) Except as may be set forth in
Section 4.9(a) of the Company Disclosure Schedule, or as disclosed in any
Company Report (as defined in Section 4.5) filed with the SEC prior to the date
of this Agreement, since December 31, 2001 there has been no change or
development or combination of changes or developments which, individually or in
the aggregate, has had a Material Adverse Effect on the Company.
(b) Except as may be set forth in Section 4.9(b) of the Company
Disclosure Schedule or any Company Report filed with the SEC prior to the date
of this Agreement, since December 31, 2001 the Company and its Subsidiaries have
carried on their respective businesses in the ordinary course consistent with
their past practices.
(c) Except as may be set forth in Section 4.9(c) of the Company
Disclosure Schedule, since December 31, 2001 neither the Company nor any of
its Subsidiaries has (i) increased the wages, salaries, compensation, pension,
or other fringe benefits or perquisites payable to any executive officer,
employee, or director from the amount thereof in effect as of December 31, 2001,
granted any severance or termination pay, entered into any contract to make
or grant any severance or termination pay, or paid any bonus (except for salary
increases and bonus payments made in the ordinary course of business consistent
with past practices), (ii) suffered any strike, work stoppage, slow-down, or
other labor disturbance, (iii) been a party to a collective bargaining
agreement, contract or other agreement or understanding with a labor union or
organization, or (iv) had any union organizing activities.
4.10 Legal Proceedings. (a) Except as may be set forth in Section 4.10 of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to any, and there are no pending or, to the Company's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as may be set forth in Section 4.10(b) of the Company
Disclosure Schedule, there is no injunction, order, judgment or decree imposed
upon the Company, any of its Subsidiaries or the assets of the Company or any
of its Subsidiaries.
13
4.11 Taxes. (a) Except as may be set forth in Section 4.11(a) of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has (i)
duly and timely filed (including applicable extensions granted without penalty)
all material Tax Returns (as hereinafter defined) required to be filed at or
prior to the Effective Time, and all such Tax Returns are true and correct, and
(ii) paid in full or made adequate provision in the financial statements of the
Company (in accordance with GAAP) for all material Taxes (as hereinafter
defined) shown to be due on such Tax Returns. Except as set forth in Section
4.11(a) of the Company Disclosure Schedule, (i) as of the date hereof neither
the Company nor any of its Subsidiaries has requested any extension of time
within which to file any Tax Returns in respect of any fiscal year which have
not since been filed and no request for waivers of the time to assess any Taxes
are pending or outstanding, and (ii) as of the date hereof, with respect to each
taxable period of the Company and its Subsidiaries, the federal and state income
Tax Returns of the Company and its Subsidiaries have been audited by the
Internal Revenue Service ("IRS") or appropriate state tax authorities or the
time for assessing and collecting income Tax with respect to such taxable period
has closed and such taxable period is not subject to review.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) with respect to Taxes.
4.12 Employees. (a) Section 4.12(a) of the Company Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company, any of its Subsidiaries or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), all of
which together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of the Company, any Subsidiary or any ERISA Affiliate (the "Plans") .
(b) The Company has heretofore made available to Parent with respect to
each of the Plans true and correct copies of each of the following documents, if
applicable: (i) the Plan document; (ii) the actuarial report for such Plan for
each of the last two years, (iii) the most recent determination letter from the
IRS for such Plan and (iv) the most recent summary plan description and related
summaries of material modifications.
(c) Except as may be set forth in Section 4.12(c) of the Company
Disclosure Schedule: each of the Plans is in compliance with the applicable
provisions of the Code and ERISA; each of the Plans intended to be "qualified"
within the meaning of section 401(a) of the Code has received a favorable
determination letter from the IRS; no Plan has an accumulated or waived funding
deficiency within the meaning of section 412 of the Code; neither the Company
nor any ERISA Affiliate has incurred, directly or indirectly, any liability to
or on account of a Plan pursuant to Title IV of ERISA (other than PBGC
premiums); to the knowledge of the Company no proceedings have been instituted
to terminate any Plan that is subject to Title IV of ERISA; no "reportable
event," as such term is defined in section 4043(c) of ERISA, has occurred with
respect to any Plan (other than a reportable event with respect to which the
thirty day notice period has been waived); and no condition exists that presents
a material risk to the Company of incurring a liability to or on account of
a Plan pursuant to Title IV of ERISA; no Plan is a multiemployer plan (within
the meaning of section 4001(a)(3) of ERISA and no Plan is a multiple employer
14
plan as defined in Section 413 of the Code; and there are no pending, or to the
knowledge of the Company, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto.
4.13 Company Information. The information relating to the Company and its
Subsidiaries which is provided to Parent by the Company for inclusion in the
Proxy Statement and the registration statement on Form S-4 (the "S-4") in which
the Proxy Statement will be included as a prospectus, or in any other document
filed with any other regulatory agency in connection herewith, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Proxy Statement (except for such portions
thereof that relate to Parent or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
4.14 Compliance with Applicable Law. The Company and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has received notice of any violations of any of the above.
4.15 Certain Contracts. (a) Except as set forth in Section 4.15(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to or bound by any contract (whether written or oral) (i) with respect
to the employment of any directors, officers, employees or consultants, (ii)
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 or benefits (whether of severance pay or otherwise)
becoming due, or the acceleration or vesting of any rights to any payment or
benefits, from Parent, the Company, the Surviving Corporation or any of their
respective Subsidiaries to any officer, director, employee or consultant of the
Company or any of its Subsidiaries, (iii) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement, regardless of whether the contract has been filed or
incorporated by reference in the Company Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 90 days or less notice involving the payment of
more than $250,000 per annum, or (v) which materially restricts the conduct of
any line of business by the Company or any of its Subsidiaries. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.15(a), whether or not set forth in Section 4.15(a) of the Company Disclosure
Schedule, is referred to herein as a "Company Contract". The Company has
previously delivered or made available to Parent true and correct copies of each
contract, arrangement, commitment or understanding of the type described in this
Section 4.15(a).
(b) Except as set forth in Section 4.15(b) of the Company Disclosure
Schedule, (i) each Company Contract is valid and binding and in full force and
effect, (ii) the Company and each of its Subsidiaries has performed all
obligations required to be performed by it to date under each Company Contract,
(iii) no event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a default on the part of the Company or any
of its Subsidiaries under any Company Contract, and (iv) no other party to any
Company Contract is, to the knowledge of the Company, in default in any respect
thereunder.
15
4.16 Agreements with Regulatory Agencies. Except as may be set forth in
Section 4.16 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is subject to any cease-and-desist or other 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, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth on Section 4.16 of the Company
Disclosure Schedule, a "Regulatory Agreement"), any Regulatory Agency that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
the Company or any of its Subsidiaries been advised by any Regulatory Agency
that it is considering issuing or requesting any Regulatory Agreement.
4.17 Environmental Matters. Except as may be set forth in Section 4.17 of
the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and, to the knowledge of
the Company, each of the Participation Facilities and the Loan Properties (each
as hereinafter defined), are in compliance with all applicable federal, state
and local laws, including common law, regulations and ordinances, and with all
applicable decrees, orders and contractual obligations relating to pollution or
the discharge of, or exposure to, Hazardous Materials (as hereinafter defined)
in the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of the Company, threatened, before any Governmental Entity or other
forum in which the Company, any of its Subsidiaries, any Participation Facility
or any Loan Property, has been or, with respect to threatened proceedings, may
be, named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by the Company or any of its
Subsidiaries, any Participation Facility or any Loan Property; and
(c) To the knowledge of the Company, during the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property, there
has been no release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property, there
was no release of Hazardous Materials in, on, under or affecting any such
property, Participation Facility or Loan Property.
The following definitions apply for purposes of this Section 4.17: (x)
"Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, (y)
"Loan Property" means any property in which the Company or any of its
Subsidiaries holds a security interest, and, where required by the context, such
term means the owner or operator of such property; and (z) "Participation
Facility" means any facility in which the Company or any of its Subsidiaries
participates in the management and, where required by the context, such term
means the owner or operator of such property.
4.18 Opinion. Prior to the execution of this Agreement, the Company has
received an opinion from Sandler ▇'▇▇▇▇▇ to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the Merger
16
Consideration to be received by the stockholders of the Company is fair to such
stockholders from a financial point of view. Such opinion has not been amended
or rescinded as of the date of this Agreement.
4.19 Approvals. As of the date of this Agreement, the Company knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
should not be obtained.
4.20 Loan Portfolio. (a) Except as may be set forth in Section 4.20 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any written or oral (i) loan agreement, note or borrowing arrangement
(including, without limitation, leases, credit enhancements, commitments,
guarantees and interest-bearing assets) (collectively, "Loans"), other than
Loans the unpaid principal balance of which does not exceed $250,000, under the
terms of which the obligor was, as of February 28, 2002, over 90 days delinquent
in payment of principal or interest or in default of any other provision, or
(ii) Loan with any director, executive officer or five percent or greater
stockholder of the Company or any of its Subsidiaries, or to the knowledge of
the Company, any person, corporation or enterprise controlling, controlled by or
under common control with any of the foregoing. Section 4.20 of the Company
Disclosure Schedule sets forth (i) all of the Loans of the Company or any of its
Subsidiaries that as of February 28, 2002, were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit
Risk Assets", "Concerned Loans", "Watch List" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, and (ii) each asset of
the Company that as of February 28, 2002, was classified as "Other Real Estate
Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess of $250,000 (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.21 Property. Each of the Company and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, which are reflected on the
consolidated balance sheet of the Company as of December 31, 2001 or acquired
after such date, except (i) liens for taxes not yet due and payable or contested
in good faith by appropriate proceedings, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of business, (iii) such
imperfections of title, easements and encumbrances, if any, as do not interfere
with the use of the respective property as such property is used on the date of
this Agreement, (iv) for dispositions of or encumbrances on such properties or
assets in the ordinary course of business or (v) mechanics', materialmen's,
workmen's, repairmen's, warehousemen's, carrier's and other similar liens and
encumbrances arising in the ordinary course of business. All leases pursuant to
which the Company or any Subsidiary of the Company, as lessee, leases real or
personal property are valid and enforceable in accordance with their respective
terms and neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, any other party thereto, is in default thereunder.
4.22 Reorganization. As of the date of this Agreement, the Company has no
reason to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the Code.
17
4.23 State Takeover Laws and Charter Provisions. Assuming the accuracy of
the representations and warranties of Parent set forth in Section 5.15 hereof,
the Company has taken all necessary action to exempt the transactions
contemplated by this Agreement from any restrictive provision of (i) any
applicable moratorium, control share, fair price, business combination, or other
anti-takeover laws and regulations (including, without limitation, Sections
607.0901 and 607.0902 of the FBCA), or (ii) the Articles of Incorporation or
Bylaws of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Subject to Article III, Parent hereby represents and warrants to the
Company as follows:
5.1 Corporate Organization. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina. Parent 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 duly 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. Parent is duly registered as a bank holding company
under the BHC Act. The Articles of Incorporation and Bylaws of Parent, copies of
which have previously been made available to the Company, are true and correct
copies of such documents as in effect as of the date of this Agreement.
(b) Each Subsidiary of Parent is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary of Parent 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 duly 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. The deposit accounts of each
Subsidiary of Parent that is a bank are insured by the FDIC through the Bank
Insurance Fund or the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid when due. The charter documents and bylaws of each
Subsidiary of Parent that is a "Significant Subsidiary" (within the meaning of
Rule 1-02 of Regulation S-X of the SEC), copies of which have previously been
made available to the Company, are true and correct copies of such documents as
in effect as of the date of this Agreement.
(c) The minute books of Parent and each of its Subsidiaries contain true
and correct records of all meetings and other corporate actions held or taken
since December 31, 1999 of their respective stockholders and Boards of Directors
(including committees of their respective Boards of Directors).
5.2 Capitalization. (a) The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, no par value per share ("Parent Preferred Stock"). As of the date of this
Agreement, there were 41,296,522 shares of Parent Common Stock and no shares of
Parent Preferred Stock issued and outstanding, and no shares of Parent Common
Stock held in Parent's treasury. As of the date of this Agreement, no shares of
Parent Common Stock or Parent Preferred Stock were reserved for issuance, except
that (i) 6,415,373 shares of Parent Common Stock were reserved for issuance upon
the exercise of stock options pursuant to the stock plans listed on Attachment
A-1 to Section 5.2(a) of the Parent Disclosure Schedule (collectively, the
18
"Parent Stock Plans"), and (ii) 20,614,488 shares of Parent Common Stock were
reserved for issuance upon exercise of the rights (the "Parent Rights")
distributed to holders of Parent Common Stock pursuant to the Amended and
Restated Shareholder Rights Agreement, dated as of November 9, 1993, between
Parent and Carolina First Bank, as Rights Agent (the "Parent Shareholder Rights
Agreement"). All of the issued and outstanding shares of Parent Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except as referred to above
or reflected in Section 5.2(a) of the Parent Disclosure Schedule and except for
the Parent Shareholder Rights Agreement, Parent does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of Parent Common Stock or any other equity securities of Parent or any
securities representing the right to purchase or otherwise receive any shares of
Parent Common Stock or Parent Preferred Stock or any other equity securities of
Parent. The shares of Parent Common Stock to be issued pursuant to the Merger
will be duly authorized and validly issued and, at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(b) Section 5.2(b) of the Parent Disclosure Schedule sets forth a true
and correct list of all of the Parent Subsidiaries as of the date of this
Agreement. Except as may be set forth in Section 5.2(b) of the Parent Disclosure
Schedule, as of the date of this Agreement, Parent owns, directly or indirectly,
all of the issued and outstanding shares of capital stock of each of the
Subsidiaries of Parent, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. As of the date of
this Agreement, no Subsidiary of Parent has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character with any party calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.
5.3 Authority; No Violation. (a) Parent has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(b) Except as may be set forth in Section 5.3(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent, nor the consummation by Parent of the transactions contemplated hereby,
nor compliance by Parent with any of the terms or provisions hereof, will (i)
violate any provision of the Articles of Incorporation or Bylaws of Parent, or
the articles of incorporation or bylaws or similar governing documents of any of
its Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Parent or
any of its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
19
charge or other encumbrance upon any of the respective properties or assets of
Parent or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
5.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, and
approval of such applications and notices, (b) the filing with the SEC of the
Proxy Statement and the filing and declaration of effectiveness of the S-4, (c)
the filing of the Florida Articles of Merger with the Florida Department and the
South Carolina Articles of Merger with the South Carolina Secretary, (d) the
filing of applications and notices, as applicable, with the FDIC under the Bank
Merger Act, Federal Deposit Insurance Act and the rules and regulations of the
FDIC, and approval of such applications and notices, (e) the State Banking
Approvals, (f) such filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states in connection with the
issuance of the shares of Parent Common Stock pursuant to this Agreement, (g)
approval of the listing of the Parent Common Stock to be issued in the Merger on
the NASDAQ/NMS, and (h) such filings, authorizations or approvals as may be set
forth in Section 5.4 of the Parent Disclosure Schedule, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are required to be made by Parent in connection with (1) the execution and
delivery by Parent of this Agreement and (2) the consummation by Parent of the
Merger and the other transactions contemplated hereby.
5.5 SEC Reports. Parent has previously made available to the Company a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 1999 by Parent
with the SEC pursuant to the Securities Act or the Exchange Act (the "Parent
Reports") and (b) communication mailed by Parent to its shareholders since
December 31, 1999, and no such Parent Report (when filed and at their respective
effective time, if applicable) or communication (when mailed) contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. Parent has timely filed all Parent Reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act since December 31, 1999, and, as of their respective dates, all Parent
Reports complied with the published rules and regulations of the SEC with
respect thereto.
5.6 Regulatory Reports. Parent and each of its Subsidiaries 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 since
December 31, 1999 with any Regulatory Agency, and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Parent and its Subsidiaries, and except as may be set forth in
Section 5.6 of Parent Disclosure Schedule, no Regulatory Agency has initiated
any proceeding or, to the knowledge of Parent, investigation into the business
or operations of Parent or any of its Subsidiaries since December 31, 1999.
There is no unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
Parent or any of its Subsidiaries.
5.7 Financial Statements. Parent has previously made available to the
Company copies of the consolidated balance sheets of Parent and its Subsidiaries
as of December 31 for the fiscal year 2001 and 2000 and the related consolidated
statements of income, changes in shareholders' equity and comprehensive income,
and cash flows for the fiscal years 1999 through 2001, inclusive, as reported in
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
filed with the SEC under the Exchange Act, accompanied by the audit report of
KPMG LLP, independent public accountants with respect to Parent. The December
31, 2001 consolidated balance sheet of Parent (including the related notes,
20
where applicable) fairly presents the consolidated financial position of Parent
and its Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 5.7 (including the related notes, where applicable)
fairly present and the financial statements to be filed with the SEC after the
date hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and changes in shareholders' equity and
consolidated financial position of Parent and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) complies, and
the financial statements to be filed with the SEC after the date hereof will
comply, with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements to be filed with the SEC after the date hereof will be, prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
5.8 Broker's Fees. Neither Parent nor any Subsidiary of Parent, nor any of
their respective officers or directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that Parent has engaged, and will pay a fee or commission to, SunTrust ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Capital Markets.
5.9 Absence of Certain Changes or Events. Except as may be set forth in
Section 5.9 of the Parent Disclosure Schedule, or as disclosed in any Parent
Report (as defined in Section 5.5) filed with the SEC prior to the date of this
Agreement, since December 31, 2001, there has been no change or development or
combination of changes or developments which, individually or in the aggregate,
has had a Material Adverse Effect on Parent.
5.10 Legal Proceedings. (a) Except as may be set forth in Section 5.10 of
the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any and there are no pending or, to Parent's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent or any of
its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement.
(b) There is no injunction, order, judgment or decree imposed upon
Parent, any of its Subsidiaries or the assets of Parent or any of its
Subsidiaries.
5.11 Taxes. Except as may be set forth in Section 5.11 of the Parent
Disclosure Schedule, each of Parent and its Subsidiaries has (i) duly and timely
filed (including applicable extensions granted without penalty) all material Tax
Returns required to be filed at or prior to the Effective Time, and all such Tax
Returns are true and correct, and (ii) paid in full or made adequate provision
in the financial statements of Parent (in accordance with GAAP) for all material
Taxes shown to be due on such Tax Returns. Except as set forth in Section 5.11
of the Parent Disclosure Schedule, (i) as of the date hereof, neither Parent nor
any of its Subsidiaries has requested any extension of time within which to file
21
any Tax Returns in respect of any fiscal year which have not since been filed
and no request for waivers of the time to assess any Taxes are pending or
outstanding, and (ii) as of the date hereof, with respect to each taxable period
of Parent and its Subsidiaries, the federal and state income Tax Returns of
Parent and its Subsidiaries have been audited by the IRS or appropriate state
tax authorities or the time for assessing and collecting income Tax with respect
to such taxable period has closed and such taxable period is not subject to
review.
5.12 Employees. (a) Section 5.12(a) of the Parent Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of the ERISA); "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to as of the date of this
Agreement by Parent, any of its Subsidiaries or by any trade or business,
whether or not incorporated (a "Parent ERISA Affiliate"), all of which together
with Parent would be deemed a "single employer" within the meaning of Section
4001 of ERISA, for the benefit of any employee or former employee of Parent, any
Subsidiary or any Parent ERISA Affiliate (the "Parent Plans").
(b) Except as may be set forth in Section 5.12(b) of the Parent
Disclosure Schedule: each of the Parent Plans is in compliance with the
applicable provisions of the Code and ERISA; each of the Parent Plans intended
to be "qualified" within the meaning of section 401(a) of the Code has received
a favorable determination letter from the IRS; no Parent Plan has an accumulated
or waived funding deficiency within the meaning of section 412 of the Code;
neither Parent nor any Parent ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Parent Plan pursuant to Title IV
of ERISA (other than PBGC premiums); to the knowledge of Parent no proceedings
have been instituted to terminate any Parent Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in section 4043(c) of
ERISA, has occurred with respect to any Parent Plan (other than a reportable
event with respect to which the thirty day notice period has been waived); and
no condition exists that presents a material risk to Parent of incurring a
liability to or on account of a Parent Plan pursuant to Title IV of ERISA; no
Parent Plan is a multiemployer plan (within the meaning of section 4001(a)(3) of
ERISA and no Parent Plan is a multiple employer plan as defined in Section 413
of the Code; and there are no pending, or, to the knowledge of Parent,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Parent Plans or any trusts related thereto.
5.13 Parent Information. The information relating to Parent and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other
document filed with any other regulatory agency in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Proxy Statement (except for such portions
thereof that relate to the Company or any of its Subsidiaries) will comply with
the provisions of the Exchange Act and the rules and regulations thereunder. The
S-4 will comply with the provisions of the Securities Act and the rules and
regulations thereunder.
5.14 Compliance with Applicable Law. Parent and each of its Subsidiaries
holds, and has at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to Parent or any of its
Subsidiaries and neither Parent nor any of its Subsidiaries has received notice
of any violations of any of the above.
5.15 Ownership of Company Common Stock; Affiliates and Associates.
22
(a) Neither Parent nor any of its affiliates or associates (as such
terms are defined under the Exchange Act) (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Company (other than Trust Account Shares); and
(b) Neither Parent nor any of its Subsidiaries is a " Principal
Shareholder" (as such term is defined in Article X of the Company's Articles of
Incorporation), or an "interested shareholder" or an "associate" or "affiliate"
of any "interested shareholder" (as such terms are defined in Section 607.0901
of the FBCA).
5.16 Agreements with Regulatory Agencies. Except as may be set forth in
Section 5.16 of the Parent Disclosure Schedule or as disclosed in Parent's
Annual Report on Form 10-K for the year ended December 31, 2001, neither Parent
nor any of its Subsidiaries is subject to any cease-and-desist or other 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, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth in Section 5.16 of
the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any Regulatory
Agency that restricts the conduct of its business or that in any manner relates
to its capital adequacy, its credit policies, its management or its business,
nor has Parent or any of its Subsidiaries been advised by any Regulatory Agency
that it is considering issuing or requesting any Parent Regulatory Agreement.
5.17 Environmental Matters. Except as may be set forth in Section 5.17 of
the Parent Disclosure Schedule:
(a) Each of Parent and its Subsidiaries and, to the knowledge of
Parent, each of the Participation Facilities and the Loan Properties (each as
hereinafter defined), are in compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Parent, threatened, before any Governmental Entity or other forum
in which Parent, any of its Subsidiaries, any Participation Facility or any Loan
Property, has been or, with respect to threatened proceedings, may be, named as
a defendant (x) for alleged noncompliance (including by any predecessor) with
any Environmental Laws, or (y) relating to the release, threatened release or
exposure to any Hazardous Material (as defined in Section 4.17) whether or not
occurring at or on a site owned, leased or operated by Parent or any of its
Subsidiaries, any Participation Facility or any Loan Property; and
(c) To the knowledge of Parent during the period of (x) Parent's or any
of its Subsidiaries' ownership or operation of any of their respective current
or former properties, (y) Parent's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property. To the
knowledge of Parent, prior to the period of (x) Parent's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Parent's or any of its Subsidiaries' participation in the
management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there was no release of Hazardous
Materials in, on, under or affecting any such property, Participation Facility
or Loan Property.
The following definitions apply for purposes of this Section 5.17: (x)
"Loan Property" means any property in which Parent or any of its Subsidiaries
holds a security interest, and, where required by the context, such term means
the owner or operator of such property; and (y) "Participation Facility" means
any facility in which Parent or any of its Subsidiaries participates in the
23
management and, where required by the context, such term means the owner or
operator of such property.
5.18 Financing. Parent has available sufficient cash and cash equivalents
on hand to pay the Total Cash Amount as contemplated by Section 1.4 hereof.
5.19 Approvals. As of the date of this Agreement, Parent knows of no reason
why all regulatory approvals required for the consummation of the transactions
contemplated hereby (including, without limitation, the Merger) should not be
obtained.
5.20 Loan Portfolio. (a) Except as may be set forth in Section 5.20 of
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any written or oral (i) Loan, other than Loans the unpaid principal
balance of which does not exceed $500,000, under the terms of which the obligor
was, as of January 31, 2002, over 90 days delinquent in payment of principal or
interest or in default of any other provision, or (ii) Loan with any director,
executive officer or five percent or greater stockholder of Parent or any of its
Subsidiaries, or to the knowledge of Parent, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 5.20 of Parent Disclosure Schedule sets forth (i) all of the
Loans in original principal amount in excess of $500,000 of Parent or any of its
Subsidiaries that as of January 31, 2002, were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit
Risk Assets", "Concerned Loans", "Watch List" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, (ii) by category of Loan
(i.e., commercial, consumer, etc.), all of the other Loans of Parent and its
Subsidiaries that as of January 31, 2002, were classified as such, together with
the aggregate principal amount of and accrued and unpaid interest on such Loans
by category, and (iii) each asset of Parent that as of January 31, 2002, was
classified as "Other Real Estate Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess of $500,000 (i) is
evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
5.21 Property. Each of Parent and its Subsidiaries has good and marketable
title free and clear of all liens, encumbrances, mortgages, pledges, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, tangible or intangible, and which are reflected on the consolidated
balance sheet of Parent as of December 31, 2001 or acquired after such date,
except (i) liens for taxes not yet due and payable or contested in good faith by
appropriate proceedings, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of business, (iii) such imperfections of title,
easements and encumbrances, if any, as do not interfere with the use of the
respective property as such property is used on the date of this Agreement, (iv)
for dispositions of or encumbrances on such properties or assets in the ordinary
course of business or (v) mechanics', materialmen's, workmen's, repairmen's,
warehousemen's, carrier's and other similar liens and encumbrances arising in
the ordinary course of business. All leases pursuant to which Parent or any
Subsidiary of Parent, as lessee, leases real or personal property are valid and
enforceable in accordance with their respective terms and neither Parent nor any
of its Subsidiaries nor, to the knowledge of Parent, any other party thereto is
in default thereunder.
24
5.22 Reorganization. As of the date of this Agreement, Parent has no reason
to believe that the Merger will fail to qualify as a reorganization under
Section 368(a) of the Code.
5.23 Certain Contracts. (a) Except as set forth in Section 5.23(a) of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to or bound by any contract (whether written or oral) (i) with respect to
the employment of any directors, officers, employees or consultants, (ii) which
is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement, regardless of whether the
contract has been filed or incorporated by reference in the Company Reports, or
(iii) which materially restricts the conduct of any line of business by Parent
or any of its Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in this Section 5.23(a), whether or not set
forth in Section 5.23(a) of the Parent Disclosure Schedule, is referred to
herein as a "Parent Contract". Parent has previously delivered or made available
to the Company true and correct copies of each contract, arrangement, commitment
or understanding of the type described in this Section 5.23(a).
(b) Except as set forth in Section 5.23(b) of the Parent Disclosure
Schedule, (i) each Parent Contract is valid and binding and in full force and
effect, (ii) Parent and each of its Subsidiaries has performed all obligations
required to be performed by it to date under each Parent Contract, (iii) no
event or condition exists which constitutes or, after notice or lapse of time or
both, would constitute, a default on the part of Parent or any of its
Subsidiaries under any Parent Contract, and (iv) no other party to any Parent
Contract is, to the knowledge of Parent, in default in any respect thereunder.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, and except as set forth in Section 6.1
of the Company Disclosure Schedule or as otherwise contemplated by this
Agreement or consented to in writing by Parent, the Company shall not, and shall
not permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any dividends on,
or make other distributions in respect of, any of its capital stock, other than
the Company's normal annual dividend not in excess of $0.10 per share of Company
Common Stock;
(b) (i) repurchase, redeem or otherwise acquire (excep t for the
acquisition of Trust Account Shares and DPC Shares, as such terms are defined in
Section 1.4(d) hereof) any shares of the capital stock of the Company or any
Subsidiary of the Company, or any securities convertible into or exercisable for
any shares of the capital stock of the Company or any Subsidiary of the Company,
(ii) split, combine or reclassify any shares of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iii) issue, deliver
or sell, or authorize or propose the issuance, delivery or sale of, any shares
of its capital stock or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing other than pursuant to the ESPP,
except, in the case of clauses (ii) and (iii), for the issuance of Company
25
Common Stock upon the exercise or fulfillment of rights or options issued or
existing pursuant to employee benefit plans, programs or arrangements, all to
the extent outstanding and in existence on the date of this Agreement and in
accordance with their present terms;
(c) amend its Articles of Incorporation, Bylaws or other similar
governing documents;
(d) make any capital expenditures other than those which (i) are made
in the ordinary course of business or are necessary to maintain existing assets
in good repair and (ii) in any event are in an amount of no more than $100,000
in the aggregate;
(e) enter into any new line of business;
(f) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire any assets, which would be material, individually or in the aggregate,
to the Company, other than in connection with foreclosures, settlements in lieu
of foreclosure or troubled loan or debt restructurings in the ordinary course of
business consistent with past practices;
(g) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(h) change its methods of accounting in effect at December 31, 2001,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by the Company's independent auditors;
(i) (i) except as set forth in Section 7.8 hereof, as required by
applicable law or as required to maintain qualification pursuant to the Code,
adopt, amend, or terminate any employee benefit plan (including, without
limitation, any Plan) or any agreement, arrangement, plan or policy between the
Company or any Subsidiary of the Company and one or more of its current or
former directors, officers or employees or any "affiliate" of any such person
(as such term is used in Rule 12b-2 under the Exchange Act), except that the
Company may adopt the retention and severance programs and make the pro-rata
bonus payments, in each case as described in Section 6.1(i) of the Company
Disclosure Schedule, or (ii) except for normal increases in the ordinary course
of business consistent with past practice or except as required by applicable
law, increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares).
(j) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements;
(k) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(l) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries;
26
(m) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or lease
for goods, services or office space to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date;
(n) take or cause to be taken any action which would or could
reasonably be expected to prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code; or
(o) agree to do any of the foregoing.
6.2 Covenants of Parent. Except as set forth in Section 6.2 of the Parent
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to in writing by the Company, Parent shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of Parent, declare or pay any dividends on or
make any other distributions in respect of any of its capital stock other than
its current quarterly dividends; provided, however, that nothing contained
herein shall prohibit Parent from increasing the quarterly cash dividend on the
Parent Common Stock in a manner consistent with past practice;
(b) take any action that is intended or may easonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(c) take any action or enter into any agreement that could reasonably
be expected to jeopardize or materially delay the receipt of any Requisite
Regulatory Approval (as defined in Section 8.1(c));
(d) change its methods of accounting in effect at December 31, 2001,
except in accordance with changes in GAAP or regulatory accounting principles as
concurred to by Parent's independent auditors;
(e) take or cause to be taken any action which would or could
reasonably be expected to prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code; or
(f) agree to do any of the foregoing.
6.3 Conduct of Parent's Business. Parent shall, and Parent shall cause its
Subsidiaries to, conduct their business in substantially the same manner as
heretofore conducted.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. (a) The Company shall promptly prepare and file
with the SEC the Proxy Statement and Parent shall promptly prepare and file with
the SEC the S-4, in which the Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use its reasonable best efforts to have the
S-4 declared effective under the Securities Act as promptly as practicable after
27
such filing, and the Company shall thereafter mail the Proxy Statement to its
stockholders. Parent shall also use its reasonable best efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) Parent and the Company shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) Parent and the Company shall promptly furnish each other with
copies of written communications received by Parent or the Company, as the case
may be, or any of their respective Subsidiaries, Affiliates or Associates (as
such terms are defined in Rule 12b-2 under the Exchange Act as in effect on the
date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each party shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, it
shall, and shall cause its Subsidiaries to, make available to the other party
all information concerning its business, properties and personnel as the other
party may reasonably request. Neither party nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
any attorney-client privilege or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) All information furnished to Parent or the Company by the other
party hereto pursuant to Section 7.2(a) shall be subject to, and the parties
shall hold all such information in confidence in accordance with, the provisions
of the confidentiality agreement, dated January 23, 2002 (the "Confidentiality
Agreement"), between Parent and the Company.
28
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, neither the Company nor any of its directors,
officers, agents, affiliates (as such term is used in Rule 12b-2 under the
Exchange Act) or representatives (collectively, "Representatives") shall,
directly or indirectly, initiate, solicit, encourage or knowingly facilitate
(including by way of furnishing information) any inquiries with respect to or
the making of any Acquisition Proposal (as defined below).
(b) Notwithstanding anything herein to the contrary, the Company and
its Board of Directors shall be permitted (i) to comply with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal,
(ii) to engage in any discussions or negotiations with, or provide any
information to, any person in response to an unsolicited bona fide written
Acquisition Proposal by any such person, if and only to the extent that (a) the
Company's Board of Directors concludes in good faith and consistent with its
fiduciary duties to the Company's stockholders under applicable law that such
Acquisition Proposal would reasonably be expected to result in a Superior
Proposal (as defined below), (b) prior to providing any information or data to
any person in connection with an Acquisition Proposal by any such person, the
Company's Board of Directors receives from such person an executed
confidentiality agreement containing terms at least as stringent as those
contained in the Confidentiality Agreement (as defined in Section 7.2(b)), and
(c) prior to providing any information or data to any person or entering into
discussions or negotiations with any person, the Company's Board of Directors
notifies Parent promptly of such inquiries, proposals, or offers received by,
any such information requested from, or any such discussions or negotiations
sought to be initiated or continued with, any of its Representatives indicating,
in connection with such notice, the name of such person and the material terms
and conditions of any inquiries, proposals or offers.
(c) The Company agrees that it will, and will cause its Representatives
to, immediately cease and cause to be terminated any activities, discussions, or
negotiations existing as of the date of this Agreement with any parties
conducted heretofore with respect to any Acquisition Proposal.
(d) For purposes of this Section 7.3:
(i) The term "Acquisition Proposal" means any tender offer or exchange
offer or any proposal for a merger, reorganization, consolidation, share
exchange, recapitalization, liquidation, dissolution or other business
combination involving the Company or the Company Bank or any proposal or offer
to acquire a substantial equity interest in, or a substantial portion of the
assets of, the Company or the Company Bank, other than the transaction
contemplated or permitted by this Agreement.
(ii) The term "Superior Proposal" means, with respect to the Company,
any written Acquisition Proposal made by a person other than Parent which is for
(i) (a) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization or similar transaction involving the Company, (b)
a sale, lease, exchange, transfer, or other disposition of at least 50% of the
assets of the Company and its Subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (c) the acquisition,
directly or indirectly, by a person of beneficial ownership of 50% or more of
the Company Common Stock whether by merger, consolidation, share exchange,
business combination, tender, or exchange offer or otherwise, and (ii) which is
otherwise on terms which the Board of Directors of the Company in good faith
concludes (after consultation with its financial advisors and outside counsel),
taking into account, among other things, all legal, financial, regulatory, and
other aspects of the proposal and the person making the proposal, (a) would, if
29
consummated, result in a transaction that is more favorable to its stockholders
(in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement, and (b) is reasonably capable of
being completed.
7.4 Stockholder Meetings. The Company shall take all steps necessary to
duly call, give notice of, convene and hold a meeting of its stockholders to be
held as soon as is reasonably practicable after the date on which the S-4
becomes effective for the purpose of voting upon the approval of this Agreement
and the consummation of the transactions contemplated hereby. The Company shall,
through its Board of Directors, subject to the fiduciary duties of such board,
recommend to its stockholders approval of this Agreement and the transactions
contemplated hereby and such other matters as may be submitted to its
stockholders in connection with this Agreement.
7.5 Legal Conditions to Merger. Each of Parent and the Company shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VIII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company or Parent or any of their respective Subsidiaries in connection
with the Merger and the other transactions contemplated by this Agreement, and
to comply with the terms and conditions of such consent, authorization, order or
approval.
7.6 Affiliates. The Company shall use its reasonable best efforts to cause
each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act) of the Company to deliver to
Parent, as soon as practicable after the date of this Agreement, a written
agreement, in the form of Exhibit 7.6 hereto.
7.7 Stock Exchange Listing. Parent shall use its reasonable best efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NASDAQ/NMS as of the Effective Time.
7.8 Employee Benefit Plans; Existing Agreements. (a) As of the Effective
Time, the employees of the Company and its Subsidiaries (the "Company
Employees") shall be eligible to participate in employee benefit plans of Parent
or its Subsidiaries in which similarly situated employees of Parent or its
Subsidiaries participate, to the same extent that similarly situated employees
of Parent or its Subsidiaries participate (it being understood that inclusion of
Company Employees in Parent's employee benefit plans may occur at different
times with respect to different plans).
(b) With respect to each Parent Plan for which length of service is
taken into account for any purpose, service with the Company or any of its
Subsidiaries (or predecessor employers to the extent the Company provides past
service credit) shall be treated as service with Parent for purposes of
determining eligibility to participate, vesting, and entitlement to benefits,
including for severance benefits and vacation entitlement (but not for accrual
of defined benefit pension benefits); provided however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations. Each Parent Plan shall
30
waive pre-existing condition limitations to the same extent waived under the
applicable Company Plan. Company Employees shall be given credit for amounts
paid under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the Parent
Plan.
(c) As of the Effective Time, Parent shall assume and honor and shall
cause the appropriate Subsidiaries of Parent to assume and to honor in
accordance with their terms all agreements listed in Section 7.8 of the
Company Disclosure Schedule (the "Benefit Agreements"). Parent acknowledges and
agrees that the Merger will constitute a merger, sale or a change in control
of the Company for all purposes under such agreements. The provisions of this
Section 7.8(c) are intended to be for the benefit of, and shall be enforceable
by, each director, officer or employee that is a party to any Benefit Agreement.
(d) Parent and the Company agree that, prior to the Effective Time, the
company may adopt a severance plan (the "Severance Plan") and a change in
control retention plan (the "Retention Plan"), each substantially as provided in
Section 6.1(i) of the Company Disclosure Schedule. Notwithstanding any other
provision of this Agreement, any Plan or otherwise, Parent agrees to maintain in
full force and effect, without amendment or modification, (i) for a period of no
less than one year following the Closing Date, the Severance Plan and (ii) the
Retention Plan until such time as all Parent or Company obligations are
fulfilled thereunder.
7.9 Indemnification. (a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director, officer or employee of the Company or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of the Company, any of
the Subsidiaries of the Company or any of their respective predecessors or
affiliates or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Parent shall indemnify and hold harmless, as and to the fullest
extent permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees and
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with
Parent; provided, however, that (1) Parent shall have the right to assume the
defense thereof and upon such assumption Parent shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Parent elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between Parent and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent, and Parent shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) Parent shall in all cases be
obligated pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld), and (4) Parent shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
31
Indemnification under this Section 7.9, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof,
provided that the failure to so notify shall not affect the obligations of
Parent under this Section 7.9 except to the extent such failure to notify
materially prejudices Parent. Parent's obligations under this Section 7.9 shall
continue in full force and effect without time limit from and after the
Effective Time.
(b) Parent shall cause the persons serving as officers and directors of
the Company immediately prior to the Effective Time to be covered for a period
of three years from the Effective Time by the directors' and officers' liability
insurance policy maintained by the Company (provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy) with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such officers and directors in their capacity as such; provided, however, that
in no event shall Parent be required to expend on an annual basis more than 200%
of the current amount expended by the Company (the "Insurance Amount") to
maintain or procure insurance coverage, and further provided that if Parent is
unable to maintain or obtain the insurance called for by this Section 7.9(b),
Parent shall use all reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
assume the obligations set forth in this Section 7.9.
(d) The provisions of this Section 7.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.10 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by Parent.
7.11 Employee Stock Purchase Plan. Parent shall assume and honor the ESPP
and shall not take any action that would terminate, or adversely affect the
participants in, the ESPP until the completion of the annual offering (the
"Offering") commenced under the ESPP on January 1, 2002, which Offering shall
terminate on December 31, 2002 (the "Offering Termination Date"). The options
granted to participants in the ESPP shall have the terms described in Section
7.11 of the Company Disclosure Schedule.
7.12 Appointment of Directors. Effective as of the Effective Time, Parent
shall cause its Board of Directors to be expanded by one member, to a total of
18 members, and shall appoint ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Company Director") to
fill the vacancy on Parent's Board of Directors created by such increase.
Subject to the foregoing, as of the Effective Time the class of directors with a
term expiring at Parent's 2005 annual meeting of stockholders shall include the
Company Director. If the Company Director does not become a director of Parent
because of death, disability or otherwise, or if the Company Director shall
cease to be a director of Parent at any time before the third anniversary of the
Effective Time, Parent agrees, after consultation with the Bank Directors (as
defined in Section 7.13), to cause a person who is a member of the Board of
Directors of the Company as of the date hereof to be elected or appointed to the
Board of Directors of Parent as the new Company Director. In connection with the
annual meeting of Parent next following the Effective Time (the "Next Annual
Meeting"), Parent shall nominate the Company Director for election as a director
32
by the stockholders of the Company, to continue serving as a director of the
class of directors whose term expires at Parent's 2005 annual meeting of
stockholders, and Parent shall solicit proxies for his election at the Next
Annual Meeting.
7.13 Execution and Authorization of Bank Merger Agreement.
(a) As soon as reasonably practicable after the date of this Agreement,
(a) Parent shall (i) cause the Board of Directors of Parent Bank to approve the
Bank Merger Agreement, (ii) cause Parent Bank to execute and deliver the Bank
Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole
stockholder of Parent Bank, and (b) the Company shall (i) cause the Board of
Directors of the Company Bank to approve the Bank Merger Agreement, (ii) cause
the Company Bank to execute and deliver the Bank Merger Agreement, and (iii)
approve the Bank Merger Agreement as the sole stockholder of the Company Bank.
(b) The Bank Merger Agreement shall provide that (i) the surviving
entity in the Bank Merger (the "Surviving Bank") shall continue under the name
"Mercantile Bank", or another name to be mutually agreed by Parent and the
Company, (ii) immediately following the effective time of the Bank Merger, the
directors of the Surviving Bank shall consist of all the directors of the Parent
Bank serving immediately prior to the effective time of the Bank Merger and the
Bank Directors (as defined below), each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Bank until their
respective successors are duly elected or appointed and qualified, and (iii) the
Bank Directors shall hold office for a period of no less than two years from the
effective time of the Bank Merger. The Bank Merger Agreement shall contain other
terms that are normal and customary in light of the transactions contemplated
hereby and such additional terms as are necessary to carry out the purposes of
this Agreement. The term "Bank Directors" shall mean, collectively, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and four additional persons who are currently serving in the board of
directors of either the Company or Company Bank, each of who shall be reasonably
acceptable to Parent.
(c) If any of the Bank Directors does not become a director of the
Surviving Bank because of death, disability or otherwise, or if any of the Bank
Directors shall cease to be a director of the Surviving Bank at any time before
the second anniversary of the effective time of the Bank Merger, Parent agrees,
after consultation with the remaining Bank Directors, to cause a person who is a
member of the Board of Directors of the Company as of the date hereof to be
elected or appointed to the Board of Directors of the Surviving Bank as the new
Bank Director.
7.14 Advisory Board. Parent shall, effective as of the Effective Time,
cause each individual who is currently serving as a director of the Company or
the Company Bank (other than the Company Director and the Bank Directors), if
such persons are willing to so serve, to be elected or appointed as members of
an advisory board ("Advisory Board") established by Parent, the function of
which shall be to advise Parent with respect to deposit and lending activities
in the Company's former market area and to maintain and develop customer
relationships. The members of the Advisory Board who are willing to so serve
initially shall be elected or appointed for a term of one year. Parent agrees
annually to re-elect or re-appoint each of the initial members of the Advisory
Board to two successive one-year terms following the initial one-year term;
provided, however, that Parent shall have no obligation to re-elect or
re-appoint any member if Parent reasonably determines that such member has a
conflict of interest that compromises such member's ability to serve effectively
as a member of the advisory board or any cause exists that otherwise would allow
for removal of such person as a director of Parent if such person were a member
of Parent's Board of Directors. Each member of the Advisory Board shall receive
a fee for such service consistent with Parent's other advisory boards, as
described in Section 7.14 of Parent's Disclosure Schedule. Service on the Board
of Directors of the Surviving Bank or the Advisory Board shall constitute
continued service for purposes of the Company Option Plan.
33
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the holders of the outstanding shares of
Company Common Stock under applicable law.
(b) Listing of Shares. The shares of Parent Common Stock which shall be
issued to the stockholders of the Company upon consummation of the Merger shall
have been authorized for listing on the NASDAQ/NMS.
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby (including the Merger) shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired (all such approvals and the
expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been issued
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger.
8.2 Conditions to Obligations of Parent. The obligation of Parent to effect
the Merger is also subject to the satisfaction or waiver by Parent at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of the Company set forth in this Agreement (other
than those set forth in Section 4.2) shall be true and correct as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; and (ii) the representations and warranties of the Company set
forth in Section 4.2 of this Agreement shall be true and correct in all material
respects (without giving effect to Section 3.2 of this Agreement) as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date. Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer or the Chief Financial Officer of the
Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
34
received a certificate signed on behalf of the Company by the Chief Executive
Officer or the Chief Financial Officer of the Company to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. Parent shall have received an opinion from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P., counsel to Parent ("Parent's
Counsel"), in form and substance reasonably satisfactory to Parent, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, Parent's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form
and substance to such counsel.
8.3 Conditions to Obligations of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of Parent set forth in this Agreement (other than
those set forth in Section 5.2) shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; and (ii) the representations and warranties of Parent set forth in
Section 5.2 of this Agreement shall be true and correct in all material respects
(without giving effect to Section 3.2 of this Agreement) as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date. The Company shall have received a certificate signed on behalf of
Parent by the Chief Executive Officer or the Chief Financial Officer of Parent
to the foregoing effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Parent by the Chief Executive Officer
or the Chief Financial Officer of Parent to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. The Company shall have received an opinion
from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP (the "Company's Counsel"), in form
and substance reasonably satisfactory to the Company, dated the Effective Time,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, the Company's Counsel may require and rely upon representations
and covenants, including those contained in certificates of officers of Parent,
the Company and others, reasonably satisfactory in form and substance to such
counsel.
35
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual consent of the Company and Parent in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either Parent or the Company upon written notice to the other
party (i) 30 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 30-day period following such
denial or withdrawal a petition for rehearing or an amended application has been
filed with the applicable Governmental Entity, provided, however, that no party
shall have the right to terminate this Agreement pursuant to this Section 9.1(b)
(i) if such denial or request or recommendation fo withdrawal shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein or (ii) if
any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either Parent or the Company if the Merger shall not have been
consummated on or before the later of (i) October 31, 2002, or (ii) if the S-4
is given a full review by the SEC, December 31, 2002, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or the Company if the approval of the stockholders
of the Company required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such stockholders or at any adjournment or postponement thereof;
(e) by either Parent or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement on the part
of the other party, which breach is not cured within thirty days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
9.1(e) unless the breach of representation or warranty, together with all other
such breaches, would entitle the party receiving such representation not to
consummate the transactions contemplated hereby under Section 8.2(a) (in the
case of a breach of representation or warranty by the Company) or Section 8.3(a)
(in the case of a breach of representation or warranty by Parent);
(f) by either Parent or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach shall not have been cured within thirty days
following receipt by the breaching party of written notice of such breach from
the other party hereto, or which breach, by its nature, cannot be cured prior
to the Closing; or
36
(g) by the Company, in the event that the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
in light of a Superior Proposal it is necessary to terminate this Agreement in
order to comply with its fiduciary duties to the Company and to the Company's
shareholders under applicable law; provided, however, that the Board of
Directors of the Company may terminate this Agreement pursuant to this Section
9.1(g) solely in order to concurrently enter into a letter of intent, agreement
in principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to a Superior Proposal; provided further,
however, that this Agreement may be terminated pursuant to this Section 9.1(g)
only after the fifth day following Parent's receipt of written notice advising
Parent that the Board of Directors of the Company is prepared to accept a
Superior Proposal, and only if, during such five-day period, if Parent so
elects, the Company and its advisors shall have negotiated in good faith with
Parent to make such adjustments in the terms and conditions of this Agreement as
would enable Parent to proceed with the transactions contemplated herein on such
adjusted terms; or
(h) by the Company at any time during the three-day period following
the Determination Date (as defined in Section 1.4 hereof), if both of the
following conditions are satisfied:
(1) the Average Closing Price (as defined below) shall be less than
the product of 0.85 and the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the "Parent
Ratio") shall be less than (ii) the number obtained by dividing the Index
Price on the Determination Date by the Index Price on the Starting Date and
subtracting 0.10 from such quotient (such number being referred to herein
as the "Index Ratio");
subject to the following. If the Company elects to exercise its termination
right pursuant to the immediately preceding sentence, it shall give prompt
written notice to Parent; provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned three-day period. During the
three-day period commencing with its receipt of such notice, Parent shall have
the option of increasing the Total Stock Amount and/or the Total Cash Amount in
a manner such that the conditions set forth in either clauses (1) or (2) above
shall be deemed not to exist; provided, however, that the Total Cash Amount
shall not be increased in a manner that would cause the failure of the
conditions set forth in Sections 8.2(d) or 8.3(d) hereof. For purposes hereof,
the condition set forth in (1) above shall be deemed not to exist if the Total
Stock Amount and/or the Total Cash Amount is increased so that the Per Share
Consideration after such increase is not less than the Per Share Consideration
that would have been in effect if the condition set forth in (1) above did not
exist. For purposes hereof, the condition set forth in clause (2) above shall be
deemed not to exist if the Total Stock Amount and/or the Total Cash Amount is
increased so that the Per Share Consideration after such increase is not less
than the Per Share Consideration that would have been in effect if the condition
set forth in (2) above did not exist. If Parent makes this election, within such
three-day period, it shall give prompt written notice to Company of such
election and the revised Total Stock Amount and/or Total Cash Amount, whereupon
no termination shall have occurred pursuant to this Section 9.1(h) and this
Agreement shall remain in effect in accordance with its terms (except as the
Total Stock Consideration and/or Total Cash Amount shall have been so modified),
and any references in this Agreement to "Total Stock Consideration," "Total
Stock Amount," "Per Share Stock Consideration" and "Per Share Cash
Consideration" shall thereafter be deemed to refer to the Total Stock
Consideration, Total Stock Amount, Per Share Stock Consideration and Per Share
Cash Consideration after giving effect to any adjustment made pursuant to this
Section 9.1(h). For purposes of this Section 9.1(h), the following terms shall
have the meanings indicated:
"Average Closing Price" means the average of the last reported sale prices
per share of Parent Common Stock as reported on the NASDAQ/NMS (as reported in
▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Journal or, if not reported therein, in another mutually agreed
upon authoritative source) for the 10 consecutive trading days immediately
preceding the Determination Date (as defined in Section 1.4(a) hereof).
"Index Price" on a given date means the closing price of the NASDAQ
Bank Index.
"Starting Price" shall mean $19.568.
If Parent declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the Starting Date and the Determination Date, the prices for
the common stock of Parent shall be appropriately adjusted for the purposes of
applying this Section 9.1(h).
9.2 Effect of Termination.
(a) In the event of termination of this Agreement by either Parent or
the Company as provided in Section 9.1, this Agreement shall forthwith become
void and have no effect except (i) Sections 7.2(b), 9.2 and 10.3 shall survive
any termination of this Agreement and (ii) that, notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
(b) If the Company terminates this Agreement pursuant to Section 9.1(g),
the Company shall pay to Parent a termination fee equal to $5 million (the
"Termination Fee Amount") by wire transfer of same day funds on the date of
termination.
(c) In the event that an Acquisition Proposal with respect to the
Company or any of its Subsidiaries shall have been made known to the Company or
any of its Subsidiaries and shall have been publicly announced or otherwise
become public, or shall have been made to the shareholders of the Company,
and thereafter (x) this Agreement is terminated by either Parent or the Company
pursuant to either (i) Section 9.1(c) hereof and prior to such termination the
stockholders of the Company shall not have previously approved the Merger, or
(ii) Section 9.1(d) hereof as a result of the failure of the stockholders of the
Company to approve the Merger, and (y) within twelve months of such termination
(A) the Company or the Company Bank enters into any Acquisition Agreement
providing for any transaction described in clause (i)(a) or clause (i)(b) of
Section 7.3(d)(ii), other than any such transaction involving a merger,
consolidation or similar transaction as to which the common stockholders of the
Company immediately prior thereto own in the aggregate at least 60% of the
common stock of the surviving or transferee corporation or its publicly-held
parent corporation immediately following consummation thereof, or (B) any person
shall acquire beneficial ownership of or the right to acquire 25% or more of the
outstanding shares of Company Common Stock, then upon the first occurrence of
either of the events contemplated by clause (y) the Company shall pay Parent a
termination fee equal to the Termination Fee Amount by wire transfer of same day
funds.
(d) The Company agrees that the agreements contained in Section 9.2(b)
and 9.2(c) above are integral parts of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty.
(e) Provided that the Company shall not be in material breach of this
Agreement, in the event that this Agreement is terminated by Parent or the
Company pursuant to (i) Section 9.1(c), and at the time of such termination any
of the Non-Florida Approvals (as defined below) shall not have been obtained, or
(ii) Section 9.1(b) as a result of the failure of Parent to obtain any of the
Non-Florida Approvals, Parent shall pay to the Company a termination fee of $3.5
million by wire transfer of same day funds on the date of termination. The term
"Non-Florida Approvals" shall mean the Requisite Regulatory Approvals other than
any regulatory approval required under Florida law.
38
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of either
the Company or Parent; provided, however, that after any approval of the
transactions contemplated by this Agreement by the Company's stockholders, there
may not be, without further approval of such stockholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to the Company stockholders hereunder other than 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.
9.4 Extension; Waiver. At any time prior to the Effective Time, each of the
parties hereto, by action taken or authorized by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
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 X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the first
day which is (a) the last business day of a month and (b) at least one business
days after the satisfaction or waiver (subject to applicable law) of the latest
to occur of the conditions set forth in Article VIII hereof (other than those
conditions which relate to actions to be taken at the Closing) (the "Closing
Date"), at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P., unless
another time, date or place is agreed to in writing by the parties hereto.
10.2 Nonsurvival 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 shall survive the Effective
Time, except for those covenants and agreements contained herein and therein
which by their terms apply in whole or in part after the Effective Time.
10.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4 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):
39
(a) if to Parent, to:
The South Financial Group
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Hummers III
Executive Vice President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P.
First Union Plaza, Suite 1400
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
and
(b) if to the Company, to:
Gulf West Banks, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
10.5 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". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to March 21, 2002. No provision of this Agreement shall be construed to
require the Company, Parent or any of their respective Subsidiaries or
affiliates to take any action that would violate any applicable law (including
common law), rule or regulation.
10.6 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.
10.7 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 with respect to the subject matter hereof, other than the
Confidentiality Agreement between Parent and the Company.
40
10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida, without regard to any
applicable conflicts of law.
10.9 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in 7.2(b) of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Section 7.2(b) of this
Agreement and to enforce specifically the terms and provisions thereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.10 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 any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.11 Publicity. Except as expressly permitted by this Agreement or
otherwise required by law or the rules of the NASDAQ/NMS, so long as this
Agreement is in effect, neither Parent nor the Company shall, or shall permit
any of its Subsidiaries 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.
10.12 Assignment; No Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations hereunder 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 will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
41
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.38
THE SOUTH FINANCIAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. Hummers III
----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Hummers III
Title: Vice President
GULF WEST BANKS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board and
President
42
