AGREEMENT AND PLAN OF MERGER By and Between FIRST NATIONAL BANCSHARES, INC. and CAROLINA NATIONAL CORPORATION August 26, 2007
By
and Between
FIRST
NATIONAL BANCSHARES, INC.
and
CAROLINA
NATIONAL CORPORATION
August
26, 2007
TABLE
OF CONTENTS
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Page
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| LIST OF EXHIBITS |
5
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| AGREEMENT AND PLAN OF MERGER |
6
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PREAMBLE
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6
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| ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER |
6
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1.1
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Merger.
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6
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1.2
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Time
and Place of Closing.
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6
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1.3
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Effective
Time.
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6
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1.4
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Restructure
of Transaction
|
7
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| ARTICLE 2 TERMS OF MERGER |
7
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2.1
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Articles
of Incorporation.
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7
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2.2
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Bylaws.
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7
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2.3
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Directors
and Officers.
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7
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| ARTICLE 3 MANNER OF CONVERTING SHARES |
8
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3.1
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Effect
on Seller Common Stock.
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8
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3.2
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Election
and Proration Procedures.
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8
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3.3
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Exchange
Procedures.
|
10
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3.4
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Effect
on Buyer Common Stock.
|
11
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3.5
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Seller
Options.
|
11
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|
3.6
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Bank
Merger.
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12
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3.7
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Rights
of Former Seller Shareholders.
|
12
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3.8
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Fractional
Shares.
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12
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| ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER |
13
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4.1
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Organization,
Standing, and Power.
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13
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4.2
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Authority
of Seller; No Breach By Agreement.
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13
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4.3
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Capital
Stock.
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14
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4.4
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Seller
Subsidiaries.
|
14
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4.5
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Exchange
Act Filings; Securities Offerings; Financial Statements.
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15
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4.6
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Absence
of Undisclosed Liabilities.
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16
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4.7
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Absence
of Certain Changes or Events.
|
16
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4.8
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Tax
Matters.
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17
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4.9
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Allowance
for Loan Losses; Loan and Investment Portfolio, etc.
|
19
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4.10
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Assets.
|
19
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4.11
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Intellectual
Property.
|
20
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4.12
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Environmental
Matters.
|
20
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4.13
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Compliance
with Laws.
|
21
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4.14
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Labor
Relations.
|
22
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|
4.15
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Employee
Benefit Plans
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23
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4.16
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Material
Contracts.
|
25
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-2-
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4.17
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Privacy
of Customer Information.
|
26
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4.18
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Legal
Proceedings.
|
26
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4.19
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Reports.
|
26
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|
4.20
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Books
and Records.
|
26
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4.21
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Loans
to Executive Officers and Directors.
|
27
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4.22
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Certain
Actions.
|
27
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4.23
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State
Takeover Laws.
|
27
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4.24
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Brokers
and Finders; Opinion of Financial Advisor.
|
27
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4.25
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Board
Recommendation.
|
27
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4.26
|
Statements
True and Correct.
|
27
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4.27
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Delivery
of Seller Disclosure Memorandum.
|
28
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| ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER |
29
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5.1
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Organization,
Standing, and Power.
|
29
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5.2
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Authority
of Buyer; No Breach By Agreement.
|
29
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5.3
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Exchange
Act Filings; Financial Statements.
|
30
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5.4
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Reports.
|
30
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|
5.5
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Brokers
and Finders.
|
31
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5.6
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Certain
Actions.
|
31
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5.7
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Available
Consideration.
|
31
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5.8
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Statements
True and Correct.
|
31
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5.9
|
Absence
of Certain Changes or Events.
|
32
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| ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION |
32
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6.1
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Affirmative
Covenants of Seller.
|
32
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6.2
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Negative
Covenants of Seller.
|
33
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6.3
|
Adverse
Changes in Condition.
|
35
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6.4
|
Reports.
|
35
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| ARTICLE 7 ADDITIONAL AGREEMENTS |
35
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7.1
|
Shareholder
Approvals.
|
35
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7.2
|
Registration
of Buyer Common Stock.
|
36
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7.3
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Other
Offers, etc.
|
37
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7.4
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Consents
of Regulatory Authorities.
|
38
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|
7.5
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Agreement
as to Efforts to Consummate.
|
38
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7.6
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Investigation
and Confidentiality.
|
39
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7.7
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Press
Releases.
|
39
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7.8
|
Charter
Provisions.
|
39
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7.9
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Employee
Benefits and Contracts.
|
40
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7.10
|
Section
16 Matters.
|
41
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7.11
|
Affiliate
Letters.
|
41
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7.12
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Indemnification.
|
41
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| ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE |
42
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8.1
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Conditions
to Obligations of Each Party.
|
42
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8.2
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Conditions
to Obligations of Buyer.
|
43
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8.3
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Conditions
to Obligations of Seller.
|
44
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-3-
| ARTICLE 9 TERMINATION |
45
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9.1
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Termination.
|
45
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9.2
|
Effect
of Termination
|
47
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9.3
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Termination
Fee.
|
48
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9.4
|
Non-Survival
of Representations and Covenants.
|
48
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| ARTICLE 10 MISCELLANEOUS |
48
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10.1
|
Definitions.
|
48
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10.2
|
Expenses.
|
57
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10.3
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Brokers
and Finders.
|
58
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10.4
|
Entire
Agreement.
|
58
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10.5
|
Amendments.
|
58
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10.6
|
Waivers.
|
58
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10.7
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Assignment.
|
59
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10.8
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Notices.
|
59
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10.9
|
Governing
Law.
|
59
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10.10
|
Counterparts.
|
59
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10.11
|
Captions;
Articles and Sections.
|
60
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10.12
|
Interpretations.
|
60
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Enforcement
of Agreement.
|
60
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10.14
|
Severability.
|
60
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-4-
LIST
OF EXHIBITS
|
Exhibit
|
Description
|
|
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A
|
Form
of Plan of Bank Merger
|
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B
|
Form
of Support Agreement
|
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C
|
Form
of Affiliate's Agreement
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D
|
Form
of Claims Letter
|
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E
|
Form
of Seller’s Counsel Legal Opinion
|
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|
Form
of Buyer’s Counsel Legal Opinion
|
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|
G
|
Form
of Director Non-Competition
Agreement
|
-5-
THIS
AGREEMENT AND PLAN OF MERGER
(this
“Agreement”)
dated
as of August 26, 2007 is by and between First
National Bancshares, Inc.,
a
South
Carolina corporation (“Buyer”),
and
Carolina
National Corporation,
a
South
Carolina corporation (“Seller”).
Preamble
This
Agreement provides for the merger of Seller with and into Buyer (the
“Merger”).
At
the effective time of the Merger, the outstanding shares of the capital stock
of
Seller shall be converted into the right to receive shares of the common stock
of Buyer and cash (as provided herein and subject to certain terms and
conditions). As a result, shareholders of Seller shall become shareholders
of
Buyer. The transaction described in this Agreement is subject to the approvals
of the shareholders of Seller, regulatory agencies, and the satisfaction of
certain other conditions described in this Agreement. It is the intention of
the
parties to this Agreement that the Merger for federal income tax purposes shall
qualify as a “reorganization” within the meaning of Section 368(a) of the
Internal Revenue Code of 1986.
Certain
terms used in this Agreement are defined in Section 10.1 of this Agreement.
NOW,
THEREFORE,
in
consideration of the above and the mutual warranties, representations,
covenants, and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Parties, intending to be legally bound, agree as follows:
ARTICLE
1
TRANSACTIONS
AND TERMS OF MERGER
1.1 Merger.
Subject
to the terms and conditions of this Agreement, at the Effective Time, Seller
shall be merged with and into Buyer pursuant to and with the effect provided
in
Section 00-00-000 of the SCBCA, and Buyer shall be the Surviving Corporation
resulting from the Merger and shall continue to be governed by the Laws of
the
State of South Carolina. The Merger shall be consummated pursuant to the terms
of this Agreement, which has been approved and adopted by the respective Boards
of Directors of Seller and Buyer.
1.2 Time
and Place of Closing.
The
closing of the transactions contemplated hereby (the “Closing”)
will
take place at 11:00 A.M. Eastern Time on the date that the Effective Time occurs
(or the immediately preceding day if the Effective Time is earlier than 11:00
A.M. Eastern Time), or at such other time as the Parties, acting through their
authorized officers, may mutually agree. The Closing shall be held at such
location as may be mutually agreed upon by the Parties and may be effected
by
electronic or other transmission of signature pages, as mutually agreed
upon.
1.3 Effective
Time.
The
Merger and other transactions contemplated by this Agreement shall become
effective on the date and time the Articles of Merger (the “Articles
of Merger”)
reflecting the Merger shall be filed and become effective with the South
Carolina Secretary of State (the “Effective
Time”).
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the authorized officers of each Party, the Parties shall
use
their reasonable efforts to cause the Effective Time to occur on the last day
or
the first day of a calendar month immediately following the last of the
following dates to occur: (i) the effective date (including expiration of
any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger,
(ii) the date on which the shareholders of Seller approve this Agreement,
and (iii) the date on which shareholders of Buyer approve this
Agreement.
-6-
1.4 Restructure
of Transaction.
Buyer
shall have the right to revise the structure of the Merger contemplated by
this
Agreement by merging Seller with and into a wholly-owned subsidiary of Buyer,
provided,
that
no such
revision to the structure of the Merger (i) shall result in any changes in
the
amount or type of the consideration which the holders of shares of Seller Common
Stock or Seller Options are entitled to receive under this Agreement,
(ii) shall unreasonably impede or delay consummation of the Merger, or
(iii) shall impose any less favorable terms or conditions on Bank or Seller.
Buyer may request such consent by giving written notice to Seller in the manner
provided in Section 10.8, which
notice shall be in the form of an amendment to this Agreement or in the form
of
a proposed amendment to this Agreement or in the form of an Amended and Restated
Agreement and Plan of Merger, and which shall be accompanied by such other
exhibits hereto as are reasonably necessary or appropriate to effect such
change.
ARTICLE
2
TERMS
OF MERGER
2.1 Articles
of Incorporation.
The
Articles of Incorporation of Buyer in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
otherwise duly amended or repealed.
2.2 Bylaws.
The
Bylaws of Buyer in effect immediately prior to the Effective Time shall be
the
Bylaws of the Surviving Corporation until otherwise duly amended or repealed.
2.3 Directors
and Officers.
(a) The
directors of Buyer in office immediately prior to the Effective Time, together
with such additional persons as may thereafter be elected, shall serve as the
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Surviving Corporation’s Bylaws, until the earlier of their
resignation or removal or otherwise ceasing to be a director. Immediately prior
to the Effective Time, Buyer shall take all action necessary, including but
not
limited to the amendment of the Surviving Corporation’s Bylaws, to appoint four
individuals who were directors of the Bank on the date hereof and who are chosen
by Buyer after consultation with Seller to the board of directors of Buyer
(and
two of such individuals shall be appointed to serve on the Executive Committee
of Buyer's board of directors), to be effective as soon as practicable following
the Effective Time, and cause each such individual to be nominated as a
management nominee for election by the shareholders to the board of directors
of
Buyer at the next annual meeting of shareholders of Buyer following such
individual’s election to the board of directors of Buyer. The officers of Buyer
in office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Corporation from and after the Effective Time in accordance with
the
Surviving Corporation’s Bylaws, until the earlier of their resignation or
removal or otherwise ceasing to be an officer.
(b) It
is
anticipated that the directors of the Bank, the Seller’s wholly owned
subsidiary, in office immediately prior to the Effective Time, shall serve
as
members of First National Bank of the South’s Columbia regional board of
advisors. The amount of the board fees will be determined in good faith by
the
Parties.
-7-
ARTICLE
3
MANNER
OF CONVERTING SHARES
3.1 Effect
on Seller Common Stock.
(a)
At
the
Effective Time, in each case subject to Sections 3.1(d) and 3.2, by virtue
of
the Merger and without any action on the part of the Parties, each share of
Seller Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares of Seller Common Stock held by either Party
or
any Subsidiary of either Party (in each case other than shares of Seller Common
Stock held on behalf of third parties or held by any Buyer Entity or Seller
Entity as a result of debts previously contracted) shall be converted into
the
right to receive one of the following: (i) cash in the amount of $21.65, less
any applicable withholding Taxes (the "Cash
Consideration");
(ii)
a number of shares of Buyer Common Stock equal to the Fixed Exchange Ratio
(the
"Stock
Consideration");
or
(iii) a combination of 70% Stock Consideration and 30% Cash Consideration (the
"Mixed
Consideration")
(items
(i), (ii), or (iii) are referred to herein individually as the “Per
Share Purchase Price”).
The
"Fixed
Exchange Ratio"
shall
be 1.4678 shares of Buyer Common Stock. Assuming
the total number of shares of Seller Common Stock issued and outstanding
immediately prior to the Effective Time is 2,578,623 shares, then Buyer will
issue an aggregate of 2,649,431 shares of Buyer Common Stock and pay $16,748,159
(the
"Merger
Consideration").
(b)
At
the Effective Time, all shares of Seller Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to
exist as of the Effective Time, and each certificate previously representing
any
such shares of Seller Common Stock (the “Certificates”)
shall
thereafter represent only the right to receive the Per Share Purchase
Price.
(c)
If,
prior
to the Effective Time, the outstanding shares of Seller Common Stock or Seller
Options shall have been increased, decreased, changed into or exchanged for
a
different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, then an
appropriate and proportionate adjustment shall be made to the Per Share Purchase
Price.
(d)
Each
share of Seller Common Stock issued and outstanding immediately prior to the
Effective Time and owned by any of the Parties or their respective Subsidiaries
(in each case other than shares of Seller Common Stock held on behalf of third
parties or as a result of debts previously contracted) shall, by virtue of
the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be cancelled and retired without payment of any consideration
therefore, and shall cease to exist (the “Excluded
Shares”).
3.2
Election and Proration Procedures.
(a)
An election form (an “Election
Form”)
shall
be mailed with the transmittal materials referred to in Section 3.3 below to
each holder of Seller Common Stock of record at the Effective Time. Seller
shall provide to the Exchange Agent all information reasonably necessary for
it
to perform its obligations as specified herein.
(b)
Each Election Form shall entitle the holder of Seller Common Stock (or the
beneficial owner through appropriate and customary documentation and
instructions) to elect to receive (i) the Stock Consideration for all of such
holder’s shares (a “Stock
Election”),
(ii)
the Cash Consideration for all of such holder’s shares (a “Cash
Election”),
(iii)
the Mixed Consideration for all of such holder's shares (a “Mixed
Election”)
or
(iv) make no election (a “Non-Election”).
Holders of record of Seller Common Stock who hold such shares as nominees,
trustees or in other representative capacity (a “Holder
Representative”)
may
submit multiple Election Forms, provided that such Holder Representative
certifies that each such Election Form covers all of the shares of Seller Common
Stock held by that Holder Representative for a particular beneficial
owner. The shares of Seller Common Stock as to which a Stock Election has
been made (including pursuant to a Mixed Election) are referred to herein as
“Stock
Election Shares”
and
the
aggregate number thereof is referred to herein as the “Stock
Election Number.”
The shares of Seller Common Stock as to which a Cash Election has been made
(including pursuant to a Mixed Election) are referred to herein as “Cash
Election Shares”
and
the
aggregate number thereof is referred to as the "Cash
Election Number".
Shares of Seller Common Stock as to which no election has been made (or as
to
which an Election Form is not properly completed or returned in a timely
fashion) are referred to as “Non-Election
Shares.”
-8-
(c)
To be effective, a properly completed Election Form must be received by the
Exchange Agent on or before 4:00 p.m., local time on such date as the parties
may mutually agree (the “Election
Deadline”).
An election shall have been properly made only if the Exchange Agent shall
have
actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates representing all shares of Seller Common
Stock covered by such Election Form, or the guaranteed delivery of such
certificates (or customary affidavits and, if required by Buyer, indemnification
regarding the loss or destruction of such certificates), together with duly
completed transmittal materials. For the holders of Seller Common Stock
who make a Non-Election, subject to Section 3.2(e), the Exchange Agent shall
have the authority to determine the type of consideration to be exchanged for
the Non-Election Shares. Any Seller shareholder may at any time prior to, but
not after, the Election Deadline change his or her election by written notice
received by the Exchange Agent prior to the Election Deadline accompanied by
a
properly completed and signed revised Election Form. Any Seller
shareholder may, at any time prior to the Election Deadline, revoke his or
her
election by written notice received by the Exchange Agent prior to the Election
Deadline or by withdrawal prior to the Election Deadline of his or her
certificates, or of the guarantee of delivery of such certificates. All
elections shall be revoked automatically if the Exchange Agent is notified
in
writing by either party that this Agreement has been terminated. If a
shareholder either (i) does not submit a properly completed Election Form by
the
Election Deadline or (ii) revokes its Election Form prior to the Election
Deadline but does not submit a new properly executed Election Form prior to
the
Election Deadline, the shares of Seller Common Stock held by such shareholder
shall be designated as Non-Election Shares. Subject to the terms of this
Agreement and the Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any election, revocation or change has been
properly made and to disregard immaterial defects in any Election Form, and
any
good faith decisions of the Exchange Agent regarding such matters shall be
binding and conclusive.
(d)
The number of shares of Seller Common Stock to be converted into the right
to
receive the Cash Consideration shall be equal to 30% of the number of shares
of
Seller Common Stock outstanding immediately prior to the Effective Time (the
“Aggregate
Cash Limit”)
and
the number of shares of Seller Common Stock to be converted into the right
to
receive the Stock Consideration shall be equal to 70% of the number of shares
of
Seller Common Stock outstanding immediately prior to the Effective Time (the
“Aggregate
Stock Limit”).
(e)
Within ten business days after the later to occur of the Election Deadline
or
the Effective Time, Buyer shall cause the Exchange Agent to effect the
allocation among holders of Seller Common Stock of rights to receive the Per
Share Purchase Price and to distribute such as follows:
(i)
if the Stock Election Number exceeds the Aggregate Stock Limit, then all Cash
Election Shares and all Non-Election Shares shall be converted into the right
to
receive the Cash Consideration, and each Stock Election Share shall be converted
into the right to receive (A) the Stock Consideration in respect of that number
of Stock Election Shares equal to the product obtained by multiplying (1) the
number of Stock Election Shares held by such holder by (2) a fraction, the
numerator of which is the Aggregate Stock Limit and the denominator of which
is
the Stock Election Number and (B) the Cash Consideration in respect of the
remaining number of such Stock Election Shares;
-9-
(ii)
if the Cash Election Number exceeds the Aggregate Cash Limit, then all Stock
Election Shares and all Non-Election Shares shall be converted into the right
to
receive the Stock Consideration, and each Cash Election Share shall be converted
into the right to receive (A) the Cash Consideration in respect of that number
of Cash Election Shares equal to the product obtained by multiplying (1) the
number of Cash Election Shares held by such holder by (2) a fraction, the
numerator of which is the Aggregate Cash Limit and the denominator of which
is
the Cash Election Number and (B) the Stock Consideration in respect of the
remaining number of such Cash Election Shares; and
(iii)
if the Stock Election Number and the Cash Election Number do not exceed the
Aggregate Stock Limit and the Aggregate Cash Limit, respectively, then (i)
all
Cash Election Shares shall be converted into the right to receive the Cash
Consideration, (ii) all Stock Election Shares shall be converted into the right
to receive the Stock Consideration, and (iii) all Non-Election Shares shall
be
converted into the right to receive either the Cash Consideration or the Stock
Consideration such that the aggregate number of shares of Seller Common Stock
entitled to receive the Cash Consideration is equal to the Aggregate Cash Limit
and the aggregate number of shares of Seller Common Stock entitled to receive
the Stock Consideration is equal to the Aggregate Stock Limit.
3.3
Exchange Procedures.
(a) As
soon
as reasonably practicable after the Effective Time, Buyer shall cause the
exchange agent selected by Buyer (the “Exchange
Agent”)
to
mail to the former shareholders of Seller appropriate transmittal materials
(which shall specify that delivery shall be effected, and risk of loss and
title
to the certificates or other instruments theretofore representing shares of
Seller Common Stock shall pass, only upon proper delivery of such certificates
or other instruments to the Exchange Agent). The certificate or certificates
of
Seller Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may reasonably require. In the event of a transfer of ownership of shares of
Seller Common Stock represented by certificates that is not registered in the
transfer records of Seller, the Per Share Purchase Price payable for such shares
as provided in Sections 3.1 and 3.2 may be issued to a transferee if the
certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
reasonably satisfactory to the Exchange Agent that such transfer is proper
and
that any applicable stock transfer taxes have been paid. In the event any
certificate representing Seller Common Stock 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 the posting
by
such person of a bond in such amount as Buyer may reasonably direct as indemnity
against any claim that may be made against it with respect to such certificate,
the Exchange Agent shall issue in exchange for such lost, stolen, or destroyed
certificate the Per Share Purchase Price as provided for in Sections 3.1 and
3.2. The Exchange Agent may establish such other reasonable and customary rules
and procedures in connection with its duties as it may deem appropriate. Buyer
shall pay all charges and expenses, including those of the Exchange Agent in
connection with the distribution of the Per Share Purchase Price as provided
in
Sections 3.1and 3.2. Buyer or its Exchange Agent will maintain a book entry
list
of the Buyer Common Stock to which each former holder of Seller Common Stock
is
entitled. Certificates evidencing the Buyer Common Stock into which the Seller
Common Stock has been converted will not be issued.
-10-
(b) After
the
Effective Time, each holder of shares of Seller Common Stock (other than
Excluded Shares) issued and outstanding at the Effective Time shall surrender
the Certificate or Certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Sections 3.1 and 3.2, without interest, pursuant
to
this Section 3.3. Buyer shall not be obligated to deliver the consideration
to
which any former holder of Seller Common Stock is entitled as a result of the
Merger until such holder surrenders such holder’s Certificate or Certificates
for exchange as provided in this Section 3.3. Any other provision of this
Agreement notwithstanding, neither any Buyer Entity, nor any Seller Entity,
nor
the Exchange Agent shall be liable to any holder of Seller Common Stock for
any
amounts paid or properly delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat, or similar Law.
(c) Each
of
Buyer and the Exchange Agent shall be entitled to deduct and withhold from
the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Seller Common Stock and Seller Options such amounts, if any, as it
is
required to deduct and withhold with respect to the making of such payment
under
the Code or any provision of state, local, or foreign Tax Law or by any Taxing
Authority or Governmental Authority. To the extent that any amounts are so
withheld by Buyer, the Surviving Corporation, or the Exchange Agent, as the
case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Seller Common
Stock, as applicable in respect of which such deduction and withholding was
made
by Buyer, the Surviving Corporation, or the Exchange Agent, as the case may
be.
(d) Adoption
of this Agreement by the shareholders of Seller shall constitute ratification
of
the appointment of the Exchange Agent.
3.4
Effect on Buyer Common Stock.
At
and
after the Effective Time, each share of Buyer Common Stock issued and
outstanding immediately prior to the Effective Time shall remain an issued
and
outstanding share of common stock of the Surviving Corporation and shall not
be
affected by the Merger.
3.5
Seller Options.
(a) At
the
Effective Time, all rights with respect to Seller Common Stock pursuant to
stock
options or warrants granted by Seller (the “Seller
Options”)
which
are outstanding at the Effective Time not to exceed 313,269, whether or not
exercisable, shall be converted into and become rights with respect to Buyer
Common Stock, and Buyer shall assume each Seller Option in accordance with
the
terms of the warrant agreement or the Seller option plan and the stock option
agreement by which it is evidenced (the “Converted
Options”);provided,
however, at the written request of any of the Seller’s directors received before
the Effective Time, such director’s warrants to purchase shares of Seller’s
common stock shall be converted immediately prior to the Effective Time into
the
right to receive from Carolina National an amount of cash equal to the Cash
Consideration for each share covered by the warrant, less the exercise price
of
the warrants adjusted as set forth below in this Section 3.5(a)(iii)(which
cash
shall not be included in the Aggregate Cash Limit). From and after the Effective
Time, (i) each Seller Option assumed by Buyer may be exercised solely for shares
of Buyer Common Stock, (ii) the number of shares of Buyer Common Stock subject
to each Seller Option shall be equal to the product of the number of shares
of
Seller Common Stock subject to such Seller Option immediately prior to the
Effective Time multiplied by the Fixed Exchange Ratio, provided that any
fractional shares of Buyer Common Stock subject to the Converted Options shall
be exchanged for cash (without interest) in an amount equal to such fractional
part of a share of Buyer Common Stock multiplied by Final Buyer Stock Price
less
the exercise price of such Converted Option, and (iii) the per share exercise
price under each such Seller Option shall be adjusted by dividing the per share
exercise price under each such Seller Option by the Fixed Exchange Ratio and
rounding down to the nearest cent. Seller agrees to take all necessary steps
to
effectuate the foregoing provisions of this Section 3.5.
-11-
(b) Before
the Effective Time, Buyer will take all corporate action necessary to reserve
for future issuance a sufficient additional number of shares of Buyer Common
Stock to provide for the satisfaction of its obligations with respect to the
Converted Options.
(c) Seller’s
board of directors and its compensation committee shall not make any new grants
of Seller Options following the execution of this Agreement.
(d) The
Seller’s board of directors or its compensation committee shall make any
adjustments and amendments to or make such determinations with respect to the
Seller Options necessary to effect the foregoing provisions of this Section
3.5.
(e)
Within
10
business days after the Effective Time, Buyer shall file a registration
statement on Form S-8 with respect to Converted Options that are eligible for
registration on Form S-8 and Buyer shall use its reasonable best efforts to
maintain the current status of the prospectus or prospectuses contained therein
for so long as such options remain outstanding.
3.6
Bank Merger.
Buyer
anticipates that concurrently with or as soon as practicable after the execution
and delivery of this Agreement, First National Bank of the South, a wholly
owned
subsidiary of Buyer, and the Bank, a wholly owned subsidiary of Seller, shall
enter into the Plan of Bank Merger, in the form attached hereto as Exhibit
A,
pursuant to which the Bank will merge with and into First National Bank of
the
South (the “Bank
Merger”).
The
Plan of Bank Merger shall provide that the directors of First National Bank
of
the South as the surviving entity of the Bank Merger shall be (a) all the
directors of First National Bank of the South serving immediately prior to
the
Bank Merger and (b) the four individuals who are appointed to the board of
directors of Buyer pursuant to Section 2.3(a). The parties anticipate that
the
Bank Merger will become effective simultaneously with or immediately following
the Effective Time.
3.7
Rights of Former Seller Shareholders.
At
the
Effective Time, the stock transfer books of Seller shall be closed as to holders
of Seller Common Stock and no transfer of Seller Common Stock by any holder
of
such shares shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 3.3, each Certificate
theretofore representing shares of Seller Common Stock (other than certificates
representing Excluded Shares), shall from and after the Effective Time represent
for all purposes only the right to receive the Per Share Purchase Price, without
interest, as provided in Article 3.
3.8
Fractional Shares.
Notwithstanding
any other provision of this Agreement, each holder of shares of Seller Common
Stock exchanged pursuant to the Merger, who would otherwise have been entitled
to receive a fraction of a share of Buyer Common Stock (after taking into
account all certificates delivered by such holder), shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part
of a
share of Buyer Common Stock multiplied by Final
Buyer Stock Price. No
such
holder will be entitled to dividends, voting rights, or any other rights as
a
shareholder in respect of any fractional shares.
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ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
represents and warrants to Buyer, except as set forth on the Seller Disclosure
Memorandum with respect to each such Section below, as follows:
4.1 Organization,
Standing, and Power.
Seller
is
a corporation duly organized, validly existing, and in good standing under
the
Laws of the State of South Carolina and is a bank holding company within the
meaning of the Bank Holding Company Act of 1956 (the “BHCA”).
The
Bank is a national association, duly organized, validly existing and in good
standing under the National Bank Act. Each of Seller and the Bank has the
corporate power and authority to carry on its business as now conducted and
to
own, lease, and operate its Assets. Each of the Seller and the Bank is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the states of the United States and foreign jurisdictions where
the
character of its Assets or the nature or conduct of its business requires it
to
be so qualified or licensed, except for such jurisdictions where the failure
to
be so qualified or licensed is not reasonably likely to have, individually
or in
the aggregate, a Seller Material Adverse Effect. The minute book and other
organizational documents for each of Seller and the Bank have been made
available to Buyer for its review and, except as disclosed in Section 4.1 of
the
Seller Disclosure Memorandum, are true and complete in all material respects
as
in effect as of the date of this Agreement and accurately reflect in all
material respects all amendments thereto and all proceedings of the respective
board of directors (including any committees of the board of directors) and
shareholders thereof. The Bank is an “insured institution” as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits held by Bank are insured by the FDIC’s Deposit Insurance
Fund.
4.2 Authority
of Seller; No Breach By Agreement.
(a) Seller
has the corporate power and authority necessary to execute, deliver, and, other
than with respect to the Merger, perform this Agreement, and with respect to
the
Merger, upon the approval of the Merger, as required by Sections 8.1(b) and
8.1(c) and by Seller’s shareholders in accordance with this Agreement and the
SCBCA,
to
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of Seller, subject to the approval of this
Agreement by the holders of two-thirds of the outstanding shares of Seller
Common Stock, which is the only Seller’s shareholder vote required for approval
of this Agreement and consummation of the Merger. Subject to any necessary
approvals referred to in Sections 8.1(b) and 8.1(c) and receipt of such
requisite shareholder approval, this Agreement represents a legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with
its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors’ rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be
brought).
(b) Neither
the execution and delivery of this Agreement by Seller, nor the consummation
by
Seller and the Bank of the transactions contemplated hereby, nor compliance
by
Seller and the Bank with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Seller’s articles of
incorporation or bylaws or the certificate or articles of association or bylaws
of the Bank or any resolution adopted by the board of directors or the
shareholders of any Seller Entity, or (ii) except as disclosed in Section
4.2 of the Seller Disclosure Memorandum, constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any
Lien
on any Asset of any Seller Entity under, any Contract or Permit of any Seller
Entity or, (iii) subject to receipt of the requisite Consents referred to
in Section 8.1(b) and (c), constitute or result in a Default under, or require
any Consent pursuant to, any Law or Order applicable to any Seller Entity or
any
of their respective material Assets (including any Buyer Entity or any Seller
Entity becoming subject to or liable for the payment of any Tax on any of the
Assets owned by any Buyer Entity or any Seller Entity being reassessed or
revalued by any Regulatory Authority).
-13-
(c) Other
than in connection or compliance with the provisions of the Securities Laws
and
applicable state corporate and securities Laws, and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
IRS
or the Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, no notice to, filing with, or Consent of, any Governmental Authority
is
necessary for the consummation by Seller of the Merger and the other
transactions contemplated in this Agreement.
4.3 Capital
Stock.
(a) The
authorized capital stock of Seller consists of 20,000,000 shares of Seller
Common Stock, of which 2,578,623 shares are issued and outstanding as of the
date of this Agreement, and, assuming that all of the issued and outstanding
Seller Options had been exercised, not more than an additional 313,269 shares,
with a per share weighted average exercise price of $10.57, would be issued
and
outstanding at the Effective Time, and 10,000,000 shares of Seller preferred
stock, of which none are issued and outstanding as of the date of this
Agreement. All of the issued and outstanding shares of capital stock of Seller
are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of capital stock of Seller has
been issued in violation of any preemptive rights of the current or past
shareholders of Seller.
(b) Except
for the 313,269 shares of Seller Common Stock reserved for issuance pursuant
to
outstanding Seller Options or as disclosed in Section 4.3 of the Seller
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of Seller reserved for issuance and no outstanding Rights relating
to
the capital stock of Seller.
(c) Except
as
specifically set forth in this Section 4.3, there are no shares of Seller
capital stock or other equity securities of Seller outstanding and there are
no
outstanding Rights with respect to any Seller securities or any right or
privilege (whether pre-emptive or contractual) capable of becoming a Contract
or
Right for the purchase, subscription, exchange or issuance of any securities
of
Seller.
4.4 Seller
Subsidiaries.
Seller
has no Subsidiaries except the Bank and Seller owns all of the equity interests
in the Bank. No capital stock (or other equity interest) of the Bank is or
may
become required to be issued (other than to another Seller Entity) by reason
of
any Rights, and there are no Contracts by which the Bank is bound to issue
(other than to another Seller Entity) additional shares of its capital stock
(or
other equity interests) or Rights or by which any Seller Entity is or may be
bound to transfer any shares of the capital stock (or other equity interests)
of
the Bank (other than to another Seller Entity). There are no Contracts relating
to the rights of any Seller Entity to vote or to dispose of any shares of the
capital stock (or other equity interests) of the Bank. All of the shares of
capital stock (or other equity interests) of the Bank are fully paid and
nonassessable and are owned directly or indirectly by Seller free and clear
of
any Lien, except as provided by 12 U.S.C. Section 55. The Bank is a national
association duly organized, validly existing, and in good standing under the
National Bank Act, and has the corporate or entity power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as
now
conducted. The Bank is duly qualified or licensed to transact business as a
foreign entity in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of
its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Seller Material
Adverse Effect. The minute books and other organizational documents for the
Bank
have been made available to Buyer for its review, and, except as disclosed
in
Section 4.4 of the Seller Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings
of
the board of directors and shareholders thereof.
-14-
4.5 Exchange
Act Filings; Securities Offerings; Financial Statements.
(a) Except
as
disclosed in Section 4.5 of the Seller Disclosure Memorandum, Seller has timely
filed and made available to Buyer all Exchange Act Documents required to be
filed by Seller since July 1, 2004 (the
“Seller
Exchange Act Reports”).
The
Seller Exchange Act Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such filing or, in the case of registration statements, at the
effective date thereof) contain any untrue statement of a material fact or
omit
to state a material fact required to be stated in such Seller Exchange Act
Reports or necessary in order to make the statements in such Seller Exchange
Act
Reports not misleading. Each offering or sale of securities by Seller (i) was
either registered under the Securities Act or made pursuant to a valid exemption
from registration, (ii) complied in all material respects with the
applicable requirements of the Securities Laws and other applicable Laws, except
for immaterial late “blue sky” filings, including disclosure and broker/dealer
registration requirements, and (iii) was made pursuant to offering
documents which did not, at the time of the offering (or, in the case of
registration statements, at the effective date thereof) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in the offering documents or necessary in order to make the statements
in
such documents not misleading. Seller has delivered or made available to Buyer
all comment letters received by Seller from the staff of the SEC and all
responses to such comment letters by or on behalf of Seller with respect to
all
filings under the Securities Laws. Seller’s principal executive officer and
principal financial officer (and Seller’s former principal executive officers
and principal financial officers, as applicable) have made the certifications
required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act and the rules and
regulations of the Exchange Act thereunder with respect to Seller’s Exchange Act
Documents to the extent such rules or regulations applied at the time of the
filing. For purposes of the preceding sentence, “principal executive officer”
and “principal financial officer” shall have the meanings given to such terms in
the Xxxxxxxx-Xxxxx Act. Such certifications contain no qualifications or
exceptions to the matters certified therein and have not been modified or
withdrawn; and neither Seller nor any of its officers has received notice from
any Regulatory Authority questioning or challenging the accuracy, completeness,
content, form, or manner of filing or submission of such certifications.
The
Bank
is not required to file any Exchange Act Documents.
(b) Each
of
the Seller Financial Statements (including, in each case, any related notes)
that are contained in the Seller Exchange Act Reports, including any Seller
Exchange Act Reports filed after the date of this Agreement until the Effective
Time, complied, or will comply, as to form in all material respects with the
Exchange Act, was, or will be, prepared in accordance with GAAP applied on
a
consistent basis throughout the periods involved (except as may be indicated
in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the Exchange Act), fairly presented
the
consolidated financial position of Seller and the Bank as at the respective
dates and the consolidated results of operations and cash flows for the periods
indicated, including the fair values of the assets and liabilities shown
therein, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are
not
expected to be material in amount or effect, and were certified to the extent
required by the Xxxxxxxx-Xxxxx Act.
-15-
(c) Seller’s
independent public accountants, which have expressed their opinion with respect
to the Financial Statements of Seller and its Subsidiaries whether or not
included in Seller’s Exchange Act Reports (including the related notes), are and
have been throughout the periods covered by such Financial Statements (x) a
registered public accounting firm (as defined in Section 2(a)(12) of the
Xxxxxxxx-Xxxxx Act) (to the extent applicable during such period), (y)
“independent” with respect to Seller within the meaning of Regulation S-X, and
(z) with respect to Seller, in compliance with subsections (g) through (l)
of
Section 10A of the Exchange Act and related Securities Laws. Section 4.5(c)
of
the Seller Disclosure Memorandum lists all non-audit services preformed by
Seller’s independent public accountants for Seller and the Bank.
(d) Seller
maintains disclosure controls and procedures as required by Rule 13a-15 or
15d-15 under the Exchange Act, and such controls and procedures are effective
to
ensure that all material information relating to Seller and its Subsidiaries
is
made known on a timely basis to the Seller’s principal executive officer and the
Seller’s principal financial officer.
4.6 Absence
of Undisclosed Liabilities.
No
Seller
Entity has any Liabilities required under GAAP to be set forth on a consolidated
balance sheet or in the notes thereto that are reasonably likely to have,
individually or in the aggregate, a Seller Material Adverse Effect, except
Liabilities which are (i) accrued or reserved against in the consolidated
balance sheet of Seller as of June 30, 2007, included in the Seller Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto, (ii) incurred in the ordinary course of business consistent
with
past practices, or (iii) incurred in connection with the transactions
contemplated by this Agreement. Section 4.6 of the Seller Disclosure Memorandum
lists, and Seller has attached and delivered to Buyer copies of the
documentation creating or governing, all securitization transactions and
“off-balance
sheet arrangements”
(as
defined in Item 303(a)(4) of Regulation S-K of the Exchange Act) effected by
Seller or its Subsidiaries other than letters of credit and unfunded loan
commitments or credit lines. Except as disclosed in Section 4.6 of the Seller
Disclosure Memorandum or as reflected on Seller’s balance sheet at June 30,
2007, no Seller Entity is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount
or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person for any amount
in
excess of $50,000
and any
amounts, whether or not in excess of $50,000 that, in the aggregate, exceed
$100,000. Except (x) as reflected in Seller’s balance sheet at June 30, 2007 or
liabilities described in any notes thereto (or liabilities for which neither
accrual nor footnote disclosure is required pursuant to GAAP or any applicable
Regulatory Authority) or (y) for liabilities incurred in the ordinary course
of
business since June 30, 2007 consistent with past practice or in connection
with
this Agreement or the transactions contemplated hereby, neither Seller nor
any
of its Subsidiaries has any Material Liabilities or obligations of any nature.
4.7 Absence
of Certain Changes or Events.
Except
as
disclosed in the Seller Financial Statements delivered prior to the date of
this
Agreement or as disclosed in Section 4.7 of the Seller Disclosure Memorandum,
(i) there have been no events, changes, or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Seller
Material Adverse Effect, (ii) none of the Seller Entities has taken any
action, or failed to take any action, prior to the date of this Agreement,
which
action or failure, if taken after the date of this Agreement, would represent
or
result in a material breach or violation of any of the covenants and agreements
of Seller provided in this Agreement, and (iii) since December 31, 2006 the
Seller Entities have conducted their respective businesses in the ordinary
course of business consistent with past practice.
-16-
4.8 Tax
Matters.
(a) All
Seller Entities have timely filed with the appropriate Taxing Authorities,
all
Tax Returns in all jurisdictions in which Tax Returns are required to be filed,
and such Tax Returns are correct and complete in all material respects. None
of
the Seller Entities is the beneficiary of any extension of time within which
to
file any Tax Return. All Taxes of the Seller Entities (whether or not shown
on
any Tax Return) have been fully and timely paid. There are no Liens for any
Taxes (other than a Lien for current real property or ad
valorem Taxes
not
yet due and payable) on any of the Assets of any of the Seller Entities. No
claim has ever been made by an authority in a jurisdiction where any Seller
Entity does not file a Tax Return that such Seller Entity may be subject to
Taxes by that jurisdiction.
(b) None
of
the Seller Entities has received any notice of assessment or proposed assessment
in connection with any Taxes, and there are no threatened or pending disputes,
claims, audits, or examinations regarding any Taxes of any Seller Entity or
the
assets of any Seller Entity. No officer or employee responsible for Tax matters
of any Seller Entity expects any Taxing Authority to assess any additional
Taxes
for any period for which Tax Returns have been filed. No issue has been raised
by a Taxing Authority in any prior examination of the Seller which, by
application of the same or similar principles, could be expected to result
in a
proposed deficiency for any subsequent taxable period. None of the Seller
Entities has waived any statute of limitations in respect of any Taxes or agreed
to a Tax assessment or deficiency.
(c) Each
Seller Entity has complied in all material respects with all applicable Laws
relating to the withholding of Taxes and the payment thereof to appropriate
authorities, including Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee or independent contractor,
and Taxes required to be withheld and paid pursuant to Sections 1441 and 1442
of
the Code or similar provisions under foreign Law.
(d) The
unpaid Taxes of each Seller Entity (i) did not, as of the most recent fiscal
month end, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) included in the most recent balance sheet (rather than in any notes
thereto) for such Seller Entity and (ii) do not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with past custom
and practice of the Seller Entities in filing their Tax Returns.
(e) Except
as
described in Section 4.8(e) of the Seller Disclosure Memorandum, none of the
Seller Entities is a party to any Tax allocation or sharing agreement and none
of the Seller Entities has been a member of an affiliated group filing a
consolidated federal income Tax Return or has any Tax Liability of any Person
under Treasury Regulation Section 1.1502-6 or any similar provision of state,
local or foreign Law, or as a transferee or successor, by contract or
otherwise.
(f) During
the five-year period ending on the date hereof, none of the Seller Entities
was
a “distributing corporation” or a “controlled corporation” as defined in, and in
a transaction intended to be governed by Section 355 of the Code.
(g) Except
as
disclosed in Section 4.8(g) of the Seller Disclosure Memorandum, none of the
Seller Entities has made any payments, is obligated to make any payments, or
is
a party to any contract that could obligate it to make any payments that could
be disallowed as a deduction under Section 280G or 162(m) of the Code, or which
would be subject to withholding under Section 4999 of the Code. None of the
Seller Entities has been or will be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section
481
of the Code or any comparable provision under state or foreign Tax Laws as
a
result of transactions or events occurring prior to the Closing. There is no
taxable income of Seller that will be required under applicable tax law to
be
reported by Buyer, for a taxable period beginning after the Closing Date which
taxable income was realized prior to the Closing Date. Any net operating losses
of the Seller Entities disclosed in Section 4.8(g) of the Seller Disclosure
Memorandum are not subject to any limitation on their use under the provisions
of Sections 382 or 269 of the Code or any other provisions of the Code or the
Treasury Regulations dealing with the utilization of net operating losses other
than any such limitations as may arise as a result of the consummation of the
transactions contemplated by this Agreement.
-17-
(h) Each
of
the Seller Entities is in compliance in all material respects with, and its
records contain all information and documents (including properly completed
IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and
such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Code.
(i) No
Seller
Entity is subject to any private letter ruling of the IRS or comparable rulings
of any Taxing Authority.
(j) No
property owned by any Seller Entity is (i) property required to be treated
as
being owned by another Person pursuant to the provisions of Section 168(f)(8)
of
the Internal Revenue Code of 1954, as amended and in effect immediately prior
to
the enactment of the Tax Reform Act of 1986, (ii) “tax-exempt use property”
within the meaning of Section 168(h)(1) of the Code, (iii) “tax-exempt bond
financed property” within the meaning of Section 168(g) of the Code, (iv)
“limited use property” within the meaning of Rev. Proc. 76-30, (v) subject to
Section 168(g)(1)(A) of the Code, or (vi) subject to any provision of state,
local or foreign Law comparable to any of the provisions listed
above.
(k) No
Seller
Entity has any “corporate acquisition indebtedness” within the meaning of
Section 279 of the Code.
(l) Seller
has disclosed on its federal income Tax Returns all positions taken therein
that
are reasonably believed to give rise to substantial understatement of federal
income tax within the meaning of Section 6662 of the Code.
(m)
No
Seller Entity has participated in any reportable transaction, as defined in
Treasury Regulation Section 1.6011-4(b)(1), or a transaction substantially
similar to a reportable transaction.
(n) Seller
has made available to Buyer complete copies of (i) all federal, state, local
and
foreign income or franchise Tax Returns of the Seller Entities relating to
the
taxable periods since inception and (ii) any audit report issued within the
last
four years relating to any Taxes due from or with respect to the Seller
Entities.
(o) No
Seller
Entity nor any other Person on its behalf has (i) filed a consent pursuant
to
Section 341(f) of the Code (as in effect prior to the repeal under the Jobs
and
Growth Tax Reconciliation Act of 2003) or agreed to have Section 341(f)(2)
of
the Code (as in effect prior to the repeal under the Jobs and Growth Tax
Reconciliation Act of 2003) apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by any Seller
Entities, (ii) executed or entered into a closing agreement pursuant to Section
7121 of the Code or any similar provision of Law with respect to the Seller
Entities, or (iii) granted to any Person any power of attorney that is currently
in force with respect to any Tax matter.
(p) No
Seller
Entity has, or ever had, a permanent establishment in any country other than
the
United States, or has engaged in a trade or business in any country other than
the United States that subjected it to tax in such country.
For
purposes of this Section 4.8, any reference to the Seller or any Seller Entity
shall be deemed to include any Person which merged with or was liquidated into
or otherwise combined with the Seller or a Seller Entity.
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4.9 Allowance
for Loan Losses; Loan and Investment Portfolio, etc.
(a) The
Seller’s allowance for loan, lease, securities, or credit losses (the
“Allowance”)
shown
on the balance sheets of Seller included in the most recent Seller Financial
Statements dated prior to the date of this Agreement was, and the Allowance
shown on the balance sheets of Seller included in the Seller Financial
Statements as of dates subsequent to the execution of this Agreement will be,
as
of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for all known or reasonably
anticipated losses relating to or inherent in the loan, lease and securities
portfolios (including accrued interest receivables, letters of credit, and
commitments to make loans or extend credit), by the Seller Entities as of the
dates thereof. The Seller Financial Statements fairly present the values of
all
loans, leases, securities, tangible and intangible assets and liabilities,
and
any impairments thereof on the bases set forth therein.
(b) As
of the
date hereof, all loans, discounts and leases (in which any Seller Entity is
lessor) reflected on Seller’s Financial Statements were, and with respect to the
consolidated balance sheets delivered as of the dates subsequent to the
execution of this Agreement will be as of the dates thereof, (a) at the time
and
under the circumstances in which made, made for good, valuable and adequate
consideration in the ordinary course of business and are the legal and binding
obligations of the obligors thereof, (b) evidenced by genuine notes, agreements,
or other evidences of indebtedness and (c) to the extent secured, have been
secured, to the Knowledge of Seller, by valid liens and security interests
which
have been perfected. Accurate lists of all loans, discounts and financing leases
as of July 31, 2007 and on a monthly basis thereafter, and of the investment
portfolios of each Seller Entity as of such date, have been and will be made
available to Buyer concurrently with the Seller Disclosure Memorandum. Except
as
specifically set forth in Section 4.9(b) of the Seller Disclosure Memorandum,
neither Seller nor the Bank is a party to any written or oral loan agreement,
note, or borrowing arrangement, including any loan guaranty, that was, as of
the
most recent month-end (i) delinquent by more than 30 days in the payment of
principal or interest, (ii) to Seller’s Knowledge, otherwise in material default
for more than 30 days, (iii) classified as “substandard,” “doubtful,” “loss,”
“other assets especially mentioned” or any comparable classification by Seller
or by any applicable Regulatory Authority, (iv) an obligation of any director,
executive officer or 10% shareholder of any Seller Entity who is subject to
Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing, or (v) in violation of any Law.
4.10 Assets.
(a) To
Seller’s Knowledge, except as disclosed in Section 4.10 of the Seller Disclosure
Memorandum or as disclosed or reserved against in the Seller Financial
Statements delivered prior to the date of this Agreement, the Seller Entities
have good and marketable title, free and clear of all Liens, to all of their
respective Assets that they own. In addition, to Seller’s Knowledge, all
tangible properties used in the businesses of the Seller Entities are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Seller’s past practices.
(b) All
Assets which are material to Seller’s business, held under leases or subleases
by any of the Seller Entities, are held under valid Contracts enforceable in
accordance with their respective terms, and each such Contract is in full force
and effect.
(c) The
Seller Entities currently maintain insurance, including bankers’ blanket bonds,
with insurers of recognized financial responsibility, similar in amounts, scope,
and coverage to that maintained by other peer organizations. None of the Seller
Entities has received notice from any insurance carrier that (i) any policy
of insurance will be canceled or that coverage thereunder will be reduced or
eliminated, (ii) premium costs with respect to such policies of insurance
will be substantially increased, or (iii) similar coverage will be denied or
limited or not extended or renewed with respect to any Seller Entity, any act
or
occurrence, or that any Asset, officer, director, employee or agent of any
Seller Entity will not be covered by such insurance or bond. There are presently
no claims for amounts exceeding $25,000 individually or in the aggregate pending
under such policies of insurance or bonds, and no notices of claims in excess
of
such amounts have been given by any Seller Entity under such policies. Seller
has made no claims, and no claims are contemplated to be made, under its
directors’ and officers’ errors and omissions or other insurance or bankers’
blanket bond.
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(d) The
Assets of the Seller Entities include all Assets required by Seller Entities
to
operate the business of the Seller Entities as presently conducted.
4.11 Intellectual
Property.
Except
as
disclosed in Section 4.11 of the Seller Disclosure Memorandum, each Seller
Entity owns or has a license to use all of the Intellectual Property used by
such Seller Entity in the course of its business, including sufficient rights
in
each copy possessed by each Seller Entity. Each Seller Entity is the owner
of or
has a license, with the right to sublicense, to any Intellectual Property sold
or licensed to a third party by such Seller Entity in connection with such
Seller Entity’s business operations, and such Seller Entity has the right to
convey by sale or license any Intellectual Property so conveyed. To Seller’s
Knowledge, no Seller Entity is in Default under any of its Intellectual Property
licenses. To Seller’s Knowledge, no proceedings have been instituted, or are
pending or to the Knowledge of Seller threatened, which challenge the rights
of
any Seller Entity with respect to Intellectual Property used, sold, or licensed
by such Seller Entity in the course of its business, nor has any person claimed
or alleged any rights to such Intellectual Property. To Seller’s Knowledge, the
conduct of the business of the Seller Entities does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 4.11
of the Seller Disclosure Memorandum, no Seller Entity is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 4.11 of the Seller Disclosure
Memorandum, Seller does not have any Contracts with its directors, officers,
or
employees which require such officer, director, or employee to assign any
interest in any Intellectual Property to a Seller Entity and to keep
confidential any trade secrets, proprietary data, customer information, or
other
business information of a Seller Entity, and to Seller’s Knowledge, no such
officer, director, or employee is party to any Contract with any Person other
than a Seller Entity which requires such officer, director or employee to assign
any interest in any Intellectual Property to any Person other than a Seller
Entity or to keep confidential any trade secrets, proprietary data, customer
information, or other business information of any Person other than a Seller
Entity. To Seller’s Knowledge, no officer, director, or employee of any Seller
Entity is party to any confidentiality, nonsolicitation, noncompetition, or
other Contract for the benefit of any Person other than a Seller Entity which
restricts or prohibits such officer, director, or employee from engaging in
activities competitive with any Person, including any Seller
Entity.
4.12 Environmental
Matters.
(a) Seller
has delivered, or caused to be delivered or made available to Buyer, true and
complete copies of, all environmental site assessments, test results, analytical
data, boring logs, permits for storm water, wetlands fill, or other
environmental permits for construction of any building, parking lot or other
improvement, and other environmental reports and studies in the possession
of
any Seller Entity relating to its Participation Facilities and Operating
Properties. To Seller’s Knowledge, there are no material violations of
Environmental Laws on properties that secure loans made by Seller or
Bank.
(b) To
Seller’s Knowledge, each Seller Entity, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws, except for violations which are not reasonably likely to have,
individually or in the aggregate, a Seller Material Adverse Effect.
(c) There
is
no Litigation pending, and to Seller’s Knowledge there is no environmental
enforcement action, investigation, or litigation threatened before any
Governmental Authority or other forum in which any Seller Entity or any of
its
Operating Properties or Participation Facilities (or Seller in respect of such
Operating Property or Participation Facility) has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with or Liability under any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting)
a
site currently or formerly owned, leased, or operated by any Seller Entity
or
any of its Operating Properties or Participation Facilities.
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(d) During
the period of (i) any Seller Entity’s ownership or operation of any of
their respective current properties, (ii) any Seller Entity’s participation
in the management of any Participation Facility, or (iii) any Seller
Entity’s holding of a security interest in any Operating Property, there have
been no releases, discharges, spillages, or disposals of Hazardous Material
in,
on, under, adjacent to, or affecting (or potentially affecting) such properties.
Prior to the period of (i) any Seller Entity’s ownership or operation of
any of their respective current properties, (ii) any Seller Entity’s
participation in the management of any Participation Facility, or (iii) any
Seller Entity’s holding of a security interest in any Operating Property, to
Seller’s Knowledge, there were no releases, discharges, spillages, or disposals
of Hazardous Material in, on, under, or affecting any such property,
Participation Facility or Operating Property. During and prior to the period
of
(i) Seller Entity’s ownership or operation of any of their respective current
properties, (ii) any Seller Entity’s participation in the management of any
Participation Facility, or (iii) any Seller Entity’s holding of a security
interest in any Operating Property, there have been no violations of any
Environmental Laws, including but not limited to unauthorized alterations of
wetlands.
4.13 Compliance
with Laws.
(a) Seller
is
a bank holding company duly registered and in good standing as such with the
Federal Reserve. Bank is a national bank in good standing with the OCC and
is a
member in good standing of the FDIC.
(b) Compliance
with Permits, Laws and Orders.
(i) To
Seller's Knowledge, each of the Seller Entities has in effect all Permits and
has made all filings, applications, and registrations with Governmental
Authorities that are required for it to own, lease, or operate its assets and
to
carry on its business as now conducted, and there has occurred no Default under
any such Permit applicable to their respective businesses or employees
conducting their respective businesses.
(ii) To
Seller's Knowledge, none of the Seller Entities is in Default under any Laws
or
Orders applicable to its business or employees conducting its
business.
(iii) None
of
the Seller Entities has received any notification or communication from any
Governmental Authority (A) asserting that Seller or any of its Subsidiaries
is in Default under any of the Permits, Laws, or Orders which such Governmental
Authority enforces, (B) threatening to revoke any Permits, or
(C) requiring Seller or any of its Subsidiaries (x) to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
resolution of its board of directors or similar undertaking.
(iv) There
(A) is no unresolved violation, criticism, or exception by any Governmental
Authority with respect to any report or statement relating to any examinations
or inspections of Seller or any of its Subsidiaries, (B) are no notices or
correspondence received by Seller with respect to formal or informal inquiries
by, or disagreements or disputes with, any Governmental Authority with respect
to Seller’s or any of Seller’s Subsidiaries’ business, operations, policies, or
procedures since its inception, and (C) is not any pending or, to Seller’s
Knowledge, threatened, nor has any Governmental Authority indicated an intention
to conduct any, investigation, or review of it or any of its
Subsidiaries.
-21-
(v) None
of
the Seller Entities nor any of its directors, officers, employees, or
Representatives acting on its behalf has offered, paid, or agreed to pay any
Person, including any Government Authority, directly or indirectly, any thing
of
value for the purpose of, or with the intent of obtaining or retaining any
business in violation of applicable Laws, including (1) using any corporate
funds for any unlawful contribution, gift, entertainment, or other unlawful
expense relating to political activity, (2) making any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds, (3) violating any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (4) making any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(vi) Each
Seller Entity has complied
in all material respects with
all
requirements of Law under the Bank Secrecy Act and the USA Patriot Act, and
each
Seller Entity has timely filed all reports of suspicious activity, including
those required under 12 C.F.R. § 353.3.
4.14 Labor
Relations.
(a) No
Seller
Entity is the subject of any Litigation asserting that it or any other Seller
Entity has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state Law) or other violation of
state or federal labor Law or seeking to compel it or any other Seller Entity
to
bargain with any labor organization or other employee representative as to
wages
or conditions of employment, nor is any Seller Entity party to any collective
bargaining agreement or subject to any bargaining order, injunction, or other
Order relating to Seller’s relationship or dealings with its employees, any
labor organization or any other employee representative. There is no strike,
slowdown, lockout, or other job action or labor dispute involving any Seller
Entity pending or threatened and there have been no such actions or disputes
in
the past five years. To Seller’s Knowledge, there has not been any attempt by
any Seller Entity employees or any labor organization or other employee
representative to organize or certify a collective bargaining unit or to engage
in any other union organization activity with respect to the workforce of any
Seller Entity. Except as disclosed in Section 4.14 of the Seller Disclosure
Memorandum, employment of each employee and the engagement of each independent
contractor of each Seller Entity is terminable at will by the relevant Seller
Entity without (i) any penalty, liability, or severance obligation incurred
by
any Seller Entity, (ii) and in all cases without prior consent by any
Governmental Authority. No Seller Entity will owe any amounts to any of its
employees or independent contractors as of the Closing Date, including any
amounts incurred for any wages, bonuses, vacation pay, sick leave, contract
notice periods, change of control payments, or severance obligations except
as
disclosed in Section 4.14 of the Seller Disclosure Memorandum.
(b) To
Seller’s Knowledge, all of the employees employed in the United States are
either United States citizens or are legally entitled to work in the United
States under the Immigration Reform and Control Act of 1986, as amended, other
United States immigration Laws and the Laws related to the employment of
non-United States citizens applicable in the state in which the employees are
employed.
(c) No
Seller
Entity has effectuated (i) a “plant closing” (as defined in the Worker
Adjustment and Retraining Notification Act (the “WARN
Act”))
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of any Seller Entity; or (ii) a
“mass layoff” (as defined in the WARN Act) affecting any site of employment or
facility of any Seller Entity; and no Seller Entity has been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Law. None of any
Seller Entity’s employees has suffered an “employment loss” (as defined in the
WARN Act) since six months prior to the Closing Date.
(d) Section
4.14 of the Seller Disclosure Memorandum contains a list of all independent
contractors of each Seller Entity (separately listed by Seller Entity) and
each
such Person meets the standard for an independent contractor under all Laws
(including Treasury Regulations under the Code and federal and state labor
and
employment Laws) and no such Person is an employee of any Seller Entity under
any applicable Law.
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4.15 Employee
Benefit Plans.
(a) Seller
has disclosed in Section 4.15 of the Seller Disclosure Memorandum, and has
delivered or made available to Buyer prior to the execution of this Agreement,
(i) copies of each Employee Benefit Plan currently adopted, maintained by,
sponsored in whole or in part by, or contributed or required to be contributed
to by any Seller Entity or ERISA Affiliate thereof for the benefit of employees,
former employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries or under which employees, retirees, former
employees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (each, a “Seller
Benefit Plan,”
and
collectively, the “Seller
Benefit Plans”)
and
(ii) a list of each Employee Benefit Plan that is not identified in (i) above
(e.g., former Employee Benefit Plans) but for which any Seller Entity or ERISA
Affiliate has or reasonably could have any obligation or Liability. Any of
the
Seller Benefit Plans which is an “employee pension benefit plan,” as that term
is defined in ERISA Section 3(2), is referred to herein as a “Seller
ERISA Plan.”
Each
Seller ERISA Plan which is also a “defined benefit plan” (as defined in Code
Section 414(j)) is referred to herein as a “Seller
Pension Plan,”
and
is
identified as such in Section 4.15 of the Seller Disclosure
Memorandum.
(b) Seller
has delivered or made available to Buyer prior to the execution of this
Agreement (i) all trust agreements or other funding arrangements for all
Employee Benefit Plans, (ii) all determination letters, rulings, opinion
letters, information letters, or advisory opinions issued by the United States
Internal Revenue Service (“IRS”
),
the
United States Department of Labor (“DOL”)
or the
Pension Benefit Guaranty Corporation during this calendar year or any of the
preceding three calendar years, (iii) any filing or documentation (whether
or
not filed with the IRS) where corrective action was taken in connection with
the
IRS EPCRS program set forth in Revenue Procedure 2001-17 (or its predecessor
or
successor rulings), (iv) annual reports or returns, audited or unaudited
financial statements, actuarial reports, and valuations prepared for any
Employee Benefit Plan for the current plan year and the three preceding plan
years, and (v) the most recent summary plan descriptions and any material
modifications thereto.
(c) Each
Seller Benefit Plan is in material compliance with the terms of such Seller
Benefit Plan, in material compliance with the applicable requirements of the
Code, in material compliance with the applicable requirements of ERISA, and
in
material compliance with any other applicable Laws. Each Seller ERISA Plan
which
is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter or opinion from the IRS that is still in effect
and applies to the Seller ERISA Plan as amended and as administered or, within
the time permitted under Code Section 401(b), has timely applied for a favorable
determination letter which when issued will apply retroactively to the Seller
ERISA Plan as amended and as administered. Seller is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. Seller has not received any communication (written or unwritten) from
any Governmental Authority questioning or challenging the compliance of any
Seller Benefit Plan with applicable Laws. No Seller Benefit Plan is currently
being audited by any Governmental Authority for compliance with applicable
Laws
or has been audited with a determination by any Governmental Authority that
the
Employee Benefit Plan failed to comply with applicable Laws.
(d) There
has
been no material oral or written representation or communication with respect
to
any aspect of the Employee Benefit Plans made to employees of the Seller which
is not in accordance with the written or otherwise preexisting terms and
provisions of such plans. To Seller’s Knowledge, neither Seller nor any
administrator or fiduciary of any Seller Benefit Plan (or any agent of any
of
the foregoing) has engaged in any transaction, or acted or failed to act in
any
manner, which could subject Seller or Buyer to any direct or indirect Liability
(by indemnity or otherwise) for breach of any fiduciary, co-fiduciary, or other
duty under ERISA. To Seller’s Knowledge, there are no unresolved claims or
disputes under the terms of, or in connection with, the Seller Benefit Plans
other than claims for benefits which are payable in the ordinary course of
business and no action, proceeding, prosecution, inquiry, hearing, or
investigation has been commenced with respect to any Seller Benefit
Plan.
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(e) All
Seller Benefit Plan documents and annual reports or returns, audited or
unaudited financial statements, actuarial valuations, summary annual reports,
and summary plan descriptions issued with respect to the Seller Benefit Plans
are correct and complete in all material respects, have been timely filed with
the IRS or the DOL, and distributed to participants of the Seller Benefit Plans
(as required by Law), and there have been no changes in the information set
forth therein.
(f) To
the
Seller’s Knowledge, no “party
in interest”
(as
defined in ERISA Section 3(14)) or “disqualified
person”
(as
defined in Code Section 4975(e)(2)) of any Seller Benefit Plan has engaged
in
any nonexempt “prohibited
transaction”
(described in Code Section 4975(c) or ERISA Section 406).
(g) No
Seller
Entity has, or ever has had, a Seller Pension Plan, or any plan that is or
was
subject to Code Section 412 or ERISA Section 302 or Title IV of ERISA. There
is
no Lien nor is there expected to be a Lien under Code Section 412(n) or ERISA
Section 302(f) or Tax under Code Section 4971 applicable to any Seller Entity
or
any Seller Entity’s Assets. Neither Seller nor any of its ERISA Affiliates is
subject to or can reasonably be expected to become subject to a Lien under
Code
Section 401(a)(29). All premiums required to be paid under ERISA Section 4006,
if any, have been timely paid by Seller and by its ERISA
Affiliates.
(h) No
Liability under Title IV of ERISA has been or is expected to be incurred by
Seller or its ERISA Affiliates and no event has occurred that could reasonably
result in Liability under Title IV of ERISA being incurred by Seller or its
ERISA Affiliates with respect to any ongoing, frozen, terminated, or other
single-employer plan of Seller or the single-employer plan of any ERISA
Affiliate. There has been no “reportable
event,”
within
the meaning of ERISA Section 4043, for which the 30-day reporting requirement
has not been waived by any ongoing, frozen, terminated or other single employer
plan of Seller or of an ERISA Affiliate.
(i) Except
as
disclosed in Section 4.15 of the Seller Disclosure Memorandum, no Seller Entity
has any Liability for retiree health or life benefits under any of the Seller
Benefit Plans, or other plan or arrangement, and there are no restrictions
on
the rights of such Seller Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder except to the extent
required under Part 6 of Title I of ERISA or Code Section 4980B. No Tax under
Code Sections 4980B or 5000 has been incurred with respect to any Seller Benefit
Plan, or other plan or arrangement, and no circumstance exists which could
give
rise to such Taxes.
(j) Except
as
disclosed in Section 4.15 of the Seller Disclosure Memorandum, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any Seller Entity from any Seller Entity
under any Seller Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any Seller Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit, or any
benefit under any life insurance owned by any Seller Entity or the rights of
any
Seller Entity in, to or under any insurance on the life of any current or former
officer, director, or employee of any Seller Entity, or change any rights or
obligations of any Seller Entity with respect to such insurance.
(k) The
actuarial present values of all accrued deferred compensation entitlements
(including entitlements under any executive compensation, supplemental
retirement, or employment agreement) of employees and former employees of any
Seller Entity and their respective beneficiaries, other than entitlements
accrued pursuant to funded retirement plans, whether or not subject to the
provisions of Code Section 412 or ERISA Section 302, have been fully reflected
on the Seller Financial Statements to the extent required by and in accordance
with GAAP.
-24-
(l) All
individuals who render services to any Seller Entity and who are authorized
to
participate in a Seller Benefit Plan pursuant to the terms of such Seller
Benefit Plan are in fact eligible to and authorized to participate in such
Seller Benefit Plan.
(m)
Neither
the Seller nor any of its ERISA Affiliates has had an “obligation to contribute”
(as defined in ERISA Section 4212) to, or other obligations or Liability in
connection with, a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3)
or 3(37)(A)).
(n) Except
as
disclosed in Section 4.15 of the Seller Disclosure Memorandum, there are no
payments or changes in terms due to any insured person as a result of this
Agreement, the Merger or the transactions contemplated herein, under any
bank-owned, corporate-owned split dollar life insurance, other life insurance,
or similar arrangement or Contract, and the Successor Corporation shall, upon
and after the Effective Time, succeed to and have all the rights in, to and
under such life insurance Contracts as Seller presently holds. Each Seller
Entity will, upon the execution and delivery of this Agreement, and will
continue to have, notwithstanding this Agreement or the consummation of the
transaction contemplated hereby, all ownership rights and interest in all
corporate or bank-owned life insurance.
4.16 Material
Contracts.
(a) Except
as
disclosed in Section 4.16 of the Seller Disclosure Memorandum or otherwise
reflected in the Seller Financial Statements, none of the Seller Entities,
nor
any of their respective Assets, businesses, or operations, is a party to, or
is
bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting, or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $25,000,
(ii) any Contract relating to the borrowing of money by any Seller Entity
or the guarantee by any Seller Entity of any such obligation (other than
Contracts evidencing the creation of deposit liabilities, purchases of federal
funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, entry
into repurchase agreements fully secured by U.S. government securities or U.S.
government agency securities, advances of depository institution Subsidiaries
incurred in the ordinary course of Seller’s business, and trade payables and
Contracts relating to borrowings or guarantees made in the ordinary course
of
Seller’s business), (iii) any Contract which prohibits or restricts any
Seller Entity or any personnel of a Seller Entity from engaging in any business
activities in any geographic area, line of business or otherwise in competition
with any other Person, (iv) any Contract involving Intellectual Property (other
than Contracts entered into in the ordinary course with customers or
“shrink-wrap” software licenses), (v) any Contract relating to the
provision of data processing, network communication, or other technical services
to or by any Seller Entity, (vi) any Contract relating to the purchase or
sale of any goods or services (other than Contracts entered into in the ordinary
course of business and involving payments under any individual Contract or
series of contracts not in excess of $25,000), (vii) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract
or
any Contract that is a combination thereof not included on its balance sheet,
and (viii) any other Contract that would be required to be filed as an
exhibit to a Form 10-K filed by Seller as of the date of this Agreement pursuant
to the reporting requirements of the Exchange Act (together with all Contracts
referred to in Sections 4.11 and 4.15(a), the “Seller
Contracts”
).
(b) With
respect to each Seller Contract and except as disclosed in Section
4.16(b) of the Seller Disclosure Memorandum:
(i) the Contract is in full force and effect; (ii) no Seller Entity is
in Default thereunder; (iii) no Seller Entity has repudiated or waived any
material provision of any such Contract; (iv) no other party to any such
Contract is, to Seller’s Knowledge, in Default in any respect or has repudiated
or waived any material provision thereunder; and (v) no consent which has not
been or will not be obtained is required by a Contract for the execution,
delivery, or performance of this Agreement, the consummation of the Merger
or
the other transactions contemplated hereby. Section 4.16(b) of the Seller
Disclosure Memorandum lists every Consent required by any Contract involving
an
amount in excess of $50,000. All of the indebtedness of any Seller Entity for
money borrowed is prepayable at any time by such Seller Entity without penalty,
premium or charge, except as specified in Section 4.16(b) of the Seller
Disclosure Memorandum.
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4.17 Privacy
of Customer Information.
(a) Each
Seller Entity is the sole owner of all individually identifiable personal
information relating to an identifiable or identified natural person
(“IIPI”),
relating to customers, former customers, and prospective customers that will
be
transferred to Buyer and the Buyer Entities pursuant to this
Agreement.
(b) Each
Seller Entity’s collection and use of such IIPI, the transfer of such IIPI to
Buyer and the Buyer Entities, and the use of such IIPI by the Buyer Entities
as
contemplated by this Agreement, complies with Seller’s privacy policy, the Fair
Credit Reporting Act, the Xxxxx-Xxxxx-Xxxxxx Act, and all other applicable
privacy Laws, and any Seller Entity Contract and industry standards relating
to
privacy.
4.18 Legal
Proceedings.
Except
as
disclosed in Section 4.18 of the Seller Disclosure Memorandum, there is no
Litigation instituted or pending, or, to the Knowledge of Seller, threatened
(or
unasserted but considered probable of assertion) against any Seller Entity,
or
to Seller’s Knowledge, against any director, officer, employee, or agent of any
Seller Entity in their capacities as such or with respect to any service to
or
on behalf of any Employee Benefit Plan or any other Person at the request of
the
Seller Entity or Employee Benefit Plan of any Seller Entity, or against any
Asset, interest, or right of any of them, nor are there any Orders or judgments
outstanding against any Seller Entity. No claim for indemnity has been made
or,
to Seller’s Knowledge, threatened by any director, officer, employee,
independent contractor, or agent to any Seller Entity and to Seller’s knowledge,
no basis for any such claim exists.
4.19 Reports.
Except
as
disclosed in Section 4.19 of the Seller Disclosure Memorandum, since July 1,
2004, each Seller Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Governmental Authorities. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of their respective dates, such reports and documents did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this Section 4.19,
Seller Entities may have made immaterial late filings, which are disclosed
in
Section 4.19 of the Seller Disclosure Memorandum.
4.20 Books
and Records.
Seller
and each Seller Entity maintains accurate books and records reflecting its
Assets and Liabilities and maintains proper and adequate internal accounting
controls which provide assurance that (a) transactions are executed with
management’s authorization; (b) transactions are recorded as necessary to permit
preparation of the consolidated financial statements of Seller and to maintain
accountability for Seller’s consolidated Assets; (c) access to Seller’s Assets
is permitted only in accordance with management’s authorization; (d) the
reporting of Seller’s Assets is compared with existing Assets at regular
intervals; and (e) accounts, notes, and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
-26-
4.21 Loans
to Executive Officers and Directors.
Seller
has not, since its inception, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of Seller, except as permitted by Section 13(k) of the Exchange Act
and
Federal Reserve Regulation O. Section 4.21 of the Seller Disclosure Memorandum
identifies any loan or extension of credit maintained by Seller after July
29,
2002 to which the second sentence of Section 13(k)(1) of the Exchange Act
applies or would apply if Seller were subject to such Section.
4.22 Certain
Actions.
No
Seller
Entity or, to Seller’s Knowledge, any Affiliate thereof has taken or agreed to
take any action or has any Knowledge of any fact or circumstance that is
reasonably likely to materially
impede or delay receipt of any required Consents or result in the imposition
of
a condition or restriction of the type referred to in the last sentence of
Section 8.1(b).
4.23 State
Takeover Laws.
Each
Seller Entity has taken all necessary action, if any, to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable “moratorium,” “fair price,” “business
combination,” “control share,” or other anti-takeover Laws, (collectively,
“Takeover
Laws”).
4.24 Brokers
and Finders; Opinion of Financial Advisor.
Except
for Seller Financial Advisor, neither Seller nor its Subsidiaries, or any of
their respective officers, directors, employees, or Representatives, has
employed any broker, finder, or investment banker or incurred any Liability
for
any financial advisory fees, investment bankers fees, brokerage fees,
commissions, or finder’s or other such fees in connection with this Agreement or
the transactions contemplated hereby. Seller has received the written opinion
of
the Seller Financial Advisor, dated the date of this Agreement, to the effect
that the consideration to be received in the Merger by the holders of Seller
Common Stock is fair, from a financial point of view, to such holders, a signed
copy of which has been or will be delivered to Buyer.
4.25 Board
Recommendation.
The
board
of directors of Seller, at a meeting duly called and held, has by unanimous
vote
of the directors present (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger and the transactions
contemplated hereby and thereby, taken together, are fair to and in the best
interests of the Seller's shareholders and (ii) resolved, subject to the
terms of this Agreement, to recommend that the holders of the shares of Seller
Common Stock approve this Agreement, the Merger, and the related transactions
and to call and hold a meeting of Seller’s shareholders to consider this
Agreement, the Merger, and the related transactions.
4.26 Statements
True and Correct.
(a) No
statement, certificate, instrument, or other writing furnished or to be
furnished by any Seller Entity or any Affiliate thereof to Buyer pursuant to
this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in
light
of the circumstances under which they were made, not misleading.
(b) None
of
the information supplied or to be supplied by any Seller Entity or any Affiliate
thereof for inclusion in the Registration Statement to be filed by Buyer with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be
supplied by any Seller Entity or any Affiliate thereof for inclusion in any
Proxy Statement/Prospectus to be mailed to Seller’s shareholders in connection
with Seller's Shareholders’ Meeting, and any other documents to be filed by any
Seller Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the
respective time such documents are filed, and with respect to the Proxy
Statement/Prospectus, when first mailed to the shareholders of Seller be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, at the
time
of the Seller’s Shareholders’ Meeting be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
any
proxy for Seller’s Shareholders’ Meeting.
-27-
(c) All
documents that any Seller Entity or any Affiliate thereof is responsible for
filing with any Governmental Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
4.27 Delivery
of Seller Disclosure Memorandum.
Seller
has delivered to Buyer a complete Seller Disclosure Memorandum.
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ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to Seller, except as set forth on the Buyer
Disclosure Memorandum with respect to each such Section below, as
follows:
5.1 Organization,
Standing, and Power.
Buyer
is
a corporation duly organized, validly existing, and in good standing under
the
Laws of the State of South Carolina, and has the corporate power and authority
to carry on its business as now conducted and to own, lease, and operate its
Assets. Buyer is duly qualified or licensed to transact business as a foreign
corporation in good standing in the states of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of
its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Buyer Material
Adverse Effect.
5.2 Authority
of Buyer; No Breach By Agreement.
(a) Buyer
has
the corporate power and authority necessary to execute, deliver, and, other
than
with respect to the Merger, perform this Agreement, and with respect to the
Merger, upon the approval of the Merger, as required by Sections 8.1(b), and
8.1(c) and by Buyer’s shareholders in accordance with this Agreement and the
SCBCA,
to
perform its obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of Buyer, subject to the approval of this
Agreement by the holders of two-thirds of the outstanding shares of Buyer Common
Stock, which is the only Buyer’s shareholder vote required for approval of this
Agreement and consummation of the Merger. Subject to any necessary approvals
referred to in Sections 8.1(b) and 8.1(c), and receipt of such requisite
shareholder approval, this Agreement represents a legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors’ rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be
brought).
(b) Neither
the execution and delivery of this Agreement by Buyer, nor the consummation
by
Buyer of the transactions contemplated hereby, nor compliance by Buyer with
any
of the provisions hereof, will (i) conflict with or result in a breach of
any provision of Buyer’s articles of incorporation or bylaws or any resolution
adopted by the board of directors or shareholders of Buyer, or (ii) result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any Buyer Entity under, any Contract or
Permit of any Buyer Entity, or, (iii) subject to receipt of the requisite
Consents referred to in Section 8.1(b) and (c), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Buyer Entity or any of their respective material Assets.
(c) Other
than in connection or compliance with the provisions of the Securities Laws,
applicable state corporate and securities Laws and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
IRS
or the Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, and other than Consents, filings, or notifications which, if not obtained
or made, are not reasonably likely to have, individually or in the aggregate,
a
Buyer Material Adverse Effect, no notice to, filing with, or Consent of, any
Governmental Authority is necessary for the consummation by Buyer of the Merger
and the other transactions contemplated in this Agreement.
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5.3 Exchange
Act Filings; Financial Statements.
(a) Buyer
has
timely filed and made available to Seller all Exchange Act Documents required
to
be filed by Buyer since July 1, 2004 (together with all such Exchange Act
Documents filed, whether or not required to be filed, the “Buyer
Exchange Act Reports”).
The
Buyer Exchange Act Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such amended or subsequent filing or, in the case of registration
statements, at the effective date thereof) contain any untrue statement of
a
material fact or omit to state a material fact required to be stated in such
Buyer Exchange Act Reports or necessary in order to make the statements in
such
Buyer Exchange Act Reports, in light of the circumstances under which they
were
made, not misleading.
Buyer’s
principal executive officer and principal financial officer (and Buyer’s former
principal executive officers and principal financial officers, as applicable)
have made the certifications required by Sections 302 and 906 of the
Xxxxxxxx-Xxxxx Act and the rules and regulations of the Exchange Act thereunder
with respect to Buyer’s Exchange Act Documents to the extent such rules or
regulations applied at the time of the filing. For purposes of the preceding
sentence, “principal executive officer” and “principal financial officer” shall
have the meanings given to such terms in the Xxxxxxxx-Xxxxx Act. Such
certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither Buyer nor any
of
its officers has received notice from any Regulatory Authority questioning
or
challenging the accuracy, completeness, content, form, or manner of filing
or
submission of such certifications. No Buyer Subsidiary is required to file
any
Exchange Act Documents.
(b) Each
of
the Buyer Financial Statements (including, in each case, any related notes)
contained in the Buyer Exchange Act Reports, including any Buyer Exchange Act
Reports filed after the date of this Agreement until the Effective Time,
complied, or will comply, as to form in all material respects with the
applicable published rules and regulations of the Exchange Act with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such
financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the Exchange Act), and fairly presented in all
material respects the consolidated financial position of Buyer and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect, and were certified to the extent required by the Xxxxxxxx-Xxxxx
Act.
(c) Buyer’s
independent public accountants, which have expressed their opinion with respect
to the Financial Statements of Buyer included in Buyer’s Exchange Act Reports
(including the related notes), are and have been throughout the periods covered
by such Financial Statements (x) a registered public accounting firm (as defined
in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act) (to the extent applicable during
such period), (y) “independent” with respect to Buyer within the meaning of
Regulation S-X and, (z) with respect to Buyer, in compliance with subsections
(g) through (l) of Section 10A of the Exchange Act and related Securities
Laws.
(d) Buyer
maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15
under the Exchange Act, and such controls and procedures are effective to ensure
that all material information relating to Buyer is made known on a timely basis
to the individuals responsible for the preparation of Buyer’s Exchange Act
Documents.
5.4 Reports.
Since
July 1, 2004, each Buyer Entity has filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Governmental Authorities. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of their respective dates, such reports and documents did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
-30-
5.5 Brokers
and Finders.
Except
for Buyer Financial Advisor, neither Buyer nor any of their respective officers,
directors, employees, or Representatives, has employed any broker, finder or
investment banker or incurred any Liability for any financial advisory fees,
investment bankers’ fees, brokerage fees, commissions, or finder’s fees or other
such fees in connection with this Agreement or the transactions contemplated
hereby.
5.6 Certain
Actions.
No
Buyer
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to
materially impede or delay receipt of any required Consents or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of Section 8.1(b).
5.7 Available
Consideration.
Buyer
has
available to it, or as of the Effective Time will have available to it,
sufficient shares of authorized and unissued Buyer Common Stock and all funds
necessary for the issuance and payment of the Merger Consideration and has
funds
available to it to satisfy its payment obligations under this
Agreement.
5.8 Statements
True and Correct.
(a) No
statement, certificate, instrument, or other writing furnished or to be
furnished by any Buyer Entity or any Affiliate thereof to Seller pursuant to
this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in
light
of the circumstances under which they were made, not misleading.
(b) None
of
the information supplied or to be supplied by any Buyer Entity or any Affiliate
thereof for inclusion in the Registration Statement to be filed by Buyer with
the SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact
necessary to make the statements therein not misleading. None of the information
supplied by any Buyer Entity or any Affiliate thereof for inclusion in the
Proxy
Statement/Prospectus to be mailed to Seller’s shareholders in connection with
the Seller’s Shareholders’ Meeting, and any other documents to be filed by any
Buyer Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the
respective time such documents are filed, and with respect to the Proxy
Statement/Prospectus, when first mailed to the shareholders of Seller be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, at the
time
of the Seller’s Shareholders’ Meeting be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
any
proxy for Seller’s Shareholders’ Meeting.
-31-
(c) All
documents that any Buyer Entity or any Affiliate thereof is responsible for
filing with any Governmental Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
5.9 Absence
of Certain Changes or Events.
Except
as
disclosed in the Buyer Financial Statements delivered prior to the date of
this
Agreement or as disclosed in Section 5.9 of the Buyer Disclosure Memorandum,
(i) there have been no events, changes, or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Buyer
Material Adverse Effect, (ii) none of the Buyer Entities has taken any
action, or failed to take any action, prior to the date of this Agreement,
which
action or failure, if taken after the date of this Agreement, would represent
or
result in a material breach or violation of any of the covenants and agreements
of Buyer provided in this Agreement, and (iii) since December 31, 2006 the
Seller Entities have conducted their respective businesses in the ordinary
course of business consistent with past practice.
ARTICLE
6
CONDUCT
OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative
Covenants of Seller.
(a) From
the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of Buyer shall
have been obtained, and except as otherwise expressly contemplated herein,
Seller shall, and shall cause each of its Subsidiaries to, (i) operate its
business only in the usual, regular, and ordinary course, (ii) use commercially
reasonable efforts to preserve intact its business organization and Assets
and
maintain its rights and franchises, (iii) use commercially reasonable efforts
to
cause its representations and warranties to be correct at all times, (iv) use
its best efforts to provide all information requested by Buyer related to loans
or other transactions made by Seller with a value equal to or exceeding
$500,000, (v) consult with Buyer prior to entering into or making any loans
or
other transactions with a value equal to or exceeding $1,000,000, (vi) consult
with Buyer prior to entering into or making any loans that exceed regulatory
loan to value guidelines, and (vii) take no action which would (A) adversely
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Sections 8.1(b)
or
8.1(c), or (B) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement.
(b) From
the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of Seller shall
have been obtained, and except as otherwise expressly contemplated herein,
Buyer
shall, and shall cause each of its Subsidiaries to, (i) operate its business
only in the usual, regular, and ordinary course, (ii) use commercially
reasonable efforts to preserve intact its business organization and Assets
and
maintain its rights and franchises, (iii) use commercially reasonable efforts
to
cause its representations and warranties to be correct at all times, and (iv)
take no action which would (A) adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Sections 8.1(b) or 8.1(c), or (B) materially adversely affect
the
ability of any Party to perform its covenants and agreements under this
Agreement.
(c) Seller
and Buyer each shall, and shall cause each of its Subsidiaries to, cooperate
with the other Party and provide all necessary corporate approvals, and
cooperate in seeking all approvals of any business combinations of such Seller
and its Subsidiaries requested by Buyer, provided,
the
effective time of such business combinations is on or after the Effective Time
of the Merger.
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6.2 Negative
Covenants of Seller.
From
the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of Buyer shall
have been obtained, and except as otherwise expressly contemplated herein,
Seller covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend
the
articles of incorporation, bylaws, or other governing instruments of any Seller
Entity;
(b) incur
any
additional debt obligation or other obligation for borrowed money in excess
of
an aggregate of $250,000 except in the ordinary course of the business of any
Seller Entity consistent with past practices and
that
are prepayable without penalty, charge, or other payment (which exception shall
include, for Seller Entities that are depository institutions, creation of
deposit liabilities, purchases of federal funds, advances from a Federal Reserve
Bank or a Federal Home Loan Bank, and entry into repurchase agreements fully
secured by U.S. government securities or U.S. government agency securities),
or
impose, or suffer the imposition, on any Asset of any Seller Entity of any
Lien
or permit any such Lien to exist (other than in connection with public
deposits, repurchase agreements, bankers’ acceptances, “treasury tax and loan”
accounts established in the ordinary course of business of Subsidiaries that
are
depository institutions, the satisfaction of legal requirements in the exercise
of trust powers, and Liens in effect as of the date hereof that are disclosed
in
the Seller Disclosure Memorandum);
(c) repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the ordinary
course under employee benefit plans), directly or indirectly, any shares, or
any
securities convertible into any shares, of the capital stock of any Seller
Entity, or declare or pay any dividend or make any other distribution in respect
of Seller’s capital stock;
(d) issue,
sell, pledge, encumber, authorize the issuance of, enter into any Contract
to
issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of Seller Common Stock, any other
capital stock of any Seller Entity, or any Right;
(e) adjust,
split, combine, or reclassify any capital stock of any Seller Entity or issue
or
authorize the issuance of any other securities in respect of or in substitution
for shares of Seller Common Stock, or sell, lease, mortgage, or otherwise
dispose of (i) any shares of capital stock of any Seller Subsidiary or (ii)
any
Asset other than in the ordinary course of business for reasonable and adequate
consideration;
(f) purchase
any securities or make any material investment except in the ordinary course
of
business consistent with past practice, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Seller Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in connection
with foreclosures of loans in the ordinary course of business;
(g)
except
as contemplated by this Agreement or as may be required by existing Contract,
(i) grant any bonus or increase in compensation or benefits to the employees,
officers or directors of any Seller Entity (except in accordance with past
practice and as disclosed on Schedule 6.2(g)), (ii) commit or agree to pay
any
severance or termination pay, or any stay or other bonus to any Seller director,
officer or employee, (iii) enter into or amend any severance agreements with
officers, employees, directors, independent contractors, or agents of any Seller
Entity, (iv) change any fees or other compensation or other benefits to
directors of any Seller Entity, or (v) waive any stock repurchase rights,
accelerate, amend, or change the period of exercisability of any Rights or
restricted stock, or reprice Rights granted under Seller stock plans or
authorize cash payments in exchange for any Rights; or (vi) accelerate or vest
or commit or agree to accelerate or vest any amounts, benefits or rights payable
by any Seller Entity provided, however, that Seller may (x) continue to make
annual merit salary increases consistent with past practices, (y) pay all earned
bonuses and incentive compensation and (z) pay bonuses to the management team
for efforts associated with the Merger to the extent disclosed in Section 6.2(g)
of the Seller Disclosure Memorandum;
-33-
(h) enter
into or amend any employment Contract between any Seller Entity and any Person
(unless such amendment is required by Law) that the Seller Entity does not
have
the unconditional right to terminate without Liability (other than Liability
for
services already rendered), at any time on or after the Effective Time, except
in the case of amendments to comply with Section 409A of the Internal Revenue
Code;
(i) adopt
any
new employee benefit plan of any Seller Entity or terminate or withdraw from,
or
make any material change in or to, any existing employee benefit plans, welfare
plans, insurance, stock or other plans of any Seller Entity other than any
such
change that is required by Law or to maintain continuous benefits at current
levels or that, in the written opinion of counsel, is necessary or advisable
to
maintain the tax qualified status of any such plan, or make any distributions
from such employee benefit or welfare plans, except as required by Law, the
terms of such plans or consistent with past practice;
(j) make
any
change in any Tax or accounting methods or systems of internal accounting
controls, except as may be appropriate and necessary to conform to changes
in
Tax Laws, regulatory accounting requirements, or GAAP;
(k) commence
any Litigation other than in accordance with past practice or settle any
Litigation involving any Liability of any Seller Entity for money damages or
restrictions upon the operations of any Seller Entity;
(l) enter
into, modify, amend, or terminate any material Contract other than with respect
to those involving aggregate payments of less than, or the provision of goods
or
services with a market value of less than, $50,000 per annum and other than
Contracts covered by Sections 6.2(b), (m), (n) and (o) or as otherwise permitted
by Section 6.1(a)(v);
(m) except
in
the ordinary course of business consistent with past practice, make,
renegotiate, renew, increase, extend, modify or purchase any loan, lease (credit
equivalent), advance, credit enhancement or other extension of credit, or make
any commitment in respect of any of the foregoing;
(n) except
in
conformity with existing policies and practices, waive, release, compromise,
or
assign any material rights or claims, or make any adverse changes in the mix,
rates, terms, or maturities of Seller’s deposits and other Liabilities;
(o) except
for loans or extensions of credit made on terms generally available to the
public, make or increase any loan or other extension of credit, or commit to
make or increase any such loan or extension of credit, to any director or
executive officer of Seller or the Bank, or any entity controlled, directly
or
indirectly, by any of the foregoing, other than renewals of existing loans
or
commitments to loan;
(p) restructure
or materially change its investment securities portfolio or its interest rate
risk position, through purchases, sales or otherwise, or the manner in which
the
portfolio is classified or reported;
(q) make
any
capital expenditures in excess of $10,000 other than pursuant to binding
commitments existing on the date hereof and other than expenditures necessary
to
maintain existing assets in good repair or to make payment of necessary
taxes;
(r) except
for completion of branches or offices in process, establish or commit to the
establishment of any new branch or other office facilities or file any
application to relocate or terminate the operation of any banking office unless
otherwise requested by Buyer;
(s) take
any
action that is intended or expected to result in any of its representations
and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the conditions
to
the Merger set forth in Article 8 not being satisfied or in a violation of
any
provision of this Agreement;
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(t) implement
or adopt any change in its accounting principles, practices or methods, other
than as may be required by GAAP or regulatory guidelines;
(u) knowingly
take any action that would prevent or impede the Merger from qualifying as
a
reorganization within the meaning of Section 368(a) of the IRC;
(v) agree
to
take, make any commitment to take, or adopt any resolutions of its board of
directors in support of, any of the actions prohibited by this Section
6.2;
(w) cause
the
Allowance to be less than 1.20% of loans and leases and other credits; or
(x) take
any
action or fail to take any action that at the time of such action or inaction
is
reasonably likely to prevent, or would be reasonably likely to materially
interfere with, the consummation of the Merger.
6.3 Adverse
Changes in Condition.
Each
Party agrees to give written notice promptly to the other Party upon becoming
aware of the occurrence or impending occurrence of any event or circumstance
relating to it or any of its Subsidiaries which (i) has had or is reasonably
likely to have, individually or in the aggregate, a Seller Material Adverse
Effect or a Buyer Material Adverse Effect, as applicable, (ii) would cause
or
constitute a material breach of any of its representations, warranties, or
covenants contained herein, or (iii) would be reasonably likely to prevent
or
materially interfere with the consummation of the Merger, and to use its
reasonable efforts to prevent or promptly to remedy the same.
6.4 Reports.
Each
of
Buyer and its Subsidiaries and Seller and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the
date
of this Agreement and the Effective Time and shall make available to the other
Party copies of all such reports promptly after the same are filed. Seller
and
its Subsidiaries shall also make available to Buyer monthly financial statements
and quarterly call reports. The financial statements of Buyer and Seller,
whether or not contained in any such reports filed under the Exchange Act or
with any other Regulatory Authority, will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders’
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring
year-end adjustments that are not material). As of their respective dates,
such
reports of Buyer and Seller filed under the Exchange Act or with any other
Regulatory Authority will comply in all material respects with the Securities
Laws and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were
made, not misleading. Any financial statements contained in any other reports
to
another Regulatory Authority shall be prepared in accordance with the Laws
applicable to such reports.
ARTICLE
7
ADDITIONAL
AGREEMENTS
7.1 Shareholder
Approvals.
(a) Seller
will submit to its shareholders this Agreement and any other matters required
to
be approved or adopted by shareholders in order to carry out the intentions
of
this Agreement. In furtherance of that obligation, Seller will take, in
accordance with applicable law and its articles of incorporation and bylaws,
all
action necessary to call, give notice of, convene, and hold the Seller's
Shareholders’ Meeting as promptly as practicable for the purpose of considering
and voting on approval and adoption of this Agreement and the transactions
provided for in this Agreement.
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(b) Neither
the board of directors of Seller nor any committee thereof shall (i) except
as
expressly permitted by this Section, withdraw, qualify or modify, or propose
publicly to withdraw, qualify or modify, in a manner adverse to Buyer, the
approval or recommendation of such board of directors or such committee of
the
Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal, or (iii) cause Seller to enter
into any letter of intent, agreement in principle, acquisition agreement, or
other document, instrument, or agreement (each, an “Acquisition
Agreement”)
related to any Acquisition Proposal. Notwithstanding the foregoing, in the
event
that, prior to the adoption of this Agreement by the holders of Seller Common
Stock, the board of directors of Seller determines in good faith that it has
received a Superior Proposal and that the failure to accept the Superior
Proposal would result in the board of directors of Seller breaching its
fiduciary duties to Seller shareholders under applicable Law, the board of
directors of Seller may (subject to this and the following sentences) inform
Seller shareholders that it no longer believes that the Merger is advisable
and
no longer recommends approval and may (subject to this Section) approve or
recommend a Superior Proposal (and in connection therewith withdraw or modify
its approval or recommendation of this Agreement and the Merger) (a
“Subsequent
Determination”),
but
only at a time that is after the fifth business day following Buyer’s receipt of
written notice advising Buyer that the board of directors of Seller has received
a Superior Proposal specifying the material terms and conditions of such
Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing), identifying the person making such Superior
Proposal and stating that it intends to make a Subsequent Determination. After
providing such notice, Seller shall provide Buyer reasonable opportunity during
this five business day period to make such adjustments in the terms and
conditions of this Agreement as would enable Seller to proceed with its
recommendation to its shareholders without a Subsequent Determination;
provided,
however,
that any
such adjustment shall be at the discretion of the Parties at the time.
Notwithstanding any other provision of this Agreement, except
to
the extent prohibited by the SCBCA
determined by Seller after consultation with Seller’s counsel, Seller shall
submit this Agreement to its shareholders at the Seller's Shareholders’ Meeting
even if the board of directors of Seller determines at any time after the date
hereof that it is no longer advisable or recommends that Seller shareholders
reject it, in which case the board of directors of Seller may communicate the
basis for its lack of recommendation to the shareholders in the Proxy
Statement/Prospectus or any appropriate amendment or supplement
thereto.
(c)
Buyer
will submit to its shareholders this Agreement and any other matters required
to
be approved or adopted by its shareholders in order to carry out the intentions
of this Agreement. In furtherance of that obligation, Buyer will take, in
accordance with applicable law and its articles of incorporation and bylaws,
all
action necessary to call, give notice of, convene, and hold the Buyer's
Shareholders' Meeting as promptly as practicable for the purpose of considering
and voting on approval and adoption of this Agreement and the transactions
provided for in this Agreement.
7.2 Registration
of Buyer Common Stock.
(a) As
promptly as reasonably practicable following the date hereof, Buyer shall
prepare and file with the SEC a registration statement on Form S-4 with respect
to the issuance of Buyer Common Stock in the Merger (such Form S-4, and any
amendments or supplements thereto, the “Registration
Statement”).
The
Registration Statement shall contain proxy materials relating to the matters
to
be submitted to the Seller’s shareholders at the Seller's Shareholders’ Meeting
and to the Buyer’s shareholders at the Buyer’s Shareholders’ Meeting. Such proxy
materials shall also constitute the prospectus relating to the shares of Buyer
Common Stock to be issued in the Merger (such proxy statement-prospectus, and
any amendments or supplements thereto, the “Proxy
Statement/Prospectus”).
Seller will furnish to Buyer the information required to be included in the
Registration Statement with respect to its business and affairs and shall have
the right to review and consult with Buyer on the form of, and any
characterizations of such information included in, the Registration Statement
prior to its being filed with the SEC. Buyer shall use its reasonable best
efforts to have the Registration Statement declared effective by the SEC and
to
keep the Registration Statement effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby. Seller will use its
reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed
to
its shareholders as promptly as practicable after the Registration Statement
is
declared effective under the Securities Act. Buyer will advise Seller, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective, the issuance of any stop order, the suspension of the
qualification of the Buyer Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Registration Statement.
If at
any time prior to the Effective Time any information relating to Buyer or
Seller, or any of their respective affiliates, officers or directors, should
be
discovered by Buyer or Seller which should be set forth in an amendment or
supplement to any of the Registration Statement or the Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading, the party that discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed by Buyer with the SEC and disseminated by Seller to
its
shareholders.
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(b) Seller
shall also take any action required to be taken under any applicable state
securities laws in connection with the Merger and each of Buyer and Seller
shall
furnish all information concerning it and the holders of Seller Common Stock
as
may be reasonably requested in connection with any such action.
(c) Prior
to
the Effective Time, Buyer shall take such action as shall be necessary to permit
the additional shares of Buyer Common Stock to be issued by Buyer in exchange
for the shares of Seller Common Stock to be traded on the exchange on which
the
Buyer Common Stock is listed.
7.3
Other Offers, etc.
(a) No
Seller
Entity shall, nor shall it authorize or permit any of its Affiliates or
Representatives to, directly or indirectly (i) solicit, initiate, encourage,
or
induce the making, submission, or announcement of any Acquisition Proposal,
(ii)
participate in any discussions or negotiations regarding, or furnish to any
Person or “Group”
(as
such term is defined in Section 13(d) under the Exchange Act) any nonpublic
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably
be
expected to lead to, any Acquisition Proposal, (iii) subject to Section 7.1(b),
approve, endorse, or recommend any Acquisition Proposal, or (iv) subject to
Section 7.1(b), enter into any Acquisition Agreement contemplating or otherwise
relating to any Acquisition Transaction; provided,
however, that
this
Section 7.3 shall not prohibit a Seller Entity from furnishing nonpublic
information regarding any Seller Entity to, or entering into a confidentiality
agreement or discussions or negotiations with, any Person or Group in response
to a bona
fide unsolicited
written Acquisition Proposal submitted by such Person or Group (and not
withdrawn) if (A) no Seller Entity or Representative or Affiliate thereof shall
have violated any of the restrictions set forth in this Section 7.3, (B) the
board of directors of Seller determines in its good faith judgment (based on,
among other things, the advice of the Seller Financial Advisor) that such
Acquisition Proposal constitutes a Superior Proposal, (C) the board of directors
of Seller concludes in good faith, after consultation with its outside legal
counsel, that the failure to take such action would be inconsistent with its
fiduciary duties, as such duties would exist in the absence of this Section
7.3,
to the shareholders of Seller under applicable Law, (D) (1) at least five
business days prior to furnishing any such nonpublic information to, or entering
into discussions or negotiations with, such Person or Group, Seller gives Buyer
written notice of the identity of such Person or Group and of Seller’s intention
to furnish nonpublic information to, or enter into discussions or negotiations
with, such Person or Group, and (2) Seller receives from such Person or Group
an
executed confidentiality agreement containing terms no less favorable to the
disclosing Party than the confidentiality terms of this Agreement, and (E)
contemporaneously with furnishing any such nonpublic information to such Person
or Group, Seller furnishes such nonpublic information to Buyer (to the extent
such nonpublic information has not been previously furnished by Seller to
Buyer). In addition to the foregoing, Seller shall provide Buyer with at least
five business days’ prior written notice of a meeting of the board of directors
of Seller at which meeting the board of directors of Seller is reasonably
expected to resolve to recommend a Superior Proposal to its shareholders and
together with such notice a copy of the most recently proposed documentation
relating to such Superior Proposal;
provided, further,
that
Seller hereby agrees promptly to provide to Buyer any revised documentation
and
any Acquisition Agreement.
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(b) In
addition to the obligations of Seller set forth in this Section 7.3, as promptly
as practicable, after any of the directors or executive officers of Seller
become aware thereof, Seller shall advise Buyer of any request received by
Seller for nonpublic information which Seller reasonably believes could lead
to
an Acquisition Proposal or of any Acquisition Proposal, the material terms
and
conditions of such request or Acquisition Proposal, and the identity of the
Person or Group making any such request or Acquisition Proposal. Seller shall
keep Buyer informed promptly of material amendments or modifications to any
such
request or Acquisition Proposal.
(c) Seller
shall, and shall cause its Subsidiaries directors, officers, employees, and
Representatives to immediately cease any and all existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any Acquisition Proposal and will use and cause to be used all commercially
reasonable best efforts to enforce any confidentiality or similar or related
agreement relating to any Acquisition Proposal.
(d) Nothing
contained in this Agreement shall prevent a Party or its board of directors
from
complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect
to
an Acquisition Proposal, provided,
that such
Rules will in no way eliminate or modify the effect that any action pursuant
to
such Rules would otherwise have under this Agreement.
7.4
Consents of Regulatory Authorities.
The
Parties hereto shall cooperate with each other and use their reasonable efforts
to promptly prepare and file all necessary documentation and applications,
to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all Consents of all Regulatory Authorities and other
Persons which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger). The Parties agree that
they will consult with each other with respect to the obtaining of all Consents
of all Regulatory Authorities and other Persons 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 consummation of
the
transactions contemplated herein. Each Party also shall promptly advise the
other upon receiving any communication from any Regulatory Authority or other
Person whose Consent is required for consummation of the transactions
contemplated by this Agreement which causes such Party to believe that there
is
a reasonable likelihood that any requisite Consent will not be obtained or
that
the receipt of any such Consent will be materially delayed.
7.5 Agreement
as to Efforts to Consummate.
Subject
to the terms and conditions of this Agreement, each Party agrees to use, and
to
cause its Subsidiaries to use, its reasonable efforts to take, or cause to
be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective,
as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied
the
conditions referred to in Article 8; provided,
that nothing
herein shall preclude either Party from exercising its rights under this
Agreement.
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7.6 Investigation
and Confidentiality.
(a) Prior
to
the Effective Time, each Party shall keep the other Party advised of all
material developments relevant to its business and the consummation of the
Merger and shall permit the other Party to make or cause to be made such
investigation of its business and properties (including that of its
Subsidiaries) and of their respective financial and legal conditions as the
other Party reasonably requests, provided,
that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the ability of such Party to rely on
the
representations and warranties of the other Party.
Between
the date hereof and the Effective Time, Seller shall permit Buyer’s senior
officers and independent auditors to meet with the senior officers of Seller,
including officers responsible for the Seller Financial Statements, the internal
controls of Seller, and the disclosure controls and procedures of Seller and
Seller’s independent public accountants, to discuss such matters as Buyer may
deem reasonably necessary or appropriate for Buyer to satisfy its obligations
under Sections 302, 404 and 906 of the Xxxxxxxx-Xxxxx Act.
(b) In
addition to each Party’s obligations pursuant to Section 7.6(a), each Party
shall, and shall cause its advisors and agents to, maintain the confidentiality
of all confidential information furnished to it by the other Party concerning
its and its Subsidiaries’ businesses, operations, and financial positions and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) Seller
shall use its reasonable efforts to exercise, and shall not waive any of, its
rights under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to Seller to preserve the
confidentiality of the information relating to the Seller Entities provided
to
such Persons and their Affiliates and Representatives.
(d) Each
Party agrees to give the other Party notice as soon as practicable after any
determination by it of any fact or occurrence relating to the other Party which
it has discovered through the course of its investigation and which represents,
or is reasonably likely to represent, either a material breach of any
representation, warranty, covenant, or agreement of the other Party or which
has
had or is reasonably likely to have a Seller Material Adverse Effect or a Buyer
Material Adverse Effect, as applicable.
7.7 Press
Releases.
Prior
to
the Effective Time, Seller shall consult with Buyer as to the form and substance
of any press release, communication with Seller Shareholders or Buyer
Shareholders, or other public disclosure materially related to this Agreement,
or any other transaction contemplated hereby; provided,
that
nothing
in this Section 7.7 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party’s disclosure obligations imposed by Law.
7.8 Charter
Provisions.
Each
Seller Entity shall take all necessary action to ensure that the entering into
of this Agreement and the consummation of the Merger and the other transactions
contemplated hereby do not and will not result in the grant of any rights to
any
Person under the articles of incorporation, articles of association, bylaws,
or
other governing instruments of any Seller Entity or restrict or impair the
ability of Buyer or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any Seller Entity that
may be directly or indirectly acquired or controlled by them.
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7.9 Employee
Benefits and Contracts.
(a) All
persons who are employees of the Seller Entities immediately prior to the
Effective Time and whose employment is not specifically terminated, if any,
at
or prior to the Effective Time (a “Continuing
Employee”)
shall,
at the Effective Time, become employees of First National Bank of the South;
provided,
however,
that in
no event shall any of the employees of the Seller Entities be officers of Buyer
or First National Bank of the South, or have or exercise any power or duty
conferred upon such an officer, unless and until duly elected or appointed
to
such position by the board of directors of Buyer or First National Bank of
the
South and in accordance with the bylaws of Buyer or First National Bank of
the
South. All of the Continuing Employees shall be employed at the will of First
National Bank of the South and no contractual right to employment shall inure
to
such employees because of this Agreement except as otherwise set forth in this
Agreement. For
those
employees of the Seller Entities who had executed change of control severance
agreements prior to August 1, 2007, Buyer anticipates that it will provide
a
lump sum payment to each employee as contemplated in the change of control
severance agreements in exchange for termination of the change in control
severance agreements regardless of whether the employee remains employed with
Buyer or First National Bank of the South.
(b) As
of the
Effective Time, each Continuing Employee shall be eligible to participate in
Buyer’s 401(k) plan with full credit for prior service with Seller for purposes
of eligibility and vesting.
(c) Except
as
provided in the following sentence, as of the Effective Time, Buyer shall make
available employer-provided health and other employee welfare benefit plans
to
each Continuing Employee on the same basis as it provides such coverage to
Buyer
employees except that any pre-existing condition, eligibility waiting period,
or
other limitations or exclusions otherwise applicable under such plans to new
employees shall not apply to a Continuing Employee or their covered dependents
who were covered under a similar Seller plan at the Effective Time of the
Merger.
Notwithstanding the above language, Buyer may continue Seller's health and
other
employee welfare benefit plans for each Continuing Employee as currently in
place for the 2008 year and roll Seller's employees into Buyer's plans for
2009.
(d) Upon
execution of this Agreement, each of Seller’s directors shall execute and
deliver (i) an
agreement dated as of the date hereof in the form of Exhibit
B
pursuant
to which he or she will vote his or her shares of Seller Common Stock in favor
of this Agreement and the transactions contemplated hereby and (ii) a
non-competition agreement dated as of the date hereof in the form of
Exhibit
G
(the
"Non-Competition
Agreement").
(e) No
officer, employee, or other Person (other than the corporate Parties to this
Agreement) shall be deemed a third party or other beneficiary of this Agreement,
and no such Person shall have any right or other entitlement to enforce any
provision of this Agreement or seek any remedy in connection with this
Agreement, except as set forth in Section 7.12.
(f)
Subject
to Section 7.9(a), if Buyer, within six months of Closing, terminates the
employment of any employee of Seller Entities immediately prior to the Effective
Time, excluding those employees that have change in control severance agreements
with Seller (a "Non-Continuing
Employee"),
Buyer
agrees to provide to such Non-Continuing Employee a lump sum payment equal
to
two weeks of the Non-Continuing Employee's salary in effect at the date of
termination times the number of years the Non-Continuing Employee has been
employed by Seller Entities measuring from the date of the beginning of
employment to the date of termination. A Non-Continuing Employee that has been
employed by Seller Entities for less than two years will receive pay equal
to
four weeks of the Non-Continuing Employee's salary. A Non-Continuing Employee
that has been employed by Seller Entities for more than five years will receive
ten weeks of the Non-Continuing Employee's salary. Subject to the foregoing,
for
any fractional year served, Buyer agrees to pay the amount of the two weeks
salary divided by twelve times the number of months the Non-Continuing Employee
served in the fractional year. In addition, Buyer agrees to provide compensation
up to $2,000 for COBRA coverage to each Non-Continuing Employee and to any
other
employee who has a change in control severance agreement who is terminated
by
Buyer within six months of Closing.
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(g)
Buyer
anticipates paying a retention bonus to certain key employees employed by Seller
Entities, to be chosen at Buyer's sole discretion, to remain employed with
Buyer
for at least six months after the Closing or for a shorter period of time as
determined by Buyer.
7.10 Section
16 Matters.
Prior
to
the Effective Time, Seller and Buyer shall take all such steps as may be
required to cause any dispositions of Seller Common Stock (including derivative
securities with respect to Seller Common Stock) or acquisitions of Buyer Common
Stock resulting from the transactions contemplated by this Agreement by each
individual who is subject to the reporting requirements of Section 16(a) of
the
Exchange Act with respect to Seller to be exempt under Rule 16b-3 promulgated
under the Exchange Act. Seller agrees to promptly furnish Buyer with all
requisite information necessary for Buyer to take the actions contemplated
by
this Section 7.10.
7.11 Affiliate
Letters.
Seller
shall use its best efforts to cause each director, executive officer, and other
person who is an “affiliate” of Seller under Rule 145 of the Securities Act to
deliver to Buyer as soon as practicable, and prior to the mailing of the Proxy
Statement/Prospectus, executed letter agreements, each substantially in the
form
attached hereto as Exhibit
C,
providing that such person will comply with Rule 145, as
well
as claims letters in the form attached hereto as Exhibit
D.
7.12 Indemnification.
(a) For
a
period of three years after the Effective Time, Buyer shall indemnify, defend,
and hold harmless the present and former directors, officers, employees, and
agents of the Seller Entities (each, an “Indemnified
Party”)
against all Liabilities arising out of actions or omissions arising out of
the
Indemnified Party’s service or services as directors, officers, employees, or
agents of Seller Entities or, at Seller’s request, of another corporation,
partnership, joint venture, trust, or other enterprise, occurring at or prior
to
the Effective Time (including the transactions contemplated by this Agreement)
to the fullest extent permitted under the SCBCA,
Section
402 of the Xxxxxxxx-Xxxxx Act, the Securities Laws and FDIC Regulations Part
359, and by Seller’s articles of incorporation and bylaws as in effect on the
date hereof, including provisions relating to advances of expenses incurred
in
the defense of any Litigation and whether or not any Buyer Entity is insured
against any such matter.
(b) Prior
to
the Effective Time, Buyer shall purchase, or shall direct Seller to purchase,
an
extended reporting period endorsement under Seller Entities’ existing directors’
and officers’ liability insurance coverage (“Seller
D&O Policy”)
for
acts or omissions occurring prior to the Effective Time by such directors and
officers currently covered by Seller Entities’ D&O Policy. The directors and
officers of Seller Entities shall take all reasonable actions required by the
insurance carrier necessary to procure such endorsement. Such endorsement shall
provide such directors and officers with coverage following the Effective Time
for three years or such lesser period of time as can be purchased for an
aggregate amount equal to three times the current annual premium for Seller
Entities’ D&O Policy (the “Premium
Multiple”).
If
Buyer is unable to obtain or maintain the insurance coverage called for in
this
Section 7.12(b), then Buyer shall obtain the most advantageous coverage that
can
be purchased for the Premium Multiple.
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(c) Any
Indemnified Party wishing to claim indemnification under paragraph (a) of this
Section 7.12, upon learning of any such Liability or Litigation, shall promptly
notify Buyer thereof in writing. In the event of any such Litigation (whether
arising before or after the Effective Time), (i) Buyer shall have the right
to
assume the defense thereof and Buyer shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if Buyer elects not to assume such defense or counsel
for
the Indemnified Parties and advises that there are substantive issues which
raise conflicts of interest between Buyer and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Buyer shall
pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided,
that
Buyer
shall be obligated pursuant to this paragraph (c) to pay for only one firm
of
counsel for all Indemnified Parties in any jurisdiction; (ii) the Indemnified
Parties will cooperate in good faith in the defense of any such Litigation;
and
(iii) Buyer shall not be liable for any settlement effected without its prior
written consent and which does not provide for a complete and irrevocable
release of all Buyer Entities and their respective directors, officers, and
controlling persons, employees, agents, and Representatives; provided,
however,
that
Buyer shall not have any obligation hereunder to any Indemnified Party when
and
if a court of competent jurisdiction shall determine, and such determination
shall have become final, that the indemnification of such Indemnified Party
in
the manner contemplated hereby is prohibited by applicable Law.
(d) If
Buyer
or any successors or assigns shall consolidate with or merge into any other
Person and shall not be the continuing or surviving Person of such consolidation
or merger or shall transfer all or substantially all of its assets to any
Person, then and in each case, proper provision shall be made so that the
successors and assigns of Buyer shall assume the obligations set forth in this
Section 7.12.
(e) The
provisions of this Section 7.12 are intended to be for the benefit of and shall
be enforceable by, each Indemnified Party and their respective heirs and legal
and personal representatives.
ARTICLE
8
CONDITIONS
PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions
to Obligations of Each Party.
The
respective obligations of each Party to perform this Agreement and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Section 10.6:
(a) Shareholder
Approval.
The
shareholders of Seller shall have approved this Agreement, and the consummation
of the transactions contemplated hereby, including the Merger, as and to the
extent required by Law and by the provisions of Seller’s articles of
incorporation and bylaws.
The
holders of Buyer Common Stock shall have approved this Agreement, and the
consummation of the transactions contemplated hereby, including the Merger,
as
and to the extent required by Law and by the provisions of Buyer's articles
of
incorporation and bylaws.
(b) Regulatory
Approvals.
All
Consents of, filings and registrations with, and notifications to, all
Regulatory Authorities required for consummation of the Merger shall have been
obtained or made and shall be in full force and effect and all waiting periods
required by Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including requirements relating
to the raising of additional capital or the disposition of Assets) which in
the
reasonable judgment of the board of directors of Buyer would so materially
adversely affect the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement been
known, the Buyer would not, in its reasonable judgment, have entered into this
Agreement.
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(c) Consents
and Approvals.
Each
Party shall have obtained any and all Consents required for consummation of
the
Merger (other than those referred to in Section 8.1(b)) or for the preventing
of
any Default under any Contract or Permit of such Party which, if not obtained
or
made, would be reasonably likely to have, individually or in the aggregate,
a
Seller Material Adverse Effect or a Buyer Material Adverse Effect, as
applicable. Seller shall have obtained the Consents listed in Section 4.2 of
the
Seller Disclosure Memorandum, including Consents from the lessors of each office
leased by Seller, if any. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the board of
directors of Buyer would so materially adversely affect the economic or business
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, Buyer would not, in its reasonable
judgment, have entered into this Agreement.
(d) Registration
Statement; Blue Sky Laws.
The
Registration Statement shall have been declared effective by the SEC and no
proceedings shall be pending or threatened by the SEC to suspend the
effectiveness of the Registration Statement, and Buyer shall have received
all
required approvals by state securities or “blue sky” authorities with respect to
the transactions contemplated by this Agreement.
(e) Tax
Opinion.
Buyer
and Seller shall have received the opinion of Seller’s Counsel dated as of the
Closing, in form and substance customary in transactions of the type
contemplated hereby, and reasonably satisfactory to Buyer and Seller, as the
case may be, substantially to the effect that on the basis of the facts,
representations, and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, (i) the Merger will
be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the IRC, (ii) Buyer and Seller will each be a party to
that
reorganization within the meaning of Section 368(b) of the IRC, and (iii) except
to the extent of any cash received in lieu of a fractional share interest in
Buyer Common Stock and any other cash consideration received, the shareholders
of Seller will not recognize any gain or loss by exchanging their shares of
Seller Common Stock for shares of Buyer Common Stock pursuant to the Merger.
Such opinion may be based on, in addition to the review of such matters of
fact
and law as the opinion giver considers appropriate, representations contained
in
certificates of officers of Buyer, Seller, and others.
(f) Legal
Proceedings.
No
Governmental Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits, restricts,
or makes illegal consummation of the transactions contemplated by this
Agreement.
8.2 Conditions
to Obligations of Buyer.
The
obligations of Buyer to perform this Agreement and consummate the Merger and
the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Buyer pursuant to Section
10.6(a):
(a) Representations
and Warranties.
For
purposes of this Section 8.2(a), the accuracy of the representations and
warranties of Seller set forth in this Agreement shall be assessed as of the
date of this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of the
Effective Time (provided,
that representations
and warranties which are confined to a specified date shall speak only as of
such date). The representations and warranties set forth in Section 4.3 shall
be
true and correct (except for inaccuracies which are de
minimis
in
amount). There shall not exist inaccuracies in the representations and
warranties of Seller set forth in this Agreement (including the representations
and warranties set forth in Section 4.3) such that the aggregate effect of
such
inaccuracies has, or is reasonably likely to have, a Seller Material Adverse
Effect; provided,
that
for
purposes of this sentence only, those representations and warranties which
are
qualified by references to “material” or “Material Adverse Effect” or to the
“Knowledge” of any Person shall be deemed not to include such
qualifications.
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(b) Performance
of Agreements and Covenants.
Each
and all of the agreements and covenants of Seller to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with
in
all material respects.
(c) Officers’
Certificate.
Seller
shall have delivered to Buyer (i) a certificate, dated as of the Closing Date
and signed on its behalf by its chief executive officer and its chief financial
officer, to the effect that the conditions set forth in Section 8.1 as it
relates to Seller and in Sections 8.2(a), 8.2(b) and 8.2(g), have been
satisfied.
(d) Secretary’s
Certificate.
Seller
Entities shall have delivered a certificate of the secretary of the Seller
Entities, dated as of the Closing Date, certifying as to (i) the incumbency
of
officers of the Seller Entities executing documents executed and delivered
in
connection herewith, (ii) a copy of the articles of incorporation of the Seller
as in effect from the date of this Agreement until the Closing Date, along
with
a certificate (dated not more than twenty days prior to the Closing Date) of
the
Secretary of State of the State of South Carolina as to the good standing of
the
Seller; (iii) a copy of the bylaws of the Seller as in effect from the date
of
this Agreement until the Closing Date, (iv) a copy of the consent of Seller’s
board of directors authorizing and approving the applicable matters contemplated
hereunder, (v) a certificate of the Federal Reserve Bank (dated not more than
twenty days prior to the Closing Date) certifying that the Seller is a
registered bank holding company, (vi) a copy of the articles of association
of
the Bank as in effect from the date of this Agreement until the Closing Date,
(vii) a copy of the bylaws of the Bank as in effect from the date of this
Agreement until the Closing Date, (viii) a certificate of the OCC (dated not
more than twenty days prior to the Closing Date) as to the good standing of
the
Bank, and (ix) a certificate of the Federal Deposit Insurance Corporation (dated
not more than twenty days prior to the Closing Date) certifying that the Bank
is
an insured depository institution.
(e) Legal
Opinions.
Buyer
shall have received legal opinions in form and substance satisfactory to Buyer
from Seller’s counsel as to the matters specified in Exhibit
E.
(f) Support
Agreements, Affiliate Agreements, and Non-Competition Agreements.
The
Support Agreements in the form attached hereto as Exhibit
B
and the
Non-Competition Agreements in the form attached hereto as Exhibit
G
shall
have been executed by each of the directors and delivered to Buyer. Each of
the
directors and executive officers shall have executed Affiliate Agreements in
the
form attached hereto as Exhibit
C.
(g) No
Material Adverse Effect.
There
shall not have occurred any Seller Material Adverse Effect from the June 30,
2007 balance sheet to the Effective Time with respect to Seller or the Bank.
8.3 Conditions
to Obligations of Seller.
The
obligations of Seller to perform this Agreement and consummate the Merger and
the other transactions contemplated hereby are subject to the satisfaction
of
the following conditions, unless waived by Seller pursuant to Section
10.6(b):
(a) Representations
and Warranties.
For
purposes of this Section 8.3(a), the accuracy of the representations and
warranties of Buyer set forth in this Agreement shall be assessed as of the
date
of this Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the Effective
Time (provided
that
representations and warranties which are confined to a specified date shall
speak only as of such date). There shall not exist inaccuracies in the
representations and warranties of Buyer set forth in this Agreement such that
the aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Buyer Material Adverse Effect; provided
that,
for
purposes of this sentence only, those representations and warranties which
are
qualified by references to “material” or “Material Adverse Effect” or to the
“Knowledge” of any Person shall be deemed not to include such
qualifications.
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(b) Performance
of Agreements and Covenants.
Each
and all of the agreements and covenants of Buyer to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with
in
all material respects.
(c) Officers’
Certificate.
Buyer
shall have delivered to the Seller a certificate, dated as of the Closing Date
and signed on its behalf by its chief executive officer and its chief financial
officer, to the effect that the conditions set forth in Section 8.1 as it
relates to Buyer and in Sections 8.3(a), 8.3(b), and 8.3(g) have been
satisfied.
(d) Secretary’s
Certificate.
Buyer
Entities shall have delivered a certificate of the secretary of the Buyer
Entities, dated as of the Closing Date, certifying as to (i) the incumbency
of
officers of the Buyer Entities executing documents executed and delivered in
connection herewith, (ii) a copy of the articles of incorporation of the Buyer
as in effect from the date of this Agreement until the Closing Date, along
with
a certificate (dated not more than twenty days prior to the Closing Date) of
the
Secretary of State of the State of South Carolina as to the good standing of
the
Buyer; (iii) a copy of the bylaws of the Buyer as in effect from the date of
this Agreement until the Closing Date, (iv) a copy of the consent of Buyer’s
board of directors authorizing and approving the applicable matters contemplated
hereunder, (v) a certificate of the Federal Reserve Bank (dated not more than
twenty days prior to the Closing Date) certifying that the Buyer is a registered
bank holding company, (vi) a copy of the articles of association of First
National Bank of the South as in effect from the date of this Agreement until
the Closing Date, (vii) a copy of the bylaws of First National Bank of the
South
as in effect from the date of this Agreement until the Closing Date, (viii)
a
certificate of the OCC (dated not more than twenty days prior to the Closing
Date) as to the good standing of First National Bank of the South, and (ix)
certificate of the Federal Deposit Insurance Corporation (dated not more than
twenty days prior to the Closing Date) certifying that First National Bank
of
the South is an insured depository institution.
(e) Payment
of Merger Consideration.
Buyer
shall pay the Merger Consideration as provided by this Agreement.
(f) Legal
Opinions.
Seller
shall have received legal opinions in form and substance satisfactory to Seller
from Buyer’s counsel as to the matters specified in Exhibit
F.
(g) No
Material Adverse Effect.
There
shall not have occurred any Buyer Material Adverse Effect from the June 30,
2007
balance sheet to the Effective Time with respect to Buyer.
ARTICLE
9
TERMINATION
9.1 Termination.
Notwithstanding
any other provision of this Agreement, and notwithstanding the approval of
this
Agreement by the shareholders of Seller, this Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) By
mutual
written agreement of Buyer and Seller; or
(b) By
either
Party (provided, that the terminating Party is not then in material breach
of
any representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any representation
or
warranty contained in this Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching Party of
such
breach and which breach is reasonably likely, in the opinion of the
non-breaching Party, to permit such Party to refuse to consummate the
transactions contemplated by this Agreement pursuant to the standard set forth
in Section 8.2(a) or 8.3(a) as applicable; or
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(c) By
either
Party in the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated hereby shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
(ii) any Law or Order permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger shall have become final and
nonappealable, (iii) the shareholders of Seller fail to vote their approval
of
the matters relating to this Agreement and the transactions contemplated hereby
at Seller’s Shareholders’ Meeting where such matters were presented to such
shareholders for approval and voted upon, or (iv) the shareholders of Buyer
fail
to vote their approval of the matters relating to this Agreement and the
transactions contemplated hereby at Buyer's Shareholders' Meeting where such
matters were presented to such shareholders for approval and voted upon;
or
(d) By
either
Party in the event that the Merger shall not have been consummated by June
20,
2008, if the failure to consummate the transactions contemplated hereby on
or
before such date is not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this Section 9.1; or
(e) By
Buyer
(provided, that Buyer is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event
that (i) the board of directors of Seller, shall have failed to reaffirm its
approval upon Buyer’s request for such reaffirmation of the Merger and the
transactions contemplated by this Agreement (to the exclusion of any other
Acquisition Proposal), or shall have resolved not to reaffirm the Merger, or
(ii) the board of directors of Seller shall have failed to include in the Proxy
Statement/Prospectus its recommendation, without modification or qualification,
that Seller shareholders approve the Merger or shall have withdrawn, qualified
or modified, or proposed publicly to withdraw, qualify or modify, in a manner
adverse to Buyer, the recommendation of such board of directors to Seller’s
shareholders that they approve the Merger, or (iii)
the
board of directors of Seller shall have affirmed, recommended, or authorized
entering into any Acquisition Transaction other than the Merger or, within
five
business days after commencement of any tender or exchange offer for any shares
of Seller Common Stock, the board of directors of Seller shall have made any
recommendation other than against acceptance of such tender or exchange offer
by
its shareholders, or (iv)
the
board of directors of Seller negotiates or authorizes the conduct of
negotiations (and five business days have elapsed without such negotiations
being discontinued) with a third party (it being understood and agreed that
“negotiate” shall not be deemed to include the provision of information to, or
the request and receipt of information from, any Person that submits an
Acquisition Proposal or discussions regarding such information for the sole
purpose of ascertaining the terms of such Acquisition Proposal and determining
whether the board of directors will in fact engage in, or authorize,
negotiations) regarding an Acquisition Proposal other than the Merger; provided,
however, that this Agreement may not be terminated by Buyer pursuant to this
section (e) if the Merger is approved by the requisite vote of the shareholders
of the Seller; or
(f) By
Seller (provided,
that Seller is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement), if prior to the
approval of this Agreement by the affirmative vote of the holders of the
requisite number of the outstanding shares of Seller Common Stock entitled
to
vote thereon at the Seller's Shareholders’ Meeting, the board of directors of
Seller has (x) withdrawn
or modified or changed its recommendation or approval of this Agreement in
a
manner adverse to Buyer in order to approve and permit Seller to accept a
Superior Proposal and (y)
determined, after consultation with, and the receipt of advice from outside
legal counsel to Seller, that the failure to take such action as set forth
in
the preceding clause (x)
would
be likely to result in a breach of the board of directors’ fiduciary duties
under applicable Law, provided,
however,
that at
least five business days prior to any such termination, Seller shall, and shall
cause its advisors to, negotiate with Buyer, if Buyer elects to do so, to make
such adjustments in the terms and conditions of this Agreement as would enable
Seller to proceed with the transactions contemplated herein on such adjusted
terms.
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(g) By
Seller, at any time during the ten-day period commencing two days after the
Determination Date, if both of the following conditions are
satisfied:
(1)
the
Final Buyer Stock Price shall be twenty percent (20%) less than the Starting
Price; and
(2)
(i)
the quotient of the Final Buyer Stock Price divided by the Starting Price (such
quotient being the "Buyer Ratio") shall be less than (ii) ninety percent (90%)
of the quotient of the Average Index Price divided by the Index Price on the
Starting Date (which amount shall be the "Index Ratio"); provided, however,
that
if Seller refuses to consummate the Merger pursuant to this Section 9.1(g),
it
shall give prompt written notice thereof to Buyer; and provided, further, that
such notice of election to terminate may be withdrawn at any time within the
aforementioned ten-day period.
For
purposes of this Section 9.1(g), the following terms shall have the meanings
indicated:
"Average
Index Price" shall mean the average of the daily current market price of the
Index for the 20 consecutive full trading days ending at the closing of trading
on the Determination Date.
"Determination
Date" shall mean the last of the following dates to occur: (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the
shareholders of Seller approve this Agreement.
“Final
Buyer Stock Price” shall mean the average of the closing sale prices of Buyer
Common Stock as reported on the Nasdaq Capital Market during the 20
consecutive full trading days ending at the closing of trading on the
Determination Date;
provided, however, that in the event Buyer Common Stock does not trade on any
one or more of the trading days during the 20
consecutive full trading days ending at the closing of trading on the
Determination Date,
any
such date shall be disregarded in computing the average closing sales price
and
the average shall be based upon the closing sales prices and number of days
on
which Buyer Common Stock actually traded during the 20
consecutive full trading days ending at the closing of trading on the
Determination Date.
"Index"
shall mean the NASDAQ Bank Index.
"Index
Price" on a given date shall mean the current market price of the Index for
that
day.
"Starting
Date" shall mean August 26, 2007.
"Starting
Price" shall mean $14.75 per share.
If
Buyer
declares or effects a stock dividend, reclassification, recapitalization, split
up, combination, exchange of shares, similar transaction between the date of
this Agreement and the Determination Date, the prices for the Buyer Common
Stock
shall be appropriately adjusted for the purposes of applying this Section
9.1(g).
9.2 Effect
of Termination.
In
the
event of the termination and abandonment of this Agreement by either Buyer
or
Seller pursuant to Section 9.1, this Agreement shall have no further effect,
except that (i) the provisions of Sections 7.6, 9.2, 9.3, and Article 10 shall
survive any such termination and abandonment, and (ii) no such termination
shall
relieve the breaching Party from Liability resulting from any breach by that
Party of this Agreement.
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9.3 Termination
Fee.
(a) If
Buyer
terminates this Agreement pursuant to Section 9.1(e) of this Agreement or Seller
terminates this Agreement pursuant to Section 9.1(f) of this Agreement and
within 12 months of such termination (A) an Acquisition Transaction has been
announced with respect to any Seller Entity or (B) an Acquisition Agreement
with
respect to an Acquisition Transaction has been entered into with respect to
Seller or any Seller Entity, then Seller shall pay to Buyer the sum of $500,000.
Upon consummation of the Acquisition Transaction, Seller shall pay to Buyer
the
sum of $1,250,000 (together with $500,000 being the "Termination
Fee").
The
Termination Fee shall be paid to Buyer in same day funds. Seller hereby waives
any right to set-off or counterclaim against such amount.
(b) If
this
Agreement is terminated following commencement of any tender or exchange offer
for more than 50% of the shares of Seller Common Stock and within 12 months
of
such termination an Acquisition Transaction has occurred involving the tender
offeror or its affiliates and Seller or any Seller Entity, then Seller shall
pay
to Buyer the Termination Fee described above in same day funds.
(c) The
Parties acknowledge that the agreements contained in this Article 9 are an
integral part of the transactions contemplated by this Agreement, and that
without these agreements, they would not enter into this Agreement; accordingly,
if Seller fails to pay promptly any fee payable by it pursuant to this Section
9.3, then Seller shall pay to Buyer its reasonable costs and expenses (including
reasonable attorneys’ fees) in connection with collecting such Termination Fee,
together with interest on the amount of the fee at the prime annual rate of
interest (as published in The
Wall Street Journal)
plus 2%
as the same is in effect from time to time from the date such payment was due
under this Agreement until the date of payment.
9.4 Non-Survival
of Representations and Covenants.
Except
for Article 3, Sections 7.6(b), 7.8, 7.9, and 7.12, this Article 9 and Article
10, the respective representations, warranties, obligations, covenants, and
agreements of the Parties shall not survive the Effective Time.
ARTICLE
10
MISCELLANEOUS
10.1 Definitions.
(a) Except
as
otherwise provided herein, the capitalized terms set forth below shall have
the
following meanings:
“Acquisition
Agreement”
shall
have the meaning as set forth in the Section 7.1(b) of the
Agreement.
“Acquisition
Proposal”
means
any proposal (whether communicated to Seller or publicly announced to Seller’s
shareholders) by any Person (other than Buyer or any of its Affiliates) for
an
Acquisition Transaction involving Seller or any of its present or future
consolidated Subsidiaries, or any combination of such Subsidiaries, the assets
of which constitute 5% or more of the consolidated assets of Seller as reflected
on Seller’s consolidated statement of condition prepared in accordance with
GAAP.
“Acquisition
Transaction”
means
any transaction or series of related transactions (other than the transactions
contemplated by this Agreement) involving: (i) any acquisition or purchase
from Seller by any Person or Group (other than Buyer or any of its Affiliates)
of 25% or more in interest of the total outstanding voting securities of Seller
or any of its Subsidiaries, or any tender offer or exchange offer that if
consummated would result in any Person or Group (other than Buyer or any of
its
Affiliates) beneficially owning 25% or more in interest of the total outstanding
voting securities of Seller or any of its Subsidiaries, or any merger,
consolidation, business combination or similar transaction involving Seller
pursuant to which the shareholders of Seller immediately preceding such
transaction hold less than 75% of the equity interests in the surviving or
resulting entity (which includes the parent corporation of any constituent
corporation to any such transaction) of such transaction; (ii) any sale or
lease (other than in the ordinary course of business), or exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of 5% or more of the Assets of Seller; or (iii) any liquidation
or dissolution of Seller.
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“Affiliate”
of a
Person means: (i) any other Person directly, or indirectly through one or
more intermediaries, controlling, controlled by or under common control with
such Person; (ii) any officer, director, partner, employer, or direct or
indirect beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in
clause (ii) acts in any such capacity.
“Agreement”
shall
have the meaning as set forth in the introduction of the Agreement.
“Aggregate
Cash Limit” shall
have the meaning as set forth in the Section 3.2(d) of the
Agreement.
“Aggregate
Stock Limit”
shall
have the meaning as set forth in the Section 3.2(d) of the
Agreement.
“Allowance”
shall
have the meaning as set forth in the Section 4.9(a) of the
Agreement.
“Articles
of Merger” shall
have the meaning as set forth in the Section 1.3 of the Agreement.
“Assets”
of a
Person means all of the assets, properties, businesses and rights of such Person
of every kind, nature, character and description, whether real, personal or
mixed, tangible or intangible, accrued or contingent, or otherwise relating
to
or utilized in such Person’s business, directly or indirectly, in whole or in
part, whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of such Person
and wherever located.
“Average
Index Price” shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Bank”
means
Carolina National Bank and Trust Company, a national banking association and
a
wholly owned Subsidiary of Seller.
“Bank
Merger”
shall
have the meaning as set forth in Section 3.6 of the Agreement.
“BHCA”
shall
have the meaning as set forth in the Section 4.1 of the Agreement.
“Buyer”
shall
have the meaning as set forth in the introduction of the Agreement.
“Buyer
Common Stock”
means
the common stock, par value $0.01 per share, of Buyer.
“Buyer
Entities”
means,
collectively, Buyer and all Buyer Subsidiaries.
“Buyer
Exchange Act Reports” shall
have the meaning as set forth in the Section 5.3(a) of the
Agreement.
“Buyer
Financial Advisor” means
Xxxx Xxxxxx Xxxxxx & Xxxxxx, Inc.
“Buyer
Financial Statements”
means
(i) the consolidated balance sheets of Buyer as of June 30, 2007 and December
31, 2006 and 2005, and the related statements of income, changes in
shareholders’ equity, and cash flows (including related notes and schedules, if
any) for the six month period ended June 30, 2007, and for each of the three
fiscal years ended December 31, 2006, as filed by Buyer in Exchange Act
Documents, and (ii) the consolidated balance sheets of Buyer (including related
notes and schedules, if any) and related statements of income, changes in
shareholders’ equity, and cash flows (including related notes and schedules, if
any) included in Exchange Act Documents, as amended, filed with respect to
periods ended subsequent to June 30, 2007.
-49-
“Buyer
Material Adverse Effect”
means an
event, change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse effect on (i)the financial
position, property, business, assets or results of operations of Buyer and
its
Subsidiaries, taken as a whole, or (ii) the ability of Buyer to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided,
that “Buyer
Material Adverse Effect” shall not be deemed to include the effects of
(A) changes in banking and other Laws of general applicability or
interpretations thereof by Governmental Authorities, (B) changes in GAAP or
regulatory accounting principles generally applicable to banks and their holding
companies, (C) actions and omissions of Buyer (or any of its Subsidiaries)
taken with the prior written Consent of Seller in contemplation of the
transactions contemplated hereby, or (D) the direct effects of compliance
with this Agreement on the operating performance of Buyer. Notwithstanding
the
foregoing, “Buyer Material Adverse Effect” shall not be deemed to include any
change in the per share price of Buyer’s Common Stock on or after the date of
execution of this Agreement by Seller.
“Buyer
Ratio”
shall
have the meaning as set forth in Section 9.1(g) of the Agreement.
"Buyer's
Shareholders' Meeting"
means
the meeting of Buyer’s common stock shareholders to be held pursuant to Section
7.1(c), including any adjournment or adjournments thereof.
“Buyer
Subsidiaries”
means
the Subsidiaries of Buyer, which shall include any corporation, bank, savings
association, limited liability company, limited partnership, limited liability
partnership or other organization acquired as a Subsidiary of Buyer in the
future and held as a Subsidiary by Buyer at the Effective Time.
“Cash
Consideration” shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
“Cash
Election” shall
have the meaning as set forth in Section 3.2(b) of the Agreement.
“Cash
Election Number” shall
have the meaning as set forth in Section 3.2(b) of the Agreement.
“Cash
Election Shares” shall
have the meaning as set forth in Section 3.2(b) of the Agreement.
“CERCLA”
shall
have the meaning as set forth under the definition of “Environmental Laws” in
this Section 10.1(a) of the Agreement.
“Certificates”
shall
have the meaning as set forth in Section 3.1(b) of the Agreement.
“Closing”
shall
have the meaning as set forth in Section 1.2 of the Agreement.
“Closing
Date”
means
the date on which the Closing occurs.
“Code”
means
the
Internal Revenue Code of 1986, and the rules and regulations promulgated
thereunder.
“Commissioner”
means
the South Carolina Commissioner of Banking.
“Consent”
means
any consent, approval, authorization, clearance, exemption, waiver, or similar
affirmation by any Person pursuant to any Contract, Law, Order, or
Permit.
“Contract”
means
any written or oral agreement, arrangement, authorization, commitment, contract,
indenture, instrument, lease, license, obligation, plan, practice, restriction,
understanding, or undertaking of any kind or character, or other document to
which any Person is a party or that is binding on any Person or its capital
stock, Assets or business.
-50-
“Converted
Options”
shall
have the meaning as set forth in Section 3.5(a) of the Agreement.
“Default”
means
(i) any breach or violation of, default under, contravention of, or
conflict with, any Contract, Law, Order, or Permit, (ii) any occurrence of
any event that with the passage of time or the giving of notice or both would
constitute a breach or violation of, default under, contravention of, or
conflict with, any Contract, Law, Order, or Permit, or (iii) any occurrence
of any event that with or without the passage of time or the giving of notice
would give rise to a right of any Person to exercise any remedy or obtain any
relief under, terminate or revoke, suspend, cancel, or modify or change the
current terms of, or renegotiate, or to accelerate the maturity or performance
of, or to increase or impose any Liability under, any Contract, Law, Order,
or
Permit.
“Determination
Date”
shall
have the meaning as set forth in Section 9.1(g) of the Agreement.
“Disqualified
Person”
shall
have the meaning as set forth in Section 4.15(f) of the Agreement.
“DOL”
shall
have the meaning as set forth in Section 4.15(b) of the Agreement.
“Election
Deadline” shall
have the meaning as set forth in Section 3.2(c) of the Agreement.
“Election
Form” shall
have the meaning as set forth in Section 3.2(a) of the Agreement.
“Effective
Time”
shall
have the meaning as set forth in Section 1.3 of the Agreement.
“Employee
Benefit Plan”
means
each pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, share purchase, severance pay, vacation, bonus,
retention, change in control or other incentive plan, medical, vision, dental
or
other health plan, any life insurance plan, flexible spending account, cafeteria
plan, vacation, holiday, disability or any other employee benefit plan or fringe
benefit plan, including any “employee benefit plan,” as that term is defined in
Section 3(3) of ERISA and any other plan, fund, policy, program, practice,
custom understanding or arrangement providing compensation or other benefits,
whether or not such Employee Benefit Plan is or is intended to be (i) covered
or
qualified under the Code, ERISA or any other applicable Law, (ii) written or
oral, (iii) funded or unfunded, (iv) actual or contingent or (v) arrived at
through collective bargaining or otherwise.
“Environmental
Laws”
shall
mean all Laws relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface
or
subsurface strata) and which are administered, interpreted or enforced by the
United States Environmental Protection Agency and state and local Governmental
Authorities with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including: (i) the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et seq.
(“CERCLA”);
(ii)
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act, 42 U.S.C. §§6901 et seq. (“RCRA”);
(iii)
the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et
seq.); (iv) the Clean Air Act (42 U.S.C. §§7401 et seq.); (v) the Clean Water
Act (33 U.S.C. §§1251 et seq.); (vi) the Toxic Substances Control Act (15 U.S.C.
§§2601 et seq.); (vii) any state, county, municipal or local statues, laws or
ordinances similar or analogous to the federal statutes listed in parts (i)
-
(vi) of this subparagraph; (viii) any amendments to the statutes, laws or
ordinances listed in parts (i) - (vi) of this subparagraph, regardless of
whether in existence on the date hereof, (ix) any rules, regulations,
guidelines, directives, orders or the like adopted pursuant to or implementing
the statutes, laws, ordinances and amendments listed in parts (i) - (vii) of
this subparagraph; and (x) any other law, statute, ordinance, amendment, rule,
regulation, guideline, directive, order or the like in effect now or in the
future relating to environmental, health or safety matters and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
any
Hazardous Material.
-51-
“ERISA”
means
the Employee Retirement Income Security Act of 1974.
“ERISA
Affiliate”
means
any trade or business, whether or not incorporated, which together with a Seller
Entity would be treated as a single employer under Code Section 414(b), (c),
(m), or (o).
“Exchange
Act”
means
the Securities Exchange Act of 1934, and the rules and regulations promulgated
thereunder.
“Exchange
Act Documents”
means
all forms, proxy statements, registration statements, reports, schedules, and
other documents, including all certifications and statements required by the
Exchange Act or Section 906 of the Xxxxxxxx-Xxxxx Act with respect to any report
that is an Exchange Act Document, filed, or required to be filed, by a Party
or
any of its Subsidiaries with any Regulatory Authority pursuant to the Securities
Laws.
“Exchange
Agent”
shall
have the meaning as set forth in Section 3.3(a) of the Agreement.
“Excluded
Shares” shall
have the meaning as set forth in Section 3.1(d) of the Agreement.
“Exhibits”
means
the Exhibits so marked, copies of which are attached to this Agreement. Such
Exhibits are hereby incorporated by reference herein and made a part hereof,
and
may be referred to in this Agreement and any other related instrument or
document without being attached hereto or thereto.
“FDIC”
shall
mean the Federal Deposit Insurance Corporation.
“Federal
Reserve”
shall
mean the Board of Governors of the Federal Reserve System and the Federal
Reserve Bank of Richmond.
“Final
Buyer Stock Price”
shall
have the meaning as set forth in Section 9.1(g) of the Agreement.
“First
National Bank of the South”
shall
have the meaning as set forth in Section 3.6 of the Agreement.
“Fixed
Exchange Ratio” shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
“GAAP”
shall
mean generally accepted accounting principles in the United States, consistently
applied during the periods involved.
“Governmental
Authority”
shall
mean any federal, state, local, foreign, or other court, board, body,
commission, agency, authority or instrumentality, arbitral authority,
self-regulatory authority, mediator, tribunal, including Regulatory Authorities
and Taxing Authorities.
“Group”
shall
have the meaning as set forth in Section 7.3(a) of the Agreement.
“Hazardous
Material”
shall
mean any chemical, substance, waste, material, pollutant, or contaminant defined
as or deemed hazardous or toxic or otherwise regulated under any Environmental
Law, including RCRA hazardous wastes, CERCLA hazardous substances, and HSRA
regulated substances, pesticides
and other agricultural chemicals, oil and petroleum products or byproducts
and
any constituents thereof, urea formaldehyde insulation, lead in paint or
drinking water, mold, asbestos, and polychlorinated biphenyls (PCBs): (i) any
hazardous substance, hazardous material, hazardous waste, regulated substance,
or toxic substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum
products, or oil (and specifically shall include asbestos requiring abatement,
removal, or encapsulation pursuant to the requirements of Environmental Law),
provided, notwithstanding the foregoing or any other provision in this Agreement
to the contrary, the words “Hazardous Material” shall not mean or include any
such Hazardous Material used, generated, manufactured, stored, disposed of
or
otherwise handled in normal quantities in the ordinary course of business in
compliance with all applicable Environmental Laws, or such that may be naturally
occurring in any ambient air, surface water, ground water, land surface or
subsurface strata.
-52-
“Indemnified
Party”
shall
have the meaning as set forth in Section 7.12(a) of the Agreement.
“Index”
shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Index
Price” shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Index
Ratio” shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Individually
Identifiable Personal Information” or “IIPI”
shall
have the meaning as set forth in Section 4.17(a) of the Agreement.
“Intellectual
Property”
means
copyrights, patents, trademarks, service marks, service names, trade names,
domain names, together with all goodwill associated therewith, registrations
and
applications therefor, technology rights and licenses, computer software
(including any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, and other
intellectual property rights.
“IRS”
shall
have the meaning as set forth in Section 4.15(b) of the Agreement.
“Knowledge”
as used
with respect to a Person (including references to such Person being aware of
a
particular matter) means those facts that are known or should reasonably have
been known after due inquiry of the records and employees of such Person by
the
chairman, president, or chief financial officer, or any senior or executive
vice
president of such Person without any further investigation.
“Law”
means
any code, law (including common law), ordinance, regulation, reporting or
licensing requirement, rule, statute, regulation or order applicable to a Person
or its Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
“Liability”
means
any direct or indirect, primary or secondary, liability, indebtedness,
obligation, penalty, cost or expense (including reasonable attorneys fees,
costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of
business) of any type, whether accrued, absolute or contingent, liquidated
or
unliquidated, matured or unmatured, or otherwise.
“Lien”
means
any conditional sale agreement, default of title, easement, encroachment,
encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge, or claim of any nature whatsoever
of,
on, or with respect to any property or any property interest, other than
(i) Liens for current property Taxes not yet due and payable,
and (ii) for
any depository institution, pledges to secure public deposits and other Liens
incurred in the ordinary course of the banking business.
“Litigation”
means
any action, arbitration, cause of action, lawsuit, claim, complaint, criminal
prosecution, governmental or other examination or investigation, audit (other
than regular audits of financial statements by outside auditors), compliance
review, inspection, hearing, administrative or other proceeding relating to
or
affecting a Party, its business, its Assets or Liabilities (including Contracts
related to Assets or Liabilities), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of depository
institutions and their Affiliates by Regulatory Authorities.
-53-
“Material”
or
“material”
for
purposes of this Agreement shall be determined in light of the facts and
circumstances of the matter in question; provided,
that
any
specific monetary amount stated in this Agreement shall determine materiality
in
that instance.
“Merger”
shall
have the meaning as set forth in the Preamble of the Agreement.
“Merger
Consideration”
shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
“Mixed
Consideration” shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
“Mixed
Election”
shall
have the meaning as set forth in Section 3.2 (b) of the Agreement.
“Non
Election”
shall
have the meaning as set forth in Section 3.2(b) of the Agreement.
“Non
Election Shares”
shall
have the meaning as set forth in Section 3.2(b) of the Agreement.
“OCC”
means
the federal Office of the Comptroller of the Currency.
“Off
Balance Sheet Arrangements”
shall
have the meaning as set forth in Section 4.6 of the Agreement.
“Operating
Property”
means
any property owned, leased, or operated by the Party in question or by any
of
its Subsidiaries or in which such Party or Subsidiary holds a security interest
or other interest (including an interest in a fiduciary capacity), and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property.
“Order”
means
any administrative decision or award, decree, injunction, judgment, order,
quasi-judicial decision or award, directive, ruling, or writ of any Governmental
Authority.
“Participation
Facility”
means
any facility or property in which the Party in question or any of its
Subsidiaries participates in the management and, where required by the context,
means the owner or operator of such facility or property, but only with respect
to such facility or property.
“Party”
means
Seller, Buyer
or
Bank and “Parties”
means
two or more of such Persons.
“Party
in Interest”
shall
have the meaning as set forth in Section 4.15(f) of the Agreement.
“Permit”
means
any federal, state, local, and foreign Governmental Authority approval,
authorization, certificate, easement, filing, franchise, license, notice,
permit, or right to which any Person is a party or that is or may be binding
upon or inure to the benefit of any Person or its securities, Assets, or
business, the absence of which or a default under would constitute a Buyer
or
Seller Material Adverse Effect, as the case may be.
“Per
Share Purchase Price”
shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
“Person”
means a
natural person or any legal, commercial or Governmental Authority, such as,
but
not limited to, a corporation, general partnership, joint venture, limited
partnership, limited liability company, limited liability partnership, trust,
business association, group acting in concert, or any person acting in a
representative capacity.
“Premium
Multiple”
shall
have the meaning as set forth in Section 7.12(b) of the Agreement.
“Prohibited
Transaction”
shall
have the meaning as set forth in Section 4.15(f) of the Agreement.
“Proxy
Statement/Prospectus”
shall
have the meaning as set forth in Section 7.2(a) of the Agreement.
“RCRA”
shall
have the meaning as set forth under the definition of “Environmental Laws” in
this Section 10.1(a) of the Agreement.
-54-
“Regulatory
Authorities”
means,
collectively, the SEC, the Nasdaq Stock Market, the NASD, the South Carolina
State Board of Financial Institutions, the OCC, the FDIC, the Department of
Justice, and the Federal Reserve and all other federal, state, county, local
or
other Governmental Authorities having jurisdiction over a Party or its
Subsidiaries.
“Reportable
Event”
shall
have the meaning as set forth in Section 4.15(h) of the Agreement.
“Representative”
means
any investment banker, financial advisor, attorney, accountant, consultant,
or
other representative or agent of a Person.
“Registration
Statement” shall
have the meaning as set forth in Section 7.2(a) of the Agreement.
“Rights”
shall
mean all arrangements, calls, commitments, Contracts, options, rights to
subscribe to, scrip, warrants, or other binding obligations of any character
whatsoever by which a Person is or may be bound to issue additional shares
of
its capital stock or other securities, securities or rights convertible into
or
exchangeable for, shares of the capital stock or other securities of a Person
or
by which a Person is or may be bound to issue additional shares of its capital
stock or other Rights.
“Xxxxxxxx-Xxxxx
Act” means
the
Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations promulgated
thereunder.
“SCBCA”
means
the South Carolina Business Corporation Act of 1988.
“SEC”
means
the
United States Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, and the rules and regulations promulgated
thereunder.
“Securities
Laws”
means
the Securities Act, the Exchange Act, the Investment Company Act of 1940, the
Investment Advisors Act of 1940, the Trust Indenture Act of 1939, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
“Seller”
shall
have the meaning as set forth in the introduction of the Agreement.
“Seller
Benefit Plan(s)”
shall
have the meaning as set forth in Section 4.15(a) of the Agreement.
“Seller
Common Stock”
means
the no par value common stock of Seller.
“Seller
Contracts”
shall
have the meaning as set forth in Section 4.16(a) of the Agreement.
“Seller
D&O Policy”
shall
have the meaning as set forth in Section 7.12(b) of the Agreement.
“Seller
Disclosure Memorandum”
means
the written information entitled "Carolina National Corporation Disclosure
Memorandum” delivered with this Agreement to Buyer describing in reasonable
detail the matters contained therein as of the Effective Date and, with respect
to each disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with
respect to one Section shall not be deemed to be disclosed for purposes of
any
other Section not specifically referenced with respect thereto.
“Seller
Entities”
means,
collectively, Seller and all Seller Subsidiaries.
“Seller
ERISA Plan”
shall
have the meaning as set forth in Section 4.15(a) of the Agreement.
“Seller
Exchange Act Reports”
shall
have the meaning as set forth in Section 4.5(a) of the Agreement.
“Seller
Financial Advisor”
means
XxXxxx Partners.
“Seller
Financial Statements”
means
(i) the consolidated balance sheets of Seller as of June 30, 2007 and December
31, 2006 and 2005, and the related statements of income, changes in
shareholders’ equity, and cash flows (including related notes and schedules, if
any) for the period ended June 30, 2007, and for each of the three fiscal years
ended December 31, 2006, as filed by Seller in Exchange Act Documents, and
(ii)
the consolidated balance sheets of Seller (including related notes and
schedules, if any) and related statements of income, changes in shareholders’
equity, and cash flows (including related notes and schedules, if any) included
in Exchange Act Documents, as amended, filed with respect to periods ended
subsequent to June 30, 2007.
-55-
“Seller
Material Adverse Effect”
means an
event, change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse effect on (i) the management
team, financial position, property, business, assets or results of operations
of
Seller and its Subsidiaries, taken as a whole, or (ii) the ability of
Seller to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement, provided,
that “Seller
Material Adverse Effect” shall not be deemed to include the effects of
(A) changes in banking and other Laws of general applicability or
interpretations thereof by Governmental Authorities, (B) changes in GAAP or
regulatory accounting principles generally applicable to banks and their holding
companies, or (C) actions and omissions of Seller (or any of its
Subsidiaries) taken with the prior written Consent of Buyer in contemplation
of
the transactions contemplated hereby, or (D) the direct effects of negotiating,
entering into and compliance with this Agreement on the operating performance
of
Seller, including specifically Seller’s costs and expenses associated therewith,
including, but not limited to, reasonable accounting, financial advisor, and
legal fees incurred in accordance with the agreements such parties have with
Seller as disclosed in the Seller Disclosure Memorandum.
“Seller
Pension Plan”
shall
have the meaning as set forth in Section 4.15(a) of the Agreement.
“Seller
Options”
shall
have the meaning as set forth in Section 3.5(a) of the Agreement.
“Seller's
Shareholders’ Meeting”
means
the meeting of Seller’s shareholders to be held pursuant to Section 7.1(a),
including any adjournment or adjournments thereof.
“Seller
Subsidiaries”
means
the Subsidiaries, if any, of Seller, as of the date of this Agreement, Seller
has only one Subsidiary, Carolina National Bank and Trust Company.
“Stock
Consideration”
shall
have the meaning as set forth in Section 3.1(a) of the Agreement
“Starting
Date” shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Starting
Price” shall
have the meaning as set forth in the Section 9.1(g) of the
Agreement.
“Stock
Election”
shall
have the meaning as set forth in Section 3.2(b) of the Agreement
“Stock
Election Number”
shall
have the meaning as set forth in Section 3.2(b) of the Agreement
“Stock
Election Shares”
shall
have the meaning as set forth in Section 3.2(b) of the Agreement
“Subsequent
Determination”
shall
have the meaning as set forth in Section 7.1(b) of the Agreement.
“Subsidiaries”
means
all those corporations, banks, associations, or other entities of which the
entity in question either (i) owns or controls 50% or more of the
outstanding equity securities either directly or through an unbroken chain
of
entities as to each of which 50% or more of the outstanding equity securities
is
owned directly or indirectly by its parent (provided,
there
shall not be included any such entity the equity securities of which are owned
or controlled in a fiduciary capacity), (ii) in the case of partnerships,
serves as a general partner, (iii) in the case of a limited liability
company, serves as a managing member, or (iv) otherwise has the ability to
elect a majority of the directors, trustees or managing members
thereof.
-56-
“Superior
Proposal” means
any
Acquisition Proposal (on its most recently amended or modified terms, if amended
or modified) (i) involving the acquisition of at least a majority of the
outstanding equity interest in, or all or substantially all of the assets and
liabilities of, the Seller Entities and (ii) with respect to which the Board
of
Directors of Seller (A) determines in good faith that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated on a timely basis,
taking into account all legal, financial, regulatory and other aspects of the
Acquisition Proposal and the Person or Group making the Acquisition Proposal,
and (B) determines in its good faith judgment (based on, among other
things, the advice of its Financial Advisor) to be more favorable to Seller’s
shareholders than the Merger taking into account all relevant factors (including
whether, in the good faith judgment of the Board of Directors of Seller, after
obtaining the advice of Seller’s Financial Advisor, the Person or Group making
such Acquisition Proposal is reasonably able to finance the transaction and
close it timely, and any proposed changes to this Agreement that may be proposed
by Buyer in response to such Acquisition Proposal).
“Support
Agreements”
shall
have the meaning as set forth in Section 8.2(f) of the Agreement.
“Surviving
Corporation”
means
Buyer as the surviving corporation resulting from the Merger.
“Takeover
Laws”
shall
have the meaning as set forth in Section 4.23 of the Agreement.
“Tax”
or
“Taxes”
means
all taxes, charges, fees, levies, imposts, duties, or assessments, including
income, gross receipts, excise, employment, sales, use, transfer, recording
license, payroll, franchise, severance, documentary, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad
valorem,
value
added, alternative or add-on minimum, estimated, or other taxes, fees,
assessments or charges of any kind whatsoever, imposed or required to be
withheld by any Governmental Authority (domestic or foreign), including any
interest, penalties, and additions imposed thereon or with respect
thereto.
“Tax
Return”
means
any report, return, information return, or other information required to be
supplied to a Governmental Authority in connection with Taxes, including any
return of an affiliated or combined or unitary group that includes a Party
or
its Subsidiaries.
“Taxing
Authority”
means
the Internal Revenue Service and any other Governmental Authority responsible
for the administration of any Tax.
“Termination
Fee”
shall
have the meaning as set forth in Section 9.3(a) of the Agreement.
“WARN
Act” shall
have the meaning as set forth in Section 4.14(c) of the Agreement.
(b) Any
singular term in this Agreement shall be deemed to include the plural, and
any
plural term the singular. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed followed by the
words “without limitation”, and such terms shall not be limited by enumeration
or example.
10.2 Expenses.
Each
of
the Parties shall bear and pay all direct costs and expenses incurred by it
or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees
and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, and which in the case of Seller, shall be paid at
Closing and prior to the Effective Time.
-57-
10.3 Brokers
and Finders.
Except
for Seller Financial Advisor as to Seller and Buyer Financial Advisor as to
Buyer, each of the Parties represents and warrants that neither it nor any
of
its officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers’ fees, brokerage fees, commissions, or finders’ fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon such broker’s representing or being retained
by or allegedly representing or being retained by Seller or by Buyer, each
of
Seller and Buyer, as the case may be, agrees to indemnify and hold the other
Party harmless from any Liability in respect of any such claim. Seller has
provided a copy of Seller Financial Advisor’s engagement letter and expected fee
for its services as Section 10.3 of the Seller Disclosure Memorandum and shall
pay all amounts due thereunder at Closing and prior to the Effective
Time.
10.4 Entire
Agreement.
Except
as
otherwise expressly provided herein, this Agreement (including the documents
and
instruments referred to herein) constitutes the entire agreement between the
Parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement expressed or implied, is intended to confer upon
any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Sections 7.9 and 7.12.
10.5 Amendments.
To
the
extent permitted by Law, and subject to Section 1.4, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after shareholder approval of this
Agreement has been obtained; provided,
that
after
any such approval by the holders of Seller Common Stock, there shall be made
no
amendment that reduces or modifies in any respect the consideration to be
received by holders of Seller Common Stock.
10.6 Waivers.
(a) Prior
to
or at the Effective Time, Buyer, acting through its board of directors, chief
executive officer, or other authorized officer, shall have the right to waive
any Default in the performance of any term of this Agreement by Seller, to
waive
or extend the time for the compliance or fulfillment by Seller of any and all
of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Buyer under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of Buyer.
(b) Prior
to
or at the Effective Time, Seller, acting through its board of directors, chief
executive officer, or other authorized officer, shall have the right to waive
any Default in the performance of any term of this Agreement by Buyer, to waive
or extend the time for the compliance or fulfillment by Buyer of
any
and all of its obligations under this Agreement, and to waive any or all of
the
conditions precedent to the obligations of Seller under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law.
No such waiver shall be effective unless in writing signed by a duly authorized
officer of Seller.
(c) The
failure of any Party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such Party at a later
time to enforce the same or any other provision of this Agreement. No waiver
of
any condition or of the breach of any term contained in this Agreement in one
or
more instances shall be deemed to be or construed as a further or continuing
waiver of such condition or breach or a waiver of any other condition or of
the
breach of any other term of this Agreement.
-58-
10.7 Assignment.
Except
as
expressly contemplated hereby, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law, including by merger or consolidation, or
otherwise) without the prior written consent of the other Party. 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.
10.8 Notices.
All
notices or other communications which are required or permitted hereunder shall
be in writing and sufficient if delivered by hand, by facsimile transmission,
by
registered or certified mail, postage pre-paid, or by courier or overnight
carrier, to the persons at the addresses set forth below (or at such other
address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered or refused:
| Buyer: | First National Bancshares, Inc.
000
Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxx,
XX 00000
Attention:
Chief Executive Officer
|
| Copy to Counsel: | Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx,
LLP
000
X. Xxxx Xx., Xxxxx 000
Xxxxxxxxxx,
Xxxxx Xxxxxxxx 00000
Facsimile
Number: (000)-000-0000
Attention:
Xxxx X. Xxxxxxx
|
| Seller: |
Carolina
National Corporation
0000
Xxxx Xxxxxx
Xxxxxxxx,
Xxxxx Xxxxxxxx 00000
Attention:
Chief Executive Officer
|
| Copy to Counsel: | Haynsworth Xxxxxxx Xxxx, P.A.
0000
Xxxx Xxxxxx, 00xx
Xxxxx
Xxxxxxxx,
Xxxxx Xxxxxxxx 00000
Facsimile
Number: (000) 000-0000
Attention:
Xxxxxx X. Xxxx, Xx.
|
10.9 Governing
Law.
Regardless
of any conflict of law or choice of law principles that might otherwise apply,
the Parties agree that this Agreement shall be governed by and construed in
all
respects in accordance with the laws of the State of South Carolina.
10.10 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute one and
the
same instrument.
-59-
10.11 Captions;
Articles and Sections.
The
captions contained in this Agreement are for reference purposes only and are
not
part of this Agreement. Unless otherwise indicated, all references to particular
Articles or Sections shall mean and refer to the referenced Articles and
Sections of this Agreement.
10.12 Interpretations.
Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against any Party, whether under any rule of construction or otherwise.
No Party to this Agreement shall be considered the draftsman. The Parties
acknowledge and agree that this Agreement has been reviewed, negotiated, and
accepted by all Parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly
to
accomplish the purposes and intentions of all Parties hereto.
10.13 Enforcement
of Agreement.
The
Parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement was 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
this Agreement and to enforce specifically the terms and provisions hereof
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.
10.14 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.
[signatures
appear on next page]
-60-
IN
WITNESS WHEREOF,
each of
the Parties has caused this Agreement to be executed on its behalf by its duly
authorized officers as of the day and year first above written.
|
FIRST
NATIONAL BANCSHARES, INC.
(BUYER)
|
||
| |
|
|
| By: | ||
|
Xxxxx
X. Xxxxxxx
|
||
|
President
and Chief Executive Officer
|
||
|
CAROLINA
NATIONAL
CORPORATION
(SELLER)
|
||
| |
|
|
| By: | ||
|
Xxxxxx
X. Xxxxxx, Xx.
|
||
|
Chairman
of the Board
|
||
| |
|
|
| By: | ||
|
Xxxxx X. Xxxxxx |
||
|
President
and Chief Executive Officer
|
||
-61-
EXHIBIT
A
FORM
OF PLAN OF BANK MERGER
[Use
OCC
form of Bank Merger Agreement]
-62-
EXHIBIT
B
FORM
OF SUPPORT AGREEMENT
August
26, 2007
First
National Bancshares, Inc.
000
X.
Xxxx Xx.
Xxxxxxxxxxx,
Xxxxx Xxxxxxxx 00000
Ladies
and Gentlemen:
The
undersigned is a director of Carolina National Corporation and the beneficial
holder of shares of common stock of Carolina National Corporation (the “Carolina
National Corporation Common Stock”).
First
National Bancshares, Inc. and Carolina National Corporation are considering
the
execution of an Agreement and Plan of Merger (the “Agreement”) contemplating the
acquisition of Carolina National Corporation through the merger of Carolina
National Corporation with and into First National Bancshares, Inc. (the
“Merger”). The execution of the Agreement by First National Bancshares, Inc. is
subject to the execution and delivery of this letter agreement.
In
consideration of the substantial expenses that First National Bancshares, Inc.
will incur in connection with the transactions contemplated by the Agreement
and
to induce First National Bancshares, Inc. to execute the Agreement and to
proceed to incur such expenses, the undersigned agrees and undertakes, in his
or
her capacity as a shareholder of Carolina National Corporation, and not in
his
or her capacity as a director or officer of Carolina National Corporation,
as
follows:
1. While
this letter agreement is in effect the undersigned shall not, directly or
indirectly, except with the prior approval of First National Bancshares, Inc.,
which approval shall not be unreasonably withheld, (a) sell or otherwise dispose
of or encumber (other than in connection with an ordinary bank loan) prior
to
the record date of the Seller’s Shareholders’ Meeting (as defined in the
Agreement) any or all of his or her shares of Carolina National Corporation
Common Stock, or (b) deposit any shares of Carolina National Corporation Common
Stock into a voting trust or enter into a voting agreement or arrangement with
respect to any shares of Carolina National Corporation Common Stock or grant
any
proxy with respect thereto, other than for the purpose of voting to approve
the
Agreement and the Merger and matters related thereto.
2. While
this letter agreement is in effect the undersigned shall vote all of the shares
of Carolina National Corporation Common Stock for which the undersigned has
sole
voting authority, and shall use his or her best efforts to cause to be voted
all
of the shares of Carolina National Corporation Common Stock for which the
undersigned has shared voting authority, in either case whether such shares
are
beneficially owned by the undersigned on the date of this letter agreement
or
are subsequently acquired: (a) for the approval of the Agreement and the Merger
at the Shareholders Meeting; and (b) against any Acquisition Proposal (as
defined in the Agreement) (other than the Merger).
3. The
undersigned acknowledges and agrees that any remedy at law for breach of the
foregoing provisions shall be inadequate and that, in addition to any other
relief which may be available, First National Bancshares, Inc. shall be entitled
to temporary and permanent injunctive relief without having to prove actual
damages.
-63-
4. The
foregoing restrictions shall not apply to shares with respect to which the
undersigned may have voting power as a fiduciary for others. In addition, this
letter agreement shall only apply to actions taken by the undersigned in his
or
her capacity as a shareholder of Carolina National Corporation and, if
applicable, shall not in any way limit or affect actions the undersigned may
take in his or her capacity as a director or officer of Carolina National
Corporation.
6. This
letter agreement, and all rights and obligations of the parties hereunder,
shall
terminate upon the first to occur of (a) the Effective Time of the Merger or
(b)
the date upon which the Merger Agreement is terminated in accordance with its
terms, in which event the provisions of this Agreement shall
terminate.
7. As
of the
date hereof, the undersigned has voting power (sole or shared) with respect
to
the number of shares of Carolina National Corporation Common Stock set forth
below.
IN
WITNESS WHEREOF, the undersigned has executed this agreement as of the date
first above written.
|
Very
truly yours,
|
|
|
|
|
|
Print
Name
|
|
| Number of shares beneficially owned with sole voting authority: _______________ | |
| Number of shares beneficially owned with shared voting authority: _______________ |
Accepted
and agreed to as of
the
date
first above written:
First
National Bancshares, Inc.
By:
Xxxxx
X. Xxxxxxx
Its:
President and Chief Executive Officer
-64-
EXHIBIT
C
FORM
OF AFFILIATE’S AGREEMENT
August
26, 2007
First
National Bancshares, Inc.
000
X.
Xxxx Xx.
Xxxxxxxxxxx,
Xxxxx Xxxxxxxx 00000
Ladies
and Gentlemen:
I
have
been advised that I may be deemed to be, but do not admit that I am, an
“affiliate” of Carolina National Corporation, a South Carolina corporation, as
that term is defined in Rule 144 and used in Rule 145 promulgated by the
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933
(the “Securities Act”). I understand that pursuant to the terms of the Agreement
and Plan of Merger, dated as of August 26, 2007 (the “Merger Agreement”), by and
between Carolina National Corporation and First National Bancshares, Inc.,
a
South Carolina corporation, Carolina National Corporation plans to merge with
and into First National Bancshares, Inc. (the “Merger”).
I
further
understand that as a result of the Merger, I may receive shares of common stock,
par value $0.01 per share, of First National Bancshares, Inc. (“First National
Bancshares, Inc. Common Stock”) in exchange for shares of common stock, no par
value, of Carolina National Corporation (“Carolina National Corporation Common
Stock”).
I
have
carefully read this letter and reviewed the Merger Agreement and discussed
their
requirements and other applicable limitations upon my ability to sell, transfer,
or otherwise dispose of First National Bancshares, Inc. Common Stock, to the
extent I felt necessary, with my counsel or counsel for Carolina National
Corporation.
I
represent, warrant, and covenant with and to First National Bancshares, Inc.
that in the event I receive any shares of First National Bancshares, Inc. Common
Stock as a result of the Merger:
1. I
shall
not make any sale, transfer, or other disposition of such shares of First
National Bancshares, Inc. Common Stock unless (i) such sale, transfer, or other
disposition has been registered under the Securities Act, which is not
anticipated, (ii) such sale, transfer, or other disposition is made in
conformity with the provisions of Rule 145 under the Securities Act, or (iii)
in
the opinion of counsel in form and substance reasonably satisfactory to First
National Bancshares, Inc., or under a “no-action” letter obtained by me from the
staff of the SEC, such sale, transfer, or other disposition will not violate
the
registration requirements of, or is otherwise exempt from registration under,
the Securities Act.
2. I
understand that, subject to the last paragraph of this letter, First National
Bancshares, Inc. is under no obligation to register the sale, transfer, or
other
disposition of shares of First National Bancshares, Inc. Common Stock by me
or
on my behalf under the Securities Act or to take any other action necessary
to
make compliance with an exemption from such registration available.
3. I
understand that stop transfer instructions will be given to First National
Bancshares, Inc.’s transfer agent with respect to shares of First National
Bancshares, Inc. Common Stock issued to me as a result of the Merger and that
there will be placed on the certificates for such shares, or any substitutions
therefor, a legend stating in substance:
“The
shares represented by this certificate were issued as a result of the merger
of
Carolina National Corporation with and into First National Bancshares, Inc.,
in
a transaction to which Rule 145 promulgated under the Securities Act of 1933
applies. The shares represented by this certificate may be transferred only
in
accordance with the terms of a letter agreement between the registered holder
hereof and First National Bancshares, Inc., a copy of which agreement is on
file
at the principal offices of First National Bancshares, Inc..”
-65-
4. I
understand that, unless the transfer by me of the First National Bancshares,
Inc. Common Stock issued to me as a result of the Merger has been registered
under the Securities Act or such transfer is made in conformity with the
provisions of Rule 145(d) under the Securities Act, First National Bancshares,
Inc. reserves the right, in its sole discretion, to place the following legend
on the certificates for such shares, or any substitutions therefor, issued
to my
transferee:
“The
shares represented by this certificate were acquired from [SHAREHOLDER] who,
in
turn, received such shares as a result of the merger of Carolina National
Corporation Bankshares, Inc. with and into First National Bancshares, Inc.,
in a
transaction to which Rule 145 under the Securities Act of 1933 applies. The
shares have been acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act of 1933 and may not be offered, sold, pledged or otherwise transferred
except in accordance with an exemption from the registration requirements of
the
Securities Act of 1933.”
It
is
understood and agreed that the legends set forth in paragraphs (3) and (4)
above
shall be removed by delivery of substitute certificates without such legends
if
I shall have delivered to First National Bancshares, Inc. (i) a copy of a “no
action” letter from the staff of the SEC, or an opinion of counsel in form and
substance reasonably satisfactory to First National Bancshares, Inc., to the
effect that such legend is not required for purposes of the Act, or (ii)
evidence or representations reasonably satisfactory to First National
Bancshares, Inc. that First National Bancshares, Inc. Common Stock represented
by such certificates is being or has been sold in conformity with the provisions
of Rule 145(d).
I
further
understand and agree that the provisions of Rule 145 shall apply to all shares
of First National Bancshares, Inc. Common Stock that my spouse, any relative
of
mine, or any relative of my spouse, any one of whom has the same home as me,
receives as a result of the Merger.
By
acceptance hereof, First National Bancshares, Inc. agrees, for a period of
two
years after the Effective Time (as defined in the Agreement) that, so long
as it
is obligated to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, it will use commercially reasonable efforts to timely
file
such reports so that the public information requirements of Rule 144(c)
promulgated under the Securities Act are satisfied and the resale provisions
of
Rule 145(d)(1) and (2) are therefore available to me if I desire to transfer
any
First National Bancshares, Inc. Common Stock issued to me in the
Merger.
Very
truly yours,
By:
Name:
Accepted
this _____ day of ________________, 2007.
First
National Bancshares, Inc.
By: Xxxxx X. Xxxxxxx
Its:
President and Chief Executive Officer
-66-
EXHIBIT
D
FORM
OF CLAIMS LETTER
August
26, 2007
First
National Bancshares, Inc.
000
X.
Xxxx Xx.
Xxxxxxxxxxx,
Xxxxx Xxxxxxxx 00000
Ladies
and Gentlemen:
This
letter is delivered pursuant to the Agreement and Plan of Merger, dated as
of
August 26, 2007, by and between First National Bancshares, Inc. and Carolina
National Corporation.
In
my
capacity as an officer or a director of Carolina National Corporation, and
as of
the date of this letter, I do not, to the best of my knowledge, have any claims,
and I am not aware of any facts or circumstances that I believe are likely
to
give rise to any claim, for indemnification under Carolina National
Corporation's Articles of Incorporation or Bylaws as existing on the date hereof
or as may be afforded by the laws of the State of South Carolina or the United
States.
| Very truly yours, | |
|
Signature
of Officer or Director
|
|
|
Name
of Officer or Director
|
|
|
Position
at Carolina National Corporation
|
|
-67-
EXHIBIT
E
FORM
OF SELLER’S COUNSEL LEGAL OPINION
Based
on
and subject to the foregoing and subject to the additional qualifications set
forth below, it is our opinion that:
1. The
Company (i) is a registered bank holding company under the BHC Act; (ii) was
duly organized as a corporation, and is validly existing and in good standing
under the laws of State of South Carolina; (iii) has the corporate power and
authority to own its assets and conduct its businesses as now being conducted;
and (iv) is duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned or leased by it
therein, or in which the transaction of its businesses, makes such qualification
necessary, except where failure so to qualify would not have a Seller Material
Adverse Effect;
2. The
Company has the corporate power and authority to execute and deliver the
Agreement and to perform its obligations under the Agreement and carry out
the
transactions described therein;
3. The
Bank
has been duly chartered and is validly existing as a national association,
in
good standing under the National Bank Act, with power and authority to own
its
properties and conduct its business as now being conducted; the deposit accounts
of the Bank are insured up to the applicable limits by the FDIC; and all of
the
issued and outstanding capital stock of the Bank has been duly authorized and
validly issued and is fully paid and nonassessable and is owned directly by
the
Company free and clear of any pledge, lien, encumbrance, claim or equity except
as provided by 12 U.S.C. Section 55;
4. The
Company has duly authorized the execution and delivery of the Agreement and
all
performance by the Company thereunder and has duly executed and delivered the
Agreement;
5. The
Agreement is enforceable against the Company, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance and other laws affecting the rights and remedies of creditors
generally and to general principles of equity;
6. The
Company’s authorized shares consist of _______ shares of common stock, of which
________ shares are outstanding, and _______ shares of preferred stock, none
of
which are outstanding. The outstanding shares of common stock have been duly
authorized and validly issued and are fully paid and nonassessable;
7. To
our
knowledge, immediately prior to the Effective Time, except for the ____ shares
of common stock reserved for issuance pursuant to outstanding stock options
and
_____ shares of common stock reserved for issuance pursuant to outstanding
warrants, (A) there are no outstanding rights (contractual or otherwise),
warrants or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of or other equity interest in the Company; and
(B)
there are no contracts, agreements or understandings between the Company and
any
person granting such person the right to require the Company to file a
registration statement under the Act or otherwise register any securities of
the
Company owned or to be owned by such person;
8. The
compliance by the Company with all of the provisions of the Agreement and the
consummation of the transactions therein contemplated will not conflict with
or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any material agreement (as such term is defined
in
Item 601 of Regulation S-K under the Securities Act of 1933) known to us to
which the Company is a party or by which the Company is bound, nor will such
action result in any violation of the provisions of the articles of
incorporation or bylaws of the Company or of the articles of association or
bylaws of the Bank or any statute or any order, rule or regulation known to
us
of any court or Governmental Authority;
-68-
9. To
our
knowledge, no consents, approvals or waivers are required to be obtained from
any person or entity in connection with the Company’s execution and delivery of
the Agreement, or the performance of the obligations or agreements of the
Company or the consummation of the transactions described therein, except for:
(i) approvals of the Company’s board of directors and shareholders (which
approvals have been obtained); and (ii) required approvals of governmental
or
regulatory authorities (which approvals have been obtained);
10. To
our
knowledge, neither the Company nor the Bank is a party to or subject to any
order, decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter, supervisory letter or similar submission to,
any
Governmental Authority charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits or the supervision or
regulation of it or any of its subsidiaries and neither the Company nor the
Bank
has been advised by any such Governmental Authority that such Governmental
Authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission;
-69-
EXHIBIT
F
FORM
OF BUYER’S COUNSEL LEGAL OPINION
Based
on
and subject to the foregoing and subject to the additional qualifications set
forth below, it is our opinion that:
1.
The
Company (i) is a registered bank holding company under the BHC Act; (ii) was
duly organized as a corporation, and is validly existing and in good standing
under the laws of State of South Carolina; (iii) has the corporate power and
authority to own its assets and conduct its businesses as now being conducted;
and (iv) is duly qualified to do business and is in good standing in each other
jurisdiction in which the character of the properties owned or leased by it
therein, or in which the transaction of its businesses, makes such qualification
necessary, except where failure so to qualify would not have a Buyer Material
Adverse Effect;
2.
The
Company has the corporate power and authority to execute and deliver the
Agreement and to perform its obligations under the Agreement and carry out
the
transactions described therein;
3.
The
Buyer’s Bank has been duly chartered and is validly existing as a national
association, in good standing under the National Bank Act, with power and
authority to own its properties and conduct its business as now being conducted;
the deposit accounts of the Bank are insured up to the applicable limits by
the
FDIC; and
all
of the issued and outstanding capital stock of the Buyer’s
Bank
has
been duly authorized and validly issued and is fully paid and nonassessable
and
is owned directly by the Company free and clear of any pledge, lien,
encumbrance, claim or equity except as provided by 12 U.S.C. Section
55;
4.
The
Company has duly authorized the execution and delivery of the Agreement and
all
performance by the Company thereunder and has duly executed and delivered the
Agreement;
5.
The
Agreement is
enforceable against
the Company,
subject
to the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium, fraudulent conveyance and other laws affecting the rights and
remedies of creditors generally and to general principles of
equity;
6. The
Company’s authorized shares consist of _______
shares
of common stock, of which ________ shares are outstanding, and _______ shares
of
preferred stock, none of which are outstanding. The outstanding shares of common
stock have been duly authorized and validly issued and are fully paid and
nonassessable. The shares of common stock to be issued by the Company under
the
Agreement have been duly authorized and, when issued and delivered in accordance
with the terms of the Agreement and the Proxy Statement/Prospectus, will have
been validly issued and will be fully paid and nonassessable, will be eligible
for trading on the exchange on which Buyer stock is traded and the issuance
of
such shares is not subject to any statutory preemptive rights;
7.
To
our
knowledge, immediately
prior to
the Effective Time, except for the ____ shares of common stock reserved for
issuance pursuant to the Agreement, ____ shares of common stock reserved for
issuance pursuant to outstanding stock options, and _____ shares of common
stock
reserved for issuance pursuant to outstanding warrants, (A) there are no
outstanding rights (contractual or otherwise), warrants or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of capital
stock of or other equity interest in the Company; and (B) except for the
Agreement, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company
to
file a registration statement under the Act or otherwise register any securities
of the Company owned or to be owned by such person;
-70-
8.
The
compliance by the Company with all of the provisions of the Agreement and the
consummation of the transactions therein contemplated will not conflict with
or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any material agreement (as such term is defined
in
Item 601 of Regulation S-K under the Securities Act of 1933) known to us to
which the Company is a party or by which the Company is bound, nor will such
action result in any violation of the provisions of the articles of
incorporation or bylaws of the Company or of the articles of association or
bylaws of the Bank or any statute or any order, rule or regulation known to
us
of any court or Governmental Authority;
9.
To
our
knowledge, no consents, approvals or waivers are required to be obtained from
any person or entity in connection with the Company’s execution and delivery of
the Agreement, or the performance of the obligations or agreements of the
Company or the consummation of the transactions described therein, except for:
(i) approval of the Company’s board of directors and shareholders (which
approval has been obtained); and (ii) required approvals of governmental or
regulatory authorities (which approvals have been obtained);
10.
To
our
knowledge, neither the Company nor the Bank is a party to or subject to any
order, decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter, supervisory letter or similar submission to,
any
Governmental Authority charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits or the supervision or
regulation of it or any of its subsidiaries and neither the Company nor the
Bank
has been advised by any such Governmental Authority that such Governmental
Authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission;
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EXHIBIT
G
FORM
OF
DIRECTOR
NON-COMPETITION AGREEMENT
THIS
DIRECTOR NON-COMPETITION AGREEMENT (the “Agreement”)
is
entered into as of August 26, 2007 between First National Bancshares, Inc.
(“Buyer”)
a
corporation organized under the laws of the State of South Carolina and the
holding company for First National Bank of the South, National Association
(the
“Bank”),
with
its principal offices at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxxxx, Xxxxx Xxxxxxxx
00000 and the undersigned director (“Director”) of Carolina National Corporation
(“Seller”),
a
corporation organized under the laws of the State of South Carolina and the
holding company for Carolina National Bank and Trust Company (“Carolina”),
with
its principal office at 0000 Xxxx Xxxxxx, Xxxxxxxx, Xxxxx Xxxxxxxx 00000, and
shall become effective on the Effective Time of the Merger provided in the
Merger Agreement (as defined below), between Buyer and Seller.
WHEREAS,
the Boards of Directors of Buyer and Seller have determined that the acquisition
of Seller by Buyer (the “Merger”)
pursuant to that Agreement and Plan of Merger dated as of August 26, 2007 (the
“Merger
Agreement”)
is in
the best interests of the shareholders and consistent with, and in furtherance
of, their respective business strategies; and
WHEREAS,
the parties hereto acknowledge that the Director, as a director of Seller and
Carolina, occupies a unique position of trust and confidence with respect to
Seller, and is receiving Merger Consideration pursuant to the terms and
conditions of the Merger Agreement; and
WHEREAS,
the parties further acknowledge that, by virtue of this position, the Director
has acquired significant knowledge relating to the business of Seller and
Carolina; and
WHEREAS,
following the Merger the Director has the opportunity to join the Columbia
advisory board of the Bank; and
WHEREAS,
the Board of Directors of Buyer has determined that it is in the best interests
of Buyer and its shareholders to protect the business and goodwill associated
with the business of Seller and Carolina by strengthening restrictions on the
Director’s ability to enter into certain competitive business activities
following the completion of the Merger; and
WHEREAS,
the Merger Agreement contemplates that, upon the execution and delivery of
the
Merger Agreement by Seller, as a condition and inducement to the willingness
of
Buyer to enter into the Merger Agreement, Director will enter into and perform
this Agreement.
WHEREAS,
the Director has agreed to accept such limitations on his ability to compete
with Buyer and Bank following the Merger as an inducement for Buyer to execute
the Merger Agreement.
IN
CONSIDERATION of the premises and for other good and valuable consideration,
including, without limitation, the Merger Consideration to be received by
Director, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Certain
Definitions.
(a) “Affiliated
Company”
means
any company or entity controlled by, controlling or under common control with
Buyer or Seller.
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(b) “Confidential
Information”
means
all information regarding Seller, Buyer and their Affiliated Companies and
any
of their respective activities, businesses or customers that is not generally
known to persons not employed (whether as employees or independent contractors)
by Seller, Buyer or their respective Affiliated Companies, that is not generally
disclosed publicly to persons not employed by Seller, Buyer or their respective
Affiliated Companies (except to their regulatory authorities and pursuant to
confidential or other relationships where there is no expectation of public
disclosure or use by third Persons), and that is the subject of reasonable
efforts to keep it confidential, and/or where such information is subject to
limitations on disclosure or use by applicable Laws. “Confidential
Information”
shall
include, without limitation, all customer information, customer lists,
confidential methods of operation, lending and credit information, commissions,
xxxx-ups, product/service formulas, information concerning techniques for use
and integration of websites and other products/services, current and future
development and expansion or contraction plans of Seller, Buyer or their
respective Affiliated Companies, sale/acquisition plans and contacts, marketing
plans and contacts, information concerning the legal affairs of and information
concerning the pricing of product and services, strategy, tactics and financial
affairs of Seller, Buyer or their respective Affiliated Companies. “Confidential
Information”
also
includes any “confidential information,” “trade secrets” or any equivalent term
under any other federal, state or local Law. “Confidential
Information”
shall
not include information that (a) has become generally available to the public
by
the act of one who has the right to disclose such information without violating
any right or privilege of Seller or Buyer or their respective Affiliated
Companies or any duty owed to any of them;
(b) was
rightfully in the possession of a person or entity prior to receipt of such
Confidential Information, directly or indirectly, from the Director; or (c)
is
independently developed by a person or entity without reference to or use of
Confidential Information.
(c) Capitalized
terms used but not defined herein shall have the same meanings provided in
the
Merger Agreement.
2. Nondisclosure
of Confidential Information.
(a) Nondisclosure
of Confidential Information.
Director
hereby agrees that for the later of one year following the Effective Time of
the
Merger or six months following the termination of service as an advisory
director of the Bank, Director shall not directly or indirectly transmit or
disclose any Confidential Information to any Person, or use or permit others
to
use any such Confidential Information, directly or indirectly, without the
prior
express written consent of the Chief Executive Officer of Buyer, which consent
may be withheld in the sole discretion of Buyer’s Chief Executive Officer. If
required to disclose such information by law, the Director shall use reasonable
efforts to protect and preserve the confidentiality of such information. The
Director also acknowledges and agrees that the trading in Buyer or Seller
securities using Confidential Information or non-public information may
violate federal and state securities laws and agrees to comply with such
securities laws and Buyer’s policies regarding xxxxxxx xxxxxxx in effect from
time to time.
(b) Enforceability
of Covenants.
Director
and Buyer agree that Director’s obligations under these nondisclosure covenants
are separate and distinct from other provisions of this Agreement, and a failure
or alleged failure of Seller and Buyer to perform their obligations under any
provision of this Agreement or other agreements with Director shall not
constitute a defense to, or waiver of the enforceability of, these nondisclosure
covenants. Nothing in this provision or this Agreement shall limit any rights
or
remedies otherwise available to Seller, Buyer or any Affiliated Company under
federal, state or local law.
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3. Nonrecruitment
and Nonsolicitation Covenants.
(a) Nonrecruitment
of Employees.
Director
hereby agrees that for the later of one year following the Effective Time of
the
Merger
or six
months following the termination of service as an advisory director of the
Bank,
Director shall not, without the prior written consent of Buyer’s Chief Executive
Officer, which consent may be withheld at the sole discretion of Buyer’s Chief
Executive Officer, directly or indirectly solicit or recruit for employment
or
encourage to leave employment with Buyer or any of Buyer’s Affiliated Companies
on his own behalf or on behalf of any other Person, any employee of Buyer or
of
any Buyer’s Affiliated Companies with whom Director worked during Director’s
services as a director of Seller, any Seller Affiliated Company, or the Bank
and
who performed services for Seller, Buyer or any of their Affiliated Companies’
customers and who has not thereafter ceased to be employed by Seller, Buyer
or
any of their Affiliated Companies for a period of not less than one
year.
(b) Nonsolicitation
of Customers.
Director hereby agrees that for the later of one year following the Effective
Time of the Merger or six months following the termination of service as an
advisory director of the Bank, Director shall not, without the prior written
consent of Buyer’s Chief Executive Officer, which consent may be withheld at the
sole discretion of Buyer’s Chief Executive Officer, directly or indirectly, on
behalf of himself or any other Person, solicit or attempt to solicit for the
purpose of providing any Business Activities (as defined in Section 3(c)) any
customer of the Seller, Buyer or any of their Affiliated Companies with whom
Director had material contact on behalf of Seller or the Bank in the course
of
Director’s service as a director of Seller or the Bank.
(c) Noncompetition.
Director hereby agrees that for the later of one year following the Effective
Time of the Merger or six months following the termination of service as an
advisory director of the Bank, Director shall not, without the prior written
consent of Buyer’s Chief Executive Officer, which consent may be withheld at the
sole discretion of Buyer’s Chief Executive Officer, engage or participate in, or
prepare or apply to commence, any Business Activities with, for or on behalf
of
any new financial institution as a director, consultant, officer, employee,
agent or shareholder, or on behalf of any other Person that competes in the
Restricted Area with Buyer or any Buyer Affiliated Company with respect to
Business Activities. For purposes of this Section 3, “Business
Activities”
shall
be any of the business activities conducted by Buyer, Seller or any of their
Affiliated Companies, which the parties agree include the offering of commercial
or consumer loans and extensions of credit, letters of credit, commercial and
consumer deposits and deposit accounts, securities repurchase agreements and
sweep accounts, cash management services, money transfer and xxxx payment
services, internet or electronic banking, automated teller machines, XXX and
retirement accounts, mortgage loans, and home equity lines of credit. For
purposes of this Section 3(c), the “Restricted
Area”
shall
be a
radius
of twenty-five miles from the main office of Carolina in Columbia. Nothing
in this Section 3(c) shall prohibit Director from acquiring or holding, for
investment purposes only, less than 5% of the outstanding securities of any
corporation which may compete directly or indirectly with Seller, Buyer or
any
of their Affiliated Companies or preclude Director from continuing any Business
Activities conducted as of the date hereof.
(d) Enforceability
of Covenants.
Director
acknowledges and agrees that the covenants in this Agreement are direct
consideration for a sale of a business and should be governed by standards
applicable to restrictive covenants entered into in connection with a sale
of a
business. Director acknowledges that each of Buyer and their Affiliated
Companies have a current and future expectation of business within the
Restricted Area and from the current and proposed customers of Seller that
are
derived from the acquisition of Seller by Buyer. Director acknowledges that
the
term, geographic area, and scope of the covenants set forth in this Agreement
are reasonable, and agrees that he will not, in any action, suit or other
proceeding, deny the reasonableness of, or assert the unreasonableness of,
the
premises, consideration or scope of the covenants set forth herein. Director
agrees that his position as a director of Seller and, after the Effective Time,
as an advisory director of the Bank, involves information relating to all
aspects of the Business Activities and all of the Restricted Area. Director
further acknowledges that complying with the provisions contained in this
Agreement will not preclude him from engaging in a lawful profession, trade
or
business, or from becoming gainfully employed. Director and Buyer agree that
Director’s obligations under the above covenants are separate and distinct under
this Agreement, and the failure or alleged failure of Buyer to perform its
obligations under any other provisions of this Agreement shall not constitute
a
defense to the enforceability of this covenant. Director and Buyer agree that
if
any portion of the foregoing covenants is deemed to be unenforceable because
the
geography, time or scope of activities restricted is deemed to be too broad,
the
court shall be authorized to substitute for the overbroad term an enforceable
term that will enable the enforcement of the covenants to the maximum extent
possible under applicable law. Director acknowledges and agrees that any breach
or threatened breach of this covenant will result in irreparable damage and
injury to Buyer and its Affiliated Companies and that Buyer will be entitled
to
exercise all rights including, without limitation, obtaining one or more
temporary restraining orders, injunctive relief and other equitable relief,
including specific performance in the event of any breach or threatened breach
of this Agreement, in any federal or state court of competent jurisdiction
in
South Carolina without the necessity of posting any bond or security (all of
which are waived by the Director), and to exercise all other rights or remedies,
at law or in equity, including, without limitation, the rights to damages.
-74-
4. Successors.
(a) This
Agreement is personal to Director and is not assignable by Director, and none
of
Director’s duties hereunder may be delegated.
(b) This
Agreement may be assigned by, and shall be binding upon and inure to the benefit
of, Buyer and any of its Affiliated Companies and their successors and
assigns.
5. Miscellaneous.
(a) Waiver.
Failure
of any party to insist, in one or more instances, on performance by the other
in
strict accordance with the terms and conditions of this Agreement shall not
be
deemed a waiver or relinquishment of any right granted in this Agreement or
of
the future performance of any such term or condition or of any other term or
condition of this Agreement, unless such waiver is contained in a writing signed
by the party making the waiver.
(b) Severability.
If any
provision or covenant, or any part thereof, of this Agreement should be held
by
any court to be invalid, illegal or unenforceable, either in whole or in part,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of the remaining provisions or covenants, or any
part
thereof, of this Agreement, all of which shall remain in full force and
effect.
(c) Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of South Carolina.
(d) Notices.
All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or three days after mailing if mailed, first class, certified mail,
postage prepaid:
| To Buyer : | First National Bancshares, Inc.
000
Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxx,
XX 00000
Attention:
Chief Executive Officer
|
| To Director: | See signature page of this Agreement |
-75-
Any
party
may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(e) Amendments
and Modifications.
This
Agreement may be amended or modified only by a writing signed by both parties
hereto, which makes specific reference to this Agreement.
(f) Entire
Agreement.
Except
as provided herein, this Agreement contains the entire agreement between Buyer
and Director with respect to the subject matter hereof and, from and after
the
date hereof, this Agreement shall supersede any prior agreement between the
parties with respect to the subject matter hereof.
(g) Counterparts,
etc.
This
Agreement may be executed in identical counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and
the
same instrument. A facsimile signature shall constitute and have the same force
and effect as an original signature for all purposes under this
Agreement.
-76-
IN
WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first above written.
FIRST
NATIONAL BANCSHARES, INC.
By:
Name:
Title:
DIRECTOR
Name:
Address:
________________________
________________________
________________________
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