AGREEMENT AND PLAN OF MERGER

Exhibit 99.2

AGREEMENT AND PLAN OF MERGER

by and between

VALRICO BANCORP, INC.

and

CENTERSTATE BANKS OF FLORIDA, INC.

Dated as of

November 14, 2006

TABLE OF CONTENTS

 

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of November 14, 2006, by and between V ALRICO B ANCORP , I NC . (“VBI”), a corporation organized and existing under the laws of the State of Florida, with its principal office located in Valrico, Florida, and C ENTERSTATE B ANKS OF F LORIDA , I NC . (“CBF”), a corporation organized and existing under the laws of the State of Florida, with its principal office located in Winter Haven, Florida.

Preamble

The Boards of Directors of VBI and CBF are of the opinion that the transactions described herein are in the best interests of the parties and their respective stockholders. This Agreement provides for the merger (the “Merger”) of VBI with and into CBF. At the Effective Time of such Merger, the outstanding shares of the capital stock of VBI shall be converted into the right to receive shares of the common stock of CBF and/or cash (as provided herein). The Merger is subject to the approvals of the stockholders of VBI, the Florida Department of Financial Services and the Federal Reserve Board, and the satisfaction of certain other conditions described in this Agreement. It is the intention of the parties to this Agreement that, for federal income tax purposes, the merger shall qualify as a “reorganization” within the meaning of Section 368(a) of the IRC.

Certain terms used in this Agreement are defined in Section 11.1 of this Agreement.

NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants and agreements set forth herein, the parties 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, VBI shall be merged with and into CBF in accordance with the provisions of Section 607.1107 of the FBCA and with the effect provided in the applicable provisions of the FBCA. CBF shall be the Surviving Corporation resulting from the Merger and shall continue to be governed by the Laws of the State of Florida. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the CBF Board and the VBI Board.

1.2 Time and Place of Closing . The place of Closing shall be at the offices of CBF, Winter Haven, Florida, or such other place as may be mutually agreed upon by the Parties. Subject to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the chief executive officers of each Party, the Closing will take place at 9:00 A.M. Eastern Standard Time on the first business day of the month immediately subsequent to the month in which the closing conditions set forth in Article 9 below have been satisfied (or waived pursuant to Section 11.4 of this Agreement).

 

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1.3 Effective Time . The Merger and other transactions provided for in this Agreement shall become effective: (a) on the date and at the time that the Articles of Merger reflecting the Merger shall be accepted for filing by the Secretary of State of Florida, or (b) on such date and at such time subsequent to the date and time established pursuant to subsection 1.3(a) above as may be specified by the Parties in the Articles of Merger (such time is hereinafter referred to as the “Effective Time”). Unless CBF and VBI otherwise mutually agree in writing, the Parties shall use their commercially reasonable efforts to cause the Effective Time to occur on the date of Closing.

1.4 Director Agreements . Concurrently with the execution of this Agreement and as a material condition hereto, each member of the VBI Board and Board of Directors of VBI Bank has executed and delivered a Stockholders Agreement in the form attached as Exhibit A hereto and a Non-Competition Agreement Related to the Sale of Goodwill in the form attached as Exhibit B hereto (collectively the “Director Agreements”).

ARTICLE 2

EFFECT OF MERGER

2.1 Articles of Incorporation . The Articles of Incorporation of CBF in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation immediately following the Effective Time.

2.2 Bylaws . The Bylaws of CBF in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation immediately following the Effective Time, until otherwise amended or repealed.

2.3 Officers and Directors . The incumbent officers and directors of CBF immediately prior to the Effective Time shall be the officers and directors of the Surviving Corporation.

ARTICLE 3

CONVERSION OF CONSTITUENTS’ CAPITAL SHARES

3.1 Manner of Converting Shares . Subject to the provisions of this Article 3, at the Effective Time, by virtue of the Merger and without any further action on the part of CBF, VBI or the holders of any shares thereof, the shares of the constituent corporations shall be converted as follows:

(a) each share of CBF Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.

(b) Subject to the potential adjustment provided for in Section 3.2 below, each share of VBI Common Stock (excluding shares held by any VBI Company, other than in a fiduciary capacity or as a result of debts previously contracted, and excluding shares held by stockholders who perfect their dissenters’ rights of appraisal as provided in Section 3.4 of this Agreement) issued and outstanding at the Effective Time shall cease to be outstanding and shall be converted

 

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into and exchanged for the right to receive shares of CBF Common Stock and/or cash as set forth in this Section 3.1.

(c) Holders of VBI Common Stock may elect to receive shares of CBF Common Stock or cash in exchange for their shares of VBI Common Stock. The total number of shares of VBI Common Stock to be converted into CBF Common Stock (the “Stock Consideration pursuant to this Agreement (the “Stock Conversion Number”) shall not be less than 235,900 shares (65% times 362,923 total VBI common shares outstanding) nor more than 254,046 shares (70% times 362,923 total VBI common shares outstanding). All shares of VBI Common Stock not exchanged for CBF Common Stock shall be exchanged for $105.06 in cash per share (the “Cash Consideration”).

(d) At the election of holders of VBI Common Stock, each share of VBI Common Stock may be exchanged for 5.25 shares of Centerstate Common Stock (the “Exchange Ratio”), subject to the election restrictions set forth above and below.

(e) An Election Form, in such form as CBF and VBI mutually agree (“Election Form”), will be included in, and sent with the Proxy Statement/Prospectus, which shall be mailed to each holder of record of VBI Common Stock entitled to vote at VBI Stockholders’ Meeting, permitting such holder, subject to the allocation and election procedure set forth herein:

(i) to specify the number of shares of VBI Common Stock owned by such holder with respect to which the holder desires to receive Cash Consideration (a “Cash Election”) in accordance with the provisions stated herein;

(ii) to specify the number of shares of VBI Common Stock owned by such holder with respect to which such holder desires to receive Stock Consideration (a “Stock Election), or;

(iii) to indicate that such record holder has no preference as to the receipt of Stock Consideration or Cash Consideration for such shares (a “Non-Election”).

Holders of record of shares of VBI Common Stock who hold such shares as nominees, trustees or in other representative capacities (a “Representative”) may submit multiple Election Forms, provided that each such Election Form covers all the shares of VBI Common Stock held by each representative for a particular beneficial owner.

Any shares of VBI Common Stock with respect to which the holder thereof shall not, as of the Election Deadline (defined below), have made an election by submission to VBI of an effective, properly completed Election Form shall be deemed Non-Election shares. Any Dissenting Shares shall be deemed shares subject to an all Cash Election.

Any holder of VBI Common Stock shall have the right to change his or her election to a Cash Election or Stock Election at any time prior to the Election Deadline (as defined in subparagraph 3.1(f) below) by submitting a new Election Form to VBI.

(f) The term “Election Deadline” shall mean the same deadline for return of the proxy card relating to the shareholder vote pursuant to the proposed Merger at the VBI

 

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Stockholders’ Meeting. An election shall have been properly made only if VBI shall have actually received a properly completed Election Form by the Election Deadline. Subject to the terms of this Definitive Agreement and of the Election Form, CBF and the Exchange Agent shall have discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the Election Forms, and any decisions of VBI regarding such matters shall be binding and conclusive. Neither CBF nor the Exchange Agent shall be under any obligation to notify any person of any defect in an Election Form.

(g) As soon as practicable, but in no event more than two (2) business days after the Election Deadline, VBI shall deliver to CBF a schedule (the “Exchange Schedule”), certified by VBI’s corporate secretary, whereby VBI has calculated the amount of cash and CBF Common Stock that each VBI shareholder shall be entitled to receive, listed by VBI stock certificate number, pursuant to the provisons of Article 3 hereof. Such Exchange Schedule shall be reviewed by CBF within five (5) business days after receipt by CBF.

(h) The “Stock Election Number” means the aggregate number of shares of VBI Common Stock with respect to which Stock Elections have been made. The “Cash Election Number” means the aggregate number of shares of VBI Common Stock with respect to which Cash Elections have been made.

(i) If the Stock Election Number exceeds 254,046, then:

(i) all Non-Election shares of each holder of VBI Common Stock shall be converted into the right to receive the Cash Consideration, and,

(ii) All Stock Election shares of each holder of VBI Common Stock will be adjusted, on a pro-rata basis, such that the aggregate number of shares of VBI Common Stock electing stock consideration equals 254,046. Such adjustment (the “Adjusted Stock Election”) shall be determined as follows: the number of Adjusted Stock Election shares that each holder of VBI Common Stock who properly elected Stock Consideration will be entitled to receive shall equal the product obtained by multiplying (x) the number of Stock Election shares held by such holder by (y) a fraction, the numerator of which is 254,046 and the denominator of which is the Stock Election Number. The Adjusted Stock Election shares shall then be converted into the right to receive shares of CBF Common Stock determined by multiplying the number of Adjusted Stock Election shares by 5.25, with any fractional shares being converted into cash at the rate of $105.06 for each whole share of VBI Common Stock. The remaining number of such holder’s Stock Election shares shall be converted into the right to receive the Cash Consideration.

(j) If the Stock Election Number is less than 235,900, then;

(i) all Non-Election shares of each holder of VBI Common Stock or, if less than all, such number of Non-Election shares as necessary to reduce the aggregate number of shares of VBI Common Stock receiving Cash Consideration to 127,023 (allocated on a prorata basis), shall be converted into the right to receive the Stock Consideration; and

(ii) to the extent that the aggregate number of shares of VBI Common Stock that are to be allocated Stock Consideration after the conversion (noted in subparagraph (j)(i)

 

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hereof) of Non-Election shares still is less than 235,900; then the Cash Election shares of each holder of VBI Common Stock, will be adjusted such that the aggregate number of shares of VBI Common Stock electing Stock Consideration equals 235,900. Such adjustment (the “Adjusted Cash Election”) shall be determined as follows: the number of Adjusted Cash Election shares that each holder of VBI Common Stock will be entitled to exercise shall equal the product obtained by multiplying (X) the number of Cash Election shares held by such holder by (Y) a fraction, the numerator of which is 127,023 and the denominator of which is the Cash Election Number. The Adjusted Cash Election shares are then converted into the right to receive Cash Consideration by multiplying the Adjusted Cash Election shares by $105.06. The remaining number of such holder’s Stock Election shares shall be converted into the right to receive the Stock Consideration.

(k) If the Stock Election Number is higher than 235,900 and lower than 254,046, then, all holders who have submitted a proper and timely Election Form shall be converted into the right to receive Stock Consideration and/or Cash Consideration as they have properly elected. In such event, all Non-Election Shareholders shall be converted into the right to receive the Cash Consideration only.

(l) All outstanding and unexercised options to purchase shares of VBI Common Stock pursuant to the VBI Stock Option Plans (a “VBI Option”) will cease to represent an option to purchase VBI Common Stock at the Effective Time and will be converted automatically into the right to receive a cash payment at the Effective Time equal to $79.06 per share represented by such VBI Option, or $371,819.18 in the aggregate.

3.2 Anti-Dilution Provisions . In the event CBF changes the number of shares of CBF Common Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock and the record date therefor shall be prior to the Effective Time, the Exchange Ratio shall be proportionately adjusted as needed to preserve the relative economic benefit to the Parties.

3.3 Shares Held by VBI . Each of the shares of VBI Common Stock held by any VBI Company, other than in a fiduciary capacity or as a result of debts previously contracted, shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.

3.4 Dissenting Stockholders . Any holder of shares of VBI Common Stock who perfects his dissenter’s rights of appraisal in accordance with and as contemplated by Section 607.1320 of the FBCA (the “Dissenter Provisions”) shall be entitled to receive the value of such shares in cash as determined pursuant to such provision of Law; provided, however, that no such payment shall be made to any dissenting stockholder unless and until such dissenting stockholder has complied with the applicable provisions of the FBCA and surrendered to the Surviving Corporation the certificate or certificates representing the shares for which payment is being made; provided, further, nothing contained in this Section 3.4 shall in any way limit the right of CBF to terminate this Agreement and abandon the Merger pursuant to subsection 10.1(i) below. If any dissenting stockholder gives notice to VBI, VBI will promptly give CBF notice thereof, and CBF will have the right to participate in all negotiations and proceedings with respect to any such demands. VBI will not, except with the prior written consent of CBF, voluntarily make any

 

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payment with respect to, or settle or offer to settle, any such demand for payment. In the event that after the Effective Time a dissenting stockholder of VBI fails to perfect, or effectively withdraws or loses, his right to appraisal and of payment for his shares, the Surviving Corporation shall issue and deliver the consideration to which such holder of shares of VBI Common Stock is entitled under this Article 3 (without interest) upon surrender by such holder of the certificate or certificates representing shares of VBI Common Stock held by him.

3.5 Fractional Shares . No certificates or scrip representing fractional shares of CBF Common Stock shall be issued upon the surrender of certificates for exchange; no dividend or distribution with respect to CBF Common Stock shall be payable on or with respect to any fractional share; and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of CBF. In lieu of any such fractional share, CBF shall pay to each former stockholder of VBI who otherwise would be entitled to receive a fractional share of CBF Common Stock an amount in cash (without interest) determined by multiplying (a) $105.06 by (b) the fraction of a share of CBF Common Stock to which such holder would otherwise be entitled.

ARTICLE 4

EXCHANGE OF SHARES

4.1 Exchange Procedures . As soon as practicable, but in no event more than two (2) business days after CBF confirms and accepts the Exchange Schedule from VBI, CBF shall deliver the Exchange Schedule to the Exchange Agent and cause the Exchange Agent to promptly after the Effective Time, mail to the former stockholders of VBI appropriate transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing shares of VBI Common Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent). After completion of the allocation procedure set forth in Section 3.1(c)(5) and upon surrender of a certificate or certificates for exchange and cancellation to the Exchange Agent (such shares to be free and clear of all liens, claims and encumbrances), together with a properly executed letter of transmittal, the holder of such certificate or certificates shall be entitled to receive in exchange therefore: (a) a certificate representing that number of whole shares of CBF Common Stock which such holder of VBI Common Stock became entitled to receive pursuant to the provisions of Article 3 hereof and (b) a check representing the aggregate cash consideration, if any, which such holder has the right to receive pursuant to the provisions of Article 3 hereof and the Exchange Schedule, and the VBI Common Stock certificate or certificates so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the Cash Consideration, any cash in lieu of fractional shares, or any unpaid dividends and distributions, if any, payable to holders of certificates for VBI Common Stock. Subject to provision for lost shares as set forth in Section 4.4 hereof, the Surviving Corporation shall not be obligated to deliver the consideration to which any former holder of VBI Common Stock is entitled as a result of the Merger until such holder surrenders his certificate or certificates representing the shares of VBI Common Stock for exchange as provided in this Section 4.1. The certificate or certificates for VBI Common Stock so surrendered shall be duly endorsed as the Exchange Agent may require. Any other provision of this Agreement notwithstanding, neither the Surviving Corporation, CBF nor the Exchange

 

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Agent shall be liable to a holder of VBI Common Stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property Law.

4.2 Rights of Former VBI Stockholders . At the Effective Time, the stock transfer books of VBI shall be closed as to holders of VBI Common Stock immediately prior to the Effective Time, and no transfer of VBI Common Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 4.1 of this Agreement, each certificate theretofore representing shares of VBI Common Stock (“VBI Certificate”), other than shares to be canceled pursuant to Section 3.3 of this Agreement or as to which dissenter’s rights of appraisal have been perfected as provided in Section 3.4 of this Agreement, shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Section 3.1 of this Agreement in exchange therefor. To the extent permitted by Law, former stockholders of record of VBI Common Stock shall be entitled to vote after the Effective Time at any meeting of CBF stockholders the number of whole shares of CBF Common Stock into which their respective shares of VBI Common Stock (excluding Cash Election Shares) are converted, regardless of whether such holders have exchanged their VBI Certificates for certificates representing CBF Common Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by CBF on the CBF Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares issuable pursuant to this Agreement. Notwithstanding the preceding sentence, any person holding any VBI Certificate at or after the Effective Time (the “Cutoff”) shall not be entitled to receive any dividend or other distribution payable after the Cutoff to holders of CBF Common Stock, which dividend or other distribution is attributable to such person’s CBF Common Stock represented by said VBI Certificate held after the Cutoff, until such person surrenders said VBI Certificate for exchange as provided in Section 4.1 of this Agreement. However, upon surrender of such VBI Certificate, both the CBF Common Stock certificate (together with all such undelivered dividends or other distributions, without interest) and any undelivered cash payments (without interest) shall be delivered and paid with respect to each share represented by such VBI Certificate. No holder of shares of VBI Common Stock shall be entitled to receive any dividends or distributions declared or made with respect to the CBF Common Stock with a record date before the Effective Time of the Merger.

4.3 Identity of Recipient of CBF Common Stock . In the event that the delivery of the consideration provided for in this Agreement is to be made to a person other than the person in whose name any certificate representing shares of VBI Common Stock surrendered is registered, such certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer), with the signature(s) appropriately guaranteed, and otherwise in proper form for transfer, and the person requesting such delivery shall pay any transfer or other taxes required by reason of the delivery to a person other than the registered holder of such certificate surrendered or establish to the satisfaction of CBF that such tax has been paid or is not applicable.

4.4 Lost or Stolen Certificates . If any holder of VBI Common Stock convertible into the right to receive shares of CBF Common Stock is unable to deliver the VBI Certificate that represents VBI Common Stock, the Exchange Agent, in the absence of actual notice that any such shares have been acquired by a bona fide purchaser, shall deliver to such holder the shares

 

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of CBF Common Stock to which the holder is entitled for such shares upon presentation of the following: (a) evidence to the reasonable satisfaction of CBF that any such VBI Certificate has been lost, wrongfully taken or destroyed; (b) such security or indemnity as may be reasonably requested by CBF to indemnify and hold CBF and the Exchange Agent harmless; and (c) evidence satisfactory to CBF that such person is the owner of the shares theretofore represented by each VBI Certificate claimed by the holder to be lost, wrongfully taken or destroyed and that the holder is the person who would be entitled to present such VBI Certificate for exchange pursuant to this Agreement.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF VBI

VBI hereby represents and warrants to CBF as follows:

5.1 Corporate Organization, Standing and Power .

(a) VBI is a corporation duly organized, validly existing and in good standing under the Laws of the State of Florida, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets and to incur its Liabilities. VBI 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 Material Adverse Effect on VBI. VBI has delivered to CBF complete and correct copies of its Articles of Incorporation and Bylaws and the articles of incorporation, bylaws and other, similar governing instruments of each of its Subsidiaries, in each case as amended through the date hereof.

(b) Valrico Capital Trust (the “Trust”) (i) has been duly created and is validly existing and in good standing as a statutory trust under the Delaware Statutory Trust Act, 12 Del. C. 3801, et seq . (the “Statutory Trust Act”), and (ii) has all requisite power and authority to own or lease its properties and assets and to carry on its business as now conducted.

5.2 Authority; No Breach By Agreement .

(a) VBI has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions provided for herein. The execution, delivery and performance of this Agreement and the consummation of the transactions provided for herein, including the Merger, have been duly and validly authorized by all necessary corporate action on the part of VBI, subject to the approval of this Agreement by the holders of a majority of the outstanding shares of VBI Common Stock. Subject to such requisite stockholder approval and required regulatory consents, this Agreement represents a legal, valid and binding obligation of VBI, enforceable against VBI in accordance with its terms.

(b) Except as set forth on Schedule 5.2(b) , neither the execution and delivery of this Agreement by VBI, nor the consummation by VBI of the transactions provided for herein, nor compliance by VBI with any of the provisions hereof, will (i) conflict

 

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with or result in a breach of any provision of VBI’s Articles of Incorporation or Bylaws or the Articles or Certificates of Incorporation or Bylaws of any VBI Company, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any VBI Company under, any Contract or Permit of any VBI Company (including, without limitation, under the Indenture, the Declaration of Trust, or any agreements entered into in connection therewith), where failure to obtain such Consent is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on such VBI Company, or, (iii) subject to receipt of the requisite Consents and approvals referred to in this Agreement, violate or conflict with any Law or Order applicable to any VBI Company or any of their respective Assets.

(c) Except as set forth on Schedule 5.2(c) , other than (i) in connection or compliance with the provisions of the Securities Laws and applicable state corporate and securities Laws, (ii) Consents required from Regulatory Authorities, (iii) the approval by the stockholders of VBI of the Merger and the transactions provided for in this Agreement, (iv) notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and (v) Consents, filings or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the VBI Company at issue, no notice to, filing with or Consent of, any Person or public body or authority is necessary for the consummation by VBI of the Merger and the other transactions provided for in this Agreement.

5.3 Capital Stock .

(a) The authorized capital stock of VBI consists solely of 1,000,000 shares of VBI Common Stock, of which 362,923 shares are issued and outstanding (none of which is held in the treasury of VBI). All of the issued and outstanding shares of VBI Common Stock are duly and validly issued and outstanding and are fully paid and nonassessable. None of the shares of capital stock, options, or other securities of VBI has been issued in violation of the Securities Laws or any preemptive rights of the current or past stockholders of VBI. Pursuant to the terms of the VBI Stock Option Plans, there are currently outstanding options with the right to purchase a total of 4,703 shares of VBI Common Stock, as more fully set forth in Schedule 5.3 attached hereto.

(b) Except as set forth in Section 5.3(a) of this Agreement, there are no shares of capital stock or other equity securities of VBI outstanding and no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of VBI or contracts, commitments, understandings or arrangements by which VBI is or may be bound to issue additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock. VBI has no liability for dividends declared or accrued, but unpaid, with respect to any of its capital stock.

 

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5.4 VBI Subsidiaries .lp6

(a) The VBI Subsidiaries include the Trust and VBI Bank, which is a Florida, FDIC-insured, non-member banking corporation, duly organized, validly existing and in good standing under the Laws of the State of Florida. Each of the VBI Subsidiaries has the corporate power and authority necessary for it to own, lease and operate its Assets and to incur its Liabilities and to carry on its business as now conducted. Each VBI Subsidiary 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 jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

(b) The authorized and issued and outstanding capital stock of each VBI Subsidiary, including without limitation the Trust and VBI Bank, is set forth on Schedule 5.4(b) . VBI or VBI Bank owns all of the issued and outstanding shares of capital stock of each VBI Subsidiary (except for the Trust, as to which VBI owns all of the issued and outstanding Common Securities) as defined in the Placement Agreement relating to such Trust). None of the shares of capital stock or other securities of any VBI Subsidiary has been issued in violation of the Securities Laws or any preemptive rights. No equity securities of any VBI Subsidiary are or may become required to be issued by reason of any options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of any such Subsidiary, and there are no Contracts by which any VBI Subsidiary is bound to issue additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock or by which any VBI Company is or may be bound to transfer any shares of the capital stock of any VBI Subsidiary. There are no Contracts relating to the rights of any VBI Company to vote or to dispose of any shares of the capital stock of any VBI Subsidiary. All of the shares of capital stock of each VBI Subsidiary held by a VBI Company are fully paid and nonassessable under the applicable corporation Law of the jurisdiction in which such Subsidiary is incorporated and organized and are owned by the VBI Company free and clear of any Lien. No VBI Subsidiary has any liability for dividends declared or accrued, but unpaid, with respect to any of its capital stock. For purposes of this Section 5.4(b), references to “capital stock” shall be deemed to include membership interests with respect to any VBI Company that is a limited liability company.

(c) The minute books of VBI, VBI Bank and each VBI Subsidiary contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof), since January 1, 1998 (or since such entity’s formation, if later), provided that specific resolutions and minutes in respect of the proposed affiliation of VBI with CBF or other entities have not been included in such materials provided to CBF.

(d) None of the VBI Companies has or is currently engaged in any activities that are not permissible under the BHC Act for a bank holding company.

 

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(e) No VBI Company and no employee or agent thereof is registered or required to be registered as an investment adviser or broker/dealer under the Securities Laws. All activities with respect to the solicitation, offer, marketing and/or sale of securities under “networking” or similar arrangements: (i) are and have at all times been conducted in accordance with all applicable Laws, including without limitation the Securities Laws and all state and federal banking laws and regulations, and (ii) satisfy the definition of a “Third Party Brokerage Arrangement” under Section 201 of the Gramm-Leach-Bliley Act and regulations promulgated thereunder. There has been no misrepresentation or omission of a material fact by any VBI Company and/or their respective agents in connection with the solicitation, marketing or sale of any securities, and each customer has been provided with any and all disclosure materials as required by applicable Law.

5.5 Financial Statements . (a) VBI previously has provided to CBF copies of all VBI Financial Statements and VBI Call Reports for periods ended prior to the date hereof, and VBI will deliver to CBF promptly copies of all VBI Financial Statements and VBI Call Reports prepared subsequent to the date hereof. The VBI Financial Statements (as of the dates thereof and for the periods covered thereby) (i) are or, if dated after the date of this Agreement, will be in accordance with the books and records of the VBI Companies, which are or will be, as the case may be, complete and correct and which have been or will have been, as the case may be, maintained in accordance with applicable legal and accounting principles and reflect only actual transactions, and (ii) present or will present, as the case may be, fairly the consolidated financial position of the VBI Companies as of the dates indicated and the consolidated results of operations, changes in stockholders’ equity and cash flows of the VBI Companies for the periods indicated, in accordance with GAAP (subject to exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end audit adjustments that are not material). The VBI Call Reports have been prepared in material compliance with (A) the rules and regulations of the respective federal or state banking regulator with which they were filed, and (B) regulatory accounting principles, which principles have been consistently applied during the periods involved, except as otherwise noted therein.

5.6 Absence of Undisclosed Liabilities . No VBI Company has any Liabilities that have or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI, except Liabilities accrued or reserved against in the consolidated balance sheets of VBI as of September 30, 2006, included in the VBI Financial Statements or reflected in the notes thereto, except as set forth on Schedule 5.6 . No VBI Company has incurred or paid any Liability since September 30, 2006, except for such Liabilities incurred or paid in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

5.7 Absence of Certain Changes or Events . Except as set forth on Schedule 5.7 , since December 31, 2005 (i) there have been no events, changes or occurrences that have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI or its Subsidiaries, including without limitation any change in the administrative or supervisory standing or rating of VBI or VBI Bank with any Regulatory Authority, (ii) the VBI Companies have not taken any action, or failed to take any action, prior to the date of this Agreement, which

 

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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 VBI provided in Article 7 of this Agreement, and (iii) to VBI’s Knowledge, no fact or condition exists which VBI believes will cause a Material Adverse Effect on VBI or its Subsidiaries in the future, subject to changes in general economic or industry conditions.

5.8 Tax Matters .

(a) All Tax returns required to be filed by or on behalf of any of the VBI Companies have been timely filed or requests for extensions have been timely filed, granted and have not expired, and all returns filed are complete and accurate in all material respects. All Taxes shown as due on filed returns have been paid. There is no audit examination, deficiency, refund Litigation or matter in controversy pending, or to the Knowledge of VBI or VBI Bank, threatened, with respect to any Taxes that might result in a determination that would have, individually or in the aggregate, a Material Adverse Effect on VBI, except as reserved against in the VBI Financial Statements delivered prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been fully paid.

(b) None of the VBI Companies has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due (excluding such statutes that relate to years currently under examination by the Internal Revenue Service or other applicable taxing authorities) that is currently in effect.

(c) Adequate provision for any Taxes due or to become due for any of the VBI Companies for the period or periods through and including the date of the respective VBI Financial Statements has been made and is reflected on such VBI Financial Statements.

(d) Any and all deferred Taxes of the VBI Companies have been provided for in accordance with GAAP.

(e) None of the VBI Companies is responsible for the Taxes of any other Person other than the VBI Companies under Treasury Regulation 1.1502-6 or any similar provision of federal or state Law.

(f) Except as set forth on Schedule 5.8(f) , none of the VBI Companies has made any payment, is obligated to make any payment or is a party to any Contract that could obligate it to make any payment that would be disallowed as a deduction under Section 280G or 162(m) of the IRC.

(g) There has not been an ownership change, as defined in Section 382(g) of the IRC, that occurred during or after any taxable period in which VBI, VBI Bank or any VBI Subsidiaries incurred an operating loss that carries over to any taxable period ending after the fiscal year of VBI immediately preceding the date of this Agreement.

 

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(h) (i) Proper and accurate amounts have been withheld by the VBI Companies from their employees and others for all prior periods in compliance in all material respects with the tax withholding provisions of all applicable federal, state and local Laws and proper due diligence steps have been taken in connection with back up withholding, , (ii) federal, state and local returns have been filed by the VBI Companies for all periods for which returns were due with respect to withholding, Social Security and unemployment taxes or charges due to any federal, state or local taxing authority and (iii) the amounts shown on such returns to be due and payable have been paid in full or adequate provision therefore have been included by VBI in the VBI Financial Statements.

(i) VBI has delivered or made available to CBF correct and complete copies of all Tax returns filed by VBI and each VBI Subsidiary for each fiscal year ended on and after December 31, 2000.

5.9 Loan Portfolio; Documentation and Reports .

(a) (i) Except as disclosed in Schedule 5.9(a)(i) , none of the VBI Companies is a creditor as to any written or oral loan agreement, note or borrowing arrangement, including without limitation leases, credit enhancements, commitments and interest-bearing assets (the “Loans”), other than Loans the unpaid principal balance of which does not exceed $25,000 per Loan or $50,000 in the aggregate, under the terms of which the obligor is, as of the date of this Agreement, over 90 days delinquent in payment of principal or interest or in default of any other material provisions.

(ii) Except as otherwise set forth in Schedule 5.9(a)(ii) , none of the VBI Companies is a creditor as to any Loan, including without limitation any loan guaranty, to any director, executive officer or 5% stockholder thereof, or to the Knowledge of VBI or VBI Bank, any Person controlling, controlled by or under common control with any of the foregoing.

(iii) All of the Loans held by any of the VBI Companies are in all respects the binding obligations of the respective obligors named therein in accordance with their respective terms, are not subject to any defenses, setoffs or counterclaims, except as may be provided by bankruptcy, insolvency or similar Laws or by general principles of equity, and were solicited, originated and exist in material compliance with all applicable Laws and VBI loan policies, except for deviations from such policies that (a) have been approved by current management of VBI, in the case of Loans with an outstanding principal balance that exceeds $25,000, or (b) in the judgment of VBI management, will not adversely affect the ultimate collectibility of such Loan.

(iv) Except as set forth in Schedule 5.9(a)(iv) , none of the VBI Companies holds any Loans in the original principal amount in excess of $25,000 per Loan or $50,000 in the aggregate that have been classified by any bank examiner, whether regulatory or internal, or, in the exercise of reasonable diligence by VBI, VBI Bank or any Regulatory Authority, should have been classified, as “other loans Specifically Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Watch List,” “Criticized,” “Credit Risk Assets,” “concerned loans” or words of similar import.

 

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(v) The allowance for possible loan or credit losses (the “VBI Allowance”) shown on the consolidated balance sheets of VBI included in the most recent VBI Financial Statements dated prior to the date of this Agreement was, and the VBI Allowance shown on the consolidated balance sheets of VBI included in the VBI 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 losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of the VBI Companies and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by the VBI Companies as of the dates thereof. The reserve for losses with respect to other real estate owned (“OREO Reserve”) shown on the most recent Financial Statements and VBI Call Reports were, and the OREO Reserve to be shown on the Financial Statements and VBI Call Reports as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to the other real estate owned portfolio of VBI and VBI Bank as of the dates thereof. The reserve for losses in respect of litigation (“Litigation Reserve”) shown on the most recent Financial Statements and VBI Call Reports and the Litigation Reserve to be shown on the Financial Statements and VBI Call Reports as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to or arising out of all pending or threatened litigation applicable to VBI, VBI Bank and the VBI Subsidiaries as of the dates thereof. Each such reserve described above has been established in accordance with applicable accounting principles and regulatory requirements and guidelines.

(b) The documentation relating to each Loan made by any VBI Company and to all security interests, mortgages and other liens with respect to all collateral for loans is adequate for the enforcement of the material terms of such Loan, security interest, mortgage or other lien, except for inadequacies in such documentation which will not, individually or in the aggregate, have a Material Adverse Effect on VBI.

5.10 Assets; Insurance . The VBI Companies have marketable title, free and clear of all Liens, to all of their respective Assets. One of the VBI Companies has good and marketable fee simple title to the real property described in Schedule 5.10(a) and has an enforceable leasehold interest in the real property described in Schedule 5.10(b) , if any, free and clear of all Liens. All tangible real and personal properties and Assets used in the businesses of the VBI Companies are usable in the ordinary course of business consistent with VBI’s past practices. All Assets that are material to VBI’s business on a consolidated basis, held under leases or subleases by any of the VBI Companies are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect and there is not under any such Contract any Default or claim of Default by VBI or VBI Bank or, to the Knowledge of VBI or VBI Bank, by any other party to the Contract. Schedules 5.10(a) and 5.10(b) identify each parcel of real estate or interest therein owned, leased or subleased by any of the VBI Companies or in which any VBI Company has any ownership or leasehold interest. If applicable, Schedule 5.10(b) also lists or otherwise describes each and every written or oral lease or sublease under which any VBI Company is the lessee of any real property and which relates in any manner to

 

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the operation of the businesses of any VBI Company. None of the VBI Companies has violated, or is currently in violation of, any Law, regulation or ordinance relating to the ownership or use of the real estate and real estate interests described in Schedules 5.10(a) and 5.10(b) , including without limitation any Law relating to zoning, building, occupancy, environmental or comparable matter which individually or in the aggregate would have a Material Adverse Effect on VBI. As to each parcel of real property owned or used by any VBI Company, no VBI Company has received notice of any pending or, to the Knowledge of each of the VBI Companies, threatened condemnation proceedings, litigation proceedings or mechanic’s or materialmen’s liens. The Assets of the VBI Companies include all assets required to operate the business of the VBI Companies as now conducted. In the reasonable opinion of the VBI Companies, the policies of fire, theft, liability and other insurance maintained with respect to the Assets or businesses of the VBI Companies provide adequate coverage against loss or Liability, and the fidelity and blanket bonds in effect as to which any of the VBI Companies is a named insured are reasonably sufficient. Schedule 5.10(c) contains a list of all such policies and bonds maintained by any of the VBI Companies, and VBI has provided true and correct copies of each such policy to CBF. Except as set forth on Schedule 5.10(c) , no claims have been made under such policies or bonds since January 1, 2004, and no VBI Company has Knowledge of any fact or condition presently existing that might form the basis of any such claim.

5.11 Environmental Matters . (a) Each VBI Company, its Participation Facilities and, to VBI’s Knowledge its Loan Properties, are, and have been, in compliance with all Environmental Laws, except for violations that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

(b) There is no Litigation pending or, to the Knowledge of VBI and VBI Bank, threatened before any court, governmental agency or authority or other forum in which any VBI Company or any of its Participation Facilities has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a site owned, leased or operated by any VBI Company or any of its Participation Facilities, except for such Litigation pending or threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

(c) There is no Litigation pending or, to the Knowledge of VBI and VBI Bank, threatened before any court, governmental agency or board or other forum in which any of its Loan Properties (or VBI with respect to such Loan Property) has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material or oil, whether or not occurring at, on, under or involving a Loan Property, except for such Litigation pending or threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

(d) To the Knowledge of VBI and VBI Bank, there is no reasonable basis for any Litigation of a type described in subsections 5.11(b) or 5.11(c), except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

 

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(e) During the period of (i) any VBI Company’s ownership or operation of any of its respective current properties, (ii) any VBI Company’s participation in the management of any Participation Facility or (iii) any VBI Company’s holding of a security interest in a Loan Property, there have been no releases of Hazardous Material or oil in, on, under or affecting such properties as to subparagraphs (e)(i) and (e)(ii) and, there have been no releases of Hazardous Material or oil in, on, under or affecting such properties referenced in subparagraph (e)(iii), except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. Prior to the period of (i) any VBI Company’s ownership or operation of any of its respective current properties, (ii) any VBI Company’s participation in the management of any Participation Facility, or (iii) any VBI Company’s holding of a security interest in a Loan Property, to the Knowledge of VBI and VBI Bank, there were no releases of Hazardous Material or oil in, on, under or affecting any such property, Participation Facility or Loan Property, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

5.12 Compliance with Laws . VBI is duly registered as a bank holding company under the BHC Act. Each VBI Company has in effect all Permits necessary for it to own, lease or operate its Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI, and there has occurred no Default under any such Permit except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. Each of the VBI Companies:

(a) is and has been in compliance with all Laws, Orders and Permits applicable to its business or employees, agents or representatives conducting its business except where such noncompliance is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.; and

(b) has received no notification or communication from any agency or department of federal, state or local government or any Regulatory Authority or the staff thereof (i) asserting that any VBI Company is not, or suggesting that any VBI Company may not be, in compliance with any of the Laws or Orders that such governmental authority or Regulatory Authority enforces, (ii) threatening to revoke any Permits, (iii) requiring any VBI Company, or suggesting that any VBI Company may be required, to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment or memorandum of understanding, or to adopt any board resolution or similar undertaking, or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit in any manner the operations of any VBI Company, including without limitation any restrictions on the payment of dividends, or that in any manner relates to such entity’s capital adequacy, credit or reserve policies or management or business.

 

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Without limiting the foregoing, VBI Bank is and has been in compliance with the Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “USA Patriot Act”), the trade sanctions administered and enforced by the Department of Treasury’s Office of Foreign Assets Controls, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, all other applicable fair lending Laws and other Laws relating to discrimination except where such noncompliance is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. VBI Bank has systems and procedures in place such that any material violation of any of the foregoing would reasonably be expected to have been detected by VBI Bank.

5.13 Labor Relations; Employees .

(a) No VBI Company is the subject of any Litigation asserting that it or any other VBI Company has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state Law) or seeking to compel it or any other VBI Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving any VBI Company, pending or threatened, nor to its Knowledge, is there any activity involving any VBI Company’s employees seeking to certify a collective bargaining unit or engaging in any other organization activity. Each VBI Company is and has been in compliance with all Employment Laws, except for violations that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI.

(b) Schedule 5.13(b) contains a true and complete list showing the names and current annual salaries of all current executive officers of each of the VBI Companies and lists for each such person the amounts paid, payable or expected to be paid as salary, bonus payments and other compensation for 2004, 2005 and 2006. Schedule 5.13(b) also sets forth the name and offices held by each officer and director of each of the VBI Companies.

5.14 Employee Benefit Plans .

(a) Schedule 5.14(a) lists, and VBI has delivered or made available to CBF prior to the execution of this Agreement copies of, all pension, retirement, profit-sharing, salary continuation and split dollar agreements, deferred compensation, director deferred fee agreements, director retirement agreement, stock option, employee stock ownership, severance pay, vacation, bonus or other incentive plan, all other employee programs, arrangements or agreements, all medical, vision, dental or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including, without limitation, “employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any VBI Company or Affiliate thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors or other beneficiaries and under which employees, retirees, dependents, spouses, directors, independent contractors or other beneficiaries are eligible to participate (collectively, the “VBI Benefit Plans”). Any of the VBI Benefit Plans which is an “employee pension benefit plan,” as that term is defined in Section 3(2) of ERISA, is referred to herein as a “VBI ERISA Plan.” Each VBI ERISA Plan which is also a “defined benefit plan” (as defined in Section 414(j) of the IRC) is referred to herein as

 

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an “VBI Pension Plan”. No VBI Pension Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.

(b) All VBI Benefit Plans and the administration thereof are in compliance with the applicable terms of ERISA, the IRC and any other applicable Laws, the breach or violation of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. Each VBI ERISA Plan which is intended to be qualified under Section 401(a) of the IRC has received a favorable determination letter or opinion letter, as applicable, from the Internal Revenue Service, and VBI is not aware of any circumstances that could result in revocation of any such favorable determination letter/opinion letter. No VBI Company has engaged in a transaction with respect to any VBI Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject any VBI Company to a tax or penalty imposed by either Section 4975 of the IRC or Section 502(i) of ERISA in amounts which are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. There are no actions, suits, arbitrations or claims, including any investigations or audits by the Internal Revenue Service or any other governmental authority, pending (other than routine claims for benefits) or threatened against, any VBI Benefit Plan or any VBI Company with regard to any VBI Benefit Plan, any trust which is a part of any VBI Benefit Plan, and there are no such actions, suits, arbitrations or claims related to any VBI Benefit Plan threatened or pending against any trustee, fiduciary, custodian, administrator or other person or entity holding or controlling assets of any VBI Benefit Plan, and no basis to anticipate any such action, suit, arbitration, claim, investigation or audit exists.

(c) There is no VBI ERISA Plan which is a defined benefit pension plan subject to Section 412 of the IRC.

(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by any VBI Company with respect to any ongoing, frozen or terminated single-employer plan or the single-employer plan of any ERISA Affiliate. No VBI Company has incurred any withdrawal Liability with respect to a multi-employer plan under Subtitle D of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate), which Liability is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on VBI. No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any VBI Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof.

(e) Except for obligations under change in control agreements and salary continuation plans previously disclosed to CBF, no VBI Company has any obligations for retiree health and life benefits under any of the VBI Benefit Plans, and there are no restrictions on the rights of such VBI Company to amend or terminate any such plan without incurring any Liability thereunder, which Liability is reasonably likely to have a Material Adverse Effect on VBI.

 

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(f) Except as set forth on Schedule 5.14(f) , neither the execution and delivery of this Agreement nor the consummation of the transactions provided for herein will (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director, officer or employee of any VBI Company under any VBI Benefit Plan, employment contract or otherwise, (ii) increase any benefits otherwise payable under any VBI Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.

(g) With respect to all VBI Benefit Plans (whether or not subject to ERISA and whether or not qualified under Section 401(a) of the IRC), all contributions due (including any contributions to any trust account or payments due under any insurance policy) previously declared or otherwise required by Law or contract to have been made and any employer contributions (including any contributions to any trust account or payments due under any insurance policy) accrued but unpaid as of the date hereof will be paid by the time required by Law or contract. All contributions made or required to be made under any VBI Benefit Plan have been made and such contributions meet the requirements for deductibility under the IRC, and all contributions which are required and which have not been made have been properly recorded on the books of VBI.

5.15 Material Contracts . Except as set forth on Schedule 5.15 , none of the VBI Companies, nor any of their respective Assets, businesses or operations, is a party to, or is bound or affected by, or receives benefits under any of the following (whether written or oral, express or implied): (i) any employment, severance, termination, consulting or retirement Contract with any Person; (ii) any Contract relating to the borrowing of money by any VBI Company or the guarantee by any VBI Company of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, trade payables and Contracts relating to borrowings or guarantees made and letters of credit); (iii) any Contract relating to indemnification or defense of any director, officer or employee of any of the VBI Companies or any other Person; (iv) any Contract with any labor union; (v) any Contract relating to the disposition or acquisition of any interest in any business enterprise; (vi) any Contract relating to the extension of credit to, provision of services for, sale, lease or license of Assets to, engagement of services from, or purchase, lease or license of Assets from, any 5% stockholder, director or officer of any of the VBI Companies, any member of the immediate family of the foregoing or, to the Knowledge of VBI, any related interest (as defined in Regulation O promulgated by the FRB) (“Related Interest”) of any of the foregoing; (vii) any Contract (A) which limits the freedom of any of the VBI Companies to compete in any line of business or with any Person or (B) which limits the freedom of any other Person to compete in any line of business with any VBI Company; (viii) any Contract providing a power of attorney or similar authorization given by any of the VBI Companies, except as issued in the ordinary course of business with respect to routine matters; or (ix) any Contract (other than deposit agreements and certificates of deposits issued to customers entered into in the ordinary course of business and letters of credit) that involves the payment by any of the VBI Companies of amounts aggregating $5,000 or more in any twelve-month period (together with all Contracts referred to in Sections 5.10 and 5.14(a) of this Agreement, the “VBI Contracts”). VBI has delivered or made available to CBF correct and complete copies of all VBI Contracts. Each of

 

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the VBI Contracts is in full force and effect, and none of the VBI Companies is in Default under any VBI Contract. All of the indebtedness of any VBI Company for money borrowed is prepayable at any time by such VBI Company without penalty or premium, except as set forth in Schedule 5.15.

5.16 Legal Proceedings . Except as set forth on Schedule 5.16 , there is no Litigation instituted or pending, or, to the Knowledge of VBI or VBI Bank, threatened (or unasserted but considered probable of assertion) against any VBI Company, or against any Asset, interest, or right of any of them, nor are there any Orders of any Regulatory Authorities, other governmental authorities or arbitrators outstanding, pending or, to the Knowledge of VBI or VBI Bank, threatened against any VBI Company. No VBI Company has any Knowledge of any fact or condition presently existing that might give rise to any Order, litigation, investigation or proceeding which, if determined adversely to any VBI Company, would have a Material Adverse Effect on such VBI Company or would materially restrict the right of any VBI Company to carry on its businesses as presently conducted.

5.17 Reports . Since its formation, each VBI Company has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file with the Regulatory Authorities, and any applicable state securities or banking authorities and all other material reports and statements required to be filed by it, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by Regulatory Authorities in the regular course of the business of the VBI Companies, to the Knowledge of any VBI Company, no Regulatory Authority has initiated any proceeding or, to the Knowledge of any VBI Company, investigation into the business or operations of any VBI Company. There is no unresolved violation, criticism or exception by any Regulatory Authority with respect to any report or statement or lien or any examinations of any VBI Company. As of their respective dates, each of such reports, registrations, statements and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws, including without limitation all Securities Laws. As of its respective date, each of such reports, registrations, statements and documents did not, in any material respects, 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. Other than the VBI Call Reports, the financial information and reports contained in each of such reports, registrations, statements and documents (including the related notes, where applicable), (a) has been prepared in all material respects in accordance with GAAP, which principles have been consistently applied during the periods involved, except as otherwise noted therein, (b) fairly presents the financial position of the VBI Companies as of the respective dates thereof, and (c) fairly presents the results of operations of the VBI Companies for the respective periods therein set forth.

5.18 Statements True and Correct . Neither this Agreement nor any statement, certificate, instrument or other writing furnished or to be furnished by any VBI Company or any Affiliate thereof to CBF pursuant to this Agreement, including the Exhibits and Schedules hereto, 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. None of the information supplied or to be supplied by any VBI Company or any Affiliate thereof for inclusion in the documents to be prepared by CBF in connection with the

 

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transactions provided for in this Agreement, including without limitation (i) documents to be filed with the SEC, including without limitation the Registration Statement on Form S-4 of CBF registering the shares of CBF Common Stock to be offered to the holders of VBI Common Stock, and all amendments thereto (as amended, the “S-4 Registration Statement”) and the Proxy Statement and Prospectus in the form contained in the S-4 Registration Statement, and all amendments and supplements thereto (as amended and supplemented, the “Proxy Statement/Prospectus”), (ii) filings pursuant to any state securities and blue sky Laws, and (iii) filings made in connection with the obtaining of Consents from Regulatory Authorities, in the case of the S-4 Registration Statement, at the time the S-4 Registration Statement is declared effective pursuant to the 1933 Act, in the case of the Proxy Statement/Prospectus, at the time of the mailing thereof and at the time of the meeting of stockholders to which the Proxy Statement/Prospectus relates, and in the case of any other documents, the time such documents are filed with a Regulatory Authority and/or at the time they are distributed to stockholders of CBF or VBI, contains or will contain any untrue statement of a material fact or fails to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents that any VBI Company is responsible for filing with any Regulatory Authority in connection with the transactions provided for herein will comply as to form in all material respects with the provisions of applicable Law.

5.19 Tax and Regulatory Matters . No VBI Company or any Affiliate thereof has taken any action or has any Knowledge of any fact or circumstance that is reasonably likely to (a) prevent the transactions provided for herein, including the Merger, from qualifying as a reorganization within the meaning of Section 368(a) of the IRC, or (b) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in subsection 9.1(b) of this Agreement or result in the imposition of a condition or restriction of the type referred to in the last sentence of such subsection 9.1(b).

5.20 Offices . The headquarters of each VBI Company and each other office, branch or facility maintained and operated by each VBI Company (including without limitation representative and loan production offices and operations centers) and the locations thereof are listed on Schedule 5.20 . None of the VBI Companies maintains any other office or branch or conducts business at any other location, or has applied for or received permission to open any additional office or branch or to operate at any other location, except as set forth on Schedule 5.20 .

5.21 Data Processing Systems . The electronic data processing systems and similar systems utilized in processing the work of each of the VBI Companies, including both hardware and software, (a) are supplied by a third party provider; (b) satisfactorily perform the data processing function for which they are presently being used; and (c) are wholly within the possession and control of one of the VBI Companies or its third party provider such that physical access to all software, documentation, passwords, access codes, backups, disks and other data storage devices and similar items readily can be made accessible to and delivered into the possession of CBF or CBF’s third party provider.

5.22 Intellectual Property . Each of the VBI Companies owns or possesses valid and binding licenses and other rights to use without additional payment all material patents,

 

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copyrights, trade secrets, trade names, service marks, trademarks, computer software and other intellectual property used in its business; and none of the VBI Companies has received any notice of conflict with respect thereto that asserts the rights of others. The VBI Companies have in all material respects performed all the obligations required to be performed by them and are not in default in any material respect under any contract, agreement, arrangement or commitment relating to any of the foregoing. Schedule 5.22 lists all of the trademarks, trade names, licenses and other intellectual property used to conduct the businesses of the VBI Companies. Each of the VBI Companies has taken reasonable precautions to safeguard its trade secrets from disclosure to third-parties.

5.23 Administration of Trust Accounts . VBI Bank does not possess and does not exercise trust powers.

5.24 Advisory Fees . VBI has retained Austin Associates, LLC (the “VBI Financial Advisor”) to serve as its financial advisor. Attached as Schedule 5.24 is a true and accurate copy of the engagement letter entered into by and between VBI and the VBI Financial Advisor, which sets forth the fee (the “Advisory Fee”) to be paid to the VBI Financial Advisor in connection with the Merger. Other than the VBI Financial Advisor and the Advisory Fee, neither VBI nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions provided for in this Agreement.

5.25 Regulatory Approvals . VBI knows of no reason why all requisite regulatory approvals regarding the Merger should not or cannot be obtained.

5.26 [ Intentionally Omitted ]

5.27 Repurchase Agreements; Derivatives Contracts . With respect to all agreements currently outstanding pursuant to which any VBI Company has purchased securities subject to an agreement to resell, such VBI Company has a valid, perfected first lien or security interest in the securities or other collateral securing such agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby. With respect to all agreements currently outstanding pursuant to which any VBI Company has sold securities subject to an agreement to repurchase, no VBI Company has pledged collateral in excess of the amount of the debt secured thereby. No VBI Company has pledged collateral in excess of the amount required under any interest rate sw