Exhibit 2.1
AGREEMENT AND PLAN OF
MERGER
By And Between
SCBT FINANCIAL
CORPORATION
(Buyer)
AND
SUN BANCSHARES,
INC.
(Seller)
Dated as of
July 21, 2005
TABLE OF CONTENTS
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2
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LIST OF EXHIBITS
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Exhibit
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Description
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A-1
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Form of Support Agreement for Directors and
Officers
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A-2
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Form of Support Agreement for Other
Significant Shareholders
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B
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Form of Employment Agreement of Thomas
Bouchette
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C
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Form of Noncompete Agreement of Thomas
Bouchette
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D
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Form of Employment Agreement of Randy L.
Carmon
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E
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Form of Director’s
Agreement
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F
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Form of Seller’s Legal
Opinion
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G
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Form of Buyer’s Legal
Opinion
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H
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Form of Letter Agreement
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I
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Form of Affiliate Agreement
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4
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF
MERGER (this “
Agreement ”) dated as of July 21, 2005 is by and
between SCBT Financial Corporation, a South Carolina corporation
(“ Buyer ”), Sun Bancshares, Inc., a South
Carolina corporation (“ Seller ”).
Preamble
The Boards of Directors of Buyer and
Seller are of the opinion that the transaction described herein is
in the best interest of the parties and their respective
shareholders. 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, the Board of Governors of
the Federal Reserve System and the South Carolina Board of
Financial Institutions, as well as to 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.
Immediately following the Closing of
the Merger, SunBank, N.A., a national banking association and
wholly owned subsidiary of Seller (the “ Bank ”)
will remain in existence under its Articles of Association and
Bylaws as in effect immediately prior to the Effective Time (but
following the amendments described in Section 2.2 below) as a
wholly owned subsidiary of Buyer. South Carolina Bank and
Trust, N.A., a national banking association and wholly owned
subsidiary of SCBT Financial Corporation (“SCBT”), will
remain in existence under its Articles of Association and Bylaws as
in effect immediately prior to the Effective Time as a wholly owned
subsidiary of Buyer.
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, and other good and valuable consideration and 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 3-11-106 of the SCBCA (the “ Merger
”), 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 and the Bank shall become a
wholly-owned subsidiary of Buyer, and shall so operate as a wholly
owned subsidiary of Buyer for no less than two years from and after
the Effective Time, unless there is a material change in the
Bank’s financial condition or CAMELS rating, or the Board of
Directors of the
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Bank elects to consolidate with Buyer prior to
the second anniversary date of the Effective Time. 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 9:00 A.M. Eastern Time on the date that the Effective
Time occurs (or the immediately preceding day if the Effective Time
is earlier than 9:00 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
within five business days of 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 to the extent such
approval is required by applicable Law or such later date within 30
days thereof as may be specified by Buyer.
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 Rights are entitled to receive under this
Agreement, (ii) would unreasonably impede or delay
consummation of the Merger, (iii) imposes any less favorable
terms or conditions on Bank or Seller; or (iv) would
contemplate the Bank being a wholly owned subsidiary of Seller for
a period of less than two years; and further provided, however, no
such revision shall be effective without the prior written consent
of Seller. Buyer may request such consent by giving written
notice to Seller in the manner provided in Section 11.8, 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 the
addition of such other exhibits hereto as are reasonably necessary
or appropriate to effect such change.
ARTICLE 2
TERMS OF MERGER
2.1
Charter.
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.
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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. Prior to the Effective Time, the Bylaws of the Bank
shall be amended to require shareholder approval to take any action
prohibited by the provisions of Section 7.2.
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. Buyer shall take all action
necessary, including but not limited to the amendment of the
Surviving Corporation’s Bylaws, to execute the appointment of
Dalton B. Floyd, Jr. to the Board of Directors of Buyer,
effective as soon as practicable following the Effective Time. 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) The directors of the Bank
in office immediately prior to the Effective Time shall serve as
directors of the Bank from and after the Effective Time in
accordance with the Bank’s Bylaws, until the earlier of their
resignation or removal or otherwise ceasing to be a director.
Buyer and Seller shall take all action necessary, including but not
limited to the amendment of the Bank’s Bylaws, to execute the
appointment of a senior executive officer of Buyer to the Board of
Directors of the Bank, effective as soon as practicable following
the Effective Time. The Bank’s Bylaws shall be amended
to provide that, subject to the approval of the shareholder of the
Bank, such approval not to be unreasonably withheld, in the event
of a vacancy on the Bank’s Board of Directors during the two
year period following the Effective Time, any such vacancy (other
than a vacancy in the position held by a senior executive officer
of Buyer) shall be appointed by the remaining members of the Board
of Directors of the Bank, unless (i) there is a material
change in the Bank’s financial condition, (ii) there is
a material change in the Bank’s CAMELS rating,
(iii) there is an objection to any such appointment by any
Regulatory Authority, or (iv) the Board of Directors of the
Bank elects to consolidate with Buyer prior to the second
anniversary date of the Effective Time.
(c) The Bank’s directors
shall be paid $300 per member per board meeting attended and $150
per member per committee meeting attended.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Effect
on Seller Common Stock.
(a)
At the Effective Time, in each case subject to Section 3.1(d),
by virtue of the Merger and without any action on the part of the
Parties or the holder thereof, shares of Seller Common Stock that
are issued and outstanding immediately prior to the Effective Time
(other than shares of Seller Common Stock held by either Party or
any Subsidiary of a 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) or shares of the Common Stock that are owned by
shareholders properly exercising their dissenters’ rights
pursuant to Sections 33-13-101
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through 33-13-310 of the
SCBCA (the “ Dissenter Shares ”)) shall be
converted into the right to receive $4,374,000 in cash (subject to
adjustment as provided below) and no more than 564,387 of shares of
Buyer Common Stock, less any applicable withholding Taxes (the
“ Merger Consideration ”). In addition,
Buyer anticipates paying approximately $2,860,550 in cash to the
holders of Seller Rights pursuant to Sections 3.3 and 3.4
below. The cash portion of the Merger Consideration shall be
increased proportionately if any Seller Rights outstanding on the
date hereof are exercised prior to the Effective Date and therefore
are not exchanged for cash as contemplated by Section 3.3 or
3.4. The cash portion of the Merger Consideration shall be
reduced (x) to reflect any cash payments to be made pursuant to
Section 3.5 below and (y) by the amount by which Buyer makes
aggregate payments in excess of $100,000 on behalf of or to
discharge any payment obligation of Seller or any Seller Entity for
any termination fees, liquidated damages, or similar charges
related to change of control or similar provisions in any contract
or other agreement, whether written or oral, that are triggered by
this Merger, other than (i) payments in the amount of $300,000
to Thomas Bouchette (which amount includes the $103,000 payment in
exchange for his execution of the Noncompete Agreement) and
$100,000 to Randy L. Carmon, (ii) proposed service
continuation payments in the amount of $25,000 to John Truelove,
$15,000 to Joel Odom, and $15,000 to Judy Majors, and
(iii) amounts due under Seller’s agreement with
FiServ. The exact amount of cash and shares of Buyer Common
Stock into which each such share of Seller Common Stock shall be
converted (the “ Per Share Purchase Price ”)
shall be determined on a pro rata basis at the Effective
Time. For example, after taking into the account the
anticipated cash payments under Sections 3.3 and 3.4, assuming no
reduction in the Merger Consideration for contract payments as
described above, assuming no Seller shareholders exercise
dissenter’s rights, and assuming the total number of shares
of Seller Common Stock issued and outstanding immediately prior to
the Effective Time is 1,215,000 shares, then each share Seller
Common Stock would be converted into the right to receive $3.60 in
cash and 0.464516 shares of Buyer Common Stock.
(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 Merger
Consideration and any Dissenting Shares shall thereafter represent
only the right to receive applicable payments as set forth in
Section 3.5.
(c)
If, prior to the Effective Time, the outstanding shares of Seller
Common Stock or Seller Rights 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 therefor and shall cease to exist (the
“ Excluded Shares ”).
3.2 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 Buyer Common Stock and shall not be affected by the
Merger.
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3.3 Seller
Options.
(a)
Immediately prior to the Effective Time, each option (each, a
“ Seller Option ”) to acquire a share of Seller
Common Stock granted pursuant to Seller’s 2000 Stock
Incentive Plan then outstanding shall be cancelled and shall
entitle the holder of each Seller Option to receive cash (without
interest) equal to the amount by which, if any, $18.00 exceeds the
exercise price per share of Seller Common Stock under such Seller
Option (with the aggregate amount of such payment rounded down to
the nearest cent) less applicable Taxes, if any, required to be
withheld with respect to such payment. No consideration shall
be paid with respect to any Seller Option, the exercise price of
which exceeds $18.00.
(b)
The Seller’s Board of Directors and its Compensation
Committee shall not make any grants of Seller Options and, with the
exception of the potential exercise of options for 5,000 shares
awarded to Linwood Wilson, shall prevent the exercise of any Seller
Options following the execution of this Agreement.
(c)
The Seller’s Board of Directors or its Compensation Committee
shall make such adjustments and amendments to or make such
determinations with respect to the Seller Options to effect the
foregoing provisions of this Section 3.3.
3.4 Seller
Warrants.
(a)
Buyer shall pay each holder (each a “ Warrantholder
”) of an outstanding warrant to purchase shares of Seller
Common Stock (each, a “ Seller Warrant ” and
collectively with the Seller Options, the “ Seller
Rights ”) upon surrender of each Warrant, cash (without
interest) equal to the amount by which, if any, $18.00 exceeds the
exercise price per share of Seller Common Stock under such Seller
Warrant (with the aggregate amount of such payment rounded down to
the nearest cent) less applicable Taxes, if any, required to be
withheld with respect to such payment. No consideration shall
be paid with respect to any Seller Warrant, the exercise price of
which exceeds $18.00. The Seller’s Board of Directors
and its Compensation Committee shall not make any grants of Seller
Warrants and shall prevent the exercise of any Seller Warrants
following the execution of this Agreement.
3.5
Dissenting Shareholders.
Any holder of shares of Seller
Common Stock who perfects such holder’s dissenters’
rights in accordance with and as contemplated by Sections 33-13-101
through 33-13-310 of the SCBCA shall be entitled to receive from
the Surviving Corporation, in lieu of the Per Share Purchase Price,
the value of such shares as to which dissenters rights have been
perfected in cash as determined pursuant to such provision of Law;
provided , that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder
has complied with all applicable provisions of such Law, and
surrendered to Seller the certificate or certificates representing
the shares for which payment is being made. In the event that
after the Effective Time a dissenting shareholder of Seller fails
to perfect, or effectively withdraws or loses, such holder’s
right to appraisal of and payment for such holder’s
Dissenting Shares, Buyer or the Surviving Corporation shall issue
and deliver the consideration to which such holder of shares of
Seller Common Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or
certificates representing such shares of Seller Common Stock held
by such holder.
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ARTICLE 4
PAYMENT OF SHARES
4.1 Payment
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 and former holders of Seller Rights 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
and Seller Rights shall pass, only upon proper delivery of such
certificates or other instruments to the Exchange Agent). The
certificate or certificates of Seller Common Stock and instruments
representing Seller Rights 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 Merger Consideration payable for such shares as
provided in Section 3.1 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 or Seller Right 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 Merger Consideration as
provided for in Section 3.1. 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 Merger
Consideration as provided in Section 3.1.
(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 Section 3.1, without interest,
pursuant to this Section 4.1. 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 4.1. 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 or to any holder of Seller Rights 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 Rights 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 or Seller Rights, 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.
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(d)
Adoption of this Agreement by the shareholders of Seller shall
constitute ratification of the appointment of the Exchange
Agent.
4.2
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 4.1, each Certificate theretofore representing shares
of Seller Common Stock (other than certificates representing
Excluded Shares and Dissenting Shares), shall from and after the
Effective Time represent for all purposes only the right to receive
the Merger Consideration, without interest, as provided in
Article 3.
ARTICLE 5
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:
5.1
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 banking
association, duly organized, validly existing and in good standing
under the laws of the United States of America. 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 5.1 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 Bank
Insurance Fund.
5.2
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, including any necessary approvals referred to in Sections
9.1(b) and 9.1(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 each of Seller, subject to the approval of
this Agreement by the holders of a majority of the outstanding
shares of Seller Common Stock, which is the only shareholder vote
required for approval of this
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Agreement and consummation
of the Merger. Subject to any necessary approvals referred to
in Sections 9.1(b) and 9.1(c) and by such requisite
shareholder approval, this Agreement represents a legal, valid, and
binding obligation of Seller, enforceable against Seller in
accordance with its terms.
(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
incorporation or association or bylaws of any Seller Subsidiary or
any resolution adopted by the Board of Directors or the
shareholders of any Seller Entity, or (ii) except as disclosed
in Section 5.2 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 9.1(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 or any of the
Assets owned by any Buyer Entity or any Seller Entity being
reassessed or revalued by any Regulatory Authority).
(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 Internal Revenue Service
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.
5.3 Capital
Stock.
(a)
The authorized capital stock of Seller consists only of 10,000,000
shares of Seller Common Stock, of which 1,215,000 shares are issued
and outstanding as of the date of this Agreement, 2,000,000 of
preferred stock, none of which are issued and outstanding as of the
date of this Agreement, and, assuming that all of the issued and
outstanding Seller Options or Seller Warrants had been exercised,
not more than 1,579,600 shares, with a per share weighted average
strike price of $10.1543, would be issued and outstanding at the
Effective Time. 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 77,750 shares of Seller Common Stock reserved for
issuance pursuant to outstanding Seller Options and 286,850 shares
of Seller Common Stock reserved for issuance pursuant to
outstanding Seller Warrants, each as disclosed in Section 5.3
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 5.3, 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.
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5.4 Seller
Subsidiaries.
Seller has disclosed in
Section 5.4 of the Seller Disclosure Memorandum each of the
Seller Subsidiaries that is a corporation (identifying its
jurisdiction of incorporation, each jurisdiction in which it is
qualified or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such
share ownership) and each of the Seller Subsidiaries that is a
general or limited partnership, limited liability company, or other
non-corporate entity (identifying the form of organization and the
Law under which such entity is organized, each jurisdiction in
which it is qualified or licensed to transact business, and the
amount and nature of the ownership interest therein). Except
as disclosed in Section 5.4 of the Seller Disclosure
Memorandum, Seller owns, directly or indirectly, all of the issued
and outstanding shares of capital stock (or other equity interests)
of each Seller Subsidiary. No capital stock (or other equity
interest) of any Seller Subsidiary 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 any Seller Subsidiary
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 any
Seller Subsidiary (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 any Seller Subsidiary. All of the shares
of capital stock (or other equity interests) of each Seller
Subsidiary are fully paid and nonassessable (except as provided in
12 U.S.C. 55 with respect to the Bank) and are owned directly or
indirectly by Seller free and clear of any Lien. Except as
disclosed in Section 5.4 of the Seller Disclosure Memorandum,
each Seller Subsidiary is a national banking association,
corporation, limited liability company, limited partnership or
limited liability partnership, and each such Subsidiary is duly
organized, validly existing, and in good standing under the Laws of
the jurisdiction in which it is incorporated or organized, 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. Each Seller Subsidiary 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 book
and other organizational documents for each Seller Subsidiary have
been made available to Buyer for its review, and, except as
disclosed in Section 5.4 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.
5.5
Exchange Act Filings; Securities Offerings; Financial
Statements.
(a)
Seller has timely filed and made available to Buyer all Exchange
Act Documents required to be filed by Seller since its
inception (the “ Seller
Exchange Act Reports ”). Seller has not been
requested to file any Exchange Act Reports since March 28,
2003. 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,
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(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
staffs of the SEC and the OCC 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 Sarbanes-Oxley 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 Sarbanes–Oxley
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. No Seller
Subsidiary is 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 as to
form in all material respects with the Exchange Act, 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-QSB of the Exchange Act),
fairly presented the financial position of Seller and its
Subsidiaries as at the respective dates and the 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 Sarbanes-Oxley Act.
(c)
Each of the Seller Financial Statements (including, in each case,
any related notes) that are not required to be contained in the
Seller Exchange Act Reports, including any Seller Exchange Act
Reports filed after the date of this Agreement until the Effective
Time 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), fairly presented the
financial position of Seller and its Subsidiaries as at the
respective dates and the 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.
(d)
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 Sarbanes-Oxley 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
14
related Securities
Laws. Section 5.5(d) of the Seller Disclosure
Memorandum lists all non-audit services preformed by Seller’s
independent public accountants for Seller and its
Subsidiaries.
(e)
Seller maintains disclosure controls and procedures that would be
required by Rule 13a-15 or 15d-15 under the Exchange Act; such
controls and procedures are effective to ensure that all material
information concerning Seller and its Subsidiaries is made known on
a timely basis to the principal executive officer and the principal
financial officer. Seller and its directors and executive
officers have complied at all times with Section 16(a) of
the Exchange Act, in all material respects, including the filing
requirements thereunder to the extent applicable.
5.6
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 March 31,
2005, 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 5.6
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)(ii) 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 5.6 of the Seller Disclosure Memorandum,
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 March 31, 2005 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 March 31, 2005
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.
5.7
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 5.7 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, 2004 the Seller
Entities have conducted their respective businesses in the ordinary
course of business consistent with past practice.
5.8 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 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
15
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 company 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 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) set forth on the
face of 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 5.8(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 5.8(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 5.8(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.
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(h)
Each of the Seller Entities is in compliance with, and its records
contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state,
and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of
the 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 provided Buyer with 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 5.8, 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.
5.9
Allowance for Possible Loan Losses; Loan and Investment Portfolio,
etc.
(a)
The Seller’s allowance for possible 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
17
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
fair market values of all loans, leases, securities, tangible and
intangible assets and liabilities, and any impairments
thereof.
(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 May 31,
2005 and on a monthly basis thereafter, and of the investment
portfolios of each Seller Entity as of such date, have been and
will be delivered to Buyer concurrently with the Seller Disclosure
Memorandum. Except as specifically set forth in
Section 5.9(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 or Reserve,
(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.
5.10 Assets.
(a)
To Seller’s Knowledge, except as disclosed in
Section 5.10 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.
18
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.
(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.
5.11 Intellectual
Property.
Except as disclosed in
Section 5.11 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 5.11 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 5.11 of the Seller Disclosure Memorandum, Seller
has Contracts with each of 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 which restricts or prohibits such
officer, director or employee from engaging in activities
competitive with any Person, including any Seller
Entity.
5.12 Environmental
Matters.
(a)
Seller has delivered, or caused to be delivered 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 Participating Facilities and Operating
Facilities. To Seller’s Knowledge, there are no
material violations of Environmental Laws or 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.
19
(c)
There is no Litigation pending, or to Seller’s Knowledge, 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.
(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.
5.13 Compliance with
Laws.
(a)
Seller is a bank holding company duly registered and in good
standing as such with the Federal Reserve and the
Commissioner. Seller Bank is a member in good standing of the
Federal Reserve System and the FDIC.
(b)
Compliance with Permits, Laws and Orders.
(i)
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)
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
20
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.
(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 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.
§ 21.11.
5.14 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 5.14 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 5.14 of the Seller
Disclosure Memorandum.
(b)
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
21
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 5.14 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.
5.15 Employee Benefit
Plans.
(a)
Seller has disclosed in Section 5.15 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 5.15 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
22
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.
(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 5.15 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.
23
(j) Except
as disclosed in Section 5.15 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.
(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 5.15 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.
5.16 Material
Contracts.
(a)
Except as disclosed in Section 5.16 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 a
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