Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 15, 2009
BY AND AMONG
MIDATLANTIC BANCORP, INC.
GAF MERGER CORP.
AND
GREATER ATLANTIC FINANCIAL CORP.
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TABLE OF CONTENTS
Page
Nos.
Introductory Statement 1
Article I
Definitions.........................................................1
Article II The
Merger..........................................................5
2.1 The
Merger...................................................5
2.2
Closing......................................................5
2.3 Effective
Time...............................................5
2.4 Effects
of the Merger........................................5
2.5 Effect on
Outstanding Shares of GAFC Common Stock............5
2.6 Payment
Procedures...........................................6
2.7
Reserved.....................................................7
2.8 Directors
of Surviving Corporation After Effective Time......7
2.9
Certificate of Incorporation and Bylaws......................7
2.10 Dissenters'
Rights...........................................7
2.11 Alternative
Structure........................................8
2.12 Absence of
Control...........................................8
2.13 Treatment of
Stock Options...................................8
Article III Representations and
Warranties....................................8
3.1
Disclosure Letters...........................................8
3.2
Representations and Warranties of GAFC.......................8
3.3
Representations and Warranties of Acquisition Corp..........20
Article IV Conduct Pending the
Merger........................................22
4.1
Forbearances by GAFC........................................22
4.2
Forbearances by Acquisition Corp............................24
Article V
Covenants.........................................................24
5.1
Acquisition Proposals.......................................26
5.2 Advice of
Changes...........................................25
5.3 Access
and Information......................................25
5.4
Applications; Consents......................................26
5.5
Antitakeover Provisions.....................................26
5.6
Additional Agreements.......................................27
5.7
Publicity...................................................27
5.8
Stockholder
Meeting.........................................27
5.9 Proxy
Statement.............................................27
5.10 Notification
of Certain Matters.............................28
5.11 Employee
Benefit Matters....................................28
5.12 D&O
Liability Coverage......................................28
5.13
Cooperation.................................................28
5.14 Greater
Atlantic Capital Trust I............................28
5.15 Reston Branch
Lease.........................................29
Article VI Conditions to
Consummation........................................29
6.1
Conditions to Each Party's Obligations......................29
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6.2
Conditions to the Obligations of Acquisition Cor............29
6.3
Conditions to the Obligations of GAFC.......................30
Article VII
Termination.......................................................31
7.1
Termination.................................................31
7.2
Termination Fee.............................................31
7.3 Breach;
Remedies............................................32
Article VIII Certain Other
Matters...........................................32
8.1
Interpretation..............................................32
8.2
Survival....................................................33
8.3 Waiver;
Amendment...........................................33
8.4
Counterparts................................................33
8.5 Governing
Law...............................................33
8.6
Expenses....................................................33
8.7
Notices.....................................................33
8.8 Entire
Agreement; etc.......................................34
8.9
Successors and Assigns; Assignment..........................34
Exhibits
A
Form of Voting Agreement
ii
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Agreement and Plan of Merger
This is an Agreement and Plan of Merger, dated as of the 15th
day of June, 2009
("Agreement"), by and among MidAtlantic Bancorp,
Inc., a Virginia corporation
("Acquisition Corp."), GAF Merger Corp., a Virginia
corporation ("Acquisition
Sub") and Greater Atlantic Financial Corp., a Delaware corporation
("GAFC").
Introductory Statement
The Board of Directors of each of Acquisition
Corp. and GAFC have determined
that this Agreement and the business
combination and related transactions
contemplated hereby are advisable and in the best interests of
Acquisition Corp.
or GAFC, as the case may be, and in
the best long-term interests of the
stockholder of Acquisition Corp. or the
stockholders of GAFC, as the case may
be.
Acquisition Corp. and GAFC each
desire to make certain representations,
warranties and agreements in
connection with the business combination and
related transactions provided for herein and to prescribe
various conditions to
such transactions.
As a condition and inducement to Acquisition Corp.'s
willingness to enter into
this Agreement, each of the members of the
Board of Directors of GAFC have
entered into an agreement dated as of the date hereof
in the form of Exhibit A
pursuant to which he (or she) will vote his (or her) shares of GAFC
Common Stock
in favor of this Agreement and the transactions contemplated
hereby.
Acquisition Corp. and Acquisition Sub have been formed solely for
the purpose of
effectuating the transactions contemplated by this Agreement.
In consideration of their mutual promises and obligations
hereunder, the parties
hereto adopt and make this Agreement and
prescribe the terms and conditions
hereof and the manner and basis of carrying it into
effect, which shall be as
follows:
Article I
Definitions
For purposes of this Agreement:
Acquisition Proposal means any proposal or
offer with respect to any of the
following (other than the transactions contemplated
hereunder): (i) any merger,
consolidation, share exchange,
business combination, or other
similar
transaction involving GAFC or any of its
Subsidiaries; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or
other disposition of 50% or more of
GAFC's consolidated assets in a single
transaction or series of transactions;
(iii) any tender offer or exchange offer
for 50% or more of the outstanding
shares of GAFC's capital stock or the filing of a
registration statement under
the Securities Act of 1933, as amended, in
connection therewith; or (iv) any
public announcement of a proposal, plan or intention to do
any of the foregoing
or any agreement to engage in an any of the foregoing.
Acquisition Sub shall have the meaning given to that term in the
preamble.
Acquisition Sub Common Stock means the common stock, par value $.01
per share of
Acquisition Sub.
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Agreement means this Agreement, as amended,
modified or amended and restated
from time to time in accordance with its terms.
Articles of Merger shall have the meaning given to that term in
Section 2.3.
Certificate shall have the meaning given to that term in Section
2.6(b).
Closing shall have the meaning given to that term in Section
2.2.
Closing Date shall have the meaning given to that term in Section
2.2.
Confidentiality Agreement shall have the meaning given
to that term in Section
5.1(a).
Continuing Employee shall have the
meaning given to that term in Section
5.11(a).
CRA means the Community Reinvestment Act.
DGCL shall have the meaning given to that term in Section 2.1.
Disclosure Letter shall have the meaning given to that term in
Section 3.1.
Dissenters' Shares shall have the meaning given to that term in
Section 2.10.
Effective Time shall have the meaning given to that term in Section
2.3.
Environmental Consultant shall have the meaning
given to that term in Section
5.13.
Environmental Law means any federal, state or local
law, statute, ordinance,
rule, regulation, code, license, permit,
authorization, approval, consent,
order, directive, executive or
administrative order, judgment, decree,
injunction, or agreement with any
Governmental Entity relating to (i) the
protection, preservation or restoration of the
environment (which includes,
without limitation, air, water vapor, surface water, groundwater,
drinking water
supply, soil, surface land, subsurface land, plant and animal
life or any other
natural resource), or to human health or safety
as it relates to Hazardous
Materials, or (ii) the exposure to, or the use, storage,
recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release
or disposal of, Hazardous Materials,
in each case as amended and as now in
effect. The term Environmental Law includes,
without limitation, the Federal
Comprehensive Environmental Response,
Compensation and Liability Act of 1980,
the Superfund Amendments and
Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal Clean
Air Act, the Federal Clean
Water Act, the Federal Resource Conservation
and Recovery Act of 1976, the
Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational
Safety and Health Act of 1970 as it relates to Hazardous
Materials, the Federal
Hazardous Substances Transportation Act, the
Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water Act, the
Endangered Species Act, the
National Environmental Policy Act, the Rivers and
Harbors Appropriation Act or
any so-called "Superfund" or
"Superlien" law, each as amended and as now in
effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate means any entity that is considered one employer
with GAFC under
Section 4001(b)(1) of ERISA or Section 414 of the IRC.
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Excluded Shares shall consist of (i)
Dissenters' Shares and (ii) shares held
directly or indirectly by Acquisition
Corp. (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously
contracted).
FDIA means the Federal Deposit Insurance Act, as amended.
FDIC means the Federal Deposit Insurance Corporation.
GAAP means generally accepted accounting principles.
GAF Acquisition Corp. shall have the meaning given to that term in
the preamble.
GAF Merger Sub shall have the meaning given to that term in the
preamble.
GAFC shall have the meaning given to that term in the preamble.
GAFC Bank shall have the meaning given to that term in Section
3.2(b)(iv).
GAFC Common Stock means the common stock, par value $1.00 per
share, of GAFC.
GAFC Employee Plans shall have the
meaning given to that term in Section
3.2(r)(i).
GAFC Property shall have the meaning given to that term in Section
5.13.
GAFC Qualified Plan shall have the meaning given to that term in
Section
3.2(r)(iv).
GAFC's Reports shall have the meaning given to that term in Section
3.2(g).
GAFC Stock Option Plans shall have the
meaning given to that term in Section
2.13.
Government Regulator means any federal or state
governmental authority charged
with the supervision or regulation of
depository institutions or depository
institution holding companies or engaged in the insurance of bank
deposits.
Governmental Entity means any court,
administrative agency or commission or
other governmental authority or instrumentality.
Hazardous Material means any substance (whether solid,
liquid or gas) which is
or could be detrimental to human
health or safety or to the environment,
currently or hereafter listed, defined, designated or
classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental
Law, whether by type or by quantity, including any substance
containing any such
substance as a component. Hazardous Material includes,
without limitation, any
toxic waste, pollutant, contaminant,
hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance,
oil or petroleum, or any
derivative or by-product thereof,
radon, radioactive material, asbestos,
asbestos-containing material, urea
formaldehyde foam insulation, lead and
polychlorinated biphenyl.
HOLA means the Home Owners' Loan Act, as amended.
Intellectual Property shall have the
meaning given to that term in Section
3.2(p).
IRC means the Internal Revenue Code of 1986, as amended.
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IRS means the Internal Revenue Service.
knowledge means, with respect to a party hereto, actual knowledge
of the members
of the Board of Directors of that party or any
officer of that party with the
title ranking not less than senior vice president.
Letter of Transmittal shall have the
meaning given to that term in Section
2.6(a).
Lien means any charge, mortgage, pledge,
security interest, claim, lien or
encumbrance.
Loan means a loan, lease, advance,
credit enhancement, guarantee or other
extension of credit.
Loan Property means any property in which the applicable
party (or a subsidiary
of it) holds a security interest and, where required by
the context, includes
the owner or operator of such property, but only with respect to
such property.
Material Adverse Effect means an effect
which is material and adverse to the
business, financial condition or results of operations
of GAFC or Acquisition
Corp., as the context may dictate,
and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from any
(i) changes in laws,
rules or regulations or generally accepted accounting
principles or regulatory
accounting requirements or interpretations
thereof that apply to Acquisition
Corp. or GAFC, or to financial and/or depository
institutions generally, (ii)
changes in economic conditions affecting
financial institutions generally,
including but not limited to, changes in the general
level of market interest
rates, (iii) actions and omissions of Acquisition Corp.
or GAFC taken with the
prior written consent of the other or (iv) direct
effects of compliance with
this Agreement on the operating performance of the
parties, including expenses
incurred by the parties in consummating the
transactions contemplated by this
Agreement, shall not be considered in determining if a
Material Adverse Effect
has occurred.
Merger shall have the meaning given to that term in Section
2.1.
Merger Consideration shall have the
meaning given to that term in Section
2.5(a).
OTS means the Office of Thrift Supervision.
Participation Facility means any facility in which the
applicable party (or a
Subsidiary of it) participates in the management (including all
property held as
trustee or in any other fiduciary capacity) and, where
required by the context,
includes the owner or operator of such property, but
only with respect to such
property.
Paying Agent shall have the meaning given to that term in Section
2.6(c).
person means an individual, corporation, limited liability company,
partnership,
association, trust, unincorporated organization or other
entity.
Proxy Statement shall have the meaning given to that term in
Section 5.9(a).
SEC means the U.S. Securities and Exchange Commission.
Stockholder Meeting shall have the meaning given to that term in
Section 5.8.
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Subsidiary means a corporation, partnership,
joint venture or other entity in
which GAFC or Acquisition Corp., as
the case may be, has, directly
or
indirectly, an equity interest
representing 50% or more of any class of the
capital stock thereof or other equity interests therein.
Surviving Corporation shall have the meaning given to that term in
Section 2.1.
Taxes means all income, franchise, gross receipts, real
and personal property,
real property transfer and gains, wage and employment taxes.
Article II
The Merger
2.1 The Merger. Upon the terms and subject to the
conditions set forth in this
Agreement, Acquisition Sub will merge with and into
GAFC (the "Merger") at the
Effective Time. At the Effective Time, the
separate corporate existence of
Acquisition Sub shall cease.
GAFC shall be the surviving
corporation
(hereinafter sometimes referred
to in such capacity as the
"Surviving
Corporation") in the Merger and shall continue to be
governed by the Delaware
General Corporation Law ("DGCL") and its separate corporate
existence, with all
of its rights, privileges, immunities, powers and
franchises, shall continue
unaffected by the Merger.
2.2 Closing. The closing of the Merger (the
"Closing") will take place by the
electronic (PDF), facsimile or overnight courier exchange of
executed documents
or at a location and at a time as agreed to by the
parties hereto on the date
designated by Acquisition Corp.
following satisfaction or waiver of
the
conditions to Closing set forth in Article VI (other than
those conditions that
by their nature are to be satisfied at the Closing).
2.3 Effective Time. In connection with the
Closing, Acquisition Sub and GAFC
shall duly execute and deliver articles of merger (the
"Articles of Merger") to
the Delaware Secretary of State for filing
pursuant to the DGCL. The parties
will make all other filings or recordings required
under the laws of Delaware.
The Merger shall become effective at such
time as the Articles of Merger are
duly filed or at such later date or time as Acquisition Corp. and
GAFC agree and
specify in the Articles of Merger
(the date and time the Merger becomes
effective being the "Effective Time").
2.4 Effects of the Merger. The Merger will
have the effects set forth in the
DGCL. Without limiting the generality of the
foregoing, and subject thereto,
from and after the Effective Time,
Acquisition Sub shall possess all of the
properties, rights, privileges, powers and franchises of GAFC
and be subject to
all of the debts, liabilities and obligations of GAFC.
2.5 Effect on Outstanding Shares of
GAFC Common Stock.
(a) By virtue of the Merger,
automatically and without any action on the
part of the holder thereof, each
share of GAFC Common Stock issued
and
outstanding at the Effective Time, other than Excluded Shares,
shall become and
be converted into the right to receive $0.10 in
cash without interest (the
"Merger Consideration").
(b) As of the Effective Time, each
Excluded Share, other than Dissenters'
Shares, shall be canceled and retired and shall cease to
exist, and no payment
shall be made with respect thereto. All shares of
GAFC Common Stock that are
held by Acquisition Corp., if any,
other than shares held in a fiduciary
capacity or in satisfaction of a debt previously
contracted, shall be canceled
and shall constitute authorized but unissued shares. In addition,
no Dissenters'
Shares shall be converted into the Merger
Consideration but instead shall be
treated in accordance with the provisions
set forth in Section 2.10 of this
Agreement.
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2.6 Payment Procedures.
(a) Appropriate transmittal
materials ("Letter of Transmittal") in a form
satisfactory to Acquisition Corp. and
GAFC shall be mailed as soon
as
practicable after the Effective Time to
each holder of record of GAFC Common
Stock as of the Effective Time. A Letter of Transmittal will
be deemed properly
completed only if accompanied by certificates
representing all shares of GAFC
Common Stock to be converted thereby.
(b) At and after the
Effective Time, each certificate
("Certificate")
previously representing shares of GAFC Common Stock (except
as specifically set
forth in Section 2.5) shall represent only
the right to receive the Merger
Consideration.
(c) Prior to the Effective Time,
Acquisition Corp. shall deposit, or cause
to be deposited, with a bank, trust
company, transfer agent and registrar or
other similar entity selected by
Acquisition Corp. and consented to by GAFC,
whose consent shall not unreasonably be
withheld, which shall act as paying
agent (the "Paying Agent") for the benefit
of the holders of shares of GAFC
Common Stock, for exchange in accordance
with this Section 2.6, an amount of
cash sufficient to pay the aggregate Merger Consideration.
(d) The Letter of Transmittal
shall (i) specify that delivery shall be
effected, and risk of loss and title to the
Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent, (ii) be in
a form and contain
any other provisions as Acquisition Corp. may
reasonably determine and (iii)
include instructions for use in effecting the surrender
of the Certificates in
exchange for the Merger
Consideration. Upon the proper
surrender of the
Certificates to the Paying Agent, together with a
properly completed and duly
executed Letter of Transmittal, the
holder of such Certificates shall be
entitled to receive in exchange therefor a check in the amount
equal to the cash
that such holder has the right to receive pursuant to Section
2.5. Certificates
so surrendered shall forthwith be canceled. As
soon as practicable following
receipt of the properly completed Letter
of Transmittal and any necessary
accompanying documentation, the Paying
Agent shall distribute the Merger
Consideration as provided herein. If there is a
transfer of ownership of any
shares of GAFC Common Stock not registered in the transfer
records of GAFC, the
Merger Consideration shall be
issued to the transferee thereof
if the
Certificates representing such GAFC Common Stock
are presented to the Paying
Agent, accompanied by all documents required, in
the reasonable judgment of
Acquisition Corp. and the Paying Agent, to evidence and effect such
transfer and
to evidence that any applicable stock transfer Taxes have been
paid.
(e) The stock transfer books of GAFC shall
be closed immediately upon the
Effective Time and from and after the Effective Time there shall be
no transfers
on the stock transfer records of GAFC of any shares of
GAFC Common Stock. If,
after the Effective Time, Certificates are presented to
Acquisition Corp., they
shall be canceled and exchanged for the Merger
Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the
procedures set
forth in this Section 2.6.
(f) Any portion of the
aggregate amount of cash to be paid pursuant
to
Section 2.5 or any proceeds from any investments thereof that
remains unclaimed
by the stockholders of GAFC for six months after
the Effective Time shall be
repaid by the Paying Agent to Acquisition
Corp. upon the written request of
Acquisition Corp. After such request is made, any
stockholders of GAFC who have
not theretofore complied with this Section 2.6 shall
look only to Acquisition
Corp. for the Merger Consideration deliverable in respect of
each share of GAFC
Common Stock such stockholder holds, as
determined pursuant to Section 2.5 of
this Agreement, without any interest thereon. If
outstanding Certificates are
not surrendered prior to the date on which such payments would
otherwise escheat
to or become the property of any governmental
unit or agency, the unclaimed
items shall, to the extent permitted by any abandoned property,
escheat or other
applicable laws, become the property of
Acquisition Corp. (and, to the extent
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not in its possession, shall be paid over to it), free
and clear of all claims
or interest of any person previously entitled to such
claims. Notwithstanding
the foregoing, neither the Paying Agent nor any party to this
Agreement (or any
affiliate thereof) shall be liable to any former holder of GAFC
Common Stock for
any amount delivered to a public official
pursuant to applicable abandoned
property, escheat or similar laws.
(g) Acquisition Corp. and the
Paying Agent shall be entitled to rely upon
GAFC's stock transfer books to establish the identity of those
persons entitled
to receive the Merger Consideration, which
books shall be conclusive with
respect thereto. In the event of a dispute with
respect to ownership of stock
represented by any Certificate, Acquisition Corp. and the
Paying Agent shall be
entitled to deposit any Merger Consideration represented
thereby in escrow with
an independent third party and thereafter be relieved with respect
to any claims
thereto.
(h) If any Certificate shall have been
lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming
such Certificate to
be lost, stolen or destroyed and, if required by the Paying Agent
or Acquisition
Corp., the posting by such person of a bond in such amount as
the Paying Agent
may direct as indemnity against any
claim that may be made against it with
respect to such Certificate, the Paying Agent
will issue in exchange for such
lost, stolen or destroyed Certificate the Merger
Consideration deliverable in
respect thereof pursuant to Section 2.5.
2.7 Reserved
2.8 Directors of Surviving Corporation After Effective
Time. Immediately after
the Effective Time, until their
respective successors are duly elected or
appointed and qualified, the directors of
the Surviving Corporation shall
consist of the directors of Acquisition Sub
serving immediately prior to the
Effective Time.
2.9 Articles of Incorporation and Bylaws.
The articles of incorporation of
Acquisition Sub, as in effect immediately prior to the
Effective Time, shall be
the certificate of incorporation of GAFC until thereafter
amended in accordance
with applicable law. The bylaws of GAFC, as in effect
immediately prior to the
Effective Time, shall be the
bylaws of the Surviving Corporation
until
thereafter amended in accordance with applicable law.
2.10 Dissenters' Rights. Notwithstanding any other
provision of this Agreement
to the contrary, shares of GAFC Common Stock that are
outstanding immediately
prior to the Effective Time and which are held by
stockholders who shall have
not voted in favor of the Merger and who shall
have filed with GAFC a written
objection to the Merger at or before the Stockholder Meeting
(collectively, the
"Dissenters' Shares") shall not be converted into
or represent the right to
receive the Merger Consideration. Such stockholders instead shall
be entitled to
receive payment of the fair value of such shares held by them in
accordance with
the provisions of the Delaware General Corporation Law ("DGCL"),
except that all
Dissenters' Shares held by stockholders who shall have failed
to perfect or who
effectively shall have withdrawn or otherwise
lost their rights to payment of
the fair value of such shares under the DGCL shall
thereupon be deemed to have
been converted into and to have become exchangeable, as
of the Effective Time,
for the right to receive, without any interest thereon, the Merger
Consideration
upon surrender, in the manner provided in Section 2.6 of the GAFC
Certificate(s)
that, immediately prior to the Effective Time, evidenced such
shares. GAFC shall
give Acquisition Corp. (i) prompt notice of
any written objections to the
Merger, attempted withdrawals of demands for payment
and any other instruments
served pursuant to the DGCL and received by GAFC relating to
Dissenters' Shares,
and (ii) the opportunity to participate in all negotiations and
proceedings with
respect to demands under the DGCL
consistent with the obligations of GAFC
thereunder. GAFC shall not, except with prior
written consent of Acquisition
Corp., (x) make any payment with respect to such demand, (y)
offer to settle or
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settle any demand for payment or (z) waive
any failure to timely deliver a
written objection to the Merger or timely
take any other action to perfect
dissenters' rights in accordance with the DGCL.
2.11 Alternative Structure. Notwithstanding anything to
the contrary contained
in this Agreement, prior to the Effective Time,
Acquisition Corp. may specify
that the structure of the transactions contemplated by this
Agreement be revised
and the parties shall enter into such alternative
transactions as Acquisition
Corp. may reasonably determine to
effect the purposes of this Agreement;
provided, however, that such revised structure shall not (i) alter
or change the
amount or kind of the Merger Consideration or (ii) adversely impede
or delay the
receipt of any regulatory approval referred to in, or
the consummation of the
transactions contemplated by, this
Agreement. In the event that Acquisition
Corp. elects to make such a revision, the parties agree to
execute appropriate
documents to reflect the revised structure.
2.12 Absence of Control. Subject to any specific
provisions of this Agreement,
it is the intent of the parties hereto that Acquisition Corp.
by reason of this
Agreement shall not be deemed
(until consummation of the
transactions
contemplated hereby) to control, directly or
indirectly, GAFC or to exercise,
directly or indirectly, a controlling influence over the
management or policies
of GAFC.
2.13 Treatment of Stock Options. Prior to the Effective
Time, GAFC shall take
all action necessary to terminate each
stock option plan of GAFC (the "GAFC
Stock Option Plans") and use its reasonable
best efforts to obtain from each
stock option holder an agreement cancelling such
person's outstanding stock
options as of the Effective Time.
Article III
Representations and Warranties
3.1 Disclosure Letters. Prior to the execution and
delivery of this Agreement,
Acquisition Corp. and GAFC have each delivered to the other a
letter (each, its
"Disclosure Letter") setting forth, among other things, facts,
circumstances and
events the disclosure of which is required or appropriate
either in response to
an express disclosure requirement contained
in a provision hereof or as an
exception to one or more of their respective representations and
warranties (and
making specific reference to the
Section of this Agreement to which they
relate).
3.2 Representations and Warranties of GAFC.
GAFC represents and warrants to
Acquisition Corp. that, except as disclosed in GAFC's Disclosure
Letter:
(a) Organization and
Qualification. GAFC is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Delaware
and is registered with the OTS as a savings and loan holding
company. GAFC has
all requisite corporate power and
authority to own, lease and operate its
properties and to conduct the business currently being
conducted by it. GAFC is
duly qualified or licensed as a foreign corporation to
transact business and is
in good standing in each jurisdiction in which the
character of the properties
owned or leased by it or the nature of the business
conducted by it makes such
qualification or licensing necessary,
except where the failure to be so
qualified or licensed and in good standing would
not have a Material Adverse
Affect on GAFC. GAFC engages only in activities (and
holds properties only of
the types) permitted to savings and loan holding
companies by the HOLA and the
rules and regulations of the OTS promulgated thereunder.
(b) Subsidiaries.
(i) GAFC's Disclosure
Letter sets forth with respect to each of
GAFC's
direct and indirect Subsidiaries its name, its
jurisdiction of incorporation,
GAFC's percentage ownership, the number of shares of
stock owned or controlled
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by GAFC and the name and number of shares held by any other
person who owns any
stock of the Subsidiary. GAFC owns of record and
beneficially all the capital
stock of each of its Subsidiaries free and clear
of any Liens. There are no
contracts, commitments, agreements or understandings relating to
GAFC's right to
vote or dispose of any equity securities of its
Subsidiaries. GAFC's ownership
interest in each of its Subsidiaries is in compliance with
all applicable laws,
rules and regulations relating to equity investments by savings and
loan holding
companies or federally chartered savings banks.
(ii) Each of GAFC's
Subsidiaries is a corporation duly
organized and
validly existing under the laws of its jurisdiction of
incorporation, has all
requisite corporate power and authority to own, lease and operate
its properties
and to conduct the business currently
being conducted by it and is duly
qualified or licensed as a foreign corporation to
transact business and is in
good standing in each jurisdiction in which
the character of the properties
owned or leased by it or the nature of the business
conducted by it makes such
qualification or licensing necessary,
except where the failure to be so
qualified or licensed and in good standing would
not have a Material Adverse
Effect on such Subsidiary.
(iii) The outstanding shares of
capital stock of each Subsidiary have been
validly authorized and are validly issued, fully
paid and nonassessable. No
shares of capital stock of any Subsidiary of GAFC are
or may be required to be
issued by virtue of any options, warrants or other
rights, no securities exist
that are convertible into or exchangeable for
shares of such capital stock or
any other debt or equity security of any Subsidiary, and there are
no contracts,
commitments, agreements or understandings
of any kind for the issuance of
additional shares of capital stock or other
debt or equity security of any
Subsidiary or options, warrants or other rights with respect to
such securities.
(iv) No Subsidiary of GAFC other
than Greater Atlantic Bank ("GAFC Bank")
is an "insured depository institution" as defined in the FDIA and
the applicable
regulations thereunder. GAFC Bank's deposits are insured by the
FDIC through the
Deposit Insurance Fund to the fullest extent
permitted by law. GAFC Bank is a
member in good standing of the Federal Home Loan Bank of
Atlanta.
(c) Capital Structure.
(i) The authorized capital stock of
GAFC consists of 10,000,000 shares of
GAFC Common Stock and 2,500,000 shares of preferred stock.
(ii) As of the date of this Agreement:
(A) 3,024,220 shares of GAFC Common Stock
are issued and outstanding, all
of which are validly issued, fully paid and
nonassessable and were issued in
full compliance with all applicable laws and not in violation
of any preemptive
rights and no shares of preferred stock are issued and
outstanding.
(B) No shares of
GAFC Common Stock are held in
treasury by GAFC or
otherwise directly or indirectly owned by GAFC.
(C) 192,666 shares are reserved for
issuance upon the exercise of options
outstanding under the GAFC Stock Option Plans or warrants to
acquire GAFC Common
Stock.
(iii) No bonds, debentures, notes or other
indebtedness having the right to
vote on any matters on which stockholders
of GAFC may vote are issued or
outstanding.
(iv) Except as set forth in
this Section 3.2(c), as of the date of this
Agreement, (A) no shares of capital stock or other voting
securities of GAFC are
issued, reserved for issuance or outstanding and (B) neither GAFC
nor any of its
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Subsidiaries has or is bound by
any outstanding subscriptions, options,
warrants, calls, rights, convertible securities,
commitments or agreements of
any character obligating GAFC or any of its
Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional
shares of capital
stock of GAFC or obligating GAFC or any of its Subsidiaries to
grant, extend or
enter into any such option,
warrant, call, right, convertible
security,
commitment or agreement. As of the
date hereof, there are no outstanding
contractual obligations of GAFC or any of its Subsidiaries to
repurchase, redeem
or otherwise acquire any shares
of capital stock of GAFC or any of
its
Subsidiaries.
(d) Authority. GAFC has
all requisite corporate power and authority
to
enter into this Agreement, to
perform its obligations hereunder and
to
consummate the transactions contemplated by this
Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated
by this Agreement have been duly authorized by all necessary
corporate actions
on the part of GAFC's Board of Directors, and no other
corporate proceedings on
the part of GAFC are necessary to authorize this Agreement or
to consummate the
transactions contemplated by this Agreement other than the approval
and adoption
of this Agreement by the affirmative vote of the
holders of a majority of the
outstanding shares of GAFC Common
Stock. This Agreement has been duly and
validly executed and delivered by GAFC
and constitutes a valid and binding
obligation of GAFC, enforceable against
GAFC in accordance with its terms,
subject to applicable bankruptcy,
insolvency and similar laws affecting
creditors' rights and remedies generally and to
general principles of equity,
whether applied in a court of law or a court of equity.
(e) No Violations.
The execution, delivery and
performance of this
Agreement by GAFC do not, and the consummation of the
transactions contemplated
by this Agreement will not, (i) assuming all
required governmental approvals
have been obtained and the applicable waiting periods have
expired, violate any
law, rule or regulation or any judgment, decree, order,
governmental permit or
license to which GAFC or any of its Subsidiaries
(or any of their respective
properties) is subject, (ii) violate the certificate of
incorporation or bylaws
of GAFC or the similar organizational documents of any
of its Subsidiaries or
(iii) constitute a breach or violation
of, or a default under (or an event
which, with due notice or lapse of time or both,
would constitute a default
under), or result in the termination of, accelerate the performance
required by,
or result in the creation of any Lien upon any of the
properties or assets of
GAFC or any of its Subsidiaries
under, any of the terms,
conditions or
provisions of any note, bond, indenture, deed of trust, loan
agreement or other
agreement, instrument or obligation to which GAFC or any of
its Subsidiaries is
a party, or to which any of their
respective properties or assets may be
subject.
(f) Consents and
Approvals. No consents or approvals of, or
filings or
registrations with, any Governmental Entity or any
third party are required to
be made or obtained in connection with the
execution and delivery by GAFC of
this Agreement or the consummation by
GAFC of the Merger and the other
transactions contemplated by this Agreement, except for
filings of applications
and notices with, receipt of approvals or nonobjections from,
and expiration of
the related waiting period required by, federal and state
banking authorities.
As of the date hereof, GAFC has no knowledge of any
reason pertaining to GAFC
why any of the approvals referred to in
this Section 3.2(f) should not be
obtained without the imposition of
any material condition or restriction
described in Section 6.1(b).
(g) Governmental Filings. GAFC
and each of its Subsidiaries has filed all
reports, schedules, registration statements and other documents
that it has been
required to file since September 30, 2006 with the
SEC, OTS, the FDIC, or any
other Governmental Regulator (collectively, "GAFC's Reports"). No
administrative
actions have been taken or, to the
knowledge of GAFC, threatened or orders
issued in connection with any of GAFC's Reports. As of their
respective dates,
each of GAFC's Reports complied in
all material respects with all laws or
regulations under which it was filed (or was amended so as to
be in compliance
promptly following discovery of such
noncompliance). Any financial statement
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contained in any of GAFC's Reports fairly presented in all material
respects the
financial position of GAFC on a consolidated basis, GAFC alone or
each of GAFC's
Subsidiaries alone, as the case may
be, and was prepared in all material
respects in accordance with GAAP or applicable regulations.
(h) Financial Statements.
GAFC's Disclosure Letter contains copies of (i)
the audited consolidated balance
sheet of GAFC and its Subsidiaries as of
September 30, 2008 and 2007 and related
consolidated statements of income for
each of the years in the two-year period ended
September 30, 2008 and (ii) the
unaudited consolidated balance sheet of GAFC and
its Subsidiaries as of March
31, 2009 and the related unaudited
consolidated statement of income for the
three and six months ended March 31, 2009.
Such financial statements were
prepared from the books and records of GAFC and its Subsidiaries,
fairly present
the consolidated financial position of GAFC and its Subsidiaries in
each case at
and as of the dates indicated and the consolidated results of
operations of GAFC
and its Subsidiaries for the periods indicated, and were
prepared in accordance
with GAAP consistently applied throughout the periods covered
thereby; provided,
however, that the unaudited financial statements for interim
periods are subject
to normal year-end adjustments (which will not be
material individually or in
the aggregate.
(i) Undisclosed Liabilities.
Neither GAFC nor any of its Subsidiaries has
incurred any debt, liability or obligation of any
nature whatsoever (whether
accrued, contingent, absolute or otherwise
and whether due or to become due)
other than liabilities reflected on or
reserved against in the consolidated
balance sheet of GAFC as of September 30,
2008, except for (i) liabilities
incurred since September 30, 2008 in the ordinary course of
business consistent
with past practice that, either alone
or when combined with all similar
liabilities, have not had, and would not
reasonably be expected to have, a
Material Adverse Effect on GAFC and
(ii) liabilities incurred for legal,
accounting, financial advisory fees and
out-of-pocket expenses in connection
with the transactions contemplated by this Agreement.
(j) Absence of Certain Changes or Events.
Since September 30, 2008:
(i) GAFC and its Subsidiaries have
conducted their respective businesses
only in the ordinary and usual course of such
businesses consistent with their
past practices;
(ii) there has not
been any event or occurrence that has
had, or is
reasonably expected to have, a Material Adverse Effect
on GAFC; (iii) GAFC has
not declared, paid or set aside any dividends or
distributions with respect to
the GAFC Common Stock other than as expressly permitted by this
Agreement;
(iv) except for supplies or
equipment purchased in the ordinary course of
business, neither GAFC nor any of its
Subsidiaries have made any capital
expenditures exceeding individually or in the aggregate
$25,000;
(v) there has not been any
write-down by GAFC Bank in excess of $25,000
with respect to any individual Loan or other real estate owned;
(vi) there has not been any sale,
assignment or transfer of any assets by
GAFC or any of its Subsidiaries in excess of $25,000 other
than in the ordinary
course of business or pursuant to a contract or
agreement disclosed in GAFC's
Disclosure Letter;
(vii) there has been no increase in
the salary, compensation, pension or
other benefits payable or to become payable by GAFC or any of
its Subsidiaries
to any of their respective directors,
officers or employees, other than in
conformity with the policies and
practices of such entity in the usual and
ordinary course of its business;
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(viii) neither GAFC nor
any of its Subsidiaries has paid or made
any
accrual or arrangement for payment of bonuses or
special compensation of any
kind or any severance or termination pay to any of their
directors, officers or
employees other than as expressly permitted by this Agreement;
and
(ix) there has been no change in any
accounting principles, practices or
methods of GAFC or any of its Subsidiaries.
(k) Litigation. There are no
suits, actions or legal, administrative or
arbitration proceedings pending or, to the knowledge of GAFC,
threatened against
or affecting GAFC or any of its Subsidiaries or any property or
asset of GAFC or
any of its Subsidiaries that (i) is seeking
damages or declaratory relief
against GAFC or any of its Subsidiaries or
(ii) challenge the validity or
propriety of the transactions contemplated
by this Agreement. There are no
judgments, decrees, injunctions, orders or rulings of any
Governmental Entity or
arbitrator outstanding against
GAFC or any of its
Subsidiaries that,
individually or in the aggregate, would
reasonably be expected to have a
Material Adverse Effect on GAFC.
(l) Absence of Regulatory
Actions. Since September 30, 2006, neither GAFC
nor any of its Subsidiaries has been a party to
any cease and desist order,
written agreement or memorandum of understanding with, or any
commitment letter
or similar undertaking to, or has been subject to any action,
proceeding, order
or directive by any Government Regulator, or has
adopted any board resolutions
at the request of any
Government Regulator, or has been
advised by any
Government Regulator that it is
contemplating issuing or requesting (or is
considering the appropriateness of issuing
or requesting) any such action,
proceeding, order, directive, written agreement,
memorandum of understanding,
commitment letter, board resolutions
or similar undertaking. There are no
unresolved violations, criticisms or exceptions by any Government
Regulator with
respect to any report or statement relating to any
examinations of GAFC or its
Subsidiaries.
(m) Compliance with Laws. GAFC and
each of its Subsidiaries conducts its
business in compliance with all statutes, laws, regulations,
ordinances, rules,
judgments, orders or decrees applicable to it or the
employees conducting such
business, except where noncompliance
would not, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect on GAFC.
GAFC and each of its Subsidiaries has all
permits, licenses, certificates of
authority, orders and approvals of, and has made all
filings, applications and
registrations with, all Governmental
Entities that are required in order to
permit it to carry on its business in all material
respects as it is presently
conducted; all such permits, licenses,
certificates of authority, orders and
approvals are in full force and effect, and no suspension or
cancellation of any
of them is, to the knowledge of GAFC, threatened.
Neither GAFC nor any of its
Subsidiaries has been given written notice or
been charged with any violation
of, any law, ordinance, regulation, order, writ,
rule, decree or condition to
approval of any Governmental Entity which,
individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on
GAFC.
(n) Taxes. All federal, state, local and
foreign tax returns required to be
filed by or on behalf of GAFC or any of its Subsidiaries have
been timely filed
or requests for extensions have been timely filed and any
such extension shall
have been granted and not have expired, and all such filed
returns are complete
and accurate in all material respects. All Taxes
shown on such returns, all
Taxes required to be shown on returns for which extensions have
been granted and
all other Taxes required to be paid by GAFC or any of its
Subsidiaries have been
paid in full or adequate provision has been made
for any such Taxes on GAFC's
balance sheet (in accordance with
GAAP). There is no audit examination,
deficiency assessment, tax investigation or
refund litigation with respect to
any Taxes of GAFC or any of its Subsidiaries, and
no claim has been made in
writing by any authority in a jurisdiction where GAFC or any of its
Subsidiaries
do not file tax returns that GAFC or any such Subsidiary is
subject to taxation
in that jurisdiction. All Taxes, interest,
additions and penalties due with
respect to completed and settled examinations or
concluded litigation relating
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to GAFC or any of its Subsidiaries have been paid in full or
adequate provision
has been made for any such Taxes on GAFC's balance
sheet (in accordance with
GAAP). GAFC and its Subsidiaries have not executed an extension or
waiver of any
statute of limitations on the assessment or
collection of any tax due that is
currently in effect. GAFC and each of its Subsidiaries has withheld
and paid all
Taxes required to have been withheld and paid in connection with
amounts paid or
owing to any employee, independent contractor,
creditor, stockholder or other
third party, and GAFC and each of its Subsidiaries has timely
complied with all
applicable information reporting requirements
under Part III, Subchapter A of
Chapter 61 of the IRC and similar
applicable state and local information
reporting requirements. Neither GAFC nor any of its
Subsidiaries is a party to
any agreement, contract, arrangement or plan that has
resulted or would result,
individually or in the aggregate, in
connection with this Agreement in the
payment of any "excess parachute payment" within the meaning
of Section 280G of
the IRC and neither GAFC nor any of its Subsidiaries has made any
payment and is
not a party to any agreement, and does not
maintain any plan, program or
arrangement, that could require it to make any payment
that would not be fully
deductible by reason of Section 162(m) of the IRC.
(o) Agreements.
(i) GAFC has
previously delivered to Acquisition
Corp., and GAFC's
Disclosure Letter lists, any contract, arrangement,
commitment or understanding
(whether written or oral) to which GAFC or any of its Subsidiaries
is a party or
is bound:
(A) with any executive officer or
other key employee of GAFC or any of its
Subsidiaries the benefits of which are
contingent, or the terms of which are
materially altered, upon the occurrence of a
transaction involving GAFC or any
of its Subsidiaries of the nature contemplated by this
Agreement;
(B) with respect to the employment of any
directors, officers, employees or
consultants;
(C) any of the benefits of
which will be increased, or the vesting
or
payment of the benefits of which will be accelerated,
by the occurrence of any
of the transactions contemplated by this Agreement, or
the value of any of the
benefits of which will be calculated on the basis
of any of the transactions
contemplated by this Agreement (including any stock option
plan, phantom stock
or stock appreciation rights plan,
restricted stock plan or stock purchase
plan);
(D) containing covenants
that limit the ability of GAFC or any of its
Subsidiaries to compete in any line of business
or with any person, or that
involve any restriction on the geographic area in
which, or method by which,
GAFC (including any successor thereof) or any of its
Subsidiaries may carry on
its business (other than as may be required by law or any
regulatory agency);
(E) pursuant to which GAFC or any of
its Subsidiaries may become obligated
to invest in or contribute capital to any entity;
(F) that relates to borrowings of money
(or guarantees thereof) by GAFC or
any of its Subsidiaries in excess of $50,000;
(G) which is a lease or
license with respect to any property,
real or
personal, whether as landlord, tenant,
licensor or licensee, involving a
liability or obligation as obligor in excess of $25,000 on an
annual basis; or
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(H) the termination of which
would require payment by GAFC or any of its
Subsidiaries in excess of $25,000.
(ii) Neither GAFC nor any of its
Subsidiaries is in default under (and no
event has occurred which, with due
notice or lapse of time or both, would
constitute a default under) or is in violation of
any provision of any note,
bond, indenture, mortgage, deed of
trust, loan agreement, lease or other
agreement to which it is a party or by which it is bound or
to which any of its
respective properties or assets is subject and, to
the knowledge of GAFC, no
other party to any such agreement (excluding any
loan or extension of credit
made by GAFC or any of its
Subsidiaries) is in default in any
respect
thereunder.
(iii) GAFC's Disclosure
Letter lists each agency or brokerage
contract
pursuant to which GAFC or any of its Subsidiaries is
authorized to represent an
insurer or place insurance through another agency.
Neither GAFC nor any of its
Subsidiaries have received written notice of termination of
any existing agency
o
