AGREEMENT AND PLAN OF MERGER

Exhibit 2.10

 

AGREEMENT AND PLAN OF MERGER

 

by and between

 

FNB CORP.

 

and

 

UNITED FINANCIAL, INC.

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into as of the 9 ^th day of May, 2005 by and between UNITED FINANCIAL, INC., a North Carolina corporation and registered bank holding company (“United”), and FNB CORP., a North Carolina corporation and registered bank holding company (“FNB”);

 

W   I   T   N   E   S   S   E   T   H :

 

WHEREAS, the parties hereto have agreed that it is in their mutual best interests and in the best interests of their respective shareholders for United to be merged with and into FNB pursuant to a plan of merger (the “Plan of Merger”) in the form attached hereto as Schedule A , and the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with the Merger (as defined in Section 1.1) and transactions contemplated hereby.

 

NOW, THEREFORE, in consideration of the premises, the mutual benefits to be derived from this Agreement, and of the representations, warranties, conditions, covenants and promises herein contained, and subject to the terms and conditions hereof, the parties hereto mutually agree as follows:

 

ARTICLE I. THE MERGER

 

1.1 Merger. Subject to the provisions of this Agreement and the Plan of Merger, as of the Effective Time (as defined in Section 1.12 hereof), United shall be merged with and into FNB (the “Merger”), the separate corporate existence of United shall cease and the corporate existence of FNB, as the surviving corporation in the Merger, shall continue under the laws of the State of North Carolina. FNB, as the surviving corporation in the Merger, is hereinafter sometimes referred to as the “Surviving Corporation.”

 

1.2 Effect of the Merger . At the Effective Time and by reason of the Merger, and in accordance with applicable law, all of the property, assets and rights of every kind and character of FNB and of United including, without limitation, its stock in its wholly owned subsidiary, Alamance Bank (“Alamance Bank”), and all real, personal or mixed property, all debts due on whatever account, all other choses in action and every other interest of or belonging to or due to United, whether tangible or intangible, shall vest in the Surviving Corporation, and the Surviving Corporation shall succeed to all the rights, privileges, immunities, powers, purposes and franchises of a public or private nature of United and FNB, all without any conveyance, assignment or further act or deed; and the Surviving Corporation shall become responsible for all of the liabilities, duties and obligations of every kind, nature and description of United and FNB as of the Effective Time.

 

1.3 Articles of Incorporation, Bylaws and Management. The Articles of Incorporation and bylaws of FNB in effect at the Effective Time shall be the Articles of Incorporation and bylaws of the Surviving Corporation until thereafter amended in accordance with applicable laws. The officers and directors of FNB at the Effective Time shall continue to hold such offices and positions of the Surviving Corporation until removed as provided by law or until the election or appointment of their respective successors.

 

1.4 Conversion of Shares.

 

(a) United Stock . Except as otherwise provided herein, at the Effective Time, all rights of United’s shareholders with respect to all then outstanding shares of the common stock of United, $1.00 par value per share

(“United Stock”), shall cease to exist, and the holders of shares of United Stock shall cease to be, and shall have no further rights as, shareholders of United. At the Effective Time, each such outstanding share of United Stock (except for shares held, other than in a fiduciary capacity or as a result of debts previously contracted, by United, FNB or any of their subsidiaries, which shall be canceled in the Merger, and for Dissenting Shares (as defined in Section 1.9)) shall be converted, without any action on the part of the holder of such shares, into the right to receive the Merger Consideration (as defined in Section 1.5) in accordance with this Article I. Following the Effective Time, certificates representing shares of United Stock outstanding at the Effective Time shall evidence only the right of the registered holder thereof to receive, and may be exchanged for, the Merger Consideration.

 

(b) Outstanding FNB Stock . Each share of common stock of FNB, par value $2.50 per share (“FNB Stock”), issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding and shall not be affected by the Merger.

 

1.5 Merger Consideration.

 

(a) Per Share Consideration. Subject to the provisions of this Article I, at the Effective Time each outstanding share of United Stock (except for shares held, other than in a fiduciary capacity or as a result of debts previously contracted, by United, FNB or any of their subsidiaries and for Dissenting Shares) shall cease to represent any interest (equity, shareholder or otherwise) in United and shall automatically be converted exclusively into the right to receive, at the election of the holder thereof, either: (A) $14.25 in cash, without interest; (B) 0.6828 shares (the “Exchange Ratio”) of FNB Stock; or (C) 35% of the cash amount set forth in clause (A) above and a number of shares of FNB Stock equal to 65% of the Exchange Ratio; provided, however, that a holder of United Stock may, pursuant to Section 1.6, make no election, in which case such shares of United Stock held by such holder shall be converted exclusively into the right to receive the consideration set forth in Section 1.6(e) below with respect to Non-Election Shares (as defined in Section 1.6(b)). The amount of cash into which shares of United Stock shall be converted pursuant to this Agreement is sometimes hereinafter referred to as “Cash Consideration,” and the number of shares of FNB Stock into which shares of United Stock shall be converted pursuant to this Agreement is sometimes hereinafter referred to as “Stock Consideration.” The Cash Consideration and Stock Consideration are sometimes referred to herein collectively as the “Merger Consideration.” No share of United Stock, other than Dissenting Shares (as defined in Section 1.9), shall be deemed to be outstanding or have any rights other than those set forth in this Section 1.5(a) after the Effective Time. The Exchange Ratio is subject to possible adjustment in accordance with Section 1.5(c) below.

 

(b) Fractional Shares . Notwithstanding any other provision of this Agreement, each holder of shares of United Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of FNB Stock (after taking into account all certificates delivered by such holder under Sections 1.6(c) and 1.8(a) below and the elections made pursuant to Section 1.6) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of FNB Stock multiplied by the market value of one share of FNB Stock at the Effective Time. The market value of one share of FNB Stock at the Effective Time shall be the last sale price of FNB Stock on Nasdaq Stock Market, Inc. National Market System (“Nasdaq”) as reported by The Wall Street Journal or, if not reported thereby, any other authoritative source selected by FNB, on the last trading day preceding the Effective Time. No such holder will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares.

 

(c) Anti-Dilution Provisions . In the event FNB changes the number of shares of FNB Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend, recapitalization, reclassification, combination, exchange of shares, or similar transaction with respect to such stock and the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split, recapitalization, reclassification, combination, exchange of shares, or similar transaction for which a record date is not established) shall be prior to the Effective Time, the Exchange Ratio shall be appropriately adjusted to reflect such change.

 

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1.6 Election and Allocation Procedures.

 

(a) An election form (an “Election Form”) and other appropriate and customary transmittal materials, which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing United Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent (as hereinafter defined) in such form as United and FNB shall mutually agree shall be mailed on the Mailing Date (as defined below) to each shareholder of record of United. The “Mailing Date” shall be the date on which proxy materials relating to the Merger are mailed to holders of shares of United Stock.

 

(b) Each Election Form shall entitle the holder of shares of United Stock (or the beneficial owner through appropriate and customary documentation and instructions) to (i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”), (ii) elect to receive the Stock Consideration for all of such holder’s shares (a “Stock Election”), (iii) elect to receive Merger Consideration in accordance with clause (C) of the first sentence of Section 1.5(a) (a “Mixed Election”), or (iv) make no election or to indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a “Non-Election”). Shareholders of record of United who hold shares of United Stock as nominees, trustees or in other representative capacities may submit multiple Election Forms, provided that such representative certifies that each such Election Form covers all the shares of United Stock held by that representative for a particular beneficial owner. Shares of United Stock in respect of which a Cash Election shall have been made are referred to herein as “Cash Election Shares.” Shares of United Stock in respect of which a Stock Election shall have been made are referred to herein as “Stock Election Shares.” Shares of United Stock in respect of which no election shall have been made are referred to as “Non-Election Shares.” The aggregate number of shares of United Stock with respect to which a Stock Election shall have been made is referred to herein as the “Stock Election Number.” Shares of United Stock with respect to which a Mixed Election shall have been made shall not be deemed either Stock Election Shares or Cash Election Shares, but shall in all events be converted into the right to receive the Merger Consideration as specified in subsection (e) of this Section 1.6.

 

(c) To be effective, a properly completed Election Form shall be submitted to the Exchange Agent on or before 5:00 p.m. North Carolina time on the last business day prior to the date of the shareholders’ meeting contemplated by Section 4.3(a) (or such other time and date as United and FNB may mutually agree) (the “Election Deadline”). An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more certificates (or customary affidavits and, if required by FNB pursuant to Section 1.8(b), indemnification regarding the loss or destruction of such certificates or the guaranteed delivery of such certificates) representing all shares of United Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. Any United shareholder may at any time prior to the Election Deadline change his or her election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and signed revised Election Form. Any United shareholder may, at any time prior to the Election Deadline, revoke his or her election by written notice received by the Exchange Agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of his or her certificates, or of the guarantee of delivery of such certificates, previously deposited with the Exchange Agent. All elections shall be revoked automatically if the Exchange Agent is notified in writing by FNB and United that this Agreement has been terminated. If a United shareholder either (i) does not submit a properly completed Election Form by the Election Deadline, or (ii) revokes its Election Form prior to the Election Deadline, the shares of United Stock held by such shareholder shall be designated Non-Election Shares. FNB shall cause the certificates representing United Stock described in clause (ii) above to be promptly returned without charge to the person submitting the Election Form upon written request to that effect from the person who submitted the Election Form. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive.

 

(d) Notwithstanding any other provision contained in this Agreement, 65% (the “Stock Conversion Number”) of the total number of shares of United Stock outstanding at the Effective Time to be converted into

 

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Merger Consideration pursuant to Section 1.5(a) excluding such shares as may be subject to an effective Mixed Election (the “Adjustable Conversion Shares”), shall be converted into the Stock Consideration and the remaining Adjustable Conversion Shares shall be converted into the Cash Consideration (in each case, excluding shares of United Stock to be canceled as provided in Section 1.4(a) and Dissenting Shares); provided, however, that for federal income tax purposes, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code and in order that the Merger will not fail to satisfy continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a) of the Code, as reasonably determined by counsel to FNB, FNB shall increase the number of Adjustable Conversion Shares that will be converted into the Stock Consideration and reduce the number of Adjustable Conversion Shares that will be converted into the right to receive the Cash Consideration.

 

(e) Within five business days after the later to occur of the Election Deadline or the Effective Time, FNB shall cause the Exchange Agent to effect the allocation among holders of United Stock of rights to receive the Cash Consideration and the Stock Consideration as follows:

 

(i) In any event, all shares of United Stock with respect to which a Mixed Election shall have been made shall be converted into 35% of the amount of cash set forth in clause (A) of the first sentence of Section 1.5(a) and a number of shares of FNB Stock equal to 65% of the Exchange Ratio;

 

(ii) If the Stock Election Number exceeds the Stock Conversion Number, then all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and each holder of Stock Election Shares will be entitled to receive the Stock Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holder’s Stock Election Shares being converted into the right to receive the Cash Consideration; and

 

(iii) If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the Non-election Shares and Cash Election Shares shall be treated in the following manner:

 

(A) If the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and each holder of Non-Election Shares shall receive the Stock Consideration in respect of that number of Non-Election Shares equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares, with the remaining number of such holder’s Non-Election Shares being converted into the right to receive the Cash Consideration; or

 

(B) If the Shortfall Number exceeds the number of Non-Election Shares, then all Non-Election Shares shall be converted into the right to receive the Stock Consideration, and each holder of Cash Election Shares shall receive the Stock Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number of Non-Election Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holder’s Cash Election Shares being converted into the right to receive the Cash Consideration.

 

For purposes of this Section 1.6(e), if FNB is obligated to increase the number of Adjustable Conversion Shares to be converted into shares of FNB Stock as a result of the application of the last clause of Section 1.6(d) above, then the higher number shall be the Stock Conversion Number in the calculations set forth in this Section 1.6(e).

 

1.7 Closing Payment. As of the Effective Time, FNB shall deposit, or shall cause to be deposited, with Registrar and Transfer Company, transfer agent of FNB Stock (the “Exchange Agent”), for the benefit of each

 

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holder of United Stock for exchange in accordance with this Article I, (i) certificates representing the aggregate number of whole shares of FNB Stock to be issued as Stock Consideration, and (ii) an aggregate amount of cash to be delivered to holders of United Stock as Cash Consideration and in lieu of any fractional shares, to be issued and paid pursuant to this Article I for outstanding shares of United Stock (such certificates for shares of FNB Stock and such cash are referred to as the “Exchange Fund”). The Exchange Agent shall, pursuant to irrevocable instructions in accordance with this Article I, deliver the FNB Stock and cash contemplated to be issued with respect to United Stock out of the Exchange Fund. The Exchange Fund shall not be used for any other purpose. The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by FNB, on a daily basis. Any interest and other income resulting from such investments shall be paid to FNB.

 

1.8 Exchange of Shares.

 

(a) Exchange Procedures. After the Effective Time, FNB shall cause the Exchange Agent to mail to the shareholders of United of record at the Effective Time who did not previously submit a completed Election Form transmittal materials and other appropriate written instructions (collectively, a “Transmittal Letter”) (which shall specify that delivery shall be effected, and risk of loss and title to the certificate representing shares of United Stock prior to such Effective Time shall pass, only upon proper delivery of such certificates to the Exchange Agent and which shall be in such form and have such other provisions as FNB may reasonably specify). After the Effective Time and upon the proper surrender of certificate(s) representing shares of United Stock to the Exchange Agent, together with a properly completed and duly executed Transmittal Letter or, as applicable, Election Form, the holder of such certificate(s) shall be entitled to receive in exchange therefor the number of shares of FNB Stock and the cash to which such holder is entitled hereunder (including any cash payments to which such holder is entitled hereunder in respect of rights to receive fractional shares and any dividends or other distributions to which such holder is entitled pursuant to Section 1.8(c)), subject to any required withholding of applicable taxes. Neither FNB nor the Exchange Agent shall be obligated to deliver any of such payments in cash or stock until such holder surrenders the certificate(s) representing such holder’s shares. The certificate(s) so surrendered shall be duly endorsed as the Exchange Agent may require. If there is a transfer of ownership of any shares of United Stock not registered in the transfer records of United, the Merger Consideration shall be issued to the transferee thereof if the certificates representing such United Stock are presented to the Exchange Agent, accompanied by all documents required, in the reasonable judgment of FNB and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Any portion of the Exchange Fund which remains undistributed to the holders of certificates representing United Stock for six months after the Effective Time shall be delivered to FNB, upon demand, and any shareholders of United who have not previously complied with the provisions of this Article I shall thereafter look only to FNB for payment of their claim for FNB Stock and/or cash and any dividends or distributions with respect to FNB Stock. Any portion of the Exchange Fund remaining unclaimed by holders of United Stock five years after the Effective Time (or such earlier date immediately prior to such time as such portion would otherwise escheat to or become property of any government entity) shall, to the extent permitted by applicable law, become the property of FNB free and clear of any claims or interest of any person previously entitled therein. Any other provision of this Agreement notwithstanding, neither FNB nor the Exchange Agent shall be liable to any holder of shares of United Stock for any amounts paid or properly delivered in good faith to a public official pursuant to any applicable abandoned property law.

 

(b) Lost Certificates . Any shareholder of United whose certificate representing shares of United Stock has been lost, destroyed, stolen or otherwise is missing shall be entitled to receive a certificate representing the shares of FNB Stock and/or any cash, including cash in lieu of fractional shares, to which he or she is entitled in accordance with and upon compliance with conditions reasonably imposed by the Exchange Agent or FNB (including, without limitation, a requirement that the shareholder provide a lost instruments indemnity bond in form, substance and amount reasonably satisfactory to the Exchange Agent and FNB).

 

(c) Rights of Former United Shareholders . At the Effective Time, the stock transfer books of United shall be closed as to holders of United Stock immediately prior to the Effective Time and no transfer of United Stock

 

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by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 1.8(a) of this Agreement, each certificate theretofore representing shares of United Stock (other than shares to be canceled pursuant to Section 1.4(a) of this Agreement and Dissenting Shares) shall from and after the Effective Time represent for all purposes only the right to receive the Merger Consideration. If, after the Effective Time, certificates representing United Stock are presented to FNB or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article I. To the extent permitted by North Carolina law, former shareholders of record of United shall be entitled to vote after the Effective Time at any meeting of shareholders of FNB the number of whole shares of FNB Stock into which their respective shares of United Stock are converted, regardless of whether such holders have exchanged their certificates representing United Stock for certificates representing FNB Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by FNB on the FNB Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of FNB Stock to be issued pursuant to the Merger, but beginning at the Effective Time no dividend or other distribution payable to the holders of record of FNB Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate representing shares of United Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 1.8(a) of this Agreement; provided, however, that upon surrender of such United Stock certificate (or compliance with Section 1.8(b) of this Agreement), the FNB Stock certificate, together with all undelivered dividends or other distributions (without interest) and any cash payments to be paid for fractional share interests (without interest), shall be delivered and paid with respect to each share represented by such United Stock certificate.

 

1.9 Dissenting Shares. Notwithstanding any other provision of this Agreement to the contrary, shares of United Stock that are outstanding immediately prior to the Effective Time and that are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with Article 13 of the North Carolina Business Corporation Act (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of the appraised value of such shares held by them in accordance with the provisions of Article 13 of the North Carolina Business Corporation Act, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares under Article 13 of the North Carolina Business Corporation Act 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 1.8 of the certificate or certificates that, immediately prior to the Effective Time, evidenced such shares. United shall give FNB (i) prompt notice of any written demands for appraisal of any shares of United Stock, attempted withdrawals of such demands for appraisal or any other instruments served pursuant to Article 13 of the North Carolina Business Corporation Act and received by United relating to shareholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands under Article 13 of the North Carolina Business Corporation Act consistent with the obligations of United thereunder. United shall not, except with the prior written consent of FNB, (x) make any payment with respect to such demand, (y) offer to settle or settle any demand for appraisal, or (z) waive any failure to timely deliver a written demand for appraisal or timely take any other action to perfect appraisal rights in accordance with Article 13 of the North Carolina Business Corporation Act.

 

1.10 Treatment of United Stock Options . At the Effective Time, each unexpired and unexercised outstanding option, whether or not then vested or exercisable in accordance with its terms, to purchase shares of United Stock (the “United Options”) previously granted by United or its subsidiaries under the United Financial, Inc. 1999 Incentive Stock Option Plan or the United Financial, Inc. 1999 Nonstatutory Stock Option Plan (collectively, the “United Option Plan”) shall be cancelled and converted into the right to receive from FNB, within 10 days following the Effective Time, cash in an amount equal to the product of (a) $14.25 minus the exercise price per share of such United Option, times (b) the number of shares of United Stock that may be purchased upon exercise of such United Option (whether or not then exercisable). Prior to (but effective at) the

 

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Effective Time, United shall use its best efforts to (i) obtain any consents from all holders of Company Options and (ii) make any amendment to the terms of such stock option or compensation plans or arrangements that, in the case of either clause (i) or (ii), are necessary to give effect to the transactions contemplated by this Section 1.10. Immediately prior to the Effective Time, United shall terminate the United Option Plan effective as of the Effective Time.

 

1.11 Closing . The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Schell Bray Aycock Abel & Livingston P.L.L.C. in Greensboro, North Carolina, or at such other place as FNB shall designate, on a date mutually agreeable to United and FNB (the “Closing Date”) after the expiration of any and all required waiting periods following the effective date of all required approvals of the Merger by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the North Carolina Commissioner of Banks (the “Commissioner”) and any other governmental or regulatory authorities (as soon as practicable, but in no event to be more than 60 days following the expiration of all such required waiting periods). At the Closing, FNB and United shall take such actions (including, without limitation, the delivery of certain closing documents and the execution of Articles of Merger under North Carolina law) as are required herein and as otherwise shall be required by law to consummate the Merger and cause it to become effective.

 

1.12 Effective Time . Subject to satisfaction or waiver of all conditions precedent set forth in this Agreement, the Merger shall become effective (the “Effective Time”) on the date and at the time on which Articles of Merger containing the Plan of Merger and the other provisions required by, and executed in accordance with applicable North Carolina and applicable federal law shall have been accepted for filing by the Secretary of State of the State of North Carolina (or such later time as may be specified in the Articles of Merger); provided, however, that unless otherwise mutually agreed upon by the parties hereto, the Effective Time shall in no event be more than ten days following the Closing Date.

 

1.13 Further Assurances . If at any time after the Effective Time FNB shall consider or be advised that any further deeds, assignments or assurances in law or any other actions are necessary, desirable or proper to vest, perfect or confirm of record or otherwise, in the Surviving Corporation, the title to any property or rights of United acquired or to be acquired by reason of, or as a result of, the Merger, United, its subsidiaries and their officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights in FNB and otherwise to carry out the purpose of this Agreement, and the officers and directors of FNB are fully authorized and directed in the name of United or otherwise to take any and all such actions.

 

ARTICLE II. REPRESENTATIONS AND WARRANTIES OF UNITED

 

Except as otherwise specifically provided herein or as “Previously Disclosed” to FNB, United hereby makes the following representations and warranties to FNB. (“Previously Disclosed” shall mean, as to United, the disclosure of information in a letter delivered by United to FNB specifically referring to this Agreement and arranged in sections corresponding to the sections, subsections and items of this Agreement applicable thereto, and which letter has been delivered prior to the execution of this Agreement. Information shall be deemed Previously Disclosed for the purpose of a given section, subsection or item of this Agreement only to the extent that a specific reference thereto is made in connection with disclosure of such information at the time of such delivery.)

 

2.1 Corporate Organization, Capacity and Authority.

 

(a) Organization . United is a corporation duly organized and validly existing under the laws of the State of North Carolina and is registered with the Commissioner as a bank holding company and with the Federal Reserve Board as a bank holding company under the Bank Holding Company Act of 1956, as amended.

 

(b) Subsidiaries . United has one wholly owned subsidiary, Alamance Bank, a North Carolina banking corporation. Alamance Bank is the successor-in-interest to Alamance National Bank, a national banking

 

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corporation. All references in this Agreement to Alamance Bank shall also refer, as appropriate in the context, to Alamance National Bank. Alamance Bank has one wholly owned subsidiary, Premier Investment Services, Inc., a North Carolina corporation (“Premier”). Alamance Bank and Premier are sometimes referred to in this Agreement as the subsidiaries of United. Other than Alamance Bank and Premier, United has no subsidiaries, direct or indirect, and does not own, directly or indirectly, any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity, except for equity issues reflected in United’s investment portfolio and securities held in a fiduciary capacity.

 

(c) Organization of Subsidiaries. Each of United’s subsidiaries is duly organized and validly existing under the laws of the State of North Carolina, and all of the outstanding capital stock of each such subsidiary is owned of record and beneficially, free and clear of all security interests and claims, by United or Alamance Bank. All of the outstanding shares of capital stock of each of United’s subsidiaries are duly authorized, validly issued, fully paid and nonassessable except to the extent of assessability as set forth in N.C. Gen. Stat. § 53-42. Alamance Bank has not received any notice of impairment from the Commissioner pursuant to N.C. Gen. Stat. § 53-42.

 

(d) Power and Authority . Each of United and its subsidiaries has all requisite power and authority (corporate and other) to own, lease and operate its properties and to carry on its business as it is now being conducted, is duly qualified to do business and is in good standing in each other jurisdiction in which the character of the properties owned, leased or operated by it therein or in which the transaction of its business makes such qualification necessary, except where failure so to qualify would not have a Material Adverse Effect (as defined herein) on United and its subsidiaries, and, to the best knowledge and belief of the management of United, is not transacting business or operating any properties owned or leased by it in violation of any provision of federal, state or local law or any rule or regulation promulgated thereunder, which violation would have a Material Adverse Effect on United and its subsidiaries. For purposes of this Article II, “Material Adverse Effect” shall mean: (a) with respect to references to United, any change in the business of United that is or could be materially adverse to the financial condition, results of operations, prospects, business, assets, investments, properties or operations of United, or (b) with respect to references to United and its subsidiaries, any change in the business of United or its subsidiaries that is or could be materially adverse to the financial condition, results of operations, prospects, business, assets, loan portfolio, investments, properties or operations of United and its subsidiaries considered as one enterprise.

 

(e) Constituent Documents. United has previously delivered to FNB true, accurate and complete copies of the currently effective charter and bylaws or equivalent organizational documents of each of United and its subsidiaries, including all amendments and proposed amendments thereto.

 

2.2 Capital Stock . The authorized capital stock of United consists of 10,000,000 shares of common stock, $1.00 par value per share, of which 1,640,565 shares are issued and outstanding as of May 4, 2005, and 3,000,000 shares of preferred stock, no par value, of which no shares are issued and outstanding. Other than the United Stock, United has no outstanding class of capital stock. Each outstanding share of United Stock has been duly authorized and validly issued, is fully paid and nonassessable, has been issued in compliance with applicable federal and state securities laws and has not been issued in violation of the preemptive rights of any shareholder.

 

2.3 Principal Shareholders . Except as Previously Disclosed, there are no persons or entities known to United that own beneficially, directly or indirectly, more than 5% of the outstanding shares of United Stock.

 

2.4 Convertible Securities, Options, Etc. Except for the United Option Plan and the stock options granted thereunder, United does not have any outstanding (i) securities or other obligations (including debentures or other debt instruments) which are convertible into shares of United Stock or any other securities of United, (ii) options, warrants, rights, calls or other commitments of any nature which entitle any person to receive or acquire any shares of United Stock or any other securities of United, or (iii) plan, agreement or other arrangement pursuant to which shares of United Stock or any other securities of United or options, warrants, rights, calls or other commitments of any nature pertaining thereto, have been or may be issued.

 

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2.5 Authorization and Validity of Agreement . This Agreement has been duly and validly approved by United’s Board of Directors. Subject only to approval of the Plan of Merger by the shareholders of United, (i) United has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described herein, (ii) all corporate proceedings and approvals required to be taken to authorize United to enter into this Agreement and to perform its obligations and agreements and to carry out the transactions described herein have been duly and properly taken, and (iii) this Agreement constitutes the valid and binding agreement of United enforceable in accordance with its terms (except to the extent enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect which affect creditors’ rights generally, (B) legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (C) general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

 

2.6 Validity of Transactions; Absence of Required Consents or Waivers . Provided the required approvals of United’s shareholders and of governmental or regulatory authorities are obtained, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by United with any of its obligations or agreements contained herein, will: (i) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, the Articles of Incorporation or bylaws or the equivalent organizational documents of United or any subsidiary, or any material contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding (oral or written) to which United or any subsidiary is bound or by which it or its business, capital stock or any of its properties or assets may be affected; (ii) result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of the properties or assets of United or any subsidiary; (iii) violate any applicable federal or state statute, law, rule or regulation, or any judgment, order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; (iv) result in the acceleration of any obligation or indebtedness of United or any subsidiary; or (v) interfere with or otherwise adversely affect the ability of United to carry on its business as presently conducted, or interfere with or otherwise adversely affect the ability of FNB to carry on such business after the Effective Time. No consents, approvals or waivers are required to be obtained from any person or entity in connection with United’s execution and delivery of this Agreement, or the performance of its obligations or agreements or the consummation of the transactions described herein, except for required approvals of United’s shareholders as described in Section 7.1(a) below and of governmental or regulatory authorities as described in Section 7.1(d) below and approvals previously obtained.

 

2.7 Books and Records . The books of account of each of United and its subsidiaries have been maintained in material compliance with all applicable legal and accounting requirements and in accordance with good business practices, and such books of account are complete and reflect accurately in all material respects United’s and its subsidiaries’, respectively, items of income and expense and all of its assets, liabilities and shareholders’ equity. The minute books of each of United and its subsidiaries accurately reflect in all material respects the corporate actions which its respective shareholders and board of directors, and all committees thereof, have taken during the time periods covered by such minute books. All such minute books have been or will be made available to FNB and its representatives.

 

2.8 Regulatory Reports . Since January 1, 2001, each of United and Alamance Bank has filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed with (i) the FDIC, (ii) the Commissioner and (iii) any other governmental or regulatory authorities having jurisdiction over United or Alamance Bank except to the extent that failure to file such reports, registrations and statements would not have a Material Adverse Effect on United and its subsidiaries. All such reports, registrations and statements filed by United or Alamance Bank with the FDIC, the Commissioner or other such regulatory authority are collectively referred to herein as the “United Reports.” As of their respective dates, the United Reports complied in all material respects with all the statutes, rules and regulations enforced or promulgated by the regulatory authority with which they were filed and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements

 

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therein, in light of the circumstances under which they were made, not misleading; and neither United nor Alamance Bank has been notified that any such United Reports were deficient as to form or content. Following the date of this Agreement, United shall deliver to FNB, simultaneous with the filing thereof, a copy of each report, registration, statement or other regulatory filing made thereafter by United or Alamance Bank, with the FDIC, the Commissioner or any other such regulatory authority.

 

2.9 SEC Filings; Financial Statements.

 

(a) SEC Filings . United has filed and made available to FNB all forms, reports and documents required to be filed by United with the Securities and Exchange Commission (the “SEC”) since June 30, 2002 (collectively, the “United SEC Reports”) and Alamance Bank has filed, and United has made available to FNB, all forms, reports and documents required to be filed by Alamance Bank with the Office of the Comptroller of the Currency (the “OCC”) pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”), since December 31, 1997 and prior to December 31, 2002 (collectively, the “Alamance SEC Reports”). The United SEC Reports and the Alamance SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the 1934 Act and the Securities Act of 1933, as amended (the “1933 Act”), 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) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such United SEC Reports or Alamance SEC Reports or necessary in order to make the statements in such United SEC Reports or Alamance SEC Reports, in light of the circumstances under which they were made, not misleading.

 

(b) Financial Statements . United has filed with the SEC and made available to FNB the following financial statements (collectively, the “United Financial Statements”): (i) its consolidated balance sheets as of December 31, 2004 and 2003 and its consolidated statements of operations, changes in shareholders’ equity and cash flows for the years ended December 31, 2004, 2003 and 2002, together with notes thereto, all as audited by Larrowe & Company, PLC, independent certified public accountants; (ii) its balance sheets as of March 31, 2005 and 2004, and the related statements of income for the three-month periods then ended. Following the date of this Agreement, United promptly will deliver to FNB all other annual or interim financial statements prepared by or for United. The United Financial Statements (including any related notes and schedules thereto) (x) are in accordance with United’s books and records, and (y) except as stated therein, were prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated and present fairly United’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified therein subject, in the case of unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein, which adjustments will not be material in amount or effect.

 

2.10 Tax Returns and Other Tax Matters . (i) Each of United and its subsidiaries has timely filed or caused to be filed, or obtained proper extensions of time for filing, all federal, state and local income tax returns and reports which are required by law to have been filed, and all such returns and reports were true, correct and complete in all material respects and contained all material information required to be contained therein; (ii) all federal, state and local income, profits, franchise, sales, use, occupation, property, excise, withholding, employment and other taxes (including interest and penalties), charges and assessments which have become due from or been assessed or levied against United, any subsidiary or their respective properties have been fully paid or, if not yet due, a reserve or accrual which is reasonably believed by the management of United to be adequate in all material respects for the payment of all such taxes to be paid and the obligation for such unpaid taxes is reflected on the United Financial Statements; (iii) tax returns and reports of United and its subsidiaries have not been subject to audit by the Internal Revenue Service (the “IRS”) or the North Carolina Department of Revenue in the last seven years and neither United nor any subsidiary has received any indication of the pendency of any audit or examination in connection with any such tax return or report or has any knowledge that any such return or report is subject to adjustment; and (iv) neither United nor any subsidiary has executed any waiver or extended the statute of limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax.

 

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2.11 Absence of Material Adverse Changes or Certain Other Events.

 

(a) Since December 31, 2004, each of United and its subsidiaries have conducted its respective business only in the ordinary course, and there has been no Material Adverse Effect, and there has occurred no event or development and there currently exists no condition or circumstance which, with the lapse of time or otherwise, may or could cause, create or result in a Material Adverse Effect, on United and its subsidiaries.

 

(b) Since December 31, 2004, and other than in the ordinary course of its business, neither United nor any subsidiary has incurred any material liability or engaged in any material transaction or entered into any material agreement, increased the salaries, compensation or general benefits payable to its employees, suffered any loss, destruction or damage to any of its respective properties or assets, or made a material acquisition or disposition of any assets or entered into any material contract or lease. For purposes of this Section 2.11(b), “material” means material to United and its subsidiaries considered as one enterprise.

 

2.12 Absence of Undisclosed Liabilities . Neither United nor any subsidiary has any liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute, contingent or otherwise, whether due or to become due (including, without limitation, tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (i) those reflected in the United Financial Statements, or (ii) obligations or liabilities incurred in the ordinary course of its business since December 31, 2004 and which are not, individually or in the aggregate, material to United and its subsidiaries considered as one enterprise. No facts or circumstances exist that could reasonably be expected to serve as the basis for any other liabilities of United or any subsidiary.

 

2.13 Litigation and Compliance with Law.

 

(a) There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the best knowledge and belief of management of United, any facts or circumstances which reasonably could result in such), including, without limitation, any such action by any governmental or regulatory authority, which currently exist or are ongoing, pending or, to the best knowledge and belief of management of United, threatened, contemplated or probable of assertion, against, relating to or otherwise affecting United, any subsidiary or any of their respective properties, assets or employees which, if determined adversely, could result in liability on the part of United or any subsidiary for, or subject United or any subsidiary to, material monetary damages, fines or penalties or an injunction, or which could have a Material Adverse Effect on United and its subsidiaries or on United’s ability to consummate the Merger.

 

(b) Except for such licenses, permits, orders, authorizations or approvals (“Permits”) the absence of which would not have a Material Adverse Effect on United or its subsidiaries, each of United and its subsidiaries has all Permits of any federal, state, local or foreign governmental or regulatory body that are material to or necessary for the conduct of its respective business or to own, lease and operate its respective properties. Except as would not have a Material Adverse Effect on United and its subsidiaries, all such Permits are in full force and effect and no violations are or have been recorded in respect of any such Permits. No proceeding is pending or, to the best knowledge and belief of management of United, threatened or probable of assertion to suspend, cancel, revoke or limit any Permit.

 

(c) Neither United nor any subsidiary is subject to any supervisory agreement, enforcement order, writ, injunction, capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any regulatory or other governmental authority (including, without limitation, the Federal Reserve Board, the FDIC or the Commissioner) relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or otherwise; there are no judgments, orders, stipulations, injunctions, decrees or awards against United or any subsidiary that in any manner limit, restrict, regulate, enjoin or prohibit any present or past business or practice of United or any subsidiary; and neither United nor any subsidiary has been advised or has any reason to believe that any regulatory or other governmental authority or any court is contemplating, threatening or requesting the issuance of any such agreement, order, injunction, directive, memorandum, judgment, stipulation, decree or award.

 

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(d) Neither United nor any subsidiary is in violation or default under, and each has complied with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any court or federal, state, municipal or other governmental or regulatory authority having jurisdiction or authority over it or its business operations, properties or assets (including, without limitation, all provisions of North Carolina law relating to usury, the Consumer Credit Protection Act, and all other laws and regulations applicable to extensions of credit) except for any such violation, default or noncompliance as does not or would not have a Material Adverse Effect on United and its subsidiaries, and, to the best knowledge and belief of management of United, there is no basis for any claim by any person or authority for compensation, reimbursement or damages or otherwise for any violation of any of the foregoing.

 

2.14 Real Properties . United has Previously Disclosed to FNB a listing of all real property owned or leased by United or any subsidiary (the “Real Property”) and all leases pertaining to any such Real Property to which United or any subsidiary is a party (the “Real Property Leases”). With respect to all Real Property, United or any subsidiary has good and marketable fee simple title to, or a valid and subsisting leasehold interest in, such Real Property and owns the same free and clear of all mortgages, liens, leases, encumbrances, title defects and exceptions to title other than (i) the lien of current taxes not yet due and payable, and (ii) such imperfections of title and restrictions, covenants and easements (including utility easements) which do not materially affect the value of the Real Property and which do not and will not materially detract from, interfere with or restrict the present or future use of the properties subject thereto or affected thereby. With respect to each Real Property Lease (i) such lease is valid and enforceable in accordance with its terms, (ii) there currently exists no circumstance or condition which constitutes an event of default by United or any subsidiary (as lessor or lessee) or its respective lessor or which, with the passage of time or the giving of required notices will or could constitute such an event of default, and (iii) subject to any required consent of United’s lessor, each such Real Property Lease may be assigned to FNB and the execution and delivery of this Agreement does not constitute an event of default thereunder. To the best knowledge and belief of management of United, the Real Property complies with all applicable federal, state and local laws, regulations, ordinances or orders of any governmental authority, including those relating to zoning, building and use permits, except for such noncompliance as does not or would not have a Material Adverse Effect on United and its subsidiaries, and the Real Property may be used under applicable zoning ordinances for commercial banking facilities as a matter of right rather than as a conditional or nonconforming use. All improvements and fixtures included in or on the Real Property are in good condition and repair, ordinary wear and tear excepted, and there does not exist any condition which materially adversely affects the economic value thereof or materially adversely interferes (or will interfere after the Merger) with the contemplated use thereof.

 

2.15 Loans, Accounts, Notes and Other Receivables.

 

(a) All loans, accounts, notes and other receivables reflected as assets on the books and records of United and its subsidiaries (i) have resulted from bona fide business transactions in the ordinary course of operations of United and its subsidiaries, (ii) were made in accordance with the standard loan policies and procedures of United and its subsidiaries, and (iii) are owned by United or a subsidiary free and clear of all liens, encumbrances, assignments, participation or repurchase agreements or other exceptions to title or to the ownership or collection rights of any other person or entity.

 

(b) All of the records of United and its subsidiaries regarding all outstanding loans, accounts, notes and other receivables, and all other real estate owned, are accurate in all material respects, and, with respect to such loans the loan documentation of which indicate are secured by any real or personal property or property rights (“Loan Collateral”), such loans are in all material respects secured by valid, perfected and enforceable liens on all such Loan Collateral having the priority described in the records of such loan. Neither United nor any subsidiary has engaged in any form of indirect lending and no such indirect loans are outstanding.

 

(c) To the best knowledge and belief of management of United, each loan reflected as an asset on the books of United and its subsidiaries and each guaranty therefor, is the legal, valid and binding obligation of the obligor or guarantor thereon, and no defense, offset or counterclaim has been asserted with respect to any such loan or guaranty.

 

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(d) United has Previously Disclosed to FNB (i) a written listing of each loan, extension of credit or other asset of United or any subsidiary which, as of December 31, 2004, is classified by the FDIC, the OCC or the Commissioner as “Loss,” “Doubtful,” “Substandard” or “Special Mention” (or otherwise by words of similar import), or which it has designated as a special asset or for special handling or placed on any “watch list” because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, and (ii) a written listing of each loan or extension of credit that, as of December 31, 2004, was past due as to the payment of principal or interest or both, or as to which any obligor thereon (including the borrower or any guarantor) otherwise was in default, is the subject of a proceeding in bankruptcy or otherwise has indicated any inability or intention not to repay such loan or extension of credit. Each such listing is accurate and complete in all material respects as of the date indicated.

 

(e) As of December 31, 2004, United’s, or any subsidiary’s, reserve for possible loan losses (the “Loan Loss Reserve”) has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of the FDIC and the Commissioner and, in the best judgment of management of United, (i) is reasonable in view of the size and character of its loan portfolio, current economic conditions and other relevant factors, and (ii) is adequate to provide for losses relating to or the risk of loss inherent in its loan portfolio. At December 31, 2004, United’s Loan Loss Reserve was $1,545,808 and at March 31, 2005, United’s Loan Loss Reserve was $1,646,615.

 

2.16 Securities Portfolio and Investments . Except as Previously Disclosed, all securities owned by United or any subsidiary (whether owned of record or beneficially) are held free and clear of all mortgages, liens, pledges, encumbrances or any other restriction or rights of any other person or entity, whether contractual or statutory, which would materially impair the ability of United or any subsidiary to dispose freely of any such security or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which United or any subsidiary is a party with respect to the voting of any such securities. With respect to all “repurchase agreements” to which United or any subsidiary has “purchased” securities under agreement to resell, United or such subsidiary has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed that is secured by such collateral. Except for fluctuations in the market values of its investment securities, since December 31, 2004, there has been no significant deterioration or material adverse change in the quality, or any material decrease in the value, of United’s securities portfolio as a whole.

 

2.17 Personal Property and Other Assets . All tangible personal property of United or any subsidiary material to the business operations of United and such subsidiary (including, without limitation, all banking equipment, data processing equipment, vehicles, and all other tangible personal property located in any office of or used by United or such subsidiary in the operation of its business) is owned or leased by United or such subsidiary free and clear of all liens, encumbrances, leases, title defects or exceptions to title other than such as are not material in character, amount or extent, and which do not materially detract from the value of, or interfere with the present or future use or ability to convey, the property subject thereto or affected thereby. All of United or any subsidiary’s tangible personal property material to its business is in good operating condition and repair, ordinary wear and tear excepted.

 

2.18 Patents and Trademarks . United and its subsidiaries own, possess or have the right to use any and all patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary and other confidential information necessary to conduct their business as now conducted; and neither United nor any subsidiary has violated, and currently is not in conflict with, any patent, license, trademark, trade name, copyright or proprietary right of any other person or entity.

 

2.19 Environmental Matters.

 

(a) United has Previously Disclosed to FNB copies of all written reports, correspondence, notices or other materials, if any, in its or any subsidiary’s possession pertaining to environmental surveys or assessments of the

 

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Real Property or any of its Loan Collateral and any improvements thereon, or to any violation of “Environmental Laws” (as defined below) on, affecting or otherwise involving the Real Property or any Loan Collateral.

 

(b) There has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any “Hazardous Substances” (as defined below) by any person prior to the date hereof on, from or relating to the Real Property or, to the best knowledge and belief of management of United, the Loan Collateral, which constitutes a violation of any Environmental Laws.

 

(c) Neither United nor any subsidiary has violated any federal, state or local law, rule, regulation, order, permit or other requirement relating to health, safety or the environment or imposing liability, responsibility or standards of conduct applicable to environmental conditions, and there has been no violation of any Environmental Laws (as defined in Section 2.19(f) below) (including, to the best knowledge and belief of management of United, any violation with respect to or relating to any Loan Collateral) by any other person or entity for whose liability or obligation with respect to any particular matter or violation United or any subsidiary is or may be responsible or liable, except to the extent any violations of which, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries.

 

(d) Neither United nor any subsidiary is subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to the Real Property or, to the best knowledge and belief of management of United, any Loan Collateral by any person or entity.

 

(e) No facts, events or conditions relating to the Real Property or, to the best knowledge and belief of management of United, any Loan Collateral, or the operations of United or any subsidiary, will prevent, hinder or limit continued compliance with Environmental Laws, or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

 

(f) For purposes of this Agreement, “Environmental Laws” shall include:

 

(i) all federal, state and local statutes, regulations, ordinances, orders, decrees, and similar provisions having the force or effect of law,

 

(ii) all contractual agreements, and

 

(iii) all common law

 

concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control, emergency removal, clean-up or remediation of any Hazardous Substances (including without limitation the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendment and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, any “Superfund” or “Superlien” law, the Americans with Disabilities Act, and the Occupational Safety and Health Act), as such may now or at any time hereafter be defined or in effect.

 

(g) For purposes of this Agreement, “Hazardous Substances” shall include hazardous, toxic or otherwise regulated materials, substances or wastes; chemical substances or mixtures; pesticides; pollutants; contaminants;

 

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toxic chemicals; oil or other petroleum products, byproducts, or constituents (including but not limited to crude oil, diesel oil, fuel oil, gasoline, lubrication oil, oil refuse, oil mixed with other waste, oil sludge, and all other liquid hydrocarbons regardless of specific gravity); asbestos or asbestos containing material; flammable explosives; polychlorinated biphenyls (“PCBs”) or any material containing PCBs; radioactive materials; biological micro organisms, viruses, fungi, spores; environmental tobacco smoke; radon or radon gas; formaldehyde or any material containing formaldehyde; fumigants; any material or substance comprising or contributing to conditions known as “sick building syndrome,” “building-related illness” or similar conditions or exposures; and/or any hazardous, toxic, regulated or dangerous waste, substance or material defined as such by the United States Environmental Protection Agency or any other federal, state or local governmental agency or political subdivision thereof, or for the purpose of or by any Environmental Laws, as now or at any time hereafter may be in effect.

 

2.20 Brokerage or Finders’ Commissions . All negotiations relative to this Agreement and the transactions described herein have been carried on by United or its representative, The Carson Medlin Company (“Carson Medlin”), directly with FNB or its representatives, and no person or firm other than Carson Medlin has been retained by or has acted on behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, United or its Board of Directors, as a broker, finder or agent or has performed similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein.

 

2.21 Material Contracts.

 

(a) Except as Previously Disclosed, neither United nor any subsidiary is a party to or bound by any agreement, other than loans made in the ordinary course of business, (i) involving money or other property in an amount or with a value in excess of $50,000, (ii) which calls for the provision of goods or services to United or any subsidiary and cannot be terminated without material penalty upon written notice to the other party thereto, (iii) which is material to United or any subsidiary and was not entered into in the ordinary course of business, (iv) which involves hedging, options or any similar trading activity, or interest rate exchanges or swaps, (v) which commits United or any subsidiary to extend any loan or credit (with the exception of letters of credit, lines of credit and loan commitments extended in the ordinary course of a subsidiary’s business), (vi) which involves the purchase or sale of any assets of United or any subsidiary, or the purchase, sale, issuance, redemption or transfer of any capital stock or other securities of United or any subsidiary, or (vii) with any director, officer or principal shareholder of United or any subsidiary (including, without limitation, any consulting agreement, but not including any agreement relating to loans or other banking services which were made in the ordinary course of its business and on substantially the same terms and conditions as were prevailing at that time for similar agreements with unrelated persons).

 

(b) Neither United nor any subsidiary is in default, and there has not occurred any event which with the lapse of time or giving of notice or both would constitute such a default, under any contract, lease, insurance policy, commitment or arrangement to which it is a party or by which it or its property is or may be bound or affected or under which it or its property receives benefits.

 

2.22 Employment Matters; Employee Relations.

 

(a) Each of United and its subsidiaries (i) has paid in full to or accrued on behalf of all its respective directors, officers and employees all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services rendered, including all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services performed by them to the date of this Agreement and all vacation pay, sick pay, severance pay and other amounts promised to the extent required by law or its existing policies or practices, and (ii) is in compliance in all material respects with all applicable federal, state and local laws, statutes, rules and regulations with regard to employment and employment practices, terms and conditions, and wages and hours and other compensation matters; and no person has, to the best knowledge and belief of management of

 

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United, asserted that United or any subsidiary is liable in any amount for any arrearages in wages or employment taxes or for any penalties for failure to comply with any of the foregoing.

 

(b) There is no action, suit or proceeding by any person pending or, to the best knowledge and belief of management of United, threatened against United or any subsidiary (or their employees), involving employment discrimination, harassment, wrongful discharge or similar claims. Neither United nor any subsidiary is a party to or bound by any collective bargaining agreement with any of its employees, any labor union or any other collective bargaining unit or organization. There is no pending or threatened labor dispute, work stoppage or strike involving United, any subsidiary, or any of their employees, or any pending or threatened proceeding in which it is asserted that United or any subsidiary has committed an unfair labor practice; and, neither United nor any subsidiary is aware of any activity involving it or any of its employees seeking to certify a collective bargaining unit or engaging in any other labor organization activity.

 

2.23 Employment Agreements; Employee Benefit Plans.

 

(a) United has Previously Disclosed to FNB a true and complete list of all bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans; all employment and severance contracts; all medical, dental, health, and life insurance plans; all vacation, sickness and other leave plans, disability and death benefit plans; and all other employee benefit plans, contracts, or arrangements maintained or contributed to by United or any subsidiary for the benefit of any employees, former employees, directors, former directors or any of their beneficiaries (collectively, the “Plans”). True and complete copies of all Plans, including, but not limited to, any trust instruments or insurance contracts, if any, forming a part thereof, and all amendments thereto, previously have been supplied to FNB. Neither United nor any subsidiary maintains, sponsors, contributes to or otherwise participates in any “Employee Benefit Plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), any “Multiemployer Plan” within the meaning of Section 3(37) of ERISA, or any “Multiple Employer Welfare Arrangement” within the meaning of Section 3(40) of ERISA. Each Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Code, has received or applied for a favorable determination letter from the IRS and United is not aware of any circumstances reasonably likely to result in the revocation or denial of any such favorable determination letter. All reports and returns with respect to the Plans (and any Plans previously maintained by United or any subsidiary) required to be filed with any governmental department, agency, service or other authority, including, without limitation, Internal Revenue Service Form 5500 (Annual Report), have been properly and timely filed.

 

(b) All “Employee Benefit Plans” maintained by or otherwise covering employees or former employees of United or any subsidiary currently are, and at all times have been, in compliance with all provisions and requirements of ERISA except those the noncompliance of which, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries. There is no pending or threatened litigation relating to any Plan or any such Plan previously maintained by United or any subsidiary. Neither United nor any subsidiary has engaged in a transaction with respect to any Plan that has subjected it, or absent the exemption under which the transaction was effected, would subject it to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

 

(c) United has delivered to FNB a true, correct and complete copy (including copies of all amendments thereto) of each of its retirement plans that is intended to be qualified under Section 401(a) of the Code (collectively, the “Retirement Plans”), together with true, correct and complete copies of the summary plan descriptions relating to the Retirement Plans, the most recent determination letters received from the IRS regarding the Retirement Plans, and the most recent Annual Reports (Form 5500 series) and related schedules, if any, for the Retirement Plans. The Retirement Plans are qualified under the provisions of Section 401(a) of the Code, the trusts under the Retirement Plans are exempt trusts under Section 501(a) of the Code, and determination letters have been issued or applied for with respect to the Retirement Plans to said effect, including determination letters covering the current terms and provisions of the Retirement Plans. There are no issues

 

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relating to said qualification or exemption of the Retirement Plans currently pending before the IRS, the United States Department of Labor, the Pension Benefit Guaranty Corporation or any court. The Retirement Plans and the administration thereof meet (and have met since the establishment of the Retirement Plans) the requirements of ERISA, the Code and all other laws, rules and regulations applicable to the Retirement Plans and do not violate (and since the establishment of the Retirement Plans have not violated) any of the provisions of ERISA, the Code and such other laws, rules and regulations, except to the extent such violation, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries. Without limiting the generality of the foregoing, all reports and returns with respect to the Retirement Plans required to be filed with any governmental department, agency, service or other authority have been properly and timely filed. There are no disputes or unresolved disagreements with respect to the Retirement Plans or the administration thereof currently existing between United, any subsidiary or any trustee or other fiduciary thereunder, and any governmental agency, any current or former employee of United, any subsidiary or beneficiary of any such employee or any other person or entity. No “reportable event” within the meaning of Section 4043(b) of ERISA has occurred at any time with respect to the Retirement Plans, other than those, when taken as a whole, that would not have a Material Adverse Effect on United or its subsidiaries.

 

(d) No liability under subtitle C or D of Title IV of ERISA has been or is expected to be incurred by United or any subsidiary with respect to the Retirement Plans or with respect to any other ongoing, frozen or terminated defined benefit pension plan currently or formerly maintained by United or any subsidiary. Neither United nor any subsidiary presently contributes to a “Multiemployer Plan” or has ever contributed to such a plan. All contributions required to be made pursuant to the terms of each of the Plans (including without limitation the Retirement Plans and any other “pension plan” (as defined in Section 3(2) of ERISA, provided such plan is intended to qualify under the provisions of Section 401(a) of the Code) maintained by United or any subsidiary have been timely made. Neither the Retirement Plans nor any other “pension plan” maintained by United or any subsidiary have an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither United nor any subsidiary has provided, and is not required to provide, security to any “pension plan” or to any “Single Employer Plan” pursuant to Section 401(a)(29) of the Code. Under the Retirement Plans and any other “pension plan” maintained by United or any subsidiary as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the plan’s most recent actuarial valuation) did not exceed the then current value of the assets of such plan, and there has been no material change in the financial condition of any such plan since the last day of the most recent plan year.

 

(e) There are no restrictions on the rights of United or any subsidiary to amend or terminate any Plan. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (except as otherwise specifically provided for or contemplated by the transactions described in this Agreement) (i) result in any payment to any person (including, without limitation, any severance compensation or payment, unemployment compensation, “golden parachute” or “change in control” payment, or otherwise) becoming due under any plan or agreement to any director, officer, employee or consultant, (ii) increase any benefits otherwise payable under any plan or agreement, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.

 

2.24 Insurance . United has in effect a “financial institutions bond” and such other policies of general liability, casualty, directors and officers liability, employee fidelity, errors and omissions and other property and liability insurance as have been Previously Disclosed to FNB (the “Policies”). The Policies provide coverage in such amounts and against such liabilities, casualties, losses or risks as is required by applicable law or regulation; and, in the judgment of management of United, the insurance coverage provided under the Policies is reasonable and adequate in all respects for United and its subsidiaries. Each of the Policies is in full force and effect and is valid and enforceable in accordance with its terms, and is underwritten by an insurer of recognized financial responsibility that is qualified to transact business in North Carolina; and United and its subsidiaries have taken all requisite actions (including the giving of required notices) under each such Policy to preserve all rights

 

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thereunder with respect to all matters. Neither United nor any subsidiary is in default under the provisions of, has received notice of cancellation or nonrenewal of or any premium increase on, or has any knowledge of any failure to pay any premium on or any inaccuracy in any application for any Policy. There are no pending claims under any Policy, and United has no knowledge of any facts or of the occurrence of any event that is reasonably likely to result in any such claim.

 

2.25 Insurance of Deposits . Alamance Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. The deposits of each depositor in Alamance Bank are insured by the FDIC to the maximum amount provided by law, all deposit insurance premiums due from Alamance Bank to the FDIC have been paid in full in a timely fashion, and, to the best knowledge and belief of United, no proceedings have been commenced or are contemplated by the FDIC or otherwise to terminate such insurance.

 

2.26 Compensation; Stock Ownership . United has Previously Disclosed (i) the name and current salary or wage rate for each present employee of United or its subsidiaries, (ii) the name of and number of shares of United Stock beneficially owned by each of the directors and officers of United and by any person or entity known to United to own beneficially 5% or more of United Stock, and (iii) the name, number and vesting schedule of outstanding options and restricted stock awards held by each person to whom a stock option or restricted stock award has been granted and currently is outstanding under any stock option or other plan of United, including, without limitation, the United Option Plan.

 

2.27 Affiliates . United will deliver to FNB within 15 days of the date hereof a listing of those persons deemed by United and its counsel as of the date of this Agreement to be “Affiliates” of United as that term is defined in Rule 405 promulgated under the 1933 Act, including persons, trusts, estates or other entities related to persons deemed to be Affiliates of United.

 

2.28 State Takeover Laws. United has taken all necessary action to exempt the transactions contemplated by this Agreement from any applicable “moratorium,” “control share,” “fair price,” “business combination,” or other anti-takeover laws and regulations of the State of North Carolina (collectively, “Takeover Laws”).

 

2.29 Obstacles to Regulatory Approval or Tax Treatment . To the best knowledge and belief of management of United, there exists no fact or condition relating to United or any subsidiary that may reasonably be expected to (i) prevent, impede or delay FNB or United from obtaining the regulatory approvals required to consummate transactions described herein, or (ii) prevent the Merger from qualifying to be a tax-free reorganization under Section 368(a)(1)(A) of the Code; and, if any such fact or condition becomes known to United, United shall promptly (and in any event within three days after obtaining such knowledge) communicate such fact or condition to the President of FNB.

 

2.30 Disclosure . To the best knowledge and belief of management of United, no written statement, certificate, schedule, list or other written information furnished by or on behalf of United at any time to FNB in connection with this Agreement (including without limitation the statements contained herein), when considered as a whole, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. Each document delivered or to be delivered by United to FNB is or will be a true and complete copy of such document, unmodified except by another document delivered by United.

 

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF FNB

 

Except as otherwise specifically described herein or as “Previously Disclosed” to United, FNB hereby makes the following representations and warranties to United. (“Previously Disclosed” shall mean, as to FNB, the disclosure of information in a letter delivered by FNB to United specifically referring to this Agreement and

 

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arranged in sections corresponding to the sections, subsections and items of this Agreement applicable thereto, and which letter has been delivered prior to the execution of this Agreement. Information shall be deemed Previously Disclosed for the purpose of a given section, subsection or item of this Agreement only to the extent a specific reference thereto is made in connection with disclosure of such information at the time of such delivery.)

 

3.1 Corporate Organization, Capacity and Authority.

 

(a) Organization. FNB is a corporation duly organized and validly existing under the laws of the State of North Carolina and is registered with the Federal Reserve Board as a bank holding company under the Bank Holding Company Act of 1956, as amended.

 

(b) Subsidiaries. FNB has two wholly owned subsidiaries, First National Bank and Trust Company, a national banking corporation (“First National”), and Dover Mortgage Company, a North Carolina corporation (“Dover”). First National has one wholly owned subsidiary, First National Investor Services, Inc., a North Carolina corporation (“FNIS”). First National, Dover and FNIS are sometimes referred to as the subsidiaries of FNB. Other than First National, Dover and FNIS, FNB has no subsidiaries, direct or indirect, and does not own, directly or indirectly, any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity, except for equity issues reflected in First National’s investment portfolio and securities held in a fiduciary capacity.

 

(c) Organization of Subsidiaries. First National is duly organized and validly existing under the laws of the United States. Each of Dover and FNIS is duly organized and validly existing under the laws of the State of North Carolina. Except as Previously Disclosed, all of the outstanding capital stock of each such subsidiary is owned of record and beneficially, free and clear of all security interests and claims, by FNB or First National. All of the outstanding shares of capital stock of each of FNB’s subsidiaries are duly authorized, validly issued, fully paid and nonassessable.

 

(d) Power and Authority. Each of FNB and its subsidiaries has all requisite power and authority (corporate and other) to own, lease and operate its properties and conduct its business as now being conducted, is duly qualified to do business and is in good standing in each other jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where failure so to qualify would not have a Material Adverse Effect (as defined herein) on FNB and its subsidiaries, and is not transacting business, or operating any properties owned or leased by it, in violation of any provision of federal or state law or any rule or regulation promulgated thereunder, which violation would have a Material Adverse Effect on FNB and its subsidiaries. For purposes of this Article III, “Material Adverse Effect” shall mean: (a) with respect to references to FNB, any change in the business of FNB that is or could be materially adverse to the financial condition, results of operations, prospects, business, assets, investments, properties or operations of FNB, or (b) with respect to references to FNB and its subsidiaries, any change in the business of FNB or its subsidiaries that is or could be materially adverse to the financial condition, results of operations, prospects, business, assets, loan portfolio, investments, properties or operations of FNB and its subsidiaries considered as one enterprise.

 

(e) Constituent Documents. FNB has previously delivered to United true, accurate and complete copies of the currently effective charter and bylaws or equivalent organizational documents of each of FNB and its subsidiaries, including all amendments and proposed amendments thereto.

 

3.2 Capital Stock . The authorized capital stock of FNB consists of 10,000,000 shares of FNB Stock, of which 5,603,553 shares are issued and outstanding as of April 29, 2005, and 200,000 shares of preferred stock, par value $10.00 per share, of which no shares are issued and outstanding. Each outstanding share of FNB Stock has been duly authorized and validly issued, is fully paid and nonassessable, has been issued in compliance with applicable federal and state securities laws and has not been issued in violation of the preemptive rights of any shareholder. The shares of FNB Stock issued to United’s shareholders pursuant to this Agreement, when issued

 

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