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AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 12, 2004
BY AND BETWEEN
FIRST COMMUNITY CORPORATION
AND
DUTCHFORK BANCSHARES, INC.
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April 12, 2004
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TABLE OF CONTENTS
Page No.
INTRODUCTORY
STATEMENT.......................................................1
ARTICLE I
DEFINITIONS.....................................................1
ARTICLE II THE
MERGER......................................................6
2.1
THE
MERGER......................................................6
2.2
CLOSING.........................................................6
2.3
EFFECTIVE
TIME..................................................6
2.4
EFFECTS OF
THE MERGER...........................................7
2.5
EFFECT ON
OUTSTANDING SHARES OF DFBS COMMON STOCK...............7
2.6
ELECTION
AND PRORATION PROCEDURES...............................8
2.7
EXCHANGE
PROCEDURES............................................11
2.8
EFFECT ON
OUTSTANDING SHARES OF FCCO COMMON STOCK..............13
2.9 DIRECTORS OF THE
SURVIVING CORPORATION AFTER THE EFFECTIVE TIME13
2.10
CERTIFICATE OF
INCORPORATION AND BYLAWS........................14
2.11
TREATMENT OF
STOCK OPTIONS.....................................14
2.12
DISSENTERS'
RIGHTS.............................................14
2.13
BANK
MERGER....................................................15
2.14
ALTERNATIVE
STRUCTURE..........................................15
2.15
COMPANY
RESTRICTED SHARES......................................15
ARTICLE III REPRESENTATIONS AND
WARRANTIES................................15
3.1
DISCLOSURE
LETTERS.............................................16
3.2
REPRESENTATIONS AND WARRANTIES OF
DFBS.........................16
3.3
REPRESENTATIONS AND WARRANTIES OF
FCCO.........................29
ARTICLE IV CONDUCT PENDING THE
MERGER....................................37
4.1
FORBEARANCES BY
DFBS...........................................37
4.2 FORBEARANCES BY
FCCO...........................................40
ARTICLE V
COVENANTS.....................................................41
5.1
ACQUISITION
PROPOSALS..........................................41
5.2
CERTAIN
POLICIES AND ACTIONS OF DFBS...........................42
5.3
ACCESS AND
INFORMATION.........................................42
5.4
APPLICATIONS;
CONSENTS.........................................43
5.5
ANTITAKEOVER
PROVISIONS........................................44
5.6
ADDITIONAL
AGREEMENTS..........................................44
5.7
PUBLICITY......................................................44
5.8
STOCKHOLDER
MEETINGS...........................................44
5.9
REGISTRATION OF FCCO COMMON
STOCK..............................46
5.10
AFFILIATE
LETTERS..............................................47
5.11
NOTIFICATION OF
CERTAIN MATTERS................................47
5.12
EMPLOYEES,
DIRECTORS AND OFFICERS..............................47
5.13
INDEMNIFICATION................................................48
5.14
SECTION 16
MATTERS.............................................49
5.15
BOARD OF
DIRECTORS.............................................49
5.16
FINANCIAL
ABILITY..............................................49
ARTICLE VI CONDITIONS TO
CONSUMMATION....................................49
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6.1
CONDITIONS
TO EACH PARTY'S OBLIGATIONS.........................49
6.2
CONDITIONS
TO THE OBLIGATIONS OF FCCO..........................51
6.3
CONDITIONS
TO THE OBLIGATIONS OF DFBS..........................51
ARTICLE VII
TERMINATION.................................................52
7.1
TERMINATION....................................................52
7.2
DFBS
TERMINATION FEE...........................................53
7.3
EFFECT OF
TERMINATION..........................................54
ARTICLE VIII CERTAIN OTHER
MATTERS.......................................54
8.1
INTERPRETATION.................................................54
8.2
SURVIVAL.......................................................54
8.3
WAIVER;
AMENDMENT..............................................54
8.4
COUNTERPARTS...................................................55
8.5
GOVERNING
LAW..................................................55
8.6
EXPENSES.......................................................55
8.7
NOTICES........................................................55
8.8
ENTIRE
AGREEMENT; ETC..........................................56
8.9 SUCCESSORS AND
ASSIGNS; ASSIGNMENT.............................56
ii
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EXHIBITS
Exhibit A
Form of Voting
Agreement
Exhibit B
Form of
Non-Competition Agreement
Exhibit C
Plan of Bank
Merger
Exhibit D
Form of
Affiliate Letter
Exhibit E
Employment,
Consulting, and Non-Compete Agreement with J.
Thomas Johnson
Exhibit F
Employment,
Consulting, and Non-Compete Agreement with
Steve P. Sligh
Exhibit G
Termination and
Release Agreement
iii
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AGREEMENT AND PLAN OF MERGER
This is an
AGREEMENT AND PLAN OF MERGER, dated as of the 12th day of
April, 2004 ("AGREEMENT"), by and between
First Community Corporation, a South
Carolina corporation ("FCCO"), and
DutchFork Bancshares, Inc., a Delaware
corporation ("DFBS").
INTRODUCTORY STATEMENT
The Board
of Directors of each of FCCO and DFBS (i) has determined that
this Agreement and the business combination
and related transactions
contemplated hereby are advisable and in
the best interests of FCCO or DFBS, as
the case may be, and in the best long-term
interests of the stockholders of FCCO
or DFBS, as the case may be, and (ii) has
determined that this Agreement and the
transactions contemplated hereby are
consistent with, and in furtherance of, its
respective business strategies.
The
parties hereto intend that the Merger as defined herein shall
qualify
as a reorganization under the provisions of
Section 368(a) of the IRC for
federal income tax purposes.
FCCO and
DFBS each desire to make certain representations, warranties
and
agreements in connection with the business
combination and related transactions
provided for herein and to prescribe
various conditions to such transactions.
As a
condition and inducement to FCCO's willingness to enter into
this
Agreement, each of the members of the Board
of Directors of DFBS has entered
into (a) an agreement dated as of the date
hereof in the form of Exhibit A
pursuant to which he will vote his shares
of DFBS Common Stock in favor of this
Agreement and the transactions contemplated
hereby and (b) a Non-Competition
Agreement dated as of the date hereof in
the form of Exhibit B.
In
consideration of their mutual promises and obligations hereunder,
the
parties hereto adopt and make this
Agreement and prescribe the terms and
conditions hereof and the manner and basis
of carrying it into effect, which
shall be as follows:
ARTICLE I
DEFINITIONS
The
following terms are defined in this Agreement in the Section
indicated:
Defined
Term
Location of Definition
------------
----------------------
Articles
of Merger
Section 2.3
Bank
Merger
Section 2.13
Cash Consideration
Section 2.5(a)
Cash
Election
Section 2.6(b)
Cash
Election Shares
Section 2.6(b)
Cash
Proration Factor
Section 2.6(e)(i)(B)(1)
Certificate(s)
Section 2.6(c)
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Certificate Amendment
Section 3.3(c)(v)
Certificate of Merger
Section 2.3
Closing
Section 2.2
Closing
Date
Section 2.2
Continuing
Employee
Section 5.12(a)
Converted
Options
Section 2.11(a)
Determination Date
Article I
Disclosure
Letter
Section 3.1
Dissenters' Shares
Section 2.12
Effective
Time
Section 2.3
Election
Deadline
Section 2.6(c)
Election
Form
Section 2.6(a)
Exchange
Agent
Section 2.6(c)
Exchange
Ratio
Section 2.5(a)
Newberry
Federal
Section
2.13
DFBS
Preamble
DFBS
Employee Plans
Section 3.2(r)(i)
DFBS
Option
Section 2.11(a)
DFBS
Pension Plan
Section 3.2(r)(iii)
DFBS
Qualified Plan
Section 3.2(r)(iv)
DFBS's
D&O Policy
Section 5.13(c)
DFBS's
Reports
Section 3.2(g)
DFBS
Stockholder Meeting
Section
5.8(a)
Indemnified Party
Section 5.13(a)
Joint
Proxy Statement-Prospectus
Section 5.9(a)
Letter of
Transmittal
Section 2.7(a)
Mailing
Date
Section 2.6(a)
Merger
Section 2.1
Merger
Consideration
Section 2.5(a)
Mixed
Election
Section 2.6(b)
Non-Election
Section 2.6(b)
Non-Election Proration Factor
Section 2.6(e)(ii)(A)(2)
Non-Election Shares
Section 2.6(b)
Premium
Multiple
Section 5.13(c)
First
Community
Section 2.13
Registration Statement
Section 5.9(a)
Representative
Section 2.6(b)
Shortfall
Number
Section 2.6(e)(ii)
Stock
Consideration
Section 2.5(a)
Stock
Conversion Number
Section 2.6(d)
Stock
Election
Section 2.6(b)
Stock
Election Shares
Section 2.6(b)
Stock
Proration Factor
Section 2.6(e)(ii)(B)(2)
Surviving
Corporation
Section 2.1
FCCO
Preamble
2
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FCCO
Stockholder Meeting
Section 5.8(b)
FCCO's Reports
Section 3.3(g)
In
addition, for purposes of this Agreement:
"ACQUISITION PROPOSAL" means any proposal or offer with respect to
any of
the following (other than the transactions
contemplated hereunder): (i) any
merger, consolidation, share exchange,
business combination, or other similar
transaction involving DFBS or any of its
Subsidiaries; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or
other disposition of 25% or more of
DFBS's consolidated assets in a single
transaction or series of transactions;
(iii) any tender offer or exchange offer
for 25% or more of the outstanding
shares of DFBS's capital stock or the
filing of a registration statement under
the Securities Act in connection therewith;
or (iv) any public announcement of a
proposal, plan or intention to do any of
the foregoing or any agreement to
engage in an any of the foregoing.
"AGREEMENT" means this Agreement, as amended, modified or amended
and
restated from time to time in accordance
with its terms.
"BHC ACT"
means the Bank Holding Company Act of 1956, as amended.
"CRA"
means the Community Reinvestment Act.
"DGCL"
means the Delaware General Corporation Law.
"ENVIRONMENTAL LAW" means any federal, state or local law,
statute,
ordinance, rule, regulation, code, license,
permit, authorization, approval,
consent, order, directive, executive or
administrative order, judgment, decree,
injunction, or agreement with any
Governmental Entity relating to (i) the
protection, preservation or restoration of
the environment (which includes,
without limitation, air, water vapor,
surface water, groundwater, drinking water
supply, soil, surface land, subsurface
land, plant and animal life or any other
natural resource), or to human health or
safety as it relates to Hazardous
Materials, or (ii) the exposure to, or the
use, storage, recycling, treatment,
generation, transportation, processing,
handling, labeling, production, release
or disposal of, Hazardous Materials, in
each case as amended and as now in
effect. The term Environmental Law
includes, without limitation, the Federal
Comprehensive Environmental Response,
Compensation and Liability Act of 1980,
the Superfund Amendments and
Reauthorization Act of 1986, the Federal Water
Pollution Control Act of 1972, the Federal
Clean Air Act, the Federal Clean
Water Act, the Federal Resource
Conservation and Recovery Act of 1976, the
Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970 as it relates
to Hazardous Materials, the Federal
Hazardous Substances Transportation Act,
the Emergency Planning and Community
Right-To-Know Act, the Safe Drinking Water
Act, the Endangered Species Act, the
National Environmental Policy Act, the
Rivers and Harbors Appropriation Act or
any so-called "Superfund" or "Superlien"
law, each as amended and as now in
effect.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA
AFFILIATE" means any entity that is considered one employer
with
DFBS under Section 4001(b)(1) of ERISA or
Section 414 of the IRC.
"EXCHANGE
ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated
thereunder.
"EXCLUDED
SHARES" shall consist of (i) Dissenters' Shares, (ii) shares of
DFBS Common Stock held directly or
indirectly by FCCO (other than shares held in
a fiduciary capacity or in satisfaction of
a debt previously contracted), and
(iii) Ungranted Restricted Shares.
"FCCO
COMMON STOCK" means the common stock, par value $1.00 per share,
of
FCCO.
"FDIA"
means the Federal Deposit Insurance Act, as amended.
"FDIC"
means the Federal Deposit Insurance Corporation.
"FEDERAL
RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"FINAL
FCCO STOCK PRICE" shall mean the average of the closing sale
prices
of FCCO Common Stock as reported on the
Nasdaq SmallCap Market during the
Measurement Period; provided, however, that
in the event FCCO Common Stock does
not trade on any one or more of the trading
days during the Measurement Period,
any such date shall be disregarded in
computing the average closing sales price
and the average shall be based upon the
closing sales prices and number of days
on which FCCO Common Stock actually traded
during the Measurement Period.
"DFBS
COMMON STOCK" means the common stock, par value $.01 per share,
of
DFBS.
"GAAP"
means accounting principles generally accepted in the United
States
of America.
"GOVERNMENT REGULATOR" means any federal or state governmental
authority
charged with the supervision or regulation
of depository institutions or
depository institution holding companies or
engaged in the insurance of bank
deposits.
"GOVERNMENTAL ENTITY" means any court, administrative agency or
commission
or other governmental authority or
instrumentality.
"HAZARDOUS
MATERIAL" means any substance (whether solid, liquid or gas)
that is or could be detrimental to human
health or safety or to the environment,
currently or hereafter listed, defined,
designated or classified as hazardous,
toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental
Law, whether by type or by quantity,
including any substance containing any such
substance as a component. Hazardous
Material includes, without limitation, any
toxic waste, pollutant, contaminant,
hazardous substance, toxic substance,
hazardous waste, special waste, industrial
substance, oil or petroleum, or any
derivative or by-product thereof, radon,
radioactive material, asbestos,
asbestos-containing material, urea
formaldehyde foam insulation, lead and
polychlorinated biphenyl.
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"HOLA"
means the Home Owners Loan Act, as amended.
"IRC"
means the Internal Revenue Code of 1986, as amended.
"IRS"
means the Internal Revenue Service.
"KNOWLEDGE" means, with respect to a party hereto, actual knowledge
of the
members of the Board of Directors of that
party or any officer of that party
with the title ranking not less than senior
vice president.
"LIEN"
means any charge, mortgage, pledge, security interest, claim,
lien
or encumbrance.
"LOAN"
means a loan, lease, advance, credit enhancement, guarantee or
other extension of credit.
"LOAN
PROPERTY" means any property in which the applicable party (or
a
Subsidiary of it) holds a security interest
and, where required by the context,
includes the owner or operator of such
property, but only with respect to such
property.
"MATERIAL
ADVERSE EFFECT" means an effect which is material and adverse
to
the business, prospects, financial
condition, or results of operations of DFBS
or FCCO, as the context may dictate, and
its Subsidiaries taken as a whole;
PROVIDED, HOWEVER, that any such effect
resulting from any (i) changes in laws,
rules or regulations or generally accepted
accounting principles or regulatory
accounting requirements or interpretations
thereof that apply to FCCO or DFBS,
as the case may be, or to financial and/or
depository institutions generally,
(ii) changes in economic conditions
affecting financial institutions generally,
including but not limited to, changes in
the general level of market interest
rates, (iii) actions and omissions of FCCO
or DFBS taken with the prior written
consent of the other in contemplation of
the transactions contemplated hereby,
or (iv) direct effects of compliance with
this Agreement on the operating
performance of the parties, including
expenses incurred by the parties in
consummating the transactions contemplated
by this Agreement, shall not be
considered in determining if a Material
Adverse Effect has occurred.
"MEASUREMENT PERIOD" shall mean the 20 consecutive trading days
ending on
the fifth calendar day immediately prior to
the date on which the Effective Time
is to occur (such day, the "DETERMINATION
DATE").
"NASD"
means the National Association of Securities Dealers, Inc.
"PARTICIPATION FACILITY" means any facility in which the applicable
party
(or a Subsidiary of it) participates in the
management (including all property
held as trustee or in any other fiduciary
capacity) and, where required by the
context, includes the owner or operator of
such property, but only with respect
to such property.
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"PERSON"
means an individual, corporation, limited liability company,
partnership, association, trust,
unincorporated organization or other entity.
"SCBCA"
means the South Carolina Business Corporation Act of 1988, as
amended.
"SEC"
means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the
rules and regulations promulgated
thereunder.
"SUBSIDIARY" means a corporation, partnership, joint venture or
other
entity in which DFBS or FCCO, as the case
may be, has, directly or indirectly,
an equity interest representing 50% or more
of any class of the capital stock
thereof or other equity interests
therein.
"SUPERIOR
PROPOSAL" means an unsolicited, bona fide, written offer made
by
a third party to consummate an Acquisition
Proposal that DFBS's Board of
Directors determines in good faith, after
consulting with its outside legal
counsel and its financial advisor, would,
if consummated, result in a
transaction that is more favorable to the
stockholders of DFBS than the
transactions contemplated hereby (taking
into account the effects of Section 7.2
and all legal, financial, regulatory and
other aspects of the proposal and the
entity making the proposal).
"TAXES"
means all income, franchise, gross receipts, real and personal
property, real property transfer and gains,
wage and employment taxes.
"UNGRANTED
RESTRICTED SHARES" means shares of DFBS Common Stock held by a
trust that have not been granted as of the
date hereof as restricted stock
awards or otherwise under the DFBS 2001
Stock-Based Incentive Plan.
ARTICLE II
THE MERGER
2.1 THE
MERGER. Upon the terms and subject to the conditions set forth
in
this Agreement, DFBS will merge with and
into FCCO ("MERGER") at the Effective
Time. At the Effective Time, the separate
corporate existence of DFBS shall
cease. FCCO shall be the surviving
corporation (hereinafter sometimes referred
to in such capacity as the "SURVIVING
CORPORATION") in the Merger and shall
continue to be governed by the SCBCA and
its name and separate corporate
existence, with all of its rights,
privileges, immunities, powers and
franchises, shall continue unaffected by
the Merger.
2.2
CLOSING. The closing of the Merger (the "CLOSING") will take place
in
the offices of Nelson Mullins Riley &
Scarborough, LLP, Poinsett Plaza, Suite
900, 104 South Main Street, Greenville,
South Carolina at 10:00 a.m. on the date
designated by FCCO within 5 business days
following satisfaction or waiver of
the conditions to Closing set forth in
Article VI (other than those conditions
that by their nature are to be satisfied at
the Closing), or such later date as
the parties may otherwise agree (the
"CLOSING DATE").
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2.3
EFFECTIVE TIME. In connection with the Closing, FCCO shall duly
execute and deliver (a) a certificate of
merger (the "CERTIFICATE OF MERGER") to
the Delaware Secretary of State for filing
pursuant to the DGCL and (b) articles
of merger (the "ARTICLES OF MERGER") to the
South Carolina Secretary of State
for filing pursuant to the SCBCA. The
parties will make all other filings or
recordings required under the DGCL and the
SCBCA. The Merger shall become
effective at such time as the Articles of
Merger is duly filed with the South
Carolina Secretary of State or at such
later date or time as FCCO and DFBS agree
and specify in the Certificate of Merger
and the Articles of Merger (the date
and time the Merger becomes effective being
the "EFFECTIVE TIME").
2.4
EFFECTS OF THE MERGER. The Merger will have the effects set forth
in
the DGCL and the SCBCA. Without limiting
the generality of the foregoing, and
subject thereto, from and after the
Effective Time, FCCO shall possess all of
the properties, rights, privileges, powers
and franchises of DFBS and be subject
to all of the debts, liabilities and
obligations of DFBS.
2.5
EFFECT ON
OUTSTANDING SHARES OF DFBS COMMON STOCK.
(a) Subject to the provisions of SECTION 2.6 hereof, by virtue
of
the Merger, automatically and without any
action on the part of the holder
thereof, each share of DFBS Common Stock
issued and outstanding at the Effective
Time, other than Excluded Shares, shall
become and be converted into, at the
election of the holder as provided in and
subject to the limitations set forth
in this Agreement, either (i) a number of
shares of FCCO Common Stock equal to
the Exchange Ratio (as defined below) or
(ii) the right to receive $42.75 in
cash without interest (the "CASH
CONSIDERATION"). The Stock Consideration and
the Cash Consideration are referred to
herein collectively as the "MERGER
CONSIDERATION." The "Exchange Ratio" shall
be equal to 1.78125.
(b) Notwithstanding any other provision of this Agreement, no
fraction of a share of FCCO Common Stock
and no certificates or scrip therefor
will be issued in the Merger; instead, FCCO
shall pay to each holder of DFBS
Common Stock who would otherwise be
entitled to a fraction of a share of FCCO
Common Stock an amount in cash, rounded to
the nearest cent, determined by
multiplying such fraction by the Final FCCO
Stock Price.
(c) If, between the date of this Agreement and the Effective
Time,
the outstanding shares of FCCO Common Stock
shall have been changed into a
different number of shares or into a
different class by reason of any stock
dividend, subdivision, reclassification,
recapitalization, split, combination or
exchange of shares, the Exchange Ratio
shall be adjusted appropriately to
provide the holders of DFBS Common Stock
the same economic effect as
contemplated by this Agreement prior to
such event. If FCCO enters into an
agreement pursuant to which shares of FCCO
Common Stock would be converted
before the Effective Time into shares or
other securities or obligations of
another corporation, proper provision shall
be made in such agreement so that
each holder of DFBS Common Stock shall be
entitled to receive at the Effective
Time such number of shares or other
securities or amount of obligations of such
other corporation as such holder would be
entitled to receive if the Effective
Time had occurred immediately before the
consummation of such conversion,
subject to the right of this other
corporation "as successor to FCCO" under
Section 7.1(j).
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(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and
retired and shall cease to exist, and
no exchange or payment shall be made with
respect thereto. All shares of FCCO
Common Stock that are held by DFBS, if any,
other than shares held in a
fiduciary capacity or in satisfaction of a
debt previously contracted, shall be
canceled and shall constitute authorized
but unissued shares. In addition, no
Dissenters' Shares shall be converted into
shares of FCCO Common Stock pursuant
to this SECTION 2.5 but instead shall be
treated in accordance with the
provisions set forth in SECTION 2.12 of
this Agreement.
2.6
ELECTION AND
PRORATION PROCEDURES.
(a) An election form in such form as DFBS and FCCO shall
mutually
agree (an "ELECTION FORM") shall be mailed
on the Mailing Date (as defined
below) to each holder of record of shares
of DFBS Common Stock as of a record
date which shall be the same date as the
record date for eligibility to vote on
the Merger. The "MAILING DATE" shall be the
date on which proxy materials
relating to the Merger are mailed to
holders of shares of DFBS Common Stock.
FCCO shall make available Election Forms as
may be reasonably requested by all
persons who become holders of DFBS Common
Stock after the record date for
eligibility to vote on the Merger and prior
to the Election Deadline (as defined
herein), and DFBS shall provide to the
Exchange Agent all information reasonably
necessary for it to perform its obligations
as specified herein.
(b) Each Election Form shall entitle the holder of shares of
DFBS
Common 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 the Cash Consideration
with respect to some of such holder's
shares and the Stock Consideration with
respect to such holder's remaining
shares (a "MIXED ELECTION"), or (iv) make
no election or indicate that such
holder has no preference as to the receipt
of the Cash Consideration or the
Stock Consideration (a "NON-ELECTION").
Holders of record of shares of DFBS
Common Stock who hold such shares as
nominees, trustees or in other
representative capacities (a
"REPRESENTATIVE") may submit multiple Election
Forms, provided that such Representative
certifies that each such Election Form
covers all the shares of DFBS Common Stock
held by that Representative for a
particular beneficial owner. Shares of DFBS
Common Stock as to which a Cash
Election has been made (including pursuant
to a Mixed Election) are referred to
herein as "CASH ELECTION SHARES." Shares of
DFBS Common Stock as to which a
Stock Election has been made (including
pursuant to a Mixed Election) are
referred to herein as "STOCK ELECTION
Shares." Shares of DFBS Common Stock as to
which no election has been made are
referred to as "NON-ELECTION SHARES."
(c) To be effective, a properly completed Election Form must be
received by a bank or trust company
designated by FCCO and reasonably
satisfactory to DFBS (the "EXCHANGE AGENT")
on or before 5:00 p.m., Lexington,
South Carolina time, on the third business
day immediately preceding the DFBS
Stockholder Meeting (or such other time and
date as DFBS and FCCO 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
8
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completed only if accompanied by one or
more certificates theretofore
representing DFBS Common Stock
("CERTIFICATE(S)") (or customary affidavits and,
if required by FCCO pursuant to SECTION
2.7(I), indemnification regarding the
loss or destruction of such Certificates or
the guaranteed delivery of such
Certificates) representing all shares of
DFBS Common Stock covered by such
Election Form, together with duly executed
transmittal materials included with
the Election Form. Any DFBS stockholder 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 DFBS
stockholder 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
FCCO and DFBS that this Agreement has been
terminated. If a stockholder 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 and does not
submit a new properly executed Election
Form prior to the Election Deadline, the
shares of DFBS Common Stock held by such
stockholder shall be designated
Non-Election Shares. FCCO shall cause the
Certificates representing DFBS Common
Stock described in (ii) 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,
60% of the total number of shares of DFBS
Common Stock outstanding at the
Effective Time (the "Stock Conversion
Number") shall be converted into the Stock
Consideration and the remaining outstanding
shares of DFBS Common Stock (other
than the Excluded Shares) shall be
converted into the Cash Consideration.
(e) Within three business days after the later to occur of the
Election Deadline or the Effective Time,
FCCO shall cause the Exchange Agent to
effect the allocation among holders of DFBS
Common Stock of rights to receive
the Cash Consideration and the Stock
Consideration as follows:
(i) If the number of Stock Election Shares exceeds the Stock
Conversion Number, then:
(A) all Cash Election Shares and all Non-Election
Shares shall be converted into the right to
receive the Cash Consideration,
and
(B) each holder of Stock Election Shares will be
entitled to receive:
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<PAGE>14
(1) the number of shares of FCCO Common Stock
equal to the product obtained by
multiplying (a) the number of Stock Election
Shares held by such holder by (b) the
Exchange Ratio by (c) a fraction the
numerator of which is the Stock Conversion
Number and the denominator of which
is the Stock Election Number (the "Stock
Proration Factor"), and
(2) cash in an amount equal to the product
obtained by multiplying (a) the number of
Stock Election Shares held by such
holder by (b) the Cash Consideration by (c)
one minus the Stock Proration
Factor.
(ii) If the number of Stock Election Shares is less than the
Stock Conversion Number (the amount by
which the Stock Conversion Number exceeds
the number of Stock Election Shares 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:
(1) all Cash
Election Shares shall be
converted into the right to receive the
Cash Consideration; and
(2) each
Non-Election Share shall be
converted into the right to receive (a) the
number of shares of FCCO Common
Stock equal to the product obtained by
multiplying (x) the number of
Non-Election Shares held by such holder by
(y) the Exchange Ratio by (z) a
fraction the numerator of which is the
Shortfall Number and the denominator of
which is the total number of Non-Election
Shares (the "Non-Election Proration
Factor") and (b) cash in an amount equal to
the product obtained by multiplying
(x) the number of Non-Election Shares held
by such holder by (y) the Cash
Consideration by (z) one minus the
Non-Election Proration Factor; or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then:
(1) all
Non-Election Shares shall be
converted into the right to receive the
Stock Consideration; and
(2) each holder of Cash Election Shares shall
receive (a) the number of shares of FCCO
Common Stock equal to the product
obtained by multiplying (x) the number of
Cash Election Shares held by such
holder by (y) the Exchange Ratio by (z) a
fraction the numerator of which is the
amount by which the Shortfall Number
exceeds the number of Non-Election Shares
and the denominator of which is the total
number of Cash Election Shares (the
"Cash Proration Factor") and (b) cash in an
amount equal to the product obtained
by multiplying (x) the number of Cash
Election Shares held by such holder by (y)
the Cash Consideration by (z) one minus the
Cash Proration Factor.
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<PAGE>15
For purposes of the foregoing calculations, Excluded Shares shall
be
deemed Cash Election Shares.
2.7 EXCHANGE PROCEDURES.
(a) Appropriate transmittal materials ("LETTER OF TRANSMITTAL") in
a
form satisfactory to FCCO and DFBS shall be
mailed as soon as practicable after
the Effective Time to each holder of record
of DFBS Common Stock as of the
Effective Time who did not previously
submit a completed Election Form. A Letter
of Transmittal will be deemed properly
completed only if accompanied by
certificates representing all shares of
DFBS Common Stock to be converted
thereby.
(b) At and
after the Effective Time, each Certificate (except as
specifically set forth in SECTION 2.5)
shall represent only the right to receive
the Merger Consideration.
(c) Prior to the Effective Time, FCCO shall (i) reserve for
issuance
with its transfer agent and registrar a
sufficient number of shares of FCCO
Common Stock to provide for the issuance of
the aggregate Stock Consideration
and (ii) deposit, or cause to be deposited,
with the Exchange Agent, for the
benefit of the holders of shares of DFBS
Common Stock, for exchange in
accordance with this SECTION 2.7, an amount
of cash sufficient to pay the
aggregate Cash Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery
shall
be effected, and risk of loss and title to
the Certificates shall pass, only
upon delivery of the Certificates to the
Exchange Agent, (ii) be in a form and
contain any other provisions as FCCO may
reasonably determine, and (iii) include
instructions for use in effecting the
surrender of the Certificates in exchange
for the Merger Consideration. Upon the
proper surrender of the Certificates to
the Exchange Agent, together with a
properly completed and duly executed Letter
of Transmittal, the holder of such
Certificates shall be entitled to receive in
exchange therefor a certificate
representing that number of whole shares of FCCO
Common Stock that such holder has the right
to receive pursuant to SECTION 2.5,
if any, and a check in the amount equal to
the cash that such holder has the
right to receive pursuant to SECTION 2.5,
if any (including any cash in lieu of
fractional shares, if any, that such holder
has the right to receive pursuant to
SECTION 2.5, and any dividends or other
distributions to which such holder is
entitled pursuant to SECTION 2.5).
Certificates so surrendered shall forthwith
be canceled. As soon as practicable
following receipt of the properly completed
Letter of Transmittal and any necessary
accompanying documentation, the Exchange
Agent shall distribute FCCO Common Stock
and cash as provided herein. The
Exchange Agent shall not be entitled to
vote or exercise any rights of ownership
with respect to the shares of FCCO Common
Stock held by it from time to time
hereunder, except that it shall receive and
hold all dividends or other
distributions paid or distributed with
respect to such shares for the account of
the persons entitled thereto. If there is a
transfer of ownership of any shares
of DFBS Common Stock not registered in the
transfer records of DFBS, the Merger
Consideration shall be issued to the
transferee thereof if the Certificates
representing such DFBS Common Stock are
presented to the Exchange Agent,
accompanied by all documents required, in
the reasonable judgment of FCCO and
the Exchange Agent, to evidence and effect
such transfer and to evidence that
any applicable stock transfer taxes have
been paid.
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<PAGE>16
(e) No dividends or other distributions declared or made after
the
Effective Time with respect to FCCO Common
Stock issued pursuant to this
Agreement shall be remitted to any person
entitled to receive shares of FCCO
Common Stock hereunder until such person
surrenders his or her Certificates in
accordance with this SECTION 2.7. Upon the
surrender of such person's
Certificates, such person shall be entitled
to receive any dividends or other
distributions, without interest thereon,
which subsequent to the Effective Time
had become payable but not paid with
respect to shares of FCCO Common Stock
represented by such person's
Certificates.
(f) The stock transfer books of DFBS shall be closed
immediately
upon the Effective Time and from and after
the Effective Time there shall be no
transfers on the stock transfer records of
DFBS of any shares of DFBS Common
Stock. If, after the Effective Time,
Certificates are presented to FCCO, they
shall be canceled and exchanged for the
Merger Consideration deliverable in
respect thereof pursuant to this Agreement
in accordance with the procedures set
forth in this SECTION 2.7.
(g) Any portion of the aggregate amount of cash to be paid
pursuant
to SECTION 2.5, any dividends or other
distributions to be paid pursuant to this
SECTION 2.7, or any proceeds from any
investments thereof that remains unclaimed
by the stockholders of DFBS for six months
after the Effective Time shall be
repaid by the Exchange Agent to FCCO upon
the written request of FCCO. After
such request is made, any stockholders of
DFBS who have not theretofore complied
with this SECTION 2.7 shall look only to
FCCO for the Merger Consideration
deliverable in respect of each share of
DFBS Common Stock such stockholder
holds, as determined pursuant to SECTION
2.5 of this Agreement, without any
interest thereon. If outstanding
Certificates are not surrendered prior to the
date on which such payments would otherwise
escheat to or become the property of
any governmental unit or agency, the
unclaimed items shall, to the extent
permitted by any abandoned property,
escheat or other applicable laws, become
the property of FCCO (and, to the extent
not in its possession, shall be paid
over to it), free and clear of all claims
or interest of any person previously
entitled to such claims. Notwithstanding
the foregoing, neither the Exchange
Agent nor any party to this Agreement (or
any affiliate thereof) shall be liable
to any former holder of DFBS Common Stock
for any amount delivered to a public
official pursuant to applicable abandoned
property, escheat or similar laws.
(h) FCCO and the Exchange Agent shall be entitled to rely upon
DFBS's stock transfer books to establish
the identity of those persons entitled
to receive the Merger Consideration, which
books shall be conclusive with
respect thereto. In the event of a dispute
with respect to ownership of stock
represented by any Certificate, FCCO and
the Exchange Agent shall be entitled to
deposit any Merger Consideration
represented thereby in escrow with an
independent third party and thereafter be
relieved with respect to any claims
thereto.
(i) If any Certificate shall have been lost, stolen or
destroyed,
upon the making of an affidavit of that
fact by the person claiming such
Certificate to be lost, stolen or destroyed
and, if required by the Exchange
Agent or FCCO, the posting by such person
of a bond in such amount as the
Exchange Agent may direct as indemnity
against any claim that may be made
against it with respect to such
Certificate, the Exchange Agent will issue in
exchange
12
<PAGE>17
for such lost, stolen or destroyed
Certificate the Merger Consideration
deliverable in respect thereof pursuant to
SECTION 2.5.
2.8 EFFECT
ON OUTSTANDING SHARES OF FCCO COMMON STOCK. At and after the
Effective Time, each share of FCCO Common
Stock issued and outstanding
immediately prior to the Effective Time
shall remain an issued and outstanding
share of common stock of the Surviving
Corporation and shall not be affected by
the Merger.
2.9
DIRECTORS OF THE SURVIVING CORPORATION AFTER THE EFFECTIVE
TIME.
Subject to SECTION 5.15, immediately after
the Effective Time, until their
respective successors are duly elected or
appointed and qualified, the directors
of the Surviving Corporation shall consist
of the directors of FCCO serving
immediately prior to the Effective
Time.
2.10
ARTICLES OF INCORPORATION AND BYLAWS. The articles of
incorporation
of FCCO, as in effect immediately prior to
the Effective Time, shall be the
articles of incorporation of the Surviving
Corporation until thereafter amended
in accordance with applicable law. The
bylaws of FCCO, as in effect immediately
prior to the Effective Time, shall be the
bylaws of the Surviving Corporation
until thereafter amended in accordance with
applicable law.
2.11
TREATMENT OF STOCK
OPTIONS.
(a) Each option to purchase shares of DFBS Common Stock issued
by
DFBS and outstanding at the Effective Time
("DFBS OPTION") pursuant to DFBS's
2001 Stock-Based Incentive Plan shall be
converted into an option to purchase
shares of FCCO Common Stock as follows:
(i) The aggregate number of shares of FCCO Common Stock
issuable upon the exercise of the converted
DFBS Option after the Effective Time
shall be equal to the product of the Stock
Consideration multiplied by the
number of shares of DFBS Common Stock
issuable upon exercise of the DFBS Option
immediately prior to the Effective Time,
such product to be rounded to the
nearest whole share of FCCO Common Stock;
and
(ii) the exercise price per share of each converted DFBS
Option shall be equal to the quotient of
the exercise price of such DFBS Option
immediately prior to the Effective Time
divided by the Stock Consideration, such
quotient to be rounded to the nearest whole
cent; PROVIDED, HOWEVER, that, in
the case of any DFBS Option that is
intended to qualify as an incentive stock
option under Section 422 of the IRC, the
number of shares of FCCO Common Stock
issuable upon exercise of and the exercise
price per share for such converted
DFBS Option determined in the manner
provided above shall be further adjusted in
such manner as FCCO may determine to be
necessary to conform to the requirements
of Section 424(b) of the IRC.
Options to purchase shares of FCCO Common
Stock that arise from the operation of
this SECTION 2.11 shall be referred to as
"CONVERTED OPTIONS." All Converted
Options shall be exercisable for the same
period and shall otherwise have the
same terms and conditions applicable to the
DFBS Options that they replace.
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<PAGE>18
(b) Before the Effective Time, FCCO will take all corporate
action
necessary to reserve for future issuance a
sufficient additional number of
shares of FCCO Common Stock to provide for
the satisfaction of its obligations
with respect to the Converted Options.
(c) Within five business days after the Effective Time, FCCO
shall
file a registration statement on Form S-8
(or any successor or other appropriate
forms), with respect to the shares of DFBS
Common Stock subject to the options
referred to in paragraph (a) of this
Section 2.11 and shall use its reasonable
best efforts to maintain the current status
of the prospectus or prospectuses
contained therein for so long as such
options remain outstanding.
2.12
DISSENTERS' RIGHTS. Notwithstanding any other provision of this
Agreement to the contrary, shares of DFBS
Common Stock that are outstanding
immediately prior to the Effective Time and
which are held by stockholders who
shall have not voted in favor of the Merger
or consented thereto in writing and
who properly shall have demanded payment
for such shares in accordance with the
DGCL (collectively, the "DISSENTERS'
SHARES") shall not be converted into or
represent the right to receive the Merger
Consideration. Such stockholders
instead shall be entitled to receive
payment of the fair value of such shares
held by them in accordance with the
provisions of the DGCL, except that all
Dissenters' Shares held by stockholders who
shall have failed to perfect or who
effectively shall have withdrawn or
otherwise lost their rights to payment of
such shares under the DGCL shall thereupon
be deemed to have been converted into
and to have become exchangeable, as of the
Effective Time, for the right to
receive, without any interest thereon, the
Merger Consideration upon surrender
in the manner provided in SECTION 2.7 of
the DFBS Certificate or DFBS
Certificates that, immediately prior to the
Effective Time, evidenced such
shares. DFBS shall give FCCO (i) prompt
notice of any written demands for
payment of any shares of DFBS Common Stock,
attempted withdrawals of such
demands and any other instruments served
pursuant to the DGCL and received by
DFBS relating to stockholders' rights of
dissent, and (ii) the opportunity to
participate in all negotiations and
proceedings with respect to demands under
the DGCL consistent with the obligations of
DFBS thereunder. DFBS shall not,
except with the prior written consent of
FCCO, (x) make any payment with respect
to such demand, (y) offer to settle or
settle any demand for payment, or (z)
waive any failure to timely deliver a
written demand for payment or timely take
any other action to perfect dissenters
rights in accordance with the DGCL.
2.13 BANK
MERGER. Concurrently with or as soon as practicable after the
execution and delivery of this Agreement,
First Community Bank, National
Association ("FIRST COMMUNITY"), a wholly
owned subsidiary of FCCO, and Newberry
Federal ("NEWBERRY FEDERAL"), a wholly
owned subsidiary of DFBS, shall enter
into the Plan of Bank Merger, in the form
attached hereto as Exhibit C, pursuant
to which Newberry Federal will merge with
and into First Community (the "BANK
MERGER"). The Plan of Bank Merger shall
provide that the directors of First
Community as the surviving entity of the
Bank Merger shall be (a) all the
directors of First Community serving
immediately prior to the Bank Merger and
(b) two additional persons who shall become
directors of First Community in
accordance with Section 5.15. The parties
intend that the Bank Merger will
become effective simultaneously with or
immediately following the Effective
Time.
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<PAGE>19
2.14
ALTERNATIVE STRUCTURE. Notwithstanding anything to the contrary
contained in this Agreement, prior to the
Effective Time, FCCO may specify that
the structure of the transactions
contemplated by this Agreement be revised and
the parties shall enter into such
alternative transactions as FCCO may determine
to effect the purposes of this Agreement;
PROVIDED, HOWEVER, that such revised
structure shall not (i) alter or change the
amount or kind of the Merger
Consideration, (ii) change the intended
federal income tax consequences of the
transactions contemplated by this
Agreement, or (iii) materially impede or delay
the receipt of any regulatory approval
referred to in, or the consummation of
the transactions contemplated by, this
Agreement. In the event that FCCO elects
to make such a revision, the parties agree
to execute appropriate documents to
reflect the revised structure.
2.15
COMPANY RESTRICTED SHARES. At the Effective Time, each unvested
restricted share of DFBS Common Stock
granted under the DFBS 2001 Stock-Based
Incentive Plan (each a "DFBS Restricted
Share"), which is outstanding
immediately prior to the Effective Time,
shall vest and become free of
restrictions to the extent provided by the
terms thereof. Each holder of a DFBS
Restricted Share shall have the same rights
to receive the Merger Consideration
as are provided to other holders of DFBS
Common Stock as provided in this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1
DISCLOSURE LETTER. Prior to the execution and delivery of this
Agreement, FCCO and DFBS have each
delivered to the other a letter (each, its
"DISCLOSURE LETTER") setting forth in
reasonable detail, among other things,
facts, circumstances and events the
disclosure of which is required or
appropriate in relation to any or all of
their respective representations and
warranties (and making specific reference
to the Section of this Agreement to
which they relate). Without limiting the
generality of the foregoing, the mere
listing (or inclusion of a copy) of a
document or other item shall not be deemed
adequate to disclose an exception to a
representation or warranty made herein
(unless the representation or warranty has
to do with the existence of the
document or other item itself). The mere
inclusion of a fact, circumstance or
event in a Disclosure Letter shall not be
deemed an admission by a party that
such item represents a material exception
or that it is reasonably likely to
result in a Material Adverse Effect.
3.2
REPRESENTATIONS AND WARRANTIES OF DFBS. DFBS represents and
warrants
to FCCO that, except as disclosed in DFBS's
Disclosure Letter:
(a) ORGANIZATION AND QUALIFICATION. DFBS is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Delaware and is registered as a savings and
loan holding company under the HOLA.
DFBS has all requisite corporate power and
authority to own, lease and operate
its properties and to conduct the business
currently being conducted by it. DFBS
is duly qualified or licensed as a foreign
corporation to transact business and
is in good standing in each jurisdiction in
which the character of the
properties owned or leased by it or the
nature of the business conducted by it
makes such qualification or licensing
necessary, except where the failure to be
so qualified or licensed and in good
standing would not have a Material Adverse
Affect on DFBS.
15
<PAGE>20
(b)
SUBSIDIARIES.
(i) DFBS's Disclosure Letter sets forth with respect to each
of DFBS's Subsidiaries its name, its
jurisdiction of incorporation, DFBS's
percentage ownership, the number of shares
of stock owned or controlled by DFBS
and the name and number of shares held by
any other person who owns any stock of
the Subsidiary. DFBS owns of record and
beneficially all the capital stock of
each of its Subsidiaries free and clear of
any Liens. There are no contracts,
commitments, agreements or understandings
relating to DFBS's right to vote or
dispose of any equity securities of its
Subsidiaries. DFBS's ownership interest
in each of its Subsidiaries is in
compliance with all applicable laws, rules and
regulations relating to equity investments
by savings and loan holding companies
or federally-chartered savings
associations.
(ii) Each of DFBS's Subsidiaries is a corporation duly
organized and validly existing under the
laws of its jurisdiction of
incorporation, has all requisite corporate
power and authority to own, lease and
operate its properties and to conduct the
business currently being conducted by
it and is duly qualified or licensed as a
foreign corporation to transact
business and is in good standing in each
jurisdiction in which the character of
the properties owned or leased by it or the
nature of the business conducted by
it makes such qualification or licensing
necessary, except where the failure to
be so qualified or licensed and in good
standing would not have a Material
Adverse Affect on DFBS.
(iii) The outstanding shares of capital stock of each
Subsidiary have been validly authorized and
are validly issued, fully paid and
nonassessable. No shares of capital stock
of any Subsidiary of DFBS are or may
be required to be issued by virtue of any
options, warrants or other rights, no
securities exist that are convertible into
or exchangeable for shares of such
capital stock or any other debt or equity
security of any Subsidiary, and there
are no contracts, commitments, agreements
or understandings of any kind for the
issuance of additional shares of capital
stock or other debt or equity security
of any Subsidiary or options, warrants or
other rights with respect to such
securities.
(iv) No Subsidiary of DFBS other than Newberry Federal is an
"insured depository institution" as defined
in the FDIA and the applicable
regulations thereunder. The deposits of
Newberry Federal are insured by the FDIC
through the Savings Association Insurance
Fund to the fullest extent permitted
by law. Newberry Federal is a member in
good standing of the Federal Home Loan
Bank of Atlanta.
(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of DFBS consists of:
(A) 4,000,000
shares of DFBS Common Stock, par value
$.01 per share; and
(B)
500,000 shares of preferred stock, par value $.01
per share.
(ii) As of the date of this Agreement:
16
<PAGE>21
(A) 1,125,981 shares of DFBS Common Stock are
issued and outstanding (i.e. including
Ungranted Restricted Shares but excluding
shares held in treasury), all of which are
validly issued, fully paid and
nonassessable and were issued in full
compliance with all applicable laws;
(B) no shares of DFBS preferred stock are issued
and outstanding; and
(C) 101,437 shares of DFBS Common Stock are
reserved for issuance pursuant to
outstanding DFBS Options.
(iii) Set forth in DFBS's Disclosure Letter is a complete and
accurate list of all outstanding DFBS
Options and DFBS Restricted Shares,
including the names of the
optionees/awardees, dates of grant, exercise prices,
dates of vesting, dates of termination,
shares subject to each grant and whether
stock appreciation, limited or other
similar rights were granted in connection
with such options.
(iv) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which
stockholders of DFBS may vote are
issued or outstanding.
(v) Except as set forth in this SECTION 3.2(C), as of the date
of this Agreement, (A) no shares of capital
stock or other voting securities of
DFBS are issued, reserved for issuance or
outstanding and (B) neither DFBS nor
any of its Subsidiaries has or is bound by
any outstanding subscriptions,
options, warrants, calls, rights,
convertible securities, commitments or
agreements of any character obligating DFBS
or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued,
delivered or sold, any additional shares
of capital stock of DFBS or obligating DFBS
or any of its Subsidiaries to grant,
extend or enter into any such option,
warrant, call, right, convertible
security, commitment or agreement. As of
the date hereof, there are no
outstanding contractual obligations of DFBS
or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any
shares of capital stock of DFBS or
any of its Subsidiaries.
(d) AUTHORITY. DFBS has all requisite corporate power and
authority
to enter into this Agreement, to perform
its obligations hereunder and to
consummate the transactions contemplated by
this Agreement. The execution and
delivery of this Agreement and the
consummation of the transactions contemplated
by this Agreement have been duly authorized
by all necessary corporate actions
on the part of DFBS's Board of Directors,
and no other corporate proceedings on
the part of DFBS are necessary to authorize
this Agreement or to consummate the
transactions contemplated by this Agreement
other than the approval and adoption
of this Agreement by the affirmative vote
of the holders of a majority of the
outstanding shares of DFBS Common Stock.
This Agreement has been duly and
validly executed and delivered by DFBS and
constitutes a valid and binding
obligation of DFBS, enforceable against
DFBS in accordance with its terms,
subject to applicable bankruptcy,
insolvency and similar laws affecting
creditors' rights and remedies generally
and to general principles of equity,
whether applied in a court of law or a
court of equity.
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<PAGE>22
(e) NO VIOLATIONS. The execution, delivery and performance of
this
Agreement by DFBS do not, and the
consummation of the transactions contemplated
by this Agreement will not, (i) assuming
all required governmental approvals
have been obtained and the applicable
waiting periods have expired, violate any
law, rule or regulation or any judgment,
decree, order, governmental permit or
license to which DFBS or any of its
Subsidiaries (or any of their respective
properties) is subject, (ii) violate the
certificate of incorporation or bylaws
of DFBS or the similar organizational
documents of any of its Subsidiaries, or
(iii) constitute a breach or violation of,
or a default under (or an event
which, with due notice or lapse of time or
both, would constitute a default
under), or result in the termination of,
accelerate the performance required by,
or result in the creation of any Lien upon
any of the properties or assets of
DFBS or any of its Subsidiaries under, any
of the terms, conditions or
provisions of any note, bond, indenture,
deed of trust, loan agreement or other
agreement, instrument or obligation to
which DFBS or any of its Subsidiaries is
a party, or to which any of their
respective properties or assets may be subject
except, in the case of (iii), for any such
breaches, violations or defaults that
would not, individually or in the
aggregate, have a Material Adverse Effect on
DFBS.
(f) CONSENTS AND APPROVALS. No consents or approvals of, or
filings
or registrations with, any Governmental
Entity or any third party are required
to be made or obtained in connection with
the execution and delivery by DFBS of
this Agreement or the consummation by DFBS
of the Merger and the other
transactions contemplated by this
Agreement, including the Bank Merger, except
for (i) filings of applications and notices
with, receipt of approvals or
nonobjections from, and expiration of the
related waiting period required by,
federal and state banking authorities, (ii)
filing of the Registration Statement
with the SEC and declaration by the SEC of
the Registration Statement's
effectiveness under the Securities Act,
(iii) the registration or qualification
under state securities or "blue sky" laws
of the shares of FCCO Common Stock to
be issued in exchange for shares of DFBS
Common Stock, and (iv) the listing on
the NASDAQ SmallCap Market of the shares of
FCCO Common Stock to be issued in
exchange for shares of DFBS Common Stock.
As of the date hereof, DFBS knows of
no reason pertaining to DFBS why any of the
approvals referred to in this
SECTION 3.2(F) should not be obtained
without the imposition of any material
condition or restriction described in
SECTION 6.1(B).
(g) SECURITIES AND REGULATORY FILINGS. DFBS has filed with the
SEC
all reports, schedules, registration
statements, definitive proxy statements and
other documents that it has been required
to file under the Securities Act or
the Exchange Act since March 8, 2000 and
Newberry Federal has filed all such
reports with its applicable Government
Regulator from December 31, 1998 through
March 8, 2000 (collectively, "DFBS'S
REPORTS"). DFBS has made available to FCCO
an accurate and complete copy of (i) each
of DFBS's Reports and (ii) each
communication mailed by DFBS to its
stockholders since July 5, 2000. None of
DFBS's Reports or such communications
contained any untrue statement of a
material fact or omitted to state a
material fact required to be stated therein
or necessary to make the statements made
therein, in light of the circumstances
under which they were made, not misleading.
As of their respective dates, all of
DFBS's Reports complied in all material
respects with the applicable
requirements of the Securities Act or the
Exchange Act, as the case may be, or
the laws, rules, and regulations of the
Government Regulator with which they
were filed. Each of the financial
statements (including, in each case, any notes
thereto) of DFBS included in DFBS's
Reports
18
<PAGE>23
complied as to form, as of their respective
dates of filing with the SEC or any
Government Regulator, in all material
respects with applicable accounting
requirements and with the published rules
and regulations of the SEC or
applicable Government Regulator with
respect thereto.
(h) FINANCIAL STATEMENTS. DFBS has previously made available to
FCCO
copies of (i) the consolidated balance
sheets of DFBS and its Subsidiaries as of
September 30, 2003 and 2002 and related
consolidated statements of income, cash
flows and changes in stockholders' equity
for each of the three years in the
three-year period ended September 30, 2003,
together with the notes thereto,
accompanied by the audit report of DFBS's
independent public auditors, as
reported in DFBS's Annual Report on Form
10-KSB for the year ended September 30,
2003 filed with the SEC and (ii) the
unaudited consolidated balance sheet of
DFBS and its Subsidiaries as of December
31, 2003 and the related consolidated
statements of income, cash flows and
changes in stockholders' equity for the
three months ended December 31, 2003 and
2002, as reported in DFBS's Quarterly
Report on Form 10-QSB for the period ended
December 31, 2003 filed with the SEC.
Such financial statements were prepared
from the books and records of DFBS and
its Subsidiaries, fairly present the
consolidated financial position of DFBS and
its Subsidiaries in each case at and as of
the dates indicated and the
consolidated results of operations, changes
in stockholders' equity and cash
flows of DFBS and its Subsidiaries for the
periods indicated, and, except as
otherwise set forth in the notes thereto,
were prepared in accordance with GAAP
consistently applied throughout the periods
covered thereby; PROVIDED, HOWEVER,
that the unaudited financial statements for
interim periods are subject to
normal year-end adjustments (which will not
be material individually or in the
aggregate) and lack footnotes to the extent
permitted under applicable
regulations. The books and records of DFBS
and its Subsidiaries have been, and
are being, maintained in all respects in
accordance with GAAP and any other
legal and accounting requirements and
reflect only actual transactions.
(i) UNDISCLOSED LIABILITIES. Neither DFBS nor any of its
Subsidiaries has incurred any debt,
liability or obligation of any nature
whatsoever (whether accrued, contingent,
absolute or otherwise and whether due
or to become due) other than liabilities
reflected on or reserved against in the
consolidated balance sheet of DFBS as of
December 31, 2003 as included in DFBS's
Quarterly Report on Form 10-QSB for the
period ended December 31, 2003, except
for (i) liabilities incurred since December
31, 2003 in the ordinary course of
business consistent with past practice
that, either alone or when combined with
all similar liabilities, have not had, and
would not reasonably be expected to
have, a Material Adverse Effect on DFBS and
(ii) liabilities incurred for legal,
accounting, financial advising fees and
out-of-pocket expenses in connection
with the transactions contemplated by this
Agreement.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in
DFBS's Reports filed with the SEC prior to
the date of this Agreement, since
December 31, 2003, (i) DFBS and its
Subsidiaries have conducted their respective
businesses only in the ordinary and usual
course of such businesses consistent
with their past practices, (ii) there has
not been any event or occurrence that
has had, or is reasonably expected to have,
a Material Adverse Effect on DFBS,
(iii) there has been no increase in the
salary, compensation, pension or other
benefits payable or to become payable by
DFBS or any of its Subsidiaries to any
of their respective
19
<PAGE>24
directors, officers, or employees, other
than to non-executive employees in
conformity with the policies and practices
of such entity in the usual and
ordinary course of its business, (iv)
neither DFBS nor any of its Subsidiaries
has paid or made any accrual or arrangement
for payment of bonuses or special
compensation of any kind or any severance
or termination pay to any of their
directors, officers or employees, and (v)
there has been no change in any
accounting principles, practices or methods
of DFBS or any of its Subsidiaries
other than as required by GAAP.
(k) LITIGATION. There are no suits, actions or legal,
administrative
or arbitration proceedings pending or, to
the knowledge of DFBS, threatened
against or affecting DFBS or any of its
Subsidiaries or any property or asset of
DFBS or any of its Subsidiaries that (i)
individually or in the aggregate, would
reasonably be expected to have a Material
Adverse Effect on DFBS or (ii)
challenge the validity or propriety of the
transactions contemplated by this
Agreement. To the knowledge of DFBS, there
are no investigations, reviews or
inquiries by any court or Governmental
Entity pending or threatened against DFBS
or any of its Subsidiaries. There are no
judgments, decrees, injunctions, orders
or rulings of any Governmental Entity or
arbitrator outstanding against DFBS or
any of its Subsidiaries that, individually
or in the aggregate, would reasonably
be expected to have a Material Adverse
Effect on DFBS.
(l) ABSENCE OF REGULATORY ACTIONS. Since December 31, 1998,
neither
DFBS nor any of its Subsidiaries has been a
party to any cease and desist order,
written agreement or memorandum of
understanding with, or any commitment letter
or similar undertaking to, or has been
subject to any action, proceeding, order
or directive by, or has been a recipient of
any extraordinary supervisory letter
from any Government Regulator, or has
adopted any board resolutions at the
request of any Government Regulator, or has
been advised by any Government
Regulator that it is contemplating issuing
or requesting (or is considering the
appropriateness of issuing or requesting)
any such action, proceeding, order,
directive, written agreement, memorandum of
understanding, extraordinary
supervisory letter, commitment letter,
board resolutions or similar undertaking.
There are no unresolved violations,
criticisms or exceptions by any Government
Regulator with respect to any report or
statement relating to any examinations
of DFBS or its Subsidiaries.
(m) COMPLIANCE WITH LAWS. DFBS and each of its Subsidiaries
conducts
its business in compliance in all material
respects with all statutes, laws,
regulations, ordinances, rules, judgments,
orders or decrees applicable to it or
the employees conducting such business.
DFBS and each of its Subsidiaries has
all permits, licenses, certificates of
authority, orders and approvals of, and
has made all filings, applications and
registrations with, all Governmental
Entities that are required in order to
permit it to carry on its business as it
is presently conducted; all such permits,
licenses, certificates of authority,
orders and approvals are in full force and
effect, and no suspension or
cancellation of any of them is threatened.
Neither DFBS nor any of its
Subsidiaries has been given notice or been
charged with any violation of, any
law, ordinance, regulation, order, writ,
rule, decree or condition to approval
of any Governmental Entity which,
individually or in the aggregate, would
reasonably be expected to have a Material
Adverse Effect on DFBS.
(n) TAXES. All federal, state, local and foreign tax returns
required to be filed by or on behalf of
DFBS or any of its Subsidiaries have
been timely filed or requests for
20
<PAGE>25
extensions have been timely filed and any
such extension shall have been granted
and not have expired, and all such filed
returns are complete and accurate in
all material respects. All taxes shown on
such returns, all taxes required to be
shown on returns for which extensions have
been granted and all other taxes
required to be paid by DFBS or any of its
Subsidiaries have been paid in full or
adequate provision has been made for any
such taxes on DFBS's balance sheet (in
accordance with GAAP). There is no audit
examination, deficiency assessment, tax
investigation or refund litigation with
respect to any taxes of DFBS or any of
its Subsidiaries, and no claim has been
made by any authority in a jurisdiction
where DFBS or any of its Subsidiaries do
not file tax returns that DFBS or any
such Subsidiary is subject to taxation in
that jurisdiction. All taxes,
interest, additions and penalties due with
respect to completed and settled
examinations or concluded litigation
relating to DFBS or any of its Subsidiaries
have been paid in full or adequate
provision has been made for any such taxes on
DFBS's balance sheet (in accordance with
GAAP). DFBS and its Subsidiaries have
not executed an extension or waiver of any
statute of limitations on the
assessment or collection of any tax due
that is currently in effect. DFBS and
each of its Subsidiaries has withheld and
paid all taxes required to have been
withheld and paid in connection with
amounts paid or owing to any employee,
independent contractor, creditor,
stockholder or other third party, and DFBS and
each of its Subsidiaries has timely
complied with all applicable information
reporting requirements under Part III,
Subchapter A of Chapter 61 of the IRC and
similar applicable state and local
information reporting requirements. Neither
DFBS nor any of its Subsidiaries is a party
to any agreement, contract,
arrangement or plan that has resulted or
would result, individually or in the
aggregate, in connection with this
Agreement in the payment of any "excess
parachute payments" within the meaning of
Section 280G of the IRC and neither
DFBS nor any of its Subsidiaries has made
any payments and is not a party to any
agreement, and does not maintain any plan,
program or arrangement, that could
require it to make any payments (including
any deemed payment of compensation
upon the exercise of a DFBS Option or upon
the issuance of any DFBS Common
Stock), that would not be fully deductible
by reason of Section 162(m) of the
IRC.
(o) AGREEMENTS.
(i) DFBS and its Subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of
Regulation S-B promulgated by the
SEC), to be performed after the date hereof
that has not been filed with DFBS's
Reports.
(ii) DFBS's Disclosure Letter lists any contract, arrangement,
commitment or understanding (whether
written or oral) to which DFBS or any of
its Subsidiaries is a party or is
bound:
(A) with any executive officer or other key
employee of DFBS or any of its Subsidiaries
the benefits of which are
contingent, or the terms of which are
materially altered, upon the occurrence of
a transaction involving DFBS or any of its
Subsidiaries of the nature
contemplated by this Agreement;
(B) with respect to the employment of any
directors, officers, employees or
consultants;
21
<PAGE>26
(C) any of the benefits of which will be increased,
or the vesting or payment of the benefits
of which will be accelerated, by the
occurrence of any of the transactions
contemplated by this Agreement, or the
value of any of the benefits of which will
be calculated on the basis of any of
the transactions contemplated by this
Agreement (including any stock option
plan, phantom stock or stock appreciation
rights plan, restricted stock plan or
stock purchase plan);
(D) containing covenants that limit the ability of
DFBS or any of its Subsidiaries to compete
in any line of business or with any
person, or that involve any restriction on
the geographic area in which, or
method by which, DFBS (including any
successor thereof) or any of its
Subsidiaries may carry on its business
(other than as may be required by law or
any regulatory agency);
(E) pursuant to which DFBS or any of its
Subsidiaries may become obligated to invest
in or contribute capital to any
entity;
(F) that relates to borrowings of money (or
guarantees thereof) by DFBS or any of its
Subsidiaries in excess of $50,000;
or
(G) which is a lease or license with respect to any
property, real or personal, whether as
landlord, tenant, licensor or licensee,
involving a liability or obligation as
obligor in excess of $25,000 on an annual
basis.
(iii) Neither DFBS nor any of its Subsidiaries is in default
under (and, to the knowledge of DFBS, no
event has occurred which, with due
notice or lapse of time or both, would
constitute a default under) or is in
violation of any provision of any note,
bond, indenture, mortgage, deed of
trust, loan agreement, lease or other
agreement to which it is a party or by
which it is bound or to which any of its
respective properties or assets is
subject and, to the knowledge of DFBS, no
other party to any such agreement
(excluding any loan or extension of credit
made by DFBS or any of its
Subsidiaries) is in default in any respect
thereunder, except for such defaults
or violations that would not, individually
or in the aggregate, have a Material
Adverse Effect on DFBS.
(p) INTELLECTUAL PROPERTY. DFBS and each of its Subsidiaries owns
or
possesses valid and binding licenses and
other rights to use without payment all
patents, copyrights, trade secrets, trade
names, service marks and trademarks
material to its businesses, and neither
DFBS nor any of its Subsidiaries has
received any notice of conflict with
respect thereto that asserts the right of
others. Each of DFBS and its Subsidiaries
has performed all the obligations
required to be performed by it and are not
in default under any contact,
agreement, arrangement or commitment
relating to any of the foregoing, except
for such non-performance or defaults that
would not, individually or in the
aggregate, have a Material Adverse Effect
on DFBS.
(q) LABOR MATTERS. DFBS and its Subsidiaries are in material
compliance with all applicable laws
respecting employment, retention of
independent contractors, employment
practices, terms and conditions of
employment, and wages and hours. Neither
DFBS nor any of
22
<PAGE>27
its Subsidiaries is or has ever been a
party to, or is or has ever been bound
by, any collective bargaining agreement,
contract or other agreement or
understanding with a labor union or labor
organization with respect to its
employees, nor is DFBS or any of its
Subsidiaries the subject of any proceeding
asserting that it has committed an unfair
labor practice or seeking to compel it
or any such Subsidiary to bargain with any
labor organization as to wages and
conditions of employment nor has any such
proceeding been threatened, nor is
there any strike, other labor dispute or
organizational effort involving DFBS or
any of its Subsidiaries pending or, to the
knowledge of DFBS, threatened.
(r) EMPLOYEE BENEFIT PLANS.
(i) DFBS's Disclosure Letter contains a complete and accurate
list of all pension, retirement, stock
option, stock purchase, stock ownership,
savings, stock appreciation right, profit
sharing, deferred compensation,
consulting, bonus, group insurance, health,
accident, life insurance, death
benefit, cafeteria, flexible benefits,
medical reimbursement, dependent care
reimbursement, severance and other benefit
plans, contracts, and other
agreements and arrangements, including, but
not limited to, "employee benefit
plans," as defined in Section 3(3) of
ERISA, incentive and welfare policies,
contracts, plans and arrangements and all
trust agreements related thereto with
respect to any present or former directors,
officers or other employees of DFBS
or any of its Subsidiaries (hereinafter
referred to collectively as the "DFBS
EMPLOYEE PLANS"). DFBS has previously
delivered or made available to FCCO true
and complete copies of each agreement, plan
and other documents referenced in
DFBS's Disclosure Letter. There has been no
announcement or commitment by DFBS
or any of its Subsidiaries to create an
additional DFBS Employee Plan, or to
amend any DFBS Employee Plan, except for
amendments set forth herein or
otherwise required by applicable law which
do not materially increase the cost
of such DFBS Employee Plan.
(ii) DFBS has previously made available to FCCO all financial
contributions, actuarial statements or
valuations, fidelity bonds, fiduciary
liability policies, investment manager or
advisory contracts, corporate
resolutions, memoranda, administrative
committee minutes or memoranda or
records, and all amendments (if any)
thereto. DFBS' Disclosure Letter lists,
with respect to DFBS Employee Plans, (A)
all trust agreements or other funding
arrangements, including insurance
contracts, and all annuity contracts (B) where
applicable, with respect to any such plan
or plans or plan amendments, the most
recent determination letters issued by the
IRS, (C) all communications or other
correspondence issued within the last six
years by the Internal Revenue Service,
United States Department of Labor or the
Pension Benefit Guaranty Corporation
with respect to any such plan, (D) annual
reports or returns in audited or
unaudited financial statements for the most
recent three plan years and any
amendments thereto, and (E) the most recent
summary plan descriptions, any
material modifications thereto, and all
material and employee communications
with respect to any such plans. DFBS has
previously delivered or made available
to FCCO true and complete copies of all
such writings.
(iii) There is no pending or, to the knowledge of DFBS,
threatened litigation, administrative
action or proceeding relating to any DFBS
Employee Plan. All of the DFBS Employee
Plans and the operation and terms
thereof comply in all material respects
with
23
<PAGE>28
all applicable requirements of ERISA, the
IRC and other applicable laws. No
event has occurred which is likely to give
rise to a failure of any DFBS
Employee Plan to obtain or maintain
intended tax benefits, including, where
applicable, qualification under IRC section
401(a), and the avoidance of tax
under IRC section 511. There has occurred
no material "prohibited transaction"
(as defined in Section 406 of ERISA or
Section 4975 of the IRC) with respect to
the DFBS Employee Plans which is likely to
result in the imposition of any
penalties or taxes upon DFBS or any of its
Subsidiaries under Section 502(i)
of ERISA or Section 4975 of the IRC.
(iv) No oral or written representation or communication with
respect to any of the DFBS Employee Plans
has been or will be made to anyone
prior to the Closing that is not in
accordance with the written terms and
provisions of such applicable plan in
effect immediately prior to the Closing,
except for any amendments or other action
required by the terms of this
Agreement.
(v) All annual reports or returns, audited or unaudited
financial statements, actuarial valuations,
summary annual reports and summary
plan descriptions issued with respect to
the DFBS Employee Plans are correct and
accurate in all material respects as of the
dates thereof; and there have been
no amendments filed to any such reports,
returns, statements, valuations or
descriptions are required to make the
information therein true and accurate in
all material respects.
(vi) No liability to the Pension Benefit Guarantee Corporation
has been or is expected by DFBS or any of
its Subsidiaries to be incurred with
respect to any DFBS Employee Plan which is
subject to Title IV of ERISA ("DFBS
PENSION PLAN"), or with respect to any
"single-employer plan" (as defined in
Section 4001(a) of ERISA) currently or
formerly maintained by DFBS or any ERISA
Affiliate. No DFBS Pension Plan had an
"accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether
or not waived, as of the last day of
the end of the most recent plan year ending
prior to the date hereof; the fair
market value of the assets of each DFBS
Pension Plan is at least equal to the
present value of the "benefit liabilities"
(as defined in Section 4001(a)(16) of
ERISA) (whether or not vested) under such
DFBS Pension Plan as of the end of the
most recent plan year with respect to the
respective DFBS Pension Plan ending
prior to the date hereof, calculated on the
basis of the actuarial assumptions
used in the most recent actuarial valuation
for such DFBS Pension Plan as of the
date hereof; and no notice of a "reportable
event" (as defined in Section 4043
of ERISA) for which the 30-day reporting
requirement has not been waived has
been required to be filed for any DFBS
Pension Plan within the 12-month period
ending on the date hereof. Neither DFBS nor
any of its ERISA Affiliates has
provided, or is required to provide,
security to any DFBS Pension Plan or to any
plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the IRC.
(vii) As of the Closing Date, full payment will have been made
of all amounts which DFBS or any of its
Subsidiaries will be required to have
made at or prior to the Closing Date, under
any DFBS Employee Plan or applicable
law, as a contribution to any applicable
DFBS Employee Plan (and, for this
purpose, any such contribution which shall
not have been required to have been
made on or prior to the Closing Date due to
applicable accrual or other
requirements which have not been met for
the plan year which includes the
Closing Date shall be considered required
to be made as of the Closing Date on a
prorated basis as of the
24
<PAGE>29
Closing Date); and no accumulated funding
deficiency (as defined in ERISA
section 302 or IRC section 412), whether or
not waived, will exist with respect
to any DFBS Pension Plan.
(viii) DFBS does not maintain any plan or other arrangement
providing deferred or stock-based
compensation which is not reflected in DFBS'
Disclosure Letter.
(ix) Each DFBS Employee Plan that is an "employee pension
benefit plan" (as defined in Section 3(2)
of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC
(a "DFBS QUALIFIED PLAN") has received
a favorable determination letter from the
IRS, and DFBS and its Subsidiaries are
not aware of any circumstances likely to
result in revocation of any such
favorable determination letter.
(x) Neither DFBS nor any of its Subsidiaries has any
obligations for post-retirement or
post-employment benefits under any DFBS
Employee Plan that cannot be amended or
completely terminated upon 60 days'
notice or less (and without the consent of
any person) without incurring any
liability thereunder, except for coverage
required by Part 6 of Title I of ERISA
or Section 4980B of the IRC, or similar
state laws, the cost of which is borne
solely by the covered individuals.
(xi) All DFBS Employee Plans which are subject to IRC section
4980B or Part VI of Title I of ERISA or
both have been maintained in compliance
with the requirements of such laws and any
regulation (proposed or otherwise)
issued thereunder.
(xii) No liability to the PBGC will have been incurred as of
the Closing Date by DFBS or any ERISA
affiliate of DFBS, except for PBGC
insurance premiums, and all such insurance
premiums incurred up to and including
the Closing Date have been or will have
been timely paid.
(xiii) Neither DFBS nor any ERISA affiliate of DFBS maintains,
has maintained, has contributed to or has
been required to contribute to a
multi-employer plan (as defined in ERISA
section 3(37)); and no amount is due or
owing from DFBS on account of any
withdrawal from any such multi-employer plan.
(xiv) All annual reports (as described in ERISA section 103)
and Treasury Forms 5300 relating to the
applicable provisions of the IRC
required to be filed in connection with one
or more of the DFBS Employee Plans
have been timely and properly filed in
accordance with applicable law.
(xv) No violation of ERISA, the IRC or other applicable law
will arise in respect of any DFBS Employee
Plan as a result of or in connection
with the transactions contemplated by this
Agreement.
(s)
PROPERTIES.
(i) A description of each parcel of real property owned by
DFBS or a Subsidiary of DFBS is set forth
in DFBS's Disclosure Letter. DFBS and
each of its Subsidiaries
25
<PAGE>30
has good and marketable title to all real
property owned by it (including any
property acquired in a judicial foreclosure
proceeding or by way of a deed in
lieu of foreclosure or similar transfer),
in each case free and clear of any
Liens except (i) liens for taxes not yet
due and payable and (ii) such
easements, restrictions and encumbrances,
if any, as are not material in
character, amount or extent, and do not
materially detract from the value, or
materially interfere with the present use
of the properties subject thereto or
affected thereby. All real property and
fixtures of DFBS and each of its
Subsidiaries are in a good state of
maintenance and repair (normal wear and tear
excepted), conform with all applicable
ordinances, regulations and zoning laws
and are considered by DFBS to be adequate
for the current business of DFBS and
its Subsidiaries. To the knowledge of DFBS,
none of the buildings, structures or
other improvements located on its real
property encroaches upon or over any
adjoining parcel or real estate or any
easement or right-of-way.
(ii) DFBS and each of its Subsidiaries has good and marketable
title to all tangible personal property
owned by it, free and clear of all Liens
except such encumbrances, if any, as are
not material in character, amount or
extent, and do not materially detract from
the value, or materially interfere
with the present use of the properties
subject thereto or affected thereby. With
respect to personal property used in the
business of DFBS and its Subsidiaries
that is leased rather than owned, neither
DFBS nor any of its Subsidiaries is in
default in any material respect under the
terms of any such lease.
(iii) A description of all real property leased by DFBS or a
Subsidiary of DFBS is set forth in DFBS's
Disclosure Letter. Each lease pursuant
to which DFBS or any of its Subsidiaries as
lessee, leases real or personal
property, is valid and in full force and
effect and neither DFBS nor any of its
Subsidiaries, nor, to DFBS's knowledge, any
other party to any such lease, is in
default or in violation of any material
provisions of any such lease.
(t) FAIRNESS OPINION. DFBS has received the opinion of Sandler
O'Neill & Partners, L.P. to the effect
that, as of the date hereof, the Merger
Consideration is fair, from a financial
point of view, to DFBS's stockholders.
(u) FEES. Other than financial advisory services performed for
DFBS
by Sandler O'Neill & Partners, L.P.
pursuant to an agreement dated September 16,
2003, a true and complete copy of which has
been previously delivered to FCCO,
neither DFBS nor any of its Subsidiaries,
nor any of their respective officers,
directors, employees or agents, has
employed any broker or finder or incurred
any liability for any financial advisory
fees, brokerage fees, commissions or
finder's fees, and no broker or finder has
acted directly or indirectly for DFBS
or any of its Subsidiaries in connection
with this Agreement or the transactions
contemplated hereby.
26
<PAGE>31
(v) ENVIRONMENTAL MATTERS.
(i) To the knowledge of DFBS, each of DFBS and its
Subsidiaries, the Participation Facilities
and the Loan Properties are, and have
been, in substantial compliance with all
Environmental Laws.
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive,
investigation or proceeding pending or, to the
knowledge of DFBS, threatened, before any
court, governmental agency or board or
other forum against DFBS or any of its
Subsidiaries or any Participation
Facility (A) for alleged noncompliance
(including by any predecessor) with, or
liability under, any Environmental Law or
(B) relating to the presence of or
release into the environment of any
Hazardous Material, whether or not occurring
at or on a site owned, leased or operated
by DFBS or any of its Subsidiaries or
any Participation Facility.
(iii) To the knowledge of DFBS, there is no suit, claim,
action, demand, executive or administrative
order, directive, investigation or
proceeding pending or threatened before any
court, governmental agency or board
or other forum relating to or against any
Loan Property (or DFBS or any of its
Subsidiaries in respect of such Loan
Property) (A) relating to alleged
noncompliance (including by any
predecessor) with, or liability under, any
Environmental Law or (B) relating to the
presence of or release into the
environment of any Hazardous Material,
whether or not occurring at a Loan
Property.
(iv) Neither DFBS nor any of its Subsidiaries has received any
notice, demand letter, executive or
administrative order, directive or request
for information from any Governmental
Entity or any third party indicating that
it may be in violation of, or liable under,
any Environmental Law.
(v) There are no underground storage tanks at any properties
owned or operated by DFBS or any of its
Subsidiaries or, to the knowledge of
DFBS, at any Participation Facility and no
underground storage tanks have been
closed or removed from any properties owned
or operated by DFBS or, to the
knowledge of DFBS, any of its Subsidiaries
or any Participation Facility.
(vi) During the period of (A) DFBS's or its Subsidiary's
ownership or operation of any of their
respective current properties or (B)
DFBS's or its Subsidiary's participation in
the management of any Participation
Facility, there has been no release of
Hazardous Materials in, on, under or
affecting such properties. To the knowledge
of DFBS, prior to the period of (A)
DFBS's or its Subsidiary's ownership or
operation of any of their respective
current properties or (B) DFBS's or its
Subsidiary's participation in the
management of any Participation Facility,
there was no contamination by or
release of Hazardous Material in, on, under
or affecting such properties.
(w) LOAN PORTFOLIO; ALLOWANCE FOR LOAN LOSSES.
(i) With
respect to each Loan owned by DFBS or its
Subsidiaries in whole or in part:
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<PAGE>32
(A) The note and the related security documents are
each legal, valid and binding obligations
of the maker or obligor thereof,
enforceable against such maker or obligor
in accordance with their terms,
subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of
general applicability relating to or
affecting creditors' rights and to general
equity principles;
(B) neither DFBS nor any of its Subsidiaries, nor
any prior holder of a Loan, has modified
the note or any of the related security
documents in any material respect or
satisfied, canceled or subordinated the
note or any of the related security
documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) DFBS or a Subsidiary of DFBS is the sole holder
of legal and beneficial title to each Loan
(or DFBS's or its Subsidiary's
applicable participation interest, as
applicable), except as otherwise
referenced on the books and records of DFBS
or a Subsidiary of DFBS;
(D) the original note and the related security
documents are included in the Loan files,
and copies of any documents in the
Loan files are true and correct copies of
the documents they purport to be and
have not been suspended, amended, modified,
canceled or otherwise changed except
as otherwise disclosed by documents in the
applicable Loan file; and
(E) with respect to a Loan held in the form of a
participation, the participation
documentation is legal, valid, binding and
enforceable in accordance with its terms,
subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of
general applicability relating to or
affecting creditors' rights and to general
equity principles.
(ii) Neither the terms of any Loan, any of the documentation
for any Loan, the manner in which any Loans
have been administered and serviced,
nor DFBS's practices of approving or
rejecting Loan applications, violate in any
material respect any federal, state, or
local law, rule or regulation applicable
thereto, including, without limitation, the
Truth In Lending Act, Regulations O
and Z of the Federal Reserve Board, the
CRA, the Equal Credit Opportunity Act,
and any state laws, rules and regulations
relating to consumer protection,
installment sales and usury.
(iii) The allowance for loan losses reflected in DFBS's
audited balance sheet at September 30, 2003
was, and the allowance for loan
losses shown on the balance sheets in
DFBS's Reports for periods ending after
September 30, 2003, in the opinion of
management, was or will be adequate, as of
the dates thereof, under GAAP.
(x) ANTI-TAKEOVER PROVISIONS INAPPLICABLE. DFBS and its
Subsidiaries
have taken all actions required to exempt
FCCO, the Agreement, the Plan of Bank
Merger, the Merger and the Bank Merger from
any provisions of an antitakeover
nature contained in their organizational
documents, and the provisions of any
federal or state "anti-takeover," "fair
price," "moratorium," "control share
acquisition" or similar laws or
regulations.
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<PAGE>33
(y) MATERIAL INTERESTS OF CERTAIN PERSONS. No officer or director
of
DFBS, or any "associate" (as such term is
defined in Rule 12b-2 under the
Exchange Act) of any such officer or
director, has any material interest in any
material contract or property (real or
personal), tangible or intangible, used
in or pertaining to the business of DFBS or
any of its Subsidiaries, other than
banking relationships in the ordinary
course of business.
(z) INSURANCE. In the opinion of management, DFBS and its
Subsidiaries are presently insured for
amounts deemed reasonable by management
against such risks as companies engaged in
a similar business would, in
accordance with good business practice,
customarily be insured. All of the
insurance policies and bonds maintained by
DFBS and its Subsidiaries are in full
force and effect, DFBS and its Subsidiaries
are not in default thereunder and
all material claims thereunder have been
filed in due and timely fashion.
(aa) INVESTMENT SECURITIES; DERIVATIVES.
(i) Except for restrictions that exist for securities that are
classified as "held to maturity," none of
the investment securities held by DFBS
or any of its Subsidiaries is subject to
any restriction (contractual or
statutory) that would materially impair the
ability of the entity holding such
investment freely to dispose of such
investment at any time.
(ii) Neither DFBS nor any of its Subsidiaries is a party to or
has agreed to enter into an exchange-traded
or over-the-counter equity, interest
rate, foreign exchange or other swap,
forward, future, option, cap, floor or
collar or any other contract that is a
derivative contract (including various
combinations thereof) or owns securities
that (A) are referred to generically as
"structured notes," "high risk mortgage
derivatives," "capped floating rate
notes" or "capped floating rate mortgage
derivatives" or (B) are likely to have
changes in value as a result of interest or
exchange rate changes that
significantly exceed normal changes in
value attributable to interest or
exchange rate changes.
(bb) INDEMNIFICATION. Except as provided in the certificate of
incorporation or bylaws of DFBS and the
similar organizational documents of its
Subsidiaries and except as set forth in
DFBS's Disclosure Letter, neither DFBS
nor any of its Subsidiaries is a party to
any agreement that provides for the
indemnification of any of its present or
former directors, officers or
employees, or other persons who serve or
served as a director, officer or
employee of another corporation,
partnership or other enterprise at the request
of DFBS and, to the knowledge of DFBS,
there are no claims for which any such
person would be entitled to indemnification
under the certificate of
incorporation or bylaws of DFBS or the
similar organizational documents of any
of its Subsidiaries, under any applicable
law or regulation or under any
indemnification agreement.
(cc) CORPORATE DOCUMENTS. DFBS has previously furnished or made
available to FCCO a complete and correct
copy of the certificate of
incorporation, bylaws and similar
organizational documents of DFBS and each of
DFBS's Subsidiaries, as in effect as of the
date of this Agreement. Neither DFBS
nor any of DFBS's Subsidiaries is in
violation of its certificate of
incorporation, bylaws or similar
organizational documents. The minute books of
29
<PAGE>34
DFBS and each of DFBS's Subsidiaries
constitute a complete and correct record of
all actions taken by their respective
boards of directors (and each committee
thereof) and their stockholders.
(dd) DFBS INFORMATION. The information regarding DFBS and its
Subsidiaries to be supplied by DFBS for
inclusion in the Registration Statement,
any filings or approvals under applicable
state securities laws, or any filing
pursuant to Rule 165 or Rule 425 under the
Securities Act or Rule 14a-12 under
the Exchange Act will not contain any
untrue statement of a material fact or
omit to state any material fact required to
be stated therein or necessary in
order to make the statements therein, in
light of the circumstances under which
they are made, not misleading.
(ee) COMMUNITY REINVESTMENT ACT COMPLIANCE. Newberry Federal is
in
material compliance with the applicable
provisions of the CRA and the
regulations promulgated thereunder, and
Newberry Federal currently has a CRA
rating of satisfactory or better. To the
knowledge of DFBS, there is no fact or
circumstance or set of facts or
circumstances that would cause Newberry Federal
to fail to comply with such provisions or
cause the CRA rating of Newberry
Federal to fall below satisfactory.
(ff) TAX TREATMENT OF THE MERGER. DFBS has no knowledge of any
fact
or circumstance relating to it that would
prevent the transactions contemplated
by this Agreement from qualifying as a
reorganization under the IRC.
3.3
REPRESENTATIONS AND WARRANTIES OF FCCO. FCCO represents and
warrants
to DFBS that, except as set forth in FCCO's
Disclosure Letter:
(a) ORGANIZATION AND QUALIFICATION. FCCO is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
South Carolina and is registered as a bank
holding company under the BHC Act.
FCCO has all requisite corporate power and
authority to own, lease and operate
its properties and to conduct the business
currently being conducted by it. FCCO
is duly qualified or licensed as a foreign
corporation to transact business and
is in good standing in each jurisdiction in
which the character of the
properties owned or leased by it or the
nature of the business conducted by it
makes such qualification or licensing
necessary, except where the failure to be
so qualified or licensed and in good
standing would not have a Material Adverse
Affect on FCCO.
(b)
SUBSIDIARIES.
(i) FCCO owns of record and beneficially all the capital stock
of each of its Subsidiaries free and clear
of any Liens. There are no contracts,
commitments, agreements or understandings
relating to FCCO's right to vote or
dispose of any equity securities of its
Subsidiaries. FCCO's ownership interest
in each of its Subsidiaries is in
compliance with all applicable laws, rules and
regulations relating to equity investments
by bank holding companies or national
banking associations.
(ii) Each of FCCO's Subsidiaries is a corporation duly
organized and validly existing under the
laws of its jurisdiction of
incorporation, has all requisite corporate
power and authority to own, lease and
30
<PAGE>35
operate its properties and to conduct the
business currently being conducted by
it and is duly qualified or licensed as a
foreign corporation to transact
business and is in good standing in each
jurisdiction in which the character of
the properties owned or leased by it or the
nature of the business conducted by
it makes such qualification or licensing
necessary, except where the failure to
be so qualified or licensed and in good
standing would not have a Material
Adverse Affect on FCCO.
(iii) The outstanding shares of capital stock of each
Subsidiary have been validly authorized and
are validly issued, fully paid and
nonassessable. No shares of capital stock
of any Subsidiary of FCCO are or may
be required to be issued by virtue of any
options, warrants or other rights, no
securities exist that are convertible into
or exchangeable for shares of such
capital stock or any other debt or equity
security of any Subsidiary, and there
are no contracts, commitments, agreements
or understandings of any kind for the
issuance of additional shares of capital
stock or other debt or equity security
of any Subsidiary or options, warrants or
other rights with respect to such
securities.
(iv) No Subsidiary of FCCO other than First Community is an
"insured depository institution" as defined
in the FDIA and the applicable
regulations thereunder. The deposits of
First Community are insured by the FDIC
through the Bank Insurance Fund to the
fullest extent permitted by law. First
Community is a member in good standing of
the Federal Home Loan Bank of Atlanta.
(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of FCCO consists of:
(A) 10,000,000
shares of FCCO Common Stock, par value
$1.00 per share; and
(B)
10,000,000 shares of preferred stock, par value
$1.00 per share.
(ii) As of the date of this Agreement:
(A) 1,598,401 shares of FCCO Common Stock are
issued and outstanding, all of which are
validly issued, fully paid and
nonassessable and were issued in full
compliance with all applicable laws;
(B) no shares of FCCO preferred stock are issued
and outstanding; and
(C) 150,763 shares of FCCO Common Stock are
reserved for issuance pursuant to
outstanding grants or awards under FCCO's
stock-based benefit plans.
(iii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which
stockholders of FCCO may vote are
issued or outstanding.
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<PAGE>36
(iv) Except as set forth in this SECTION 3.3(C) or in FCCO's
Disclosure Letter, as of the date of this
Agreement, (A) no shares of capital
stock or other voting securities of FCCO
are issued, reserved for issuance or
outstanding and (B) neither FCCO nor any of
its Subsidiaries has or is bound by
any outstanding subscriptions, options,
warrants, calls, rights, convertible
securities, commitments or agreements of
any character obligating FCCO or any of
its Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or
sold, any additional shares of capital
stock of FCCO or obligating FCCO or any
of its Subsidiaries to grant, extend or
enter into any such option, warrant,
call, right, convertible security,
commitment or agreement. As of the date
hereof, there are no outstanding
contractual obligations of FCCO or any of its
Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital
stock of FCCO or any of its
Subsidiaries.
(v) The shares of FCCO Common Stock to be issued in exchange
for shares of DFBS Common Stock upon
consummation of the Merger in accordance
with this Agreement will be duly authorized
and, when issued in accordance with
the terms of this Agreement, will be
validly issued, fully paid and
nonassessable and subject to no preemptive
rights.
(d) AUTHORITY. FCCO has all requisite corporate power and
authority
to enter into this Agreement, to perform
its obligations hereunder and to
consummate the transactions contemplated by
this Agreement. The execution and
delivery of this Agreement and the
consummation of the transactions contemplated
by this Agreement have been duly authorized
by all necessary corporate actions
on the part of FCCO's Board of Directors,
and no other corporate proceedings on
the part of FCCO are necessary to authorize
this Agreement or to consummate the
transactions contemplated by this Agreement
other than the approval and adoption
of this Agreement by the affirmative vote
of the holders of two-thirds of the
outstanding shares of FCCO Common Stock.
This Agreement has been duly and
validly executed and delivered by FCCO and
constitutes a valid and binding
obligation of FCCO, enforceable against
FCCO in accordance with its terms,
subject to applicable bankruptcy,
insolvency and similar laws affecting
creditors' rights and remedies generally
and to general principles of equity,
whether applied in a court of law or a
court of equity.
(e) NO VIOLATIONS. The execution, delivery and performance of
this
Agreement by FCCO do not, and the
consummation of the transactions contemplated
by this Agreement will not, (i) assuming
all required governmental approvals
have been obtained and the applicable
waiting periods have expired, violate any
law, rule or regulation or any judgment,
decree, order, governmental permit or
license to which FCCO or any of its
Subsidiaries (or any of their respective
properties) is subject, (ii) assuming
approval by the stockholders of FCCO of
the Agreement, violate the articles of
incorporation or bylaws of FCCO or the
similar organizational documents of any of
its Subsidiaries or (iii) constitute
a breach or violation of, or a default
under (or an event which, with due notice
or lapse of time or both, would constitute
a default under), or result in the
termination of, accelerate the performance
required by, or result in the
creation of any Lien upon any of the
properties or assets of FCCO or any of its
Subsidiaries under, any of the terms,
conditions or provisions of any note,
bond, indenture, deed of trust, loan
agreement or other agreement, instrument or
obligation to which FCCO or any of its
Subsidiaries is a party, or to which any
of their respective properties or assets
may be subject except, in the case of
32
<PAGE>37
(iii), for any such breaches, violations or
defaults that would not,
individually or in the aggregate, have a
Material Adverse Effect on FCCO.
(f) CONSENTS AND APPROVALS. No consents or approvals of, or
filings
or registrations with, any Governmental
Entity or any third party are required
to be made or obtained in connection with
the execution and delivery by FCCO of
this Agreement or the consummation by FCCO
of the Merger and the other
transactions contemplated by this
Agreement, including the Bank Merger, except
for (i) filings of applications and notices
with, receipt of approvals or
nonobjections from, and expiration of the
related waiting period required by,
federal and state banking authorities, (ii)
filing of the Registration Statement
with the SEC and declaration by the SEC of
the Registration Statement's
effectiveness under the Securities Act,
(iii) the registration or qualification
under state securities or "blue sky" laws
of the shares of FCCO Common Stock to
be issued in exchange for shares of DFBS
Common Stock, and (iv) the listing on
the NASDAQ SmallCap Market of the shares of
FCCO Common Stock to be issued in
exchange for shares of DFBS Common Stock.
As of the date hereof, FCCO knows of
no reason pertaining to FCCO why any of the
approvals referred to in this
SECTION 3.3(F) should not be obtained
without the imposition of any material
condition or restriction described in
SECTION 6.1(B).
(g) SECURITIES AND REGULATORY FILINGS. FCCO has filed with the
SEC
all reports, schedules, registration
statements, definitive proxy statements and
other documents that it has been required
to file under the Securities Act or
the Exchange Act since December 31, 1998
and First Community has filed all such
reports with its applicable Government
Regulator (collectively, "FCCO'S
REPORTS"). FCCO has made available to DFBS
an accurate and complete copy of (i)
each of FCCO's Reports and (ii) each
communication mailed by FCCO to its
stockholders since December 31, 1998. None
of FCCO's Reports or such
communications contained any untrue
statement of a material fact or omitted to
state a material fact required to be stated
therein or necessary to make the
statements made therein, in light of the
circumstances under which they were
made, not misleading. As of their
respective dates, all of FCCO's Reports
complied in all material respects with the
applicable requirements of the
Securities Act or the Exchange Act, as the
case may be, or the laws, rules, and
regulations of the Government Regulator
with which they were filed. Each of the
financial statements (including, in each
case, any notes thereto) of FCCO
included in FCCO's Reports complied as to
form, as of their respective dates of
filing with the SEC or any Government
Regulator, in all material respects with
applicable accounting requirements and with
the published rules and regulations
of the SEC or applicable Government
Regulator with respect thereto.
(h) FINANCIAL STATEMENTS. FCCO has previously made available to
DFBS
copies of (i) the consolidated balance
sheets of FCCO and its Subsidiaries as of
December 31, 2003 and 2002 and related
consolidated statements of income, cash
flows and changes in stockholders' equity
for each of the three years in the
three-year period ended December 31, 2003,
together with the notes thereto,
accompanied by the audit report of FCCO's
independent public auditors, as
reported in FCCO's Annual Report on Form
10-KSB for the year ended December 31,
2003 filed with the SEC. Such financial
statements were prepared from the books
and records of FCCO and its Subsidiaries,
fairly present the consolidated
financial position of FCCO and its
Subsidiaries in each case at and as of the
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<PAGE>38
dates indicated and the consolidated
results of operations, changes in
stockholders' equity and cash flows of FCCO
and its Subsidiaries for the periods
indicated, and, except as otherwise set
forth in the notes thereto, were
prepared in accordance with GAAP
consistently applied throughout the periods
covered thereby. The books and records of
FCCO and its Subsidiaries have been,
and are being, maintained in all respects
in accordance with GAAP and any other
legal and accounting requirements and
reflect only actual transactions.
(i) UNDISCLOSED LIABILITIES. Neither FCCO nor any of its
Subsidiaries has incurred any debt,
liability or obligation of any nature
whatsoever (whether accrued, contingent,
absolute or otherwise and whether due
or to become due) other than liabilities
reflected on or reserved against in the
consolidated balance sheet of FCCO as of
December 31, 2003 as included in FCCO's
Annual Report on Form 10-KSB for the period
ended December 31, 2003, except for
(i) liabilities incurred since December 31,
2003 in the ordinary course of
business consistent with past practice
that, either alone or when combined with
all similar liabilities, have not had, and
would not reasonably be expected to
have, a Material Adverse Effect on FCCO and
(ii) liabilities incurred for legal,
accounting, financial advising fees and
out-of-pocket expenses in connection
with the transactions contemplated by this
Agreement.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in
FCCO's Reports filed with the SEC prior to
the date of this Agreement, since
December 31, 2003, (i) FCCO and its
Subsidiaries have conducted their respective
businesses only in the ordinary and usual
course of such businesses consistent
with their past practices and (ii) there
has not been any event or occurrence
that has had, or is reasonably expected to
have, a Material Adverse Effect on
FCCO.
(k) LITIGATION. There are no suits, actions or legal,
administrative
or arbitration proceedings pending or, to
the knowledge of FCCO, threatened
against or affecting FCCO or any of its
Subsidiaries or any property or asset of
FCCO or any of its Subsidiaries that (i)
individually or in the aggregate, would
reasonably be expected to have a Material
Adverse Effect on FCCO or (ii)
challenge the validity or propriety of the
transactions contemplated by this
Agreement. To the knowledge of FCCO, there
are no investigations, reviews or
inquiries by any court or Governmental
Entity pending or threatened against FCCO
or any of its Subsidiaries. There are no
judgments, decrees, injunctions, orders
or rulings of any Governmental Entity or
arbitrator outstanding against FCCO or
any of its Subsidiaries that, individually
or in the aggregate, would reasonably
be expected to have a Material Adverse
Effect on FCCO.
(l) ABSENCE OF REGULATORY ACTIONS. Since December 31, 1998,
neither
FCCO nor any of its Subsidiaries has been a
party to any cease and desist order,
written agreement or memorandum of
understanding with, or any commitment letter
or similar undertaking to, or has been
subject to any action, proceeding, order
or directive by, or has been a recipient of
any extraordinary supervisory letter
from any Government Regulator, or has
adopted any board resolutions at the
request of any Government Regulator, or has
been advised by any Government
Regulator that it is contemplating issuing
or requesting (or is considering the
appropriateness of issuing or requesting)
any such action, proceeding, order,
directive, written agreement, memorandum of
understanding, extraordinary
supervisory letter, commitment letter,
board resolutions or similar undertaking.
There are no unresolved violations,
criticisms or exceptions by any Government
Regulator with respect to any report or
statement relating to any examinations
of FCCO or its Subsidiaries.
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<PAGE>39
(m) COMPLIANCE WITH LAWS. FCCO and each of its Subsidiaries
conducts
its business in compliance in all material
respects with all statutes, laws,
regulations, ordinances, rules, judgments,
orders or decrees applicable to it or
the employees conducting such business.
FCCO and each of its Subsidiaries has
all permits, licenses, certificates of
authority, orders and approvals of, and
has made all filings, applications and
registrations with, all Governmental
Entities that are required in order to
permit it to carry on its business as it
is presently conducted; all such permits,
licenses, certificates of authority,
orders and approvals are in full force and
effect, and no suspension or
cancellation of any of them is threatened.
Neither FCCO nor any of its
Subsidiaries has been given notice or been
charged with any violation of, any
law, ordinance, regulation, order, writ,
rule, decree or condition to approval
of any Governmental Entity which,
individually or in the aggregate, would
reasonably be expected to have a Material
Adverse Effect on FCCO.
(n) TAXES. All federal, state, local and foreign tax returns
required to be filed by or on behalf of
FCCO or any of its Subsidiaries have
been timely filed or requests for
extensions have been timely filed and any such
extension shall have been granted and not
have expired, and all such filed
returns are complete and accurate in all
material respects. All taxes shown on
such returns, all taxes required to be
shown on returns for which extensions
have been granted and all other taxes
required to be paid by FCCO or any of its
Subsidiaries have been paid in full or
adequate provision has been made for any
such taxes on FCCO's balance sheet (in
accordance with GAAP). There is no audit
examination, deficiency assessment, tax
investigation or refund litigation with
respect to any taxes of FCCO or any of its
Subsidiaries, and no claim has been
made by any authority in a jurisdiction
where FCCO or any of its Subsidiaries do
not file tax returns that FCCO or any such
Subsidiary is subject to taxation in
that jurisdiction. All taxes, interest,
additions and penalties due with respect
to completed and settled examinations or
concluded litigation relating to FCCO
or any of its Subsidiaries have been paid
in full or adequate provision has been
made for any such taxes on FCCO's balance
sheet (in accordance with GAAP). FCCO
and its Subsidiaries have not executed an
extension or waiver of any statute of
limitations on the assessment or collection
of any tax due that is currently in
effect. FCCO and each of its Subsidiaries
has withheld and paid all taxes
required to have been withheld and paid in
connection with amounts paid or owing
to any employee, independent contractor,
creditor, stockholder or other third
party, and FCCO and each of its
Subsidiaries has timely complied with all
applicable information reporting
requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar
applicable state and local information
reporting requirements.
(o) AGREEMENTS.
(i) FCCO and its Subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of
Regulation S-B promulgated by the
SEC), to be performed after the date hereof
that has not been filed with FCCO's
Reports.
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<PAGE>40
(ii) FCCO's Disclosure Letter lists any contract, arrangement,
commitment or understanding (whether
written or oral) to which FCCO or any of
its Subsidiaries is a party or is bound
containing covenants that limit the
ability of FCCO or any of its Subsidiaries
to compete in any line of business or
with any person, or that involve any
restriction on the geographic area in
which, or method by which, FCCO (including
any successor thereof) or any of its
Subsidiaries may carry on its business
(other than as may be required by law or
any regulatory agency);
(iii) Neither FCCO nor any of its Subsidiaries is in default
under (and, to the knowledge of FCCO, no
event has occurred which, with due
notice or lapse of time or both, would
constitute a default under) or is in
violation of any provision of any note,
bond, indenture, mortgage, deed of
trust, loan agreement, lease or other
agreement to which it is a party or by
which it is bound or to which any of its
respective properties or assets is
subject and, to the knowledge of FCCO, no
other party to any such agreement
(excluding any loan or extension of credit
made by FCCO or any of its
Subsidiaries) is in default in any respect
thereunder, except for such defaults
or violations that would not, individually
or in the aggregate, have a Material
Adverse Effect on FCCO.
(p) INTELLECTUAL PROPERTY. FCCO and each of its Subsidiaries owns
or
possesses valid and binding licenses and
other rights to use without payment all
patents, copyrights, trade secrets, trade
names, service marks and trademarks
material to its businesses, and neither
FCCO nor any of its Subsidiaries has
received any notice of conflict with
respect thereto that asserts the right of
others. Each of FCCO and its Subsidiaries
has performed all the obligations
required to be performed by it and are not
in default under any contact,
agreement, arrangement or commitment
relating to any of the foregoing, except
for such non-performance and defaults that
would not, individually or in the
aggregate, have a Material Adverse Effect
on FCCO.
(q) LABOR MATTERS. FCCO and its Subsidiaries are in material
compliance with all applicable laws
respecting employment, retention of
independent contractors, employment
practices, terms and conditions of
employment, and wages and hours. Neither
FCCO nor any of its Subsidiaries is or
has ever been a party to, or is or has ever
been bound by, any collective
bargaining agreement, contract or other
agreement or understanding with a labor
union or labor organization with respect to
its employees, nor is FCCO or any of
its Subsidiaries the subject of any
proceeding asserting that it has committed
an unfair labor practice or seeking to
compel it or any such Subsidiary to
bargain with any labor organization as to
wages and conditions of employment nor
has any such proceeding been threatened,
nor is there any strike, other labor
dispute or organizational effort involving
FCCO or any of its Subsidiaries
pending or, to the knowledge of FCCO,
