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Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
BUCKHEAD COMMUNITY BANCORP, INC.
THE BUCKHEAD COMMUNITY BANK,
ALLIED BANCSHARES, INC.,
AND
FIRST NATIONAL BANK OF FORSYTH COUNTY
Dated as of March 1, 2007
C:\Documents and Settings\sjones\Desktop\Exhibit
2.1.doc
TABLE OF CONTENTS
Page
Parties
1
Preamble
1
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1
1.1
Company Merger
1
1.2
Bank Merger
1
1.3
Effective Time
1
1.4
Time and Place of Closing
1
ARTICLE 2
TERMS OF MERGER
1
2.1
Articles of Incorporation
1
2.2
Bylaws
1
2.3
Directors and Officers.
1
ARTICLE 3
MANNER OF CONVERTING SHARES
1
3.1
Conversion of Target Shares
1
3.2
Conversion of Stock Options and Warrants
3
3.3
Conversion of Target Bank Shares
4
ARTICLE 4
EXCHANGE OF SHARES
4
4.1
Exchange Procedures
4
4.2
Rights of Former Target Shareholders
5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET
BANK
5
5.1
Organization, Standing, and Power
5
5.2
Authority of Target; No Breach By Agreement
6
5.3
Capital Stock
7
5.4
Target Subsidiaries
7
5.5
SEC Filings; Financial Statements
8
5.6
Absence of Undisclosed Liabilities
8
5.7
Loan and Investment Portfolios
8
5.8
Absence of Certain Changes or Events
9
5.9
Tax Matters
10
5.10
Allowance for Possible Loan Losses
11
5.11
Assets
11
5.12
Intellectual Property
13
5.13
Environmental Matters
13
5.14
Compliance with Laws
14
5.15
Labor Relations
15
5.16
Employee Benefit Plans
15
5.17
Material Contracts
18
5.18
Legal Proceedings
19
5.19
Reports
19
5.20
Accounting, Tax and Regulatory Matters
20
5.21
Internal Accounting and Disclosure Controls
20
5.22
Community Reinvestment Act
20
5.23
Privacy of Customer Information
20
5.24
Technology Systems
20
5.25
Bank Secrecy Act Compliance
21
5.26
Target Disclosure Memorandum
21
5.27
Board Recommendation
21
5.28
Opinion of Financial Advisor
21
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
22
6.1
Organization, Standing and Power
22
6.2
Authority; No Breach By Agreement
22
6.3
Capital Stock
23
6.4
Purchaser Subsidiaries
24
6.5
Financial Statements
24
6.6
Absence of Undisclosed Liabilities
25
6.7
Absence of Certain Changes or Events
25
6.8
Tax Matters
25
6.9
Allowance for Possible Loan Losses
26
6.10
Environmental Matters
26
6.11
Compliance with Laws
27
6.12
Legal Proceedings
28
6.13
Community Reinvestment Act
28
6.14
Board Recommendation
28
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
29
7.1
Affirmative Covenants of Each Party
29
7.2
Negative Covenants of Target
29
7.3
Negative Covenants of Purchaser
31
7.4
Adverse Changes in Condition
31
7.5
Reports
31
ARTICLE 8
ADDITIONAL AGREEMENTS
31
8.1
Registration Statement; Proxy Statement; Shareholder
Approval
31
8.2
Applications
32
8.3
Filings with State Offices
32
8.4
Agreement as to Efforts to Consummate
32
8.5
Investigation and Confidentiality
33
8.6
No Solicitations
33
8.7
Press Releases
34
8.8
Tax Treatment
34
8.9
Charter Provisions
34
8.10
Agreement of Affiliates
35
8.11
Indemnification
35
8.12
Employee Benefits and Contracts
36
8.13
Andrew Walker Employment Agreement
37
8.14
Amendment to Warrant Agreement
37
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
37
9.1
Conditions to Obligations of Each Party
37
9.2
Conditions to Obligations of Purchaser
39
9.3
Conditions to Obligations of Target
40
ARTICLE 10
TERMINATION
40
10.1
Termination
40
10.2
Effect of Termination
42
10.3
Non-Survival of Representations and Covenants
42
10.4
Termination Payment
42
10.5
Reimbursement of Expenses
42
ARTICLE 11
MISCELLANEOUS
42
11.1
Definitions
42
11.2
Expenses
50
11.3
Brokers and Finders
51
11.4
Entire Agreement
51
11.5
Amendments
51
11.6
Waivers
51
11.7
Assignment
52
11.8
Notices
52
11.9
Governing Law
53
11.10
Counterparts
53
11.11
Captions; Articles and Sections
53
11.12
Interpretations
53
11.13
Severability
53
EXHIBITS
Exhibit A
Plan of Merger
Exhibit B
Form of Affiliate Agreement
Exhibit C
Opinion of Stewart, Melvin & Frost
Exhibit D
Form of Noncompete Agreement
Exhibit E
Opinion of Powell Goldstein, LLP
Exhibit F
Employment Agreement by and between The Buckhead Community
Bank
and Andrew K. Walker
AGREEMENT AND PLAN OF
REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into as of March 1, 2007, by and among BUCKHEAD
COMMUNITY BANCORP, INC. ("Purchaser"), a Georgia corporation, and
THE BUCKHEAD COMMUNITY BANK ("Purchaser Bank"), a Georgia chartered
bank on one hand, and ALLIED BANCSHARES, INC. ("Target"), a Georgia
corporation, and FIRST NATIONAL BANK OF FORSYTH COUNTY ("Target
Bank"), a national banking association on the other hand.
Preamble
The respective Boards of Directors of Target, Purchaser, Target
Bank and Purchaser Bank are of the opinion that the transactions
described herein are in the best interests of the parties to this
Agreement and their respective shareholders. This Agreement
provides for (i) the merger of Target Bank with and into Purchaser
Bank (the "Bank Merger") and (ii) the merger of Target with and
into Purchaser, as a result of which the outstanding shares of the
capital stock of Target shall be converted into the right to
receive cash and shares of the common stock of Purchaser and the
shareholders of Target (other than those shareholders who exchange
their shares solely for cash) shall become shareholders of
Purchaser (the "Company Merger" and, together with the Bank Merger,
the "Mergers"). The transactions described in this Agreement
are subject to the approvals of the shareholders of Target, the
Board of Governors of the Federal Reserve System, the Georgia
Department of Banking and Finance, the Federal Deposit Insurance
Corporation and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties of
this Agreement that the Company Merger for federal income tax
purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 11.1
of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth
herein, the parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1
Company Merger .
Subject to the terms and conditions of this Agreement, Target
shall be merged with and into Purchaser in accordance with the
provisions of Section 14-2-1101 of the GBCC and with the effect
provided in Section 14-2-1106 of the GBCC. Purchaser shall be
the Surviving Entity resulting from the Company Merger and shall
continue to be governed by the Laws of the State of Georgia.
The Company Merger shall be consummated pursuant to the terms
of this Agreement, which has been approved and adopted by the
respective Boards of Directors of Target and Purchaser.
1
1.2
Bank Merger .
Concurrent with the consummation of the Company Merger,
Target Bank shall be merged with and into Purchaser Bank in
accordance with the Financial Institutions Code of Georgia pursuant
to the terms and conditions of the Bank Agreement and Plan of
Merger and Merger Agreement attached hereto as
Exhibit A . Target shall vote the shares of
Target Bank in favor of the Bank Merger Agreement and the Bank
Merger.
1.3
Effective Time . The
Mergers and other transactions contemplated by this Agreement shall
become effective on the date and at the time the Certificate of
Merger reflecting the Mergers shall become effective with the
Secretary of State of Georgia (the "Effective Time"). At the
Effective Time, the separate corporate existence of Target and
Target Bank shall cease, and Purchaser and Purchaser Bank,
respectively, shall continue as the Surviving Entity.
1.4
Time and Place of Closing .
The closing of the transactions contemplated hereby (the
"Closing") will take place at 9:00 A.M. on the date that the
Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as
the Parties, acting through their authorized officers, may mutually
agree. The Closing shall be held at the office of Powell
Goldstein LLP, 1201 West Peachtree Street, Atlanta, GA 30309, or at
such location as may be mutually agreed upon by the Parties.
ARTICLE 2
TERMS OF MERGER
2.1
Articles of Incorporation .
The Articles of Incorporation of Purchaser and Purchaser Bank
in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the respective Surviving Entity.
2.2
Bylaws . The Bylaws of
Purchaser and Purchaser Bank in effect immediately prior to the
Effective Time shall be the Bylaws of the respective Surviving
Entity until duly amended or repealed.
2.3
Directors and Officers .
The officers and directors of Purchaser and Purchaser Bank in
office immediately prior to the Effective Time shall serve as the
officers and directors of the respective Surviving Entity from and
after the Effective Time. In addition, two directors (Andrew
Walker and one other director to be mutually determined by the
Parties) will be added to the Purchaser’s Board of
Directors.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1
Conversion of Target Shares
. Subject to the provisions of this Article 3, at the
Effective Time, by virtue of the Company Merger and without any
action on the part of Purchaser, Target, or the shareholders of
either of the foregoing, the shares of the constituent corporations
shall be converted as follows:
2
(a)
Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b)
Each share of Target Common Stock outstanding immediately prior
to the Effective Time, other than shares held by Target or with
respect to which the holders thereof have perfected
dissenters’ rights under Article 13 of the GBCC (the
"Dissenting Shares"), shall automatically be converted at the
Effective Time into the right to receive its pro rata portion of
the Merger Consideration (adjusted proportionately for any stock
split, stock dividend, recapitalization, reclassification, or
similar transaction that is effected by either Party, or for which
a record date occurs). Such shares to be converted are
sometimes referred to herein as the "Outstanding Target Shares."
Subject to adjustment as set forth below, each holder of
Target Common Stock may elect to receive his or her portion of the
Merger Consideration in the form of (i) cash in the amount of
$30.00 per share of Target Common Stock, (ii) 1.2 shares of
Purchaser Common Stock per share of Target Common Stock, or (iii) a
combination of both.
The relative proportions of a shareholder’s elected
portion of the Merger Consideration represented by cash and shares
of Purchaser Common Stock is subject to pro rata adjustment by the
Exchange Agent to the extent necessary to effect the issuance of
not more than the Maximum Cash Consideration, subject to the
following: (i) in the case of holders of Target Common Stock
that fail to make a timely election or do not indicate an election,
such holders shall receive Stock Consideration; (ii) if the total
of elections to receive Cash Consideration does not exceed the
Maximum Cash Consideration, holders of Target Common Stock that
have elected to receive any portion of their Merger Consideration
in cash shall receive a combination of Cash Consideration and Stock
Consideration or all Cash Consideration if they have so elected
without adjustment; and (iii) if elections to receive Cash
Consideration exceed the Maximum Cash Consideration, (A) each
holder of Target Common Stock and/or Target Warrants that has
elected to receive not more than 25% of his or her Merger
Consideration in Cash Consideration shall receive such amount of
Cash Consideration elected; and (B) each holder of Target Common
Stock and/or Target Warrants that has elected to receive more than
25% of his or her Merger Consideration in Cash Consideration shall
receive (1) Cash Consideration equal to 25% of his or her Merger
Consideration plus (2) additional Cash Consideration
adjusted on a pro rata basis among the holders electing to receive
more than 25% of their Merger Consideration in Cash Consideration
so that the Maximum Cash Consideration is not exceeded.
(c)
Notwithstanding any other provision of this Agreement, each
holder of Outstanding Target Shares exchanged pursuant to the
Company Merger who would otherwise have been entitled to receive a
fraction of a share of Purchaser Common Stock (after taking into
account all certificates delivered by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Purchaser Common Stock multiplied by
$25.00. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any
fractional shares.
(d)
Each share of Target Common Stock that is not an Outstanding
Target Share as of the Effective Time, including any shares of
Target Common Stock owned by Target, shall be canceled without
consideration therefor.
3
(e)
No Dissenting Shares shall be converted in the Company Merger.
All such shares shall be canceled, and the holders thereof
shall thereafter have only such rights as are granted to dissenting
shareholders under Article 13 of the GBCC; provided, however, that
if any such shareholder fails to perfect his or her rights as a
dissenting shareholder with respect to his or her Dissenting Shares
in accordance with Article 13 of the GBCC or withdraws or loses
such holder’s Dissenter’s Rights, such shares held by
such shareholder shall be treated the same as all other holders of
Target Common Stock who at the Effective Time held Outstanding
Target Shares.
3.2
Conversion of Stock Options and Warrants .
(a)
At the Effective Time, all rights with respect to Target Common
Stock pursuant to options ("Target Options") granted by Target
under the Target Stock Plans which are outstanding at the Effective
Time, whether or not exercisable, shall be converted into and
become rights with respect to Purchaser Common Stock, and Purchaser
shall assume each Target Option in accordance with the terms of the
Target Stock Plan and stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each Target
Option assumed by Purchaser may be exercised solely for shares of
Purchaser Common Stock, (ii) the number of shares of Purchaser
Common Stock subject to such Target Option shall be equal to the
number of shares of Target Common Stock subject to such Target
Option immediately prior to the Effective Time multiplied by 1.2,
and (iii) the per share exercise price under each such Target
Option shall be adjusted by dividing the per share exercise price
under each such Target Option by 1.2 and rounding up to the nearest
cent. Notwithstanding the provisions of clause (ii) of the
preceding sentence, Purchaser shall not be obligated to issue any
option for a fraction of a share of Purchaser Common Stock upon
conversion, and any fraction of a share of Purchaser Common Stock
that would otherwise be subject to a converted Target Option shall
represent the right to receive a cash payment equal to (i) the
product of such fraction and $25.00 minus (ii) the product of such
fraction and the per share exercise price of such Target Option.
It is intended that the foregoing assumption shall be
undertaken in a manner that will not constitute a "modification" as
defined in Section 424 of the Internal Revenue Code, as to any
stock option which is an "incentive stock option." Target and
Purchaser agree to take all necessary steps to effect the provision
of this Section 3.2.
(b)
All restrictions or limitations on transfer with respect to
Target Common Stock awarded under the Target Stock Plans or any
other plan, program or arrangement of any Target Company, to the
extent that such restrictions or limitations shall not have already
lapsed, and except as otherwise expressly provided in such plan,
program or arrangement, shall remain in full force and effect with
respect to shares of Purchaser Common Stock into which such
restricted stock is converted pursuant to Section 3.2 of this
Agreement.
4
(c)
At the Effective Time, all rights with respect to warrants
granted by Target pursuant to Target Stock Plans (the "Target
Warrants") which are outstanding at the Effective Time shall be
converted into the right to receive Merger Consideration as set
forth in Section 3.1 of the Agreement for each share of Target
Common Stock which the holders of the Target Warrants would be
authorized to elect to receive had such Target Warrants been
exercised prior to the Effective Time less an amount equal to the
exercise price of each such Target Warrant.
3.3
Conversion of Target Bank Shares . Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Bank Merger and
without any action on the part of Purchaser Bank, Target Bank, or
the shareholders of either of the foregoing, the shares of the
constituent corporations shall be converted as follows:
(a)
Each share of capital stock of Purchaser Bank issued and
outstanding immediately prior to the Effective Time shall remain
issued and outstanding from and after the Effective Time.
(b)
Each share of Target Bank common stock outstanding immediately
prior to the Effective Time shall automatically be cancelled at the
Effective Time.
ARTICLE 4
EXCHANGE OF SHARES
4.1
Exchange Procedures .
Prior to the Effective Time, Purchaser shall select a
transfer agent, bank or trust company to act as exchange agent (the
"Exchange Agent") to effect the delivery of the Merger
Consideration to holders of Target Common Stock. At the
Effective Time, Purchaser shall deliver the Merger Consideration to
the Exchange Agent. Promptly following the Effective Time,
the Exchange Agent shall send to each holder of Outstanding Target
Shares immediately prior to the Effective Time an election form and
letter of transmittal (the "Letter of Transmittal") for use in
exchanging certificates previously evidencing shares of Target
Common Stock ("Old Certificates"). The Letter of Transmittal
will contain instructions with respect to the surrender of Old
Certificates and the distribution of any cash and certificates
representing Purchaser Common Stock, which certificates shall be
deposited with the Exchange Agent by Purchaser as of the Effective
Time. If any certificates for shares of Purchaser Common
Stock are to be issued in a name other than that for which an Old
Certificate surrendered or exchanged is issued, the Old Certificate
so surrendered shall be properly endorsed and otherwise in proper
form for transfer and the person requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old
Certificate surrendered or provide funds for their purchase or
establish to the satisfaction of the Exchange Agent that such taxes
are not payable. Subject to applicable law and to the extent
that the same has not yet been paid to a public official pursuant
to applicable abandoned property laws, upon surrender of his or her
Old Certificates, the holder thereof shall be paid the
consideration to which he or she is entitled. All such
property, if held by the Exchange Agent for payment or delivery to
the holders of unsurrendered Old Certificates and unclaimed at the
end of one (1) year from the Effective Time, shall at such time be
paid or redelivered by the Exchange Agent to Purchaser, and after
such time any holder of an Old Certificate who has not surrendered
such certificate shall, subject to applicable laws and to the
extent that the same has not yet been paid to a public official
pursuant to applicable abandoned
5
property laws, look as a general creditor only to Purchaser for
payment or delivery of such property. In no event will any
holder of Target Common Stock exchanged in the Merger be entitled
to receive any interest on any amounts held by the Exchange Agent
or Purchaser of the Merger Consideration.
4.2
Rights of Former Target Shareholders .
(a)
At the Effective Time, the stock transfer books of Target shall
be closed as to holders of Target Common Stock immediately prior to
the Effective Time and no transfer of Target Common Stock by any
such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of
Section 4.1, each Certificate theretofore representing Outstanding
Target Shares shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided
in Section 3.1 in exchange therefor. To the extent permitted
by Law, former shareholders of record of Target shall be entitled
to vote after the Effective Time at any meeting of Purchaser
shareholders the number of whole shares of Purchaser Common Stock
into which their respective shares of Target Common Stock are
converted, regardless of whether such holders have exchanged their
Old Certificates for certificates representing Purchaser Common
Stock in accordance with the provisions of this Agreement.
(b)
Whenever a dividend or other distribution is declared by
Purchaser on the Purchaser Common Stock, the record date for which
is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of Purchaser Common
Stock issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of Purchaser Common
Stock as of any time subsequent to the Effective Time shall be
delivered to the holder of any Old Certificate until such holder
surrenders such Old Certificate for exchange as provided in Section
4.1. However, upon surrender of such Old Certificate, both
the Purchaser Common Stock certificate and any undelivered
dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented
by such Old Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TARGET AND
TARGET BANK
Target hereby represents and warrants to Purchaser as
follows:
5.1
Organization, Standing, and Power .
(a)
Target is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Georgia, and has the
corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. Target is
duly qualified or licensed to transact business as a foreign
corporation in good standing in the jurisdictions where the
character of the Assets or the nature or conduct of its business
requires it to be so qualified or licensed. The minute book
and other organizational documents for Target have been made
available to Purchaser for its review and, except as disclosed in
Section 5.1 of
6
the Target Disclosure Memorandum, accurately reflect all
amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
(b)
Target Bank is a national bank duly organized, validly existing,
and in good standing under the Laws of the United States of
America, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets.
Target Bank is duly qualified or licensed to transact
business and in good standing in jurisdictions where the character
of its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably
likely to have, individually or in the aggregate, a material
adverse effect on Target. The minute books and other
organizational documents and corporate records for Target Bank have
been made available to Purchaser for its review and are true and
complete in all material respects as in effect as of the date of
this Agreement and accurately reflect in all material respects all
amendments thereto and all proceeding of the Board of Directors and
shareholder thereof. Target Bank is an insured institution as
defined in the Federal Deposit Insurance Act and applicable
regulations thereunder.
5.2
Authority of Target and Target Bank; No Breach By Agreement
.
(a)
Target and Target Bank have the corporate power and authority
necessary to execute, deliver, and perform their respective
obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance
of this Agreement and the consummation of the transactions
contemplated herein, including the Mergers, have been duly and
validly authorized by all necessary corporate action in respect
thereof on the part of Target and Target Bank. Subject to the
requisite approval by Target’s and Target Bank’s
shareholders and any applicable Consents of Regulatory Authorities,
this Agreement represents a legal, valid, and binding obligation of
Target and Target Bank, enforceable against Target and Target Bank
in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors’ rights
generally and except that the availability of the equitable remedy
of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be
brought).
(b)
Neither the execution and delivery of this Agreement by Target
or Target Bank, nor the consummation by Target or Target Bank of
the transactions contemplated hereby, nor compliance by Target or
Target Bank with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Target’s
Articles of Incorporation or Bylaws or any resolution adopted by
the board of directors or the shareholders of Target that is
currently in effect, (ii) conflict with or result in a breach of
any provision of Target Bank’s Articles of Incorporation or
Bylaws or any resolution adopted by the board of directors or the
shareholders of Target that is currently in effect, or (iii) except
as disclosed in Section 5.2(b) of the Target Disclosure Memorandum,
constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of
Target or Target Bank under, any Contract or Permit of Target or
Target Bank, or, (iv) subject to receipt of the requisite Consents
referred to in Section 9.1(b), constitute or result in a Default
under, or require any Consent
7
pursuant to, any Law or Order applicable to Target, Target Bank
or any of its Assets (including any Purchaser Entity or Target
becoming subject to or liable for the payment of any Tax or any of
the Assets owned by any Purchaser Entity or Target being reassessed
or revalued by any Taxing authority).
(c)
Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities
Laws, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to
any employee benefit plans, no notice to, filing with, or Consent
of, any public body or authority is necessary for the consummation
by Target of the Company Merger, by Target Bank of the Bank Merger,
and the other transactions contemplated in this Agreement.
5.3
Capital Stock .
(a)
The authorized capital stock of Target consists of 10,000,000
shares of $0.10 par value per share Target Common Stock, of which,
as of the date of this Agreement, 1,504,000 shares are issued and
outstanding. In addition, 142,500 shares of Target Common
Stock are reserved for issuance pursuant to outstanding options to
purchase shares of common stock (the "Common Stock Options") and
287,142 shares are reserved for issuance pursuant to outstanding
warrants to purchase common stock (the "Common Stock Warrants").
All of the issued and outstanding shares of capital stock of
Target are duly and validly issued and outstanding and are fully
paid and nonassessable under the GBCC. None of the
outstanding shares of capital stock of Target has been issued in
violation of any preemptive rights of the current or past
shareholders of Target.
(b)
The authorized capital stock of Target Bank consists of
2,000,000 shares of common stock, $5.00 par value per share.
All of the issued and outstanding shares of capital stock of
Target Bank are duly and validly issued and outstanding and are
fully paid and nonassessable (except for assessment pursuant to 12
U.S.C. §55).
(c)
Except as set forth in Section 5.3(a) or 5.3(b) of this
Agreement or in Section 5.3(b) of the Target Disclosure Memorandum,
there are no (i) shares of capital stock, preferred stock or other
equity securities of Target or Target Bank outstanding or (ii)
outstanding Equity Rights relating to the capital stock of Target
or Target Bank.
5.4
Target Subsidiaries .
Target has disclosed in Section 5.4 of the Target Disclosure
Memorandum all of the Target Subsidiaries as of the date of this
Agreement. No equity securities of a Target Subsidiary is or
may become required to be issued (other than to Target) by reason
of any options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the
capital stock of a Target Subsidiary, and there are no contracts by
which a Target Subsidiary is bound to issue (other than to Target)
additional shares of its capital stock or options, warrants or
rights to purchase or acquire any additional shares of its capital
stock (other than to Target). There are no contracts relating
to the rights of any Target Entity to vote or to dispose of any
shares of the capital stock of a Target Subsidiary.
8
5.5
SEC Filings; Financial Statements .
(a)
Target has timely filed and made available to Purchaser all SEC
Documents required to be filed by Target since January 1, 2004
(the "Target SEC Reports"). The Target SEC Reports (i) at the
time filed, complied in all material respects with the applicable
requirements of the Securities Laws and other applicable Laws and
(ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such
Target SEC Reports or necessary in order to make the statements in
such Target SEC Reports, in light of the circumstances under which
they were made, not misleading. No Target Subsidiary is
required to file any SEC Documents.
(b)
Each of the Target Financial Statements (including, in each
case, any related notes) contained in the Target SEC Reports,
including any Target SEC Reports filed after the date of this
Agreement until the Effective Time, complied as to form in all
material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial
position of Target and its Subsidiaries as at the respective dates
and the consolidated results of operations and cash flows for the
periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in
amount or effect.
5.6
Absence of Undisclosed Liabilities . Except as described in Section 5.6
of the Target Disclosure Memorandum, the Target Entities have no
Liabilities of a nature required to be reflected on the
consolidated balance sheets prepared in accordance with GAAP,
except Liabilities that are accrued or reserved against in the
consolidated balance sheets of the Target Entities as of
September 30, 2006, included in the Target Financial
Statements or reflected in the notes thereto. The Target
Entities have not incurred or paid any Liability since December 31,
2005, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice
and that are not reasonably likely to have, individually or in the
aggregate, a Target Material Adverse Effect or (ii) to legal,
financial and other advisers in connection with the transactions
contemplated by this Agreement.
5.7
Loan and Investment Portfolios . As of the date of this Agreement,
all loans, discounts and financing leases reflected on the Target
Financial Statements were, and with respect to the Target Financial
Statements delivered as of the dates subsequent to the execution of
this Agreement, will be as of the dates thereof, (a) at the time
and under the circumstances in which made, made for good, valuable
and adequate consideration in the ordinary course of business, (b)
evidenced by genuine notes, agreements or other evidences of
indebtedness and (c) to the extent secured, have been secured by
valid liens and security interests that have been perfected.
Except as specifically set forth in Section 5.7 of the Target
Disclosure Memorandum, no Target Entity is a party to any written
or oral loan agreement, note or borrowing arrangement, including
any loan guaranty, that was, as of the most recent month-end (i)
delinquent by more
9
than 30 days in the payment of principal or interest, (ii) known
by the Target Entities to be otherwise in Default for more than 30
days, (iii) classified as "substandard," "doubtful," "loss," "other
assets especially mentioned" or any comparable classification by
Target, the FDIC or the Office of the Comptroller of the Currency,
or (iv) an obligation of any director, executive officer or 10%
shareholder of Target who is subject to Regulation O of the Federal
Reserve Board (12 C.F.R. Part 215), or any person, corporation or
enterprise controlling, controlled by or under common control with
any of the foregoing.
5.8
Absence of Certain Changes or Events . Since September 30, 2006, except
as disclosed in the Target Financial Statements delivered prior to
the date of this Agreement or in Section 5.8 of the Target
Disclosure Memorandum, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Target Material Adverse Effect,
(ii) Target has not declared, set aside for payment or paid any
dividend to holders of, or declared or made any distribution on,
any shares of Target Common Stock and (iii) no Target Entity has
taken any action, or failed to take any action, prior to the date
of this Agreement, which action or failure, if taken after the date
of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of Target
provided in Article 7. Except as may result from the
transactions contemplated by this Agreement, no Target Entity has,
since September 30, 2006:
(a)
except as set forth in Section 5.8(a) of the Target Disclosure
Memorandum, borrowed any money other than deposits or overnight fed
funds or entered into any capital lease or leases; or, except in
the ordinary course of business and consistent with past practices:
(i) lent any money or pledged any of its credit in connection
with any aspect of its business whether as a guarantor, surety,
issuer of a letter of credit or otherwise, (ii) mortgaged or
otherwise subjected to any Lien any of its assets, sold, assigned
or transferred any of its assets in excess of $50,000 in the
aggregate or (iv) incurred any other Liability or loss
representing, individually or in the aggregate, over $50,000;
(b)
suffered over $50,000 in damage, destruction or loss to
immovable or movable property, whether or not covered by
insurance;
(c)
experienced any material adverse change in Asset concentrations
as to customers or industries or in the nature and source of its
Liabilities or in the mix or interest-bearing versus
noninterest-bearing deposits;
(d)
except as set forth in Section 5.8(d) of the Target Disclosure
Memorandum, had any customer with a loan or deposit balance of more
than $50,000 terminate, or received notice of such customer’s
intent to terminate, its relationship with Target Bank;
(e)
failed to operate its business in the ordinary course consistent
with past practices, or failed to use reasonable efforts to
preserve its business or to preserve the goodwill of its customers
and others with whom it has business relations;
10
(f)
except as set forth in Section 5.8(f) of the Target Disclosure
Memorandum, forgiven any debt owed to it in excess of $50,000, or
canceled any of its claims or paid any of its noncurrent
obligations or Liabilities;
(g)
except as set forth in Section 5.8(g) of the Target Disclosure
Memorandum, made any capital expenditure or capital addition or
betterment in excess of $50,000.00;
(h)
except as set forth in Section 5.8(h) of the Target Disclosure
Memorandum, entered into any agreement requiring the payment,
conditionally or otherwise, of any salary, bonus, extra
compensation (including payments for unused vacation or sick time),
pension or severance payment to any of its present or former
directors, officers or employees, except such agreements as are
terminable at will without any penalty or other payment by it or
increased (except for increases of not more than 5% consistent with
past practices) the compensation (including salaries, fees,
bonuses, profit sharing, incentive, pension, retirement or other
similar payments) of any such person whose annual compensation
would, following such increase, exceed $50,000;
(i)
except as required in accordance with GAAP, changed any
accounting practice followed or employed in preparing the Target
Financial Statements;
(j)
authorized or issued any additional shares of Target Common
Stock, preferred stock, or Equity Rights; or
(k)
entered into any agreement, contract or commitment to do any of
the foregoing.
5.9
Tax Matters .
(a)
All Tax Returns required to be filed by or on behalf of any
Target Entity have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for all
periods ended on or before the date of the most recent fiscal year
end immediately preceding the Effective Time and all Tax Returns
filed are complete and accurate in all material respects. All
Taxes shown on filed Tax Returns have been paid. There is no
audit examination, deficiency, or refund Litigation with respect to
any Taxes, except as reserved against in the Target Financial
Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.9 of the Target Disclosure Memorandum.
Target’s federal income Tax Returns have not been
audited by the IRS. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded
Litigation have been paid. There are no Liens with respect to
Taxes upon any of the Assets of Target.
(b)
No Target Entity has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
(c)
The provision for any Taxes due or to become due for any Target
Entity for the period or periods through and including the date of
the respective Target Financial
11
Statements that has been made and is reflected on such Target
Financial Statements is sufficient to cover all such Taxes.
(d)
Deferred Taxes of the Target Entities have been provided for in
accordance with GAAP.
(e)
The Target Entities are in compliance with, and its records
contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state,
and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the
Internal Revenue Code, except where any such failure to comply
would not reasonably be expected to have a Target Material Adverse
Effect.
(f)
No Target Entity has experienced a change in ownership with
respect to its stock, within the meaning of Section 382 of the
Internal Revenue Code, other than the ownership change that will
occur as a result of the transactions contemplated by this
Agreement.
(g)
There is no pending claim by any taxing authority of a
jurisdiction where either the Target or Target Bank has not filed
Tax Returns that either Target or Target Bank is subject to
taxation in that jurisdiction.
(h)
There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to
the payment of any amount (individually or in the aggregate) that
would not be deductible by Purchaser, Purchaser Bank, Target or
Target Bank by reason of Code Section 280G or would be subject to
Code Section 4999.
(i)
Neither Target nor Target Bank has ever been a member of an
"affiliated group" within the meaning of Code Section 1504(a)
filing a consolidated federal income tax return, other than the
"affiliated group" of which Target is the "common parent."
Neither Target nor Target Bank is a party to any Tax sharing
or Tax allocation agreement that will remain in affect after
consummation to the Mergers contemplated by this Agreement.
5.10
Allowance for Possible Loan Losses . The allowance for possible loan or
credit losses (the "Allowance") shown on the consolidated balance
sheets of the Target Entities included in the Target Financial
Statements and the allowance shown on the consolidated balance
sheets of the Target Entities as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for all known or reasonably
anticipated losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of the Target
Entities and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by Target as
of the dates thereof.
5.11
Assets .
(a)
Except as disclosed in Section 5.11 of the Target Disclosure
Memorandum or as disclosed or reserved against in the Target
Financial Statements, the Target Entities have
12
good and marketable title, free and clear of all Liens, to its
Assets, except for (i) mortgages and encumbrances that secure
indebtedness that is properly reflected in the Target Financial
Statements or that secure deposits of public funds as required by
law; (ii) Liens for taxes accrued but not yet payable; (iii) Liens
arising as a matter of law in the ordinary course of business,
provided that the obligations secured by such Liens are not
delinquent or are being contested in good faith; (iv) such
imperfections of title and encumbrances, if any, as do not
materially detract from the value or materially interfere with the
present use of any of such properties or Assets or the potential
sale of any of such owned properties or Assets; and (v) capital
leases and leases, if any, to third parties for fair and adequate
consideration. All tangible properties used in the business
of the Target Entities are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business
consistent with Target’s past practices. All Assets
which are material to the Target Entities’ businesses on a
consolidated basis, held under leases or subleases by a Target
Entity, are held under valid Contracts enforceable against such
Target Entity in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement
of creditors’ rights generally and except that the
availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceedings may be brought), and, to the Knowledge of the
Target Entities, each such Contract is in full force and
effect.
(b)
The Target Entities have paid all amounts due and payable under
any insurance policies and guarantees applicable to the Target
Entities and their respective Assets and operations; all such
insurance policies and guarantees are in full force and effect, and
all of the Target Entities’ material properties are insured
in amounts, events and with deductibles, as set forth in Section
5.11(b) of the Target Disclosure Memorandum. No Target Entity
has received notice from any insurance carrier that (i) any policy
of insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. There
are presently no claims for amounts exceeding in any individual
case $10,000 pending under such policies of insurance, and no
notices of claims in excess of such amounts have been given by a
Target Entity under such policies.
(c)
With respect to each lease of any real property or personal
property to which any Target Entity is a party (whether as lessee
or lessor), except for financing leases in which a Target Entity is
lessor, (i) such lease is in full force and effect in accordance
with its terms against the Target Entity that is a party to the
lease; (ii) all rents and other monetary amounts that have become
due and payable thereunder have been paid by the Target Entity that
is a party to the lease; (iii) there exists no Default under such
lease by the Target Entity that is party to the lease; and (iv)
upon receipt of the consents described in Section 5.11(c) of the
Target Disclosure Memorandum, the Mergers will not constitute a
default or a cause for termination or modification of such
lease.
(d)
No Target Entity has a legal obligation, absolute or contingent,
to any other person to sell or otherwise dispose of any substantial
part of its Assets except in the ordinary course of business
consistent with past practices.
13
(e)
The Target Entities’ Assets include all Assets required to
operate the businesses of the Target Entities as presently
conducted.
5.12
Intellectual Property .
The Target Entities own or have a license to use the
Intellectual Property used by the Target Entities in the course of
their businesses. The Target Entities own or have a license
to any Intellectual Property sold or licensed to a third party by a
Target Entity in connection with the Target Entities’
business operations, and the Target Entities have the right to
convey by sale or license any Intellectual Property so conveyed.
To the Knowledge of the Target Entities, no Target Entity has
received notice of Default under any of their respective
Intellectual Property licenses. No proceedings have been
instituted, or are pending or overtly threatened, that challenge
the rights of the Target Entities with respect to Intellectual
Property used, sold or licensed by the Target Entities in the
course of their businesses, nor has any person claimed or alleged
any rights to such Intellectual Property. To the Knowledge of
the Target Entities, the conduct of the Target Entities’
businesses does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 5.12 of the Target
Disclosure Memorandum, no Target Entity is obligated to pay any
recurring royalties to any Person with respect to any such
Intellectual Property.
5.13
Environmental Matters .
(a)
To the Knowledge of the Target Entities, the Target Entities,
their Participation Facilities, and its Operating Properties are,
and have been, in compliance with all Environmental Laws.
(b)
To the Knowledge of the Target Entities, there is no Litigation
pending or threatened before any court, governmental agency, or
authority or other forum in which the Target Entities or any of
their Operating Properties or Participation Facilities (or the
Target Entities in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the Release into the indoor or outdoor
Environment of any Hazardous Material, whether or not occurring in,
at, on, under, about, adjacent to, or affecting (or potentially
affecting) an Asset currently or formerly owned, leased, or
operated by the Target Entities or any of its Operating Properties
or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
(c)
During the period of (i) the Target Entities’ ownership or
operation of any of their Assets, (ii) the Target Entities’
participation in the management of any Participation Facility, or
(iii) the Target Entities’ holding of a security interest in
an Operating Property, to the Knowledge of the Target Entities,
there has been no Release of any Hazardous Material in, at, on,
under, about, adjacent to, or affecting (or potentially affecting)
such properties. Prior to the period of (i) the Target
Entities’ ownership or operation of any of its Assets, (ii)
the Target Entities’ participation in the management of any
Participation Facility, or (iii) the Target Entities’ holding
of a security interest in an Operating Property, to the Knowledge
of the Target Entities, there was no Release of any Hazardous
Material in, at, on, under, about, or affecting any such property,
Participation Facility or Operating Property. No lead-based
paint or asbestos in
14
any form is present in, at, on, under, about, or affecting (or
potentially affecting) any Asset of the Target Entities.
(d)
Target has delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by a Target Entity pertaining to Hazardous
Materials in, at, on, under, about, or affecting (or potentially
affecting) any Asset, or concerning compliance by the Target
Entities or any other Person for whose conduct it is or may be held
responsible, with Environmental Laws.
(e)
There are no aboveground or underground storage tanks, whether
in use or closed, in, at, on, under any Asset of the Target
Entities. Section 5.13(e) of the Target Disclosure Memorandum
contains a detailed description of all above-ground or underground
storage tanks removed by or on behalf of the Target Entities at or
from any Asset of the Target Entities. Any such tank removals
were performed in accordance with Environmental Laws and no soil or
groundwater contamination resulted from the operation or removal of
such tanks.
5.14
Compliance with Laws .
Target is a Georgia corporation and a registered bank holding
company under the BHC Act, as amended, and has in effect all
Permits necessary for it to own, lease, or operate its Assets and
to carry on its business as now conducted, and there has occurred
no Default under any such Permit. Except as disclosed in
Section 5.14 of the Target Disclosure Memorandum, no Target Entity
is:
(a)
in Default under any of the provisions of its respective
Articles of Incorporation or Bylaws (or other governing
instruments);
(b)
in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business; or
(c)
since January 1, 2004, in receipt of any notification or
communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof
(i) asserting that any Target Entity is not in compliance with any
of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, (ii) threatening to revoke any
Permits or (iii) requiring the Target Entity to enter into or
consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding,
or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business or in any manner
relates to its capital adequacy, its credit or reserve policies or
its management.
Target Bank is a national bank whose deposits are and will at
the Effective Time be insured by the FDIC.
Copies of all reports, correspondence, notices and other
documents relating to any inspection, audit, monitoring or other
form of review or enforcement action by a Regulatory Authority have
been made available to Purchaser.
15
5.15
Labor Relations . No
Target Entity is a party to any Litigation asserting that it has
committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking to
compel it to bargain with any labor organization or other employee
representative to wages or conditions of employment, nor is any
Target Entity party to any collective bargaining agreement, nor is
there any pending or, to the Knowledge of the Target Entities,
threatened strike, slowdown, picketing, work stoppage or other
labor dispute involving Target. There is no activity
involving any employees of the Target Entities seeking to certify a
collective bargaining unit or engaging in any other organization
activity.
5.16
Employee Benefit Plans .
(a)
Target and any other entities which now or in the past five
years constitute a single employer within the meaning of IRC
Section 414 are hereinafter collectively referred to as the
"Company Group."
(b)
The following agreements, plans or arrangements, whether formal
or informal and whether or not documented in writing, which are
presently in effect and which cover current or former employees,
directors and/or other service providers of any member of the
Company Group (collectively "Participants") are referred to as the
"Company Plans":
(i)
Any employee benefit plan as defined in Section 3(3) of the
ERISA, and any trust or other funding agency created thereunder, or
under which any member of the Company Group, with respect to
employees, has any outstanding, present, or future obligation or
liability, or under which any employee or former employee has any
present or future right to benefits which are covered by ERISA;
or
(ii)
Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, hospitalization, medical, life
insurance, split dollar or other employee benefit plan, program,
policy, or arrangement, whether written or unwritten, formal or
informal, which any member of the Company Group maintains or to
which any member of the Company Group has any outstanding, present
or future obligations to contribute or make payments under, whether
voluntary, contingent or otherwise.
The plans, programs, policies, or arrangements described in
subsection (i) or (ii) above are hereinafter collectively referred
to as the "Company Plans." Target has delivered to Purchaser
true and complete copies, if any, of all written plan documents and
contracts evidencing the Company Plans, as they may have been
amended to the date hereof, together with the most recently filed
IRS Form 5500 relating to each Company Plan, to the extent
applicable, and any accompanying financial statements.
(c)
Except as to those plans identified in Section 5.16 of the
Target Disclosure Memorandum as Company Plans intended to be
qualified under Section 401(a) of the Internal Revenue Code (the
"Company Qualified Plans"), no member of the Company Group
maintains a Company Plan which meets or was intended to meet the
requirements of Section 401(a). As to each Company Qualified
Plan, the Internal Revenue Service has issued favorable
determination
16
letter(s) to the effect that such Company Qualified Plan is a
tax-qualified plan in form and that any related trust is exempt
from taxation, and such determination letter(s) remain in effect
and have not been revoked or, in the alternative, the Internal
Revenue Service has issued favorable determination letter(s) to the
effect that the prototype plan under which such Company Qualified
Plan has been adopted is a tax-qualified plan in form and that any
related trust is exempt from taxation, and that Target may rely
upon such favorable determination letter(s) and, to the Knowledge
of Target, such favorable determination letter(s) remain in effect
and have not been revoked. Copies of the most recent
favorable determination letters and any outstanding requests for a
favorable determination letter with respect to each Company
Qualified Plan, if any, have been delivered to the Purchaser.
Except as set forth in Section 5.16 of the Target Disclosure
Memorandum, no Company Qualified Plan has been amended since the
issuance of each respective most recent favorable determination
letter. The Company Qualified Plans currently comply in form
with the requirements under Internal Revenue Code Section 401(a),
other than changes required by statutes, regulations and rulings
for which amendments are not yet required. No issue
concerning qualification of the Company Qualified Plans is pending
before or is threatened by the Internal Revenue Service. The
Company Qualified Plans have been administered according to their
terms (except for those terms which are inconsistent with the
changes required by statutes, regulations, and rulings for which
changes are not yet required to be made, in which case the Company
Qualified Plans have been administered in accordance with the
provisions of those statutes, regulations and rulings) and in
accordance with the requirements of Internal Revenue Code Section
401(a). No member of the Company Group or any fiduciary of
any Company Qualified Plan has done anything that would adversely
affect the qualified status of the Company Qualified Plans or the
related trusts. Prior to the Closing Date, any Company
Qualified Plan which is required to satisfy Internal Revenue Code
Sections 401(k)(3) and 401(m)(2) has been, or will be, tested for
compliance with, and has satisfied, or will satisfy, the
requirements of, such Sections of the Internal Revenue Code for
each plan year ending prior to the Closing Date.
(d)
Each member of the Company Group is in compliance with the
requirements prescribed by any and all statutes, orders,
governmental rules and regulations applicable to the Company Plans
and all reports and disclosures relating to the Company Plans
required to be filed with or furnished to any governmental entity,
Participants or beneficiaries prior to the Closing Date have been
or will be filed or furnished in a timely manner and in accordance
with applicable Law.
(e)
No termination or partial termination of any Company Qualified
Plan has occurred nor has a notice of intent to terminate any
Company Qualified Plan been issued by a member of the Company
Group.
(f)
No member of the Company Group maintains an "employee benefit
pension plan" within the meaning of Section 3(2) of ERISA that is
or was subject to Title IV of ERISA or Section 412 of the Internal
Revenue Code.
(g)
No member of the Company Group has any remaining liability under
any previously maintained Company Plan, whether maintained as a
written or unwritten, formal or informal arrangement.
17
(h)
Each member of the Company Group has made full and timely
payment of, or has accrued, pending full and timely payment, all
amounts which are required under the terms of each of the Company
Plans and in accordance with applicable Law and Contracts to be
paid as a contribution to each Company Plan.
(i)
No member of the Company Group has any obligation or liability
to contribute or has contributed to any "multiemployer plan" as
defined in Section 3(37) of ERISA.
(j)
To the Knowledge of the Target Entities, no member of the
Company Group nor any other "disqualified person" or "party in
interest" (as defined in Internal Revenue Code Section 4975 and
ERISA Section 3(14), respectively) with respect to the Company
Plans, has engaged in any "prohibited transaction" (as defined in
Internal Revenue Code Section 4975 or ERISA Section 406). All
members of the Company Group and all fiduciaries with respect to
the Company Plans, including any members of the Company Group which
are fiduciaries as to a Company Plan, have complied in all respects
with the requirements of ERISA Section 404. No member of the
Company Group and no party in interest or disqualified person with
respect to the Company Plans has taken or omitted any action which
could lead to the imposition of an excise tax under the Internal
Revenue Code or a fine under ERISA.
(k)
No member of the Company Group has made or is obligated to make
any nondeductible contributions to any Company Plan.
(l)
No member of the Company Group is obligated, contingently or
otherwise, under any agreement to pay any amount which would be
treated as a "parachute payment," as defined in Internal Revenue
Code Section 280G(b) (determined without regard to Internal Revenue
Code Section 280G(b)(2)(A)(ii)).
(m)
Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending, or threatened
against any Company Plan, any trust or other funding agency created
thereunder, or against any fiduciary of any Company Plan or against
the assets of any Company Plan.
(n)
Except as disclosed in Section 5.16 of the Target Disclosure
Memorandum, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including severance, parachute payments
or otherwise) becoming due to any person, (ii) increase any
benefits otherwise payable under any Company Plan, or (iii) result
in the acceleration of the time of payment or vesting of any such
benefit.
(o)
Other than health continuation coverage required by COBRA, no
member of the Company Group has any obligation to any retired or
former employee, director or other service provider or any current
employee, director or other service provider upon retirement or
termination of employment under any Company Plan respecting health
and/or death benefits.
18
(p)
The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any
executive compensation, supplemental retirement, or employment
agreement) maintained by the Company Group for present or former
directors, employees or other service providers have been fully and
accurately reflected on the Target Financial Statements to the
extent required by and in accordance with GAAP.
(q)
Each nonqualified plan of deferred compensation, within the
meaning of Section 409A of the Internal Revenue Code, maintained by
one or more members of the Company Group has been operated in
compliance with the requirements of Section 409A (or an available
exemption therefrom) such that amounts of compensation deferred
thereunder will not be includible in gross income under Section
409A prior to the distribution of benefits thereunder in accordance
with the terms of such plan and will not be subject to the
additional tax under Section 409A(a)(1)(B)(ii).
(r)
The members of the Company Group, or any successor entity, may
terminate any Company Plan prospectively at any time without
further liability to any member of the Company Group or the
successor entity, including, without limitation, any additional
contributions, penalties, premiums, fees, surrender charges, market
value adjustments or any other charges as a result of such
termination, except to the extent of funds set aside for such
purpose or reflected as reserved for such purpose on the Target
Financial Statements.
(s)
Since September 30, 2006, except as disclosed in Section
5.16 of the Target Disclosure Memorandum, no member of the Company
Group has (i) increased the rate of compensation payable or to
become payable to any director, employee or other service provider
of the Company Group, other than in the ordinary course of business
and consistent with past practice; (ii) amended or entered into any
employment, severance, change in control or similar Contract with
any such director, employee or other service provider; (iii) paid
or agreed to pay any bonuses or other compensation, other than in
the ordinary course of business and consistent with past practice,
to any such director, employee or other service provider; (iv)
amended any Company Plan, other than any amendment required by Law;
(v) adopted any new plan, program, policy or arrangement, which if
it existed as of the Closing Date, would constitute a Company Plan;
or (vi) terminated any existing Company Plan.
5.17
Material Contracts .
Except as disclosed in Section 5.17 of the Target Disclosure
Memorandum or otherwise reflected in the Target Financial
Statements, neither the Target Entities nor any of their Assets,
businesses, or operations is a party to, or is bound or affected
by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract
relating to the borrowing of money by the Target Entities or the
guarantee by a Target Entity of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and Federal Home Loan
Bank advances of depository institution Subsidiaries, trade
payables and Contracts relating to borrowings or guarantees made in
the ordinary course of business), (iii) any Contract that prohibits
or restricts any Target Entity or employee thereof from engaging in
any business activities in any geographic area, line of business or
otherwise in competition with any other Person, (iv) any Contract
involving Intellectual Property (other than Contracts entered into
in the ordinary course of business with customers), (v) any
Contract relating to the provision of data
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processing, network communication, or other technical services
to or by any Target Entity, (vi) any Contract relating to the
purchase or sale of any goods or services (other than Contracts
entered into in the ordinary course of business and involving
payments under any individual Contract not in excess of $50,000),
or (vii) any exchange-traded or over-the-counter swap, forward,
future, option, cap, floor, or collar financial Contract, or any
other interest rate or foreign currency protection Contract not
included on its balance sheet that is a financial derivative
Contract (the "Target Contracts"). With respect to each
Target Contract and except as disclosed in Section 5.17 of the
Target Disclosure Memorandum: (i) the Contract is in full force and
effect against the Target Entity; (ii) no Target Entity is in
Default thereunder; (iii) no Target Entity has repudiated or waived
any material provision of any such Contract; and (iv) to the
Knowledge of any Target Entity, no other party to any such Contract
is in Default in any respect, or has repudiated or waived any
material provision thereunder. All of the indebtedness of the
Target Entities for money borrowed is prepayable at any time by
such Target Entity without penalty or premium.
5.18
Legal Proceedings .
Except as disclosed in Section 5.18 of the Target Disclosure
Memorandum, there is no Litigation instituted, pending or
threatened (or unasserted but considered probable of assertion and
which if asserted would have at least a reasonable probability of a
material unfavorable outcome) against any Target Entity, or against
any employee benefit plan of the Target Entities, or against any
Asset, interest, or right of any of them, nor are there any Orders
of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against the Target Entities. Section
5.18 of the Target Disclosure Memorandum contains a summary of all
Litigation as of the date of this Agreement to which any Target
Entity is a party and that names a Target Entity as a defendant or
cross-defendant or for which such Target Entity has any potential
Liability in excess of $50,000.
5.19
Reports .
(a)
Since the Target Entities’ respective incorporations, the
Target Entities have timely filed all reports and statements,
together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities.
As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading.
(b)
Each of the Target Financial Statements (including, in each
case, any related notes) contained in the Target Regulatory Reports
complied as to form in all material respects with the applicable
published rules and regulations of the Federal Reserve Board and
the Office of the Comptroller of the Currency with respect thereto,
was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes to such financial statements), and fairly presented in all
material respects the consolidated financial position of Target and
its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated.
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5.20
Tax and Regulatory Matters .
Target has not taken or agreed to take any action, and has no
Knowledge of any fact or circumstance that is reasonably likely, to
(i) prevent the Mergers from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the
imposition of a condition or restriction of the type referred to in
the last sentence of such Section.
5.21
Internal Accounting .
The Target Entities maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit the preparation of financial statements in
conformity with GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities
is permitted only in accordance with management's general or
specific authorization and (iv) the re
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