MERGER AGREEMENT
DATED AS OF JUNE 29, 2005
BY AND BETWEEN
CAPITAL BANK CORPORATION
AND
1ST STATE BANCORP, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- DEFINED TERMS
.................................................. 1
1.1. DEFINITIONS
.......................................................
1
ARTICLE II -- THE MERGER; CONVERSION AND
EXCHANGE OF COMPANY SHARES ......... 10
2.1. THE MERGER
........................................................ 10
2.2 COMPANY SHARES
.................................................... 11
2.3 MERGER CONSIDERATION
.............................................. 11
2.4 ELECTION AND ALLOCATION
PROCEDURES ................................ 13
2.5 EXCHANGE PROCEDURES
............................................... 15
2.6 AVERAGE CLOSING PRICE
ADJUSTMENT .................................. 15
2.7 COMPANY STOCK OPTIONS
............................................. 16
2.8 LIQUIDATION ACCOUNT
............................................... 16
ARTICLE III -- THE CLOSING
.................................................. 16
3.1 CLOSING
........................................................... 16
3.2 DELIVERIES BY THE COMPANY
......................................... 17
3.3 DELIVERIES BY THE BUYER
........................................... 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE COMPANY .................... 17
4.1 ORGANIZATION, STANDING AND
POWER .................................. 17
4.2 AUTHORITY; NO CONFLICTS
........................................... 18
4.3 CAPITAL STOCK; SUBSIDIARIES
....................................... 18
4.4 SEC FILINGS; COMPANY
FINANCIAL STATEMENTS ......................... 19
4.5 ABSENCE OF UNDISCLOSED
LIABILITIES ................................ 21
4.6 ABSENCE OF CERTAIN CHANGES
OR EVENTS .............................. 21
4.7 TAX MATTERS
....................................................... 22
4.8 ASSETS
............................................................ 23
4.9 SECURITIES PORTFOLIO AND
INVESTMENTS .............................. 23
4.10 ENVIRONMENTAL MATTERS
............................................. 23
4.11 COMPLIANCE WITH LAWS
.............................................. 24
4.12 LABOR RELATIONS
................................................... 25
4.13 EMPLOYEE BENEFIT PLANS
............................................ 25
4.14 MATERIAL CONTRACTS
................................................ 27
4.15 LEGAL PROCEEDINGS
................................................. 27
4.16 REPORTS
........................................................... 27
4.17 REGISTRATION STATEMENT; JOINT
PROXY STATEMENT ..................... 28
4.18 ACCOUNTING, TAX, AND REGULATORY
MATTERS ........................... 28
4.19 STATE TAKEOVER LAWS
............................................... 28
4.20 CHARTER PROVISIONS
................................................ 28
4.21 RECORDS
........................................................... 29
4.22 DERIVATIVES
....................................................... 29
4.23 CERTAIN REGULATED BUSINESSES
...................................... 29
4.24 LOANS; ALLOWANCE FOR LOAN LOSSES
.................................. 29
4.25 REPURCHASE AGREEMENTS; DERIVATIVES
................................ 30
4.26 DEPOSIT ACCOUNTS
.................................................. 30
4.27 PERMISSIBLE ACTIVITIES
............................................ 30
4.28 RELATED PARTY TRANSACTIONS
........................................ 30
4.29 COMMISSIONS
....................................................... 30
4.30 VOTING AGREEMENTS
................................................. 31
4.31 OPINION OF FINANCIAL ADVISOR
...................................... 31
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
OF THE BUYER .................... 31
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5.1 ORGANIZATION, STANDING AND
POWER .................................. 31
5.2 AUTHORITY; NO CONFLICTS
........................................... 32
5.3 BUYER'S STOCK; SUBSIDIARIES
....................................... 32
5.4 SEC FILINGS; BUYER FINANCIAL
STATEMENTS ........................... 33
5.5 ABSENCE OF UNDISCLOSED
LIABILITIES ................................ 34
5.6 ABSENCE OF CERTAIN CHANGES
OR EVENTS .............................. 34
5.7 COMPLIANCE WITH LAWS
.............................................. 34
5.8 LEGAL PROCEEDINGS
................................................. 35
5.9 REGISTRATION STATEMENT;
JOINT PROXY STATEMENT ..................... 35
5.10 ACCOUNTING, TAX, AND REGULATORY
MATTERS ........................... 36
5.11 COMMISSIONS
....................................................... 36
5.12 TAX MATTERS
....................................................... 36
5.13 RECORDS
........................................................... 37
5.14 OPINION OF FINANCIAL ADVISOR
...................................... 37
ARTICLE VI -- COVENANTS
..................................................... 37
6.1 COVENANTS OF THE COMPANY
.......................................... 37
6.2 COVENANTS OF THE BUYER
............................................ 43
6.3 COVENANTS OF BOTH PARTIES TO
THE AGREEMENT ........................ 46
ARTICLE VII -- DISCLOSURE OF ADDITIONAL
INFORMATION ......................... 49
7.1 ACCESS TO INFORMATION
............................................. 49
7.2 ACCESS TO PREMISES
................................................ 49
7.3 ENVIRONMENTAL SURVEY
.............................................. 49
7.4 CONFIDENTIALITY
................................................... 49
7.5 PUBLICITY
......................................................... 50
ARTICLE VIII -- CONDITIONS CLOSING
......................................... 50
8.1 MUTUAL CONDITIONS
................................................. 50
8.2 CONDITIONS TO THE
OBLIGATIONS OF THE COMPANY ...................... 51
8.3 CONDITIONS TO THE
OBLIGATIONS OF THE BUYER ........................ 53
ARTICLE IX -- TERMINATION
................................................... 55
9.1 TERMINATION
....................................................... 55
9.2 PROCEDURE AND EFFECT OF
TERMINATION ............................... 56
9.3 TERMINATION EXPENSES AND
FEES...................................... 56
ARTICLE X -- MISCELLANEOUS PROVISIONS
....................................... 57
10.1 EXPENSES
.......................................................... 57
10.2 SURVIVAL OF REPRESENTATIONS
....................................... 57
10.3 AMENDMENT AND MODIFICATION
........................................ 57
10.4 WAIVER OF COMPLIANCE; CONSENTS
.................................... 57
10.5 NOTICES
........................................................... 57
10.6 ASSIGNMENT
........................................................ 58
10.7 SEPARABLE PROVISIONS
.............................................. 58
10.8 GOVERNING LAW
..................................................... 59
10.9 COUNTERPARTS
...................................................... 59
10.10 INTERPRETATION
.................................................... 59
10.11 ENTIRE AGREEMENT
.................................................. 59
EXHIBIT A FORM OF PLAN OF MERGER
EXHIBIT B BAKER EMPLOYMENT
AGREEMENT
EXHIBIT C REYNOLDS EMPLOYMENT
AGREEMENT
EXHIBIT D McGILL CONSULTING
AGREEMENT
EXHIBIT E FORM OF VOTING
AGREEMENT
EXHIBIT F FORM OF AFFILIATE
LETTER
ii
<PAGE>
MERGER AGREEMENT
THIS
MERGER AGREEMENT (this "Agreement"), dated as of the 29th day
of
June, 2005, is by and among:
CAPITAL
BANK CORPORATION, a North Carolina corporation and a financial
holding company registered with the Board
of Governors of the Federal Reserve
System under the Bank Holding Company Act
of 1956, as amended, and a North
Carolina bank holding company (the
"Buyer"); and
1st STATE
BANCORP, INC., a Virginia corporation and a holding company
registered with the Board of Governors of
the Federal Reserve System under the
Bank Holding Company Act of 1956, as
amended, and a North Carolina bank holding
company (the "Company").
BACKGROUND STATEMENT
The Buyer
and the Company desire to effect a merger pursuant to which the
Company will merge into the Buyer, with the
Buyer being the surviving
corporation (the "Merger"). In
consideration of the Merger, the shareholders of
the Company will receive shares of common
stock of the Buyer and/or cash. It is
intended that the Merger qualify as a
tax-free reorganization under Section 368
of the Internal Revenue Code of 1986, as
amended.
STATEMENT OF AGREEMENT
In
consideration of the premises and the mutual representations,
warranties, covenants, agreements and
conditions contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1.
DEFINITIONS. As used in this Agreement, the following terms have
the
following meanings:
"401(k)
Plan" has the meaning given to it in Section 6.1(e).
--------------
"Actual
Average Closing Price" means, with respect to the Buyer's
Stock,
the average of the daily closing sales
price thereof on the Nasdaq National
Market System during the twenty (20)
trading day period ending three (3)
Business Days prior to the Closing Date, as
reported in The Wall Street Journal.
"Acquisition Proposal" has the meaning given to it in Section
6.1(c).
--------------
"Affiliate" means, with respect to any Person, each of the Persons
that
directly or indirectly, through one or more
intermediaries, owns or controls, or
is controlled by or under common control
with, such Person. For the purpose of
this Agreement, "Control" means the
possession, directly or indirectly, of the
power to direct or cause the direction of
management and policies, whether
through the ownership of voting securities,
by contract or otherwise.
<PAGE>
Without limiting the foregoing, as used
with respect to the Company, the term
"Affiliates" includes Company Bank, the
LLC, and any other of the Company's
Subsidiaries.
"Agreement" means this Merger Agreement.
"Assets"
means all of the assets, properties, businesses and rights of a
Person of every kind, nature, character and
description, whether real, personal
or mixed, tangible or intangible, accrued
or contingent, whether or not carried
on any books and records of such Person,
whether or not owned in such Person's
name and wherever located.
"Average
Closing Price" means the Actual Average Closing Price;
provided,
in the event that the Actual Average
Closing Price is greater than $18.00, the
Average Closing Price shall be $18.00;
provided, further, in the event that the
Actual Average Closing Price is less than
$15.00, the Buyer may set the Average
Closing Price at $15.00 pursuant to Section
2.6.
"Baker
Employment Agreement" means the employment agreement to be
entered
into at or prior to Closing between the
Buyer and A. Christine Baker for a term
of one (1) year commencing on the Closing
Date and automatically renewing on
each subsequent anniversary of the Closing
Date for an additional one (1) year
renewal term unless either party delivers
to the other party written notice of
the party's intent to terminate the
employment agreement as of the end of such
initial term or applicable one (1) year
renewal term. The employment agreement
shall contain customary terms and
conditions (including non-competition and
non-solicitation provisions) applicable to
executive employment agreements of
its nature and be substantially in the form
attached hereto as EXHIBIT B.
"Benefit
Plans" means all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock
ownership, restricted stock,
severance pay, vacation, bonus, or other
incentive plan, all other written
employee programs or agreements, all
medical, vision, dental, or other health
plans, welfare plans, all life insurance
plans, and all other employee benefit
plans, arrangements, fringe benefit plans
or perquisites, whether written or
unwritten, including without limitation
"employee benefit plans" as that term is
defined in Section 3(3) of ERISA maintained
by, sponsored in whole or in part
by, or contributed to by, a Person or any
of its subsidiaries for the benefit of
employees, retirees, dependents, spouses,
directors, independent contractors, or
any other beneficiaries and under which
employees, retirees, dependents,
spouses, directors, independent
contractors, or any other beneficiaries are
eligible to participate.
"Business
Day" means any day excluding (i) Saturday, (ii) Sunday and
(iii)
any day that is a legal holiday in the
State of North Carolina.
"Buyer"
has the meaning given to it in the introductory paragraph
hereof.
"Buyer
Bank" means Capital Bank, a North Carolina bank and a wholly
owned
subsidiary of the Buyer.
"Buyer
Financial Statements" means, with respect to the Buyer and its
Subsidiaries, the consolidated audited
statements of income and stockholder's
equity and cash flows for the years ended
December 31, 2004, 2003 and 2002 and
consolidated audited balance sheets as of
December 31, 2004 and 2003, as well as
the interim unaudited consolidated
statements of
2
<PAGE>
income and stockholders' equity and cash
flows for each of the completed fiscal
quarters since December 31, 2004 and the
consolidated interim balance sheet as
of each such quarter as filed with the
SEC.
"Buyer SEC
Reports" has the meaning given to it in Section 5.4(a).
--------------
"Buyer's
Disclosure Schedule" has the meaning given to it in the
preamble
to ARTICLE V.
"Buyer's
Stock" means the common stock of Capital Bank Corporation, no
par
value, as traded on the Nasdaq National
Market System.
"Cash
Election Amount" has the meaning given to it in Section 2.4(a).
---------------
"Cash
Election Shares" has the meaning given to it in Section 2.4(a).
--------------
"Cause"
means: (i) any act of an employee in connection with his or her
employment and relating to the Buyer's or
its Subsidiaries' business including,
but not limited to, negligence, which is
materially detrimental to the Buyer's
or its Subsidiaries' interests; (ii) any
act of misconduct, unlawfulness or
dishonesty by an employee in connection
with his or her employment which is
detrimental to the Buyer's or its
Subsidiaries' interests; (iii) an employee's
unsatisfactory job performance or failure
to comply with the Buyer's or its
Subsidiaries' board of directors'
reasonable directions; or (iv) an employee's
material breach of any agreement between
such employee and the Buyer or its
Subsidiaries.
"Closing"
means the closing of the Merger, as identified more
specifically
in ARTICLE III.
"Closing
Date" has the meaning given to it in Section 3.1.
------------
"Code"
means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import,
together with the regulations thereunder,
in each case as in effect from time to
time. References to sections of the Code
shall be construed also to refer to any
successor sections.
"Company"
has the meaning given to it in the introductory paragraph
hereof.
"Company
Bank" means 1st State Bank, a North Carolina bank.
"Company
Contracts" has the meaning given to it in Section 4.14.
------------
"Company
Financial Statements" means, with respect to the Company and
its
Subsidiaries, the consolidated audited
statements of income and stockholder's
equity and cash flows for the years ended
September 30, 2004, 2003 and 2002 and
consolidated audited balance sheets as of
September 30, 2004 and 2003, as well
as the interim unaudited consolidated
statements of income and stockholders'
equity and cash flows for each of the
completed fiscal quarters since September
30, 2004 and the consolidated interim
balance sheet as of each such quarter as
filed with the SEC.
3
<PAGE>
"Company
Option" and "Company Options" have the respective meanings
given
to them in Section 2.7(a).
--------------
"Company
Rule 145 Affiliates" has the meaning given to it in
Section 6.1(h).
--------------
"Company
SEC Reports" has the meaning given to it in Section 4.4(a).
--------------
"Company
Shares" has the meaning given to it in Section 2.2(a).
--------------
"Company's
Disclosure Schedule" has the meaning given to it in the
preamble to ARTICLE IV.
"Consent"
means any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation
by any Person given or granted with
respect to any Contract, Law, Order, or
Permit.
"Contract"
means any agreement, warranty, indenture, mortgage, guaranty,
lease, license or other contract,
agreement, arrangement, commitment or
understanding, written or oral, to which a
Person is a party.
"DCP" has
the meaning given to it in Section 6.1(e).
--------------
"Default"
means (i) any breach or violation of or default under any
Contract, Order or Permit (including any
noncompliance with restrictions on
assignment, where assignment is defined to
include a change of control of the
parties to this Agreement or any of their
Affiliates or the merger or
consolidation of any of them with another
Person), (ii) any occurrence of any
event that with the passage of time or the
giving of notice or both would
constitute such a breach or violation of or
default under any Contract, Order or
Permit, or (iii) any occurrence of any
event that with or without the passage of
time or the giving of notice would give
rise to a right to terminate or revoke,
change the current terms of, or
renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract,
Order or Permit.
"EDGAR"
has the meaning given to it in Section 4.4(a).
--------------
"Effective
Time" has the meaning given to it in Section 2.1(e).
--------------
"Election
Deadline" has the meaning given to it in Section 2.4(a).
--------------
"Election
Form" has the meaning given to it in Section 2.4(a).
---------------
"Environmental Laws" means any federal, state or local law,
statute,
ordinance, rule, regulation, permit,
directive, license, approval, guidance,
interpretation, order or other legal
requirement relating to the protection of
human health or the environment, including
but not limited to any requirement
pertaining to the manufacture, processing,
distribution, use, treatment,
storage, disposal, transportation,
handling, reporting, licensing, permitting,
investigation or remediation of materials
that are or may constitute a threat to
human health or the environment. Without
limiting the foregoing, each of the
following is an Environmental Law: the
Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C.
Section. 9601
4
<PAGE>
et seq.) ("CERCLA"), the Hazardous Material
Transportation Act (49 U.S.C.
Section. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C.
Section. 6901 et seq.) ("RCRA"), the
Federal Water Pollution Control Act (33
U.S.C. Section. 1251 et seq.), the Clean
Air Act (42 U.S.C. Section. 7401 et
seq.), the Toxic Substances Control Act (15
U.S.C. Section. 2601 et seq.), the
Safe Drinking Water Act (42 U.S.C. Section.
300 et seq.) and the Occupational
Safety and Health Act (29 U.S.C. Section.
651 et seq.) ("OSHA"), as such laws
and regulations have been or are in the
future amended or supplemented, and each
similar federal, state or local statute,
and each rule and regulation
promulgated under such federal, state and
local laws.
"Environmental Survey" has the meaning given to it in Section
7.3.
-----------
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of
similar import, together with the
regulations thereunder, in each case as in
effect from time to time. References
to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA
Plan" means any Benefit Plan that is an "employee welfare
benefit
plan," as that term is defined in Section
3(l) of ERISA, or an "employee pension
benefit plan," as that term is defined in
Section 3(2) of ERISA.
"ESOP" has
the meaning given it in Section 6.1(e).
--------------
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Exchange
Agent" has the meaning given to it in Section 2.5(a).
--------------
"Exchange
Ratio" means an amount equal to $37.15 divided by the Average
Closing Price.
"Federal
Reserve Bank" means the Federal Reserve Bank of Richmond.
"FDIC"
means the Federal Deposit Insurance Corporation.
"Foundation" means 1st State Bank Foundation, Inc.
"Foundation Agreement" has the meaning given to it in Section
6.2(e).
--------------
"FTN"
means FTN Midwest Securities Corp.
"Generally
Accepted Accounting Principles" or "GAAP" means accounting
principles generally accepted in the United
States of America as recognized by
the Public Company Accounting Oversight
Board (PCAOB), as in effect from time to
time, consistently applied and maintained
on a consistent basis for a Person
throughout the period indicated and
consistent with such Person's prior
financial practice.
"Governmental Authority" means any nation, province or state, or
any
political subdivision thereof, and any
agency, department, natural person or
other entity exercising
5
<PAGE>
executive, legislative, regulatory or
administrative functions of or pertaining
to government, including Regulatory
Authorities.
"Hazardous
Material" means any substance or material that either is or
contains a substance designated as a
hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant
or toxic substance under any
Environmental Law or is otherwise regulated
under any Environmental Law, or the
presence of which in some quantity requires
investigation, notification or
remediation under any Environmental
Law.
"IRS"
means the Internal Revenue Service.
"Joint
Proxy Statement" has the meaning given to it in Section 4.17.
-------------
"Knowledge
of the Buyer" means the knowledge of any of the directors and
executive officers of the Buyer or the
Buyer Bank or any of their respective
Subsidiaries.
"Knowledge
of the Company" means the knowledge of any of the directors and
executive officers of the Company or the
Company Bank or any of their respective
Subsidiaries.
"Law"
means any code, law, ordinance, rule, regulation, reporting or
licensing requirement, or statute
applicable to a Person or its Assets,
Liabilities, business or operations
promulgated, interpreted or enforced by any
Governmental Authority.
"Liability" means any direct or indirect, primary or secondary,
liability,
indebtedness, obligation, penalty, cost or
expense (including costs of
investigation, collection and defense),
claim, deficiency, guaranty or
endorsement of or by any Person (other than
endorsements of notes, bills,
checks, and drafts presented for collection
or deposit in the ordinary course of
business) of any type, whether accrued,
absolute or contingent, liquidated or
unliquidated, matured or unmatured or
otherwise.
"Lien"
means, whether contractual or statutory, any conditional sale
agreement, participation or repurchase
agreement, assignment, default of title,
easement, encroachment, encumbrance,
hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction,
security interest, title retention
or other security arrangement, or any
adverse right or interest, charge or claim
of any nature whatsoever of, on, or with
respect to any property or property
interest, other than (i) Liens for current
property Taxes not yet due and
payable, (ii) easements, restrictions of
record and title exceptions that could
not reasonably be expected to have a
Material Adverse Effect, and (iii) pledges
to secure deposits, Liens to secure
advances from the Federal Home Loan Bank of
Atlanta and other Liens incurred in the
ordinary course of the banking business.
"Litigation" means any action, arbitration, cause of action,
complaint,
criminal prosecution, governmental
investigation, hearing, or administrative or
other proceeding, but shall not include
regular, periodic examinations of
depository institutions and their
Affiliates by Regulatory Authorities.
"LLC" has
the meaning given to it in Section 4.1(a).
--------------
6
<PAGE>
"Loan
Collateral" means all of the assets, properties, businesses and
rights of every kind, nature, character and
description, whether real, personal,
or mixed, tangible or intangible, accrued
or contingent, owned by whomever and
wherever located, in which any Person has
taken a security interest with respect
to, on which any Person has placed a Lien
with respect to, or which is otherwise
used to secure, any loan made by the Person
or any note, account, or other
receivable payable to the Person.
"Mailing
Date" has the meaning given to it in Section 2.4(a).
--------------
"Material"
for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter
in question; provided that any
specific monetary amount stated in this
Agreement shall determine materiality in
that instance.
"Material
Adverse Effect" on a Person shall mean an event, change, or
occurrence that, individually or together
with any other event, change, or
occurrence, has a Material adverse impact
on (i) the financial condition,
results of operations, or business of such
Person and its subsidiaries, taken as
a whole, or (ii) the ability of such Person
to perform its obligations under
this Agreement or to consummate the Merger
or the other transactions
contemplated by this Agreement, provided
that "Material Adverse Effect" shall
not be deemed to include the impact of (a)
changes in banking and similar Laws
of general applicability or interpretations
thereof by courts or governmental
authorities, (b) changes in market interest
rates, real estate markets,
securities markets or other market
conditions applicable to banks or thrift
institutions generally, (c) changes in GAAP
or regulatory accounting principles
generally applicable to banks and their
holding companies, (d) actions and
omissions of a Person (or any of its
Affiliates) taken with the prior informed
consent of the other Person in
contemplation of the transactions contemplated
hereby, and (e) the Merger (and the
reasonable expenses incurred in connection
therewith) and compliance with the
provisions of this Agreement on the operating
performance of the Persons.
"McGill
Consulting Agreement" means the consulting agreement to be
entered
into at or prior to Closing between the
Buyer and James C. McGill for a term of
four (4) years commencing on the Closing
Date. The consulting agreement shall
contain customary terms and conditions
(including non-competition and
non-solicitation provisions) applicable to
agreements of its nature and be
substantially in the form attached hereto
as EXHIBIT D.
"Merger"
has the meaning given to it in the Background Statement hereof.
"Merger
Consideration" has the meaning given to it in Section 2.3(a).
--------------
"Mixed
Cash Consideration Election Amount" has the meaning given to it
in
Section 2.4(a).
--------------
"Mixed
Election Shares" has the meaning given to it in Section 2.4(a).
--------------
"Mixed
Stock Consideration Election Amount" has the meaning given to it
in
Section 2.4(a).
--------------
"MRP" has
the meaning given to it in Section 6.1(e).
7
<PAGE>
"Order"
means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or
award, ruling, or writ of any
federal, state, local, foreign or other
court, arbitrator, mediator, tribunal,
administrative agency or Governmental
Authority.
"Orr
Group" means The Orr Group, LLC.
"Pension
Plan" means any ERISA Plan that also is a "defined benefit
plan"
(as defined in Section 414(j) of the Code
or Section 3(35) of ERISA).
"Permit"
means any approval, authorization, certificate, easement,
filing,
franchise, license, notice, permit, or
right given by a Governmental Authority
to which any Person is a party or that is
or may be binding upon or inure to the
benefit of any Person or its securities,
Assets or business.
"Person"
means a corporation, a company, an association, a joint
venture,
a partnership, an organization, a business,
an individual, a trust, a
Governmental Authority or any other legal
entity.
"Per Share
Cash Consideration" has the meaning given to it in
Section 2.3(a).
--------------
"Per Share
Mixed Consideration" has the meaning given to it in
Section 2.3(a).
--------------
"Per Share
Stock Consideration" has the meaning given to in
Section 2.3(a).
--------------
"Real
Property" means all of the land, buildings, premises, or other
real
property in which a Person has ownership or
possessory rights, whether by title,
lease or otherwise (including banking
facilities and any foreclosed properties).
Notwithstanding the foregoing, "Real
Property", as used with respect to any
Person, does not include any Loan
Collateral not yet foreclosed and conveyed to
the Person as of the date with respect to
which the term "Real Property" is
being used.
"Registration Statement" has the meaning given to it in Section
4.17.
------------
"Regulatory Authorities" means, collectively, the Federal Trade
Commission, the United States Department of
Justice, the Federal Reserve Board,
the FDIC, the North Carolina Banking
Commission, the North Carolina Commissioner
of Banks, the National Association of
Securities Dealers and the SEC, and all
other regulatory agencies having
jurisdiction over the parties hereto and their
respective Affiliates.
"Retiree
Benefits" has the meaning given to it in Section 6.1(e).
--------------
"Reynolds
Employment Agreement" means the employment agreement to be
entered into at or prior to Closing between
the Buyer and Fairfax C. Reynolds
for a term of one (1) year commencing on
the Closing Date and automatically
renewing on each subsequent anniversary of
the Closing Date for an additional
one (1) year renewal term unless either
party delivers to the other party
written notice of the party's intent to
terminate the employment agreement as of
the end of such initial term or applicable
one (1) year renewal term. The
employment agreement shall contain
customary terms and conditions (including
non-competition and non-solicitation
8
<PAGE>
provisions) applicable to executive
employment agreements of its nature and be
substantially in the form attached hereto
as EXHIBIT C.
"Rights"
shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip,
understandings, warrants, or other
binding obligations of any character
whatsoever relating to, or securities or
rights convertible into or exchangeable
for, shares of the capital stock of a
Person or by which a Person is or may be
bound to issue additional shares of its
capital stock or other Rights.
"Sarbanes-Oxley" has the meaning given it in Section 4.4(a).
--------------
"SEC"
means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act of 1933, the
Securities
Exchange Act of 1934, the Investment
Company Act of 1940, the Investment
Advisors Act of 1940, the Trust Indenture
Act of 1939, each as amended, and the
rules and regulations of any Governmental
Authority promulgated under each.
"Shareholder Meeting" and
"Shareholder Meetings" have the respective
meanings given to them in Section 4.17.
"Stock
Adjustment" has the meaning given to it in Section 2.3(d).
--------------
"Stock Election
Amount" has the meaning given to it in Section 2.4(a).
--------------
"Stock
Election Shares" has the meaning given to it in Section 2.4(a).
--------------
"Subsidiary" means, with respect to any Person, each of the Persons
that
directly or indirectly, through one or more
intermediaries, is controlled by
such Person.
"Superior
Proposal" means a bona fide, written and unsolicited proposal
or
offer (including a new or solicited
proposal received by the Company after
execution of this Agreement from a person
whose initial contact with the Company
may have been solicited by the Company or
its representatives prior to the
execution of this Agreement) made by any
person or group (other than the Buyer
or any of its Subsidiaries) with respect to
an Acquisition Proposal on terms
which the board of directors of the Company
determines in good faith, and in the
exercise of reasonable judgment (based on
the advice of independent financial
advisors and outside legal counsel), to be
reasonably capable of being
consummated and to be superior from a
financial point of view to the holders of
Company Shares than the transactions
contemplated hereby, taking into
consideration all elements of the
transactions contemplated hereby including,
without limitation, the non-taxable element
of such transactions.
"Surviving
Holding Company" has the meaning given to it in Section 2.1(a).
--------------
"Tax" or
"Taxes" means any and all taxes, charges, fees, levies or other
assessments (whether federal, state, local
or foreign), including without
limitation income, gross receipts,
9
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excise, property, estate, sales, use, value
added, transfer, license, payroll,
franchise, ad valorem, withholding, Social
Security and unemployment taxes, as
well as any interest, penalties and other
additions to such taxes, charges,
fees, levies or other assessments.
"Tax
Return" means any report, return or other information required to
be
supplied to a taxing authority in
connection with Taxes.
"Taxable
Period" shall mean any period prescribed by any Governmental
Authority, including the United States or
any state, local, or foreign
government or subdivision or agency thereof
for which a Tax Return is required
to be filed or Tax is required to be
paid.
"Total
Cash Merger Consideration" has the meaning given to it in
Section 2.3(b).
--------------
"Total
Stock Merger Consideration" has the meaning given to it in
Section 2.3(b).
--------------
"Voting
Agreement" means that certain voting agreement to be entered
into
between the Buyer and each officer and
director of the Company concurrently with
the execution and delivery of this
Agreement as a condition to inducement to the
Buyer entering into this Agreement and
incurring the obligations set forth
herein substantially in the form of EXHIBIT
E.
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE OF COMPANY SHARES
2.1. THE
MERGER.
(a)
The Merger. On the
terms and subject to the conditions of this
Agreement, the Plan of Merger in respect of
the Merger, which shall be
substantially in the form attached hereto
as EXHIBIT A, and North Carolina Law
and Virginia Law, the Company shall merge
into the Buyer, the separate existence
of the Company shall cease, and the Buyer
shall be the surviving corporation
(the "Surviving Holding Company") and shall
continue its corporate existence
under the laws of the State of North
Carolina .
(b)
Governing Documents.
The articles of incorporation of the Buyer in
effect at the Effective Time (as defined
below) of the Merger shall be the
articles of incorporation of the Surviving
Holding Company until further amended
in accordance with applicable Law. The
bylaws of the Buyer in effect at such
Effective Time shall be the bylaws of the
Surviving Holding Company until
further amended in accordance with
applicable Law.
(c)
Directors and
Officers. Subject to Section 6.2(b), the Baker
Employment Agreement and the Reynolds
Employment Agreement, from and after the
Effective Time of the Merger, until
successors or additional directors are duly
elected or appointed in accordance with
applicable law, (i) the directors of the
Buyer at the Effective Time shall be the
directors of the Surviving Holding
Company, and (ii) the officers of the Buyer
at the Effective Time shall be the
officers of the Surviving Holding
Company.
(d)
Approval. The parties
hereto shall take and cause to be taken all
action necessary to approve and authorize
(i) this Agreement and the other
documents contemplated hereby
10
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(including without limitation the
above-described Plan of Merger) and (ii) the
Merger and the other transactions
contemplated hereby.
(e)
Effective Time. The
Merger shall become effective on the date and at
the time of filing of the related Articles
of Merger, in the form required by
and executed in accordance with North
Carolina Law and Virginia Law, or at such
other time specified therein. The date and
time when the Merger shall become
effective is herein referred to as the
"Effective Time."
(f)
Filing of Articles of
Merger. At the Closing, the Buyer and the
Company shall cause the Articles of Merger
(containing the above-referenced Plan
of Merger) in respect of the Merger to be
executed and filed with the Secretary
of State of North Carolina and the Virginia
State Corporation Commission, as
required by North Carolina Law and Virginia
Law, respectively, and shall take
any and all other actions and do any and
all other things to cause the Merger to
become effective as contemplated
hereby.
2.2
COMPANY SHARES.
(a)
Each share of the
Company's capital stock (the "Company Shares"), par
value $0.01 per share, issued and
outstanding immediately prior to the Effective
Time (other than Company Shares to be
canceled pursuant to this Section 2.2)
shall, by virtue of the Merger and without
any action on the part of the holders
thereof, be canceled and converted at the
Effective Time into the right to
receive the Merger Consideration (as
defined below) in accordance with this
ARTICLE II.
(b)
Each Company Share, by
virtue of the Merger and without any action on
the part of the holder thereof, shall at
the Effective Time no longer be
outstanding, shall be canceled and retired
and shall cease to exist, and each
holder of certificates representing any
such Company Shares shall thereafter
cease to have any rights with respect to
such shares, except for the right to
receive the Merger Consideration.
(c)
Notwithstanding
anything contained in this Section 2.2 to the
contrary, any Company Shares held in the
treasury of the Company immediately
prior to the Effective Time shall be
canceled without any conversion thereof,
and no payment shall be made with respect
thereto.
(d)
From and after the
Effective Time of the Merger, there shall be no
transfers on the stock transfer books of
the Surviving Holding Company of
Company Shares that were outstanding
immediately prior to the Effective Time.
If, after the Effective Time, certificates
representing Company Shares are
presented to the Surviving Holding Company,
they shall be canceled, and
exchanged for the Merger Consideration as
provided for herein.
2.3
MERGER
CONSIDERATION.
(a)
Subject to Sections
2.2, 2.4, 2.5, 2.6 and 2.8, at the Effective
Time, the holders of Company Shares
outstanding at the Effective Time, other
than the Buyer and its Affiliates, shall be
entitled to receive, and the Buyer
shall pay or issue and deliver, for each
Company Share held by such Person: (i)
0.691829 shares of the Buyer's Stock
multiplied by the Exchange Ratio plus an
amount equal to $11.4486 in cash (the "Per
Share Mixed Consideration"), (ii) 1.0
share of
11
<PAGE>
the Buyer's Stock multiplied by the
Exchange Ratio (the "Per Share Stock
Consideration"), or (iii) an amount equal
to $37.15 in cash (the "Per Share Cash
Consideration"). The foregoing
consideration, collectively and in the aggregate,
shall be referred to herein as the "Merger
Consideration."
(b)
Subject to the
allocation provisions of Section 2.4, each holder of a
Company Share may elect, for all Company
Shares beneficially owned by such
holder, to receive the Per Share Mixed
Consideration, the Per Share Stock
Consideration or the Per Share Cash
Consideration; provided, (i) that the
aggregate number of shares of Buyer's Stock
with respect to which the Per Share
Mixed Consideration and the Per Share Stock
Consideration (excluding fractions
of Company Shares issued or not issued
pursuant to Section 2.3(c) as a result of
rounding) shall be paid as Merger
Consideration shall be such number of shares
equal to $74,499,168.79 divided by the
Average Closing Price (subject to
equitable adjustment for any stock
dividend, stock split or other stock payment
by the Company after the date hereof but
prior to the Effective Time) (the
"Total Stock Merger Consideration"),
subject to adjustment so that the Total
Stock Merger Consideration shall not be
less than the amount necessary to
qualify the Merger as a tax-free
reorganization under Section 368 of the Code,
as determined by the Buyer at or
immediately after the Effective Time upon
consultation with its independent
accountants and counsel; and (ii) that the
aggregate amount of cash with respect to
which the Per Share Mixed Consideration
and the Per Share Cash Consideration shall
be paid as Merger Consideration shall
be $33,185,195.76 (the "Total Cash Merger
Consideration"); provided however,
that, if the Total Stock Merger
Consideration is adjusted as provided in Section
2.3(b)(i) above to qualify the Merger as a
tax-free reorganization under Section
368 of the Code, the Total Cash Merger
Consideration shall be adjusted so that
the aggregate value of the Merger
Consideration paid after the adjustment to the
Total Stock Merger Consideration is equal
to the aggregate value of the Merger
Consideration which would have been paid in
the absence of such adjustment.
(c)
No fractional shares
of the Buyer's Stock shall be issued or
delivered in connection with the Merger.
Instead, the number of shares of the
Buyer's Stock to which a holder of the
Company Shares is entitled to receive
pursuant to this Article II shall be
rounded to the nearest whole share (with
0.5 share rounded up to the nearest whole
share).
(d)
In the event the Buyer
changes the number of shares of the Buyer's
Stock issued and outstanding prior to the
Effective Time as a result of a stock
split, stock dividend or other distribution
payable in Buyer's Stock or
securities convertible into Buyer's Stock
or similar recapitalization with
respect to such stock or effects a
reclassification, combination or other change
with respect to Buyer's Stock (each a
"Stock Adjustment") and the record date
therefor (in the case of a stock dividend)
or the effective date thereof (in the
case of a stock split or similar
recapitalization, reclassification or
combination for which a record date is not
established) shall be prior to the
Effective Time, the Per Share Mixed
Consideration and the Per Share Stock
Consideration shall each be equitably
adjusted to reflect such change.
12
<PAGE>
2.4
ELECTION AND
ALLOCATION PROCEDURES.
(a)
Election.
(i) An election form
("Election Form"), together with the other
transmittal materials described in Section 2.5, shall be mailed as
soon as
reasonably
practicable but no later than five (5) Business Days after the
Effective
Time to each holder of Company Shares of record at the
Effective
Time. Such
date of mailing shall be referred to hereinafter as the
"Mailing
Date." Each Election Form shall provide that a holder (or the
beneficial
owner through appropriate and customary documentation and
instruction) of Company Shares will receive the Per Share Mixed
Consideration with respect to all of such holder's Company Shares,
unless
such
holder (or the beneficial owner through appropriate and
customary
documentation and instruction) elects to receive the Per Share
Cash
Consideration or the Per Share Stock Consideration with respect to
all of
such
holder's Company Shares. Company Shares as to which no election
of
Per Share
Stock Consideration or Per Share Cash Consideration is made
shall be
herein referred to as the "Mixed Election Shares"; Company
Shares
as to
which the Per Share Cash Consideration election is made shall
be
referred
to as the "Cash Election Shares"; and Company Shares as to
which
the Per
Share Stock Consideration election is made shall be referred to
as
the "Stock
Election Shares". The "Cash Election Amount" shall be equal to
the Per
Share Cash Consideration multiplied by the total number of Cash
Election Shares plus the amount of
the Per Share Mixed Consideration
consisting
of cash multiplied by the total number of Mixed Election Shares
(the
"Mixed Cash Consideration Election Amount"). The "Stock
Election
Amount"
shall be equal to the Per Share Stock Consideration multiplied
by
the total
number of Stock Election Shares plus the amount of the Per
Share
Mixed
Consideration consisting of the Buyer's Stock multiplied by the
total
number of Mixed Election Shares (the "Mixed Stock Consideration
Election
Amount").
(ii) Any Company Share with respect to which the holder (or the
beneficial
owner, as the case may be) shall not have submitted to the
Exchange
Agent an effective, properly completed Election Form on or
before
a date
after the Effective Date to be agreed upon by the parties
hereto
(which
date shall be set forth on the Election Form), but in any event
not
earlier
than the twentieth (20th) Business Day after the Mailing Date
(such
deadline, the "Election Deadline"), shall be converted into the
Per
Share
Mixed Consideration as set forth in Section 2.4(b) and shall be
deemed to
be a Mixed Election Share.
(iii)The Buyer shall make available one or more Election Forms as
may
be
reasonably requested by all Persons who become holders (or
beneficial
owners) of
Company Shares between the Mailing Date and the close of
business
on the business day prior to the Election Deadline, and the
Buyer
shall
provide to the Exchange Agent all information reasonably
necessary
for it to
perform as specified herein.
(iv) Any election shall have been properly made only if the
Exchange
Agent
shall have actually received a properly completed Election Form
by
the
Election Deadline. An Election Form shall be deemed properly
completed
only if
accompanied by
13
<PAGE>
one or
more certificates (or customary affidavits and indemnification
regarding
the loss or destruction of such certificates or the guaranteed
delivery
of such certificates) representing all Company Shares covered
by
such
Election Form, together with duly executed transmittal
materials
included
with the Election Form. Any Election Form may be revoked or
changed by
the person submitting such Election Form (or the beneficial
owner of
the shares covered by such Election Form through appropriate
and
customary
documentation and instruction) at or prior to the Election
Deadline.
In the event an Election Form is revoked prior to the Election
Deadline
and no other valid election is made by the Election Deadline,
the
Company
Shares represented by such Election Form shall be Mixed
Election
Shares.
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 the Election Forms, and any good faith
decisions
of the Exchange Agent regarding such matters shall be binding
and
conclusive. Neither the Buyer nor the Exchange Agent shall be
under
any obligation to notify any
person of any defect in an Election Form.
(b)
Allocation. As soon as
reasonably practicable after the Effective
Time, the Buyer shall cause the Exchange
Agent to allocate the Merger
Consideration among the holders of Company
Shares, which shall be effected by
the Exchange Agent as follows:
(i) Each Mixed
Election Share shall be converted into the right to
receive an amount of cash and a number of
shares of the Buyer's Stock equal to
the Per Share Mixed Consideration.
(ii) If the Total Cash Merger Consideration is greater than the
aggregate Cash Election Amount, then:
(A) each Cash Election
Share shall be converted into the right
to receive an amount of cash equal to the Per Share Cash
Consideration; and
(B) each Stock
Election Share shall be converted into the
right to receive (1) an amount in cash equal to the Total Cash
Merger
Consideration less the aggregate Cash Election Amount divided by
the
total number of Stock Election Shares, and (2) a number of shares
of
the Buyer's Stock equal to the Total Stock Merger Consideration
less
the aggregate Mixed Stock Consideration Election Amount divided
by
the total number of Stock Election Shares.
(iii) If the Total Cash Merger Consideration is less than the
Cash
Election Amount then:
(A) each Stock
Election Share shall be converted into the
right to receive the Per Share Stock Consideration; and
(B) each Cash Election
Share shall be converted into the right
to receive (1) an amount in cash equal to the Total Cash Merger
Consideration less the aggregate Mixed Cash Consideration
Election
Amount divided by the total number of Cash Election Shares, and (2)
a
number of shares of the Buyer's Stock
14
<PAGE>
equal to the Total Stock Merger Consideration less the
aggregate
Stock Election Amount divided by the total number of Cash
Election
Shares.
2.5
EXCHANGE
PROCEDURES.
(a)
After the Effective
Time, the Buyer shall cause an exchange agent
selected by the Buyer and reasonably
acceptable to the Company (the "Exchange
Agent") to mail to the shareholders of the
Company of record at the Effective
Time the Election Form, as required under
Section 2.4, and other appropriate
transmittal materials (which shall specify
that delivery shall be effected, and
risk of loss and title to the certificates
representing Company Shares prior to
such Effective Time shall pass, only upon
proper delivery of such certificates
to the Exchange Agent). After the Effective
Time, each holder of Company Shares
issued and outstanding at the Effective
Time (other than any of such shares held
by the Buyer or any Affiliate thereof or
canceled pursuant to Section 2.2(c) or
(d)) shall surrender the certificate or
certificates representing such shares to
the Exchange Agent and upon surrender
thereof and completion of all required
allocation procedures contained in this
ARTICLE II receive in exchange therefor
the number of shares of the Buyer's Stock
and the cash to which such holder is
entitled hereunder. The Buyer, or the
Exchange Agent, as applicable, shall not
be obligated to deliver any of such
payments in cash or stock until such holder
surrenders the certificate(s) representing
such holder's Company Shares. The
certificate(s) so surrendered shall be duly
endorsed as the Exchange Agent may
require. Any other provision of this
Agreement notwithstanding, neither the
Buyer nor the Exchange Agent shall be
liable to any holder of Company Shares for
any amounts paid or properly delivered in
good faith to a public official
pursuant to any applicable abandoned
property Law.
(b)
To the extent
permitted by applicable Law, former shareholders of
record of the Company shall be entitled to
vote after the Total Stock Merger
Consideration has been allocated pursuant
to the provisions of this ARTICLE II
at any meeting of the Buyer's shareholders
the number of whole shares of the
Buyer's Stock into which their respective
Company Shares are converted pursuant
to the Merger, regardless of whether such
holders have exchanged their
certificates representing such Company
Shares for certificates representing the
Buyer's Stock in accordance with the
provisions of this Agreement. Whenever a
dividend or other distribution is declared
by the Buyer on the Buyer's 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 the Buyer's
Stock issuable pursuant to this Agreement,
but beginning at the Effective Time
no dividend or other distribution payable
to the holders of record of the
Buyer's Stock as of any time subsequent to
the Effective Time shall be delivered
to the holder of any certificate
representing any of the Company Shares issued
and outstanding at such Effective Time
until such holder surrenders such
certificate for exchange as provided in
this Section 2.5. However, upon
surrender of such certificate(s), both the
certificate(s) representing the
shares of the Buyer's Stock to which such
holder is entitled and any such
undelivered dividends (without any
interest) shall be delivered and paid with
respect to each share represented by such
certificates.
2.6
AVERAGE CLOSING PRICE
ADJUSTMENT. In the event that the Actual
Average Closing Price is less than $15.00,
the Buyer shall deliver written
notice to the Company no later than the
second (2nd) Business Day preceding the
Closing Date pursuant to which the Buyer
shall elect, in its sole discretion,
to: (a) maintain the Average Closing Price
at a price
15
<PAGE>
equal to the Actual Average Closing Price;
(b) set the Average Closing Price at
$15.00 and pay the holders of Company
Shares receiving shares of Buyer's Stock
as Merger Consideration (after giving
effect to the allocation procedures set
forth in Section 2.4) an amount in cash
equal to $15.00 minus the Actual Average
Closing Price per share of Buyer's Stock to
be received by such holders of
Company Shares; or (c) set the Average
Closing Price at $15.00 and pay no
additional consideration to the holders of
Company Shares receiving shares of
Buyer's Stock as Merger Consideration
(after giving effect to the allocation
procedures set forth in Section 2.4). In
the event that the Buyer elects option
(c) described above, the Company may
terminate this Agreement by providing the
Buyer written notice of termination no
later than one (1) Business Day prior to
the Closing Date.
2.7
COMPANY STOCK
OPTIONS.
(a)
Each option or other
right to purchase Company Shares (each, a
"Company Option" and collectively, the
"Company Options") granted by the Company
under its Benefit Plans that are
outstanding at the Effective Time shall, by
virtue of the Merger and without any action
on the part of the holders thereof,
be canceled and converted at such Effective
Time into the right to receive, and
the Buyer shall pay, an amount equal to
$37.15 minus the exercise price
applicable to each such Company Option, in
cash, per Company Share covered by
each such Company Option.
(b)
Each Company Option,
by virtue of the Merger and without any action
on the part of the holder thereof, shall at
the Effective Time no longer be
outstanding, shall be canceled and retired
and shall cease to exist, and each
holder of Company Options shall thereafter
cease to have any rights with respect
to such Company Options, except for the
right to receive the cash consideration
provided in Section 2.7(a) above.
2.8
LIQUIDATION ACCOUNT.
The liquidation account established by Company
Bank pursuant to the plan of conversion
adopted in connection with the Company
Bank's conversion from mutual to stock form
shall, to the extent required by
Law, continue to be maintained by Buyer
Bank after the Effective Time for the
benefit of those persons and entities who
were savings account holders of
Company Bank on the eligibility record date
and supplemental eligibility record
date for such conversion and who continue
from time to time to have rights
therein.
ARTICLE III
THE CLOSING
3.1
CLOSING. The Closing
of the Merger shall take place at the offices of
Smith, Anderson, Blount, Dorsett, Mitchell
& Jernigan, L.L.P. in Raleigh, North
Carolina as soon as reasonably practical
after all conditions to Closing have
been met, or on such other date or at such
other location as the Buyer and the
Company may mutually agree (such date, the
"Closing Date"), provided, that the
Closing shall not occur before January 1,
2006. At the Closing, the parties will
execute, deliver and file all documents
necessary to effect the transactions
contemplated with respect to the Merger,
including the Articles of Merger in
respect of the Merger.
16
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3.2
DELIVERIES BY THE
COMPANY. At or by the Closing, the Company shall
have caused the following documents to be
executed and delivered:
(a)
the agreements,
opinions, certificates, instruments and other
documents contemplated in Section 8.3;
and
-----------
(b)
all other documents,
certificates and instruments required hereunder
to be delivered to the Buyer, or as may
reasonably be requested by the Buyer at
or prior to the Closing.
3.3
DELIVERIES BY THE
BUYER. At or by the Closing, the Buyer shall have
caused the following documents to be
executed and delivered:
(a)
the agreements,
opinions, certificates, instruments and other
documents contemplated in Section 8.2;
and
------------
(b)
all other documents,
certificates and instruments required hereunder
to be delivered to the Company, or as may
reasonably be requested by the Company
at or prior to the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as
set forth on the Company's Disclosure Schedule (the "Company's
Disclosure Schedule"), the Company
represents and warrants to the Buyer that the
statements contained in this ARTICLE IV are
correct and complete as of the date
of this Agreement and will be correct and
complete as of the Closing Date.
4.1
ORGANIZATION, STANDING
AND POWER.
(a)
The Company is a bank
holding company registered with the Board of
Governors of the Federal Reserve System
under the Bank Holding Company Act of
1956, as amended, and the Company Bank is a
bank under North Carolina Law. The
Company Bank is an "insured institution" as
defined in the Federal Deposit
Insurance Act and applicable regulations
thereunder, and subject to dollar
limits under such Act, all deposits in the
Company Bank are fully insured by the
FDIC to the extent permitted by Law.
Company Bank's Subsidiary, First Capital
Services Company, LLC, is a North Carolina
limited liability company (the
"LLC").
(b) The Company is a corporation, duly
organized, validly existing and in
good standing under the Laws of the
Commonwealth of Virginia. The Company Bank
is a bank, duly organized, validly existing
and in good standing under the Laws
of the State of North Carolina. The LLC is
a limited liability company, duly
organized, validly existing and in good
standing under the Laws of the State of
North Carolina. Each of the Company and its
Subsidiaries has the corporate or
other applicable power and authority to
carry on, in all Material respects, its
businesses as now conducted and to own,
lease and operate its Assets. Each of
the Company and its Subsidiaries is duly
qualified or licensed to transact
business as a foreign corporation in good
standing in the States of the United
States and foreign jurisdictions where the
character of its Assets or the nature
or conduct of its business requires it to
be so qualified or licensed, except
for
17
<PAGE>
such jurisdictions in which the failure to
be so qualified or licensed could not
reasonably be expected to have a Material
Adverse Effect on the Company.
(c) The
minute books of the Company and its Subsidiaries contain
records
of all meetings and other corporate actions
held or taken of their respective
shareholders and board of directors
(including the committees of such boards)
since October 1, 2001, which records are
complete and accurate in all material
respects and have been made available to
the Buyer.
4.2
AUTHORITY; NO
CONFLICTS.
(a)
Subject to required
regulatory and shareholder approvals, the Company
has the corporate power and authority
necessary to execute, deliver and perform
its obligations under this Agreement and to
consummate the transactions
contemplated hereby. Subject to required
shareholder approval, the execution,
delivery and performance of the Company's
obligations under this Agreement and
the other documents contemplated hereby and
the consummation of the transactions
contemplated herein, including the Merger,
have been duly and validly authorized
by all necessary corporate action in
respect thereof on the part of the Company.
This Agreement represents a legal, valid
and binding obligation of the Company,
enforceable against the Company in
accordance with its terms (except in all
cases as such enforceability may be limited
by applicable bankruptcy,
insolvency, reorganization, moratorium or
similar Laws affecting the enforcement
of creditors' rights generally and except
that the availability of specific
performance, injunctive relief and other
equitable remedies is subject to the
discretion of the court before which any
proceeding may be brought). To the
Knowledge of the Company, there is no fact
or condition relating to the Company
that would prevent all regulatory approvals
required for the consummation of the
transactions contemplated hereby from being
obtained.
(b)
Neither the execution
and delivery of this Agreement by the Company,
nor the consummation by the Company of the
transactions contemplated hereby, nor
compliance by the Company with any of the
provisions hereof, will (i) conflict
with or result in a breach of any provision
of the Company's articles of
incorporation, charter, bylaws or any other
similar governing document, (ii)
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 the Company or any of its
Subsidiaries under, any Contract or Permit
of the Company or any of its
Subsidiaries, except as could not
reasonably be expected to have a Material
Adverse Effect on the Company, or (iii)
subject to obtaining the requisite
Consents referred to in Section 8.1 of this
Agreement, violate any Law or Order
applicable to the Company or any of its
Subsidiaries or any of their respective
Assets.
(c)
Other than in
connection or compliance with the provisions of the
Securities Laws and banking Regulatory
Authorities, no notice to, filing with,
or Consent of, any Governmental Authority
is necessary for the consummation by
the Company of the Merger and the other
transactions contemplated in this
Agreement.
4.3
CAPITAL STOCK;
SUBSIDIARIES.
(a)
The authorized capital
stock of the Company consists of 7,000,000
shares of common stock, $0.01 par value per
share, of which 2,898,637 shares are
issued and outstanding as of the date of
this Agreement, and 1,000,000 shares of
preferred stock, $0.01 par value per
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share, of which there are no shares issued
and outstanding as of the date of
this Agreement. Except for the 2,898,637
shares of common stock referenced in
the preceding sentence, there are no shares
of capital stock or other equity
securities of the Company outstanding.
There are options to purchase 308,812
shares of common stock of the Company
outstanding as of the date of this
Agreement, and except for such options,
there are no options, Rights or
Contracts requiring the Company to issue
additional shares of its capital stock.
There are 308,812 shares of capital stock
reserved with respect to such options.
The authorized capital stock of the Company
Bank consists of 10,000,000 shares
of common stock, par value $10.00 per
share, of which 600,000 shares are issued
and outstanding as of the date of this
Agreement and are owned and held by the
Company, and except for such 600,000 shares
of common stock, there are no shares
of capital stock or other equity securities
of the Company Bank outstanding. All
outstanding interests in the LLC are owned
and held by the Company Bank, and
except for such interests, there are no
other ownership interests or other
securities of the LLC outstanding. The
Company has no other direct or indirect
Subsidiaries other than the Company Bank as
of the date of this Agreement. The
Company Bank has no other direct or
indirect Subsidiaries other than the LLC as
of the date of this Agreement.
(b)
All of the issued and
outstanding shares of capital stock of the
Company and its Subsidiaries are duly and
validly issued and outstanding and are
fully paid and nonassessable. None of the
outstanding shares of capital stock of
the Company or any of its Subsidiaries has
been issued in violation of any
preemptive rights of the current or past
shareholders of such Persons. Except as
set forth in Section 4.3(a) above, (i) no
equity securities of any Subsidiaries
of the Company are or may become required
to be issued (other than to the
Company or any of its Subsidiaries) by
reason of any Rights, and (ii) there are
no Contracts by which the Company or any
Subsidiary of the Company is bound to
issue (other than to the Company or any of
its Subsidiaries) additional shares
of its capital stock or Rights or by which
the Company or any of its
Subsidiaries is or may be bound to transfer
any shares of the capital stock of
any Subsidiary of the Company (other than
to the Company or any of its
Subsidiaries). There are no equity
securities reserved for any of the foregoing
purposes (except as set forth in Section
4.3(a) above), and there are no
Contracts relating to the rights of the
Company or any of its Subsidiaries to
vote or to dispose of any shares of the
capital stock of any Subsidiary of the
Company.
4.4
SEC FILINGS; COMPANY
FINANCIAL STATEMENTS.
(a)
The Company has on a
timely basis filed all forms, reports and
documents required to be filed by it with
the SEC since September 30, 1999.
Except to the extent available in full
without redaction on the SEC's website
through the Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR")
two (2) days prior to the date of this
Agreement, the Company has delivered to
Buyer copies in the form filed with the SEC
of (i) the Company's Annual Reports
on Form 10-K for each fiscal year of the
Company beginning since September 30,
1999, (ii) its Quarterly Reports on Form
10-Q for each of the first three fiscal
quarters in each of the fiscal years of the
Company referred to in clause (i)
above, (iii) all proxy statements relating
to meetings of the Company's
shareholders (whether annual or special)
held, and all information statements
relating to stockholder consents since the
beginning of the first fiscal year
referred to in clause (i) above, (iv) all
certifications and statements required
by (x) the SEC's Order dated June 27, 2002
pursuant to Section 21(a)(1) of the
Exchange Act (File No. 4-460), (y) Rule
13a-14 or 15d-14 under the Exchange Act
or (z) 18 U.S.C. Section. 1350 (Section 906
of the Sarbanes-
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Oxley Act of 2002, as amended
("Sarbanes-Oxley")) with respect to any report
referred to in clause (i) or (iii) above,
(v) all other forms, reports,
registration statements and other documents
(other than preliminary materials if
the corresponding definitive materials have
been provided to Buyer pursuant to
this Section 4.4) filed by the Company with
the SEC since the beginning of the
first fiscal year referred to in clause (i)
above (the forms, reports,
registration statements and other documents
referred to in clauses (i), (ii),
(iv) and (v) above are, collectively, the
"Company SEC Reports"), and (vi) all
comment letters received by the Company
from the Staff of the SEC since
September 30, 1999 and all responses to
such comment letters by or on behalf of
the Company. The Company SEC Reports (i) at
the time filed with the SEC,
complied in all Material respects with the
applicable requirements of the
Securities Laws, as the case may be, and
(ii) did not at the time filed with the
SEC (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 therein or
necessary in order to make the statements
made therein, in the light of the
circumstances under which they were made,
not misleading. No Subsidiary of the
Company is or has been required to file any
form, report, registration
statement, or other document with the SEC.
The Company maintains disclosure
controls and procedures required by Rule
13a-15 or 15d-15 under the Exchange
Act; such controls and procedures are
effective to ensure that all material
information concerning the Company and its
Subsidiaries is made known on a
timely basis to the individuals responsible
for the preparation of the Company's
filings with the SEC and other public
disclosure documents. The Company has
delivered to Buyer copies of, all written
descriptions of, and all policies,
manuals and other documents promulgating,
such disclosure controls and
procedures. To the Knowledge of the
Company, except as disclosed in the Company
SEC Reports, each director and executive
officer of the Company has filed with
the SEC on a timely basis all statements
required by Section 16(a) of the
Exchange Act and the rules and regulations
thereunder since September 30, 1999.
As used in this Section 4.4, the term
"file" shall be broadly construed to
include any manner in which a document or
information is furnished, supplied
otherwise made available to the SEC.
(b)
Each of the Company
Financial Statements (including, in each case,
any related notes) contained in the Company
SEC Reports, including any Company
SEC Reports filed after the date of this
Agreement until the Effective Time,
complied or will comply as to form in all
Material respects with the applicable
published rules and regulations of the SEC
with respect thereto, was prepared or
will be 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 statements, as permitted by
the rules and regulations governing
Quarterly Reports on Form 10-Q), and fairly
presented or will fairly present the
consolidated financial position of the
Company and its Subsidiaries as at the
respective dates and the consolidated
results of its 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 that were
not or are not expected to be Material
in amount or effect (except as may be
indicated in such financial statements or
notes thereto).
(c)
The Company and its
Subsidiaries maintain accounting controls
sufficient to provide reasonable assurance
that (i) transactions are executed in
accordance with management's general or
specific authorization, (ii)
transactions are recorded as necessary to
permit preparation of the consolidated
financial statements of the Company in
accordance with GAAP and to
20
<PAGE>
maintain asset accountability, (iii) access
to the Company's assets is permitted
only in accordance with management's
general or specific authorization, and (iv)
assets are reconciled at reasonable
intervals and appropriate action is taken
with respect to any Material
differences.
(d)
The Chief Executive
Officer and the Chief Financial Officer of the
Company have signed, and the Company has
furnished to the SEC, all
certifications required by Section 906 of
Sarbanes-Oxley; such certifications
contain no qualifications or exceptions to
the matters certified therein and
have not been modified or withdrawn; and
neither the Company nor any of its
officers has received notice from any
Governmental Authority questioning or
challenging the accuracy, completeness,
form or manner of filing or submission
of such certifications.
(e)
The Company has
delivered to the Buyer complete and accurate copies
of notices received from its independent
auditor prior to the date hereof of any
significant deficiencies or material
weaknesses in the Company's internal
control over financial reporting since
October 1, 2003 and any other management
letter or similar correspondence from any
independent auditor of the Company or
any of its Subsidiaries received since
October 1, 2003 and prior to the date
hereof. As of the date hereof, the Company
is implementing such programs and is
taking such steps as it believes are
necessary to effect compliance (not later
than the relevant statutory and regulatory
deadline therefor) with all
provisions of Section 404 of Sarbanes-Oxley
that will become applicable to the
Company and has not received, orally or in
writing, any notification that its
independent auditor (i) believes that the
Company will not be able to complete
its assessment before the reporting
deadline, or, if completed, that it will not
be completed in sufficient time for the
independent auditor to complete its
assessment or (ii) will not be able to
issue unqualified attestation reports
with respect thereto.
4.5
ABSENCE OF UNDISCLOSED
LIABILITIES. Neither the Company nor any of
its Subsidiaries has any Liabilities that
could reasonably be expected to have a
Material Adverse Effect on the Company,
except Liabilities that are accrued or
reserved against in the consolidated
balance sheets of the Company as of March
31, 2005, included in the Company Financial
Statements or reflected in the notes
thereto and except for Liabilities incurred
in the ordinary course of business
subsequent to March 31, 2005. Neither the
Company nor any of its Subsidiaries
has incurred or paid any Liability since
March 31, 2005, except for (a) such
Liabilities incurred or paid in the
ordinary course of business consistent with
past business practice and (b) Liabilities
that could not reasonably be expected
to have a Material Adverse Effect on the
Company. To the Knowledge of the
Company, no facts or circumstances exist
that could reasonably be expected to
serve as the basis for any other
Liabilities of the Company or any of its
Subsidiaries, except as could not
reasonably be expected to have a Material
Adverse Effect on the Company.
4.6
ABSENCE OF CERTAIN
CHANGES OR EVENTS. Since March 31, 2005, (a) there
have been no events, changes, or
occurrences that have had, or could reasonably
be expected to have, a Material Adverse
Effect on the Company, and (b) each of
the Company and its Subsidiaries has
conducted in all Material respects its
respective businesses in the ordinary and
usual course (excluding the incurrence
of expenses in connection with this
Agreement and the transactions contemplated
hereby).
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<PAGE>
4.7
TAX MATTERS.
(a)
All Tax Returns
required to be filed by or on behalf of any of
Company and its Subsidiaries have been
timely filed, or requests for extensions
have been timely filed, granted, and have
not expired for periods ended on or
before September 30, 2004, and all Tax
Returns filed are complete and accurate
in all Material respects. All Tax Returns
for periods ending on or before the
date of the most recent fiscal year end
immediately preceding the Effective Time
will be timely filed or requests for
extensions will be timely filed. All Taxes
shown on filed Tax Returns have been paid.
There is no audit examination,
deficiency, or refund Litigation with
respect to any Taxes that could have a
Material Adverse Effect on the Company,
except to the extent reserved against in
the Company Financial Statements dated
prior to the date of this Agreement. All
Taxes and other Liabilities due with
respect to completed and settled
examinations or concluded Litigation have
been paid.
(b)
None of the Company or
its Affiliates has executed an extension or
waiver of any statute of limitations on the
assessment or collection of any Tax
due (excluding such statutes that relate to
years currently under examination by
the Internal Revenue Service or other
applicable taxing authorities) that is
currently in effect.
(c)
Adequate provision for
any Material Taxes due or to become due for
the Company or any of its Subsidiaries for
the period or periods through and
including the date of the respective
Company Financial Statements has been made
and is reflected on such Company Financial
Statements.
(d)
Each of the Company
and its Subsidiaries is in compliance with, and
its records contain all information and
documents (including properly completed
IRS Forms W-9) necessary to comply with,
all applicable information reporting
and Tax withholding requirements under
federal, state, and local Tax Laws, and
such records identify with specificity all
accounts subject to backup
withholding under Section 3406 of the
Code.
(e)
None of the Company
and its Subsidiaries has made any payments, is
obligated to make any payments, or is a
party to any contract, agreement, or
other arrangement that could obligate it to
make any payments that would be
disallowed as a deduction under Section
280G or 162(m) of the Code.
(f)
There are no Material
Liens with respect to Taxes upon any of the
Assets of the Company and its
Subsidiaries.
(g)
There has not been an
ownership change, as defined in Code Section
382(g), of the Company and its Subsidiaries
that occurred during any Taxable
Period in which any of the Company and its
Subsidiaries has incurred a net
operating loss that carries over to another
Taxable Period ending after
September 30, 2004.
(h)
After the date of this
Agreement, no Material election with respect
to Taxes will be made without the prior
consent of the Buyer.
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<PAGE>
(i)
Neither the Company
nor any of its Subsidiaries has or has had a
permanent establishment in any foreign
country, as defined in any applicable tax
treaty or convention between the United
States and such foreign country.
4.8
ASSETS. Each of the
Company and its Subsidiaries has good and
marketable title, free and clear of all
Liens, to all of its Assets, except for
Liens to secure public deposits, accounts
at the Federal Reserve Bank, or
Federal Home Loan Bank of Atlanta advances,
each in the ordinary course of
business consistent with past practice. All
tangible properties used in the
businesses of the Company and its
Subsidiaries are in good condition, reasonable
wear and tear excepted, and are usable in
the ordinary course of business
consistent with past practice. All Material
Assets held under leases or
subleases by any of the Company and its
Subsidiaries are held under valid
Contracts enforceable in accordance with
their respective terms, and each such
Contract is in full force and effect. Each
of the Company and its Subsidiaries
currently maintain insurance in amounts,
scope, and coverage necessary for its
operations. None of the Company or its
Subsidiaries has received notice from any
insurance carrier that (a) such insurance
will be canceled or that coverage
thereunder will be reduced or eliminated,
or (b) premium costs with respect to
such policies of insurance will be
increased. The Assets of the Company and its
Subsidiaries include all Assets required to
operate their businesses taken as a
whole as presently conducted.
4.9
SECURITIES PORTFOLIO
AND INVESTMENTS. All securities owned by the
Company or any of its Subsidiaries (whether
owned of record or beneficially) are
held free and clear of all Liens that would
impair the ability of the owner
thereof to dispose freely of any such
security and/or otherwise to realize the
benefits of ownership thereof at any time
except for securities pledged to
secure public deposits, securities pledged
to the Federal Reserve Bank, or
securities pledged to secure Federal Home
Loan Bank of Atlanta advances, each in
the ordinary course of business consistent
with past practices. There are no
voting trusts or other agreements or
undertakings to which the Company or any of
its Subsidiaries is a party with respect to
the voting of any such securities.
Except for fluctuations in the market
values of United States Treasury and
agency or municipal securities, since
September 30, 2004, there has been no
significant deterioration or adverse change
in the quality, or any decrease in
the value, of the securities portfolio of
the Company and its Subsidiaries,
taken as a whole.
4.10
ENVIRONMENTAL MATTERS.
(a)
Each of the Company
and its Subsidiaries, their respective facilities
and properties, and their respective Loan
Collateral are, and have been, in
compliance with all Environmental Laws.
(b)
To the Knowledge of
the Company, there is no Litigation pending or
threatened before any court, governmental
agency, or authority, or other forum
in which any of the Company or its
Subsidiaries or any of their respective
facilities or properties has been or, with
respect to threatened Litigation, may
be expected to 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 environment of any Hazardous
Material, whether or not occurring at, on,
under, or involving a site owned, leased,
or operated by the Company or any of
its Subsidiaries or any of their facilities
or properties.
23
<PAGE>
(c)
To the Knowledge of
the Company, there is no Litigation pending or
threatened before any court, governmental
agency or authority or other forum in
which any of its Loan Collateral (or the
Company or any of its Subsidiaries in
respect of such Loan Collateral) has been
or, with respect to threatened
Litigation, may be expected to be named as
a defendant or potentially
responsible party (i) for alleged
noncompliance (including by any predecessor)
with any Environmental Law or (ii) relating
to the release into the environment
of any Hazardous Material, whether or not
occurring at, on, under, or involving
Loan Collateral.
(d)
To the Knowledge of
the Company, no facts exist that provide a
reasonable basis for any Litigation of a
type described in subsections (b) or
(c).
(e)
To the Knowledge of
the Company, during and prior to the period of
(i) any of the Company's or its
Subsidiaries' ownership or operation of any of
their respective current properties, (ii)
any of the Company's or its
Subsidiaries' participation in the
management of any facility or property, or
(iii) any of the Company's or its
Subsidiaries' holding of a security interest
in Loan Collateral, there have been no
releases of Hazardous Material in, on,
under, or affecting (or potentially
affecting) such properties.
(f)
To the Knowledge of
the Company, there is no asbestos or
asbestos-containing material at its or its
Subsidiaries' facilities or
properties that is friable, capable of
becoming airborne, or in any state or
condition which would render the site or
building in noncompliance with
applicable Laws.
(g)
To the Knowledge of
the Company, there are no above- or underground
storage tanks or related equipment
(including without limitation pipes and
lines) at, on or under any of its or its
Subsidiaries' facilities or properties,
and that all such tanks and equipment, if
any, previously located thereat,
thereon or thereunder have been removed or
closed in place in accordance with
all applicable Laws, including without
limitation the preparation and filing of
any required closure certification with the
North Carolina Department of
Environment and Natural Resources.
4.11
COMPLIANCE WITH LAWS.
(a)
Each of the Company
and its Subsidiaries has in effect all Permits
necessary for it to own, lease, or operate
its Material Assets and to carry on
its business as now conducted, except for
those Permits the absence of which
could not reasonably be expected to have a
Material Adverse Effect on the
Company, and there has occurred no Default
under any such Permit, other than
Defaults that could not reasonably be
expected to have a Material Adverse Effect
on the Company. None of the Company or any
of its Subsidiaries: (i) is in
violation of any Laws, Orders, or Permits
applicable to its business or
employees conducting its business, except
for violations that could not
reasonably be expected to have a Material
Adverse Effect on the Company
(provided that this clause (i) shall not
apply to Environmental Laws, which are
covered in Section 4.10 above); or (ii) has
received any notification or
communication from any agency or department
of federal, state, or local
Government or any Regulatory Authority or
the staff thereof (A) asserting that
any of the Company or its Subsidiaries is
not in compliance with any of the Laws
or Orders that such Governmental Authority
or Regulatory Authority enforces,
except where such noncompliance could not
reasonably be expected to have a
Material Adverse
24
<PAGE>
Effect on the Company, (B) threatening to
revoke any Permits, except where the
revocation of which could not reasonably be
expected to have a Material Adverse
Effect on the Company, or (C) requiring the
Company or any of its Subsidiaries
(1) to enter into or consent to the
issuance of a cease and desist order, formal
agreement, directive, commitment, or
memorandum of understanding, or (2) to
adopt any board or directors resolution or
similar undertaking that restricts
the conduct of its business, or in any
manner relates to its capital adequacy,
its credit or reserve policies, its
management, or the payment of dividends.
(b)
There are no pending
or, to the Knowledge of the Company, threatened
actions against any director or officer of
the Company pursuant to Section 8A or
20(b) of the Securities Act, 15 U.S.C.
Sections. 77h-1 or 77t(b), or Section
21(d) or 21C of the Exchange Act, 15 U.S.C.
Sections. 78u(d) or 78u-3. The
Company has delivered to Buyer copies of
all reports made by any attorney to the
Company's chief legal officer, chief
executive officer, board of directors (or
committee thereof) or other representative
pursuant to 17 C.F.R. Part 205, and
all responses thereto.
(c)
The Company is in
compliance in all Material respects and will
continue to remain in compliance in all
Material respects after the date hereof,
up to and including the Effective Time,
with all current listing and corporate
governance requirements of the Nasdaq
National Market System, and is in
compliance in all Material respects, and
will continue to remain in compliance
in all Material respects after the date
hereof, up to and including the
Effective Time, with all rules,
regulations, and requirements of Sarbanes-Oxley
and the SEC.
4.12 LABOR
RELATIONS. Neither the Company nor any of its Subsidiaries is
the subject of 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 as to
wages or conditions of employment, nor is
any of them a party to or bound by any
collective bargaining agreement, Contract,
or other agreement or understanding
with a labor union or labor organization,
nor is there any strike or other labor
dispute involving any of them, pending or,
to the Knowledge of the Company,
threatened. To the Knowledge of the
Company, there is not currently any activity
involving any of the Company's or its
Subsidiaries' employees seeking to certify
a collective bargaining unit or engaging in
any other organization activity.
4.13
EMPLOYEE BENEFIT PLANS.
(a)
The Company has made
available to the Buyer prior to the execution of
this Agreement correct and complete copies
in each case of all Company Benefits
Plans.
(b)
Each Company ERISA
Plan is in compliance with and has been
administered in all respects consistent
with, its terms, ERISA, the Code and
other applicable Laws. To the Knowledge of
the Company, no Company ERISA Plan
has encountered any operational
failure.
(c)
Neither the Company
nor any of its Subsidiaries has an "obligation to
contribute" (as defined in ERISA Section
4212) to a "multiemployer plan" (as
defined in ERISA Sections 4001(a)(3) and
3(37)(A)). Each "employee pension
benefit plan," as defined in Section 3(2)
of ERISA, ever maintained by the
Company or its Subsidiaries that was
intended to qualify under
25
<PAGE>
Section 401(a) of the Code and with respect
to which the Company or any of its
Subsidiaries has any Liability, is
disclosed as such in Section 4.13 of the
Company's Disclosure Schedule.
(d)
The Company has made
available to the Buyer prior to the execution of
this Agreement correct and complete copies
of the following documents: (i) all
trust agreements or other funding
arrangements for such Company Benefit Plans
(including insurance contracts), and all
amendments thereto; (ii) with respect
to any such Company Benefit Plans or
amendments, all determination letters,
rulings, opinion letters, information
letters, or advisory opinions issued by
the Internal Revenue Service, the United
States Department of Labor, or the
Pension Benefit Guaranty Corporation after
December 31, 1994; (iii) annual
reports or returns, audited or unaudited
financial statements, actuarial
valuations and reports, and summary annual
reports prepared for any Company
Benefit Plan with respect to the three (3)
most recent plan years; and (iv) the
most recent summary plan descriptions and
any modifications thereto.
(e)
Each Company ERISA
Plan that is intended to be qualified under
Section 401(a) of the Code has received a
favorable determination letter from
the Internal Revenue Service, and, to the
Knowledge of the Company, there is no
circumstance that will or could reasonably
be expected to result in revocation
of any such favorable determination letter
or in such Plan's failure to be so
qualified. Each trust created under any
Company ERISA Plan has been determined
to be exempt from Tax under Section 501(a)
of the Code and the Company is not
aware of any circumstance that will or
could be expected to result in revocation
of such exemption. With respect to each
such Company Benefit Plan, to the
Knowledge of the Company, no event has
occurred that will or could be expected
to give rise to a loss of any intended Tax
consequences under the Code or to any
Tax under Section 511 of the Code. There is
no Litigation pending or, to the
Knowledge of the Company, threatened
relating to any Company Benefit Plan.
(f)
Neither the Company
nor any of its Affiliates has engaged in a
transaction with respect to any Company
Benefit Plan that, assuming the Taxable
Period of such transaction expired as of
the date of this Agreement, would
subject the Company or any of its
Affiliates to a Material tax or penalty
imposed by either Section 4975 of the Code
or Section 502(i) of ERISA. Neither
the Company nor any of its Affiliates nor
any administrator or fiduciary of any
Company Benefit Plan (or any agent of any
of the foregoing) has engaged in any
transaction, or acted or failed to act in
any manner, that could subject the
Company or any of its Affiliates to any
direct or indirect Liability (by
indemnity or otherwise) for breach of any
fiduciary, co-fiduciary, or other duty
under ERISA. No oral or written
representation or communication with respect to
any aspect of the Company Benefit Plans has
been made to employees of the
Company or any of its Affiliates that is
not in accordance with the written or
otherwise preexisting terms and provisions
of such plans.
(g) Neither the Company nor any of its
Affiliates maintains or has ever
maintained or otherwise had any obligation
to contribute to a Company Pension
Plan or other plan subject to Title IV of
ERISA, a "Multiemployer Plan" as
defined in Section 3(37) of ERISA, or a
multiple employer welfare arrangement
(MEWA) as defined in Section 3(40) of
ERISA.
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(h)
Neither the Company
nor any of its Affiliates has any obligation for
retiree health and retiree life benefits
under any of the Company Benefit Plans
other than with respect to benefit coverage
mandated by applicable Law.
(i)
Neither the execution
and delivery of this Agreement nor the
consummation of the transactions
contemplated hereby will, by themselves, (i)
result in any payment (including without
limitation severance, unemployment
compensation, golden parachute, or
otherwise) becoming due to any director or
any employee of the Company or its
Affiliates from the Company or any of its
Affiliates under any Company Benefit Plan
or otherwise, (ii) increase any
benefit otherwise payable under any Company
Benefit Plan, or (iii) result in any
acceleration of the time of any payment or
vesting of any benefit.
4.14
MATERIAL CONTRACTS. None of the Company or its Subsidiaries, nor
any
of their respective Assets, businesses, or
operations, is a party to, or is
bound or affected by, or receives benefits
under, (a) any employment, severance,
termination, consulting, or retirement
Contract, (b) any Contract relating to
the borrowing of money by the Company or
its Subsidiaries or the guarantee by
the Company or its Subsidiaries of any such
obligation (other than Contracts
evidencing deposit liabilities, purchases
of federal funds, fully-secured
repurchase agreements, and Federal Reserve
or Federal Home Loan Bank of Atlanta
advances of depository institution
Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made
in the ordinary course of business),
and (c) any other Contract or amendment
thereto that would be required to be
filed as an exhibit to an Annual Report on
Form 10-K filed by the Company with
the SEC as of the date of this Agreement
that has not been filed or incorporated
by reference as an exhibit to the Company's
Annual Report on Form 10-K filed for
the fiscal year ended September 30, 2004,
or in another document filed by the
Company with the SEC and identified to the
Buyer (together with all Contracts
referred to in Sections 4.8 and 4.13(a) of
this Agreement, the "Company
Contracts"). With respect to each Company
Contract: (i) the Contract is in full
force and effect; (ii) none of the Company
or its Subsidiaries is in Default
thereunder; (iii) neither the Company nor
any of its Subsidiaries has repudiated
or waived any Material provision of any
such Contract; and (iv) no other party
to any such Contract is, to the Knowledge
of the Company, in Default in any
respect, or has repudiated or waived any
provision thereunder. Except for
Federal Reserve and Federal Home Loan Bank
of Atlanta advances, all of the
indebtedness of the Company and its
Subsidiaries for money borrowed (not
including deposit Liabilities) is
prepayable at any time without penalty or
premium.
4.15 LEGAL
PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of the Company, threatened
against the Company or any of its
Subsidiaries, or against any Asset,
employee benefit plan, interest, or right of
any of them, except as could not reasonably
be expected to have a Material
Adverse Effect on the Company, nor are
there any Orders of any Regulatory
Authorities, other Governmental
Authorities, or arbitrators outstanding against
any the Company or its Subsidiaries, except
as could not reasonably be expected
to have a Material Adverse Effect on the
Company. There is no Litigation to
which the Company or any of its
subsidiaries is a party that names the Company
or any of its Subsidiaries as a defendant
or cross-defendant.
4.16
REPORTS. Since October 1, 2001, each of the Company and its
Subsidiaries has timely filed all reports
and statements, together with any
amendments required to be made
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with respect thereto, that it was required
to file with any 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.
4.17
REGISTRATION STATEMENT; JOINT PROXY STATEMENT. Subject to the
accuracy of the representations contained
in Section 5.9, the information
supplied by the Company or its Subsidiaries
for inclusion in the registration
statement (the "Registration Statement")
covering the shares of the Buyer's
Stock to be issued pursuant to this
Agreement shall not, at the time the
Registration Statement (including any
amendments or supplements thereto) is
declared effective by the SEC, contain any
untrue statement of a Material fact
or omit to state any Material fact required
to be stated therein or necessary to
make the statements therein not misleading.
The information supplied by or on
behalf of the Company and its Subsidiaries
for inclusion in the joint proxy
statement/prospectus to be sent to the
shareholders of each of the Company and
the Buyer to consider, at special meetings
(each a "Shareholder Meeting" and
collectively, the "Shareholder Meetings"),
the Merger (such proxy
statement/prospectus as amended or
supplemented is referred to herein as the
"Joint Proxy Statement") will not, on the
date the Joint Proxy Statement is
first mailed to shareholders, at the time
of each of the Shareholder Meetings
and at the Effective Time, contain any
untrue statement of a Material fact or
omit to state any Material fact necessary
to make the statements therein, in
light of the circumstances under which they
were made, not misleading. If at any
time prior to the Effective Time any event
relating to the Company or its
Subsidiaries or any of their Affiliates,
officers or directors should be
discovered by the Company or its
Subsidiaries that should be set forth in an
amendment to the Registration Statement or
a supplement to the Joint Proxy
Statement, the Company will promptly inform
the Buyer. The Joint Proxy Statement
shall comply in all Material respects with
the requirements of the Securities
Laws and the rules and regulations
thereunder applicable to the Company.
Notwithstanding the foregoing, the Company
makes no representation or warranty
with respect to any information supplied by
the Buyer and its Subsidiaries that
is contained or incorporated by reference
in, or furnished in connection with
the preparation of, the Registration
Statement or the Joint Proxy Statement.
4.18
ACCOUNTING, TAX, AND REGULATORY MATTERS. To the Knowledge of
the
Company, none of the Company or any of its
Subsidiaries has taken or agreed to
take any action, that could reasonably be
expected to (a) prevent the
transactions contemplated hereby, including
the Merger, from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, or (b)
Materially impede or delay receipt of any
Consents of Regulatory Authorities
referred to in Section 8.1(c) of this
Agreement.
4.19 STATE
TAKEOVER LAWS. Each of the Company and its Subsidiaries has
taken all necessary action to exempt the
transactions contemplated by this
Agreement from any applicable "moratorium,"
"control share," "fair price,"
"business combination," or other
anti-takeover laws and regulations of the State
of Virginia.
4.20
CHARTER PROVISIONS.
(a) Each
of the Company and its Subsidiaries has taken all action so
that
the entering into of this Agreement and the
consummation of the Merger and the
other transactions contemplated by this
Agreement do not and will not result in
the grant of any rights to any
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Person under the articles of incorporation,
bylaws, or other governing
instruments of any of them or restrict or
impair the ability of the Buyer or any
of its Subsidiaries to vote, or otherwise
to exercise the rights of a
shareholder with respect to, the capital
stock of the Company or any of its
Subsidiaries that may be directly or
indirectly acquired or controlled by it.
(b)
The transactions
contemplated by this Agreement do not implicate
Article XIII, Approval of Certain Business
Combinations, of the Company's
articles of incorporation and the Company
has taken all necessary action to
exempt the transactions contemplated by
this Agreement from such provision of
the Company's articles of
incorporation.
4.21
RECORDS. Complete and accurate copies of the articles of
incorporation or charter and bylaws of each
of the Company and its Subsidiaries
have been made available to the Buyer. The
stock books of the Company and its
Subsidiaries contain complete and accurate
records of the record share ownership
of the issued and outstanding shares of
stock thereof.
4.22
DERIVATIVES. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts,
and other similar risk management
arrangements, whether entered into for the
account of the Company or it
Affiliates or their customers were entered
into (a) in accordance with prudent
business practices and all applicable Laws,
and (b) with counterparties believed
to be financially responsible.
4.23
CERTAIN REGULATED BUSINESSES. Neither the Company nor any of
its
Subsidiaries is an "investment company" as
defined in the Investment Company Act
of 1940, as amended, nor is it a "public
utility holding company" as defined in
the Public Utility Holding Company Act of
1935, as amended.
4.24
LOANS; ALLOWANCE FOR LOAN LOSSES
(a)
All of the loans,
leases, installment sales contracts and other
credit transactions on the books of the
Company Bank are valid and properly
documented and were made in the ordinary
course of business, and the security
therefor, if any, is valid and properly
perfected. Neither the terms of such
loans, leases, installment sales contracts
and other credit transactions, nor
any of the documentation evidencing such
transactions, nor the manner in which
such loans, leases, installment sales
contracts and other credit transactions
have been administered and serviced, nor
the Company Bank's procedures and
practices of approving or rejecting
applications for such transactions, violates
any federal, state or local law, rule,
regulation or ordinance applicable
thereto, including without limitation the
TILA, Regulations O and Z of the
Federal Reserve Board, the CRA, the Equal
Credit Opportunity Act, as amended,
and state laws, rules and regulations
relating to consumer protection,
installment sales and usury.
(b)
The allowances for
losses respecting loans, leases, installment sales
contracts and other credit transactions
reflected on the consolidated balance
sheets included in the Company Financial
Statements are adequate as of their
respective dates under the requirements of
GAAP and applicable regulatory
requirements and guidelines.
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4.25
REPURCHASE AGREEMENTS; DERIVATIVES
(a)
With respect to all
agreements currently outstanding pursuant to
which the Company or the Subsidiaries has
purchased securities subject to an
agreement to resell, the Company or the
Subsidiaries have a valid, perfected
first lien or security interest in the
securities or other collateral securing
such agreement, and the value of such
collateral equals or exceeds the amount of
the debt secured thereby. With respect to
all agreements currently outstanding
pursuant to which the Company or the
Subsidiaries have sold securities subject
to an agreement to repurchase, neither the
Company nor any of its Subsidiaries
has pledged collateral having a value at
the time of entering into such pledge
that exceeds the amount of the debt secured
thereby. Neither the Company nor any
of its Subsidiaries has pledged collateral
having a value at the time of
entering into such pledge that exceeds the
amount required under any interest
rate swap or other similar agreement
currently outstanding.
(b)
Neither the Company
nor any of its Subsidiaries is a party to or has
agreed to enter into an 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 sheets
in the Company Financial Statements, which
is a financial derivative contract
(including various combinations thereof),
except for options and forwards
entered into in the ordinary course of its
mortgage lending business consistent
with past practice and current policy.
4.26
DEPOSIT ACCOUNTS. The deposit accounts of the Company Bank are
insured by the FDIC to the maximum extent
permitted by federal law, and the
Company Bank has paid all premiums and
assessments and filed all reports
required to have been paid or filed under
all rules and regulations applicable
to the FDIC.
4.27
PERMISSIBLE ACTIVITIES. Each of the activities in which the LLC
is
engaged is permitted of a subsidiary of a
national bank by applicable banking
Laws, including, but not limited to,
Section 24a of the National Bank Act.
4.28
RELATED PARTY TRANSACTIONS. The Company has disclosed all
existing
transactions, investments and loans,
including loan guarantees existing as of
the date hereof other than deposits with
Company Bank, to which the Company or
any of its Subsidiaries is a party with any
director, executive officer or five
percent (5%) shareholder of the Company or
any person, corporation, or
enterprise controlling, controlled by or
under common control with any of the
foregoing. All such transactions,
investments and loans were negotiated at arm's
length and are on terms and conditions that
are substantially the same as those
prevailing for comparable transactions with
other persons and do not involve
more than the normal risk of repayment or
present other unfavorable features.
4.29
COMMISSIONS. No broker, finder or other Person is entitled to
any
brokerage fees, commissions or finder's
fees in connection with the transactions
contemplated hereby by reason of any action
taken by the Company, any of its
Subsidiaries or any of the Company's
shareholders.
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<PAGE>
4.30
VOTING AGREEMENTS. Concurrently with the execution and delivery
of
this Agreement, each significant Company
shareholder listed on Schedule 4.29,
Company officer and Company director has
executed and delivered to the Buyer the
form of Voting Agreement substantially in
the form of EXHIBIT E.
4.31
OPINION OF FINANCIAL ADVISOR. The Company has received the
written
opinion of Orr Group to the effect that the
Merger Consideration to be received
in the Merger by the holders of Company
Shares is fair, from a financial point
of view, to such holders. A true, correct
and complete copy of the written
opinion delivered by Orr Group, as well as
a true and correct copy of the
Company's engagement of Orr Group, have
been delivered to the Buyer by the
Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Except as
set forth on the Buyer's Disclosure Schedule (the "Buyer's
Disclosure Schedule"), the Buyer represents
and warrants to the Company that the
statements contained in this ARTICLE V are
correct and complete as of the date
of this Agreement and will be correct and
complete as of the Closing Date.
5.1
ORGANIZATION, STANDING
AND POWER.
(a)
The Buyer is a
financial holding company registered with the Board of
Governors of the Federal Reserve System
under the Bank Holding Company Act of
1956, as amended, and the Buyer Bank is a
bank under North Carolina Law. The
Buyer Bank is an "insured institution" as
defined in the Federal Deposit
Insurance Act and applicable regulations
thereunder, and subject to dollar
limits under such Act, all deposits in the
Buyer Bank are fully insured by the
FDIC to the extent permitted by Law.
(b)
Each of the Buyer and
its Subsidiaries is either a corporation or a
bank duly organized, validly existing and
in good standing under the Laws of the
State of North Carolina, and has the
corporate power and authority to carry on,
in all Material respects, its businesses as
now conducted and to own, lease and
operate its Assets. Each of the Buyer and
its Subsidiaries is duly qualified or
licensed to transact business as a foreign
corporation in good standing in the
States of the United States and foreign
jurisdictions where the character of its
Assets or the nature or conduct of its
business requires it to be so qualified
or licensed except for such jurisdiction,
in which the failure to be so
qualified or licensed could not reasonably
be expected to have a Material
Adverse Effect on the Buyer.
(c)
The minute books of
the Buyer and its Subsidiaries contain records of
all meetings and other corporate actions
held or taken of their respective
shareholders and boards of directors
(including the committees of such boards)
since January 1, 2002, which records are
complete and accurate in all material
respects and have been made available to
the Company.
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5.2
AUTHORITY; NO
CONFLICTS.
(a)
Subject to required
regulatory and shareholder approvals, the Buyer
has the corporate power and authority
necessary to execute, deliver and perform
its obligations under this Agreement and to
consummate the transactions
contemplated hereby. Subject to required
shareholder approval, the execution and
delivery of and performance of its
obligations under this Agreement and the
other documents contemplated hereby, and
the consummation of the transactions
contemplated herein, including the Merger,
have been duly and validly authorized
by all necessary corporate action in
respect thereof on the part of the Buyer.
This Agreement represents a legal, valid,
and binding obligation of the Buyer,
enforceable against it in accordance with
its terms (except in all cases as such
enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization, moratorium or similar Laws
affecting the enforcement of
creditors' rights generally and except that
the availability of specific
performance, injunctive relief and other
equitable remedies is subject to the
discretion of the court before which any
proceeding may be brought). To the
Knowledge of the Buyer, there is no fact or
condition relating to the Buyer that
would prevent all regulatory approvals
required for the consummation of the
transactions contemplated hereby from being
obtained.
(b)
Neither the execution
and delivery of this Agreement by the Buyer,
nor the consummation by the Buyer of the
transactions contemplated hereby, nor
compliance by the Buyer with any of the
provisions hereof will (i) conflict with
or result in a breach of any provision of
the Buyer's articles of incorporation
or bylaws, (ii) 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 the Buyer
under, any Contract or Permit of the Buyer,
except as could not reasonably be
expected to have a Material Adverse Effect
on the Buyer, or (iii) subject to
obtaining the requisite Consents referred
to in Section 8.1 of this Agreement,
violate any Law or Order applicable to the
Buyer or any of its respective
Assets.
(c)
Other than in
connection or compliance with the provisions of the
Securities Laws and banking Regulatory
Authorities, no notice to, filing with,
or Consent of, any Governmental Authority
is necessary for the consummation by
the Buyer of the Merger and the other
transactions contemplated in this
Agreement.
5.3
BUYER'S STOCK.
(a)
The authorized capital
stock of the Buyer consists of 20,000,000
shares of common stock, no par value per
share, of which 6,625,870 shares are
issued and outstanding as of the date of
this Agreement, and except for such
shares, there are no shares of capital
stock of the Buyer outstanding. There are
options to purchase 647,383 shares of
common stock of the Buyer outstanding as
of the date of this Agreement. There are
833,360 shares of capital stock
reserved with respect to such options. In
addition, there are 200,000 shares of
capital stock reserved under the Capital
Bank Corporation Deferred Compensation
Plan for Outside Directors and 16,827
shares of capital stock reserved under the
Capital Bank Corp. Deferred Compensation
Plan for Advisory Board Members which
shares can be used in lieu of cash to pay
the deferred compensation benefits
under those plans if the Buyer elects.
Except for such options and the 216,827
shares reserved under the deferred
compensation plans, there are no options,
Rights or Contracts requiring the Buyer to
issue additional shares of its
capital stock.
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<PAGE>
The authorized capital stock of the Buyer
Bank consists of 20,000,000 shares of
common stock, par value $5.00 per share, of
which 2,477,651 shares are issued
and outstanding as of the date of this
Agreement and are owned and held by the
Buyer, and except for such 2,477,651 shares
of common stock, there are no shares
of capital stock or other equity securities
of the Buyer Bank outstanding.
(b)
All of the issued and
outstanding shares of capital stock of the
Buyer are duly and validly issued and
outstanding and are fully paid and
nonassessable, except to the extent
otherwise required by the North Carolina
General Statutes 53-42 or other applicable
banking Law, and none are subject to
preemptive rights. Shares of the Buyer's
Stock to be issued in connection with
the Merger have been duly authorized and,
when so issued, will be fully paid and
nonassessable, and will not be subject to
preemptive rights.
5.4
SEC FILINGS; BUYER
FINANCIAL STATEMENTS.
(a)
The Buyer has on a
timely basis filed all forms, reports, and
documents required to be filed by the Buyer
with the SEC since December 31, 1999
(collectively, the "Buyer SEC Reports").
The Buyer SEC Reports (i) at the time
filed with the SEC, complied in all
Material respects with the applicable
requirements of the Securities Laws, as the
case may be, and (ii) did not at the
time filed with the SEC (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 Buyer SEC Reports or
necessary in order to make the statements in
such Buyer SEC Reports, in light of the
circumstances under which they were
made, not misleading. None of the Buyer's
Subsidiaries is required to file any
forms, reports, or other documents with the
SEC. The Buyer maintains disclosure
controls and procedures required by Rule
13a-15 or 15d-15 under the Exchange
Act; such controls and procedures are
effective to ensure that all material
information concerning the Buyer and its
Subsidiaries is made known on a timely
basis to the individuals responsible for
the preparation of the Buyer's filings
with the SEC and other public disclosure
documents.
(b)
Each of the Buyer
Financial Statements (including, in each case, any
related notes) contained in the Buyer SEC
Reports, including any Buyer SEC
Reports filed after the date of this
Agreement until the Effective Time,
complied or will comply as to form in all
Material respects with the applicable
published rules and regulations of the SEC
with respect thereto, was prepared or
will be 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 statements, as permitted by
the rules and regulations governing
Quarterly Reports on Form 10-Q), and fairly
presented or will fairly present the
consolidated financial position of the
Buyer and its Subsidiaries as at the
respective dates and the consolidated
results of its 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 that were
not or are not expected to be Material
in amount or effect (except as may be
indicated in such financial statements or
notes thereto).
(c)
The Buyer and its
Subsidiaries maintain accounting controls
sufficient to provide reasonable assurance
that (i) transactions are executed in
accordance with management's general or
specific authorization, (ii)
transactions are recorded as necessary to
permit preparation of the
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<PAGE>
consolidated financial statements of the
Buyer in accordance with GAAP and to
maintain asset accountability, (iii) access
to the Buyer's assets is permitted
only in accordance with management's
general or specific authorization, and (iv)
assets are reconciled at reasonable
intervals and appropriate action is taken
with respect to any Material
differences.
(d)
The Chief Executive
Officer and the Chief Financial Officer of the
Buyer have signed, and the Company has
furnished to the SEC, all certifications
required by Section 906 of Sarbanes-Oxley;
such certifications contain no
qualifications or exceptions to the matters
certified therein and have not been
modified or withdrawn; and neither the
Buyer nor any of its officers has
received notice from any Governmental
Authority questioning or challenging the
accuracy, completeness, form or manner of
filing or submission of such
certifications.
(e)
The Buyer has
delivered to the Company complete and accurate copies
of notices received from its independent
auditor prior to the date hereof of any
significant deficiencies or material
weaknesses in the Buyer's internal control
over financial reporting since January 1,
2004 and any other management letter
or similar correspondence from any
independent auditor of the Company or any of
its Subsidiaries received since January 1,
2004 and prior to the date hereof.
5.5
ABSENCE OF UNDISCLOSED
LIABILITIES. Neither the Buyer nor any of its
Subsidiaries has any Liabilities that could
reasonably be expected to have a
Material Adverse Effect on the Buy
