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Exhibit 10.1
EXECUTION COUNTERPART
AGREEMENT AND PLAN OF SHARE EXCHANGE
between
Wilson/Bennett Capital Management, Inc.
and
Cardinal Financial Corporation
April 29, 2005
TABLE OF CONTENTS
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* As permitted by Regulation S-K, the Company has not included this exhibit in the filing. The Company agrees to furnish supplementally a copy of this exhibit to the Commission upon request.
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AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the “Agreement”) is made and entered into as of April 29, 2005 by and between Wilson/Bennett Capital Management, Inc., a Virginia corporation (“Wilson/Bennett”) and Cardinal Financial Corporation, a Virginia corporation (“Cardinal”).
WITNESSETH:
WHEREAS, Wilson/Bennett is an investment advisor, registered with the Securities and Exchange Commission; and
WHEREAS, Cardinal is a financial holding company and the sole shareholder of Cardinal Bank; and
WHEREAS, Wilson/Bennett and Cardinal desire to combine their respective businesses; and
WHEREAS, the boards of directors of Cardinal and Wilson/Bennett deem it advisable for Wilson/Bennett to become a wholly owned subsidiary of Cardinal pursuant to this Agreement, the Plan of Share Exchange attached as Exhibit A (the “Plan”) and the provisions of Va. Code Section 13.1-717, whereby the holders of shares of common stock of Wilson/Bennett will receive cash and common stock of Cardinal in exchange therefor; and
WHEREAS, the respective Boards of Directors of Wilson/Bennett and Cardinal have resolved that the transactions described herein are in the best interests of the parties and their respective shareholders and have authorized and approved the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereby agree as follows:
The Share Exchange and Related Matters
1.1 The Share Exchange . Subject to the terms and conditions of this Agreement, at the Effective Date as defined in Section 1.2 hereof, each share of Wilson/Bennett Stock (as hereinafter defined) will be exchanged for cash and Cardinal Common Stock (as hereinafter defined) in accordance with Section 2.1 (the “Share Exchange”). At the Effective Date, the Reorganization shall have the effect provided in Section 13.1-721 of the Virginia Stock Corporation Act.
1.2 The Closing and Effective Date. The closing of the transactions contemplated by this Agreement and the Plan shall take place at the offices of Cardinal Financial Corporation, 8270 Greensboro Drive, Suite 500, McLean, VA 22102, Virginia or at such other place as may be
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mutually agreed upon by the parties. Provided all of the conditions to the parties’ obligations to consummate the Share Exchange have been satisfied, the closing shall occur sixty-five (65) days following the first notice Wilson/Bennett sends to its clients pursuant to Section 4.8 hereof. The Share Exchange shall become effective on the date shown on the Certificate of Share Exchange issued by the State Corporation Commission of Virginia effecting the Share Exchange (the “Effective Date”). The closing date and the Effective Date shall be the same. All documents required by the terms of this Agreement to be delivered at or prior to consummation of the Share Exchange will be exchanged by the parties at the closing of the Share Exchange (the “Share Exchange Closing”), which shall be held on or before the Effective Date. At the Share Exchange Closing, Cardinal and Wilson/Bennett shall execute and deliver to the Virginia State Corporation Commission (the “SCC”) Articles of Share Exchange containing a Plan of Share Exchange in substantially the form of Exhibit A hereto.
1.3 Definitions. Any term defined anywhere in this Agreement shall have the meaning ascribed to it for all purposes of this Agreement (unless expressly noted to the contrary). In addition:
(a) the term “Affiliate” shall mean, with respect to Cardinal, any corporation of which Cardinal beneficially owns a majority of the voting stock.
(b) the term “Assets Under Management” shall mean the dollar amount of client assets as of the date of this Agreement with respect to which Wilson/Bennett provides services as an investment adviser.
(c) the term “Cardinal” shall mean Cardinal Financial Corporation, a Virginia corporation, and any corporation with which it may merge prior to the Effective Date.
(d) the term “Cardinal Common Stock” shall mean common stock of Cardinal, par value $1.00 per share.
(e) the term “Consent” or “Consented” shall mean the written consent of a Wilson/Bennett client to the Share Exchange or, in the case of an Investment Contract which prohibits assignment or states by its terms that it terminates upon assignment, the execution of an amendment to the existing Investment Contract or a new Investment Contract effective upon the Effective Date. The form and substance of the Consent shall be determined by Wilson/Bennett, subject to the approval of Cardinal which shall not be unreasonably withheld.
(f) the term “Fair Market Value”, with respect to shares of Cardinal Common Stock, shall mean the average closing sale price on the Nasdaq National Market for sales of Cardinal Common Stock for the twenty (20) days on which Cardinal Common Stock trades immediately preceding the fifth day before the Share Exchange Closing, adjusted, if necessary, for any stock split or stock dividend, during such twenty (20) day period; provided, however, that if such average is less than $9.00, Fair Market Value shall mean $9.00 and if such average is greater than $11.00, Fair Market Value shall mean $11.00. The preceding floor and ceiling
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prices shall be adjusted for any stock split or stock dividend that occurs after the date of this Agreement and prior to the Effective Date.
(g) “Knowledge” of a Person shall mean what the Person should have known after a reasonable investigation.
(h) “Material Adverse Effect,” when used in reference to any party, shall mean or describe an event, occurrence, or circumstance (including without limitation, any breach of a representation or warranty contained herein by such party) which (1) has an effect on the financial condition, results of operations, or business of such party and its subsidiaries, that, if reduced to monetary damages, would be in excess of $25,000 or (2) would materially impair any party’s ability to timely perform its obligations under this Agreement or the consummation of any of the transactions contemplated hereby; provided , that a Material Adverse Effect with respect to a party shall not include events or conditions generally affecting the securities industry or the banking industry or effects resulting from general economic conditions (including changes in interest rates), changes in accounting practices or changes to statutes, regulations or regulatory policies, that do not have a materially more adverse effect on such party than that experienced by similarly situated financial services companies or investment advisers.
(i) the term “Person” shall mean any individual or entity.
(j) the term “Previously Disclosed” by a party shall mean information set forth in a written disclosure letter that is delivered by that party to the other party prior to or contemporaneously with the execution of this Agreement and on a date not more than 30 days prior to the Effective Date and, in each case, specifically designated as information “Previously Disclosed” pursuant to this Agreement.
(k) the term “Shareholders” shall mean John W. Fisher and James B. Moloney.
(l) the term Wilson/Bennett Stock shall mean the Class A Stock, no par value, and Class B Stock, no par value, of Wilson/Bennett.
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(m) The capitalized terms set forth below are defined in the following sections:
Effect of Share Exchange on Common Stock
2.1 Conversion of Shares. (a) Upon, and by reason of the Share Exchange becoming effective pursuant to the issuance of a Certificate of Share Exchange by the Virginia State Corporation Commission each share of Wilson/Bennett Stock issued and outstanding on the Effective Date shall be exchanged for a pro rata share of (y) shares of Cardinal Common Stock with a Fair Market Value of Five Million Five Hundred Thousand Dollars ($5,500,000.00) and (z) One Million One Hundred Thousand Dollars ($1,100,000.00) in cash, subject to the adjustments described in Sections 2.1(b) and 2.1(c).
(b) If the tangible net worth of Wilson/Bennett on the Effective Date is less than $42,000, the value of the exchange consideration described in Section 2.1(a) shall be reduced by $1.00 for every dollar of the deficiency. If the tangible net worth of Wilson/Bennett on the Effective Date exceeds $42,000, the value of the exchange consideration shall be increased by $1.00 for every dollar of such excess. Cardinal shall have the right after the Effective Date to audit the net worth of Wilson/Bennett as of the Effective Date. The exchange consideration shall be retroactively adjusted if such audit discloses any error or inaccuracy in the balance sheet of Wilson/Bennett on the Effective Date. Any such adjustment shall be settled by a cash payment to or by the Shareholders. The parties intend that this subsection operate such that the net income of Wilson/Bennett, computed according to generally accepted accounting principles, earned with respect to services performed by it before the Effective Date shall be paid out to the shareholders, as long as such payments do not reduce the tangible net worth of Wilson/Bennett to less than $42,000. For purposes of this Section 2.1(b), accounts receivable are included in tangible net worth.
(c) If at the Effective Date, clients of Wilson/Bennett representing more than ten percent (10%) of Assets Under Management shall have terminated or notified Wilson/Bennett of an intent to terminate Investment Contracts, the exchange consideration described in Section 2.1 shall be reduced. The reduced exchange consideration shall be
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calculated by multiplying $6,600,000 by a fraction, the numerator of which is one hundred percent (100%) minus the percentage of Assets Under Management held by clients who have terminated or given notice of an intent to terminate Investment Contracts and the denominator of which is 90%.
(d) If the exchange consideration described in Section 2.1(a) is adjusted pursuant to Section 2.1(b) or 2.1(c), the adjustment shall be to the cash portion of the exchange consideration and not to the aggregate Fair Market Value of the shares of Cardinal Common Stock to be issued.
(e) Shares of Wilson/Bennett Stock issued and outstanding shall, by virtue of the Reorganization, continue to be issued and outstanding shares and shall be held by Cardinal.
2.2 Manner of Exchange. As promptly as practicable after the Effective Date, Cardinal shall cause its stock transfer agent, acting as the exchange agent (“Exchange Agent”), to send to each former shareholder of record of Wilson/Bennett immediately prior to the Effective Date transmittal materials for use in exchanging such shareholder’s certificates of Wilson/Bennett Stock for the consideration set forth in Section 2.1 above and Section 2.3 below. Any fractional share checks which a Wilson/Bennett shareholder shall be entitled to receive in exchange for such shareholder’s shares of Wilson/Bennett Stock, and all dividends paid on any shares of Cardinal Common Stock that such shareholder shall be entitled to receive prior to the delivery to the Exchange Agent of such shareholder’s certificates representing all of such shareholder’s shares of Wilson/Bennett Stock will be delivered to such shareholder only upon delivery to the Exchange Agent of the certificates representing all of such shares (or indemnity satisfactory to Cardinal and the Exchange Agent, in their judgment, if any of such certificates are lost, stolen or destroyed). No interest will be paid on any such fractional share checks or dividends to which the holder of such shares shall be entitled to receive upon such delivery.
2.3 Fractional Shares. Cardinal shall not issue fractional shares. Cardinal will pay the value of such fractional shares in cash on the basis of the Fair Market Value per share of Cardinal Common Stock.
2.4 Dividends. No dividend or other distribution payable to the holders of record of Cardinal Common Stock at or as of any time after the Effective Date shall be paid to the holder of any certificate representing shares of Wilson/Bennett Stock issued and outstanding at the Effective Date until such holder physically surrenders such certificate for exchange as provided in Section 2.2 of this Agreement, promptly after which time all such dividends or distributions shall be paid (without interest).
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Representation and Warranties
3.1 Representations and Warranties of Wilson/Bennett. Each Shareholder and Wilson/Bennett represents and warrants to Cardinal as follows:
(a) Organization and Standing . (1) Wilson/Bennett is a corporation, duly organized, validly existing and in good standing under Virginia law and is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified. Wilson/Bennett has the corporate power and authority necessary to carry on its business as it is now being conducted and to own all its material properties and assets. Wilson/Bennett has in effect all federal, state, local, and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted.
(2) All of the shares of capital stock of Wilson/Bennett are fully paid and nonassessable.
(b) Authority. (1) The execution and delivery of this Agreement and the Plan and the consummation of the Share Exchange have been duly and validly authorized by all necessary corporate action on the part of Wilson/Bennett. The Agreement represents the legal, valid, and binding obligations of Wilson/Bennett, enforceable against Wilson/Bennett in accordance with its terms (except in all such cases as enforceability may be limited by applicable bankruptcy, insolvency, Share Exchange, moratorium or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).
(2) The execution, delivery and performance of this Agreement by Wilson/Bennett, and the consummation of the transactions contemplated hereby, do not and will not (i) constitute a breach or violation of, or a default under, or cause or allow the acceleration or creation of any charge, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance (a “Lien”) (with or without the giving of notice, passage of time or both) pursuant to any law, rule or regulation or any judgment, decree, order, governmental or non-governmental permit or license, or agreement, indenture or instrument of Wilson/Bennett, or to which Wilson/Bennett, or Wilson/Bennett’s properties is subject or bound, (ii) constitute a breach or violation of, or a default under, Wilson/Bennett’s charter or by-laws, or (iii) except as set forth in Exhibit B, require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental or non-governmental permit or license, or the consent or approval of any other party to any such agreement, indenture or instrument.
(c) Capital Structure. The authorized capital stock of Wilson/Bennett consists of ten shares of Class A Stock, no par value, and ten shares of Class B Stock, no par value, all of
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which, as of the date hereof, are issued, outstanding, fully paid and nonassessable, not subject to shareholder preemptive rights and were not issued in violation of any agreement to which Wilson/Bennett is a party or otherwise bound, or of any registration or qualification provisions of any federal or state securities laws. John W. Fisher is the record holder and beneficial owner of ten shares of Class A Stock and eight shares of Class B Stock. James B. Moloney is the owner of two shares of Class B Stock. There are no outstanding options, warrants or other rights to subscribe for or purchase from Wilson/Bennett any capital stock of Wilson/Bennett or securities convertible into or exchangeable for capital stock of Wilson/Bennett.
(d) Ownership of the Stock. Except set forth in Exhibit B-1, Wilson/Bennett does not beneficially own, directly or indirectly, any of the outstanding capital stock or other voting securities of any corporation or other organization.
(e) Financial Statements. Exhibit B-2 contains copies of the following financial statements of Bank (the “Wilson/Bennett Financial Statements”):
(i) Balance Sheets as of March 31, 2005 and December 31, 2004 and 2003;
(ii) Statements of Income for each of the quarters ended March 31, 2005 and 2005 and each of the three years ended December 31, 2004, 2003 and 2002;
(iii) Statements of Changes in Stockholders’ Equity for each of the quarters ended March 31, 2005 and 2004 and each of the three years ended December 31, 2004, 2003 and 2002; and
(iv) Statements of Cash Flows for each of the three years ended December 31, 2004, 2003 and 2002.
Such financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. Each of such statements of financial condition, together with the notes thereto, presents fairly as of its date the financial condition and assets and liabilities of Wilson/Bennett. Such statements of operations, statements of stockholders’ equity and statements of cash flows, together with the notes thereto present fairly the results of operations of Wilson/Bennett for the periods indicated.
(f) Absence of Undisclosed Liabilities. At March 31, 2005, Wilson/Bennett had no obligation or liability (contingent or otherwise) of any nature which was not reflected in the Wilson/Bennett Financial Statements, except for those which in the aggregate are immaterial or have been Previously Disclosed.
(g) Legal Proceedings; Compliance with Laws. (1) There are no actions, suits or proceedings instituted or pending or, to the best knowledge of Wilson/Bennett’s
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management, threatened against Wilson/Bennett, or against any property, asset, interest or right of Wilson/Bennett. Wilson/Bennett is not a party to any agreement or instrument or subject to any judgment, order, writ, injunction, decree or rule that might reasonably be expected to have a Material Adverse Effect on the condition (financial or otherwise), business or prospects of Wilson/Bennett.
(2) Wilson/Bennett has not received notice of any claims against Wilson/Bennett by any present or former client of Wilson/Bennett and there is no basis for any claim against Wilson/Bennett by any present or former client of Wilson/Bennett.
(3) The conduct of its business by Wilson/Bennett is not in violation, in any material respect, of any law, statute, ordinance, license, rule or regulation (including those of the Self-Regulatory Bodies).
(4) Wilson/Bennett has all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Regulatory Authorities and Self-Regulatory Bodies that are required in order to permit it to own and operate its business as presently conducted. All such permits, licenses, authorizations, orders and approvals are in full force and effect and no suspension or cancellation of any of them is threatened or reasonably likely. All such filings, applications and registrations are current. Wilson/Bennett is in good standing with all relevant Regulatory Authorities and is a member in good standing with all relevant Self-Regulatory Bodies.
(5) Wilson/Bennett has not received any notification or written communication (or, to its knowledge, any other communication) from any Regulatory Authority or Self-Regulatory Body (A) asserting that Wilson/Bennett is not in compliance with any of the statutes, rules, regulations, or ordinances which such Regulatory Authority or Self-Regulatory Body enforces, or has otherwise engaged in any unlawful business practice, (B) threatening to revoke any license, franchise, permit, governmental authorization, or other privilege, (C) requiring Wilson/Bennett (including any of Wilson/Bennett’s directors or controlling persons) to enter into a cease and desist order, agreement, or memorandum of understanding (or requiring the board of directors thereof to adopt any resolution or policy) or (D) restricting or disqualifying the activities of Wilson/Bennett.
(6) Wilson/Bennett is not aware of any pending or threatened investigation, review or disciplinary proceeding by any Regulatory Authority or Self-Regulatory Body against Wilson/Bennett or any officer, director or employee thereof.
(7) Neither Wilson/Bennett nor any officer, director or employee thereof, is a party or subject to any order, directive, decree, condition or similar arrangement or action (other than exemptive orders) relating to the business of Wilson/Bennett, with or by any federal, state, local or foreign regulatory authority or industry trade group.
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(8) Wilson/Bennett and each of its officers and employees who are required to be registered as an investment adviser, investment adviser representative or agent with the Securities and Exchange Commission (the “SEC”), the securities commission of any state or any Regulatory Authority or Self-Regulatory Body (the “Regulatory Authorities”), is duly registered as such and such registration is in full force and effect, and a list of all such registrations is disclosed in Exhibit C. All federal, state and foreign registration requirements have been complied with in all material respects and such registrations as currently filed, and all periodic reports required to be filed with respect thereto, are accurate and complete in all material respects.
(h) Investment Advisory Activities. (1) Disclosed in Exhibit D-1 is a listing of (i) all of the clients to which Wilson/Bennett provides investment management, investment advisory or sub-advisory services on the date hereof, and (ii) each contract or agreement, and all amendments thereto, in effect on the date hereof relating to Wilson/Bennett’s rendering of investment advisory or management services (including without limitation all sub-advisory services) to any client (together with any such contract or agreement entered into after the date hereof, the “Investment Contracts”). Each Investment Contract and any subsequent renewal has been duly authorized, executed and delivered by Wilson/Bennett and, to Wilson/Bennett’s best knowledge, each other party thereto and, to the extent applicable, has been adopted in compliance with any statute, order, ordinance, rule or regulation to which such Investment Contract is subject and is a valid and binding agreement of Wilson/Bennett and each other party thereto, enforceable in accordance with its terms (subject to bankruptcy, insolvency, moratorium, fraudulent transfer and similar laws affecting creditors’ rights generally and to general equity principles). Each of Wilson/Bennett and client party thereto is in compliance in all material respects with the terms of each Investment Contract to which it is a party, and is not currently in default under any of the terms of any such Investment Contract. Each such Investment Contract is in full force and effect. Except as disclosed in Exhibit D-4, none of the Investment Contracts, or any other arrangements or understandings relating to Wilson/Bennett’s rendering of investment advisory or management services (including without limitation all sub-advisory services), contains any undertaking by a client to cap fees or to reimburse any or all fees thereunder, and all such Investment Contracts or other arrangements or understandings provide for the payment of fees. Copies of each Investment Contract, including a current fee schedule, have been supplied to Cardinal. Except as Previously Disclosed, Wilson/Bennett is not an adviser or sub-adviser to any Investment Company.
(2) Except as disclosed in Exhibit D-2, Wilson/Bennett has not received any notice (written or otherwise) that any client has terminated or is planning to terminate its relationship with Wilson/Bennett or will reduce materially its use of the services of Wilson/Bennett.
(3) Wilson/Bennett has properly administered, in all respects material and which could reasonably be expected to be material to the business, operations or financial condition of Wilson/Bennett, all accounts for which it acts as investment advisor, in accordance with the terms of the governing documents and applicable law and regulation and common law. To the best
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knowledge of Wilson/Bennett, neither Wilson/Bennett nor any director, officer or employee of Wilson/Bennett has committed any breach with respect to any such account. The accountings for each such account are true and correct in all respects and accurately reflect the assets of such account in all respects.
(4) Listed in Exhibit D-3 is each client that is subject to ERISA. The accounts of each such client have been managed by Wilson/Bennett in compliance in all material respects with the applicable requirements of ERISA.
(5) No basis exists upon which Wilson/Bennett would have any material liability to any client.
(6) Wilson/Bennett has adopted a formal code of ethics and a written policy regarding insider trading, a copy of each of which has been provided or supplied to Cardinal. Such code and policy comply with Section 17(j) of the Investment Company Act of 1940 (as amended, the “Investment Company Act”), and Rule 17j-1 thereunder, if applicable, and Section 204A of the Investment Advisers Act of 1940 (as amended, the “Investment Advisers Act”), respectively. The policies of Wilson/Bennett with respect to avoiding conflicts of interest are as set forth in the most recent Form ADV thereof, as amended, a copy of which has been delivered or made available to Cardinal, and Wilson/Bennett’s “soft-dollar” policies and arrangements satisfy the requirements of Section 28(e) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and all other applicable laws and regulations. There have been no violations or allegations of violations of such policies.
(7) Except as disclosed in Exhibit E, neither Wilson/Bennett nor any other person “associated” (as defined under the Investment Advisers Act) with Wilson/Bennett, has for a period not less than five years prior to the date hereof been convicted of any crime or is or has been subject to any disqualification that would be a basis for denial, suspension or revocation of registration of an investment adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser for any Investment Company pursuant to Section 9(a) of the Investment Company Act or as an investment adviser representative under any applicable state or federal law, and there is no basis for, or proceeding or investigation that is reasonably likely to become the basis for, any such disqualification, denial, suspension or revocation.
(8) Wilson/Bennett is not required to be registered as a broker-dealer under any state or federal law.
(9) All “wrap-fee” programs of Wilson/Bennett are and have been conducted in full compliance with Rule 3a-4 under the Investment Advisors Act and all other applicable law, including all disclosure and delivery requirements applicable to such programs. All disclosure documents and Investment Contracts relating to the “wrap fee” programs for which the Wilson/Bennett serves as an adviser, sponsor or portfolio manager are set forth in Exhibit D-5,
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which identifies the program sponsors and underlying clients in respect of each “wrap fee” program sponsored by a third-party.
(10) The aggregate amount of Assets Under Management by Wilson/Bennett are accurately set forth in Exhibit D-6 hereto, together with a brief summary of the fee arrangements in effect with respect to each Investment Contract.
(i) Reports . Wilson/Bennett has timely filed (and, for the past five (5) years each person associated with Wilson/Bennett has timely filed) all reports, registrations, statements and other filings, together with any amendments required to be made with respect thereto, with (i) the SEC, (ii) any other applicable federal, state or foreign securities, banking, insurance, or other regulatory authority, and (iii) the National Association of Securities Dealers, Inc. (“NASD”), or any other self-regulatory body or industry trade group (the “Self-Regulatory Bodies”)(all such reports and statements being collectively referred to herein as the “Company Reports”), including without limitation all reports, registrations, statements and filings required under the Investment Company Act, the Investment Advisers Act, or any applicable state securities. To the knowledge of Wilson/Bennett and the Shareholders, as of their respective dates, the Company Reports complied in all material respects with the statutes, rules, regulations and orders enforced or promulgated by the regulatory authority or Self-Regulatory Body with which they were filed and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(j) Regulatory Approvals. To the knowledge of Wilson/Bennett there is no reason why the regulatory approvals referred to in Section 6.1(a) should not be obtained without the imposition of any condition of the type referred to in Section 6.1(a).
(k) Labor Relations. Wilson/Bennett is not 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 it the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel it to bargain with any labor organization as to wages and conditions of employment, nor is there any strike or other labor dispute involving it pending or, to the best of its knowledge, threatened, nor is it aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in any other organization activity.
(l) Tax Matters. Wilson/Bennett has filed all federal, state and local tax returns and reports required to be filed, and has paid all taxes shown by such returns to be due and payable. Except as Previously Disclosed, no tax return or report of Wilson/Bennett is under examination by any taxing authority or the subject of any administrative or judicial proceeding, and no unpaid tax deficiency has been asserted against Wilson/Bennett by any taxing authority.
Wilson/Bennett (and any corporate predecessor of Wilson/Bennett) has been a validly electing S corporation within the meaning of Code §§1361 and 1362 of the Internal Revenue
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Code at all times during its existence and Wilson/Bennett will be an S corporation up to and including the Effective Date.
Wilson/Bennett shall not be liable for any tax under Code §1374 in connection with the deemed sale of Wilson/Bennett’s assets (including the assets of any qualified subchapter S subsidiary) caused by the §338(h)(10) election described in Section 4.11(b). Neither Wilson/Bennett nor any qualified subchapter S subsidiary of Wilson/Bennett has, in the past 10 years, (A) acquired assets from another corporation in a transaction in which Wilson/Bennett’s tax basis for the acquired assets was determined, in whole or in part, by reference to the tax basis of the acquired assets (or any other property) in the hands of the transferor or (B) acquired the stock of any corporation that is a qualified subchapter S subsidiary.
(m) (1) Property . Except as Previously Disclosed or reserved against in the Wilson/Bennett Balance Sheet or Wilson/Bennett Financial Statements, Wilson/Bennett has good and marketable title free and clear of all material liens, encumbrances, charges, defaults or equities of whatever character to all of the material properties and assets, tangible or intangible, reflected in the Wilson/Bennett Financial Statements as being owned by Wilson/Bennett as of the dates thereof. To the best knowledge of Wilson/Bennett, all buildings, and all fixtures, equipment, and other property and assets which are material to its business on a consolidated basis, held under leases or subleases by Wilson/Bennett are held under valid instruments enforceable in accordance with their respective terms (except as 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 the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). The buildings, structures, and appurtenances owned, leased, or occupied by Wilson/Bennett are in good operating condition and in a state of good maintenance and repair, and to the best knowledge of Wilson/Bennett (i) comply with applicable zoning and other municipal laws and regulations, and (ii) there are no latent defects therein.
(2) The Company has the right to use within the geographic territory in which it conducts its business (the “Territory”), and after consummation of the transactions contemplated hereby will have the right to use in the Territory, free and clear of any claims of others, all patents, patent applications, trademarks, service marks (whether registered or unregistered), trade names, copyrights and other proprietary rights necessary to own and operate its properties and to carry on its business as currently conducted.
(3) The Company owns or licenses all computer software developed or currently used by it which is material to the conduct of its business and has the right to use such software without infringing upon the intellectual property rights (including trade secrets rights) of a third party.
(n) Employee Benefit Plans. (1) Wilson/Bennett will deliver for Cardinal’s review, as soon as practicable, true and complete copies of all material pension, retirement, profit-sharing, deferred compensation, stock option, bonus, vacation or other material incentive plans or
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agreements, all material medical, dental or other health plans, all life insurance plans and all other material employee benefit plans or fringe benefit plans, including, without limitation, all “employee benefit plans” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), currently adopted, maintained, sponsored in whole or in part, or contributed to by Wilson/Bennett for the benefit of employees, retirees or other beneficiaries eligible to participate (collectively, the “Wilson/Bennett Benefit Plans”). Any of the Wilson/Bennett Benefit Plans which is an “employee pension benefit plan,” as that term is defined in Section (32) of ERISA, is referred to herein as a “Wilson/Bennett ERISA Plan.” No Wilson/Bennett Benefit Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
(2) Except as Previously Disclosed, all Wilson/Bennett Benefit Plans are in compliance with the applicable terms of ERISA and the Internal Revenue Code of 1986, as amended (the “IRC”) and any other applicable laws, rules and regulations, the breach or violation of which could result in a material liability to Wilson/Bennett on a consolidated basis.
(3) No Wilson/Bennett ERISA Plan is a defined benefit pension plan.
(o) Investment Securities. Except as Previously Disclosed, none of the investment securities reflected in the Wilson/Bennett Financial Statements is (i) subject to any restriction, contractual, statutory, or otherwise, which would impair materially the ability of the holder of such investment to dispose freely of any such investment at any time or (ii) of a type or in an amount that Cardinal would be prohibited from holding under the Bank Holding Company Act of 1956 (as amended, the “Bank Holding Company Act”) or regulations of the Federal Reserve thereunder.
(p) Material Contracts . Except as listed in Exhibit D-1 or as disclosed in Exhibit F, neither Wilson/Bennett nor any of its assets, businesses or operations, is a party to, or is bound or subject to, or receives benefits under, any material contract, lease or agreement ( i . e ., a contract, lease or agreement providing for annual payments in excess of $25,000). Copies of such contracts or agreements have been supplied or made available to Cardinal. Wilson/Bennett is not in default under any such material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business or operations may be bound or subject to, or under which it or any of its assets, business or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default by Wilson/Bennett. Wilson/Bennett is not subject to or bound by any contract containing covenants which limit the ability of Wilson/Bennett to compete in any line of business or with any person or which involves any restriction of geographical area in which, or method by which, Wilson/Bennett may carry on its business (other than as may be required by law or any applicable regulatory authority). Except as disclosed in Exhibit F, there are no contracts between any affiliate of Wilson/Bennett, on the one hand, and Wilson/Bennett on the other hand.
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(q) Insurance. Wilson/Bennett is insured with reputable insurers against such risks and in such amounts as the management of Wilson/Bennett reasonably has determined to be prudent in accordance with industry practices. Disclosed in Exhibit G is a complete list, as of the date hereof, of the material insurance policies related to the business currently conducted by Wilson/Bennett (copies of which have been supplied to Cardinal). Wilson/Bennett has not made any claim under any insurance policy and is not aware of any event or condition that is reasonably likely to give rise to any such claim. Wilson/Bennett is not in default with respect to any provision contained in any such policy or binder and has not failed to give any notice or present any claim under any such policy or binder in due and timely fashion. Wilson/Bennett has not received notice of cancellation or non-renewal of any such policy or binder. Wilson/Bennett has no knowledge of any inaccuracy in any application for such policies or binders, any failure to pay premiums when due or any similar state of facts or the occurrence of any event that is reasonably likely to form the basis for any material claim against it not fully covered (except to the extent of any applicable deductible) by the policies or binders referred to above. Wilson/Bennett has not received notice from any of its insurance carriers that any insurance premiums will be increased materially in the future or that any such insurance coverage will not be available in the future on substantially the same terms as now in effect.
(r) Absence of Material Changes and Events. Since December 31, 2004, there has not been any material adverse change in the condition (financial or otherwise), aggregate assets or liabilities, assets under management, cash flow, earnings or business of Wilson/Bennett, and except for entering into this Agreement, Wilson/Bennett has conducted its business only in the ordinary course consistent with past practice.
(s) Brokers and Finders. Neither Wilson/Bennett nor any of its officers, directors or employees, has employed any broker, finder or financial advisor or incurred any liability for any fees or commissions in connection with the transactions contemplated herein.
(t) Environmental Matters. (1) There are no legal, administrative, arbitral or other claims, causes of action or governmental investigations of any nature, seeking to impose, or that could result in the imposition, on Wilson/Bennett of any liability arising under any Environmental Laws pending or, to the best knowledge of Wilson/Bennett, threatened against (A) Wilson/Bennett, (B) any person or entity whose liability for any Environmental Claim Wilson/Bennett has or may have retained or assumed either contractually or by operation of law, or (C) any real or personal property which Wilson/Bennett owns or leases, or has been or is judged to have managed, supervised or participated in the management of, which liability might have a Material Adverse Effect on the business, financial condition or results of operations of Wilson/Bennett. Wilson/Bennett is not subject to any agreement, order, judgment, decree or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any such liability.
(2) To the best knowledge of Wilson/Bennett, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Materials of Environmental Concern, that could
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reasonably form the basis of any Environmental Claim or other claim or action or governmental investigation that could result in the imposition of any liability arising under any Environmental Laws currently in effect or adopted but not yet effective against Wilson/Bennett or against any person or entity whose liability for any Environmental Claim Wilson/Bennett or any Wilson/Bennett Subsidiary has or may have retained or assumed either contractually or by operation of law.
(3) For the purpose of this Agreement, the following terms shall have the following meanings:
(i) “Communication” means a communication which is of a substantive nature and which is made (A) in writing to Wilson/Bennett or any Wilson/Bennett Subsidiary on the one hand or to Cardinal or any Cardinal Subsidiary on the other hand, or (B) orally to a senior officer of Wilson/Bennett or any Wilson/Bennett Subsidiary or of Cardinal or any Cardinal Subsidiary, whether from a governmental authority or a third party.
(ii) “Environmental Claim” means any Communication from any governmental authority or third party alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern.
(iii) “Environmental Laws” means all applicable federal, state and local laws and regulations, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, that relate to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata). This definition includes, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.
(iv) “Materials of Environmental Concern” means pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products and any other materials regulated under Environmental Laws.
(u) Untrue Statements and Omissions . No representation or warranty contained in Section 3.1 of this Agreement or information Previously Disclosed contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(v) Books and Records . Wilson/Bennett has at all times during the previous five (5) years maintained books and records which accurately reflect all its material transactions and account information in reasonable detail, and has at all times maintained accounting controls, policies and procedures reasonably designed to provide that (A) such transactions are executed in
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accordance with its management’s general or specific authorization, as applicable, (B) such transactions are recorded in a manner which permits the preparation of financial statements in accordance with generally accepted accounting principles and applicable regulatory accounting requirements, and (C) the documentation pertaining thereto is retained, protected and duplicated in accordance with applicable law.
3.2 Representations and Warranties of Cardinal. Cardinal represents and warrants to Wilson/Bennett as follows:
(a) Organization, Standing and Power. Cardinal is a corporation duly organized, validly existing and in good standing under the laws of Virginia. It has all requisite corporate power and authority to carry on its business as now being conducted and to own and operate its assets, properties and business, and Cardinal has the corporate power and authority to execute and deliver this Agreement and perform the respective terms of this Agreement and of the Plan. Cardinal is duly registered as a bank holding company under the Bank Holding Company Act.
(b) Authority. (1) The execution and delivery of this Agreement and the Plan and the consummation of the Share Exchange have been duly and validly authorized by all necessary corporate action on the part of Cardinal. The Agreement represents the legal, valid, and binding obligation of Cardinal, enforceable against Cardinal in accordance with its terms (except in all such cases as enforceability may be limited by applicable bankruptcy, insolvency, Share Exchange, moratorium or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).
(2) Neither the execution and delivery of the Agreement, the consummation of the transactions contemplated therein, nor the compliance by Cardinal with any of the provisions thereof will (i) conflict with or result in a breach of any provision of the Articles of Incorporation or Bylaws of Cardinal, (ii) except as Previously Disclosed, constitute or result in the breach of any term, condition or provision of, or constitute default under, or give rise to any right of termination, cancellation or acceleration with respect to, or result in the creation of any lien, charge or encumbrance upon, any property or assets of the Cardinal Companies pursuant to (A) any note, bond, mortgage, indenture, or (B) any material license, agreement, lease or other instrument or obligation, to which any of the Cardinal Companies is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to the receipt of the requisite approvals referred to in Section 4.6, violate any order, writ, injunction, decree, statute, rule or regulation applicable to any of the Cardinal Companies or any of their properties or assets.
(c) Capital Structure. The authorized capital stock of Cardinal consists of: 10,000,000 shares of preferred stock, par value $1.00 per share, none of which is outstanding and 50,000,000 shares of Cardinal Common Stock, of which 18,530,794 shares are issued and outstanding, fully paid and nonassessable, not subject to shareholder preemptive rights, and not
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issued in violation of any agreement to which Cardinal is a party or otherwise bound, or of any registration or qualification provisions of any federal or state securities laws. The shares of Cardinal Common Stock to be issued upon consummation of the Share Exchange will have been duly authorized and, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable and subject to no preemptive rights.
(d) Financial Statements. Cardinal has previously furnished to Wilson/Bennett true and complete copies of its audited consolidated balance sheets and related consolidated statements of income, statements of cash flows, and statements of stockholders equity for the three year period ended December 31, 2004 (together with the notes thereto, the “Cardinal Financial Statement”). The Cardinal Financial Statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis during the periods presented, and present fairly the financial position of Cardinal as of the respective dates thereof and the results of its operations for the three year period then ended.
(e) Regulatory Approvals. Cardinal knows of no reason why the regulatory approvals referred to in Section 6.1(a) should not be obtained without the imposition of any condition of the type referred to in Section 6.1(a).
(f) Absence of Material Changes and Events. Since December 31, 2004, there has not been any material adverse change in the condition (financial or otherwise), aggregate assets or liabilities, cash flow, earnings or business or Cardinal, and Cardinal has conducted its business only in the ordinary course consistent with past practice.
(g) Absence of Claims. Cardinal has no knowledge of any claims, liabilities or contingent liabilities that are not reflected in the Cardinal Financial Statements or incurred after December 31, 2004 in the ordinary course of business that would have a Material Adverse Effect on Cardinal.
Conduct Prior to the Effective Date
4.1 Access to Records; Current Information. (a) Prior to the Effective Date, Cardinal, on the one hand, and Wilson/Bennett on the other, agree to give to the other party reasonable access to all the premises and books and records (including tax returns filed and those in preparation) of it and its subsidiaries and to cause its officers to furnish the other with such financial and operating data and other information with respect to the business and properties as the other shall from time to time request for the purposes of verifying the warranties and representations set forth herein; provided, however, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the respective business of the other.
(b) During the period from the date of this Agreement to the Effective Date, each of Wilson/Bennett and Cardinal shall, and shall cause its representatives to, promptly notify the
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other of (1) any material change in its business or operations, (2) any material complaints, investigations or hearings (or communications indicating that the same may be contemplated) of any Regulatory Authority relating to it, (3) any denial of any application filed by it with any Regulatory Authority with respect to this Agreement, (4) the institution or the threat of material litigation involving or relating to it, or (5) any event or condition that might be reasonably expected to cause any of its representations or warranties set forth herein not to be true and correct as of the Effective Date (and will use its best efforts to prevent or promptly remedy the same) or prevent it from fulfilling its obligations hereunder; and in each case shall keep the other informed with respect thereto.
4.2 Confidentiality. Between the date of this Agreement and the Effective Date, Cardinal and Wilson/Bennett each will maintain in confidence, and cause its directors, officers, employees, agents and advisors to maintain in confidence, and not use to the detriment of the other party, any written, oral or other information obtained in confidence from the other party or a third party in connection with this Agreement or the transactions contemplated hereby unless such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, unless use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the transactions contemplated hereby or unless the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings. If the Share Exchange is not consummated, each party will return or destroy as much of such written information as may reasonably be requested.
4.3. Forbearances of Wilson/Bennett . From the date hereof until the Effective Date, except as expressly contemplated by this Agreement, without the prior written consent of Cardinal, Wilson/Bennett will not:
(a) Ordinary Course . Conduct the business of Wilson/Bennett other than in the ordinary and usual course or fail to use reasonable efforts to preserve intact its business organization and assets and maintain its rights, franchises and existing relations with clients, customers, suppliers, employees and business associates, engage in any new activities or lines of business, or take any action reasonably likely to have a Material Adverse Effect upon Wilson/Bennett’s ability to perform any of its material obligations under this Agreement. Wilson/Bennett shall not engage in any business or activity that is impermissible for a financial holding company under the Bank Holding Company Act or the rules and regulations of the Board of Governors of the Federal Reserve System. Upon request by Wilson/Bennett, Cardinal will promptly advise Wilson/Bennett whether any particular business, activity or investment is impermissible for a financial holding company.
(b) Capital Stock . Issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of capital stock of Wilson/Bennett or any rights to acquire capital stock of Wilson/Bennett, or enter into any agreement with respect to the foregoing, or permit any additional shares of capital stock of Wilson/Bennett to become subject
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to new grants of employee options, other rights to acquire capital stock of Wilson/Bennett or similar stock-based employee rights.
(c) Stock Splits, Etc . Directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc . Enter into, amend, modify or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer or employee of Wilson/Bennett, or grant any salary, wage or other compensation increase or increase any employee benefit (including incentive or bonus payments), except (1) for normal individual increases in compensation to employees in the ordinary course of business consistent with past practice, or (2) for employment arrangements for newly hired employees in the ordinary course of business consistent with past practice.
(e) Benefit Plans . Enter into, establish, adopt or amend any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee of Wilson/Bennett.
(f) Dispositions . Except for the sale of securities or other investments or assets in the ordinary course of business consistent with past practice, sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its material assets, business or properties.
(g) Acquisitions . Except for the purchase of securities or other investments or assets in the ordinary course of business consistent with past practice, acquire any material assets, business, securities or properties of any other entity.
(h) Governing Documents . Amend Wilson/Bennett’s Articles of Incorporation or By-Laws.
(i) Contracts . Except in the ordinary course of business, enter into or terminate any material contract or amend or modify in any material respect any of its existing material contracts.
(j) Claims . Settle any claim, action or proceeding, except for any claim, action or proceeding involving solely money damages in an amount, individually and in the aggregate for all such settlements, not more than $25,000 and which is not reasonably likely to establish an adverse precedent or basis for subsequent settlements.
(k) Adverse Actions . Knowingly take any action that is intended or is reasonably likely to (1) result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Date, (2) result in any of the conditions to the Share Exchange set forth in Article 6 not
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being materially satisfied or (3) result in a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or regulation.
(l) Indebtedness . Incur any indebtedness for borrowed money or settle, modify or forgive any indebtedness for borrowed money owed to Wilson/Bennett.
(m) Commitments . Agree, commit to or enter into any agreement to take any of the actions prohibited by Sections 4.3(a) through (l).
(n) Payables . Fail to pay all bills as they become due in the ordinary course of business.
4.4 Forbearances of Cardinal . From the date hereof until the Effective Date, except as expressly contemplated by this Agreement, without the prior written consent of Wilson/Bennett, which consent shall not be unreasonably withheld, Cardinal will not knowingly take any action that is intended or is reasonably likely to (1) result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Date, provided that Cardinal may proceed with and consummate its pending public offering of Cardinal Common Stock, (2) result in any of the conditions to the Share Exchange set forth in Article 6 not being materially satisfied or (3) result in a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or regulation.
4.5 No Solicitation. Unless and until this Agreement shall have been terminated pursuant to its terms, neither Wilson/Bennett nor any of its officers, directors, representatives or agents shall, directly or indirectly, (i) encourage, solicit or initiate discussions or negotiations with any person other than Cardinal concerning any Share Exchange, share exchange, sale of substantial assets, tender offer, sale of shares of capital stock or similar transaction involving Wilson/Bennett, (ii) enter into any agreement with any third party providing for a business combination transaction, equity investment or sale of a significant amount of assets, or (iii) furnish any information to any other person relating to or in support of such transaction.
4.6. Regulatory Applications and Approvals . Each of the parties hereto, at its own expense, shall use its reasonable best efforts (A) promptly to prepare and submit any applications that may be required to the appropriate Regulatory Authorities for approval of the Share Exchange, and (B) promptly to make all other appropriate filings to secure all other approvals, consents and rulings which are necessary for the consummation of the Share Exchange. Each of Wilson/Bennett and Cardinal agrees to cooperate with the other and, subject to the terms and conditions set forth in this Agreement, use its reasonable best efforts to prepare and file all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Regulatory Authorities necessary or advisable to consummate the transactions contemplated by this Agreement. Each of Wilson/Bennett and Cardinal shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable laws relating to the exchange of information, with respect to all written
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information submitted to any third party or any regulatory authorities in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party hereto agrees that it will consult with the other party hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and regulatory authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other party apprised of the status of material matters relating to completion of the transactions contemplated hereby.
4.7. Client Consents . As soon as reasonably practicable, but in no event later than ten (10) days, after the date of this Agreement, Wilson/Bennett shall notify its clients in writing of the transactions contemplated by this Agreement. Such notice shall be prepared by Wilson/Bennett and approved by Cardinal before it is sent. With such notice, Wilson/Bennett shall, in compliance with the Investment Advisers Act, request Consent of each such client to the Share Exchange and use its reasonable best efforts to obtain such Consent. In the case of Investment Contracts which prohibit assignment or state by their terms that they terminate upon assignment, Wilson/Bennett shall use its reasonable best efforts to enter into new Investment Contracts or amend such Investment Contracts to delete such prohibition or provide that they shall not terminate, in each case effective upon the Effective Date. Cardinal shall have the right to approve the form of any such new Investment Contract.
Thirty (30) days after the notice described above, Wilson/Bennett shall, in writing, contact each client who has not returned a Consent to the Share Exchange and again request that the client give a Consent to the Share Exchange.
Within five (5) business days following the Effective Date Wilson/Bennett shall send a notice to each client for whom it is performing services and who has not returned a Consent to the Share Exchange. Such notice shall advise each such client that the Share Exchange has become effective and state that Wilson/Bennett will continue to provide the same services on the same terms as before the Effective Date. Sixty (60) days after the Effective Date, Wilson/Bennett shall send a notice to each client for whom it is performing services and who has not returned a Consent to the Share Exchange. Such notice shall provide, in substance, that the client’s consent to the Share Exchange will be implied from the client’s continued acceptance of Wilson/Bennett’s services.
All notices sent pursuant to this Section 4.8 shall be by certified mail, return receipt requested and Wilson/Bennett shall retain all returned receipts.
4.8 Share Exchange Consummation. Subject to the terms and conditions of this Agreement, each party shall use its best efforts in good faith to take, or cause to be taken, all actions, and to do or cause to be done all things necessary, proper or desirable, or advisable under applicable laws, as promptly as practicable so as to permit consummation of the Share Exchange at the earliest possible date, consistent with Section 1.2 herein, and to otherwise enable consummation of the transactions contemplated hereby and shall cooperate fully with the other party hereto to that
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end, and each of Wilson/Bennett and Cardinal shall use, and shall cause each of their respective subsidiaries to use, its best efforts to obtain all consents (governmental or other) necessary or desirable for the consummation of the transactions contemplated by this Agreement.
4.9 Bank Accounts . Wilson/Bennett intends to maintain its principal bank accounts with Cardinal Bank, a wholly-owned subsidiary of Cardinal, but shall be permitted to maintain accounts at other banks.
4.10 Modification of Transaction/Taxes . (a) Structure. At the request of Cardinal, Wilson/Bennett agrees to take such actions as may be reasonably necessary to modify the structure of, or to substitute parties to (as long as such substitute is Cardinal or a wholly-owned subsidiary of Cardinal) the transactions contemplated hereby, provided that such modifications do not change the Share Exchange Consideration or abrogate the covenants and other agreements contained in this Agreement.
(b) Section 338(h)(10) Election . At Cardinal’s request, Shareholders shall join with Cardinal in making timely, effective and irrevocable elections under Section 338(h)(10) of the Code and any corresponding elections under state, local or foreign tax law that have substantially the same effect as an election under Section 338(h)(10) of the Code (collectively, a “Section 338(h)(10) Election”) with respect to Wilson/Bennett. Cardinal, Wilson/Bennett and each Shareholder agree that the consideration given by Cardinal under Section 2.1 will be allocated to the assets of Wilson/Bennett by Cardinal in a manner consistent with Internal Revenue Code §§338 and 1060 and the regulations thereunder. Cardinal, Wilson/Bennett and each Shareholder shall file all tax returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation.
(c) Tax Periods Ending On or Before Effective Date . Each shareholder shall, jointly and severally, indemnify Wilson/Bennett and/or Cardinal as applicable and hold them harmless from and against all and any taxes (or the non-payment thereof) of Wilson/Bennett for all taxable periods ending on or before the Effective Date.
(d) Shareholders’ Tax . Shareholders shall include any income gain, loss, deduction, or other tax item resulting from the §338(h)(10) election on their tax returns to the extent required by applicable law. Shareholders shall also pay any tax imposed on Wilson/Bennett attributable to the making of the §338(h)(10) Election, including (i) any tax imposed under Code §1374, (ii) any tax imposed under Treasury Regulation §1.338(h)(10-1(e)(5, or (iii) any state, local or foreign tax imposed on Wilson/Bennett’s gain.
4.11 Fiscal Year . Wilson/Bennett will adopt a fiscal year ending December 31.
4.12 Demand Registration. The Shareholder and Cardinal shall have entered an agreement in the form attached as Exhibit H under which the Shareholder shall have certain rights to require Cardinal to Register shares of the Cardinal Common Stock issued to him in the Share Exchange.
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4.13. Exhibits. Wilson/Bennett shall have updated all Exhibits, except Exhibits A and H as of the Share Exchange Closing date.
Additional Agreements
5.1 Benefit Plans. Upon consummation of the Share Exchange, as soon as administratively practicable and subject to Cardinal’s best efforts, employees of Wilson/Bennett shall be entitled to participate in Cardinal pension, benefit, health and similar plans on the same terms and conditions as employees of Cardinal and its subsidiaries, without waiting periods and giving effect to years of service with Wilson/Bennett as if such service were with Cardinal; provided, however, that no Wilson/Bennett employee shall receive credit for service with Wilson/Bennett for benefit accrual purposes under any Cardinal defined benefit pension plan. Cardinal also shall cause Wilson/Bennett to honor in accordance with their terms as in effect on the date hereof (or as amended after the date hereof with the prior written consent of Cardinal), all employment, severance, consulting and other compensation contracts and agreements Previously Disclosed and executed in writing by Wilson/Bennett on the one hand and any individual current or former director, officer or employee thereof on the other hand, copies of which have previously been delivered by Wilson/Bennett to Cardinal.
5.2 Restricted Stock . The offer and sale of Cardinal Common Stock contemplated by this Agreement is intended to be exempt from the registration requirements of the Securities Act of 1933 and applicable state law. Cardinal will not file any registration statement with the Securities and Exchange Commission or any state. However, the parties will enter into the registration rights agreement attached hereto as Exhibit H, which obligates Cardinal to file a registration statement in certain cases. Transfer of the shares of Cardinal Common Stock issued as hereunder will be restricted to the extent necessary to comply with the Securities Act of 1933 and any applicable state laws. Each share certificate for shares of Cardinal Common Stock issued pursuant to this Agreement shall bear the following legend:
The shares of stock represented by this Certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and no transfer, sale, assignment, pledge, hypothecation or other disposition of the shares represented by this Certificate may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable state securit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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