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Merger Agreement |
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2002 |
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<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>3
<FILENAME>exhibit2-1.txt
<TEXT>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT"), dated as of the first day of
May, 2002, is by and between:
CAPITAL BANK CORPORATION, a North Carolina 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
financial holding company (the "BUYER"); and
HIGH STREET CORPORATION, a North Carolina corporation and 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. It is
intended that the Merger qualify as a tax-free reorganization under Section
368 of the Internal Revenue Code.
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:
"ACQUISITION PROPOSAL" has the meaning given to it in Section 6.1(c).
"ACQUISITION TRANSACTION" means any merger, share exchange, stock sale,
recapitalization, consolidation or other business combination involving the
Company or any of its Subsidiaries or divisions of any of the foregoing and
an unaffiliated third party, or any acquisition in any manner, directly or
indirectly, of a more than a thirty percent (30%) equity interest in, or more
than a thirty percent (30%) portion of the consolidated assets of, the
Company and its Subsidiaries, other than pursuant to the transactions
contemplated by this Agreement.
"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. Without limiting the foregoing, as used with respect to the
Company, the term "AFFILIATES" includes its Subsidiaries.
"AGREEMENT" means this Merger Agreement.
1
<PAGE>
"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 average of the closing prices for the
Buyer's Stock on the Nasdaq National Market System (or, if the Buyer's Stock
is not then approved for trading on the Nasdaq National Market System, then
on such other securities market on which Buyer's Stock is then principally
traded) for the most recent twenty (20) trading days ending on the third day
prior to the date of the Company Shareholders Meeting. For this purpose, a
"trading day" is a day on which securities are generally traded on such
market, whether or not the Buyer's Stock is traded on such day, and the
closing price for the Buyer's Stock on a trading day when it is not traded
shall be deemed to be the closing price on the most recent trading day on
which the Buyer's Stock was traded. The closing prices used for this
determination shall be the closing prices as reported by such market or, if
such reports are not available, as reported by another authoritative source
identified by the Buyer and reasonably acceptable to the Company.
"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, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, 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 other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors,
or other beneficiaries are eligible to participate.
"BUSINESS DAY" means any day excluding (a) Saturday, (b) Sunday and (c)
any day that shall be 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 FAIRNESS OPINION" has the meaning given to it in Section 5.14.
"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, 2001, 2000 and 1999
and consolidated audited balance sheets as of December 31, 2001, 2000 and
1999, as well as the interim unaudited consolidated statements of income and
stockholders' equity and cash flows for each of the completed fiscal quarters
since December 31, 2001 and the consolidated interim balance sheet as of each
such quarter included in any Forms 10-Q filed by the Buyer with the SEC.
"BUYER SEC REPORTS" has the meaning given to it in Section 5.4.
"BUYER'S DISCLOSURE SCHEDULE" has the meaning given to it in the
preamble to ARTICLE V.
2
<PAGE>
"BUYER SHAREHOLDERS MEETING" has the meaning given to it in Section
6.2(e).
"BUYER'S STOCK" means the common stock of Capital Bank Corporation no
par value.
"CAUSE" means: (i) any act of gross negligence, 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; (ii) an employee's willful failure to comply with the employee
policies or reasonable directions of the management of the Buyer or one of
its Subsidiaries; or (iii) an employee's material breach of any agreement
between such employee and Buyer or its Subsidiaries.
"CLAIM" has the meaning given to it in Section 6.2(d).
"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 High Street Banking Company, a North Carolina bank
and a wholly-owned Subsidiary of Company.
"COMPANY CONTRACTS" has the meaning given to it in Section 4.14.
"COMPANY DIRECTOR STOCK PLAN" has the meaning given to it in Section
6.2(b)(iii).
"COMPANY FAIRNESS OPINION" has the meaning given to it in Section 4.25.
"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 December 31, 2001,
2000 and 1999 and consolidated audited balance sheets as of December 31,
2001, 2000 and 1999, as well as the interim unaudited consolidated statements
of income and stockholders' equity and cash flows for each of the completed
fiscal quarters since December 31, 2001 and the consolidated interim balance
sheet as of each such quarter included in any Forms 10-QSB filed by the
Company with the SEC.
"COMPANY OPTIONS" has the meaning given to it in Section 2.6.
"COMPANY SEC REPORTS" has the meaning given to it in Section 4.4.
"COMPANY SHAREHOLDERS MEETING" has the meaning given to it in Section
6.1(d).
"COMPANY SHARES" has the meaning given to it in Section 2.2(a).
3
<PAGE>
"COMPANY'S DISCLOSURE SCHEDULE" has the meaning given to it in the
preamble to ARTICLE IV.
"CONFIDENTIAL INFORMATION" has the meaning given to it in Section 7.3.
"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.
"CONVERSION RATIO" has the meaning given to it in Section 2.3(b).
"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.
"DIRECTOR SHARES" has the meaning given to it in Section 6.5.
"DISCLOSABLE INFORMATION" has the meaning given to it in Section 7.3.
"DISSENTING SHARES" has the meaning given to it in Section 2.7.
"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.
"EFFECTIVE TIME" has the meaning given to it in Section 2.1(e).
"EMPLOYMENT AGREEMENTS" has the meaning given to it in Section 8.3(f).
"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.ss.ss.9601 et
seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C.ss.ss.1801
et seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.ss.6901 et
seq.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C.ss.ss.1251 et
seq.), the Clean Air Act (42 U.S.C.ss.ss.7401 et seq.), the Toxic Substances
Control Act (15 U.S.C.ss.ss.2601 et seq.), the Safe Drinking Water Act (42
U.S.C.ss.ss.300 et seq.) and the Occupational Safety and Health Act (29 U.S.C.
ss.ss.651 et seq.) ("OSHA"), as such laws and regulations have been or are in
4
<PAGE>
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.
"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.
"EXCHANGE AGENT" has the meaning given to it in Section 2.5(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, 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 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.
"INDEMNIFIED PARTIES" has the meaning given to it in Section 6.2(d).
"INDEMNIFIED LIABILITIES" has the meaning given to it in Section 6.2(d).
"INTELLECTUAL PROPERTY" means (a) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrights and all applications, registrations and renewals in connection
therewith, (d) all know-how, trade secrets, whether patentable or
unpatentable and whether or not reduced to practice (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production process and techniques, technical data, designs, drawings,
specifications, pricing and cost information and business and marketing plans
and proposals), (e) all computer software (including data and related
documentation) and (f) all other proprietary rights.
"JOINT PROXY STATEMENT" has the meaning given to it in Section 4.17.
"KNOWLEDGE OF THE BUYER" means the actual personal knowledge of any of
the directors and officers of the Buyer or the Buyer Bank or any of their
Subsidiaries.
5
<PAGE>
"KNOWLEDGE OF THE COMPANY" means the actual personal knowledge of any
of the directors and officers of the Company or the Company Bank or any of
their 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.
"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.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question.
"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 effects of the Merger (and the
6
<PAGE>
reasonable expenses incurred in connection therewith) and compliance with the
provisions of this Agreement on the operating performance of a Person.
"MERGER CONSIDERATION" has the meaning given to it in Section 2.3(a).
"MERGER" has the meaning given to it in the Background Statement hereof.
"NORTH CAROLINA COMMISSIONER OF BANKS" means the North Carolina
Commissioner of Banks, North Carolina Department of Commerce.
"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.
"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.
"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 North Carolina Commissioner of Banks, the FDIC, the National
Association of Securities Dealers and the SEC, and all other regulatory
agencies having jurisdiction over the parties hereto and their respective
Affiliates.
"RESTRICTED DIRECTOR" has the meaning given to it in Section 6.4.
"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.
"SEC" means the Securities and Exchange Commission.
"SECURITIES DOCUMENTS" means all forms, proxy statements, registration
statements, reports, schedules and other documents filed or required to be
filed by a Person or any of its Affiliates
7
<PAGE>
with any Regulatory Authority pursuant to the Securities Laws.
"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 MEETINGS" has the meaning given to it in Section 4.17.
"STOCK ADJUSTMENT" has the meaning given to it in Section 2.3(d).
"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
an Affiliate of the Company) with respect to an Acquisition Proposal on terms
which the Board of Directors of the Company determines in good faith, after
taking into account the advice of independent financial advisors and outside
legal counsel, to be superior to 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, 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.
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, 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").
8
<PAGE>
(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), 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 such Effective Time shall be the directors of the
Surviving Holding Company, and (ii) the officers of the Buyer at such
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 (including without limitation the
above-described Plan of Merger) and (ii) subject to shareholder approval, 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, 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" of the Merger.
(f) Filing of Articles of Merger. On the Closing Date, 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, as required by North
Carolina Law, 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 common stock (the "COMPANY SHARES"),
no par value per share, issued and outstanding immediately prior to the
Effective Time of the Merger, except for Company Shares held by the Buyer and
its Affiliates (other than shares held in a fiduciary capacity or as a result
of debts previously contracted) and Dissenting Shares, shall, by virtue of
the Merger and without any action on the part of the holders thereof, be
converted at such Effective Time into shares of the Buyer's Stock in
accordance with this ARTICLE II and each holder of certificates representing
any such Company Shares shall thereafter cease to have any rights with
respect to such shares, except as provided herein.
(b) 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
the Company Shares that were outstanding immediately prior to the Effective
Time of the Merger. If, after such Effective Time, certificates representing
Company Shares are presented to the Surviving Holding Company, they shall be
canceled, and exchanged and converted into the Merger Consideration as
provided for herein.
9
<PAGE>
2.3 MERGER CONSIDERATION.
(a) Subject to Sections 2.2, 2.4 and 2.5, at the Effective Time of
the Merger, each outstanding Company Share, except for Company Shares held by
the Buyer and its Affiliates (other than shares held in a fiduciary capacity
or as a result of debts previously contracted) and Dissenting Shares, shall
be converted into a fraction of a share of the Buyer's Stock (the "MERGER
CONSIDERATION") equal to the Conversion Ratio determined in accordance with
Section 2.3(b).
(b) The conversion ratio upon which Company Shares will be converted
into shares of the Buyer's Stock at the Effective Time of the Merger (the
"CONVERSION RATIO") shall be equal to .747 unless the Average Closing Price
of the Buyer's Stock is less than $12.50, in which case the Conversion Ratio
shall be equal to the lesser of (i) .830 and (ii) a fraction, the numerator
of which is $9.34 and the denominator of which is the Average Closing Price,
unless, in the event the Average Closing Price is less than $11.25, the
parties mutually agree in writing to a greater Conversion Ratio (which they
shall not be obligated to do).
(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
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 or Company changes the number of shares of
the Buyer's Stock or Company's Shares issued and outstanding prior to the
Effective Time of the Merger as a result of a stock split, stock dividend, or
similar recapitalization with respect to such 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 for which a record date is not established) shall be prior
to such Effective Time, the Merger Consideration shall each be equitably
adjusted to reflect such change.
2.4 CLOSING PAYMENT. At the Effective Time of the Merger or as soon
thereafter as is reasonably practicable, the holders of the Company Shares
shall surrender the certificates representing such shares to the Buyer and in
exchange therefor, the Buyer shall issue and deliver to each such holder
certificates representing the number of shares of the Buyer's Stock to which
such shareholder is entitled hereunder. The Buyer shall not be obligated to
deliver any of such shares of the Buyer's Stock to a holder until such holder
either surrenders the certificates representing such holder's Company Shares
or provides any affidavits and indemnity bonds required pursuant to Section
2.5(b).
2.5 EXCHANGE PROCEDURES.
(a) Prior to the Effective Time of the Merger, the Buyer shall engage
Registrar & Transfer Company, or another bank or trust company (which may be
an Affiliate of the Buyer), to act as exchange agent in the Merger (the
"EXCHANGE AGENT") and which Exchange Agent, and the agreement entered into by
the Buyer and such Exchange Agent, shall be reasonably satisfactory to the
Company, it being agreed that Registrar & Transfer Company shall be
satisfactory to the Company. Promptly after the Effective Time of the Merger,
the Exchange Agent shall mail to the shareholders of the Company of record at
the Effective Time 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 such Effective Time, each holder of Company Shares issued and
outstanding at such Effective Time (other than any of such shares held by the
Buyer or any Affiliate thereof, except shares held in a fiduciary
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capacity or as a result of debts previously contracted, and other than any
Dissenting Shares) shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the number of shares of the Buyer's Stock to which
such holder is entitled hereunder. The Buyer shall not be obligated to deliver
any of such stock until such holder either surrenders the certificates
representing such holder's Company Shares or provides any affidavits and
indemnity bonds required pursuant to Section 2.5(b). 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) In the event that any certificate representing Company Shares
shall have been lost, stolen, or destroyed, upon the making of an affidavit
of that fact by the Person claiming such certificate to be lost, stolen, or
destroyed and, if required by the Buyer, the posting by such Person of a bond
in such amount as the Buyer may reasonably direct as indemnity against any
claim that may be made against it with respect to such certificate, the
Exchange Agent shall issue in exchange for such lost, stolen, or destroyed
certificate the consideration deliverable in respect thereof pursuant to this
Agreement.
(c) To the extent permitted by applicable Law, former shareholders of
record of the Company shall be entitled to vote after the Effective Time of
the Merger 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 of the Merger, the declaration shall include dividends or
other distributions on all shares of the Buyer's Stock issuable pursuant to
this Agreement, but beginning at such Effective Time no dividend or other
distribution payable to the holders of record of the Buyer's Stock as of any
time subsequent to such Effective Time of the Merger 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 or provides any required affidavits and indemnity
bonds as provided in this Section 2.5. However, upon surrender of such
certificate(s) or provision of such affidavits and indemnity bonds, 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 COMPANY STOCK OPTIONS.
(a) At the Effective Time of the Merger, each option or other right
to purchase Company Shares pursuant to stock options ("COMPANY OPTIONS")
granted by the Company under its Benefit Plans that are outstanding at the
Effective Time of the Merger shall be converted into and become rights with
respect to the Buyer's Stock, and the Buyer shall assume each Company Option,
in accordance with the terms of the applicable Benefit Plan of the Company
and the stock option agreement by which such Company Option is evidenced,
except that from and after such Effective Time: (i) the Buyer and/or its
compensation committee shall be substituted for the Company and the
compensation committee of its board of directors (including if applicable,
the entire Board of Directors of the Company) administering such Benefit Plan
or Plans of the Company; (ii) the Company Options assumed by the Buyer may be
exercised solely for shares of the Buyer's Stock; (iii) the number of shares
of the Buyer's Stock subject to
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such converted Company Options shall be equal to the number of Company Shares
subject to such Company Options immediately prior to the Effective Time
multiplied by the Conversion Ratio, rounded to the next highest share; and (iv)
the per-share exercise price under each such converted Company Option shall be
adjusted by dividing the exercise price of the Company Option immediately prior
to the Effective Time by the Conversion Ratio, rounded down to the nearest cent.
(b) In addition, notwithstanding clauses (ii), (iii) and (iv) of
Section 2.6(a), each assumed Company Option that is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option, within the meaning of
Section 424(h) of the Internal Revenue Code.
(c) As soon as practicable after the Effective Time of the Merger,
the Buyer shall deliver to each holder of an assumed Company Option an
appropriate notice setting forth such participant's rights pursuant thereto,
and the grants pursuant to such options shall continue in effect on
substantially the same terms and conditions (subject to the adjustments
required by the above subsection (a) after giving effect to the Merger), and
the Buyer shall comply with the terms of the assumed Company Options to
ensure, to the extent required by, and subject to the provisions of, such
options, that the Company Options that qualified as incentive stock options
prior to the Effective Time of the Merger continue to qualify as incentive
stock options after such Effective Time. At or prior to the Effective Time of
the Merger, and at all times thereafter, the Buyer shall have reserved a
sufficient number of shares of the Buyer's Stock for issuance upon exercise
of the Company Options assumed by it in accordance with this Section 2.6. The
Buyer agrees to file as promptly as practicable, and in no event later than
60 days, after the Effective Time, a registration statement on Form S-8
covering the shares of the Buyer's Stock issuable pursuant to such options
and shall use its reasonable best efforts to maintain the effectiveness of
such registration statement (and maintain the current status of the
prospectus therein) for so long as such options remain outstanding.
(d) Following the Effective Time of the Merger, in the event of any
Stock Adjustment by the Buyer, or any consolidation or merger of the Buyer
with or into any other entity, or the sale or transfer of all or
substantially all of the Buyer's assets, the rights of the holders of
outstanding Company Options shall be appropriately adjusted so that such
holders will be in substantially the same position as if their options had
been exercised immediately before such corporate action or transaction.
2.7 DISSENTING SHARES. Notwithstanding any other provision of this
Agreement to the contrary, Company Shares that are outstanding immediately
prior to the Effective Time and that are held by shareholders who shall have
not voted in favor of the Merger or consented thereto in writing and who
properly shall have demanded appraisal for such shares in accordance with
North Carolina Law (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration.
Such shareholders instead shall be entitled to receive payment of the
appraised value of such shares held by them in accordance with the provisions
of North Carolina Law, except that all Dissenting Shares held by shareholders
who shall have failed to perfect or who effectively shall have withdrawn or
otherwise lost their rights to appraisal of such shares under North Carolina
Law shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
provided in Section 2.5 of the certificate or certificates that, immediately
prior to the Effective Time, evidenced such shares. The Company shall give
the Buyer (i) prompt notice of any written demands for
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appraisal of any shares of Company Shares, attempted withdrawals of such demands
for appraisal or any other instruments served pursuant to North Carolina Law and
received by the Company relating to shareholders' rights of appraisal, and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to demands under North Carolina Law consistent with the obligations of the
Company thereunder. The Company shall not, except with the prior written consent
of the Buyer, (x) make any payment with respect to such demand, (y) offer to
settle or settle any demand for appraisal or (z) waive any failure to timely
deliver a written demand for appraisal or timely take any other action to
perfect appraisal rights in accordance with North Carolina Law.
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").
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule dated the date
hereof and delivered by the Company to the Buyer (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.
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.
(b) Each of the Company and its Subsidiaries is either a bank or a
corporation, 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 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.
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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 regulatory and
shareholder approvals, 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).
(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 articles of
incorporation, charter, bylaws or any other similar governing document of the
Company or any of its Subsidiaries, or (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(b) 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 applicable banking Laws, 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
20,000,000 shares of common stock, no par value per share, of which 1,748,421
shares are issued and outstanding as of the date of this Agreement, and
except for such 1,748,421 shares of common stock, there are no shares of
capital stock or other equity securities of the Company outstanding. The
authorized capital stock of the Company Bank consists of 20,000,000 shares of
common stock, $5.00 par value per share, of which 1,748,421 shares are issued
and outstanding as of the date of this Agreement and are owned and held by
the Company, and except for such 1,748,421 shares of common stock, there are
no shares of capital stock or other equity securities of the Company Bank
outstanding. Section 4.3 of the Company's Disclosure Schedule lists all of
the Company's direct and indirect Subsidiaries other than the Company Bank as
of the date of this Agreement. The Company or one of its Subsidiaries owns
all of the issued and outstanding shares of capital stock of each such
Subsidiary.
(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 except to the extent otherwise required by
applicable banking Laws. 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 on Section 4.3 of the Company's
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Disclosure Schedule, 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 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, 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 filed and made available to the Buyer all forms,
reports, and documents required to be filed by the Company or any of its
Subsidiaries with the SEC or the FDIC pursuant to the Securities Exchange Act
of 1934 since December 31, 1999 (collectively, the "COMPANY SEC REPORTS").
The Company SEC Reports (i) at the time filed, 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 they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a Material fact or omit to
state a Material fact required to be stated in such Company SEC Reports or
necessary in order to make the statements in such Company SEC Reports, in
light of the circumstances under which they were made, not misleading. None
of the Company's Subsidiaries is required to file any forms, reports, or
other documents with the SEC pursuant to Section 13 of the Securities
Exchange Act of 1934.
(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 of the Merger, 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 Form 10-QSB of the SEC), 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
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