UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
-
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- ------
COMMISSION FILE NUMBER 0-28106
FIRSTBANCORPORATION, INC.
-------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-1033905
- - ------------------------------ ---------------------------------
State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1121 Boundary Street P.O. Box 2147, Beaufort, S.C. 29901-2147
-------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 843-521-5600
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
The number outstanding shares of the issuer's $.01 par value common stock as
of May 7, 1999 is 963,325.
1
<PAGE>
<PAGE>
INDEX FORM 10-QSB
Part I
Page
Item 1. Consolidated Financial Statements and Related Notes-------------- 3-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations --------------------------------------8-13
Part II
Item 1. Legal Proceedings ------------------------------------------------- 14
Item 2. Changes in Securities --------------------------------------------- 14
Item 3. Defaults upon Senior Securities ----------------------------------- 14
Item 4. Submission of Matters to a Vote
of Security Holders----------------------------------------------- 14
Item 5. Other Information ------------------------------------------------- 14
Item 6. Exhibits and Reports on Form 8-K ---------------------------------- 14
Signatures -------------------------------------------------------- 71
Exhibit 27. Financial data schedule---------------------------------------- 72
2
<PAGE>
<PAGE>
PART 1. CONSOLIDATED FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS AND RELATED NOTES
BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
AT MARCH 31, AT DECEMBER 31,
1999 1998
ASSETS
Cash and amounts due from banks $ 5,154 $ 4,089
Interest bearing overnight deposits 5,570 4,665
Securities available-for-sale 12,133 11,165
Loans available-for-sale 1,464 1,740
Loans 82,792 83,443
Less allowance for loan losses (901) (860)
---------- ---------
Net loans 81,891 82,583
---------- ---------
Premises and equipment 1,864 1,932
Accrued interest receivable 538 596
Real estate owned-acquired
through foreclosure 28 40
Deferred tax asset 337 337
Other assets 658 346
---------- ---------
Total assets $ 109,637 $ 107,494
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 89,171 $ 87,753
Federal Home Loan Bank advances 4,250 4,250
Other borrowed funds 2,100 2,100
Amounts due to depository institutions 133 490
Advances from borrowers for taxes
and insurance 50 85
Accrued interest payable 269 280
Expenses payable 149 166
Other liabilities 791 245
---------- ---------
Total liabilities $96,913 $ 95,369
---------- ---------
Stockholders' Equity
Preferred stock - $.01 par value;
shares authorized - 1,000,000,
issued and outstanding - none
Common stock - $.01 par value;
shares authorized - 3,000,000,
issued and outstanding
- 963,325 - 3/31/99;
887,637 - 12/31/98. $ 10 9
Additional paid-in capital 10,129 9,623
Accumulated other comprehensive loss:
Unrealized loss on securities
available-for-sale, net of
applicable deferred income taxes (21) (13)
Retained earnings 2,606 2,506
---------- ---------
Total stockholders' equity $ 12,724 $ 12,125
---------- ---------
Total liabilities and
stockholders' equity $ 109,637 $ 107,494
========== =========
3
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED MARCH 31, 1999 AND
1998(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three THREE
Months MONTHS
Ended ENDED
3/31/99 3/31/98
------- -------
Interest income
Interest on mortgage loans $ 946 $1,091
Interest on other loans 842 720
Interest on investments 233 72
------- -------
Total interest income 2,021 1,883
Interest expense
Interest on deposits 764 800
Interest on FHLB advances 99 31
------- -------
Total interest expense 863 831
Net interest income 1,158 1,052
------- -------
Provision for loan losses 54 45
------- -------
Net interest income after provision for loan losses 1,104 1,007
Noninterest income
Service charges on deposit accounts 155 154
Other noninterest income 129 96
------- -------
Total noninterest income 284 250
Noninterest expenses
Compensation and benefits 571 440
Occupancy 187 137
Data processing 41 32
Other noninterest expenses 419 252
------- -------
Total noninterest expenses 1,218 861
Net income before taxes 170 396
------- -------
Income tax expense 71 156
------- -------
Net income $ 99 $ 240
======= =======
Net income per share-basic $ 0.11 $ 0.35
======= =======
Net income per share-diluted $ 0.11 $ 0.33
======= =======
4
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDING MARCH 31, 1999 AND
MARCH 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
Common Common Additional Retained Accumulated Total
shares Stock Paid-in Earnings Other Stockholders'
Capital Comprehensive Equity
Income (Loss)
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1997 690,323 $ 7 $6,249 $1,740 $(15) $7,981
Comprehensive income:
Net income 240 240
Other comprehensive
income (loss) net of
tax:
Unrealized loss on
securities available
for sale 6 6
------
Comprehensive income 240 6 246
------ ---- ------
Stock options exercised 2,425 26 26
Balances at March 31,
1998 692,748 $ 7 $6,275 $1,980 $( 9) $8,253
======= === ====== ====== ===== ======
Balances at December 31,
1997 887,637 $9 $9,623 $2,506 $(13) $12,125
Comprehensive income:
Net income 99 99
Other comprehensive
income, net of tax:
Unrealized gain on
securities available
for sale (8) (8)
-------
Comprehensive income 99 (8) 91
------ ---- -------
Stock options exercised 75,688 1 507 508
Balances at March 31,
1999 963,325 $10 $10,130 $2,605 $(21) $12,724
======= === ======= ====== ==== =======
</TABLE>
5
<PAGE>
<PAGE>
STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 (UNAUDITED) Three months Three months
(DOLLARS IN THOUSANDS) Ended Ended
3/31/99 3/31/98
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 99 $ 240
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Amortization of deferred loan fees (34) (4)
Provision for loan losses 54 45
Depreciation and amortization 96 71
Deferred income taxes 0 9
Decrease(increase) in interest receivable 57 19
Decrease (increase) in other assets (231) 139
Originations of loans sold to investors (5,972) (4,953)
Proceeds from sales of loans to investors 5,972 4,953
Disbursements on loans serviced for others (1,992) (628)
Receipts on loans serviced for others 1,917 547
(Increase) decrease in real estate loans
held for sale 276 (1,249)
Increase (decrease) in accrued interest payable (12) 48
(Increase) decrease in expenses payable 69 (53)
Increase (decrease) in other liabilities 314 (11)
-------- -------
Net cash provided (used) by operating activities 613 (827)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale (5,137) 0
Maturities and repayments of securities
available-for-sale 4,169 82
Loans originated or acquired, net 771 1,265
Proceeds from the sale of foreclosed real estate 12 0
Capital expenditures (34) (13)
---------- ---------
Net cash provided (used) for investing activities (219) 1,334
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in non interest-bearing
demand accounts 2,198 (292)
Increases in Now, Money Market and
Savings accounts 1,012 4,098
Increase (decrease) in certificates of deposit, net (1,805) 450
Repayment of Federal Home Loan Bank advances 0 (4,200)
Increase in amounts due to depository institutions (301) (128)
Increase (decrease) in advances from borrowers for
taxes and insurance (35) 18
Stock issuance costs 0 (18)
Proceeds from stock options exercised 508 26
---------- ---------
Net cash provided (used) by financing activities 1,577 (46)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,971 (461)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,754 6,096
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,724 $ 6,557
========== =========
CASH PAID DURING THE PERIOD:
Interest paid on deposits and borrowings $ 883 $ 783
========== =========
Income tax paid $ 131 $ 28
========== =========
6
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. On October 31, 1995, FirstBank, N.A. ("Bank"), (formerly The Savings Bank
of Beaufort County, FSB) reorganized as a wholly-owned subsidiary of
FirstBancorporation, Inc. ("Company"). As a result of the reorganization, each
issued and outstanding share of common stock, $5.00 par value per share, of
the Bank was converted into one share of common stock, $.01 par value per
share, of the Company. On September 1, 1998 the Company opened FirstBank of
the Midlands, National Association (FBM) after receiving all regulatory
approvals. The Company's principal business is its investment in the two
banks. On March 4, 1999, the Company entered into a definitive merger
agreement with First National Corporation in which First National will
exchange 1.222 shares of its common stock outstanding for each share of
FirstBancorporation common stock outstanding in a transaction which will be
accounted for as a pooling of interests.
2. The unaudited interim consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results for the reported interim periods. Such adjustments
are of a normal recurring nature. The interim consolidated financial
statements, including related notes, should be read in conjunction with the
consolidated financial statements for the year ended December 31, 1998
appearing in the 1998 Annual Report of FirstBancorporation, Inc. on Form 10-
KSB. The results of operations for the period ended March 31, 1999 are not
necessarily indicative of the results of operations for the full year.
3. Earnings Per Share - Basic earnings per common share are calculated on the
basis of the weighted average number of shares outstanding during the year.
Diluted earnings per common share include stock options which have been
granted but not exercised. Average basic shares outstanding for the three
month periods ending March 31, 1999 and 1998 totaled 911,184 shares and
692,155 shares respectively. Average diluted shares outstanding for the three
month periods ended March 31, 1999 and 1998 totaled 919,467 and 736,716 shares
respectively.
4. Loan Commitments - At March 31, 1999, the Bank had total unused loan
commitments outstanding of $12,748,000 which were comprised of construction
and commercial unfunded lines of $5,550,000, unfunded consumer lines of credit
of $6,888,000 and letters of credit issued totaling $310,000. In the normal
course of business, the Bank issues loan commitments to customers at market
rates of interest. The Company's general practice is to obtain investor
commitments for fixed rate loans at the time of commitment. At March 31, 1999,
all fifteen to thirty year fixed rate residential loan commitments were
covered by commitments from investors for purchase.
5. Statement of Cash Flows - For the purposes of reporting cash flows, cash
and cash equivalents include cash, interest-bearing overnight deposits and
other short-term investments with original maturities of 90 days or less.
6. FirstBank of the Midlands, National Association was granted regulatory
authority to open for business on September 1, 1998. FBM is located at 1900
Assembly Street, Columbia, South Carolina. The Company acquired all of the
common stock of FBM for $5.0 million. The acquisition of FBM's common stock
was funded from the proceeds of the sale of additional common stock of the
Company and a loan from an unaffiliated commercial bank.
7
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
- - ------------------------------------------------------------------------
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND DECEMBER 31, 1998
Total assets increased from $107.5 million at December 31, 1998 to $109.6
million at March 31, 1999. Loans receivable, net, decreased from $82.6 million
at December 31, 1998 to $81.9 million at March 31, 1999 primarily as a result
of mortgage loan repayments and prepayments. Cash and cash equivalents
increased from $8.7 million at December 31, 1998 to $10.7 million at March 31,
1999. Total deposits increased 1.6% from $87.8 million at December 31, 1998 to
$89.2 million at March 31, 1999 primarily as a result of increases in NOW,
savings and money market accounts of $1.0 million, increases in non interest
demand accounts of $2.2 million and decreases in certificate accounts of $1.8
million. Total stockholders' equity increased from $12.1 million at December
31, 1998 to $12.7 million at March 31, 1999 as a result of retained net income
of $99,000 and proceeds of $508,000 received from the exercise of stock
options (75,688 shares at an average exercise price of $6.71 per share).
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NET INCOME. Net income decreased 58.8% from $240,000 for the three months
ended March 31, 1998 ($0.35 per basic earnings per common share and $0.33 per
share on a diluted basis) to $99,000 for the three months ended March 31, 1999
($0.11 per basic earnings per common share and $0.11 per share on a diluted
basis) primarily as a result of a $357,000 increase in non interest expenses
which were primarily the result of additional overhead costs of FBM and
professional fees associated with the planned merger with First National
Corporation. These were offset by a $34,000 increase in non-interest income
and a $106,000 increase in net interest income.
NET INTEREST INCOME. Net interest income increased to $1.2 million in the
three months ended March 31, 1999 from $1.1 million for the first quarter of
1998. The Company's interest rate spread decreased from 4.31% for the three
months ended March 31, 1998 to 4.12% for the same period in 1999 as the
average yield on interest-earning assets decreased from 8.73% for the three
months ended March 31, 1998 to 8.10% for the comparative period in 1999 while
the average rate paid on interest-bearing liabilities decreased from 4.42% for
the three months ended March 31, 1998 to 3.98% for the same period in 1999.
Interest income increased from $1.9 million for the three months ended
March 31, 1998 to $2.1million for the three months ending March 31, 1999.
Interest expense increased from $831,000 for the three months ended March 31,
1998 to $863,000 for the same period in 1999 primarily as a result of higher
average deposits and borrowings outstanding.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered
adequate by management to provide for probable known and inherent loan losses
based on management's evaluation of the collectible of the loan portfolio. In
determining the adequacy of the allowance for loan losses, management
considers past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect a borrower's ability to repay,
the estimated value of any underlying collateral, and current economic
conditions. Although management uses the best information available, future
adjustments to the allowance may be necessary as a result of changes in
economic, operating, regulatory and other conditions that may be beyond the
Company's control. While the Company maintains its allowance for loan losses
at a level that management considers as adequate to provide for probable known
and inherent losses, there can be no assurance that further additions will not
be made to the allowance for loan losses or that actual losses will not exceed
the estimated amounts.
The provision for loan losses increased from $45,000 for the three months
ended March 31, 1998 to $54,000 for the three months ended March 31, 1999.
Total loans 90 days past due and on non accrual totaled $1,125,000 at March
31, 1999 versus $1,290,000 at December 31, 1998. At March 31, 1999, the
Company's allowance for loan losses as a percent of total loans was 1.09%.
NONINTEREST INCOME. Noninterest income increased from $250,000 for the
three months ended March 31, 1998 to $284,000 for the same period in 1998
primarily as a result of increased gains on sale of loans sold.
NONINTEREST EXPENSES. Noninterest expenses increased 17.8% from $861,000
for the three months ended March 31, 1998 to $1,218,000 for the three months
ended March 31, 1999 primarily as a result of a $51,000 increase in
compensation expense related to salary expense associated with FBM and general
salary increases and a $83,000 increase in occupancy expense attributable to
rent increases on the Beaufort main office lease and expenses related to the
office space for FBM.
PROVISION FOR INCOME TAX EXPENSE. The Company pays Federal corporate
income taxes and South Carolina bank taxes. The provision for income taxes
decreased from $156,000 for the three months ended March 31, 1998 to $71,000
for the three months ended March 31, 1999 as a result of lower income before
income taxes.
8
<PAGE>
<PAGE>
ASSET/LIABILITY AND LIQUIDITY MANAGEMENT
INTEREST SENSITIVITY POSITION
MARCH 31, 1999 Year 1 Year 2-3 Years 4 thru 7 Year 8+ Total
(Dollars in thousands)
Interest-earning assets:
Loans and loans held
for sale $49,589 $18,899 $ 10,893 $6,021 $81,606
GNMA MBSs 1,015 0 0 0 1,097
Overnight and other
investments 13,395 0 0 280 16,360
------- ------- -------- ------- -------
Total interest-earning
assets 63,999 18,899 10,893 6,301 99,063
Interest-bearing
liabilities:
Deposits 54,784 18,021 7,202 0 80,006
FHLB borrowings/long
term debt 2,200 150 1,000 3,000 6,350
------- ------- -------- ------- -------
Total interest-bearing
liabilities 56,984 18,171 8,202 3,000 86,356
Asset (liability)
gap position $ 7,015 $ 729 $ 2,691 $ 5,082 $15,517
======= ======= ======== ======= =======
Cumulative gap position $ 7,015 $ 7,744 $ 10,435 $15,517
======= ======= ======== =======
Cumulative Gap to
Total Earning
Assets 6.89% 7.60% 10.24% 15.23%
======= ======= ======== =======
(1) Contractual terms regarding periodic repricing during the loan terms are
used to determine repricing periods. Loans are net of undisbursed portions of
loans in process.
(2) Now, regular savings and money marketings accounts are considered
interest-sensitive.
As of March 31, 1999, the Company's interest-earning assets that reprice
within one year totaled $63,999,000 while interest-bearing liabilities
repricing within one year totaled $56,984,000 This resulted in a positive gap
position of $7,015,000 or 6.89% of total interest-earning assets.
9
<PAGE>
<TABLE>
<PAGE>
YIELDS EARNED AND RATES PAID
The following table is a comparison of the three months ended March 31, 1999 and 1998.
AVERAGE BALANCES AND YIELDS EARNED VERSUS RATES PAID
QUARTER ENDED MARCH 31, 1999 COMPARED TO 1998
(Dollars in thousands)
Average Interest Earned Annualized
Balance or Paid Yield/Rate
For the quarter ended March 31,
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets
Loans $ 84,340 $ 81,267 $1,841 $ 1,811 8.73% 8.91%
Investments 18,065 4,987 232 72 5.14% 5.78%
--------- -------- ------- ------- ----- ----
Total earning assets/
Income earned 102,405 86,254 2,073 1,883 8.10% 8.73%
Non-earning assets 6 ,110 4,359
--------- --------
Total assets $ 108,515 $ 90,613
========= ========
Liabilities:
Interest-bearing deposits $ 80,619 $ 73,265 $ 764 $ 800 3.79% 4.37%
Borrowings 6,350 2,081 98 31 6.22% 5.98%
--------- -------- ------ ------- ----- -----
Interest-bearing deposits and
borrowings/expense 86,969 75,346 863 831 3.98% 4.42%
Non-interest-bearing liabilities 9,025 7,197
Stockholders' equity 12,521 8,070
--------- --------
Total Liabilities and
Stockholders' equity $ 108,515 $ 90,613
========= ========
Net interest income $1,210 $1,052
====== ======
Interest Rate Spread (1) 4.12% 4.31%
Net yield on average interest-earning
assets (1) 4.73% 4.88%
</TABLE>
<PAGE>
(1) Net interest income is the difference between interest income and interest
expense. Interest rate spread is the difference between the average rate on
earning assets and the average rate on interest-bearing liabilities. Net yield
on average interest-earning assets is net interest income divided by total
interest-earning assets.
Net interest income increased by $106,000 during the current year's
quarter as a result of a higher volume of interest-earning assets. Yield on
interest-earning assets decreased by .63% during the current year's quarter
and the rate paid on interest bearing liabilities decreased by .44% resulting
in an decrease in the net interest rate spread of .19% over the same period
last year. Total average interest-earning assets increased by $17,902,000 as
result of a higher volumes of loans of $3,073,000 and higher investments of
$13,078,000. Interest-bearing liabilities increased by $11,623,000 from the
first quarter 1998.
10
<PAGE>
<PAGE>
CAPITAL RESOURCES
For regulatory purposes, each of the Company's banks is required to maintain a
minimum of level of capital based upon the risk related composition of its
loan portfolio. This risk-based capital requirement requires that the each
bank maintain capital at a minimum 8% level of its regulatory defined risk
weighted assets. A bank may not declare or pay a cash dividend or repurchase
any of its capital stock, if the effect would cause the stockholders' equity
to be reduced below its capital requirements. As of March 31, 1999, both banks
met all of risk- based capital requirements and met the definition of a "well
capitalized institution" under the OCC's regulation entitled Prompt and
Corrective Action.
The Company's and subsidiary banks' actual capital ratios are presented in the
following table (dollars in thousands):
At March 31, 1999 Amount Ratio
Tier 1 Capital ( to
Total Assets):
Consolidated $12,724 11.6%
FirstBank, N.A. 8,483 9.0
FirstBank of the Midlands, National Association 4,547 30.7
Tier 1 Capital (to
Risk Weighted Assets):
Consolidated $12,724 18.6%
FirstBank, N.A. 8,483 15.2
FirstBank of the Midlands, National Association 4,547 61.4
Total Capital (to
Risk Weighted Assets):
Consolidated $13,513 19.7%
FirstBank, N.A. 9,248 13.6
FirstBank of the Midlands, National Association 4,573 61.7
YEAR 2000 READINESS DISCLOSURE
The Company is a user of computers, computer software and equipment
utilizing embedded microprocessors that will be effected by the year 2000
issue. The year 2000 issue exists because many computer systems and
applications use two-digit date fields to designate a year. As the century
date change occurs, date-sensitive systems may recognize the year 2000 as
1900, or not at all. This inability to recognize or properly treat the year
2000 may cause erroneous results, ranging from system malfunctions to
incorrect or incomplete processing.
The Company's Y2K Task Force is chaired by its Chief Financial Officer
who oversees operational matters of the Company and includes a cross-section
of bank managers. The Audit Committee of the Board of Directors is charged
with oversight of the Y2K readiness effort. The Task Force makes a progress
report to the Board of Directors at least quarterly. Management has been
active in promoting customer confidence and public education on Y2K issues.
The Y2K Task Force has developed and is implementing a comprehensive plan
to make all information and non-information technology assets year 2000
compliant. The plan is comprised of the following phases:
1. Awareness - Educational initiatives on year 2000 issues and concerns.
This phase is complete.
2. Assessment - Develop a plan, identify and evaluate all vital systems
of the Company. This phase was completed as of June 30, 1998.
3. Renovation - Upgrade or replace any critical system that is non-year
2000 compliant. This phase was substantially completed as of December 31,
1998.
4. Validation - Testing all critical systems and third-party vendors for
year 2000 compliance. The validation phase was
11
<PAGE>
<PAGE>
substantially complete as of March 31, 1999 and will be complete by June 30,
1999. The Company replaced most in-house equipment (teller station equipment,
etc.) with year 2000 compliant equipment in 1997 when it underwent a
system-wide data processing conversion. The Company processes its core banking
applications using Jack Henry and Associates CIF 20/20 system ("JHA"). JHA now
warrants its 20/20 product as being Y2K compliant. The Company is relying on
the results of proxy testing by JHA for certain date sensitive testing. The
proxy testing, which involved the use of live client data, tested the results
of transactions at various test dates before and after the year 2000 date
change and covered all of the applications used by the Company. This proxy
testing was completed in December 1998. The Company successfully conducted
connectivity testing during March 1999. Connectivity testing involved The
Company and its third-party service bureau each rolling forward their computer
systems to January 3, 2000 so that the Company could process its own data
files under simulated year 2000 conditions using all applications. Other
parties whose year 2000 compliance may effect the Company include the Federal
Home Loan Bank of Atlanta, The Federal Reserve Bank of Richmond, brokerage
firms, the Company's item processor and the operator of the Company's
automated teller machine network. These third parties have indicated their
compliance or intended compliance. Where it is possible to do so, the Company
has scheduled testing with these third parties. Where testing is not possible,
the Company will rely on certifications from vendors and service providers.
5. Implementation - Placement of renovated systems on-line. The Company
believes that its mission critical systems over which it has control are year
2000 compliant as of March 1999. Systems including electric and telephone
systems are beyond the control of the Company and will be addressed in the
Company's Contingency plan.
The Company estimates its total cost to identify, fix and replace
computer equipment, software programs or other equipment containing embedded
microprocessors that were not year 2000 compliant to be no more than $100,000,
of which $83,000 has been incurred as of March 31, 1999. This excludes the
cost of the Company's 1997 computer conversion which was not considered to be
undertaken for the express purpose of Year 2000 remediation. System
maintenance or modification costs are charged to expense as incurred, while
the cost of new hardware, software or other equipment is capitalized and
amortized over their estimated useful lives.
Because the Company depends substantially on its computer systems and
those of third parties, the failure of these systems to be year 2000 compliant
could cause substantial disruption of the Company's business and could have a
material adverse financial impact on the Company. Failure to resolve year 2000
issues presents the following risks to the Company: (1) The Company could lose
customers to other financial institutions, resulting in a loss of revenue, if
the Company's third party service bureau is unable to properly process
customer transactions; (2) governmental agencies, such as the Federal Home
Loan Bank of Atlanta, and correspondent institutions could fail to provide
funds to the Company, which could materially impair the Company's liquidity
and affect The Company's ability to fund loans and deposit withdrawals; (3)
concern on the part of depositors that year 2000 issues could impair access to
their deposit account balances could result in The Company experiencing
deposit outflows prior to December 31, 1999; and (4) The Company could incur
increased personnel costs if additional staff is required to perform functions
that inoperative systems would have otherwise performed.
The Company has developed a Y2K Contingency Master Plan to minimize
disruption of service and risk of loss from safety and soundness,
profitability and customer confidence concerns. The Contingency Master Plan is
further defined in two specific types of contingency plans: the Business
Resumption Plan and the Remediation Contingency Plan.
The Business Resumption Contingency Plan addresses the actions the
Company would take if core business processes, such as paying and receiving,
cannot be carried out in the normal manner through the century date change due
to system or vendor failure. The Company's Business Resumption Contingency
Plan follows an industry-recognized four phase approach:
o Organization Planning
o Business Impact Analysis
o Contingency Planning
o Validation
The first three phases are complete and the validation phase will be
complete by September 30, 1999. The Y2K Task Force and the existing Disaster
Recovery Control Group, has identified the interdependency between critical
systems and the core business processes, and has completed a risk assessment
of possible failure scenarios. An individual business resumption plan has been
drafted for each core business process under every failure scenario rated
medium or high risk.
A Remediation Contingency Plan is in place and will be implemented in the
event that a critical system will not meet regulatory deadlines for
renovation, validation or implementation. Management is confident that the
Remediation Contingency Plan will not need to be implemented, as all critical
systems have been renovated, validated and implemented within required time
frames.
Management believes that it is not possible to estimate the potential
lost revenue due to the year 2000 issue, as the extent and longevity of any
potential problem cannot be predicted. Because the majority of the Company's
loan portfolio consists of loans to individuals and small business
enterprises, management believes that year 2000 issues will not impair the
ability of the Company's borrowers to repay
12
<PAGE>
<PAGE>
their debt.
There can be no assurances that the Company's year 2000 plan will
effectively address the year 2000 issue, that the Company's estimates of the
timing and costs of completing the plan will ultimately be accurate or that
the impact of any failure of the Company or its third-party vendors and
service providers to be year 2000 compliant will not have a material adverse
effect on the Company's business, financial condition or results of
operations. However, management of the Company is confident of its ability to
complete the transition into the next century with minimal disruption of
normal service levels.
The Company received an OCC year 2000 exam in October, 1998 and a second
on-site OCC Y2K examination in April, 1999.
13
<PAGE>
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - --------------------------
There were no material legal proceedings pending or settled during the quarter
in which the Company was, or the Banks were a party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- - --------------------------------------------------
A. Changes in Securities: None
- - ------------------------
B. Use of Proceeds: None
- - -------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- - ----------------------------------------
The Company has not issued any instruments of indebtedness which constitute
securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
There were no matters submitted to vote of security holders .
ITEM 5. OTHER INFORMATION
- - --------------------------
There were no matters of the registrant which required reporting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
3. Exhibits
3.1--Articles of Incorporation of FirstBancorporation, Inc. (incorporated by
reference to Exhibit 3.1 contained in the Company's Current Report on Form 8-k
dated November 7, 1995)
3.2--Bylaws of FirstBancorporation, Inc. (incorporated by reference to Exhibit
3.2 contained in the Company's Current Report on form 8-k dated November 7,
1995)
10.1--Employment Agreement with James A. Shuford, III (incorporated by
reference to Exhibit 10(g) contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995)
10.2--Employment agreement with James L. Pate, III (Incorporated by reference
on Registration Statement on Form SB-2)
10.3 Employment Agreement with Richard E. Morgan, Jr. (Incorporated by
reference on Registration Statement on Form SB-2)
10.4--Employment Agreement with F. Wayne Lovelace (Incorporated by reference
on Registration Statement on Form SB-2)
10.5 1996 Stock Option Plan (incorporated by reference to Exhibit A appended
to the Company's 1996 annual meeting proxy statement)
10.6--Qualified Incentive Stock Option Plan (incorporated by reference to
Exhibit 10(b) contained in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995)
10.7--Amended and Restated Non-Qualified Stock Option Plan (incorporated by
reference to Exhibit 10(c) contained in the Company's Annual Report on form
10-KSB for the year ended December 31, 1995)
10.8--Non-qualified Stock Option for Robert A. Kerr (incorporated by reference
to Exhibit 10(d) contained in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995)
10.9--Lease for Company's main office (incorporated by reference to Exhibit
10(e) contained in the company's Annual Report on Form 10-KSB for the year
ended December 31, 1995)
14
<PAGE>
<PAGE>
10.10--Lease for Company's main office (incorporated by reference to Exhibit
10(e) contained in the company's Annual Report on Form 10-KSB for the year
ended December 31, 1995)
10.11--Lease for Columbia, South Carolina Office (Incorporated by reference on
Registration Statement on Form SB-2)
10.12--Consultant Agreement with Robert A. Kerr
10.13--Merger Agreement between First National Corporation and
FirstBancorporation, Inc.
(Note: All other required exhibits are not applicable.)
No reports on Form 8-K were filed during the quarter under report.
15
<PAGE>
<PAGE>
Exhibit 10.12
Consultant Agreement with Robert A. Kerr
Dated March 4, 1999
16
<PAGE>
<PAGE>
CONSULTANT AGREEMENT
THIS CONSULTANT AGREEMENT, made and entered into this 4th day of March,
1999, by and between FIRSTBANK, N.A., (the "Bank"), and ROBERT A. KERR,
("Contractor").
WHEREAS, the experience, knowledge, and contacts in the banking business
are valuable to the Bank, and the Bank desires to retain Contractor's services
as a consultant for the term hereof and Contractor desires to be so retained;
and
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Consultant. The Bank hereby retains Contractor as a consultant and
Contractor hereby accepts such appointment on the terms and conditions
hereinafter set forth.
2. Term. The term of this Agreement shall be for a period of 36
months, commencing on April 1, 1999, and terminating on March 1, 2003.
3. Duties. During the term hereof, Contractor shall render to the Bank
such services of an advisory or consultative nature relating to the
maintenance and enhancement of the goodwill of the Bank with its customers and
in the communities which are served by the Bank as the Bank may reasonably
request and Contractor shall be available for the rendering of other advice
and counsel to the officers and directors of the Bank at reasonable times by
telephone, letter or in person so that the Bank may have the benefit of
Contractor's experience, knowledge, contacts or reputation in the business in
which the Bank is engaged. Contractor agrees that he will not during the term
of this Agreement be involved in any other venture that would conflict or
compete with the operations of the Bank.
4. Compensation, Expenses, Etc.
(a) During the term hereof, Bank shall pay Contractor compensation for
such services at the rate of $3,333.33 per month, due on the first day of each
month. In consideration of such base compensation, Contractor shall be
provided the services described in Section 3 hereof during the term of this
Agreement. Both parties hereto shall treat such amounts for tax purposes as
compensation for services rendered. Should the Contractor die or become
disabled during the term of this contract compensation shall be paid for the
remainder of the term of this Contract to the Contractor or his estate.
5. Independent Contractor. It is expressly understood that Contractor
is an independent contractor under this Agreement and, as such, he shall have
no authority, executive or otherwise, to bind the Bank, or to determine the
affairs of the Bank, and he
17
<PAGE>
<PAGE>
shall not participate as an employee in any plan or program maintained by the
Bank for the benefit of its employees. Contractor shall be solely responsible
for all federal, state and local tax obligations arising out the payments and
benefits provided to Contractor under this Agreement.
6. Termination of Consultant Engagement. Engagement of Contractor as a
consultant under this Agreement shall terminate upon the occurrence of any of
the following events:
(a) Termination by Contractor Without Cause. Contractor may terminate
his obligations to provide consulting services under this Agreement at any
time upon not less than thirty (30) days' written notice to the Bank. In the
event of such notice by Contractor, the Bank may deem the termination
effective prior to the expiration of the notice period but in no event not
less than ten (10) days from receipt of such notice. In the event of such
termination, the Bank shall pay to Contractor the compensation then due him
through the effective date of termination.
(b) Termination by Bank for Cause. The Bank may terminate this
Agreement immediately at any time for cause (as defined below). In the event
of such termination, the Bank shall pay Contractor the monthly compensation
then due him through the period ending with the effective date of such
termination as designated by the Bank.
Termination for cause shall include termination because of Contractor's
dishonesty, disloyalty, willful misconduct, breach of fiduciary duty, willful
violation of any law, rule or regulation, (other than traffic violations or
similar offenses) including without limitation breach of the rules,
regulations, and policies of any bank regulatory authority, or a final cease
and desist order, or a breach of the covenants under Section 7 hereunder.
(c) Termination By the Bank Without Cause. Contractor's engagement as a
consultant under this Agreement may be terminated at any time by the Bank upon
ten (10) days' written notice to Contractor. In the event of such
termination, the Bank shall pay Contractor the base compensation to which he
would be entitled under this Agreement in such installments and on such dates
as regularly paid under Section 4 through the expiration of the term of this
Agreement set forth in Section 2 hereof.
7. Certain Covenants by Contractor.
(a) Confidentiality. During and after his engagement as a consultant
hereunder, except for the purpose of carrying out his duties hereunder,
Contractor shall not remove or retain, or make copies or reproductions of any
non-public figures, calculations, letters, paper or information of any type or
description relating to the business of the Bank, its respective subsidiaries,
affiliates, or customers, and the Contractor shall not divulge to others or
use for his personal benefit any non-public information
18
<PAGE>
<PAGE>
or data acquired by him while under contract of the Bank which relates to the
methods, processes, or other trade secrets or confidential information of the
Bank or the subsidiaries or affiliates or either. Contractor agrees that, in
the event of termination of this Agreement for any reason, he will not retain
any non-public information written or otherwise recorded or copied concerning
the business or operations of the Bank.
(b) Noncompetition. In consideration of the engagement of Contractor
hereunder, Contractor covenants and agrees that he will not, during the term
of this Agreement, directly or indirectly, either as principal, agent,
consultant, manager, employee, owner, partner, stockholder or investor (other
than as a less than 5% owner of a business entity whose stock is registered
pursuant to the Securities Exchange Act of 1934), director or officer, engage
in any business or be affiliated with any business organization within
Beaufort County, South Carolina, or induce or attempt directly or indirectly
to induce any customer or person contracting with the Bank or its subsidiaries
or affiliates thereof or solicit, directly or indirectly, any employee of the
Bank or any subsidiary or affiliate thereof to leave the employee thereof.
Contractor acknowledges that sufficient consideration has been given for
the covenants under this Section 7(b) and that such covenants are sufficiently
accurate, definitive and descriptive so as to inform Contractor of the scope
of the covenants and that the scope of the activities prohibited by the
covenants is reasonable and necessary to protect the legitimate interests of
the Bank.
8. Binding Effect; Successors and Assigns. This Agreement and all
rights and powers granted hereunder shall bind and enure to the benefit of the
parties hereto and their respective successors and assigns. Since the Bank is
contracting for the personal services of Contractor, he shall, however, not
assign or delegate his obligations and duties of performance hereunder.
9. Entire Agreement; Amendments and Waiver. This Agreement sets forth
all of the promises, covenants, agreements, conditions and undertakings
between the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and undertakings,
inducements or conditions, express or implied, oral or written. This
Agreement may be amended only by an instrument in writing signed by Contractor
and a duly authorized officer of the Bank, and any provision hereof may be
waived only by an instrument in writing duly signed by the party against whom
enforcement of such waiver is sought.
10. Governing Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise, by
the laws of South Carolina except to the extent that Federal law shall be
deemed to apply. All rights and powers granted herein to Contractor or the
Bank shall be subject to and superseded by applicable state and federal laws
and
19
<PAGE>
<PAGE>
rules, regulations and policies promulgated there under by governmental
authority having jurisdiction in respect to the Bank.
11. Notices. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed given and received; (a) upon delivery, if delivered
personally; (b) on the fifth day after being deposited with the U.S. Postal
Service if mailed by First Class Mail, postage prepaid, registered or
certified with return receipt requested, to Contractor at his home address as
maintained in the records of the Bank or the Chief Executive Officer of the
Bank at the principal business office of the Bank; or (c) on the next day
after being deposited with a reliable overnight delivery service addressed to
such persons at such addresses.
12. Counterparts; Captions. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument. The sections,
subsection, and other headings as may appear in this Agreement are for
convenience of reference only and are not intended, to any extent and for any
purpose to limit or defined the text of any section or subsection hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: BANK
/s/ James L. Pate By: /s/ James A. Shuford, Pres. & CEO
- - -------------------------- --------------------------------------
WITNESS:
/s/ William C. Robinson /s/ Robert A. Kerr
- - -------------------------- ------------------------------------------
Robert A. Kerr
If a contemplated merger between FirstBank, N.A. and First National Bank
Corporation should occur, First National Bank Corporation agrees to assume
this Contract.
/s/ C. John Hipp, III
------------------------------------------
JOHN HIPP, President
First National Bank Corporation
20
<PAGE>
<PAGE>
Exhibit 10.13
Merger Agreement between First National Corporation
and
FirstBancorporation, Inc.
Dated as of March 4, 1999
21
<PAGE>
<PAGE>
- - ------------------------------------------------------------------------------
MERGER AGREEMENT
between
FIRST NATIONAL CORPORATION
AND
FIRSTBANCORPORATION, INC.
Dated as of March 4, 1999
- - ------------------------------------------------------------------------------
22
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINED TERMS
1.1 Definitions......................................................1
ARTICLE II
THE MERGER
2.1 The Merger.......................................................7
2.2 Effective Time...................................................7
2.3 Effect of the Merger.............................................7
2.4 Articles of Incorporation; Bylaws................................7
2.5 Directors and Officers...........................................8
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
3.1 Merger Consideration.............................................8
3.2 Rights as Shareholders; Stock Transfers..........................8
3.3 Fractional Shares................................................8
3.4 Exchange Procedures..............................................8
3.5 Anti-Dilution Provisions.........................................9
3.6 Stock Options....................................................9
3.7 Dissenting Shares................................................9
ARTICLE IV
THE CLOSING
4.1 Closing.........................................................10
4.2 Deliveries by FirstBancorporation...............................10
4.3 Deliveries by FNC...............................................10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FIRSTBANCORPORATION
5.1 Organization, Standing and Power................................11
5.2 Authority; No Breach By Agreement...............................11
5.3 Capital Stock...................................................12
5.4 Records.........................................................12
5.5 Subsidiaries and Affiliates.....................................12
5.6 Financial Statements............................................12
5.7 Tax Matters.....................................................13
5.8 Real Property...................................................14
5.9 Assets..........................................................15
5.10 Intellectual Property Rights....................................15
23
<PAGE>
<PAGE>
5.11 Loans, Accounts, Notes and Other Receivables; Loan Collateral...15
5.12 Securities Portfolio and Investments............................16
5.13 Environmental Matters...........................................16
5.14 Compliance with Laws............................................17
5.15 Labor Relations; Employment Matters.............................17
5.16 Employee Benefit Plans; ERISA...................................18
5.17 Insurance.......................................................19
5.18 Material Contracts..............................................20
5.19 Legal Proceedings...............................................20
5.20 Absence of Other Liabilities....................................20
5.21 Absence of Changes or Events....................................21
5.22 Reports.........................................................21
5.23 Accounting, Tax and Regulatory Matters..........................21
5.24 Charter Provisions..............................................21
5.25 Certain Regulated Businesses....................................22
5.26 Commissions.....................................................22
5.27 Registration Statement; Joint Proxy Statement/Prospectus........22
5.28 Takeover Laws...................................................22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FNC
6.1 Organization....................................................22
6.2 Authority; No Breach By Agreement...............................23
6.3 Capital Stock...................................................23
6.4 FNC's Financial Statements......................................23
6.5 Reports.........................................................24
6.6 Absence of Changes..............................................24
6.7 Legal Proceedings...............................................24
6.8 Accounting, Tax and Regulatory Matters..........................24
6.9 Commissions.....................................................24
6.10 Registration Statement; Joint Proxy Statement/Prospectus........24
6.11 Tax Matters.....................................................25
6.12 Loans, Accounts, Notes and Other Receivables; Loan Collateral...26
6.13 Securities Portfolio and Investments............................27
6.14 Environmental Matters...........................................27
6.15 Compliance with Laws............................................27
6.16 Labor Relations; Employment Matters.............................28
6.17 Absence of Other Liabilities....................................28
6.18 Certain Regulated Businesses....................................28
6.19 Takeover Laws...................................................28
ARTICLE VII
COVENANTS
7.1 Covenants of FirstBancorporation................................28
7.2 Covenants of FNC................................................32
7.3 Covenants of All Parties to the Agreement.......................34
ARTICLE VIII
DISCLOSURE OF ADDITIONAL INFORMATION
8.1 Access to Information by FirstBancorporation....................35
24
<PAGE>
<PAGE>
8.2 Access to Information...........................................36
8.3 Access to Premises..............................................36
8.4 Confidentiality.................................................36
8.5 Publicity.......................................................36
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Mutual Conditions...............................................36
9.2 Conditions to the Obligations of FirstBancorporation............37
9.3 Conditions to the Obligations of FNC............................38
ARTICLE X
TERMINATION
10.1 Termination.....................................................39
10.2 Procedure and Effect of Termination.............................41
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses........................................................41
11.2 Survival of Representations.....................................41
11.3 Amendment and Modification......................................42
11.4 Waiver of Compliance; Consents..................................42
11.5 Notices.........................................................42
11.6 Assignment; Third Party Beneficiaries...........................43
11.7 Separable Provisions............................................43
11.8 Governing Law...................................................43
11.9 Counterparts....................................................43
11.10 Interpretation..................................................43
11.11 Entire Agreement................................................43
25
<PAGE>
<PAGE>
SCHEDULES
Schedule 1.1 FirstBancorporation Transaction Fees and Expenses
Schedule 5.1 Jurisdictional Qualifications
Schedule 5.2 Exceptions to Representation of no Breaches
Schedule 5.3 Five Percent Holders
Schedule 5.5 Affiliates
Schedule 5.7 Income Tax
Schedule 5.8 Real Property
Schedule 5.9 Liens
Schedule 5.10 Intellectual Property
Schedule 5.11 Delinquent Loans
Schedule 5.14 Compliance With Laws
Schedule 5.15 Loans to Officers, Directors, and Employees
Schedule 5.16 Employee Benefit Plans; ERISA
Schedule 5.17 Insurance
Schedule 5.18(a) Material Contracts
Schedule 5.18(b) Contracts Requiring Consents
Schedule 5.19 Litigation
Schedule 5.20 Undisclosed Liabilities
Schedule 6.11 Income Tax
Schedule 6.12 FNC Delinquent Loans
Schedule 6.15 FNC Compliance with Laws
Schedule 6.17 FNC Undisclosed Liabilities
Schedule 7.1(a) Ordinary Conduct of Business
Schedule 7.1(e) Retention Bonus Employees
Schedule 7.2 FNC Acquisitions
EXHIBITS
Exhibit A Form of Plan of Merger
Exhibit B Form of Affiliate Agreement
Exhibit C Form of Opinion of Counsel to FNC
Exhibit D Form of Employment and Noncompetition Agreement with James A.
Shuford, III
Exhibit E Form of Opinion of Counsel to FirstBancorporation
26
<PAGE>
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement"), dated as of March 4, 1999,
is by and between FIRST NATIONAL CORPORATION, a South Carolina corporation
("FNC"), and FIRSTBANCORPORATION, INC., a South Carolina corporation
("FirstBancorporation").
Background Statement
--------------------
FNC and FirstBancorporation desire to effect a merger pursuant to
which FirstBancorporation will merge with and into FNC, and FNC will be the
surviving corporation (the "Merger"). The parties intend that the Merger
qualify as a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended, and qualify for "pooling-of-interest" accounting
treatment.
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 7.1(b).
"Act" means the Bank Holding Company Act of 1956, as amended.
"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.
"Affiliate Agreement" has the meaning given to it in Section 7.1(d).
"Agreement" means this Merger Agreement and the exhibits and schedules
hereto, as amended or modified from time to time in accordance with Section
11.3.
"Articles of Merger" has the meaning given to it in Section 2.2.
"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. Notwithstanding the foregoing,
"Assets", does not include Loan Collateral not foreclosed as of the date with
respect to which the term Assets is being used.
"Assumable Options" has the meaning given to it in Section 3.6.
"Bank Merger" has the meaning given to it in Section 7.1(f).
"Benefit Plan" means any employee pension, retirement, profit-sharing,
stock bonus, incentive, deferred compensation, stock option, employee stock
ownership, hospitalization, medical, dental, vacation, insurance, sick pay,
disability, severance or other plan, fund, program, policy, contract or
arrangement, whether arrived at through collective bargaining or otherwise,
providing employee benefits (including but not limited to any "employee
benefit
27
<PAGE>
<PAGE>
plan" as that term is defined in Section 3(3) of ERISA and any employee
benefit plan that is a "cafeteria plan" as described in Section 125 of the
Code), currently maintained or previously maintained at any time in the last
five years by, sponsored in whole or in part by, or contributed to by
FirstBancorporation or any Subsidiary, for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries, whether created in writing, through an employee manual or
similar document, or orally.
"Business Day" means any day excluding Saturday, Sunday and any day
that shall be a legal holiday in the State of South Carolina.
"Claim" has the meaning given to it in Section 7.2(c)(ii).
"Closing" means the closing of the Merger, as identified more
specifically in Article IV.
"Closing Date" has the meaning given to it in Section 4.1.
"COBRA" has the meaning given to it in Section 5.16.
"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.
"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.
"Continuing Employees" has the meaning given to it in Section 7.2(e).
"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.
"Default" means, with respect to a Contract, Order or Permit, (i) any
breach or violation of or default under such Contract, Order or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of or default under such
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, such Contract, Order or
Permit.
"Dissenting Shares" has the meaning given to it in Section 3.7.
"Effective Date" means the day on which the Effective Time occurs.
"Effective Time" has the meaning given to it in Section 2.2.
"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. 9601 et
seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.)
("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.),
the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. 300 et seq.)
and the Occupational Safety and Health Act (29 U.S.C. 651 et seq.) ("OSHA"),
as such laws and regulations have been or are in the future amended or
supplemented, and each similar federal, state or local statute, and each rule
and regulation promulgated under such federal, state and local laws.
28
<PAGE>
<PAGE>
"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.
"Exchange Ratio" has the meaning given to it in Section 3.1.
"FDIC" means the Federal Deposit Insurance Corporation.
"FFIEC" means the Federal Financial Institutions Examination Council.
"Financial Statements" means FirstBancorporation's audited
consolidated statements of income, cash flow and shareholder's equity for the
years ended December 31, 1998, December 31, 1997 and 1996 and audited balance
sheets as of December 31, 1998 and 1997.
"First National Bank" means First National Bank, a national banking
association.
"First Securities Corporation" means First Securities Corporation, a
South Carolina corporation.
"FirstBank" means FirstBank, National Association, a national banking
association.
"FirstBancorporation" has the meaning given to it in the introductory
paragraph hereof.
"FirstBancorporation Option" has the meaning given to it in Section
5.3.
"FirstBancorporation Stock" means the common stock of
FirstBancorporation, par value $.01 per share.
"Florence County National Bank" means Florence County National Bank, a
national banking association.
"FNC" has the meaning given to it in the introductory paragraph
hereof.
"FNC Financial Statements" has the meaning given to it in Section 6.4.
"FNC FirstBancorporation Shares" has the meaning given to it in
Section 3.1(c).
"FNC Stock" means the common stock of FNC, par value $2.50 per share,
as traded on the American Stock Exchange.
"FNC Subsidiaries" means First National Bank, Florence County National
Bank, and National Bank of York County, and "FNC Subsidiary" means any of
them.
"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.
29
<PAGE>
<PAGE>
"Income Taxes" means all federal, state or local income taxes
(inclusive of any interest and penalties thereon) imposed on a Person with
respect to its assets or operations and which are based in whole or in part
upon income, but does not include any other Taxes.
"Indemnified Liabilities" has the meaning given to it in Section
7.2(c)(ii).
"Indemnified Parties" has the meaning given to it in Section
7.2(c)(ii).
"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 other than off-the-shelf
software) and (f) all other proprietary rights.
"Interim Financial Statements" means the Interim Monthly Financial
Statements and the Interim Quarterly Financial Statements.
"Interim Monthly Financial Statements" has the meaning given to it in
Section 7.1(g).
"Interim Quarterly Financial Statements" has the meaning given to it
in Section 7.1(g).
"Joint Proxy Statement/Prospectus" has the meaning given to it in
Section 5.27.
"Knowledge of FNC" means the actual knowledge of the directors and
senior officers of FNC and the FNC Subsidiaries.
"Knowledge of FirstBancorporation" means the actual knowledge of the
directors and senior officers of FirstBancorporation and the Subsidiaries.
"Law" means any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business 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, which is required under
Generally Accepted Accounting Principles to be reflected in an audited balance
sheet or disclosed in the notes thereto.
"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.
"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.
30
<PAGE>
<PAGE>
"Loan Collateral" means, with respect to any Person, 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 such Person
has taken a security interest with respect to, on which such Person has placed
a Lien with respect to, or which is otherwise used to secure, any loan made by
such Person or any note, account, or other receivable payable to such Person.
"Material Adverse Effect" means, with respect to a party, any effect
or effects that (i) are or could reasonably be material and adverse to the
condition (financial or otherwise), operations, business, loan portfolio or
investment portfolio of such party and its subsidiaries taken as a whole, or
(ii) would materially impair the ability of such party to perform its
obligations under this Agreement or otherwise materially threaten or
materially impede the consummation of the Merger and the other transactions
contemplated by this Agreement; provided, however, 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, or other changes affecting depository institutions
generally, including changes in general economic conditions and changes in
prevailing interest and deposit rates; (b) changes in Generally Accepted
Accounting Principles or regulatory accounting requirements applicable to
banks and their holding companies generally; (c) any modifications or changes
to valuation policies and practices in connection with the Merger or
restructuring change taken at the written request of FNC in connection with
the Merger, in each case in accordance with Generally Accepted Accounting
Principles; (d) changes resulting from transaction expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement and the Merger (which fees and expenses for FirstBancorporation
shall not materially exceed the estimates set forth on Schedule 1.1); and (e)
actions or omissions of a party or its subsidiaries taken with the written
consent of the other party in consideration of the transactions contemplated
by the Agreement.
"Material Contract" has the meaning given to it in Section 5.18(a).
"Material Permit" has the meaning given to it in Section 5.2(b).
"Merger" has the meaning given to it in the Background Statement
hereof.
"Merger Consideration" has the meaning given to it in Section 2.1.
"Midlands Bank" means FirstBank of the Midlands, National Association,
a
national banking association.
"National Bank of York County" means National Bank of York County, a
national banking association.
"New Certificates" has the meaning given to it in Section 3.4.
"OCC" means Office of the Comptroller of the Currency.
"Old Certificates" has the meaning given to it in Section 3.4.
"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.
"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 subject or that is or may be binding upon
or inure to the benefit of any Person or its securities, Assets or business.
"Permitted Liens" means (a) Liens for current property Taxes not yet
due and payable, (b) pledges to secure deposits in the ordinary course of
business consistent with past practices, (c) Liens as security for Federal
Home Loan Bank and Federal Reserve Bank advances entered into in the ordinary
course of business consistent with past practices, (d) Liens granted in
connection with repurchase agreements entered into in the ordinary course of
business consistent with past practices and (e) in the case of Real Property,
easements, restrictions and similar non-monetary Liens which do not adversely
affect the use, value or marketability of such Real Property.
31
<PAGE>
<PAGE>
"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.
"Plan of Merger" has the meaning given to it in Section 2.2.
"Policies" has the meaning given to it in Section 5.17.
"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" does not include
any Loan Collateral not yet foreclosed 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 5.27.
"Regulatory Authorities" means, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of Governors of
the Federal Reserve System, the South Carolina Commissioner of Banks, the OCC,
the FDIC, and all other federal and state regulatory agencies having
jurisdiction over the parties and their respective subsidiaries, and the SEC.
"Regulatory Reports" has the meaning given to it in Section 5.22.
"Replacement Options" has the meaning given to it in Section 3.6.
"Reports" has the meaning given to it in Section 6.5.
"Representatives" has the meaning given to it in Section 7.1(b).
"SCBCA" means the South Carolina Business Corporation Act of 1988, as
amended.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning given to it in Section 5.22.
"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 5.27.
"Stock Option Plans" has the meaning given to it in Section 3.6.
"Subsidiary Merger" has the meaning given to it in Section 7.1(f).
"Subsidiaries" means, collectively, FirstBank, Midlands Bank, First
Securities Corporation, and "Subsidiary" means any of them.
"Superior Proposal" has the meaning given to it in Section 7.1(b).
"Surviving Corporation" has the meaning given to it in Section 2.1.
"Takeover Laws" means the South Carolina Control Share Acquisition Act
(Section 35-2-101 et seq. of the Code of Laws of South Carolina 1976) and the
South Carolina Business Combination Act (Section 35-2-201 et seq. of the Code
of Laws of South Carolina 1976).
32
<PAGE>
<PAGE>
"Taxes" means 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.
"Treasury Regulations" means the Income Tax Regulations to the Code.
"Treasury Shares" has the meaning given to it in Section 3.1.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms hereof and subject to the conditions
set forth in Article IX, and in accordance with the SCBCA, at the Effective
Time, FirstBancorporation shall be merged with and into FNC. As a result of
the Merger, the separate corporate existence of FirstBancorporation shall
cease and FNC shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). Notwithstanding anything to the contrary contained
in this Section 2.1, FNC may elect to merge FirstBancorporation with and into
a direct or indirect wholly-owned subsidiary of FNC; provided, however, that
no such election shall (i) alter or change the amount or kind of consideration
to be issued to holders of FirstBancorporation Stock as provided for in this
Agreement (the "Merger Consideration"), (ii) cause the Merger not to qualify
as a tax-free reorganization under Section 368 of the Code or for "pooling of
interests" accounting treatment, (iii) materially impede or materially delay
consummation of the transactions contemplated by this Agreement, or (iv)
materially diminish or alter the obligations of FNC under this Agreement. In
such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing and to provide, as the case may
be, that such other wholly-owned subsidiary of FNC shall be the Surviving
Corporation.
2.2 Effective Time. Subject to the satisfaction or waiver of the
conditions set forth in Article IX, the Merger shall become effective on the
date and at the time of the filing of articles of merger (the "Articles of
Merger"), in the form required by and executed in accordance with the SCBCA,
or at such other time specified in the Articles of Merger. The date and time
when the Merger shall become effective shall be referred to herein as the
"Effective Time." Unless otherwise agreed by the parties, at or as soon as
practicable after the Closing, FNC and FirstBancorporation shall cause the
Articles of Merger to be executed and filed with the Secretary of State of
South Carolina, as required by the SCBCA, 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. The plan of merger, which shall be
substantially in the form of Exhibit A hereto (the "Plan of Merger"), shall be
set forth in the Articles of Merger. 2.3 Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of the SCBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of FirstBancorporation shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of FirstBancorporation shall become the
debts, liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.
2.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by FNC prior to the Effective Time, at
the Effective Time, the Articles of Incorporation of FNC, as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation (as amended by the Articles of
Merger).
(b) Unless otherwise determined by FNC prior to the Effective Time, the
Bylaws of FNC, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended
33
<PAGE>
<PAGE>
as provided by law, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
2.5 Directors and Officers. The directors of FNC immediately after the
Effective Time, together with the two individuals designated in Section 7.2(d)
hereof, shall be the directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation and the SCBCA, and the officers of FNC immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
3.1 Merger Consideration. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Merger and without any
action on the part of any Person:
(a) Each share of FirstBancorporation Stock, excluding
Dissenting Shares, Treasury Shares and FNC FirstBancorporation Shares, issued
and outstanding immediately prior to the Effective Time shall become and be
converted into 1.222 shares of FNC Stock (the "Exchange Ratio"). The Exchange
Ratio is subject to adjustment as set forth in Section 3.5.
(b) Each share of FNC Stock issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding from and after the
Effective Time.
(c) Each share of FirstBancorporation Stock held in treasury by
FirstBancorporation or otherwise owned by FirstBancorporation or the
Subsidiaries ("Treasury Shares"), and each share of FirstBancorporation Stock
owned by FNC or the FNC Subsidiaries ("FNC FirstBancorporation Shares"),
immediately prior to the Effective Time shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.2 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of shares of FirstBancorporation Stock shall cease to be, and shall
have no rights as, shareholders of FirstBancorporation, other than (i) to
receive any dividend or other distribution with respect to shares of
FirstBancorporation Stock with a record date occurring prior to the Effective
Time and the consideration provided under this Article III and (ii) those
rights afforded to the holders of Dissenting Shares under the SCBCA. After the
Effective Time, there shall be no transfers on the stock transfer books of
FirstBancorporation or the Surviving Corporation of shares of
FirstBancorporation Stock.
3.3 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of FNC Stock and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, FNC
shall pay to each holder of FirstBancorporation Stock who would otherwise be
entitled to a fractional share of FNC Stock (after taking into account all Old
Certificates delivered by such holder) an amount in cash (without interest)
determined by multiplying such fraction by the last sale price of FNC Stock
published by the American Stock Exchange (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative source), for the
trading day immediately preceding the Effective Date.
3.4 Exchange Procedures. As promptly as practicable after the
Effective Time, but not later than 10 Business Days after the Effective Date,
FNC shall send or cause to be sent to each former holder of record of shares
of FirstBancorporation Stock immediately prior to the Effective Time
transmittal materials for use in exchanging such shareholder's certificates
formerly representing shares of FirstBancorporation Stock (the "Old
Certificates") for the consideration set forth in this Article III. FNC shall
cause the certificates representing the shares of FNC Stock (the "New
Certificates") into which shares of FirstBancorporation Stock are converted at
the Effective Time and/or any check in respect of any fractional share
interest or dividends or distributions which such Person shall be entitled to
receive to be delivered to such shareholder upon delivery to FNC of Old
Certificates representing such shares of FirstBancorporation Stock (or
indemnity reasonably satisfactory to FNC that such certificates are lost,
stolen or destroyed) owned by such shareholder and properly completed
transmittal materials. No interest will be
34
<PAGE>
<PAGE>
paid on any such cash to be paid in lieu of fractional share interests or in
respect of dividends or distributions which any such Person shall be entitled
to receive pursuant to this Article III upon such delivery. Old Certificates
surrendered for exchange by any Affiliate of FirstBancorporation shall not be
exchanged for New Certificates until FNC has received an Affiliate Agreement
from such Person as specified in Section 7.1(d). Notwithstanding the
foregoing, no party hereto shall be liable to any former holder of
FirstBancorporation Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
At the election of FNC, no dividends or other distributions with respect to
FNC Stock with a record date occurring on or after the Effective Date shall be
paid to the holder of any unsurrendered Old Certificate representing shares of
FirstBancorporation Stock converted in the Merger into the right to receive
shares of such FNC Stock until the holder thereof shall be entitled to receive
New Certificates in exchange therefor in accordance with the procedures set
forth in this Section 3.4. After becoming so entitled in accordance with this
Section 3.4, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of FNC Stock such holder
had the right to receive upon surrender of the Old Certificates.
3.5 Anti-Dilution Provisions. In the event FNC changes (or establishes
a record date for changing) the number of shares of FNC Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding FNC Stock and the record date or effective date therefor shall be
prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted.
3.6 Stock Options. At the Effective Time, each outstanding option to
purchase shares of FirstBancorporation Stock (in each case, an "Assumable
Option") granted under (i) the 1986 Amended and Restated Non-Qualified Stock
Option Plan of FirstBancorporation, Inc., and (ii) the 1996 Stock Option Plan
of FirstBancorporation, Inc. (collectively, the "Stock Option Plans"), which
have not been exercised prior to the Effective Time, shall be converted into
an option (a "Replacement Option") to acquire, on the same terms and
conditions as were applicable under such Assumable Option, the number of
shares of FNC Stock equal to (A) the number of shares of FirstBancorporation
Stock subject to the Assumable Option, multiplied by (B) the Exchange Ratio
(such product rounded to the nearest whole number), at an exercise price per
share (rounded to the nearest whole cent) equal to (y) the aggregate exercise
price for the shares of FirstBancorporation Stock which were purchasable
pursuant to such Assumable Option divided by (z) the number of full shares of
FNC Stock subject to such Replacement Option in accordance with the foregoing.
Notwithstanding the foregoing, each Assumable Option which is intended to be
an "incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the Code. At or
prior to the Effective Time, FirstBancorporation shall use its reasonable best
efforts to take all action necessary, including obtaining any necessary
consents from optionees, to permit the replacement of the outstanding
Assumable Options by FNC pursuant to this Section 3.6 and to permit FNC to
assume the Stock Option Plans. FirstBancorporation shall further take all
action necessary to amend the Stock Option Plans to eliminate automatic grants
or awards thereunder following the Effective Time. At the Effective Time, FNC
shall assume the Stock Option Plans provided that such assumption shall be
only in respect of the Replacement Options and that FNC shall have no
obligation with respect to any awards under the Stock Option Plans other than
the Replacement Options and shall have no obligation to make any additional
grants or awards under the Stock Option Plans. Prior to and at all times after
the Effective Time, FNC shall reserve for issuance such number of shares of
FNC Stock as necessary so as to permit the exercise of Replacement Options
granted in the manner contemplated by this Agreement. FNC shall file a
registration statement on Form S-8 (or an amendment to the Registration
Statement to the same effect) as soon as reasonably practicable after the
Effective Time so as to permit the exercise of such options and the sale of
the shares received by the optionee upon such exercise at and after the
Effective Time and FNC shall continue to make such filings thereafter as may
be necessary to permit the continued exercise of options and sale of such
shares; provided, however, that the parties acknowledge and agree that
"affiliates" (as described in Section 7.1(d)) of FirstBancorporation as of the
Effective Time and affiliates of FNC shall be required to comply with the
provisions of Rule 144 and Rule 145 under the Securities Act of 1933, as
amended (or any successor rules) with respect to the sale of shares of FNC
Stock acquired upon the exercise of Replacement Options.
3.7 Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, shares of FirstBancorporation Stock that are
outstanding immediately prior to the Effective Time and which are held by a
holder who shall have
35
<PAGE>
<PAGE>
properly given written notice of his intent to exercise dissenters' rights
with respect to such shares in connection with the Merger and in compliance
with Chapter 13 of the SCBCA (collectively, the "Dissenting Shares") shall not
be converted into or represent the right to receive the Merger Consideration.
Such holder shall be entitled to receive payment of the appraised value of
such Dissenting Shares held by him in accordance with the provisions of such
Chapter 13, except that all Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares under such Chapter 13 shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 3.4, of
the Old Certificates.
(b) FirstBancorporation shall give FNC (i) prompt notice of any
demands for appraisal received by FirstBancorporation, withdrawals of such
demands, and any other instruments served pursuant to the SCBCA in respect of
Dissenting Shares and received by FirstBancorporation and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for
appraisal under the SCBCA. FirstBancorporation shall not, except with the
prior written consent of FNC, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
ARTICLE IV
THE CLOSING
4.1 Closing. Upon the terms hereof and subject to the satisfaction or
waiver of the conditions set forth in Article IX, the Closing of the Merger
shall take place at the offices of FNC in Orangeburg, South Carolina on a date
specified by FNC (such date, the "Closing Date") after the expiration of any
and all required waiting periods following the effective date of required
approvals of the Merger by Regulatory Authorities (but in no event more than
10 Business Days following the expiration of all such required waiting
periods). At the Closing, the parties will execute, deliver and file all
documents necessary to effect the transactions contemplated herein, including
the Articles of Merger.
4.2 Deliveries by FirstBancorporation. At or by the Closing,
FirstBancorporation shall have caused the following documents to be executed
and delivered to FNC:
(a) the agreements, opinions, certificates, instruments and other
documents contemplated in Section 9.3; and
(b) all other documents, certificates and instruments required
hereunder to be delivered by FirstBancorporation, or as may reasonably be
requested by FNC at or prior to the Closing.
4.3 Deliveries by FNC. At or by the Closing, FNC shall have caused the
following documents to be executed and delivered to FirstBancorporation:
(a) the agreements, opinions, certificates, instruments and other
documents contemplated in Section 9.2; and
(b) all other documents, certificates and instruments required
hereunder to be delivered by FNC, or as may reasonably be requested by
FirstBancorporation at or prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FIRSTBANCORPORATION
FirstBancorporation represents and warrants to FNC as follows:
36
<PAGE>
<PAGE>
5.1 Organization, Standing and Power.
(a) Each of FirstBancorporation and First Securities Corporation is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of South Carolina, and FirstBancorporation is duly
registered as a bank holding company under the Act. Each of FirstBank and
Midlands Bank is a national banking association organized and existing under
the laws of the United States of America. Each of FirstBancorporation and the
Subsidiaries has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Each of
FirstBancorporation and the 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 where the failure to be so qualified or licensed would not
have a Material Adverse Effect on FirstBancorporation), and all such
jurisdictions are set forth on Schedule 5.1. Schedule 5.1 also lists and
separately identifies any additional jurisdictions in which
FirstBancorporation or any Subsidiary has offices or conducts business, or
where its employees are present to provide services on behalf of
FirstBancorporation or such Subsidiary, but in which such Person is not so
qualified or licensed.
(b) Each of FirstBank and Midlands Bank is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and all deposits in FirstBank and Midlands Bank are insured by the
FDIC to the maximum extent permitted by applicable Law. FirstBancorporation
has received all requisite approvals and consents of the Regulatory
Authorities to own and operate the Subsidiaries.
5.2 Authority; No Breach By Agreement.
(a) FirstBancorporation has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of its obligations under this Agreement 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 FirstBancorporation, subject only to the
adoption and approval of this Agreement by the shareholders of
FirstBancorporation. This Agreement shall constitute a legal, valid and
binding obligation of FirstBancorporation, enforceable against
FirstBancorporation in accordance with its terms (except in all cases as such
enforceability may be limited by a court acting in equity, applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
the enforcement of creditors' rights generally).
(b) Neither the execution and delivery of this Agreement by
FirstBancorporation, nor the consummation by FirstBancorporation of the
transactions contemplated hereby, nor compliance by FirstBancorporation with
any of the provisions hereof, will (i) conflict with or result in a breach of
any provision of (A) the articles of association or bylaws of FirstBank or
Midlands Bank or (B) the articles of incorporation or bylaws of
FirstBancorporation or any other Subsidiary, or (ii) except as disclosed in
Schedule 5.2 or in Schedule 5.18, 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 FirstBancorporation or any Subsidiary under, (A) any Material
Contract or Material Permit (as defined below) of FirstBancorporation or any
Subsidiary or (B) any material loan, account, note or other receivable
reflected as an asset on the books and records of FirstBancorporation and the
Subsidiaries, or (iii) subject to obtaining the requisite Consents referred to
in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
FirstBancorporation or any Subsidiary or any of their respective Assets in a
manner that would impose any material liability, obligation or limitation on
FirstBancorporation, any Subsidiary, FNC, any FNC Subsidiary or any of their
respective businesses. For purposes of this Agreement, "Material Permit" shall
mean a Permit that is necessary for a party and its subsidiaries to operate
their respective businesses as currently conducted or to own their respective
Assets.
(c) Except as disclosed in Schedule 5.2, no notice to, filing with or
Consent of any Governmental Authority by FirstBancorporation or any Subsidiary
is necessary for the consummation by FirstBancorporation of the Merger and the
other transactions contemplated in this Agreement.
(d) The affirmative vote of the holders of two-thirds of the
outstanding shares of FirstBancorporation Stock is the only vote of the
holders of any class or series of FirstBancorporation capital stock necessary
to approve this Agreement and the Merger.
37
<PAGE>
<PAGE>
5.3 Capital Stock.
(a) The authorized capital stock of FirstBancorporation consists of (i)
1,000,000 shares of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding, and (ii) 3,000,000 shares of
FirstBancorporation Stock, of which 963,325 shares are issued and outstanding
as of the date of this Agreement, which constitutes FirstBancorporation's only
issued and outstanding securities. As of the date of this Agreement, there are
Assumable Options to purchase 15,575 shares of FirstBancorporation Stock
outstanding under the Stock Option Plans and options to purchase 13,341 shares
of FirstBancorporation Stock outstanding under 1986 Bank Incentive Stock
Option Plan of The Savings Bank of Beaufort County, F.S.B., which options will
terminate upon the Effective Time of the Merger unless exercised prior thereto
(together with the Assumable Options, the "FirstBancorporation Options").
Other than the aforementioned shares of FirstBancorporation Stock and
FirstBancorporation Options, there are no outstanding warrants, options,
agreements, convertible or exchangeable securities, or other commitments
pursuant to which FirstBancorporation is or may become obligated to issue,
sell, purchase, return, or redeem any shares of capital stock or other
securities of FirstBancorporation, and there are no equity securities of
FirstBancorporation reserved for issuance for any purpose. Each outstanding
share of FirstBancorporation Stock (i) has been duly authorized and is validly
issued and outstanding, and is fully paid and nonassessable, (ii) has not been
issued in violation of the preemptive rights of any shareholder, and (iii) has
been issued in compliance with the Securities Laws.
(b) Schedule 5.3 sets forth the names of all Persons of record who own
more than 5% of the outstanding shares of FirstBancorporation Stock and the
number of shares of FirstBancorporation Stock owned by each such Person.
(c) The authorized capital stock of (A) FirstBank is (x) 1,000,000
shares of preferred stock, no par value, of which no shares are issued and
outstanding, and (y) 1,000,000 shares of common stock, par value $5.00 per
share, of which 1,000 shares are issued and outstanding and owned of record
and beneficially held entirely by FirstBancorporation, (B) Midlands Bank is
1,000,000 shares of common stock, no par value, of which 200,000 shares are
issued and outstanding and owned of record and beneficially held entirely by
FirstBancorporation, and (C) First Securities Corporation is 1,000,000 shares
of common stock, par value $.01 per share, of which 100,000 shares are issued
and outstanding and owned of record and beneficially held entirely by
FirstBank. There are no outstanding warrants, options, agreements, convertible
or exchangeable securities, or other commitments pursuant to which any
Subsidiary is or may become obligated to issue, sell, purchase, return, or
redeem any shares of capital stock or other securities of any Subsidiary, and
there are no equity securities of any Subsidiary reserved for issuance for any
purpose. Each outstanding share of capital stock of the Subsidiaries (i) has
been duly authorized and is validly issued and outstanding, and is fully paid
and nonassessable, (ii) has not been issued in violation of the preemptive
rights of any shareholder, and (iii) has been issued in compliance with the
Securities Laws.
5.4 Records. Complete and accurate copies of the articles of
incorporation or charter and bylaws of each of FirstBancorporation and the
Subsidiaries have been delivered to FNC. The stock book of each such Person
contains complete and accurate records of the record share ownership of the
issued and outstanding shares of stock thereof; provided, however, that this
sentence shall be deemed to be accurate for purposes of Section 9.3(a) unless
any such incompleteness or inaccuracy could reasonably be expected to impose a
liability or obligation on FirstBancorporation, any Subsidiary, FNC or any FNC
Subsidiary or impede, delay or prevent the consummation of the transactions
contemplated hereby.
5.5 Subsidiaries and Affiliates. Other than marketable securities
issued by Persons of which FirstBancorporation and the Subsidiaries do not, in
the aggregate, own more than 5% of the outstanding shares of voting common
stock, neither FirstBancorporation nor any Subsidiary owns, directly or
indirectly, any capital stock of or any other equity interests in any Person
other than the Subsidiaries. Neither FirstBancorporation or any Subsidiary own
any shares of FNC Stock. Schedule 5.5 sets forth all Affiliates of
FirstBancorporation or any Subsidiary.
5.6 Financial Statements. FirstBancorporation has provided or made
available to FNC complete copies of all of the Financial Statements. Each of
the Financial Statements, together with notes thereto, have been, and on the
Closing Date each of the Interim Quarterly Financial Statements will have
been, prepared in accordance
38
<PAGE>
<PAGE>
with Generally Accepted Accounting Principles and fairly present, and on the
Closing Date each of the Interim Quarterly Financial Statements will fairly
present, in all material respects the results of operations and financial
position of FirstBancorporation and the Subsidiaries for the periods and as of
the dates set forth therein (except that in respect of Interim Quarterly
Financial Statements, notes may be omitted and such statements may be subject
to normal recurring year-end adjustments). Each of the Interim Monthly
Financial Statements will be prepared in the ordinary course of business
consistent with past practices.
5.7 Tax Matters. Each of FirstBancorporation and the Subsidiaries has
timely filed (including extension periods) all Tax Returns required to be
filed for any period ending on or before the date hereof, or if applicable,
any period that includes such date. All such Tax Returns are correct and
complete in all material respects. Each of FirstBancorporation and the
Subsidiaries has timely paid or will timely pay or cause to be paid all Taxes
(whether or not shown on any Tax Return) when due to any taxing authority with
respect to all such periods. Neither FirstBancorporation nor any of the
Subsidiaries has received written notice that the Internal Revenue Service or
any other taxing authority has asserted against FirstBancorporation or any of
the Subsidiaries any deficiency or claim for additional Taxes in connection
therewith which could reasonably result in a material liability to
FirstBancorporation or FNC and neither FirstBancorporation nor any of the
Subsidiaries reasonably expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. Neither
FirstBancorporation nor any of the Subsidiaries has filed a consent under Code
Section 341(f) concerning collapsible corporations. Neither
FirstBancorporation nor any of the Subsidiaries has made any payments, nor is
it obligated to make any payments, nor is it a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. Neither FirstBancorporation nor any
of the Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). To the Knowledge of
FirstBancorporation, each of FirstBancorporation and the Subsidiaries has
disclosed on the federal Income Tax Returns of FirstBancorporation and the
Subsidiaries all positions taken therein that could give rise to a substantial
understatement of federal Income Taxes within the meaning of Code Section
6662. Neither FirstBancorporation nor any of the Subsidiaries has been a
member of an affiliated group (as defined by the Code) filing a consolidated
federal income tax return with any Person other than FirstBancorporation or
the Subsidiaries nor does it have any liability for the Income Taxes of any
Person other than FirstBancorporation and the Subsidiaries under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract, or otherwise. The books and records of
FirstBancorporation and each of the Subsidiaries accurately and completely set
forth in all material respects the basis of FirstBancorporation and the
Subsidiaries in its assets and the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to FirstBancorporation or the Subsidiaries,
all as of December 31, 1998. The unpaid Income Taxes of FirstBancorporation
and the Subsidiaries did not, as of December 31, 1998, exceed in any material
respect the reserve for tax liability (rather than any reserve for deferred
taxes established to reflect timing differences between book and tax income)
set forth on the balance sheet as of such date contained in the Financial
Statements, and any such unpaid Income Taxes do not exceed in any material
respect that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past practices of FirstBancorporation in filing
its Income Tax returns. Neither FirstBancorporation nor any of the
Subsidiaries has been granted nor has FirstBancorporation or any of the
Subsidiaries been given any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of any Tax. All deposits
required by law to be made by FirstBancorporation or the Subsidiaries with
respect to employees' withholding taxes have been made. Each of
FirstBancorporation and the Subsidiaries has withheld and paid in all material
respects all Taxes required to have been withheld and paid in connection with
the amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party. There are no Liens for the payment of Taxes
on any assets of FirstBancorporation or any of the Subsidiaries except for
statutory Liens for property Taxes that are not past due as to payment. There
are no disputes or claims pending against FirstBancorporation or any of the
Subsidiaries for past due Taxes in a material amount, and, to the Knowledge of
FirstBancorporation, there is no claim or dispute threatened against
FirstBancorporation or any of the Subsidiaries, or any basis for such a claim
or dispute, for past due Taxes. During the past five years, no such claim has
been made by an authority in a jurisdiction where FirstBancorporation or any
of the Subsidiaries does not file Tax Returns. As of the date hereof, there
are not any matters under discussion with any federal, state, local or other
authority with respect to any additional Taxes relating to FirstBancorporation
or any of the Subsidiaries. All amounts required to be paid by
FirstBancorporation or any of the Subsidiaries as estimated Income Taxes under
Code Section 6655, and any comparable provisions of state or local statutes,
have been duly paid, except where the failure to make such payment would not,
individually or in the aggregate with other such
39
<PAGE>
<PAGE>
nonpayments, result in a material liability to FirstBancorporation or FNC.
There are no tax rulings, requests for rulings or closing agreements relating
to FirstBancorporation or any of the Subsidiaries that could affect its
liability for Income Taxes for any period after the Closing Date. Any
adjustment of Taxes of FirstBancorporation or any of the Subsidiaries made by
the Internal Revenue Service in any examination which is required to be
reported to state, foreign, or local taxing authorities has been so reported
and any additional Taxes due with respect thereto have been paid. To the
Knowledge of FirstBancorporation, there are no facts that, if known to any
taxing authority, would likely result in the issuance of a notice of proposed
deficiency or similar notice of intention to assess Income Taxes in any
material amount against FirstBancorporation or any of the Subsidiaries.
Neither FirstBancorporation nor any of the Subsidiaries has taken any action
not in accordance with its past practices that would have the effect of
deferring any tax liability for FirstBancorporation or any of the Subsidiaries
from any taxable period ending on or before the Closing Date to any taxable
period ending after the Closing Date. No material amount of income recognized,
for federal, state, local or foreign Income Tax purposes, by
FirstBancorporation or any of the Subsidiaries during the period beginning
January 1, 1999 and ending on the Closing Date will be derived other than in
the ordinary course of business or arise from transactions of a type not
reflected on the relevant return for the taxable period ending on December 31,
1998. Neither FirstBancorporation nor any of the Subsidiaries has any deferred
gain or loss arising from deferred intercompany transactions (as described in
Section 1.1502-13 of the Treasury Regulations) with respect to the stock or
obligations of any other member of FirstBancorporation's or any of the
Subsidiaries' affiliated group (as described in Section 1.1502-14 of the
Treasury Regulations). No property of FirstBancorporation or any of the
Subsidiaries is "tax exempt use property" within the meaning of Section 168(h)
of the Code. Except as set forth on Schedule 5.7, neither FirstBancorporation
nor any of the Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code (or similar provisions of other law or
regulation) by reason of a change in an accounting method, nor does
FirstBancorporation or any of the Subsidiaries have any knowledge that the
Internal Revenue Service (or other taxing authority) has proposed or is
considering any such change in an accounting method. Neither
FirstBancorporation nor any of the Subsidiaries is a party to an interest rate
swap, currency swap, or similar transaction. Neither FirstBancorporation nor
any of the Subsidiaries has any corporate acquisition indebtedness, as defined
in Section 279(b) of the Code, or any obligations described in Section
279(a)(2) of the Code. The accruals for deferred federal income taxes
reflected in the Financial Statements for the period ended December 31, 1998
are adequate to cover any deferred income tax liability of FirstBancorporation
and each of the Subsidiaries determined in accordance with Generally Accepted
Accounting Principles through the date thereof. All Income Taxes as to which
FirstBancorporation and each of the Subsidiaries may be liable which relate to
a period ending on or before December 31, 1998 have been adequately accrued or
reserved in the Financial Statements as of such date in accordance with
Generally Accepted Accounting Principles.
5.8 Real Property.
(a) Schedule 5.8 lists all Real Property owned or leased by
FirstBancorporation or any of the Subsidiaries as of the date hereof,
separately listing that which is owned and that which is leased and whether it
is owned or leased by FirstBancorporation or one of the Subsidiaries. Except
as indicated on Schedule 5.8, with respect to all Real Property owned by
FirstBancorporation or any of the Subsidiaries, FirstBancorporation or the
Subsidiary, as the case may be, has good and marketable fee simple title to
such Real Property and owns the same free and clear of all Liens (other than
Permitted Liens). Except as set forth on Schedule 5.8, with respect to all
Real Property leased by FirstBancorporation or any of the Subsidiaries: (i)
each lease of Real Property is valid and enforceable in accordance with its
terms in all material respects, (ii) there exists no material Default by
FirstBancorporation or any of the Subsidiaries under such lease, and (iii)
each such lease may be assigned to FNC and the FNC Subsidiaries, and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not create a material Default
thereunder. All improvements and fixtures in or on the Real Property owned or
leased by FirstBancorporation or any of the Subsidiaries are in good condition
and repair, ordinary wear and tear excepted, and to the Knowledge of
FirstBancorporation, there does not exist any condition that interferes with
FirstBancorporation's or the Subsidiaries', as the case may be, use or affects
the economic value thereof.
(b) The Real Property owned or leased by FirstBancorporation or any of
the Subsidiaries substantially complies with all applicable federal, state and
local laws, regulations, ordinances or orders of any Governmental Authority,
including those relating to zoning, building and use permits, and such Real
Property as is currently used for commercial banking facilities may be so used
under applicable zoning ordinances as a matter of right rather than as a
conditional or nonconforming use.
40
<PAGE>
<PAGE>
5.9 Assets. Except as disclosed on Schedule 5.9, each of
FirstBancorporation and the Subsidiaries has good and marketable title, free
and clear of all Liens (other than Permitted Liens), to all of their
respective owned material Assets. All material tangible personal properties
used in the business of FirstBancorporation or any of the Subsidiaries are in
good condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business consistent with FirstBancorporation's or the
Subsidiary's past practices. All material Assets held under leases or
subleases by FirstBancorporation or any of the Subsidiaries are held under
valid Contracts enforceable in accordance with their respective terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The Assets of FirstBancorporation
and the Subsidiaries include all assets required to operate the business of
FirstBancorporation and the Subsidiaries as presently conducted.
5.10 Intellectual Property Rights.
(a) Each of FirstBancorporation and the Subsidiaries owns all right,
title and interest to, free and clear of all Liens (other than Permitted
Liens), or has the legally enforceable right to use (pursuant to license,
sublicense, agreement or permission), free and clear of all Liens (other than
Permitted Liens), all Intellectual Property currently used in or necessary to
its business as currently conducted, except where the failure to have any such
right would not, individually or in the aggregate with all other such
failures, have a Material Adverse Effect on FirstBancorporation. All
registered trademarks and patents owned or used by FirstBancorporation or any
of the Subsidiaries (together with any application therefor) and all trade
names, copyrights and processes used by FirstBancorporation or any of the
Subsidiaries are listed on Schedule 5.10. Except as disclosed on Schedule
5.10, neither FirstBancorporation nor any of the Subsidiaries has pledged,
mortgaged, assigned, licensed, granted permission with respect to or otherwise
transferred any such Intellectual Property to any third party. Except as set
forth on Schedule 5.10, none of FirstBancorporation's or the Subsidiaries'
rights with respect to any such Intellectual Property will be terminated,
limited or otherwise affected by its execution of this Agreement or its
consummation of the transactions contemplated by this Agreement, except where
any such termination, limitation or affect would not, individually or in the
aggregate with all other such terminations, limitations or affects, have a
Material Adverse Effect on FirstBancorporation.
(b) Neither FirstBancorporation nor any of the Subsidiaries has
received, or has reason to believe that it will not continue to receive, a
rating of less than "satisfactory" on any Year 2000 Report of Examination of
any Regulatory Authority. FirstBancorporation has made available to FNC a
complete and accurate copy of its plan, including an estimate of the
anticipated associated costs, for addressing the issues set forth in the
statements of the FFIEC dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," and December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk," as such issues affect it
and the Subsidiaries, and such plan is in material compliance with the
schedule set forth in the FFIEC statements. Except as set forth on Schedule
5.10, to the Knowledge of FirstBancorporation, there are no issues with
respect to its or the Subsidiaries hardware and software systems that would
prevent it or the Subsidiaries from being Year 2000 compliant in a timely
manner, except where any such issue would not, individually or in the
aggregate with all other such issues, have a Material Adverse Effect on
FirstBancorporation.
5.11 Loans, Accounts, Notes and Other Receivables; Loan Collateral.
(a) All loans, accounts, notes and other receivables reflected as
assets on each of FirstBancorporation's and the Subsidiaries' books and
records (i) have resulted from bona fide business transactions in the ordinary
course of such Person's operations, (ii) were to the Knowledge of
FirstBancorporation made in compliance with such Person's standard loan
policies and procedures, and (iii) are owned by such Person free and clear of
all Liens (other than Permitted Liens), or other exceptions to title or to the
ownership or collection rights of any other person or entity.
(b) All records of FirstBancorporation and the Subsidiaries regarding
all outstanding loans, accounts, notes and other receivables are accurate in
all material respects, and with respect to each loan that
FirstBancorporation's or any of the Subsidiaries' loan documentation indicates
is secured by Loan Collateral, to the
41
<PAGE>
<PAGE>
Knowledge of FirstBancorporation such loan is secured by valid, perfected and
enforceable liens on all such Loan Collateral having the priority described in
such Person's documentation of such loan.
(c) Each material loan reflected as an asset on FirstBancorporation's
or any of the Subsidiaries' books as of the date hereof, and each material
guaranty therefor, is the legal, valid and binding obligation of the obligor
or guarantor thereon, and no defense, offset or counterclaim has been asserted
with respect to any such loan or guaranty.
(d) Schedule 5.11 lists as of the date hereof: (i) each loan,
extension of credit or other Asset that is classified by any Regulatory
Authority or FirstBancorporation or any of the Subsidiaries as "Loss",
"Doubtful", "Substandard" or "Special Mention" (or otherwise by words of
similar import) or that FirstBancorporation or any of the Subsidiaries has
designated as a special asset or for special handling or placed on any "watch
list" because of concerns regarding the ultimate collectibility or
deteriorating condition of such Asset or any obligor or Loan Collateral
therefor; and (ii) each loan or extension of credit of FirstBancorporation or
any of the Subsidiaries that is past due 30 days or more as to the payment of
principal and/or interest, or as to which FirstBancorporation or any
Subsidiary has given written notice of default which has not been cured, or is
to the Knowledge of FirstBancorporation the subject of a proceeding in
bankruptcy, or as to which the obligor otherwise has indicated any inability
or intention not to repay such loan or extension of credit.
(e) Each of the loans and other extensions of credit by
FirstBancorporation or any of the Subsidiaries (with the exception of those
loans and extensions of credit listed on Schedule 5.11) is as of the date
hereof to the Knowledge of FirstBancorporation collectible in the ordinary
course of such Person's business in an amount that is not less than the amount
at which it is carried on such Person's books and records net of reserves
reflected on such Person's books and records.
(f) Each of FirstBancorporation's and the Subsidiaries' reserve for
possible loan losses shown in the Financial Statements and the Interim
Quarterly Financial Statements (i) has been (or will be in the case of the
Interim Quarterly Financial Statements) established in conformity with
Generally Accepted Accounting Principles and all applicable requirements of
applicable Regulatory Authorities, (ii) in the reasonable opinion of such
Person's management, as of the respective dates referenced therein, is (or
will be in the case of the Interim Quarterly Financial Statements) reasonable
in view of the size and character of such Person's loan portfolio, current
economic conditions and other relevant factors, and (iii) in the reasonable
opinion of such Person's management, as of the respective dates referenced
therein, is (or will be in the case of the Interim Quarterly Financial
Statements) adequate to provide for losses relating to or the risk of loss
inherent in such Person's loan portfolio.
(g) Neither the terms of any loan made by FirstBancorporation or any
of the Subsidiaries, nor any of the loan documentation, nor the manner in
which such loans have been administered and serviced, violates in any material
respect any Law applicable thereto, including without limitation, the
Truth-in-Lending Act, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, Regulations O and Z of the Federal Reserve Board, the
Community Reinvestment Act of 1977, the Equal Credit Opportunity Act, all as
amended, and state laws, rules and regulations relating to consumer
protection, installment sales and usury, except where any such violation would
not, individually or in the aggregate with all other such violations, have a
Material Adverse Effect on FirstBancorporation.
5.12 Securities Portfolio and Investments. All securities owned by
FirstBancorporation or any of the Subsidiaries (whether owned of record or
beneficially) are held free and clear of all Liens (other than Permitted
Liens). There are no voting trusts or other agreements or undertakings to
which FirstBancorporation or any of the Subsidiaries is a party with respect
to the voting of any such securities. Except for fluctuations in the market
values of United States Treasury and agency or municipal securities, since
December 31, 1998, there has been no significant deterioration or material
adverse change in the quality, or any material decrease in the value, of the
securities portfolio of FirstBancorporation and the Subsidiaries, taken as a
whole.
5.13 Environmental Matters.
(a) All of the Real Property owned or leased by FirstBancorporation or
any Subsidiary and all of the Loan Collateral that is in the nature of real
property is and has been in compliance with all Environmental Laws,
42
<PAGE>
<PAGE>
except where any such noncompliance would not, individually or in the
aggregate with all other such noncompliances, have a Material Adverse Effect
on FirstBancorporation.
(b) As of the date hereof, there is no Litigation pending or, to the
Knowledge of FirstBancorporation, threatened, before any court, Governmental
Authority, board or other forum relating to the Real Property owned or leased
by FirstBancorporation or any Subsidiary or any Loan Collateral that is in the
nature of real property in which FirstBancorporation or any Subsidiary has
been or may be named as a defendant or potentially responsible party (i) for
alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material, and to the Knowledge of FirstBancorporation there is no reasonable
basis for any such Litigation.
(c) There have been no releases of Hazardous Materials in, on, under
or affecting any of the Real Property owned or leased by FirstBancorporation
or any Subsidiary or any Loan Collateral that is in the nature of real
property, except where any such release would not, individually or in the
aggregate with all other such releases, have a Material Adverse Effect on
FirstBancorporation.
5.14 Compliance with Laws. Each of FirstBancorporation and the
Subsidiaries has in effect all Permits required for it to own, lease, or
operate its Assets and to carry on its business as now conducted, and there
has occurred no Default under any Material Permit. Except as disclosed in
Schedule 5.14, neither FirstBancorporation nor any of the Subsidiaries: (i) is
in material violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business; and (ii) has since December 31,
1995, received any notification or communication from any Governmental
Authority (A) asserting that it is in material violation of any of the Laws or
Orders that such Governmental Authority enforces, (B) threatening to revoke
any Permits, or (C) requiring it to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or to adopt any resolution or similar undertaking that
restricts the conduct of its business or in any manner relates to its capital
adequacy, its credit or reserve policies, its management or the payment of
dividends.
5.15 Labor Relations; Employment Matters.
(a) Neither FirstBancorporation nor any of the Subsidiaries is party
to any collective bargaining agreement, nor is it the subject of any
Litigation seeking to compel it to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other labor
dispute involving FirstBancorporation or any of the Subsidiaries pending or
threatened, and to the Knowledge of FirstBancorporation, there is no activity
involving FirstBancorporation's or any of the Subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other organization
activity.
(b) Except as set forth in Schedule 5.15, there are no obligations
(including obligations under any loans) payable or owing by
FirstBancorporation or any Subsidiary to any Affiliates, officers, directors,
or employees of FirstBancorporation or any Subsidiary or any of their
Affiliates, except salaries, wages, bonuses and salary advances, benefits and
reimbursement of expenses incurred and accrued in the ordinary course of
business, nor are there any obligations (including obligations under any
loans) payable or owing by any such Persons or their Affiliates to
FirstBancorporation or any Subsidiary, nor has FirstBancorporation or any
Subsidiary guaranteed any of such Persons' loans or obligations to any Person;
provided, however, that the foregoing representation and warranty shall only
apply to material obligations payable or owing by FirstBancorporation or any
Subsidiary to, and material obligations payable or owing by, employees of
FirstBancorporation or any Subsidiary who are not Affiliates, officers or
directors of FirstBancorporation or any Subsidiary. Except as set forth in
Schedule 5.15, each employee of FirstBancorporation and each Subsidiary is
employed on an "at-will" basis, and there are no employment agreements or
similar arrangements with any such employees.
(c) Each of FirstBancorporation and the Subsidiaries is in substantial
compliance with all laws and other obligations relating to employment, denial
of employment or employment opportunity and termination of employment.
(d) There is no controversy pending or, to the Knowledge of
FirstBancorporation, threatened between FirstBancorporation or any of the
Subsidiaries and any of its present or former officers, directors, supervisory
43
<PAGE>
<PAGE>
personnel or any group of its employees, except where any such controversy
would not, individually or in the aggregate with all other such controversies,
have a Material Adverse Effect on FirstBancorporation.
5.16 Employee Benefit Plans; ERISA.
(a) Schedule 5.16 identifies each Benefit Plan by name and ERISA plan
number, if any. Neither FirstBancorporation nor any of the Subsidiaries has a
formal plan or commitment nor has it made an announcement of its intentions,
whether or not legally binding, to create any additional Benefit Plan or
modify or change any existing Benefit Plan except as specifically contemplated
by this Agreement. With respect to each Benefit Plan, a true and complete copy
of each of the following has been delivered to FNC:
(i) the written Benefit Plan, if any (including all amendments
thereto);
(ii) the annual returns or reports (including, without
limitation, reports on the Form 5500 series, including all attachments
thereto), if required under ERISA or the Code, for the three most recent plan
years with filing deadlines prior to the date of the Agreement or for which
returns have actually been prepared or filed prior to the date of the
Agreement and a copy of each summary annual report with respect to each such
annual report;
(iii) the most recent summary plan description, if any,
together with each subsequent summary of material modifications, required
under ERISA, and all other material employee communications;
(iv) all written rules, regulations, procedures and
interpretations, if any, for such Benefit Plan;
(v) if such Benefit Plan is funded through a trust or other
funding arrangement, including insurance contracts, the trust or other funding
agreement (including all amendments thereto) and the latest financial
statements thereof;
(vi) all contracts relating to such Benefit Plan with respect
to which it may have any liability, including, without limitation, insurance
contracts, investment management agreements, subscription and participation
agreements, administration agreements and record keeping agreements;
(vii) if such Benefit Plan is intended to be qualified under
Section 401(a) of the Code, (A) the most recent determination letter received
from the Internal Revenue Service, (B) each subsequent determination letter,
and (C) complete copies of the determination letter applications (including
attachments and cover letters) for such determination letters; and
(viii) all rulings, opinion letters, information letters or
advisory opinions issued by the Internal Revenue Service or the United States
Department of Labor within the ten-year period prior to the date of this
Agreement.
(b) Prohibited Transactions. No prohibited transaction (as defined in
Section 4975 of the Code or Section 406 of ERISA) or transaction that would
violate Section 404 of ERISA has occurred with respect to any Benefit Plan
which is an "employee benefit plan" as defined in Section 3(3) of ERISA in
connection with which FirstBancorporation or any of the Subsidiaries or any of
their respective officers, directors or employees would be subject, directly
or indirectly, to any tax, penalty or liability to any person for prohibited
transactions or breach of fiduciary responsibility under ERISA or the Code
(including, without limitation, liability for a breach of fiduciary
responsibility by a cofiduciary pursuant to Section 405 of ERISA).
(c) Funding. Except as disclosed on Schedule 5.16, full payment has
been made of all amounts that each of FirstBancorporation and the Subsidiaries
is required to have paid under the terms of each Benefit Plan and applicable
law (including any employee salary deferral contributions described in Section
125 or 401(k) of the Code).
44
<PAGE>
<PAGE>
(d) Compliance with Applicable Law. (i) Each Benefit Plan that is
subject to Title I of ERISA conforms to, and its administration is in
substantial compliance with, applicable federal laws, including but not
limited to ERISA; (ii) each Benefit Plan that is intended to be qualified
under Section 401(a) of the Code meets all of the applicable operational
requirements for qualification and meets all of the plan document requirements
for qualification that are required to be included in the plan document as of
the Closing Date, and either a favorable determination letter has been
received or has been applied for, and nothing has occurred since the most
recent favorable determination letter that would adversely affect such
qualification; (iii) each Benefit Plan that includes a cash or deferred
arrangement described in Section 401(k) of the Code has been administered in
accordance with all applicable requirements of Section 401(k) and the Treasury
Regulations issued thereunder; and (iv) each Benefit Plan that includes a
cafeteria plan described in Section 125 of the Code has been administered in
accordance with all applicable requirements of Section 125 and the Treasury
Regulations issued thereunder. There is no pending or, to the Knowledge of
FirstBancorporation, threatened action, claim or proceeding against or with
respect to any Benefit Plan by the Internal Revenue Service, the Department of
Labor, the Equal Employment Opportunity Commission, or any participant,
beneficiary or any other person or entity involving any aspect of the Benefit
Plans (other than routine benefit claims), nor to the Knowledge of
FirstBancorporation are there any facts that could form the basis for any such
action, claim or proceeding. The reporting and disclosure requirements of the
Code and ERISA, the bonding requirements of ERISA, and other provisions
applicable to the Benefit Plans have been fully complied with in all material
respects.
(e) Multiemployer Plans; Pension Plans. Neither FirstBancorporation
nor any of the Subsidiaries participates in or contributes to, nor has it ever
participated in or contributed to, any "multiemployer plan." Except as
disclosed on Schedule 5.16, neither FirstBancorporation nor any of the
Subsidiaries maintains nor has ever maintained an "employee pension benefit
plan" as defined in Section 3(2) of ERISA that is subject to Title IV of
ERISA.
(f) Effect of Agreement. Except as disclosed on Schedule 5.16, the
execution and performance of this Agreement will not result in any (i) payment
(whether retirement benefits, severance pay, unemployment compensation,
"change-in-control" payment or otherwise) becoming due from
FirstBancorporation, any Subsidiary, FNC or any FNC Subsidiary to any
employee, former employee or director of FirstBancorporation or any of the
Subsidiaries, (ii) increase in benefits otherwise payable under any Benefit
Plan, or (iii) acceleration of the time of payment or vesting of any such
benefits. No amounts payable by FirstBancorporation, any Subsidiary, FNC or
any FNC Subsidiary to any officer, employee or director of FirstBancorporation
or any of the Subsidiaries under any Benefit Plan in connection with the
transactions contemplated hereby will fail to be deductible for federal income
tax purposes by virtue of Section 280G or Section 162(m) of the Code.
(g) Benefits for Former Employees. Except as disclosed on Schedule
5.16, no Benefit Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees beyond retirement or other termination of service other than (i)
coverage mandated by Section 4980B of the Code, Part 6 of Subtitle B of Title
I of ERISA and Title XXII of the Public Health Service Act (collectively,
"COBRA"); (ii) death benefits or retirement benefits under any Benefit Plan
qualified under Section 401(a) of the Code; (iii) disability benefits under
any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) that
have been fully provided for by insurance or otherwise; (iv) deferred
compensation benefits accrued as liabilities on the books of
FirstBancorporation or any of the Subsidiaries; or (v) benefits the full cost
of which is borne by the current or former employee (or his or her
beneficiary). Each Benefit Plan that is subject to the provisions of COBRA has
been, and as of the Closing Date will have been, maintained in compliance with
the provisions of COBRA.
5.17 Insurance. Schedule 5.17 lists all of the insurance policies
involving a one-time or annual premium payment in excess of $10,000 (the
"Policies") maintained by each of FirstBancorporation and the Subsidiaries,
and for each indicates the insurer's name, policy number, expiration date and
amount and type of coverage. The Policies provide coverage in such amounts and
against such liabilities, casualties, losses or risks as is customary or
reasonable for entities engaged in FirstBancorporation's or the Subsidiary's,
as the case may be, business or as is required by applicable law or
regulations. Each of the Policies is in full force and effect and is valid and
enforceable in accordance with its terms, and is underwritten by an insurer of
recognized financial responsibility and qualified to transact business in
South Carolina. FirstBancorporation or the Subsidiary, as the case may be, has
taken all requisite actions (including the giving of required notices) under
each such Policy in order
45
<PAGE>
<PAGE>
to preserve all rights thereunder with respect to all matters, and the
coverage of all such Policies will not be restricted as a result of the
transactions contemplated hereby. Neither FirstBancorporation nor any of the
Subsidiaries is in Default under the provisions of any Policy, nor has it
received notice of cancellation, nonrenewal, reduction or elimination of
coverage, or premium increase with respect to any Policy, except as set forth
in Schedule 5.17. There has been no failure to pay any premium on any Policy,
and there have been no material inaccuracies or misstatements in any
application for any Policy. There are no material pending claims with respect
to any Policy that are not fully covered by insurance maintained by
FirstBancorporation or any Subsidiary (subject only to deductible amounts),
and to the Knowledge of FirstBancorporation, there exists no state of facts
and there is no anticipated event the occurrence of which is reasonably likely
to form the basis for any such claim.
5.18 Contracts.
(a) Schedule 5.18(a) sets forth each Contract (other than Contracts
evidencing loans or other extensions of credit, deposit liabilities, purchases
of federal funds, Federal Home Loan Bank or Federal Reserve Bank advances and
trade payables, in each case entered into in the ordinary course of business
consistent with past practices) to which FirstBancorporation or any Subsidiary
is a party or by which it or its Assets are bound that (i) is not terminable
in writing without penalty on 30 days' notice or less and involves an annual
obligation to or by FirstBancorporation or any Subsidiary exceeding $10,000,
(ii) relates to the borrowing of money by FirstBancorporation or any
Subsidiary or the guarantee by FirstBancorporation or any Subsidiary of any
obligation for borrowed money, (iii) is a lease of Real Property by
FirstBancorporation or a Subsidiary, or (iv) is otherwise material to
FirstBancorporation's or any Subsidiary's business or its Assets (other than
documentation regarding lending transactions) (such Contracts set forth on
Schedule 5.18(a) being referred to herein as the "Material Contracts"). With
respect to each Material Contract, except as noted on Schedule 5.18(a), (i)
such Material Contract is in full force and effect; (ii) no party thereto is
in Default thereunder; (iii) no party thereto has repudiated or waived any
material provision thereof; and (iv) a complete copy thereof, including all
amendments thereto, has been delivered to FNC. Except as noted on Schedule
5.18(a), with respect to any Material Contract under which FirstBancorporation
or any of the Subsidiaries is indebted for money borrowed, such indebtedness
is prepayable at any time by FirstBancorporation or the Subsidiary, as the
case may be, without penalty or premium.
(b) Schedule 5.18(b) sets forth each Material Contract to which
FirstBancorporation or any of the Subsidiaries is a party or by which it or
its Assets are bound, the terms of which (i) prevent or restrict the
assignment of such Material Contract by FirstBancorporation or any Subsidiary,
and define assignment to include a change in control of FirstBancorporation or
any Subsidiary, the merger or consolidation of FirstBancorporation or any
Subsidiary with another entity or other similar dispositions of
FirstBancorporation or any Subsidiary, (ii) will be or are likely to be
violated by the consummation of the transactions contemplated herein, or (iii)
otherwise make the Consent of one or more other parties to such Material
Contract necessary or desirable in connection with the transactions
contemplated herein.
5.19 Legal Proceedings. Except as listed on Schedule 5.19, as of the
date hereof, there is no Material Litigation (as defined below) instituted or
pending or, to the Knowledge of FirstBancorporation, threatened against
FirstBancorporation or any of the Subsidiaries or against any of their
respective Assets, and there are no Orders outstanding against or unsatisfied
by FirstBancorporation or any of the Subsidiaries or against any of their
respective Assets. For purposes of this Agreement, "Material Litigation" shall
mean (i) any Litigation involving a claim for equitable relief or monetary
damages in excess of $10,000, (ii) any Litigation commenced by, or involving,
any Governmental Authority and (iii) any other Litigation that in the
reasonable opinion of FirstBancorporation is material to its business and
operations. FirstBancorporation shall provide FNC with notice of all Material
Litigation and Orders arising after the date hereof.
5.20 Absence of Other Liabilities. Except as disclosed on Schedule
5.20, neither FirstBancorporation nor any of the Subsidiaries has any
Liabilities other than (i) Liabilities reserved against or otherwise disclosed
in the Financial Statements or the notes to the Financial Statements, and (ii)
Liabilities incurred after December 31, 1998 in the ordinary course of
business consistent (in amount and kind) with past practice or Liabilities
incurred in accordance with the specific terms of this Agreement (and
transaction fees and expenses not materially in excess of the estimates set
forth in Schedule 1.1). Except as disclosed in Schedule 5.20, no facts or
circumstances exist that would reasonably be expected to serve as the basis
for any other Liabilities of FirstBancorporation or any of the Subsidiaries
that would be required to be disclosed on Schedule 5.20.
46
<PAGE>
<PAGE>
5.21 Absence of Changes or Events. Since December 31, 1998, neither
FirstBancorporation nor any Subsidiary has: (i) issued any shares of its
capital stock or declared, set aside or paid any dividend or distribution with
respect to shares of its capital stock other than the issuance of shares
pursuant to the exercise of FirstBancorporation Options and dividends and
distributions to FirstBancorporation by the Subsidiaries; (ii) made any
material changes in any Benefit Plan; (iii) granted or made any commitments
with respect to any increases in any form of compensation to its employees
except in the ordinary course of business consistent with past practices; (iv)
entered into any Material Contract or conducted its business other than in the
ordinary course of business consistent with past practices and this Agreement;
or (v) suffered any Material Adverse Effect.
5.22 Reports.
(a) Since December 31, 1995, FirstBancorporation has filed on a timely
basis all reports, registrations and statements, together with any amendments,
that it was required to file with the SEC, including without limitation Forms
10-KSB, Forms 10-QSB and proxy statements (collectively, the "SEC Reports").
As of their respective dates, the SEC Reports complied in all material
respects with all of the rules and regulations promulgated by the SEC and did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Each of FirstBancorporation and the Subsidiaries has filed and
delivered or made available to FNC to the extent permitted by Law all forms,
reports, statements and documents, together with any amendments required to be
made with respect thereto, required to be filed by such Person with the OCC,
the FDIC and the Board of Governors of the Federal Reserve System and any
other Regulatory Authority since December 31, 1995 (other than the SEC
Reports) (collectively, the "Regulatory Reports"). The Regulatory Reports at
the time filed and amended were in all material respects accurate and complete
and complied in all material respects with all applicable Laws and the other
requirements applicable thereto. As of its respective date, each such
Regulatory Report did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(c) None of the information supplied or to be supplied by
FirstBancorporation or any of the Subsidiaries in writing for inclusion in any
document to be filed by FNC or FirstBancorporation or any of the Subsidiaries
with the OCC, the FDIC, the Board of Governors of the Federal Reserve System
or any other Regulatory Authority in connection with the actions contemplated
hereby is or will be false or misleading with respect to any material fact,
nor does it or will it omit to state any material fact necessary to make such
information not misleading. All documents that FirstBancorporation or any of
the Subsidiaries is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.23 Accounting, Tax and Regulatory Matters. Neither
FirstBancorporation nor any of the Subsidiaries has taken any action, and to
the Knowledge of FirstBancorporation there is no fact or circumstance, that is
reasonably likely to (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.24 Charter Provisions. Each of FirstBancorporation and the
Subsidiaries has taken all action so that the entering into of this Agreement
and the consummation of the Merger and the other transactions contemplated by
this Agreement do not and will not result in the grant of any rights to any
Person under the articles of incorporation, articles of association, bylaws,
or other governing instruments of FirstBancorporation and the Subsidiaries or
restrict or impair the ability of FNC or any FNC Subsidiary to vote or
otherwise to exercise the rights of a shareholder with respect to shares of
FirstBancorporation and the Subsidiaries that may be directly or indirectly
acquired or controlled by it.
47
<PAGE>
<PAGE>
5.25 Certain Regulated Businesses. Neither FirstBancorporation nor any
of the Subsidiaries is an "investment company" as defined in the Investment
Company Act of 1940, as amended, nor is it a "public utility holding company"
as defined in the Public Utility Holding Company Act of 1935, as amended.
5.26 Commissions. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees from FirstBancorporation or any
Subsidiary in connection with the transactions contemplated hereby by reason
of any action taken by FirstBancorporation, any of the Subsidiaries or any of
FirstBancorporation's shareholders other than the payment of fees to RP
Financial LC in an amount not to exceed $42,500, plus reasonable out-of-pocket
expenses.
5.27 Registration Statement; Joint Proxy Statement/Prospectus. Subject
to the accuracy of the representations contained in Section 6.10, the
information supplied by FirstBancorporation or any Subsidiary in writing for
inclusion in the registration statement (the "Registration Statement")
covering the shares of FNC Stock to be issued pursuant to this Agreement shall
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
joint proxy statement/prospectus that may be sent to the shareholders of FNC
to consider the Merger and the issuance of shares of FNC Stock in connection
with the Merger (if the Merger is structured as a merger of
FirstBancorporation with and into FNC as provided by Section 2.1 of this
Agreement), and that will be sent to the shareholders of FirstBancorporation
in connection with the meeting of the shareholders of FirstBancorporation to
consider the Merger (all such meetings collectively, the "Shareholder
Meetings") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "Joint Proxy Statement/Prospectus") will not, on the
date the Joint Proxy Statement/Prospectus is first mailed to shareholders, at
the time of the Shareholder Meetings and at the Effective Time, (a) contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (b) contain any statement which (i)
at the time and in light of the circumstances under which it was made is false
or misleading with respect to any material fact or (ii) omits to state any
material fact necessary to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Shareholder Meetings which has
become false or misleading. If at any time prior to the Effective Time any
event relating to FirstBancorporation or any Subsidiary or any of their
Affiliates, officers or directors should be discovered by FirstBancorporation
or any Subsidiary which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/
Prospectus, FirstBancorporation will promptly inform FNC. The Joint Proxy
Statement/Prospectus shall comply in all material respects with the
requirements of the Securities Laws. Notwithstanding the foregoing, neither
FirstBancorporation nor any Subsidiary makes any representation or warranty
with respect to any information supplied by FNC or any FNC Subsidiary which is
contained or incorporated by reference in, or furnished in connection with the
preparation of, the Registration Statement or the Joint Proxy Statement/
Prospectus.
5.28 Takeover Laws. FirstBancorporation has taken all actions required
to be taken by it in order to exempt this Agreement and the transactions
contemplated hereby from the requirements of any Takeover Laws applicable to
FirstBancorporation and the Subsidiaries.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FNC
FNC represents and warrants to FirstBancorporation as follows:
6.1 Organization.
(a) FNC is a corporation duly organized, validly existing and in good
standing under the Laws of the State of South Carolina, and is duly registered
as a bank holding company under the Act. Each of the FNC Subsidiaries is a
national banking association organized and existing under the laws of the
United States of America. Each of FNC and the FNC Subsidiaries has the
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its Assets.
48
<PAGE>
<PAGE>
(b) Each FNC Subsidiary is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and all
deposits in the FNC Subsidiaries are insured by the FDIC to the maximum extent
permitted by applicable Law.
6.2 Authority; No Breach By Agreement.
(a) FNC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of and
performance of its obligations under this Agreement and the other documents
contemplated hereby, and the consummation of the transactions contemplated
herein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of FNC, subject only
to the approval of this Agreement by the shareholders of FNC. This Agreement
represents a legal, valid, and binding obligation of FNC, enforceable against
it in accordance with its terms (except in all cases as such enforceability
may be limited by a court acting in equity, applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally).
(b) Neither the execution and delivery of this Agreement by FNC, nor
the consummation by FNC of the transactions contemplated hereby, nor
compliance by FNC with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of (A) the articles of association or
bylaws of any FNC Subsidiary, or (B) the articles of incorporation or bylaws
of FNC, 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 FNC
or any FNC Subsidiary under, (A) any "material contract" (within the meaning
of Item 601(b)10 of the SEC's Regulation S-K) or Material Permit of FNC or any
FNC Subsidiary or (B) any material loan, account, note or other receivable
reflected as an asset on the books and records of FNC and the FNC
Subsidiaries, or (iii) subject to obtaining the requisite Consents referred to
in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
FNC or any FNC Subsidiary or any of their respective Assets in a manner that
would impose any material liability, obligation or limitation on FNC or any
FNC Subsidiary.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to
or filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than
Consents, filings, or notifications that are to be made or obtained pursuant
to this Agreement, no notice to, filing with, or Consent of, any Governmental
Authority is necessary for the consummation by FNC of the Merger and the other
transactions contemplated in this Agreement.
(d) Assuming the Board of Directors of FNC recommends this Agreement
to the shareholders of FNC, the affirmative vote of the holders of two-thirds
of the outstanding shares of FNC Stock is the only vote of the holders of any
class or series of FNC capital stock necessary to approve this Agreement and
the Merger.
6.3 Capital Stock.
(a) The authorized capital stock of FNC consists of 40,000,000 shares
of FNC Stock, of which 5,821,775 shares were issued and outstanding as of
December 31, 1998, which constitutes FNC's only issued and outstanding
securities as of such date. Each outstanding share of FNC Stock (i) has been
duly authorized and is validly issued and outstanding, and is fully paid and
nonassessable, (ii) has not been issued in violation of the preemptive rights
of any shareholders, and (iii) has been issued in compliance with the
Securities Laws.
(b) Shares of FNC Stock to be issued hereunder are duly authorized
and, upon issuance, will be validly issued and outstanding and fully paid and
nonassessable, free and clear of any Liens. Shares of FNC Stock to be issued
hereunder will be issued in compliance with the Securities Laws. None of the
shares of FNC Stock to be issued pursuant to this Agreement will be issued in
violation of any preemptive rights of the current or past shareholders of FNC.
6.4 FNC's Financial Statements. FNC's consolidated audited statements
of income, cash flow and shareholders' equity for the years ended December 31,
1998, 1997 and 1996 and audited balance sheet as of
49
<PAGE>
<PAGE>
December 31, 1998 and 1997, together with the notes thereto, which have been
provided or made available to FirstBancorporation (collectively, the "FNC
Financial Statements"), have been prepared in accordance with Generally
Accepted Accounting Principles and fairly present in all material respects the
results of operations and financial position of FNC for the periods and as of
the dates set forth therein.
6.5 Reports. Since December 31, 1995, FNC has filed on a timely basis
all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with: (i) the SEC, including
without limitation Forms 10-K, Forms 10-Q and proxy statements; and (ii) other
Regulatory Authorities (collectively, the "Reports"). The Reports at the time
filed and amended were in all material respects accurate and complete and
complied in all material respects with all applicable Laws and the other
requirements applicable thereto. As of its respective date, each such Report
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading.
6.6 Absence of Changes. Since December 31, 1998, FNC and the FNC
Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby), and FNC has not incurred
a Material Adverse Effect.
6.7 Legal Proceedings. Except as disclosed in the Reports filed by FNC
prior to the date hereof, there is no Litigation instituted or pending or, to
the Knowledge of FNC, threatened against FNC or any FNC Subsidiary, or against
any Asset, interest or right of FNC or any FNC Subsidiary, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FNC, nor are there any Orders outstanding against FNC or any FNC Subsidiary
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FNC.
6.8 Accounting, Tax and Regulatory Matters. Neither FNC nor any of the
FNC Subsidiaries has taken any action, and to the Knowledge of FNC there is no
fact or circumstance, that is reasonably likely, to (i) prevent the Merger
from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
materially impede or delay obtaining any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement or result in the imposition of
a condition or restriction of the type referred to in the last sentence of
such Section.
6.9 Commissions. No broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees from FNC or any FNC Subsidiary in
connection with the transactions contemplated hereby by reason of any action
taken by FNC or any of the FNC Subsidiaries other than the payment of fees to
The Robinson- Humphrey & Company.
6.10 Registration Statement; Joint Proxy Statement/Prospectus. Subject
to the accuracy of the representations contained in Section 5.27, the
information supplied by FNC or any FNC Subsidiary in writing for inclusion in
the Registration Statement shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Joint Proxy Statement/Prospectus will
not, on the date the Joint Proxy Statement/Prospectus is first mailed to
shareholders, at the time of the Shareholder Meetings and at the Effective
Time, (a) contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of
circumstances under which they were made, not misleading, or (b) contain any
statement which (i) at the time and in light of the circumstances under which
it was made is false or misleading with respect to any material fact or (ii)
omits to state any material fact necessary to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholder
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to FNC, the FNC Subsidiaries or any of their
Affiliates, officers or directors should be discovered by FNC or any FNC
Subsidiary which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, FNC will
promptly inform FirstBancorporation. The Joint Proxy Statement/Prospectus
shall comply in all material respects with the requirements of the Securities
Laws. Notwithstanding the foregoing, FNC makes no representation or warranty
with respect to any information supplied by FirstBancorporation or the
Subsidiaries which is contained or incorporated by reference in, or furnished
in connection with the preparation of,
50
<PAGE>
<PAGE>
the Registration Statement or the Joint Proxy Statement/Prospectus.
6.11 Tax Matters. Each of FNC and the FNC Subsidiaries has timely
filed (including extension periods) all Tax Returns required to be filed for
any period ending on or before the date hereof, or if applicable, any period
that includes such date. All such Tax Returns are correct and complete in all
material respects. Each of FNC and the FNC Subsidiaries has timely paid or
will timely pay or cause to be paid all Taxes (whether or not shown on any Tax
Return) when due to any taxing authority with respect to all such periods.
Neither FNC nor any of the FNC Subsidiaries has received written notice that
the Internal Revenue Service or any other taxing authority has asserted
against FNC or any of the FNC Subsidiaries any deficiency or claim for
additional Taxes in connection therewith which could reasonably result in a
material liability to FNC and neither FNC nor any of the FNC Subsidiaries
reasonably expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. Neither FNC nor any of the FNC
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations. Neither FNC nor any of the FNC Subsidiaries has made
any payments, nor is it obligated to make any payments, nor is it a party to
any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. Neither FNC nor
any of the FNC Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii). To the knowledge of FNC,
each of FNC and the FNC Subsidiaries has disclosed on the federal Income Tax
Returns of FNC and the FNC Subsidiaries all positions taken therein that could
give rise to a substantial understatement of federal Income Taxes within the
meaning of Code Section 6662. Neither FNC nor any of the FNC Subsidiaries has
been a member of an affiliated group (as defined by the Code) filing a
consolidated federal income tax return with any Person other than FNC or the
FNC Subsidiaries nor does it have any liability for the Income Taxes of any
Person other than FNC and the FNC Subsidiaries under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. The books and records of
FNC and each of the FNC Subsidiaries accurately and completely set forth in
all material respects the basis of FNC and the FNC Subsidiaries in its assets
and the amount of any net operating loss, net capital loss, unused investment
or other credit, unused foreign tax, or excess charitable contribution
allocable to FNC or the FNC Subsidiaries, all as of December 31, 1998. The
unpaid Income Taxes of FNC and the FNC Subsidiaries did not, as of December
31, 1998, exceed in any material respect the reserve for tax liability (rather
than any reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the balance sheet as of such date
contained in the FNC Financial Statements, and any such unpaid Income Taxes do
not exceed in any material respect that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past practices of FNC in
filing its Income Tax returns. Neither FNC nor any of the FNC Subsidiaries has
been granted nor has FNC or any of the FNC Subsidiaries been given any waiver
of any statute of limitations with respect to, or any extension of a period
for the assessment of any Tax. All deposits required by law to be made by FNC
or the FNC Subsidiaries with respect to employees' withholding taxes have been
made. Each of FNC and the FNC Subsidiaries has withheld and paid in all
material respects all Taxes required to have been withheld and paid in
connection with the amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party. There are no Liens for
the payment of Taxes on any assets of FNC or any of the FNC Subsidiaries
except for statutory Liens for property Taxes that are not past due as to
payment. There are no disputes or claims pending against FNC or any of the FNC
Subsidiaries for past due Taxes in a material amount, and, to the Knowledge of
FNC, there is no claim or dispute threatened against FNC or any of the FNC
Subsidiaries, or any basis for such a claim or dispute, for past due Taxes.
During the past five years, no such claim has been made by an authority in a
jurisdiction where FNC or any of the FNC Subsidiaries does not file Tax
Returns. As of the date hereof, there are not any matters under discussion
with any federal, state, local or other authority with respect to any
additional Taxes relating to FNC or any of the FNC Subsidiaries. All amounts
required to be paid by FNC or any of the FNC Subsidiaries as estimated Income
Taxes under Code Section 6655, and any comparable provisions of state or local
statutes, have been duly paid, except where the failure to make such payments
would not, individually or in the aggregate with other such nonpayments,
result in a material liability to FNC. There are no tax rulings, requests for
rulings or closing agreements relating to FNC or any of the FNC Subsidiaries
that could affect its liability for Income Taxes for any period after the
Closing Date. Any adjustment of Taxes of FNC or any of the FNC Subsidiaries
made by the Internal Revenue Service in any examination which is required to
be reported to state, foreign, or local taxing authorities has been so
reported and any additional Taxes due with respect thereto have been paid. To
the Knowledge of the FNC, there are no facts that, if known to any taxing
authority, would likely result in the issuance of a notice of proposed
deficiency or similar notice of intention to assess Income Taxes in any
material amount against FNC or any of the FNC Subsidiaries. Neither FNC nor
any of the FNC Subsidiaries has taken any action not in accordance with its
past practices that would have the effect of deferring any tax liability for
FNC or
51
<PAGE>
<PAGE>
any of the FNC Subsidiaries from any taxable period ending on or before the
Closing Date to any taxable period ending after the Closing Date. No material
amount of income recognized, for federal, state, local or foreign Income Tax
purposes, by FNC or any of the FNC Subsidiaries during the period beginning
January 1, 1999 and ending on the Closing Date will be derived other than in
the ordinary course of business or arise from transactions of a type not
reflected on the relevant return for the taxable period ending on December 31,
1998. Neither FNC nor any of the FNC Subsidiaries has any deferred gain or
loss arising from deferred intercompany transactions (as described in Section
1.1502-13 of the Treasury Regulations) with respect to the stock or
obligations of any other member of FNC's or any of the FNC Subsidiaries'
affiliated group (as described in Section 1.1502-14 of the Treasury
Regulations). No property of FNC or any of the FNC Subsidiaries is "tax exempt
use property" within the meaning of Section 168(h) of the Code. Except as set
forth on Schedule 6.11, neither FNC nor any of the FNC Subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulation) by reason of a change
in an accounting method, nor does FNC or any of the FNC Subsidiaries have any
knowledge that the Internal Revenue Service (or other taxing authority) has
proposed or is considering any such change in an accounting method. Neither
FNC nor any of the FNC Subsidiaries is a party to an interest rate swap,
currency swap, or similar transaction. Neither FNC nor any of the FNC
Subsidiaries has any corporate acquisition indebtedness, as defined in Section
279(b) of the Code, or any obligations described in Section 279(a)(2) of the
Code. The accruals for deferred federal income taxes reflected in the FNC
Financial Statements, for the period ended December 31, 1998 are adequate to
cover any deferred income tax liability of FNC and each of the FNC
Subsidiaries determined in accordance with Generally Accepted Accounting
Principles through the date thereof. All Income Taxes as to which FNC and each
of the FNC Subsidiaries may be liable which relate to period ending on or
before the December 31, 1998 have been adequately accrued or reserved in the
FNC Financial Statements as of such date in accordance with Generally Accepted
Accounting Principles.
6.12 Loans, Accounts, Notes and Other Receivables; Loan Collateral.
(a) All loans, accounts, notes and other receivables reflected as
assets on each of FNC's and the FNC Subsidiaries' books and records (i) have
resulted from bona fide business transactions in the ordinary course of such
Person's operations, (ii) were to the Knowledge of FNC made in compliance with
such Person's standard loan policies and procedures, and (iii) are owned by
such Person free and clear of all Liens (other than Permitted Liens), or other
exceptions to title or to the ownership or collection rights of any other
person or entity.
(b) All records of FNC and the FNC Subsidiaries regarding all
outstanding loans, accounts, notes and other receivables are accurate in all
material respects, and with respect to each loan that FNC's or any of the FNC
Subsidiaries' loan documentation indicates is secured by Loan Collateral, to
the Knowledge of FNC such loan is secured by valid, perfected and enforceable
liens on all such Loan Collateral having the priority described in such
Person's documentation of such loan.
(c) Each material loan reflected as an asset on FNC's or any of the
FNC Subsidiaries' books as of the date hereof, and each material guaranty
therefor, is the legal, valid and binding obligation of the obligor or
guarantor thereon, and no defense, offset or counterclaim has been asserted
with respect to any such loan or guaranty.
(d) Schedule 6.12 lists as of the date hereof: (i) each loan,
extension of credit or other Asset that is classified by any Regulatory
Authority or FNC or any of the FNC Subsidiaries as "Loss", "Doubtful",
"Substandard" or "Special Mention" (or otherwise by words of similar import)
or that FNC or any of the FNC Subsidiaries has designated as a special asset
or for special handling or placed on any "watch list" because of concerns
regarding the ultimate collectibility or deteriorating condition of such Asset
or any obligor or Loan Collateral therefor; and (ii) each loan or extension of
credit of FNC or any of the FNC Subsidiaries that is past due 30 days or more
as to the payment of principal and/or interest, or as to which FNC or any FNC
Subsidiary has given written notice of default which has not been cured, or is
to the Knowledge of FNC the subject of a proceeding in bankruptcy, or as to
which the obligor otherwise has indicated any inability or intention not to
repay such loan or extension of credit; provided that Schedule 6.12 shall list
only such loans, extensions of credit or Assets described in subclauses (i)
and (ii) above that have an original principal amount in excess of $250,000.
(e) Each of the loans and other extensions of credit by FNC or any of
the FNC Subsidiaries (with the exception of those loans and extensions of
credit listed on Schedule 6.12) is as of the date hereof to the Knowledge
52
<PAGE>
<PAGE>
of FNC collectible in the ordinary course of such Person's business in an
amount that is not less than the amount at which it is carried on such
Person's books and records net of reserves reflected on such Person's books
and records.
(f) Each of FNC's and the FNC Subsidiaries' reserve for possible loan
losses shown in the FNC Financial Statements (i) has been established in
conformity with Generally Accepted Accounting Principles and all applicable
requirements of applicable Regulatory Authorities, (ii) in the reasonable
opinion of such Person's management, as of the respective dates referenced
therein, is reasonable in view of the size and character of such Person's loan
portfolio, current economic conditions and other relevant factors, and (iii)
in the reasonable opinion of such Person's management, as of the respective
dates referenced therein, is adequate to provide for losses relating to or the
risk of loss inherent in such Person's loan portfolio.
(g) Neither the terms of any loan made by FNC or any of the FNC
Subsidiaries, nor any of the loan documentation, nor the manner in which such
loans have been administered and serviced, violates in any material respect
any Law applicable thereto, including without limitation, the Truth-in-Lending
Act, the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
Regulations O and Z of the Federal Reserve Board, the Community Reinvestment
Act of 1977, the Equal Credit Opportunity Act, all as amended, and state laws,
rules and regulations relating to consumer protection, installment sales and
usury, except where any such violation would not, individually or in the
aggregate with all other such violations, have a Material Adverse Effect on
FNC.
6.13 Securities Portfolio and Investments. All securities owned by
FNC or any of the FNC Subsidiaries (whether owned of record or beneficially)
are held free and clear of all Liens (other than Permitted Liens). There are
no voting trusts or other agreements or undertakings to which FNC or any of
the FNC Subsidiaries is a party with respect to the voting of any such
securities. Except for fluctuations in the market values of United States
Treasury and agency or municipal securities, since December 31, 1998, there
has been no significant deterioration or material adverse change in the
quality, or any material decrease in the value, of the securities portfolio of
FNC and the FNC Subsidiaries, taken as a whole.
6.14 Environmental Matters.
(a) All of the Real Property owned or leased by FNC or any FNC
Subsidiary and all of the Loan Collateral that is in the nature of real
property is and has been in compliance with all Environmental Laws, except
where any such noncompliance would not, individually or in the aggregate with
all other such noncompliances, have a Material Adverse Effect on FNC.
(b) As of the date hereof, there is no Litigation pending or, to the
Knowledge of FNC, threatened, before any court, Governmental Authority, board
or other forum relating to the Real Property owned or leased by FNC or any FNC
Subsidiary or any Loan Collateral that is in the nature of real property in
which FNC or any FNC Subsidiary has been or may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material, and to the Knowledge of FNC there
is no reasonable basis for any such Litigation.
(c) There have been no releases of Hazardous Materials in, on, under
or affecting any of the Real Property owned or leased by FNC or any FNC
Subsidiary or any Loan Collateral that is in the nature of real property,
except where any release would not, individually or in the aggregate with all
other such releases, have a Material Adverse Effect on FNC.
6.15 Compliance with Laws. Each of FNC and the FNC Subsidiaries has in
effect all Permits required for it to own, lease, or operate its Assets and to
carry on its business as now conducted, and there has occurred no Default
under any Material Permit. Except as disclosed in Schedule 6.15, neither FNC
nor any of the FNC Subsidiaries: (i) is in material violation of any Laws,
Orders, or Permits applicable to its business or employees conducting its
business; and (ii) has since December 31, 1995, received any notification or
communication from any Governmental Authority (A) asserting that it is in
material violation of any of the Laws or Orders that such Governmental
Authority enforces, (B) threatening to revoke any Permits, or (C) requiring it
to enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any resolution or similar undertaking that restricts the conduct of its
business or in any manner relates to its capital adequacy, its credit or
reserve policies, its management or the payment of dividends.
53
<PAGE>
<PAGE>
6.16 Labor Relations; Employment Matters.
(a) Each of FNC and the FNC Subsidiaries is in substantial compliance
with all laws and other obligations relating to employment, denial of
employment or employment opportunity and termination of employment.
(b) There is no controversy pending or, to the Knowledge of FNC,
threatened between FNC or any of the FNC Subsidiaries and any of its present
or former officers, directors, supervisory personnel or any group of its
employees, except where any such controversy would not, individually or in the
aggregate with all other such controversies, have a Material Adverse Effect on
FNC.
6.17 Absence of Other Liabilities. Except as disclosed on Schedule
6.17, neither FNC nor any of the FNC Subsidiaries has any Liabilities other
than (i) Liabilities reserved against or otherwise disclosed in the FNC
Financial Statements or the notes thereto, and (ii) Liabilities incurred after
December 31, 1998 in the ordinary course of business consistent (in amount and
kind) with past practice or Liabilities incurred accordance with this
Agreement (including transaction fees and expenses incurred in connection with
the Merger). Except as disclosed in Schedule 6.17, no facts or circumstances
exist that would reasonably be expected to serve as the basis for any other
Liabilities of FNC or any of the FNC Subsidiaries that would be required to be
disclosed on Schedule 6.17. Neither FNC nor any of the FNC Subsidiaries has
received, or has reason to believe that it will not continue to receive, a
rating of less than "satisfactory" on any Year 2000 Report of Examination of
any Regulatory Authority.
6.18 Certain Regulated Businesses. Neither FNC nor any of the FNC
Subsidiaries is an "investment company" as defined in the Investment Company
Act of 1940, as amended, nor is it a "public utility holding company" as
defined in the Public Utility Holding Company Act of 1935, as amended.
6.19 Takeover Laws. FNC has taken all actions required to be taken by
it in order to exempt this Agreement and the transactions contemplated hereby
from the requirements of any Takeover Laws applicable to FNC and the FNC
Subsidiaries.
ARTICLE VII
COVENANTS
7.1 Covenants of FirstBancorporation.
(a) Ordinary Conduct of Business. Except as otherwise contemplated by
this Agreement, FirstBancorporation will, and will cause each of the
Subsidiaries to, from the date of this Agreement to the Closing, conduct its
business in the ordinary course in substantially the same manner as presently
conducted and will make reasonable commercial efforts consistent with past
practices to preserve its relationships with other Persons. Additionally,
except as otherwise contemplated by this Agreement or as set forth on Schedule
7.1(a), FirstBancorporation will not, nor will it permit any of the
Subsidiaries to, do any of the following without the prior written consent of
FNC:
(i) amend its articles of incorporation, articles of association or
bylaws;
(ii) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver any stock, options or equity equivalents of any
class or any other of its securities (other than the issuance of shares of
FirstBancorporation Stock pursuant to the exercise of FirstBancorporation
Options outstanding on the date of this Agreement), or amend any of the terms
of any securities outstanding as of the date hereof;
(iii) (A) split, combine or reclassify any shares of its capital
stock, (B) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, or (C) redeem or otherwise acquire any of its securities;
54
<PAGE>
<PAGE>
(iv) (A) incur or assume any long-term debt or issue any debt
securities or, except under existing lines of credit and in amounts not
material to it, incur or assume any short-term debt other than in the ordinary
course of business, (B) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, (C) make any capital contributions to, or
investments in, any other Person that, individually or in the aggregate, are
greater than $10,000, or any new loan, loan renewal or advance to any Person
or its Affiliates that, individually or in the aggregate, is greater than
$350,000 other than those loans, renewals or advances for which
FirstBancorporation or any Subsidiary has committed to make as of the date
hereof (provided that any consent of FNC to make any such loan, loan renewal
or advance shall not be unreasonably withheld), (D) pledge or otherwise
encumber shares of its capital stock or (E) mortgage or pledge any of its
Assets, tangible or intangible, or create or suffer to exist any Lien
thereupon, except for Permitted Liens;
(v) adopt or amend any Benefit Plan;
(vi) grant to any director or senior officer any increase in his or
her compensation or grant to any employee an increase in his or her
compensation other than in the ordinary course of business consistent with
past practice, or pay or agree to pay to any such person any bonus, severance
or termination payment except in accordance with this Agreement, specifically
including any such payment that becomes payable by virtue of the Merger or
upon the termination of such person after the Closing;
(vii) enter into or amend any employment Contract;
(viii) (A) acquire, sell, lease or dispose of any material Assets
outside the ordinary course of business, (B) enter into any Contract or
transaction outside the ordinary course of business consistent with past
practice, or (C) acquire, lease, dispose or agree to acquire, lease or dispose
of any Real Property;
(ix) (A) voluntarily change or modify any of the accounting principles
or practices used by it or (B) revalue in any material respect any of its
Assets, including without limitation writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business;
(x) (A) acquire any Person (or division thereof), any equity interest
therein or the assets thereof; (B) enter into, cancel or modify any Contract
other than in the ordinary course of business consistent with past practices;
(C) enter into, cancel or modify any Material Contract (provided that any
consent of FNC to renew a Material Contract shall not be unreasonably
withheld); (D) authorize any new capital expenditure or expenditures that,
individually or in the aggregate, are in excess of $10,000 (provided that any
consent of FNC to authorize such expenditure or expenditures shall not be
unreasonably withheld); or (E) enter into or amend any Contract with respect
to any of the foregoing;
(xi) pay, discharge or satisfy, cancel, waive or modify any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against
in or contemplated by the Financial Statements or on Schedule 5.20, or
incurred in the ordinary course of business consistent with past practices or
in connection with this Agreement and the Merger;
(xii) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(xiii) take, or agree in writing or otherwise to take, any action that
would make any of the representations or warranties of it contained in this
Agreement untrue or incorrect in any material respect or would result in any
of the conditions set forth in this Agreement not being satisfied; or
(xiv) agree, whether in writing or otherwise, to do any of the
foregoing.
(b) No Solicitation. From the date of this Agreement until the
Effective Time or the termination of this Agreement pursuant to its terms,
FirstBancorporation agrees that it will not and will not permit any of the
Subsidiaries, or any of its or their officers, directors, employees,
representatives, agents, or Affiliates, including,
55
<PAGE>
<PAGE>
without limitation, any investment banker, attorney or accountant retained by
FirstBancorporation or any of the Subsidiaries (collectively, the
"Representatives") to, directly or indirectly, (i) initiate, solicit,
encourage or otherwise facilitate (including by way of furnishing
information), any inquiries or the making of any proposal or offer that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
(as defined below), or (ii) enter into or maintain or continue discussions or
negotiate with any Person in furtherance of such inquiries or to obtain an
Acquisition Proposal, or (iii) agree to, approve, recommend, or endorse any
Acquisition Proposal, or authorize or permit any of the Subsidiaries or
Representatives to take any such action and FirstBancorporation shall promptly
notify FNC of any such inquiries and proposals received by FirstBancorporation
or any of the Subsidiaries or Representatives, relating to any of such
matters; provided, however, that nothing contained in this Agreement shall
prohibit the board of directors of FirstBancorporation from (A) furnishing
information to, or engaging in discussions or negotiations with, any Person in
response to an unsolicited bona fide written Acquisition Proposal; or (B)
recommending such an unsolicited bona fide written Acquisition Proposal to the
shareholders of FirstBancorporation, if and only to the extent that (1) the
board of directors of FirstBancorporation concludes in good faith (after
consultation with its financial advisors) that such Acquisition Proposal would
constitute a Superior Proposal (as hereinafter defined), (2) the board of
directors of FirstBancorporation determines in good faith (after consultation
with outside legal counsel) that the failure to take such action would result
in a breach by the board of directors of FirstBancorporation of its fiduciary
duties to FirstBancorporation shareholders under the Laws of South Carolina,
(3) prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, FirstBancorporation provides prompt written
notice to FNC to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such Person (which notice shall
identify the nature and material terms of the proposal) and (4) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the board of directors of
FirstBancorporation receives from such Person an executed confidentiality
agreement with provisions no less favorable to FirstBancorporation than the
confidentiality agreement previously entered into between FirstBancorporation
and FNC in connection with the consideration of the Merger.
FirstBancorporation agrees that it will, and will cause its Representatives
to, immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any parties regarding any Acquisition
Proposal. FirstBancorporation agrees to keep FNC fully and timely informed of
the status of any discussions, negotiations, furnishing of non-public
information, or other activities relating to an Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by this Agreement) involving FirstBancorporation or
the Subsidiaries: (i) any merger, reorganization, consolidation, share
exchange, recapitalization, business combination, liquidation, dissolution, or
other similar transaction involving, or any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of all or any significant portion of the
assets or 20% or more of the equity securities of, FirstBancorporation or any
of the Subsidiaries, in a single transaction or series of related transactions
which could reasonably be expected to interfere with the completion of the
Merger; or (ii) any tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of FirstBancorporation or the filing of a
registration statement under the Securities Laws in connection therewith.
For purposes of this Agreement, "Superior Proposal" means a bona fide
Acquisition Proposal received by FirstBancorporation after the date hereof
from a third Person that the board of directors of FirstBancorporation
determines in its good faith judgment to be more favorable to
FirstBancorporation's shareholders than the Merger (based on, among other
things, the written opinion of FirstBancorporation's independent financial
advisor that the value of the consideration to FirstBancorporation's
shareholders provided for in such proposal exceeds the value of the
consideration to FirstBancorporation's shareholders provided for in the
Merger) and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the board of directors of
FirstBancorporation (based on the written advice of FirstBancorporation's
independent financial advisor), is reasonably capable of being obtained by
such third Person.
(c) Charter Provisions. FirstBancorporation shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any Person under the articles of
incorporation, articles of association, bylaws or other governing instruments
of FirstBancorporation or any Subsidiary or restrict or impair the ability of
FNC to exercise the rights of a shareholder with respect to shares of a
FirstBancorporation Subsidiary that are to be acquired or controlled by it.
56
<PAGE>
<PAGE>
(d) Agreements of Affiliates. Not later than the 15th day prior to the
mailing of the Joint Proxy Statement/Prospectus to the shareholders of
FirstBancorporation, FirstBancorporation shall deliver to FNC a schedule of
each Person that, to the Knowledge of FirstBancorporation, is or is reasonably
likely to be, as of the date of the FirstBancorporation Shareholders' Meeting,
deemed to be an "affiliate" of FirstBancorporation as that term is used in
Rule 145 under the Securities Act of 1933, as amended, or SEC Accounting
Series Releases 130 and 135. FirstBancorporation shall use its reasonable best
efforts to cause each Person who may be deemed to be an affiliate of
FirstBancorporation as described above to execute and deliver to
FirstBancorporation and FNC on or before the date of mailing of the Joint
Proxy Statement/Prospectus an agreement (each an "Affiliate Agreement") in the
form attached as Exhibit B to this Agreement. Shares of FNC Stock issued to an
affiliate of FirstBancorporation described above in exchange for shares of
FirstBancorporation Stock shall not be transferable until such time as such
transfer would not affect the treatment of the Merger as a "pooling of
interest" under Generally Accepted Accounting Principles (which under current
Law would be after financial results covering at least 30 days of combined
operations of FNC and FirstBancorporation have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies). Shares of FNC Stock issued to an affiliate of FirstBancorporation
described above in exchange for shares of FirstBancorporation Stock shall not
be transferable except in accordance with the Securities Laws and the rules
and regulations thereunder, including Rules 144 and 145 under the Securities
Act of 1933, as amended. FNC shall be entitled to place restrictive legends
upon certificates for FNC Stock issued to affiliates of FirstBancorporation
described above pursuant to this Agreement to enforce the provisions of this
Section 7.1(d).
(e) Shareholder Approval. FirstBancorporation will, at the earliest
practical date after the Registration Statement becomes effective, hold a
meeting of its shareholders for the purpose of voting upon adoption of this
Agreement and approval of the Merger under applicable Law. In connection with
such Shareholders' Meeting, (i) FirstBancorporation shall use its reasonable
best efforts to cause its board of directors to recommend (subject to
compliance with the board members' fiduciary duties as advised by counsel) to
its shareholders the adoption of this Agreement and the consummation of the
Merger, and (ii) FirstBancorporation shall use its reasonable best efforts to
cause its board of directors and officers (subject to compliance with the
board members' and officers' fiduciary duties as advised by counsel) to obtain
such shareholder approval.
(f) Merger of FirstBank and Midlands Bank. If requested by FNC,
FirstBancorporation shall take all action necessary to cause Midlands Bank to
be merged with and into FirstBank (the "Subsidiary Merger") not later than
immediately prior to the Effective Time, including without limitation filing
all applications, reports and statements with all Regulatory Authorities
having jurisdiction over such transaction. If requested by FNC,
FirstBancorporation shall take all action necessary to cause FirstBank and
Midlands Bank to file applications, reports and statements with all Regulatory
Authorities having jurisdiction regarding the merger of such Subsidiaries with
and into First National Bank (the "Bank Merger") not earlier than the
Effective Time. Notwithstanding anything to the contrary, in connection with
the transactions and filings described in this Section 7.1(f), (i) FNC shall
bear the cost of all filing fees and charges to be paid to Regulatory
Authorities, (ii) neither the Subsidiary Merger nor the Bank Merger will be
undertaken if it would materially impede or delay the consummation of the
Merger or cause the Merger not to qualify as a tax-free organization under
Section 368 of the Code or for "pooling of interests" accounting treatment,
and (iii) FirstBancorporation shall be under no obligation to consummate the
Subsidiary Merger until it shall have received reasonably satisfactory
evidence that the Merger will be consummated immediately thereafter.
(g) Financial Statements. No later than the 10th day of each month
from the date of this Agreement until the Effective Time or the termination of
this Agreement pursuant to its terms, FirstBancorporation shall deliver to FNC
such interim monthly unaudited statements of income, cash flow and
shareholder's equity for the immediately preceding calendar month and an
interim unaudited balance sheet as of the end of such month (collectively, the
"Interim Monthly Financial Statements") that it prepares in the ordinary
course of business consistent with past practices. No later than 45 days after
the end of each calendar quarter following the date of this Agreement until
the Effective Time or the termination of this Agreement pursuant to its terms
(but in no event later than the availability of such financial statements),
FirstBancorporation shall deliver to FNC consolidated interim quarterly
unaudited statements of income, cash flow and shareholder's equity for the
immediately preceding calendar quarter and an interim unaudited balance sheet
as of the end of such quarter (collectively, the "Interim Quarterly Financial
Statements"). The Interim Quarterly Financial Statements shall be prepared in
accordance
57
<PAGE>
<PAGE>
with Generally Accepted Accounting Principles except that notes thereto may be
omitted and such statements may be subject to normal recurring year-end
adjustment.
(h) Benefit Plans. FirstBancorporation shall take all action necessary
or otherwise appropriate to terminate any 401(k) profit-sharing plan of
FirstBancorporation or the Subsidiaries, effective prior to the Effective
Time, including without limitation (i) the timely adoption of a valid
resolution of the appropriate board of directors terminating such plan, and
(ii) fully vesting all account balances of participants in such plan.
7.2 Covenants of FNC.
(a) Listing of Additional Shares. FNC will notify the American Stock
Exchange by the Effective Time of the listing of the shares of FNC Stock to be
issued in connection with the Merger and FNC shall take all other actions
required to effect such listing as of the Effective Time.
(b) Shareholder Approval. If the Merger is structured as a Merger of
FirstBancorporation with and into FNC as provided by Section 2.1 of this
Agreement, FNC will, at the earliest practicable date after the Registration
Statement becomes effective, hold a meeting of its shareholders for the
purpose of voting upon the adoption of this Agreement and the approval of the
Merger and/or the issuance of the Merger Consideration under applicable Law.
In connection with such Shareholders' Meeting, (i) FNC shall use its
reasonable best efforts to cause its board of directors to recommend (subject
to compliance with the board members' fiduciary duties as advised by counsel)
to its shareholders the adoption of this Agreement and the consummation of the
Merger, and (ii) FNC shall use its reasonable best efforts to cause its board
of directors and officers (subject to compliance with the board members' and
officers' fiduciary duties as advised by counsel) to obtain such shareholder
approval.
(c) Directors and Officers Insurance and Indemnification.
(i) FNC shall maintain, or shall cause the FNC Subsidiaries to
maintain, in effect for three years from the Closing Date, if available, the
current directors' and officers' liability insurance policies maintained by
FirstBancorporation and the Subsidiaries; provided, however, that FNC may
substitute therefor policies of at least the same coverage containing terms
and conditions that are not taken as a whole materially less favorable to the
insured with respect to matters occurring prior to the Effective Time of the
Merger. If such insurance is not obtained at least five Business Days prior to
the anticipated Closing Date, then FirstBancorporation shall be permitted to
purchase tail coverage on the existing policies for such three year period.
(ii) From and after the Effective Time, FNC shall indemnify, defend
and hold harmless each person who is now, or who has been at any time before
the date hereof or who becomes before the Effective Time, an officer, director
or employee of FirstBancorporation or the Subsidiaries (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees), liabilities, judgments, fines or amounts that are
paid in settlement (which settlement shall require the prior written consent
of FNC, which consent shall not be unreasonably withheld) of or in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, or administrative (each a "Claim"), in which an Indemnified Party
is, or is threatened to be made, a party or witness arising in whole or in
part out of the fact that such person is or was a director, officer or
employee of FirstBancorporation or any of the Subsidiaries if such Claim
pertains to any matter or fact arising, existing or occurring before the
Effective Time (including without limitation the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is
asserted or claimed before, at or after the Effective Time (the "Indemnified
Liabilities"), to the fullest extent permitted by applicable Law in effect as
of the date hereof or as amended applicable to a time before the Effective
Time. Any Indemnified Party wishing to claim indemnification under this
Section 7.2(c)(ii), upon learning of any Claim, shall notify FNC (but the
failure so to so notify shall not relieve FNC from any liability which it may
have under this Section 7.2(c)(ii), except to the extent such failure
materially prejudices FNC). In the event of any such Claim, whether arising
before, on or after the Effective Time, (A) FNC shall have the right to assume
the defense thereof (in which event the Indemnified Parties will cooperate in
the defense of any such matter) and upon such assumption, FNC shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection
with the defense therefor, except that if FNC elects not to assume such
defense, or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between FNC and the
Indemnified Parties, the Indemnified Parties
58
<PAGE>
<PAGE>
may retain counsel reasonably satisfactory to them, and FNC shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties, (B)
FNC shall be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties whose reasonable fees and expenses shall
be paid promptly as statements are received, (C) FNC shall not be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld), and (D) FNC shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law (it being acknowledged by
the parties hereto that in the event of any good faith dispute about the
lawfulness of such indemnification, FNC or FirstBancorporation or the
Subsidiaries may place the amounts at issue in escrow pending the final and
nonappealable determination of such dispute). The obligations of FNC pursuant
to this Section 7.2(c) are intended to be enforceable against FNC directly by
the Indemnified Parties. If FNC or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and in
each case, FNC (or such successor and assign) shall use its reasonable best
efforts to cause the successors and assigns of FNC to assume the obligations
set forth in this Section 7.2(c)(ii).
(d) Directors. At the Effective Time, FNC will cause Colden R. Battey,
Jr. and Richard L. Gray (or their designees, if reasonably acceptable to FNC)
to be elected to the board of directors of FNC to serve as such until the 2000
annual meeting of FNC's shareholders. FNC will use its reasonable best efforts
to cause Richard L. Gray and Colden R. Battey, Jr. to be nominated at the 2000
annual meeting of FNC's shareholders to serve as a director of the Company for
a term expiring at the 2001 annual meeting of FNC's shareholders and the 2002
annual meeting of FNC's shareholders, respectively. At the Effective Time or
as soon thereafter as practicable, FNC will cause Colden R. Battey, Jr.,
Richard L. Gray and Thomas E. Suggs (or their designees, if reasonably
acceptable to FNC) to serve as members of the board of directors of First
National Bank until the 2000 annual meeting of FNC's shareholders.
(e) Employees.
(i) After the Effective Time, except as specifically provided by
this Agreement or set forth on Schedule 5.15, any and all of
FirstBancorporation's or the Subsidiaries' employees will be employed on an
"at-will" basis, and nothing in this Agreement shall be deemed to constitute
an employment agreement with any such person to obligate FNC or any FNC
Subsidiary to employ any such person for any specific period of time or in any
specific position or to restrict FNC's or any FNC Subsidiary's right to
terminate the employment of any such person at any time and for any reason
satisfactory to it (subject to the payment of severance as set forth in
subsection (ii) below).
(ii) FNC shall, with respect to each employee of
FirstBancorporation or any Subsidiary who is employed by FirstBancorporation
or any Subsidiary immediately before the Effective Time who experiences a
separation of service during the six-month period commencing on the Effective
Time, pay to such employee a one-time severance payment in the amount of two
times such employee's weekly salary at the time of termination times the
number of years of credited service of such employee with FirstBancorporation
or any Subsidiary and FNC or any FNC Subsidiary plus any accrued but unused
vacation leave during such service; provided, however, that the aggregate
liability of FNC hereunder shall not exceed $200,000, and provided further
that the provisions hereof shall not apply to James A. Shuford, III or any
employee of FirstBancorporation or any Subsidiary that is entitled to
severance or a change of control payment pursuant to a written agreement with
FirstBancorporation or any Subsidiary that is in effect on the date hereof or
at the Effective Time.
(iii) Each employee of FirstBancorporation or a Subsidiary set
forth on Schedule 7.1(e) shall be entitled to receive a "retention" bonus from
FirstBancorporation or the Subsidiaries equal to no more than six months of
such employee's annual base salary as of the date of this Agreement in the
event that FirstBancorporation and FNC determine in good faith that the
retention bonus is appropriate to induce the employee to continue his
employment through the Effective Date and up to three months thereafter;
provided, that retention bonuses in the aggregate shall not exceed $75,000 and
no retention bonus shall be paid to an employee who voluntarily terminates his
employment prior to the expiration of the designated retention period (which
shall be no earlier than the Effective Date).
59
<PAGE>
<PAGE>
(iv) Employees of FirstBancorporation or any Subsidiary that
continue employment with FNC or the FNC Subsidiaries after the Effective Time
will be entitled to benefits consistent with and no less favorable than the
benefits being provided or to be provided to similarly situated employees of
FNC and the FNC Subsidiaries ("Continuing Employees"), with credit for past
service with FirstBancorporation or the Subsidiaries for purposes of
participation, eligibility, vesting and accrual of benefits under all of such
benefit plans and arrangements, except that there will be no past credit
service for the accrual of benefits under any existing qualified defined
benefit pension plan. Continuing Employees shall not be subject to any waiting
periods or pre-existing condition exclusions under the group health plan of
FNC or any FNC Subsidiary to the extent that such periods are longer or
restrictions impose a greater limitation than the periods or limitations
imposed under the applicable group health plan of FirstBancorporation or the
applicable Subsidiary; and provided to the extent that the initial period of
coverage for Continuing Employees under any plan of FNC or any FNC Subsidiary,
whichever is applicable, that is an "employee welfare benefit plan" as defined
in Section 3(1) of ERISA is not a full 12-month period of coverage, Continuing
Employees shall be given credit under the applicable welfare plan for any
deductibles and co-insurance payments made by such Continuing Employees under
the corresponding welfare plan of FirstBancorporation or any of the
Subsidiaries during the balance of such 12-month period of coverage.
(v) FNC shall, and shall cause the FNC Subsidiaries to, honor any
and all vacation and sick leave of Continuing Employees accrued with
FirstBancorporation or the Subsidiaries and shall credit each Continuing
Employee for past service with FirstBancorporation or the Subsidiaries for
purposes of calculating such employee's entitlements to vacation and sick
leave under the employment policies of FNC and the FNC Subsidiaries.
(vi) At the Closing, FNC shall cause First National Bank to enter
into a consulting arrangement with Robert A. Kerr in form and substance
reasonably satisfactory to FNC and FirstBancorporation (the "Consulting
Agreement"), under which Mr. Kerr shall agree to provide consulting services
to FNC and the FNC Subsidiaries and to not compete with such entities, and
First National Bank would make aggregate consulting payments to Mr. Kerr in an
amount not in excess of $120,000 over the three-year period after Closing.
(f) Negative Covenants. From the date of this Agreement until the
Effective Time, FNC covenants and agrees that it will not do or agree or
commit to do, or permit any of the Subsidiaries to do or agree or commit to
do, any of the following with the prior written consent of
FirstBancorporation, which consent shall not be unreasonably withheld with
regard to subclause (ii) or subclause (iii):
(i) in the case of FNC only, declare or pay any cash dividend
other than quarterly dividends at a rate not more than 20% in excess of the
current quarterly dividend rate of 13 cents per share or establish a record
date for any such quarterly dividends inconsistent with past practices; or
(ii) make any acquisition (including an acquisition of branch
offices and related deposit liabilities) that materially delays the
consummation of the Merger except as set forth on Schedule 7.2; or
(iii) take, or agree to take in writing or otherwise, any action
that would make any of the representations or warranties of it contained in
this Agreement untrue or incorrect in any material respect or would result in
any of the conditions set forth in this Agreement not being satisfied.
7.3 Covenants of All Parties to the Agreement.
(a) Joint Proxy Statement/Prospectus; Registration Statement. FNC and
FirstBancorporation shall cooperate in the timely preparation and filing with
the SEC of the Registration Statement. FirstBancorporation will furnish to FNC
the information required to be included in the Registration Statement with
respect to its business and affairs before it is filed with the SEC and again
before any amendments are filed, and shall have the right to review and
consult with FNC on the form of, and any characterizations of such information
included in, the Registration Statement prior to the filing with the SEC. Such
Registration Statement, at the time it becomes effective and on the Effective
Date, shall in all material respects conform to the requirements of the
Securities Laws. FNC shall take all actions required to register or obtain
exemptions from such registration for the FNC Common Stock to be issued in
connection with the Merger under applicable state "Blue Sky" securities laws,
as appropriate. The Registration Statement shall include the form of Joint
Proxy Statement/Prospectus. The parties shall use their reasonable best
60
<PAGE>
<PAGE>
efforts to cause the Joint Proxy Statement/Prospectus to be cleared by the SEC
for mailing to their respective shareholders, and the Joint Proxy Statement/
Prospectus shall, on the date of mailing and on the Effective Time, conform in
all material respects to the requirements of the Securities Laws.
FirstBancorporation and FNC (if applicable) shall cause the Joint Proxy
Statement/Prospectus to be mailed to their respective shareholders.
(b) Reorganization for Tax Purposes. Each of the parties hereto
undertakes and agrees to use its reasonable best efforts to cause the Merger
to qualify as a "reorganization" within the meaning of Section 368(a) of the
Code and that it will not intentionally take any action that would cause the
Merger to fail to so qualify.
(c) Accounting Treatment. Each of the parties hereto undertakes and
agrees to use its reasonable best efforts to cause the Merger to qualify to be
treated as a "pooling-of-interests" under Generally Accepted Accounting
Principles and that it will not intentionally take any action that would cause
the Merger to fail to so qualify. Each of the parties hereto shall use its
reasonable best efforts to cause its "affiliates" (as defined in Section
7.1(d) of this Agreement) to not transfer shares of FNC Stock until such time
as such transfer would not affect the treatment of the Merger as a "pooling of
interest" under Generally Accepted Accounting Principles.
(d) Notification. Each party hereto agrees to notify promptly the
other party hereto of any event, fact, or other circumstance arising after the
date hereof that would have caused any representation or warranty herein,
including any information on any schedule hereto, to be untrue or misleading
had such event, fact, or circumstance arisen prior to the execution of this
Agreement. The parties hereto will exercise their reasonable best efforts to
ensure that no such events, facts, or other circumstances occur, come to pass,
or become true.
(e) Consummation of Agreement. The parties hereto each agree to use
their reasonable best efforts to perform or fulfill all conditions and
obligations to be performed or fulfilled by them under this Agreement so that
the transactions contemplated hereby shall be consummated. Except for events
that are the subject of specific provisions of this Agreement, if any event
should occur, either within or outside the control of FirstBancorporation or
FNC that would materially delay or prevent fulfillment of the conditions upon
the obligations of any party hereto to consummate the transactions
contemplated by this Agreement, each party will notify the others of any such
event and the parties will use their reasonable, diligent and good faith
efforts to cure or minimize the same as expeditiously as possible. Each party
hereto shall use its reasonable best efforts to obtain all Consents required
for the consummation of the transactions contemplated by this Agreement and to
assist in the procuring or providing of all documents which must be procured
or provided pursuant to Article IX hereof.
(f) Maintenance of Corporate Existence. Each of the parties hereto
shall maintain in full force and effect their respective corporate existences.
(g) Applications and Reports. FNC shall promptly prepare and file, and
FirstBancorporation and the Subsidiaries shall cooperate in the preparation
and, where appropriate, filing of, applications, reports and statements with
all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. The party
responsible for the making of any filing shall provide the other party with
its proposed filing information for review and comment prior to filing
(including any subsequent filings) and copies of all comments and
correspondence received from Regulatory Authorities with respect thereto.
ARTICLE VIII
DISCLOSURE OF ADDITIONAL INFORMATION
8.1 Access to Information by FirstBancorporation. Prior to the Closing
Date, FirstBancorporation shall, and FirstBancorporation shall cause each of
the Subsidiaries to:
(a) give FNC and its authorized representatives reasonable access,
during normal business hours and upon reasonable notice, to the books,
records, offices and other facilities and properties of FirstBancorporation;
and
61
<PAGE>
<PAGE>
(b) furnish FNC with such financial and operating data and other
information with respect to the business operations of FirstBancorporation
including, but not limited to, information relating to Taxes as FNC may from
time to time request.
8.2 Access to Information by FNC. Prior to the Closing Date, FNC
shall, and FNC shall cause each of the FNC Subsidiaries to:
(a) give FirstBancorporation and its authorized representatives
reasonable access, during normal business hours and upon reasonable notice, to
the books, records, offices and other facilities and properties of FNC; and
(b) furnish FirstBancorporation with such financial and operating data
and other information with respect to the business operations of FNC
including, but not limited to, information relating to Taxes as
FirstBancorporation may from time to time request.
8.3 Access to Premises. Prior to Closing, FirstBancorporation shall
give FNC and its authorized representatives access to all of the Real Property
owned or leased by FirstBancorporation or any Subsidiary for the purpose of
inspecting such property.
8.4 Confidentiality. Prior to Closing, except as otherwise provided in
this Agreement, the parties hereto shall not discuss or disclose, and each
will use its reasonable best efforts to cause its employees, lenders,
accountants, representatives, agents, consultants and advisors not to discuss
or disclose, or use for any purpose other than the transactions contemplated
hereby, the subject matter or transactions contemplated by this Agreement or
information pertaining to FirstBancorporation or FNC, with any other Person
without the prior consent of the other party hereto, unless (a) such
information is public other than as a result of a violation of this Agreement
or (b) the use of such information is necessary or appropriate in making any
filing or obtaining any Consent necessary or desirable for the consummation of
the transactions contemplated hereby.
8.5 Publicity. Without the prior consent of the other party (which
consent shall not be unreasonably withheld), no party hereto shall issue any
news release or other public announcement or disclosure, or prior to the
initial press release regarding the execution of this Agreement, have any
communications with its employees, suppliers or customers, regarding this
Agreement or the transactions contemplated hereby, except as may be required
by law, but in which case the disclosing party shall provide the other parties
hereto with reasonable advance notice of the timing and substance of any such
disclosure.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Mutual Conditions. The respective obligations of each party hereto
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by both parties:
(a) Adverse Proceedings. Neither FirstBancorporation, any Subsidiary,
FNC nor any FNC Subsidiary shall be subject to any order, decree or injunction
of a court of competent jurisdiction that enjoins or prohibits the
consummation of this Agreement and no Governmental Authority shall have
instituted a suit or proceeding that is then pending and seeks to enjoin or
prohibit the transactions contemplated hereby. Any party who is subject to any
such order, decree or injunction or the subject of any such suit or proceeding
shall take any steps within that party's control to cause any such order,
decree or injunction to be modified so as to permit the Closing and to cause
any such suit or proceeding to be dismissed.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger, the Subsidiary Merger and the Bank Merger shall
have been obtained or made and shall be in full force and effect and all
waiting periods required by Law shall have expired. No Consent obtained from
any Regulatory Authority that is necessary to consummate the actions
62
<PAGE>
<PAGE>
contemplated hereby shall contain non-standard conditions which in the
reasonable judgment of the board of directors of either party hereto would so
materially adversely impact the economic or business assumptions of the
transactions contemplated by this Agreement that had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into this Agreement.
(c) Effectiveness of Registration Statement. (i) The Registration
Statement covering the shares of FNC Stock to be issued pursuant hereto shall
have been declared effective by the SEC, and no stop order suspending such
effectiveness shall have been initiated or, to the Knowledge of FNC,
threatened by the SEC, and (ii) FNC shall have received all state securities
or "Blue Sky" permits or other authorizations, or confirmations as to the
availability of an exemption from such registration requirements as may be
necessary to issue the shares of FNC Stock to be issued in the Merger, and no
proceedings shall be pending or, to the Knowledge of FNC, threatened by any
state "Blue Sky" securities administration to suspend the effectiveness of the
Registration Statement.
(d) AMEX Listing. The shares of FNC Stock to be issued in the Merger
shall have been approved for listing on the American Stock Exchange as of the
Effective Time, subject to notice of issuance.
(e) Pooling Opinion. FNC shall have received assurances from J.W. Hunt
& Company, LLP, in form and substance reasonably satisfactory to FNC, to the
effect that the Merger will qualify to be treated as a "pooling of interests"
for accounting purposes. FNC also shall have received a letter from J.W. Hunt
& Company, LLP, in form and substance reasonably satisfactory to FNC, to the
effect that such accountants are not aware of any fact or circumstance
applicable to FirstBancorporation that might cause the Merger not to qualify
for such treatment. Nothing shall have come to the attention of FNC that any
event has occurred or will occur or that any condition or circumstance exists
that makes it likely that the Merger may not so qualify.
9.2 Conditions to the Obligations of FirstBancorporation. The
obligation of FirstBancorporation to effect the transactions contemplated
hereby shall be further subject to the fulfillment of the following
conditions, unless waived by FirstBancorporation:
(a) All representations and warranties of FNC contained in Sections
6.1, 6.2, 6.3, 6.9 and 6.18 of this Agreement shall be true and correct as of
the Closing Date as though made as of such date (except for representations
and warranties that are made as of a specific date, which shall be true and
correct as of such date). All other representations and warranties of FNC
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as though made as of such date (except for
representations and warranties that are made as of a specific date, which
shall be true and correct in all material respects as of such date, and except
for representations and warranties qualified by the words "material," "in all
material respects," "in any material amount," "substantial," and the like, and
representations and warranties that exclude matters that would not have a
"material effect," result in a "material liability," have a "Material Adverse
Effect" or the like, which representations and warranties shall be true and
correct). FNC and the FNC Subsidiaries shall have performed and complied in
all material respects with all covenants and agreements contained in this
Agreement required to be performed and complied with by them at or prior to
the Closing. FirstBancorporation shall have received a certificate to the
matters set forth in this Section 9.2(a) signed by FNC.
(b) All documents required to have been executed and delivered by FNC
to FirstBancorporation at or prior to the Closing shall have been so executed
and delivered, whether or not such documents have been or will be executed and
delivered by the other parties contemplated thereby.
(c) FirstBancorporation shall have received an opinion of Robinson,
Bradshaw & Hinson, P.A., counsel to FNC, dated as of the Closing Date, in form
and substance reasonably acceptable to FirstBancorporation, as to the matters
set forth in Exhibit C.
(d) As of the Closing Date, FirstBancorporation shall have received
the following documents with respect to FNC:
(i) a true and complete copy of its articles of incorporation and
all amendments thereto, certified by the jurisdiction of its incorporation as
of a recent date;
63
<PAGE>
<PAGE>
(ii) a true and complete copy of its bylaws, certified by its
Secretary or an Assistant Secretary;
(iii) a certificate from its Secretary or an Assistant Secretary
certifying that its articles of incorporation have not been amended since the
date of the certificate described in subsection (i) above and that nothing has
occurred since such date that would adversely affect its existence;
(iv) a true and complete copy of the resolutions of its board of
directors and shareholders authorizing the execution, delivery and performance
of this Agreement, and all instruments and documents to be delivered in
connection herewith, and the transactions contemplated hereby, certified by
its Secretary or an Assistant Secretary;
(v) a certificate from its Secretary or an Assistant Secretary
certifying the incumbency and signatures of its officers who will execute
documents at the Closing or who have executed this Agreement; and
(vi) such other documents, agreements or certificates as reasonably
requested by FirstBancorporation.
9.3 Conditions to the Obligations of FNC. The obligations of FNC to
effect the transactions contemplated hereby shall be further subject to the
fulfillment of the following conditions, unless waived by FNC:
(a) All representations and warranties of FirstBancorporation
contained in Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.24, 5.25, and 5.26 of this
Agreement shall be true and correct as of the Closing Date as though made as
of such date (except for representations and warranties that are made as of a
specific date, which shall be true and correct as of such date). All other
representations and warranties of FirstBancorporation contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date as though made as of such date (except for representations and warranties
that are made as of a specific date, which shall be true and correct in all
material respects as of such date, and except for representations and
warranties qualified by the words "material," "in all material respects," "in
any material amount," "substantial," and the like, and representations and
warranties that exclude matters that would not have a "material effect",
result in a "material liability," have a "Material Adverse Effect" or the
like, which representations and warranties shall be true and correct).
FirstBancorporation and the Subsidiaries shall have performed and complied in
all material respects with all covenants and agreements contained in this
Agreement required to be performed and complied with by them at or prior to
the Closing. FNC shall have received certificates to the matters set forth in
this Section 9.3(a) signed by an authorized officer of FirstBancorporation.
(b) There shall be no Litigation instituted or pending or, to the
Knowledge of FirstBancorporation, threatened against FirstBancorporation or
any of the Subsidiaries or against any of their respective Assets, and there
shall be no Orders outstanding or unsatisfied by FirstBancorporation or any of
the Subsidiaries or against any of their respective Assets, that would have,
individually or in the aggregate with all such Litigation and Orders, a
Material Adverse Effect on FirstBancorporation. FNC shall have received a
certificate to the matters set forth in this Section 9.3(b) signed by an
authorized officer of FirstBancorporation.
(c) All documents required to have been executed and delivered by
FirstBancorporation to FNC at or prior to the Closing shall have been so
executed and delivered, whether or not such documents have been or will be
executed and delivered by the other parties contemplated thereby.
(d) James A. Shuford, III, shall have entered into an Employment and
Noncompetition Agreement with FNC substantially in the form of Exhibit D and
such agreement shall be in full force and effect as of the Effective Time.
(e) FNC shall have received the written Affiliate Agreements signed by
all Persons who are affiliates of FirstBancorporation as provided in Section
7.1(d).
64
<PAGE>
<PAGE>
(f) FNC shall have received a legal opinion from Breyer & Associates,
PC, special counsel to FirstBancorporation, dated as of the Closing Date, in
form and substance reasonably satisfactory to FNC, as to the matters set forth
in Exhibit E.
(g) FirstBancorporation hereto shall have obtained any and all
Consents required for consummation of the Merger or for the preventing of any
Default under any and all Real Property leases and FirstBancorporation's
servicing contract with Jack Henry and Associates, Inc.
(h) FNC shall have received evidence that FirstBancorporation or a
Subsidiary shall have received extensions for the leases on terms reasonably
satisfactory to FNC for (i) the main office of FirstBancorporation located in
Beaufort, South Carolina, and (ii) the branch office of FirstBancorporation or
a Subsidiary located in Lady's Island, South Carolina.
(i) The holders of no more than 5% of the outstanding shares of
FirstBancorporation Stock shall have given written notice of their intent to
demand payment for their shares and shall not have voted for the Merger,
pursuant to Chapter 13 of the SCBCA.
(j) As of the Closing Date, FNC shall have received the following
documents with respect to FirstBancorporation and each of the Subsidiaries:
(i) a long-form certificate of its corporate existence issued by
the jurisdiction of its incorporation as of a recent date and a certificate of
existence or authority as a foreign corporation issued as of a recent date by
each of the jurisdictions in which it is qualified to do business as a foreign
corporation, as indicated on Schedule 5.1;
(ii) a true and complete copy of its articles of incorporation or
articles of association and all amendments thereto, certified by the
jurisdiction of its incorporation as of a recent date;
(iii) a true and complete copy of its bylaws, certified by its
Secretary or an Assistant Secretary;
(iv) a certificate from its Secretary or an Assistant Secretary
certifying that its articles of incorporation have not been amended since the
date of the certificate described in subsection (ii) above, and that nothing
has occurred since the date of issuance of the certificate of existence
specified in subsection (i) above that would adversely affect its existence;
(v) with respect to FirstBancorporation only, a true and complete
copy of the resolutions of its board of directors and shareholders authorizing
the execution, delivery and performance of this Agreement, and all instruments
and documents to be delivered in connection herewith, and the transactions
contemplated hereby, certified by its Secretary or an Assistant Secretary;
(vi) with respect to FirstBancorporation only, a certificate from
its Secretary or an Assistant Secretary certifying the incumbency and
signatures of its officers who will execute documents at the Closing or who
have executed this Agreement; and
(vii) such other documents, agreements or certificates as
reasonably requested by FNC.
(k) Robert A. Kerr shall have entered into the Consulting Agreement.
ARTICLE X
TERMINATION
10.1 Termination. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time
prior to the Closing Date:
65
<PAGE>
<PAGE>
(a) By mutual written consent of the boards of directors of
FirstBancorporation and FNC;
(b) By the board of directors of either FNC or FirstBancorporation, if
there shall be any Law or regulation that makes consummation of this Agreement
illegal or otherwise prohibited or if any judgment, injunction, order or
decree enjoining FirstBancorporation or its shareholders, or FNC or its
shareholders, from consummating this Agreement is entered and such judgment,
injunction, order or decree shall become final and non-appealable;
(c) By the board of directors of either FNC or FirstBancorporation, if
the conditions to the obligation to effect the transactions contemplated
hereby of the party seeking termination shall not have been fulfilled or
waived by October 31, 1999, and if the party seeking termination is in
material compliance with all of its obligations under this Agreement;
(d) By the board of directors of either FNC or FirstBancorporation, if
a condition to the obligation to effect the transactions contemplated hereby
of the party seeking termination shall have become incapable of fulfillment
(notwithstanding the efforts of the party seeking to terminate as set forth in
Section 7.3(e)) and has not been waived;
(e) By the board of directors of FNC, if (i) the board of directors of
FirstBancorporation (A) does not recommend this Agreement or the Merger to its
shareholders; (B) withdraws or modifies such recommendation in a manner
materially adverse to FNC; (C) shall have recommended to the shareholders of
FirstBancorporation any Acquisition Proposal or resolved to do so; or (D)
shall have resolved or publicly announced or disclosed to any Person its
intention to do any of the foregoing (provided, however, that in the case of
subclauses (A) and (B), except where such action is based on a breach by FNC
of its representations and warranties hereunder or a failure (or anticipated
failure) to satisfy the conditions to the obligations of FirstBancorporation
set forth in Sections 9.1 or 9.2 of this Agreement); (ii) a tender or exchange
offer for 20% or more of the outstanding shares of FirstBancorporation Stock
is commenced or a registration statement with respect thereto shall have been
filed and the board of directors of FirstBancorporation, within 10 Business
Days after such tender or exchange offer is commenced, either fails to
recommend against acceptance of such tender or exchange offer by its
shareholders or takes no position with respect to the acceptance of such
tender or exchange offer by its shareholders, or (iii) any Person or group of
Persons acting in concert as a partnership or other group shall, as a result
of a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become, after the date hereof, the "beneficial
owner" (within the meaning of such term under Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of 20% or more of outstanding shares of
FirstBancorporation Stock and the shareholders of FirstBancorporation shall
fail to adopt or approve the Merger at the Shareholders Meeting held by
FirstBancorporation;
(f) By the board of directors of FirstBancorporation, if the board of
directors of FirstBancorporation shall have determined to recommend an
Acquisition Proposal to its shareholders after determining, pursuant to
Section 7.1(b), that such Acquisition Proposal constitutes a Superior
Proposal, and FirstBancorporation gives FNC at least three Business Days prior
notice of its intention to effect such termination pursuant to this Section
10.1(f), and FirstBancorporation makes the payment required pursuant to
Section 10.2(d) of this Agreement;
(g) By the board of directors of either FNC or FirstBancorporation, if
the shareholders of a party fail to adopt or approve this Agreement, and to
the extent applicable, the transactions contemplated herein, as required by
applicable law; provided any termination or right of termination under Section
10.1(e), (f) or (h) shall take precedence over a termination under this
Section 10.1(g), even where notice of termination under Section 10.1(e), (f)
or (h) is given after notice of termination under this Section 10.1(g); or
(h) By the board of directors of either FNC or FirstBancorporation, if
the board of directors of FNC (i) does not recommend this Agreement or the
Merger to its shareholders or (ii) withdraws or modifies such recommendation
in a manner materially adverse to FirstBancorporation, and in each such case
such action is not based on a breach by FirstBancorporation of its
representations and warranties hereunder or a failure (or anticipated failure)
to satisfy the conditions to the obligations of FNC set forth in Sections 9.1
and 9.3 of this Agreement.
66
<PAGE>
<PAGE>
10.2 Procedure and Effect of Termination. In the event of a
termination contemplated hereby by any party pursuant to Section 10.1, the
party seeking to terminate this Agreement shall give prompt written notice
thereof to the other party, and the transactions contemplated hereby shall be
abandoned, without further action by any party hereto. In such event:
(a) The parties hereto shall continue to be bound by their obligations
of confidentiality set forth in Section 8.4, and all copies of the information
provided by FirstBancorporation and FNC hereunder will be returned to
FirstBancorporation and FNC, respectively, or destroyed immediately upon its
request therefor.
(b) All filings, applications and other submissions relating to the
transactions contemplated hereby shall, to the extent practicable, be
withdrawn from the Person to which made.
(c) Unless this Agreement is terminated pursuant to Section 10.1(e),
10.1(f) or 10.1(h), the terminating party shall be entitled to seek any remedy
to which such party may be entitled at law or in equity for the willful
violation or willful breach of any agreement, covenant, representation or
warranty contained in this Agreement.
(d) If this Agreement is terminated (i) by FNC pursuant to Section
10.1(e), or (ii) by FirstBancorporation pursuant to Section 10.1(f),
FirstBancorporation shall pay to FNC by wire transfer in immediately available
funds within one Business Day of such termination, a termination fee of
$960,000 in cash, which the parties agree is a reasonable estimate of the out-
of-pocket expenses of FNC for attorneys, accountants and financial advisors
paid by FNC in connection with the proposed Merger, the cost of management
time and overhead devoted to pursuing the proposed Merger, and FNC's loss of
opportunity to pursue other transactions by pursuing the proposed Merger. If
this Agreement is terminated by FNC or FirstBancorporation pursuant to Section
10.1(h), FNC shall pay to FirstBancorporation by wire transfer in immediately
available funds within one Business Day of such termination, a termination fee
of $960,000 in cash, which the parties agree is a reasonable estimate of the
out-of-pocket expenses of FirstBancorporation for attorneys, accountants and
financial advisors paid by FirstBancorporation in connection with the proposed
Merger, the cost of management time and overhead devoted to pursuing the
Merger, and FirstBancorporation's loss of opportunity to pursue other
transactions by pursuing the Merger.
(e) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to Section 10.1, no party to this Agreement shall have
any liability or further obligation to any other party hereunder except as set
forth in Section 10.2(a)-(d), provided, however, if a party is entitled to
relief under Section 10.2(d), such relief shall be its sole and exclusive
remedy.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, (i) FNC shall pay all costs and expenses incurred by it and the
FNC Subsidiaries in connection with this Agreement and the transactions
contemplated hereby and (ii) FirstBancorporation shall pay all costs and
expenses incurred by it and the Subsidiaries in connection with this Agreement
and the Merger. Without limiting the effect of the foregoing,
FirstBancorporation and FNC shall each pay their respective share of the cost
of preparing and printing the Joint Proxy Statement/Prospectus and soliciting
the approval of their respective shareholders in respect of the Merger.
11.2 Survival of Representations. The representations and warranties
made by the parties hereto will not survive the Closing, and no party shall
make or be entitled to make any claim based upon such representations and
warranties after the Closing Date; provided, however, that the parties'
agreements contained in Sections 7.2(c), 7.2(d) and 7.2(e)(ii), (iii) (iv) and
(v) shall survive the Closing Date and shall be enforceable directly by each
person benefited or intended to be benefited by such sections. No warranty or
representation shall be deemed to be waived or otherwise diminished as a
result of any due diligence investigation by the party to whom the warranty or
representation was made or as a result of any actual or constructive knowledge
by such party with respect to any
67
<PAGE>
<PAGE>
facts, circumstances or claims or by the actual or constructive knowledge of
such person that any warranty or representation is false at the time of
signing or Closing.
11.3 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of FirstBancorporation and
FNC approved by their respective boards of directors; provided after the
Shareholder Meetings, or either of them, this Agreement may not be amended if
it would violate the SCBCA.
11.4 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure by FNC or FirstBancorporation to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived by the other party or parties only by a written instrument
signed by the party or parties granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto,
such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 11.4.
11.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by hand or by facsimile
transmission (with confirmed receipt), one Business Day after sending by a
reputable national over-night courier service or three Business Days after
mailing when mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties in the manner provided below:
(a) Any notice to FirstBancorporation shall be delivered to the
following addresses:
FirstBancorporation, Inc.
1121 Boundary Street
Beaufort, SC 29902
Attention: James A. Shuford, III
Telephone: (843) 521-5600
Facsimile: (843) 521-5625
with a copy to:
Breyer & Associates, PC
1100 New York Avenue, Suite 700 East
Washington, DC 20005
Attention: John F. Breyer, Jr.
Telephone: (202) 737-7900
Facsimile: (202) 737-7979
(b) Any notice to FNC shall be delivered to the following addresses:
First National Corporation
950 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115
Attention: C. John Hipp, III
Telephone: (803) 531-0565
Facsimile: (803) 531-0596
68
<PAGE>
<PAGE>
with a copy to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Robin L. Hinson
Telephone: 704/377-2536
Facsimile: 704/378-4000
Any party may change the address to which notice is to be given by notice
given in the manner set forth above.
11.6 Assignment; Third Party Beneficiaries. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors
and permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto without the
prior written consent of the other party, except that FNC may assign its
rights and obligations under this Agreement to any Affiliate of FNC. If such
assignment is made, the assignee shall be entitled to all the rights and shall
assume all the obligations of FNC hereunder, but FNC shall not be released
from liability for the performance of the obligations of such assignee under
this Agreement. Except as set forth in Section 7.2(c), 7.2(d) and 7.2(e)(ii),
(iii), (iv) and (v), this Agreement shall not be deemed to confer upon any
third party beneficiaries or other Persons, including any employees of
FirstBancorporation, any rights or remedies hereunder.
11.7 Separable Provisions. If any provision of this Agreement shall be
held invalid or unenforceable, the remainder nevertheless shall remain in full
force and effect.
11.8 Governing Law. The execution, interpretation and performance of
this Agreement shall be governed by the internal laws and judicial decisions
of the State of South Carolina.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.11 Entire Agreement. This Agreement, including the Schedules and
any exhibits hereto, embodies the entire agreement and understanding of the
parties with respect of the subject matter of this Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to the transactions contemplated hereby and subject matter hereof.
69
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FIRST NATIONAL CORPORATION
By: /s/ C. John Hipp, III
-----------------------------------
C. John Hipp, III
President
FIRSTBANCORPORATION, INC.
By: /s/ James A. Shuford, III
-----------------------------------
James A. Shuford, III
President
70
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FirstBancorporation, Inc.
DATED: May 11, 1999
/s/James A. Shuford, III
-------------------------
James A. Shuford, III
Chief Executive Officer
DATED: May 11, 1999 /s/ James L. Pate, III
-------------------------
James L. Pate, III
Chief Financial Officer
71
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 5154
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5570
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12133
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 82792
<ALLOWANCE> (901)
<TOTAL-ASSETS> 109637
<DEPOSITS> 89171
<SHORT-TERM> 100
<LIABILITIES-OTHER> 1592
<LONG-TERM> 6050
0
0
<COMMON> 10
<OTHER-SE> 12714
<TOTAL-LIABILITIES-AND-EQUITY> 109637
<INTEREST-LOAN> 1788
<INTEREST-INVEST> 233
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2021
<INTEREST-DEPOSIT> 764
<INTEREST-EXPENSE> 863
<INTEREST-INCOME-NET> 1158
<LOAN-LOSSES> 54
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1218
<INCOME-PRETAX> 170
<INCOME-PRE-EXTRAORDINARY> 71
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<YIELD-ACTUAL> 4.73
<LOANS-NON> 424
<LOANS-PAST> 701
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 859
<CHARGE-OFFS> 22
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 901
<ALLOWANCE-DOMESTIC> 662
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 239
</TABLE>
