SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported ):
October 27, 1997
MAINSTREET BANKGROUP INCORPORATED
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(Exact name of as specified in charter)
Virginia 0-8622 54-1046817
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
P.O. BOX 4831, Martinsville, Virginia 24115-4831
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(Address of principal executive offices ) (Zip Code)
Registrant's telephone number, including area code:
540-666-6724
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<PAGE>
Item 5. Other Events
This current report on Form 8-K is filed by MainStreet
BankGroup Incorporated ("Registrant") to report Registrant's
agreement to acquire Regency Financial Shares, Inc. ("Regency"),
subject to regulatory approval and approval by the shareholders
of Regency and certain other specified conditions. Under terms
of the agreement, Registrant has agreed to pay the equivalent of
$13.00 per share for each outstanding share of Regency common
stock in the form of MainStreet Common Stock, subject to
adjustment under certain conditions. Registrant has agreed to
exchange a maximum of .500 and a minimum of .406 shares of its
Common Stock for each share purchased of Regency 1,389,096 shares
of Common Stock. In addition, MainStreet has agreed to purchase
the balance of Regency's outstanding 15,000 directors' options
which have not been exercised as of the consummation of the
merger for the difference between the exercise price per option
and $13.00 in the form of MainStreet Common Stock, resulting in a
maximum exchange ratio of .250 shares and a minimum exchange
ratio of .188 shares per option purchased. If the maximum
exchange ratios are used and all directors' options are exercised
prior to the merger, 702,048 shares of Registrant's Common Stock
will be issued in the transaction. MainStreet has also agreed to
assume the outstanding employee stock options of Regency. The
purchase price of this transaction is valued at approximately
$18.2 million. At September 30, 1997, Registrant had 11,411,434
shares of Common Stock outstanding.
Regency was organized under the laws of Virginia in
Richmond, and serves the Richmond area with three offices. At
September 30, 1997, Regency reported total assets of $74.9
million.
Registrant is a multi-community bank holding company
headquartered in Martinsville, Virginia. It owns eight community
banks ( 35 offices), and one nonbanking subsidiary, chartered as
a limited purpose national banking association, with total third
quarter assets of $1.5 billion and pending affiliations with
Commerce Bank, College Park, Maryland, with third quarter assets
of $90.1 million and Tysons Financial Corporation, McLean,
Virginia, with third quarter assets of $98.0 million. Registrant
currently serves the following markets: City of Martinsville and
Henry County; the City of Galax, Town of Hillsville and Carroll
and Grayson Counties; the Towns of Ferrum and Rocky Mount and
Franklin County; the Town of Forest, City of Lynchburg and
Bedford, Campbell and Amherst Counties; the Town of Stuart and
Patrick Cou nty; the Towns of Saltville and Chilhowie and Smyth
County; the City of Clifton Forge and Alleghany County; the Towns
of Ashland and Mechanicsville and the Counties of Hanover and
Henrico, Virginia and contiguous areas.
<PAGE>
Item 7(c). Exhibits
(2) Agreement and Plan of Merger
<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.
MAINSTREET BANKGROUP INCORPORATED
Date: November 3, 1997 By: /S/JAMES E. ADAMS
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James E. Adams
Chief Financial Officer,
Executive Vice President,
Treasurer
<PAGE>
AGREEMENT
AND
PLAN OF MERGER
BETWEEN
MAINSTREET BANKGROUP INCORPORATED
A VIRGINIA CORPORATION
AND
REGENCY FINANCIAL SHARES, INC.
A VIRGINIA CORPORATION
DATED AS OF
OCTOBER 27, 1997
Douglas W. Densmore
Flippin, Densmore, Morse,
Rutherford & Jessee
300 First Campbell Square
Drawer 1200
Roanoke, Virginia 24006
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 27th day of
October, 1997 (this "Plan"), by and among MainStreet BankGroup
Incorporated, a Virginia corporation ("MSBC"), and Regency
Financial Shares, Inc., a Virginia corporation ("Regency").
RECITALS:
(A) MSBC. MSBC is a corporation duly organized and
existing in good standing under the laws of the Commonwealth of
Virginia, with its principal executive offices located in
Martinsville, Virginia. As of the date hereof, MSBC has
20,000,000 authorized shares of Common Stock, each of $5.00 par
value ("MSBC Common Stock"), and 1,000,000 authorized shares of
Preferred Stock, each of $5.00 par value ("MSBC Preferred Stock")
(no other class of capital stock being authorized), of which
11,411,434 shares of MSBC Common Stock and no shares of MSBC
Preferred Stock, respectively, are issued and outstanding as of
September 30, 1997. MSBC has eight (8) wholly owned bank
subsidiaries: Piedmont Trust Bank, a Virginia bank; Bank of
Ferrum, a Virginia bank; Bank of Carroll, a Virginia bank; First
Community Bank, a Virginia bank; The First Bank of Stuart, a
Virginia bank; First Community Bank of Saltville, a Virginia
bank; Hanover Bank, a Virginia bank; and First National Bank of
Clifton Forge, a national banking association (each of which is
referred to as a "MSBC Bank Subsidiary" and all of which are
referred to as "MSBC Bank Subsidiaries"). In addition, MSBC has
two wholly owned nonbanking subsidiaries, MainStreet Trust
Company, chartered as a limited purpose national banking
association to engage in the business of a trust company and
businesses incidental thereto ("MSBC Trust Subsidiary"), and MB
Corp., incorporated under Virginia law ("MB Corp.") in connection
with the pending Agreement and Plan of Merger dated as of July
25, 1997 with Tysons Financial Corporation. MSBC will form a
corporation, JAA Corp. (the "Holding Company"), under Virginia
law, as a wholly owned subsidiary of MSBC for the purpose of
consummating the Merger (as hereinafter defined). The MSBC Bank
Subsidiaries, MSBC Trust Subsidiary, MB Corp. and the Holding
Company (upon formation) are individually referred to as an "MSBC
Subsidiary" and collectively as "MSBC Subsidiaries".
(B) REGENCY. Regency is a corporation duly organized and
existing in good standing under the laws of the Commonwealth of
Virginia, with its principal executive offices located at 1011
East Main Street, Richmond, Virginia 23219, and is authorized to
do business as a bank holding company under the federal Bank
Holding Company Act of 1956, as amended, and Chapter 13 of the
Virginia Banking Act. Regency's only subsidiary is Regency Bank
("RB"). As of the date hereof, Regency has 8,000,000 authorized
shares of Common Stock, each of $2.50 par value ("Regency Common
Stock"), of which 1,389,096 shares were issued and outstanding as
of September 30, 1997, (no other class of capital stock being
authorized). The holders of Regency Common Stock have no
preemptive rights. Regency Common Stock is not subject to the
provisions of Section 12, 13, 14(a), 14(c), 14(d), 15(d) and 16
of the Securities Exchange Act of 1934, as amended, (together
with the rules and regulations of the Securities and Exchange
Commission ("SEC") promulgated thereunder, the "Exchange Act").
Regency has granted options to purchase Regency Common Stock to
Regency employees ("Employee Options") and to Regency directors
("Directors Options"). The Employee Options and Directors
Options are collectively referred to as "Regency Options". The
names of the Regency Option holders, the respective number of
Employee and Directors Options held, the total number of Regency
Options granted, and the respective strike price for each
Regency Option ("Strike Price") have been Previously Disclosed.
(C) THE HOLDING COMPANY. The Holding Company, when formed,
will be a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Virginia, having
5,000 authorized shares of common stock, no par value ("Holding
Company Common Stock") (no other class of capital stock being
authorized) of which as of the Merger Closing (as hereinafter
defined) 1,000 shares will be issued and outstanding, all of
which shall be held of record and beneficially by MSBC.
(D) RB. RB is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of Virginia, is
qualified to do business as a bank in Virginia and is a member
bank of the Federal Reserve System. RB's headquarters are
located at 1011 East Main Street, Richmond, Virginia 23219. RB
has 2,000,000 shares of common stock, $5.00 par value per share
("RB Common Stock") authorized (no other class of capital stock
being authorized), of which 505,490 shares are issued and
outstanding as of September 30, 1997, all of which are held of
record and beneficially by Regency. There are no shares of RB
Common Stock authorized and reserved for issuance and there is no
commitment to authorize, issue or sell any such shares or any
other securities, warrants or obligations convertible into or
exchangeable for, or giving any right to subscribe for or acquire
any such shares and no securities, warrants or obligations
representing any such rights are outstanding. There are no
options or share appreciation rights authorized or granted for RB
Common Stock and no commitment to grant any such options or share
appreciation rights.
With respect to Regency, any reference herein to
"Subsidiary" or "Subsidiaries" refers to RB and, with respect to
MSBC, any reference to "Subsidiary" refers to any MSBC Subsidiary
and any reference to "Subsidiaries" refers to the MSBC
Subsidiaries, jointly and severally (unless the context otherwise
requires).
(E) RIGHTS, ETC. Except as Previously Disclosed or except
in connection with the transactions contemplated by this Plan,
there are no shares of MSBC Common Stock or MSBC Preferred Stock
authorized and reserved for issuance, and MSBC has no commitment
to authorize, issue or sell any such shares or any securities or
obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from MSBC, any such
shares and no securities or obligations representing any such
rights are outstanding. Except as Previously Disclosed, MSBC has
not granted or made any commitment to grant any options or share
appreciation rights with respect to the MSBC Common Stock or MSBC
Preferred Stock. Except as Previously Disclosed and except for
shares reserved pursuant to the Stock Option Agreement (as
hereinafter defined), there are no shares of Regency Common Stock
authorized and reserved for issuance and Regency has no
commitment to authorize, issue or sell any such shares, or any
other securities, warrants or obligations convertible into or
exchangeable for, or giving any right to subscribe for or acquire
from Regency any such shares, and no securities, warrants or
obligations representing any such rights are outstanding. Except
for the Regency Options Previously Disclosed, Regency has not
granted or made any commitment to grant any options or share
appreciation rights with respect to Regency Common Stock.
(F) THIS TRANSACTION. The Boards of Directors of MSBC and
Regency, respectively, deem it advisable and in the best
interests of MSBC and Regency and their stockholders that Regency
be acquired by MSBC through a merger of Holding Company into
Regency pursuant to this Agreement and Plan of Merger.
(G) STOCK OPTION AGREEMENT. As a condition and inducement
to MSBC's willingness to enter into this Plan, Regency has agreed
that prior to 5:00 p.m., on October 28, 1997, Regency shall enter
into a Stock Option Agreement with MSBC ("Stock Option
Agreement") in the form attached hereto as Exhibit E pursuant to
which Regency shall grant to MSBC an option ("Option") to
purchase, under certain circumstances, shares of Regency Common
Stock.
(H) APPROVALS. The Board of Directors of each of MSBC and
Regency has approved and adopted, at meetings of each of such
Board of Directors, this Plan and the Stock Option Agreement and
has authorized the execution of such instruments in counterparts
by a member of the Office of the Chairman of MSBC and by the
President of Regency, respectively, and any further modifications
to such instruments as may be agreed by an officer authorized to
execute this Plan and the Stock Option Agreement and not
inconsistent with the authorizations of their respective Board of
Directors. At the meeting of the Regency Board of Directors, the
Board of Directors of Regency recommended the Plan as so executed
to its shareholders.
(I) NASDAQ. Trading of the MSBC Common Stock is presently
reported on the National Association of Securities Dealers
("NASD") Quotations System National Market System("NASDAQ/NMS").
Regency Common Stock and the Regency Options are not traded on
any established exchange.
(J) BENEFITS OF PLAN. MSBC and Regency believe the Plan
and its consummation are in the respective best interests of each
corporation and its shareholders for the following reasons, among
others: (1) the Merger (as hereinafter defined) will allow them
to provide banking and related financial services more
effectively and efficiently; (2) the Merger will expand the range
of banking and related financial services which they can provide;
(3) the Merger will enhance the safety and soundness of their
operations; (4) the Merger will enable them to expand the market
for their banking and related financial services; (5) Regency, as
a wholly owned subsidiary of MSBC, will benefit from the larger
and more diverse shareholder base of MSBC and the liquidity of
the equity investments of former Regency shareholders as a result
of receiving MSBC Common Stock in connection with the Merger will
be enhanced; and (6) no gain or loss generally will be recognized
by stockholders of Regency who receive shares of MSBC Common
Stock in exchange for their shares of Regency Common Stock.
(K) OTHER. It is the intention of the parties to this Plan
that, on or after the Merger Effective Date (as hereinafter
defined), MSBC may (but shall not be obligated to) cause the
transfer of all of the assets and liabilities of RB to Hanover
Bank, a wholly owned subsidiary of MSBC, including by means of a
statutory merger, and may, but shall not be obligated to,
terminate the separate corporate existence of the Continuing
Corporation (as hereinafter defined).
NOW, THEREFORE, in consideration of their mutual promises
and obligations, the parties hereto adopt and make this Plan and
prescribe the terms and conditions thereof and the manner and
basis of carrying it into effect, which shall be as follows:
I. THE MERGER
(A) THE CONTINUING CORPORATION. On the Merger Effective
Date the Holding Company shall merge into Regency (the "Merger"),
the separate existence of the Holding Company shall cease and
Regency (the "Continuing Corporation") shall survive.
(B) RIGHTS, ETC. Upon consummation of the Merger, the
Continuing Corporation shall thereupon and thereafter possess all
of the rights, privileges, immunities and franchises, of a public
as well as of a private nature, of each of the merging
corporations; and all property, real, personal and mixed, and all
debts due on whatever account, and all other choses in action,
and all and every other interest, of or belonging to or due to
each of the corporations so merged, shall be deemed to be vested
in the Continuing Corporation without further act or deed; and
the title to any real estate or any interest therein, vested in
any of such corporations, shall not revert or be in any way
impaired by reason of the Merger as provided by the laws of the
Commonwealth of Virginia.
(C) LIABILITIES. Upon consummation of the Merger, the
Continuing Corporation shall thenceforth be responsible and
liable for all the liabilities, obligations and penalties of each
of the corporations so merged.
(D) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS
OF CONTINUING CORPORATION. The Articles of Incorporation of the
Continuing Corporation shall be those of the Holding Company, and
the Bylaws of the Continuing Corporation shall be those of the
Holding Company. The officers and directors of Holding Company in
office immediately prior to the Merger becoming effective shall
be the officers and directors of the Continuing Corporation, who
shall hold office until such time as their successors are elected
and qualified in accordance with the Articles and Bylaws of the
Continuing Corporation.
(E) MERGER CLOSING; MERGER EFFECTIVE DATE. The Merger
shall become effective on the date and time the Virginia State
Corporation Commission ("Virginia Corporation Authority") issues
a certificate of merger reflecting the Merger (the "Merger
Effective Date"). Unless otherwise agreed upon in writing by the
chief executive officers of MSBC and Regency, subject to the
conditions to the obligations of the parties to effect the Merger
as set forth in Article VI, the parties shall use their best
efforts to cause the Merger Effective Date to occur as soon as
practicable following the satisfaction of the conditions set
forth in Paragraphs (A), (B) and (C) of Article VI but in no
event later than June 30, 1998. All documents required by the
terms of this Agreement to be delivered at or prior to
consummation of the Merger will be exchanged by the parties at
the closing of the Merger (the "Merger Closing"), which shall be
held on such date as MSBC shall designate to Regency and which is
reasonably acceptable to Regency after the satisfaction of the
condition set forth in Paragraphs (A), (B) and (C) of Article VI
but no later than the Merger Effective Date. Prior to the Merger
Closing, Holding Company and Regency shall execute and deliver to
the Virginia Corporation Authority, Articles of Merger containing
a Plan of Merger in substantially the form of Exhibit A hereto
(the "Plan of Merger") for approval.
II. MERGER CONSIDERATION
(A) OUTSTANDING HOLDING COMPANY COMMON STOCK. The shares
of Holding Company Common Stock issued and outstanding
immediately prior to the Merger Effective Date, on and after the
Merger Effective Date, shall be converted automatically into that
number of shares of common stock of Regency issued and
outstanding immediately prior to the Merger Effective Date and
shall constitute the only issued and outstanding shares of common
stock of the Continuing Corporation.
(B) OUTSTANDING MSBC COMMON STOCK. The shares of MSBC
Common Stock issued and outstanding immediately prior to the
Merger Effective Date shall, on and after the Merger Effective
Date, remain issued and outstanding shares of MSBC Common Stock.
(C) OUTSTANDING REGENCY COMMON STOCK. Each share
(excluding shares held by Regency, RB or by MSBC or by any of the
MSBC Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted (the
"Excluded Shares")) of Regency Common Stock issued and
outstanding immediately prior to the Merger Effective Date shall,
by virtue of the Merger, automatically and without any action on
the part of the holder thereof on the Merger Effective Date,
become and be converted into the right to receive that number of
shares of MSBC Common Stock obtained by dividing the Negotiated
Price per Regency Common Share by the average of the bid/asked
price per share for MSBC Common Stock ("Average MSBC Share
Price") as reported on the NASDAQ/NMS for each of the twenty (20)
trading days preceding the tenth calendar day prior to the Merger
Effective Date. If the Exchange Ratio computed in accordance
with the immediately preceding sentence is less than .406, the
Exchange Ratio shall be .406, and if the Exchange Ratio computed
in accordance with the immediately preceding sentence is greater
than .500, the Exchange Ratio shall be .500 ("Exchange Ratio").
The Negotiated Price per Regency Common Share is $13.00.
(D) STOCKHOLDER RIGHTS, STOCK TRANSFERS. On the Merger
Effective Date, holders of Regency Common Stock shall cease to
be, and shall have no rights as, stockholders of Regency other
than to receive the Merger consideration provided under Paragraph
(C) above. After the Merger Effective Date, there shall be no
transfers on the stock transfer books of Regency or the
Continuing Corporation of the shares of Regency Common Stock
which were issued and outstanding immediately prior to the Merger
becoming effective.
(E) FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fractional shares of MSBC Common Stock and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be issued in the Merger; instead, MSBC shall pay to
each holder of Regency Common Stock who would otherwise be
entitled to a fractional share an amount in cash determined by
multiplying such fractional share by the Average MSBC Share
Price.
(F) EXCHANGE PROCEDURES. As promptly as practicable after
the Merger Effective Date, MSBC shall send or cause to be sent to
each former stockholder of Regency of record immediately prior to
the Merger Effective Date transmittal materials for use in
exchanging such stockholder's certificates of Regency for the
consideration set forth in Paragraph (C) above. Any fractional
share checks which a Regency stockholder shall be entitled to
receive in exchange for such stockholder's shares of Regency
Common Stock, and any dividends paid on any shares of MSBC Common
Stock, that such stockholder shall be entitled to receive prior
to the delivery to MSBC of such stockholder's certificates
representing all of such stockholder's shares of Regency Common
Stock will be delivered to such stockholder only upon delivery to
MSBC of the certificates representing all of such shares (or
indemnity satisfactory to MSBC, in its judgment, if any of such
certificates are lost, stolen or destroyed). No interest will be
paid on any such fractional share checks or dividends which the
holder of such shares shall be entitled to receive upon such
delivery. After the Merger Effective Date, to the extent
permitted by law, former stockholders of record of Regency shall
be entitled to vote at any meeting of holders of MSBC Common
Stock, the number of whole shares of MSBC Common Stock into which
their respective shares of Regency Common Stock are converted,
regardless of whether such holders have exchanged their
certificates representing Regency Common Stock for certificates
representing MSBC Common Stock in accordance with the provisions
of this Plan.
(G) SHARES HELD BY REGENCY OR MSBC. Each of the shares of
Regency Common Stock held by Regency, RB, MSBC or any MSBC
Subsidiary, in each case other than in a fiduciary capacity or as
a result of debts previously contracted, shall be canceled and
retired at the Merger Effective Date and no consideration shall
be issued in exchange therefor.
(H) ANTI-DILUTION PROVISIONS. In the event MSBC changes
the number of shares of MSBC Common Stock issued and outstanding
prior to the Merger Effective Date as a result of a stock split,
stock dividend, recapitalization or similar transaction with
respect to the outstanding MSBC Common Stock (but not including
shares issued in connection with a merger, share exchange or
similar transaction) and the record date therefor shall be prior
to the Merger Effective Date, the Exchange Ratio and Option Ratio
shall be proportionately adjusted.
(I) DIVIDENDS. Regency shareholders shall not under any
circumstances be entitled to any dividend (cash or otherwise)
declared by MSBC with a record date prior to the Merger Effective
Date.
III. ACTIONS PENDING MERGER
A. REGENCY ACTIONS. Without the prior written consent or
approval of a proper officer of MSBC, Regency will not and will
cause its Subsidiary not to:
(1) STOCK DISTRIBUTIONS. Make, declare or pay any dividend
other than cash dividends on Regency Common Stock or RB Common
Stock, as the case may be, consistent with past practice and in
an amount not greater than the last previous cash dividend paid
prior hereto by Regency or RB, respectively, or declare or make
any distribution on, or directly or indirectly combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its
capital stock (other than in a fiduciary capacity in the ordinary
course of its business and consistent with past practice or in
connection with stock received on a debt previously contracted
basis) or authorize the creation or issuance of, or issue (except
as may be required to comply with Regency's obligations under the
Regency Options), any additional shares of it capital stock, or
any options, calls, warrants or commitments relating to its
capital stock or any securities or obligations convertible into
or exchangeable for, or giving any person any right to subscribe
for or acquire from its shares of its capital stock or any
securities or obligations convertible into or exchangeable for
shares of its capital stock, or issue any long-term debt;
(2) EMPLOYMENT CONTRACTS. Enter into any employment
contracts with, increase the rate of compensation of (except in
accordance with existing policy consistent with past practice or
pursuant to any agreement existing and as in effect on the date
hereof and Previously Disclosed), or pay or agree to pay any
bonus to, any of its directors, officers or employees, except in
accordance with plans or agreements existing and as in effect on
the date hereof and Previously Disclosed;
(3) EMPLOYEE BENEFIT PLANS. Enter into or modify (except
as may be required by applicable law) any pension, retirement,
stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect
of any of its directors, officers or other employees, including
without limitation taking any action that accelerates (1) the
vesting or exercise of any benefits payable thereunder, or (2)
the right to exercise any employee stock options or stock
appreciation rights outstanding thereunder;
(4) ASSET DISPOSITION. Dispose of, grant an encumbrance
against or discontinue any portion of its assets, business,
operations or properties, which is material to Regency or RB or
merge or consolidate with, or acquire all or any substantial
portion of, the business or property of any other entity (except
foreclosures, acquisitions of control in its fiduciary capacity
or securitization transactions, in each case in the ordinary
course of business consistent with past practice);
(5) CONSTITUENT DOCUMENTS. Amend its Articles of
Incorporation or Bylaws as delivered to MSBC in connection with
this Plan;
(6) MATERIAL TRANSACTIONS. (a) Settle any material
litigation or legal proceeding brought by or against it or
material claim of or against it or (b) enter into any material
transaction or make any material commitment relating to its
assets, business, operations or properties (including but not
limited to any acquisition thereof), otherwise than as
contemplated hereby or in the ordinary course of business
consistent with past practice;
(7) ACTIONS NOT IN ORDINARY COURSE. Take any action not in
the ordinary course of business consistent with past practice; or
(8) AGREEMENTS. Agree to take any of the foregoing
actions.
IV. REPRESENTATIONS AND WARRANTIES
Regency hereby represents and warrants to MSBC and MSBC
hereby represents and warrants to Regency as follows:
(A) RECITALS. The facts set forth in the Recitals of this
Plan with respect to it and its respective Subsidiaries are true
and correct.
(B) CAPITALIZATION. The outstanding shares of it and its
respective Subsidiaries are validly issued and outstanding, fully
paid and nonassessable, and subject to no preemptive rights.
(C) GENERAL CORPORATE POWER AND OWNERSHIP OF PROPERTIES.
It and its respective Subsidiaries have the corporate power and
authority to carry on their respective business as now being
conducted and to own all of their respective material properties
and assets and have good and marketable title to or a valid
leasehold interest in all of the material properties and assets
thereof reflected as owned or leased in its balance sheet as of
December 31, 1996, and included in the MSBC Reports and Regency
Reports (as hereinafter defined) and in all material properties
and assets acquired or leased by it or its respective
Subsidiaries, since December 31, 1996. In the case of Regency
and its Subsidiary only, none of such properties is subject to
any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind except: (1) mechanic's,
carrier's, worker's or similar liens arising in the ordinary
course of business; (2) as Previously Disclosed; (3)
imperfections of title, if any, none of which is material in
amount or materially detracts from the value or impairs the
existing use of the property subject thereto or the operations of
Regency or its Subsidiary; and (4) liens of current taxes not due
and payable.
(D) SPECIFIC CORPORATE AUTHORITY. Subject to any necessary
receipt of approval by its stockholders and the regulatory
approvals referred to in Paragraphs (B) and (C) of Article VI,
this Plan has been authorized by all necessary corporate action
of it and is a valid and binding agreement of it enforceable
against it in accordance with its terms, subject to (1)
bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights; and (2) general
equity principles. In the case of Regency, it represents and
warrants to MSBC that the Stock Option Agreement has been
authorized by all necessary corporate action of it and is a valid
and binding agreement of it enforceable against it in accordance
with its terms subject only to conditions (1) and (2) in the
immediately preceding sentence.
(E) NO DEFAULT. The execution, delivery and performance of
this Plan and, in the case of Regency, the Stock Option Agreement
and the consummation of the transactions contemplated hereby and
thereby by it, will not constitute: (1) a breach of violation
of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license,
franchise or agreement, indenture, instrument or authorization
applicable to, of or held by it or its Subsidiaries, or to which
it, its Subsidiaries or its or its Subsidiaries' respective
properties are subject or bound, which breach, violation or
default is reasonably likely to have a Material Adverse Effect on
it; or (2) a breach or violation of, or a default under, its or
its Subsidiaries' respective Articles of Incorporation or Bylaws.
(F) MSBC Reports. Except as Previously Disclosed, (1) MSBC's
Annual Report on Form 10-K, for the fiscal year ended December
31, 1996, and all other documents filed or to be filed subsequent
to December 31, 1996 under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act in the form filed with the SEC, all of which
have been Previously Disclosed (all of the foregoing reports and
documents of MSBC are hereinafter referred to as its "MSBC
Reports") did not and will 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; and each of the balance sheets in or incorporated by
reference into the MSBC Reports (including the related notes and
schedules thereto) fairly presents and will fairly present the
financial position of the entity or entities to which it relates
as of its date and each of the statements of income and changes
in stockholders' equity and cash flows or equivalent statements
in the MSBC Reports (including any related notes and schedules
thereto) fairly presents and will fairly present the results of
operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein, in each case in
accordance with generally accepted accounting principles
consistently applied, except as may be noted therein, subject to
normal and recurring year-end audit adjustments in the case of
unaudited statements.
(G) REGENCY REPORTS. In the case of Regency only, it has
Previously Disclosed to MSBC copies of (1) Regency's Consolidated
Financial Statements, for the years ended December 31, 1994, 1995
and 1996; (2) RB's "Consolidated Report of Condition and Income"
on Form FFIEC 034, as delivered to the appropriate bank
regulatory authority for the years ended December 31, 1994,
December 31, 1995, and December 31, 1996 and for the periods
ending March 31, 1997 and June 30, 1997; (3) all other reports
and documents filed with or sent to any federal or state
regulatory authority by it or RB during 1995, 1996 and 1997; and
(4) to the extent not prohibited by law, all reports of any state
or federal regulatory authority relating to it or RB and received
during or relating to matters in 1995, 1996 or 1997 (all of the
foregoing reports and documents are hereinafter referred to as
"Regency Reports"). Regency represents and warrants to MSBC
that, as of their respective dates, the Regency Reports referred
to in (1) and (2) above fairly present the financial position of
the entity or entities to which they relate and each of the
statements of income and changes in stockholders' equity and cash
flows or equivalent statements (including any related notes and
schedules thereto) fairly present the results of operations,
changes in stockholders equity and changes in cash flows, as the
case may be, of the entity or entities to which it relates for
the periods set forth therein and, in the case of the Regency
Statements referred to in (1) in accordance with generally
accepted accounting principles, consistently applied, and that,
as of their respective dates the Regency Reports referred to in
(2) and (3) above complied in all material respects with all
legal and regulatory requirements applicable thereto.
(H) MATERIAL EVENTS. Except as Previously Disclosed, no
event(s), occurrence(s), condition(s), or circumstance(s),
whether known or unknown, has or have occurred which has or is
reasonably likely to have at any future time a Material Adverse
Effect on it.
(I) LITIGATION. Except as Previously Disclosed, no
litigation, proceeding or controversy before any court or
governmental agency and no mediation or arbitration is pending
which has or is reasonably likely to have at any future time a
Material Adverse Effect on it and, to the best of its knowledge,
no such litigation, proceeding, controversy, mediation or
arbitration has been threatened.
(J) MATERIAL CONTRACTS. Except as Previously Disclosed and
except for this Plan and the Stock Option Agreement, neither it
nor any Subsidiary is bound by any material contract (as to it
and its Subsidiaries taken as a whole) to be performed in whole
or part after the date hereof.
(K) COMMISSIONS. All negotiations relative to this Plan
and the transactions contemplated hereby have been carried on by
it directly with the other parties hereto and no action has been
taken by it that would give rise to any valid claim against any
party hereto for a brokerage commission, finder's fee or other
like payment, excluding a fee in an amount Previously Disclosed
to Wheat, First Securities, Inc. who has acted as financial
advisor to Regency.
(L) ERISA. Except as Previously Disclosed:
(1) all "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), covering employees or former
employees of it and/or its Subsidiaries (the "Employees") are
Previously Disclosed, true and complete copies of which have been
made available to the other party;
(2) all employee benefit plans covering Employees, to
the extent subject to ERISA (the "ERISA Plans"), are in
compliance with ERISA, except for failure to so comply which are
not reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on it; each ERISA Plan which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), has either (a) received a
favorable determination letter from the Internal Revenue Service,
or (b) is or will be the subject of an application for a
favorable determination letter, and it is not aware of any
circumstances likely to result in the revocation or denial of any
such favorable determination letter; there is no pending or, to
the best of its knowledge, threatened litigation relating to the
ERISA Plans which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it; and neither
it nor any Subsidiary has engaged in a transaction with respect
to any ERISA Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject it or
the Subsidiary to a tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA in an amount which is
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on it;
(3) no liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by it or any
Subsidiary with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any of them or any
entity which is considered one "employer" with it or any
Subsidiary under Section 4001(a)(14) of ERISA or Section 414 of
the Code (an "ERISA Affiliate"), which liability is reasonably
likely to have a Material Adverse Effect on it; neither it nor
any Subsidiary has incurred and does not expect to incur any
withdrawal liability with respect to a multiemployer plan under
Subtitle E of Title IV of ERISA; and to its knowledge no notice
of a "reportable event" within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or the
Pension Plan of an ERISA Affiliate within the 12-month period
ending on the date hereof;
(4) during the current plan year and the immediately
preceding three plan years of such ERISA Plan, all contributions
required to be made under the terms of any ERISA Plan of it or an
ERISA Affiliate have been timely made; and no pension plan of it
or an ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA which is reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on it;
(5) under each Pension Plan which is a single-employer
plan, as of the last day of the most recent plan year ended prior
to the date hereof, the actuarially determined present value of
all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the ERISA Plan's most recent actuarial
valuation) did not exceed the then current value of the assets of
such ERISA Plan, and there has been no material adverse change in
the financial position of such ERISA Plan since the last day of
the most recent plan year; and
(6) there are no material current or projected
liabilities for retiree health or life insurance benefits.
(M) REGULATORY APPROVALS. It knows of no reason why the
regulatory approvals referred to in Paragraphs (B) and (C) of
Article VI should not be obtained without the imposition of any
condition of the type referred to in the proviso following such
Paragraph (C).
(N) AGREEMENTS WITH BANK REGULATORS. Except as Previously
Disclosed neither MSBC nor Regency nor any Subsidiary,
respectively, is a party to any written agreement or memorandum
of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order or directive
by, or a recipient of any extraordinary supervisory letter from,
any bank regulator which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its
credit or reserve policies or its management, nor has it been
advised by any bank regulator that it is contemplating issuing or
requesting any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment
letter or similar submission.
(O) SUBSIDIARIES. In the case of Regency only, t has no
subsidiaries other than RB, all of the outstanding shares of
which are validly issued, fully paid and nonassessable (except
pursuant to 12 USC 55) and are owned by it free and clear of
all liens, claims, encumbrances and restrictions on transfer
whatsoever. In the case of MSBC only, its only Subsidiaries are
the MSBC Subsidiaries, all of the outstanding shares of which
(with the exception of MB Corp. and the Holding Company as of the
date hereof) are validly issued, fully paid and nonassessable
(except pursuant to 12 USC 55 or comparable state law) and are
owned by it free and clear of all liens, claims, encumbrances and
restrictions on transfer whatsoever.
(P) COLLECTIVE BARGAINING CONTRACTS. Neither it nor any
Subsidiary is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a
labor union or labor organization or is the subject of a
proceeding asserting that it or the Subsidiary has committed an
unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel it or the Subsidiary to
bargain with any labor organization as to wages and conditions of
employment. There is not any strike or other labor dispute
involving it or any Subsidiary and to the best of its knowledge
none is threatened. It is not aware of any activity involving
the employees of it or any Subsidiary seeking to certify a
collective bargaining unit or engaging in any other organization
activity.
(Q) CLASSIFIED ASSETS AND LOAN AND LEASE LOSS RESERVE.
Regency has Previously Disclosed a list of the loans, extensions
of credit or other assets of RB that were classified by the
examiners of the Federal Reserve Board ("FRB") or by the Bureau
of Financial Institutions of the Virginia State Corporation
Commission ("Virginia Bank Regulator") in its last respective
preceding examination ("RB Asset Classification") and has
Previously Disclosed a list of its loans and extensions of credit
by RB in the respective initial principal amount of $10,000 or
more, any payment of which is, as of the date so disclosed,
delinquent ("RB Delinquent Loan List"). The RB Asset
Classification and the RB Delinquent Loan List are, respectively,
accurate and complete in all material respects and no loans,
extensions of credit or other assets (or portions thereof) that
have been classified as of the respective date of the RB Asset
Classification by any regulatory examiner as "Other Loans
Specially Mentioned", "Substandard", "Doubtful", "Loss", or words
of similar import are excluded from the amounts disclosed in the
RB Asset Classification other than amounts of loans, extensions
of credit or other assets that were charged off by RB prior to
the respective date of the RB Asset Classification. RB's loan
and lease loss reserve as Previously Disclosed to MSBC and MSBC's
consolidated loan and lease loss reserve as Previously Disclosed
to Regency are reasonably believed by the disclosing party to be
adequate as of the date thereof and no event(s), occurrence(s),
condition(s) or circumstance(s) has or have occurred which have
had, will have, or are reasonably likely (separately or
collectively) to have the effect of rendering such loan and lease
loss reserve materially inadequate or causing a material addition
to the reserve to be made.
(R) AFFILIATES. In the case of Regency only, except as
Previously Disclosed, to the best of its knowledge, there is no
person who, as of the date of this Plan, may be deemed to be an
"affiliate" of it as that term is used in Rule 145 under the
Securities Act of 1933, as amended (together with the rules and
regulations thereunder, the "Securities Act"; hereinafter the
Securities Act and the Exchange Act are referred to as the
"Federal Securities Laws").
(S) INSURANCE POLICIES. In the case of Regency only, it
has made available to MSBC correct and complete copies of all of
its or its Subsidiary's insurance policies respecting the
properties, operations, liabilities, officers, directors and
employees thereof, all of which are in full force and effect or
provide coverage to it or its Subsidiary and their respective
officers, directors and employees.
(T) MSBC STOCK. In the case of MSBC only, the shares of
MSBC Common Stock to be issued in exchange for shares of Regency
Common Stock and Directors Options upon consummation of the
Merger will have been duly authorized and, when issued in
accordance with the terms of this Plan, will be validly issued,
fully paid and nonassessable and subject to no preemptive rights.
(U) TAKEOVER LAWS. In the case of Regency only, it has
taken all necessary action to exempt the transactions
contemplated by this Plan and the Stock Option Agreement from, or
the transactions contemplated by this Plan and the Stock Option
Agreement are otherwise exempt from, any applicable state
takeover laws in effect as of the date of this Plan, including,
without limitation, Articles 14 and 14.1 of the Virginia Stock
Corporation Act.
(V) APPROVAL OF THIS TRANSACTION. In the case of Regency
only, it has taken all action so that the entering into of this
Plan and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby (including without
limitation the Merger) or any other action or combination of
actions, or any other transactions, contemplated hereby or
thereby do not and will not (1) require a vote of stockholders
(other than as set forth in Paragraph (A) of Article VI); or (2)
result in the grant of any rights to any person under its
Articles of Incorporation or Bylaws or, except as Previously
Disclosed, under any agreement; or (3) except as set forth in
Paragraphs (B) and (C) of Article VI, and Section 8 of the Stock
Option Agreement and except for consents required to be obtained
from the holders of Regency Options, require any consent or
approval under any law, rule, regulation, judgment, decree,
order, governmental permit or license or, except as Previously
Disclosed, the consent or approval of any other party to any
agreement, indenture or instrument; or (4) restrict or impair in
any way the ability of MSBC to exercise the rights granted
hereunder or under the Stock Option Agreement.
(W) ENVIRONMENTAL LAWS. As to Regency only, (1) To its
knowledge, it, its Subsidiary, the Participation Facilities and
the Loan Properties (each as defined below) are, and have been,
in compliance with all Environmental Laws (as defined below),
except for instances of noncompliance which are not reasonably
likely, individually or in the aggregate, to have a Material
Adverse Effect on it;
(2) there is no proceeding pending or, to its
knowledge, threatened before any court, governmental agency or
board or other forum in which it, its Subsidiary, or any
Participation Facility has been, or with respect to threatened
proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (a) for alleged
noncompliance (including by any predecessor) with any
Environmental Law or (b) relating to the release or threatened
release into the environment of any Hazardous Material (as
defined below), whether or not occurring at or on a site owned,
leased or operated by it, its Subsidiary or any Participation
Facility, except for such proceedings pending or threatened that
are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on it;
(3) to its knowledge, there is no proceeding pending
or threatened before any court, governmental agency or board or
other forum in which any Loan Property, it or its Subsidiary is
or with respect to threatened proceedings, reasonably would be
expected to be, named as a defendant or potentially responsible
party (a) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (b) relating to the
release or threatened release into the environment of any
Hazardous Material, except for such proceedings pending or
threatened that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it;
(4) to its knowledge, there is no reasonable basis for
any proceeding of a type described in subparagraphs (2) or (3)
above;
(5) to its knowledge, during the period of its or its
Subsidiary's (a) ownership or operation of any of their
respective current properties, (b) participation in the
management of any Participation Facility, or (c) holding of a
security interest in a Loan Property, there have been no releases
of Hazardous Material in, on, under or affecting any such
property, Participation Facility or Loan Property, except for
such releases that are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on it;
(6) to its knowledge, prior to the period of its or
its Subsidiary's: (a) ownership or operation of any of their
respective current properties, (b) participation in the
management of any Participation Facility, or (c) holding of a
security interest in a Loan Property, there were no releases of
Hazardous Material in, on, under or affecting any such property,
Participation Facility or Loan Property, except for such releases
that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on it;
(7) the following definitions apply for purposes of
this Paragraph (W): "to its knowledge" means the actual
knowledge of any officer of Regency, any information contained in
the business records of Regency and, with respect to any "Loan
Property", any information contained in a Phase I or Phase II
environmental assessment furnished to Regency; "Loan Property"
means any property owned by it or its Subsidiary or in which it
or its Subsidiary holds a security interest, and, where required
by the context, includes the owner or operator of such property,
but only with respect to such property; "Participation Facility"
means any facility in which it or its Subsidiary participates in
the management and, where required by the context, includes the
owner or operator or such property, but only with respect to such
property; "Environmental Law" means (a) any federal, state and
local law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
governmental entity, relating to (i) the protection, preservation
or restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, or
(ii) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Material, in each
case as amended and as now in effect and includes, without
limitation, the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Superfund Amendments
and Reauthorization Act, the Federal Water Pollution Control Act
of 1972, the federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the
Federal Solid Waste Disposal Act and the Federal Toxic Substances
Control Act, and the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act
of 1970, each as amended and as now in effect, and (b) any common
law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any
Hazardous Material; "Hazardous Material" means any substance
presently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under
any Environmental Law, whether by type or quantity, and includes,
without limitation, any oil or other petroleum product, toxic
waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste or petroleum or any
derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
(X) TAXES. Except as Previously Disclosed, to the best of
its knowledge (1) all reports and returns with respect to Taxes
(as defined below) that are required to be filed by or with
respect to it or its Subsidiaries, including without limitation
consolidated federal income tax returns of it and its
Subsidiaries (collectively, the "Tax Returns"), have been duly
filed, or requests for extensions have been timely filed and have
not expired, for periods ended on or prior to September 30, 1997,
and on or prior to the date of the most recent fiscal year end
immediately preceding the Merger Effective Date, except to the
extent all such failures to file, taken together, are not
reasonably likely to have a Material Adverse Effect on it, and
such Tax Returns were true, complete and accurate in all material
respects, (2) all material taxes (which shall mean federal,
state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes imposed on
the income, properties or operations of it and its Subsidiaries,
together with any interest, additions, or penalties with respect
thereto and any interest in respect of such additions or
penalties, collectively the "Taxes") shown to be due on the Tax
Returns have been paid in full, (3) all Taxes due with respect to
completed and settled examinations have been paid in full, (4) no
issues have been raised by the relevant taxing authority in
connection with the examination of any of the Tax Returns which
are reasonably likely to result in a determination that would
have a Material Adverse Effect on it, except as reserved against
in the Regency Reports, and (5) no waivers of statutes of
limitations (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service) have
been given by or requested with respect to any Taxes of it or its
Subsidiaries.
(Y) LEGAL COMPLIANCE. Except as Previously Disclosed, it
and its Subsidiaries are in compliance with all applicable laws,
ordinances, orders, decrees, or resolutions of any governmental
entity relating or applicable to the conduct of their respective
businesses, operations, employment practices or relating to the
ownership or use of their respective properties which either
alone or in the aggregate have or are reasonably likely to have a
Material Adverse Effect on it.
(Z) CERTAIN INTERESTS. Except in arm's length transactions
pursuant to normal commercial terms and conditions, no executive
officer or director of it or its Subsidiaries has any material
interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of it and its
Subsidiaries, except for the usual rights of a shareholder in it;
no such person is indebted to it, except for normal business
expense advances and for loans made, in the case of MSBC, by an
MSBC Bank Subsidiary, and in the case of Regency, by RB, in each
case in full compliance with the law, including but not limited
to, Regulation O of the FRB and in the ordinary course of
business; and it is not indebted to such person except for
amounts due under normal and disclosed compensation arrangements
or reimbursement of ordinary business expenses.
(AA) LICENSES. It and its Subsidiaries have in effect all
approvals, authorizations, consents, licenses, clearances, and
orders of and registrations with all governmental and regulatory
authorities the failure to have and comply with which either
alone or in the aggregate would have a Material Adverse Effect on
it.
(BB) LIABILITIES. Except to the extent reflected or
reserved against in the MSBC Reports, as to MSBC and its
Subsidiaries, and in the Regency Reports, as to Regency and RB,
and except as Previously Disclosed, it and its Subsidiaries have
no material liability or obligation of any nature whether
accrued, absolute, contingent or otherwise and whether due or to
become due.
(CC) TEN PERCENT SHAREHOLDERS. Except as Previously
Disclosed, it has no shareholder who owns of record or
beneficially 10% or more of the outstanding shares of Regency
Common Stock, or MSBC Common Stock, as the case may be, and there
is no person known to it who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise
has or shares (1) voting power which includes the power to vote
or to direct the voting of, such shares and/or (2) investment
power, which includes the power to dispose or to direct the
disposition, of 10% or more of the outstanding shares of Regency
Common Stock or MSBC Common Stock, as the case may be (all of the
foregoing, "10% Ownership"). There is no person to its knowledge
who, directly or indirectly, has created or uses a trust, proxy,
power of attorney, pooling arrangement or any other contract,
arrangement or device with the purpose or effect of divesting
such person of 10% Ownership or preventing the vesting of 10%
Ownership. A person shall also be deemed to be a beneficial
owner for purposes of the foregoing if that person has the right
to acquire beneficial ownership of such shares within 60 days.
(DD) OPTION SHARES. In the case of Regency only, the Option
Shares (as defined in the Stock Option Agreement) when issued
upon exercise of the Option, will be validly issued, fully paid
and nonassessable and subject to no preemptive rights.
(EE) ARTICLES AND BYLAWS. In the case of Regency only,
true, correct and current copies of its and its Subsidiary's
Articles of Incorporation (or Association) and bylaws have been
delivered to MSBC.
(FF) MSBC SHAREHOLDER APPROVAL. In the case of MSBC, the
approval of the Merger by the holders of shares of MSBC Common
Stock is not required.
(GG) POOLING OF INTERESTS. It has taken no action that
would cause the Merger to fail to qualify for pooling of
interests accounting treatment.
V. COVENANTS
Regency hereby covenants to MSBC, and MSBC hereby covenants
to Regency, that:
(A) BEST EFFORTS TO COMPLETE MERGER. Subject to the terms
and conditions of this Plan, it shall use its best efforts in
good faith to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or desirable,
or advisable under applicable laws, as promptly as practicable so
as to permit consummation of the Merger within the time
contemplated by this Agreement and to otherwise enable
consummation of the transactions contemplated hereby and by the
Stock Option Agreement and shall cooperate fully with the other
parties hereto to that end (it being understood that any
amendments to the Registration Statement (as hereinafter defined)
or a resolicitation of proxies as a consequence of an acquisition
agreement by MSBC shall not violate this covenant), including (1)
using its best efforts to lift or rescind any order adversely
affecting its ability to consummate the transactions contemplated
herein and in the Stock Option Agreement and to cause to be
satisfied the conditions referred to in Article VI and in the
Stock Option Agreement, and each of Regency and MSBC shall use,
and shall cause their respective Subsidiaries to use, their
respective best efforts to obtain all consents (governmental or
other) necessary or desirable for the consummation of the
transactions contemplated by this Plan and the Stock Option
Agreement; and (2) in the case of Regency, cooperating with MSBC
in supplying such information as MSBC may reasonably request in
connection with any public offerings of securities by MSBC prior
to the Merger Effective Date. Notwithstanding the foregoing, in
the event that one party hereto notifies the other party pursuant
to Paragraph (B) of Article VIII that a breach has occurred in
this Plan, either party shall have the option of suspending its
obligations under this Paragraph or Paragraph (O) of this Article
until such time as the breach has been cured.
(B) REGENCY PROXY STATEMENT. In the case of Regency only,
(1) it shall promptly prepare and provide to MSBC prior to its
filing and mailing a proxy statement (the "Proxy Statement") to
be mailed to the holders of Regency Common Stock in connection
with the Merger and to be filed by MSBC in a registration
statement (the "Registration Statement") with the SEC, which
shall conform to all applicable legal requirements; (2) without
limiting the foregoing, at the time such Proxy Statement or any
amendment or supplement thereto is mailed to holders of Regency
Common Stock and at all times thereafter up to and including the
meeting of Regency shareholders referred to in Subparagraph (3)
of this Paragraph (B), the Proxy Statement and such amendments
and supplements will comply in all material respects with the
provisions (to the extent applicable) of the Exchange Act and
will 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 contained therein not
misleading; provided, however, in no event shall any party hereto
be liable for any untrue statement of a material fact or omission
to state a material fact in the Proxy Statement made in reliance
upon, and in conformity with, written information concerning
another party furnished by such other party specifically for use
in the Proxy Statement; (3) it shall hold a special meeting (the
"Meeting") of the holders of Regency Common Stock as soon as
practicable after the Registration Statement has become effective
for purposes of voting upon this Plan, the Plan of Merger and the
Merger contemplated hereby and thereby, and (4) it shall use its
best efforts to solicit and obtain votes of the holders of
Regency Common Stock in favor of the above proposals and shall
once, at MSBC's request, recess or adjourn the Meeting for a
period not exceeding ten days (unless Regency consents to a
longer period) if such recess or adjournment is deemed by MSBC to
be necessary or desirable.
(C) REGISTRATION STATEMENT CONTENTS. When the Registration
Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such
effectiveness, up to and including the date of the Meeting, such
Registration Statement and all amendments or supplements thereto,
with respect to all information set forth therein furnished or to
be furnished by Regency relating to Regency and its Subsidiary
and by MSBC relating to MSBC and the MSBC Subsidiaries (1) will
comply in all material respects with the provisions of the
Securities Act and any other applicable statutory or regulatory
requirements, and (2) will 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 contained
therein not misleading; provided, however, in no event shall any
party hereto be liable for any untrue statement of a material
fact or omission to state a material fact in the Registration
Statement made in reliance upon, and in conformity with, written
information concerning another party furnished by such other
party specifically for use in the Registration Statement. In
connection with the preparation of the Registration Statement and
related Prospectus/Proxy Statement, each will cooperate with the
other and will furnish the information concerning itself required
by law to be included therein.
(D) EFFECTIVENESS OF REGISTRATION STATEMENT. MSBC will
advise Regency, promptly after MSBC receives notice thereof, of
the time when the Registration Statement has become effective or
any supplement or amendment has been filed and becomes effective
or of the issuance of any stop order or the suspension of the
qualification of the MSBC Common Stock for offering or sale in
any jurisdiction, of the initiation or threat of any proceeding
for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for
additional information.
(E) PUBLIC ANNOUNCEMENTS. It agrees that, unless approved
by the other party hereto in advance, it will not issue any press
release or written statement for general circulation relating to
the transactions contemplated hereby, except as otherwise
required by law or applicable NASD or stock exchange rule.
(F) REVIEW OF INFORMATION.
(1) Upon reasonable notice, it shall afford the other
party hereto, and its officers, employees, counsel, accountants
and other authorized representatives, access, during normal
business hours throughout the period prior to the Merger
Effective Date, to all of its properties, books, contracts,
commitments, properties and records to the extent permitted by
law and to its officers, employees, counsel and accountants,
authorizing each of them to discuss fully with the other party's
representatives all matters related to this Plan, the
transactions contemplated hereby and the condition, operations,
business, assets or properties of such party. During such
period, it shall also furnish promptly to the other party hereto
(a) a copy of each material report, schedule and other document
filed by it pursuant to the requirements of the Federal
Securities Laws or any state laws, rules and regulations
regulating the issuance, sale or exchange of securities or the
markets in which any of the foregoing occurs ("Blue Sky Law(s)"
which together with the Federal Securities Laws are hereinafter
referred to as the "Securities Laws") or banking laws, and (b)
all other information concerning its business, properties and
personnel as the other parties hereto may reasonably request. No
investigation pursuant to this Paragraph (F) by any party shall
affect or be deemed to modify or waive any representation or
warranty made by any other party hereto or the conditions to the
obligation of the first party to consummate the transactions
contemplated by the Plan.
(2) Each party hereto agrees not to use any information
obtained pursuant to this Paragraph (F) for any purpose unrelated
to its evaluation of the transactions contemplated by this Plan
and the Stock Option Agreement. If the Merger is not
consummated, each party will hold all information and documents
obtained pursuant to this Paragraph in confidence (as provided in
Paragraph (F) of Article VIII) except to the extent that
disclosure to a third party is for the purpose of assisting in
the assessment of such information or documents for purposes of
evaluating this Plan and its consummation (in which case
reasonable steps shall be taken to preserve the confidentiality
thereof) and in any event unless and until such time as such
information or documents become publicly available other than by
reason of any action or failure to act by such party or as it is
advised by counsel that any such information or document is
required by law or applicable NASD or stock exchange rule to be
disclosed. In the event of the termination of this Plan, each
party will, upon request by the other party, deliver to the other
all documents so obtained by it or destroy such documents.
(G) NO SOLICITATION. In the case of Regency only, (1) it
shall not, and shall direct the officers, directors, employees
and other persons affiliated with it or any investment banker,
attorney, accountant or other representative of it, not to,
directly or indirectly, solicit or encourage inquiries or
proposals with respect to, or (except as required by the
fiduciary duties of its Board of Directors as advised in writing
by its counsel) furnish any nonpublic information relating to or
participate in any negotiations or discussion concerning, any
acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, it or any merger
or other business combination with it other than as contemplated
by this Plan,; (2) shall notify MSBC immediately if any such
inquiries or proposals are received by, or any such negotiations
or discussions are sought to be initiated with, it; and (3) shall
instruct its officers, directors, agents, advisors and affiliates
to refrain from doing any of the foregoing.
(H) FILING OF REGISTRATION STATEMENT. In the case of MSBC
only, it shall, as promptly as practicable following the date of
this Plan, prepare and file the Registration Statement with the
SEC and MSBC shall use its best efforts to cause the Registration
Statement to be declared effective as soon as practicable after
the filing thereof.
(I) BLUE SKY. In the case of MSBC only, it shall use its
best efforts to obtain, prior to the effective date of the
Registration Statement, all necessary Blue Sky Law permits and
approvals, provided that MSBC shall not be required by virtue
thereof to submit to general jurisdiction in any state.
(J) AFFILIATES. In the case of Regency only, it will cause
each person who may be deemed to be an "affiliate" of it for
purposes of Rule 145 under the Securities Act to execute and
deliver to in the form attached hereto as Exhibit B restricting
the disposition of such affiliate's shares of Regency Common
Stock and the shares of MSBC Common Stock to be received by such
person in exchange for such person's shares of Regency Common
Stock.
(K) REGENCY'S POLICIES AND PRACTICES. In the case of
Regency only: Regency shall and shall cause its Subsidiary to
use its best efforts to modify and change its credit, investment,
litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) prior to
the Merger Closing so as to be consistent on a mutually
satisfactory basis with those of MSBC and generally accepted
accounting principles. Regency shall not be required to modify
or change any policies or practices, however, until (x)
satisfaction of the conditions set forth in Paragraphs (A), (B)
and (C) of Article VI, (y) such time as Regency and MSBC shall
reasonably agree that the Merger Closing will occur prior to
public disclosure of such modifications or changes in regular
periodic earnings releases or periodic reports filed with the SEC
or other applicable governmental authority available to the
public, and (z) such time as MSBC acknowledges in writing that
all conditions to MSBC's obligation to consummate the Merger (and
MSBC's rights to terminate this Plan) have been waived or
satisfied; provided, however, that in all circumstances Regency
shall and shall cause its Subsidiary to make such modifications
and changes not later than immediately prior to the Merger
Effective Date. Regency's representations, warranties and
covenants and contained in the Plan shall not be deemed to be
untrue or breached in any respect for any purpose as a
consequence of any modifications or changes undertaken solely on
account of this Paragraph (K).
(L) STATE TAKEOVER LAWS. In the case of Regency only, it
shall not take any action that would cause the transactions
contemplated by this Plan and/or the Stock Option Agreement to be
subject to any applicable state takeover statute in effect as of
the date of this Plan and shall take all necessary steps to
exempt (or ensure the continued exemption of) the transactions
contemplated by this Plan and the Stock Option Agreement from, or
if necessary challenge the validity or applicability of, any
applicable state takeover law, as now or hereafter in effect,
including, without limitation, Articles 14 and 14.1 of the
Virginia Stock Corporation Act.
(M) REGENCY SPECIAL SHAREHOLDER RIGHTS. In the case of
Regency only: (1) it shall take all necessary steps to ensure
that the entering into of this Plan and the Stock Option
Agreement and the consummation of the transactions contemplated
hereby and thereby (including without limitation the Merger and
the exercise of the Option) and any other action or combination
of actions, or any other transactions contemplated hereby or
thereby do not and will not result in the grant of any rights to
any person under the Articles of Incorporation of Bylaws of
Regency or under any agreement to which Regency is a party (other
than as Previously Disclosed); or (2) it shall not restrict or
impair in any way the ability of MSBC to exercise the rights
granted hereunder or under the Stock Option Agreement.
(N) SHAREHOLDER APPROVAL. In the case of Regency, only, it
shall not adopt any plan or other arrangement granting any rights
to any shareholders that would adversely affect in any way MSBC's
rights under this Plan or the Stock Option Agreement and, in the
case of MSBC only, it shall not amend the terms of its
Participating Cumulative Preferred Stock, Series A, of which
100,000 shares are authorized but unissued as of September 30,
1997, in a manner that affects holders of Regency Common Stock in
a disproportionate manner.
(O) BEST EFFORTS FOR MERGER. Subject to the terms of this
Agreement, it undertakes and agrees to use its best efforts to
cause the Merger to be effected.
(P) NOTICE OF ADVERSE EVENTS. It shall promptly (but in
any event within ten days after discovering the same) notify the
other party hereto in writing of any event(s), occurrence(s),
condition(s) or circumstance(s) which alone or in the aggregate
results or is reasonably likely to result in the inaccuracy of
any warranty or representation or the material breach of any
covenant or agreement in this Plan of the party discovering the
same.
(Q) GOVERNMENT APPLICATIONS. In the case of MSBC only, it
shall promptly prepare and submit an application to the FRB and
the Virginia Bank Regulator for approval of the Merger and
promptly make all appropriate filings to secure all other
approvals, consents and rulings which are necessary for the
consummation of the Merger by MSBC. Both MSBC and Regency will
use their best efforts to obtain and will cooperate with each
other in making applications for such approvals or other actions
advisable in the reasonable judgment of MSBC, with the consent of
Regency, such consent not to be unreasonably withheld, to
consummate the Merger including, but not limited to, promptly
furnishing information relating to it and its Subsidiaries
required to be set forth therein; provided, however, that any
approval shall not require a change which materially adversely
impacts the economic or business benefits to either MSBC or
Regency of the transactions contemplated by this Plan so as to
render inadvisable the consummation of the Merger in the
reasonable opinion of the Board of Directors of either MSBC or
Regency.
(R) ENVIRONMENTAL TESTS. Regency and its Subsidiary will
allow MSBC to conduct, through designated representatives,
environmental and engineering tests provided that no test or
information discovered pursuant thereto shall be deemed to affect
or modify or waive any representation or warranty made by
Regency.
(S) LISTING OF MSBC COMMON STOCK. MSBC will use its best
efforts, prior to the Merger Effective Date, to cause the shares
of the MSBC Common Stock to be issued to Regency shareholders in
connection with the consummation of the Plan, to be listed on the
NASDAQ/NMS, upon official notice of issuance.
(T) EXECUTION OF PLAN BY HOLDING COMPANY. Upon the
incorporation of the Holding Company and its due organization
subsequent to the date of this Agreement and prior to Merger
Closing, MSBC shall cause the Holding Company by a duly
authorized officer to execute this Plan.
(U) DIRECTORS OPTIONS. Not less than thirty days prior to
the Merger Closing each holder of a Directors Option shall have
entered into a written agreement with Regency for the express
benefit of and reasonably satisfactory to MSBC agreeing to accept
as of the Merger Closing in full satisfaction of the optionee's
rights under such Directors Option that number of shares of MSBC
Common Stock equal to the quotient obtained by dividing (y) the
difference between $13.00 minus the respective Strike Price for
such Option by (z) the Average MSBC Share Price ("Option Ratio").
If the Option Ratio computed in accordance with the immediately
preceding sentence is less than the ratio ("Bottom Ratio")
obtained by dividing (aa) the difference between $13.00 minus the
respective Strike Price, by (bb) $32.00, the Option Ratio shall
be the Bottom Ratio; if the Option Ratio computed in accordance
with the immediately preceding sentence is greater than the ratio
("Top Ratio") obtained by dividing (i) the difference between
$13.00 minus the respective Strike Price, (ii) by $26.00, the
Option Ratio shall be the Top Ratio. As of the Merger Closing,
the optionees with respect to all outstanding Directors Options
shall by agreement be entitled to receive from MSBC only the
shares of MSBC Common Stock as provided in the agreements
executed in accordance with this Paragraph and shall have no
further rights under the terms of their Directors Options.
(V) POOLING LETTER. MSBC and Regency shall have received a
letter, dated as of the Merger Effective Date, in a form and
substance reasonably acceptable to MSBC and Regency, from Coopers
& Lybrand to the effect that the acquisition of Regency Common
Stock by MSBC and the Merger will qualify for pooling of
interests accounting treatment.
(W) TRANSACTIONS IN MSBC COMMON STOCK. Other than
transactions in MSBC Common Stock in connection with employee
benefit plans of MSBC or in connection with the operation in the
ordinary course of MSBC's dividend reinvestment plan, neither
MSBC or any MSBC Subsidiary or Regency or any Regency subsidiary
will purchase, sell or otherwise acquire or dispose of any shares
of MSBC Common Stock during the period of calculation of the
Average MSBC Share Price.
VI. CONDITIONS TO CONSUMMATION OF THE MERGER.
Consummation of the Merger is conditioned upon:
(A) SHAREHOLDER APPROVAL. Approval of the Merger and the
other transactions contemplated hereby (including any actions
contemplated by Paragraph (L) of Article VIII) by the requisite
vote of the stockholders of Regency.
(B) SPECIFIC REGULATORY APPROVAL. Procurement of the
approval by the FRB and the Virginia Bank Regulator of the Merger
and procurement of all other regulatory consents and approvals
applicable to financial institutions and their holding companies
and satisfaction of all other regulatory requirements applicable
to financial institutions and their holding companies necessary
for consummation of the Merger, and the expiration of the
statutory waiting periods relating thereto.
(C) GENERAL GOVERNMENTAL APPROVAL. Procurement of all
other governmental consents and approvals (including but not
limited to approval of Articles of Merger by the Virginia
Corporation Authority) and satisfaction of all other requirements
prescribed by law which are necessary to the consummation of the
Merger; provided, however, that no approval or consent in
Paragraph (B) or (C) of this Article VI shall have imposed any
condition or requirement which would materially adversely impact
the economic or business benefits to either MSBC or Regency of
the transactions contemplated by this Plan so as to render
inadvisable the consummation of the Merger.
(D) NO COUNTERVENING ORDERS. There shall not be in effect
any order, decree or injunction of any court or agency of
competent jurisdiction that enjoins or prohibits consummation of
the Merger.
(E) ACCOUNTANTS' REPORTS AS TO MSBC. Regency and its
directors shall have received from Coopers & Lybrand letters,
dated the date of or shortly prior to (i) the mailing of the
Proxy Statement, and (ii) the Merger Effective Date, in form and
substance satisfactory to Regency with respect to MSBC's
consolidated financial position and results of operations, which
letters shall be based upon customary specified procedures
undertaken by such firm.
(F) ACCOUNTANTS' REPORTS AS TO REGENCY. MSBC shall have
received from KPMG Peat Marwick LLP, dated the date of or shortly
prior to (1) the mailing of the Proxy Statement, (2) the public
offerings of any securities by MSBC prior to the Merger Effective
Date, and (3) the Merger Effective Date, in form and substance
satisfactory to MSBC with respect to Regency's financial position
and results of operations, which letters shall be based upon
customary specified procedures undertaken by such firm.
(G) MSBC LEGAL OPINION. Regency shall have received an
opinion, dated the Merger Effective Date, of Flippin, Densmore,
Morse, Rutherford & Jessee, P.C., counsel for MSBC and the
Holding Company, in form reasonably satisfactory to Regency,
which shall cover the matters contained in Exhibit C hereto.
(H) REGENCY LEGAL OPINION. MSBC and its directors and
officers who sign the Registration Statement shall have received
an opinion, dated the Merger Effective Date of LeClair Ryan, a
professional corporation, in form reasonably satisfactory to
MSBC, which shall cover the matters contained in Exhibit D
hereto.
(I) MSBC REPRESENTATIONS AND WARRANTIES. (1) Each of the
representations and warranties contained herein of MSBC shall be
true and correct as of the date of this Plan and upon the Merger
Effective Date with the same effect as though all such
representations and warranties had been made on the Merger
Effective Date, except for any such representations and
warranties made as of a specified date, which shall be true and
correct as of such date; and (2) each and all of the agreements
and covenants of MSBC to be performed and complied with pursuant
to this Plan and the other agreements contemplated hereby prior
to the Merger Effective Date shall have been duly performed and
complied with in all material respects, and Regency shall have
received a certificate or certificates signed by the Chief
Executive Officer and Chief Financial Officer of MSBC dated the
Merger Effective Date, to such effect.
(J) REGENCY REPRESENTATIONS AND WARRANTIES. (1) Each of
the representations and warranties contained herein of Regency
shall be true and correct as of the date of this Plan and upon
the Merger Effective Date with the same effect as though all such
representations and warranties had been made on the Merger
Effective Date, except for any such representations and
warranties made as of a specified date, which shall be true and
correct as of such date; and (2) each and all of the agreements
and covenants of Regency to be performed and complied with
pursuant to this Plan and the other agreements contemplated
hereby prior to the Merger Effective Date shall have been duly
performed and complied with in all material respects, and MSBC
shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officer of Regency dated the
Merger Effective Date, to such effect.
(K) REGISTRATION STATEMENT EFFECTIVENESS. The Registration
Statement shall have become effective and no stop order
suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC or any other regulatory
authority.
(L) BLUE SKY APPROVALS. MSBC shall have received all Blue
Sky Law approvals, permits and other authorizations necessary to
consummate the Merger.
(M) TAX FREE REORGANIZATION OPINION. MSBC and Regency
shall have received an opinion from Flippin, Densmore, Morse,
Rutherford & Jessee, PC to the effect that (1) the acquisition of
Regency Common Stock by MSBC and the Merger constitutes a
reorganization under Section 368 of the Code, and (2) no gain or
loss will be recognized by stockholders of Regency who receive
shares of MSBC Common Stock in exchange for their shares of
Regency Common Stock except that gain or loss may be recognized
as to cash received in lieu of fractional share interests and, in
rendering their opinion, may require and rely upon
representations contained in certificates of officers of MSBC,
Regency and others.
(N) LISTING OF MSBC COMMON STOCK. The shares of MSBC
Common Stock issuable pursuant to the Merger shall have been
approved for listing on the NASDNAQ/NMS, subject to official
notice of issuance.
(O) AFFILIATE LETTERS. MSBC shall have received from each
affiliate of Regency the affiliates letter referred to in
Paragraph (J) of Article V.
(P) REGENCY FAIRNESS OPINION. At the time the Proxy
Statement is mailed to the holders of shares of Regency Common
Stock, the Board of Directors of Regency shall have received an
opinion from Wheat, First Securities, Inc. that the Exchange
Ratio is fair to the shareholders of Regency from a financial
point of view.
(Q) EMPLOYEE OPTIONS. As of a date which is no later than
30 days before the Merger Closing, each and every holder of an
Employee Option to purchase shares of Regency Common Stock, to
the extent legally necessary to allow such conversion, shall have
entered into a written agreement with Regency for the express
benefit of and reasonably acceptable to MSBC obligating such
holder to accept the conversion of such Employee Options with
respect to MSBC Common Stock as contemplated by Paragraph (M) of
Article VIII.
(R) DIRECTORS OPTIONS. Each optionee with respect to each
Regency Directors Option shall by written agreement with Regency
for the express benefit of MSBC be entitled to receive from MSBC
only the shares of MSBC Common Stock provided in Paragraph U of
Article V.
provided, however, that a failure to satisfy any of the
conditions set forth in the proviso following Paragraph (C) or in
Paragraph (F), (H), (J), (L), (M), (O), (Q) or (R) of this
Article VI shall only constitute conditions if asserted by MSBC
and a failure to satisfy any of the conditions set forth in the
proviso following Paragraph (C), Paragraph (E), (G), (I), (M),
(N) or (P) of this Article VI shall only constitute conditions if
asserted by Regency.
VII. TERMINATION.
This Plan may be terminated prior to the Merger Effective
Date, either before or after receipt of required stockholder
approval:
(A) MUTUAL CONSENT. By the mutual consent of MSBC and
Regency , if the Board of Directors of each so determines by vote
of a majority of the members of its entire Board.
(B) ON BREACH. By MSBC or Regency, if its Board of
Directors so determines by vote of a majority of the members of
its entire Board, in the event (1) any representation or warranty
contained herein made by the other party is breached and the
breach cannot be or has not been cured within thirty (30) days
after the giving of written notice to the breaching party of such
breach, or (2) a material breach by the other party of any of the
covenants or agreements contained herein, which breach cannot be
or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach; provided,
however, that a breach can only be asserted as a basis for
termination pursuant to this paragraph (B) by a party who is not
itself at such time in breach hereof.
(C) FAILURE TO CONSUMMATE ON TIME. By MSBC or Regency, if
its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not
consummated by June 30, 1998.
(D) FAILURE TO OBTAIN CERTAIN APPROVALS. By MSBC or
Regency, if its Board of Directors so determines by a vote of a
majority of the members of its entire Board, in the event that
(1) any common stockholder approval contemplated by Paragraph (A)
of Article VI is not obtained at a meeting or meetings called for
the purpose of obtaining such approval; (2) if any regulatory
approval contemplated by Paragraph (B) of Article VI to the
extent necessary to consummate the Merger legally, is finally and
unconditionally denied.
(E) FAILURE TO EXECUTE STOCK OPTION AGREEMENT. By MSBC if,
prior to 5:00 p.m. on October 28, 1997, Regency does not execute
and deliver to MSBC the Stock Option Agreement.
(F) POSSIBLE ADJUSTMENT IN EXCHANGE RATIO AND OPTION RATIO.
By Regency by vote of a majority of the members of its entire
Board during the ten (10) day period commencing on the
Determination Date if both of the following conditions are
satisfied:
(1) if the Average MSBC Determination Price
for MSBC Common Stock on the Determination Date is
less than $26.00; and
(2) if the First Percentage exceeds the
Second Percentage by at least ten (10) percentage
points;
subject, however, to the immediately following four sentences.
If Regency elects to exercise its termination right pursuant to
Paragraph (F) of Article VII, it shall give prompt written notice
to MSBC (provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned ten (10) day
period). During the seven (7) day period commencing with its
receipt of such notice, MSBC shall have the option of increasing
the consideration to be received by the holders of Regency Common
Stock
(including shares to be acquired pursuant to Employee Options)and
by optionees with respect to Directors Options by adjusting the
Exchange Ratio and Option Ratio,
respectively, to equal a quotient, the numerator of which is
$26.00 multiplied by the Exchange Ratio (as then in effect) with
respect to Regency Common Stock and the Option Ratio (as then in
effect) with respect to the Directors Options and in either case
the denominator of which is the Average MSBC Determination Price.
If MSBC makes the election contemplated by the immediately
preceding sentence, it shall give prompt written notice to
Regency of such election and the revised Exchange Ratio and
Option Ratio, whereupon no termination shall have accrued
pursuant to this Paragraph (F) and the Plan shall remain in
effect in accordance with its terms (except as the Exchange Ratio
or Option Ratio shall have been so modified) and any references
in this Plan to "Exchange Ratio" or "Option Ratio" shall
thereafter be deemed to refer to the Exchange Ratio or Option
Ratio as adjusted pursuant to this Paragraph (F).
For purposes of this Paragraph (F) the following terms shall
have the meanings indicated:
"Average MSBC Determination Price" means the average of the
bid/asked price for MSBC Common Stock as reported on the
NASDAQ/NMS for the 20 consecutive full trading days preceding the
Determination Date.
"Determination Date" means the tenth calendar day prior to
the Merger Closing.
"First Percentage" means the percentage resulting from: (a)
taking the remainder ("First Remainder") obtained by subtracting
the Average MSBC Determination Price from $29.75 (the average of
the bid and asked prices of MSBC Common Stock as reported on the
NASDAQ/NMS on October 15, 1997; and (b) dividing the First
Remainder by the Average MSBC Determination Price.
"Second Percentage" means the percentage resulting from: (a)
taking the remainder ("Second Remainder") obtained by subtracting
the SNL Southeast Bank Index reported most recently prior to the
last trading day in the measuring period for calculating the
Average MSBC Determination Price ("Recent SNL Bank Index") from
the SNL Southeast Bank Index at October 15, 1997; and (b)
dividing the Second Remainder by the Recent SNL Bank Index.
VIII. OTHER MATTERS.
(A) SURVIVAL. If the Merger Effective Date occurs, the
agreements of the parties in Paragraph (F) of Article II, and
Paragraphs (A), (D), (F), (I), (J) and (K) of this Article VIII
shall survive the Merger Effective Date; all other
representations, warranties, agreements and covenants contained
in this Plan shall be deemed to be conditions of the Merger and
shall not survive the Merger Effective Date. If this Plan is
terminated prior to the Merger Effective Date, the agreements and
representations of the parties in Paragraph (K) of Article IV,
Paragraphs (F)(2) of Article V and Paragraphs (A), (D), (E), (F)
and (I) of this Article VIII shall survive such termination. In
the event of the termination and abandonment of this Plan
pursuant to the provisions of Article VII, this Plan shall become
void and have no effect, except (1) as provided in the
immediately preceding sentence; and (2) no party shall be
relieved or released from any liability arising out of a breach
of any provisions of this Plan except as provided in Paragraph
(E) of this Article.
(B) WAIVER, AMENDMENT. Prior to the Merger Effective Date,
any provision of this Plan may be (1) waived by the party
benefited by the provision, or (2) amended or modified at any
time (including the structure of the transaction), by an
agreement in writing among the parties hereto approved by or
approved in the manner authorized by their respective Boards of
Directors and executed in the same manner as this Plan, except
that, after the vote by the stockholders of Regency, the
consideration to be received by the stockholders of Regency for
each share of Regency Common Stock shall not be decreased (except
in accordance with Section 4 of the Plan of Merger).
(C) COUNTERPARTS. This Plan may be executed in one or more
counterparts, each of which shall be deemed to constitute an
original. This Plan shall become effective when one counterpart
has been signed by each party hereto.
(D) GOVERNING LAW. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of
Virginia.
(E) FEES AND EXPENSES. In the event that the Plan is
terminated in accordance with the provisions of Article VII
otherwise than on account of a breach by Regency, each party
shall bear its own costs, expenses and fees in connection with
and arising out of the Merger and the other transactions
contemplated by this Plan (including, without limitation, amounts
paid or payable to investment bankers, to counsel and
accountants, and to governmental and regulatory agencies). In
the event that the Plan is terminated in accordance with the
provisions of Article VII on account of a breach by one party,
the total documented out-of-pocket costs, expenses, and fees
(excluding only investment banking fees) incurred by the other
party (regardless of whether incurred before or after the
execution of this Plan), so long as such other party shall not
also be in breach, in connection with and arising out of the
Merger and other transactions contemplated by this Plan shall be
paid by the breaching party and shall promptly make such
reimbursement to the breaching party as is necessary to
effectuate the same.
(F) CONFIDENTIALITY. Except as otherwise provided in
Paragraph (F)(2) of Article V, each of the parties hereto and
their respective agents, attorneys and accountants will maintain
the confidentiality of all information provided in connection
herewith which has not been publicly disclosed.
(G) NOTICES. All notices, requests and other
communications hereunder to a party shall be in writing and shall
be deemed to have been duly given when delivered by hand,
telegram or facsimile (confirmed in writing) to such party at its
address set forth below or such other address as such party may
specify by notice to the parties hereto.
If to MSBC or Holding Company, to:
MainStreet BankGroup Incorporated
200 E. Church Street
Martinsville, VA 24112-5409
Attn: Michael Brenan,
Chief Executive Officer
Copy to:
Douglas W. Densmore, Esq.
Flippin, Densmore, Morse, Rutherford & Jessee
300 First Campbell Square
Drawer 1200
Roanoke, Virginia 24006
If to Regency, to:
Regency Financial Shares, Inc.
1011 East Main Street
Richmond, Virginia 23219
Attn: Merlin A. Henkel
President
Copy to:
George P. Whitley
LeClair Ryan
707 East Main Street, 11th Floor
Richmond, Virginia 23219
(H) DEFINITIONS. Any term defined anywhere in this Plan
shall have the meaning ascribed to it for all purposes of this
Plan (unless expressly noted to the contrary). In addition:
(1) the term "knowledge" when used with respect to a
party shall mean the actual knowledge or constructive knowledge
assuming due inquiry after notice, of any Vice President or
equivalent or superior officer;
(2) the term "Material Adverse Effect," when applied
to a party, shall mean an event, occurrence, condition or
circumstance (including without limitation (a) the making of any
provisions for possible loan and lease losses, classification of
assets, loan or credit problems, investment losses or write-
downs, legal proceedings, violations of law, assertions of
claims, write-downs of other real estate and taxes) which, in any
case, (i) has or is reasonably likely at any future time to have
a material adverse effect on the financial condition, assets,
results of operations, liquidity, or business of the party and
its Subsidiaries, taken as a whole, or (ii) has impaired or is
reasonably likely to impair materially the party's ability to
perform its obligations under this Plan or the consummation of
the Merger and the other transactions contemplated by this Plan;
and provided that material adverse effect and material impairment
shall not be deemed to include the impact of (x) changes in
banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities,
(y) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and bank
holding companies generally and (z) the effects of Merger on the
operating performance of the parties to this Plan;
(3) the term "Previously Disclosed" by a party shall
mean information set forth in a written disclosure that is
delivered by that party to the other party contemporaneously with
the execution of this Plan and specifically designated as
information "Previously Disclosed" pursuant to this Plan;
provided, further, the mere inclusion of an item in a disclosure
letter shall not be deemed an admission by a party that such item
represents a material exception of fact, event or circumstances
or that such item is reasonably likely to result in a Material
Adverse Effect.
(I) ENTIRE UNDERSTANDING. This Plan represents the entire
understanding of the parties hereto with reference to the
transactions contemplated hereby and supersede any and all other
oral or written agreements heretofore made. Nothing in this Plan
expressed or implied, is intended to confer upon any person,
other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason
of this Plan, other than as provided in Paragraph (K) below.
(J) BENEFIT PLANS. Upon consummation of the Merger, as
soon as administratively practicable employees of Regency shall
be entitled to participate in MSBC's pension, severance, benefit
and similar plans on the same terms and conditions as employees
of MSBC and its Subsidiaries. With respect to the MSBC 401(k)
plan only, employees of Regency shall be given full credit for
prior service with Regency with respect to eligibility for and
vesting in such plan. MSBC shall cause the Continuing
Corporation to honor in accordance with their terms as in effect
on the date hereof, or as amended after the date hereof with the
prior written consent of MSBC, all employment, severance,
consulting and other compensation contracts and agreements
Previously Disclosed to MSBC and executed in writing by both
Regency or RB on the one hand and any individual current or
former director, officer or employee thereof on the other hand,
copies of which have previously been delivered by Regency to
MSBC.
(K) INDEMNIFICATION. (1) In the case of MSBC only, it
agrees that for the period of the relevant statute of limitations
but in no event less than six-years following the Merger
Effective Date, it shall cause the Continuing Corporation and any
successor thereto to indemnify and hold harmless any person who
has rights to indemnification from Regency to the same extent and
on the same conditions as such person is entitled to
indemnification pursuant to Regency's Articles of Incorporation
as in effect on the date of this Plan, to the extent legally
permitted to do so, with respect to matters occurring on or prior
to the Merger Effective Date (regardless of whether a claim is
asserted in connection therewith on or prior to the Merger
Effective Date or thereafter). Without limiting the foregoing, in
any case in which approval by the Continuing Corporation may be
required to effectuate any such indemnification, MSBC shall cause
the Continuing Corporation to direct, at the election of the
party to be indemnified, that the determination of any such
approval shall be made by independent counsel mutually agreed
upon between MSBC and the indemnified party. MSBC shall use its
reasonable best efforts to provide coverage to the officers and
directors of the Continuing Corporation under MSBC policy or
policies of director and officers liability insurance on the same
or substantially similar terms then in effect for the directors
and officers of MSBC and the Continuing Corporation shall
reimburse MSBC for the additional premium incurred by it in
connection with providing such coverage; (2) If MSBC 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, proper provisions shall be made so that the successors and
assigns of MSBC shall assume the obligations set forth in this
Paragraph (K)(1). MSBC shall pay all reasonable costs, including
attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in
this Paragraph (K)(1).
(L) ACQUISITION OF MSBC. In the event that MSBC is
acquired through a merger, share exchange or other business
combination in which it is not the surviving entity, MSBC agrees
that it shall make provision by which the acquirer shall assume
this Agreement and the holders of Regency Common Shares shall be
entitled to receive the same consideration for such shares as the
holders of MainStreet Common Stock received, giving effect to the
Exchange Ratio and appropriate provision shall be made for the
holders of Regency Options.
(M) EMPLOYEE OPTIONS AND STOCK APPRECIATION RIGHTS. From
and after the Merger Effective Date, all Employee Options to
purchase shares of Regency Common Stock which are then
outstanding and unexercised, shall be converted into and become
options with respect to MSBC Common Stock, and MSBC shall assume
each such option and right, in accordance with the terms of the
plan and agreement by which it is evidenced. From and after the
Merger Effective Date, (i) each such Employee Option assumed by
MSBC may be exercised solely for shares of MSBC Common Stock,
(ii) the number of shares of MSBC Common Stock subject to each
Employee Option shall be equal to the number of shares of Regency
Common Stock subject to such Employee Option immediately prior to
the Merger Effective Date multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Employee
Option shall be adjusted by dividing the per share exercise price
of each such Employee Option by the Exchange Ratio, and rounding
to the nearest cent. The maximum number of shares of Regency
Common Stock which are issuable upon exercise of such Employee
Options as of the date hereof are Previously Disclosed. No stock
appreciation rights are outstanding and unexercised as of the
date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed in counterparts by their duly
authorized officers, all as of the day and year first above
written.
MainStreet BankGroup Incorporated
By: /S/MICHAEL BRENAN
------------------------------
Michael Brenan
Chief Executive Officer
Regency Financial Shares, Inc.
By: /S/MERLIN A. HENKEL
------------------------------
Merlin A. Henkel
President/Chief Executive
Officer
JAA Corp.
By: /S/JAMES E. ADAMS
------------------------------
JAMES E. ADAMS
President
<PAGE>
EXHIBIT A
ARTICLES OF MERGER
MERGING
JAA CORP.
A VIRGINIA CORPORATION
INTO
REGENCY FINANCIAL SHARES, INC.
A VIRGINIA CORPORATION
Pursuant to the provisions of Section 13.1-720 of the
Virginia Stock Corporation Act, Regency Financial Shares, Inc., a
Virginia corporation (the "Surviving Corporation"), as the
surviving corporation, and JAA Corp., a Virginia corporation (the
"Disappearing Corporation"), as the disappearing corporation,
hereby execute and deliver the following articles of merger and
set forth:
1. The Plan of Merger (the "Plan") pursuant to which the
Disappearing Corporation will merge into the Surviving
Corporation is attached hereto as Annex 1.
2. The Plan was adopted by the unanimous consent of the
sole shareholder of the Disappearing Corporation.
3. The Plan was submitted to the shareholders of the
Surviving Corporation by its board of directors in
accordance with the provisions of Chapter 9 Title 13.1
of the Code of Virginia; and
(a) The designation, number of outstanding
shares, and the number of votes entitled
to be cast by each voting group entitled
to vote separately on the Plan were:
No. of
Designation Outstanding Shares No. of Votes
Common
(b) The total number of votes cast for and
against the Plan by each voting group entitled to
vote separately on the Plan were:
Total No. of Votes Total No. of Votes Voting Group
Cast for the Plan Cast Against the Plan
Common
4. Pursuant to Section 13.1-606 of the Virginia Stock
Corporation Act, the effective time and date of the
merger shall be _______a.m. on __________.
<PAGE>
The undersigned, _____________________, of Regency Financial
Shares, Inc., and ______________________, of JAA Corp., each
declare that the facts herein stated are true as of
____________, _________.
REGENCY FINANCIAL SHARES, INC.
By:________________________________
Its: President
JAA CORP.
By:________________________________
Its: President
<PAGE>
Annex 1
to Exhibit A
PLAN OF MERGER
A. JAA Corp. ("JAAC") is a corporation organized and
existing under the laws of the Commonwealth of Virginia.
B. Regency Financial Shares, Inc. ("Regency") is a
corporation organized and existing under the laws of the
Commonwealth of Virginia.
C. JAAC and Regency, their respective Boards of Directors
and shareholders have approved a statutory merger ("Merger") of
JAAC (the "Disappearing Corporation") with and into Regency ("the
Continuing Corporation").
1. EFFECTIVE TIME. The Merger shall become effective at
the time when a certificate of merger shall have been issued by
the State Corporation Commission of the Commonwealth of Virginia
(the "Effective Time") but in no event later than June 30, 1998,
and the conditions in Article VI of the Agreement and Plan of
Merger between Regency, the Disappearing Corporation and
MainStreet BankGroup Incorporated ("MSBC") dated as of October
27, 1997 (the "Agreement") shall have been fulfilled or waived.
2. MERGER. At the Effective Time, the Disappearing
Corporation shall be merged with and into the Continuing
Corporation in accordance with the provisions of Article 12 of
the Virginia Stock Corporation Act. The Continuing Corporation
shall be and continue in existence as the surviving corporation
and the separate corporate existence of the Disappearing
Corporation shall cease.
3. EFFECT OF MERGER ON OUTSTANDING SHARES. The manner of
converting or cancelling the shares of the Disappearing
Corporation and of the Continuing Corporation shall, by virtue of
the Merger, and without any action on the part of the holders
thereof be as follows:
(A) The shares of the Disappearing Corporation issued and
outstanding as of the Effective Time shall be converted into the
shares of common stock of the Continuing Corporation issued and
outstanding as of the Effective Time and shall constitute the
only issued and outstanding shares of common stock of the
Continuing Corporation.
(B) Each share of the common stock, $2.50 par value per
share, of Regency ("Regency Common Stock") shall be converted
into the right to receive that number of shares of the common
stock, $5.00 par value per share, of MainStreet BankGroup
Incorporated ("MSBC Common Stock") obtained by dividing the
Negotiated Price per share of Regency Common Stock by the average
of the bid/asked price per share for the MSBC Common Stock as
reported on the National Association of Securities Dealers
Quotations System National Market System ("NASDAQ/NMS") for each
of the twenty (20) trading days preceding the tenth calendar day
prior to the date on which the Effective Time occurs ("Merger
Effective Date"). If the Exchange Ratio computed in accordance
with the immediately preceding sentence is less than .406, the
Exchange Ratio shall be .406, and if the Exchange Ratio computed
in accordance with the immediately preceding sentence is greater
than .500, the Exchange Ratio shall be .500. ("Exchange Ratio").
The Negotiated Price per share of Regency Common Stock is $13.00.
(C) STOCKHOLDER RIGHTS; STOCK TRANSFERS. As of the
Effective Time, holders of the shares of Regency Common Stock
shall cease to be, and shall have no rights as, stockholders of
Regency, other than to receive the Merger consideration provided
under Paragraph (B) above, and the consideration provided in
Paragraph (D) below. After the Effective Time, there shall be no
transfers on the stock transfer books of Regency or the Surviving
Corporation of the shares of Regency Common Stock which were
issued and outstanding immediately prior to the Effective Time.
(D) FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fractional shares of MSBC Common Stock and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be issued in the Merger; instead, MSBC shall pay to
each holder of Regency Common Stock who would otherwise be
entitled to a fractional share an amount in cash determined by
multiplying such fractional share by the average of the last
bid/asked price of MSBC Common Stock on the last trading day
prior to the Effective Time, as reported on the NASDAQ/NMS (as
reported by The Wall Street Journal).
(E) EXCHANGE PROCEDURES. As promptly as practicable after
the Effective Time, MSBC shall send or cause to be sent to each
former holder of Regency Common Stock of record immediately prior
to the Effective Time transmittal materials for use in exchanging
such stockholder's certificates of Regency Common Stock for the
consideration set forth in Paragraphs (B) and (D) above. Any
fractional share checks which a Regency stockholder shall be
entitled to receive in exchange for such stockholder's shares of
Regency Common Stock, and any dividends paid on any shares of
MSBC Common Stock that such stockholder shall be entitled to
receive prior to the delivery to Registrar and Transfer Company
(the "Exchange Agent") of such stockholder's certificates
representing all of such stockholder's share of Regency Common
Stock will be delivered to such stockholder only upon delivery to
the Exchange Agent of the certificates representing all of such
shares (or indemnity satisfactory to MSBC and the Exchange
Agent, in their judgment, if any of such certificates are lost,
stolen or destroyed). No interest will be paid on any such
fractional share checks or dividends to which the holder of such
shares shall be entitled to receive upon such delivery. After
the Effective Time, to the extent permitted by law, former
stockholders of record of Regency shall be entitled to vote at
any meeting of holders of MSBC Common Stock the number of whole
shares of MSBC Common Stock into which their respective shares of
Regency Common Stock entitle them, regardless of whether such
holders have exchanged their Regency Common Stock for
certificates representing MSBC Common Stock in accordance with
the provisions of this Plan of Merger.
(F) ANTI-DILUTION PROVISIONS. In the event MSBC changes
the number of shares of MSBC Common 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 MSBC Common Stock (but not as a result of a
merger, share exchange or similar transaction) and the record
date therefor shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
(G) EXCLUDED SHARES. Each of the shares of Regency Common
Stock held by Regency, MSBC or any of their respective
subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted shall be canceled and
retired at the Effective Time.
(H) POSSIBLE ADJUSTMENT IN EXCHANGE RATIO. The Agreement
may be terminated prior to the Effective Time (i) as set forth in
3 below or (ii) either before or after approval by the
stockholders of Regency, by Regency by vote of a majority of the
members of its entire Board during the ten (10) day period
commencing on the Determination Date if both of the following
conditions are satisfied:
(1) if the Average MSBC Determination Price
for MSBC Common Stock on the Determination Date is
less than $26.00; and
(2) if the First Percentage exceeds the
Second Percentage by at least ten (10) percentage
points;
subject, however, to the immediately following four sentences.
If Regency elects to exercise its termination right pursuant to
clause (ii), it shall give prompt written notice to MSBC
(provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten (10) day
period). During the seven (7) day period commencing with its
receipt of such notice, MSBC shall have the option of increasing
the consideration to be received by the holders of Regency Common
Stock by adjusting the Exchange Ratio, to equal a quotient, the
numerator of which is $26.00 multiplied by the Exchange Ratio (as
then in effect) and the denominator of which in either case is
the Average MSBC Determination Price. If MSBC makes an election
contemplated by the immediately preceding sentence, it shall give
prompt written notice to Regency of such election and the revised
Exchange Ratio, whereupon no termination shall have accrued
pursuant to clause (ii) and the Agreement shall remain in effect
in accordance with its terms (except as the Exchange Ratio shall
have been so modified) and any references in this Plan to
"Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Paragraph (H). For
purposes of this Paragraph (H) the following terms shall have the
meanings indicated:
"Average MSBC Determination Price" means the average of the
bid/asked price for MSBC Common Stock as reported on the
NASDAQ/NMS for the 20 consecutive full trading days preceding the
Determination Date.
"Determination Date" means the tenth calendar day prior to
the Merger Closing.
"First Percentage" means the percentage resulting from: (a)
taking the remainder ("First Remainder") obtained by subtracting
the Average MSBC Determination Price from $29.75 (the average of
the bid and asked prices of MSBC Common Stock as reported on the
NASDAQ/NMS on October 15, 1997); and (b) dividing the First
Remainder by the Average MSBC Determination Price.
"Second Percentage" means the percentage resulting from: (a)
taking the remainder ("Second Remainder") obtained by subtracting
the SNL Southeast Bank Index reported most recently prior to the
last trading day in the measuring period for calculating the
Average MSBC Price ("Recent SNL Bank Index") from the SNL
Southeast Bank Index at October 15, 1997; and (b) dividing the
Second Remainder by the Recent SNL Bank Index.
"Merger Closing" means an end of the month date designated
by MSBC and reasonably acceptable to Regency after the
satisfaction of the conditions to the Merger set forth in
Paragraphs (A), (B) and (C) of Article VI of the Agreement but no
later than the Effective Time and in no event later than June 30,
1998.
3. TERMINATION OF ABANDONMENT. In addition to the
termination provisions set forth above, this Plan of Merger shall
terminate and the Merger be abandoned at any time prior to the
Effective Time if the Agreement is terminated in accordance with
its terms.
4. AMENDMENT. Pursuant to Section 13.1-718(I) of the
Virginia Stock Corporation Act, the Board of Directors of MSBC
and Regency reserve the right to amend this Plan of Merger at any
time prior to the issuance by the Virginia State Corporation
Commission of the certificate of merger; provided, however, that
any such amendment made subsequent to the submission of this Plan
of Merger to the shareholders of Regency, may not: (i) alter or
change the amount or kind of shares, securities, cash, property
or rights to be received in exchange for or in conversion of all
or any of the shares of any class or series of such corporation;
(ii) alter or change any of the terms and conditions of this Plan
of Merger if such alteration or change would adversely affect the
shares of any class or series of such corporation; or (iii) alter
or change any term of the articles of incorporation of any
corporation (except as provided herein) whose shareholders must
approve this Plan of Merger.
5. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of the Disappearing Corporation in
effect at the Effective Time shall continue (until amended or
repealed as provided by applicable law) to be the Articles of
Incorporation and Bylaws of the Continuing Corporation after the
Effective Time.
6. OFFICERS AND DIRECTORS. The officers and directors of
the Continuing Corporation immediately prior to the Effective
Time together with such additional officers and directors as may
thereafter be elected, shall be the officers and directors of the
Continuing Corporation after the Effective Time to serve, in
accordance with the Bylaws of the Continuing Corporation until
their successors are duly elected and qualified or their earlier
death, resignation or removal.
(7) EMPLOYEE OPTIONS AND STOCK APPRECIATION RIGHTS. From
and after the Merger Effective Date, all Employee Options to
purchase shares of Regency Common Stock which are then
outstanding and unexercised, shall be converted into and become
options with respect to MSBC Common Stock, and MSBC shall assume
each such option and right, in accordance with the terms of the
plan and agreement by which it is evidenced. From and after the
Merger Effective Date, (i) each such Employee Option assumed by
MSBC may be exercised solely for shares of MSBC Common Stock,
(ii) the number of shares of MSBC Common Stock subject to each
Employee Option shall be equal to the number of shares of Regency
Common Stock subject to such Employee Option immediately prior to
the Merger Effective Date multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Employee
Option shall be adjusted by dividing the per share exercise price
of each such Employee Option by the Exchange Ratio, and rounding
to the nearest cent. The maximum number of shares of Regency
Common Stock which are issuable upon exercise of such Employee
Options as of the date hereof are Previously Disclosed. No stock
appreciation rights are outstanding and unexercised as of the
date hereof.
<PAGE>
EXHIBIT B
Form of Regency Affiliate's Letter
_______________, 19__
MainStreet BankGroup Incorporated
address
Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger,
dated as of October 27, 1997, by and between MainStreet BankGroup
Incorporated, a Virginia corporation ("MSBC"), JAA Corp., a
Virginia corporation (the "Holding Company") and Regency
Financial Shares, Inc. ("Regency"), (the "Agreement"), the
Holding Company, a wholly owned subsidiary of MSBC, shall merge
with and into Regency (the "Merger"). As a result of the Merger
the undersigned may receive shares of Common Stock, $5.00 par
value per share, of MSBC ("MSBC Common Stock"). The undersigned
would receive such shares in exchange for shares owned by the
undersigned of Common Stock, $2.50 par value per share, of
Regency.
The undersigned hereby represents, warrants to, and
covenants with, MSBC that in the event the undersigned receives
any MSBC Common Stock as a result of the Merger:
(A) The undersigned shall not make any sale, transfer
or other disposition of the MSBC Common Stock in violation
of the Securities Act of 1933, as amended, or the rules and
regulations thereunder (the "Act").
(B) The undersigned has carefully read this letter and
discussed its requirements and other applicable limitations
upon the undersigned's ability to sell, transfer or
otherwise dispose of MSBC Common Stock to the extent the
undersigned felt necessary, with the undersigned's counsel
or counsel for Regency.
(C) The undersigned will not sell, transfer or
otherwise dispose of MSBC Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or
other disposition has been registered under the Act, (ii)
such sale, transfer or other disposition is made in
conformity with the provisions of Rule 145 under the Act
(as such rule may be hereafter from time to time be
amended), or (iii) in the opinion of counsel in form and
substance reasonably acceptable to MSBC, in which counsel
for MSBC concurs, or in a "no-action" letter obtained by the
undersigned from the staff of the Securities and Exchange
Commission (the "Commission"), a determination is made that
such sale, transfer or other disposition will not violate or
is otherwise exempt from registration under the Act.
(D) The undersigned understands that MSBC is under no
obligation to register the sale, transfer or other
disposition of shares of MSBC Common Stock by the
undersigned or on the undersigned's behalf under the Act or
to take any other action necessary in order to make
compliance with an exemption from such registration
available.
(E) The undersigned also understands that stop
transfer instructions will be given to MSBC's transfer agent
with respect to MSBC Common Stock owned by the undersigned
and that there will be placed on the certificates for the
MSBC Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this
certificate were issued in a transaction to
which Rule 145(d) under the Securities Act of
1933 applies. The shares represented by this
certificate may only be transferred in
accordance with the terms of a letter
agreement dated __________________, 199___
between the registered holder hereof and
MainStreet BankGroup Incorporated, a copy of
which agreement is on file at the principal
offices of MainStreet BankGroup
Incorporated."
(F) The undersigned also understands that unless the
transfer by the undersigned of the undersigned's MSBC Common
Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145(d) under the Act,
MSBC reserves the right, in its sole discretion, to place
the following legend on the certificates issued to any
transferee of shares from the undersigned:
"The shares represented by this
certificate have not been registered under
the Securities Act of 1933 and were acquired
from a person who received such shares in a
transaction to which Rule 145 under the
Securities Act of 1933 applies. The shares
have been acquired by the holder not with a
view to, or for resale in connection with,
any distribution thereof within the meaning
of the Securities Act of 1933 and may not be
offered, sold, pledged or otherwise
transferred except in accordance with an
exemption from the registration requirements
of the Securities Act of 1933."
It is understood and agreed that the legends set forth
in paragraphs (E) and (F) above shall be removed by delivery
of substitute certificates without such legend if the
undersigned shall have delivered to MSBC (i) a copy of a "no
action" letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably
satisfactory to MSBC, in which counsel for MSBC concurs, to
the effect that such legend is not required for purposes of
the Act, or (ii) reasonably satisfactory evidence or
representations that the shares represented by such
certificates are being or have been transferred in a
transaction made in conformity with the provisions of Rule
145(d).
(G) The undersigned further represents and warrants to
and covenants with MSBC that the undersigned will not,
within the thirty (30) days prior to the Merger Effective
Date (as defined in the Agreement) sell, transfer, or
otherwise dispose of any shares of the capital stock of
either MSBC or Regency held by the undersigned and that the
undersigned will not sell, transfer, or otherwise dispose of
any shares of MSBC Common Stock received by the undersigned
in the Merger or other shares of the capital stock of MSBC
until after such time as results covering at least thirty
(30) days of combined operations of MSBC after the Merger
have been published by MSBC within the meaning of section
201.01 of the Commissioner's Codification of Financial
Reporting Policies.
(H) The undersigned also understands and agrees that
this letter agreement shall apply to all shares of capital
stock of MSBC and Regency that are owned by (i) the
undersigned's spouse (ii) any relative of the undersigned or
of the undersigned's spouse who has the same home as the
undersigned (iii) any trust or estate in which the
undersigned, the undersigned's spouse and any such relative
collectively own at least at 10% beneficial interest or of
which any of the foregoing serves as trustee, executor or in
any similar fiduciary capacity, and (iv) any corporation or
other organization in which the undersigned, the
undersigned's spouse or any such relative collectively own
at least 10% of any class of equity securities or if the
equity interest or that otherwise are deemed to be owned by
the undersigned pursuant to Rule 13(d) under the Securities
Exchange Act of 1934.
<PAGE>
Very truly yours,
____________________________
Name:
[add below the signatures of
all registered owners (other
than nominee) of shares deemed
beneficially owned by the
affiliate]
____________________________
Name:
____________________________
Name:
____________________________
Name:
Acknowledged this ___ day of
___________________, 199___.
MAINSTREET BANKGROUP INCORPORATED
By: ________________________
Name:
Title:
<PAGE>
EXHIBIT C
The opinion of counsel for MainStreet BankGroup Incorporated
("MSBC") contemplated in Paragraph (G) of Article VI of the
Agreement and Plan of Merger to which this EXHIBIT C is attached
(the "Plan") shall be to the following effect (all terms used
herein which are defined in the Plan have the meanings set forth
therein):
(A) MSBC and JAA Corp. the ("Holding Company") are each
corporations duly organized and existing in good standing under
the laws of the Commonwealth of Virginia;
(B) MSBC and the Holding Company have the corporate power
and authority to carry on their respective business as it is now
being conducted and to own all their respective material property
and assets;
(C) the outstanding shares of capital stock of MSBC and of
Holding Company are validly issued and outstanding, fully paid
and nonassessable and subject to no preemptive rights. Except as
Previously Disclosed, there are no outstanding options, warrants,
rights to subscribe to or securities convertible into shares of
MSBC Common Stock. Except for _____________________________,
there are no shares of MSBC Preferred Stock outstanding and
except as Previously Disclosed there are no outstanding options,
warrants, rights to subscribe to or securities or rights
convertible into shares of MSBC Preferred Stock.
(D) MSBC and the Holding Company have each taken all
required corporate action to approve and adopt the Plan and the
Plan is a valid and binding agreement of it enforceable against
it in accordance with the terms of the Plan, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium and other
laws of general applicability relating to or affecting creditors'
rights in general and to general equity principles (provided,
however, that such counsel need not render any such opinion with
respect to any indemnification provisions);
(E) the execution, delivery and performance of the Plan by
MSBC and by the Holding Company, respectively, did not, and the
consummation of the transactions contemplated thereby by them
does not, constitute (i) to the knowledge of such counsel, a
breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of MSBC or any of
its subsidiaries or to which it or any of its subsidiaries is
subject, which breach, violation or default to the knowledge of
such counsel would have a Material Adverse Effect on MSBC or (ii)
a breach or violation of or a default under the Articles of
Incorporation or Bylaws of MSBC or of Holding Company; and, (iii)
to such counsel's knowledge, the consummation of the transactions
contemplated by the Plan, does not require any material consent
or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or, except as
Previously Disclosed, the material consent or approval of any
other party to any such agreement, indenture or instrument, other
than the required approvals of the appropriate federal and state
regulatory authorities, and required filings under the federal
securities laws and under the state "blue sky" or securities laws
which have been made or received and are in full force and
effect;
(F) except as Previously Disclosed or as reflected in MSBC
Reports, (i) to such counsel's knowledge, there is no litigation,
proceeding or controversy before any court or governmental agency
pending against MSBC or any of its subsidiaries with respect to
the transactions contemplated by the Plan by a governmental
authority which is reasonably likely to have a Material Adverse
Effect on MSBC and, to the knowledge of such counsel, no such
litigation, proceeding or controversy has been threatened or is
contemplated, (ii) neither MSBC nor any of its subsidiaries is
subject to any (as to MSBC and its subsidiaries taken as a whole)
order, decree, agreement, memorandum of understanding or similar
arrangement with, or commitment letter or similar submission to,
any federal or state governmental agency or authority charged
with the supervision or regulation of depository institutions or
engaged in the insurance of deposits which restricts or purports
to restrict in any material respect the conduct of the business
of it or any of its subsidiaries or properties, or in any manner
relates to the capital, liquidity, credit policies or management
of it or any of its subsidiaries; and (iii) to the knowledge of
such counsel neither MSBC nor any of its subsidiaries has been
advised by any such regulatory authority that such authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter or
similar submission;
(G) the regulatory consents set forth in Paragraphs B and C
of Article VI of the Plan, necessary to permit the consummation
of the Plan, have been secured and are in full force and effect;
(H) the Registration Statement and Prospectus included
therein, as of the effective date of the Registration Statement,
complied in all material respects as to form with the provisions
of the Federal Securities Laws. Further such counsel does not
believe that, insofar as they relate to MSBC and its
subsidiaries, the Registration Statement and Prospectus, on such
effective date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading. (Such opinion may state that such counsel does not
assume any responsibility for the accuracy or fairness of the
statements contained in the Registration Statement and Prospectus
and that he does not express any opinion or belief as to material
in the Registration Statement insofar as it includes or reflects
any information relating to or supplied by entities other than
MSBC or its subsidiaries or as to any financial statements or
other financial data contained in the Registration Statement and
prospectus); and
(I) the shares of MSBC Common Stock to be issued in
exchange for shares of Regency Financial Shares, Inc. ("Regency")
Common Stock and Directors Options upon consummation of the
Merger have been duly authorized and, when issued in accordance
with the terms of the Plan, will be validly issued, fully paid
and nonassessable and subject to no preemptive rights.
<PAGE>
EXHIBIT D
The opinion of counsel for Regency Financial Shares, Inc.
("Regency") contemplated in Paragraph (H) of Article VI of the
Agreement and Plan of Merger to which this Exhibit D is attached
(the "Plan") shall be to the following effect (all terms used
herein which are defined in the Plan have the meanings set forth
therein):
(A) Regency is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of Virginia; and
is authorized to do business in Virginia as a bank holding
company within the meaning of the federal Bank Holding Company
Act of 1956, as amended, and Chapter 13 of the Virginia Banking
Act;
(B) Regency Bank ("RB") is a corporation duly organized and
existing in good standing under the laws of the Commonwealth of
Virginia and is qualified to do business as a bank in Virginia.
(C) Regency and RB each have the corporate power and
authority to carry on their respective business as it is now
being conducted and to own all their respective material property
and assets;
(D) the authorized capital stock of Regency consists of
8,000,000 shares of common stock, $2.50 par value per share, of
which 1,389,096 shares are issued and outstanding as of the date
hereof [ and ________ shares are reserved for issuance as set
forth on Schedule I attached hereto]; the authorized capital
stock of RB consists of 2,000,000 shares of common stock, $5.00
par value per share ("RB Common Stock"), of which 505,490 shares
are issued and outstanding as of the date hereof and no shares
are reserved for issuance [as set forth on Schedule I attached
hereto]. The outstanding shares of Regency Common Stock and RB
Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable and are subject to no preemptive
rights. All of the issued and outstanding shares of RB Common
Stock are held of record by Regency. Except for the Regency
Options described in the next following sentence, there are no
outstanding options, warrants, rights to subscribe to or
securities or rights convertible into shares of Regency Common
Stock or RB Common Stock. Regency has granted as of the date
hereof a total of 78,368 options to purchase Regency Common Stock
("Regency Options"). The holders of these Options are, as of the
date hereof, obligated to exchange them for shares of MSBC Common
Stock in accordance with the provisions of Paragraph U of Article
V and Paragraph Q of Article VI of the Agreement.
(E) Regency has taken all required corporate action to
approve and adopt the Plan and the Stock Option Agreement, and
the Plan and the Stock Option Agreement are valid and binding
agreements of it enforceable against it in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, moratorium and other laws of general applicability
relating to or affecting creditors' rights in general, and to
general equity principles (provided, however, that such counsel
need not render any such opinion with respect to any
indemnification provisions);
(F) the execution, delivery and performance of the Plan and
Stock Option Agreement by Regency did not, and the consummation
of the transactions contemplated thereby by such agreements does
not, constitute or result in (i) to the knowledge of such
counsel, a breach or violation of, or a default under any law,
rule or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture or instrument of
Regency or RB or to which Regency or RB is subject, which breach,
violation or default to the knowledge of such counsel would have
a Material Adverse Effect on Regency or RB; (ii) a breach or
violation of, or a default under, the Articles of Incorporation
or Bylaws of Regency or RB; (iii) to the knowledge of such
counsel, the consummation of the transactions contemplated by the
Plan and the Stock Option Agreement, does not require any
material consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or
license or, except as Previously Disclosed, the material consent
or approval of any other party to any such agreement, indenture
or instrument, other than the required approvals or the
appropriate federal and state regulatory authorities, and
required filings under the federal securities laws and under the
state "blue sky" or securities laws, and (iv) result in the grant
of any rights to any person under the Articles of Incorporation
or Bylaws of Regency or RB or, to the knowledge of such counsel,
under any agreement to which Regency or RB is a party;
(G) Regency has taken all necessary action to exempt the
transactions contemplated by the Plan and the Stock Option
Agreement from any applicable take over, business combination,
control share acquisition or similar law in effect under the laws
of the Commonwealth of Virginia as of the date hereof, including
without limitation Articles 14 and 14.1 of the Virginia Stock
Corporation Act;
(H) except as Previously Disclosed or as reflected in the
Regency Reports, (i) to such counsel's knowledge, there is no
litigation, proceeding or controversy before any court or
governmental agency pending against Regency or RB by a
governmental authority which is reasonably likely to have a
Material Adverse Effect on Regency and, to the knowledge of such
counsel, no such litigation, proceeding or controversy has been
threatened or is contemplated, (ii) except as Previously
Disclosed Regency or RB are not subject to any order, decree,
agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, any
federal or state governmental agency or authority charged with
the supervision or regulation of depository institutions or
engaged in the insurance of deposits which restricts or purports
to restrict in any material respect the conduct of their
respective business or properties, or in any manner relates to
their respective capital, liquidity, credit policies or
management; and (iii) to the knowledge of such counsel and except
as Previously Disclosed, Regency and RB have not been advised by
any such regulatory authority that such authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter or
similar submission;
(I) the Proxy Statement (including any documents relating
to Regency and RB incorporated by reference therein), as of the
mailing date thereof, complied in all material respects as to
form with the requirements of all applicable laws, rules, and
regulations. Further, such counsel does not believe that,
insofar as it relates to Regency and RB, the Proxy Statement, on
such mailing date, contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading. (Such opinion may state that such counsel does not
assume any responsibility for the accuracy or fairness of the
statements contained in the Proxy Statement and that he does not
express any opinion or belief as to material in the Proxy
Statement insofar as it includes or reflects any information
relating to or supplied by entities other than Regency and RB or
as to any financial statements or other financial data contained
in the Proxy Statement);
(J) except as Previously Disclosed, to the knowledge of
such counsel there are no persons who may be deemed to be
"affiliate" of Regency within the meaning of Rule 145 under the
Securities Act.
<PAGE>
EXHIBIT E
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 27, 1997 (the
"Agreement"), by and between Regency Financial Shares, Inc.
("Issuer"), and MainStreet BankGroup, Incorporated, a Virginia
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger dated as of October 27, 1997 (the "Plan"),
providing for, among other things, the merger of Issuer with and
into a wholly-owned subsidiary of Grantee, with Issuer as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's
execution of the Plan, Grantee has required that Issuer agree,
and Issuer has agreed, to grant Grantee the Option (as defined
below);
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein and in the Plan, and intending to be legally
bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but
not defined herein shall have the meanings ascribed to such terms
in the Plan.
2. Grant of Option. Subject to the terms and conditions
set forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 276,430 shares (as
adjusted as set forth herein) (the "Option Shares", which shall
include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, $2.50 par value per share
("Issuer Common Stock"), of Issuer at a purchase price per Option
Share (the "Purchase Price") of $10.00.
3. Exercise of Option.
(a) Provided that (i) Grantee shall not be in material
breach of the agreements or covenants contained in this Agreement
or the Plan, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee may exercise the Option, in
whole or in part, at any time and from time to time following the
occurrence of a Purchase Event; provided that the Option shall
terminate and be of no further force and effect upon the earliest
to occur of (a) the Merger Effective Date, (b) termination of the
Plan in accordance with the terms thereof prior to the occurrence
of a Purchase Event or a Preliminary Purchase Event (other than a
termination of the Plan by Grantee pursuant to Paragraph (B)(1)
or Paragraph (B)(2) of Article VII thereof or by Grantee and
Issuer pursuant to Paragraph (A) of Article VII thereof if
Grantee shall at that time have been entitled to terminate the
Plan pursuant to Paragraph (B)(1) or Paragraph (B)(2) of Article
VII thereof (a "Default Termination")); (c) 12 months after the
termination of the Plan by Grantee pursuant to a Default
Termination (provided, however, that if within 12 months after
such termination of the Plan a Purchase Event or a Preliminary
Purchase Event shall occur, then notwithstanding anything to the
contrary contained herein (including clause (d) of this
sentence), this Option shall terminate 12 months after the first
occurrence of such an event), (d) 12 months after termination of
the Plan (other than pursuant to a Default Termination) following
the occurrence of a Purchase Event or a Preliminary Purchase
Event; and (e) June 30, 1998, (subject to the proviso in clause
(c) of this sentence); and provided, further, that any purchase
of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation,
the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The rights set forth in Section 8 shall terminate when the right
to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer
shall have authorized, recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose, or
entered into an agreement with any person (other than Grantee or
any subsidiary of Grantee) to effect an Acquisition Transaction
(as defined below). As used herein, the term Acquisition
Transaction shall mean (a) a merger, consolidation or similar
transaction involving Issuer or any of its subsidiaries (other
than transactions solely between Issuer's subsidiaries), (b) the
disposition, by sale, lease, exchange or otherwise, of assets of
Issuer or any of its subsidiaries or (c) the issuance, sale or
other disposition of (including by way of merger, consolidation,
share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition
Transaction"); or
(ii) any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Exchange Act
of or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall
have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act, with respect to, a tender
offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then outstanding shares
of Issuer Common Stock (such an offer being referred to herein as
a "Tender Offer" or an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common stock shall not have
approved the Plan at the meeting of such stockholders held for
the purchase of voting on the Plan, such meeting shall not have
been held or shall have been canceled prior to termination of the
Plan or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Plan, in each
case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (a)
made, or disclosed an intention to make, a proposal to engage in
an Acquisition Transaction, (b) commenced a Tender Offer or filed
a registration statement under the Securities Act with respect to
an Exchange Offer or (c) filed an application (or given a
notice), whether in draft or final form, under the BHC Act, the
Bank Merger Act or the Change in Bank Control Act of 1978, for
approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Grantee wishes to exercise the
Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 15 business days from the
Notice Date for the closing (the "Closing") of such purchase (the
"Closing Date"). If prior notification to or approval oft he
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or any other regulatory authority is required in
connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice of application for
approval and the obtaining of such approval and the Closing shall
occur immediately following such regulatory approvals (and any
mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased
on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in
Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery
of immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Grantee (a)
a certificate or certificates representing the Option Shares to
be purchased at such Closing, which Option Shares shall be free
and clear of all liens, claims, charges and encumbrances of any
kind whatsoever and subject to no preemptive rights, and (b) if
the Option is exercised in part only, an executed new agreement
with the same terms as this Agreement evidencing the right to
purchase the balance of the shares of Issuer Common Stock
purchasable hereunder, and (ii) Grantee shall deliver to Issuer a
letter agreeing that Grantee shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal
and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required
by applicable law, certificates for the Option Shares delivered
at each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF ______________________. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for
purposes of the Securities Act.
5. Representations and Warranties of Issuer. Issuer
hereby represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite
corporate power and authority to enter into this Agreement and,
subject to any approvals referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been
duly executed and delivered by Issuer.
(b) Authorized Stock. Issuer has taken all necessary
corporate and other action to authorize and reserve and to permit
it to issue, and, at all times from the date hereof until the
obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common
Stock necessary for Grantee to exercise the Option, and Issuer
will take all necessary corporate action to authorize and reserve
for issuance all additional shares of Issuer Common Stock or
other securities which may be issued pursuant to Section 7 upon
exercise of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid and nonassessable,
and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
6. Representations and Warrants of Grantee. Grantee
hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite
corporate power and authority to enter into this Agreement and,
subject to any approvals or consents referred to herein, to
consummate the transactions contemplate hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This
Agreement has been duly executed and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not
being, and any Option Shares or other securities acquired by
Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Issuer Common Stock
by reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction so that Grantee shall
received, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee would have
received in respect of Issuer Common Stock of the Option had been
exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer
Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this
Section 7(a)), the number of shares of Issuer Common Stock
subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of
shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant
to the Option.
(b) In the event that Issuer shall enter in an
agreement: (i) to consolidate with or merge into any person,
other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Issuer Common Stock shall
be changed into or exchanged for stock or other securities of
Issuer or any other person or cash or any other property or the
outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions
so that upon the consummation of any such transaction and upon
the terms and conditions set forth herein, the Grantee shall
receive for each Option Share with respect to which the Option
has not been exercised an amount of consideration in the form of
and equal to the per share amount of consideration that would be
received by the holder of one share of Issuer Common Stock less
the Purchase Price (and, in the event of an election or similar
arrangement with respect to the type of consideration to be
received by the holders of Issuer Common Stock, subject to the
foregoing, proper provision shall be made so that the holder of
the Option would have the same election or similar rights as
would the holder of the number of shares of Issuer Common Stock
for which the Option is then exercisable).
(c) Issuer shall not enter into any agreement of the
type described in Section 7(b) unless the other party thereto
commits to provide the funding required for Issuer to pay the
Section 8 Repurchase Consideration.
8. Repurchase at the Option of Grantee.
(a) Subject to the last sentence of Section 3(a), at
the request of Grantee at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d))
and ending 12 months immediately thereafter, Issuer shall
repurchase from Grantee (i) the Option and (ii) all shares of
Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date
on which Grantee exercises its rights under this Section 8 is
referred to as the "Request Date". Such repurchase shall be at
an aggregate price (the "Section 8 Repurchase Consideration")
equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee
for any shares of Issuer Common Stock acquired pursuant to the
Option with respect to which Grantee then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common Stock
over (y) the Purchase Price (subject to adjustment pursuant to
Section 7), multiplied by the number of shares of Issuer Common
Stock with respect to which the Option has not been exercised;
and
(iii) the excess, if any, of the Applicable
Price over the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by Grantee for each share of Issuer Common
Stock with respect to which the Option has been exercised and
with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this Section
8, Issuer shall, within 10 business days after the Request Date,
pay the Section 8 Repurchase Consideration to Grantee in
immediately available funds, and contemporaneously with such
payment Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then has
beneficial ownership, and Grantee shall warrant that it has sole
record and beneficial ownership of such shares and that the same
are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of the Federal Reserve Board or other regulatory authority is
required in connection with the payment of all or any portion of
the Section 8 Repurchase Consideration, Grantee shall have the
ongoing option to revoke its request for repurchase pursuant to
Section 8, in whole or part, or to require that Issuer deliver
from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application
and the obtaining of any such approval). If the Federal Reserve
Board of any other regulatory authority disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8,
Issuer shall promptly give notice of such fact to Grantee. If
the Federal Reserve Board or other agency prohibits the
repurchase in part but not in whole, then Grantee shall have the
right (i) to revoke the repurchase request or (ii) to the extent
permitted by the Federal Reserve Board or other agency, determine
whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Grantee shall thereupon
have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased. Grantee shall notify
Issuer of its determination under the preceding sentence within
five (5) business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of
Grantee's rights under this Section 8 shall terminate on the date
of termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common Stock paid for any such share by the person or
groups described in Section 8(d)(i), (ii) the price per share of
Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii), or 7(b)(iii),
or (iii) the highest closing sales price per share of Issuer
Common Stock reported on the NASDAQ (or if transactions in Issuer
Common Stock are not reported on the NASDAQ, the highest bid
price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported
by a recognized source chosen by Grantee) during the 60 business
days preceding the Request Date; provided, however, that in the
event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee, divided by the
number of shares of the Issuer Common Stock outstanding at the
time of such sale. If the consideration to be offered, paid or
received pursuant to either of the foregoing clauses (i) or (ii)
shall be other than in cash, the value of such consideration
shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Grantee and
reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the
right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of
Issuer Common Stock, or (ii) any of the transactions described in
Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be consummated.
(e) In connection with the application of the
provisions of this Section 8, Grantee acknowledges the regulatory
and capital matters Previously Disclosed by Issuer to Grantee.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject
to the conditions of subparagraph (c) below, if requested by
Grantee (or if applicable, a Grantee Majority), as expeditiously
as possible prepare and file a registration statement under the
Securities Act if such registration is necessary in order to
permit the sale or other disposition of any or all shares of
Issuer Common Stock or other securities that have been acquired
by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition
stated by Grantee in such request, including without limitation a
"shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use
its best efforts to qualify such shares or other securities for
sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common Stock under the Securities Act in
connection with an underwritten public offering of such Issuer
Common Stock, Issuer will promptly give written notice to Grantee
(and any permitted transferee) of its intention to do so and,
upon the written request of Grantee (or any such permitted
transferee of Grantee) given within 30 days after receipt of any
such notice (which request shall specify the number of shares of
Issuer Common Stock intended to be included in such underwritten
public offering by Grantee (or such permitted transferee)),
Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so
registered and included in such underwritten public offering,
provided, however, that Issuer may elect to not cause any such
shares to be so registered (i) if the underwriters in good faith
object for valid business reasons, or (ii) in the case of a
registration solely to implement an employee benefit plan or a
registration filed on Form S-4; provided, further, however, that
such election pursuant to (i) may only be made one time. If some
but not all the shares of Issuer Common Stock, with respect to
which Issuer shall have received requests for registration
pursuant to this subparagraph (b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares
to be registered among Grantee and any such permitted transferee
desiring to register their shares pro rata in the proportion that
the number of shares requested to be registered by each such
holder bears to the total number of shares requested to be
registered by all such holders then desiring to have Issuer
Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in subparagraph (a) above to become effective and to
obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement
effective, provided, however, that Issuer may delay any
registration of Option Shares required pursuant to subparagraph
(a) above for a period not exceeding 90 days provided Issuer
shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to
subparagraph (a) above:
(i) prior to the earliest of (a) termination of
the Plan pursuant to Article VII thereof, (b) failure to obtain
the requisite stockholder approval pursuant to Paragraph (A) of
Article VI of the Plan, and (c) a Purchase Event or a Preliminary
Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to
which the holder or holders of the Option Shares concerned were
afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer
by the holder or holders of at least 25% or more of the aggregate
number of Option Shares then outstanding.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after
the expiration of nine months from the effective date of such
registration statement. Issuer shall use all reasonable efforts
to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale
or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such
shares, provided, however, that Issuer shall not be required to
consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law
prohibits such payments, Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses (including the fees and expenses of
counsel), legal expenses including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are
being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters,
excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require,
and the reasonable fees and expenses of any necessary special
experts) in connection with each registration pursuant to
subparagraph (a) or (b) above (including the related offerings
and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to
subparagraph (a) or (b) above.
(e) Indemnification. In connection with any
registration under subparagraph (a) or (b) above Issuer hereby
indemnifies the holder of the Option Shares, and each underwriter
thereof, including each person, if any, who controls such holder
or underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement of
a material fact contained in any registration statement or
prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as
such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged
untrue statement that was included by Issuer in any such
registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in
reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling
person of Issuer shall be indemnified by such holder of the
Option Shares, or by such underwriter, as the case may be, for
all such expenses, losses, claims, damages and liabilities caused
by any untrue, or alleged untrue, statement, that was included by
Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such
underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this subparagraph (e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any
indemnified party under this subparagraph (e). In case notice of
commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party
shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own
expenses with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other
than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party either agrees
to pay the same; (ii) the indemnifying party fails to assume the
defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the
interest of the indemnified party, in which case the indemnifying
party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such
counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may
not be unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in
respect of any expenses, losses, claims, damages or liabilities
referred to herein, then the indemnifying party, in lieu of
indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by Issuer, the selling
shareholders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling
shareholders and the underwriters in connection with the
statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party
as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or
claim; provided, however, that in no case shall the holders of
the Option Shares be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its
Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
Any obligation by any holder to indemnify shall be several and
not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each holder of any Option Shares
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of this subparagraph (e).
(f) Miscellaneous Reporting. Issuer shall comply with
all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of
any Option Shares by the holder thereof in accordance with and to
the extent permitted by any rule or regulation promulgated by the
SEC from time to time, including, without limitation, Rule 144A.
Issuer shall at its expense provide the holder of any Option
Shares with any information necessary in connection with the
completion and filing of any reports or forms required to be
filed by them under the Securities Act or the Exchange Act, or
required pursuant to any state securities laws or the rules of
any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will save
Grantee harmless, without limitation as to time, against any and
all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any
other securities to be acquired upon exercise of the Option are
then authorized for quotation or trading or listing by or on
NASDAQ, National Association of Securities Dealers Small Cap
Market (" NASD/SCM"), the National Association of Securities
Dealers Automated Quotation System National Market System
("NASD/NMS") or any securities exchange, Issuer, upon the request
of Grantee, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares or
Issuer Common Stock or other securities to be acquired upon
exercise of the Option on the NASDAQ, NASD/SCM, NASD/NMS or such
other securities exchange and will use its best efforts to obtain
approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option
of Grantee, upon presentation and surrender of this Agreement at
the principal office of Issuer for other Agreements providing for
Options of different denominations entitling the holder thereof
to purchase in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section
9, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement: No Third-Party Beneficiary;
Severability. This Agreement, together with the Plan and the
other documents and instruments referred to herein and therein,
between Grantee and Issuer (a) constitutes the entire agreement
and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject
matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the
Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Option does
not permit Grantee to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as
provided in Sections 3 and 8 (as adjusted pursuant to Section 7),
it is the express intention of Issuer to allow Grantee to acquire
or to require Issuer to repurchase such lesser number of shares
as may be permissible without any amendment or modification
hereof.
(d) Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the Commonwealth of
Virginia without regard to any applicable conflicts of law rules.
(e) Descriptive Heading. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Issuer to:
Regency Financial Shares, Inc.
1011 East Main Street
Richmond, Virginia 23219
Attn: Merlin A. Henkel, President
with a copy to:
George P. Whitley
LeClair Ryan
707 East Main Street, 11th Floor
Richmond, Virginia 23219
If to Grantee to:
MainStreet BankGroup Incorporated
200 E. Church Street
Martinsville, Virginia 24112-5409
Attn: Michael Brenan, Chairman
with a copy to:
Douglas W. Densmore, Esq.
Flippin, Densmore, Morse, Rutherford & Jessee
300 First Campbell Square
P.O. Box 1200
Roanoke, Virginia 24006
(g) Counterparts. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same counterpart.
(h) Neither this Agreement nor any of the rights,
interest or obligations hereunder or under the Option shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
party, except that Grantee may assign this Agreement to a wholly
owned subsidiary of Grantee and Grantee may assign its rights
hereunder in whole or in part after the occurrence of a Purchase
Event. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise
of the Option by Grantee, Issuer and Grantee shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree
that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective officers
thereunto duly authorized, all as of the day and year first
written above.
<PAGE>
ATTEST: Regency Financial Shares, Inc.
By: By:
---------------------- -------------------------
Merlin A. Henkel
[CORPORATE SEAL] President
ATTEST: MainSteet BankGroup Incorporated
By: By:
---------------------- -------------------------
Michael Brenan, Chairman
[CORPORATE SEAL]
