<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
March 31, 1997 1-13640
SOUTHFIRST BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1121255
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
126 North Norton Avenue, Sylacauga, Alabama 35150
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 205-245-4365
- --------------------------------------------------------------------------------
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Common Stock, par value $.01 per share 846,900 shares
-------------------------------------- --------------------------
Class Outstanding at May 9, 1997
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SouthFirst Bancshares, Inc.
Statements of Financial Condition
March 31, 1997 (Unaudited) and September 30, 1996
<TABLE>
<CAPTION>
Assets March 31, 1997 September 30, 1996
------ -------------- ------------------
<S> <C> <C>
(audited)
Cash and amounts due from depository institutions $ 3,077,122 $ 2,625,561
Interest - bearing deposits in other financial
institutions 3,257 -
Investment securities held to maturity at cost
(market value of $153,853 at March 31, 1997 and
$153,853 at September 30, 1996) 153,853 153,853
Investment securities available for sale at market
value 18,739,469 21,792,852
Loans receivable 67,025,107 62,652,755
Less allowance for loan losses (267,821) (250,714)
----------- -----------
Net loans 66,757,286 62,402,041
Loans held for sale at market value 103,000 131,100
Premises and equipment, net 1,795,641 1,802,482
Foreclosed real estate, net 157,717 -
Accrued interest receivable 507,683 553,606
Other assets 1,418,921 635,902
Investments in affiliates 196,465 184,537
----------- -----------
Total assets $92,910,415 $90,281,934
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits:
Non-interest bearing $ 1,413,921 $ 1,087,042
Interest bearing 62,403,045 63,007,561
----------- -----------
Total deposits 63,816,966 64,094,603
----------- -----------
Advances by borrowers for property taxes
insurance 322,271 392,280
Accrued interest payable 430,924 842,285
Borrowed funds 14,083,338 10,959,285
Income taxes payable 655,924 285,401
Accrued expenses and other liabilities 612,747 820,266
----------- -----------
Total liabilities $79,922,170 $77,394,120
STOCKHOLDERS' EQUITY
--------------------
Common stock, $.01 par value, 2,000,000 shares
authorized, 863,200 shares issued and 821,100
shares outstanding 8,632 8,632
Treasury stock, 42,100 shares at cost (535,409) (500,802)
Additional paid in capital 7,872,147 7,704,856
Retained earnings, substantially restricted (note
2) 5,733,676 5,690,301
Unrealized gain on investment securities available
for sale, net of tax 821,200 729,537
Deferred compensation (912,000) (744,710)
Total stockholders' equity $12,988,246 $12,887,814
----------- -----------
Total liabilities and stockholders' equity $92,910,415 $90,281,934
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
SouthFirst Bancshares, Inc.
Statements of Earnings (Unaudited) for the
Six Months Ending March 31, 1997 and March 31, 1996
and for the Three Months Ending March 31, 1997 and March 31, 1996
<TABLE>
<CAPTION>
Three months ended
------------------
Six months ended March 31, March 31,
-------------------------- ---------
1997 1996 1997 1996
---- ---- ---- -----
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans $2,749,944 $2,325,961 $1,384,246 $1,177,137
Interest and dividend income on investment 4,308 212,192 2,154 3,467
securities held to maturity
Interest and dividend income on securities
available for sale 712,082 665,629 334,600 426,356
---------- ---------- ---------- ----------
Total interest and dividend income 3,466,333 3,203,782 1,721,000 1,606,960
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits 1,429,455 1,478,462 697,251 736,560
Interest on borrowed funds 419,996 223,257 214,330 121,042
---------- ---------- ---------- ----------
Total interest expense 1,849,451 1,701,719 911,580 857,602
---------- ---------- ---------- ----------
Net interest income 1,616,882 1,502,063 809,420 749,358
Provision for loan losses 17,700 1,200 17,700 1,200
---------- ---------- ---------- ----------
Net interest income after provision for loan 1,599,182 1,500,863 791,720 748,158
losses
Other income:
Settlement of lawsuit (note 3) - 508,257 - -
Service charges and other fees 294,959 289,497 148,325 148,559
Gain on sale of loans 63,733 54,618 14,962 28,589
Insurance commissions 1,433 1,166 3,180 (3,929)
Equity in loss of affiliates (38,072) (30,113) (17,151) (26,303)
Other 29,593 28,564 19,373 11,215
---------- ---------- ---------- ----------
Total other income 351,646 851,989 168,688 158,131
Other expenses:
Compensation and benefits 903,439 1,244,056 443,442 482,405
Insurance expense 48,143 - 24,451 -
Net occupancy expense 86,138 77,612 43,614 38,281
Furniture and fixtures 110,890 81,282 52,630 37,044
Data processing 83,929 84,274 42,384 42,027
Office supplies and expenses 89,778 94,813 45,864 48,590
Deposit insurance premiums 39,187 88,362 28,722 43,980
Other 179,579 374,675 81,267 173,938
---------- ---------- ---------- ----------
Total other expenses 1,541,083 2,045,074 762,374 866,265
---------- ---------- ---------- ----------
Income before taxes 409,745 307,778 198,034 40,024
Income tax expense 160,770 116,956 79,447 15,209
---------- ---------- ---------- ----------
Net income $ 248,975 $ 190,822 $ 118,587 $ 24,815
========== ========== ========== ==========
Net income per common share 0.30 0.22 0.14 0.03
Weighted average common shares outstanding 831,544 854,855 831,544 863,200
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
SouthFirst Bancshares, Inc.
Statements of Cash Flows (Unaudited) for the
Six Months Ending March 31, 1997 and 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996
--------------- --------------
<S> <C> <C>
Operating activities:
Net income $ 248,974 $ 190,822
Adjustments to reconcile net income to net cash
Cash provided by operating activities:
Depreciation and amortization 86,582 67,642
Equity in loss of unconsolidated affiliate 38,072 30,114
Gain on sale of loans 63,733 (54,618)
Increase (decrease) in deferred loan origination fees 13,414 17,423
Net (accretion) amortization of premium/discount on
investment securities held to maturity - 1,664
Net amortization of premium on investment securities
available for sale 69 1,165
Provision for loan losses (17,700) -
Loans originated for sale 2,098,610 -
Proceeds from sale of loans 1,898,423 1,741,268
Decrease in accrued interest receivable 45,923 42,694
Decrease (increase) in other assets (783,019) 195,252
Increase in accrued interest payable (411,363) (400,186)
Increase (decrease) in income taxes payable 314,341 (79,586)
Increase (decrease) in accrued expenses and other
liabilities (207,519) 19,191
------------ ------------
Net cash provided by operating activities 3,388,541 1,772,845
------------ ------------
Investing activities:
Investment in affiliated company (50,000) (175,000)
Maturities on interest bearing deposits in other financial
institutions - 300,000
Reinvestment of dividends/interest bearing deposits in other
financial institutions (75) -
Purchase of investment securities available for sale - (1,070,385)
Proceeds from sale of investments 3,821,770 -
Purchases of FHLB time deposits held to maturity - 357,000
Purchase of FHLB agency note available for sale (2,000,000) -
Reinvestment of mutual fund dividend (15,908) (4,293)
Gain on sale of investment securities available for sale 15,706 -
Principal repayments of MBS available for sale 381,581 1,359,991
Principal repayments of CMO's available for sale 994,827 280,451
Net increase in loans (8,541,341) (6,569,220)
Purchase of premises and equipment (79,742) (257,798)
------------ ------------
Net cash used in investing activities (5,473,182) (5,779,254)
------------ ------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
SouthFirst Bancshares, Inc.
Statements of Cash Flows (Unaudited) for the
Six Months Ending March 31, 1997 and 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996
--------------- --------------
<S> <C> <C>
Financing activities:
Net (decrease) increase in NOW accounts and savings accounts $ 396,925 $ (938,166)
Net increase (decrease) in certificates of deposits (674,562) 2,264,264
Proceeds from borrowed funds 3,125,000 6,367,540
Cash dividends paid (205,599) (1,938,050)
Treasury stock purchased (34,606) -
Repayment of borrowed funds (947) (2,372,798)
Decrease in advances by borrowers for property taxes and
insurance (70,009) (50,798)
----------- -----------
Net cash provided by financing activities 2,536,202 3,331,992
----------- -----------
Increase (decrease) in cash and amounts due from depository
institutions 451,561 (674,417)
Cash and amounts due from depository institutions beginning
of period 2,625,561 4,464,099
----------- -----------
Cash and amounts due from depository institutions end of period $ 3,077,122 $ 3,789,682
=========== ===========
Supplemental information on cash payments:
Interest paid $ 1,429,455 $ 2,139,877
Income taxes expensed 160,770 (65,975)
Supplemental information on non-cash transactions:
Transfers to investment securities available for sale - 12,476,980
Change in net unrealized gain on investment available
for sale $ 156,691 $ 341,772
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
SOUTHFIRST BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
Information filed on this Form 10-Q as of and for the quarter ended
March 31, 1997 was derived from the financial records of SouthFirst
Bancshares, Inc. (the "Corporation") and its wholly-owned subsidiary, First
Federal of the South (the "Bank," formerly First Federal Savings & Loan
Association of Sylacauga, collectively the Corporation and the Bank are
referred to herein as the "Company"). As of February 13, 1995, the Bank
converted from a mutual to a stock form of ownership, whereby all of the stock
of the Bank was purchased by the Corporation upon the issuance of 830,000
shares of the Corporation's common stock (the "Conversion").
In the opinion of management of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments (none of
which are other than normal recurring accruals) necessary for a fair statement
of the financial position of the Company and the results of operations for the
three month and six month periods ended March 31, 1997. The results contained
in these statements are not necessarily indicative of the results which may be
expected for the entire year.
(2) RETAINED EARNINGS
The Bank, pursuant to applicable Office of Thrift Supervision ("OTS")
regulations, established a special "liquidation account" for the benefit of the
eligible account holders and supplemental eligible account holders in the
Conversion. The liquidation account was established in an amount equal to the
regulatory capital of the Bank as of the date of the statement of financial
condition contained in the final Prospectus prepared in connection with the
Conversion. Each eligible account holder and supplemental eligible account
holder is entitled, on a complete liquidation of the Bank after the Conversion
(and only in such event), to an interest in the liquidation account. The
initial interest in such liquidation account is determined by multiplying the
opening balance in the liquidation account by a fraction of which the numerator
is the amount of the qualifying deposit in the related deposit account and the
denominator is the total amount of the qualifying deposits of all eligible
account holders and supplemental eligible account holders in the Bank. If, on
any annual closing date subsequent to the Conversion, the amount in any
qualifying deposit account is less than the amount in such account on the
initial applicable date, then the interest in the liquidation account is
reduced by an amount proportionate to any such reduction. If, subsequent to
the Conversion, a qualified deposit account is closed, then the interest of the
account holder in the liquidation account will be reduced to zero. A merger,
consolidation, sale of bulk assets or similar combination transaction with an
FDIC-insured institution, in which the Bank is not the surviving insured
institution, would not be considered to be a "liquidation" under which any
distribution of the liquidation account would be made. In such a transaction,
the liquidation account would be assumed by the surviving institution. The
creation and maintenance of the liquidation account would not restrict the use
or application of any of the capital accounts of the Bank, except that the Bank
may not declare or pay a cash dividend to, or repurchase any of its capital
stock from, the Company, if the effect of such dividend or repurchase would be
to cause its equity to be reduced below the aggregate amount then required for
the liquidation account.
6
<PAGE> 7
(3) SETTLEMENT OF LAWSUIT
On May 23, 1996, the Bank entered into a final settlement agreement
with United States Fidelity & Guaranty Company ("USF&G"), under which
litigation between the Bank and USF&G was ended. Over the course of the
litigation, the Bank received, net of legal fees, $619,000. The litigation
arose from a claim filed by the Bank alleging, among other things, that USF&G
had breached its contractual obligations under a fidelity bond the Bank held
with USF&G.
In the normal course of its business, the Company and the Bank from
time to time are involved in legal proceedings. The Company and Bank
management believe there are no pending or threatened legal proceedings which
upon resolution are expected to have a material effect upon the Company's or
the Bank's financial condition.
(4) SUBSEQUENT EVENTS
On April 16, 1997, the Company declared a regular dividend of $0.125
per share, payable on May 15, 1997 to stockholders of record on May 1, 1997.
On April 11, 1997, the Company's wholly-owned subsidiary, Benefit
Financial Services Inc., purchased substantially all of the assets of Pension &
Benefit Financial Services, Inc., a Montgomery-based employee benefits
consulting firm. The purchase price, the form of which consisted of a
combination of SouthFirst common stock and cash, was approximately $850,000.
See "ITEM 2: CHANGE IN SECURITIES."
On April 15, 1997, the Company entered into a definitive agreement to
merge with First Federal Savings & Loan Association of Chilton County ("Chilton
County"). As a result of the agreement, Chilton County will be merged with the
Bank and the Bank will be the surviving entity following the merger. The merger
is subject to the approval of the shareholders of the Company and Chilton
County, and to required regulatory filings and approvals. The merger is
expected to be completed in the fourth quarter of 1997 and will be accounted
for as a purchase transaction. The transaction is structured as a stock
election merger, in which holders of Chilton County stock will have the right,
subject to certain conditions, to choose either shares of the Company's common
stock, cash or a combination of both. The transaction is expected to have an
aggregate value of approximately $5.3 million, or approximately $30 per Chilton
County common share, which is approximately 120% of Chilton County's fully
diluted book value at December 31, 1996. The Company expects the merger to be
immediately accretive to its earnings per share. As of March 31, 1997, Chilton
County presently has an asset base of approximately $75 million.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
REVIEW OF RESULTS OF OPERATIONS
OVERVIEW
Net Income for the six months ended March 31, 1997 increased $58,153
or 23.4% when compared to the comparable period during fiscal 1996. This
increase in net income resulted primarily from an increase in net interest
income of $98,319 compared to the same period during fiscal 1996. Other income
for the six month period ending March 31, 1997 decreased approximately $500,000
compared
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<PAGE> 8
to the same period in fiscal 1996. The decrease in other income was due to
the $508,000 received in the first quarter of fiscal 1996 as a settlement in
the lawsuit with USF&G. See Note 3 to "Notes to Financial Statements." The
decrease in other income for the six month period ending March 31, 1997 was
offset by a decrease in other expenses of approximately $504,000 compared to
the comparable period during fiscal 1996. Net income per common share, based
on weighted average shares outstanding was $0.30 and $0.14 for the six months
and three months ending March 31, 1997, respectively.
Further discussion of significant items affecting net earnings are
discussed in detail below.
NET INTEREST INCOME
Net interest income is the difference between the interest and fees
earned on loans, securities, and other interest-bearing assets (interest
income) and the interest paid on deposits and borrowed funds (interest
expense). Higher net interest income is a result of the relationship between
the interest-earning assets and the interest-bearing liabilities.
There was a slight decrease in interest rates in the six months ended
March 31, 1997, as compared to the same period in fiscal 1996. As of March
31, 1997, net interest margin increased thirty-five basis points as rates
earned on interest-earning assets increased 26 basis points to 8.02%, while
cost of funds decreased 9 basis points to 4.84%, when compared to the
comparable period during fiscal 1996. As a result, net interest income before
provision for loan losses increased by $114,819 or 7.6% to $1,616,882 in the
first six months of fiscal 1997 compared to $1,502,863 for the first six months
of fiscal 1996.
OTHER INCOME
Other income for the six months ended March 31, 1997 decreased by
$500,343 to $351,646 compared to $851,989 for the six months ended March 31,
1996. The higher than normal result for the six months ended March 31, 1996
was primarily due to the Bank's fidelity bond claim settlement with USF&G of
approximately $508,000 which was entered into during that period. See Note 3
to "Notes to Financial Statements."
For the three month period ended March 31, 1997, other income
increased by approximately $10,500 compared to the same period in fiscal 1996.
This increase was primarily the result of a decrease in losses from affiliated
companies of approximately $9,000, an increase of approximately $8,150 in other
income, and an increase in income of approximately $7,100 from insurance
commissions. These increases were offset by a decrease of approximately $13,600
from gain on sale of loans compared to the same period in fiscal 1996.
OTHER EXPENSE
Total other expense decreased from $2,045,704 for the six months ended
March 31, 1996 to $1,541,083 for the six months ended March 31, 1997. This
decrease of $503,991 was due to several factors, including reduced costs
associated with the implementation of employee benefit plans that were
previously incurred in the first quarter of fiscal 1996, as well reduced other
expenses which, during the six months ended March 31, 1996, consisted primarily
of legal and accounting costs associated with the production of the Company's
first annual report on Form 10-K. The majority of these costs were nonrecurring
in nature and, therefore, were not incurred during the six months ended March
31, 1997.
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<PAGE> 9
For the three month period ended March 31, 1997, other expenses
decreased by approximately $104,000 compared to the same period in fiscal 1996.
This decrease was primarily due to costs associated with the implementation of
employee benefit plans that occurred in the three month period ended March 31,
1996 that were nonrecurring in nature.
INCOME TAX EXPENSE
The Company's effective tax rate for the six month period ended March
31, 1997 was 39.2% compared to the federal statutory rate of 34.0%. The
Company's effective tax rate was higher than the statutory rate due primarily
to state income taxes. Income tax expense increased $43,814 or 27.2% to
$160,770 for the six months ended March 31, 1997, as compared to $116,956 for
the six months ended March 31, 1996, due to the increase in pre-tax earnings.
REVIEW OF FINANCIAL CONDITION
OVERVIEW
Management continuously monitors the financial condition of the
Company in order to protect depositors, increase retained earnings, and protect
current and future earnings.
Return on average stockholders' equity is one way of assessing the
return the Company has generated for its stockholders. The table below sets
forth the return on average stockholders' equity and other performance ratios
of the Company for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
MARCH 31
----------------
1997 1996
---- ----
<S> <C> <C>
Return on assets 0.53% 0.44%
Return on equity 3.81% 2.71%
Equity-to-assets ratio 13.92% 16.42%
Interest rate spread 3.18% 2.83%
Net interest margin 3.72% 3.64%
Total risk-based capital ratio 22.05% 23.47%
Nonperforming loans to loans 0.47% 0.85%
Allowance for loan losses to loans 0.41% 0.47%
Allowance for loan losses to nonperforming loans 86.67% 55.75%
Ratio of net charge-offs to average loans outstanding 0.00% 0.01%
Book value per common share outstanding $15.62 $15.48
</TABLE>
Significant factors affecting the Company's financial condition during
the six months ended March 31, 1997 are detailed below:
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<PAGE> 10
ASSETS
Total assets increased $2,628,481 or 2.91% from $90,281,934 at
September 30, 1996 to $92,910,415 at March 31, 1997. During this six month
period, net loans receivable increased by $4,355,245 due to increased loan
demand in residential mortgages and in residential construction loans.
Mortgage-backed securities and collateralized mortgage obligations ("CMOs")
decreased by approximately $3.1 million with principal pay downs being used to
fund the residential mortgage and residential construction loans.
LIABILITIES
Total liabilities increased $2,528,050 or 3.2% from $77,394,120 at
September 30, 1996 to $79,922,170 at March 31, 1997. This increase was
primarily due to advance borrowing from the Federal Home Loan Bank of Atlanta,
increasing by approximately $3.1 million or 28.5% from September 30, 1996 to
March 31, 1997. This increase reflected the funding requirements as a result
of increased residential mortgage and construction loan demand. The increase in
borrowing was offset by a decrease in accrued interest payable of approximately
$411,000 or 48.8% from $842,285 at September 30, 1996 to $430,924 at March 31,
1997. In addition, accrued expenses and other liabilities decreased
approximately $208,000 or 25.3% from $820,266 at September 30, 1996 to $612,747
at March 31, 1997.
LOAN QUALITY
A major key to long-term earnings growth is maintenance of a
high-quality loan portfolio. The Company's directive in this regard is carried
out through its policies and procedures for review of loans. The goal and
result of these policies and procedures is to provide a sound basis for new
credit extensions and an early recognition of problem assets to allow the most
flexibility in their timely disposition.
At March 31, 1997, the allowance for loan losses was $267,821, as
compared to $250,714 at September 30, 1996. The Company recorded small
provisions for loan losses of $17,700 and $1,200 for the first six months of
fiscal 1996 and 1997, respectively, because charge-offs were insignificant
during these periods. Nonperforming loans at March 31, 1997 were approximately
$309,000 as compared to approximately $546,000 at September 30, 1996.
Foreclosed real estate during the six months ended March 31, 1997 was $157,717.
There was no foreclosed real estate for the comparable time period in fiscal
1996. At March 31, 1997 and September 30, 1996, the allowance for loan losses
represented 0.41% and 0.40% of loans outstanding, respectively. The provision
for loan losses and the adequacy of the allowance for loan losses is based upon
management's continuing evaluation of the collectibility of the loan portfolio
under current economic conditions and includes analysis of underlying
collateral value and other factors which could affect the collectibility.
Management considers the allowance for loan losses to be adequate based upon
the evaluations of specific loans, internal loan rating systems and guidelines
provided by the banking regulatory authorities governing the Bank. Although
loans have increased, management believes loan loss reserves are adequate due
to the fact it has not experienced significant loan charge-offs.
LIQUIDITY AND INTEREST SENSITIVITY
Liquidity is the ability of an organization to meet its financial
commitments and obligations on a timely basis. These commitments and
obligations include credit needs of customers, withdrawals by depositors, and
payment of operating expenses and dividends.
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<PAGE> 11
The Company is required under applicable federal regulations to
maintain specified levels of cash and "liquid" investments in qualifying types
of United States Treasury and Federal Agency securities, and other investments
generally having maturities of five years or less. Such investments serve as a
source of funds upon which the Company may rely to meet deposit withdrawals and
other short-term needs. The required level of such investments is calculated
based on a "liquidity base" consisting of net withdrawable accounts plus
borrowing payable on demand or with maturities of one year or less.
Management's objectives continue to include maintaining liquidity in excess of
the required regulatory amount of 5.0% of net deposits and short-term borrowing
in order to provide greater flexibility and to better match maturities of the
requirements of normal operations, potential deposit outflows and loan demand.
The Company closely monitors its cash flow position to ensure adequate
liquidity and to take advantage of market opportunities. At September 30, 1996
and March 31, 1997, the Company's liquid assets represented 12.88% and 10.66%,
respectively, of its liquidity base. Management believes that the Company's
liquidity is adequate to fund all outstanding commitments and other cash needs.
Changes in interest rates will necessarily lead to changes in the net
interest margin. It is the Company's goal to minimize volatility in the net
interest margin by taking an active role in managing the level, mix and
maturities of assets and liabilities.
To reduce the adverse effect of changes in interest on its net
interest margin, the Company is pursuing various strategies to improve the rate
sensitivity of its assets and stabilize net interest income.
CAPITAL ADEQUACY AND RESOURCES
Management is committed to maintaining capital at a level sufficient
to protect depositors, provide for reasonable growth, and fully comply with all
regulatory requirements. Management's strategy to achieve this goal is to
retain sufficient earnings while providing a reasonable return on equity.
The OTS has issued guidelines identifying minimum regulatory
"tangible" capital equal to 1.50% of adjusted total assets, a minimum 3.0% core
capital ratio, and a minimum risk-based capital of 8.0% of risk-weighted
assets. The Company has provided the majority of its capital requirements
through the retention of earnings and issuance of common stock in the Company's
initial public offering.
At March 31, 1997, the Company satisfied all regulatory capital
requirements. The Company's compliance with the current standards is as
follows:
<TABLE>
<CAPTION>
PERCENT OF
ASSET
AMOUNT BASE
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible Capital $12,988 13.21%
Core Capital 12,988 13.21
Risk-based Capital 13,256 22.05
</TABLE>
The OTS has proposed an amendment to its capital regulations
establishing a minimum core capital ratio of 3.0% for savings associations
rated composite 1 under the OTS CAMEL rating system. For all other savings
associations, the minimum core capital ratio will be 3.0% plus at least an
additional 100 to 200 basis points. In determining the amount of additional
core capital, the OTS will assess both
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<PAGE> 12
the quality of risk management systems and the level of overall risk in each
individual savings association through the supervisory process on a
case-by-case basis.
The OTS also requires savings institutions with more than a normal
level of interest rate risk to maintain additional capital except institutions
with less than $300 million in assets and at least a 12 percent risk-based
capital ratio are not subject to this interest rate risk capital component
("IRR") unless notified by the OTS. The Company is not currently required to
maintain additional capital based on IRR.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("FAS 123"). FAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. Such
instruments include stock purchase plans, stock options, restricted stock, and
stock appreciation rights. FAS 123 also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from
nonemployees. Those transactions are accounted for based on the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever can be more reliably measured. FAS 123 provides a choice for
accounting for employee stock compensation plans. A company can elect to use
the new fair-value-based method of accounting for employee stock compensation
plans, under which compensation cost is measured and recognized in results of
operations, or companies may continue to account for these plans under the
current accounting standards. Entities electing to remain with the present
accounting method must make disclosure of what net income and earnings per
share would have been if the fair-value-based method of accounting had been
applied. The Company plans to continue to account for employee stock options
using the present accounting method and include the required disclosures in the
financial statements for its fiscal year ended September 30, 1997. FAS 123 is
effective for financial statements issued for fiscal years beginning after
December 15, 1995.
PART II. OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES
In connection with the purchase by Benefit Financial Services, Inc.
("Benefit Financial") of substantially all of the assets of Pension & Benefit
Financial Services, Inc. ("Pension Benefit") (See Note 4 to "Notes to Financial
Statements"), on April 11, 1997, the Company issued, in the aggregate, 25,800
shares of its $.01 par value common stock to the principals of Pension Benefit.
The 25,800 shares of Company common stock was divided among the principals of
Pension Benefit as follows: (i) Malcomb J. Massey, the President and Chief
Executive Officer of Pension Benefit, received 15,512 shares of Company common
stock pursuant an employment agreement between himself and Benefit Financial,
(ii) Ruth M. Roper, an Executive Vice President of Pension Benefit, received
5,623 shares of Company common stock pursuant to an employment agreement
between herself and Benefit Financial, and (iii) Bill G. Lambert, also an
Executive Vice President of Pension Benefit, received 4,665 shares of Company
common stock pursuant a consulting agreement between himself and Benefit
Financial. Under the terms of Mr. Massey's and Ms. Roper's employment
agreements, the shares of Company common stock received by them will vest in
equal annual increments over a period of 15 years beginning on April 11, 1997.
Under the terms of Mr. Lambert's consulting agreement, the shares of Company
common stock received by him will vest in equal annual increments over a period
of 5 years beginning on April 11, 1997. As Messrs. Massey and Lambert and Ms.
Roper are sophisticated investors, were afforded access to information on the
Company and were the only offerees solicited to purchase the Company's common
stock, the Company did not register the shares of common stock issued to them
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1997 Annual Meeting of Stockholders of the Company was held on
March 19, 1997. At the meeting the following persons were elected as directors
to serve for a term of three years and until their successors are elected and
qualified: Paul A. Brown, Donald C. Stroup and Charles R. Vawter, Jr.
The results of voting with respect to the election of directors
were as follows:
<TABLE>
<CAPTION>
Votes Votes
FOR WITHHELD
------- --------
<S> <C> <C>
Paul A. Brown 511,046 3,061
Donald C. Stroup 511,046 3,061
Charles R. Vawter, Jr. 511,046 3,061
</TABLE>
12
<PAGE> 13
Each of the following director's term of office as a director continued after
the Annual Meeting of Stockholders: H. David Foote, Jr., Joe K. McArthur,
Allen Gray McMillan, III and John T. Robbs.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 - Agreement for Purchase and Sale of Assets by and
among Pension & Benefit Financial Services, Inc.,
Bill G. Lambert, J. Malcomb Massey, Ruth M. Roper and
Benefit Financial Services, Inc.
2.2 - Agreement and Plan of Merger by and among SouthFirst
Bancshares, Inc., First Federal of the South and
First Federal Savings & Loan Association of Chilton
County.
27.1 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended March 31, 1997.
13
<PAGE> 14
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.
SOUTHFIRST BANCSHARES, INC.
Date: April 29, 1997 By: /s/ Donald C. Stroup
------------------------------------
Donald C. Stroup, President and
Chief Executive Officer
(principal executive officer)
Date: April 29, 1997 By: /s/ Joe K. McArthur
------------------------------------
Joe K. McArthur, Executive Vice
President and Chief Financial
Officer
(principal financial and accounting
officer)
14
<PAGE> 15
SOUTHFIRST BANCSHARES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ------------------------------------------------
<S> <C>
2.1 Agreement for Purchase and Sale of Assets by
and among Pension & Benefit Financial Services,
Inc., Bill G. Lambert, J. Malcomb Massey,
Ruth M. Roper and Benefit Financial Services,
Inc., dated April 11, 1997.
2.2 Agreement and Plan of Merger by and among
SouthFirst Bancshares, Inc., First Federal of the
South and First Federal Savings & Loan Association
of Chilton County, dated April 14, 1997.
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
15
<PAGE> 1
AGREEMENT FOR
PURCHASE AND SALE OF ASSETS
BY AND AMONG
PENSION & BENEFIT FINANCIAL SERVICES, INC.,
BILL G. LAMBERT, J. MALCOMB MASSEY, RUTH M. ROPER
AND
BENEFIT FINANCIAL SERVICES, INC.
DATED AS OF APRIL 11, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Assets and Properties to be Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II Purchase Price, Payment, Costs and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Purchase Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Costs; Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Liabilities Assumed by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Liabilities Not Assumed by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV Closing of Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Pension Benefit's Closing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Buyer's Closing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V Joint and Several Representations and Warrantiesof Pension Benefit and Sellers . . . . . . . . . . . . . . 5
5.1 Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Subsidiaries and Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.7 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.8 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.10 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.11 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.12 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.13 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.14 Condition of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.16 Owned Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.17 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.18 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.19 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.20 Employment and Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.21 Interested Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.22 Necessary Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.23 Financial Advisor Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.24 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Governmental Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Financial Advisor Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE VII Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Conduct of Pension Benefit's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Tax Returns and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Payment of Pension Benefit's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.7 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Conditions Precedent to Obligations of Pension Benefit and Sellers. . . . . . . . . . . . . . . 17
8.2 Conditions Precedent to Obligations of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX Survival of Representations and Warranties/Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.1 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Pension Benefit's and the Sellers' Indemnity Agreement . . . . . . . . . . . . . . . . . . . . 18
9.3 Buyer's Indemnity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.4 Conditions of Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.6 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7 Adjustment of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.8 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.9 Non-Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.2 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.3 Waivers and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.5 Sales and Use Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.6 Bulk Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.7 Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.8 Right to Open Mail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.11 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
-ii-
<PAGE> 4
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT (this "Agreement") is made as of this 11th day of
April, 1997, by and among PENSION & BENEFIT FINANCIAL SERVICES, INC. ("Pension
Benefit") and BILL G. LAMBERT ("Lambert"), J. MALCOMB MASSEY ("Massey"), RUTH
M. ROPER ("Roper") (Lambert, Massey and Roper each a, "Seller" and
collectively, the "Sellers"), and BENEFIT FINANCIAL SERVICES, INC., an Alabama
corporation ("Buyer").
WITNESSETH:
WHEREAS, Pension Benefit and Sellers are in the business of operating
a financial services company located in and around Montgomery, Alabama at the
location identified on Schedule 1.1 specializing in the planning, designing,
implementation and administration of employee benefit plans (collectively the
"Business"); and
WHEREAS, Buyer wishes to purchase from Pension Benefit and Sellers,
and Pension Benefit and Sellers wish to sell, transfer, assign, convey and
deliver to Buyer certain assets and property, including the Business as a going
concern, and Buyer wishes to assume certain contractual obligations of Pension
Benefit, all upon the terms and conditions hereinafter set forth; and
WHEREAS, Sellers are the sole shareholders of Pension Benefit (each a
"Shareholder") and, as a result thereof, will be the primary beneficiaries of
the transactions contemplated herein and, as such, are willing to execute and
enter into this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
covenant and agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.1 Assets and Properties to be Transferred. Subject to the terms
and conditions of this Agreement, and on the basis of the representations and
warranties hereinafter set forth, Pension Benefit and Sellers hereby sell,
transfer, assign, convey and deliver to Buyer, and Buyer hereby purchases from
Pension Benefit and Sellers, all of the tangible and intangible property listed
on Schedule 1.1 annexed hereto, (excluding those certain assets described on
Schedule 1.2 annexed hereto), in each case free and clear of all mortgages,
liens, encumbrances, equities, claims and obligations to other persons of every
kind and character, except with respect to the Assumed Liabilities as described
in Section 3.1 (hereinafter collectively referred to as the "Purchased
Assets").
1.2 Excluded Assets. The parties to this Agreement expressly
acknowledge and agree that there shall be excluded from the Purchased Assets to
be transferred to the Buyer hereunder the assets, rights and properties
described on Schedule 1.2 annexed hereto (hereinafter collectively referred to
as the "Excluded Assets").
ARTICLE II
Purchase Price, Payment, Costs and Accounts Receivable
2.1 Purchase Price and Payment. Upon and subject to the terms and
conditions of this Agreement, Buyer shall transfer to Pension Benefit at the
Closing (as defined in Section 4.1) the
<PAGE> 5
aggregate sum of Two Hundred Eighty Thousand Eight Hundred Twenty-Five Dollars
and 23/100's ($280,825.23) (the "Purchase Price") payable by Buyer in
immediately available funds by check.
2.2 Closing Costs; Transfer Taxes. Sellers shall pay, at the
Closing or, if due thereafter, promptly when due, all gross receipts taxes,
gains taxes, transfer taxes, sales taxes, use taxes, excise taxes, stamp taxes,
conveyance taxes and other taxes applicable to, arising out of or imposed upon
the transactions contemplated hereunder.
2.3 Accounts Receivable Buyer shall have the sole right to
collect all accounts receivable transferred, and Buyer shall have the right to
endorse, without recourse, with the names Pension & Benefit Financial Services,
Inc. (or Lambert, Massey, Roper & Taylor, Inc., as the case may be) and
Benefit Financial Services, Inc. any checks received on account of any accounts
receivable, or similar items, but Buyer need only use reasonable efforts to
collect such accounts. Buyer shall have recourse against Sellers for any
credit losses incurred with respect to the transferred accounts receivable and
with respect to non-existing or overstated accounts receivable. Within one
hundred (100) days after Closing, Buyer shall prepare, and promptly thereafter
submit, a report to Sellers setting forth all relevant information concerning
collection of accounts receivable during the ninety (90) day period following
Closing. If such report shows a balance due to Buyer for any uncollected
accounts, Buyer may offset such amount from any sums due to Sellers under the
Employment Agreements (as hereinafter defined), provided, that if Sellers
dispute the amount Buyer proposes to offset, the dispute shall be resolved by
arbitration as set forth in Section 11.10 hereof. At the request of Sellers,
Buyer shall reassign to Sellers the accounts receivable with respect to which
Buyer has been reimbursed by Sellers as set forth above; however, unless Buyer
reassigns such accounts receivable to Sellers, Buyer shall, when, as, if and to
the extent that any such account is collected, remit to Sellers any amounts due
to Sellers by reason of the ultimate collection of such account.
ARTICLE III
Assumption of Liabilities
3.1 Liabilities Assumed by Buyer. Simultaneously with the
execution of this Agreement, the Buyer shall by written instrument assume, as
of the Closing Date, and thereafter shall fully and timely perform and
discharge when due in accordance with their terms, all liabilities and
obligations of the Sellers that are described on Schedule 3.1 annexed hereto
(hereinafter collectively referred to as the "Assumed Liabilities").
3.2 Liabilities Not Assumed by Buyer. Buyer shall not assume or
incur, and Sellers shall remain liable to pay, perform and discharge, all
liabilities and obligations of any of the Sellers other than the Assumed
Liabilities.
ARTICLE IV
Closing of Purchase and Sale
4.1 Closing. Closing of the purchase and sale provided for herein
(the "Closing") shall occur at the offices of Buyer, 126 North Norton Avenue,
Sylacauga, Alabama on April 11, 1997 (the "Closing Date"), or at such other
place or time as the parties shall mutually agree upon.
-2-
<PAGE> 6
4.2 Pension Benefit's Closing Obligations. At the Closing,
Pension Benefit shall deliver to the Buyer:
(a) an executed original of a General Assignment and Bill
of Sale, in substantially the form as annexed hereto as Exhibit A, conveying
the Purchased Assets to Buyer;
(b) a certified copy of the following documents:
(i) a copy of the Articles of Incorporation and
Bylaws of Pension Benefit, certified as of a date not earlier than three
business days prior to the Closing Date from the Secretary of State of Alabama,
a certificate from such Secretary of State not earlier than three business days
prior to the Closing Date as to the existence of Pension Benefit, and a
certificate from the Alabama Department of Revenue not earlier than three
business days prior to the Closing Date as to the good standing of Pension
Benefit.
(ii) a certificate of the Secretary of Pension
Benefit, dated as of the Closing Date and certifying (A) that attached thereto
is a true and complete copy of resolutions duly adopted by the Board of
Directors and Shareholders of Pension Benefit authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, and (B) as to
the incumbency and specimen signature of each officer of Pension Benefit
executing this Agreement and the transactions contemplated hereby; and
(c) all such other agreements, certificates, documents or
instruments with respect to the existence and authority of Pension Benefit and
Sellers;
(d) original executed copies of all lien waivers and
releases (including appropriate UCC termination statements dated not earlier
than two days prior to the Closing Date) from third parties which Buyer's
counsel may deem reasonably necessary or desirable to evidence the proper
transfer and assignment by Pension Benefit to Buyer of the Purchased Assets
free and clear of all liens and encumbrances of any nature, kind or character;
(e) an executed original consent from all third parties
(such consent to be in form and substance satisfactory in the reasonable
judgment of Buyer's counsel) for each contract or lease included within the
Purchased Assets for which a consent to assignment is necessary or desirable in
the reasonable judgment of Buyer's counsel, including, without limitation, a
consent from the landlord with respect to the assignment of the office lease,
or in the alternative Pension Benefit will deliver to Buyer written evidence,
in form and substance satisfactory in the reasonable judgment of Buyer's
counsel, whereby the appropriate third party agrees to grant such consent
subject to Buyer or Pension Benefit curing certain expressly enumerated
arrearages or other defaults;
(f) an opinion of counsel to Pension Benefit with respect
to such matters and in such form as shall be agreed upon between such counsel
and Buyer or Buyer's counsel; and
(g) all of the books and records of Pension Benefit
included in the Purchased Assets, including, but not limited to, true and
complete copies of any or all books of account, and Contracts to which Pension
Benefit or any of the Sellers are a party; and such other documents as shall be
reasonably requested by Buyer;
(h) written certification of Sellers that there have been
no material adverse changes to the financial condition of Pension Benefit as
shown on the Balance Sheet (as defined in Section 5.9(a)); and Pension Benefit
has no liabilities, other than as set forth on the Balance Sheet;
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(i) Employment Agreements (as defined in Section 7.8)
executed by each of the Sellers in the forms as Exhibit C annexed hereto;
(j) such other documents, instruments, agreements and
certificates as Buyer or its counsel may reasonably request.
4.3 Buyer's Closing Obligations. At the Closing Buyer shall
deliver to Pension Benefit:
(a) an executed original of an Assumption of the Assumed
Liabilities, in form and substance substantially similar to Exhibit B annexed
hereto;
(b) a certified copy of the resolutions duly adopted by
the board of directors of the Buyer authorizing and approving the execution and
delivery by Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby and thereby, and that such resolutions have
not been modified, rescinded or amended and are in full force and effect;
(c) all such certified resolutions, certificates,
documents or instruments or agreements as Pension Benefit or its counsel may
reasonably request;
(d) the Employment Agreements executed by Buyer;
(e) the Purchase Price in accordance with Section 2.1
hereof; and
(f) an opinion of counsel to Buyer with respect to such
matters and in such form as shall be agreed upon between such counsel and
Pension Benefit or Pension Benefit's counsel.
ARTICLE V
Joint and Several Representations and Warranties
of Pension Benefit and Sellers
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
Buyer shall rely thereon, Pension Benefit and Sellers jointly and severally
represent and warrant to Buyer the following as of the date hereof:
5.1 Capacity. Sellers have the full power, authority and capacity
necessary to enter into and perform the obligations under this Agreement, and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Sellers, and constitutes the legal, valid and
binding obligation of them, enforceable in accordance with its terms, except as
such enforceability is subject to the effect of (a) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally and (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.2 Organization; Qualification. Pension Benefit is a corporation
duly incorporated and organized, validly existing and in good standing under
the laws of the State of Alabama, and Pension Benefit has all requisite power
and authority to own, lease or operate all of its properties and assets and to
carry on its business as it is now being conducted. Sellers are the sole
holders of all of the issued and outstanding capital stock of Pension Benefit.
Sellers have obtained, or will have obtained by the Closing Date, any consent
needed from any third party to the execution, delivery and performance by
Pension Benefit and Sellers of this Agreement.
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5.3 Power and Authority. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Pension Benefit. This Agreement has been duly authorized, executed and
delivered by Pension Benefit and constitutes a valid and binding agreement of
Pension Benefit, enforceable against Pension Benefit in accordance with its
terms, except as such enforceability is subject to the effect of (a) any
applicable bankruptcy, insolvency, reorganization or similar laws relating to
or affecting creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.4 Subsidiaries and Investments. Pension Benefit has no
Subsidiaries and Pension Benefit has not in the past and does not currently
own, directly or indirectly, any capital stock or other equity, ownership,
proprietary or voting interest in any Person, other than Pension Benefit's
wholly-owned subsidiary, Corporate Financial Services, Inc., which shall be
dissolved prior to the Closing Date. For purposes of this Agreement, a
"Person" shall mean a natural person or any legal, commercial or governmental
entity, such as, but not limited to, a corporation, general partnership, joint
venture, limited partnership, limited liability company, trust, business
association or any person acting in a representative capacity.
5.5 Governmental Authorization. The execution, delivery and
performance by Pension Benefit and Sellers of this Agreement and the
consummation by each of them of the transactions contemplated hereby requires
no action by or in respect of, or filing with any federal, state, county,
local, foreign or other governmental or public agency, instrumentality,
commission, authority, grand jury, official, board or body (collectively, any
"Governmental Authority").
5.6 No Violation; Consents. The execution, delivery and
performance by each of Pension Benefit and Sellers of this Agreement and the
consummation by each of them of the transactions contemplated hereby do not and
will not (a) contravene or constitute a default under or give rise to (or give
rise after the giving of notice, the passage of time or both) a right of
termination, cancellation or acceleration of any obligation of Pension Benefit
and/or Sellers or to a loss of any benefit to which any of Pension Benefit and
Sellers is entitled under any provision of (i) Pension Benefit's Articles of
Incorporation or Bylaws, (ii) any law, regulation, judgment, injunction, order
or decree binding upon Pension Benefit and Sellers or their respective
properties, including without limitation, the Purchased Assets, or (iii) any
agreement, contract or other instrument binding upon Pension Benefit and/or
Sellers or any license, franchise, permit or other similar authorization held
by any of Pension Benefit and/or Sellers, without limitation; (b) result in the
creation or imposition of any Lien on any asset of any of Pension Benefit
and/or Sellers, including, without limitation, the Purchased Assets, or (C)
require any consent, approval or authorization of, notification to, or filing
with any Person.
5.7 Authorizations. Pension Benefit and Sellers, to the best of
their knowledge, possess all permits, licenses, waivers, authorizations, and
approvals from third parties, including without limitation, Governmental
Authorities, which are necessary to conduct the Business in the manner in which
it presently is being conducted (the "Authorizations"). A true, complete and
correct list of the Authorizations is attached hereto as Schedule 5.7. The
Authorizations are valid, in good standing and in full force and effect and
Pension Benefit is in compliance with each such Authorization. No event has
occurred with respect to any of the Authorizations which permits, or after
notice, or lapse of time, or both, would permit, revocation or termination
thereof or would result in any other impairment of the rights of Pension
Benefit and/or Sellers with respect to the Authorizations. There are no
applications, petitions, objections or other pleadings with any Governmental
Authority pending, or threatened, which question the validity of or contest any
of the Authorizations.
5.8 Payment of Taxes. Pension Benefit and Sellers have filed all
federal, state, and local tax returns required to be filed and has made timely
payment of all taxes which are due and payable,
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including any and all employment taxes of every nature, kind and character and
there exists no tax liens or other encumbrances on any of the Purchased Assets
being sold pursuant to this Agreement.
5.9 Financial Statements. Attached hereto as Schedule 5.9 is a
true, complete and correct copy of the unaudited balance sheet of Pension
Benefit as of March 31, 1997 (the "Balance Sheet") and unaudited statement of
operations of Pension Benefit as of March 31, 1997 (the "Income Statement" and
together with the Balance Sheet, the "Financial Statements"). The Financial
Statements present fairly, in accordance with the books and records of Pension
Benefit, the financial position of Pension Benefit as of the date indicated and
the results of operations and cash flows of Pension Benefit for the periods
then ended; provided, however, that such balance sheet fails to disclose a
promissory note for $60,000 payable to Leonard Taylor ("Taylor"), issued for
the redemption of shares of common stock of Pension Benefit owned by Taylor.
5.10 Absence of Certain Changes. Since March 31, 1997, there has
not been any transaction or occurrence in which Pension Benefit has:
(a) failed to pay or discharge when due any liabilities the
failure of which to pay or discharge has caused or will cause any damage or
risk of loss to Pension Benefit or any of Pension Benefit's assets or
properties, including without limitation, the Purchased Assets;
(b) sold, encumbered, assigned or transferred any of the Purchased
Assets;
(c) created, incurred, assumed or guaranteed any indebtedness for
money borrowed, or mortgaged, pledged or subjected any of the Purchased Assets
to any mortgage, lien, pledge, security interest, conditional sales contract or
other encumbrance; provided, however, that Pension Benefit has incurred that
certain promissory note for $60,000 payable to Taylor referenced in Section
5.9;
(d) made or suffered any amendment or termination of any Contract
to which it is a party or by which it or the Purchased Assets are bound, or
canceled, modified or waived any debts or claims held by it or waived any
rights held by it, whether or not in the ordinary course of business;
(e) declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its capital shares; provided, however, that Pension Benefit has
redeemed those certain shares of common stock of Pension Benefit owned by
Taylor referenced in Section 5.9;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting the Business,
Purchased Assets, operations, prospects or condition (financial or otherwise)
of Pension Benefit or (ii) of any item or items carried on its books of account
individually or in the aggregate at more than $10,000, or suffered any
repeated, recurring or prolonged shortage, cessation or interruption of
supplies or utility or other services required to conduct its business and
operations;
(g) suffered any material adverse change in the Business,
Purchased Assets, operations, prospects or condition (financial or otherwise)
of Pension Benefit;
(h) received notice or had knowledge of any actual or threatened
labor trouble, strike or other occurrence, event or condition of any similar
character which has had or might have an adverse effect on the Business,
Purchased Assets, operations, prospects or condition (financial or otherwise)
of Pension Benefit;
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(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $10,000;
(j) changed any of the accounting principles followed by it or the
methods of applying such principles; or
(k) entered into any transaction other than in the ordinary course
of business consistent with past practice.
5.11 Absence of Undisclosed Liabilities. Pension Benefit has no
known liabilities or obligations of any kind, except as and to the extent
reflected, reserved against or otherwise disclosed in the Financial Statements.
5.12 Title to Assets. Except for the leasehold interests
identified on the Schedules hereto, Pension Benefit and Sellers have good and
marketable title to all of the Purchased Assets, free and clear of all
mortgages, liens, pledges, charges, or encumbrances of any nature, kind or
character whatsoever.
5.13 Litigation and Claims. There are no (a) legal,
administrative, arbitration, or other proceedings pending against Pension
Benefit and/or any of the Sellers and neither Pension Benefit and/or any of the
Sellers know of any basis therefor, and (b) there are no (i) governmental
investigations or (ii) proposed or threatened claims of any party not fully
covered by insurance. Pension Benefit and/or Sellers have substantially
complied with, and are not in default in any material respect under any law,
ordinance, requirements, regulations or orders applicable to the Business,
including without limitation all applicable safety, environmental, pollution,
and equal opportunity (including affirmative action compliance) laws or
regulations. Pension Benefit and/or Sellers have complied with and is not in
default in any material respect under any applicable federal, state, and local
laws and regulations relating to the employment of labor, including without
limitation, federal, state, and local withholding tax laws, federal labor laws,
wage and hour laws and discrimination laws.
5.14 Condition of Purchased Assets. All of the Purchased Assets
are in good operating condition and repair, subject only to usual wear and tear
from normal use thereof.
5.15 Contracts. Schedule 1.1 annexed hereto sets forth a complete
and accurate list of all material contracts to which Pension Benefit and/or any
of the Sellers are a party or which affect or relate to the Purchased Assets or
the Business or are used or useful in the Business as a going concern (each a,
"Contract" and collectively, the "Contracts") including, without limitation,
those set forth below. As used herein, the term Contract includes any written
or oral agreement, commitment, understanding or arrangement, including purchase
or sales of goods or services commitments and letters of credit or their
equivalent.
(a) all Contracts (excluding Employee Benefit Plans as
defined in Section 5.20(a)) providing for a commitment of employment
or consultation services, including, without limitation, with any
agent, employee, partner, officer, director or shareholder;
(b) all Contracts with any Person containing any
provision or covenant prohibiting or materially limiting the ability
of any of the Sellers to engage in any business activity or compete
with any Person in connection with the Business or, prohibiting or
materially limiting the ability of any Person to compete with Pension
Benefit and/or any of the Sellers in connection with the Business;
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(d) all lease, rental or occupancy agreements, licenses,
installment and conditional sales agreements, and other Contracts
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property;
(e) all licensing agreements or other Contracts with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
non-disclosure of any of intellectual property assets;
(f) all material partnership, joint venture,
shareholders' or other similar Contracts with any Person in connection
with the Business;
(g) all Contracts with sales agencies or franchises with
whom Pension Benefit and/or any of the Sellers deal(s) in connection
with the Business;
(h) all Contracts relating to the future disposition or
acquisition of any Assets individually or in the aggregate material to
the Condition of the Business;
(i) all Contracts of warranty, guaranty, surety and/or
other similar undertakings extended by Pension Benefit and/or any of
the Sellers;
(j) all powers of attorney that are currently effective
and outstanding;
(k) all other Contracts with respect to the Business that
(A) involve the payment or potential payment, pursuant to the terms of
any such Contract, by or to Pension Benefit and/or Sellers of more
than $5,000 annually and (B) cannot be terminated within ninety (90)
days after giving notice of termination without resulting in any
material cost or penalty to Pension Benefit, including promissory
notes, loan, credit or other financing agreements or arrangements or
evidence of indebtedness; and
(l) all amendments, supplements, and modifications
(whether oral or written) in respect of any of the foregoing.
Pension Benefit and/or Sellers have performed in all respects all contractual
obligations required to be performed by it to date under each Contract and, to
the best of Seller's knowledge and belief is not in default under any Contract
to which it is a party or by which it is bound and no other party to any such
Contract is in material default in the performance of its obligations
thereunder or has taken any action which constitutes, or with notice or lapse
of time would constitute, a breach or anticipatory breach thereof. Except as
specifically referenced in Schedule 1.1 all Contracts listed therein are
assignable to Buyer without modification of the terms thereof and without the
consent of any party other than Pension Benefit who is a party thereto.
5.16 Owned Personal Property. Schedule 5.16 contains a true and
correct list of:
(i) All equipment owned by Pension Benefit (including
automobiles, if any); and
(ii) All furniture and fixtures and other items of
tangible personal property owned by Pension Benefit.
5.17 Books and Records. The books and records of Pension Benefit
are, correct and complete in all material respects, have been maintained in
accordance with good business practice and in accordance with all laws,
regulations and other requirements applicable to its business and operations.
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5.18 Customers. Attached hereto as Schedule 5.18 is a complete and
accurate list of all current and active prospective customers of the Business
known to any of the Sellers and the approximate dollar value of services that
has been and was provided to such customers.
5.19 Insurance Policies. Schedule 5.19 sets forth a true, complete
and correct list and description of all insurance policies in force naming
Pension Benefit and any of the Sellers or any employee of Pension Benefit, as
an insured or beneficiary or as a loss payee or for which Pension Benefit has
paid or is obligated to pay all or part of the premiums including, without
limitation, all liability, malpractice, fire, health and life insurance
policies. Neither Pension Benefit nor any of the Sellers have received notice
of any pending or threatened termination or premium increase (retroactive or
otherwise) with respect thereto, and Pension Benefit is in compliance with all
conditions contained therein. There have been no lapses (whether cured or not)
in the coverage provided under such policies during the term of such policies,
as extended or renewed.
5.20 Employment and Labor Matters.
(a) Schedule 5.20(a) contains a true, complete and
correct list of (i) all employees of Pension Benefit and (ii) the
number of employees in each job classification employed by Pension
Benefit along with a complete and accurate Schedule (the "Employee
Benefits Schedule") of the direct compensation (including, without
limitation, wages, salaries and actual or anticipated bonuses) plus an
accurate description of other benefits paid or provided in the fiscal
year ended December 31, 1996 and to be paid or provided in the current
fiscal year (collectively, the "Employee Benefit Plans"). Schedule
5.20(a) contains true, complete and correct copies of all written
personnel policies, rules or procedures and true, complete and correct
descriptions of all oral personnel policies, rules or procedures of
Pension Benefit. Except as disclosed on Schedule 5.20(a), the
employment of all employees of Pension Benefit is terminable at will
by Pension Benefit without any penalty or severance obligation of any
kind on the part of Pension Benefit and/or the Sellers. Other than as
disclosed on Schedule 5.20(a), Pension Benefit shall not owe any
amounts to any of its employees for any reason whatsoever as of the
Closing Date, including, without limitation, vacation and sick leave.
(b) Except as and to the extent set forth in Schedule
5.20(a), (i) no attempt to organize any group or all of the employees
of Pension Benefit has been made, proposed or threatened; (ii) Pension
Benefit is not a party to any union agreement or collective bargaining
agreement or work rules or practices agreed to with any labor
organization or employee association applicable to any employees of
Pension Benefit, (iii) Pension Benefit has not had any Equal
Employment Opportunity Commission charges or other claims of
employment discrimination made against it; (iv) no wage and hour
department investigations have been made of Pension Benefit; (v) no
labor strike, dispute, slowdown, stoppage or lockout is pending or has
been threatened against or affecting Pension Benefit, the Business or
the Purchased Assets during the past five years; (vi) no union claims
to represent any of the employees of Pension Benefit; (vii) Pension
Benefit has not engaged in any unfair labor practices as defined in
the National Labor Relations Act or other applicable Regulation;
(viii) no unfair labor practice charge or complaint against Pension
Benefit is pending or threatened before the National Labor Relations
Board or any similar Governmental Authority; (ix) there is no
grievance against Pension Benefit arising out of any collective
bargaining agreement or other grievance procedure; and (x) no claim is
pending or threatened in any forum by or on behalf of any present or
former employee of Pension Benefit, any applicant for employment or
classes of the foregoing alleging breach of any express or implied
Contract of employment, any Regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship.
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(c) None of the Sellers has received any notice that any
of the employees of Pension Benefit will terminate his or her
employment at any time prior to the Closing Date or will not agree to
continue his employment with Buyer on substantially the same terms and
conditions after the Closing Date as his or her current employment by
Pension Benefit.
5.21 Interested Transactions. Except as set forth in Schedule
5.21, Pension Benefit is not currently a party to any Contract, loan or other
transaction with any of the Sellers or any Relative of the Sellers, or in which
any such Person has any direct or indirect interest (other than as a
Shareholder or employee of Pension Benefit or Shareholder) in Pension Benefit.
For purposes of this Agreement, a "Relative" shall mean, with regard to any
natural Person, his spouse, parent, sibling, child, aunt, uncle, niece, nephew
or grandparent, or a trustee or other representative appointed to represent any
such natural Person. Except as described in Schedule 5.21, none of the Sellers
or Relative of the Sellers owns or during the last three years has owned,
directly or indirectly, or has during the last three years had a substantial
ownership interest in, any Person which is a party to, or in any property which
is the subject of, any Contract with Pension Benefit, and none of the Sellers
or any Relative of any of the Sellers owns directly or indirectly, or has an
interest in, any Person which is in competition with Pension Benefit and/or any
of the Sellers.
5.22 Necessary Assets. The Purchased Assets constitute all of the
assets necessary to the operation of the Business as previously conducted by or
on behalf of Pension Benefit.
5.23 Financial Advisor Fees. There is no investment banker,
broker, finder or other agent or intermediary which has been retained by or is
authorized to act on behalf of Pension Benefit and/or Sellers who might be
entitled to any fee or commission from Buyer upon consummation of the
transactions contemplated by this Agreement.
5.24 Disclosure. Neither this Agreement nor any schedule, exhibit
or certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Pension
Benefit, or by any of Pension Benefit's directors or officers, in connection
with the transactions contemplated hereby, contains any untrue statement of
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no
fact known to Pension Benefit and/or any of the Sellers which materially and
adversely affects the Business, or the prospects or financial condition of
Pension Benefit or its properties or assets, which has not been set forth in
this Agreement or in the schedules or certificates in writing furnished in
connection with the transactions contemplated by this Agreement.
ARTICLE VI
Representations and
Warranties of Buyer
As an inducement to Pension Benefit and Sellers to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that Pension Benefit and Sellers shall rely thereon, Buyer represents
and warrants to Pension Benefit and Sellers the following:
6.1 Capacity. Buyer has the full power, authority and capacity
necessary to enter into and perform the obligations under this Agreement, and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Buyer, and constitutes the legal, valid and
binding obligation, enforceable in accordance with its terms, except as such
enforceability is subject to the effect of (a) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or
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affecting creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.2 Organization; Qualification. The Buyer is a corporation duly
incorporated and organized, validly existing and in good standing under the
laws of the State of Alabama, and the Buyer has all requisite power and
authority to own, lease or operate all of its properties and assets and to
carry on its business as it is now being conducted. The character of the
property owned or leased by the Buyer and the nature of the Business does not
require Pension Benefit to be qualified or licensed to transact business in any
jurisdiction other than the State of Alabama. SouthFirst Bancshares, Inc. is
the sole holder of all of the issued and outstanding capital stock of the
Buyer. The Buyer has obtained, or will have obtained by the Closing Date, any
consent needed from any third party to the execution, delivery and performance
by the Buyer of this Agreement.
6.3 Governmental Authorization. The execution, delivery and
performance by the Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby requires no action by or in respect of, or
filing with any Governmental Authority.
6.4 Litigation. There is no governmental investigation or
proceeding or governmental or private litigation pending or threatened against
Buyer or relating to Buyer's business that would impair Buyer's ability to
perform its obligations under this Agreement, nor is there any basis therefor
and there are no outstanding judgments, orders, writs, injunctions or decrees
of any court, government or governmental agency against or affecting Buyer's
ability to perform its obligations under this Agreement.
6.5 Disclosure. Neither this Agreement nor any certificate
delivered in accordance with the terms hereof or any document or statement in
writing which has been supplied by or on behalf of Buyer in connection with the
transactions contemplated hereby, contains any untrue statement of material
fact, or omits any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading.
6.6 Financial Advisor Fees. There is no investment banker,
broker, finder or other agent or intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission from Buyer upon consummation of the transactions contemplated by
this Agreement.
ARTICLE VII
Additional Covenants
7.1 Conduct of Pension Benefit's Business. Prior to the Closing
Date, Pension Benefit and/or Sellers shall:
(a) not issue or sell or enter into any Contract to issue
or sell, any shares of capital stock of Pension Benefit, or any
options, warrants, securities or rights exchangeable for any such
shares, or rights to purchase the foregoing, without the prior written
consent of Buyer;
(b) not purchase or redeem or Contract to purchase or
redeem any shares of capital stock of Pension Benefit, without the
prior written consent of Buyer;
(c) not propose, solicit or enter into any Contract with
any Person providing for or relating to the acquisition or proposed
acquisition of Pension Benefit, any shares of capital stock
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of Pension Benefit, or the Purchased Assets, whether by way of merger,
consolidation, purchase of shares, purchase of assets or otherwise,
without the prior written consent of Buyer;
(d) not enter into any Contract relating to the proposed
or actual acquisition of any portion of the capital stock, assets or
business of any Person, without the prior written consent of Buyer;
(e) conduct the Business only in the normal and ordinary
course, consistent with past practice, in substantially the same
manner as presently being conducted, and refrain from entering into
any transaction or Contract other than in the ordinary course of
business consistent with past practice;
(f) consult with Buyer prior to undertaking any new
business opportunity and not undertake such new business opportunity,
without the prior written consent of Buyer;
(g) notify Buyer in writing of any emergency or other
change in the normal course of the operation of Pension Benefit, the
Business or the Purchased Assets and of any complaints,
investigations, adjudicatory proceedings or hearings of any
Governmental Authority (or communications indicating that the same may
be contemplated), affecting Pension Benefit, the Sellers, the Business
or the Purchased Assets, and keep Buyer fully informed of such events
and permit its representatives access to all materials prepared in
connection therewith;
(h) not enter into any new employment Contract or any
commitment to employees (including any commitment to pay retirement or
other benefits), without the prior written consent of Buyer;
(i) not increase the compensation (including fringe
benefits) payable or to become payable to any officer, director or
employee of Pension Benefit, without the prior written consent of
Buyer;
(j) not change the banking or safe deposit arrangements
of Pension Benefit;
(k) except in the ordinary course of business consistent
with past practice, not (i) create or incur any indebtedness, (ii)
enter into or terminate any lease of real property, or (iii) release
or create any Liens;
(l) except in the ordinary course of business consistent
with past practice, not make or commit to make any capital
expenditure, or enter into any lease of equipment as lessee or lessor;
(m) not declare or pay any dividend or increase any
compensation (including fringe benefits) paid to Sellers or any
Relative of the Sellers, without the prior written consent of Buyer;
(n) not sell any asset or make any commitment relating to
the Purchased Assets other than in the ordinary course of business
consistent with past practice;
(o) not make any changes in the accounting methods or
practices of Pension Benefit;
(p) not take any action, or omit to take any action,
which would cause the representations and warranties contained in
Article V hereof to be incorrect or incomplete; and
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(q) not enter into any Contract which will result in or
cause to occur a violation of any of the items contained in paragraphs
(a) through (p) of this Section.
7.2 Tax Returns and Reports. Pension Benefit shall prepare and
file or cause the preparation and filing of all Tax Returns, required by law,
and promptly pay all Taxes which are required through and as of the Closing
Date. In the event that Pension Benefit should subsequently be held liable for
any deficiency in respect of Taxes attributable to periods ending on or
including the Closing Date, and in the event that contrary to the provisions of
this Agreement, Buyer is for any reason required to pay any such amounts,
Sellers shall promptly pay or reimburse Buyer for any such payments, plus
interest and penalties assessed by any taxing authority thereon.
7.3 Payment of Pension Benefit's Obligations. With the exception
of those obligations expressly provided to be assumed by Buyer hereunder,
Pension Benefit shall pay, fulfill, perform, and discharge when due all duties
and obligations of Pension Benefit relating to the Business which could in any
way give rise to a claim against Buyer or the Purchased Assets.
7.4 Access and Information. From the date hereof until the
Closing Date, Sellers shall cause Pension Benefit to afford to Buyer and its
officers, directors, employees, counsel, accountants, advisors, representatives
and agents (collectively, "Representatives") access, upon reasonable prior
notice, to the officers, employees, agents, properties, Purchased Assets,
offices and other facilities, and to the books, records and Contracts of Buyer
and shall furnish Buyer and such Representatives all relevant financial,
operating and other data and information which Buyer or such Representatives
may from time to time reasonably request.
7.5 Consents and Approvals. Pension Benefit and Sellers agree to
use their best efforts to obtain the waiver, consent and approval of all
Persons whose waiver, consent or approval (i) is required in order to
consummate the transactions contemplated by this Agreement, or (ii) is required
by any Contract or decree, injunction, judgment, order, ruling, writ or award
or administrative decision or award of any federal, state, local, foreign or
other court, arbitrator, mediator, tribunal, administrative agency or
Governmental Authority (collectively, an "Order") to which Pension Benefit or
any of the Sellers are a party or subject on the Closing Date. All written
waivers, consents and approvals obtained by Pension Benefit and Sellers shall
be produced any time prior to or at Closing in form and substance satisfactory
to Buyer.
7.6 Further Assurances. At any time or from time to time after
the Closing, Pension Benefit and Sellers shall execute and deliver any further
instruments or documents and take all such further action as Buyer may
reasonably request in order to (a) vest in Buyer title to and possession of the
Purchased Assets, (b) perfect and record, if necessary, the sale, assignment,
conveyance, transfer, and delivery to Buyer of the Purchased Assets and (c)
otherwise evidence the consummation of the transactions contemplated hereby.
At or after the Closing, Pension Benefit and Sellers shall promptly deliver to
Buyer the original of any mail or other communication received by them after
the Closing Date pertaining to the Business, the Purchased Assets or the
Assumed Liabilities and any moneys, checks or other instruments of payment to
which Buyer is entitled.
7.7 Risk of Loss. Pension Benefit assumes all risk of
condemnation, destruction, loss or damage due to fire or other casualty from
the date of this Agreement until the Closing. If the condemnation,
destruction, loss, or damage is such that the Business is materially
interrupted or curtailed or any of the Purchased Assets are materially
affected, then Buyer shall have the right to terminate this Agreement. If
Buyer nonetheless elects to close the transactions contemplated hereby, Pension
Benefit shall remit all net condemnation proceeds or third party insurance
proceeds to Buyer and the consideration for the Purchased Assets shall be
adjusted to reflect such condemnation, destruction, loss or damage to
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<PAGE> 17
the extent that insurance or condemnation proceeds are not sufficient to cover
such destruction, loss or damage.
7.8 Employment Agreements. At Closing, Buyer shall cause each of
the Sellers to and each of the Sellers agree to duly execute and deliver an
employment agreement (collectively, the "Employment Agreements") substantially
in the forms as annexed hereto as Exhibit C.
ARTICLE VIII
Closing Conditions
8.1 Conditions Precedent to Obligations of Pension Benefit and
Sellers. The obligation of Pension Benefit and Sellers to proceed with the
transactions contemplated hereunder to be consummated at the Closing are
subject, at the option of Pension Benefit and Sellers, to the fulfillment of
each and all of the following conditions at or prior to the Closing Date:
(a) All representations and warranties of Buyer contained
in Article VI hereof shall be true and correct in all material respects on and
as of the Closing Date with the same force and effect as if made on the Closing
Date.
(b) All covenants, agreements and obligations required by
the terms of this Agreement to be performed by Buyer at or before the Closing
Date (including those set forth in Section 4.3 above) shall have been fully
performed when due.
(c) There shall have been delivered to Pension Benefit a
closing certificate from the Buyer confirming that the foregoing conditions
precedent have been properly fulfilled.
(d) Pension Benefit shall have received from Buyer
Financial Statements of Buyer as of a date not more than six (6) months prior
to the Closing Date.
8.2 Conditions Precedent to Obligations of Buyer. The obligation
of Buyer to proceed with the transactions contemplated hereunder to be
consummated at the Closing are subject, at the option of Buyer, to the
fulfillment of each and all of the following conditions at or prior to the
Closing Date:
(a) All representations and warranties of Pension Benefit
and/or Sellers contained in Article V hereof shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as if made on the Closing Date.
(b) All covenants, agreements and obligations required by
the terms of this Agreement to be performed by the Pension Benefit and/or
Sellers at or before the Closing Date (including those set forth in Section 4.2
above) shall have been fully performed when due.
(c) Pension Benefit shall have delivered to Buyer a
closing certificate, dated as of the Closing Date, confirming that the
foregoing conditions precedent have been properly fulfilled.
(d) Buyer shall have received certification from the
State of Alabama that Pension Benefit has paid all taxes in said state.
(e) Buyer shall have negotiated terms of employment with
those employees of Pension Benefit that it desires to retain in the Business.
In that regard, Buyer shall have the right, but not the obligation, to offer
employment to the current employees of Pension Benefit.
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<PAGE> 18
8.3 Best Efforts. Each party agrees that it will utilize its best
efforts to fulfill all of the closing conditions set forth or referenced in
this Article VIII. By way of example, but not limitation, each party agrees
that it will utilize its best efforts to obtain all necessary third party
consents.
ARTICLE IX
Survival of Representations and Warranties/Indemnity
9.1 Survival of Representations and Warranties. All of the
representations and warranties of Pension Benefit, Sellers and Buyer contained
in this Agreement shall survive the Closing.
9.2 Pension Benefit's and the Sellers' Indemnity Agreement.
Pension Benefit and each of the Sellers shall, jointly and severally, defend,
indemnify and hold harmless Buyer and its successors and permitted assigns (and
their respective directors, officers, employees, agents and affiliates) from
and against any and all direct or indirect requests, demands, claims, payments,
defenses, obligations, recoveries, deficiencies, fines, penalties, interest,
assessments, actions, liens, causes of action, suits, proceedings, judgments,
losses, damages, liabilities, costs and expenses of any kind or nature
(including without limitation (i) interest, penalties and reasonable attorneys'
fees and expenses, (ii) attorneys' fees and expenses necessary to enforce their
rights to indemnification hereunder, and (iii) consultants' fees and other
costs of defending or investigating any claim hereunder, whether or not
resulting in any liability), and interest on any amount payable as a result of
the foregoing, whether accrued, absolute, contingent, known, unknown, or
otherwise as of the Closing Date or thereafter asserted against, imposed upon
or incurred by the Purchased Assets or Buyer or its successors or permitted
assigns or any of their respective directors, officers, employees, agents or
affiliates based upon, awarded or asserted against in respect of or otherwise
in respect of:
(a) (i) The operation of Business or the use of the
Purchased Assets at any time on or before the Closing Date unless specifically
assumed by Buyer pursuant to this Agreement, (ii) any negligent, illegal,
unjustified or wrongful act or omission of Pension Benefit, or (iii) any other
liabilities of Pension Benefit that are not specifically assumed by Buyer
pursuant to this Agreement;
(b) Any breach of any representation or warranty or
nonfulfillment of any covenant or agreement on the part of Pension Benefit
and/or Sellers contained in this Agreement, or any misrepresentation in or
omission from or nonfulfillment of any covenant on the part of Pension Benefit
and/or Sellers contained in any other agreement, certificate or other
instrument furnished or to be furnished to Buyer by Pension Benefit and/or
Sellers pursuant to this Agreement;
(c) Any intentional or unintentional failure by Pension
Benefit and/or any of the Sellers to comply with any bulk sales laws applicable
to the transactions contemplated hereby; or
(d) Any failure of Pension Benefit to transfer the
Purchased Assets to Buyer free and clear of all claims, liens and encumbrances
or the failure of Pension Benefit and/or Sellers to obtain, prior to the
Closing Date, all consents, approvals and waivers of lessors, landlords,
suppliers and other third parties as may be necessary to permit the assignment
to Buyer on the Closing Date of Pension Benefit's contracts and agreements and
the consummation of the sale of the Purchased Assets to Buyer; or
(e) Any and all liabilities, obligations and/or losses
incurred or imposed in connection with or based upon any provision of any
federal, state or local law or regulation or common law, including
Environmental Laws pertaining to health, safety or environmental protection and
arising out of any act or omission of Pension Benefit, Pension Benefit's
employees, agents or representatives or Pension Benefit's predecessors in
interest occurring on or prior to the Closing Date, or arising out of the
ownership, use, handling, control or operation of any plant, equipment,
container, facility, site, area or
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<PAGE> 19
property from which any substance was Released into the Environment on or prior
to the Closing Date. The term "Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment. The term "Environment" means any
surface or ground water, drinking water supply, land, surface or subsurface
strata, or the ambient air. The term "Environmental Laws" shall mean the
Resource, Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act (Super Fund), the Clean Air Act, the
Clean Water Act, the Toxic Substances Control Act and all other United States
Federal and state and local laws and regulations concerning protection of the
Environment and the transportation, storage, treatment or disposal of any
Hazardous Materials. The term "Hazardous Materials" shall mean and include all
hazardous substances, hazardous waste, toxic substances or hazardous materials
or words of similar import under any applicable local, state or federal law or
under the regulations adopted or publications promulgated pursuant thereto,
including, but not limited to, the statutes listed in the definition of
Environmental Laws.
9.3 Buyer's Indemnity Agreement. Buyer shall defend, indemnify
and hold harmless Pension Benefit and/or Sellers and their successors and
permitted assigns (and their respective directors, officers, employees, agents
and affiliates) from and against any and all direct or indirect requests,
demands, claims, payments, defenses, obligations, recoveries, deficiencies,
fines, penalties, interest, assessments, actions, liens, causes of action,
suits, proceedings, judgments, losses, damages, liabilities, costs and expenses
of any kind or nature (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder, whether or not resulting in any liability), and interest on any
amount payable as a result of the foregoing, whether accrued, absolute,
contingent, known, unknown, or otherwise as of the Closing Date or thereafter
asserted against, imposed upon or incurred by Pension Benefit and/or Sellers or
its successors or permitted assigns or any of their respective directors,
officers, employees, agents or affiliates based upon, awarded or asserted
against in respect of or otherwise in respect of:
(a) Any breach of any representation and warranty or
non-fulfillment of any covenant or agreement on the part of Buyer contained in
this Agreement, or any misrepresentation in or omission from or non-fulfillment
of any covenant on the part of Buyer contained in any other agreement,
certificate or other instrument furnished or to be furnished to Pension Benefit
by Buyer pursuant to this Agreement; or
(b) Buyer's failure to comply, pay, perform or otherwise
comply with any of the Assumed Liabilities specifically and expressly assumed
by Buyer at Closing.
9.4 Conditions of Indemnification. The obligations and
liabilities of the parties under Sections 9.2 and 9.3 with respect to claims
resulting from the assertion of liability by third parties shall be subject to
the following terms and conditions:
(a) The party hereby seeking indemnification (the
"Indemnitee") will give the other party hereto (the "Indemnitor") notice of any
such claims promptly after the Indemnitee receives notice thereof, and the
Indemnitor will accept the defense thereof by counsel of its own choosing
reasonably acceptable to the Indemnitee; provided, however, the failure to give
such notice shall not relive the Indemnitor of its obligations hereunder except
and to the extent he or it is prejudiced thereby.
(b) In the event that the Indemnitor, within a reasonable
time after notice of any such claim, fails to defend against such claim, the
Indemnitee (upon further notice to the Indemnitor) will have the right to
undertake the defense, compromise or settlement of such claim on behalf of and
for the account and risk of the Indemnitor, subject to the right of the
Indemnitor to assume the defense of such claim at any time prior to the
settlement, compromise or final determination thereof;
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<PAGE> 20
(c) Anything in this Section 9.4 to the contrary
notwithstanding, (i) if the Indemnitee shall so elect, the Indemnitee shall
have the right, at its sole cost and expense, to defend, compromise or settle
such claim or to participate in the defense of any claim being defended by the
Indemnitor, (ii) the Indemnitor shall not, without the Indemnitee's written
consent, settle or compromise any claim or consent to entry of any judgment
which does not include an unconditional term thereof giving the Indemnitee a
release from all liability in respect of such claim by the claimant or the
plaintiff, and (iii) the Indemnitor agrees to act in good faith with due regard
to the Indemnitee's on- going business interests to the extent compatible with
an efficient and cost effective resolution of the dispute.
9.5 Payment. The Indemnitor shall promptly pay the Indemnitee any
amount due under this Article IX. Upon judgment, determination, settlement or
compromise of any third party Claim, the Indemnitor shall pay promptly on
behalf of the Indemnitee, and/or to the Indemnitee in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other Claims of the
Indemnitee with respect thereto, unless in the case of a judgment an appeal is
made from the judgment. If the Indemnitor desires to appeal from an adverse
judgment, then the Indemnitor shall post and pay the cost of the security or
bond to stay execution of the judgment pending appeal. Upon the payment in
full by the Indemnitor of such amounts, the Indemnitor shall succeed to the
rights of such Indemnitee, to the extent not waived in settlement, against the
third party who made such third party claim.
9.6 No Waiver. The closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any party of its rights to
Indemnification hereunder, regardless of whether the party seeking
Indemnification had knowledge at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, of the breach,
violation or failure of condition constituting the basis of any claim.
9.7 Adjustment of Liability. In the event an Indemnitor is
required to make any payment under this Article IX in respect of any damages,
liability, obligation, loss, claim, or other amount indemnified hereunder, such
Indemnitor shall pay the Indemnitee an amount (the "Adjusted Amount") which is
equal to the sum of (i) the amount of such damages, liability, obligation,
loss, claim or other amount, minus (ii) the amount of any insurance proceeds
the Indemnitee actually receives with respect thereto, minus (iii) any third
party payments actually received by the Indemnitee with respect to such
damages, liability, obligation, loss, claim or other amount after demand or
notice to such third party from the Indemnitor (with the consent of the
Indemnitee which will not be unreasonably withheld), plus (iv) the amount of
the Net Tax Liability. "Net Tax Liability" shall be equal to the amount, if
any, by which, the sum of all federal, state, and local taxes, if any, required
to be paid by such Indemnitee in respect of the receipt or accrual of the
Adjusted Amount exceeds the sum of (a) the value of any reduction in taxes of
such Indemnitee by reason of deductions, credits or allowances in respect of
the payment or accrual of the damages, liability, obligation, loss, claim or
other amount included in clause (i) above recognized by such Indemnitee in the
same year in which the taxes in respect of the receipt or accrual by such
Indemnitee of the Adjusted Amount would be payable and (b) the net present
value of any reduction in taxes of such Indemnitee by reason of deductions,
credits or allowances in respect of the payment or accrual of the damages,
liability, obligation, loss, claim or other amount included in clause (i) above
recognized by such Indemnitee in years thereafter. The net present value of
any such reduction in taxes shall be determined by discounting the amount of
such reduction in taxes semi-annually from the date such tax saving is
recognized or reasonably expected to be recognized (which shall be deemed to be
the date the applicable tax return on which such tax saving would be properly
reflected is due, without extensions) to the date of payment of the applicable
indemnity by such Indemnitor, applying a discount factor equal to the interest
rate federal income tax deficiencies in effect at the time of such adjustment.
For purposes of determining the amount of any taxes required to be paid and any
tax savings recognized or reasonably expected to be recognized by such
Indemnitee hereunder, it shall be assumed that such
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<PAGE> 21
Indemnitee is subject to tax in each applicable taxing jurisdiction at the
highest applicable marginal rate then in effect in such jurisdiction.
9.8 Limitation of Liability. In no event shall the liability of
Pension Benefit and the Sellers pursuant to this Article IX exceed the Purchase
Price.
9.9 Non-Exclusive Remedy. The rights and remedies of the parties
hereto pursuant to this Article IX are in addition to and not in lieu of other
rights and remedies available at law or in equity.
ARTICLE X
Termination of Agreement
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) By mutual agreement of Buyer and Pension Benefit
and/or Sellers;
(b) By Pension Benefit and/or Sellers, if Pension Benefit
and/or Sellers shall discover that any representation or warranty made by Buyer
herein is false in any material respect or if Buyer shall have breached any of
its agreements and covenants contained herein in any material respect;
(c) By Buyer, if Buyer shall discover that any
representation or warranty made by Pension Benefit and/or any of the Sellers
herein is false in any material respect or if Pension Benefit and/or any of the
Sellers shall have breached any of its agreements and covenants contained
herein in any material respect;
(d) By Pension Benefit and/or Sellers or Buyer, provided
that the terminating party is not in default hereunder, if the Closing shall
not have occurred on or before April 18, 1997.
(e) By Buyer if at any time Buyer shall determine that
the conditions set forth in Section 4.2 and 8.2 hereof cannot be satisfied.
ARTICLE XI
Miscellaneous
11.1 Expenses. Except as otherwise specifically provided herein
the Buyer on the one hand and Pension Benefit and/or Sellers on the other shall
pay their own respective expenses, including the fees and disbursements of
their respective counsel in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby. This Section 11.1 shall expressly survive the termination
of this Agreement.
11.2 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties with respect
to the subject matter hereof, and may not be modified, amended or terminated
except by a written instrument specifically referring to this Agreement signed
by the party against whom enforcement is sought.
11.3 Waivers and Consents. All waivers and consents given
hereunder shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed a
waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
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<PAGE> 22
11.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given only if (i) personally
delivered or (ii) three (3) business days after mailing, postage prepaid, by
certified mail or (iii) when delivered (and receipted for) by an overnight
delivery service, addressed in each case as follows:
(a) If to Buyer to:
Benefit Financial Services, Inc.
126 North Norton Avenue
Sylacauga, Alabama 35150
Attn: Donald C. Stroup
with a copy in like manner to
Smith, Gambrell & Russell, LLP
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326-1010
Attn: W. Thomas King, Esq.
(b) If to Pension Benefit and/or to the Sellers to
Pension & Benefit Financial Services, Inc.
60 Commerce Street
Suite 1001
Montgomery, Alabama 36101
Attn: J. Malcomb Massey
With a copy in like manner to:
Capell, Howard, Knabe & Cobbs, P.A.
57 Adams Avenue
Montgomery, Alabama 36104-4045
Attn: D. Kyle Johnson, Esq.
Buyer on the one hand, and Pension Benefit and/or Sellers, on the other, may
change the address(es) for the giving of notices and communications to them or
to it, as the case may be, by written notice to the other parties in conformity
with the foregoing.
11.5 Sales and Use Taxes. Pension Benefit shall be responsible for
payment of any sales, use or similar taxes arising on account of the
transactions contemplated herein.
11.6 Bulk Sales. Pension Benefit hereby waives compliance by Buyer
with the provisions of the bulk sales laws of any state.
11.7 Gender. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
11.8 Right to Open Mail. Pension Benefit and Sellers agree and
hereby authorize and empower Buyer from and after the Closing Date (i) to
receive and open mail addressed to Pension Benefit and any of the Sellers; and
(ii) to deal with the contents thereof in any manner as Buyer sees fit,
provided
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<PAGE> 23
that such mail and the contents thereof relate to the business presently
conducted by Pension Benefit and/or the Sellers, or to any of the Purchased
Assets, or to any of the liabilities or obligations assumed by Buyer pursuant to
this Agreement.
11.9 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Alabama.
11.10 Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms shall be settled
by binding arbitration held in Sylacauga, Alabama in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, except as specifically otherwise provided in this Section 11.10. The
interpretation and enforceability of this Section 11.10 shall be governed
exclusively by the Federal Arbitration Act, 9 U.S.C. Section Section 1-16.
(b) If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed $50,000, then the panel to be appointed shall consist of three
neutral arbitrators; otherwise, one neutral arbitrator.
(c) The arbitrator(s) shall allow such discovery as the
arbitrator(s) determine appropriate under the circumstances and shall resolve
the dispute as expeditiously as practicable, and if reasonably practicable,
within 120 days after the selection of the arbitrator(s). The arbitrator(s)
shall give the parties written notice of the decision, with the reasons
therefor set out, and shall have 30 days thereafter to reconsider and modify
such decision if any party so requests within 10 days after the decision.
Thereafter, the decision of the arbitrator(s) shall be final, binding, and
nonappealable with respect to all persons, including (without limitation)
persons who have failed or refused to participate in the arbitration process.
(d) The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration and to
award recovery of attorneys fees and expenses in such manner as is determined
to be appropriate by the arbitrator(s).
(e) Judgment upon the award rendered by the arbitrator(s)
may be entered in any court having in personam and subject matter jurisdiction.
(f) All proceedings under this Section 11.10, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
(g) The fact that the dispute resolution procedures
specified in this Section 11.10 shall have been or may be invoked shall not
excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith, subject to any rights to terminate
this Agreement that may be available to any party and to the right of set off
provided herein.
(h) All applicable statutes of limitation shall be tolled
while the procedures specified in this Section 11.10 are pending. The parties
will take such action, if any, required to effectuate such tolling.
11.11 Parties in Interest. Buyer may transfer and assign this
Agreement and its rights hereunder to any affiliate of Buyer without the
consent of Pension Benefit. Except as expressly stated above, this
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<PAGE> 24
Agreement may not be transferred, assigned, pledged or hypothecated by any
party hereto, other than with the written consent of the other parties hereto
and any attempted transfer, assignment, pledge or hypothecation without such
consent shall be null and void and of no effect. Subject to the foregoing
restrictions, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
11.12 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
11.13 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date first above written.
"PENSION BENEFIT"
PENSION & BENEFIT FINANCIAL SERVICES, INC.
By: /s/ J. Malcomb Massey
-------------------------------------
Title: President and Chief Executive
Officer
----------------------------------
"SELLERS"
/s/ Bill G. Lambert (L.S.)
----------------------------------
BILL G. LAMBERT
/s/ J. Malcomb Massey (L.S.)
----------------------------------
J. MALCOMB MASSEY
/s/ Ruth M. Roper (L.S.)
----------------------------------
RUTH M. ROPER
"BUYER"
BENEFIT FINANCIAL SERVICES, INC.
By: /s/ Donald C. Stroup
-------------------------------------
Title: President and Chief Executive
Officer
---------------------------------
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<PAGE> 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SOUTHFIRST BANCSHARES, INC.
FIRST FEDERAL OF THE SOUTH
AND
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF CHILTON COUNTY
DATED AS OF APRIL 14, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Federal Stock Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Shares Held by Chilton County or SouthFirst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Conversion of Stock Options, Warrants, and Other Rights . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4 EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Rights of Former Chilton County Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CHILTON COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Authority; No Breach by Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Chilton County Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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5.12 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.15 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.16 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.17 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.18 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.19 Federal Stock Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.20 Derivatives Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SOUTHFIRST AND
FIRST FEDERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Authority; No Breach By Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 SouthFirst Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.16 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.17 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.18 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.19 Derivatives Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Affirmative Covenants of Chilton County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Negative Covenants of Chilton County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Covenants of SouthFirst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Adverse Changes In Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Control of Chilton County by SouthFirst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Registration Statement; Prospectus/Joint Proxy Statement; Shareholder Approvals . . . . . . . . . . . 24
8.2 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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8.3 Filings With State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Agreement As To Efforts To Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.5 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Dividend Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.7 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.8 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.9 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.10 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.11 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.13 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.14 Listing of Shares on the American Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Conditions to Obligations of SouthFirst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Conditions to Obligations of Chilton County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.6 Obligations of SouthFirst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.15 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.16 Liquidation Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<PAGE> 5
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1 Form of Election for Holders of Chilton County
Common Stock
2 Employment Agreement dated _____ __, 1997 between
Bobby R. Cook and First Federal of the South
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of April 14, 1997, by and among SOUTHFIRST BANCSHARES, INC.
("SouthFirst"), a Delaware corporation having its principal office located in
Sylacauga, Alabama; FIRST FEDERAL OF THE SOUTH ("First Federal"), a federally
chartered stock savings bank having its principal office located in Sylacauga,
Alabama, which is a wholly owned subsidiary of SouthFirst; and FIRST FEDERAL
SAVINGS AND LOAN ASSOCIATION OF CHILTON COUNTY ("Chilton County"), a federally
chartered stock savings and loan association having its principal office
located in Clanton, Alabama.
PREAMBLE
The Boards of Directors of Chilton County, First Federal and SouthFirst
are of the opinion that the acquisition described herein is in the best
interests of the parties and their respective shareholders. This Agreement
provides for the acquisition of Chilton County by SouthFirst pursuant to the
merger of Chilton County with and into First Federal (the "Merger"). At the
effective time of such Merger, the outstanding shares of the capital stock of
Chilton County shall be converted into the right to receive shares of the
common stock of SouthFirst and cash (except as provided herein). As a result,
certain of the shareholders of Chilton County shall become shareholders of
SouthFirst. The transactions described in this Agreement are subject to the
approvals of the shareholders of SouthFirst and Chilton County, the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger (as hereinafter
defined) for federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time, Chilton County shall be merged with and into First
Federal in accordance with the applicable provisions of the regulations of the
Office of Thrift Supervision ("OTS"). The separate corporate existence of
Chilton County shall thereupon cease, and First Federal shall be the Surviving
Bank resulting from the Merger. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective Boards of Directors of Chilton County, First Federal and SouthFirst.
1.2 TIME AND PLACE OF CLOSING. The Parties shall use their
reasonable efforts to cause the closing of the transactions contemplated by
this Agreement to take place at 9:00 A.M. on or before October 31, 1997, or at
such other time as the Parties, acting through their chief executive officers
or chief financial officers, may mutually agree, provided that such closing
shall not occur prior to the Effective Time (as defined in Section 1.3 hereof).
The place of closing shall be at such location as may be mutually agreed upon
by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time all
necessary consents have been issued with respect to the
1
<PAGE> 7
Merger and the conditions of Sections 9.1 and 9.2 of this Agreement have been
satisfied (or, if applicable, waived) by the appropriate Party (the "Effective
Time"). Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by each Party, the Effective Time shall occur on the
last to occur of (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Merger if such action is
required, and (ii) the date on which the shareholders of each of Chilton
County, First Federal and SouthFirst approve this Agreement, to the extent such
approval is required by applicable Law. Notwithstanding the preceding
sentence, the Merger shall not be effective unless and until the Merger
receives necessary approval from the OTS pursuant to 12 C.F.R. Section
563.22(a).
ARTICLE 2
TERMS OF MERGER
2.1 FEDERAL STOCK CHARTER. Pursuant to the Merger, the Federal
Stock Charter of First Federal in effect at the Effective Time shall be the
Federal Stock Charter of the Surviving Bank until otherwise amended or
repealed.
2.2 BYLAWS. Pursuant to the Merger, the Bylaws of First Federal in
effect at the Effective Time shall be the Bylaws of the Surviving Bank until
otherwise amended or repealed.
2.3 DIRECTORS. Upon the Effective Time, the directors of First
Federal shall continue as the directors of the Surviving Bank, provided that
three of the current directors of Chilton County shall, on or before the
Effective Time, be elected as directors of the Surviving Bank, to serve until
the next annual meeting of the shareholders of the Surviving Bank; and further
provided that one of said three directors shall be elected as a director of
SouthFirst to serve until the next annual meeting of the shareholders of
SouthFirst.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of Chilton County, First Federal or SouthFirst or the
shareholders of any of the foregoing, the shares of the parties shall be
converted as follows:
(a) Each share of SouthFirst Common Stock, and each Right
of SouthFirst, issued and outstanding immediately prior to the Effective Time,
shall remain issued and outstanding from and after the Effective Time.
(b) Each share of Chilton County Common Stock outstanding
immediately prior to the Effective Time, other than shares held by a
shareholder who exercises dissenters' rights under the applicable provisions of
12 C.F.R. Section 552.14 (the "Dissenter Provisions") and shares which shall
be canceled without consideration at the Effective Time pursuant to Section 3.3
of this Agreement shall, based on the election of the holders thereof, be
exchanged for and converted into, upon surrender of the certificates
theretofore representing such Chilton County Common Stock, the right to receive
either (i) $30.00 per share, the "Cash Price Per Share," (ii) the "Stock Price
Per Share" (as determined below) or (iii) any combination of the Cash Price Per
Share and the Stock Price Per Share; subject to the provisions of paragraph (e)
hereof and provided that no single share of Chilton County Common Stock may be
converted into a combination of the Cash Price Per Share or the Stock Price Per
Share.
2
<PAGE> 8
(c) The election to exchange shares of Chilton County
Common Stock for the Cash Price Per Share or the Stock Price Per Share, or a
combination thereof, shall be made by Chilton County Stockholders no less than
10 Business Days prior to the Effective Time by submission to SouthFirst of the
Form of Election, provided herein as Exhibit 1, which shall be provided by
SouthFirst to each of the Chilton County Stockholders along with the
Prospectus/Joint Proxy Statement prior to the Effective Time (provided that
SouthFirst may, in its discretion, extend the time period during which Chilton
County Stockholders must submit the Form of Election, but not beyond the
Effective Time). In the event that any Chilton County Stockholder fails to
submit the Form of Election to SouthFirst within the prescribed time period (as
may be extended), then SouthFirst, in its sole discretion, and with the
intention of preserving the "reorganization" status of the Merger under Section
368(a) of the Code, shall determine the form of the conversion and exchange of
the Chilton County Common Stock of such Chilton County Stockholder.
(d) The Stock Price Per Share shall be determined by
multiplying the Average Closing Price by the Exchange Ratio as set forth more
fully below:
(i) If the Average Closing Price SouthFirst Common Stock
is no less than $12.00 and no greater than $14.00,
then the exchange ratio for each share of Chilton
County Common Stock shall be that number of shares of
SouthFirst Common Stock equal to the quotient
obtained by dividing $30.00 by the Average Closing
Price (the "Exchange Ratio"). The Average Closing
Price shall mean the average of the closing sale
price per share of SouthFirst Common Stock on the
American Stock Exchange (as reported in The Wall
Street Journal, or if not reported thereby, any other
authoritative source as mutually determined by
SouthFirst and Chilton County) for each of the 10
consecutive Trading Days immediately preceding the 5
consecutive Business Days immediately preceding the
Effective Time. A "Trading Day" shall mean any day
in which the American Stock Exchange is open and no
less than 100 shares of SouthFirst Common Stock are
traded. A "Business Day" shall mean any day, except
Saturdays, Sundays and Federal Holidays, in which
First Federal is open;
(ii) If the Average Closing Price of SouthFirst Common
Stock is greater than $14.00, then the Exchange Ratio
shall be fixed at 2.1429 shares of SouthFirst Common
Stock for each outstanding share of Chilton County
Common Stock;
(iii) If the Average Closing Price of SouthFirst Common
Stock is less than $12.00, then the Exchange Ratio
shall be fixed at 2.50 shares of SouthFirst Common
Stock for each outstanding share of Chilton County
Common Stock.
(e) Notwithstanding the provisions of Sections 3.1(b) and
(c) hereof, the Total Merger Consideration shall consist of cash and shares of
SouthFirst Common Stock; provided that (A) 50% of the Total Merger
Consideration shall be paid in the form of cash at the Cash Price Per Share
(the "Threshold Cash Amount"), and (B) 50% of the Total Merger Consideration
shall be paid in the form of SouthFirst Common Stock at the Stock Price Per
Share. If the Aggregate Cash Amount (as defined below) is more or less than
the Threshold Cash Amount, the number of shares of SouthFirst Common Stock and
the amount of cash paid to each electing holder of Chilton County Common Stock
shall be determined as follows:
(i) In the event that the aggregate amount of cash
elected by the holders of Chilton County Common Stock
at the Cash Price Per Share, including the cash paid
for (1) the Chilton County Options, (2) any
dissenters' rights (estimated for purposes of the
pro-rata allocations required hereunder at $30.00 per
share) and (3) fractional
3
<PAGE> 9
shares (collectively, the "Aggregate Cash Amount")
will be less than the Threshold Cash Amount, then
certain of those shares of Chilton County Common
Stock for which the holders have elected conversion
into shares of SouthFirst Common Stock (the "Stock
Election Shares") shall, instead, be converted into
those shares of Chilton County Common Stock which
carry the right to convert into the Cash Price Per
Share (the "Cash Election Shares"), which Cash
Election Shares shall be allocated by SouthFirst to
each holder of Stock Election Shares, pro-rata, on
the basis of the following formula:
Formula For Pro-Rata Allocation When Cash Is
Undersubscribed (and Stock is Oversubscribed):
A. Stock Election Shares: (1) Divide the
Threshold Cash Amount by the Stock Price Per
Share. (2) Divide that quotient amount by
the Stock Election Shares of all electing
holders. (3) Multiply that quotient amount
by the total number of shares of Chilton
County Common Stock owned by the electing
holder. (4) Multiply that product amount by
the Exchange Ratio.
B. Cash Election Shares: (1) Subtract the
product amount obtained in step A(3) above
from the total number of shares of Chilton
County Common Stock owned by the electing
holder. (2) Add that difference to any
fractional share of SouthFirst Common Stock
that would be issued pursuant to step A(4)
above.
(ii) In the event that the Aggregate Cash Amount will be
greater than the Threshold Cash Amount, then the Cash
Election Shares shall, instead, be converted into
Stock Election Shares, which SouthFirst shall
allocate to each holder of Cash Election Shares,
pro-rata, on the basis of the following formula:
Formula For Pro-Rata Distribution When Cash Is
Oversubscribed (and Stock is Undersubscribed):
A. Cash Election Shares: (1) Subtract the cash
paid for (i) the Chilton County Options, (ii)
any dissenters' rights and (iii) fractional
shares from the Threshold Cash Amount. (2)
Divide that difference by the Cash Price Per
Share. (3) Divide that quotient amount by
the Cash Election Shares of all holders. (4)
Multiply that quotient amount by the total
number of shares of Chilton County Common
Stock owned by the electing holder. (5) Add
that product to any fractional share of
SouthFirst Common Stock that may be issued
pursuant to step B(2) below.
B. Stock Election Shares: (1) Subtract
the product amount obtained in step A(4)
above from the total number of shares of
Chilton County Common Stock owned by the
electing holder. (2) Multiply that difference
by the Exchange Ratio.
(f) Notwithstanding the provisions of Sections 3.1(e) hereof,
SouthFirst:
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(i) Shall convert Cash Election Shares to Stock Election
Shares or Cash Election Shares to Stock Election
Shares, as the case may be, pro-rata, to the extent
necessary for 50% of the Total Merger Consideration
(determined as of the Effective Time) to be paid in
the form of cash and 50% of the Total Merger
Consideration (determined as of the Effective Time)
in the form of SouthFirst Common Stock at the Stock
Price Per Share;
(ii) May, at SouthFirst's sole discretion, waive the
maintenance of the Threshold Cash Amount if the
difference between the Threshold Cash Amount and
the Aggregate Cash Amount is less than 10% of the
Threshold Cash Amount; or
(iii) May, at SouthFirst's sole discretion, determine the
form of consideration to be received under this
Article 3 after the Effective Time by a dissenting
shareholder of Chilton County who fails to perfect, or
effectively withdraws or loses, his right to appraisal
and payment of his shares subsequent to the Effective
Time.
3.2 ANTI-DILUTION PROVISIONS. Prior to the Effective Time, Chilton
County and SouthFirst each hereby represent and warrant not to change the
number of shares of Chilton County Common Stock or SouthFirst Common Stock,
respectively, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend, recapitalization, reclassification or similar
transaction; provided, however, that SouthFirst may issue, prior to the
Effective Time, an amount of shares not to exceed 39,500 shares, currently held
by SouthFirst as treasury shares, in connection with certain employment
agreements contemplated by Benefit Financial Services, Inc. ("Benefit
Financial"), a wholly-owned subsidiary of SouthFirst.
3.3 SHARES HELD BY CHILTON COUNTY OR SOUTHFIRST. Each share of
Chilton County Common Stock held by Chilton County or by any SouthFirst
Company, in each case other than those shares of Chilton County Common Stock
held in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Chilton County Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of SouthFirst Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the Average Closing Price of such
fractional part of a share of SouthFirst Common Stock at the Effective Time. No
such holder will be entitled to dividends, voting rights, or any other rights
as a shareholder in respect of any fractional shares.
3.5 CONVERSION OF STOCK OPTIONS, WARRANTS, AND OTHER RIGHTS. At
the Effective Time, each award, option, warrant, or other right to purchase or
acquire shares of Chilton County Common Stock pursuant to stock awards, stock
options, warrant agreements, or stock appreciation rights ("Chilton County
Options") granted by Chilton County under the Chilton County Stock Plans or
otherwise to employees who are not Chilton County directors (including, without
limitation, those options issued to certain officers and directors of Chilton
County), which are outstanding at the Effective Time and as were previously
listed and described in Section 3.5 of the Chilton County Disclosure Memorandum
shall be canceled and all rights in respect thereof will cease to exist except
as set forth herein. As consideration for the cancellation of all of the
Chilton County Options, each holder thereof shall receive cash in an amount
equal to (i) the aggregate number of Option Shares which each holder of Chilton
County Options could have been converted into immediately prior to the
Effective Time, multiplied by (ii) the difference between (A) the Cash Price
Per Share (i.e., $30.00) and (B) the exercise price for each Chilton County
Option.
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ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES
(a) From and after the Effective Time, each holder of an
outstanding certificate which immediately prior to the Effective Time
represented shares of Chilton County Common Stock (each a "Chilton County
Certificate") shall be entitled to receive in exchange therefor upon surrender
thereof to SouthFirst, a certificate or certificates representing the number of
whole shares of SouthFirst Common Stock, or, as applicable, cash, to which such
holder is entitled pursuant to Sections 3.1 and 3.4. Notwithstanding the other
provisions of this Agreement (i) until holders of Chilton County Certificates
have surrendered them for exchange as provided herein, no dividends or other
distributions shall be paid by SouthFirst with respect to any shares
represented by such Chilton County Certificates and no payment for shares or
fractional shares shall be made, and (ii) without regard to when such Chilton
County Certificates are surrendered for exchange as provided herein, no
interest shall be paid on any dividends or other distributions or any cash
payments for whole or fractional shares. If any certificate for shares of
SouthFirst Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay
any transfer or other taxes similar-type required by reason of the issuance of
certificates for such shares of SouthFirst Common Stock in a name other than
that of the registered holder of the Chilton County Certificate surrendered, or
shall establish to the satisfaction of SouthFirst that such tax has been paid
or is not applicable.
(b) SouthFirst (or its Exchange Agent) shall provide each holder of
record of a Chilton County Certificate a letter of transmittal containing the
Form of Election attached hereto as Exhibit 1 which shall specify that delivery
shall be effected, and risk of loss and title to the Chilton County
Certificates shall pass, only upon actual delivery of the Chilton County
Certificates to SouthFirst. Upon surrender of Chilton County Certificates to
SouthFirst for cancellation, together with a duly executed letter of
transmittal and such other documents as SouthFirst shall reasonably require,
the holder of such Chilton County Certificates shall be entitled to receive in
exchange therefor one or more certificates representing that number of whole
shares of SouthFirst Common Stock, or, as applicable, cash into which the
shares of Chilton County Certificates Stock theretofore represented by the
Chilton County Certificates so surrendered shall have been converted pursuant
to the provisions of Sections 3.1 and 3.4, and the Chilton County Certificates
so surrendered shall forthwith be canceled.
4.2 DISSENTING SHAREHOLDERS. Any holder of shares of Chilton
County Common Stock who perfects his dissenters' rights in accordance with, and
as contemplated by, the Dissenter Provisions shall be entitled to receive the
value of cash as determined pursuant to the provisions thereof; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the Dissenter Provisions and
surrendered the certificate or certificates representing the shares for which
payment is being made. In the event that after the Effective Time a dissenting
shareholder of Chilton County fails to perfect, or effectively withdraws or
loses, his right to appraisal and of payment for his shares, SouthFirst shall
determine the form of the consideration to which such holder of shares of
Chilton County Common Stock is entitled under Section 3.1 and issue and deliver
such consideration pursuant to Sections 3.1 and 3.4 (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of Chilton County Common Stock held by him.
4.3 RIGHTS OF FORMER CHILTON COUNTY SHAREHOLDERS. At the Effective
Time, the stock transfer books of Chilton County shall be closed as to holders
of shares of Chilton County Common Stock immediately prior to the Effective
Time and no transfer of shares of Chilton County Common Stock by any
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such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Chilton County Common Stock
(other than shares to be canceled pursuant to Section 3.3 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1 and 3.4 of this
Agreement in exchange therefor, subject, however, to SouthFirst's obligation to
pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by Chilton County in
respect of such shares of Chilton County Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. Whenever
a dividend or other distribution is declared by SouthFirst on the SouthFirst
Common Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares
issuable pursuant to this Agreement, but beginning 60 days after the Effective
Time no dividend or other distribution payable to the holders of record of
SouthFirst Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of Chilton
County Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange as provided in Section 4.1 of
this Agreement. However, upon surrender of such shares of Chilton County Common
Stock certificate, both the SouthFirst Common Stock certificate (together with
all such undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate. Any portion of the consideration
(including the proceeds of any investments thereof) which had been made
available to the Exchange Agent pursuant to Section 4.1 of this Agreement that
remain unclaimed by the shareholders of Chilton County for six months after the
Effective Time shall be paid to SouthFirst. Any shareholders of Chilton County
who have not theretofore complied with this Article 4 shall thereafter look
only to SouthFirst for payment of their shares of SouthFirst Common Stock, cash
in lieu of fractional shares, and unpaid dividends and distributions on the
SouthFirst Common Stock deliverable in respect of each Chilton County Common
Share such shareholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CHILTON COUNTY
Chilton County hereby represents and warrants to SouthFirst as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Chilton County is a federal
savings association duly incorporated, validly existing, and in good standing
under the Laws of the United States, and has the corporate power and authority
to carry on its business as now conducted and to own, lease, and operate its
Material Assets. The State of Alabama is the only jurisdiction in which
Chilton County's business is conducted.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Chilton County has the power and authority necessary to execute
and deliver this Agreement, and, subject to the approval and adoption of this
Agreement by the shareholders of Chilton County, to perform its obligations
under this Agreement and consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by Chilton County and
the consummation by Chilton County of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Chilton County, subject to
the approval of this Agreement by its shareholders as contemplated by Section
8.1 hereof. Subject to such requisite shareholder approval (and assuming due
authorization, execution, and delivery by SouthFirst and Surviving Bank), this
Agreement represents a legal, valid, and binding obligation of Chilton County,
enforceable against
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Chilton County in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought). The
affirmative vote of the holders of two-thirds (66 2/3%) of the outstanding
shares of Chilton County Common Stock is the only shareholder vote necessary to
approve this Agreement and the transactions contemplated hereby.
(b) Except as disclosed in Section 5.2(b) of the Chilton County
Disclosure Memorandum, neither the execution and delivery of this Agreement by
Chilton County, nor the consummation by Chilton County of the transactions
contemplated hereby, nor compliance by Chilton County with any of the
provisions hereof, will (i) conflict with or result in a breach of any
provision of Chilton County's Federal Stock Charter or Bylaws, or, (ii)
constitute or result in a default under, or result in the creation of any Lien
on any Material Asset of Chilton County under, or require any consent pursuant
to, any Contract or Permit of Chilton County, where such default or Lien, or
any failure to obtain such Consent, is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Chilton County, or, (iii)
subject to receipt of the requisite Consents referred to in Sections 9.1(a),
(b) and (c) of this Agreement, violate any Order or, to its knowledge, any Law
applicable to Chilton County or any of its Material Assets which will have a
Material Adverse Effect on Chilton County.
(c) Other than Consents required from Regulatory Authorities, no
notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by Chilton County of the Merger and the other
transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Chilton County consists of (i)
15,000,000 shares of Chilton County Common Stock, of which 169,222 shares will
be issued and outstanding as of the date of this Agreement, except for shares
of Chilton County Common Stock which may be issued to employees upon the
exercise of Chilton County Options prior to the Effective Time, and (ii)
5,000,000 preferred shares, none of which are issued and outstanding. All of
the issued and outstanding shares of Chilton County Common Stock are duly and
validly issued and outstanding and are fully paid and nonassessable. None of
the outstanding shares of Chilton County Common Stock have been issued in
violation of any preemptive rights. Chilton County has reserved 17,382 shares
of Chilton County Common Stock for issuance under the Chilton County Stock
Plans, pursuant to which options and warrants to purchase not more than 12,931
shares of Chilton County Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement, there
are no shares of capital stock or other equity securities of Chilton County
outstanding and no outstanding Rights relating to the capital stock of Chilton
County.
5.4 CHILTON COUNTY SUBSIDIARIES. Chilton County has no
subsidiaries.
5.5 FINANCIAL STATEMENTS.
(a) Chilton County has made available to SouthFirst a copy of its
balance sheets and its related consolidated statements of income, consolidated
statements of changes in shareholders' equity and consolidated statements of
cash flows (including related notes and schedules) as of and for the three-year
period ended June 30, 1996.
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(b) Each of the Chilton County Financial Statements for interim
periods ended after the date of this Agreement until the Effective Time, will
be prepared on a consistent basis throughout the periods involved (except as
may be indicated therein or in the notes to such financial statements) and will
present fairly the financial position of Chilton County at the respective dates
and the consolidated results of its operations and cash flows at and for the
periods indicated, except that the unaudited interim financial statements are
subject to normal and recurring year-end adjustments which were not or are not
expected to be Material in amount, and except for the absence of certain
footnote information in the unaudited statements.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 5.6 of the Chilton County Disclosure Memorandum since June 30, 1996,
(i) there have been no events, changes, or occurrences which have had or, to
the Knowledge of Chilton County, are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Chilton County, or (ii) Chilton
County has not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a Material breach or violation of
any of the covenants and agreements of Chilton County provided in Article 7 or
8 of this Agreement, or which action or failure, if taken after the date of
this Agreement, would result in a Material Adverse Effect on Chilton County.
5.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of
Chilton County has been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1993, except to the extent that all such failures to file, taken
together, are not reasonably likely to have a Material Adverse Effect on
Chilton County, and to the Knowledge of Chilton County, all Tax Returns filed
are complete and accurate in all Material respects. All Taxes shown on filed
Tax Returns have been paid. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a
Material Adverse Effect on Chilton County, except as reserved against in the
Chilton County Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.7(a) of the Chilton County Disclosure
Memorandum. All Taxes and other liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid, accrued or
provided for as disclosed in Section 5.7(a) of the Chilton County Disclosure
Memorandum.
(b) Except as disclosed in Section 5.7(b) of the Chilton County
Disclosure Memorandum, Chilton County has not executed an extension or waiver
of any statute of limitations on the assessment or collection of any Material
Tax due that is currently in effect.
(c) Except as disclosed in Section 5.7(c) of the Chilton County
Disclosure Memorandum, adequate provision for any Taxes due or to become due
for Chilton County for the period or periods through and including the date of
the respective Chilton County Financial Statements has been made and is
reflected on such Chilton County Financial Statements.
(d) Deferred Taxes of Chilton County and related valuation
allowance have been adequately provided for in the Chilton County Financial
Statements in accordance with GAAP. Effective July 1, 1991, Chilton County
adopted Financial Accounting Standards Board Statement No. 109 "Accounting for
Income Taxes."
(e) To the Knowledge of Chilton County, Chilton County is in
compliance with, and its records contain all information and documents
(including properly completed Internal Revenue Service Forms W-9) necessary to
comply with, all applicable information reporting and Tax withholding
requirements under federal, state, and local Tax Laws, and such records
identify with specificity all accounts subject to backup
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withholding under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Chilton
County.
(f) There are no Liens with respect to Taxes upon any of the assets
of Chilton County except for loans on the Subsidiaries' books generated in the
normal course of business.
(g) All Material elections with respect to Taxes affecting Chilton
County as of the date of this Agreement have been or will be timely made as set
forth in Section 5.7(g) of the Chilton County Disclosure Memorandum. After the
date hereof, other than as set forth in Section 5.7(g) of the Chilton County
Disclosure Memorandum, no election with respect to Taxes will be made without
the prior written consent of SouthFirst, which consent will not be unreasonably
withheld.
5.8 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan or credit losses (the "Allowance") shown on the balance sheet of Chilton
County included in the most recent Chilton County Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheet of Chilton County included in the Chilton County
Financial Statements as of the dates subsequent thereto will be, as of the
dates thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in
the loan and lease portfolios (including accrued interest receivables) of
Chilton County and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by Chilton County as of the dates
thereof, except where the failure of such Allowance to be so adequate is not
reasonably likely to have a Material Adverse Effect on Chilton County.
5.9 ASSETS. Except as disclosed in Section 5.9 of the Chilton
County Disclosure Memorandum, Chilton County has good and marketable title,
free and clear of all Liens (except for those Liens which are not likely to
have a Material Adverse Effect on Chilton County) to all of its respective
Material Assets, reflected in Chilton County Financial Statements as being
owned by Chilton County as of the date hereof. All Material tangible properties
used in the business of Chilton County are in good condition, reasonable wear
and tear excepted, and are usable in the ordinary course of business consistent
with Chilton County's past practices. All Assets which are Material to Chilton
County's business are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. Chilton County currently
maintains insurance in amounts, scope, and coverage as disclosed in Section 5.9
of the Chilton County Disclosure Memorandum. Chilton County has not received
written notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in Section 5.9 of the Chilton County Disclosure
Memorandum, to the Knowledge of Chilton County there are presently no
occurrences giving rise to a claim under such policies of insurance and no
notices have been given by Chilton County under such policies.
5.10 ENVIRONMENTAL MATTERS. To the Knowledge of Chilton County,
none of the assets of Chilton County (defined for purposes of this Section 5.10
as the real property and tangible personal property owned or leased by Chilton
County as of the date of this Agreement and as of the Effective Time) contain
any hazardous materials (defined as any substance whose nature and/or quantity
or existence, use, manufacture or effect render it subject to federal, state or
local regulation as potentially injurious to public health or welfare
("Hazardous Materials") other than in such quantities which are incidental and
customary for the maintenance of such assets (e.g., cleaning fluids) or not
otherwise reasonably likely, in the aggregate, to have
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a Material Adverse Effect on Chilton County ("Incidental Quantities"). Except
as disclosed in Section 5.10 of the Chilton County Disclosure Memorandum, to
the Knowledge of Chilton County without inquiry, no collateral securing any
loan made by Chilton County, as of the date of this Agreement and as of the
Effective Time, contains any Hazardous Materials, other than in Incidental
Quantities.
5.11 COMPLIANCE WITH LAWS. Chilton County is duly chartered as a
federal stock savings and loan association and is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Savings Association
Insurance Fund. Chilton County has in effect all Permits necessary for it to
own, lease, or operate its Material Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Chilton County, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Chilton County. Except as disclosed in
Section 5.11 of the Chilton County Disclosure Memorandum, Chilton County:
(a) is not in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individual ly or in the
aggregate, a Material Adverse Effect on Chilton County; and
(b) has not received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that Chilton County is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Chilton County, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Chilton County, or (iii) requiring
Chilton County to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of understanding,
or to adopt any Board resolution or similar undertaking, which restricts
Materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
5.12 LABOR RELATIONS. Chilton County is not the subject of any
Litigation asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel it to bargain with any labor organization as to wages or conditions
of employment, nor is there any strike or other labor dispute involving Chilton
County, pending or to the Knowledge of Chilton County threatened, nor is there
any activity involving Chilton County's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.13 EMPLOYEE BENEFIT PLANS.
(a) Chilton County has disclosed in Section 5.13(a) of the Chilton
County Disclosure Memorandum, and has delivered or made available to SouthFirst
prior to the execution of this Agreement copies or summaries in each case of,
all Material pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" (as that term is defined in Section 3(3) of
ERISA), currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by Chilton County for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries are eligible to participate
(collectively, the "Chilton County Benefit Plans"). Any of the Chilton County
Benefit Plans which is an
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"employee pension benefit plan" (as that term is defined in Section 3(2) of
ERISA) is referred to herein as a "Chilton County ERISA Plan." No Chilton
County Benefit Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.13(b) of the Chilton County
Disclosure Memorandum, all Chilton County Benefit Plans are in compliance in
all Material respects with the applicable terms of ERISA, the Internal Revenue
Code, and any other applicable Laws, the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Chilton County.
(c) Except as disclosed in Section 5.13(c) of the Chilton County
Disclosure Memorandum, no Chilton County ERISA Plan which is a "defined benefit
pension plan" (as defined in Section 4140 of the Internal Revenue Code) has any
"unfunded current Liability" (as that term is defined in Section 302(d)(8)(A)
of ERISA) and the present fair market value of the assets of any such plan
exceeds the plan's "benefit liabilities" (as that term is defined in Section
4001(a)(16) of ERISA) when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
(d) Except as disclosed in Section 5.13(d) of the Chilton County
Disclosure Memorandum or otherwise provided by this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of Chilton County, (ii)
increase any benefits otherwise payable under any Chilton County Benefit Plan
or (iii) result in any acceleration of the time of payment or vesting of any
such benefits, where such payment, increase, or acceleration is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Chilton County.
5.14 MATERIAL CONTRACTS. Except as disclosed in Section 5.14 of the
Chilton County Disclosure Memorandum, Chilton County is not a party to or
subject to the following: (i) any employment, severance, termination,
consulting, or retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $25,000, (ii) any Contract relating to
the borrowing of money by Chilton County or the guarantee by Chilton County of
any such obligation (other than Contracts evidencing deposit liabilities,
purchases of federal funds, fully-secured repurchase agreements, and Federal
Reserve Bank and Federal Home Loan Bank advances, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any lease of real property, or (iv) any other Contract involving payments
by Chilton County of $25,000 or more per year which is not terminable by
Chilton County on 90 days or less notice without Liability (together with all
Contracts referred to in Sections 5.9 and 5.13(a) of this Agreement, the
"Chilton County Contracts"). With respect to each of the Chilton County
Contracts and except as disclosed in Section 5.14 of the Chilton County
Disclosure Memorandum: (i) each of the Chilton County Contracts is in full
force and effect; (ii) Chilton County is not in default thereunder, other than
defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Chilton County; (iii) Chilton County
has not repudiated or waived any Material provision of any of such Chilton
County Contracts; and (iv) no other party to any such Contract is, to the
Knowledge of Chilton County, in default in any Material respect, other than
defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Chilton County, or has repudiated or
waived any Material provision thereunder. Except for Federal Home Loan Bank
advances, all of the indebtedness of Chilton County for money borrowed is
prepayable at any time by Chilton County without penalty or premium.
5.15 LEGAL PROCEEDINGS. Except as disclosed in Section 5.15 of the
Chilton County Disclosure Memorandum, there is no Litigation instituted or
pending, or, to the Knowledge of Chilton County, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Chilton County, or
against any Asset, employee
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benefit plan, interest, or right of any of them, that is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Chilton
County, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against Chilton County,
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Chilton County. Section 5.15 of the Chilton County
Disclosure Memorandum includes a summary report of all Litigation as of the
date of this Agreement to which Chilton County is a party and which names
Chilton County as a defendant or cross-defendant.
5.16 REPORTS. Since July 1, 1993, Chilton County has timely filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with (i) the OTS, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Chilton County). As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all Material respects with all
applicable Laws. As of its respective date, each such report and document did
not, in all Material respects, 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.
5.17 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by Chilton County for inclusion in the Registration Statement
to be filed by SouthFirst with the SEC will, when the Registration Statement
becomes effective, be false or misleading with respect to any Material fact, or
omit to state any Material fact necessary to make the statements therein not
misleading. None of the information to be mailed to Chilton County's
shareholders in connection with the Chilton County Shareholders' Meeting, and
any other documents to be filed by Chilton County or any Affiliate thereof with
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Prospectus/Joint Proxy Statement, when first mailed to the shareholders
of Chilton County, be false or misleading with respect to any Material fact, or
omit to state any Material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Prospectus/Joint Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Chilton County Shareholders' Meeting, be
false or misleading with respect to any Material fact, or omit to state any
Material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Chilton County
Shareholders' Meeting.
5.18 ACCOUNTING, TAX AND REGULATORY MATTERS. To the Knowledge of
Chilton County, Chilton County has not taken or agreed to take any action which
would, or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the transactions contemplated hereby, including the
Merger, from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code, or (ii) Materially
impede or delay receipt of any Consents of Regulatory Authorities referred to
in Section 9.1(b) of this Agreement or result in the imposition of a condition
or restriction of the type referred to in the last sentence of such Section.
5.19 FEDERAL STOCK CHARTER PROVISIONS. Chilton County has taken all
action so that the entering into this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and
will not result in any super-majority voting requirement or the grant of any
rights to any Person under the Federal Stock Charter, Bylaws, or other
governing instruments of any Chilton County or restrict or impair the ability
of SouthFirst or any of its Subsidiaries to vote, or otherwise to exercise the
rights of a shareholder with respect to, shares of Chilton County that may be
directly or indirectly acquired or controlled by it.
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5.20 DERIVATIVES CONTRACTS. Except as disclosed in Section 5.20 of
the Chilton County Disclosure Memorandum, Chilton County is not a party to or
has agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor, or collar financial contract, or any other interest
rate or foreign currency protection contract not included on its balance sheet
which is a financial derivative contract (including various combinations
thereof) (each a "Derivatives Contract").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SOUTHFIRST AND FIRST FEDERAL
SouthFirst and First Federal hereby represent and warrant to Chilton
County as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
(a) SouthFirst is a corporation duly organized, validly existing,
and in good standing under the Laws of the State of Delaware, and has the
corporate power and authority to carry on its business as now conducted and to
own, lease, and operate its Material Assets. SouthFirst is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on SouthFirst.
(b) First Federal is a federally chartered stock savings bank
having its principal office in Sylacauga, Alabama, and has the power and
authority to carry on its business as now conducted and to own, lease, and
operate its Material Assets. First Federal is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets
or the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on First Federal. First Federal is a member in good
standing of the Federal Home Loan Bank of Atlanta and all eligible accounts
issued by First Federal are insured by the Savings Association Insurance Fund
to the maximum extent permitted under federal law.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Each of SouthFirst and First Federal has the power and
authority necessary to execute, deliver, and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of SouthFirst and First Federal. This Agreement represents a legal, valid,
and binding obligation of SouthFirst and First Federal, enforceable against
SouthFirst and First Federal in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
SouthFirst or First Federal, nor the consummation by SouthFirst or First
Federal of the transactions contemplated hereby, nor compliance by SouthFirst
or First Federal with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of SouthFirst's Certificate of
Incorporation or Bylaws, or First Federal's Federal Stock Charter or
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Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any of the
SouthFirst Companies or First Federal under any Contract or Permit of any of
the SouthFirst Companies or First Federal, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on SouthFirst or First Federal, or,
(iii) subject to receipt of the requisite Consents referred to in Sections
9.1(a), (b) and (c) of this Agreement, violate any Order or, to its knowledged,
Law applicable to any of the SouthFirst Companies or First Federal or any of
their respective Material Assets which will have a Material Adverse Effect on
SouthFirst or First Federal.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the American Stock Exchange, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on SouthFirst and First Federal,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by SouthFirst and First Federal of the Merger
and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of SouthFirst consists of (i)
2,000,000 shares of SouthFirst Common Stock, of which 821,100 shares will be
issued and outstanding as of the date of this Agreement, except for those
certain shares of SouthFirst Common Stock currently held by SouthFirst as
treasury shares, of which not more than 39,500 shares shall be issued prior to
the Effective Time in connection with certain employment agreements
contemplated by Benefit Financial, and (ii) 500,000 preferred shares, par value
$.01 per share, none of which are issued and outstanding. SouthFirst shall not
otherwise issue or repurchase additional shares of capital stock prior to the
Effective Time. All of the issued and outstanding shares of SouthFirst Common
Stock are, and all of the SouthFirst Common Stock to be issued in exchange for
shares of Chilton County Common Stock upon consummation of the Merger, will be
authorized and reserved for issuance prior to the Effective Time and, when
issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable. None of the
outstanding shares of SouthFirst Common Stock have been, and none of the shares
of SouthFirst Common Stock to be issued in exchange for shares of Chilton
County Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past shareholders of
SouthFirst. SouthFirst has reserved 83,000 shares of SouthFirst Common Stock
for issuance under the SouthFirst Stock Plans, as listed and described in
Section 6.3 of the SouthFirst Disclosure Memorandum, pursuant to which options
to purchase not more than 83,000 shares of SouthFirst Common Stock are
outstanding.
(b) Except as set forth in Section 6.3(a) of this Agreement, there
are no shares of capital stock or other equity securities of SouthFirst
outstanding and no outstanding rights relating to the capital stock of
SouthFirst.
6.4 SOUTHFIRST SUBSIDIARIES. Except as disclosed in Section 6.4 of
the SouthFirst Disclosure Memorandum, the list of Subsidiaries of SouthFirst
filed by SouthFirst with the SouthFirst Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 is a true and complete list of all of the
SouthFirst Subsidiaries as of the date of this Agreement. Except as disclosed
in Section 6.4 of the SouthFirst Disclosure Memorandum, SouthFirst or one of
its Subsidiaries owns all of the issued and outstanding shares of capital stock
of each SouthFirst Subsidiary. No equity securities of any SouthFirst
Subsidiary are or may become required to be issued (other than one of the other
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SouthFirst Companies) by reason of any Rights, and there are no Contracts by
which any SouthFirst Subsidiary is bound to issue (other than to one of the
other SouthFirst Companies) additional shares of its capital stock or Rights or
by which any of the SouthFirst Companies is or may be bound to transfer any
shares of the capital stock of any SouthFirst Subsidiary (other than to one of
the other SouthFirst Companies). There are no Contracts relating to the rights
of any of the SouthFirst Companies to vote or to dispose of any shares of the
capital stock of any SouthFirst Subsidiary. All of the shares of capital stock
of each SouthFirst Subsidiary held by any of the SouthFirst Companies are fully
paid and nonassessable under the applicable corporation Law of the jurisdiction
in which such Subsidiary is incorporated or organized, and are owned and clear
of any Lien. Each SouthFirst Subsidiary is either a bank or a corporation, and
is duly organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Each SouthFirst Subsidiary is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing in each jurisdiction where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SouthFirst and its Subsidiaries taken as a whole.
Each SouthFirst Subsidiary that is a depository institution is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) SouthFirst has filed and made available to Chilton County all
forms, reports, and documents required to be filed by SouthFirst with the SEC
since October 1, 1994 (collectively, the "SouthFirst SEC Reports"). The
SouthFirst SEC Reports (i) at the time filed, complied in all Material respects
with the applicable requirements of the 1933 Act and the 1934 Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such SouthFirst SEC Reports or necessary
in order to make the statements in such SouthFirst SEC Reports, in light of the
circumstances under which they were made, not misleading.
(b) Each of the SouthFirst Financial Statements (including, in each
case, any related notes) contained in the SouthFirst SEC Reports, including any
SouthFirst SEC Reports filed after the date of this Agreement until the
Effective Time, complied and will comply as to form in all Material respects
with the applicable published rules and regulations of the SEC with respect
thereto, was prepared and will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted in Quarterly Reports on Form 10-Q by the SEC), and fairly
presented the consolidated financial position of SouthFirst and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be Material in
amount.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the SouthFirst Financial Statements delivered prior to the date of this
Agreement, since December 31, 1996, (i) there have been no events, changes or
occurrences which have had or, to the Knowledge of SouthFirst, are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst, or (ii) the SouthFirst Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a Material breach or violation of any of the covenants and agreements of
SouthFirst provided in Articles 7 or 8 of this Agreement, or which action or
failure, if taken after the date of this Agreement, would result in a Material
Adverse Effect on SouthFirst.
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6.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of each of
the SouthFirst Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1993, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on SouthFirst, and all Tax Returns filed are complete and
accurate in all Material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes that is reasonably likely to result in a determination
that would have, individually or in the aggregate, a Material Adverse Effect on
the SouthFirst Companies, except as reserved against in the SouthFirst
Financial Statements delivered prior to the date of this Agreement. All Taxes
and other liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) Adequate provision for any Taxes due or to become due for any
of the SouthFirst Companies for the period or periods through and including the
date of the respective SouthFirst Financial Statements has been made and is
reflected on such SouthFirst Financial Statements.
(c) Deferred Taxes of the SouthFirst Companies have been adequately
provided for in accordance with GAAP. Effective October 1, 1993, SouthFirst
adopted Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes."
(d) To the Knowledge of SouthFirst, each of the SouthFirst
Companies is in compliance with, and its records contain all information and
documents (including properly completed Internal Revenue Service Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SouthFirst.
6.8 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan or credit losses (the "Allowance") shown on the consolidated balance sheet
of SouthFirst included in the most recent SouthFirst Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheet of SouthFirst included in the SouthFirst Financial
Statements as of the dates subsequent thereto will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of SouthFirst and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by SouthFirst as of the dates thereof, except where the
failure of such Allowance to be so adequate is not reasonably likely to have a
Material Adverse Effect on SouthFirst.
6.9 ASSETS. Except as disclosed in Section 6.9 of the SouthFirst
Disclosure Memorandum, each of the SouthFirst Companies has good and marketable
title, free and clear of all Liens (except for those Liens which are not likely
to have a Material Adverse Effect on SouthFirst or its Subsidiaries taken as a
whole), to all of their respective Material Assets, reflected in SouthFirst
Financial Statements as being owned by SouthFirst as of the date hereof. All
Material tangible properties used in the businesses of the SouthFirst Companies
are in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with SouthFirst's past practices. All
Assets which are Material to SouthFirst's business on a consolidated basis, are
held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium,
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or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and
effect. The SouthFirst Companies currently maintain insurance in amounts,
scope, and coverage as disclosed in Section 6.9 of the SouthFirst Disclosure
Memorandum. None of the SouthFirst Companies has received written notice from
any insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as disclosed
in Section 6.9 of the SouthFirst Disclosure Memorandum, to the Knowledge of
SouthFirst there are presently no occurrences giving rise to a claim under such
policies of insurance and no notices have been given by any SouthFirst Company
under such policies.
6.10 ENVIRONMENTAL MATTERS.
To the Knowledge of SouthFirst, none of the assets of SouthFirst (defined
for purposes of this Section 6.10 as the real property and tangible personal
property owned or leased by SouthFirst as of the date of this Agreement and as
of the Effective Time) contain any hazardous materials (defined as any
substance whose nature and/or quantity or existence, use, manufacture or effect
render it subject to federal, state or local regulation as potentially
injurious to public health or welfare ("Hazardous Materials") other than in
such quantities which are incidental and customary for the maintenance of such
assets (e.g., cleaning fluids) or not otherwise reasonably likely, in the
aggregate, to have a Material Adverse Effect on SouthFirst ("Incidental
Quantities"). Except as disclosed in Section 6.10 of the SouthFirst Disclosure
Memorandum, to the Knowledge of SouthFirst, without inquiry, no collateral
securing any loan made by SouthFirst, as of the date of this Agreement and as
of the Effective Time, contains any Hazardous Materials, other than in
Incidental Quantities.
6.11 COMPLIANCE WITH LAWS. SouthFirst is duly registered as a
thrift holding company under the applicable regulations of the OTS. Each of
the SouthFirst Companies has in effect all Permits necessary for it to own,
lease, or operate its Material Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst. None of the SouthFirst Companies is presently in Default under or
in violation of any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst. None of the SouthFirst Companies:
(a) is in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SouthFirst; and
(b) has received any notification or communication from
any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any SouthFirst
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SouthFirst, (ii) threatening to revoke any Permits,
the revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SouthFirst, or (iii) requiring any
SouthFirst Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any board resolution or similar undertaking, which
restricts Materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management or the
payment of dividends.
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6.12 LABOR RELATIONS. SouthFirst is not the subject of any
Litigation asserting that it or any other SouthFirst Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other SouthFirst
Company to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any
SouthFirst Company, pending or to the Knowledge of SouthFirst threatened, nor
is there any activity involving any SouthFirst Company's employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
6.13 EMPLOYEE BENEFIT PLANS.
(a) SouthFirst has made available to First Federal prior to the
Effective Time copies in each case of all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by any SouthFirst Company or Affiliate thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "SouthFirst
Benefit Plans"). Any of the SouthFirst Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "SouthFirst ERISA Plan." Each SouthFirst ERISA Plan
which is also a "defined benefit plan" (as defined in Section 4140 of the
Internal Revenue Code) is referred to herein as a "SouthFirst Pension Plan."
No SouthFirst Pension Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(b) All SouthFirst Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SouthFirst.
Each SouthFirst ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable determination
letter from the Internal Revenue Service, and SouthFirst is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. No SouthFirst Company has engaged in a transaction with
respect to any SouthFirst Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would subject any SouthFirst
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA.
(c) No SouthFirst Pension Plan has any "unfunded current
Liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
fair market value of the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no Material change in the
financial position of any SouthFirst Pension Plan, (ii) no change in the
actuarial assumptions with respect to any SouthFirst Pension Plan, and (iii) no
increase in benefits under any SouthFirst Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SouthFirst or
Materially adversely affect the funding status of any such plan. Neither any
SouthFirst Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any
SouthFirst Company, or the single-employer plan of any entity which is
considered one employer with SouthFirst under Section 4001 of ERISA or Section
414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (an "ERISA Affiliate") has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA. No SouthFirst Company has provided, or is required to provide,
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security to a SouthFirst Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any SouthFirst Company with respect to
any ongoing, frozen, or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on SouthFirst. No SouthFirst Company has incurred any
withdrawal Liability with respect to a multiemployer plan under Subtitle B of
Title IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material Adverse
Effect on SouthFirst. 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 SouthFirst Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.13(e) of the SouthFirst
Disclosure Memorandum, no SouthFirst Company has any Liability for retiree
health and life benefits under any of the SouthFirst Benefit Plans and there
are no restrictions on the rights of such SouthFirst Company to amend or
terminate any such Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 6.13(f) of the SouthFirst
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any a director or any employee of any SouthFirst
Company from any SouthFirst Company under any SouthFirst Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any SouthFirst
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any SouthFirst Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the SouthFirst Financial
Statements to the extent required by and in accordance with GAAP.
6.14 MATERIAL CONTRACTS. Except as disclosed in Section 6.14 of the
SouthFirst Disclosure Memorandum or otherwise reflected in the SouthFirst
Financial Statements, none of the SouthFirst Companies, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate
payments to any Person in any calendar year in excess of $25,000, (ii) any
Contract relating to the borrowing of money by any SouthFirst Company or the
guarantee by any SouthFirst Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds,
fully-secured repurchase agreements, and Federal Reserve Bank and Federal Home
Loan Bank advances of depository institution Subsidiaries, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contracts between or among SouthFirst Companies, (iv) any
lease of real property, or (v) any other Contract involving payments by a
SouthFirst Company of $25,000 or more per year which is not terminable by such
SouthFirst Company on 90 days or less notice without Liability (together with
all Contracts referred to in Sections 6.9 and 6.13(a) of this Agreement, the
"SouthFirst Contracts"). None of the SouthFirst Companies is in Default under
any SouthFirst Contract, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst. All of the indebtedness of any SouthFirst Company for money
borrowed is prepayable at any time by such SouthFirst Company without penalty
or premium.
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6.15 LEGAL PROCEEDINGS. Except as disclosed in Section 6.15 of the
SouthFirst Disclosure Memorandum, there is no Litigation instituted or pending,
or, to the Knowledge of SouthFirst, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any SouthFirst Company, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any SouthFirst
Company, that are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on SouthFirst.
6.16 REPORTS. Since January 1, 1990, or the date of organization if
later, each SouthFirst Company has filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
SouthFirst). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied
in all Material respects with all applicable Laws. As of its respective date,
each such report and document did not, in all Material respects, 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.
6.17 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by any of the SouthFirst Companies or any Affiliate thereof
for inclusion in the Registration Statement to be filed by SouthFirst with the
SEC, will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or omit to state any Material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by any of the SouthFirst Companies or
any Affiliate thereof for inclusion in the Prospectus/Joint Proxy Statement to
be mailed to Chilton County's shareholders in connection with the Chilton
County Shareholders' Meeting, and any other documents to be filed by any of the
SouthFirst Companies or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Prospectus/Joint Proxy Statement, when first mailed to the shareholders of
Chilton County, be false or misleading with respect to any Material fact, or
omit to state any Material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Prospectus/Joint Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Chilton County Shareholders' Meeting, be
false or misleading with respect to any Material fact, or omit to state any
Material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meeting.
All documents that any of the SouthFirst Companies or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.
6.18 ACCOUNTING, TAX AND REGULATORY MATTERS. None of the SouthFirst
Companies or any Affiliate thereof has taken or agreed to take any action or
has any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Sections 368 (a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code, or (ii) Materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b)
of this Agreement or result in the imposition of a condition or restriction of
the type referred to in the last sentence of such Section.
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6.19 DERIVATIVES CONTRACTS. Neither SouthFirst nor any of its
Subsidiaries is a party to or has agreed to enter into a Derivatives Contract,
except for those Derivatives Contracts set forth in Section 6.19 of the
SouthFirst Disclosure Memorandum.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF CHILTON COUNTY. Unless the prior
written consent of SouthFirst shall have been obtained, and except as otherwise
expressly contemplated herein, Chilton County shall (i) operate its business
only in the usual, regular, and ordinary course, (ii) use its reasonable best
efforts to preserve intact its business organization and Assets and maintain
its rights and franchises, (iii) use its reasonable efforts to maintain its
current employee relationships, and (iv) take no action which would adversely
affect the ability of any Party to obtain any Consents of Regulatory
Authorities required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) of this Agreement.
7.2 NEGATIVE COVENANTS OF CHILTON COUNTY. Except as described in
Section 7.2 of the Chilton County Disclosure Memorandum, from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Chilton County covenants and agrees that it will not do or agree or
commit to do, any of the following without the prior written consent of the
chief executive officer, chief financial officer of SouthFirst (and, with
respect to clauses (c) and (e), of the Board of Directors of SouthFirst), which
consent shall not be unreasonably withheld:
(a) amend the Federal Stock Charter, Bylaws or other
governing instruments of Chilton County, except as may be necessary to
consummate the Merger; or
(b) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $100,000 except in
the ordinary course of the business of Chilton County consistent with past
practices (which shall include creation of deposit liabilities, purchases of
federal funds, advances from the Federal Reserve Bank or Federal Home Loan
Bank, and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose, or suffer the imposition, on any Asset of
Chilton County of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances, "treasury
tax and loan" accounts established in the ordinary course of business, the
satisfaction of legal requirements in the exercise of trust powers, and Liens
in effect as of the date hereof that are disclosed in the Chilton County
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of Chilton County, or, except as permitted in
Section 8.6 of this Agreement, declare or pay any dividend or make any other
distribution in respect of Chilton County's capital stock; or
(d) except for this Agreement, or pursuant to the
exercise of Chilton County Options granted to Chilton County employees and
outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof and as disclosed in Section 7.2(d) of the Chilton
County Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of Chilton County Common Stock, or any Right to acquire any
such stock; or
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(e) adjust, split, combine or reclassify any capital
stock of Chilton County or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Chilton County Common
Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber
any Asset (other than loan participations) having a book value in excess of
$25,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities of five
years or less, purchase any securities, specifically including but not limited
to, derivative securities as such term is defined by the Regulatory
Authorities, or make any Material investment, either by purchase of stock of
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary course
of business, or (ii) acquisitions of control in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the
employees or officers of Chilton County except in accordance with past practice
disclosed in Section 7.2(g) of the Chilton County Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 7.2(g) of the Chilton County Disclosure
Memorandum; enter into or amend any severance agreements with officers of
Chilton County; grant any Material increase in fees or other increases in
compensation or other benefits to directors of Chilton County except in
accordance with past practice disclosed in Section 7.2(g) of the Chilton County
Disclosure Memorandum; or voluntarily accelerate the vesting of any Chilton
County Options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between
Chilton County and any Person (unless such amendment is required by Law) that
Chilton County does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) adopt any new employee benefit plan of Chilton County
or make any Material change in or to any existing employee benefit plans of
Chilton County other than any such change that is required by Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of Chilton County
for Material money damages or restrictions upon the operations of Chilton
County; or
(l) except in the ordinary course of business, modify,
amend or terminate any Material Contract or waive, release, compromise or
assign any Material rights or claims.
7.3 COVENANTS OF SOUTHFIRST. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
SouthFirst covenants and agrees that it shall (i) continue to conduct its
business and the business of its Subsidiaries in a manner designed in its
reasonable judgment, to enhance the long-term value of the SouthFirst Common
Stock and the business prospects of the SouthFirst Companies; and (ii) take no
action which would (a) Materially adversely affect the ability of any Party to
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obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) of this Agreement, or (b) Materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement; provided, that the foregoing shall not prevent any SouthFirst
Company from discontinuing or disposing of any of its Assets or business if
such action is, in the judgment of SouthFirst, desirable in the conduct of the
business of SouthFirst and its Subsidiaries; and (iii) adjust, split, combine
or reclassify any SouthFirst Capital Stock or issue or authorize the issuance
of any other securities in respect of or in substitution for SouthFirst Common
Stock, except for those certain shares of SouthFirst Common Stock currently
held by SouthFirst as treasury shares, of which not more than 39,500 shares
shall be issued prior to the Effective Time in connection with certain
employment agreements contemplated by Benefit Financial. SouthFirst further
covenants and agrees that it will not, without the prior written consent of the
Chief Executive Officer of Chilton County, which consent shall not be
unreasonably withheld, amend the Certificate of Incorporation or Bylaws of
SouthFirst, in each case in any manner adverse to the holders of shares of
Chilton County Common Stock.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance which (i) is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on it or (ii) would cause or constitute a Material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party shall file all reports required to be
filed by each of them with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed by SouthFirst with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
Material and except for the absence of certain footnote information in the
unaudited financial statements). As of their respective dates, such reports
filed with the SEC will comply in all Material respects with the Securities
Laws 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 in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
7.6 CONTROL OF CHILTON COUNTY BY SOUTHFIRST. Notwithstanding any
other provision of this Agreement, until the Effective Time, the authority to
establish and implement the business policies of Chilton County shall continue
to reside solely in Chilton County's officers and Board of Directors.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROSPECTUS/JOINT PROXY STATEMENT;
SHAREHOLDER APPROVALS.
(a) As soon as practicable after execution of this Agreement (in
no event later than May 1, 1997), SouthFirst shall (i) file the Registration
Statement with the SEC and shall use its best efforts to cause the Registration
Statement, including the Prospectus/Joint Proxy Statement, to become effective
under the 1933 Act, and (ii) take any action required to be taken under
applicable state securities or "blue sky" laws in connection with the issuance
of shares of SouthFirst Common Stock upon consummation of the Merger.
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Chilton County shall promptly furnish all information concerning it and the
holders of its capital stock as SouthFirst may reasonably request in connection
with such action.
(b) Chilton County shall call the Chilton County Shareholders'
Meeting and SouthFirst shall call the SouthFirst Shareholders' Meeting, each to
be held on a date or dates as soon as practicable after the Registration
Statement is declared effective by the SEC.
(c) The Boards of Directors of each of Chilton County and
SouthFirst shall (subject to compliance with their fiduciary duties as advised
by counsel and receipt of their respective fairness opinions pursuant to this
Agreement) (i) recommend to their shareholders approval of this Agreement and
(ii) use their reasonable efforts to obtain such shareholders' approvals.
8.2 APPLICATIONS. SouthFirst shall promptly prepare and file, and
Chilton County shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction
over the transactions contemplated by this Agreement seeking the requisite
Consents necessary to consummate the transactions contemplated by this
Agreement and thereafter use its reasonable best efforts to cause the Merger to
be consummated as expeditiously as possible.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, SouthFirst shall execute and make any applicable
filings with state regulatory authorities in connection with the Closing.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each Party agrees to use, its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under applicable Laws to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including the use
of their respective reasonable best efforts to lift or rescind any Order
adversely affecting its ability to consummate the transactions contemplated
herein and to cause to be satisfied the conditions referred to in Article 9 of
this Agreement; provided, that nothing herein shall preclude either Party from
exercising its rights under this Agreement. Each Party shall use, and
SouthFirst shall cause each of its Subsidiaries to use, its reasonable efforts
to obtain all Permits and Consents of all third parties and Regulatory
Authorities necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.5 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Prior to the Effective Time, SouthFirst, First Federal and
Chilton County will keep one another advised of all Material developments
relevant to its business and to consummation of the Merger and shall permit
each other to make or cause to be made such investigation of their business and
properties and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations.
(b) Except as may be required by applicable Law or legal process,
and except for such disclosure to those of its directors, officers, employees
and representatives as may be appropriate or required in connection with the
transactions contemplated hereby, SouthFirst, First Federal and Chilton County
shall hold in confidence all nonpublic information obtained from each other
(including work papers and other Material derived therefrom) as a result of
this Agreement or in connection with the transactions contemplated hereby
(whether so obtained before or after the execution hereof) until such time as
the Party providing such information consents so its disclosure or such
information becomes otherwise publicly available. Promptly
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following any termination of this Agreement, SouthFirst, First Federal and
Chilton County agree to use their best efforts to cause their respective
directors, officers, employees and representatives to destroy or return to the
providing Party all such nonpublic information (including work papers and other
Material retrieved therefrom), including all copies thereof. SouthFirst, First
Federal and Chilton County shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its businesses, operations, and financial positions
and shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, SouthFirst, First Federal and Chilton County shall
promptly return all documents and copies thereof and all work papers containing
confidential information received from the other Party, except one copy of
certain Materials that can be retained for legal files.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a Material
breach of any representation, warranty, covenant or agreement of the other
Party or which has had or is reasonably likely to have a Material Adverse
Effect on the other Party.
8.6 DIVIDEND PAYMENT. After the date of this Agreement and until
the Effective Time, Chilton County may declare and pay a dividend not to exceed
$.28 per share to holders of Chilton County Common Stock.
8.7 CURRENT INFORMATION. During the period from the date of this
Agreement until the Effective Time or the termination of this Agreement, each
of Chilton County and SouthFirst shall, and shall cause its representatives to,
confer on a regular and frequent basis with representatives of the other. Each
of Chilton County and SouthFirst shall promptly notify the other of (i) any
Material change in its business or operations, (ii) any Material complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any Regulatory Authority, (iii) the institution or the threats
of Material litigation involving such party, or (iv) the occurrence, or
nonoccurrence, of any event or condition the occurrence, or nonoccurrence, of
which would reasonably be expected to cause any of such party's representations
or warranties set forth herein that are qualified as to materiality to become
untrue or inaccurate in any respect as of the Effective Time, and in each case
shall keep the other fully informed with respect thereto.
8.8 OTHER ACTIONS. No Party shall take any action, except in
every case as may be required by applicable Law, that would or is intended to
result in (i) any of its representations and warranties set forth in this
Agreement that are qualified as to materiality being or becoming untrue, (ii)
any of such representations and warranties that are not so qualified becoming
untrue in any Material manner having a Material Adverse Effect, (iii) any of
the conditions set forth in this Agreement not being satisfied or in a
violation of any provision of this Agreement, or (iv) adversely affecting the
ability of any of them to obtain any of the Consents or Permits from the
Regulatory Authorities (unless such action is required by sound banking
practice).
8.9 PRESS RELEASES. Prior to the Effective Time, Chilton County
and SouthFirst shall consult with each other as to the form and substance of
any press release or other public disclosure Materially related to this
Agreement or any other transaction contemplated hereby; provided, that nothing
in this Section 8.9 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
8.10 AFFILIATES. Chilton County has disclosed in Section 8.10 of
the Chilton County Disclosure Memorandum all Persons whom it reasonably
believes are "affiliates" of Chilton County for purposes of Rule 145 under the
1933 Act.
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8.11 EMPLOYEE BENEFITS.
(a) Following the Effective Time, SouthFirst shall provide
generally to officers and employees of Chilton County, employee benefits under
employee benefit plans (other than stock option or other plans involving the
potential issuance of SouthFirst Common Stock), on terms and conditions which
when taken as a whole are no less favorable than those currently provided by
Chilton County or those currently provided by the SouthFirst Companies to their
similarly situated officers and employees; provided, that, for a period of 12
months after the Effective Time, SouthFirst shall provide generally to officers
and employees of Chilton County severance benefits in accordance with the
policies of First Federal. For purposes of eligibility, participation and
vesting (but not benefit accrual under any employee benefit plans of SouthFirst
and its subsidiaries other than the Chilton County Benefit Plans) under such
employee benefit plans, and for receiving other employee benefits including,
but not limited to, vacation and sick pay, the service of the employees of
Chilton County prior to the Effective Time shall be treated as service with
First Federal.
(b) Chilton County will terminate Chilton County's Profit Sharing
Plan prior to the Effective Time and employees of Chilton County who are
participants in such Plan and who become employees of SouthFirst or the
Surviving Bank as of the Effective Time may have their account balances
transferred to the 401(k) Plan maintained by First Federal.
8.12 INDEMNIFICATION.
(a) SouthFirst shall, and shall cause the Surviving Bank to,
indemnify, defend and hold harmless the present and former directors, officers,
employees and agents of Chilton County (the "Indemnified Party") against all
Liabilities arising out of actions or omissions occurring at or prior to the
Effective Time (including the actions contemplated by this Agreement) to the
full extent permitted under applicable Law and by the Federal Stock Charter and
Bylaws of Chilton County as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
SouthFirst or the Surviving Bank shall pay expenses in advance of the final
disposition of any such claim to such Indemnified Party to the full extent
permitted by law upon receipt of any undertaking required by Law. Without
limiting the foregoing, in any case in which approval by the Surviving Bank is
required to effectuate any indemnification, SouthFirst shall cause the
Surviving Bank to direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made, at SouthFirst's expense, by
independent counsel mutually agreed upon between SouthFirst and the Indemnified
Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.12, upon learning of any such Liability or
Litigation, shall promptly notify SouthFirst thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) SouthFirst
or the Surviving Bank shall have the right to assume the defense thereof and
SouthFirst shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof except that if
SouthFirst or the Surviving Bank elects not to assume such defense or counsel
for the Indemnified Parties advises that there are substantive issues which
raise conflicts of interest between SouthFirst or the Surviving Bank and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and SouthFirst or the Surviving Bank shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, that SouthFirst shall be obligated pursuant to
this paragraph (c) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction, (ii) the Indemnified Parties will cooperate in the
defense of any such Litigation, and (iii) SouthFirst shall not be liable for
any settlement effected without its prior written consent; and provided further
that the Surviving Bank shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine,
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and such determination shall have become final, that the indemnification of
such Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law.
(c) SouthFirst shall, or shall cause the Surviving Bank to, (and
First Federal shall cooperate prior to the Effective Time in these efforts) to
maintain in effect, for a period of three years after the Effective Time, First
Federal's existing directors' and officers' Liability insurance policy
(provided that SouthFirst may substitute therefor its own or other policies of
at least the same coverage and amounts containing terms and conditions which
are substantially no less advantageous) with respect to claims arising from
facts or events which occurred prior to the Effective Time and covering persons
who are currently covered by such insurance; provided, however, that neither
SouthFirst nor the Surviving Bank shall be obligated to make premium payments
for such three-year period in respect of such policy (or coverage replacing
such policy) which exceed, for the portion related to First Federal's directors
and officers, 200% of the annual premium payments on First Federal's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If
the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, SouthFirst shall maintain the most
advantageous policies of directors' and officers' Liability insurance
obtainable for a premium equal to the Maximum Amount.
(d) If the Surviving Bank or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall
transfer all or substantially all of its assets to any Person, then and in each
case, proper provision shall be made so that the successors and assigns of the
Surviving Bank shall assume the obligations set forth in this Section 8.12.
8.13 NO SOLICITATION.
(a) Chilton County shall not, nor shall it authorize or permit any
officer, director of employee of, or any investment banker, attorney or other
advisor or representative of, Chilton County to (i) solicit or initiate, or
encourage the submission of, any takeover proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Competing Transaction or superior proposal (as hereinafter defined);
provided, however, that, if in the opinion of its Board of Directors, after
consultation with counsel, such failure to act would be inconsistent with its
fiduciary duties to shareholders under applicable law, Chilton County may, in
response to an unsolicited takeover proposal, and subject to compliance with
subparagraph (c) below, (A) furnish information with respect to Chilton County
to any Person pursuant to a confidentiality agreement and (B) participate in
negotiations regarding such takeover proposal. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
immediately preceding sentence by any executive officer of Chilton County or
any investment banker, attorney or other advisor or representative of Chilton
County, whether or not such person is purporting to act on behalf of Chilton
County or otherwise, shall be deemed to be a breach of this Section 8.13 by
Chilton County. For purposes of this Agreement, "takeover proposal" means an
inquiry, proposal or acquisition or purchase of a substantial amount of assets
of Chilton County (other than investors in the ordinary course of business) or
of over 20% of any class of equity securities of Chilton County or any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 20% or more of any class of equity securities of Chilton
County, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving Chilton County other than the transactions contemplated
by this Agreement, or any other transaction the consummation of which would
reasonably be expected to impede, interfere with, prevent or Materially delay
the Merger or which would reasonably be expected to dilute Materially the
benefits to SouthFirst of the transactions contemplated hereby.
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(b) Except as set forth herein, neither the Board of Directors of
Chilton County nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to SouthFirst, the approval
or recommendation of such Board of Directors or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any takeover proposal or (iii) enter into any agreement with respect
to any takeover proposal. Notwithstanding the foregoing, if in the opinion of
the Chilton County Board of Directors, after consultation with counsel, failure
to do so would be inconsistent with its fiduciary duties to Chilton County
shareholders under applicable law, then, prior to the Shareholders' Meeting,
the Chilton County Board of Directors may (subject to the terms of this and the
following sentences) withdraw or modify its approval or recommendation of this
Agreement or the Merger, approve or recommend a superior proposal, or enter
into an agreement with respect to a superior proposal, in each case at any time
after the second business day following SouthFirst's receipt of written notice
(a "Notice of Superior Proposal") advising SouthFirst that the Chilton County
Board of Directors has received a superior proposal, specifying the Material
terms and conditions of such superior proposal and identifying the Person
making such superior proposal; provided that Chilton County shall not enter
into an agreement with respect to a superior proposal unless Chilton County
shall have furnished SouthFirst with written notice no later than 12:00 noon
one day in advance of any date that it intends to enter into such agreement.
In addition, if Chilton County proposes to enter into an agreement with respect
to any takeover proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to SouthFirst the Termination Fee (as
defined in Section 11.2(b)). For purposes of this Agreement, a "superior
proposal" means any bona fide takeover proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of Chilton County Common Stock then outstanding or all or
substantially all of the assets of Chilton County and otherwise on terms which
the Chilton County Board of Directors determines in good faith judgment (based
on the advice of a financial advisor of national reputation) to be more
favorable to its shareholders than the terms of this Agreement.
(c) In addition to the obligations of Chilton County set forth in
paragraph (b) above, Chilton County shall immediately advise SouthFirst orally
and in writing of any request for information or of any takeover proposal, the
Material terms and conditions of such request, takeover proposal or inquiry,
and the identity of the person making any takeover proposal or inquiry.
Chilton County shall keep SouthFirst fully informed of the status and details
(including amendments or proposed amendments) of any such request, takeover
proposal or inquiry.
(d) Nothing contained in this Section 8.13 shall prohibit Chilton
County from making any disclosure to Chilton County's shareholders if, in the
opinion of the Chilton County Board of Directors, after consultation with
counsel, failure to so disclose would be inconsistent with its fiduciary duties
to its shareholders under applicable law; provided that Chilton County does
not, except as permitted by subparagraph (b) above, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger or
approve or recommend, or propose to approve or recommend, a takeover proposal.
8.14 LISTING OF SHARES ON THE AMERICAN STOCK EXCHANGE. SouthFirst
undertakes, prior to the Effective Time, to cause the shares of SouthFirst
Common Stock to be issued pursuant to the Merger to be listed on the American
Stock Exchange.
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.7 of this Agreement:
(a) SHAREHOLDER APPROVALS. The shareholders of Chilton
County, First Federal and SouthFirst shall have approved this Agreement, and
the consummation of the transactions contemplated hereby, including the Merger,
as and to the extent required by Law and the rules and regulations of the
American Stock Exchange.
(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so Materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement been
known, such Party would not, in its reasonable judgment, have entered into this
Agreement.
(c) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger (other
than those referred to in Section 9.1(b) of this Agreement or listed in Section
9.1(c) of the Chilton County Disclosure Memorandum) or for the preventing of
any default under any Contract of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated by
this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective under the 1933 Act, and no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued, and no action, suit, proceeding, or investigation by the SEC to suspend
the effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals under state securities Laws or the 1933 Act or 1934 Act
relating to the issuance or trading of the shares of SouthFirst Common Stock
issuable pursuant to the Merger shall have been received.
(f) TAX MATTERS. Each Party shall have received a
written opinion or opinions from Smith, Gambrell & Russell, LLP, counsel to
SouthFirst, in a form reasonably satisfactory to such Parties (the "Tax
Opinion"), to the effect that (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the
exchange in the Merger of shares of Chilton County Common Stock for SouthFirst
Common Stock will not give rise to gain or loss to the shareholders of Chilton
County with respect to such exchange (except to the extent of any cash
received). In rendering such Tax
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Opinion, such counsel shall be entitled to rely upon representations of
officers of Chilton County and SouthFirst reasonably satisfactory in form and
substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF SOUTHFIRST. The obligations of
SouthFirst to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by SouthFirst pursuant to Section 11.7(a)
of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of
this Section 9.2(a), the accuracy of the representations and warranties of
Chilton County set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as though all
such representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Chilton County set forth in Section 5.3 of this Agreement shall
be true and correct (except for inaccuracies which are de minimus in amount,
i.e., less than $5,000). The representations and warranties of Chilton County
set forth in Sections 5.18, 5.19 and 5.20 of this Agreement shall be true and
correct in all Material respects. There shall not exist inaccuracies in the
representations and warranties of Chilton County set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3, 5.18,
5.19, and 5.20) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Chilton County;
provided that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "Material" or "Material Adverse
Effect" shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of Chilton County to be performed and
complied with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
(c) CERTIFICATES. Chilton County shall have delivered to
SouthFirst (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Section 9.2(a) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Chilton County's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as SouthFirst and its counsel shall request.
(d) PRICE CONSIDERATION. The Average Closing Price
exceeds $15.50.
(e) LOAN LOSS RESERVES. Prior to the Effective Time, the
loan loss reserves of Chilton County shall be not less than $260,000.
(f) SALE OF CERTAIN SECURITIES. Prior to the Effective
Time, Chilton County shall cause to be sold or shall have placed binding and
confirmed orders to sell, as requested by SouthFirst, any of the investment
securities held in the "available for sale" investment portfolio of Chilton
County. Chilton County shall provide to SouthFirst evidence reasonably
satisfactory to SouthFirst that such sales have been effected or binding orders
for sale have been placed and confirmed on or before such date and time.
(g) LOSS ON INVESTMENT SECURITIES. Prior to the
Effective Time, the unrealized loss on investment securities held in the "held
to maturity" investment portfolio of Chilton County shall not exceed $500,000.
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(h) NET WORTH. The GAAP tangible net worth of
Chilton County shall not be less than Four Million Two Hundred Thousand Dollars
($4.2 million), excluding any adjustment for additional loan loss reserves of
Chilton County as determined by Chilton County, prior to the Effective Time, as
necessary to reflect Chilton County's good faith estimate of the
uncollectibility of any loans held by Chilton County, not to exceed Four
Hundred Thousand Dollars ($400,000).
(i) OPINION OF COUNSEL. SouthFirst shall have
received a written opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, P.C., and Capell, Howard, Knabe & Cobbs, P.A., counsel to Chilton
County, dated as of the Effective Time, with respect to such matters and in
such form as shall be agreed upon between such firm and South First.
(j) FAIRNESS OPINION. SouthFirst shall have
received from Trident Financial Corporation a letter, dated not more than five
Business Days prior to the date of the Prospectus/Joint Proxy Statement, to the
effect that, in the opinion of such firm, the Exchange Ratio and the Cash Price
Per Share are fair, from a financial point of view, to the holders of
SouthFirst Common Stock, and such opinion shall not be withdrawn prior to the
SouthFirst Shareholders' meeting.
(k) EMPLOYMENT CONTRACT OF CERTAIN OFFICER OF CHILTON
COUNTY. SouthFirst shall provide Mr. Bobby R. Cook ("Cook"), and Cook shall
enter into, the new First Federal employment contract (attached hereto as
Exhibit 2) in exchange for the cancellation by Cook of his existing Chilton
County employment contract and corresponding change of control and severance
pay agreements.
(l) LIMITATION ON DISSENTING SHAREHOLDERS. The
holders of not more than 10% of all of the issued and outstanding shares of
Chilton County Common Stock shall have filed written notice of intent to demand
payment for their shares and voted against the Merger pursuant to the Dissenter
Provisions.
9.3 CONDITIONS TO OBLIGATIONS OF CHILTON COUNTY. The obligations
of Chilton County to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Chilton County pursuant to Section
11.7(b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of
this Section 9.3(a), the accuracy of the representations and warranties of
SouthFirst set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties of
SouthFirst set forth in Section 6.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimus in amount, i.e., less than
$5,000). The representations and warranties of SouthFirst set forth in Section
6.11 of this Agreement shall be true and correct in all Material respects.
There shall not exist inaccuracies in the representations and warranties of
SouthFirst set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3 and 6.11) such that the aggregate effect
of such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on SouthFirst; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to "Material"
or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of SouthFirst to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all Material respects.
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(c) CERTIFICATES. SouthFirst shall have delivered to
Chilton County (i) a certificate, dated as of the Effective Time and signed on
its behalf by its chief executive officer and its chief financial officer, to
the effect that the conditions of its obligations set forth in Section 9.3(a)
and 9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by SouthFirst's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as First
Federal and its counsel shall request.
(d) FAIRNESS OPINION. Chilton County shall have received
from Professional Bank Services, Inc. a letter, dated not more than five
Business Days prior to the date of the Prospectus/Joint Proxy Statement, to the
effect that, in the opinion of such firm, the Exchange Ratio and the Cash Price
Per Share are fair, from a financial point of view, to the holders of Chilton
County Common Stock, and such opinion shall not be withdrawn prior to the
Chilton County Shareholders' Meeting.
(e) PAYMENT OF CONSIDERATION. SouthFirst shall have
delivered to Exchange Agent the consideration to be paid to holders of the
shares of Chilton County Common Stock pursuant to Sections 3.1 and 3.4 of this
Agreement.
(f) PRICE CONDITION. The Average Closing Price is less
than $10.50.
(g) OPINION OF COUNSEL. Chilton County shall have
received a written opinion of Smith, Gambrell & Russell, LLP, counsel to
SouthFirst, dated as of the Effective Time, with respect to such matters and in
such form as shall be agreed upon between such firm and Chilton County.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Chilton County, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual written consent of SouthFirst and Chilton
County; or
(b) By either SouthFirst or Chilton County if (i) the
Merger shall not have been consummated on or before October 31, 1997 (the
"Termination Date") provided the terminating party shall not have breached in
any material respect its obligations under this Agreement in a manner that
proximately contributed to the failure to consummate the Merger by such date,
(ii) any governmental or regulatory body, the consent of which is a condition
to the obligations of SouthFirst and Chilton County to consummate the
transactions contemplated hereby, shall have determined not to grant its
consent and all appeals of such determination shall have been taken and have
been unsuccessful, or (iii) any court of competent jurisdiction in the United
States or any State shall have issued an order, judgment or decree (other than
a temporary restraining order) restraining, enjoining or otherwise prohibiting
the Merger and such order, judgment or decree shall have become final and
nonappealable.
(c) By SouthFirst:
(i) if any event shall have occurred as a result
of which any condition set forth in Sections
9.1 or 9.2 is no longer capable of being
satisfied; or
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(ii) if there has been a breach by Chilton County
of any representation or warranty contained
in this Agreement which would have or would
be reasonably likely to have a Material
Adverse Effect on the assets, liabilities,
financial condition, results of operations,
business or prospects of Chilton County, or
there has been a Material breach of any of
the covenants or agreements set forth in this
Agreement on the part of Chilton County,
which breach is not curable, or, if curable,
is not cured within 20 days after written
notice of such breach is given by SouthFirst
to Chilton County; or
(iii) if Chilton County (or its Board of Directors)
shall have authorized, recommended, proposed
or publicly announced its intention to enter
into a superior proposal (as defined in
Section 8.13(b)) or a Competing Transaction
(as hereinafter defined) which has not been
consented to in writing by SouthFirst; or
(iv) if the Board of Directors of Chilton County
shall have withdrawn or materially modified
its authorization, approval or recommendation
to the holders of Chilton County Common Stock
with respect to the Merger or this Agreement
in a manner adverse to SouthFirst, unless the
fairness opinion pursuant to Section 9.3(d)
shall have been withdrawn or, after receipt
of a fairness opinion pursuant to Section
9.3(d), shall have failed to make the
favorable recommendation required by Section
8.1(c); or
(v) if the Average Closing Price exceeds $15.50.
(d) By Chilton County:
(i) if any event shall have occurred as a result
of which any condition set forth in Sections
9.1 or 9.3 is no longer capable of being
satisfied; or
(ii) if there has been a breach by SouthFirst of
any representation or warranty contained in
this Agreement which would have or would be
reasonably likely to have a Material Adverse
Effect on the assets, liabilities, financial
condition, results of operations, business or
prospects of SouthFirst and its Subsidiaries
taken as a whole, or there has been a
Material breach of any of the covenants or
agreements set forth in this Agreement on the
part of SouthFirst which breach is not
curable or, if curable, is not cured within
20 days after written notice of such breach
is given by Chilton County to SouthFirst; or
(iii) if the Board of Directors of SouthFirst shall
have withdrawn or materially modified its
authorization, approval or recommendation to
the holders of SouthFirst Common Stock with
respect to the Merger or this Agreement in a
manner adverse to Chilton County, unless the
fairness opinion pursuant to Section 9.2(j)
shall have been withdrawn or, after receipt
of a fairness opinion pursuant to Section
9.2(j), shall have failed to make the
favorable recommendation required by Section
8.1(c); or
(iv) if the Average Closing Price is less than
$10.50.
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For purposes of this Agreement, the term "Competing Transaction" means any of
the following involving Chilton County (other than the transactions
contemplated by this Agreement): (1) any merger, consolidation, share
exchange, business combination, or other similar transaction; (2) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 15% or more
of the assets of Chilton County in a single transaction or series of
transactions to the same person, entity or group; or (3) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of all
of the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, such
Party or any of its Subsidiaries (other than the transactions contemplated or
permitted by this Agreement).
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person or (ii) any officer,
director, partner, employer, or direct or indirect owner of any 10% or greater
equity or voting interest of such Person.
"AGGREGATE CASH AMOUNT" shall have the meaning set forth in
Section 3.1(e) hereof.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"ALLOWANCE" shall have the meaning set forth in Sections 5.8
and 6.8 hereof.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"AVERAGE CLOSING PRICE" shall have the meaning set forth in
Section 3.1(d) hereof.
"BENEFIT FINANCIAL" shall have the meaning set forth in
Section 3.2 hereof.
"BUSINESS DAY(S)" shall have the meaning set forth in Section
3.1(d) hereof.
"CASH ELECTION SHARES" shall have the meaning set forth in
Section 3.1(e) hereof.
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"CHILTON COUNTY" shall have the meaning set forth in the
first paragraph hereof.
"CHILTON COUNTY BENEFITS PLANS" shall have the meaning set
forth in Section 5.13(a) hereof.
"CHILTON COUNTY COMMON STOCK" shall mean the $.01 par value
common shares of Chilton County.
"CHILTON COUNTY CONTRACT" shall have the meaning set forth in
Section 5.14 hereof.
"CHILTON COUNTY DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Chilton County Corporation Disclosure Memorandum"
delivered prior to the date of this Agreement to SouthFirst describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed with
respect to one Section shall not be deemed to be disclosed for purposes of any
other Section not specifically referenced with respect thereto.
"CHILTON COUNTY ERISA PLAN" shall have the meaning set forth
in Section 5.13(a) hereof.
"CHILTON COUNTY FINANCIAL STATEMENTS" shall mean (i) the
balance sheets (including related notes and schedules, if any) of Chilton
County as of [the latest reported period], and as of June 30, 1996 and 1995,
and the related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the 6 months ended
[the latest reported period], and for each of the three fiscal years ended June
30, 1996, 1995, and 1994.
"CHILTON COUNTY OPTIONS" shall have the meaning set forth in
Section 3.5 hereof.
"CHILTON COUNTY SHAREHOLDERS' MEETING" shall mean the meeting
of the shareholders of Chilton County to be held pursuant to Section 8.1 of
this Agreement, including any adjournment or adjournments thereof.
"CHILTON COUNTY STOCK PLANS" shall mean the existing stock
Chilton County set forth in Section 3.5 of the Chilton County Disclosure
Memorandum.
"CLOSING" shall mean the closing of the transactions
contemplated hereby, as described in Section 1.2 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"COMPETING TRANSACTION" shall have the meaning set forth in
Section 10.1 hereof.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person.
"CONTRACT" shall mean any written: agreement, commitment,
contract, note, bond, mortgage, indenture, instrument, lease, obligation,
license, plan, of any kind or character, or other written document to which any
Person is a party or that is binding on any Person or its capital stock or
Assets.
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"DEFAULT" shall mean (i) any breach or violation of or default
under any Contract, or (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, or (iii) any
occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right to terminate or
revoke, change the current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any Contract, Order, where,
in any such event, such default is reasonably likely to have a
Material Adverse Effect on a Party.
"DERIVATIVES CONTRACT" shall have the meaning set forth in
Section 5.20 hereof.
"DISSENTER PROVISIONS" shall have the meaning set forth in
Section 3.1(b) hereof.
"EFFECTIVE TIME" shall have the meaning set forth in Section
1.3 hereof.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXCHANGE AGENT" shall mean a bank or trust company selected
by SouthFirst to act as exchange agent to effectuate the delivery of
the Merger consideration to holders of Chilton County Common Stock
pursuant to Section 4.1 hereof.
"EXCHANGE RATIO" shall have the meaning set forth in Section
3.1(d) hereof.
"EXHIBITS" 1 through 2, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and
may be referred to in this Agreement and any other related instrument
or document without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FIRST FEDERAL" shall have the meaning set forth in the first
paragraph hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States consistently applied during the periods involved
applicable to banks or bank holding companies, as the case may be.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 8.13(a) hereof.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall
mean the personal knowledge of the chairman, president, chief
financial officer, chief accounting officer, chief credit officer,
general counsel, any assistant or deputy general counsel, or any
senior or executive vice president of such Person and the knowledge of
any such persons obtained or which would have been obtained from a
reasonable investigation.
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"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those
promulgated, interpreted, or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or
expense (including costs of investigation, collection and defense),
claim, deficiency, guaranty or endorsement of or by any Person (other
than endorsement of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" with respect to any Asset shall mean any conditional
sale agreement, default of title, easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention, or other security
arrangement, or any adverse right or interest, charge, or claim of any
nature whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due
and payable,(ii) for Chilton County or First Federal, pledges to
secure deposits, and (iii) other Liens incurred in the ordinary course
of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, hearing, inquiry,
administrative or other proceeding, or notice by any Person alleging
potential Liability.
"LOAN PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in
which such Party or its Subsidiary holds a security or other interest
(including an interest in a fiduciary capacity) where required by the
context, includes the owner or operator of such property, but only
with respect to such property.
"MATERIAL" shall be determined in light of the facts and
circumstances of the matter in question; provided that any specific
monetary amount stated in this Agreement shall determine materiality
in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change, or occurrence which, individually or together with any other
event, change, or occurrence, has a Material adverse impact on (i) the
financial position, business, or results of operations of such Party
and its Subsidiaries, taken as a whole, or (ii) the ability of such
Party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement,
provided that "Material Adverse Effect" shall not be deemed to include
the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed consent of the other Party in contemplation of the
transactions contemplated hereby, (d) circumstances affecting regional
bank holding companies generally, and (e) the Merger and compliance
with the provisions of this Agreement on the operating performance of
the Parties.
"MERGER" shall mean the merger of Chilton County with and into
First Federal referred to in the Preamble hereof.
"OTS" shall mean the Office of Thrift Supervision.
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"ORDER" shall mean any decree, injunction, judgment, order,
decision or award, ruling, or writ of any federal, state, local, or
foreign or other court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means
the owner or operator of such facility or property, but only with
respect to such facility or property.
"PARTY" shall mean either Chilton County, First Federal or
SouthFirst, and "Parties" shall mean Chilton County, First Federal and
SouthFirst.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person.
"PERSON" shall mean a natural person or any legal, commercial,
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
Liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"PROSPECTUS/JOINT PROXY STATEMENT" shall mean both the
prospectus used by SouthFirst to offer and sell shares of SouthFirst
Common Stock to holders of Chilton County Common Stock and the proxy
statement used by each of Chilton County and SouthFirst to solicit the
approval of their shareholders of the transactions contemplated by
this Agreement.
"REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC
by SouthFirst under the 1933 Act with respect to the shares of
SouthFirst Common Stock to be issued to the shareholders of Chilton
County in connection with the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal
Trade Commission, the United States Department of Justice, the Board
of the Governors of the Federal Reserve System, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the SEC, the American
Stock Exchange and all state regulatory agencies having jurisdiction
over the Parties and their respective Subsidiaries.
"RIGHT(S)" shall mean all calls, commitments, options, rights
to subscribe to, scrip, understandings, warrants, or other binding
obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital
stock of a Person or by which a Person is or any contracts,
commitments, or other arrangements may be bound to issue additional
shares of its capital stock, or options, warrants, rights to purchase
or acquire any additional shares of the capital stock.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents
filed, or required to be filed, by a Party or any of its Subsidiaries
with any Regulatory Authority pursuant to the Securities Laws.
"SEC" shall mean the Securities and Exchange Commission.
39
<PAGE> 45
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Trust Indenture Act of
1939, as amended, and the rules and regulations of any Regulatory
Authority promulgated thereunder.
"SOUTHFIRST" shall have the meaning set forth in the first
paragraph hereof.
"SOUTHFIRST CAPITAL STOCK" shall mean, collectively, the
SouthFirst Common Stock, the SouthFirst preferred stock, and any other
class or series of capital stock of SouthFirst.
"SOUTHFIRST COMMON STOCK" shall mean the $.01 par value
common stock of SouthFirst.
"SOUTHFIRST COMPANIES" shall mean, collectively, SouthFirst
and all SouthFirst Subsidiaries.
"SOUTHFIRST DISCLOSURE MEMORANDUM" shall mean the written
information entitled "SouthFirst Corporation Disclosure Memorandum"
delivered prior to the date of this Agreement to First Federal
describing in reasonable detail the matters contained therein and,
with respect to each disclosure made therein, specifically referencing
each Section of this Agreement under which such disclosure is being
made.
"SOUTHFIRST FINANCIAL STATEMENTS" shall mean (i) the
consolidated statements of condition (including related notes and
schedules, if any) of SouthFirst as of December 31, 1996 and as of
September 31, 1996, 1995 and 1994, and the related statements of
income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the 6 months ended December
31, 1996, and for each of the three years ended September 31, 1995,
1994, and as filed by SouthFirst in SEC Documents, and (ii) the
consolidated statements of condition of SouthFirst (including related
notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to December 31, 1996.
"SOUTHFIRST SEC REPORTS" shall have the meaning set forth in
Section 6.5(a) hereof.
"SOUTHFIRST SHAREHOLDERS' MEETING" shall mean the meeting of
the shareholders of SouthFirst to be held pursuant to Section 8.1 of
this Agreement, including any adjournment or adjournments thereof.
"SOUTHFIRST STOCK PLANS" shall mean existing stock option and
other stock-based compensation plans and warrant instruments of
SouthFirst set forth in Section 6.3(a) of the SouthFirst Disclosure
Memorandum.
"SOUTHFIRST SUBSIDIARIES" shall mean the Subsidiaries of
SouthFirst, which shall include any corporation, bank, savings
association, or other organization acquired as a Subsidiary of
SouthFirst in the future and owned by SouthFirst at the Effective
Time.
"SUBSIDIARIES" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns
or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned directly or
indirectly by its parent; provided, there shall not be included any
such entity acquired through foreclosure or any such entity the equity
securities of which are owned or controlled in a fiduciary capacity.
40
<PAGE> 46
"SURVIVING BANK" shall mean First Federal as the surviving
savings association resulting from the Merger.
"TAX OPINION" shall have the meaning set forth in Section
9.1(f) hereof.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including any return of an
affiliated or combined or unitary group that includes a Party or
Subsidiaries of SouthFirst.
"TAX(ES)" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental
fee of any kind whatsoever, imposed or required to be withheld by the
United States or any state, local, foreign government or subdivision
or agency thereof, including any interest, penalties or additions
thereto.
"TAXABLE PERIOD" shall mean any period prescribed by any
governmental authority, including the United States or any state,
local, foreign government or subdivision or agency thereof for which a
Tax Return is required to be filed or Tax is required to be paid.
"TERMINATION FEE" shall have the meaning set forth in Section
11.2(b) hereof.
"THRESHOLD CASH AMOUNT" shall have the meaning set forth in
Section 3.1(e) hereof.
"THRESHOLD STOCK AMOUNT" shall have the meaning set forth in
Section 3.1(e) hereof.
"TOTAL MERGER CONSIDERATION" shall equal the sum of (1)(a) the
Cash Price Per Share divided by the sum of the Cash Price Per Share
and the Stock Price Per Share, (b) multiplied by the product of the
Chilton County Options multiplied by 2/3 (the "Fully Diluted Share
Equivalents"), (c) multiplied by the Stock Price Per Share and
(2)(a)the Stock Price Per Share divided by the sum of the Cash Price
Per Share and the Stock Price Per Share, (b) multiplied by the Fully
Diluted Share Equivalents, (c) multiplied by the Cash Price Per Share.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total Cash Price Fully- Stock Price Fully-
---------- Diluted Stock ----------- Diluted Cash
Merger = Cash + Stock X Share X Price + Cash + Stock X Share X Price
Consideration Price Price Equivalents Price Price Equivalents
</TABLE>
(b) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
41
<PAGE> 47
11.2 FEES AND EXPENSES.
(a) Except as otherwise provided in this Section 11.2, each of
SouthFirst and Chilton County shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration, and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of SouthFirst
and Chilton County shall bear and pay one-half ( 1/2) of the printing costs
incurred in connection with the printing of the Prospectus/Joint Proxy
Statement.
(b) Chilton County acknowledges that SouthFirst has spent, and
will be required to spend, substantial time and effort in examining the
business, properties, affairs, financial condition and prospects of Chilton
County, has incurred, and will continue to incur, substantial fees and expenses
in connection with such examination, the preparation of this Agreement and the
accomplishment of the transactions contemplated hereunder, and will be unable
to evaluate and, possibly, make investments in or acquire other entities due to
the limited number of personnel available for such purpose and the constraints
of time. Therefore, to induce SouthFirst to enter this Agreement,
(i) If SouthFirst terminates this Agreement
pursuant to:
(a) Section 10.1(c)(i) or (c)(ii) by reason of
the failure to meet any condition contained
in Section 9.2(a), which was not previously
waived by SouthFirst or (b) due to Chilton
County's knowing and intentional
misrepresentation or knowing and intentional
breach of warranty or breach of any covenant
or agreement and at the time of such knowing
and intentional misrepresentation or breach,
Chilton County, had or had previously had
between the date hereof and such time,
directly or indirectly, through any officer,
director, employee, agent, investment banker,
financial consultant, attorney, accountant or
other representative of Chilton County,
verbal or written contact, dialogue or
discussions with any third party regarding a
Competing Transaction;
(b) Section 10.1(c)(iv);
(c) Section 10.1(c)(iii) and within nine months
from the Termination Date a superior proposal
(as defined in Section 8.13(b)) or a
Competing Transaction is consummated or
Chilton County shall have entered into an
agreement which if consummated would
constitute a Competing Transaction; or
(ii) If Chilton County terminates this Agreement pursuant
to Section 10.1(d) because this Agreement did not
receive the requisite vote of the holders of Chilton
County Common Stock and within nine months from the
Termination Date a superior proposal (as defined in
Section 8.13(b)) or a Competing Transaction is
consummated or Chilton County shall have entered into
an agreement which if consummated would constitute a
Competing Transaction;
then Chilton County shall pay to SouthFirst a fee in the
amount of $270,000 in addition to all reasonable out-of-pocket
expenses and fees (including, without limitation, fees and
expenses payable to all investment banking firms and their
respective agents and counsel, and all fees of counsel,
accountants, experts and consultants to SouthFirst) actually
incurred by SouthFirst or on its behalf in connection with the
Merger and all transactions contemplated by this Agreement
(the "Termination Fee"). Upon payment
42
<PAGE> 48
of the Termination Fee, which shall be considered full and
complete liquidated damages, Chilton County shall have no
further liability to SouthFirst at law or equity. The
Termination Fee shall be payable to SouthFirst notwithstanding
that any action taken by the Board of Directors of Chilton
County which may give rise to the obligation to pay the
Termination Fee may have been taken in accordance with the
fiduciary duties of the Board of Directors. Any payment
required pursuant to this Section 11.2 shall be made as
promptly as practicable, but in no event later than two
Business Days after the date due and shall be made by wire
transfer of immediately available funds to an account
designated by SouthFirst. In the event that SouthFirst is
entitled to the Termination Fee, Chilton County shall also pay
to SouthFirst interest at a simple interest rate per annum
equal to the highest "prime rate" of interest published from
time to time in the "Money Rates" section of the Wall Street
Journal on any amounts that are not paid when due, plus all
costs and expenses in connection with or arising out of the
enforcement of the obligation of Chilton County to pay the
Termination Fee or such interest.
(iii) In the event that SouthFirst terminates this
Agreement pursuant to Section 10.1(c) by reason of
the failure to meet the conditions contained in
Section 9.1(a) or Sections 9.2(a), which were not
previously waived by SouthFirst or (b) due to Chilton
County's knowing or intentional misrepresentation or
knowing and intentional breach of warranty or breach
of any covenant or agreement, and Chilton County is
not obligated to pay the Termination Fee either at
such time or in the future, then Chilton County shall
pay (but not as liquidated damages and Chilton County
shall not be relieved or released from any other
damages or liabilities hereunder) SouthFirst on
demand, in same day funds, all reasonable
out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to all
investment banking firms and their respective agents
and counsel, and all fees of counsel, accountants,
experts and consultants to SouthFirst) actually
incurred by SouthFirst or on its behalf in connection
with the Merger and all transactions contemplated by
this Agreement but in no event more than $300,000;
(iv) In the event that Chilton County terminates this
Agreement pursuant to Section 10.1(d) by reason of
the failure to meet any condition contained in
Section 9.1(a) or Sections 9.3(a), which were not
previously waived by Chilton County or (b) due to
SouthFirst's knowing and intentional
misrepresentation or knowing and intentional breach
of warranty or breach of any covenant or agreement,
then SouthFirst shall pay (but not as liquidated
damages and SouthFirst shall not be relieved or
released from any other damages or liabilities
hereunder) Chilton County on demand, in same day
funds, all reasonable out-of-pocket expenses and fees
(including, without limitation, fees and expenses
payable to all investment banking firms and their
respective agents and counsel, and all fees of
counsel, accountants, experts and consultants of
Chilton County) actually incurred by Chilton County
or on its behalf in connection with the Merger and
all transactions contemplated by this Agreement, but
in no event more than $300,000;
11.3 BROKERS AND FINDERS. Except for Professional Bank Services,
Inc. as to Chilton County and except for Trident Financial Corporation as to
SouthFirst, each of the Parties represents and warrants that neither it nor any
of its officers, directors, employees, or Affiliates has employed any broker or
finder in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim
43
<PAGE> 49
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by Chilton County or SouthFirst,
each of Chilton County and SouthFirst, as the case may be, agrees to indemnify
and hold the other Party harmless of and from any Liability in respect of any
such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement between the Parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement
may be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement has been obtained; provided, that
after any such approval by the holders of shares of Chilton County Common
Stock, there shall be made no amendment that reduces or modifies in any
Material respect the consideration to be received by holders of shares of
Chilton County Common Stock without the further approval of such shareholders.
11.6 OBLIGATIONS OF SOUTHFIRST. Whenever this Agreement requires
SouthFirst (including the Surviving Bank) to take any action, such requirement
shall be deemed to include an undertaking by SouthFirst to cause the SouthFirst
Subsidiaries to take such action.
11.7 WAIVERS.
(a) Prior to or at the Effective Time, SouthFirst, acting through
its Board of Directors, chief executive officer, president or other authorized
officer, shall have the right to waive any default in the performance of any
term of this Agreement by Chilton County, to waive or extend the time for the
compliance or fulfillment by Chilton County of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of SouthFirst under this Agreement, except any condition which,
if not satisfied, would result in the violation of any Law. No such waiver
shall be effective unless in writing signed by a duly authorized officer of
SouthFirst.
(b) Prior to or at the Effective Time, Chilton County, acting
through its Board of Directors, chief executive officer, president or other
authorized officer, shall have the right to waive any default in the
performance of any term of this Agreement by SouthFirst, to waive or extend the
time for the compliance or fulfillment by SouthFirst of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Chilton County under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Chilton County.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained
in this Agreement in one or more instances shall be deemed to be or construed
as a further or continuing waiver of such condition or breach or a waiver of
any other condition or of the breach of any other term of this Agreement.
44
<PAGE> 50
11.8 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the Parties and their respective successors and assigns.
11.9 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre- paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
Chilton County: 102 5th Street North
Clanton, Alabama 35046
Telecopy Number: 205-755-3960
Attention: Bobby R. Cook
President and Chief
Executive Officer
Copy to Counsel Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, P.C.
601 Pennsylvania Avenue, N.W.
North Building - Suite 750
Washington, D.C. 20004-2612
Telecopy Number: 202-393-0796
Attention: Edward B. Crosland, Jr.
Capell, Howard, Knabe & Cobbs, P.A.
57 Adams Avenue
Montgomery, Alabama 36102
Telecopy Number: 334-265-7454
Attention: James H. McLemore
SouthFirst 126 North Norton Avenue
and First Federal: Sylacauga, Alabama 35150
Telecopy Number: 205-245-6341
Attention: Donald C. Stroup
President and Chief Executive
Officer
Copy to: Joe K. McArthur, Vice
President and Chief
Financial Officer
Copy to Counsel: Smith, Gambrell & Russell, LLP
3343 Peachtree Road, NE
Suite 1800
Atlanta, Georgia 30326
Telecopy Number: 404-264-2652
Attention: W. Thomas King
45
<PAGE> 51
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.13 SURVIVAL. The respective representations, warranties,
obligations, covenants and agreements of the Parties shall not survive the
Effective Time or the termination and abandonment of this Agreement, except
that (i) Articles Two, Three and Eleven and Sections 8.5(b), 8.11, 8.12 and
9.1(f) of this Agreement shall survive the Effective Time; and (ii) Sections
8.5(b), 8.13, 10.1, 11.2, 11.13 and 11.14 shall survive the termination and
abandonment of this Agreement; provided, however, that the foregoing shall not
relieve any Party for liability for fraud, deception or intentional
misrepresentation.
11.14 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.15 GOVERNING LAW. This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance with the laws of
Alabama without taking into account a provision regarding choice of law, except
to the extent certain matters may be governed by federal law by reason of
preemption.
11.16 LIQUIDATION ACCOUNT. Upon consummation of the Merger, the
liquidation account for the benefit of certain savings account holders of
Chilton County shall be assumed and maintained by the Surviving Bank pursuant
to applicable rules and regulations of the OTS, and such account holders shall
have no further right, title or interest in the Chilton County liquidation
account.
46
<PAGE> 52
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
SOUTHFIRST BANCSHARES, INC.
By: /s/ Paul A. Brown
------------------------------------
Name: Paul A. Brown
Title: Chairman
By: /s/ Donald C. Stroup
------------------------------------
Name: Donald C. Stroup
Title: President and Chief
Executive Officer
FIRST FEDERAL OF THE SOUTH
By: /s/ Paul A. Brown
------------------------------------
Name: Paul A. Brown
Title: Chairman
By: /s/ Donald C. Stroup
------------------------------------
Name: Donald C. Stroup
Title: President and Chief
Executive Officer
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHILTON COUNTY
By: /s/ L. Neal Bice
------------------------------------
Name: L. Neal Bice
Title: Chairman
By: /s/ Bobby R. Cook
------------------------------------
Name: Bobby R. Cook
Title: President and Chief
Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTHFIRST BANCSHARES, INC. FOR THE SIX MONTH PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 3,077
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,739
<INVESTMENTS-CARRYING> 154
<INVESTMENTS-MARKET> 154
<LOANS> 67,025
<ALLOWANCE> 268
<TOTAL-ASSETS> 92,910
<DEPOSITS> 63,817
<SHORT-TERM> 7,367
<LIABILITIES-OTHER> 2,022
<LONG-TERM> 5,690
0
0
<COMMON> 0
<OTHER-SE> 12,988
<TOTAL-LIABILITIES-AND-EQUITY> 92,910
<INTEREST-LOAN> 2,750
<INTEREST-INVEST> 716
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,466
<INTEREST-DEPOSIT> 1,429
<INTEREST-EXPENSE> 1,849
<INTEREST-INCOME-NET> 1,617
<LOAN-LOSSES> 18
<SECURITIES-GAINS> (37)
<EXPENSE-OTHER> 1,541
<INCOME-PRETAX> 410
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 8.02
<LOANS-NON> 309
<LOANS-PAST> 130
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 251
<CHARGE-OFFS> 17
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 268
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
