Exhibit 2.1 - Agreement and Plan of Reorganization and Merger dated as of March 7, 2005 by and among Summit Financial Corporation, Summit National Bank, and First Citizens Bank and Trust Company, Inc., and joined in by First Citizens Bancorporation, Inc

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THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the “Agreement”) is entered into as of the 7th day of March, 2005, by and between FIRST CITIZENS BANK AND TRUST COMPANY, INC. (“FCB”), SUMMIT FINANCIAL CORPORATION (“SFC”), and SUMMIT NATIONAL BANK (“SNB”), and is being joined in by FIRST CITIZENS BANCORPORATION, INC. (“Bancorp”) for purposes of its agreement to the terms hereof.

 

WHEREAS, FCB is a South Carolina bank with its principal office and place of business located in Columbia, South Carolina, and is a wholly-owned bank subsidiary of First Citizens Bancorporation, Inc. (“Bancorp”), a South Carolina business corporation which also has its principal office and place of business in Columbia, South Carolina; and,

 

WHEREAS, Bancorp is a South Carolina business corporation with its principal office and place of business located in Columbia, South Carolina, is the owner of all the issued and outstanding shares of common stock of FCB and is a financial holding company registered as such with the Board of Governors of the Federal Reserve System; and,

 

WHEREAS, SFC is a South Carolina business corporation with its principal office and place of business located in Greenville, South Carolina, and, by virtue of its being the owner of all the issued and outstanding shares of common stock of SNB and Freedom Finance, Inc. (“FFI”), is a financial holding company registered as such with the Board of Governors of the Federal Reserve System; and,

 

WHEREAS, SNB is a national banking association with its principal office and place of business located in Greenville, South Carolina, and is a wholly-owned subsidiary of SFC and the owner of all the issued and outstanding shares of common stock of Summit Investment Services, Inc. (“SIS”), a South Carolina business corporation which has its principal office and place of business in Greenville, South Carolina; and,

 

WHEREAS, FCB, SFC and SNB have agreed that it is in their mutual best interests and in the best interests of their respective shareholders for SFC and SNB to be merged with and into FCB in the manner and upon the terms and conditions contained in this Agreement and the Plan of Merger attached as an exhibit hereto; and,

 

WHEREAS, to effectuate the foregoing, FCB, SFC and SNB desire to adopt this Agreement and Plan of Reorganization; and,

WHEREAS, FCB’s and Bancorp’s Boards of Directors have approved this Agreement, and Bancorp has approved this Agreement in its capacity as FCB’s sole shareholder and desires to join in the execution of this Agreement for purposes of evidencing its approval of the transactions described herein and its agreement to the terms hereof; and,

 

WHEREAS, SNB’s and SFC’s Boards of Directors have approved this Agreement, and SFC’s Board of Directors has approved this Agreement in its capacity as SNB’s sole shareholder.

 

NOW, THEREFORE, in consideration of the premises, the mutual benefits to be derived from this Agreement, and the representations, warranties, conditions, covenants and promises herein contained, and subject to the terms and conditions hereof, FCB, Bancorp, SFC and SNB hereby adopt and make this Agreement and mutually agree as provided below.

 

 

As used in this Agreement, certain of the capitalized terms used throughout this Agreement are listed below with their meanings as used herein.

 

1.01 Best Knowledge. The term “Best Knowledge of SFC” or “Knowledge,” when used with reference to facts or information known by SFC, SNB, SIS or FFI, refers to facts or information of which J. Randolph Potter, James B. Schwiers, James G. Bagnal III, Blaise B. Bettendorf, James G. Gulledge, Jr., J. Stephen Rush and William E. Covington, Jr. are consciously aware or of which they should have become consciously aware in the ordinary course of business and the performance of their management duties.

 

The term “Best Knowledge of FCB” or “Knowledge,” when used with reference to certain facts or information known by FCB or Bancorp, refers to facts or information of which executive officers of FCB or Bancorp are consciously aware or of which they should have become consciously aware in the ordinary course of business and the performance of their management duties.

 

1.02. Dissenters’ Rights.  The term “Dissenters’ Rights” means the right to dissent from the Merger and receive cash under and in the manner described in Chapter 13 of the South Carolina Business Corporation Act of 1988, as amended.

 

1.03. Effective Time.  The term Effective Time means the date and time at which the Merger shall become effective as specified in Articles of Merger executed by FCB and filed by it with the South Carolina Secretary of State in accordance with applicable law in order to effectuate the Merger of SFC and SNB into FCB.

 

1.04. Environmental Laws.  The term “Environmental Laws” means (a) all federal, state and local statutes, regulations and ordinances, (b) all common law, and (c) all orders, decrees, and similar provisions having the force or effect of law and to which SFC, SNB, SIS or FFI is subject, which, in the case of any of the above, concern or relate to pollution or protection of the environment; standards of conduct and bases of obligations or liability relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control or clean-up of any “Hazardous Substances” (as defined in subparagraph 1.11 below); public or worker health and safety; wetlands protection, drainage or stormwater management; noise; odor; or indoor air pollution.

 

1.05. FCB Material Adverse Change.  The term “FCB Material Adverse Change” means a material adverse change in or affecting FCB and Bancorp considered as one entity, in Bancorp’s

consolidated financial condition or results of operations, in Bancorp’s businesses, investments, Loan portfolio or operations, or in the ability of FCB or Bancorp to consummate the transactions described herein, but shall not include any change resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by any of the SFC Companies or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of FCB or Bancorp, (c) compliance by FCB or Bancorp with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

 

1.06. FCB Material Adverse Effect.  The term “FCB Material Adverse Effect” means a material adverse effect on FCB and Bancorp considered as one entity, on Bancorp’s consolidated financial condition or results of operations, on Bancorp’s or FCB’s business, or on the ability of FCB and Bancorp to consummate the transactions described herein or to carry on its business as presently conducted, or on FCB’s ability to conduct SNB’s business following the Merger, but shall not include any effect resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by any of the SFC Companies or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of FCB or Bancorp, (c) compliance by FCB or Bancorp with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

 

1.07. FDIC.  The term “FDIC” means the Federal Deposit Insurance Corporation.

 

1.08. FFI Stock.  The term “FFI Stock” means the outstanding $1.00 par value common stock of FFI.

 

1.09. FRB.  The term “FRB” means, collectively, the Federal Reserve Board and the Federal Reserve Bank of Richmond.

 

1.10. GAAP.  The term “GAAP” means accounting principles generally accepted in the United States.

 

1.11. Hazardous Substance.  The term “Hazardous Substance” means any materials, substances, wastes, chemical substances, or mixtures presently listed, defined, designated, classified or otherwise regulated as hazardous, toxic, or dangerous under any Environmental Laws, whether by type or quantity, including without limitation pesticides, pollutants, contaminants, toxic chemicals, oil, or other petroleum products or byproducts, asbestos or materials containing (or presumed to contain) asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon, methyl tertiary butyl ether or radioactive material.

 

1.12. Loans.  The term “Loans” means any and all loans, lines of credit, letters of credit or other extensions of credit (including all unfunded commitments to make a Loan or issue or extend credit), and all accounts, notes and other receivables of any of the SFC Companies.

 

1.13. OCC.  The term “OCC” means the Office of the Comptroller of the Currency.

 

1.14. Previously Disclosed.  The terms “Previously Disclosed to FCB” and “Previously Disclosed to SFC” shall mean the disclosure of information by SFC and SNB to FCB and Bancorp, or by FCB and Bancorp to SFC, respectively, as of the last day of the calendar month immediately preceding the date of this Agreement or as of such other date as is specified herein, in the manner described in Paragraph 11.05 of this Agreement.

 

1.15. Regulatory Authorities.  The term “Regulatory Authorities” includes each and every federal, state or local governmental, regulatory, or judicial authority having jurisdiction over SFC, SNB,

SIS, FFI, FCB or Bancorp, or any of their respective business operations, properties or assets, or the transactions described herein.

 

1.16. SEC.  The term “SEC” means the Securities and Exchange Commission.

 

1.17. 1934 Act.  The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

 

1.18. SFC Audited Financial Statements. The term “SFC Audited Financial Statements” means SFC’s audited consolidated statements of financial condition as of December 31, 2004 and 2003, and its audited consolidated statements of income, shareholders’ equity and cash flows for the three years ended December 31, 2004, 2003 and 2002, together with the notes thereto.

 

1.19. SFC Companies.  The term “SFC Companies” refers collectively to SFC, SNB, SIS and FFI.

 

1.20. SFC Material Adverse Change.  The term “SFC Material Adverse Change” means a material adverse change in or affecting SFC, SNB, SIS and FFI considered as one entity, in SFC’s consolidated financial condition or results of operations, in the SFC Companies’ respective businesses, investments, Loan portfolio or operations, or in the ability of SFC or SNB to consummate the transactions described herein or to carry on SNB’s business as presently conducted, or in FCB’s ability to conduct SNB’s business following the Merger, but shall not include any change resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by FCB or Bancorp or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of the SFC Companies, (c) compliance by SFC or SNB with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

 

1.21. SFC Material Adverse Effect.  The term “SFC Material Adverse Effect” means a material adverse effect on SFC, SNB, SIS and FFI considered as one entity, on SFC’s consolidated financial condition or results of operations, on the SFC Companies’ respective businesses, investments, Loan portfolio or operations, or on the ability of SFC or SNB to consummate the transactions described herein or to carry on SNB’s business as presently conducted, or on FCB’s ability to conduct SNB’s business following the Merger, but shall not include any effect resulting from (a) the execution or announcement of this Agreement, (b) any actions taken by FCB or Bancorp or any of their respective affiliates after the date hereof and prior to the Effective Time that relate to, or affect, the businesses of the SFC Companies, (c) compliance by SFC or SNB with the terms of this Agreement, or (d) any reasonable out-of-pocket costs or expenses associated with, relating to or arising from the transactions contemplated by this Agreement (including legal, accounting and financial advisory fees and disbursements).

 

1.22. SFC Real Property.  The term “SFC Real Property” means all real property owned or leased by the SFC Companies, including SNB’s and FFI’s office facilities and all other real estate or foreclosed properties, including improvements thereon.

 

1.23. SFC Stock.  The term “SFC Stock” means the outstanding $1.00 par value common stock of SFC.

 

1.24. SFC Stock Option.  The term “SFC Stock Option” means any and all options to purchase shares of SFC Stock that have been issued prior to the date of this Agreement pursuant to any option plan maintained or provided by SFC or otherwise and that remain outstanding and unexercised on the date of this Agreement.

 

1.25. SIS Stock.  The term “SIS Stock” means the outstanding $1.00 par value common stock of SIS.

1.26. SNB Stock.  The term “SNB Stock” means the outstanding $5.00 par value common stock of SNB.

 

1.27. South Carolina Board.  The term “South Carolina Board” means the South Carolina State Board of Financial Institutions.

 

 

2.01. Nature of Transaction; Plan of Merger.  Subject to the provisions of this Agreement, at the Effective Time SFC and SNB each simultaneously will be merged into and with FCB (the “Merger”) as provided in the plan of merger (the “Plan of Merger”) attached as Exhibit A to this Agreement.

 

2.02. Effect of Merger; Surviving Corporation.  At the Effective Time, and by reason of the Merger, the separate corporate existences of SFC and SNB shall cease while the corporate existence of FCB as the surviving corporation in the Merger shall continue with all of its purposes, objects, rights, privileges, powers and franchises, all of which shall be unaffected and unimpaired by the Merger. Following the Merger, FCB shall continue to operate as a South Carolina bank and will conduct its business at the then legally established branch and main offices of FCB and SNB. The duration of the corporate existence of FCB, as the surviving corporation, shall be perpetual and unlimited.

 

2.03. Assets and Liabilities of SFC and SNB.  At the Effective Time, and by reason of the Merger, and in accordance with applicable law, all of the property, assets and rights of every kind and character of SFC and SNB (including without limitation all real, personal or mixed property, all debts due on whatever account, all other choses in action and every other interest of or belonging to or due to SFC or SNB, whether tangible or intangible) shall be transferred to and vest in FCB, and FCB shall succeed to all the rights, privileges, immunities, powers, purposes and franchises of a public or private nature of SFC and SNB, all without any conveyance, assignment or further act or deed; and FCB shall become responsible for all of the liabilities, duties and obligations of every kind, nature and description of SFC and SNB as of the Effective Time. By virtue of the Merger, SFC’s interest in and ownership of the outstanding shares of FFI Stock, and SNB’s interest in and ownership of the outstanding shares of SIS Stock, shall be transferred to and vest in FCB, and SIS and FFI shall become wholly-owned subsidiaries of FCB.

 

2.04. Conversion and Exchange of Stock.

 

(a) Conversion of SFC Stock.  Except as otherwise provided in this Agreement, at the Effective Time all rights of SFC’s shareholders with respect to all outstanding shares of SFC Stock shall cease to exist and, as consideration for and to effect the Merger, each such outstanding share (not to exceed an aggregate of the 4,525,855 shares outstanding on the date of this Agreement and up to 664,848 shares for which options to purchase SFC Stock have been issued by SFC and could be exercised before the Closing) shall be converted, without any action by SFC, FCB or any SFC shareholder, into the right to receive cash in the amount of $22.00, all in the manner and subject to the limitations described in this Agreement.

 

At the Effective Time, and without any action by FCB, SFC or any SFC shareholder, SFC’s stock transfer books shall be closed and there shall be no further transfers of SFC Stock on its stock transfer books or the registration of any transfer of a certificate evidencing SFC Stock (a “SFC Certificate”) by any holder thereof, and the holders of SFC Certificates shall cease to be, and shall have no further rights as, shareholders of SFC other than as provided in this Agreement. Following the Effective Time, SFC Certificates shall evidence only the right of the registered holders thereof to receive the consideration into which their SFC Stock was converted at the Effective Time as provided in this

Paragraph 2.04(a), or, in the case of SFC Stock held by shareholders who properly shall have exercised Dissenters’ Rights, cash as provided in Paragraph 2.04(e) below.

 

(b) Cancellation of SNB Stock. At the Effective Time, all outstanding shares of SNB Stock shall be cancelled, and no cash or other consideration shall be issued in exchange for or with respect to those shares.

 

(c) Exchange and Payment Procedures; Surrender of Certificates.

 

(i) Prior to the Effective Time, FCB shall designate an agent reasonably acceptable to SFC to act as agent for the holders of the SFC Stock in connection with the Merger (the “Paying Agent”) to receive in trust, the aggregate consideration to which holders of SFC Stock shall become entitled pursuant to Paragraph 2.04(a) (the “Merger Consideration”). SFC and SNB agree that FCB’s own trust department, or the corporate trust department of First-Citizens Bank & Trust Company, Raleigh, North Carolina, each shall be acceptable to them as FCB’s Paying Agent.

 

(ii) At the Effective Time, FCB shall deposit the Merger Consideration with the Paying Agent. The Merger Consideration shall be held in trust for the benefit of the holders of SFC Stock and such cash shall not be used for any other purposes; provided that FCB may direct the Paying Agent to invest such cash, provided that such investments (A) shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations receiving the highest rating from Standard & Poor’s Corporation, or in certificates of deposit of domestic commercial banks with capital exceeding $250,000,000 (collectively, the “Permitted Investments”) or in money market funds which are invested solely in Permitted Investments, and (B) shall have maturities that will not prevent or delay payments to be made pursuant to Paragraph 2.04(a) and this Paragraph 2.04(c). If for any reason (including losses) the funds held by the Paying Agent are inadequate to pay the amounts to which the holders of SFC Stock shall be entitled under Paragraph 2.04(a), Bancorp and FCB shall be liable for the payment thereof.

 

(iii) As promptly as practicable after the Effective Time, FCB and Bancorp shall cause to be mailed to each record holder, as of the Effective Time, whose shares of SFC Stock were converted pursuant to Paragraph 2.04(a) into the right to receive the Merger Consideration, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to a SFC Certificate shall pass, only upon proper delivery of the SFC Certificate to the Paying Agent and shall be in such form and have such other provisions as FCB may reasonably specify) and instructions for effecting the surrender of a SFC Certificate in exchange for the Merger Consideration for the SFC Stock. Upon surrender of a SFC Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by FCB, together with such letter of transmittal duly executed and completed in accordance with the instructions thereto, the holder of such SFC Certificate shall receive promptly in exchange therefor the Merger Consideration for each share of SFC Stock formerly evidenced thereby, and such SFC Certificate shall forthwith be canceled.

 

(iv) At any time following the 12 month anniversary of the Effective Time, FCB shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent, and holders shall be entitled to look to FCB (subject to abandoned property, escheat or other similar laws) only as a general creditor thereof with respect to the Merger Consideration payable upon due surrender of their SFC Certificates without any interest thereon. Notwithstanding the foregoing, neither FCB, Bancorp nor the Paying Agent shall be liable to any holder of a SFC Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

 

(d) Antidilutive Adjustments. If, prior to the Effective Time, SFC shall declare any dividend payable in shares of SFC Stock or shall subdivide, split, reclassify or combine the presently outstanding shares of SFC Stock, then an appropriate and proportionate adjustment shall be made in the

amount of cash into which each share of SFC Stock will be converted at the Effective Time pursuant to this Agreement.

 

(e) Dissenters.  Any shareholder of SFC who properly exercises Dissenters’ Rights shall be entitled to receive payment of the fair value of his or her shares of SFC Stock in the manner and pursuant to the procedures provided in Chapter 13 of the South Carolina Business Corporation Act of 1988. Shares of SFC Stock held by persons who exercise Dissenters’ Rights shall not be converted as described in Paragraph 2.04(a). However, if any shareholder of SFC who exercises Dissenters’ Rights shall fail to perfect those rights, or effectively shall waive or lose such rights, then each of his or her shares of SFC Stock shall be deemed to have been converted into the right to receive cash as of the Effective Time as provided in Paragraph 2.04(a) hereof.

 

(f) Lost Certificates.  In the event that any SFC Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such SFC Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed SFC Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Article II, provided, that the person to whom the Merger Consideration is paid shall, as a condition precedent to the payment thereof, and at the sole discretion of FCB, give FCB a bond in such sum as it may direct or otherwise indemnify FCB and Bancorp in a manner satisfactory to them against any claim that may be made against FCB or Bancorp with respect to shares of SFC Stock represented by the SFC Certificate claimed to have been lost, stolen or destroyed..

 

2.05 Articles of Incorporation, Bylaws and Management.  The Articles of Incorporation and Bylaws of FCB in effect at the Effective Time shall be the Articles of Incorporation and Bylaws of FCB as the surviving corporation in the Merger. The directors of FCB in office at the Effective Time shall constitute the Board of Directors of FCB as the surviving corporation in the Merger and shall continue to hold such offices until removed as provided by law or until the election or appointment of their respective successors. The officers of FCB in office at the Effective Time shall continue to serve in their same positions as officers of FCB as the surviving corporation in the Merger until removed as provided by law or until the election or appointment of their respective successors.

 

2.06. Closing; Effective Time.  The consummation and closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of FCB in Columbia, South Carolina, or at such other place as FCB shall designate, on a date mutually agreeable to FCB and SFC (the “Closing Date”) after the expiration of any and all required waiting periods following the effective date of required approvals of the Merger by governmental or regulatory authorities (but in no event more than five business days following the satisfaction of all conditions to consummation of the Merger as described in Article VIII of this Agreement). At the Closing, FCB, Bancorp, SFC and SNB shall take such actions (including without limitation the delivery of certain closing documents and the execution of Articles of Merger under South Carolina law) as are required in this Agreement and as otherwise shall be required by law to consummate the Merger and cause it to become effective.

 

Subject to the terms and conditions set forth in this Agreement, the Merger shall become effective on the Effective Time specified in Articles of Merger executed by FCB and filed by it with the South Carolina Secretary of State in accordance with applicable law; provided, however, that the Effective Time shall in no event be more than three business days following the Closing Date.

 

 

Except as otherwise specifically described in this Agreement or as Previously Disclosed to FCB, SFC and SNB hereby make the following representations and warranties to FCB.

3.01. Organization; Standing; Power.  SFC is duly organized and incorporated, validly existing and in good standing as a business corporation under the laws of the State of South Carolina and is a registered financial holding company under the Bank Holding Company Act of 1956, as amended.

 

SNB is duly organized, validly existing and in good standing as a national banking association under the laws of the United States of America.

 

SIS and FFI each is duly organized and incorporated, validly existing and in good standing as a business corporation under the laws of the State of South Carolina.

 

Each of the SFC Companies (i) has all requisite power and authority (corporate and other) to own, lease and operate its properties and to carry on its business as it now is being conducted; (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned, leased or operated by it therein, or in which the transaction of its business, makes such qualification necessary, except where failure so to qualify would not have an SFC Material Adverse Effect; and (iii) is not transacting business or operating any properties owned or leased by it in violation of any provision of federal, state or local law or any rule or regulation promulgated thereunder, except where such violation would not result in an SFC Material Adverse Effect.

 

3.02. Capital Stock and Securities.  SFC’s authorized capital stock consists of 20,000,000 shares of SFC Stock, of which 4,525,855 shares are issued and outstanding as of the date of this Agreement and constitute SFC’s only outstanding equity securities. The outstanding shares of SFC Stock are listed on The Nasdaq SmallCap Market.

 

SNB’s authorized capital stock consists of 2,000,000 shares of SNB Stock, of which 850,000 shares are issued and outstanding. All of the SNB Stock is held, beneficially and of record, by SFC, and those shares constitute SNB’s only outstanding equity securities.

 

SIS’s authorized capital stock consists of 100,000 shares of SIS Stock, of which 1,000 shares are issued and outstanding. All of the SIS Stock is held, beneficially and of record, by SNB, and those shares constitute SIS’s only outstanding equity securities.

 

FFI’s authorized capital stock consists of 100,000 shares of FFI Stock, of which 1,000 shares are issued and outstanding. All of the FFI Stock is held, beneficially and of record, by SFC, and those shares constitute FFI’s only outstanding equity securities.

 

Each outstanding share of SFC Stock, SNB Stock, SIS Stock and FFI Stock (i) has been duly authorized and is validly issued and outstanding, and is fully paid and, except with respect to the SNB Stock as provided in 12 USC 55, nonassessable, (ii) has been legally issued pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, or an available exemption from such registration, and in conformity with applicable state securities laws, and (iii) has not been issued in violation of the preemptive rights of any shareholder. The SFC Stock is registered with the SEC under the 1934 Act, and SFC is subject to the registration and reporting requirements of the 1934 Act. The SNB Stock, SIS Stock and FFI Stock are not registered under, and SNB, SIS and FFI are not subject to the registration and reporting requirements of, the 1934 Act.

 

3.03. Principal Shareholders.  To the Best Knowledge of SFC, no person or entity beneficially owns, directly or indirectly, more than 5% of the outstanding shares of SFC Stock.

 

3.04. Subsidiaries.  With the exception of SNB, FFI and SIS, SFC has no subsidiaries, direct or indirect; and, except for equity securities included in its investment portfolio and Previously Disclosed to FCB, SFC does not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

 

With the exception of SIS, SNB has no subsidiaries, direct or indirect, and, except for equity securities included in its investment portfolio and Previously Disclosed to FCB, SNB does not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

 

SIS and FFI have no subsidiaries, direct or indirect; and SIS and FFI do not own any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity.

 

3.05. Convertible Securities, Options, Etc.  None of the SFC Companies have any outstanding (a) securities or other obligations (including debentures or other debt instruments) which are convertible into shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock, or any other securities of any of the SFC Companies, (b) options, warrants, rights, calls or other commitments of any nature which entitle any person to receive or acquire any shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock or any other securities of any of the SFC Companies, or (c) plan, agreement or other arrangement pursuant to which shares of SFC Stock, SNB Stock, SIS Stock or FFI Stock or any other securities of any of the SFC Companies, or options, warrants, rights, calls or other commitments of any nature pertaining to any securities of any of the SFC Companies, have been or may be issued.

 

3.06. Authorization and Validity of Agreement.  This Agreement has been duly and validly approved by SFC’s and SNB’s respective Boards of Directors and by SFC as the sole shareholder of SNB. Subject only to approval of this Agreement by the shareholders of SFC in the manner required by law and required approvals of Regulatory Authorities (as contemplated by Paragraph 7.01), (a) SFC and SNB each has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described in this Agreement, (b) all corporate proceedings and approvals required to authorize SFC and SNB to enter into this Agreement and to perform its obligations and agreements and carry out the transactions described herein have been duly and properly completed or obtained, and (c) this Agreement constitutes the valid and binding agreement of each of SFC and SNB enforceable in accordance with its terms (except to the extent enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect which affect creditors’ rights generally, (ii) legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (iii) general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

 

3.07. Validity of Transactions; Absence of Required Consents or Waivers.  Subject to approval of this Agreement by the shareholders of SFC in the manner required by law and receipt of required approvals of Regulatory Authorities, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by SFC or SNB with any of their respective obligations or agreements contained herein, nor any action or inaction by SFC or SNB required herein, will conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, the Articles of Incorporation or Association, as applicable, or Bylaws of SFC or SNB or, except where the same could not, individually or in the aggregate, reasonably be expected to have an SFC Material Adverse Effect, (a) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, any contract, agreement, lease, mortgage, note, bond, indenture, license, obligation or understanding (oral or written) to which either of them is bound or to which either of them or their respective businesses, capital stock or properties or assets is subject; (b) result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of the properties or assets of any of the SFC Companies; (c) violate any applicable federal or state statute, law, rule or regulation, or any judgment, order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; or (d) result in the acceleration of any obligation or indebtedness of any of the SFC Companies.

 

No further consents, approvals or waivers are required to be obtained from any person or entity in connection with SFC’s or SNB’s execution and delivery of this Agreement, or the performance of their obligations or agreements or the consummation of the transactions described herein, except for required approvals of SFC’s shareholders and of Regulatory Authorities.

 

3.08. SFC Books and Records. The SFC Companies’ respective books of account and business records have been maintained in all material respects in compliance with all applicable legal, regulatory and accounting requirements, and such books and records are complete and reflect accurately in all material respects their respective items of income and expense and all of their respective assets, liabilities and stockholders’ equity. The SFC Companies’ minute books are complete and accurately reflect in all material respects all corporate actions which their respective shareholders and boards of directors, and all committees thereof, have taken during the time periods covered by such minute books.

 

3.09. SFC Reports.  To the Best Knowledge of SFC, (a) since December 31, 1999, each of the SFC Companies has filed all reports, registrations and statements and other filings, together with any amendments required to be made with respect thereto (“Reports”), that it was required to file with any Regulatory Authority; (b) each such Report filed by the SFC Companies complied in all material respects with all the statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which it was filed and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (c) none of the SFC Companies have been notified by a Regulatory Authority that any such Report filed by any of them was deficient in any material respect as to form or content.

 

3.10. SFC Financial Statements.  SFC has Previously Disclosed to FCB a copy of the SFC Audited Financial Statements. The SFC Audited Financial Statements (a) were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated, (b) are in accordance with the SFC Companies’ books and records, and (c) present fairly in all material respects SFC’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified therein. The SFC Audited Financial Statements have been audited by KPMG LLP, which serves as SFC’s independent registered public accounting firm.

 

3.11. SFC Tax Returns and Other Tax Matters.  Since January 1, 1999, (a) each of the SFC Companies has timely filed or caused to be filed all federal, state and local income tax returns and reports which are required by law to have been filed, and, to the Best Knowledge of SFC, all such returns and reports were true, correct and complete in all material respects and contained all material information required to be contained therein; (b) all federal, state and local income, profits, franchise, sales, use, occupation, property, excise, withholding, employment and other taxes (including interest and penalties), charges and assessments attributable to periods ending on or before December 31, 2004, which have become due from or been assessed or levied against any of the SFC Companies or their respective properties have been fully paid or, if not yet due, a reserve or accrual, which is adequate in all material respects for the payment of all such taxes to be paid and the obligation for such unpaid taxes, is reflected on the SFC Audited Financial Statements; (c) none of the SFC Companies have been involved in any audit by or other dispute with the Internal Revenue Service (the “IRS”) or the South Carolina Department of Revenue (the “SCDOR”) or other taxing authority, and none of the SFC Companies have received any notification from the IRS, the SCDOR or other taxing authority of the pendency of any audit or examination in connection with any such tax return or report; (d) none of the SFC Companies has waived or extended the statute of limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax year, the audit of any such tax return or report, or the assessment or collection of any tax.

 

3.12. Absence of Material Adverse Changes or Certain Other Events.

 

(a) Since December 31, 2004, (i) each of the SFC Companies has conducted its business only in the ordinary course, (ii) there has occurred no SFC Material Adverse Change, and (iii) there have occurred no events or developments, and there currently exist no conditions or circumstances, which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in an SFC Material Adverse Change.

 

(b) Since December 31, 2004, and except as described in Paragraph 3.13 below, (i) none of the SFC Companies have incurred any material liability, engaged in any material transaction, or entered into any material agreement, (ii) increased the salaries, compensation or general benefits payable or provided to its employees (with the exception of routine increases in the salaries of employees effected at such times and in such amounts as is consistent with their past practices and salary administration and review policies and procedures in effect prior to December 31, 2004), (iii) suffered any material loss, destruction or damage to any of their properties or assets not reserved for in the SFC Audited Financial Statements, or (iv) made a material acquisition or disposition of any assets or entered into any material contract or lease.

 

3.13. Absence of Undisclosed Liabilities.  None of the SFC Companies have any material liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute, contingent or otherwise, whether due or to become due (including without limitation tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (a) those reflected in the SFC Audited Financial Statements, (b) increases in SNB’s deposit accounts in the ordinary course of its business since December 31, 2004, or (c) unfunded commitments to make, issue or extend Loans in amounts which, either individually or in the aggregate, do not exceed the lesser of amounts which are consistent with SNB’s and FFI’s lending practices prior to the date of this Agreement or the maximum amounts permitted by applicable banking regulations.

 

3.14. Compliance with Existing Obligations.  Each of the SFC Companies has performed in all material respects all obligations required to be performed by it under, and it is not in default in any material respect under, or in violation in any material respect of, the terms and conditions of, its Articles of Incorporation or Association, as applicable, Bylaws or any material contract, agreement, lease, mortgage, note, bond, indenture, license, obligation, understanding or other undertaking (whether oral or written) by which it is bound or to which its business, operations, capital stock, properties or assets are subject.

 

3.15. Litigation and Compliance with Law.

 

(a) There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the Best Knowledge of SFC, any facts or circumstances which reasonably could be expected to result in such), including without limitation any such action by any Regulatory Authority, which are pending or, to the Best Knowledge of SFC, threatened, contemplated or probable of assertion, (i) against any of the SFC Companies or any of their respective businesses or assets, or (ii) to the Best Knowledge of SFC, otherwise relating to or affecting any of the SFC Companies or any of their respective businesses or assets.

 

(b) Each of the SFC Companies has all licenses, permits, orders, authorizations or approvals (“Permits”) of all federal, state, local or foreign governmental or regulatory agencies that are required for the conduct of its business or to own, lease and operate its properties, all such Permits are in full force and effect, no violations have occurred with respect to any such Permits, and no proceeding is pending or, to the Best Knowledge of SFC, threatened or probable of assertion, to suspend, cancel, revoke or limit any Permit, except where the failure to obtain or maintain any such Permits, or the occurrence of any such violations, suspensions, cancellations, revocations or limitations, individually or in the aggregate, could reasonably be expected to result in an SFC Material Adverse Effect.

 

(c) (i) None of the SFC Companies are subject to any supervisory agreement, enforcement order, writ, injunction, capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any Regulatory Authority relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or any other matter; (ii) there are no judgments, orders, stipulations, injunctions, decrees or awards against any of the SFC Companies which limit, restrict, regulate, enjoin or prohibit in any material respect any of their present or past businesses or practices; and (iii) none of the SFC Companies have been notified by any Regulatory Authority or any court that it is contemplating, threatening or requesting the issuance of any such agreement, order, writ, injunction, directive, memorandum, judgment, stipulation, decree or award.

 

(d) To the Best Knowledge of SFC, none of the SFC Companies are in violation or default in any material respect under, and each of them has complied in all material respects with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any Regulatory Authority (including without limitation all provisions of South Carolina law relating to usury, the Consumer Credit Protection Act, and all other federal and state laws and regulations applicable to extensions of credit by SNB and FFI). No person or authority has asserted a claim, and, to the Best Knowledge of SFC, there is no reasonable basis for any claim by any person or authority, for compensation, reimbursement, damages or other penalties or relief for any violations described in this subparagraph (d).

 

(e) To the Best Knowledge of SFC, it has complied and is in compliance in all material respects with the requirements, including all corporate governance requirements, of The Nasdaq SmallCap Market for the continued listing of the SFC Stock.

 

3.16. Real Properties.

 

(a) SFC has Previously Disclosed to FCB a list of all parcels of SFC Real Property owned by one of the SFC Companies. With respect to each such parcel of owned SFC Real Property, the SFC Company owning that parcel has good and marketable fee simple title to that SFC Real Property and owns the same free and clear of all mortgages, liens, leases, encumbrances, title defects and exceptions to title other than (i) the lien of current taxes not yet due and payable, and (ii) such imperfections of title and restrictions, covenants and easements (including utility easements) which do not materially and adversely affect the economic value or marketability of that SFC Real Property or materially detract from, interfere with or restrict the present or future use of that SFC Real Property for the purposes for which it currently is used.

 

(b) SFC has Previously Disclosed to FCB a list of all parcels of SFC Real Property in which one of the SFC Companies has a leasehold interest, together with true and complete copies of the lease agreement pertaining to each such parcel (the “Lease Agreements”). With respect to each such parcel, (i) the SFC Company-lessee of such parcel has unconditionally accepted occupancy of and currently is occupying that property; (ii) the lease term, commencement date, expiration date, renewal terms, and current rent applicable to that parcel is as set forth in the Lease Agreement pertaining to it; (iii) the Lease Agreement pertaining to that parcel is in full force and effect and has not been modified or amended; (iv) the terms and conditions of the Lease Agreement pertaining to that parcel will continue without modification notwithstanding the Merger, and the Merger will not be deemed to be a transfer or assignment in violation of or otherwise to violate the Lease Agreement, to require the approval of the landlord under the Lease Agreement, or to prevent the exercise of or result in the loss of any right or option to renew or extend the Lease Agreement or to purchase that parcel; (v) the SFC Company-lessee of such parcel has performed all of the lessee’s obligations (including the payment of rent) under the Lease Agreement pertaining to that parcel, and no event of default by the lessee exists or has occurred under that Lease Agreement (including without limitation any default that would prevent the exercise of or result in the loss of any right or option to renew or extend the Lease Agreement or to purchase that parcel); and

 

(vi) to the Best Knowledge of SFC, the landlord with respect to that parcel has performed all of the landlord’s obligations under the Lease Agreement pertaining to that parcel, and no event of default by the landlord exists or has occurred under that Lease Agreement.

 

(c) The SFC Real Property complies in all material respects with all applicable federal, state and local laws, regulations, ordinances or orders of any governmental or regulatory authority, including without limitation those relating to zoning, building and use permits, as well as the Americans with Disabilities Act. The parcels of SFC Real Property upon which SNB’s and FFI’s offices are situated, or which are used by SNB and FFI in conjunction with their respective businesses, may, under applicable zoning ordinances, be used for the purposes for which they currently are used as a matter of right rather than as a conditional or nonconforming use.

 

(d) With respect to each parcel of SFC Real Property that currently is used by SNB or FFI as an office, (i) all improvements and fixtures included in or on that SFC Real Property are in satisfactory condition and repair and performing the functions and operations for which they were designed, ordinary wear and tear excepted, and (ii) there does not exist any condition which materially and adversely affects the economic value or marketability of that SFC Real Property or materially detracts from, interferes with or restricts SNB’s or FFI’s present use (or FCB’s use after the Merger) of that SFC Real Property or those improvements and fixtures for the purposes for which they currently are used.

 

3.17. Loans, Accounts, Notes and Other Receivables.

 

(a) All Loans reflected as assets on the SFC Companies’ respective books and records (i) have resulted from bona fide business transactions in the ordinary course of their respective operations, (ii) in all material respects were made in accordance with their respective standard practices and procedures, and (iii) are owned by them, respectively, free and clear of all liens, encumbrances, assignments, participation or repurchase agreements or other exceptions to title or to the ownership or collection rights of any other person or entity.

 

(b) All records of the SFC Companies regarding all outstanding Loans and all other real estate owned, are accurate in all material respects, and, to the Best Knowledge of SFC, each Loan which the SFC Companies’ respective Loan documentation indicates is secured by any real or personal property or property rights (“Loan Collateral”) is secured by valid, perfected and enforceable liens on all such Loan Collateral having the priority described in their records of such Loan.

 

(c) To the Best Knowledge of SFC, each Loan reflected as an asset on the SFC Companies’ books, and each guaranty therefor, is the legal, valid and binding obligation of the obligor or guarantor thereon, and no defense, offset or counterclaim has been asserted with respect to any material Loan or guaranty.

 

(d) SFC has Previously Disclosed to FCB a written listing of (i) each Loan or other asset of any of the SFC Companies which, as of the last day of the calendar year immediately preceding the date of this Agreement, was classified by any Regulatory Authority, or by any of the SFC Companies themselves, as “Loss,” “Doubtful,” “Substandard” or “Special Mention” (or otherwise by words of similar import), or which any of the SFC Companies otherwise have designated as a special asset, a “potential problem Loan,” or for special handling, or placed on any “watch list” because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, (ii) each Loan which, as of the last day of the calendar year immediately preceding the date of this Agreement, was past due more than 30 days as to the payment of principal and/or interest, and (iii) each Loan as to which, to the Best Knowledge of SFC, any obligor thereon (including the borrower or any guarantor) was in default (other than as a result of nonpayment of principal or interest), was the subject of a proceeding in bankruptcy, or has indicated any inability or intention not to repay such Loan in accordance with its terms.

 

(e) To the Best Knowledge of SFC, each of the Loans (with the exception of those Loans Previously Disclosed to FCB pursuant to Paragraph 3.17(d) above) is collectible in the ordinary course of the SFC Companies’ business in an amount which is not less than the amount at which it is carried on their books and records.

 

(f) The SFC Companies’ reserves for possible Loan losses (the “Loan Loss Reserves”) has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of Regulatory Authorities and, in the best judgment of management and the Boards of Directors of the SFC Companies, is reasonable in view of the size and character of the SFC Companies’ Loan portfolios, current economic conditions and other relevant factors and is adequate in all material respects to provide for losses relating to or the risk of loss inherent in the SFC Companies’ Loan portfolios.

 

3.18. Securities Portfolio and Investments.  SFC has Previously Disclosed to FCB a listing of all securities owned, of record or beneficially, by each of the SFC Companies as of the last day of the calendar year immediately preceding the date of this Agreement. All securities owned by each of the SFC Companies are held free and clear of all mortgages, liens, pledges, encumbrances or any other restriction or rights of any other person or entity, whether contractual or statutory (with the exception of customary pledges or sales of securities by SNB in the ordinary course of its business to secure public funds deposits or in connection with “repurchase agreements” entered into by it with its customers), which would materially impair the ability of any of the SFC Companies to dispose freely of any such security and/or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which any of the SFC Companies are a party with respect to the voting of any such securities. With respect to all “repurchase agreements” under which any of the SFC Companies has “purchased” securities under agreement to resell, it has a valid and, to the Best Knowledge of SFC, perfected, first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed to it which is secured by such collateral.

 

Since December 31, 2004, there has been no material deterioration or adverse change in the quality, or any material decrease in the value, of any of the SFC Companies’ securities portfolios as a whole.

 

3.19. Personal Property and Other Assets.  All banking equipment, data processing equipment, vehicles, and other personal property used by each of the SFC Companies and material to the operation of its business are owned by it free and clear of all liens, encumbrances, leases, title defects or exceptions to title. To the Best Knowledge of SFC, all personal property material to the SFC Companies’ respective businesses is in satisfactory operating condition and repair, ordinary wear and tear excepted.

 

3.20. Patents and Trademarks.  To the Best Knowledge of SFC, each of the SFC Companies owns, possesses or has the right to use any and all patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary and other confidential information necessary to conduct its business as now conducted; and, to the Best Knowledge of SFC, none of the SFC Companies have violated, and none of them currently is in conflict with, any patent, license, trademark, trade name, copyright or proprietary right of any other person or entity.

 

3.21. Environmental Matters.

 

(a) SFC has Previously Disclosed to FCB, and provided FCB with copies of, all written reports, correspondence, notices or other information or materials in the SFC Companies’ possession pertaining to environmental surveys or assessments of any of the SFC Real Property and any improvements thereon, the presence of any Hazardous Substance on any of the SFC Real Property, or any violation or alleged violation of Environmental Laws on, affecting or otherwise involving any of the SFC Real Property or involving any of the SFC Companies.

 

(b) To the Best Knowledge of SFC, there has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, emission, discharge, release or threatened release of any Hazardous Substances by any person on, from or relating to any of the SFC Real Property which constitutes a violation of any Environmental Laws, or any removal, clean-up or remediation of any Hazardous Substances from, on or relating to any of the SFC Real Property.

 

(c) None of the SFC Companies have violated any Environmental Laws relating to any of the SFC Real Property and, to the Best Knowledge of SFC, there has been no violation of any Environmental Laws relating to any of the Real Property by any other person or entity for whose liability or obligation with respect to any particular matter or violation any of the SFC Companies are or may become responsible or liable.

 

(d) To the Best Knowledge of SFC, none of the SFC Companies are subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any of the SFC Real Property, by any person or entity.

 

(e) To the Best Knowledge of SFC, no facts, events or conditions relating to any of the SFC Real Property, or the operations of any of the SFC Companies at any of their office locations, will prevent, hinder or limit continued compliance with Environmental Laws or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

 

(f) To the Best Knowledge of SFC, (i) there has been no violation of any Environmental Laws with respect to any Loan Collateral by any person or entity for whose liability or obligation with respect to any particular matter or violation any of the SFC Companies are or may become responsible or liable, (ii) none of the SFC Companies are subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any Loan Collateral, by any person or entity, (iii) there are no facts, events or conditions relating to any Loan Collateral that will give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities pursuant to Environmental Laws; and (iv) there is no Hazardous Substance on, from, under, at or relating to any Loan Collateral in an amount, volume, or concentration sufficient to invoke or require regulation under any Environmental Laws.

 

3.22. Absence of Brokerage or Finders Commissions. Except for SFC’s engagement of Allen C. Ewing & Co. by SFC’s Board of Directors as its financial adviser in connection with the Merger and to provide it with an opinion as to the fairness, from a financial point of view, of the terms of the Merger to SFC’s shareholders, (a) all negotiations relative to this Agreement and the transactions described herein have been carried on by SFC directly (or through its legal counsel) with FCB, and no person or firm has been retained by or has acted on behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, any of the SFC Companies or either of their respective Boards of Directors, as a broker, finder or agent or has performed similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein; and (b) none of the SFC Companies have agreed, and none of them have any obligation, to pay any brokerage fee or commission, or, with the exception of its legal counsel and

 

accountants, any other fee or compensation, to any person or entity in connection with or as a result of the transactions described herein.

 

SFC has Previously Disclosed to FCB the terms of its Board of Directors’ engagement of Allen C. Ewing & Co. (including fees to be paid to that firm by SFC).

 

3.23. Material Contracts.  Other than agreements with customers relating to Loans or other banking services which were made in the ordinary course of their businesses, or as Previously Disclosed to FCB by SFC, none of the SFC Companies are parties to or bound by any agreement (a) involving money or other property in an amount or with an aggregate cumulative value over its full term in excess of $100,000, (b) which is not to be performed in full prior to December 31, 2005, (c) which calls for the provision of goods or services to any of the SFC Companies and cannot be terminated without material penalty upon no more than 30 days notice to the other party thereto, (d) which otherwise is material to the SFC Companies considered as one enterprise and was not entered into in the ordinary course of business, (e) which involves hedging, options or any similar trading activity, or interest rate exchanges or swaps, (f) which commits SNB or FFI to make, issue or extend any Loan other than commitments in the ordinary course of their respective businesses for Loans which do not exceed that amount typically dealt with in the normal course of their respective businesses, (g) which involves the sale of any assets of any of the SFC Companies which are used in and are material to the operation of their respective businesses, (h) which involves any purchase or sale of real property, or which involves the purchase or sale of any other assets in the amount of more than $50,000 in the case of any single transaction or $150,000 in the case of all such transactions, (i) which involves the purchase, sale, issuance, redemption or transfer of any capital stock or other securities of any of the SFC Companies, or (j) with any director or officer of any of the SFC Companies, or any principal shareholder of SFC (including without limitation any consulting agreement.

 

None of the SFC Companies are in default in any material respect, and there has not occurred any event which with the lapse of time or giving of notice or both would constitute such a default, under any contract, lease, insurance policy, commitment or arrangement to which they are parties or by which they or their respective properties are bound or affected or under which they or their property receives benefits, where the consequences of such default would have an SFC Material Adverse Effect.

 

3.24. Employment Matters; Employee Relations.  SFC has Previously Disclosed to FCB a listing of the names, years of credited service and current base salary or wage rates of all employees of the respective SFC Companies’ as of the last day of the calendar month immediately preceding the date of this Agreement. Each of the SFC Companies (a) has in all material respects paid in full to or, to the extent required by GAAP, accrued on behalf of all its respective directors, officers and employees all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services performed by them, and all vacation pay, sick pay, severance pay, overtime pay and other amounts for which it is obligated under applicable law or its existing agreements, benefit plans, policies or practices, and (b) is in compliance with all applicable federal, state and local laws, statutes, rules and regulations with regard to employment and employment practices, terms and conditions, wages and hours and other compensation matters. To the Best Knowledge of SFC, no person has asserted that any of the SFC Companies are liable in any amount for any arrearage in wages or employment taxes or for any penalties for failure to comply with any of the foregoing.

 

There is no action, suit or proceeding by any person pending or, to the Best Knowledge of SFC, threatened, against any of the SFC Companies (or any of their employees), alleging employment discrimination, sexual harassment, wrongful discharge or similar claims involving any of the SFC Companies.

 

None of the SFC Companies are parties to or bound by any collective bargaining agreement with any of their employees, any labor union or any other collective bargaining unit or organization. There is no pending or, to the Best Knowledge of SFC, threatened labor dispute, work

 

stoppage or strike involving any of the SFC Companies and any of their respective employees, or any pending or threatened proceeding in which it is asserted that any of the SFC Companies have committed an unfair labor practice; and to the Best Knowledge of SFC, there is no activity involving the employees of any of the SFC Companies seeking to certify a collective bargaining unit or engaging in any other labor organization activity.

 

3.25. Employment Agreements; Employee Benefit Plans; Other Arrangements.

 

(a) SFC has Previously Disclosed to FCB a true and complete list of all “Plans” maintained by any of the SFC Companies or to which any of them are parties. For purposes of this Agreement, the term “Plans” shall include any and all (i) bonus, incentive compensation, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans maintained or provided by any of the SFC Companies or under which any of them has any obligation to any person; (ii) employment agreements, salary continuation agreements, and severance contracts to which any of the SFC Companies are parties or under which they have any obligation to any person; (iii) medical, dental, health, and life insurance plans maintained or provided by any of the SFC Companies or under which they have any obligation to any person; (iv) vacation, sickness and other leave plans maintained or provided by any of the SFC Companies, (v) disability and death benefit plans maintained or provided by any of the SFC Companies; and (vi) all other employee benefit plans, contracts, or arrangements to which any of the SFC Companies are parties or which are maintained or contributed to by any of them for the benefit of any of their respective current or former employees or directors or any of their beneficiaries.

 

(b) True and complete copies of all Plans, including, but not limited to, any trust instruments and/or insurance contracts, if any, forming a part thereof or applicable to the administration of any such Plan or the assets thereof, and all amendments thereto, have been Previously Disclosed to FCB.

 

(c) Neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, will (i) result in any payment to any person (including without limitation any severance compensation or payment, unemployment compensation, “golden parachute” or “change in control” payment, or otherwise) becoming due under any Plan or agreement to any director, officer, employee or consultant, (ii) increase any benefits otherwise payable under any Plan or agreement, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.

 

(d) Since January 1, 1999, none of the SFC Companies have maintained, sponsored, participated in or contributed to plan (including a multiemployer plan) within the meaning of Section 3(27) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that is or was subject to the provisions of Section 412 of the Internal Revenue Code of 1986, as amended (the “Code”), Title IV of ERISA, or Section 302 of ERISA.

 

(e) Since January 1, 1999, SNB’s Section 401(k) plan (referenced in Paragraph 7.09 below) (the “Retirement Plan”) is the sole Plan that is or has been maintained, participated in or contributed to by the SFC Companies that is (i) an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, and (ii) intended to be qualified under Code Section 401(a). The Retirement Plan has received a favorable determination as to its qualification or is utilizing a prototype plan document and is relying on the prototype plan’s national opinion letter. To the Best Knowledge of SFC, there are no circumstances that are reasonably likely to result in the revocation or denial of the Retirement Plan’s qualified status, or any issues relating to the qualification or exemption of the Retirement Plan that are currently pending before the IRS, the United States Department of Labor, or any court or that are threatened.

 

(f) All reports and returns with respect to the Plans required to be filed with any governmental department, agency, service or other authority, including without limitation Internal Revenue Service Form 5500 (Annual Report), have been properly and timely filed.

 

(g) Each Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA. To the Best Knowledge of SFC, there is no pending or threatened litigation relating to any Plan. To the Best Knowledge of SFC, none of the SFC Companies have engaged in a transaction with respect to any Plan that could subject any of them or a Plan to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

 

(h) All contributions required to be made pursuant to the terms of each of the Plans (including without limitation the Retirement Plan and any other Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) have been timely made.

 

(i) Except as Previously Disclosed to FCB, as of the last day of the most recent plan year ending prior to the date hereof, the current value of assets of each Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) equaled or exceeded the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the applicable Plan’s most recent actuarial valuation). To the Best Knowledge of SFC, there has not been any material adverse change in the financial condition of any such Plan that is a “pension plan” (as defined in Section 3(2) of ERISA) since the last day of the most recent plan year.

 

(j) Except as provided in the terms of the Retirement Plan itself, there are no restrictions on the rights of any of the SFC Companies to terminate any Retirement Plan without incurring any liability thereunder.

 

3.26. Insurance.  SFC has Previously Disclosed to FCB a listing of each blanket bond, liability insurance, property and casualty, workers’ compensation and employer liability, life or other insurance policy in effect on the last day of the calendar month immediately preceding the date of this Agreement, and in which any of the SFC Companies were insured parties or beneficiaries (the “Policies”). The Policies provide coverage in such amounts and against such liabilities, casualties, losses or risks as is customary or reasonable for entities engaged in the businesses of the SFC Companies or as is required by applicable law or regulation; and, in the reasonable opinion of management of SFC and SNB, the insurance coverage provided under the Policies is reasonable and adequate in all respects for the SFC Companies. To the Best Knowledge of SFC, each of the Policies is in full force and effect and is valid and enforceable in accordance with its terms, and each of the SFC Companies has complied in all material respects with requirements (including the giving of required notices) under each such Policy in order to preserve all material rights thereunder with respect to all matters. None of the SFC Companies are in default under the provisions of, have received notice of cancellation or nonrenewal of, or any material premium increase on, or have failed to pay any premium on, any such Policy, and, to the Best Knowledge of SFC, there has not been any material inaccuracy in any application for any Policy. There are no pending claims with respect to any Policy, and, to the Best Knowledge of SFC, there currently are no conditions, and there has occurred no event, that is reasonably likely to form the basis for any such claim.

 

3.27. Insurance of Deposits.  All deposits of SNB are insured by the Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all deposit insurance premiums due from SNB to the FDIC have been paid in full in a timely fashion, SNB has not received any notice that any proceedings to terminate such insurance have been commenced or are contemplated by the FDIC, and, to the Best Knowledge of SFC, no such proceedings are contemplated.

 

3.28. Indemnification Obligations. Except to the extent provided by their respective Articles of Incorporation or Association, as applicable, or Bylaws in effect on the date of this Agreement, or as otherwise required by Chapter 8 of the South Carolina Business Corporation Act of 1988 or the National

 

Bank Act of 1864, as amended, or regulations thereunder, none of the SFC Companies have any obligation to indemnify or hold harmless any of their current or former directors, officers or employees, or any other person, against or from any costs or expenses (including attorneys’ fees), judgments, fines, amounts paid in settlement, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative.

 

3.29. Obstacles to Regulatory Approval. To the Best Knowledge of SFC, there exists no fact or condition (including without limitation SNB’s record of compliance with the Community Reinvestment Act) that may reasonably be expected to prevent or materially impede or delay any of the SFC Companies or FCB from obtaining all approvals of Regulatory Authorities required in order to consummate the transactions described in this Agreement; and, if any such fact or condition becomes known to SFC or SNB, it shall promptly (and in any event within three days after obtaining such Knowledge) give notice of such fact or condition to FCB in the manner provided herein.

 

3.30. Disclosure.  To the Best Knowledge of SFC, no written statement, certificate, schedule, list or other written information furnished by or on behalf of any of the SFC Companies to FCB or Bancorp or their employees or agents in connection with this Agreement and the transactions described herein, when considered as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

 

Except as otherwise specifically described in this Agreement or as Previously Disclosed to SFC, FCB and Bancorp hereby make the following representations and warranties to SFC and SNB. Following Bancorp’s completion of the subordinated debt offering described in Paragraphs 8.02(i) and 8.03(d) below, then FCB’s and Bancorp’s representations in Paragraphs 4.05, 4.06 and 4.07 below shall terminate and be of no further force or effect, effective as of the date of this Agreement.

 

4.01. Organization; Standing; Power.  Each of FCB and Bancorp, (a) is duly organized and incorporated, validly existing and in good standing under the laws of South Carolina, (b) has all requisite power and authority (corporate and other) to own its respective properties and conduct its respective business as it now is being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein, or in which the transaction of its respective business, makes such qualification necessary, except where failure so to qualify would not have an FCB Material Adverse Effect.

 

4.02. Authorization and Validity of Agreement. This Agreement has been duly and validly approved by FCB’s and Bancorp’s Boards of Directors and by Bancorp in its capacity as FCB’s sole shareholder. Subject only to receipt of required approvals of Regulatory Authorities (as contemplated by Paragraph 7.01), (a) each of FCB and Bancorp has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described herein, (b) all corporate proceedings required to be taken to authorize each of FCB and Bancorp to enter into this Agreement and to perform its obligations and agreements and carry out the transactions described herein have been duly and properly taken, and (c) this Agreement constitutes the valid and binding agreement of each of FCB and Bancorp enforceable in accordance with its terms (except to the extent enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect which affect creditors’ rights generally, (ii) legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (iii) general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

 

4.03. Validity of Transactions; Absence of Required Consents or Waivers.  Subject to receipt of required approvals of Regulatory Authorities, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by FCB and Bancorp with any of their respective obligations or agreements contained herein, will conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, FCB’s or Bancorp’s Articles of Incorporation or Bylaws, or, except where the same could not, individually or in the aggregate, reasonably be expected to have an FCB Material Adverse Effect, (a) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, any contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding (oral or written) to which FCB or Bancorp is bound or by which either of them, or their respective businesses, capital stock or any of their respective properties or assets may be affected; (b) result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of FCB’s or Bancorp’s properties or assets; (c) violate any applicable federal or state statute, law, rule or regulation, or any order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; or (d) result in the acceleration of any obligation or indebtedness of FCB or Bancorp.

 

No further consents, approvals or waivers are required to be obtained from any person or entity in connection with FCB’s or Bancorp’s execution and delivery of this Agreement, or the performance of their respective obligations or agreements or the consummation of the transactions described herein, except for required approvals of Regulatory Authorities as described in Paragraph 7.01.

 

4.04. Obstacles to Regulatory Approval. To the Best Knowledge of FCB, no fact or condition (including without limitation FCB’s record of compliance with the Community Reinvestment Act) exists that may reasonably be expected to prevent or materially impede or delay FCB, Bancorp or the SFC Companies from obtaining all approvals of Regulatory Authorities required in order to consummate the transactions described in this Agreement; and, if any such fact or condition becomes known to FCB or Bancorp, it shall promptly (and in any event within three days after obtaining such Knowledge) give notice of such fact or condition to SFC in the manner provided herein.

 

4.05. Bancorp Financial Statements. Bancorp has Previously Disclosed to SFC a copy of Bancorp’s audited financial statements for the years ended December 31, 2003 and 2002 and Bancorp’s unaudited financial statements for the quarter ended September 30, 2004. Following the date of this Agreement, Bancorp promptly will deliver to SFC all other annual or quarterly financial statements of Bancorp contained in its reports filed under the 1934 Act. Bancorp’s audited financial statements and unaudited financial statements (a) were prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated, (b) are in accordance with the Bancorp’s books and records, and (c) present fairly in all material respects Bancorp’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified therein; provided, however, that, to the extent permitted by GAAP and other applicable regulations the unaudited financial statements are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and lack footnotes. Bancorp’s audited financial statements have been audited by Pricewaterhouse Coopers LLP which serves as Bancorp’s independent registered public accounting firm.

 

4.06. Absence of Material Adverse Changes or Certain Other Events. Since September 30, 2004, (a) each of Bancorp and FCB has conducted its business in the ordinary course, (b) there has occurred no FCB Material Adverse Change, and (c) there have occurred no events or developments, and there currently exist no conditions or circumstances, which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in an FCB Material Adverse Effect.

 

4.07. Absence of Undisclosed Liabilities. Bancorp and FCB do not have any material liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute,

 

contingent or otherwise, whether due or to become due (including without limitation tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (a) those reflected in the Bancorp’s unaudited financial statements for the quarter ended September 30, 2004, (b) increases in FCB’s deposit accounts in the ordinary course of its business since September 30, 2004, or (c) unfunded commitments to make, issue or extend Loans in amounts which, either individually or in the aggregate, do not exceed the lesser of amounts which are consistent with FCB’s lending practices prior to the date of this Agreement or the maximum amounts permitted by applicable banking regulations.

 

4.08. Disclosure.  To the Best Knowledge of FCB, no written statement, certificate, schedule, list or written information furnished by or on behalf of FCB or Bancorp to the SFC Companies or their employees or agents in connection with this Agreement, when considered as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.

 

 

5.01. Affirmative Covenants of SFC and SNB.  SFC and SNB each agrees as follows:

 

(a) SFC Shareholders’ Meeting; Proxy Statement; Recommendation. SFC shall cause a meeting of its shareholders (the “SFC Shareholders’ Meeting”) to be duly called and held as soon as practicable after the date of this Agreement for the purpose of voting by SFC’s shareholders on the approval of the Plan of Merger. In connection with the call and conduct of, and all other matters relating to, the SFC Shareholders’ Meeting (including the solicitation of appointments of proxies), SFC will comply in all material respects with all provisions of applicable law and regulations and with its Articles of Incorporation and Bylaws.

 

SFC will solicit appointments of proxies from its shareholders for use at the SFC Shareholders’ Meeting and, in connection with that solicitation, will prepare and distribute to its shareholders proxy solicitation materials (a “Proxy Statement”) that, in all material respects, shall contain or be accompanied by such information regarding the SFC Shareholders’ Meeting, this Agreement, the parties hereto, the Merger and other transactions described herein, and otherwise be in such form and contain such information, as is required by the 1934 Act and rules and regulations of the SEC thereunder (including without limitation Regulation 14A), or as SFC’s Board of Directors otherwise shall determine.

 

SFC will mail the Proxy Statement to its shareholders on a date mutually agreed upon by SFC and FCB, but in no event less than 20 days prior to the scheduled date of the SFC Shareholders’ Meeting; provided, however, that no such materials shall be mailed to SFC’s shareholders unless and until the Proxy Statement shall have been filed by SFC with the SEC, the review period applicable thereto shall have expired, and SFC shall have satisfactorily responded to and complied with any comments of the SEC thereon.

 

SFC covenants that its directors, individually and collectively as SFC’s Board of Directors, will recommend that SFC’s shareholders vote their shares of SFC Stock at the SFC Shareholders’ Meeting in favor of approval of the Plan of Merger. The Proxy Statement distributed to SFC’s shareholders in connection with the SFC Shareholders’ Meeting will state that SFC’s Board of Directors considers the Merger to be advisable and in the best interests of SFC and its shareholders and that the Board of Directors recommends that SFC’s shareholders vote for approval of the Plan of Merger. Notwithstanding the foregoing, if SFC’s Board of Directors reasonably believes in good faith, after consultation with and receipt of the advice of its outside legal counsel and financial advisers, that such a recommendation would violate the directors’ duties or obligations as such to SFC or to its shareholders under applicable law, then the Board of Directors may submit the Agreement to shareholders at the SFC Shareholders’ Meeting without recommendation and, to the extent required by law, communicate the basis

 

for its lack of a recommendation to the shareholders in the Proxy Statement or any appropriate amendment or supplement thereto.

 

(b) Conduct of Business Prior to Effective Time. Although the parties recognize that the operation of the SFC Companies until the Effective Time is the responsibility of their respective Boards of Directors and officers, between the date of this Agreement and the Effective Time, and except as otherwise provided herein or expressly agreed to in writing by FCB’s Chief Executive Officer, President or Chief Financial Officer, SFC and SNB each will carry on their respective businesses, and will cause SIS and FFI to carry on their respective businesses, in and only in the regular and usual course in substantially the same manner as such business heretofore was conducted, and, to the extent consistent with such business and within its ability to do so, and subject to the use of sound business judgment, each of the SFC Companies will use commercially reasonable efforts to:

 

(i) preserve intact its present business organizations, keep available its present officers and employees, and preserve its relationships with customers, depositors, creditors, correspondents, suppliers, and others having business relationships with it;

 

(ii) maintain all of its properties and equipment in customary repair, order and condition, ordinary wear and tear excepted;

 

(iii) maintain its books of account and records in the usual, regular and ordinary manner in accordance with sound business practices applied on a consistent basis;

 

(iv) comply in all material respects with all laws, rules and regulations applicable to it, to its properties, assets or employees, and to the conduct of its business;

 

(v) not change its existing Loan underwriting guidelines, policies or procedures in any material respect except as may be required by law;

 

(vi) except to the extent that changed circumstances dictate otherwise, continue to maintain in force the Policies described in Paragraph 3.26; and not cancel, terminate, fail to renew, or modify any Policy, or allow any Policy to be cancelled or terminated, unless the cancelled or terminated Policy is replaced with a bond or policy providing coverage, or unless the Policy as modified provides coverage, that is substantially equivalent to the Policy that is replaced or modified;

 

(vii) promptly notify FCB of any actual or, to the Best Knowledge of SFC, threatened litigation by or against any of the SFC Companies, together with a description of the circumstances surrounding any such actual or threatened litigation, its present status and management’s evaluation of such litigation; and

 

(viii) promptly provide to FCB such information about its financial condition, results of operations, prospects, businesses, assets, Loan portfolio, investments, properties, employees or operations, as FCB reasonably shall request.

 

(c) Periodic Financial and Other Information. Following the date of this Agreement and from time to time as indicated below until the Effective Time, SFC and SNB promptly will deliver the following information to FCB in writing:

 

(i) within five business days following each calendar month-end, SFC’s unaudited consolidated year-to-date income statement and an unaudited consolidated statement of condition, each as of that month-end;

 

(ii) within 15 days following each calendar quarter-end, SFC’s interim unaudited consolidated financial statements for and as of the end of that quarterly period;

 

(iii) promptly following the filing thereof, a copy of each report, registration, statement or other filing (and any amendments thereto) made by any of the SFC Companies with or to any Regulatory Authority;

 

(iv) within five business days following each calendar month-end, a current listing of all classified or “watch list” Loans, along with the outstanding balance and amount specifically allocated to the Loan Loss Reserves for each such classified or “watch list” Loan;

 

(v) within 15 days following each calendar quarter-end, management’s analysis of SNB’s and FFI’s Loan Loss Reserves;

 

(vi) with respect to SNB’s Loans or any commitment to make, issue or extend any Loan, a copy of each month’s directors report, simultaneously with the distribution thereof to members of SNB’s board of directors;

 

(vii) within five business days following each calendar month-end, the following information with respect to SNB’s Loans or any commitments to make, issue or extend any Loan, all as of that month-end:

 

(A)

a listing of (1) each Loan made by SNB to a borrower, or commitment by SNB to make, issue or extend any Loan to a borrower, in excess of the lesser of $750,000 or an amount that would cause SNB’s credit exposure to that borrower to exceed that amount, and (2) each renewal, extension or modification by SNB of the terms of, or commitment by SNB to renew, extend or modify the terms of, any existing Loan to a borrower to whom SNB has a credit exposure in excess of $750,000;

 

(B)

a list of Loans that are past due as to principal or interest for more than 30 days;

 

(C)

a list of Loans in nonaccrual status;

 

(D)

a list of Loans for which there has been no reduction in principal for a period of longer than one year;

 

(E)

a list of all foreclosed real property or other real estate owned and all repossessed personal property;

 

(F)

a list of all reworked or restructured Loans still outstanding, including original terms, restructured terms and status; and

 

(G)

a then current listing of all documentation or compliance exceptions relating to SNB’s Loans.

 

(d) Notice of Certain Changes or Events.  Following the execution of this Agreement and up to the Effective Time, SFC and SNB promptly will notify FCB in writing of and provide to it such further information as it shall request regarding (i) any SFC Material Adverse Change, or (ii) the actual or prospective existence or occurrence of any condition or event of which SFC or SNB has Knowledge and which has caused or, with the lapse of time or otherwise, reasonably could be expected to result in an SFC Material Adverse Change or to cause any statement, representation or warranty of SFC or SNB herein to be or become inaccurate, misleading or incomplete in any material respect, or which has resulted or reasonably could be expected to cause, create or result in the breach or

 

violation in any material respect of any of SFC’s or SNB’s covenants or agreements contained herein or in the failure of any of the conditions described in Paragraphs 8.01 or 8.03.

 

(e) Accruals for Loan Loss Reserve, Expenses and Other Accounting Matters. SFC and SNB will make such appropriate accounting entries in their books and records and take such other actions as FCB, in its sole discretion, deems to be required by GAAP, or which FCB otherwise reasonably deems to be necessary, appropriate or desirable in anticipation of the Merger and which are not in violation of GAAP or applicable law, including without limitation additional provisions to SNB’s or FFI’s Loan Loss Reserves or accruals or the creation of reserves for employee benefit and Merger-related expenses; provided, however, that notwithstanding any provision of this Agreement to the contrary, and except as otherwise agreed to by SFC and FCB, SFC and SNB shall not be required to make any such accounting entries until immediately prior to the Closing and only following receipt of written confirmation from FCB that it is not aware of any fact or circumstance that would prevent completion of the Merger; and, provided further, however, that no such entry made as a result of such a request by FCB shall, itself alone, constitute a breach by SFC or SNB of any representation, warranty or covenant made by them in this Agreement.

 

(f) Loan Charge-Offs.  SFC and SNB will make such appropriate accounting entries in their books and records and take such other actions which are not in violation of GAAP or applicable law as FCB reasonably deems to be necessary, appropriate or desirable to charge-off any Loans on SNB’s books, or any portions thereof, that FCB, in its sole discretion, considers to be losses or that FCB otherwise believes, in good faith, are required to be charged off pursuant to applicable banking regulations, GAAP or otherwise, or that otherwise would be charged off by FCB after the Effective Time in accordance with its Loan administration and charge-off policies and procedures; provided, however, that notwithstanding any provision of this Agreement to the contrary, and except as otherwise agreed to by SFC and FCB, SFC and SNB shall not be required to make any such accounting entries or take any such actions until immediately prior to the Closing and only following receipt of written confirmation from FCB that it is not aware of any fact or circumstance that would prevent completion of the Merger; and, provided further, however, that no such entry made as a result of such a request by FCB shall, itself alone, constitute a breach by SFC or SNB of any representation, warranty or covenant made by them in this Agreement.

 

(g) Consents to Assignment of Contracts and Leases.  With respect to each contract or other agreement (including without limitation each lease or rental agreement pertaining to real or personal property, and each software license) to which any of the SFC Companies are parties and which FCB reasonably believes requires the consent of any other contracting party in connection with an actual or deemed assignment or transfer of the SFC Companies’ interests or obligations thereunder as a result of the Merger, SFC and SNB will use their commercially reasonable efforts to obtain the written consent of the other parties to the assignment to FCB of the SFC Companies’ rights and obligations under the agreement (including, in the case of Lease Agreements pertaining to leased SFC Real Property, estoppel certificates from each of the landlords under those Lease Agreements), each of which consents shall be in a form reasonably satisfactory to FCB.

 

(h) Access.  Following the date of this Agreement and to and including the Effective Time, SFC and SNB will provide FCB and its employees, accountants, legal counsel, environmental consultants or other consultants or other representatives and agents access to all of the SFC Companies’ books, records, files (including without limitation credit files and Loan documentation and records), minutes of meetings of their Boards of Directors, Board committees and shareholders, books and other information (whether maintained electronically or otherwise), to all their properties and facilities, and to all their employees, accountants, legal counsel, environmental or other consultants, or other representatives or agents, as FCB shall, in its reasonable discretion, consider to be necessary or appropriate for the purpose of conducting ongoing reviews and investigations of the assets and business affairs of the SFC Companies, preparing for consummation of the Merger and the consolidation of SFC’s and SNB’s operations into those of FCB, determining the accuracy of SFC’s and SNB’s representations

 

and warranties in this Agreement or their compliance with their covenants in this Agreement, or for any other reason relating to this Agreement or the Merger; provided, however, that any investigation or reviews conducted by or on behalf of FCB shall be performed in such a manner as will not interfere unreasonably with the SFC Companies’ normal operations or with their relationship with their customers or employees, and shall be conducted in accordance with procedures established by the parties.

 

(i) Pricing of Deposits and Loans. Following the date of this Agreement, SFC, SNB and FFI will make pricing decisions with respect to SNB’s deposit accounts and SNB’s and FFI’s Loans in a manner consistent with their past practices based on competition and prevailing market interest rates in their banking markets.

 

(j) Further Action; Instruments of Transfer. SFC and SNB will (i) use their commercially reasonable efforts in good faith to take or cause to be taken all action required of them under this Agreement as promptly as practicable so as to permit the consummation of the transactions described herein at the earliest possible date, (ii) perform all acts and execute and deliver to FCB all documents or instruments required of them herein, or as otherwise shall be reasonably necessary or useful to or requested by FCB, in consummating such transactions, and, (iii) cooperate with FCB in every way in carrying out and pursue diligently the expeditious completion of such transactions.

 

5.02. Negative Covenants of SFC and SNB.  SFC and SNB each agrees that, between the date hereof and the Effective Time, and without the prior written consent and authorization of FCB’s Chief Executive Officer, President or Chief Financial Officer, none of the SFC Companies will take any of the actions described below.

 

(a) Amendments to Articles of Incorporation or Bylaws. None of the SFC Companies will amend their respective Articles of Incorporation or Association, as applicable, or Bylaws.

 

(b) Change in Capitalization.  None of the SFC Companies will make any change in their authorized capital stock, create any other or additional authorized capital stock or other securities, or reclassify, combine or split any shares of their capital stock or other securities.

 

(c) Sale or Issuance of Shares or Other Securities. None of the SFC Companies will sell or issue any additional shares of capital stock or other securities, including any securities convertible into capital stock, or enter into any agreement or understanding with respect to any such action. However, notwithstanding anything to the contrary contained in this Agreement, (i) this Paragraph 5.02(c) shall not prohibit SNB from issuing certificates of deposit, or selling portfolio securities for liquidity purposes, all in the ordinary course of its business, and (ii) SFC may issue and sell shares of SFC Stock upon the exercise of an SFC Stock Option that was granted prior to, and remains outstanding and in effect on, the date of this Agreement, provided that the SFC Stock Option is exercisable in accordance with its terms at the time of such exercise and that the sale of SFC Stock upon such exercise is in accordance with the terms and conditions of that SFC Stock Option as in effect on the date of, or as otherwise contemplated by, this Agreement.

 

(d) Purchase or Redemption of Shares. None of the SFC Companies will purchase, redeem, retire or otherwise acquire any shares of their capital stock.

 

(e) Options, Warrants and Rights.  None of the SFC Companies will grant or issue any options, warrants, calls, puts or other rights of any kind relating to the purchase, redemption or conversion of shares of their capital stock or any other securities (including securities convertible into capital stock) or enter into any agreement or understanding with respect to any such action.

 

(f) Dividends and Distributions.  SFC will not declare or pay any dividends (whether in cash or in stock) on its outstanding shares of capital stock or make any other distributions on or in respect of any shares of its capital stock or otherwise to its shareholders; provided, however, that if

 

the Merger has not become effective on or before June 30, 2005, and to the extent otherwise permitted by applicable law and consistent with SFC’s prior practices, SFC shall be permitted to pay a cash dividend on the SFC Stock during July 2005 in an amount not in excess of $0.075 per outstanding share and, if the Merger has not become effective on or before November 20, 2005, and to the extent otherwise permitted by applicable law and consistent with SFC’s prior practices, SFC shall be permitted to pay a second cash dividend on the SFC Stock during December 2005 in an amount not in excess of $0.075 per outstanding share.

 

(g) Employment, Benefit or Retirement Agreements or Plans.  Except as required by law or otherwise contemplated in this Agreement, none of the SFC Companies will (i) enter into, become bound by, or amend any oral or written contract, agreement or commitment for the employment or compensation of any director, officer, employee or consultant which is not immediately terminable by them without cost or other liability on no more than 30 days’ notice; (ii) adopt, enter into, become bound by, or amend any profit-sharing, bonus, incentive, change in control or “golden parachute,” stock option, stock purchase, pension, retirement, deferred compensation, insurance (hospitalization, life or other), paid leave (sick leave, vacation leave or other) or similar contract, agreement, commitment, understanding, plan or arrangement (whether formal or informal) with respect to or which provides for benefits for any of their current or former directors, officers, employees or consultants; provided, however, that SNB may modify or amend any one or more of its Salary Continuation Agreements described in Paragraph 7.08(b) below in the manner and to the extent provided in that Paragraph in order for it or them to comply with Section 409A of the Code, if applicable; or (iii) enter into, become bound by, or amend any contract with or commitment to any labor or trade union or association or any collective bargaining group.

 

(h) Increase in Compensation; Bonuses.  Except as contemplated below, none of the SFC Companies will increase the compensation or benefits of, or pay any bonus or other special or additional compensation to, any of their current or former directors, officers, employees or consultants. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time SFC and SNB may (i) make payments pursuant to and in accordance with the terms of the FFI Bonus Plan, the SNB LOA Incentive Plan, the SNB Account Officer Incentive Plan, the SNB FSR Incentive Plan, the SNB Teller Incentive Plan, and SFC’s director attendance fee arrangement, all as Previously Disclosed to FCB, and (ii) review and make reasonable merit increases in the salaries of their employees, provided, that the times and amounts of those increases are consistent with their past practices and their salary administration and review policies and procedures in effect on December 31, 2004. Notwithstanding anything contained herein to the contrary, following the date of this Agreement and prior to the Effective Time, SFC shall, at its sole discretion, be permitted to pay special recognition cash bonuses to officers and employees of the SFC Companies up to an aggregate amount of $50,000 for all such cash bonuses.

 

(i) Accounting Practices; Independent Accountants.  None of the SFC Companies will make any changes in their accounting methods, practices or procedures or in depreciation or amortization policies, schedules or rates heretofore applied except as required by GAAP or applicable governmental regulations or as recommended by its independent public accountants, and SFC will not change its independent public accountants.

 

(j) Acquisitions; Additional Branch Offices.  None of the SFC Companies will, directly or indirectly, (i) acquire (by merger or otherwise), or acquire any branch or all or any significant part of the assets of, any other person or entity, (ii) open any new branch office other than SNB’s proposed new Pleasantburg branch, or (iii) enter into or become bound by any contract, agreement, commitment or letter of intent relating to, or otherwise take or agree to take any action in furtherance of, any such transaction or the opening of a new branch office other than SNB’s proposed new Pleasantburg branch.

 

(k) Changes in Business Practices.  Except as may be required by their respective Regulatory Authorities, or otherwise as shall be required by applicable law, regulation or this Agreement, none of the SFC Companies will (i) change in any material respect the nature of their business or the

 

manner in which they conduct their business, (ii) discontinue any material portion or line of their business, or (iii) change in any material respect their lending, investment, asset-liability management or other material banking or business policies.

 

(l) Exclusive Merger Agreement. Unless, due to a material change in circumstances after the date hereof, SFC’s Board of Directors reasonably believes in good faith, following consultation with and receipt of the advice of its outside legal counsel and financial advisers, that any such action or inaction would violate the directors’ duties or obligations as such to SFC or to its shareholders, SFC will not, directly, or indirectly through any person, (i) encourage, solicit or attempt to initiate or procure discussions, negotiations or offers with or from any person or entity (other than FCB) relating to a merger or other acquisition of any of the SFC Companies, the purchase or acquisition of any equity or other securities (other than certificates of deposit) issued by, or all or any significant part of the assets of, any of the SFC Companies or any branch office of SNB, or provide assistance to any person in connection with any such offer; (ii) except to the extent required by law, disclose to any person or entity any information not customarily disclosed to the public concerning any of the SFC Companies or their business, or afford to any other person or entity access to the properties, facilities, books or records of any of the SFC Companies; (iii) sell or transfer any branch office of SNB or all or any significant part of the assets of any of the SFC Companies to any other person or entity; or (iv) enter into or become bound by any contract, agreement, commitment or letter of intent relating to, or otherwise take or agree to take any action in furtherance of, any such transaction.

 

(m) Acquisition or Disposition of Assets.  None of the SFC Companies will:

 

(i) Sell or lease (as lessor), or enter into or become bound by any contract, agreement, option or commitment relating to the sale, lease (as lessor) or other disposition of, any real property in any amount, other than real property acquired by SNB in connection with the foreclosure in the ordinary course of its business of a mortgage that secured one of its Loans;

 

(ii) Except as provided below, sell or lease (as lessor), or enter into or become bound by any contract, agreement, option or commitment relating to the sale, lease (as lessor) or other disposition of, any equipment or any other fixed or capital asset (other than real property) having a book value or a fair market value, whichever is greater, of more than $25,000 in the case of any individual item or asset, or $75,000 in the aggregate for all such items or assets; provided, however, that this provision shall not prohibit SNB from selling investment portfolio securities for liquidity purposes in the ordinary course of its business;

 

(iii) Purchase or lease (as lessee), or enter into or become bound by any contract, agreement, option or commitment relating to the purchase, lease (as lessee) or other acquisition of, any real property in any amount, other than real property associated with SNB’s proposed new Pleasantburg branch, or real property that is the subject of a mortgage securing one of SNB’s Loans that is being foreclosed upon in the ordinary course of its business;

 

(iv) Purchase or lease (as lessee), or enter into or become bound by any contract, agreement, option or commitment relating to the purchase, lease (as lessee) or other acquisition of, any equipment or any other fixed asset (other than real property) having a purchase price, or involving aggregate lease payments, in excess of $25,000 in the case of any individual item, or $75,000 in the aggregate for all such items or assets, other than equipment or other fixed assets reasonably related to SNB’s proposed new Pleasantburg branch, or data processing-related equipment reasonably required in connection with SNB’s data processing functions;

 

(v) Enter into any purchase or other commitment or contract for supplies or services other than in the usual and ordinary course of their business consistent with past practices;

 

(vi) Except in the ordinary course of their business consistent with their past practices, sell, purchase or repurchase, or enter into or become bound by any contract, agreement, option or commitment to sell, purchase or repurchase, any Loan or other receivable or any participation in any Loan or other receivable;

 

(vii) Except in the ordinary course of their business consistent with their past practices with respect to investment securities, loans and similar assets, sell or dispose of, or enter into or become bound by any contract, agreement, option or commitment relating to the sale or other disposition of, any other asset (whether tangible or intangible, and including without limitation any trade name, trademark, copyright, service mark or intellectual property right or license); or

 

(viii) assign their rights to or otherwise give any other person their permission or consent to use or do business under the corporate name of any of the SFC Companies or any name similar thereto; or release, transfer or waive any license or right granted to them by any other person to use any trademark, trade name, copyright, service mark or intellectual property right.

 

(n) Debt; Liabilities.  With the exception of SNB’s acceptance of deposits, entering into repurchase agreements, Fed funds purchases, borrowings from the Federal Home Loan Bank, and issuance of letters of credit, and direct investments in SNB by the Federal Reserve Bank of Richmond pursuant to its Treasury Tax and Loan Investment Program, in any such case in the ordinary course of SNB’s business consistent with its past practices, none of the SFC Companies will (i) enter into or become bound by any promissory notes, loan agreements or other agreements or arrangements pertaining to their borrowing of money, (ii) assume, guarantee, endorse or otherwise become responsible or liable for any debt, liability or other obligation of any other person or entity (other than the endorsement of checks and drafts for collection in the ordinary course of their businesses), or (iii) except in the ordinary course of their business consistent with their past practices, incur any other liability or obligation (absolute or contingent).

 

(o) Liens; Encumbrances.  With the exception of SNB’s pledges of Loans or portfolio securities to the Federal Home Loan Bank to secure borrowings permitted by Paragraph 5.02(n) above, and pledges of securities in the ordinary course of its business and consistent with its past practices in connection with the securing of public funds deposits or repurchase agreements, none of the SFC Companies will mortgage, pledge or subject any of their assets to, or permit any of their assets to become or, except for those liens or encumbrances Previously Disclosed to FCB, remain subject to, any lien or any other encumbrance.

 

(p) Waiver of Rights.  Except to the extent required by any other Paragraph of this Agreement, none of the SFC Companies will waive, release or compromise any rights in their favor against or with respect to any of their current or former officers, directors, shareholders, employees, consultants, or members of families of current or former officers, directors, shareholders, employees or consultants, nor will any of them waive, release or compromise any material rights against or with respect to any other person or entity except in the ordinary course of their business and in good faith for fair value in money or money’s worth.

 

(q) Other Contracts.  None of the SFC Companies will enter into or become bound by any contracts, agreements, commitments or understandings (other than those permitted elsewhere in this Paragraph 5.02) (i) for or with respect to any charitable contributions in excess of $3,000 in the case of any one contribution or $30,000 in the aggregate; (ii) with any governmental or regulatory agency or authority except as required by law; (iii) which is entered into other than in the ordinary course of their business; or (iv) whether or not in the ordinary course of their business, which would obligate or commit them to make expenditures over any period of time of more than $50,000 in the case of any one contract, agreement, commitment or understanding, or more than $100,000 in the case of all contracts, agreements, commitments or understandings, other than contracts, agreements, commitments or understandings (including without limitation the renewal of existing data processing-related agreements) entered into in

 

the ordinary course of SNB’s and FFI’s banking operations, reasonably related to SNB’s proposed new Pleasantburg branch, or as otherwise permitted by this Agreement.

 

(r) Deposit Liabilities. Except for changes or actions reasonably required for purposes of asset/liability management in the ordinary course of its business, SNB will not make any material change in its current deposit policies and procedures or take any actions designed to materially increase or decrease the aggregate level of its deposits as of the date of this Agreement.

 

(s) Changes in Lease Agreements. None of the SFC Companies will (i) other than at the end of the term of a Lease Agreement under the terms of which it does not have an option to renew, surrender their leasehold interest in any parcel of leased SFC Real Property, or seek or agree to the termination of the Lease Agreement pertaining to any such parcel, or (ii) modify or amend the Lease Agreement pertaining to any parcel of leased SFC Real Property other than in connection with the renewal of a Lease Agreement at the end of its term. Prior to renewing or amending a Lease Agreement as described above, SFC will consult with FCB and permit FCB to express its views regarding the terms of the renewal or amendment.

 

 

Except as otherwise specifically provided in this Agreement, FCB and Bancorp each agrees as follows:

 

6.01. Employees; Employee Benefits.

 

(a) Employment of SFC and SNB Employees. Except as otherwise contemplated by Paragraph 7.08 below, current employees of the SFC Companies who remain employed by them at the Effective Time will be offered employment with FCB (or will remain employees of FFI or SIS) on an “at will” basis after the Effective Time. In the case of each such employee who elects to become an employee of FCB, or to remain an employee of FFI or SIS, following the Effective Time (a “Continuing Employee”), such employment will be in such a position, at such location within FCB’s system, and for such rate of compensation, as shall be determined in the ordinary course of FCB’s business following the Effective Time, and except as otherwise provided in separate agreements with certain employees as contemplated by Paragraph 7.08, nothing in this Agreement shall be deemed to constitute an employment agreement between FCB and any such person or to obligate FCB to employ any such person for any specific term or period of time, in any specific position, or at any specific salary or rate of compensation, or to restrict FCB’s right to terminate the employment of any such person at any time following the Effective Time and for any reason satisfactory to it.

 

(b) Employee Benefits. Except as otherwise provided in this Agreement, following the Effective Time, each Continuing Employee shall be entitled to participate in employee benefit plans provided generally by FCB to its employees from time to time on the same basis, and subject to the same eligibility and vesting requirements and other conditions, restrictions and limitations, as generally are in effect and applicable to other FCB employees. Each Continuing Employee will be given credit for his or her full years of service with the SFC Companies prior to the Effective Time for purposes of (i) eligibility for participation and vesting (but in no event for benefit accrual purposes) in the case of FCB’s Section 401(k) savings plan and defined benefit pension plan, and (ii) for all purposes under FCB’s other benefit plans that may be offered to Continuing Employees from time to time. Continuing Employees’ participation in FCB’s health insurance plans will be without regard to any pre-existing condition exclusions under FCB’s health insurance plans provided that any such pre-existing condition would have been covered under SFC’s health insurance plan that covered the Continuing Employee immediately prior to the Effective Time. Continuing Employees shall not be required to satisfy the deductible and employee payments required by FCB’s comprehensive medical and/or dental plans for the calendar year of the

 

Effective Time to the extent of amounts previously credited during such calendar year under comparable plans maintained by SFC.

 

6.02 Further Action; Instruments of Transfer. Each of FCB and Bancorp covenants and agrees with SFC and SNB that it (a) will use commercially reasonable efforts in good faith to take or cause to be taken all action required of it under this Agreement as promptly as practicable so as to permit the consummation of the transactions described herein at the earliest possible date, (b) shall perform all acts and execute and deliver to SFC and SNB all documents or instruments required of it herein, and (c) will cooperate with SFC and SNB in every way in carrying out and pursue diligently the expeditious completion of such transactions.

 

6.03 Notice of Certain Changes or Events. Following the execution of this Agreement, Bancorp and/or FCB promptly will notify SFC in writing of and provide to it such further information as it shall request regarding (i) any FCB Material Adverse Change, or (ii) the actual or prospective existence or occurrence of any condition or event of which Bancorp and/or FCB has Knowledge and which has caused or, with the lapse of time or otherwise, reasonably could be expected to result in a FCB Material Adverse Change or to cause any statement, representation or warranty of Bancorp and/or FCB herein to be or become inaccurate, misleading or incomplete in any material respect, or which has resulted or reasonably could be expected to cause, create or result in the breach or violation in any material respect of any of Bancorp’s and/or FCB’s covenants or agreements contained herein or in the failure of any of the conditions described in Paragraphs 8.01 or 8.02. Following Bancorp’s completion of the subordinated debt offering described in Paragraphs 8.02(i) and 8.03(d) below, then FCB and Bancorp’s agreement in this Paragraph 6.03 shall terminate and be of no further force or effect, effective as of the date of this Agreement.

 

6.04. Financing. Bancorp will use commercially reasonable efforts to complete the subordinated debt offering referred to in Paragraph 8.02(i) and 8.03(d) below in accordance with the terms described therein.

 

 

7.01. Regulatory Approvals. SFC, SNB, FCB and Bancorp each agrees with the others that, as soon as practicable following the date of this Agreement, it will prepare and file, or cause to be prepared and filed, all applications required to be filed by it under applicable law and regulations for approvals by Regulatory Authorities of the Merger or other transactions described in this Agreement, including without limitation any required applications for the approval of the South Carolina Board, the FDIC, the OCC and the FRB. SFC, SNB, FCB and Bancorp each agrees (a) to use commercially reasonable efforts in good faith to obtain all necessary approvals of Regulatory Authorities required for consummation of the Merger and other transactions described herein, and (b) before the filing of any such application required to be filed, to give each other party an opportunity to review and comment on the form and content of such application. Should the appearance of any of the officers, directors, employees or counsel of SFC, SNB, FCB or Bancorp be requested by any of the others or by any Regulatory Authority at any hearing in connection with any such application, it will use commercially reasonable efforts to arrange for such appearance.

 

7.02. Information for Proxy Statement and Applications for Regulatory Approvals. SFC, SNB, FCB and Bancorp each agrees with the others that (a) it will cooperate with the others in the preparation of the Proxy Statement and applications for required approvals of Regulatory Authorities, and it will promptly respond to requests by any of the others and its legal counsel for information, and will provide all information, documents, financial statements or other material, that is required for, or that may be reasonably requested by any other party for inclusion in, any such document; (b) none of the information provided by it in writing for inclusion in any of such documents will contain any untrue

 

statement of a material fact, or omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, at and as of the time (i) the Proxy Statement is filed with the SEC, (ii) the Proxy Statement is mailed to SFC’s shareholders, (iii) the applications for required approvals of Regulatory Authorities are filed, and (iv) approvals of Regulatory Authorities are granted.

 

7.03. Announcements; Confidential Information.

 

(a) SFC, SNB and FCB each agrees that no persons other than the parties to this Agreement are authorized to make any public announcements or statements about this Agreement or any of the transactions described herein, and that, without the prior review and consent of the other parties (which consent shall not unreasonably be denied or delayed), it will not make any public announcement, statement or disclosure as to the terms and conditions of this Agreement or the transactions described herein, except for such disclosures as may be required incidental to obtaining the required approval of any Regulatory Authority to the consummation of the transactions described herein; provided, however, that the foregoing shall not prevent Allen C. Ewing & Co. from publishing a tombstone announcement of the Closing of the transaction as contemplated by this Agreement, and shall not prevent Wachovia Securities, Inc. or another investment banking firm representing Bancorp from publishing a tombstone announcement of the completion of the subordinated debt offering referred to in Paragraph 8.03(d) below.

 

(b) For purposes of this Paragraph 7.03, “Confidential Information” refers to any information (including business and financial information) that a party to whom the information pertains (an “Informing Party”) provides or makes available, in connection with this Agreement, to a party for whose benefit the information is provided (a “Receiving Party”), or to that party’s affiliates, directors, officers, employees, attorneys, advisers, consultants, representatives and agents (a “Receiving Party Representative”), or which a Receiving Party or a Receiving Party Representative may otherwise obtain from any examination of an Informing Party’s documents, books, records, files or other written materials (including electronic records and information imbedded therein) or from any discussions with any of the Informing Party’s directors, officers, employees, attorneys, advisers, consultants, representatives and agents, and shall be deemed to include, without limitation, (i) all such documents, books, records, files or other written materials themselves and all information contained therein (whether maintained in writing, electronically, on microfiche or otherwise), (ii) all corporate minutes, financial projections and budgets, historical and projected sales reports, acquisition or other expansion analyses or plans, pro forma financial data, capital spending budgets and plans, market studies and business plans, (iii) all information relative to financial results and condition, operations, policies and procedures, computer systems and software, shareholders, employees, officers, and directors, and (iv) all information relative to customers and former or prospective customers. The Receiving Party shall not, and shall not permit any Receiving Party Representative to, remove any Confidential Information of the Informing Party from the Informing Party’s offices without the consent of the Informing Party.

 

(c) Prior to the Effective Time, all Confidential Information of an Informing Party is proprietary to the Informing Party and constitutes either trade secrets or confidential information of the Informing Party and shall be held in strict confidence by a Receiving Party and, except as otherwise provided herein, may not be disclosed by a Receiving Party to any person or entity not a party to this Agreement except to a Receiving Party Representative, unless the Receiving Party can demonstrate that the same information as the Confidential Information to be disclosed:

 

(i)

already was in its possession prior to such Confidential Information being obtained from the Informing Party;

 

(ii)

already was publicly available at the time it was received by the Receiving Party or the Receiving Party Representative or, at the time of any disclosure by the Receiving Party or Receiving Party Representative, has become publicly available through no fault of or violation of this

 

Agreement by the Receiving Party or any other person that the Receiving Party knows, or has reason to know, is obligated to protect such Confidential Information; or

 

(iii)

was developed independently by or for the Receiving Party or the Receiving Party Representative, without the use of any Confidential Information received from the Informing Party.

 

(d) Notwithstanding anything contained in this Paragraph 7.03 to the contrary, prior to the Effective Time the Receiving Party may disclose Confidential Information to the Receiving Party’s affiliates, directors, officers, employees, agents, attorneys, advisers and consultants who are directly involved in the transactions described in this Agreement; provided, however, that the Receiving Party shall be responsible for any disclosure of Confidential Information by any such persons or entities (who shall be deemed Receiving Party Representatives) in violation of the above restrictions.

 

(e) Upon termination of this Agreement, the Receiving Party will deliver or cause to be delivered to the Informing Party all tangible embodiments (and all copies of) Confidential Information of the Informing Party in the possession of the Receiving Party or any Receiving Party Representative.

 

(f) Prior to the Effective Time, the Receiving Party shall not use, or permit any other persons to use, any Confidential Information of the Informing Party for any purpose other than in connection with this Agreement in an unlawful manner, or to interfere with or attempt to terminate or otherwise adversely affect any actual or proposed contractual or business relationship of the Informing Party.

 

(g) Notwithstanding anything contained in this Paragraph 7.03 to the contrary, neither SFC, SNB, FCB nor Bancorp shall be required to obtain the prior consent of the other parties for any public announcement, statement or disclosure (whether or not involving Confidential Information) which it, in good faith and upon the advice of its legal counsel, believes is required by law or any listing or trading agreement concerning its publicly traded securities; provided, however, that before any such disclosure may be made by either party upon the advice of its legal counsel, it shall, except where such notice is prohibited by law or any such listing or trading agreement, or with respect to filings with the SEC or to obtain approvals of Regulatory Authorities necessary to approve the transactions contemplated by this Agreement, give the other party reasonable notice of its intent to make such disclosure, the form of content of that disclosure, and the basis upon which its legal counsel has advised it that such disclosure is required by law or by any such listing or trading agreement, so that the other party may seek a protective order or other similar or appropriate relief, and the party intending to make such disclosure also shall undertake in good faith to have any Confidential Information to be disclosed treated confidentially by the party to whom the disclosure is made. In the case of filings by either party with the SEC or with Regulatory Authorities, the filing party will provide a copy of any such filing to the other party prior to its being filed and to give such other party a reasonable opportunity to review and comment on the content thereof.

 

7.04. Real Property Matters.

 

(a) At its option and expense, following the date of this Agreement, FCB may cause to be conducted (i) a title examination, physical survey, zoning compliance review, and structural inspection of any or all of the SFC Real Property and improvements thereon (collectively, the “Property Examination”), and (ii) site inspections, environmental assessments, historic reviews, and regulatory analyses of any or all of the SFC Real Property, together with such other studies, testing and intrusive sampling and analyses as FCB shall deem necessary or desirable (collectively, the “Environmental Survey”). If, in the course of the Property Examination or Environmental Survey, FCB identifies one or more “Material Defects” (as defined below), FCB will give prompt written notice thereof to SNB describing the facts or conditions constituting each such Material Defect.

 

(b) For purposes of this Agreement, a “Material Defect” shall include:

 

(i) the existence of any lien (other than the lien of real property taxes not yet due and payable), encumbrance, title imperfection or title irregularity relating to any of the SFC Real Property, other than (A) SFC Real Property leased by FFI as its offices (“FFI Real Estate”), (B) other real property that was acquired by SNB in connection with the foreclosure in the ordinary course of its business of a mortgage that secured one of its Loans (“SNB OREO”), or (C) with respect to SNB’s landlord’s fee title (but not SNB’s leasehold interest) in SFC Real Property currently leased by SNB at 937 No. Pleasantburg Drive and 800 E. North Street in Greenville, South Carolina;

 

(ii) the existence of any zoning restriction, easement, covenant or other restriction, or the existence of any facts or conditions that constitute a breach of SFC’s and SNB’s representations and warranties contained in Paragraph 3.16 or 3.21, relating or with respect to any of the SFC Real Property, other than FFI Real Estate or SNB OREO, in either such case that FCB reasonably believes will materially adversely affect its use of that SFC Real Property for the purpose for which and in the manner in which it currently is used or the value or marketability of that SFC Real Property;

 

(iii) the existence of any structural defects or conditions of disrepair in the improvements on any parcel of the SFC Real Property, other than FFI Real Estate or SNB OREO (including any equipment, fixtures or other components related thereto); or

 

(iv) the existence of facts or circumstances relating to any of the SFC Real Property, other than FFI Real Estate, and other than SNB OREO which has not been operated or managed by SNB and with respect to which SNB has not engaged in any activities that would result in its loss of lender liability protections under applicable Environmental Laws, reflecting that (A) there likely has been a discharge, disposal, release, threatened release, or emission by any person of any Hazardous Substance on, from, under, at, or relating to that SFC Real Property, or (B) any action has been taken or not taken, or a condition or event likely has occurred or exists, with respect to that SFC Real Property (including, without limitation, any removal or disposal of materials from the SFC Real Property) which constitutes or would constitute a violation of any Environmental Laws or any contract or other agreement between any of the SFC Companies and any other person or entity, as to which, in either such case, FCB reasonably believes, based on the advice of legal counsel or other consultants, that any of the SFC Companies could incur costs or become responsible or liable, or that FCB could incur costs or become responsible or liable, whether before or after the Effective Time, for assessment, removal, remediation, monetary damages (including without limitation any liability to other persons for property damage or personal injury), or civil, criminal or administrative penalties or other corrective action.

 

(c) Notwithstanding anything contained in this Agreement to the contrary, no condition or circumstance described in Paragraph 7.04(b) shall be deemed to be a Material Defect if, following receipt of the notice thereof from FCB, SFC and SNB shall cure or correct the condition or circumstances giving rise to that Material Defect in a manner and to an extent reasonably satisfactory to FCB.

 

(d) In the event that:

 

(i) FCB reasonably believes that (A) the total of the costs and expenses that it could incur in fully correcting all Material Defects identified by it that are described in Paragraphs 7.04(b)(i) and/or (iii) above, plus (B) the total of the costs and expenses that FCB could incur in fully correcting all Material Defects identified by it that are described in Paragraph 7.04(b)(iv) and/or all other amounts for which any of the SFC Companies could become responsible or liable, or for which FCB could become responsible or liable, whether before or after the Effective Time, related to all those Material Defects as described in Paragraph 7.04(b)(iv), plus (C) the total of the costs and expenses

 

incurred, or which would be incurred prior to Closing, by SFC and SNB in correcting Material Defects as provided in Paragraph 7.04(c) above, exceed an aggregate of $1,500,000, or

 

(ii) FCB identifies one or more Material Defects described in Paragraph 7.04(b)(ii) above,

 

then FCB shall have the right and option, exercisable upon written notice to SFC, to terminate this Agreement.

 

(e) It is contemplated that FCB will conduct the Property Examination and the Environmental Survey following the date of this Agreement and prior to the Effective Time. It is the intent of this Agreement, and SFC and SNB understand and agree, that, upon completion of the Property Examination and Environmental Survey, any of the facts, conditions, circumstances or other matters described in Paragraph 7.04(b) may be deemed by FCB to constitute a Material Defect, with the result that FCB may exercise its rights under this Paragraph 7.04, without regard to any actual knowledge on or prior to the date of this Agreement on the part of FCB or its officers or advisers of that Material Defect or the facts, conditions, circumstances or other matters pertaining thereto and without regard to any disclosure by SFC or SNB to FCB, or to any of its officers or advisers, prior to the date of this Agreement, whether pursuant to Paragraph 11.05 below or otherwise.

 

7.05. Directors’ and Officers’ Liability Insurance. SFC, SNB, FCB and Bancorp agree that, immediately prior to the Effective Time, SFC and SNB shall purchase “tail” coverage with respect to its directors’ and officers’ liability and errors and omissions liability insurance, effective at the Effective Time and for the maximum term available and in the same amount of coverage as is provided by their then current directors’ and officers’ and errors and omissions liability insurance policy, provided that the total costs of such tail coverage shall not exceed an aggregate of $75,000 without FCB’s prior written approval.

 

7.06. Final Tax Return. SFC, SNB, FCB and Bancorp agree that FCB will make all necessary arrangements for FCB’s independent accountants, PricewaterhouseCoopers LLP, to prepare, and FCB will cause to be filed, the SFC Companies’ final federal and state income tax returns for the year in which the Effective Time occurs.

 

7.07. Expenses. Subject to the provisions of Paragraph 9.04 below, and whether or not this Agreement shall be terminated or the Merger shall be consummated, SFC, SNB, FCB and Bancorp each agrees to pay its own costs and expenses incurred or to be incurred in connection with the execution and performance of its obligations under this Agreement, or otherwise in connection with this Agreement and the transactions described herein (including without limitation all accounting fees, legal fees, consulting or financial advisory fees, filing fees, printing and mailing costs, and travel expenses). For purposes of this Agreement, expenses associated with the printing and mailing of the Proxy Statement and all amounts owed by SFC to Allen C. Ewing & Co. for its services and for rendering the “SFC Fairness Opinion” described in Paragraph 8.02(f), will be deemed to have been incurred solely by SFC.

 

7.08. Employment and Salary Continuation Agreements.

 

(a) New Employment Agreements. Prior to the date of this Agreement, SFC has entered into an Employment Agreement with each of James G. Gulledge, Jr., James B. Schwiers and J. Stephen Rush (the “New Employment Agreements”) in a form which has been approved by FCB, copies of which have been Previously Disclosed to FCB. At the Effective Time, FCB shall, by virtue of the Merger, assume and become responsible for SFC’s obligations, and succeed to SFC’s rights, under each of the New Employment Agreements. Following the date of this Agreement and prior to the Effective Time, SNB will maintain the New Employment Agreements in effect and will not make or agree to any amendments to or modification of any of the New Employment Agreements except with the written consent of FCB.

 

(b) Existing Employment Agreements. At the Effective Time, FCB shall, by virtue of the Merger, assume and become responsible for SFC’s and SNB’s respective obligations, and succeed to SFC’s and SNB’s respective rights, under those certain existing Employment Agreements with each of J. Randolph Potter, Blaise B. Bettendorf, William E. Covington, Jr., and James G. Bagnal III (the “Existing Employment Agreements”) and those certain Salary Continuation Agreements with each of J. Randolph Potter, Blaise B. Bettendorf, James G. Gulledge, Jr. and James B. Schwiers. Following the date of this Agreement and prior to the Effective Time, SFC and SNB will maintain each of the Existing Employment Agreements in effect and will not make or agree to any amendments to or modifications of any of the Existing Employment Agreements except with the written consent of FCB.

 

Prior to the Effective Time SNB may modify or amend any one or more of the Salary Continuation Agreements to the extent reasonably necessary in order for it or them to comply with Section 409A of the Code, if applicable, provided that no such modification or amendment may materially increase the benefits or compensation provided under any such agreement or obligate or subject SNB or its successors to the payment of any excise or other tax or additional payment obligation. SNB shall use commercially reasonable efforts to effect any such necessary modifications or amendments prior to the Effective Time. However, in the event that those modifications or amendments cannot be effected or completed prior to the Effective Time, then FCB agrees that it will use commercially reasonable efforts to effect or complete the same following the Effective Time but prior to December 31, 2005, or, if the same cannot reasonably be completed by that date, as soon thereafter as possible; and, thereafter, FCB agrees that it will use commercially reasonable efforts to make such further modifications or amendments to the Salary Continuation Agreements as shall be necessary to cause them to comply with changes in the Code or regulations promulgated thereunder; provided, that FCB shall not be required to make any such modification or amendment that would obligate or subject FCB or its successors to the payment of any excise or other tax or additional payment obligation under any of those agreements.

 

7.09. Treatment of Section 401(k) Plan. SNB’s Section 401(k) plan will be terminated, effective immediately prior to the Effective Time. Each participant in SNB’s plan at the time it is terminated may elect, upon completion of the termination and the final liquidation of the plan, (a) to receive a distribution of the assets credited to his or her plan account at that time, (b) to have those assets credited as a direct “roll-over” to the participant’s individual retirement plan account, or, (c) if the participant has become a participant in FCB’s Section 401(k) plan, to have those assets credited as a “roll-over” to the participant’s plan account under FCB’s plan.

 

SFC and SNB agree that they will take or cause to be taken such actions as FCB shall reasonably consider to be necessary or desirable in connection with or to effect or facilitate such plan termination. As successor to SNB, FCB agrees that, as of the Effective Time, it will assume any and all administrative and fiduciary duties of SFC or SNB with respect to completion of the termination and liquidation of SNB’s plan, including, without limitation, duties relating to filings with the Internal Revenue Service relating to the plan.

 

7.10. SFC Stock Option Termination and Releases. Following the date of this Agreement, and not less than 30 days before the Effective Time, SFC shall enter into a written agreement (an “Option Release”) in form reasonably satisfactory to FCB with each holder of a then outstanding SFC Stock Option and providing that, immediately prior to the Effective Time, (a) each then outstanding SFC Stock Option held by that holder shall terminate automatically and be cancelled, (b) with respect to each such SFC Stock Option, SFC will pay to that holder, in cash, an amount (if any) equal to (i) $22.00, minus the exercise price of that SFC Stock Option as provided in the written agreement evidencing it, multiplied by (ii) the number of shares covered by the SFC Stock Option, (c) the holder understands and agrees that no assurances or representations are being made to him or her by SFC or FCB with respect to the tax treatment of any such payment, and the holder will be and remain responsible for the timely payment of all federal and state income taxes and his or her portion of any FICA and FUTA taxes applicable to the above payment, (d) SFC and its successors in interest may withhold from such payment any and all such

 

taxes that it reasonably believes it is required to withhold, and (e) the holder fully and completely releases SFC and its successors in interest from any further obligation with respect to his or her SFC Stock Options and from any liability for the tax consequences of such payment.

 

No such payment shall be made to any holder of an SFC Stock Option unless and until the holder executes and delivers an Option Release to SFC. Payments made by SFC pursuant to executed Option Releases as described in this Paragraph 7.10 shall not be deemed to breach any covenant of SFC or SNB hereunder or to result in a breach of any representation or warranty of SFC or SNB herein, provided, that such payments shall not be made with respect to an aggregate number of SFC Stock Options that exceeds the number of such options Previously Disclosed to FCB. As a result of the Merger, FCB will become responsible for SFC’s payment obligations, and shall become entitled to all rights of SFC, under each Option Release, from and after the Effective Time.

 

7.11 Correction of Credit Documentation and Compliance Deficiencies. If, during the course of its continuing review of SNB’s credit files after the date of this Agreement, FCB identifies situations or circumstances relating to specific Loans or credit files that FCB reasonably considers to be material deficiencies in Loan documentation or to constitute violations of applicable banking rules or regulations relating to Loans, SNB will cooperate in good faith with FCB to correct, in all material respects, those deficiencies or violations prior to the Effective Time.

 

 

8.01. Conditions to all Parties’ Obligations. Notwithstanding any other provision of this Agreement to the contrary, the obligations of each of the parties to this Agreement to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following conditions precedent on or prior to the Closing Date:

 

(a) Approval by Regulatory Authorities; Disadvantageous Conditions. (i) The Merger and other transactions described in this Agreement shall have been approved, to the extent required by law, by the South Carolina Board, the FDIC, the OCC and the FRB, and by all other Regulatory Authorities having jurisdiction over such transactions; (ii) no Regulatory Authority shall have objected to or withdrawn its approval of such transactions or imposed any condition on such transactions or its approval thereof, which condition is reasonably deemed by FCB to so adversely impact the economic or business benefits of this Agreement to FCB as to render it inadvisable for it to consummate the Merger; (iii) the 15-day or 30-day waiting period, as applicable, required following necessary approvals of federal Regulatory Authorities for review of the transactions described herein by the United States Department of Justice shall have expired, and, in connection with any such review, no objection to the Merger shall have been raised; and (iv) all other consents, approvals and permissions, and the satisfaction of all of the requirements prescribed by law or regulation, necessary to the carrying out of the transactions contemplated herein shall have been procured.

 

(b) Adverse Proceedings, Injunction, Etc. There shall not be (i) any order, decree or injunction of any court or agency of competent jurisdiction which enjoins or prohibits the Merger or any of the other transactions described in this Agreement or either of the parties hereto from consummating any such transaction, (ii) any pending or threatened investigation of the Merger or any of such other transactions by the United States Department of Justice, or any actual or threatened litigation under federal antitrust laws relating to the Merger or any other such transaction, (iii) any suit, action or proceeding by any person (including any Regulatory Authority), pending or threatened before any court or governmental agency in which it is sought to restrain or prohibit SFC, SNB, FCB or Bancorp from consummating the Merger or carrying out any of the terms or provisions of this Agreement, or (iv) any other suit, claim, action or proceeding pending or threatened against any of the SFC Companies, FCB or Bancorp or any of their respective officers or directors which shall reasonably be considered by SFC or

 

FCB to be materially burdensome in relation to the proposed Merger or materially adverse in relation to the financial condition, results of operations, businesses, assets, Loan portfolio, investments, properties or operations of either such corporation, and which has not been dismissed, terminated or resolved to the satisfaction of all parties hereto within 90 days of the institution or threat thereof.

 

(c) Approval by Boards of Directors and Shareholders. The Boards of Directors of each of SFC, SNB, FCB and Bancorp shall have duly approved and adopted this Agreement, the shareholders of SFC shall have duly approved the Plan of Merger at the SFC Shareholders’ Meeting, and SFC and Bancorp, as the sole shareholders of SNB and FCB, respectively, shall have duly approved and adopted the Plan of Merger, all by appropriate resolutions and to the extent required by and in accordance with the provisions of this Agreement, applicable law, and applicable provisions of their respective Articles of Incorporation or Association, as applicable, and ByLaws.

 

(d) No Termination or Abandonment. This Agreement shall not have been terminated or abandoned by either party hereto.

 

(e) Articles of Merger; Other Actions. The Articles of Merger described in Paragraph 2.06 shall have been duly executed by FCB and filed with the South Carolina Secretary of State as provided in that Paragraph.

 

8.02. Additional Conditions to SFC’s and SNB’s Obligations. Notwithstanding any other provision of this Agreement to the contrary, but except as otherwise provided in Paragraphs 8.02(a) and 8.02(c) below, SFC’s and SNB’s separate obligation to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following conditions precedent on or before the Closing Date:

 

(a) Material Adverse Change. Since the date of this Agreement, there shall not have occurred any FCB Material Adverse Change, and there shall not have occurred any events or developments, and there shall not exist any conditions or circumstances which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in any FCB Material Adverse Change. Following Bancorp’s completion of the subordinated debt offering described in Paragraphs 8.02(i) and 8.03(d) below, this Paragraph 8.02(a) shall terminate and be of no further force or effect and shall no longer be a condition to SFC’s and SNB’s obligations hereunder, without regard to the occurrence of any change, event, development, condition or circumstance described above, whether before or after the completion of the offering.

 

(b) Compliance with Laws. FCB shall have complied in all material respects with all federal and state laws and regulations applicable to the transactions described in this Agreement where the violation of or failure to comply with any such law or regulation could or may be material and adverse to FCB’s ability to consummate the Merger.

 

(c) FCB’s and Bancorp’s Representations and Warranties and Performance of Agreements; Officers’ Certificate. Unless waived in writing by SFC as provided in Paragraph 11.02, each of the representations and warranties of FCB and Bancorp contained in this Agreement shall have been true and correct in all material respects as of the date hereof, and they shall remain true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of such date, except (i) for changes or exceptions which, individually or in the aggregate, have not had, and cannot reasonably be expected to have, an FCB Material Adverse Effect, or (ii) as otherwise contemplated by this Agreement; and FCB and Bancorp each shall have performed in all material respects all of its obligations, covenants and agreements hereunder to be performed by it on or before the Closing Date. As provided in Articles IV and VI, following Bancorp’s completion of the subordinated debt offering described in Paragraphs 8.02(i) and 8.03(d) below, FCB’s and Bancorp’s representations and warranties under Paragraphs 4.05, 4.06 and 4.07, and its covenant under Paragraph 6.03, shall terminate and be of no further force or effect, and the truth and accuracy of those representations and warranties,

 

and compliance with that covenant, whether before or after completion of the offering, shall no longer be conditions to SFC’s and SNB’s obligations hereunder.

 

SFC and SNB shall have received a certificate dated as of the Closing Date and executed by FCB and Bancorp and their Chief Executive Officer and Chief Financial Officer to the effect that the conditions of this subparagraph have been met and as to such other matters as may be reasonably requested by SFC.

 

(d) Legal Opinion of FCB’s Counsel.  SFC shall have received the written legal opinion of Sherrill & Roof, LLP, legal counsel to FCB and Bancorp, dated as of the Closing Date, substantially in the form attached as Exhibit B to this Agreement.

 

(e) Other Documents and Information.  FCB and Bancorp each shall have provided to SFC correct and complete copies (certified by its Secretary) of its Articles of Incorporation and Bylaws and resolutions of their respective Boards of Directors and and FCB’s sole shareholder pertaining to approval of this Agreement and the Merger and other transactions contemplated herein, together with a certificate of the incumbency of FCB’s and Bancorp’s officers who executed this Agreement or any other documents delivered to SFC and SNB in connection with the Closing.

 

(f) Fairness Opinion. SFC shall have received from its financial adviser, Allen C. Ewing & Co., a written opinion, dated one business day prior to the mailing date for the Proxy Statement, in a form reasonably satisfactory to it (the “SFC Fairness Opinion”), to the effect that the terms of the Merger, including the consideration to be received by SFC’s shareholders in the Merger, is fair, from a financial point of view, to SFC and its shareholders, and Allen C. Ewing & Co. shall have delivered a letter to SFC, dated as of the Closing Date, to the effect that it remains its opinion that the terms of the Merger are fair, from a financial point of view, to SFC and its shareholders. SFC shall use commercially reasonable efforts to obtain the SFC Fairness Opinion and the subsequent letter from Allen C. Ewing & Co.

 

(g) Acceptance by SFC’s Counsel.  The form and substance of all legal matters described in this Agreement or related to the transactions contemplated herein shall be reasonably acceptable to SFC’s legal counsel.

 

(h) Deposit of Merger Consideration.  FCB shall have deposited the Merger Consideration with the Paying Agent as described in Paragraph 2.04(c).

 

(i) Completion of Subordinated Debt Offering. Bancorp shall have completed an issuance and sale of subordinated debt securities in an aggregate original principal amount of not less than $75,000,000.

 

8.03. Additional Conditions to FCB’s and Bancorp’s Obligations. Notwithstanding any other provision of this Agreement to the contrary, FCB’s and Bancorp’s separate obligation to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following conditions precedent on or before the Closing Date:

 

(a) Material Adverse Change.  Since the date of this Agreement, there shall not have occurred any SFC Material Adverse Change, and there shall not have occurred any events or developments, and there shall not exist any conditions or circumstances which, individually or in the aggregate, and with the lapse of time or otherwise, reasonably could be expected to cause, create or result in any SFC Material Adverse Change.

 

(b) Compliance with Laws.  SFC and SNB each shall have complied in all material respects with all federal and state laws and regulations applicable to the transactions described in this

 

Agreement where the violation of or failure to comply with any such law or regulation reasonably could be expected to cause, create or result in an SFC Material Adverse Effect.

 

(c) SFC’s and SNB’s Representations and Warranties and Performance of Agreements; Officers’ Certificate.  Unless waived in writing by FCB as provided in Paragraph 11.02, each of the representations and warranties of SFC and SNB contained in this Agreement shall have been true and correct in all material respects as of the date hereof, and they shall remain true and correct in all material respects at and as of the Closing Date with the same force and effect as though made on and as of such date, except (i) for changes or exceptions which, individually or in the aggregate, have not had, and cannot reasonably be expected to have, an SFC Material Adverse Effect, or (ii) as otherwise contemplated by this Agreement; and SFC and SNB each shall have performed in all material respects all its obligations, covenants and agreements hereunder to be performed by it on or before the Closing Date.

 

FCB and Bancorp shall have received a certificate dated as of the Closing Date and executed by SFC and SNB and their Chief Executive Officer and Chief Financial Officer to the effect that the conditions of this subparagraph have been met and as to such other matters as may be reasonably requested by FCB.

 

(d) Completion of Subordinated Debt Offering. Bancorp shall have successfully completed an issuance and private placement, through Wachovia Securities, Inc., and without any requirement of registration under the Securities Act of 1933, as amended, of subordinated debt securities in an aggregate original principal amount of not less than $75,000,000 and which shall be on terms (including without limitation maturity date, interest rate and placement fees or commissions) which are no less favorable to Bancorp than those set forth in Exhibit C to this Agreement and the net proceeds of which shall qualify for treatment as “Tier II” capital on Bancorp’s books under applicable rules and policies of the FRB.

 

(e) Employment Agreements. (i) The New Employment Agreements described in Paragraph 7.08(a) shall have been executed and delivered by SFC and each of the officers of SNB named in that subparagraph, and SFC shall have delivered a fully executed copy of each such Employment Agreement to FCB, and each such Employment Agreement shall remain in full force and effect and shall not have been modified or amended by SFC except with the written consent of FCB; and (ii) each of the Existing Employment Agreements described in Paragraph 7.08(b) shall remain in full force and effect and shall not have been modified or amended by SFC except with the written consent of FCB.

 

(f) Termination of SFC Stock Options. Except to the extent that they shall previously have been exercised in accordance with their terms or cancelled in accordance with the terms of the applicable stock option plans under which they were issued, each holder of an unexercised SFC Stock Option that is outstanding immediately prior to the Closing shall have executed and delivered to SFC an Option Release in a form reasonably satisfactory to FCB, and all outstanding SFC Stock Options shall have been effectively terminated, all in the manner described in Paragraph 7.10, effective not later than the Effective Time.

 

(g) Consents to Assignments; Estoppel Certificates. SFC shall have obtained and delivered to FCB the consents to assignments of contracts (including estoppel certificates pertaining to Lease Agreements) requested by FCB pursuant to Paragraph 5.01(g) above with respect to (i) each Lease Agreement covering any banking office of SNB, and (ii) except to the extent that the failure to obtain any such consent could not reasonably be expected to have an SFC Material Adverse Effect or, following the Effective Time, an FCB Material Adverse Effect, or to result in a material disruption in the business of any of the SFC Companies or, following the Effective Time, FCB, each other contract of any of the SFC Companies.

 

(h) Legal Opinion of SFC’s Counsel.  FCB shall have received the written legal opinion of McNair Law Firm, P.A., legal counsel to SFC and SNB, dated as of the Closing Date, substantially in the form attached as Exhibit D to this Agreement.

 

(i) Other Documents and Information. SFC and SNB shall have provided to FCB correct and complete copies (all certified by SFC’s and SNB’s Secretaries) of SFC’s and SNB’s Articles of Incorporation or Association, as applicable, and Bylaws, and resolutions of their respective Boards of Directors and shareholders pertaining to approval of this Agreement and the Merger and other transactions contemplated herein, together with a certificate as to the incumbency of SFC’s and SNB’s officers who executed this Agreement or any other documents delivered to FCB in connection with the Closing.

 

(j) Acceptance by FCB’s Counsel. The form and substance of all legal matters described in this Agreement or related to the transactions contemplated herein shall be reasonably acceptable to FCB’s legal counsel.

 

 

9.01. Mutual Termination.  At any time prior to the Effective Time (and whether before or after approval hereof by the shareholders of SFC), this Agreement may be terminated by the mutual agreement of SFC and FCB. Upon any such mutual termination, all obligations of SFC, SNB, FCB and Bancorp hereunder shall terminate and each party shall pay its own costs and expenses as provided in Paragraph 7.07.

 

9.02. Unilateral Termination.  Prior to the Effective Time, this Agreement may be terminated by either FCB or SFC (whether before or after approval hereof by SFC’s shareholders) upon written notice to the other parties in the manner provided herein and under the circumstances described below.

 

(a) Termination by FCB.  This Agreement may be terminated by FCB by action of its Board of Directors or Executive Committee:

 

(i) if any of the conditions to FCB’s and Bancorp’s obligations set forth in Paragraphs 8.01(a)(i), 8.01(a)(ii), or 8.03(d) above shall not have been satisfied in all material respects or effectively waived in writing by FCB by September 30, 2005 (except to the extent the failure of such condition to be satisfied has been caused by the failure of FCB or Bancorp to satisfy any of its obligations, covenants or agreements contained herein);

 

(ii) if SFC or SNB shall have violated or failed to fully perform any of their obligations, covenants or agreements contained in Article V or VII herein in any material respect;

 

(iii) if FCB determines at any time that (A) any of SFC’s or SNB’s representations or warranties contained in Article III above or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading in any material respect when made or would have been false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of SFC, or that (B) there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, reasonably could be expected to cause any such representations or warranties to become false or misleading in any material respect or that would cause any such representation or warranty to become false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of SFC, except, in either such case, for inaccuracies, changes and exceptions in and to representations or warranties that, individually or in the aggregate, have not had, and cannot reasonably be expected to have, an SFC Material Adverse Effect;

 

(iv) if SFC’s shareholders do not approve this Agreement and the Merger at the SFC Shareholders’ Meeting or if, notwithstanding FCB’s and Bancorp’s satisfaction in all material respects of their obligations under Paragraphs 7.02 above, the SFC Shareholders’ Meeting is not held by September 30, 2005;

 

(v) if the Merger shall not have become effective on or before December 31, 2005, or such later date as shall be mutually agreed upon in writing by FCB and SFC;

 

(vi) under the circumstances described in Paragraph 7.04; or

 

(vii) if, for the reasons and to the extent permitted by Paragraph 5.01(a), the Proxy Statement distributed by SFC to its shareholders in connection with the SFC Shareholders’ Meeting does not state that SFC’s Board of Directors considers the Merger to be advisable and in the best interests of SFC and its shareholders and that the Board recommends that SFC’s shareholders vote for approval of the Plan of Merger (or, after having made such a recommendation in the Proxy Statement, the Board withdraws, qualifies or revises that recommendation in any material respect).

 

However, before FCB may terminate this Agreement for any of the reasons specified above in (i), (ii) or (iii) of this Paragraph 9.02(a), it shall give written notice to SFC in the manner provided herein stating its intent to terminate and a description of the specific breach, default, violation or other condition giving rise to its right to so terminate, and such termination by FCB shall not become effective if, within 30 days following the giving of such notice, SFC or SNB shall cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of FCB or, if such breach, default, violation or other condition is not reasonably susceptible to cure or satisfaction within 30 days, then, following receipt of FCB’s written notice, SFC or SNB shall have promptly commenced good faith efforts to cure or satisfy the breach, default, violation or condition, shall diligently continue those efforts, and shall actually cure or satisfy the breach, default, violation or condition to FCB’s reasonable satisfaction within a reasonable time thereafter. In the event SFC or SNB cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of FCB within such notice period (or during the extended period described above), termination of this Agreement by FCB thereafter shall be effective upon its giving of written notice of termination to SFC in the manner provided herein.

 

(b) Termination by SFC.  Prior to the Effective Time, this Agreement may be terminated by SFC by action of its Board of Directors:

 

(i) if any of the conditions to SFC’s and SNB’s obligations set forth in Paragraph 8.01(a)(i), 8.01(a)(ii) or 8.02(i) above shall not have been satisfied in all material respects or effectively waived in writing by SFC by September 30, 2005 (except to the extent that the failure of such condition to be satisfied has been caused by the failure of SFC or SNB to satisfy any of its obligations, covenants or agreements contained herein);

 

(ii) if FCB or Bancorp shall have violated or failed to fully perform any of their obligations, covenants or agreements contained in Article VI or VII herein in any material respect except for breaches, violations or failures that, individually or in the aggregate, have not had, and cannot reasonably be expected to have, a material adverse effect on FCB’s ability to consummate the Merger or as otherwise provided in Paragraph 8.02(c);

 

(iii) if SFC determines at any time that, except as otherwise provided in Paragraph 8.02(c), (A) any of FCB’s or Bancorp’s representations and warranties contained in Article IV herein or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading in any material respect when made or would have been false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best

 

Knowledge of FCB, or that (B) there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, reasonably could be expected to cause any such representations or warranties to become false or misleading in any material respect or that would cause any such representation or warranty to become false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of FCB, except, in either such case, for inaccuracies, changes and exceptions in and to representations or warranties that, individually or in the aggregate, have not had, and cannot reasonably be expected to have, a material adverse effect on FCB’s ability to consummate the Merger;

 

(iv) if, notwithstanding SFC’s satisfaction of its obligations under Paragraphs 5.01(a) and 7.02 above, its shareholders do not approve this Agreement and the Merger at the SFC Shareholders’ Meeting;

 

(v) if the Merger shall not have become effective on or before December 31, 2005, or such later date as shall be mutually agreed upon in writing by SFC and FCB; or,

 

(vi) in the event that the Board of Directors of SFC determines in good faith, after consultation with and receipt of the advice of its outside counsel and financial advisers, that in light of a “Superior Proposal” (as defined below) it is necessary to terminate this Agreement in order to comply with its fiduciary duties to SFC and to SFC’s shareholders under applicable law; provided, however, that SFC’s Board of Directors may terminate this Agreement pursuant to this Paragraph 9.02(b)(vi) only if it concurrently enters into an “Acquisition Agreement” (as defined below) related to a Superior Proposal; and, provided further, however, that this Agreement may be terminated pursuant to this Paragraph 9.02(b)(vi) only after the tenth business day following FCB’s receipt of written notice advising FCB that the Board of Directors of SFC is prepared to accept a Superior Proposal, and only if, during such ten-day period, if FCB so elects, SFC and its advisers shall have negotiated in good faith with FCB to make such adjustments in the terms and conditions of this Agreement as would enable FCB to proceed with the transactions contemplated herein on such adjusted terms.

 

“Superior Proposal” means an unsolicited, bona fide, written offer made by a third party to consummate an “Acquisition Proposal” (as defined below) that SFC’s Board of Directors determines, in good faith, after consulting with its outside legal counsel and its financial adviser, would, if consummated, result in a transaction that is more favorable to the shareholders of SFC than the transactions contemplated hereby.

 

“Acquisition Proposal” means any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder): (A) any merger, consolidation, share exchange, business combination, or other similar transaction involving SFC or SNB, (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of SFC’s consolidated assets in a single transaction or series of related transactions; or (C) any tender offer or exchange offer for 25% or more of the outstanding shares of SFC’s or SNB’s capital stock, or the filing of a registration statement under the Securities Act of 1933, as amended, in connection therewith.

 

“Acquisition Agreement” means any letter of intent, agreement in principle, acquisition agreement or other similar agreement, in any case in writing, that relates to or provides for any transaction that is described in or contemplated by the term Acquisition Proposal.

 

However, before SFC may terminate this Agreement for any of the reasons specified above in clause (i), (ii) or (iii) of this Paragraph 9.02(b), it shall give written notice to FCB in the manner provided herein stating its intent to terminate and a description of the specific breach, default, violation or other condition giving rise to its right to so terminate, and such termination by SFC shall not become effective if, within 30 days following the giving of such notice, FCB or Bancorp shall cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of SFC or, if such breach, default, violation or other condition is not reasonably susceptible to cure or satisfaction within 30

 

days, then, following receipt of SFC’s written notice, FCB or Bancorp shall have promptly commenced good faith efforts to cure or satisfy the breach, default, violation or condition, shall diligently continue those efforts, and shall actually cure or satisfy the breach, default, violation or condition to SFC’s reasonable satisfaction within a reasonable time thereafter. In the event FCB or Bancorp cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of SFC within such notice period (or during the extended period described above), termination of this Agreement by SFC thereafter shall be effective upon its giving of written notice thereof to FCB in the manner provided herein.

 

(c) Survival of Certain Covenants Following Termination. Notwithstanding anything contained in this Agreement to the contrary, SFC’s, SNB’s, FCB’s and Bancorp’s respective rights, obligations and liabilities pursuant to Paragraphs 7.03, 9.01, 9.02, 9.03, 9.04 and 10.01 of this Agreement shall not be affected by a termination of this Agreement, and, following any such termination, those rights, obligations and liabilities shall survive, remain in full force and effect and be fully enforceable in accordance with their terms.

 

9.03. Termination Fees.

 

(a) If FCB terminates this Agreement pursuant to Paragraph 9.02(a)(vii), then SFC shall make payment to FCB of a termination fee in the amount of $500,000. Such amount shall be paid by wire transfer of immediately available funds within two business days following such termination. Additionally, if at any time after the date of this Agreement and before the date 12 months after such termination SFC or SNB shall have executed or entered into an Acquisition Agreement, then SFC and SNB shall be obligated, jointly and severally, to make payment to FCB of an additional termination fee in the amount of $1,000,000. Such additional amount shall be paid by wire transfer of immediately available funds within two business days following the later of such termination or the date the Acquisition Agreement is executed or entered into.

 

(b) If this Agreement is terminated by SFC pursuant to Paragraph 9.02(b)(ii) where FCB’s or Bancorp’s failure to fully perform any of its obligations, covenants or agreements that gives rise to such termination was for reasons reasonably within FCB’s or Bancorp’s control, then FCB and Bancorp shall be obligated, jointly and severally, to make payment to SFC of a termination fee in the amount of $500,000. Such amount shall be paid by wire transfer of immediately available funds within two business days following such termination.

 

(c) If this Agreement is terminated by FCB pursuant to Paragraph 9.02(a)(ii) where SFC’s or SNB’s failure to fully perform any of its obligations, covenants or agreements that gives rise to such termination was for reasons reasonably within SFC’s or SNB’s control, then SFC and SNB shall be obligated, jointly and severally, to make payment to FCB of a termination fee in the amount of $500,000. Such amount shall be paid by wire transfer of immediately available funds within two business days following such termination. Additionally, if at any time after the date of this Agreement and prior to the date of such termination an Acquisition Proposal has been publicly announced, disclosed or communicated or otherwise made known to the senior management or Board of Directors of SFC, then SFC and SNB shall be obligated, jointly and severally, to make payment to FCB of an additional termination fee in the amount of $1,000,000 if, at any time after the date of this Agreement and before the date 12 months after such termination, SFC or SNB shall have executed or entered into an Acquisition Agreement. Such additional amount shall be paid by wire transfer of immediately available funds within two business days following the later of such termination or the date the Acquisition Agreement is executed or entered into.

 

(d) If this Agreement is terminated either by FCB pursuant to Paragraph 9.02(a)(iv), or by SFC pursuant to Paragraph 9.02(b)(iv), and in any such case an Acquisition Proposal has been publicly announced, disclosed or communicated or made known to the senior management or Board of Directors of SFC at any time after the date of this Agreement and prior to the date of the SFC

 

Shareholders’ Meeting or, in the case of a termination by FCB as a result of the SFC Shareholder meeting not being held by the date specified in Paragraph 9.02(a)(iv), prior to the date of such termination, then SFC and SNB shall be obligated, jointly and severally, to make payment to FCB of a termination fee in the amount of $1,500,000 if, at any time after the date of this Agreement and before the date 12 months after such termination, SFC or SNB shall have executed or entered into an Acquisition Agreement. Such amount shall be paid by wire transfer of immediately available funds within two business days following the later of such termination or the date the Acquisition Agreement is executed or entered into.

 

(e) If SFC terminates this Agreement pursuant to Paragraph 9.02(b)(vi), then SFC and SNB shall be obligated, jointly and severally, to make payment to FCB of a termination fee in the amount of $1,500,000. Such amount shall be paid by wire transfer of immediately available funds within two business days following such termination.

 

(f) Any termination fees payable by FCB, Bancorp, SFC or SNB under any provision of this Paragraph 9.03 shall be in addition to, and not in lieu of, any other amounts that also may become payable by any of them pursuant to Paragraph 9.04 below.

 

9.04. Breach; Remedies.

 

(a) Breach by SFC or SNB. Except as otherwise provided in this Paragraph 9.04, and in addition to any termination fees that FCB shall have a right to receive from SFC and SNB under Paragraph 9.03 above, in the event of a breach by SFC or SNB of any of its representations or warranties contained in Article III of this Agreement or in any other certificate or writing delivered pursuant to this Agreement, or in the event of SFC’s or SNB’s failure to perform or violation of any of its obligations, agreements or covenants contained in Articles V or VII of this Agreement, FCB’s sole right and remedy shall be to terminate this Agreement prior to the Effective Time to the extent provided in Paragraph 9.02(a); and, in the event of any such termination of this Agreement by FCB due to a failure by SFC or SNB to perform any of their obligations, agreements or covenants contained in Articles V or VII of this Agreement for reasons reasonably within its control, SFC and SNB additionally shall be obligated, jointly and severally, to reimburse FCB and Bancorp for up to (but not more than) $250,000 in expenses described in Paragraph 7.07 which actually have been incurred by FCB and Bancorp.

 

(b) Breach by FCB or Bancorp. Except as otherwise provided in this Paragraph 9.04, and in addition to any termination fees that SFC shall have a right to receive from FCB and Bancorp under Paragraph 9.03 above, in the event of a breach by FCB or Bancorp of any of its representations or warranties contained in Article IV of this Agreement, or in the event of FCB’s or Bancorp’s failure to perform or violation of any of its obligations, agreements or covenants contained in Articles VI or VII of this Agreement, SFC’s and SNB’s sole right and remedy shall be to terminate this Agreement prior to the Effective Time to the extent provided in Paragraph 9.02(b); and, in the event of any such termination of this Agreement by SFC and SNB due to a failure by FCB to perform any of its obligations, agreements or covenants contained in Articles VI or VII of this Agreement for reasons reasonably within its control, FCB and Bancorp additionally shall be obligated to reimburse SFC and SNB for up to (but not more than) an aggregate of $250,000 in expenses described in Paragraph 7.07 which actually have been incurred by SFC and SNB.

 

(c) Willful and Intentional Breach. Notwithstanding subparagraphs 9.04(a) and 9.04(b) or any other provision of this Agreement to the contrary, if either party to this Agreement breaches this Agreement by willfully or intentionally and without justification refusing to consummate the transactions described in this Agreement or perform its obligations contained in Articles V, VI or VII of this Agreement, such party shall be obligated to pay all expenses actually incurred by the other parties described in Paragraph 7.07, together with other damages recoverable at law or in equity. For purposes of this Paragraph 9.04(c), the good faith refusal of a party to perform any of its obligations under this Agreement pursuant to an exception expressly provided for herein with respect to the exercise by its Board of Directors of fiduciary duties shall not be deemed to be without justification.

 

(d) Other Remedies. Notwithstanding any other provision of this Article IX to the contrary, either party shall be entitled to commence an action to obtain appropriate equitable relief in the event of a violation or imminent violation by the other party of Paragraph 7.03 above or to enforce the indemnification obligation of the other party under Paragraph 10.01 below.

 

 

10.01. Indemnification Following Termination of Agreement.

 

(a) By SFC and SNB.  SFC and SNB agree that, in the event this Agreement is terminated for any reason and the Merger is not consummated, it will indemnify, hold harmless and defend FCB and Bancorp and their respective officers, directors, attorneys, financial advisers and consultants from and against any and all claims, disputes, demands, causes of action, suits or proceedings of any third party (including any Regulatory Authority), together with all losses, damages, liabilities, obligations, costs and expenses of every kind and nature in connection therewith (including without limitation reasonable attorneys’ fees and legal costs and expenses in connection therewith), whether known or unknown, and whether now existing or hereafter arising, which may be threatened against, incurred, undertaken, received or paid by them:

 

(i) in connection with or which arise out of, result from, or are based upon (A) the operations or business transactions of any of the SFC Companies or their relationship with any of their employees, or (B) the failure of any of the SFC Companies’ to comply with any statute or regulation of any federal, state or local government or agency (or any political subdivision thereof) in connection with the transactions described in this Agreement;

 

(ii) in connection with or which arise out of, result from, or are based upon any fact, condition or circumstance that constitutes a breach by SFC or SNB of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of SFC or SNB to perform any of its covenants, agreements or obligations under or in connection with this Agreement; or,

 

(iii) in connection with or which arise out of, result from, or are based upon any information provided by SFC or SNB which is included in the Proxy Statement and which information causes the Proxy Statement at the time of its mailing to SFC’s shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not false or misleading.

 

(b) By FCB and Bancorp.  FCB and Bancorp each agrees that, in the event this Agreement is terminated for any reason and the Merger is not consummated, it will indemnify, hold harmless and defend SFC and SNB and their respective officers, directors, attorneys, financial advisers and consultants from and against any and all claims, disputes, demands, causes of action, suits, proceedings of any third party (including any Regulatory Authority), together with all losses, damages, liabilities, obligations, costs and expenses of every kind and nature in connection therewith (including without limitation reasonable attorneys’ fees and legal costs and expenses in connection therewith), whether known or unknown, and whether now existing or hereafter arising, which may be threatened against, incurred, undertaken, received or paid by them:

 

(i) in connection with or which arise out of, result from, or are based upon (A) FCB’s or Bancorp’s operations or business transactions or their relationship with any of their employees, or (B) FCB’s or Bancorp’s failure to comply with any statute or regulation of any federal, state

 

or local government or agency (or any political subdivision thereof) in connection with the transactions described in this Agreement;

 

(ii) in connection with or which arise out of, result from, or are based upon any fact, condition or circumstance that constitutes a breach by FCB or Bancorp of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of FCB or Bancorp to perform any of its covenants, agreements or obligations under or in connection with this Agreement; or,

 

(iii) in connection with or which arise out of, result from, or are based upon any information provided by FCB or Bancorp which is included in the Proxy Statement and which information causes the Proxy Statement at the time of its mailing to SFC’s shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not false or misleading.

 

(c) Procedure for Claiming Indemnification. If any matter subject to indemnification under this Paragraph 10.01 arises in the form of a claim (herein referred to as a “Third Party Claim”) against SFC, SNB or FCB, or their respective successors and assigns, or any of their respective subsidiary entities, officers, directors, attorneys, financial advisers or consultants (collectively, “Indemnitees”), the Indemnitee promptly shall give notice and details thereof, including copies of all pleadings and pertinent documents, to the party obligated for indemnification hereunder (the “Indemnitor”). Within 15 days of such notice, the Indemnitor either (i) shall pay the Third Party Claim either in full or upon agreed compromise, or (ii) shall notify the applicable Indemnitee that the Indemnitor disputes the Third Party Claim and intends to defend against it, and thereafter shall so defend and pay any adverse final judgment or award in regard thereto. Such defense shall be controlled by the Indemnitor and the cost of such defense shall be borne by it, except that the Indemnitee shall have the right to participate in such defense at its own expense and provided that the Indemnitor shall have no right in connection with any such defense or the resolution of any such Third Party Claim to impose any cost, restriction, limitation or condition of any kind that compromises the Indemnitee hereunder. In the case of an Indemnitee that is an officer, director or attorney of a party to this Agreement, then that party agrees that it shall cooperate in all reasonable respects in the defense of any such Third Party Claim, including making personnel, books and records relevant to the Third Party Claim available to the Indemnitor without charge therefor except for out-of-pocket expenses. If the Indemnitor fails to take action within 15 days as hereinabove provided or, having taken such action, thereafter fails diligently to defend and resolve the Third Party Claim, the Indemnitee shall have the right to pay, compromise or defend the Third Party Claim and to assert the indemnification provisions hereof. The Indemnitee also shall have the right, exercisable in good faith, to take such action as may be necessary to avoid a default prior to the assumption of the defense of the Third Party Claim by the Indemnitor.

 

10.02

Indemnification of SFC’s, SNB’s, FFI’s and SIS’s Directors and Officers Following Effective Time.

 

(a) From and after the Effective Time, and without releasing any insurance carrier and after exhaustion of all applicable director and officer liability insurance coverage for SFC, SNB, SIS and FFI and their directors and officers, FCB, as successor in interest to SFC and SNB, will be obligated to indemnify each present and former director and officer of SFC, SNB, SIS and FFI, and each officer or employee of SFC, SNB, SIS and FFI that is serving or has served as a director or trustee of another entity expressly at SFC’s or SNB’s request or direction (each, an “Indemnified Party”), as and to the extent that each of those persons would have had a right to be indemnified by SFC, SNB, SIS and FFI under their respective Articles of Incorporation or Association, as applicable, and Bylaws in effect on the date of this Agreement, or under Chapter 8 of the South Carolina Business Corporation Act of 1988, or under The National Bank Act, had the Merger not been consummated, against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, amounts paid in settlement, losses, claims damages or

 

liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time (including the transaction contemplated by this Agreement), whether asserted or claimed prior to, at or after the Effective Time, as they are from time to time incurred.

 

(b) Any Indemnified Party wishing to claim indemnification under this Section 10.02, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify FCB thereof, but the failure to so notify shall not relieve FCB of any liability it may have hereunder to such Indemnified Party if such failure does not materially and substantially prejudice FCB. Notwithstanding anything contained in this Section 10.02 to the contrary, FCB shall have the right to assume the defense of any such claim, action, suit, proceeding or investigation and, upon such assumption, FCB shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses incurred by such Indemnified Party in connection with the defense thereof. However, if FCB elects not to assume such defense or counsel for such Indemnified Party, or if there are issues which raise conflicts of interest between FCB and such Indemnified Party, such Indemnified Party may retain counsel reasonably satisfactory to him, and FCB shall pay the reasonable fees and expenses of such counsel.

 

(c) Notwithstanding anything contained in this Section 10.02 to the contrary, FCB shall not be liable for any settlement of any such claim, action, suit, proceeding or investigation that is effected without its prior written consent.

 

(d) In the event FCB or any of its successors or assigns (i) consolidates with or merges into any other person or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of FCB assume the obligations set forth in this Section 10.02.

 

(e) The provisions of this Section 10.02 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her representatives.

 

 

11.01. Survival of Representations, Warranties, Indemnification and Other Agreements.

 

(a) Representations, Warranties and Other Agreements. Except as provided below, none of the representations, warranties or agreements of SFC, SNB, FCB or Bancorp contained in this Agreement shall survive consummation of the Merger, and no party shall have any right after the Effective Time to recover damages or any other relief from any other party to this Agreement by reason of any breach of representation or warranty, any nonfulfillment or nonperformance of any agreement contained herein, or otherwise.

 

(b) Indemnification. The agreements of SFC, SNB, FCB and Bancorp under Paragraph 10.01 of this Agreement shall become effective only in the event that this Agreement is terminated, and those agreements shall survive any such termination, and neither of the parties shall have any obligations under Paragraph 10.01 in the event of or following consummation of the Merger. The agreements of FCB under Paragraph 10.02 of this Agreement shall become effective only at the Effective Time and in the event that the Merger is consummated, and FCB shall have no obligation under Paragraph 10.02 in the event that this Agreement is terminated and the Merger is not consummated.

 

11.02. Waiver.  Any term or condition of this Agreement may be waived (except as to matters of regulatory approvals and other approvals required by law), either in whole or in part, at any time by the party which is, and whose shareholders are, entitled to the benefits thereof; provided, however, that any such waiver shall be effective only upon a determination by the waiving party (through action of its Board of Directors or, in FCB’s case, by its Board of Directors or Executive Committee) that such waiver would not adversely affect the interests of the waiving party or its shareholders; and, provided further, that no waiver of any term or condition of this Agreement by any party shall be effective unless such waiver is in writing and signed by the waiving party, nor shall any such waiver be construed to be a waiver of any succeeding breach of the same term or condition or a waiver of any other or different term of condition. No failure or delay of any party to exercise any power, or to insist upon a strict compliance by the other party of any obligation, and no custom or practice at variance with any terms hereof, shall constitute a waiver of the right of any party to demand full and complete compliance with such terms.

 

11.03. Amendment.  This Agreement may be amended, modified or supplemented at any time or from time to time prior to the Effective Time, and either before or after its approval by the shareholders of SFC, by an agreement in writing approved by the Boards of Directors of SFC and SNB and the Boards of Directors or Executive Committees of FCB and Bancorp and executed in the same manner as this Agreement; provided however, that, except with the further approval of SFC’s shareholders of that change or as otherwise provided herein, following approval of this Agreement by SFC’s shareholders no change may be made in the amount of consideration into which each share of SFC Stock will be converted.

 

11.04. Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or by recognized overnight courier, by U.S. mail, first class postage prepaid, in each case addressed as follows (or to such other address as shall have been communicated to the party giving the notice as provided above):

 

If to SFC or SNB, to:   Summit Financial Corporation 2201 Augusta Road Greenville, South Carolina 29605 Attn: J. Randolph Potter, Chief Executive Officer	With copy to:   John W. Currie McNair Law Firm, P.A. 1301 Gervais Street Columbia, South Carolina 29201
If to FCB, to:   First Citizens Bank and Trust Company, Inc. 1225 Lady Street Columbia, South Carolina 29201 Attn: Craig L. Nix, Chief Financial Officer	With copy to:   William R. Lathan, Jr.        C. Joseph Roof Ward and Smith, P.A.       Sherrill & Roof LLP 1001 College Court            1122 Lady St., Suite 700 New Bern, NC 28562          Columbia, SC 29201

11.05. Previous Disclosure of Information.  In order for information to be treated as having been “Previously Disclosed” by either SFC and SNB to FCB, or by FCB and Bancorp to SFC, respectively, such information shall be contained in a letter delivered by the disclosing party(ies) to the other(s) prior to the date of this Agreement, which letter specifically refers to this Agreement and is arranged in paragraphs corresponding to the Paragraphs and Subparagraphs of this Agreement applicable thereto.

 

11.06. Further Assurance.  SFC, SNB, FCB and Bancorp each agrees to furnish to each other party such further assurances with respect to the matters contemplated in this Agreement and their respective agreements, covenants, representations and warranties contained herein, including the opinion of legal counsel, as such other party may reasonably request.

 

11.07. Headings and Captions.  Headings and captions of the Paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part hereof.

 

11.08. Gender and Number. As used in this Agreement, the masculine gender shall include the feminine and neuter, the singular number shall include the plural, and vice versa, whenever such meanings are appropriate.

 

11.09. Entire Agreement.  This Agreement (including all schedules and exhibits attached hereto and all documents incorporated herein by reference) contains the entire agreement of the parties with respect to the transactions described herein and supersedes any and all other oral or written agreement(s) heretofore made, and there are no representations or inducements by or to, or any agreements between, either of the parties hereto other than those contained herein in writing.

 

11.10. Severability of Provisions.  The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or other provision hereof shall in no way affect the validity or enforceability of any other provision or part hereof.

 

11.11. Assignment.  This Agreement may not be assigned by either party hereto except with the prior written consent of the other parties hereto.

 

11.12. Counterparts.   Any number of counterparts of this Agreement may be signed and delivered, each of which shall be considered an original and which together shall constitute one agreement.

 

11.13. Governing Law.  This Agreement is made in and shall be construed and enforced in accordance with the laws of South Carolina.

 

11.14. Inspection.  Any right of FCB and Bancorp under this Agreement to investigate or inspect the premises, properties, books, records, files and other assets or information of SFC, SNB, FFI or SIS, or of SFC and SNB to investigate or inspect the same of FCB and Bancorp, in no way shall establish any presumption that either of them should have conducted any investigation or that such right has been exercised by it, its agents, representatives or others. Any investigations or inspections actually made by SFC, SNB, FCB or Bancorp, or by either of their agents, representatives or others, prior to the date of this Agreement or otherwise prior to the Effective Time shall not be deemed in any way in derogation or limitation of the covenants, representations and warranties made by or on behalf of either such party in this Agreement.

 

IN WITNESS WHEREOF, SFC, SNB and FCB each has caused this Agreement to be executed in its name by its duly authorized officers and its corporate seal to be affixed hereto as of the date first above written.