SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information known to the Company with respect to beneficial ownership of the Company’s common stock as of November 1, 2017 for (i) each current director of the Company, (ii) each of the Company’s named executive officers, (iii) each holder of 5.0% or greater of the Company’s common stock, and (iv) all of the Company’s directors and executive officers as a group. Unless otherwise indicated, the mailing address for each beneficial owner is care of Independence Bancshares, Inc., 500 East Washington St., Greenville, South Carolina 29601.
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Shares of Common
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Options for Common
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Stock Issuable Upon
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Shares Exercisable
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Conversion of Series A
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Percentage of
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Common Shares
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within 60 Days of
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Preferred Shares
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Beneficial
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Name
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Beneficially Owned
(1)
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November 1, 2017
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Beneficially Owned
(2)
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Total
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Ownership
(3)
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Directors of the Company
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Russell Echlov
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-
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-
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3,062,500
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(5)(11)(12)(13)
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3,062,500
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9.87
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%
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H. Neel Hipp, Jr.
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201,500
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20,000
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-
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221,500
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0.74
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%
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Adam G. Hurwich
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-
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-
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3,062,500
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(7)
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3,062,500
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9.87
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%
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Lawrence R. Miller
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81,250
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80,385
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-
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161,635
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0.54
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%
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Keith Stock
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125,000
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(8)
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20,000
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125,000
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(9)
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270,000
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0.48
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%
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Robert B. Willumstad
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1,250,000
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762,500
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312,500
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2,325,000
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7.72
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%
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Named Executive Officers (Non-Directors)
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Martha L. Long
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62,500
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47,500
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-
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110,000
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0.37
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%
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E. Fred Moore
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4,125
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-
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4,125
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0.01
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%
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Other Holders of 5% or Greater of the Company’s Common Stock
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Aequitas Capital Opportunities Fund, LP
5300 Meadows Road, Suite 400
Lake Oswego, OR 97035
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-
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-
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3,062,500
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(10)
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3,062,500
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10.17
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%
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Huntington Partners, LLLP
10 S. Wacker Drive, Suite 2675
Chicago, IL 60606
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1,875,000
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-
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-
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1,875,000
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6.23
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%
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Iron Road Multi-Strategy Fund LP
115 S. LaSalle, 34th Floor
Chicago, IL 60603
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-
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-
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312,500
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(11)
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312,500
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1.04
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%
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Mendon Capital Master Fund Ltd.
115 S. LaSalle, 34th Floor
Chicago, IL 60603
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-
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-
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2,387,500
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(12)
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2,387,500
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7.93
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%
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Mendon Capital QP LP
115 S. LaSalle, 34th Floor
Chicago, IL 60603
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-
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-
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362,500
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(13)
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362,500
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1.20
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%
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Ulysses Offshore Fund, Ltd.
c/o Ulysses Management LLC
One Rockefeller Plaza
New York, New York 10020
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-
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-
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375,000
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(14)
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375,000
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1.25
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%
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Ulysses Partners, L.P.
c/o Ulysses Management LLC
One Rockefeller Plaza
New York, New York 10020
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-
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-
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2,687,500
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(14)
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2,687,500
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8.93
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%
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Gordon A. Baird
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412,250
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(4)
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1,500,000
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-
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1,912,250
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6.05
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%
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Alvin G. Hageman
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652,100
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(6)
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37,500
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156,250
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845,850
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6.93
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%
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All directors and executive officers of the Company as a group (7 persons)
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1,720,250
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930,385
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6,562,000
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9,212,635
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29.59
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%
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(1)
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Includes shares for which the named person has sole voting and investment power, has shared voting and investment power with a spouse, or holds in an IRA or other retirement plan program, unless otherwise indicated in these footnotes.
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37
Table of Contents
(2)
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Each share of Series A preferred stock is convertible, at the holder’s option, into 1,250 shares of our common stock. The Series A preferred stock is also automatically converted upon the satisfaction of certain conditions.
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(3)
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For each individual, this percentage is determined by assuming the named person converts all shares of Series A preferred stock which he or she beneficially owns and exercises all options and warrants which he or she has the right to acquire within 60 days, but that no other persons convert any shares of Series A preferred stock or exercise any options or warrants. For the directors and executive officers as a group, this percentage is determined by assuming that each director and executive officer converts all shares of Series A preferred stock which he or she beneficially owns and exercises all options and warrants which he or she has the right to acquire within 60 days, but that no other persons convert any shares of Series A preferred stock or exercise any options or warrants. The calculations are based on 20,502,760 shares of common stock outstanding on November 1, 2017.
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(4)
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Based on a Schedule 13D/A filing made on July 14, 2015, consists of 900,000 shares of common stock held by Baird Hageman & Co. Series 1, LLC and 172,250 shares of common stock individually owned by Gordon A. Baird. Mr. Baird and Alvin G. Hageman are the members of the board of managers of Baird Hageman & Co., LLC and therefore share voting and investment power over the shares. The foregoing is not an admission by Mr. Baird that he is the beneficial owner of the shares held by Baird Hageman & Co., LLC. The address of Baird Hageman & Co., LLC is c/o Baird Hageman & Co., LLC, 33 Christie Hill Road, Darien, CT 06820.
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(5)
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Consists of 1,910 shares of Series A preferred stock,
which are convertible into 2,387,500 shares of common stock, held by Mendon Capital Master Fund Ltd., 250 shares of Series A
preferred stock, which are convertible into 312,500 shares of c.s., held by Iron Road Multi-Strategy Fund LP, and 290 shares
of Series A preferred stock, which are convertible into 362,500 shares of common stock, owned by Mendon Capital QP LP. Mr.
Echlov is an assistant portfolio manager with RMB Capital Management, LLC, an affiliate of Mendon Capital Master Fund Ltd., Iron Road Multi-Strategy Fund LP and Mendon Capital QP LP. Accordingly, Mr. Echlov may be deemed to be the beneficial owner of shares of Series A
preferred stock held by Mendon Capital Master Fund Ltd., Iron Road Multi-Strategy Fund LP and Mendon Capital QP LP.
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(6)
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Based on a Schedule 13D/A filing made on July 14, 2015, consists of 900,000 shares of common stock held by Baird Hageman & Co. Series 1, LLC and 490,250 shares of common stock individually owned by The Hageman 2013 Grantor Trust. Mr. Hageman and Gordon A. Baird are the members of the board of managers of Baird Hageman & Co., LLC and therefore share voting and investment power over the shares. The foregoing is not an admission by Mr. Hageman that he is the beneficial owner of the shares held by Baird Hageman & Co., LLC. The address of Baird Hageman & Co., LLC is c/o Baird Hageman & Co., LLC, 33 Christie Hill Road, Darien, CT 06820.
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(7)
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Consists of 300 shares of Series A preferred stock, which are convertible into 375,000 shares of common stock, held by Ulysses Offshore Fund, Ltd. and 2,150 shares of Series A preferred stock, which are convertible into 2,687,500 shares of common stock, owned by Ulysses Partners, L.P. Mr. Hurwich is a portfolio manager with Ulysses Management LLC, the investment manager of Ulysses Offshore Fund, Ltd. and Ulysses Partners, L.P. Accordingly, Mr. Hurwich may be deemed to be the beneficial owner of shares of Series A preferred stock held by Ulysses Offshore Fund, Ltd. and Ulysses Partners, L.P.
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(8)
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Consists of 125,000 shares of common stock held by First Financial Partners Fund II, LP. Mr. Stock serves as general partner for FFP Affiliates II, LP, which in turn serves as the general partner of First Financial Partners Fund II, LP. Its address is One Stamford Forum, 201 Tresser Blvd., Stamford, CT 06901.
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(9)
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Consists of 100 shares of Series A preferred stock, which are convertible into 125,000 shares of common stock, held by First Financial Partners Fund II, LP. As noted above, Mr. Stock serves as general partner for FFP Affiliates II, LP, which in turn serves as the general partner of First Financial Partners Fund II, LP.
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(10)
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The general partner of Aequitas Capital Opportunities Fund, LP, is Aequitas Capital Opportunities GP, LLC (“ACOF GP”), and its investment advisor is Aequitas Investment Management, LLC (“AIM”). Both ACOF GP and AIM are subsidiaries of Aequitas Capital Management, Inc. (“ACM”). Each of ACOF GP, AIM and ACM may be deemed to be beneficial owners of the 2,450 shares of Series A preferred stock, which are convertible into 3,062,500 shares of common stock, held directly by Aequitas Capital Opportunities Fund, LP. The principal address of each of the above entities is 5300 Meadows Road, Suite 400, Lake Oswego, Oregon 97035.
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(11)
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Iron Road Multi-Strategy Fund LP is owned by Iron Road Multi-Strategy Fund Ltd. as well as other investors and is managed by Iron Road Capital Partners LLC and its investment adviser is RMB Capital Management LLC (“RMB Capital Management”). Iron Road Capital Partners LLC is owned by RMB Capital Management. RMB Capital Management is wholly-owned by RMB Capital Holdings LLC (“RMB Holdings”). Each of the foregoing may be deemed to be beneficial owners of the 250 shares of Series A preferred stock, which are convertible into 312,500 shares of common stock, held directly by Iron Road Multi-Strategy Fund LP. The principal address of each of the above entities is 115 S. LaSalle, 34th Floor, Chicago, IL 60603.
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(12)
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Mendon Capital Master Fund Ltd. is owned by Mendon Capital LLC and Mendon Capital Ltd., and is managed by RMB Mendon Managers LLC and subadvised by RMB Capital Management. RMB Mendon Managers LLC is owned by Mendon Capital Advisers Corp. (“MCA”) and RMB Capital Management. RMB Capital Management is wholly-owned by RMB Capital Holdings LLC. Each of the foregoing may be deemed to be beneficial owners of the 1,910 shares of Series A preferred stock, which are convertible into 2,387,500 shares of common stock, held directly by Mendon Capital Master Fund Ltd. The principal address of each of the above entities is 115 S. LaSalle, 34th Floor, Chicago, IL 60603, except that MCA is located at 150 Allens Creek Road, Rochester, NY 14618.
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(13)
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Mendon Capital QP LP (“MCQP”) is owned by Mendon Capital QP
Ltd. as well as other investors, and is managed by RMB Mendon Managers LLC and subadvised by RMB Capital Management. RMB Mendon
Managers LLC is owned by MCA and RMB Capital Management.
RMB Capital
Management is wholly-owned by RMB Capital Holdings LLC. Each of the foregoing may be deemed to be beneficial
owners of the 290 shares of Series A preferred stock, which are convertible into 362,500 shares of common stock,
held directly by MCQP. The principal address of each of the above entities is 115 S. LaSalle, 34th Floor,
Chicago, IL 60603, except that MCA is located at 150 Allens Creek Road, Rochester, NY 14618.
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(14)
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Ulysses Management LLC, a Delaware limited liability company (“Ulysses Management”), in its capacity as investment manager, may be deemed to share voting and investment power over the shares beneficially owned by Ulysses Partners, L.P., a Delaware limited partnership (“Ulysses Partners”) and Ulysses Offshore Fund, Ltd., an exempted company incorporated and existing under the laws of the Cayman Islands (“Ulysses Offshore,” and collectively with Ulysses Partners, the “Ulysses Purchasers”). Joshua Nash LLC, a Delaware limited liability company (“Nash LLC”), as the managing general partner of Ulysses Partners, may be deemed to share voting and investment power over the shares beneficially owned by Ulysses Partners; and Joshua Nash, who is a United States citizen (“Mr. Nash”), as an executive of Ulysses Management, the sole member of Nash LLC and the President of Ulysses Offshore, may be deemed to share voting and investment power over the shares beneficially owned by each of Ulysses Management, Ulysses Partners and Ulysses Offshore. The address of each Ulysses Management affiliate is c/o Ulysses Management LLC, One Rockefeller Plaza, New York, New York 10020.
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38
Table of Contents
SHAREHOLDER PROPOSALS
Independence does not currently anticipate holding an annual meeting of shareholders in 2017. However, if the merger is not completed as anticipated, Independence may hold a 2017 annual meeting of shareholders. If such an annual meeting is held, it will not likely fall within thirty (30) days of the anniversary of Independence’s 2016 annual meeting, which was held on November 16, 2016. Accordingly, under SEC rules, if Independence holds a 2017 annual meeting, shareholder proposals must be submitted to Independence’s Corporate Secretary at 500 East Washington Street, Greenville, South Carolina 29601, a reasonable time before Independence begins to print and send its proxy materials. Such proposals will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and Independence’s bylaws.
Under Independence’s bylaws, any shareholder proposal to be made at an annual meeting, but which is not requested to be included in Independence’s proxy statement, must comply with the advance notice provisions and other requirements and be delivered to Independence’s Corporate Secretary at 500 East Washington Street, Greenville, South Carolina 29601 between 30 and 60 days prior to the annual meeting; provided, however, that if less than 31 days’ notice of the meeting is given to shareholders, the notice must be delivered not later than 10 days following the day on which notice of the meeting was mailed to shareholders.
WHERE YOU CAN FIND MORE INFORMATION
Independence files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. In addition, Independence files such reports and other information with the SEC electronically, and the SEC maintains an internet website located at
www.sec.gov
containing this information. The reports and other information that Independence files with the SEC are also available at its website,
www.independencenb.com.
Information included on Independence’s website and Independence's annual, quarterly and current reports, proxy statements and other information filed with the SEC under the Exchange Act is not incorporated by reference into this proxy statement.
You can obtain any reports, proxy statements or other information filed by Independence with the SEC, without charge, electronically at the SEC’s website above. In addition, Independence will provide you with copies of any reports, proxy statements or other information filed by Independence with the SEC, without charge, upon written or oral request to: Independence Bancshares, Inc., 500 East Washington Street, Greenville, South Carolina 29601, Attn: Corporate Secretary, telephone no. (864) 672-1776.
You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. The information contained in this proxy statement speaks only as of the date of this proxy statement unless the information specifically indicates that another date applies. You should not assume that the information contained in this proxy statement is accurate as of any date other than the date of this proxy statement.
If you are in a jurisdiction where the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement does not extend to you.
39
Table of Contents
Annex A
AGREEMENT AND PLAN OF
MERGER
By And Among
FIRST RELIANCE
BANCSHARES, INC.,
FR MERGER SUBSIDIARY,
INC.
and
INDEPENDENCE BANCSHARES,
INC.
Dated as of
September 25, 2017
Table of Contents
TABLE OF
CONTENTS
-i-
Table of Contents
TABLE OF
CONTENTS
(continued)
-ii-
Table of Contents
TABLE OF
CONTENTS
(continued)
-iii-
Table of Contents
LIST OF
EXHIBITS
iv
Table of Contents
AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND PLAN OF
MERGER
(this
Agreement
), dated as of September 25, 2017, is by and among First Reliance
Bancshares, Inc., a South Carolina corporation (
Parent
), FR Merger Subsidiary, Inc. (
Merger Sub
) and
Independence Bancshares, Inc., a South Carolina corporation (
Independence
). Except as otherwise set forth herein,
capitalized and certain other terms used herein shall have the meanings set
forth in Section 10.1 of this Agreement.
RECITALS
WHEREAS,
the respective
Boards of Directors of Parent, Merger Sub, and Independence have determined that it is in the best interests of their respective
companies and shareholders for Parent to acquire Independence pursuant to the terms of this Agreement and have approved the merger
of Merger Sub with and into Independence, with Independence being the surviving entity (the
Merger
), upon the
terms and subject to the conditions set forth in this Agreement, whereby the issued and outstanding shares of Independence Common
Stock will be converted into the right to receive the Merger Consideration from Parent and the issued and outstanding shares of
Independence Series A Preferred Stock will be redeemed;
WHEREAS,
the board of directors of Independence has determined
to recommend that Independences shareholders approve this Agreement and the transactions contemplated hereby;
WHEREAS,
the Merger is subject to the approvals of the shareholders of Independence, regulatory agencies, and the satisfaction of certain
other conditions described in this Agreement; and
WHEREAS,
Parent, Merger Sub, and Independence desire to make certain
representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to
the Merger.
NOW,
THEREFORE,
in consideration of
the above and the mutual warranties, representations, covenants, and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Parties, intending to be legally
bound, agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF
MERGER
1.1
Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time, Merger Sub will merge with and into Independence pursuant to and with the
effect provided in Section 33-11-106 of the South Carolina Business Corporation
Act of 1988, as amended (
SCBCA
), and Independence
shall be the Surviving Corporation resulting from the Merger and shall continue
to be governed by the Laws of the State of South Carolina. The Merger shall be
consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective boards of
directors of Independence, Parent and Merger Sub.
1
Table of Contents
1.2
Time and Place of Closing.
The
closing of the transactions contemplated hereby (the
Closing
) will take place at 9:00 A.M. Eastern Time on the date that the
Effective Time occurs, or at such other time as the Parties, acting through
their authorized officers, may mutually agree. The Closing shall be held at such
location as may be mutually agreed upon by the Parties and may be effected by
electronic or other transmission of signature pages, as mutually agreed upon.
1.3
Effective Time.
The
Merger shall become effective on the date and time the Articles of Merger (the
Articles of
Merger
) reflecting the Merger
shall be filed and become effective with the Secretary of State of the State of
South Carolina (the
Effective
Time
). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur within ten business days of the
last of the following dates to occur (or, if Parent elects, on the first day of
the first month after the last of the following dates to occur): (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the shareholders
of Independence approve this Agreement to the extent such approval is required
by applicable Law.
1.4
Restructure of Transactions.
Parent shall have the right to revise the structure of the Merger
contemplated by this Agreement by merging Independence with and into Parent,
provided
, that no such revision to the structure of the
Merger (i) shall result in any changes in the amount or type of the
consideration which the holders of shares of Independence Series A Preferred
Stock or Independence Common Stock or Independence Options are entitled to
receive under this Agreement, (ii) would unreasonably impede or delay
consummation of the Merger, or (iii) imposes any less favorable terms or
conditions on Independence Bank or Independence. Parent may request such
revision by giving written notice to Independence in the manner provided in
Section 10.8, which notice shall be in the form of an amendment to this
Agreement or in the form of a proposed amendment to this Agreement or in the
form of an amended and restated agreement and plan of merger, and the addition
of such other Exhibits hereto as are reasonably necessary or appropriate to
effect such change. Independence will take any reasonable actions necessary to
implement such change.
1.5
Bank Merger and Second Step
Merger.
(a)
Concurrently with or as soon as practicable after
the execution and delivery of this Agreement, First Reliance Bank
(
First Reliance
), a wholly owned subsidiary of Parent, and
Independence National Bank (
Independence Bank
), a
wholly owned subsidiary of Independence, shall enter into the Bank Agreement of
Merger, in the form attached hereto as
Exhibit A
, with such
changes thereto as the Parent or Independence may reasonably request,
pursuant to which Independence Bank will merge
with and into First Reliance (the
Bank Merger
). The Parties
intend that the Bank Merger will become effective simultaneously with or
immediately following the Effective Time.
2
Table of Contents
(b)
On the Closing Date and as soon as reasonably
practicable following the Effective Time, in accordance with the SCBCA, Parent
shall cause the Surviving Corporation to be merged with and into Parent, with
Parent being the surviving entity in the merger (the
Second Step Merger
). Parent shall continue its existence under the
Laws of the State of South Carolina, and the separate corporate existence of the
Surviving Corporation shall cease as of the effective time of the Second Step
Merger. In furtherance of the foregoing, Parent shall cause articles of merger
relating to the Second Step Merger to be filed with the South Carolina Secretary
of State, and the Second Step Merger shall become effective as of the date and
time specified in the articles of merger.
ARTICLE 2
TERMS OF
MERGER
2.1
Articles of Incorporation.
At
the Effective Time, the articles of incorporation of the Surviving Corporation
shall be amended and restated in their entirety in the form of the articles of
incorporation of Merger Sub as in effect immediately prior to the Effective
Time, and as amended shall be the articles of incorporation of the Surviving
Corporation until thereafter amended as provided therein and under the SCBCA.
2.2
Bylaws.
At
the Effective Time, the bylaws of the Surviving Corporation shall be amended and
restated in their entirety in the form of the bylaws of Merger Sub as in effect
immediately prior to the Effective Time, and as amended shall be the bylaws of
the Surviving Corporation until thereafter amended as provided therein and under
the SCBCA.
2.3
Directors and Officers.
The
directors of Merger Sub in office immediately prior to the Effective Time,
together with such additional persons as may thereafter be elected, shall serve
as the directors of the Surviving Corporation from and after the Effective Time
in accordance with the Surviving Corporations articles of incorporation and
bylaws, until the earlier of their resignation or removal or otherwise ceasing
to be a director. The officers of Merger Sub in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
appointed, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Surviving Corporations bylaws,
until the earlier of their resignation or removal or otherwise ceasing to be an
officer.
3
Table of Contents
ARTICLE 3
MANNER OF REDEEMING AND
CONVERTING SHARES
3.1
Effect on Independence Series A Preferred Stock
and Independence Common Stock.
(a)
Immediately prior to the Effective Time, in each
case subject to Section 3.1(e), each share of par value $.01 per share preferred
stock of Independence, designated as Preferred Stock, Series A (the
Independence Series A Preferred
Stock
) that is issued and
outstanding immediately prior to the Effective Time (other than shares of
Independence Series A Preferred Stock held by either Party or any Subsidiary of
either Party (and in each case other than shares of Independence Series A
Preferred Stock held on behalf of third parties or held by any Parent Entity or
Independence Entity as a result of debts previously contracted (such as a
foreclosure on a loan) and shares of Independence Series A Preferred Stock that
are owned by holders of Independence Series A Preferred Stock properly
exercising their dissenters rights pursuant to Sections 33-13-101 through
33-13-310 of the SCBCA (the
Series A Preferred Dissenter Shares
))) shall be redeemed pursuant to the terms
thereof by the payment of cash in the amount of $1,000.00, less any applicable
withholding Taxes (the
Per Series
A Preferred Share Redemption Price
).
(b)
At the Effective Time, in each case subject to
Sections 3.1(e), by virtue of the Merger and without any action on the part of
the Parties, each share of Independence Common Stock that is issued and
outstanding immediately prior to the Effective Time (other than shares of
Independence Common Stock held by either Party or any Subsidiary of either Party
(and in each case other than shares of Independence Common Stock held on behalf
of third parties or held by any Parent Entity or Independence Entity as a result
of debts previously contracted (such as a foreclosure on a loan)) and shares of
Independence Common Stock that are owned by holders of Independence Common Stock
properly exercising their dissenters rights pursuant to Sections 33-13-101
through 33-13-310 of the SCBCA (the
Common Dissenter Shares
and, together with the Series A Preferred Dissenter Shares, the
Dissenter Shares
)) shall be converted into the right to receive
cash in the amount of $0.125 less any applicable withholding Taxes (the
Per Common Share Merger
Price
and, together with the Per
Series A Preferred Share Redemption Price, referred to herein collectively as
the
Merger
Consideration
).
(c)
At the Effective Time, all shares of Independence
Series A Preferred Stock and Independence Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist as of the Effective Time, and, with the exception of shares of
Independence Series A Preferred Stock or Independence Common Stock described in
Section 3.1(e), each certificate previously representing any such shares of
Independence Series A Preferred Stock or Independence Common Stock shall
thereafter represent only the right to receive the Per Series A Preferred Share
Redemption Price or the Per Common Share Merger Price, as applicable;
provided
, that any Dissenter Shares shall thereafter
represent only the right to receive applicable payments as set forth in Section
3.6.
(d)
If, prior to the Effective Time, the outstanding
shares of Independence Series A Preferred Stock or Independence Common Stock
shall have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar change in
capitalization, or if a record date prior to the Effective Time has been
established with respect to any such change in capitalization, then an
appropriate and proportionate adjustment shall be made to the Per Series A
Preferred Share Redemption Price or the Per Common Share Merger Price, as
applicable.
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(e)
Each share of Independence Series A Preferred
Stock or Independence Common Stock issued and outstanding immediately prior to
the Effective Time and owned by any of the Parties or their respective
Subsidiaries (in each case other than shares of Independence Series A Preferred
Stock or Independence Common Stock held on behalf of third parties or as a
result of debts previously contracted) shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
shall be cancelled and retired without payment of any consideration, and shall
cease to exist (the
Excluded
Shares
).
(f)
At the
Effective Time, each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
newly issued, fully paid, and non-assessable share of common stock of the
Surviving Corporation with the same rights, powers, and privileges as the shares
so converted and shall constitute the only outstanding shares of capital stock
of the Surviving Corporation. From and after the Effective Time, all
certificates representing shares of Merger Sub common stock shall be deemed for
all purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with the immediately
preceding sentence.
3.2
Exchange Procedures.
(a)
On the Closing Date, Parent shall make available
to the exchange agent selected by Parent and reasonably acceptable to
Independence (the
Exchange
Agent
), for exchange in
accordance with this Section 3.2, the aggregate Merger Consideration, which
shall hereinafter be referred to as the
Exchange Fund
. In the
event the cash in the Exchange Fund shall be insufficient to fully satisfy all
of the payment obligations to be made by the Exchange Agent hereunder, Parent
shall promptly make available to the Exchange Agent the amounts so required to
satisfy such payment obligations in full. The Exchange Agent shall deliver the
Merger Consideration out of the Exchange Fund. Except as contemplated by this
Section 3.2, the Exchange Fund will not be used for any other purpose.
(b)
Unless different timing is agreed to by Parent and
Independence, as soon as reasonably practicable after the Effective Time, but in
any event no more than seven business days after the Effective Time, Parent
shall cause the Exchange Agent to mail to the former shareholders of
Independence Series A Preferred Stock or Independence Common Stock appropriate
transmittal materials. The letter of transmittal shall provide instructions for
the submission of certificates representing, immediately prior to the Effective
Time, shares of Independence Series A Preferred Stock or Independence Common
Stock (or an indemnity satisfactory to Parent and the Exchange Agent, if any of
such certificates are lost, stolen, or destroyed) to each holder of record of
shares of Independence Series A Preferred Stock or Independence Common Stock
redeemed or converted into the right to receive the applicable portion of the
Merger Consideration at the Effective Time. The Exchange Agent may establish
such other reasonable and customary rules and procedures in connection with its
duties as it may deem appropriate. Parent
shall pay all charges and expenses, including those of the Exchange Agent, in
connection with the distribution of the Merger Consideration as provided in
Section 3.1. Former holders of Independence Series A Preferred Stock or
Independence Common Stock will be responsible for all charges and expenses
associated with replacing any lost, mutilated, stolen, or destroyed
certificates, including any indemnity bond expenses, as described in Section
3.2(c).
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(c)
After receipt of the transmittal materials from
the Exchange Agent, each holder of shares of Independence Series A Preferred
Stock or Independence Common Stock (other than Excluded Shares and Dissenter
Shares) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent,
together with duly executed transmittal materials provided by the Exchange
Agent, and shall promptly upon surrender thereof (or an indemnity satisfactory
to Parent and the Exchange Agent, if any of such certificates are lost, stolen,
or destroyed) the Exchange Agent shall deliver in exchange therefor the
consideration provided in Section 3.1, without interest, pursuant to this
Section 3.2. The certificate or certificates of Independence Series A Preferred
Stock or Independence Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may reasonably require. Parent shall not be obligated to deliver
the consideration to which any former holder of Independence Series A Preferred
Stock or Independence Common Stock is entitled as a result of the Merger until
such holder surrenders such holders certificate or certificates for exchange
(or an indemnity satisfactory to Parent and the Exchange Agent, if any of such
certificates are lost, stolen, or destroyed) as provided in this Section
3.2.
In
the event of a transfer of ownership of shares of Independence Series A
Preferred Stock or Independence Common Stock represented by one or more
certificates that are not registered in the transfer records of Independence,
the Merger Consideration payable for such shares as provided in Section 3.1 may
be issued to a transferee if the certificate or certificates representing such
shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence reasonably satisfactory to
the Exchange Agent that such transfer is proper and that any applicable stock
transfer taxes have been paid.
In
the event any certificate representing Independence Series A Preferred Stock or
Independence Common Stock shall have been lost, mutilated, stolen, or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, mutilated, stolen, or destroyed and the posting by such
person of a bond in such amount as the Exchange Agent may reasonably direct as
indemnity against any claim that may be made against it with respect to such
certificate, the Exchange Agent shall issue in exchange for such lost,
mutilated, stolen, or destroyed certificate the Per Series A Preferred Share
Redemption Price or the Per Common Share Merger Price, as applicable, as
provided for in Section 3.1.
Any
other provision of this Agreement notwithstanding, neither any Parent Entity,
nor any Independence Entity, nor the Exchange Agent shall be liable to any
holder of Independence Series A Preferred Stock or Independence Common Stock for
any amounts paid or properly delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat, or similar Law.
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(d)
Each of Parent and the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Independence Series A
Preferred Stock or Independence Common Stock or Independence Options such
amounts, if any, as it is required to deduct and withhold with respect to the
making of such payment under the Code or any provision of state, local, or
foreign Tax Law or by any Taxing Authority or Governmental Authority. Parent
and/or the Exchange Agent shall timely remit such deducted and withheld amounts
to the appropriate Taxing Authority or Governmental Authority. Parent shall be
fully responsible for, and shall pay, any penalty or interest arising from
failure timely to remit such amounts. To the extent that any amounts are so
withheld by Parent, the Surviving Corporation, or the Exchange Agent, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Independence Series
A Preferred Stock or Independence Common Stock, as applicable in respect of
which such deduction and withholding was made by Parent, the Surviving
Corporation, or the Exchange Agent, as the case may be.
(e)
Any portion of the Merger Consideration and cash
delivered to the Exchange Agent by Parent pursuant to Section 3.2(a) that
remains unclaimed by the holder of shares of Independence Series A Preferred
Stock or Independence Common Stock for six months after the Effective Time (as
well as any proceeds from any investment thereof) shall be delivered by the
Exchange Agent to Parent. Any holder of shares of Independence Series A
Preferred Stock or Independence Common Stock who has not theretofore complied
with Section 3.2(b) shall thereafter look only to Parent for the consideration
deliverable in respect of each share of Independence Series A Preferred Stock or
Independence Common Stock such holder holds as determined pursuant to this
Agreement without any interest thereon. If outstanding certificates for shares
of Independence Series A Preferred Stock or Independence Common Stock are not
surrendered or the payment for them is not claimed prior to the date on which
such cash would otherwise escheat to or become the property of any Governmental
Authority, the unclaimed items shall, to the extent permitted by abandoned
property and any other applicable law, become the property of Parent (and to the
extent not in its possession shall be delivered to it), free and clear of all
claims or interest of any person previously entitled to such property. Neither
the Exchange Agent nor any party to this Agreement shall be liable to any holder
of stock represented by any certificate for any consideration paid to a
Governmental Authority pursuant to applicable abandoned property, escheat or
similar laws. Parent and the Exchange Agent shall be entitled to rely upon the
stock transfer books of Independence to establish the identity of those persons
entitled to receive the consideration specified in this Agreement, which books
shall be conclusive with respect thereto. In the event of a dispute with respect
to ownership of stock represented by any certificate or certificates, Parent and
the Exchange Agent shall be entitled to deposit any consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
(f)
Adoption of this Agreement by the shareholders of
Independence shall constitute ratification of the appointment of the Exchange
Agent.
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3.3
Effect on Parent Stock.
At
and after the Effective Time, each share of Parent Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Parent Stock and shall not be affected by the Merger.
3.4
Independence Options.
(a)
Prior to the Effective Time, Independence shall
endeavor to have the holders of all Rights with respect to stock options granted
by Independence pursuant to the Independence 2005 Stock Incentive Plan or the
Independence 2013 Equity Incentive Plan (the
Independence Options
) surrender their rights under the Independence
Options in consideration of a cash payment of $0.01 per share of Independence
Common Stock underlying the Independence Options.
(b)
At the Effective Time, any outstanding options
granted pursuant to the Independence 2013 Equity Incentive Plan (the
2013 Plan
) shall be cancelled pursuant to Section 10(d) of
the 2013 Plan. At the Effective Time, each share of Independence Common Stock
reserved for issuance upon the exercise of any outstanding option granted
pursuant to the Independence 2005 Stock Incentive Plan (the
2005 Plan
) shall be converted into the right to receive, upon exercise of such
option, $0.125 in cash. For the avoidance of doubt, no
Independence Option shall be converted into an
option to acquire any security of Parent.
(c)
Independences board of directors and its
compensation committee shall not make any grants of Independence Options
following the execution of this Agreement.
(d)
Independences board of directors or its
compensation committee shall make any adjustments or amendments to or make such
determinations with respect to the Independence Options necessary to effect the
foregoing provisions of this Section 3.4.
3.5
Rights of Former Independence
Shareholders.
At
the Effective Time, the stock transfer books of Independence shall be closed as
to holders of Independence Series A Preferred Stock and Independence Common
Stock and no transfer of Independence Series A Preferred Stock or Independence
Common Stock by any holder of such shares shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 3.2, each certificate theretofore representing shares of Independence
Series A Preferred Stock or Independence Common Stock (other than certificates
representing Excluded Shares and Dissenter Shares), shall from and after the
Effective Time represent for all purposes only the right to receive the Per
Series A Preferred Share Redemption Price or the Per Common Share Merger Price,
as applicable, without interest, as provided in Article 3.
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3.6
Dissenting Shareholders.
Any
holder of shares of Independence Series A Preferred Stock or Independence Common
Stock who perfects such holders dissenters rights in accordance with and as
contemplated by Sections 33-13-101 through 33-13-310 of the SCBCA shall be
entitled to receive from the Surviving Corporation, in lieu of the Per
Series A Preferred Share Redemption Price or the Per Common Share Merger Price,
as applicable, the value of such shares as to which dissenters rights have been
perfected in cash as determined pursuant to such provisions of law;
provided
, that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder has complied
with all applicable provisions of such law, and surrendered to Independence or
Parent the certificate or certificates representing the shares for which payment
is being made. In the event that, after the Effective Time, a dissenting
shareholder of Independence fails to perfect, or effectively withdraws or loses
such holders right to appraisal of and payment for such holders Dissenter
Shares, Parent or the Surviving Corporation shall deliver to such holder of
shares of Independence Series A Preferred Stock or Independence Common Stock the
Per Series A Preferred Share Redemption Price or the Per Common Share Merger
Price, as applicable (without interest) in respect of such shares upon surrender
by such holder of the certificate or certificates representing such shares of
Independence Series A Preferred Stock or Independence Common Stock held by such
holder.
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF INDEPENDENCE
Independence represents and warrants to Parent, except as set forth on
the Independence Disclosure Memorandum with respect to each such Section below,
as follows:
4.1
Organization, Standing, and Power.
Independence is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of South Carolina and is a bank
holding company within the meaning of the Bank Holding Company Act of 1956 (the
BHCA
), duly registered and in good standing with the
Federal Reserve. Independence Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America. Each of Independence and Independence Bank has the corporate
power and authority to carry on its business as now conducted and to own, lease,
and operate its Assets. Except as described on Section 4.1 of the Independence
Disclosure Memorandum, neither Independence, Independence Bank, any Independence
Subsidiary, nor any subsidiary of Independence Bank exercises trust powers or
acts as an investment advisor, broker-dealer, or insurance agency. Each of Independence and Independence Bank is duly qualified or licensed to
transact business as a foreign corporation in good standing in the states of the
United States and foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or licensed,
except for such jurisdictions where the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate, an
Independence Material Adverse Effect. The minute book and other organizational
documents for each of Independence and Independence Bank have been made
available to Parent for its review and, except as disclosed in Section 4.1 of
the Independence Disclosure Memorandum, are true and complete in all material
respects as in effect as of the date of this Agreement and accurately reflect in
all material respects all amendments thereto and all proceedings of the
respective board of directors (including any committees of the board of
directors) and shareholders thereof. Independence Bank is an insured
institution as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits held by Independence Bank are insured
up to applicable limits by the FDICs Deposit Insurance Fund.
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4.2
Authority of Independence; No Breach by
Agreement.
(a)
Independence has the corporate power and authority
necessary to execute, deliver, and, other than with respect to the Merger,
perform this Agreement, and with respect to the Merger, upon the approval of the
Merger, including any necessary approvals referred to in Sections 8.1(b) and
8.1(c) and by Independences shareholders in accordance with this Agreement and
the SCBCA, to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Independence, subject to the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of Independence Series A Preferred Stock and by the holders of two-thirds
of the outstanding shares of Independence Common Stock, as separate voting
groups, which are the only Independence shareholder votes required for approval
of this Agreement and consummation of the Merger (the
Requisite Independence Shareholder
Vote
). Subject to any necessary
approvals referred to in Sections 8.1(b) and 8.1(c) and by such Requisite
Independence Shareholder Vote, this Agreement represents a legal, valid, and
binding obligation of Independence, enforceable against Independence in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b)
Neither the execution and delivery of this
Agreement by Independence, nor the consummation by Independence and Independence
Bank of the transactions contemplated hereby, nor compliance by Independence and
Independence Bank with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of Independences articles of incorporation
or bylaws or the articles of association or incorporation or bylaws of any
Independence Subsidiary or any resolution adopted by the board of directors or
the shareholders of any Independence Entity, or (ii) except as disclosed in
Section 4.2(b) of the Independence Disclosure Memorandum, constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any Independence Entity under, any Contract
or Permit of any Independence Entity or, (iii) subject to receipt of the
requisite Consents referred to in Sections 8.1(b) and (c), constitute or result
in a Default under, or require any Consent pursuant to, any Law or Order
applicable to any Independence Entity or any of their respective material
Assets.
(c)
Except for (i) the filing of applications and
notices with, and approval of such applications and notices from, the Federal
Reserve, the FDIC, the OCC, and the South Carolina Board of Financial
Institutions, (ii) the filing of the Articles of Merger with the Secretary of
State of the State of South Carolina, (iii) any consents, authorizations,
approvals, filings or exemptions in connection with compliance with the rules
and regulations of the SEC or the OTC Markets Group, (iv) notices or filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if
any, no consents or approvals of or filings or registrations with any
Governmental Authority are necessary in connection with the consummation by
Independence of the Merger and the other transactions contemplated by this
Agreement. No consents or approvals of or filings or registrations with any Governmental Authority are necessary in
connection with the execution and delivery by Independence of this
Agreement.
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4.3
Capital Stock.
(a)
The authorized capital stock of Independence
consists of 300,000,000 shares of Independence Common Stock, of which 20,502,760
shares are issued and outstanding as of the date of this Agreement, and,
assuming that all of the issued and outstanding Independence Options (with
respect to which each Independence Option holder, the number of shares
underlying each Independence Option and the exercise price of each Independence
Option are disclosed in Section 4.3(a) of the Independence Disclosure
Memorandum) had been exercised, not more than an additional 3,064,380 shares
would be issued and outstanding at the Effective Time, and 10,000,000 shares of
preferred stock, par value $.01 per share, of which 8,425 shares of Independence
Series A Preferred Stock are issued and outstanding as of the date of this
Agreement. All of the issued and outstanding shares of capital stock of
Independence are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of capital stock of Independence
has been issued in violation of any preemptive rights of the current or past
shareholders of Independence.
(b)
Except for (i) the 3,064,380 shares of
Independence Common Stock reserved for issuance pursuant to outstanding
Independence Options, and (ii) the 10,531,250 shares of Independence Common
Stock reserved for issuance pursuant to the conversion of the Independence
Series A Preferred Stock, there are no shares of capital stock or other equity
securities of Independence reserved for issuance and no outstanding Rights
relating to the capital stock of Independence.
(c)
Except as specifically set forth in this Section
4.3, there are no shares of Independence capital stock or other equity
securities of Independence outstanding and there are no outstanding Rights with
respect to any Independence securities or any right or privilege (whether
pre-emptive or contractual) capable of becoming a Contract or Right for the
purchase, subscription, exchange or issuance of any securities of Independence.
4.4
Independence Subsidiaries.
Independence has no Subsidiaries except Independence Bank, and
Independence owns all of the equity interests in Independence Bank. No capital
stock (or other equity interest) of Independence Bank is or may become required
to be issued by reason of any Rights, and there are no Contracts by which
Independence Bank is bound to issue (other than to another Independence Entity)
additional shares of its capital stock (or other equity interests) or Rights or
by which any Independence Entity is or may be bound to transfer any shares of
the capital stock (or other equity interests) of Independence Bank (other than
to another Independence Entity). There are no Contracts relating to the rights
of any Independence Entity to vote or to dispose of any shares of the capital
stock (or other equity interests) of Independence Bank. All of the shares of
capital stock (or other equity interests) of Independence Bank, except as
provided by Section 55 of the National Bank Act, are fully paid and
nonassessable and are owned directly or indirectly by Independence free and
clear of any Lien.
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4.5
Securities Offerings; Financial
Statements.
(a)
Each offering or sale of securities by
Independence (i) was duly registered and made pursuant to an effective
registration statement under the Securities Act or was made pursuant to a valid
exemption from registration under the Securities Act, (ii) complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws, except for immaterial late blue sky filings, including
disclosure and broker-dealer registration requirements, and (iii) was made
pursuant to offering documents which did not, at the time such statements were
made, contain any untrue statement of a material fact or omit to state a
material fact required to be stated in the offering documents or necessary in
order to make the statements in such documents not misleading.
(b)
Each of the Independence Financial Statements
(including, in each case, any related notes) was, or will be, prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
fairly presented the consolidated financial position of Independence and
Independence Bank as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
(c)
Independences independent public accountants,
which have expressed their opinion with respect to the Independence Financial
Statements of Independence and its Subsidiaries (including the related notes),
are and have been throughout the periods covered by such Financial Statements
(x) a registered public accounting firm (as defined in Section 2(a)(12) of the
Sarbanes-Oxley Act) (to the extent applicable during such period), and (y)
independent with respect to Independence within the meaning of Regulation S-X.
Independences independent public accountants have audited Independences
year-end financial statements that are included in the Independence Financial
Statements. Section 4.5(c) of the Independence Disclosure Memorandum lists all
non-audit services performed by Independences independent public accountants
for Independence or Independence Bank.
4.6
Absence of Undisclosed
Liabilities.
No
Independence Entity has any Liabilities required under GAAP to be set forth on a
consolidated balance sheet or in the notes thereto that are reasonably likely to
have, individually or in the aggregate, an Independence Material Adverse Effect,
except Liabilities which are (i) accrued or reserved against in the consolidated
balance sheet of Independence as of December 31, 2016, included in the
Independence Financial Statements delivered prior to the date of this Agreement
or reflected in the notes thereto, (ii) incurred in the ordinary course of
business consistent with past practices, or (iii) incurred in connection with
the transactions contemplated by this Agreement. Section 4.6 of the Independence
Disclosure Memorandum lists, and Independence has attached and delivered to
Parent copies of the documentation creating or governing, all securitization
transactions and off-balance sheet arrangements (as defined in Item 303(a)(4)
of Regulation S-K of the Exchange Act) effected by Independence or its
Subsidiaries other than letters of credit and unfunded loan commitments or
credit lines. Except as disclosed in Section 4.6 of the Independence Disclosure
Memorandum or as reflected on Independences
balance sheet at December 31, 2016, no Independence Entity is directly or
indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect
to, or obligated, by discount or repurchase agreement or in any other way, to
provide funds in respect to, or obligated to guarantee or assume any Liability
of any Person for any amount in excess of $50,000 and any amounts, whether or
not in excess of $50,000 that, in the aggregate, exceed $100,000. Except (x) as
reflected in Independences balance sheet at December 31, 2016 or liabilities
described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP or any applicable Regulatory
Authority) or (y) for liabilities incurred in the ordinary course of business
since December 31, 2016 consistent with past practice or in connection with this
Agreement or the transactions contemplated hereby or (z) as disclosed in Section
4.6 of the Independence Disclosure Memorandum, neither Independence nor any of
its Subsidiaries has any Material Liabilities or obligations of any
nature.
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4.7
Absence of Certain Changes or
Events.
Except as disclosed in the Independence Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 4.7 of the
Independence Disclosure Memorandum, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, an Independence Material Adverse Effect, (ii) none of the
Independence Entities has taken any action, or failed to take any action, prior
to the date of this Agreement, which action or failure, if taken after the date
of this Agreement, would represent or result in a material breach or violation
of any of the covenants and agreements of Independence provided in this
Agreement, and (iii) since December 31, 2016, the Independence Entities have
conducted their respective businesses in the ordinary course of business
consistent with past practice. Section 4.7 of the Independence Disclosure
Memorandum sets forth attorneys fees, investment banking fees, accounting fees
and other costs or fees of Independence and its Subsidiaries that, based upon
reasonable inquiry, are expected to be paid or accrued through the Effective
Time in connection with the Merger.
4.8
Tax Matters.
(a)
All Independence Entities have timely filed with
the appropriate Taxing Authorities, all Tax Returns in all jurisdictions in which Tax Returns
are required to be filed, and such Tax Returns are correct and complete in all
material respects. Except as disclosed in Section 4.8(a) of the Independence
Disclosure Memorandum, none of the Independence Entities is the beneficiary of
any extension of time within which to file any Tax Return. All Taxes of the
Independence Entities (whether or not shown on any Tax Return) have been fully
and timely paid. There are no Liens for any Taxes (other than a Lien for current
real property or ad valorem Taxes not yet due and payable) on any of the Assets
of any of the Independence Entities. No claim has ever been made by an authority
in a jurisdiction where any Independence Entity does not file a Tax Return that
such Independence Entity may be subject to Taxes by that jurisdiction.
(b)
None of the Independence Entities has received any
notice of assessment or proposed assessment in connection with any Taxes, and
there are no threatened or pending disputes, claims, audits, or examinations
regarding any Taxes of any Independence Entity or the assets of any Independence
Entity. No officer or employee responsible for Tax matters of any Independence
Entity expects any Taxing Authority to assess any additional Taxes for any
period for which Tax Returns have been
filed. No issue has been raised by a Taxing Authority in any prior examination
of Independence which, by application of the same or similar principles, could
be expected to result in a proposed deficiency for any subsequent taxable
period. None of the Independence Entities has waived any statute of limitations
in respect of any Taxes or agreed to a Tax assessment or deficiency.
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(c)
Each Independence Entity has complied in all
material respects with all applicable Laws relating to the withholding of Taxes
and the payment thereof to appropriate authorities, including Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee or independent contractor, and Taxes required to be withheld and paid
pursuant to Sections 1441 and 1442 of the Code or similar provisions under
foreign Law.
(d)
The unpaid Taxes of each Independence Entity (i)
did not, as of the most recent fiscal month end, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
most recent balance sheet (rather than in any notes thereto) for such
Independence Entity and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of the Independence Entities in filing their Tax Returns.
(e)
Except as described in Section 4.8(e) of the
Independence Disclosure Memorandum, none of the Independence Entities is a party
to any Tax allocation or sharing agreement and none of the Independence Entities
has been a member of an affiliated group filing a consolidated federal income
Tax Return (other than a group, the common parent of which is Independence) or
has any Tax Liability of any Person (other than another Independence Entity)
under Treasury Regulation Section 1.1502-6 or any similar provision of state,
local or foreign Law, or as a transferee or successor, by contract or otherwise.
(f)
During the five-year period ending on the date
hereof, none of the Independence Entities was a distributing corporation or a
controlled corporation as defined in, and in a transaction intended to be
governed by Section 355 of the Code.
(g)
Except as disclosed in Section 4.8(g) of the
Independence Disclosure
Memorandum,
none of the Independence Entities has made any payments, is obligated to make
any payments, or is a party to any Contract that could obligate it to make any
payments that could be disallowed as a deduction under Section 280G or 162(m) of
the Code, or which would be subject to withholding under Section 4999 of the
Code. None of the Independence Entities has been or will be required to include
any adjustment in taxable income for any Tax period (or portion thereof)
pursuant to Section 481 of the Code or any comparable provision under state or
foreign Tax Laws as a result of transactions or events occurring prior to the
Closing. There is no taxable income of Independence that will be required under
applicable tax law to be reported by Parent, for a taxable period beginning
after the Closing Date which taxable income was realized prior to the Closing
Date. Any net operating losses of the Independence Entities disclosed in Section
4.8(g) of the Independence Disclosure Memorandum are not subject to any
limitation on their use under the provisions of Sections 382 or 269 of the Code
or any other provisions of the Code or the Treasury Regulations dealing with the
utilization of net operating losses other than any such limitations as may arise as a result of the consummation of the
transactions contemplated by this Agreement.
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(h)
Each of the Independence Entities is in compliance
in all material respects with, and its records contain all information and
documents (including properly completed IRS Forms W-9) necessary to comply with,
all applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Code.
(i)
No Independence Entity is subject to any private
letter ruling of the IRS or comparable rulings of any Taxing Authority.
(j)
No property owned by any Independence Entity is
(i) property required to be treated as being owned by another Person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986, (ii) tax-exempt use property within the meaning of Section 168(h)(1)
of the Code, (iii) tax-exempt bond financed property within the meaning of
Section 168(g) of the Code, (iv) limited use property within the meaning of
Rev. Proc. 2001-28, (v) subject to Section 168(g)(1)(A) of the Code, or (vi)
subject to any provision of state, local or foreign Law comparable to any of the
provisions listed above.
(k)
No Independence Entity has any corporate
acquisition indebtedness within the meaning of Section 279 of the Code.
(l)
Independence has disclosed on its federal income
Tax Returns all positions taken therein that are reasonably believed to give
rise to substantial understatement of federal income tax within the meaning of
Section 6662 of the Code.
(m)
No Independence Entity has participated in any
reportable transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1), or a transaction substantially similar to a reportable transaction.
(n)
Independence has made available to Parent complete
copies of (i) all federal, state, local and foreign income or franchise Tax
Returns of the Independence Entities relating to the taxable periods since
December 31, 2013 and (ii) any audit report issued within the last four years
relating to any Taxes due from or with respect to the Independence
Entities.
(o) No Independence Entity nor any other Person on its
behalf has (i) filed a consent pursuant to Section 341(f) of the Code (as in
effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of
2003) or agreed to have Section 341(f)(2) of the Code (as in effect prior to the
repeal under the Jobs and Growth Tax Reconciliation Act of 2003) apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code (as in effect prior to the repeal under the Jobs and
Growth Tax Reconciliation Act of 2003)) owned by any Independence Entities, (ii)
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any similar provision of Law with respect to the Independence Entities,
or (iii) granted to any Person any power of attorney that is currently in force
with respect to any Tax matter. No Independence Entity has, or ever had, a
permanent establishment in any country other
than the United States, or has engaged in a trade or business in any country
other than the United States that subjected it to tax in such country.
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For
purposes of this Section 4.8, any reference to Independence or any Independence
Entity shall be deemed to include any Person which merged with or was liquidated
into or otherwise combined with Independence or an Independence Entity.
4.9
Allowance for Possible Loan Losses; Loan and
Investment Portfolios, etc.
(a)
Independences allowance for possible loan, lease,
securities, or credit losses (the
Allowance
) shown on the
balance sheets of Independence included in the most recent Independence
Financial Statements dated prior to the date of this Agreement was, and the
Allowance shown on the balance sheets of Independence included in the
Independence Financial Statements as of dates subsequent to the execution of
this Agreement will be, as of the dates thereof, adequate (within the meaning of
GAAP and applicable regulatory requirements or guidelines) to provide for all
known or reasonably anticipated losses relating to or inherent in the loan,
lease and securities portfolios (including accrued interest receivables, letters
of credit, and commitments to make loans or extend credit), by the Independence
Entities as of the dates thereof. The Independence Financial Statements fairly
present the values of all loans, leases, securities, tangible and intangible
assets and liabilities, and any impairments thereof on the bases set forth
therein.
(b)
As of the date hereof, all loans, discounts and
leases (in which any Independence Entity is lessor) reflected on Independences
Financial Statements were, and with respect to the consolidated balance sheets
delivered as of the dates subsequent to the execution of this Agreement will be
as of the dates thereof, (a) at the time and under the circumstances in which
made, made for good, valuable and adequate consideration in the ordinary course
of business and are the legal and binding obligations of the obligors thereof,
(b) evidenced by genuine notes, agreements, or other evidences of indebtedness,
and (c) to the extent secured, have been secured, to the Knowledge of
Independence, by valid liens and security interests which have been perfected.
Accurate lists of all loans, discounts and financing leases as of December 31,
2016 and on a monthly basis thereafter, and of the investment portfolios of each
Independence Entity as of such date, have been and will be made available to
Parent concurrently with the Independence Disclosure Memorandum. Except as
specifically set forth in Section 4.9(b) of the Independence Disclosure
Memorandum, neither Independence nor Independence Bank is a party to any written
or oral loan agreement, note, or borrowing arrangement, including any loan
guaranty, that was, as of the most recent month-end (i) delinquent by more than
30 days in the payment of principal or interest, (ii) to Independences
Knowledge, otherwise in material default for more than 30 days, (iii) classified
as substandard, doubtful, loss, other assets especially mentioned or any
comparable classification by Independence or by any applicable Regulatory
Authority or Reserve, (iv) an obligation of any director, executive officer or
10% shareholder of any Independence Entity who is subject to Regulation O of the
Federal Reserve Board (12 C.F.R. Part 215), or any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing, or (v) in violation of any Law.
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(c) All securities held by Independence or
Independence Bank, as reflected in the consolidated balance sheets of
Independence included in the Independence Financial Statements, are
carried in accordance with GAAP, specifically including Accounting Standards
Codification Topic 320, Investments Debt and Equity Securities. Except as
disclosed in Section 4.9(c) of the Independence Disclosure Memorandum and except
for pledges to secure public and trust deposits and Federal Home Loan Bank
advances, to Independences Knowledge, none of the securities reflected in the
Independence Financial Statements as of December 31, 2016, and none of the
securities since acquired by Independence or Independence Bank is subject to any
restriction, whether contractual or statutory, which impairs the ability of
Independence or Independence Bank to freely dispose of such security at any
time, other than those restrictions imposed on securities held to maturity under
GAAP, pursuant to a clearing agreement or in accordance with Laws.
(d) All interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management
arrangements, whether entered into for Independences own account, or for the
account of Independence Bank or its customers (all of which were disclosed in
Section 4.9(d) of the Independence Disclosure Memorandum), were entered into (a)
in the ordinary and usual course of business consistent with past practice and
in compliance with all applicable laws, rules, regulations and regulatory
policies, and (b) with counterparties believed to be financially responsible at
the time; and each of them constitutes the valid and legally binding obligation
of Independence or Independence Bank, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors rights or by general equity
principles), and is in full force and effect. Neither Independence nor
Independence Bank, nor to Independences Knowledge, any other party thereto, is
in breach of any material obligation under any such agreement or arrangement.
4.10
Assets.
(a)
To Independences Knowledge, except as disclosed
in Section 4.10 of the Independence Disclosure Memorandum or as disclosed or
reserved against in the Independence Financial Statements delivered prior to the
date of this Agreement, the Independence Entities have good and marketable
title, free and clear of all Liens, to all of their respective Assets that they
own. In addition, to Independences Knowledge, all tangible properties used in
the businesses of the Independence Entities are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with Independences past practices.
(b)
All Assets which are material to Independences
business, held under leases or subleases by any of the Independence Entities,
are held under valid Contracts enforceable in accordance with their respective
terms, and each such Contract is in full force and effect.
(c) The Independence Entities currently maintain
insurance, including bankers blanket bonds, with insurers of recognized
financial responsibility, similar in amounts, scope, and coverage to that
maintained by other peer organizations. None of the Independence Entities has
received notice from any insurance carrier that (i) any policy of insurance will
be canceled or that coverage thereunder will be reduced or eliminated, (ii)
premium costs with respect to such policies of insurance will be substantially
increased, or (iii) similar coverage will be denied or limited or not extended or renewed with respect to
any Independence Entity, any act or occurrence, or that any Asset, officer,
director, employee or agent of any Independence Entity will not be covered by
such insurance or bond. There are presently no claims for amounts exceeding
$25,000 individually or in the aggregate pending under such policies of
insurance or bonds, and no notices of claims in excess of such amounts have been
given by any Independence Entity under such policies. Except as disclosed in
Section 4.10(c) of the Independence Disclosure Memorandum, Independence has made
no claims, and no claims are contemplated to be made, under its current policies
of directors and officers errors and omissions or other insurance or its
current bankers blanket bond; and no claims are pending, or have been made
during the past three years, under any prior Independence directors and
officers errors and omissions or other insurance or bankers blanket bond.
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(d)
The Assets of the Independence Entities include
all Assets required by Independence Entities to operate the business of the
Independence Entities as presently conducted which, for the sake of clarity,
does not include online consumer lending or mobile-based payment processing. All
real and personal property which is material to the business of Independence or
Independence Bank that is leased or licensed by it is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases and licenses will not terminate or lapse prior to the
Effective Time or thereafter by reason of completion of any of the transactions
contemplated by this Agreement. All improved real property owned or leased by
Independence or Independence Bank is in material compliance with all applicable
laws, including zoning laws and the Americans with Disabilities Act of 1990.
4.11
Intellectual Property; Information Systems; and
Privacy Policies.
(a)
Except as disclosed in Section 4.11(a) of the
Independence Disclosure Memorandum, each Independence Entity owns or has a
license to use all of the Intellectual Property used by such Independence Entity
in the course of its business as presently conducted, including sufficient
rights in each copy possessed by each Independence Entity. Each
Independence Entity is the owner of or has a
license, with the right to sublicense, to any Intellectual Property sold or
licensed to a third party by such Independence Entity in connection with such
Independence Entitys business operations, and such Independence Entity has the
right to convey by sale or license any Intellectual Property so conveyed. To
Independences
Knowledge, no
Independence Entity is in Default under any of its Intellectual Property
licenses. To Independences Knowledge, no proceedings have been instituted, or
are pending or to the Knowledge of Independence threatened, which challenge the
rights of any Independence Entity with respect to Intellectual Property used,
sold, or licensed by such Independence Entity in the course of its business, nor
has any person claimed or alleged any rights to such Intellectual Property. To
Independences Knowledge, the conduct of the business of the Independence
Entities does not infringe any Intellectual Property of any other person. Except
as disclosed in Section 4.11 of the Independence Disclosure Memorandum, no
Independence Entity is obligated to pay any recurring royalties to any Person
with respect to any such Intellectual Property. Independence does not have any
Contracts with its directors, officers, or employees which require such officer,
director, or employee to assign any interest in any Intellectual Property to an
Independence Entity and to keep confidential any trade secrets, proprietary
data, customer information, or other business information of an Independence
Entity, and to Independences Knowledge, no such officer, director, or employee
is party to any Contract with any Person other than an Independence Entity which requires such officer, director or
employee to assign any interest in any Intellectual Property to any Person other
than an Independence Entity or to keep confidential any trade secrets,
proprietary data, customer information, or other business information of any
Person other than an Independence Entity. To Independences Knowledge, no
officer, director, or employee of any Independence Entity is party to any
confidentiality, nonsolicitation, noncompetition, or other Contract which
restricts or prohibits such officer, director, or employee from engaging in
activities competitive with any Person, other than an Independence Entity.
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(b)
Independence owns or has a valid right to access
and use all computer systems, programs, networks, hardware, software, software
engines, database, operating systems, websites, website content and links and
equipment used to process, store, maintain and operate data, information and
functions owned, used or provided by Independence (the
Independence Information Systems
). Independence has taken all steps in accordance
with prevailing standards in the banking industry in the United States and the
applicable regulations of the Regulatory Authorities to secure the Independence
Information Systems from unauthorized access and use by any Person, and to
ensure to the maximum extent reasonably and commercially practicable, the
continued, uninterrupted and error-free operation of Independence Information
Systems. Except as set forth in Section 4.11(b) of the Independence Disclosure
Memorandum, (i) there have been no unauthorized intrusions or breaches of
security with respect to Independence Information Systems; (ii) there has not
been any material malfunction of Independence Information Systems that has not
been promptly remedied in all respects. Independence Information Systems comply, and for the previous five years
have complied, in all material respects with all applicable Laws, including the
Americans with Disabilities Act.
(c)
Independences use or handling of the confidential
information of its customers and consumers (
Confidential Customer Information
) does not currently, and did not at any time
during the five years immediately preceding the date hereof (the past five
years), violate any Applicable Law or regulations of any Regulatory Authority.
Independence has not received any notice that it is or may be in violation of
any data privacy or data security Laws or any such regulations. Independence has
not distributed or displayed any Confidential Customer Information in violation
of any of the rules or regulations of any Regulatory Authority or in breach of
any Contract to which it is a party or is bound. Currently, Independence does,
and at all times during the past five years Independence has, (i) posted on its
website and mailed to its customers, as and to the extent required by such Laws,
rules or regulations, true and correct copies of the privacy policies governing
Independences use and collection of Confidential Customer Information, and (ii)
all of Independences privacy policies describe in all material respects
Independences use, collection, display and distribution of any such
Confidential Customer Information. Accurate and complete copies of the current
versions of all such privacy policies, and any other privacy policies publicly
disclosed by or on behalf of Independence at any time during past five years,
have been provided or made available to Parent. Independences operation of its
business is consistent and compliant with the current version of Independences
privacy policies and, during the past five years was consistent and compliant
with all such policies as in effect at any time or from time to time during
those five years. Independence has taken all steps, in accordance with
prevailing banking industry practices and the applicable requirements of the
Regulatory Authorities, to secure its websites, services and Confidential
Customer Information from unauthorized access or use by any Person and, except
as otherwise disclosed in Section 4.11(c) of
the Independence Disclosure Memorandum, Independence has not granted to any
third party any rights to access or use any of such information, including for
purposes of soliciting Independences customers or consumers. A copy of all
internally or externally prepared reports or audits prepared since December 31,
2013 that describe or evaluate Independences information security procedures
have been provided or made available to Parent. Except as otherwise set forth in
Section 4.11(c) of the Independence Disclosure Memorandum, none of the
Confidential Customer Information or Independences websites or services have
been the target of any successful or attempted unauthorized access,
denial-of-service assault or other similar attack. Except as disclosed in
Section 4.11(c) of the Independence Disclosure Memorandum, Independence has not
granted to any third party any rights to use any of such information including
for purposes of soliciting Independences customers or
consumers.
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(d)
Without limiting the generality of the foregoing
provisions of this Section 4.11, Independence maintains safeguards designed, in
accordance with the requirements of the Gramm-Leach-Bliley Act, to protect and
maintain the confidentiality of the non-public personally identifiable
information of its customers and consumers.
4.12
Environmental Matters.
(a)
Independence has delivered, or caused to be
delivered or made available to Parent, true and complete copies of, all
environmental site assessments, test results, analytical data, boring logs,
permits for storm water, wetlands fill, or other environmental permits for
construction of any building, parking lot or other improvement, and other
environmental reports and studies in the possession of any Independence Entity
relating to its Participation Facilities and Operating Properties. Except as
disclosed in Section 4.12(a) of the Independence Disclosure Memorandum, the
officers of Independence do not have actual knowledge of any material violations
of Environmental Laws on properties that secure loans made by Independence or
Independence Bank.
(b)
Except as disclosed in Section 4.12(b) of the
Independence Disclosure Memorandum, the officers of Independence do not have
actual knowledge that any Independence Entity, its Participation Facilities, and
its Operating Properties are not, and have not been, in compliance with
Environmental Laws in all material respects.
(c)
Except as disclosed in Section 4.12(c) of the
Independence Disclosure
Memorandum,
there is no Litigation pending or environmental enforcement action,
investigation, or Litigation threatened before any Governmental Authority or
other forum in which any Independence Entity or any of its Operating Properties
or Participation Facilities (or Independence in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with or Liability under any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site currently or formerly owned,
leased, or operated by any Independence Entity or any of its Operating
Properties or Participation Facilities.
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(d)
During the period of (i) any Independence Entitys
ownership or operation of any of their respective current properties, (ii) any
Independence Entitys participation in the management of any Participation
Facility, or (iii) any Independence Entitys holding of a security interest in
any Operating Property, except as disclosed in Section 4.12(d) of the
Independence Disclosure Memorandum, the officers of Independence do not have
actual knowledge of any releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Independence Entitys
ownership or operation of any of their respective current properties, (ii) any
Independence Entitys participation in the management of any Participation
Facility, or (iii) any Independence Entitys holding of a security interest in
any Operating Property, except as disclosed in Section 4.12(d) of the
Independence Disclosure Memorandum, the officers of Independence do not have
actual knowledge that there were any releases, discharges, spillages, or
disposals of Hazardous Material in, on, under, or affecting any such property,
Participation Facility or Operating Property. During and prior to the period of
(i) Independence Entitys ownership or operation of any of their respective
current properties, (ii) any Independence Entitys participation in the
management of any Participation Facility, or (iii) any Independence Entitys
holding of a security interest in any Operating Property, except as disclosed in
Section 4.12(d) of the Independence Disclosure Memorandum, the officers of
Independence do not have actual knowledge of any violations of any Environmental
Laws, including but not limited to unauthorized alterations of wetlands.
4.13
Compliance with Laws.
(a)
The Parties understand and agree that nothing in
this Agreement shall require or permit any Independence Entity to disclose
Confidential Supervisory Information to any Parent Entity, and no disclosure,
representation, or warranty shall be required to be made (or any other action
taken) pursuant to this Agreement that would involve the disclosure of
confidential supervisory information of a Governmental Authority.
(b)
Each of the Independence Entities has in effect
all Permits and has made all filings, applications, and registrations with
Governmental Authorities that are required for it to own, lease, or operate its
assets and to carry on its business as now conducted, and there has occurred no
Default under any such Permit applicable to their respective businesses or
employees conducting their respective businesses.
(c)
None of the Independence Entities is in Default
under any Laws or Orders applicable to its business or employees conducting its
business.
(d)
Since June 5, 2014, none of the Independence
Entities has received any notification or communication from any Governmental
Authority (A) asserting that Independence or any of its Subsidiaries is in
Default under any of the Permits, Laws, or Orders which such Governmental
Authority enforces, (B) threatening to revoke any Permits, or (C) requiring
Independence or any of its Subsidiaries (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment,
or memorandum of understanding, or (y) to adopt any resolution of its board of
directors or similar undertaking.
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(e)
There (A) is no unresolved violation, criticism,
or exception by any Governmental Authority with respect to any report or
statement relating to any examinations or inspections of Independence or any of
its Subsidiaries, (B) are no notices or correspondence received by Independence
with respect to formal or informal inquiries by, or disagreements or disputes
with, any Governmental Authority with respect to Independences or any of
Independences Subsidiaries business, operations, policies, or procedures since
its inception, and (C) is not any pending or, to Independences Knowledge,
threatened, nor has any Governmental Authority indicated an intention to conduct
any, investigation, or review of it or any of its Subsidiaries.
(f)
None of the Independence Entities nor any of its
directors, officers, employees, or Representatives acting on its behalf has
offered, paid, or agreed to pay any Person, including any Government Authority,
directly or indirectly, anything of value for the purpose of, or with the intent
of obtaining or retaining any business in violation of applicable Laws,
including (1) using any corporate funds for any unlawful contribution, gift,
entertainment, or other unlawful expense relating to political activity, (2)
making any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, (3) violating any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or (4)
making any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment.
(g)
Each Independence Entity has complied in all
material respects with all requirements of Law under the Bank Secrecy Act and
the USA Patriot Act, and each Independence Entity has timely filed all reports
of suspicious activity, including those required under 12 C.F.R. § 353.3.
4.14
Labor Relations.
(a)
No Independence Entity is the subject of any
Litigation asserting that it or any other Independence Entity has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or other violation of state or federal labor Law or
seeking to compel it or any other Independence Entity to bargain with any labor
organization or other employee representative as to wages or conditions of
employment, nor is any Independence Entity party to any collective bargaining
agreement or subject to any bargaining order, injunction, or other Order
relating to Independences relationship or dealings with its employees, any
labor organization or any other employee representative. There is no strike,
slowdown, lockout, or other job action or labor dispute involving any
Independence Entity pending or threatened and there have been no such actions or
disputes in the past five years. To Independences Knowledge, there has not been
any attempt by any Independence Entity employees or any labor organization or
other employee representative to organize or certify a collective bargaining
unit or to engage in any other union organization activity with respect to the
workforce of any Independence Entity. Except as disclosed in Section 4.14 of the
Independence Disclosure Memorandum, employment of each employee and the
engagement of each independent contractor of each Independence Entity is
terminable at will by the relevant Independence Entity without (i) any penalty,
Liability, or severance obligation incurred by any Independence Entity, (ii) and
in all cases without prior consent by any Governmental Authority. No
Independence Entity will owe any amounts to any of its employees or independent
contractors as of the Closing Date, including any amounts incurred for any
wages, bonuses, vacation pay, sick leave,
contract notice periods, change of control payments, or severance obligations
except as disclosed in Section 4.14 of the Independence Disclosure Memorandum.
(b) To Independences Knowledge, all of the employees
employed in the United States are either United States citizens or are legally
entitled to work in the United States under the Immigration Reform and Control
Act of 1986, as amended, other United States immigration Laws and the Laws
related to the employment of non-United States citizens applicable in the state
in which the employees are employed.
(c) No
Independence Entity has effectuated (i) a plant closing (as defined in the
Worker Adjustment and Retraining Notification Act (the
WARN Act
)) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any Independence
Entity; or (ii) a mass layoff (as defined in the WARN Act) affecting any site
of employment or facility of any Independence Entity; and no Independence Entity
has been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local Law. None of any Independence Entitys employees has suffered an
employment loss (as defined in the WARN Act) since six months prior to the
Closing Date.
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(d)
Section 4.14 of the Independence Disclosure
Memorandum contains a list of all independent contractors of each Independence
Entity (separately listed by Independence Entity) and each such Person meets the
standard for an independent contractor under all Laws (including Treasury
Regulations under the Code and federal and state labor and employment Laws) and
no such Person is an employee of any Independence Entity under any applicable
Law.
4.15
Employee Benefit Plans.
(a)
Independence has disclosed in Section 4.15(a) of
the Independence Disclosure Memorandum, and has delivered or made available to
Parent prior to the execution of this Agreement, (i) copies of each Employee
Benefit Plan currently adopted, maintained by, sponsored in whole or in part by,
or contributed or required to be contributed to by any Independence Entity or
any ERISA Affiliate thereof for the benefit of employees, former employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries or under which employees, retirees, former employees, dependents,
spouses, directors, independent contractors, or other beneficiaries are eligible
to participate (each, a
Independence Benefit Plan
, and collectively, the
Independence Benefit Plans
) and (ii) a list of each Employee Benefit Plan that is not identified
in (i) above and in connection with which any Independence Entity or any ERISA
Affiliate thereof has or reasonably could have any obligation or Liability. Any
of the Independence Benefit Plans which is an employee pension benefit plan,
as that term is defined in ERISA Section 3(2), is referred to herein as an
Independence ERISA
Plan
. Each Independence ERISA
Plan which is also a defined benefit plan (as defined in Code Section 414(j))
is referred to herein as an
Independence Pension Plan
, and is identified as such in Section 4.15 of the Independence
Disclosure Memorandum.
(b)
Independence has delivered or made available to
Parent prior to the execution of this Agreement (i) all trust agreements or
other funding arrangements for all Employee Benefit Plans, (ii) all
determination letters, rulings, opinion letters, information letters, or
advisory opinions issued by the United
States Internal Revenue Service (
IRS
), the United States
Department of Labor (
DOL
) or the Pension
Benefit Guaranty Corporation during this calendar year or any of the preceding
three calendar years, (iii) any filing or documentation (whether or not filed
with the IRS) where corrective action was taken in connection with the IRS EPCRS
program set forth in Revenue Procedure 2001-17 (or its predecessor or successor
rulings), (iv) annual reports or returns, audited or unaudited financial
statements, actuarial reports, and valuations prepared for any Employee Benefit
Plan for the current plan year and the three preceding plan years, and (v) the
most recent summary plan descriptions and any material modifications thereto.
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(c)
Each Independence Benefit Plan is in material
compliance with the terms of such Independence Benefit Plan, in material
compliance with the applicable requirements of the Code, in material compliance
with the applicable requirements of ERISA, and in material compliance with any
other applicable Laws. Each Independence ERISA Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter or opinion from the IRS or, in the alternative,
appropriately relies upon a favorable determination letter issued to a prototype
plan under which the Independence ERISA Plan has been adopted and Independence
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. Independence has not received any communication
(written or unwritten) from any Governmental Authority questioning or
challenging the compliance of any Independence Benefit Plan with applicable
Laws. No Independence Benefit Plan is currently being audited by any
Governmental Authority for compliance with applicable Laws or has been audited
with a determination by any Governmental Authority that the Employee Benefit
Plan failed to comply with applicable Laws.
(d)
To Independences Knowledge, there has been no
material oral or written representation or communication with respect to any
aspect of the Employee Benefit Plans made to employees of Independence which is
not in accordance with the written or otherwise preexisting terms and provisions
of such plans. To Independences Knowledge, neither Independence nor any
administrator or fiduciary of any Independence Benefit Plan (or any agent of any
of the foregoing) has engaged in any transaction, or acted or failed to act in
any manner, which could subject Independence or Parent to any direct or indirect
Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary,
or other duty under ERISA. To
Independences Knowledge, there are no unresolved claims or disputes
under the terms of, or in connection with, the Independence Benefit Plans other
than claims for benefits which are payable in the ordinary course of business
and no action, proceeding, prosecution, inquiry, hearing, or investigation has
been commenced with respect to any Independence Benefit Plan.
(e)
All Independence Benefit Plan documents and annual
reports or returns, audited or unaudited financial statements, actuarial
valuations, summary annual reports, and summary plan descriptions issued with
respect to the Independence Benefit Plans are correct and complete in all
material respects, have been timely filed with the IRS or the DOL, and
distributed to participants of the Independence Benefit Plans (as required by
Law), and there have been no changes in the information set forth therein.
(f)
To Independences Knowledge, no party in
interest (as defined in ERISA Section 3(14)) or disqualified person (as
defined in Code Section 4975(e)(2)) of any Independence Benefit Plan has engaged in any nonexempt prohibited
transaction (described in Code Section 4975(c) or ERISA Section 406).
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(g)
No Independence Entity nor any of its ERISA
Affiliates has, or ever has had, any obligation or Liability in connection with,
an Independence Pension Plan, or any plan that is or was subject to Code Section
412 or ERISA Section 302 or Title IV of ERISA.
(h)
No Liability under Title IV of ERISA has been or
is expected to be incurred by any Independence Entity or any ERISA Affiliate
thereof, and no event has occurred that could reasonably result in Liability
under Title IV of ERISA being incurred by any Independence Entity or any ERISA
Affiliate thereof with respect to any ongoing, frozen, terminated, or other
plan.
(i)
Except as disclosed in Section
4.15 of the Independence Disclosure Memorandum, or required under Part 6 of ERISA or Code Section 4980B, no
Independence Entity has any Liability or obligation for retiree or
post-termination of employment or services health or life benefits under any of
the Independence Benefit Plans, or other plan or arrangement, and there are no
restrictions on the rights of such Independence Entity to amend or terminate any
and all such retiree or post-termination of employment or services health or
benefit plans or arrangements without incurring any Liability. No Tax under Code
Sections 4980B or 5000 has been incurred with respect to any Independence
Benefit Plan, or other plan or arrangement, and no circumstance exists which
could give rise to such Taxes.
(j)
Except as disclosed in Section 4.15 of the
Independence Disclosure Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due from any Independence Entity under any Independence
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any Independence Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit, or any benefit under any life
insurance owned by any Independence Entity or the rights of any Independence
Entity in, to or under any insurance on the life of any current or former
officer, director, or employee of any Independence Entity, or change any rights
or obligations of any Independence Entity with respect to such insurance.
(k)
The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Independence Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans, whether or
not subject to the provisions of Code Section 412 or ERISA Section 302, have
been fully reflected on the Independence Financial Statements to the extent
required by and in accordance with GAAP.
(l)
All individuals who render services to any
Independence Entity and who are authorized to participate in an Independence
Benefit Plan pursuant to the terms of such Independence Benefit Plan are in fact
eligible to and authorized to participate in such Independence Benefit Plan.
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(m)
Neither Independence nor any of its ERISA
Affiliates has had an obligation to contribute (as defined in ERISA Section
4212) to, or other obligations or Liability in connection with, a multiemployer
plan (as defined in ERISA Sections 4001(a)(3) or 3(37)(A)).
(n)
Except as disclosed in Section 4.15 of the
Independence Disclosure Memorandum, there are no payments or changes in terms due to any insured
person as a result of this Agreement, the Merger or the transactions
contemplated herein, under any bank-owned, corporate-owned split dollar life
insurance, other life insurance, or similar arrangement or Contract, and the
Successor Corporation shall, upon and after the Effective Time, succeed to and
have all the rights in, to and under such life insurance Contracts as
Independence presently holds. Each Independence Entity will, upon the execution
and delivery of this Agreement, and will continue to have, notwithstanding this
Agreement or the consummation of the transaction contemplated hereby, all
ownership rights and interest in all corporate or bank-owned life
insurance.
(o)
Except as disclosed in Section 4.15(o) of the
Independence Disclosure Memorandum, no Independence Benefit Plan, or other plan
or arrangement, is subject to any requirement of Section 409A(a)(2), (3), or (4)
of the Code.
4.16
Material Contracts.
(a)
Except as disclosed in Section 4.16 of the
Independence Disclosure Memorandum or otherwise reflected in the Independence
Financial Statements, none of the Independence Entities, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, change in control,
severance, termination, consulting, or retirement Contract, (ii) any Contract
relating to the borrowing of money by any Independence Entity or the guarantee
by any Independence Entity of any such obligation (other than Contracts
evidencing the creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank, entry into
repurchase agreements fully secured by U.S. government securities or U.S.
government agency securities, advances of depository institution Subsidiaries
incurred in the ordinary course of Independences business, and trade payables
and Contracts relating to borrowings or guarantees made in the ordinary course
of Independences business), (iii) any Contract which prohibits or restricts any
Independence Entity or any personnel of an Independence Entity from engaging in
any business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract involving Intellectual
Property (other than Contracts entered into in the ordinary course with
customers or shrink-wrap software licenses), (v) any Contract relating to the
provision of data processing, network communication, or other technical services
to or by any Independence Entity, (vi) any Contract relating to the purchase or
sale of any goods or services (other than Contracts entered into in the ordinary
course of business and involving payments under any individual Contract or
series of contracts not in excess of $20,000), (vii) any exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
Contract, or any other interest rate or foreign currency protection Contract or
any Contract that is a combination thereof not included on its balance sheet,
and (viii) any other Contract that would be required to be filed as an exhibit
to a Form 10-K filed by Independence as of the date of this Agreement pursuant
to the reporting requirements of the Exchange Act (together with all Contracts
referred to in Sections 4.11 and 4.15(a), the
Independence Contracts
).
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(b)
With respect to each Independence Contract and
except as disclosed in Section 4.16(b) of the Independence Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no Independence
Entity is in Default thereunder; (iii) no Independence Entity has repudiated or
waived any material provision of any such Contract; (iv) no other party to any
such Contract is, to Independences Knowledge, in Default in any respect or has
repudiated or waived each material provision thereunder; and (v) no consent
which has not been or will not be obtained is required by a Contract for the
execution, delivery, or performance of this Agreement, the consummation of the
Merger or the other transactions contemplated hereby. Section 4.16(b) of the
Independence Disclosure Memorandum lists every Consent required by any Contract
involving payments in excess of $20,000. All of the indebtedness of any
Independence Entity for money borrowed is prepayable at any time by such
Independence Entity without penalty, premium or charge, except as specified in
Section 4.16(b) of the Independence Disclosure Memorandum.
4.17
Privacy of Customer Information.
(a)
Each Independence Entity is the sole owner of all
individually identifiable personal information relating to identifiable or
identified natural person (
IIPI
) relating to
customers, former customers, and prospective customers that will be transferred
to Parent and the Parent Entities pursuant to this Agreement.
(b)
Each Independence Entitys collection and use of
such IIPI, the transfer of such IIPI to Parent and the Parent Entities, and the
use of such IIPI by the Parent Entities as contemplated by this Agreement,
complies with Independences privacy policy, the Fair Credit Reporting Act, the
Gramm-Leach-Bliley Act, and all other applicable privacy Laws, and any
Independence Entity Contract and industry standards relating to privacy.
4.18
Legal Proceedings.
Except as disclosed in Section 4.18 of the Independence Disclosure
Memorandum, there is no Litigation instituted or pending, or, to the Knowledge
of Independence, threatened (or unasserted but considered probable of assertion)
against any Independence Entity, or to Independences Knowledge, against any
director, officer, employee, or agent of any Independence Entity in their
capacities as such or with respect to any service to or on behalf of any
Employee Benefit Plan or any other Person at the request of the Independence
Entity or Employee Benefit Plan of any Independence Entity, or against any
Asset, interest, or right of any of them, nor are there any Orders or judgments
outstanding against any Independence Entity. No claim for indemnity has been
made or, to Independences Knowledge, threatened by any director, officer,
employee, independent contractor, or agent to any Independence Entity and to
Independences Knowledge, no basis for any such claim exists.
4.19
Reports.
Except as disclosed in Section 4.19 of the Independence Disclosure
Memorandum, since December 31, 2013, each Independence Entity has timely filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with Governmental
Authorities. Except as corrected by subsequent amendments, as of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of their
respective dates, such reports and documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing provisions of this Section 4.19, Independence Entities may have made
immaterial late filings.
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4.20
Books and Records.
Independence and each Independence Entity maintain accurate books and
records reflecting its Assets and Liabilities and maintains proper and adequate
internal accounting controls which provide assurance that (a) transactions are
executed with managements authorization; (b) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of
Independence and to maintain accountability for Independences consolidated
Assets; (c) access to Independences Assets is permitted only in accordance with
managements authorization; (d) the reporting of Independences Assets is
compared with existing Assets at regular intervals; and (e) accounts, notes, and
other receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis.
4.21
Loans to, and Transactions with, Executive
Officers and Directors.
Independence has not, since December 31, 2013, extended or maintained
credit, arranged for the extension of credit, or renewed an extension of credit,
in the form of a personal loan to or for any director or executive officer (or
equivalent thereof) of Independence, except as permitted by Federal Reserve
Regulation O. Section 4.21 of the Independence Disclosure Memorandum identifies
any Regulation O loan or extension of credit maintained by Independence as of
the date of this Agreement. Except as disclosed in Section 4.21 of the
Independence Disclosure Memorandum, no director or executive officer of
Independence or Independence Bank, or any associate (as such term is defined
in Rule 14a-1 under the Exchange Act) or related interest of any such Person,
has any interest in any Contract or property (real or personal, tangible or
intangible), used in, or pertaining to, the business of Independence or
Independence Bank.
4.22
Regulatory
Matters.
No
Independence Entity or, to Independences Knowledge, any Affiliate thereof has
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to
materially impede or
delay receipt of any required Consents or result in the imposition of a
condition or restriction of the type referred to in the last sentence of Section
8.1(b). To the Knowledge of Independence, no Person intends to, or is likely
to, oppose, challenge or intervene with respect to any application required or
planned to be made to any Governmental Agency in connection with the Merger. No
Independence Entity is subject to any cease-and-desist or other order or
enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any Order or directive by, or
has been ordered to pay any civil penalty by, or is a recipient of any
supervisory letter from, or has adopted any
board resolutions at the request or suggestion of any Regulatory Authority or
other Governmental Authority that restricts the conduct of its business or that
relates to its capital adequacy, its ability to pay dividends, its credit or
risk management policies, its management or its business (any such agreement,
memorandum of understanding, letter, undertaking, Order, directive or
resolutions, whether or not set forth in the Independence Disclosure Memorandum,
a
Independence Regulatory
Agreement
), nor to
Independences Knowledge, are there any pending or threatened regulatory
investigations or other actions by any Regulatory Authority or other
Governmental Authority that could reasonably be expected to lead to the issuance
of any such Independence Regulatory Agreement. To the Knowledge of Independence,
there exists no Confidential Supervisory Information that would be material to
Parents decision to enter into this Agreement or consummate the Merger, the
underlying facts with respect to which have not been disclosed to Parent. For
the avoidance of doubt, the Parties acknowledge that nothing in the immediately
preceding sentence shall be deemed a request by Parent for, nor a requirement
for Independence or any Independence Entity to disclose or make available to
Parent, any Confidential Supervisory Information.
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4.23
State Takeover Laws.
Each
Independence Entity has taken all necessary action, if any, to exempt the
transactions contemplated by this Agreement from, or if necessary to challenge
the validity or applicability of, any applicable moratorium, fair price,
business combination, control share, or other anti-takeover Laws
(collectively,
Takeover
Laws
).
4.24
Brokers and Finders; Opinion of Financial Advisor.
Except for the Independence Financial Advisor, neither Independence nor
its Subsidiaries, or any of their respective officers, directors, employees, or
Representatives, has employed any broker, finder, or investment banker or
incurred any Liability for any financial advisory fees, investment bankers fees,
brokerage fees, commissions, or finders or other such fees in connection with
this Agreement or the transactions contemplated hereby. Independence has
received the written opinion of the Independence Financial Advisor, dated the
date of this Agreement, to the effect that the consideration to be received in
the Merger by the holders of Independence Common Stock is fair, from a financial
point of view, to such holders, a signed copy of which has been or will be
delivered to Parent.
4.25
Board Recommendation.
Independences board of directors, at a meeting duly called and held with
a quorum present, has by unanimous vote of the directors present (i) adopted
this Agreement and approved the transactions contemplated hereby, including the
Merger and the transactions contemplated hereby and thereby, and has determined
that, taken together, they are fair to and in the best interests of
Independences shareholders, and (ii) resolved, subject to the terms of this
Agreement, to recommend that the holders of the shares of Independence Series A
Preferred Stock and Independence Common Stock approve this Agreement, the
Merger, and the related transactions and to call and hold a meeting of
Independences shareholders at which this Agreement, the Merger, and the related
transactions shall be submitted to the holders of the shares of Independence
Series A Preferred Stock and Independence Common Stock for approval.
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4.26
Statements True and Correct.
(a)
No statement, certificate, instrument, or other
writing furnished or to be furnished by any Independence Entity or any Affiliate
thereof to Parent pursuant to this Agreement or any other document, agreement,
or instrument referred to herein contains or will contain any untrue statement
of material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b)
None of the information supplied or to be supplied
by an Independence Entity or any Affiliate thereof for inclusion in any proxy
statement relating to Independences Shareholders Meeting to be held in
connection with this Agreement and the transaction contemplated by this
Agreement (such proxy statement and any amendments or supplements thereto, the
Proxy Statement
) to be mailed to Independences shareholders in
connection with Independences Shareholders Meeting, and any other documents to
be filed by any Independence Entity or any Affiliate thereof with any Regulatory
Authority in connection with the transactions contemplated hereby, will (after
taking into account any supplemental or amended information provided prior to
filing, mailing, or the date of Independences Shareholders Meeting, as
applicable) at the respective time such documents are filed, and with respect to
any Proxy Statement, when first mailed to the shareholders of Independence be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
Independences Shareholders Meeting be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for Independences Shareholders Meeting.
(c)
All documents that any Independence Entity or any
Affiliate thereof is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
4.27
Anticipated Merger-Related
Expenses.
Section 4.27 of the Independence Disclosure Memorandum sets forth
Independences good faith estimate of its anticipated investment banking, legal,
accounting, and other expenses associated with this Agreement and the
consummation of the transactions contemplated hereby.
4.28
Delivery of Independence Disclosure
Memorandum.
Independence has delivered to Parent a complete Independence Disclosure
Memorandum.
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ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF PARENT
Parent hereby represents and warrants to Independence as follows:
5.1
Organization, Standing, and
Power.
Parent is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of South Carolina, and has the corporate
power and authority to carry on its business as now conducted and to own, lease,
and operate its Assets. Parent is duly qualified or licensed to transact
business as a foreign corporation in good standing in the states of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
5.2
Authority; No Breach by Agreement.
(a)
Parent has the corporate power and authority
necessary to execute and deliver this Agreement and, subject to any necessary
approvals referred to in Sections 8.1(b) and 8.1(c), to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Parent. Subject to any necessary approvals referred to in Sections
8.1(b) and 8.1(c), this Agreement represents a legal, valid, and binding
obligation of Parent enforceable against Parent in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b)
Neither the execution and delivery of this
Agreement by Parent, nor the consummation by Parent of the transactions
contemplated hereby, nor compliance by Parent with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of Parents
articles of incorporation or bylaws, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any Lien
on any Asset of any Parent Entity under, any Contract or Permit of any Parent
Entity, or, (iii) subject to receipt of the requisite Consents referred to in
Sections 8.1(b) and (c), constitute or result in a Default under, or require any
Consent pursuant to, any Law or Order applicable to any Parent Entity or any of
their respective material Assets.
(c)
Except for (i) the filing of applications and
notices with, and approval of such applications and notices from, the Federal
Reserve, the FDIC, the OCC, and the South Carolina Board of Financial
Institutions, (ii) the filing of the Articles of Merger with the Secretary of
State of the State of South Carolina, and (iii) notices or filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, no
consents or approvals of or filings or registrations with any Governmental
Authority are necessary in connection with the consummation by Parent of the
Merger and the other transactions contemplated by this Agreement. No consents or
approvals of or filings or registrations with any Governmental Authority are
necessary in connection with the execution and delivery by Parent of this
Agreement.
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5.3
Financial Statements.
Each
of the Parent Financial Statements (including, in each case, any related notes)
was, or will be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements), fairly presented the consolidated financial position of
Parent and First Reliance as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
5.4
Reports.
Since January 1, 2014, each Parent Entity has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Governmental Authorities. Except as
corrected by subsequent amendments, as of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable
Laws.
5.5
Legal Proceedings.
There is no Litigation instituted or pending, or, to the Knowledge of
Parent, threatened (or unasserted but considered probable of assertion) against
any Parent Entity, or to Parents Knowledge, against any director, officer,
employee, or agent of any Parent Entity in their capacities as such or with
respect to any service to or on behalf of any Employee Benefit Plan or any other
Person at the request of the Parent Entity or Employee Benefit Plan of any
Parent Entity, or against any Asset, interest, or right of any of them, nor are
there any Orders or judgments outstanding against any Parent Entity. No claim
for indemnity has been made or, to Parents Knowledge, threatened by any
director, officer, employee, independent contractor, or agent to Parent Entity
and to Parents Knowledge, no basis for any such claim exists.
5.6
Compliance with Laws.
The
deposit accounts of First Reliance are insured by the FDIC through the Deposit
Insurance Fund to the fullest extent permitted by Law, and all premiums and
assessments required to be paid in connection therewith have been paid when due.
No proceedings for the revocation or termination of such deposit insurance are
pending or, to the Knowledge of Parent, threatened. Parent and First Reliance
have in effect all Permits necessary for it to own, lease, or operate their
respective assets and to carry on their respective business as now conducted,
except for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect, and there
has occurred no Default under any such Permit, other than Defaults which could
not reasonably be anticipated to have, individually or in the aggregate, a
Parent Material Adverse Effect. The execution, delivery and performance of this
Agreement do not materially violate any such Permit, and will not result in any
revocation, cancellation, suspension, material modification or nonrenewal
thereof.
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5.7
Brokers and Finders.
Except for Parent Financial Advisor, neither Parent nor its Subsidiaries
nor any of their respective officers, directors, employees, or Representatives,
has employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers fees, brokerage fees, commissions, or
finders fees in connection with this Agreement or the transactions contemplated
hereby.
5.8
Certain Actions.
No
Parent Entity or any Affiliate thereof has taken or agreed to take any action or
has any Knowledge of any fact or circumstance that is reasonably likely to
materially impede or delay receipt of any required Consents or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of Section 8.1(b). To the Knowledge of Parent, no Person intends to,
or is likely to, oppose, challenge or intervene with respect to any application
required or planned to be made to any Governmental Agency in connection with the
Merger.
5.9
Available Consideration.
Parent has available to it all funds necessary for the issuance and
payment of the Merger Consideration and has funds available to it to satisfy its
payment obligations under this Agreement.
5.10
Statements True and Correct.
(a)
No statement, certificate, instrument, or other
writing furnished or to be furnished by any Parent Entity or any Affiliate
thereof to Independence pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b)
None of the information supplied by the Parent
Entity or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Independences shareholders in connection with Independences
Shareholders Meeting, and any other documents to be filed by any Parent Entity
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, including pursuant to
Section 7.3 hereof, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
Independence be false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of Independences Shareholders Meeting be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for Independences Shareholders Meeting.
(c)
All documents that any Parent Entity or any
Affiliate thereof is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
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ARTICLE 6
CONDUCT OF BUSINESS
PENDING CONSUMMATION
6.1
Affirmative Covenants of Independence and
Parent.
(a)
From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Parent, which shall not be unreasonably withheld, shall have
been obtained, and except as otherwise expressly contemplated herein,
Independence shall, and shall cause each of its Subsidiaries to, (i) operate its
business only in the usual, regular, and ordinary course, (ii) use commercially
reasonable efforts to preserve intact its business organization and Assets and
maintain its rights and franchises, (iii) use commercially reasonable efforts to
cause its representations and warranties to be correct at all times, (iv) use
best efforts to provide all information requested by Parent related to loans or
other transactions made by Independence to a Person with a total relationship
credit commitment exceeding $300,000, (v) provide written notice to Parent after
entering into or making any loans or other transactions with a Person with a
total relationship credit commitment exceeding $150,000 other than residential
mortgage loans for which Independence has a commitment to buy from a reputable
investor, (vi) consult with Parent prior to entering into or making any loans
that exceed regulatory loan to value guidelines, (vii) upon reasonable notice,
provide Parent, at Parents request and without charge to Parent, reasonable
office space and support at Independences main office for Parent to conduct
additional onsite due diligence, and (viii) take no action which would (A)
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Sections 8.1(b) or
8.1(c), or (B) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement.
(b)
From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Independence shall have been obtained, and except as
otherwise expressly contemplated herein, Parent shall, and shall cause each of
its Subsidiaries to, (i) use commercially reasonable efforts to cause its
representations and warranties to be correct at all times, and (ii) take no
action which would (A) adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentences of
Sections 8.1(b) or 8.1(c), or (B) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
(c)
Independence and Parent each shall, and shall
cause each of its Subsidiaries to, cooperate with the other Party and provide
all necessary corporate approvals, and cooperate in seeking all approvals of any
business combinations of Independence and its Subsidiaries requested by Parent,
provided,
the effective time of such business combinations
is on or after the Effective Time of the Merger.
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6.2
Negative Covenants of
Independence.
From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of Parent, which shall not be unreasonably
withheld, shall have been obtained, and except as otherwise expressly
contemplated herein, Independence covenants and agrees that it will not do or
agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a)
amend the articles of incorporation, bylaws, or
other governing instruments of any Independence Entity;
(b)
incur any additional debt obligation or other
obligation for borrowed money except in the ordinary course of the business of
any Independence Entity consistent with past practices
and that are prepayable without penalty, charge, or other payment (which
exception shall include, for Independence Entities that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank, and entry into repurchase agreements
fully secured by U.S. government securities or U.S. government agency
securities;
provided
,
however
, this exception does not include advances from the Federal Home Loan
Bank), or impose, or suffer the imposition, on any Asset of any Independence
Entity of any Lien or permit any such Lien to exist (other than in connection
with
public deposits, repurchase agreements, bankers
acceptances, treasury tax and loan accounts established in the ordinary course
of business of Subsidiaries that are depository institutions, the satisfaction
of legal requirements in the exercise of trust powers, and Liens in effect as of
the date hereof that are disclosed in the Independence Disclosure Memorandum);
(c)
repurchase, redeem, or otherwise acquire or
exchange (other than exchanges in the ordinary course under employee benefit
plans, directly or indirectly, any shares, or any securities convertible into
any shares, of the capital stock of any Independence Entity, or declare or pay
any dividend or make any other distribution in respect of Independences capital
stock) (other than accrued dividends on the Independence Series A Preferred
Stock);
(d)
issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of Independence Series A Preferred Stock or Independence
Common Stock, any other capital stock of any Independence Entity, or any Right;
(e)
adjust, split, combine, or reclassify any capital
stock of any Independence Entity or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Independence Series A
Preferred Stock or Independence Common Stock, or sell, lease, mortgage, or
otherwise dispose of or otherwise (i) any shares of capital stock of any
Independence Subsidiary or (ii) any Asset other than in the ordinary course of
business for reasonable and adequate consideration;
(f)
except for purchases of U.S. Government securities
or U.S. Government agency securities, which in either case have maturities of
two years or less, purchase any securities or make any material investment
except in the ordinary course of business consistent with past practice, either
by purchase of stock or securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly owned Independence
Subsidiary, or otherwise acquire direct or indirect control over any Person,
other than in connection with foreclosures of loans in the ordinary course of
business;
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(g)
(i) except as contemplated by this Agreement,
grant any bonuses or increase in compensation or benefits to the employees,
officers or directors of any Independence Entity (except, with respect to
employees who are not directors or officers, in the ordinary course of business
in accordance with past practice and, with respect to officers and directors, as
described in Section 6.2(g)(i) of the Independence Disclosure Memorandum), (ii)
commit or agree to pay any severance or termination pay, change in control, or
any stay or other bonus to any Independence director, officer or employee
(except for payments according to Section 6.2(g)(ii) of the Independence
Disclosure Memorandum), (iii) enter into, terminate, or amend any retention,
severance, change in control, or employment agreements with officers, employees,
directors, independent contractors, or agents of any Independence Entity, (iv)
change any fees or other compensation or other benefits to directors of any
Independence Entity, or (v) except in order to cancel Independence Options as
contemplated by this Agreement, waive any stock repurchase rights, accelerate,
amend, or change the period of exercisability of any Rights or restricted stock,
or reprice Rights granted under Independences 2005 Incentive Plan or 2013
Incentive Plan or authorize cash payments in exchange for any Rights; or
accelerate or vest or commit or agree to accelerate or vest any amounts,
benefits or Rights payable by any Independence Entity;
(h)
enter into or amend any employment Contract
between any Independence Entity and any Person (unless such amendment is
required by Law) that the Independence Entity does not have the unconditional
right to terminate without Liability (other than Liability for services already
rendered), at any time on or after the Effective Time;
(i)
adopt any new Employee Benefit Plan of any
Independence Entity or terminate or withdraw from, or make any material change
in or to, any existing employee benefit plans, welfare plans, insurance, stock
or other plans of any Independence Entity other than any such change that is
required by Law or to maintain continuous benefits at current levels or that, in
the written opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan, or make any distributions from such employee
benefit or welfare plans, except as required by Law, the terms of such plans or
consistent with past practice;
(j)
make any change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate and
necessary to conform to changes in Tax Laws, regulatory accounting requirements,
or GAAP;
(k)
commence any Litigation other than in accordance
with past practice or settle any Litigation involving any Liability of any
Independence Entity for money damages in excess of any amount covered by
insurance plus the amount of any deductible or retainage or restrictions upon
the operations of any Independence Entity;
(l)
enter into, modify, amend, renew or allow the
automatic renewal of, or terminate any Contract other than with respect to those
involving aggregate payments of less than, or the provision of goods or services
with a market value of less than, $10,000 per annum and other than Contracts
covered by Section 6.2(m) of the Independence Disclosure Memorandum; or sell,
lease, mortgage or otherwise dispose of any Asset with a market value of more
than $10,000;
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(m)
except to satisfy a commitment made before the
date hereof, make, renegotiate, renew, increase, extend, modify or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except,
with respect to any extension of credit to a Person with a total relationship
commitment amount equal to or less than $600,000 (
provided
, that extensions of credit equal to or less than $25,000 to a Person
with a total relationship commitment amount exceeding $600,000 shall not be
subject to the prior written consent of Parent)(
provided further
, that this exception shall not apply to existing
extensions of credit that are either (i) delinquent by more than 30 days in the
payment of principal or interest, (ii) to Independences Knowledge, otherwise in
material default for more than 30 days, or (iii) classified as substandard,
doubtful, loss, other assets especially mentioned or any comparable
classification by Independence or by any applicable Regulatory Authority or
Reserve; or new extensions of credit to borrowers of such existing extensions of
credit, or any Person that controls or is controlled by or under common control
with any such borrowers, directly or indirectly), in conformity with existing
lending policies and practices, or waive, release, compromise, or assign any
material rights or claims, or make any adverse changes in the mix, rates, terms,
or maturities of Independences deposits and other Liabilities;
(n)
except for loans or extensions of credit made on
terms generally available to the public, make or increase any loan or other
extension of credit, or commit to make or increase any such loan or extension of
credit, to any director or executive officer of Independence or Independence
Bank, or any entity controlled, directly or indirectly, by any of the foregoing,
other than renewals of existing loans or commitments to loan;
(o)
restructure or materially change its investment
securities portfolio or its interest rate risk position, through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported;
(p)
make any capital expenditures in excess of $10,000
(individually or in the aggregate) over the amount set forth in a budget
provided to Parent prior to the date hereof or thereafter approved by Parent,
other than pursuant to binding commitments existing on the date hereof and other
than expenditures necessary to maintain existing assets in good repair or to
make payment of necessary taxes;
(q)
establish or commit to the establishment of any
new branch or other office facilities or file any application to relocate or
terminate the operation of any banking office;
(r)
take any action that is intended or expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, or in any of the conditions to the Merger set forth in Article 8
not being satisfied or in a violation of any provision of this Agreement;
(s)
implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP or
regulatory guidelines;
(t)
agree to take, make any commitment to take, or
adopt any resolutions of its board of directors in support of, any of the
actions prohibited by this Section 6.2;
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(u)
maintain Independence Banks allowance for loan
losses in a manner that is not consistent with GAAP and applicable regulatory
guidelines and accounting principles, practices and methods consistent with past
practices of Independence Bank; or
(v)
take any action or fail to
take any action that at the time of such action or inaction is reasonably likely
to prevent, or would be reasonably likely to materially interfere with, the
consummation of this Merger.
6.3
Adverse Changes in Condition.
Each
Party agrees to give written notice promptly to the other Party upon becoming
aware of the occurrence or impending occurrence of any event or circumstance
relating to it or any of its Subsidiaries which (i) has had or is reasonably
likely to have, individually or in the aggregate, an Independence Material
Adverse Effect or a Parent Material Adverse Effect, as applicable, (ii) would
cause or constitute a material breach of any of its representations, warranties,
or covenants contained herein, or (iii) would be reasonably likely to prevent or
materially interfere with the consummation of the Merger, and to use its
reasonable efforts to prevent or promptly to remedy the same.
6.4
Reports.
Each
of Parent and its Subsidiaries and Independence and its Subsidiaries shall file
all reports required to be filed by it with Regulatory Authorities between the
date of this Agreement and the Effective Time and shall make available to Parent
copies of all such reports promptly after the same are filed. Independence and
its Subsidiaries shall also make available to Parent monthly financial
statements and quarterly call reports. The financial statements of
Independence, whether or not contained in any such
reports filed under the Exchange Act or with any other Regulatory Authority,
will fairly present the consolidated financial position of Independence as of
the dates indicated and the consolidated results of operations, changes in
shareholders equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports of Independence filed under the Exchange Act will comply in
all material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any Independence
financial statements contained in any reports to any Regulatory Authority other
than the SEC shall be prepared in accordance with the Laws applicable to such
reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1
Shareholder Approval.
(a)
Independence shall submit to its shareholders this
Agreement and any other matters required to be approved by shareholders in order
to carry out the intentions of this Agreement. In furtherance of that
obligation, Independence shall take, in accordance with applicable Law and its
articles of incorporation and bylaws, all action necessary to call, give notice of, convene, and hold the Independence
Shareholders Meeting as promptly as practicable for the purpose of considering
and voting on approval and adoption of this Agreement and the transactions
provided for in this Agreement. Independences board of directors shall
recommend that its shareholders approve this Agreement in accordance with the
SCBCA (the
Independence
Recommendation
) and shall
include such recommendation in the Proxy Statement mailed to shareholders of
Independence, except to the extent Independences board of directors has made an
Adverse Recommendation Change (as defined below) in accordance with the terms of
this Agreement. Subject to Sections 7.1(b) and 7.2, Independence shall solicit
and use its reasonable efforts to obtain the Requisite Independence Shareholder
Vote, to include engagement of a professional proxy solicitation firm.
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(b)
Neither Independences board of directors nor any
committee thereof shall, except as expressly permitted by this Section, (i)
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to Parent, the Independence Recommendation or (ii) approve
or recommend, or propose publicly to approve or recommend, any Acquisition
Proposal (each, an
Adverse
Recommendation Change
).
Notwithstanding the foregoing, prior to prior to the Requisite Independence
Shareholder Vote, Independences board of directors may make an Adverse
Recommendation Change if and only if:
(i)
Independences board of directors
determines in good faith, after consultation with the Independence Financial
Advisor and outside counsel, that it has received an Acquisition Proposal (that
did not result from a breach of Section 7.2) that constitutes or is likely to
result in a Superior Proposal;
(ii)
Independences board of directors
determines in good faith, after consultation with Independences outside
counsel, that a failure to accept such Superior Proposal would be inconsistent
with its fiduciary duties to Independence and its shareholders under applicable
Law;
(iii)
Independences board of directors
provides written notice (a
Notice
of Recommendation Change
) to
Parent of its receipt of the Superior Proposal and its intent to announce an
Adverse Recommendation Change on the fifth business day following delivery of
such notice, which notice shall specify the material terms and conditions of the
Superior Proposal (and include a copy thereof with all accompanying
documentation, if in writing) and identifying the Person or Group making such
Superior Proposal (it being understood that any amendment to any material term
of such Acquisition Proposal shall require a new Notice of Recommendation
Change, except that, in such case, the five business day period referred to in
this clause (iii) and in clauses (iv) and (v) shall be reduced to three business
days following the giving of such new Notice of Recommendation Change);
(iv)
after providing such Notice of
Recommendation Change, Independence shall negotiate in good faith with Parent
(if requested by Parent) and provide Parent reasonable opportunity during the
subsequent five business day period to make such adjustments in the terms and
conditions of this Agreement as would enable the board of directors of
Independence to proceed without an Adverse Recommendation Change (
provided, however,
that
Parent shall not be required to propose any such adjustments); and
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(v)
Independences board of directors,
following such five business day period, again determines in good faith, after
consultation with the Independence Financial Advisor and outside counsel, that
such Acquisition Proposal nonetheless continues to constitute a Superior
Proposal and that failure to take such action would violate their fiduciary
duties to Independence and its shareholders under applicable Law.
Notwithstanding any other provision of this Agreement,
except to the extent prohibited by the SCBCA as determined by
Independence after consultation with Independences outside counsel,
Independence shall submit this Agreement to its shareholders at Independences
Shareholders Meeting even if Independences board of directors has made an
Adverse Recommendation Change, in which case Independences board of directors
may communicate the Adverse Recommendation Change and the basis for it to the
shareholders of Independence in the Proxy Statement or any appropriate amendment
or supplement thereto.
7.2
Other Offers, etc.
(a)
From the date of this Agreement through the first
to occur of the Effective Time or termination of this Agreement, each
Independence Entity shall not, and shall cause its Affiliates and
Representatives not to, directly or indirectly (i) solicit, initiate, encourage,
induce or knowingly facilitate the making, submission, or announcement of any
proposal that constitutes an Acquisition Proposal, or (ii) participate in any
discussions (except to notify a third party of the existence of restrictions
provided in this Section 7.2) or negotiations regarding, or disclose or provide
any nonpublic information with respect to, or knowingly take any other action to
facilitate any inquiries or the making of any proposal that constitutes an
Acquisition Proposal, (iii) enter into any agreement (including any agreement in
principle, letter of intent or understanding, merger agreement, stock purchase
agreement, asset purchase agreement, or share exchange agreement, but excluding
a confidentiality agreement of the type described below) (an
Acquisition Agreement
) contemplating or otherwise relating to any
Acquisition Transaction, or (iv) propose or agree to do any of the foregoing;
provided, however, that prior to the Requisite Independence Shareholder Vote,
this Section 7.2 shall not prohibit an Independence Entity from furnishing
nonpublic information regarding any Independence Entity to, or entering into a
confidentiality agreement or discussions or negotiations with, any Person or
Group in response to a bona fide, unsolicited written Acquisition Proposal
submitted by such Person or Group (and not withdrawn) if and only if: (A) no
Independence Entity or Representative or Affiliate thereof shall have violated
any of the restrictions set forth in this Section 7.2 (other than any breach of
such obligation that is unintentional and immaterial and did not result in the
submission of such Acquisition Proposal), (B) Independences board of directors
shall have determined in good faith, after consultation with the Independence
Financial Advisor and Independences outside counsel, that such Acquisition
Proposal constitutes or is reasonably likely to result in a Superior Proposal,
(C) Independences board of directors concludes in good faith, after
consultation with its outside counsel, that the failure to take such action
would be inconsistent with its fiduciary duties under applicable Law to
Independence and its shareholders, (D) (1) at least five business days prior to
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such Person or Group, Independence gives Parent written
notice of the identity of such Person or
Group and of Independences intention to furnish nonpublic information to, or
enter into discussions or negotiations with, such Person or Group, and (2)
Independence receives from such Person or Group an executed confidentiality
agreement containing terms no less favorable to the disclosing Party than the
confidentiality terms of this Agreement, and (E) contemporaneously with
furnishing any such nonpublic information to such Person or Group, Independence
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by Independence to Parent). In
addition to the foregoing, Independence shall provide Parent with at least five
business days prior written notice of a meeting of Independences board of
directors at which meeting Independences board of directors is reasonably
expected to resolve to recommend the Acquisition Agreement as a Superior
Proposal to its shareholders, and Independence shall keep Parent reasonably
informed on a prompt basis, of the status and material terms of such Acquisition
Proposal, including any material amendments or proposed amendments as to price
and other material terms thereof.
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(b)
In addition to the obligations of Independence set
forth in this Section 7.2, as promptly as practicable, after any of the
directors or executive officers of Independence become aware thereof,
Independence shall advise Parent of any request received by Independence for
nonpublic information which Independence reasonably believes could lead to an
Acquisition Proposal or of any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal, and the identity of the
Person or Group making any such request or Acquisition Proposal. Independence
shall keep Parent informed promptly of material amendments or modifications to
any such request or Acquisition Proposal.
(c)
As of the date hereof, Independence shall, and
shall cause its and its Subsidiarys directors, officers, employees, and
Representatives to, immediately cease any and all existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any Acquisition Proposal and will use and cause to be used all commercially
reasonable best efforts to enforce any confidentiality or similar or related
agreement relating to any Acquisition Proposal.
(d)
Nothing contained in this Agreement shall prevent
a Party or its board of directors from complying with Rule 14e-2 under the
Exchange Act with respect to an Acquisition Proposal,
provided,
that
such Rule will in no way eliminate or modify the
effect that any action pursuant to such Rule would otherwise have under this
Agreement.
7.3
Consents of Regulatory Authorities.
The
Parties hereto shall cooperate with each other and use their reasonable efforts
to promptly prepare and file all necessary documentation and applications, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all Consents of all Regulatory Authorities and other
Persons which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger). The Parties agree that
they will consult with each other with respect to the obtaining of all Consents
of all Regulatory Authorities and other Persons necessary or advisable to
consummate the transactions contemplated by this Agreement and each Party will
keep the other apprised of the status of matters relating to contemplation of
the transactions contemplated herein. Each Party also shall promptly advise the
other upon receiving any communication from any Regulatory Authority or other Person whose Consent is required for
consummation of the transactions contemplated by this Agreement which causes
such Party to believe that there is a reasonable likelihood that any requisite
Consent will not be obtained or that the receipt of any such Consent will be
materially delayed.
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7.4
Agreement as to Efforts to
Consummate.
Subject to the terms and conditions of this Agreement, each Party agrees
to use, and to cause its Subsidiaries to use, its reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable after the date of this Agreement,
the transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 8;
provided,
that
nothing herein shall preclude either Party from
exercising its rights under this Agreement.
7.5
Investigation and Confidentiality.
(a)
Prior to the Effective Time, each Party shall keep
the other Party advised of all material developments relevant to its business
and the consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of its business and properties (including
that of its Subsidiaries) and of their respective financial and legal conditions
as the other Party reasonably requests, provided, that such investigation shall
be reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the ability of such Party to rely on the representations and
warranties of the other Party. Between the date hereof and the Effective Time,
Independence shall permit Parents senior officers and independent auditors to
meet with the senior officers of Independence, including officers responsible
for the Independence Financial Statements and the internal controls of
Independence and Independences independent public accountants, to discuss such
matters as Parent may deem reasonably necessary or appropriate for Parent to
satisfy its obligations under applicable Laws.
(b)
In addition to each Partys obligations pursuant
to Section 7.5(a), each Party shall, and shall cause its advisors and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c)
Independence shall use its reasonable efforts to
exercise, and shall not waive any of, its rights under confidentiality
agreements entered into with Persons which were considering an Acquisition
Proposal with respect to Independence to preserve the confidentiality of the
information relating to the Independence Entities provided to such Persons and
their Affiliates and Representatives.
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(d)
Each Party agrees to give the other Party notice
as soon as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent, either
a material breach of any representation, warranty, covenant, or agreement of the
other Party or which has had or is reasonably likely to have an Independence
Material Adverse Effect or a Parent Material Adverse Effect, as applicable.
7.6
Press Releases.
Prior to the Effective Time, Independence and Parent shall consult with
each other as to the form and substance of any press release, communication with
Independences shareholders, or other public disclosure materially related to
this Agreement, or any other transaction contemplated hereby;
provided,
that nothing in this Section 7.6 shall be deemed to prohibit any Party
from making any disclosure which its counsel deems necessary or advisable in
order to satisfy such Partys disclosure obligations imposed by Law.
7.7
Charter Provisions.
Each
Independence Entity shall take all necessary action to ensure that the entering
into of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby do not and will not result in the grant of any
rights to any Person under the articles of incorporation, bylaws, or other
governing instruments of any Independence Entity or restrict or impair the
ability of Parent or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of any Independence Entity
that may be directly or indirectly acquired or controlled by them.
7.8
Employee Benefits and Contracts.
(a)
All persons who are employees of the Independence
Entities immediately prior to the Effective Time and whose employment is not
terminated, if any, at or prior to the Effective Time (a
Continuing Employee
) shall, at the Effective Time, become employees
of First Reliance; provided, however, that in no event shall any of the
employees of the Independence Entities be officers of Parent or First Reliance,
or have or exercise any power or duty conferred upon such an officer, unless and
until duly elected or appointed to such position by the board of directors of
Parent or First Reliance and in accordance with the bylaws of Parent or First
Reliance. All of the Continuing Employees shall be employed at the will of First
Reliance, and no contractual right to employment shall inure to such employees
because of this Agreement except as may be otherwise expressly set forth in this
Agreement. First Reliance shall make a severance payment to each Continuing
Employee who is terminated by First Reliance or First Reliance Bank without
cause within the one (1) month period following the Effective Time in an amount
equal to one and one-half (1 ½) weeks of such Continuing Employees base salary
for each year of credited service, subject to a minimum payment of four (4)
weeks of such Continuing Employees base salary. The receipt of severance
pursuant to this Section 7.8(a) by any Continuing Employee shall be subject to
the execution and delivery by such Continuing Employee of release and
non-solicitation agreements proposed by First Reliance.
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(b)
As of the Effective Time, each Continuing Employee
shall be eligible to participate in each of Parents Employee Benefit Plans with
full credit for prior service with Independence solely for purposes of
eligibility and vesting.
(c)
As of the Effective Time, Parent shall make
available employer-provided benefits under Parent Employee Benefit Plans to each
Continuing Employee on the same basis as it provides such coverage to Parent or
First Reliance employees. With respect to Parent Employee Benefit Plans
providing health coverage, Parent shall use commercially reasonable efforts to
cause any pre-existing condition, eligibility waiting period, or other
limitations or exclusions otherwise applicable under such plans to new employees
not to apply to a Continuing Employee or their covered dependents who were
covered under a similar Independence plan at the Effective Time of the Merger.
In addition, if any such transition occurs during the middle of a plan year,
Parent shall use commercially reasonable efforts to cause any such Parent
Employee Benefit Plan providing health coverage to give credit towards
satisfaction of any annual deductible limitation and out-of-pocket maximum
applied under such plan for any deductible, co-payment and other cost-sharing
amounts previously paid by a Continuing Employee. respecting his or her
participation in the corresponding Independence Employee Benefit Plan during
that plan year prior to the transition effective date.
(d)
Simultaneously herewith, the Chief Executive
Officer of Independence shall enter into and deliver to Parent an Amendment of
Employment Agreement dated as of the date hereof (and which shall be effective
as of the Effective Time) in the form of
Exhibit B
.
(e)
Simultaneously herewith, the Retail Banking
Director of Independence Bank shall enter into and deliver to Parent an
Employment Agreement dated as of the date hereof (and which shall be effective
as of the Effective Time) in the form of
Exhibit C
.
(f)
Simultaneously herewith, each of Independences
and Independence Banks executive officers and directors (except for those set
forth in Section 7.8(f) of the Independence Disclosure Memorandum, who shall
each enter into a Non-Solicitation Agreement dated as of the date hereof (and
which shall be effective as of the Effective Time) in the form of
Exhibit D
) shall enter into and deliver to Parent a
Non-Competition Agreement dated as of the date hereof (and which shall be
effective as of the Effective Time) in the form of
Exhibit E
.
(g)
Simultaneously herewith, each of Independences
and Independence Banks executive officers and directors (except for those set
forth in Section 7.8(g) of the Independence Disclosure Memorandum) shall enter
into and deliver to Parent a Shareholder Support Agreement dated as of the date
hereof in the form of
Exhibit
F
pursuant to which he or she
will vote his or her shares of Independence Common Stock in favor of this
Agreement and the transactions contemplated hereby.
(h)
Simultaneously herewith, the Chairman of the board
of directors of Independence shall enter into and deliver to Parent a Waiver and
Release dated as of the date hereof (and which shall be effective as of the
Effective Time) in the form of
Exhibit G
pursuant to
which he will waive and release any right that he has to payment of fees for
service as Chairman of the board of directors.
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(i)
No officer, employee, or other Person (other than
the corporate Parties to this Agreement) shall be deemed a third party or other
beneficiary of this Agreement, and no such Person shall have any right or other
entitlement to enforce any provision of this Agreement or seek any remedy in
connection with this Agreement, except as may be expressly set forth in Section
7.9. No provision of this Agreement constitutes or shall be deemed to
constitute, an Employee Benefit Plan or other arrangement, an amendment of any
Employee Benefit Plan or other arrangement, or any provision of any Employee
Benefit Plan or other arrangement.
(j)
Other than Section 3.4 (Independence Options), no
provision of this Agreement (i) constitutes or shall be deemed to constitute, an
employee benefit plan or other arrangement, an amendment of any employee benefit
plan or other arrangement, or any provision of any employee benefit plan or
other arrangement or (ii) provide any right or entitlements to any employee or
other third party.
(k)
Upon not less than ten days notice prior to the
Closing Date from Parent to Independence, Independence shall cause the
termination, amendment or other appropriate modification of each Independence
Benefit Plan as specified by Parent in such notice such that no Independence
Entity shall sponsor or otherwise have any further Liability thereunder in
connection with such applicable Independence Benefit Plans, effective as of the
date which immediately precedes the Closing Date. Upon such action, participants
in such applicable Independence Benefit Plans that are Independence ERISA Plans
shall be 100% vested in their account balances. With respect to each such
Independence Benefit Plan as to which Parent issues such notice and which
provides for a cash or deferred arrangement pursuant to Code Section 401(k)
(each, a
401(k)
Plan
), (i) prior to the Closing
Date, the appropriate board of directors among the Independence Entities shall
adopt resolutions terminating each 401(k) Plan effective as of the date which
immediately precedes the date which includes the Effective Time (the
Termination Date
), (ii) prior to each 401(k) Plans termination
under (i), immediately above, Independence shall cause each 401(k) Plan to
adopt all amendments, including amendments and restatements, of each document
evidencing each 401(k) Plan, as may be necessary to maintain each 401(k) Plans
compliance with Code Section 401(a) and other applicable provisions of the Code
pursuant to such termination, and (iii) as of the Termination Date, Independence
shall cause each 401(k) Plan to proceed with implementing the process of
distributing each 401(k) Plans account balances to participants. Parent or
Parent Bank shall cause its Employee Benefit Plan which provides for a cash or
deferred arrangement pursuant to Code Section 401(k) to accept direct rollovers
from any 401(k) Plan described in the preceding sentence, and will use
commercially reasonable efforts to permit direct rollover of a participant plan
loan.
7.9
Indemnification.
(a)
Parent shall, and shall cause the Surviving
Corporation to, indemnify, defend, and hold harmless the present and former
directors and executive officers of the Independence Entities (each, an
Indemnified Party
) against all Liabilities arising out of actions
or omissions arising out of the Indemnified Partys service or services as
directors, officers, employees, or agents of Independence or, at Independences
request, of another corporation, partnership, joint venture, trust, or other
enterprise occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the fullest extent permitted
under the SCBCA, Section 402 of the
Sarbanes-Oxley Act, the Securities Laws and FDIC Regulations Part 359, and by
Independences Articles of Incorporation and Bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any Litigation and whether or not any Parent Entity is insured
against any such matter.
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(b)
Prior to the Effective Time, Parent shall
purchase, or shall direct Independence to purchase, an extended reporting period
endorsement under Independences existing directors and officers liability
insurance coverage (
Independence
D&O Policy
) (or, if such
extended endorsement coverage is not available, or is not available on
reasonable terms, for the requisite period of time, such additional policy or
policies as shall be necessary to provide coverage for such period of time) for
acts or omissions occurring prior to the Effective Time by such directors and
officers currently covered by Independences D&O Policy. The directors and
officers of Independence shall take all reasonable actions required by the
insurance carrier necessary to procure such endorsement (or additional policy or
policies). Such endorsement (or additional policy or policies) shall provide
such directors and officers with coverage following the Effective Time for six
years or such lesser period of time as can be purchased for an aggregate amount
equal to two and one-half times the current annual premium for Independences
D&O Policy (the
Premium
Multiple
). If Parent is unable
to obtain or maintain the insurance coverage called for in this Section 7.9(b),
then Parent shall obtain the most advantageous coverage that can be purchased
for the Premium Multiple.
7.10
Notices of Redemption of Independence Series A
Preferred Stock
.
Independence shall give notice of redemption, in accordance with
Independences Articles of Incorporation, to each holder of Independence Series
A Preferred Stock that is effective for the redemption of all outstanding shares
of Independence Series A Preferred Stock on the Closing Date.
7.11
Environmental
Testing
.
Independence shall use its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable (including under applicable Laws) to cause any
property(ies) owned by any Independence Entity and reasonably required by Parent
to be so tested, to be tested by a qualified environmental testing firm to
determine the existence and extent of any environmental contamination of such
properties, including, but not limited to, ground water contamination and air
quality contamination in the building on the properties and, if any such
contamination is found, Independence shall (i) determine the reasonable cost to
mitigate such contamination and bring the properties into compliance with
applicable Environmental Laws, and (ii) have the property reappraised and adjust
the carrying value of the properties accordingly.
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ARTICLE 8
CONDITIONS PRECEDENT TO
OBLIGATIONS TO CONSUMMATE
8.1
Conditions to Obligations of Each
Party.
The
respective obligations of each Party to perform this Agreement and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Section 10.6:
(a)
Shareholder Approval
. The shareholders of Independence shall have
approved this Agreement by the Requisite Independence Shareholder Vote, and the
consummation of the transactions contemplated hereby, including the Merger, as
and to the extent required by Law and by the provisions of Independences
articles of incorporation and bylaws.
(b)
Regulatory Approvals
. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the board of
directors of Parent would so materially adversely affect the economic or
business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, the Parent would not, in its
reasonable judgment, have entered into this Agreement.
(c)
Consents and Approvals
. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 8.1(b)) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, would be reasonably likely
to have, individually or in the aggregate, an Independence Material Adverse
Effect or a Parent Material Adverse Effect, as applicable. Independence shall
have obtained the Consents listed in Section 8.1(c) of the Independence
Disclosure Memorandum, including Consents from the lessors of each office leased
by any Independence Entity, if any. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the board of
directors of Parent would so materially adversely affect the economic or
business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, Parent would not, in its reasonable
judgment, have entered into this Agreement.
(d)
Legal Proceedings
. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced, or entered any
Law or Order (whether temporary, preliminary or permanent) or taken any other
action which prohibits, restricts, or makes illegal consummation of the
transactions contemplated by this Agreement.
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8.2
Conditions to Obligations of
Parent.
The
obligations of Parent to perform this Agreement and consummate the Merger and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by Parent pursuant to Section 10.6(a):
(a)
Representations and Warranties
. For purposes of this Section 8.2(a), the
accuracy of the representations and warranties of Independence set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (
provided
, that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties set
forth in Sections 4.1, 4.2(a), 4.2(b)(i), 4.3, and 4.25 shall be true and
correct (except for inaccuracies which are de minimis in amount or effect).
There shall not exist inaccuracies in the representations and warranties of
Independence set forth in this Agreement (including the representations and
warranties set forth in Sections 4.1, 4.2(a), 4.2(b)(i), 4.3, and 4.25) such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, an Independence Material Adverse Effect; provided, that for purposes of
this sentence only, those representations and warranties which are qualified by
references to material or Material Adverse Effect or to the Knowledge of
any Person shall be deemed not to include such qualifications.
(b)
Performance of Agreements and
Covenants
. Each and all of the
agreements and covenants of Independence to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
material respects.
(c)
Officers Certificate
. Independence shall have delivered to Parent (i)
a certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 8.1 as it relates to Independence and in
Sections 8.2(a), 8.2(b), 8.2(g), 8.2(h), and 8.2(i) have been satisfied.
(d)
Certificates of Secretary and Public
Officials
. The Independence
Entities shall have delivered the following additional certificates: (i) a
certificate of the secretary of the Independence Entities, dated as of the
Closing Date, certifying and attesting as to: (1) the incumbency of officers of
the Independence Entities executing documents executed and delivered in
connection herewith, (2) the articles of incorporation of Independence as in
effect from the date of this Agreement until the Closing Date, (3) the bylaws of
Independence as in effect from the date of this Agreement until the Closing
Date, (4) resolutions of Independences board of directors authorizing and
approving the applicable matters contemplated hereunder, (5) the articles of
association of Independence Bank as in effect from the date of this Agreement
until the Closing Date, (6) the bylaws of Independence Bank as in effect from
the date of this Agreement until the Closing Date; (ii) a certificate (dated not
less than ten days prior to the Closing Date) of the Secretary of State of the
State of South Carolina as to the corporate existence of Independence; (iii) a
certificate of the Federal Reserve Bank (dated not less than ten days prior to
the Closing Date) certifying that Independence is a registered bank holding
company; (iv) a certificate of the OCC (dated not less than ten days prior to
the Closing Date) as to the good standing of Independence Bank; and (v) a
certificate of the Federal Deposit Insurance
Corporation (dated not less than ten days prior to the Closing Date) certifying
that Independence Bank is an insured depository institution.
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(e)
Employment Agreements; Non-Competition Agreements;
Shareholder Support Agreements; Claims Letters;
Directors Fees Release and Waiver
. The Amendment of Employment Agreement in the form attached hereto as
Exhibit B
shall have been executed by the Chief Executive
Officer of Independence and delivered to Parent. The Employment Agreement in the
form attached hereto as
Exhibit
C
shall have been executed by the
Retail Banking Director of Independence and delivered to Parent. The
Non-Competition Agreements in the form attached hereto as
Exhibit D
shall have been executed by each of Independences and Independence
Banks executive officers and directors (except for those set forth in Section
7.8(f) of the Independence Disclosure Memorandum) and delivered to Parent. The
Non-Solicitation Agreements in the form attached hereto as
Exhibit E
shall have been executed by each of Independences and Independence
Banks executive officers set forth in Section 7.8(f) of the Independence
Disclosure Memorandum. The Shareholder Support Agreements in the form attached
hereto as
Exhibit
F
shall have been executed by
each of the directors and executive officers of Independence and Independence
Bank (except for those set forth in Section 7.8(g) of the Independence
Disclosure Memorandum) and delivered to Parent. The Directors Fees Release and
Waiver in the form attached hereto as
Exhibit G
shall have been
executed by the Chairman of the board of directors of Independence. Each of the
directors and executive officers of Independence and Independence Bank shall
have executed claims letters in the form attached hereto as
Exhibit H
and delivered the same to Parent.
(f)
Notices of Dissent
. Independence shall not have received timely
notice from holders of Independence Common Stock of their intent to exercise
their statutory right to dissent with respect to shares that represent more than
an aggregate of 10% of the outstanding shares of Independence Common Stock, and
shall not have received timely notice from any holders of Independence Series A
Preferred Stock of their intent to exercise their statutory right to
dissent.
(g)
Shareholders Equity; Allowance for Loan
Losses
. At the Effective Time,
Independences total loans shall not be less than $50,000,000 and total deposits
shall not be less than $65,000,000. In addition, Independence shall have (or
shall have had, as applicable) total shareholders equity, on a pro forma basis
after redemption of the Independence Series A Preferred Stock pursuant to
Section 3.1(a) hereof
(for a total
reduction of $8,425,000)
, of (i)
at least $300,000 as of the Effective Time or December 31, 2017, whichever is
sooner; and (ii) $100,000 as of March 1, 2018, if the Effective Time occurs on
or after March 1, 2018 (the
Equity Floor
), in each
case under subclauses (i) and (ii) without giving effect to (A) reasonable
expenses paid or incurred by Independence through the Effective Time in
connection with the Merger not to exceed $525,000, or (B) accumulated other
comprehensive income, but the Equity Floor may be reduced in the sole discretion
of Parent by the total amount of exposure for Litigation disclosed in Section
4.18 of the Independence Disclosure Memorandum, less any reserves established by
Independence Bank for that exposure. Independence and Independence Bank shall
maintain Independence Banks allowance for loan losses in a manner consistent
with GAAP and applicable regulatory guidelines and accounting principles,
practices and methods consistent with past practices of Independence Bank and
used in the preparation of the Independence Financial Statements.
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(h)
Exercise of Options
. The directors and executive officers of
Independence or Independence Bank shall not have exercised any Independence
Options held by such persons following the execution of this Agreement.
(i)
No Material Adverse Effect
. There shall not have occurred any Independence
Material Adverse Effect from the December 31, 2016 balance sheet to the
Effective Time with respect to Independence or Independence Bank.
(j)
Bank Merger
. The Parties shall stand ready to consummate the Bank Merger promptly
after the Merger.
(k)
Legal Opinion
. Parent shall have received a legal opinion in
form and substance satisfactory to Parent from Independences counsel as to the
matters specified in
Exhibit
I
.
(l)
Main Office Lease
. Independence Bank shall have negotiated and
executed an amendment and extension of the lease for its main office location,
which amendment shall extend the term of such lease for a period of at least
five (5) years following the end of the term of such lease as of the date hereof
on terms that are mutually agreeable to Parent and Independence.
(m)
Redemption of Independence Series A Preferred
Stock
. Independence shall have
given notice of redemption to each holder of Independence Series A Preferred
Stock in accordance with Independences Articles of Incorporation that is
effective for the redemption of all outstanding shares of Independence Series A
Preferred Stock on the Closing Date.
(n)
Environmental Matter
. Any environmental testing required by Section
7.11 shall have been completed, along with any subsequent reappraisal of the
property and adjustment of Parents financial records in a manner consistent
with GAAP and applicable regulatory guidelines and accounting principles,
practices and methods consistent with past practices of Independence Bank and
used in the preparation of the Independence Financial Statements.
8.3
Conditions to Obligations of
Independence.
The
obligations of Independence to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by Independence pursuant to Section
10.6(b):
(a)
Representations and Warranties
. For purposes of this Section 8.3(a), the
accuracy of the representations and warranties of Parent set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Sections 5.1, 5.2(a) and 5.2(b)(i), and 5.5 shall be true and correct (except
for inaccuracies which are de minimis in amount or effect). There shall not
exist inaccuracies in the representations and warranties of Parent set forth in
this Agreement (including the representations and warranties set forth in
Sections 5.1, 5.2(a) and 5.2(b)(i), and 5.5) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Parent Material
Adverse Effect; provided, that, for purposes of this sentence only, those representations and warranties which are
qualified by references to material or Material Adverse Effect or to the
Knowledge of any Person shall be deemed not to include such qualifications.
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(b)
Performance of Agreements and
Covenants
. Each and all of the
agreements and covenants of Parent to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c)
Officers Certificate
. Parent shall have delivered to Independence a
certificate, dated as of the Closing Date and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 8.1 as they relate to Parent and in Sections
8.3(a) and 8.3(b) have been satisfied.
(d)
Certificates of Secretary and Public
Officials
. The Parent Entities
shall have delivered the following additional certificates: (i) a certificate of
the secretary of the Parent Entities, dated as of the Closing Date, certifying
and attesting as to: (1) the incumbency of officers of the Parent Entities
executing documents executed and delivered in connection herewith, (2) the
articles of incorporation of Parent as in effect from the date of this Agreement
until the Closing Date, (3) the bylaws of Parent as in effect from the date of
this Agreement until the Closing Date, (4) resolutions of Parents board of
directors authorizing and approving the applicable matters contemplated
hereunder, (5) the articles of incorporation of First Reliance as in effect from
the date of this Agreement until the Closing Date, (6) the bylaws of First
Reliance as in effect from the date of this Agreement until the Closing Date;
(ii) a certificate (dated not less than ten days prior to the Closing Date) of
the Secretary of State of the State of South Carolina as to the corporate
existence of Parent; (iii) a certificate of the Federal Reserve Bank (dated not
less than ten days prior to the Closing Date) certifying that Parent is a
registered bank holding company; (iv) a certificate of the South Carolina State
Board of Financial Institutions (dated not less than ten days prior to the
Closing Date) as to the good standing of First Reliance; and (v) a certificate
of the Federal Deposit Insurance Corporation (dated not less than ten days prior
to the Closing Date) certifying that First Reliance is an insured depository
institution.
(e)
Payment of Merger Consideration
. Parent shall be prepared to deliver the Merger
Consideration as provided by this Agreement.
ARTICLE 9
TERMINATION
9.1
Termination.
Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the shareholders of
Independence, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a)
By mutual written agreement of Parent and
Independence; or
(b)
By Parent or Independence (
provided,
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this Agreement) in the event of a breach by the other
Party of any representation, warranty, covenant or other agreement contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which breach
is reasonably likely, in the opinion of the non-breaching Party, to permit such
Party to refuse to consummate the transactions contemplated by this Agreement
pursuant to the standard set forth in Section 8.2 or 8.3 as applicable; or
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(c)
By Parent or Independence in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger and
the other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, (ii) any Law or Order
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Merger shall have become final and nonappealable, or (iii) the Requisite
Independence Shareholder Vote is not obtained at Independences Shareholders
Meeting where such matters were presented to such shareholders for approval and
voted upon; or
(d)
By Parent or Independence in the event that the
Merger shall not have been consummated by June 30, 2018, if the failure to
consummate the transactions contemplated hereby on or before such date is not
caused by any breach of this Agreement by the Party electing to terminate
pursuant to this Section 9.1; or
(e)
By Parent (provided, that Parent is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event that (i) Independences board of
directors shall have made an Adverse Recommendation Change; (ii) Independences
board of directors shall have failed to reaffirm the Independence Recommendation
within ten business days after Parent requests such at any time following the
public announcement of an Acquisition Proposal, (iii) Independence shall have
failed to comply in all material respects with its obligations under Section 7.1
or 7.3, or (iv) the condition of Section 8.2(g) is not met; or
(f)
By Independence, prior to the Requisite
Independence Shareholder Vote (and provided that Independence has complied in
all material respects with Section 7.1 (including the provisions of 7.1(b)
regarding the requirements for making an Adverse Recommendation Change) and
Section 7.3), in order to accept a Superior Proposal.
(g)
By Parent, if any legal action or other proceeding
is pending to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or to obtain other relief in connection with this
Agreement or the transactions contemplated hereby or approval thereof; and the
facts alleged within such legal action or other proceeding, or facts
subsequently discovered within the action or by separate investigation, are
deemed more likely than not, in the opinion of independent legal counsel
mutually acceptable to Parent and Independence, not to trigger a duty to defend
or a duty to indemnify under Independences applicable directors and officers
liability insurance policy
.
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9.2
Effect of Termination.
In
the event of the termination and abandonment of this Agreement by either Parent
or Independence pursuant to Section 9.1, this Agreement shall become void and
have no effect, except that (i) the provisions of Sections 7.6(b), 9.2, 9.3,
10.2, and 10.3 shall survive any such termination and abandonment, and (ii) no
such termination shall relieve a breaching Party from Liability resulting from
any breach by that Party of this Agreement.
9.3
Termination Fee.
(a)
If Parent or Independence terminates this
Agreement pursuant to Section 9.1(c)(iii) of this Agreement, then Independence
shall, on the date of termination, reimburse Parent in an amount equal to the
Parent Expenses. The Parent Expenses shall be paid to Parent in same day funds.
Independence hereby waives any right to set-off or counterclaim against such
amount.
(b)
If Parent terminates this Agreement pursuant to
Sections 9.1(b) or (e) of this Agreement or Independence terminates this
Agreement pursuant to Section 9.1(f) of this Agreement, then Independence shall,
on the date of termination, pay to Parent the sum of $500,000 (the
Termination Fee
). The Termination Fee shall be paid to Parent in
same day funds. Independence hereby waives any right to set-off or counterclaim
against such amount.
(c)
In the event that (i) an Acquisition Proposal with
respect to Independence shall have been communicated to or otherwise made known
to the shareholders, senior management or board of directors of Independence, or
any Person shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal with respect to Independence after
the date of this Agreement, (ii) thereafter this Agreement is terminated (A) by
Independence or Parent pursuant to Section 9.1(d) (if the Requisite Independence
Shareholder Vote has not theretofore been obtained), (B) by Parent pursuant to
Section 9.1(b), or (C) by Independence or Parent pursuant to Section
9.1(c)(iii), and (iii) prior to the date that is twelve (12) months after the
date of such termination, Independence consummates an Acquisition Transaction or
enters into an Acquisition Agreement that is ultimately consummated, then
Independence shall on the date an Acquisition Transaction is consummated, pay
Parent a fee equal to the Termination Fee in same day funds. Independence hereby
waives any right to set-off or counterclaim against such amount.
(d)
The Parties acknowledge that the agreements
contained in this Article 9 are an integral part of the transactions
contemplated by this Agreement, and that without these agreements, Parent would
not enter into this Agreement; accordingly, if Independence fails to pay
promptly any reimbursement or fee payable by it pursuant to this Section 9.3,
then Independence shall pay to Parent its reasonable costs and expenses
(including reasonable attorneys fees) in connection with collecting such
reimbursement or fee, together with interest on the amount of the fee at the
prime annual rate of interest (as published in
The Wall Street Journal
) plus 2% as the same is in effect from time to
time from the date such payment was due under this Agreement until the date of
payment. The Parties further acknowledge that the damages and costs to Parent if
Parent terminates this Agreement pursuant to Section 9.1(b) or (e) or
Independence terminates this Agreement pursuant to Section 9.1(f) are not
susceptible to precise measurement. The
Parties hereby agree that the Termination Fee is not a penalty, but rather, a
good-faith estimate of the amount necessary to compensate Parent for its actual
damages and costs in connection with such a termination.
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9.4
Non-Survival of Representations and
Covenants.
Except for Articles 2 and 3, Sections 7.6(b), 7.8, 7.9, and 7.11, and
this Article 9, the respective representations, warranties, obligations,
covenants, and agreements of the Parties shall not survive the Effective Time.
ARTICLE
10
MISCELLANEOUS
10.1
Definitions.
(a)
Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
401(k) Plan
shall have
the meaning as set forth in Section 7.8(k) of the Agreement.
Acquisition Agreement
shall have the meaning as set forth in Section 7.2(a) of the Agreement.
Acquisition Proposal
means any proposal (whether communicated to Independence or publicly announced
to Independences shareholders) by any Person (other than Parent or any of its
Affiliates) for an Acquisition Transaction involving Independence or any of its
present or future consolidated Subsidiaries, or any combination of such
Subsidiaries, the assets of which constitute 5% or more of the consolidated
assets of Independence as reflected on Independences consolidated statement of
condition prepared in accordance with GAAP.
Acquisition Transaction
means any transaction or series of related transactions (other than the
transactions contemplated by this Agreement) involving: (i) any acquisition or
purchase from Independence by any Person or Group (other than Parent or any of
its Affiliates) of 25% or more in interest of the total outstanding voting
securities of Independence or any of its Subsidiaries, or any tender offer or
exchange offer that if consummated would result in any Person or Group (other
than Parent or any of its Affiliates) beneficially owning 25% or more in
interest of the total outstanding voting securities of Independence or any of
its Subsidiaries, or any merger, consolidation, business combination or similar
transaction involving Independence pursuant to which the shareholders of
Independence immediately preceding such transaction hold less than 75% of the
equity interests in the surviving or resulting entity (which includes the parent
corporation of any constituent corporation to any such transaction) of such
transaction; (ii) any sale or lease (other than in the ordinary course of
business), or exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of 5% or more of the assets of
Independence; or (iii) any liquidation or dissolution of Independence.
Adverse Recommendation Change
shall have the meaning as set forth in Section 7.1(b) of the Agreement.
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Affiliate
of a Person means: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
Agreement
shall have the
meaning as set forth in the introduction of the Agreement.
Allowance
shall have the
meaning as set forth in the Section 4.9(a) of the Agreement.
Articles of Merger
shall
have the meaning as set forth in the Section 1.3 of the Agreement.
Assets
of a Person means
all of the assets, properties, businesses and rights of such Person of every
kind, nature, character and description, whether real, personal or mixed,
tangible or intangible, accrued or contingent, or otherwise relating to or
utilized in such Persons business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and whether or
not owned in the name of such Person or any Affiliate of such Person and
wherever located.
Bank Agreement of Merger
shall have the meaning as set forth in Section 1.5(a) of the Agreement,
and the form attached hereto as
Exhibit A
.
Bank Merger
shall have
the meaning as set forth in Section 1.5(a) of the Agreement.
BHCA
shall have the
meaning as set forth in Section 4.1 of the Agreement.
CERCLA
shall have the
meaning as set forth in Section 10.1(a) of the Agreement.
Closing
shall have the
meaning as set forth in Section 1.2 of the Agreement.
Closing Date
means the
date on which the Closing occurs.
Code
means the Internal
Revenue Code of 1986, and the rules and regulations promulgated thereunder.
Common Dissenter Shares
shall have the meaning as set forth in Section 3.1(b) of the Agreement.
Confidential Supervisory Information
means reports or other information of a
Governmental Authority, the disclosure of which to Parent would violate any
applicable Law.
Consent
means any
consent, approval, authorization, clearance, exemption, waiver, or similar
affirmation by any Person pursuant to any Contract, Law, Order, or Permit.
Contract
means any
written or oral agreement, arrangement, authorization, commitment, contract,
indenture, instrument, lease, license, obligation, plan, practice, restriction,
understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
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Default
means (i) any
material breach or violation of, default under, contravention of, or conflict
with, any Contract, Law, Order, or Permit, (ii) any occurrence of any event that
with the passage of time or the giving of notice or both would constitute a
material breach or violation of, default under, contravention of, or conflict
with, any Contract, Law, Order, or Permit, or (iii) any occurrence of any event
that with or without the passage of time or the giving of notice would give rise
to a right of any Person to exercise any material remedy or obtain any material
relief under, terminate or revoke, suspend, cancel, or modify or change the
current terms of, or renegotiate, or to accelerate the maturity or performance
of, or to increase or impose any Liability under, any material Contract, Law,
Order, or Permit.
Disqualified Person
shall have the meaning as set forth in Section 4.15(f) of the Agreement.
Dissenter Shares
shall
have the meaning as set forth in Section 3.1(a) of the Agreement.
DOL
shall have the
meaning as set forth in Section 4.15(b) of the Agreement.
Effective Time
shall
have the meaning as set forth in Section 1.3 of the Agreement.
Employee Benefit Plan
means each pension, retirement, profit-sharing, deferred compensation, stock
option, equity incentive, synthetic equity incentive, employee stock ownership,
share purchase, severance pay, vacation, bonus, retention, change in control or
other incentive plan, medical, vision, dental or other health plan, any life
insurance plan, flexible spending account, cafeteria plan, vacation, holiday,
disability or any other employee benefit plan or fringe benefit plan, including
any employee benefit plan, as that term is defined in Section 3(3) of ERISA
and any other plan, fund, policy, program, practice, custom understanding or
arrangement providing compensation or other benefits, whether or not such
Employee Benefit Plan is or is intended to be (i) covered or qualified under the
Code, ERISA or any other applicable Law, (ii) written or oral, (iii) funded or
unfunded, (iv) actual or contingent or (v) arrived at through collective
bargaining or otherwise.
Environmental Laws
shall
mean all Laws relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) and which are administered, interpreted or enforced by the
United States Environmental Protection Agency and state and local Governmental
Authorities with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including: (i) the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et seq.
(
CERCLA
); (ii) the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act, 42 U.S.C. §§6901 et seq.
(
RCRA
); (iii) the Emergency Planning and Community
Right to Know Act (42 U.S.C. §§11001 et seq.); (iv) the Clean Air Act (42 U.S.C.
§§7401 et seq.); (v) the Clean Water Act (33 U.S.C. §§1251 et seq.); (vi) the
Toxic Substances Control Act (15 U.S.C. §§2601 et seq.); (vii) any state,
county, municipal or local statues, laws or ordinances similar or analogous to
the federal statutes listed in parts (i)
(vi) of this subparagraph; (viii) any amendments to the statues, laws or
ordinances listed in parts (i) (vi) of this subparagraph, regardless of
whether in existence on the date hereof, (ix) any rules, regulations,
guidelines, directives, orders or the like adopted pursuant to or implementing
the statutes, laws, ordinances and amendments listed in parts (i) (vii) of
this subparagraph; and (x) any other law, statute, ordinance, amendment, rule,
regulation, guideline, directive, Order or the like in effect now or in the
future relating to environmental, health or safety matters and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
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Equity Floor
shall have
the meaning as set forth in Section 8.2(g) of the Agreement.
ERISA
means the Employee
Retirement Income Security Act of 1974.
ERISA Affiliate
means
any trade or business, whether or not incorporated, which together with an
Independence Entity would be treated as a single employer under Code Section 414
or would be deemed a single employer within the meaning of Code Section 414.
Exchange Act
means the
Securities Exchange Act of 1934, and the rules and regulations promulgated
thereunder.
Exchange Act Documents
means all forms, proxy statements, registration statements, reports, schedules,
and other documents, including all certifications and statements required by the
Exchange Act or Section 906 of the Sarbanes-Oxley Act with respect to any report
that is an Exchange Act Document, filed, or required to be filed, by a Party or
any of its Subsidiaries with any Regulatory Authority pursuant to the Securities
Laws.
Exchange Agent
shall
have the meaning as set forth in Section 3.2(a) of the Agreement.
Exchange Fund
shall have
the meaning as set forth in Section 3.2(a) of the Agreement.
Excluded Shares
shall
have the meaning as set forth in Section 3.1(e) of the Agreement.
Exhibits
means the
Exhibits so marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto or thereto.
FDIC
shall mean the Federal Deposit Insurance
Corporation.
Federal Reserve
shall
mean the Board of Governors of the Federal Reserve System and the Federal
Reserve Bank of Richmond.
First Reliance
shall
have the meaning as set forth in Section 1.5 of the Agreement.
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GAAP
shall mean generally accepted accounting
principles in the United States, consistently applied during the periods
involved.
Governmental Authority
shall mean any federal, state, local, foreign, or other court, board, body,
commission, agency, authority or instrumentality, arbitral authority,
self-regulatory authority, mediator, tribunal, including Regulatory Authorities
and Taxing Authorities.
Group
shall have the
meaning as set forth in Section 13(d) of the Exchange Act.
Hazardous Material
shall
mean any chemical, substance, waste, material, pollutant, or contaminant defined
as or deemed hazardous or toxic or otherwise regulated under any Environmental
Law, including RCRA hazardous wastes, and CERCLA hazardous
substances,
pesticides and other agricultural chemicals, oil
and petroleum products or byproducts and any constituents thereof, urea
formaldehyde insulation, lead in paint or drinking water, mold, asbestos, and
polychlorinated biphenyls (PCBs): (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of Environmental Law), provided,
notwithstanding the foregoing or any other provision in this Agreement to the
contrary, the words Hazardous Material shall not mean or include any such
Hazardous Material used, generated, manufactured, stored, disposed of or
otherwise handled in normal quantities in the ordinary course of business in
compliance with all applicable Environmental Laws, or such that may be naturally
occurring in any ambient air, surface water, ground water, land surface or
subsurface strata.
Independence
shall have
the meaning as set forth in the introduction of the Agreement.
Independence Bank
shall
have the meaning as set forth in Section 1.5 of the Agreement.
Independence Benefit Plan(s)
shall have the meaning as set forth in Section 4.15(a) of the Agreement.
Independence Common Stock
means the $.01 per share par value voting common stock of Independence.
Independence Contracts
shall have the meaning as set forth in Section 4.16(a) of the Agreement.
Independence D&O Policy
shall have the meaning as set forth in Section 7.9(a) of the Agreement.
Independence Disclosure Memorandum
means the written information entitled
Independence Bancshares, Inc. Disclosure Memorandum delivered prior to the
date of this Agreement to Parent describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
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Independence Entities
means, collectively, Independence and all
Independence Subsidiaries.
Independence ERISA Plan
shall have the meaning as set forth in Section 4.15(a) of the Agreement.
Independence Financial Advisor
means FIG Partners, LLC.
Independence Financial Statements
means (i) the consolidated balance sheets of
Independence as of December 31, 2016, and the related statements of income,
changes in shareholders equity, and cash flows (including related notes and
schedules, if any) for the period ended December 31, 2016 and December 31, 2015,
and for each of the three fiscal years ended December 31, 2016, as filed by
Independence with the SEC, and (ii) the consolidated balance sheets of
Independence (including related notes and schedules, if any) and related
statements of income, changes in shareholders equity, and cash flows (including
related notes and schedules, if any) as filed by Independence with the SEC with
respect to periods ended subsequent to December 31, 2016.
Independence Material Adverse Effect
means an event, change or occurrence which,
individually or together with any other event, change or occurrence, has a
material adverse effect on (i) the financial position, property, business,
assets or results of operations of Independence and its Subsidiaries, taken as a
whole, or (ii) the ability of Independence to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement,
provided,
that
Independence Material Adverse Effect shall not be deemed to include the
effects of (A) changes in banking and other Laws of general applicability or
interpretations thereof by Governmental Authorities, (B) changes in GAAP or
regulatory accounting principles generally applicable to banks and their holding
companies, or (C) actions and omissions of Independence (or any of its
Subsidiaries) taken with the prior written Consent of Parent in contemplation of
the transactions contemplated hereby, or (D) the direct effects of negotiating,
entering into and compliance with this Agreement on the operating performance of
Independence, including specifically Independences costs and expenses
associated therewith, including, but not limited to, accounting, financial
advisor, and legal fees. For clarification, litigation will not be considered a
direct effect of negotiating, entering into or compliance with this Agreement,
and subsections (C) and (D) will not apply to actions or effects of compliance
by Independence with the environmental testing described in Section 7.11 and the
results thereof. Notwithstanding the foregoing, any change in the per share
price of Independence Common Stock on or after the date of execution of this
Agreement by Parent shall not by itself be deemed to be an Independence
Material Adverse Effect.
Independence Option Price
shall have the meaning as set forth in Section 3.4(a) of the Agreement.
Independence Options
shall have the meaning as set forth in Section 3.4(a) of the Agreement.
Independence Pension Plan
shall have the meaning as set forth in Section 4.15(a) of the Agreement.
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Independence Regulatory
Agreement
shall have the meaning
as set forth in Section 4.22 of the Agreement.
Independence Series A Preferred Stock
shall have the meaning as set forth in Section
3.1(a) of the Agreement.
Independence Shareholders Meeting
means the meeting of Independences shareholders
to be held pursuant to Section 7.1(a), including any adjournment or adjournments
thereof.
Independence Subsidiaries
means the Subsidiaries, if any, of Independence. As of the date of this
Agreement, Independence has only one Subsidiary, Independence Bank.
Individually Identifiable Personal Information or
IIPI
shall have the meaning as
set forth in Section 4.17(a) of the Agreement.
Intellectual Property
means copyrights, patents, trademarks, service marks, service names, trade
names, domain names, together with all goodwill associated therewith,
registrations and applications therefor, technology rights and licenses,
computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
IRS
shall have the
meaning as set forth in Section 4.15(b) of the Agreement.
Knowledge
as used with
respect to a Person (including references to such Person being aware of a
particular matter) means those facts that are known or should reasonably have
been known after due inquiry of the records and employees of such Person by the
chairman, president, or chief financial officer, or any senior or executive vice
president of such Person without any further investigation.
Law
means any code, law
(including common law), ordinance, regulation, reporting or licensing
requirement, rule, statute, regulation or Order applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted or
enforced by any Regulatory Authority.
Liability
means any
direct or indirect, primary or secondary, liability, indebtedness, obligation,
penalty, cost or expense (including reasonable attorneys fees, expert witness
fees, costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
Lien
means any
conditional sale agreement, default of title, easement, encroachment,
encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge, or claim of any nature whatsoever of,
on, or with respect to any property or any property interest, other than (i)
Liens for current property Taxes not yet due and payable, and (ii) for any depository institution,
pledges to secure public deposits and other Liens incurred in the ordinary
course of the banking business.
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Litigation
means any
action, arbitration, cause of action, lawsuit, claim, complaint, criminal
prosecution, governmental or other examination or formal or informal
investigation, audit (other than regular audits of financial statements by
outside auditors), compliance review, inspection, hearing, administrative or
other proceeding relating to or affecting a Party, its business, its Assets or
Liabilities (including Contracts related to Assets or Liabilities), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
Material
or
material
for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question;
provided, that
any specific monetary amount stated in this
Agreement shall determine materiality in that instance.
Merger
shall have the
meaning as set forth in the Preamble of the Agreement.
Merger Consideration
shall have the meaning as set forth in Section 3.1(b) of the Agreement.
Merger Sub
shall have
the meaning as set forth in the introduction of the Agreement.
Notice of Recommendation Change
shall have the meaning as set forth in Section 7.1(b) of the Agreement.
OCC
shall mean the Office of the Comptroller of the
Currency.
Off Balance Sheet Arrangements
shall have the meaning as set forth in Section 4.6 of the Agreement.
Operating Property
means
any property owned, leased, or operated by the Party in question or by any of
its Subsidiaries or in which such Party or Subsidiary holds a security interest
or other interest (including an interest in a fiduciary capacity), and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property.
Order
means any
administrative decision or award, decree, injunction, judgment, order,
quasi-judicial decision or award, directive, ruling, or writ of any Governmental
Authority.
Parent
shall have the
meaning as set forth in the introduction of the Agreement.
Parent Entities
means,
collectively, Parent and all Parent Subsidiaries.
Parent Expenses
means
all reasonable and documented out-of-pocket fees and expenses due and payable to
third parties (including all fees and expenses of counsel, accountants,
financial advisors, and investment bankers), incurred by Parent and First
Reliance in connection with or related to the authorization, preparation,
negotiation, execution, and performance of this Agreement and any transactions
related thereto, any litigation with respect thereto, the preparation of the
Proxy Statement, the filing of any required notices, or in connection with other regulatory approvals, and
all other matters related to the Merger and the other transactions contemplated
by this Agreement;
provided
, that in no event
shall Parent Expenses exceed $250,000 in the aggregate.
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Parent Financial
Advisor
means Hovde Group, LLC.
Parent Financial Statements
means (i)
the consolidated balance sheets of Parent as of
December 31, 2016, and the related statements of income, changes in
shareholders equity, and cash flows (including related notes and schedules, if
any) for the period ended December 31, 2016, and for each of the three fiscal
years ended December 31, 2016, and (ii) the consolidated balance sheets of
Parent (including related notes and schedules, if any) and related statements of
income, changes in shareholders equity, and cash flows (including related notes
and schedules, if any) for the three-month period ended March 31, 2017, and for
the three- and six-month periods ended June 30, 2017.
Parent Material Adverse Effect
means an event, change or occurrence which, individually or together
with any other event, change or occurrence, has a material adverse effect on the
ability of Parent to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement,
provided,
that Parent Material Adverse Effect shall not be
deemed to include the effects of (A) changes in banking and other Laws of
general applicability or interpretations thereof by Governmental Authorities,
(B) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (C) actions and omissions of Parent (or any
of its Subsidiaries) taken with the prior written Consent of Independence in
contemplation of the transactions contemplated hereby, or (D) the direct effects
of compliance with this Agreement on the operating performance of Parent.
Notwithstanding the foregoing, any change in the per share price of Parents
Common Stock on or after the date of execution of this Agreement by Independence
shall not by itself be deemed to be a Parent Material Adverse Effect.
Parent Stock
means the
common stock, par value $1.00 per share and the Series D preferred stock of
Parent.
Parent Subsidiaries
means the Subsidiaries of Parent, which shall include any corporation, bank,
savings association, limited liability company, limited partnership, limited
liability partnership or other organization acquired as a Subsidiary of Parent
in the future and held as a Subsidiary by Parent at the Effective Time.
Participation Facility
means any facility or property in which the Party in question or any of
its Subsidiaries participates in the management and, where required by the
context, means the owner or operator of such facility or property, but only with
respect to such facility or property.
Party
means
Independence,
Parent or Independence Bank and
Parties
means two or
more of such Persons.
Party in Interest
shall
have the meaning as set forth in Section 4.15(f) of the Agreement.
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Per Common Share Merger
Price
shall have the meaning as
set forth in Section 3.1(b) of the Agreement.
Per Series A Preferred Share Redemption Price
shall have the meaning as set forth in Section
3.1(a) of the Agreement.
Permit
means any
federal, state, local, or foreign Governmental Authority approval,
authorization, certificate, easement, filing, franchise, license, notice,
permit, or right to which any Person is a party or that is or may be binding
upon or inure to the benefit of any Person or its securities, Assets, or
business, the absence of which or a Default under would constitute a Parent or
Independence Adverse Effect, as the case may be.
Person
means a natural
person or any legal, commercial or Governmental Authority, such as, but not
limited to, a corporation, general partnership, joint venture, limited
partnership, limited liability company, limited liability partnership, trust,
business association, group acting in concert, or any person acting in a
representative capacity.
Premium Multiple
shall
have the meaning as set forth in Section 7.9(a) of the Agreement.
Prohibited Transaction
shall have the meaning as set forth in Section 4.15(f) of the Agreement.
Proxy Statement
shall
have the meaning as set forth in Section 4.26(b) of the Agreement.
RCRA
shall have the
meaning as set forth in Section 10.1(a) of the Agreement.
Regulatory Authorities
means, collectively, the SEC, the Financial Industry Regulatory Authority, Inc.,
the South Carolina State Board of Financial Institutions, the FDIC, the
Department of Justice, the OCC, and the Federal Reserve and all other federal,
state, county, local or other Governmental Authorities having jurisdiction over
a Party or its Subsidiaries.
Representative
means any
investment banker, financial advisor, attorney, accountant, consultant, or other
representative or agent of a Person.
Requisite Independence Shareholder Vote
shall have the meaning as set forth in Section
4.2(a) of the Agreement.
Rights
shall mean all
arrangements, calls, commitments, Contracts, options, rights to subscribe to,
scrip, warrants, or other binding obligations of any character whatsoever by
which a Person is or may be bound to issue additional shares of its capital
stock or other securities, securities or rights convertible into or exchangeable
for, shares of the capital stock or other securities of a Person or by which a
Person is or may be bound to issue additional shares of its capital stock or
other Rights.
Sarbanes-Oxley Act
means
the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated
thereunder.
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SCBCA
shall have the meaning set forth in Section 1.1
of the Agreement.
SEC
means the United States
Securities and Exchange Commission.
Second Step
Merger
shall have the meaning set forth in Section 1.5(b)
of the Agreement.
Securities Act
means the
Securities Act of 1933, and the rules and regulations promulgated thereunder.
Securities Laws
means
the Securities Act, the Exchange Act, the Investment Company Act of 1940, the
Investment Advisors Act of 1940, the Trust Indenture Act of 1939, the South
Carolina Uniform Securities Act of 2005, the securities laws of any other state
or jurisdiction and the rules and regulations of any Regulatory Authority
promulgated thereunder.
Series A Dissenter Shares
shall have the meaning as set forth in Section 3.1(a) of the Agreement.
Subsidiaries
means all
those corporations, banks associations, or other entities of which the entity in
question either (i) owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as to each
of which 50% or more of the outstanding equity securities is owned directly or
indirectly by its parent (
provided
, there shall not
be included any such entity the equity securities of which are owned or
controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as
a general partner, (iii) in the case of a limited liability company, serves as a
managing member, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof.
Superior Proposal
means
any bona fide written Acquisition Proposal made by a third party that if
consummated would result in such Person (or its shareholders) owning, directly
or indirectly, more than 50% of the shares of Independence Common Stock then
outstanding (or of the shares of the surviving entity in a merger or the direct
or indirect parent of the surviving entity in a merger) or all or substantially
all of the assets of Independence which Independences board of directors (after
consultation with the Independence Financial Advisor and Independences outside
counsel) determines (taking into account all financial, legal, regulatory, and
other aspects of such proposal and the third party making the proposal) in good
faith to be (i) more favorable to Independences shareholders from a financial
point of view than the Merger (taking into account all the terms and conditions
of such proposal and this Agreement (including any changes to the financial
terms of this Agreement proposed by Parent in response to such offer or
otherwise)), and (ii) reasonably capable of being completed.
Surviving Corporation
means Parent as the surviving corporation resulting from the Merger.
Takeover Laws
shall have
the meaning as set forth in Section 4.23 of the Agreement.
Tax
or
Taxes
means all taxes, charges, fees, levies, imposts, duties, or assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
recording license, payroll, franchise, severance, documentary, stamp,
occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock,
paid-up capital, profits, withholding, Social Security, single business and
unemployment, disability, real property, personal property, registration,
ad valorem
, value added, alternative or add-on minimum,
estimated, or other taxes, fees, assessments or charges of any kind whatsoever,
imposed or required to be withheld by any Governmental Authority (domestic or
foreign), including any interest, penalties, and additions imposed thereon or
with respect thereto.
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Tax Return
means any
report, return, information return, or other information required to be supplied
to a Governmental Authority in connection with Taxes, including any return of an
affiliated or combined or unitary group that includes a Party or its
Subsidiaries.
Taxing Authority
means
the Internal Revenue Service and any other Governmental Authority responsible
for the administration of any Tax.
Termination Date
shall
have the meaning as set forth in Section 7.8(k) of the Agreement.
Termination Fee
shall
have the meaning as set forth in Section 9.3(a) of the Agreement.
WARN Act
shall have the
meaning as set forth in Section 4.14(c) of the Agreement.
(b)
Any
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular. Whenever the words include, includes or
including are used in this Agreement, they shall be deemed followed by the
words without limitation, and such terms shall not be limited by enumeration
or example.
10.2
Expenses.
Each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, and which in the case of Independence, shall be paid
at Closing and prior to the Effective Time.
10.3
Brokers and Finders.
Except for Independence Financial Advisor as to Independence and Parent
Financial Advisor as to Parent, each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers fees, brokerage fees, commissions, or
finders fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon such brokers
representing or being retained by or allegedly representing or being retained by
Independence or Parent, each of Independence and Parent, as the case may be,
agrees to indemnify and hold the other Party harmless from any Liability in
respect of any such claim. Independence has provided a copy of Independence
Financial Advisors engagement letter and expected fee for its services as
Section 10.3 of the Independence Disclosure Memorandum and shall pay all amounts due
thereunder at Closing and prior to the Effective Time.
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10.4
Entire Agreement.
Except as otherwise expressly provided herein, this Agreement (including
the documents and instruments referred to herein) constitutes the entire
agreement among the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral. Nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, other than as provided in Section 7.9.
10.5
Amendments.
To
the extent permitted by Law, and subject to Section 1.4, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after Requisite Independence
Shareholder Vote of this Agreement has been obtained;
provided,
that after any such approval by the holders of Independence Common Stock,
there shall be made no amendment that reduces or modifies the consideration to
be received by holders of Independence Common Stock.
10.6
Waivers.
(a)
Prior to or at the Effective Time, Parent, acting
through its Boards of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Independence, to waive or extend the time for the
compliance or fulfillment by Independence of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to the
obligations of Parent under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Parent.
(b)
Prior to or at the Effective Time, Independence,
acting through its board of directors, chief executive officer, or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Parent, to waive or extend the time for the
compliance or fulfillment by Parent
of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Independence under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Independence.
(c)
The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
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10.7
Assignment.
Except as expressly
contemplated hereby, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto (whether by
operation of Law, including by merger or consolidation, or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
10.8
Notices.
All notices or other
communications which are required or permitted hereunder shall be in writing and
sufficient if delivered by hand, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, or email (with, in the case of
email, confirmation of date and time by the transmitting equipment) to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered or refused:
Parent:
|
|
First Reliance Bancshares, Inc.
|
|
|
2710
West Palmetto St.
|
|
|
Florence, SC 29501
|
|
|
Attention: F.R. Rick Saunders, Jr.
|
|
|
Email: rsaunders@firstreliance.com
|
|
Copy
to Counsel:
|
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Haynsworth Sinkler Boyd, PA
|
|
|
1201
Main Street, 22nd Floor
|
|
|
Columbia, SC 29201
|
|
|
Attention: Joseph D. Clark
|
|
|
Email: jclark@hsblawfirm.com
|
|
Independence:
|
|
Independence Bancshares, Inc.
|
|
|
500
East Washington Street
|
|
|
Greenville, South Carolina 29601
|
|
|
Attention: Lawrence R. Miller
|
|
|
Email: lmiller@independencenb.com
|
|
Copy
to Counsel:
|
|
Nelson Mullins Riley & Scarborough LLP
|
|
|
Poinsett Plaza, Suite 900
|
|
|
104
South Main Street
|
|
|
Greenville, SC 29601
|
|
|
Attention: Benjamin A. Barnhill
|
|
|
Email:
ben.barnhill@nelsonmullins.com
|
10.9
Governing Law.
Regardless of any conflict
of law or choice of law principles that might otherwise apply, the Parties agree
that this Agreement shall be governed by and construed in all respects in
accordance with the laws of the State of South Carolina.
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10.10
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
10.11
Captions; Articles and
Sections.
The
captions contained in this Agreement are for reference purposes only and are not
part of this Agreement. Unless otherwise indicated, all references to particular
Articles or Sections shall mean and refer to the referenced Articles and
Sections of this Agreement.
10.12
Interpretations.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against any Party, whether under any rule of construction
or otherwise. No Party to this Agreement shall be considered the draftsman. The
Parties acknowledge and agree that this Agreement has been reviewed, negotiated,
and accepted by all Parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all Parties hereto.
10.13
Enforcement of Agreement.
The
Parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement was not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.14
Severability.
Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
[Signatures appear on
next page]
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IN WITNESS WHEREOF
, each of the Parties has caused this Agreement to
be executed on its behalf by its duly authorized officers as of the day and year
first above written.
FIRST RELIANCE BANCSHARES,
INC.
|
(PARENT)
|
|
|
By:
|
/s/ F.R. Rick Saunders, Jr.
|
F. R. Rick Saunders, Jr.
|
President and Chief Executive Officer
|
|
FR MERGER SUBSIDIARY, INC.
|
(MERGER SUB)
|
|
|
By:
|
/s/ F.R. Rick Saunders, Jr.
|
F. R. Rick Saunders, Jr.
|
President and Chief Executive Officer
|
|
INDEPENDENCE BANCSHARES,
INC.
|
(INDEPENDENCE)
|
|
|
By:
|
/s/ Lawrence R. Miller
|
Lawrence R. Miller
|
Interim Chief Executive
Officer
|
Signature Page to
Agreement and Plan of Merger
Table of Contents
EXHIBIT A
AGREEMENT OF MERGER
OF
INDEPENDENCE
NATIONAL BANK
WITH AND INTO
FIRST RELIANCE BANK
THIS AGREEMENT OF
MERGER,
dated as of September 25,
2017 (this
Agreement
), is made and
entered into between First Reliance Bank, a South Carolina state bank
(
First Reliance
), and Independence National Bank, a national
banking association
(
Independence Bank
).
WITNESSETH:
WHEREAS
, First Reliance, a South Carolina banking
corporation duly organized and existing under the laws of the State of South
Carolina with its main office located at 2170 W. Palmetto Street, Florence,
South Carolina, has authorized capital stock consisting of 2,000,000 shares of
common stock, no par value, of which 724,115 shares of common stock are issued
and outstanding as of the date hereof;
WHEREAS
, Independence Bank, a national banking
association duly organized and existing under the laws of the United States of
America with its main office located at 500 E. Washington Street, Greenville,
South Carolina, has authorized capital stock consisting of 10,000,000 shares of
common stock, par value $5.00 per share, of which 2,050,000 shares of common
stock are issued and outstanding as of the date hereof;
WHEREAS
,
First Reliance Bancshares (the holding company of First Reliance)
(
Parent
),
FR Merger Subsidiary, Inc. (
Merger Sub
)
and Independence Bancshares, Inc., (the holding company of Independence Bank) (
Independence
Parent
) are parties to that certain Agreement and Plan of Merger, dated
as of September 25, 2017 (the
Parent Merger
Agreement
),
pursuant to which, subject to the terms and conditions of the Parent Merger Agreement, Merger Sub shall merge with and into
Independence Parent (the
Parent Merger
),
whereby Independence Parent shall be the surviving corporation and a wholly owned subsidiary of Parent; and
WHEREAS
, the respective boards of directors of First
Reliance and Independence Bank, acting pursuant to resolutions duly adopted
pursuant to the authority given by, and in accordance with, applicable law, have
approved this Agreement and authorized the execution hereof.
NOW,
THEREFORE
, in consideration of
the promises and of the mutual agreements herein contained, the parties hereto
do hereby agree as follows:
1 THE MERGER
1.1
Merger; Surviving Bank
Subject to the terms and
conditions of this agreement, as the Effective Time (as hereinafter defined),
Independence Bank shall be merged with and into First Reliance, pursuant to the
provisions of, and with the effect provided in, applicable law (said
transaction, the
Merger
) and the corporate existence of Independence Bank shall cease. First
Reliance shall continue its corporate existence under the laws of the State of
South Carolina and shall be the entity surviving the Merger (the
Surviving Bank
). The parties hereto intend that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the
Code
) and this Agreement shall be, and is hereby adopted as, a plan of
reorganization for purposes of Sections 354 and 361 of the Code.
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1.2
Articles of Incorporation and Bylaws
From and after the
Effective Time (as defined in Section 1.3 below), the Articles of Incorporation
of First Reliance, attached hereto as
Exhibit A
, shall be the
Articles of Incorporation of the Surviving Bank until thereafter amended in
accordance with applicable law. From and after the Effective Time, the Bylaws of
First Reliance, attached hereto as
Exhibit B
, shall be the
Bylaws of the Surviving Bank until thereafter amended in accordance with
applicable law.
1.3
Effective Time of Merger
The Merger shall become
effective at such time and date as are agreed to by First Reliance and
Independence Bank, subject to the receipt of all necessary approvals from any
state or federal regulatory authority having jurisdiction over the Merger, or
such other time and date as shall be provided by applicable law or regulation.
The date and time of such effectiveness is referred to as the
Effective Time
.
1.4
Effect of Merger
All assets as they exist at
the Effective Time shall pass to and vest in the Surviving Bank without any
conveyance or other transfer. The Surviving Bank shall be responsible for all of
the liabilities of every kind and description of the merging institutions
existing as of the Effective Time of the Merger.
1.5
Business of Surviving Bank
The business of the
Surviving Bank after the Merger shall continue to be that of a South Carolina
banking corporation and shall be conducted at its main office, which shall be
located at 2170 W. Palmetto Street, Florence, South Carolina, and at legally
established branches.
1.6
Directors
Upon consummation of the
Merger, the directors of the Surviving Bank shall be the persons serving as
directors of First Reliance immediately prior to the Effective Time. Directors
of the Surviving Bank shall serve for such terms in accordance with the Articles
of Incorporation and Bylaws of the Surviving Bank.
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2 - TREATMENT OF SHARES
2.1
Treatment of Shares
At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof
(a) each share of Independence Bank common stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
be cancelled, (b) the shares of First Reliance common stock issued and
outstanding immediately prior to the Effective Time shall remain outstanding,
shall be unchanged after the Merger and shall immediately after the Effective
Time constitute all of the issued and outstanding capital stock of the Surviving
Bank.
3 - CONDITIONS PRECEDENT
3.1
Conditions
The respective obligations
of the parties to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a)
Shareholder
Approval
. The Agreement shall have been ratified and confirmed by the written
consent of the sole shareholder of each of First Reliance and Independence Bank in lieu of a meeting of shareholders,
provided that such action by written consent is authorized under the applicable articles of association or bylaws or
otherwise provided by law.
(b)
Regulatory
Approvals
. The parties shall have received all consents, approvals and
permissions and the satisfaction of all of the requirements prescribed by law, including, but not limited to, the consents,
approvals and permissions of all regulatory authorities which are necessary to the carrying out of the Merger described in
this Agreement.
(c)
No
Injunctions or Restraints
. There shall not be in effect any temporary
restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger.
(d)
Parent
Merger
. The Parent Merger shall have been consummated in accordance with the
terms and conditions of the Parent Merger Agreement.
4 TERMINATION AND AMENDMENT
4.1
Termination
Notwithstanding the
approval of this Agreement by the shareholders of First Reliance or Independence
Bank, this Agreement shall terminate forthwith prior to the Effective Time in
the event the Parent Merger Agreement is terminated as therein provided. This
Agreement may also be terminated by mutual written consent of the parties
hereto.
Table of Contents
4.2
Amendment
This Agreement may not be
amended, except by an instrument in writing signed on behalf of each of the
parties hereto.
5 - MISCELLANEOUS
5.1
Representations and Warranties
Each of the parties hereto
represents and warrants that this Agreement has been duly authorized, executed
and delivered by such party and constitutes the legal, valid and binding
obligation of such party, enforceable against it in accordance with the terms
hereof.
5.2
Further Assurances
If at any time the
Surviving Bank shall consider or be advised that any further assignments,
conveyances or assurances are necessary or desirable to vest, perfect or confirm
in the Surviving Bank title to any property or rights of Independence Bank or
otherwise carry out the provisions hereof, the proper officers and directors of
Independence Bank, as of the Effective Date, and thereafter the officers of the
surviving entity acting on behalf of Independence Bank, shall execute and
deliver any and all proper assignments, conveyances and assurances, and do all
things necessary or desirable to vest, perfect or confirm title to such property
or rights in the Surviving Bank and otherwise carry out the provisions hereof.
5.3
Governing Law
This Agreement shall be
governed by and construed in accordance with the laws of the State of South
Carolina without regard to any applicable conflicts of law, except to the extent
federal law may be applicable.
5.4
Successors and Assigns
This Agreement may be
executed in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
5.5
Counterparts
This Agreement may be
executed in several counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
[
Signature Page Follows
]
Table of Contents
IN WITNESS
WHEREOF,
each of the parties
hereto has caused this Agreement of Merger to be executed by its duly authorized
officers, all as of the date first set forth above.
|
FIRST RELIANCE
BANK
|
|
|
|
|
|
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|
By
|
|
|
|
Name:
Title:
|
|
|
|
|
|
|
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INDEPENDENCE
NATIONAL BANK
|
|
|
|
|
|
|
|
By
|
|
|
|
Name:
Title:
|
Signature Page to
Agreement of Merger
Table of Contents
EXHIBIT B
THIRD AMENDMENT
TO
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This third amendment (this
Third Amendment
) is effective as of the
25th
day of September, 2017, by and among Independence Bancshares, Inc., a
South Carolina corporation (the
Company
), Independence
National Bank, (the Bank), a national bank and wholly owned subsidiary of the
Company (the Company and the Bank are collectively referred to herein as the
Employer), and Lawrence R. Miller, an individual resident of South Carolina
(the
Executive
). This Agreement amends that certain Amended and
Restated Employment Agreement between the Employer and the Executive, dated as
of December 10, 2008, as amended by that certain Amendment to the Amended and
Restated Employment Agreement between the Employer and the Executive, dated as
of December 31, 2012, and as further amended by that certain Second Amendment to
the Amended and Restated Employment Agreement between the Employer and the
Executive, dated as of December 15, 2016.
WHEREAS
, the Employer and the Executive entered into an employment agreement,
dated July 1, 2004 (the
Original
Agreement
), whereby the
Executive agreed to serve as President and Chief Executive Officer of the
Company and the Bank;
WHEREAS
, the Employer and the Executive amended and
restated the Original Agreement, effective as of December 10, 2008 (the
Amended and Restated
Agreement
), to make certain
updates to the Original Agreement required for compliance with Internal Revenue
Code Section 409A;
WHEREAS
, effective as of the closing of the Company's
private placement offering of common stock on December 31, 2012, and in
conjunction with the launch of a new business model by the Company, the
Executive resigned as President and Chief Executive Officer of the Company, but
continued to serve as President and Chief Executive Officer of the Bank, and the
Employer and the Executive amended the Amended and Restated Agreement to reflect
the Executives new roles with the Company and the Bank;
WHEREAS
, following the termination of the employment of
the Companys new chief executive officer, the board of directors of the Company
appointed the Executive as the Company's Interim Chief Executive Officer on
October 4, 2015;
WHEREAS
, the Employer and the Executive entered into the
Second Amendment to the Amended and Restated Employment Agreement as of December
15, 2016, to make certain updates required for compliance with Internal Revenue
Code Section 409A; and
WHEREAS
, the parties now desire to amend the Amended and
Restated Agreement to provide Executive with certain benefits and to require
Executive to make certain covenants in the event that Executive is terminated
without cause in connection with a Change in Control.
Table of Contents
NOW THEREFORE
, in consideration of these premises, the mutual
covenants contained in this Agreement, and other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
1.
Section
4(a)(vi) of the Amended and Restated Agreement is hereby deleted in its entirety and replaced with the following:
(vi)
by
the Executive for Good Reason upon delivery of a Notice of Termination to the Employer, or by the Employer without Cause
upon delivery of a Notice of Termination to the Executive, in each case within a 90-day period beginning on the occurrence
of a Change in Control or within a 90-day period beginning on the one-year anniversary of the occurrence of a Change in
Control. If the Executives employment is terminated pursuant to this provision, in addition to other rights and
remedies available in law or equity, the Executive shall also be entitled to the following:
(1)
the
Employer shall pay the Executive in a cash payment within fifteen days of the date of termination severance compensation in
a lump sum amount equal to his then current monthly base salary multiplied by 24, plus any bonus earned or accrued
through
·
the date of termination
(including any amounts awarded for previous years but which were not yet vested);
(2)
Executive
may continue participation, in accordance with the terms of the applicable benefits plans, in the Employers
group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation
Act (COBRA). In accordance with COBRA, assuming Executive is covered under
the Employers group health plan as of his date of termination, Executive will be entitled to elect COBRA
continuation coverage for the legally required COBRA period (the Continuation Period). If Executive elects
COBRA coverage for group health coverage, he will be obligated to pay the portion of
the full COBRA cost of the coverage equal to an active employees share of premiums for coverage for he and his spouse
the respective plan year and the Employers share of such premiums shall be treated as taxable income to Executive.
Notwithstanding the above, the Employers obligations hereunder with respect to the foregoing benefits provided in this
subsection (ii) shall be limited to the extent that if Executive obtains any coverage pursuant to a subsequent
employers benefit plans which duplicates the Executives coverage, the duplicative coverage may be terminated by
Employer;
(3)
the
restrictions on any outstanding incentive awards (including ·restricted stock) granted to the Executive under the
Companys or the Banks long-term equity incentive· program or any other incentive plan or arrangement shall
lapse and such
awards shall become 100% vested, all stock options and stock
appreciation rights granted to the Executive shall become immediately exercisable and shall become 100% vested, all
performance units granted to the Executive shall become 100% vested;
2
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(4)
the
title to any automobile purchased by the Employer and provided to the Executive
in accordance with the Employers obligations under Section 3(d) above shall
immediately be transferred to the Executive, at no cost to
.
the
Executive, or, if the Employer is providing a monthly allowance to the Executive
for the lease of an automobile, the Employer agrees that it will continue to
make all lease payments, tax payments and related expenses for the automobile
until such time as the lease in effect at the time of any Change in Control
shall expire; and
(5)
Executive
shall provide notice of termination of his membership in·Thornblade Club, Greenville, SC in the month in which the date
of termination occurs. The Employer shall pay Executive, within fifteen days of the date of termination, a lump sum amount
equal to the monthly payments (specifically including dues, minimum dining charges, and capital assessments) relating to
such membership for the required 12-month notice period.
2. Section 9(d) of the
Amended and Restated Agreement is hereby deleted in its entirety.
3. All other terms and
conditions of the Amended and Restated Agreement, as amended, except as modified
by this Third Amendment, shall remain in full force and effect and shall be
binding on the parties hereto, their heirs, successors and assigns.
4. Capitalized terms used
in this Third Amendment, unless defined herein, shall have the meanings assigned
to them in the Amended and Restated Agreement, as amended.
[
Signatures appear on following
page
]
3
Table of Contents
In Witness Whereof
, the parties have executed this Third Amendment
to Amended and Restated Employment Agreement as of the date first written above.
ATTEST
:
|
|
INDEPENDENCE BANCSHARES,
INC.
|
|
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By:
|
|
|
|
Name: Martha L. Long
|
|
|
Title: Chief Financial Officer
|
|
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ATTEST
:
|
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INDEPENDENCE NATIONAL BANK
|
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By:
|
|
|
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Name: Martha L. Long
|
|
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Title: Chief Financial Officer
|
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ATTEST
:
|
|
|
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|
|
|
Lawrence R.
Miller
|
Signature Page to
Amendment to CEO Employment Agreement
Table of Contents
EXHIBIT C
Employment Agreement
This
Employment Agreement
(the
Agreement
) dated as of this ____________day of _________________, 2017, by
and among First Reliance Bancshares, Inc., a South Carolina corporation and
registered bank holding company, First Reliance Bank, a commercial bank
chartered under the laws of South Carolina (the
Bank
) and Schaefer M. Carpenter (the
Officer
). The Bank is
sometimes referred to in this Agreement as the
Employer
.
Whereas
, the Officer is a
key executive of Independence National Bank (
INB
), a wholly owned national bank subsidiary of Independence Bancshares,
Inc., a South Carolina corporation and registered bank holding company;
and
Whereas
,
as of the Effective Time (as defined below), INB will merge with and into the Bank (the
Merger
)
pursuant to the Agreement and Plan of Reorganization dated ____________, 2017, by and among First Reliance Bancshares, Inc.
and Independence Bancshares, Inc. (the
Merger
Agreement
), and the Merger will become effective at the time and in the
manner set forth in the Merger Agreement (the
Effective
Time
); and
Whereas
, it has been the
desire of the Bank to have the benefit of the Officers loyalty and service from
and after the Effective Time; and
Whereas
, the Officer wishes
to enter into the employ of the Bank, from and after the Effective Time, subject
to the conditions set forth herein; and
Whereas
, the Officer
entered into an Amended and Restated Employment Agreement with INB and
Independence Bancshares, Inc. dated December 10, 2008, which Employment
Agreement was amended by an Amendment dated December 15, 2016, and as it may
have been further amended (such Amended and Restated Employment Agreement and
Amendment are hereinafter referred to collectively as the
Former Employment Agreement
); and
Whereas
, the Bank and the
Officer wish to set forth the terms and conditions of the Officers employment
during the Term (as defined below), and to set forth certain covenants and
agreements to survive thereafter, by entering into this Employment Agreement as
set forth herein.
Now Therefore Witnesseth:
In consideration of the
mutual covenants and agreements set forth herein, the parties agree as follows:
Article 1
Employment
1.1
Effect of Merger on This Agreement
and on the Former Employment Agreement
. The Officer and the Bank, as successor by merger to INB, acknowledge
and agree that, from and after the Effective Time, this Agreement shall
immediately and fully supersede the Former Employment Agreement, provided that
in the event that the Merger does not occur for any reason, this Agreement will automatically terminate and become null and
void, and neither party shall be required to perform any duties or obligations
set forth herein.
Page 1 of 14
Table of Contents
1.2
Employment
. The Bank hereby
employs the Officer to serve as a Relationship Banker of the Bank. Under the
direction of the Banks Chief Executive Officer and President or his designee,
the Officer will serve the Employer faithfully, diligently, competently, and to
the best of the Officers ability. The Officer will exclusively devote full
working time, energy, and attention to the business of the Employer and to the
promotion of the Employers interests throughout the term of this Agreement.
Nothing in this Section 1.2 prevents the Officer from managing personal
investments and affairs, provided that doing so does not interfere with the
proper performance of the Officers duties and responsibilities under this
Agreement.
1.3
Term
. The term of employment is two years, commencing
at the Effective Time.
Article 2
Compensation
2.1
Base Salary
. In consideration of the Officers performance of
the obligations under this Agreement, the Employer will pay or cause to be paid
to the Officer salary at the annual rate of $___0,000, payable in installments
in accordance with the Employers regular pay practices. The Officers salary
will be reviewed annually by the Employers Chief Executive Officer and in the
discretion of the Chief Executive Officer may be increased, whether to account
for increases in the cost of living or otherwise. The Officers annual salary,
as the same may be changed from time to time, is referred to in this Agreement
as the
Base
Salary
.
2.2
Benefit Plans and
Perquisites
. (a)
Reimbursement of business expenses
. Subject to guidelines issued from time to time
by the Employer and upon submission of documentation to support expense
reimbursement in conformity with applicable requirements of federal income tax
laws and regulations, the Officer is entitled to reimbursement of all reasonable
business expenses incurred performing the obligations under this Agreement,
including but not limited to all reasonable business travel and entertainment
expenses incurred while acting at the request of or in the service of the
Employer and reasonable expenses for attendance at annual and other periodic
meetings of trade associations.
(b)
Vacation
. The Officer is entitled to paid annual vacation and sick leave in
accordance with the policies established from time to time by the Employer.
(c)
Employee Benefit Plans.
The Officer shall be entitled throughout the term
of this Agreement to participate in any and all officer or employee
compensation, incentive, and benefit plans in effect from time to time,
including without limitation plans providing deferred compensation (qualified
and nonqualified), medical, dental, disability, and group life benefits, and to
receive any and all other fringe benefits provided from time to time, provided
that the Officer satisfies the eligibility requirements for any such plans or
benefits.
(d)
Compliance with Internal Revenue Code Section
409A
. If any reimbursement under
this Agreement constitutes nonqualified deferred compensation under Internal
Revenue Code Section 409A, the reimbursement will be provided in accordance with
Internal Revenue Code Section 409A.
Page 2 of 14
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The reimbursement will not
be paid later than the last day of the Officers tax year immediately after the
Officers tax year in which the expense is incurred, amounts eligible for
payment during any one taxable year under this Agreement do not effect
eligibility for payment in any other taxable year under this Agreement, and the
Officers right to the payment is not subject to liquidation or exchange for
another benefit.
Article 3
Employment
Termination
3.1
Termination Because of Death or
Disability
. (a)
Death
. The Officers employment terminates at the Officers death. If the
Officer dies in active service to the Employer, the Officers estate will
receive any sums due to the Officer as Base Salary, reimbursement of expenses
through the end of the month in which death occurred, and any bonus earned and
accrued through the date of death.
(b)
Disability
. By delivery of written notice 30 days in advance to the Officer, the
Employer may terminate the Officers employment if the Officer is disabled. For
purposes of this Agreement, Disability means an independent physician selected
by the Employer and reasonably acceptable to the Officer or the Officers legal
representative determines that, because of illness or accident, the Officer is
unable to perform the Officers duties and will be unable to perform those
duties for 90 consecutive days. The Officer shall not be considered disabled,
however, if the Officer returns to work on a full-time basis within 30 days
after the Employer gives notice of termination due to disability. During the
period of incapacity leading up to the termination of the Officers employment
under this provision, the Employer shall continue to pay the full Base Salary at
the rate then in effect and all perquisites and other benefits (other than
bonus) until the Officer becomes eligible for benefits under any disability plan
or insurance program maintained by the Employer, provided that the amount of the
Employers payments to the Officer under this Section 3.1(b) shall be reduced by
the sum of the amounts, if any, payable to the Officer for the same period under
any disability benefit or pension plan covering the Officer. Furthermore, the
Officer shall receive any bonus earned or accrued through the date of
incapacity, including any unvested amounts awarded for previous years.
3.2
Involuntary Termination by the
Employer
. (a)
With Cause
. The Employer may terminate the Officers employment with Cause. If the
Officers employment is terminated by the Employer with Cause, the Officer will
receive the Base Salary through the date on which termination becomes effective
and reimbursement of expenses to which the Officer is entitled when termination
becomes effective. If the Officer is terminated with Cause by either of First
Reliance Bancshares, Inc. or the Bank, the Officer will be deemed also to have
been terminated with Cause by the other at the same time. For purposes of this
Agreement
Cause
means any of the following
(1) gross negligence or
gross neglect of duties to the Employer,
(2) disloyalty to the Bank,
insubordination, intentional failure to follow directions, breach of fiduciary
duties, or misconduct involving dishonesty in the performance of duties,
(3) an act of fraud,
embezzlement, or theft in the course of employment,
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(4) intentional violation
of any law, which in the Employers sole judgement causes material harm to the
Bank or First Reliance Bancshares, Inc., regardless of whether the violation
leads to criminal prosecution or conviction, or violation of a significant
Employer policy in the course of employment, including but not limited to
violation of the code of conduct or code of ethics of the Bank or First Reliance
Bancshares, Inc. For purposes of this Agreement applicable laws include any
statute, rule, regulatory order, statement of policy, or final cease-and-desist
order of any governmental agency or body having regulatory authority over the
Bank or First Reliance Bancshares, Inc.,
(5) intentional wrongful
damage by the Officer to the business or property of the Bank or First Reliance
Bancshares, Inc., including without limitation the reputation of the Bank or
First Reliance Bancshares, Inc., which in the Employers sole judgment causes
material harm to the Bank or First Reliance Bancshares, Inc. For purposes of
this Agreement an act or failure to act on the part of the Officer is not
intentional if it is due primarily to an error in judgment or negligence. An act
or failure to act on the Officers part is intentional if it is not in good
faith and if it is without a reasonable belief that the action or failure to act
is in the Employers best interests,
(6) a breach by the Officer
of this Agreement that in the sole judgment of the Employer is a material
breach, which breach is not corrected by the Officer within ten days after
receiving written notice of the breach,
(7) removal of the Officer
from office or permanent prohibition of the Officer from participating in the
Banks affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1),
(8) the occurrence of any
event that results in the Officer being excluded from coverage, or having
coverage limited for the Officer as compared to other executives of the Bank,
under the Banks blanket bond or other fidelity or insurance policy covering its
directors, officers, or employees,
(9) conviction of the
Officer for or plea of no contest to a felony or conviction of or plea of no
contest to a misdemeanor involving moral turpitude, or the actual incarceration
of the Officer for three consecutive days or more resulting from a judicially
imposed criminal sentencing (not incarceration while the Officer is a defendant
in a pending criminal proceeding),
(10) abuse by the Officer
of alcohol or controlled substances, or
(11) engaging in activities
that are in competition with the activities of the Bank or First Reliance
Bancshares, Inc., including but not limited to serving as a director of or
providing services with or without compensation to any entity that provides
banking or other financial products or services.
(b)
Without Cause
. With written notice to the Officer, the Employer
may terminate the Officers employment without Cause. If the Officers
employment is terminated by the Bank other than for Cause or Disability, the
date of Termination shall be the effective date contained in the Banks notice
of such termination. If the Officers employment with either of First Reliance
Bancshares, Inc. or the Bank terminates involuntarily but without Cause, the
Officers employment with the other terminates at the same time.
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3.3
Voluntary Termination by the
Officer
. (a)
Without Good Reason
. If the Officer terminates employment voluntarily
but without Good Reason, the Officer will receive the Base Salary and expense
reimbursement to which the Officer is entitled through the date on which
termination becomes effective and any other benefits to which the Officer may be
entitled under the Employers benefit plans and policies. If the Officer's
employment with either of First Reliance Bancshares, Inc. or the Bank terminates
voluntarily but without Good Reason, the Officers employment with the other
terminates at the same time.
(b)
With Good Reason
. With advance written notice to the Employer as
provided in clause (
y
) below, the Officer may
terminate employment with Good Reason. If the Officers employment with either
of First Reliance Bancshares, Inc. or the Bank terminates voluntarily but with
Good Reason, the Officers employment with the other terminates at the same
time. For purposes of this Agreement, a voluntary termination by the Officer is
a voluntary termination with Good Reason if the conditions of the safe-harbor
definition of good reason contained in Internal Revenue Code Section 409A are
satisfied, as the same may be amended from time to time. References in this
Agreement to Internal Revenue Code Section 409A include rules, regulations, and
guidance of general application issued by the Department of the Treasury under
Section 409A. For purposes of clarification and without intending to affect the
foregoing reference to Section 409A for the definition of Good Reason, as of the
effective date of this Agreement the safe-harbor definition of separation from
service for good reason in Rule 1.409A-1(n)(2)(ii) is as follows
(
x
)
a voluntary termination by the Officer is a voluntary termination with Good
Reason if any of the following occur without the Officers advance written
consent, and the term Good Reason means the occurrence of any of the following
without the Officers advance written consent
1) a material diminution of
the Officers Base Salary, or
2) a material diminution of
the Officers authority, duties, or responsibilities, or
3) a material diminution in
the authority, duties, or responsibilities of the supervisor to whom the Officer
is required to report, or
4) a material diminution in
the budget over which the Officer retains authority, or
5) a material change in the
geographic location at which the Officer must perform services for the Employer,
or 6) any other action or inaction that constitutes a material breach by the
Employer of this Agreement.
(
y
)
the Officer must give notice to the Employer of the existence of one or more of
the conditions described in clause (
x
) within 90 days after
the initial existence of the condition, and the Employer has 30 days thereafter
to remedy the condition.
Article 4
Severance
Compensation
4.1
Cash Severance after Termination
Without Cause or Termination with Good Reason
. If the Bank terminates the Officers employment
involuntarily without Cause or if the Officer voluntarily terminates employment
with Good Reason, in addition to payment by the Bank of all accrued and unpaid
Base Salary and bonus, the Bank shall make or cause to be made a lump-sum
payment to the Officer on the date of employment termination in an amount in
cash equal to the Officers Base Salary. The
Bank and the Officer acknowledge and agree that the benefits under this Section
4.1 shall not be payable if benefits are payable or shall have been paid to the
Officer under Section 5.1.
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Article 5
Change In
Control
5.1
Change in Control
Benefits
. If a Change in Control
occurs during the term of this Agreement and if within 24 months thereafter the
Officer is involuntarily terminated without Cause or the Officer terminates
employment voluntarily but with Good Reason, the Bank will pay to the Officer,
in addition to all accrued and unpaid Base Salary and bonus, a single lump sum
of cash in an amount equal to the Officers Base Salary when termination occurs.
The payment required under this Section 5.1 is payable the day the Officers
employment terminates.
5.2
Change in Control Defined
. For
purposes of this Agreement, the term
Change in
Control
means a change in control as defined in Treasury Rule 1.409A-3(i)(5) including
(a)
Change in ownership
: a change in ownership of the Employer occurs on
the date any one person or group accumulates ownership of First Reliance
Bancshares, Inc. stock constituting more than 50% of the total fair market value
or total voting power of First Reliance Bancshares, Inc. stock, or
(b)
Change in effective control
: (
x
) any one person or more
than one person acting as a group acquires within a 12-month period ownership of
First Reliance Bancshares, Inc. stock possessing 30% or more of the total voting
power of First Reliance Bancshares, Inc., or (
y
)
a majority of First Reliance Bancshares, Inc.s board of directors is replaced
during any 12-month period by directors whose appointment or election is not
endorsed in advance by a majority of First Reliance Bancshares, Inc.s board of
directors, or
(c)
Change in ownership of a substantial portion of
assets
: a change in ownership of
a substantial portion of First Reliance Bancshares, Inc.s assets occurs if in a
12-month period any one person or more than one person acting as a group
acquires from First Reliance Bancshares, Inc. assets having a total gross fair
market value equal to or exceeding 40% of the total gross fair market value of
all of First Reliance Bancshares, Inc.s assets immediately before the
acquisition or acquisitions. For this purpose, gross fair market value means the
value of First Reliance Bancshares, Inc.s assets, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
the assets.
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Article 6
Confidentiality And
Creative Work
6.1
Non-disclosure
.
The Officer covenants and agrees not to reveal to any person, firm, or corporation any confidential information of any
nature concerning the Employer or its business, or anything connected therewith. As used in this Article 6, the term
confidential information
means all of the Employers and affiliates confidential and proprietary information and trade secrets in
existence on the date hereof or existing at any time during the term of this Agreement, including but not limited to
(a) the whole or any
portion or phase of any business plans, financial information, purchasing data,
supplier data, accounting data, or other financial information,
(b) the whole or any
portion or phase of any research and development information, design procedures,
algorithms or processes, or other technical information,
(c) the whole or any
portion or phase of any marketing or sales information, sales records, customer
lists, customer information, employee lists, employee information, financial
products and services, financial products and services pricing, financial
information and projections, or other sales information, and
(d) trade secrets, as
defined from time to time by the laws of the State of South Carolina.
However, confidential
information excludes information that as of the date hereof or at any time
after the date hereof is published or disseminated without obligation of
confidence or that becomes a part of the public domain (
x
)
by or through action of the Employer, or (
y
) otherwise than by or at
the direction of the Officer. This Section 6.1 does not prohibit disclosure
required by an order of a court having jurisdiction or a subpoena from an
appropriate governmental agency or disclosure made by the Officer in the
ordinary course of business and within the scope of the Officers authority.
6.2
Return of
Materials
. The Officer agrees to
deliver or return to the Employer upon termination, upon expiration of this
Agreement, or as soon thereafter as possible, all written information and any
other similar items furnished by the Employer or prepared by the Officer in
connection with the Officers services hereunder. The Officer will retain no
copies thereof after termination of this Agreement or termination of the
Officers employment.
6.3
Injunctive Relief
. The Officer hereby acknowledges that the
enforcement of this Article 6 is necessary to ensure the preservation,
protection, and continuity of the business, trade secrets, and goodwill of the
Employer, and that the restrictions set forth in Article 6 are reasonable in
terms of time, scope, territory, and in all other respects. The Officer
acknowledges that it is impossible to measure in money the damages that will
accrue to the Employer if the Officer fails to observe the obligations imposed
by Article 6. Accordingly, if the Employer institutes an action to enforce the
provisions hereof, the Officer hereby waives the claim or defense that an
adequate remedy at law is available to the Employer and the Officer agrees not
to urge in any such action the claim or defense that an adequate remedy at law
exists. If there is a breach or threatened breach by the Officer of the
provisions of Article 6, the Employer is entitled to an injunction without bond
to restrain the breach or threatened breach, and the prevailing party in any the
proceeding is entitled to reimbursement for
all costs and expenses, including reasonable attorneys fees. The existence of
any claim or cause of action by the Officer against the Employer does not
constitute and will not be asserted as a defense by the Officer to enforcement
of Article 6.
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6.4
Affiliates Confidential
Information is Covered
. For
purposes of this Agreement the term
affiliate
includes the
Employer and any entity that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with the
Employer.
6.5
Survival of
Obligations
. The Officers
obligations under Article 6 survive employment termination regardless of the
manner in which termination occurs and are binding upon the Officers heirs,
executors, and administrators.
Article 7
Competition
After Employment
Termination
7.1
Protection of Employers
Legitimate Business Interests
.
The Officer acknowledges and agrees that the Employer has legitimate business
interests in
(a) trade secrets, as
defined from time to time by the laws of the State of South Carolina,
(b) valuable confidential
business or professional information that otherwise does not qualify as trade
secrets,
(c) substantial
relationships with specific prospective or existing customers and clients,
(d) customer and client
goodwill associated with:
1) an ongoing business
practice, by way of trade name, trademark, service mark, or trade dress,
2) the specific geographic
location of the Bank and its branches, and
3) the specific marketing
or trade area in which those branches operate and the communities they serve,
and
(e) extraordinary or
specialized training.
For the protection of the
Employers foregoing legitimate business interests, the Officer agrees to
certain covenants placing limited restrictions on the Officers ability to
compete with the Employer.
7.2
Covenant Not to
Solicit
. If the Officers
employment is terminated during the two year term of this contract, whether
involuntarily by the Employer with or without Cause or by the Officer
voluntarily with or without Good Reason, for one year after such employment
termination, the Officer (
x
) may not solicit or
attempt to solicit and may not encourage or induce in any way any employee,
joint venturer, supplier, or business partner of the Employer to terminate an
employment or contractual relationship with the Employer, (
y
)
may not hire any person then employed by the Employer or employed by the
Employer at any time during the two-year period before the Officers employment
termination, and (
z
) may not solicit any
Employer customer or customer of any Employer affiliate or interfere with or
attempt to interfere with the relationship between the Employer or any Employer
affiliate and any Employer customer or customer of any Employer affiliate.
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7.3
Covenant Not to
Compete
. (a) Provided employment
termination occurs during the two year term of this contract according to
Section 1.3, the Officer covenants and agrees not to compete directly or
indirectly with the Bank without advance written consent of the Bank for one
year after employment termination, plus any period during which the Officer is
in violation of this covenant not to compete and any period during which the
Bank seeks by litigation to enforce this covenant not to compete. For purposes
of this Section 7.3:
|
1)
|
the term compete
means
|
|
|
|
|
|
|
(a)
|
providing financial products or services on
behalf of any financial institution for any person residing in the
territory,
|
|
|
|
|
(b)
|
assisting (other than through the
performance of ministerial or clerical duties) any financial institution
in providing financial products or services to any person residing in the
territory, or
|
|
|
|
|
(c)
|
inducing or attempting to induce any person
who was a customer of the Bank at the date of the Officers employment
termination to seek financial products or services from another financial
institution.
|
|
|
|
2)
|
the words directly
or indirectly means
|
|
|
|
|
(a)
|
acting as a consultant, officer, director,
independent contractor, or employee of any financial institution in
competition with the Bank in the territory, or
|
|
|
|
|
(b)
|
communicating to such financial institution
the names or addresses or any financial information concerning any person
who was a customer of the Bank at the Officers employment
termination.
|
|
|
|
3)
|
the term customer
means any person to whom the Bank is providing financial products or
services on the date of the Officers employment termination.
|
|
|
|
4)
|
the term financial
institution means any bank, savings association, or bank or savings
association holding company, or any other institution the business of
which is engaging in activities that are financial in nature or incidental
to such financial activities as described in Section 4(k) of the Bank
Holding Company Act of 1956, other than the Bank or any of its affiliated
corporations.
|
|
|
|
5)
|
financial product or
service means any product or service that a financial institution or a
financial holding company could offer by engaging in any activity that is
financial in nature or incidental to such a financial activity under
Section 4(k) of the Bank Holding Company Act of 1956 and that is offered
by the Bank or an affiliate on the date of the Officers employment
termination, including but not limited to banking activities and
activities that are closely related and a proper incident to
banking.
|
Page 9 of 14
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|
6)
|
the term person
means any individual or individuals, corporation, partnership, fiduciary
or association.
|
|
|
|
|
7)
|
the term territory
means all of Greenville County in South Carolina and a radius of 30 miles
from the branch offices of the Employer in Greenville County, South
Carolina.
|
(b) If any provision of
this Section or any word, phrase, clause, sentence or other portion thereof
(including, without limitation, the geographical and temporal restrictions
contained therein) is held to be unenforceable or invalid for any reason, the
unenforceable or invalid provision or portion shall be modified or deleted so
that the provisions hereof, as modified, are legal and enforceable to the
fullest extent permitted under applicable law.
7.4
No Disparagement
. The Officer promises and agrees that for as long
as the covenant against solicitation in Section 7.2 applies the Officer will not
cause statements to be made, whether written or oral, that reflect negatively on
the business reputation of the Employer. Likewise, the Employer promises and
agrees that the Employer will not cause statements to be made, whether written
or oral, that reflect negatively on the reputation of the Officer.
7.5
Remedies
. Because of the unique character of the services
to be rendered by the Officer hereunder, the Officer understands that the
Employer would not have an adequate remedy at law for the material breach or
threatened breach by the Officer of any one or more of the Officers covenants
set forth in this Article 7. Accordingly, the Officer agrees that the Employers
remedies for a material breach or threatened breach of this Article 7 include
but are not limited to (
x
) forfeiture or
recoupment of any severance compensation under Section 4.1 or any
change-in-control benefit under Section 5.1 of this Agreement, and
(
y
) a suit in equity by the Employer to enjoin the
Officer from the breach or threatened breach of such covenants. The Officer
hereby waives the claim or defense that an adequate remedy at law is available
to the Employer and the Officer agrees not to urge in any such action the claim
or defense that an adequate remedy at law exists. Nothing herein will be
construed to prohibit the Employer from pursuing any other remedies for the
breach or threatened breach.
7.6
Article 7 Survives
Termination
. The rights and
obligations set forth in this Article 7 survive termination of this Agreement.
Article 8
Miscellaneous
8.1
Successors and
Assigns
. (a)
This Agreement is binding on
successors
. This Agreement is
binding on the Employer and any successor to the Employer, including any persons
acquiring directly or indirectly all or substantially all of the business or
assets of the Employer by purchase, merger, consolidation, reorganization, or
otherwise. But this Agreement and the Employers obligations under this
Agreement are not otherwise assignable, transferable, or delegable by the
Employer. By agreement in form and substance satisfactory to the Officer, the
Employer will require any successor to all or substantially all of the business
or assets of the Employer expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Employer would be
required to perform had no succession occurred.
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(b)
This Agreement is enforceable by the Officers
heirs
. This Agreement inures to
the benefit of and is enforceable by the Officers personal or legal
representatives, executors, administrators, successors, heirs, distributees, and
legatees.
(c)
This Agreement is personal and is not
assignable
. This Agreement is
personal. Without written consent of the other parties, no party may assign,
transfer, or delegate this Agreement or any rights or obligations under this
Agreement except as expressly provided herein. Without limiting the generality
or effect of the foregoing, the Officers right to receive payments hereunder is
not assignable or transferable, whether by pledge, creation of a security
interest, or otherwise, except for a transfer by the Officers will or by the
laws of descent and distribution. If the Officer attempts an assignment or
transfer that is contrary to this Section 8.1, the Employer has no liability to
pay any amount to the assignee or transferee.
8.2
Governing Law, Jurisdiction and
Forum
. This Agreement will be
construed under and is governed by the internal laws of the State of South
Carolina, without giving effect to any conflict of laws provision or rule
(whether of the State of South Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
South Carolina. By entering into this Agreement, the Officer acknowledges that
the Officer is subject to the jurisdiction of both the federal and state courts
in the State of South Carolina. Any actions or proceedings instituted under this
Agreement may be brought and tried solely in courts located in Florence County,
South Carolina or in the federal court having jurisdiction in Florence, South
Carolina. The Officer expressly waives the right to have any actions or
proceedings brought or tried elsewhere. Service on a party is valid if served by
certified mail, return receipt requested or hand delivery. If a dispute arises
under this Agreement, before commencing any action in federal or state court the
parties will use best efforts to resolve the dispute through arbitration or
mediation, involving one or more arbitrators or mediators mutually selected by
the parties (or, failing mutual agreement, by three arbitrators or mediators,
one selected by each of the parties and the third selected by the two chosen).
8.3
Entire Agreement
. This Agreement sets forth the entire agreement
of the parties concerning the employment of the Officer. Any oral or written
statements, representations, agreements, or understandings made or entered into
prior to or contemporaneously with the execution of this Agreement are hereby
rescinded, revoked, and rendered null and void. This Agreement supersedes in its
entirety any existing employment agreement between the Bank and the Officer, and
from and after the date of this Agreement the existing employment agreement is
void and of no further force or effect.
8.4
Notices
. Any notice under this Agreement will be deemed
to have been effectively made or given if in writing and personally delivered,
delivered by mail properly addressed in a sealed envelope, postage prepaid by
certified or registered mail, delivered by a reputable overnight delivery
service, or sent by facsimile. Unless otherwise changed by notice, notice is
properly addressed to the Officer if addressed to the address of the Officer on
the books and records of the Employer at the time of the delivery of such
notice, and properly addressed to the Employer if addressed to the Bank, 2710
West Palmetto Street, Florence, South Carolina 29501, Attention: Corporate
Secretary.
8.5
Severability
. If there is a conflict between any provision of
this Agreement and any statute, regulation, or judicial precedent, the latter
prevails, but the affected provisions of this Agreement will be curtailed and
limited solely to the extent necessary to bring them within the requirements of law. If any provision of this
Agreement is held by a court of competent jurisdiction to be indefinite,
invalid, void or voidable, or otherwise unenforceable, the remainder of this
Agreement continues in full force and effect unless that would clearly be
contrary to the intentions of the parties or would result in an injustice.
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8.6
Captions and
Counterparts
. The captions in
this Agreement are solely for convenience. The captions do not define, limit, or
describe the scope or intent of this Agreement. This Agreement may be executed
in several counterparts, each of which will be deemed to be an original but all
of which together constitute one and the same instrument.
8.7
Amendment and
Waiver
. This Agreement may not be
amended, released, discharged, abandoned, changed, or modified except by an
instrument in writing signed by each of the parties hereto. The failure of any
party hereto to enforce at any time any of the provisions of this Agreement is
not a waiver of the provision and does not affect the validity of this Agreement
or any part thereof or the right of any party thereafter to enforce each and
every provision. No waiver or any breach of this Agreement is a waiver of any
other or subsequent breach.
8.8
FDIC Part 359
Limitations
. Despite any contrary
provision within this Agreement, any payment obligation on the part of the
Employer to the Officer under this Agreement or otherwise is subject to and
conditional on compliance by the Employer with 12 U.S.C. 1828 and FDIC
Regulation 12 C.F.R. Part 359, Golden
Parachute Indemnification Payments, and any other regulations or guidance
promulgated thereunder.
8
.
9
Consultation with Counsel and Interpretation of this Agreement
. The Officer
has had the assistance of counsel of the Officers choosing in the negotiation of this Agreement or the Officer has
chosen not to have the assistance of counsel. Both parties hereto having participated in the negotiation and drafting of
this Agreement, they hereby agree that there will not be strict interpretation against either party in any review of this
Agreement in which interpretation of the Agreement is an issue.
8.10
Compliance
with Internal Revenue Code Section 409A
. (a)
Interpretation.
The
intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal
Revenue Code of 1986, as amended, and applicable guidance thereunder (
Code
Section
409A
) or
comply with an exemption from the application of Code Section 409A and, accordingly, all provisions of this Agreement shall
be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.
(b)
Action.
Neither the Officer nor the Employer shall take any action to accelerate
or delay the payment of any monies and/or provision of any benefits in any
matter which would not be in compliance with Code Section 409A.
Page 12 of 14
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(c)
Separation from Service.
A termination of employment shall not be deemed to
have occurred for purposes of any provision of this Agreement unless such
termination is also a separation from service (within the meaning of Code
Section 409A) and, for purposes of this Agreement, references to a termination
or termination of employment or like references shall mean separation from
service. If the Officer is deemed on the date of separation from service with
the Employer to be a specified employee, within the meaning of that term under
Code Section 409A(a)(2)(B) and using the identification methodology
selected by the Employer from time to time, or if none, the default methodology,
then with regard to any payment or benefit that is required to be delayed in
compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be
made or provided prior to the earlier of (i) the expiration of the six-month
period measured from the date of the Officers separation from service or (ii)
the date of the Officers death. If any cash payment is delayed under this
Section 8.10(c), then interest shall be paid on the amount delayed, with such
interest to be calculated at the prime rate reported in
The Wall Street Journal
for the date of the Officers termination to the
date of payment.
(d)
Treatment of Installment Payments.
If under this Agreement, an
amount is to be paid in two or more installments, for purposes of Code Section
409A, each installment shall be treated as a separate payment. In the event any
payment payable upon termination of employment would be exempt from Code Section
409A under Treas. Reg. § 1.409A-1(b)(9)(iii) but for the amount of such
payment, the determination of the payments to the Officer that are exempt under
such provision shall be made by applying the exemption to payments based on
chronological order beginning with the payments paid closest in time on or after
such termination of employment.
(e)
Payment Period.
When, if ever, a payment under this Agreement
specifies a payment period with reference to a number of days (
e.g.
, payment shall be made within ten (10) days following the date of
termination), the actual date of payment within the specified period shall be
within the sole discretion of the Employer.
Page 13 of 14
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In Witness Whereof
, the parties have executed this Employment
Agreement as of the date first written above.
Officer
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Employer
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First Reliance Bank
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By:
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Schaefer M. Carpenter
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Its:
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President and Chief Executive
Officer
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Signature Page to the
Retail Banking Director Employment Agreement
Table of Contents
EXHIBIT D
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION
AGREEMENT
(this
Agreement
) is entered into as of [________], 2017, between First Reliance
Bancshares, Inc.(
Parent
), a South Carolina
corporation and the holding company of First Reliance Bank (
First Reliance
), and the undersigned director (
Director
) of Independence Bancshares, Inc., a South Carolina corporation and/or
subsidiary, Independence National Bank (
Independence Bank
and, together with
Independence Bancshares, Inc.,
Independence
), and shall
become effective on the Effective Time of the Merger provided in the Merger
Agreement (as defined below), between Parent and Independence Bancshares, Inc.
WHEREAS
,
the Boards of Directors of Parent and Independence Bancshares, Inc. have determined that the acquisition of Independence
Bancshares, Inc. by Parent (the
Merger
)
pursuant to that certain Agreement and Plan of Merger dated as of the date hereof (the
Merger
Agreement
)
is in the best interests of the shareholders of Parent, provided certain material conditions are met including, without
limitation, Director agreeing to execute this Agreement, and the shareholders of Independence Bancshares, Inc. and is
consistent with, and in furtherance of, their respective business strategies;
WHEREAS
, the parties hereto acknowledge that Director, as
a director of Independence Bancshares, Inc. and/or Independence Bank, occupies a
unique position of trust and confidence with respect to Independence and by
virtue of this position Director has acquired significant knowledge relating to
the business of Independence;
WHEREAS
, the Board of Directors of Parent has determined that it is in the best
interests of Parent and its shareholders to protect the business and goodwill
associated with the business of Independence by strengthening restrictions on
Directors ability to enter into certain competitive business activities
following the completion of the Merger;
WHEREAS
, (i) the Merger Agreement contemplates that, as a
condition to Parent entering into the Merger Agreement and completing the
Merger, which Merger would result in, among other things, Parent paying
approximately $[11] million in cash as Merger Consideration, Director will enter
into and perform this Agreement, and Parent is not willing to enter into the
Merger Agreement or complete the Merger unless, among other conditions, Director
enters into and performs this Agreement, (ii) Director is entering into this
Agreement in order to induce Parent to enter into the Merger Agreement and,
subject to the terms and conditions in the Merger Agreement, to complete the
Merger, and (iii) Parent is relying on Directors representations, warranties,
covenants, and agreements herein;
WHEREAS
, Director will receive Merger Consideration pursuant to the terms and
conditions of the Merger Agreement if the Merger is completed, and so Director
desires to induce Parent to complete the Merger; and
WHEREAS
, Director has agreed to accept such limitations
on Directors ability to compete with Parent or First Reliance following the
Merger as an inducement for Parent to execute the Merger Agreement and, subject to the terms and conditions of
the Merger Agreement, to complete the Merger.
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NOW, THEREFORE, IN CONSIDERATION
of the premises and for other good and valuable
consideration, including, without limitation, the Merger Consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1.
Certain Definitions
.
(a)
Affiliated Company
means any company or entity controlled by,
controlling or under common control with Parent or Independence Bancshares,
Inc., including, respectively, First Reliance and Independence Bank.
(b)
Confidential Information
means all information regarding Independence
Bancshares, Inc., Parent, and their Affiliated Companies and any of their
respective activities, businesses or customers that is not generally known to
persons not employed (whether as employees or independent contractors) by
Independence Bancshares, Inc., Parent or their respective Affiliated Companies,
that is not generally disclosed publicly to persons not employed by Independence
Bancshares, Inc., Parent or their respective Affiliated Companies (except to
their regulatory authorities and pursuant to confidential or other relationships
where there is no expectation of public disclosure or use by third Persons), and
that is the subject of reasonable efforts to keep it confidential, and/or where
such information is subject to limitations on disclosure or use by applicable
Laws.
Confidential
Information
shall include,
without limitation, all customer information, prospective customer information,
customer lists, prospective customer lists, confidential methods of operation,
lending and credit information, commissions, mark-ups, product/service formulas,
information concerning techniques for use and integration of websites and other
products/services, current and future development and expansion or contraction
plans of Independence Bancshares, Inc., Parent or their respective Affiliated
Companies, sale/acquisition plans and contacts, marketing plans and contacts,
information concerning the legal affairs of and information concerning the
pricing of products and services, strategy, tactics and financial affairs of
Independence Bancshares, Inc., Parent or their respective Affiliated Companies.
Confidential
Information
also includes any
confidential information, trade secrets or any equivalent term under any
other federal, state or local law.
Confidential Information
shall not include information that (a) has become generally available to the
public by the act of one who has the right to disclose such information without
violating any right or privilege of Independence Bancshares, Inc. or Parent or
their respective Affiliated Companies or any duty owed to any of them; or (b) is
independently developed by a person or entity without reference to or use of
Confidential Information.
(c) Capitalized terms used
but not defined herein shall have the same meanings provided in the Merger
Agreement.
2.
Nondisclosure of Confidential
Information
.
(a)
Nondisclosure of Confidential
Information.
Director hereby
agrees that until 24 months following the Effective Time of the Merger, Director
shall not directly or indirectly transmit or
disclose any Confidential Information to any Person, or use or permit others to
use any such Confidential Information, directly or indirectly, without the prior
express written consent of Parents Chief Executive Officer, which consent may
be withheld in the sole discretion of Parents Chief Executive Officer;
provided
, that Director shall keep the Confidential
Information of third parties (such as customers) and any trade secrets for an
indefinite period of time. If required to disclose such information by law,
Director shall use reasonable efforts to protect and preserve the
confidentiality of such information. Director also acknowledges and agrees that
trading in Parent or Independence Bancshares, Inc. securities using Confidential
Information or non-public information may violate federal and state securities
laws and agrees to comply with such securities laws and Parents policies
regarding insider trading in effect from time to time.
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(b)
Enforceability of Covenants.
Director and Parent agree that Directors
obligations under these nondisclosure covenants are separate and distinct from
other provisions of this Agreement, and a failure or alleged failure of
Independence Bancshares, Inc. and Parent to perform their obligations under any
provision of this Agreement or other agreements with Director shall not
constitute a defense to, or waiver of the enforceability of, these nondisclosure
covenants. Nothing in this provision or this Agreement shall limit any rights or
remedies otherwise available to Independence Bancshares, Inc., Parent, or any
Affiliated Company under federal, state or local law.
3.
Non-recruitment and Non-solicitation
Covenants
.
(a)
Non-recruitment of Employees
. Director hereby agrees that until 24 months
following the Effective Time of the Merger, Director shall not, without the
prior written consent of Parents Chief Executive Officer, which consent may be
withheld at the sole discretion of Parents Chief Executive Officer, directly or
indirectly, on behalf of Director or any other Person, solicit or recruit for
employment or encourage to leave employment with Parent or any of Parents
Affiliated Companies, any employee of Parents or of any Parents Affiliated
Companies with whom Director worked during Directors services as a director of
Independence Bancshares, Inc. or Independence Bank and who performed services
for Independence Bancshares, Inc., Parent, or any of their Affiliated Companies
customers and who has not thereafter ceased to be employed by Independence
Bancshares, Inc., Parent, or any of their Affiliated Companies for a period of
not less than one year.
(b)
Non-solicitation of Customers
. Director hereby agrees that until 24 months
following the Effective Time of the Merger, Director shall not, without the
prior written consent of Parents Chief Executive Officer, which consent may be
withheld at the sole discretion of Parents Chief Executive Officer, directly or
indirectly, on behalf of Director or any other Person, solicit or attempt to
solicit for the purpose of providing any Business Activities (as defined in
Section 3(c)) any customer of the Independence Bancshares, Inc., Parent, or any
of their Affiliated Companies with whom Director had material contact on behalf
of Independence Bancshares, Inc. or Independence Bank in the course of
Directors service as a director of Independence Bancshares, Inc. or
Independence Bank.
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(c)
Non-competition
. Director hereby agrees that until 24 months
following the Effective Time of the Merger, Director shall not, without the
prior written consent of Parents Chief Executive Officer, which consent shall
not be unreasonably withheld by Parent, engage or participate in, or prepare or
apply to commence, any Business Activities with, for or on behalf of any Person
(including, without limitation, any new financial institution) as a director,
consultant, officer, employee, agent or shareholder that competes in the
Restricted Area with Parent or any Parent Affiliated Company with respect to
Business Activities. For purposes of this Section 3,
Business Activities
shall be any of the business activities
conducted by Parent, Independence Bancshares, Inc., or any of their Affiliated
Companies as of the effective time of the Merger, which the parties agree
include, without limitation, the offering of commercial or consumer loans and
extensions of credit, letters of credit, commercial and consumer deposits and
deposit accounts, securities repurchase agreements and sweep accounts, cash
management services, money transfer and bill payment services, internet or
electronic banking, automated teller machines, IRA and retirement accounts,
mortgage loans, and home equity lines of credit. Director agrees that the
marketplace in which Independence Bank conducts its Business Activities as of
the Effective Time of the Merger includes all of Greenville County, South
Carolina. For purposes of this Section 3(c), the
Restricted Area
shall be defined as Greenville County, South
Carolina. Director agrees that the Restricted Area is narrowly tailored to
protect First Reliances interest in customer relationships and goodwill, all of
which are being acquired based on Directors acknowledgement of the marketplace.
Nothing in this Section 3(c) shall prohibit Director from acquiring or holding,
for investment purposes only, less than 5% of the outstanding securities of any
corporation which may compete directly or indirectly with Independence
Bancshares, Inc., Parent, or any of their Affiliated Companies or preclude
Director from continuing any Business Activities conducted as of the date
hereof.
(d)
Enforceability of Covenants.
Director acknowledges and agrees that the
covenants in this Agreement are direct consideration for a sale of a business
and should be governed by standards applicable to restrictive covenants entered
into in connection with a sale of a business. Director acknowledges that each of
Parent and its Affiliated Companies have a current and future expectation of
business within the Restricted Area and from the current and proposed customers
of Independence Bancshares, Inc. and Independence Bank that are derived from the
acquisition of Independence Bancshares, Inc. by Parent. Director acknowledges
that the term, geographic area, and scope of the covenants set forth in this
Agreement are reasonable, and agrees that Director will not, in any action, suit
or other proceeding, deny the reasonableness of, or assert the unreasonableness
of, the premises, consideration or scope of the covenants set forth herein.
Director agrees that his position as a director of Independence Bancshares, Inc.
and/or Independence Bank involves information relating to all aspects of the
Business Activities and all of the Restricted Area. Director further represents
and warrants that complying with the provisions contained in this Agreement will
not preclude Director from engaging in a lawful profession, trade or business,
or from becoming gainfully employed. Director and Parent agree that Directors
obligations under the above covenants are separate and distinct under this
Agreement, and the failure or alleged failure of Parent to perform its
obligations under any other provisions of this Agreement shall not constitute a
defense to the enforceability of this covenant. Director and Parent agree that
if any portion of the foregoing covenants is deemed to be unenforceable because
the geography, time or scope of activities restricted is deemed to be too broad,
the court shall be authorized to substitute for the overbroad term an
enforceable term that will enable the
enforcement of the covenants to the maximum extent possible under applicable
law. Director acknowledges and agrees that any breach or threatened breach of
this covenant will result in irreparable damage and injury to Parent and its
Affiliated Companies and that Parent will be entitled to exercise all rights
including, without limitation, obtaining one or more temporary restraining
orders, injunctive relief and other equitable relief, including specific
performance in the event of any breach or threatened breach of this Agreement,
in any federal or state court of competent jurisdiction in the State of South
Carolina without the necessity of posting any bond or security or proving
irreparable damage (all of which are waived by Director), and to exercise all
other rights or remedies, at law or in equity, including, without limitation,
the rights to damages.
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4.
Successors
.
(a) This Agreement is
personal to Director and is not assignable by Director, and none of Directors
duties hereunder may be delegated.
(b) This Agreement may be
assigned by, and shall be binding upon and inure to the benefit of, Parent and
any of its Affiliated Companies and their successors and assigns.
5.
Miscellaneous
.
(a)
Waiver
. Failure of any party to insist, in one or more instances, on
performance by the other in strict accordance with the terms and conditions of
this Agreement shall not be deemed a waiver or relinquishment of any right
granted in this Agreement or of the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver.
(b)
Severability
. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
(c)
Governing Law
. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of South Carolina.
(d)
Notices
. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered or three days after mailing if mailed, first class, certified
mail, postage prepaid:
To
Buyer:
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First Reliance Bancshares, Inc.
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2170
West Palmetto Street
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Florence, South Carolina 29501
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Attention: Chief Executive Officer
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To
Director:
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See
signature page of this Agreement
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Any party may change the
address to which notices, requests, demands and other communications shall be
delivered or mailed by giving notice thereof to the other party in the same
manner provided herein.
(e)
Amendments and Modifications
. This Agreement may be amended or modified only
by a writing signed by both parties hereto, which makes specific reference to
this Agreement.
(f)
Entire Agreement
. Except as provided herein, this Agreement
contains the entire agreement between Parent and Director with respect to the
subject matter hereof and, from and after the date hereof, this Agreement shall
supersede any prior agreement between the parties with respect to the subject
matter hereof.
(g)
Counterparts, etc
. This
Agreement may be executed in identical counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument. A facsimile signature shall constitute and have the same force
and effect as an original signature for all purposes under this Agreement.
[signatures appear on
next page]
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IN WITNESS WHEREOF
, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
FIRST RELIANCE CORPORATION
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By:
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Name:
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Title:
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Signature Page to
Non-Competition Agreement
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EXHIBIT E
NON-SOLICITATION
AGREEMENT
THIS NON-SOLICITATION
AGREEMENT
(this
Agreement
) is entered into as of September [___], 2017, between First Reliance
Bancshares, Inc. (
Parent
), a South Carolina
corporation and the holding company of First Reliance Bank (
First Reliance
), and the undersigned [Chief Financial Officer]
(
Executive
) of Independence Bancshares, Inc., a South
Carolina corporation (
Independence Bancshares
),
and Independence National Bank, a wholly-owned subsidiary of Independence
Bancshares (
Independence
Bank
and, together with
Independence Bancshares,
Independence
), and shall
become effective at the Effective Time of the Merger provided in the Merger
Agreement (as defined below), between Parent and Independence Bancshares.
WHEREAS
,
the Boards of Directors of Parent and Independence Bancshares have determined that the acquisition of Independence
Bancshares by Parent (the
Merger
)
pursuant to that certain Agreement and Plan of Merger, dated as of the date hereof (the
Merger
Agreement
), is in the best interests of Parent and its shareholders
(provided that certain material conditions including, without limitation, Executive agreeing to execute this Agreement, are
satisfied), and of Independence Bancshares and its shareholders, respectively, and is consistent with, and in furtherance
of, their respective business strategies;
WHEREAS
, the parties hereto acknowledge that Executive,
as the [Chief Financial Officer] of Independence Bancshares and Independence
Bank, occupies a unique position of trust and confidence with respect to
Independence and by virtue of these positions Executive has acquired significant
knowledge relating to the business of Independence;
WHEREAS
, the Board of Directors of Parent has determined that it is in the best
interests of Parent and its shareholders to protect the business and goodwill
associated with the business of Independence by strengthening restrictions on
Executives ability to recruit employees and solicit customers of Parent or
First Reliance following the completion of the Merger;
WHEREAS
, (i) the Merger Agreement contemplates that, as a
condition to Parent entering into the Merger Agreement and completing the
Merger, Executive will enter into and perform this Agreement, and Parent is not
willing to enter into the Merger Agreement or complete the Merger unless, among
other conditions, Executive enters into and performs this Agreement, (ii)
Executive is entering into this Agreement in order to induce Parent to enter
into the Merger Agreement and, subject to the terms and conditions in the Merger
Agreement, to complete the Merger, and (iii) Parent is relying on Executives
representations, warranties, covenants, and agreements herein;
WHEREAS
, if the Merger is completed, Executive will
receive a portion of the Merger Consideration as merger consideration for [her]
ownership of Independence Common Stock and a cash-out payment for Executives
outstanding Independence Options pursuant to the terms and conditions of the
Merger Agreement[, and will receive a change in control payment pursuant to her
existing change in control agreement with Independence, and so Executive desires
to induce Parent to complete the Merger]; and
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WHEREAS
, Executive has agreed to accept such limitations
on Executives ability to compete with Parent or First Reliance following the
Merger as an inducement for Parent to execute the Merger Agreement and, subject
to the terms and conditions of the Merger Agreement, to complete the Merger.
NOW, THEREFORE, IN CONSIDERATION
of the premises and for other good and valuable
consideration, including, without limitation, Parents entry into the Merger
Agreement, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1.
Certain Definitions
.
(a)
Affiliated Company
means any company or entity controlled by,
controlling or under common control with Parent or Independence Bancshares,
including, respectively, First Reliance and Independence Bank.
(b)
Confidential Information
means all information regarding Independence
Bancshares, Parent, and their Affiliated Companies and any of their respective
activities, businesses or customers that is not generally known to persons not
employed (whether as employees or independent contractors) by Independence
Bancshares, Parent or their respective Affiliated Companies, that is not
generally disclosed publicly to persons not employed by Independence Bancshares,
Parent or their respective Affiliated Companies (except to their regulatory
authorities and pursuant to confidential or other relationships where there is
no expectation of public disclosure or use by third Persons), and that is the
subject of reasonable efforts to keep it confidential, and/or where such
information is subject to limitations on disclosure or use by applicable Laws.
Confidential
Information
shall include,
without limitation, all customer information, prospective customer information,
customer lists, prospective customer lists, confidential methods of operation,
lending and credit information, commissions, mark-ups, product/service formulas,
information concerning techniques for use and integration of websites and other
products/services, current and future development and expansion or contraction
plans of Independence Bancshares, Parent or their respective Affiliated
Companies, sale/acquisition plans and contacts, marketing plans and contacts,
information concerning the legal affairs of and information concerning the
pricing of products and services, strategy, tactics and financial affairs of
Independence Bancshares, Parent or their respective Affiliated Companies.
Confidential
Information
also includes any
confidential information, trade secrets or any equivalent term under any
other federal, state or local law.
Confidential Information
shall not include information that (a) has
become generally available to the public by the act of one who has the right to
disclose such information without violating any right or privilege of
Independence Bancshares or Parent or their respective Affiliated Companies or
any duty owed to any of them; or (b) is independently developed by a person or
entity without reference to or use of Confidential Information.
(c) Capitalized terms used
but not defined herein shall have the same meanings provided in the Merger
Agreement.
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2.
Nondisclosure of Confidential
Information
.
(a)
Nondisclosure
of Confidential Information.
Executive hereby agrees that until the later of 24 months following the
Effective Time of the Merger or 12 months following the termination of service
as an employee or consultant of First Reliance (if applicable), Executive shall
not directly or indirectly transmit or disclose any Confidential Information to
any Person, or use or permit others to use any such Confidential Information,
directly or indirectly, without the prior express written consent of Parents
Chief Executive Officer, which consent may be withheld in the sole discretion of
Parents Chief Executive Officer;
provided
, that Executive
shall keep the Confidential Information of third parties (such as customers) and
any trade secrets for an indefinite period of time. If required to disclose such
information by law, Executive shall use reasonable efforts to protect and
preserve the confidentiality of such information. Executive also acknowledges
and agrees that trading in Parent or Independence Bancshares securities using
Confidential Information or non-public information may violate federal and state
securities laws and agrees to comply with such securities laws and Parents
policies regarding insider trading in effect from time to time.
(b)
Enforceability of Covenants.
Executive and Parent agree that Executives
obligations under these nondisclosure covenants are separate and distinct from
other provisions of this Agreement, and a failure or alleged failure of
Independence Bancshares and Parent to perform their obligations under any
provision of this Agreement or other agreements with Executive shall not
constitute a defense to, or waiver of the enforceability of, these nondisclosure
covenants. Nothing in this provision or this Agreement shall limit any rights or
remedies otherwise available to Independence Bancshares, Parent, or any
Affiliated Company under federal, state or local law.
3.
Non-recruitment and Non-solicitation
Covenants
.
(a)
Non-recruitment of Employees
. Executive hereby agrees that until the later of
24 months following the Effective Time of the Merger or 12 months following the
termination of service as an employee or consultant of First Reliance (if
applicable), Executive shall not, without the prior written consent of Parents
Chief Executive Officer, which consent may be withheld at the sole discretion of
Parents Chief Executive Officer, directly or indirectly, on behalf of [herself]
or any other Person, solicit or recruit for employment or encourage to leave
employment with Parent or any of Parents Affiliated Companies, any employee of
Parents or of any Parents Affiliated Companies with whom Executive worked
during Executives services as an employee of Independence Bancshares or any
Affiliated Company of Independence and who performed services for Independence
Bancshares, Parent, or any of their Affiliated Companies customers and who has
not thereafter ceased to be employed by Independence Bancshares, Parent, or any
of their Affiliated Companies for a period of not less than one year.
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(b)
Non-solicitation
of Customers
. Executive hereby agrees that until the later of 24 months
following the Effective Time of the Merger or 12 months following the termination of service as an employee or consultant of
First Reliance (if applicable), Executive shall not, without the prior written consent of Parents Chief Executive
Officer, which consent may be withheld at the sole discretion of Parents Chief Executive Officer, directly or
indirectly, on behalf of [herself] or any other Person, solicit or attempt to solicit for the purpose of providing any
Business Activities any customer of Independence Bancshares, Parent, or any of their Affiliated Companies with whom
Executive had material contact on behalf of Independence Bancshares or Independence Bank in the course of Executives
service as an employee of Independence Bancshares or Independence Bank. For purposes of this Section 3,
Business
Activities
shall be any of the business activities conducted by Parent, Independence Bancshares, or any of their Affiliated Companies
as of the effective time of the Merger, which the parties agree include, without limitation, the offering of commercial or
consumer loans and extensions of credit, letters of credit, commercial and consumer deposits and deposit accounts,
securities repurchase agreements and sweep accounts, cash management services, money transfer and bill payment services,
internet or electronic banking, automated teller machines, IRA and retirement accounts, mortgage loans, and home equity
lines of credit.
(c)
Enforceability of Covenants.
Executive acknowledges and agrees that the
covenants in this Agreement are direct consideration for a sale of a business
and should be governed by standards applicable to restrictive covenants entered
into in connection with a sale of a business. Executive acknowledges that each
of Parent and its Affiliated Companies have a current and future expectation of
business from the current and proposed customers of Independence Bancshares and
Independence Bank that are derived from the acquisition of Independence
Bancshares by Parent. Executive acknowledges that the term, geographic area, and
scope of the covenants set forth in this Agreement are reasonable, and agrees
that [she] will not, in any action, suit or other proceeding, deny the
reasonableness of, or assert the unreasonableness of, the premises,
consideration or scope of the covenants set forth herein. Executive agrees that
[her] position as an employee of Independence Bancshares and Independence Bank
involves information relating to all aspects of the Business Activities and all
of the Restricted Area. Executive further represents and warrants that complying
with the provisions contained in this Agreement will not preclude Executive from
engaging in a lawful profession, trade or business, or from becoming gainfully
employed. Executive and Parent agree that Executives obligations under the
above covenants are separate and distinct under this Agreement, and the failure
or alleged failure of Parent to perform its obligations under any other
provisions of this Agreement shall not constitute a defense to the
enforceability of this covenant. Executive and Parent agree that if any portion
of the foregoing covenants is deemed to be unenforceable because the geography,
time or scope of activities restricted is deemed to be too broad, the court
shall be authorized to substitute for the overbroad term an enforceable term
that will enable the enforcement of the covenants to the maximum extent possible
under applicable law. Executive acknowledges and agrees that any breach or
threatened breach of this covenant will result in irreparable damage and injury
to Parent and its Affiliated Companies and that Parent will be entitled to
exercise all rights including, without limitation, obtaining one or more
temporary restraining orders, injunctive relief and other equitable relief,
including specific performance in the event of any breach or threatened breach
of this Agreement, in any federal or state court of competent jurisdiction in
the State of South Carolina without the necessity of posting any bond or
security or proving irreparable damage (all of which are waived by Executive),
and to exercise all other rights or remedies, at law or in equity, including,
without limitation, the rights to damages.
4.
Successors
.
(a) This Agreement is
personal to Executive and is not assignable by Executive, and none of
Executives duties hereunder may be delegated.
(b) This Agreement may be
assigned by, and shall be binding upon and inure to the benefit of, Parent and
any of its Affiliated Companies and their successors and assigns.
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5.
Miscellaneous
.
(a)
Waiver
. Failure of any party to insist, in one or more instances, on
performance by the other in strict accordance with the terms and conditions of
this Agreement shall not be deemed a waiver or relinquishment of any right
granted in this Agreement or of the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver.
(b)
Severability
. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
(c)
Governing Law
. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of South Carolina.
(d)
Notices
. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered or three days after mailing if mailed, first class, certified
mail, postage prepaid:
To
Parent:
|
First Reliance Bancshares, Inc.
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2710
West Palmetto St.
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Florence, South Carolina 29501
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Attention: Chief Executive Officer
|
To Executive: See signature
page of this Agreement
Any party may change the
address to which notices, requests, demands and other communications shall be
delivered or mailed by giving notice thereof to the other party in the same
manner provided herein.
(e)
Amendments and Modifications
. This Agreement may be amended or modified only
by a writing signed by both parties hereto, which makes specific reference to
this Agreement.
(f)
Entire Agreement
. Except as provided herein, this Agreement
contains the entire agreement between Parent and Executive with respect to the
subject matter hereof and, from and after the date hereof, this Agreement shall
supersede any prior agreement between the parties with respect to the subject
matter hereof.
(g)
Counterparts, etc
. This Agreement may be executed in identical
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. A facsimile signature
shall constitute and have the same force and effect as an original signature for
all purposes under this Agreement.
[Signatures appear on
next page]
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IN WITNESS WHEREOF
, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
FIRST
RELIANCE BANCSHARES, INC.
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By:
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Name:
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Title:
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Signature Page to
Non-Solicitation Agreement
Table of Contents
EXHIBIT F
SHAREHOLDER SUPPORT
AGREEMENT
THIS
SHAREHOLDER
SUPPORT AGREEMENT
(this
Agreement
)
is made and entered into as of [________], 2017, by and among First Reliance Bancshares, Inc., a South Carolina corporation
(
Parent
),
Independence Bancshares, Inc., a South Carolina corporation
(
Independence
),
and the undersigned shareholder of Independence (the
Shareholder
).
The Shareholder desires
that Parent and Independence enter into an Agreement and Plan of Merger, dated
as of the date hereof, between Parent and Independence (as the same may be
amended or supplemented, the
Merger Agreement
). The
Merger Agreement provides for the acquisition of Independence by Parent pursuant
to a merger (the
Merger
). The transactions
described in the Merger Agreement are subject to the approvals of the Federal
Deposit Insurance Corporation, the Federal Reserve Board and the South Carolina
Board of Financial Institutions and notice to the Office of the Comptroller of
the Currency, as well as to the satisfaction of certain other conditions
described in the Merger Agreement.
The Shareholder and
Independence are executing this Agreement as an inducement and condition to
Parent entering into, executing, and performing the Merger Agreement and the
transactions (the
Transactions
)
contemplated therein, including, without limitation, the Merger. Capitalized
terms used but not defined herein shall have the same meanings as in the Merger
Agreement.
NOW, THEREFORE, in
consideration of the execution and delivery by Parent of the Merger Agreement
and the mutual covenants, conditions, and agreements contained herein and
therein, and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
1.
Representations and
Warranties
.
The Shareholder represents and
warrants to Parent as follows:
(a) The Shareholder has
voting power over the number of shares, including shares underlying Independence
Options, of Independence Common Stock and Independence Series A Preferred Stock
set forth below such Shareholders name on the signature page hereof
(
Shareholders
Shares
). Except for the
Shareholders Shares, the Shareholder does not have voting power over any shares
of Independence Common Stock or Independence Series A Preferred Stock.
(b) This Agreement has been
duly authorized, executed, and delivered by, and constitutes a valid and binding
agreement of, the Shareholder, enforceable in accordance with its terms.
(c) None of the execution
and delivery of this Agreement nor the consummation by the Shareholder of the
transactions contemplated hereby will result in a violation of, or a default
under, or conflict with, any contract, loan and credit arrangements, Liens (as
defined in subsection 1(d) below), trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Shareholder is a party or bound or to which the Shareholders
Shares are subject. Consummation by the Shareholder of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, arbitral award or
holding, statute, law, rule or regulation applicable to the Shareholder or the
Shareholders Shares.
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(d) The Shareholders
Shares and the certificates representing the Shareholders Shares are now, and
at all times during the term hereof will be, held by the Shareholder, or by a
nominee or custodian for the benefit of such Shareholder, free and clear of all
pledges, Liens, security interests, claims, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances whatsoever
(a
Lien
), except for (i) any Liens arising hereunder,
and (ii) Liens, if any, which have been disclosed on
Exhibit A
hereto.
(e) Except for
Independences engagement of FIG Partners, LLC as Independences investment
banker in connection with the Transactions, no broker, investment banker,
financial adviser or other Person is entitled to any brokers, finders,
financial advisers or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Shareholder.
(f) The Shareholder
understands and acknowledges that Parent is entering into the Merger Agreement
in reliance upon the Shareholders execution, delivery and performance of this
Agreement. The Shareholder acknowledges that the irrevocable proxy set forth in
Section 2 of this Agreement is granted in consideration for the execution and
delivery of the Merger Agreement by Parent.
2.
Voting
Agreements
.
The Shareholder agrees with, and
covenants to, Parent as follows:
(a) At any meeting of
shareholders of Independence called to vote upon the Merger Agreement and/or the
Transactions or at any adjournment or postponement thereof or in any other
circumstances upon which a vote, consent or other approval with respect to the
Merger Agreement and/or the Transactions is sought (collectively, the
Shareholders
Meeting
), the Shareholder shall
vote (or cause to be voted) all of the Shareholders Shares in favor of the
execution and delivery by Independence of the Merger Agreement, and the approval
of the terms thereof and each of the Transactions;
provided however
, that nothing in this Agreement shall be deemed
to require the Shareholder to vote any Shares over which he has or shares voting
power solely in a fiduciary capacity on behalf of any Person other than
Independence if the Shareholder determines in good faith that such a vote would
cause a breach of fiduciary duties to such other Person. The Shareholder shall
not grant any proxies to any third party, except where such proxies are
expressly directed to vote in favor of the Merger Agreement and the
Transactions. The Shareholder hereby waives all notice and publication of notice
of any Shareholders Meeting to be called or held with respect to the Merger
Agreement and the Transactions. The Shareholder hereby grants Parent an
irrevocable proxy, coupled with an interest,
to vote all of the Shareholders Shares in favor of the Merger Agreement and the
Transactions, and against any competing proposals or other Acquisition Proposals
or Acquisition Transactions;
provided, however
, that
upon the payment of the termination fee to the Parent in accordance with Section
9.3(a) of the Merger Agreement, the Shareholder will automatically be released
from the irrevocable proxy granted hereunder.
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(b) At any meeting of
Independences shareholders or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought, the
Shareholder shall vote (or cause to be voted) such Shareholders Shares against
(i) any Acquisition Proposal or Acquisition Transaction, including, without
limitation, any merger, consolidation or exchange agreement or merger or
exchange (other than the Merger Agreement and the Transactions), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by Independence, or (ii) any
amendment of Independences articles of incorporation or bylaws or other
proposal or transaction involving Independence, which amendment or other
proposal or transaction would in any manner delay, impede, frustrate, prevent or
nullify the Merger Agreement, or any of the Transactions (each of the foregoing
in clause (i) or (ii) above, a
Competing Transaction
).
3.
Covenants
.
The Shareholder agrees with, and
covenants to, Parent as follows:
(a) The Shareholder shall
not, without the prior written consent of Parent, which Parent shall not unreasonably withhold, (i) exercise any
Independence Options, (ii)
Transfer
(which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge, hypothecation or
other disposition or transfer of the Shareholders Shares or any interest therein), or consent to any Transfer of, any
or all of the Shareholders Shares or any interest therein, except to Parent pursuant to the Merger Agreement; (iii)
enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer of any or all
of Shareholders Shares or any interest therein, except to Parent, (iv) grant any proxy, written consent, power of
attorney or other authorization in or with respect to Shareholders Shares or the right to vote or provide a written
consent or waiver with respect to Shareholders Shares, except for those consistent with this Agreement, or (v)
deposit Shareholders Shares into a voting trust or enter into any voting agreement, arrangement or understanding with
respect to Shareholders Shares;
provided
,
that Shareholder may Transfer any of Shareholders Shares (a) by will or pursuant to the laws of descent and
distribution, or (b) to any family member of Shareholder or charitable institution,
provided
further
,
that such transferee shall, prior to such Transfer, become a party to this Agreement subject to its terms and obligations to
the same extent as the Shareholder, by executing and delivering to Parent a counterpart to this Agreement in form and
substance satisfactory to Parent. Independence agrees with, and covenants to, Parent that Independence shall not register
the transfer of any certificate representing any of the Shareholders Shares, including any additional shares of
Independence Common Stock or Independence Series A Preferred Stock acquired by the Shareholder and pursuant to any
Independence Options, unless such transfer is made to Parent or otherwise in compliance with this Agreement.
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(b) The Shareholders
Shares shall, pursuant to the terms of the Merger Agreement, be exchanged for an
amount of cash into which each such share of Independence Common Stock or
Independence Series A Preferred Stock shall be converted (the
Merger Consideration
as defined in Article 3 of the Merger
Agreement). The Shareholder hereby waives any rights of appraisal, or rights to
dissent from the Transactions, that such Shareholder may have.
(c) Except as specifically
permitted by Section 7.2 of the Merger Agreement solely in such Shareholders
capacity as a director of Independence, the Shareholder shall not, nor shall it
permit any investment banker, attorney or other adviser or representative of the
Shareholder to, directly or indirectly, (i) solicit, initiate or encourage the
submission of, any Acquisition Proposal or Acquisition Transaction, or (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal or Acquisition Transaction,
other than the Merger and the other Transactions contemplated by the Merger
Agreement and other than any Transfer expressly permitted by the proviso to
Section 3(a) of this Agreement.
4.
No Prior
Proxies
.
The Shareholder represents, warrants and covenants
that any proxies or voting rights previously given in respect of the
Shareholders Shares other than to Parent are not irrevocable, and that any such
proxies or voting rights are hereby irrevocably revoked.
5.
Certain
Events
.
The Shareholder agrees that this Agreement and the
obligations hereunder shall attach to the Shareholders Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of
Shareholders Shares shall pass, whether by operation of law or otherwise,
including the Shareholders successors or assigns. In the event of any stock
split, stock dividend, merger, exchange, reorganization, recapitalization or
other change in the capital structure of Independence affecting the Independence
Common Stock or Independence Series A Preferred Stock, or the acquisition of
additional shares of Independence Common Stock or Independence Series A
Preferred Stock (including pursuant to the exercise or exchange of any
Independence Options) or other voting securities of Independence by any
shareholder, the number of shares of Independence Common Stock or Independence
Series A Preferred Stock subject to the terms of this Agreement shall be
adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of Independence Common Stock or Independence
Series A Preferred Stock or other voting securities of Independence issued to or
acquired by the Shareholder.
6.
Further
Assurances
.
The Shareholder shall, upon
request of Parent and at Parents reasonable expense, execute and deliver any
additional documents and take such further actions as may reasonably be deemed
by Parent to be necessary or desirable to carry out the provisions hereof and to
vest in Parent the power to vote such Shareholders Shares as contemplated by
Section 2 of this Agreement and the other irrevocable proxies provided therein.
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7
.
Termination
.
This Agreement, and all
rights and obligations of the parties hereunder, shall terminate upon the first
to occur of (x) the Effective Time of the Merger or (y) the date upon which the
Merger Agreement is terminated in accordance with its terms and any Termination
Fee that is due to Parent has been paid, in which event the provisions of this
Agreement shall terminate.
8.
Miscellaneous
.
(a) Capitalized terms used
and not otherwise defined in this Agreement shall have the respective meanings
assigned to them in the Merger Agreement. As used herein, the singular shall
include the plural and any reference to gender shall include all other genders.
The terms
include
,
including
and similar
phrases shall mean including without limitation, whether by enumeration or
otherwise.
(b) All notices, requests,
claims, demands and other communications under this Agreement shall be in
writing and shall be deemed given if delivered personally or sent by reliable
overnight delivery or by facsimile to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice): (i) if
to Parent or Independence, to the addresses set forth in Section 10.8 of the
Merger Agreement; and (ii) if to the Shareholder, to its address shown below its
signature on the last page hereof.
(c) The headings contained
in this Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(d) This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement. A facsimile signature shall constitute an original signature
and shall have the same force and effect as an original manual signature for all
purposes.
(e) This Agreement
(including the documents and instruments referred to herein) constitutes the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
but shall not modify or supersede any other Agreement entered into as part of
the Merger Agreement or thereafter.
(f) This Agreement shall be
governed by, and construed in accordance with, the laws of the State of South
Carolina, without regard to the applicable conflicts of laws principles thereof.
(g) This Agreement shall be
binding upon and inure to the benefit of Parent, Independence and the
Shareholder, and their respective successors, assigns, heirs and personal and
legal representatives,
provided
, that the
Shareholder may not transfer or assign any rights or interests in the
Shareholders Shares, except to Parent or as expressly permitted by this Agreement. Neither this
Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or otherwise, by
Independence or the Shareholder without the prior written consent of the other
parties, except as expressly contemplated by Section 3(a) of this Agreement. Any
assignment in violation of the foregoing shall be void.
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(h) The Shareholder agrees
that irreparable damage would occur and that Parent would not have any adequate
remedy at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
The Shareholder acknowledges and agrees that any breach or threatened breach of
this Agreement will result in irreparable damage to Parent and its subsidiaries
and that Parent and any of its Subsidiaries shall be entitled to exercise all
rights and remedies, including one or more temporary restraining orders and/or
injunctions and other equitable relief, including specific performance, to
prevent breaches or threatened breaches by the Shareholder of this Agreement and
to enforce specifically the terms and provisions of this Agreement in any state
or federal court located in the State of South Carolina without the necessity of
posting any bond or security or proving irreparable damage (all of which are
waived by the Shareholder), and to exercise all other rights and remedies at law
or in equity, including, without limitation, the right to damages. In addition,
each of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any federal court located in the State of South Carolina or any
South Carolina state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, and (ii) agrees that such party
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
(i) If any term, provision,
covenant or restriction herein, or the application thereof to any circumstance,
shall, to any extent, be held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any way be
affected, impaired or invalidated, and shall be enforced to the fullest extent
permitted by law.
(j) No amendment,
modification or waiver in respect of this Agreement shall be effective against
any party unless it shall be in writing and signed by such party.
[signatures appear on the
following page]
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IN WITNESS WHEREOF, the
undersigned parties have executed and delivered this Shareholder Support
Agreement as of the day and year first above written.
FIRST RELIANCE BANCSHARES,
INC.
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By:
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Name:
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Title:
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INDEPENDENCE BANCSHARES, INC.
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By:
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Name:
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Title:
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SHAREHOLDER
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Name:
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Address:
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Number of Shares of Independence Series A Preferred Stock
and
Capacity of Ownership:
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Number of Shares of Independence Common Stock and Capacity
of
Ownership:
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Number of Independence Options and Capacity of
Ownership:
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EXHIBIT A
Liens on the
Shareholders Shares
8
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EXHIBIT G
WAIVER AND RELEASE
I, Robert B. Willumstad,
effective as of September ____, 2017, hereby waive and release any and all
rights and interest in any current and future cash compensation owed to me
pursuant to my letter agreement with the Company dated ____, 2013, to include,
without limitation, any compensation for past service that has been accrued by
the Company but not paid. I further acknowledge and agree that in the event of
any conflict between the terms of this waiver and my agreement with the Company,
the terms of this waiver shall be controlling.
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UNDERSTOOD AND AGREED:
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Witness
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Robert B. Willumstad
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Date:
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EXHIBIT H
CLAIMS LETTER
[Date]
First Reliance Bancshares,
Inc.
2170 West Palmetto Street Florence,
South Carolina 29501
RE:
|
Merger between First Reliance Bancshares, Inc.
(
Parent
) and
Independence
Bancshares, Inc. (
Independence
)
|
Ladies and Gentlemen:
This letter is delivered
pursuant to Section 8.2(e) of the Agreement and Plan of Merger, dated as of
September __, 2017, by and between Parent and Independence.
In my capacity as an
officer or a director of Independence or its subsidiary, Independence National
Bank (
Independence
Bank
), as of the date of this
letter, I do not, to the best of my knowledge, have any claims, and I am not
aware of any facts or circumstances that I believe are likely to give rise to
any claim, for indemnification under Independences Articles of Incorporation or
Bylaws as existing on the date hereof or as may be afforded by the laws of the
State of South Carolina, or under the Independence Banks Articles of
Association or Bylaws as existing on the date hereof or as may be afforded by
the laws of the State of South Carolina or the United States, or under any
contract or agreement with Independence or Independence Bank.
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Very
truly yours,
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Signature of Officer or Director
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Name
of Officer or Director
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Position at Independence or Independence Bank
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EXHIBIT I
Form of Independences
Legal Opinion
Based on and subject to the
foregoing and subject to the additional qualifications set forth below, it is
our opinion that:
1. The Company (i) is a
registered bank holding company under the BHCA; (ii) was duly organized as a
corporation, and is validly existing and in good standing under the laws of
State of South Carolina; (iii) has the corporate power and authority to own its
assets and conduct its businesses as now being conducted; and (iv) is duly
qualified to do business and is in good standing in South Carolina.
2. The Company has the
corporate power and authority to execute and deliver the
Agreement and to perform its obligations under the
Agreement and carry out the transactions described therein.
3. The Bank has been duly
chartered and is validly existing as a national bank, in good standing under the
laws of the United States, with power and authority to own its properties and
conduct its business as now being conducted, and, to our knowledge, has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
or is subject to no material liability or disability by reason of the failure to
be so qualified in any such jurisdiction; the activities of the Bank are
activities permitted by national banks under applicable law and the rules and
regulations of the OCC; the deposit accounts of the Bank are insured up to the
applicable limits by the FDIC; and all of the issued and outstanding capital
stock of the Bank has been duly authorized and validly issued and is fully paid
and nonassessable and is owned directly by the Company free and clear of any
pledge, lien, encumbrance, claim or equity.
4. The Company has duly
authorized the execution and delivery of the Agreement and all performance by
the Company thereunder and has duly executed and delivered the Agreement, and
the Agreement and the Merger have been duly approved by the shareholders of the
Company.
5. The Agreement is
enforceable against the Company, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium, fraudulent conveyance and
other laws affecting the rights and remedies of creditors generally and to
general principles of equity.
6. The Companys authorized
shares consist of 300,000,000 shares of common stock, of which, to our
knowledge, 20,502,760 shares are outstanding, and 10,000,000 shares of preferred
stock, of which, to our knowledge, 8,425 shares are outstanding. The outstanding
shares of common stock have been duly authorized and validly issued and are
fully paid and nonassessable.
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7. To our knowledge,
immediately prior to the Effective Time, except for the [3,064,380] shares of
common stock reserved for issuance pursuant to outstanding stock options and the
10,531,250 shares of common stock reserved for issuance pursuant to conversion
of outstanding preferred stock, there are no outstanding rights (contractual or
otherwise), warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity interest in the
Company. To our knowledge, immediately prior to the Effective Time, except for
registration rights of certain investors pursuant to that certain Registration
Rights Agreement, dated as of May 14, 2015, by and among the Company and the
Purchasers (as defined therein), there are no contracts, agreements or
understandings between the Company and any person granting such person the right
to require the Company to file a registration statement under the Securities Act
of 1933 (the Act) or otherwise register any securities of the Company owned or
to be owned by such person.
8. The compliance by the
Company with all of the provisions of the Agreement and the consummation of the
transactions therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any material agreement (as such term is defined in Item 601 of Regulation
S-K under the Act) known to us to which the Company is a party or by which the
Company is bound, nor will such action result in any violation of the provisions
of the articles of incorporation or bylaws of the Company or of the articles of
association or bylaws of the Bank or any statute or any order, rule or
regulation known to us of any court or Governmental Authority.
9. To our knowledge, no
consents, approvals or waivers are required to be obtained from any person or
entity in connection with the Companys execution and delivery of the Agreement,
or the performance of the obligations or agreements of the Company or the
consummation of the transactions described therein, except for: (i) approvals of
the Companys board of directors and shareholders (which approvals have been
obtained); and (ii) required approvals of governmental or regulatory authorities
(which approvals have been obtained).
10. To our knowledge,
neither the Company nor the Bank is a party to or subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter, supervisory letter or similar submission to, any Governmental
Authority charged with the supervision or regulation of depository institutions
or engaged in the insurance of deposits or the supervision or regulation of it
or any of its subsidiaries and neither the Company nor the Bank has been advised
by any such Governmental Authority that such Governmental Authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
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Annex B
CHAPTER 13
Dissenters’ Rights
ARTICLE 1
Right to Dissent and Obtain Payment for Shares
SECTION 33-13-101.
Definitions.
In this chapter:
(1) “Corporation” means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.
(2) “Dissenter” means a shareholder who is entitled to dissent from corporate action under Section 33-13-102 and who exercises that right when and in the manner required by Sections 33-13-200 through 33-13-280.
(3) “Fair value”, with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. The value of the shares is to be determined by techniques that are accepted generally in the financial community.
(4) “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.
(5) “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
(6) “Beneficial shareholder” means the person who is a beneficial owner of shares held by a nominee as the record shareholder.
(7) “Shareholder” means the record shareholder or the beneficial shareholder.
SECTION 33-13-102.
Right to dissent.
(A) A shareholder is entitled to dissent from, and obtain payment of the fair value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by Section 33-11-103 or the articles of incorporation and the shareholder is entitled to vote on the merger or (ii) if the corporation is a subsidiary that is merged with its parent under Section 33-11-104 or 33-11-108 or if the corporation is a parent that is merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares are to be acquired, if the shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale must be distributed to the shareholders within one year after the date of sale;
(4) an amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter’s shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under Section 33-6-104; or
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(5) any corporate action to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares;
(6) the conversion of a corporation into a limited liability company pursuant to Section 33-11-111 or conversion of a corporation into either a general partnership or limited partnership pursuant to Section 33-11-113;
(7) the consummation of a plan of conversion to a limited liability company pursuant to Section 33-11-111 or to a partnership or limited partnership pursuant to Section 33-11-113.
(B) Notwithstanding subsection (A), no dissenters’ rights under this section are available for shares of any class or series of shares which, at the record date fixed to determine shareholders entitled to receive notice of a vote at the meeting of shareholders to act upon the agreement of merger or exchange, were either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.
SECTION 33-13-103.
Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters’ rights as to fewer than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters’ rights. The rights of a partial dissenter under this subsection are determined as if the shares to which he dissents and his other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters’ rights as to shares held on his behalf only if he dissents with respect to all shares of which he is the beneficial shareholder or over which he has power to direct the vote. A beneficial shareholder asserting dissenters’ rights to shares held on his behalf shall notify the corporation in writing of the name and address of the record shareholder of the shares, if known to him.
ARTICLE 2
Procedure for Exercise of Dissenters’ Rights
SECTION 33-13-200.
Notice of dissenters’ rights.
(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is submitted to a vote at a shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters’ rights under Section 33-13-102 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters’ rights that the action was taken and send them the dissenters’ notice described in Section 33-13-220.
SECTION 33-13-210.
Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert dissenters’ rights (1) must give to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated and (2) must not vote his shares in favor of the proposed action. A vote in favor of the proposed action cast by the holder of a proxy solicited by the corporation shall not disqualify a shareholder from demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his shares under this chapter.
SECTION 33-13-220.
Dissenters’ notice.
(a) If proposed corporate action creating dissenters’ rights under Section 33-13-102 is authorized at a shareholders’ meeting, the corporation shall deliver a written dissenters’ notice to all shareholders who satisfied the requirements of Section 33-13-210(a).
(b) The dissenters’ notice must be delivered no later than ten days after the corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates for certificated shares must be deposited;
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(2) inform holders of uncertificated shares to what extent transfer of the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters’ rights certify whether or not he or, if he is a nominee asserting dissenters’ rights on behalf of a beneficial shareholder, the beneficial shareholder acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment demand, which may not be fewer than thirty nor more than sixty days after the date the subsection (a) notice is delivered and set a date by which certificates for certificated shares must be deposited, which may not be earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SECTION 33-13-230.
Shareholders’ payment demand.
(a) A shareholder sent a dissenters’ notice described in Section 33-13-220 must demand payment, certify whether he (or the beneficial shareholder on whose behalf he is asserting dissenters’ rights) acquired beneficial ownership of the shares before the date set forth in the dissenters’ notice pursuant to Section 33-13-220(b)(3), and deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates under subsection (a) retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements that he demand payment and deposit his share certificates where required, each by the date set in the dissenters’ notice, is not entitled to payment for his shares under this chapter.
SECTION 33-13-240.
Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from the date the demand for payment for them is received until the proposed corporate action is taken or the restrictions are released under Section 33-13-260.
(b) The person for whom dissenters’ rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
SECTION 33-13-250.
Payment.
(a) Except as provided in Section 33-13-270, as soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall pay each dissenter who substantially complied with Section 33-13-230 the amount the corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) the corporation’s balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any;
(2) a statement of the corporation’s estimate of the fair value of the shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter’s right to demand additional payment under Section 33-13-280; and
(5) a copy of this chapter.
SECTION 33-13-260.
Failure to take action.
(a) If the corporation does not take the proposed action within sixty days after the date set for demanding payment and depositing share certificates, the corporation, within the same sixty-day period, shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it must send a new dissenters’ notice under Section 33-13-220 and repeat the payment demand procedure.
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SECTION 33-13-270.
After-acquired shares.
(a) A corporation may elect to withhold payment required by section 33-13-250 from a dissenter as to any shares of which he (or the beneficial owner on whose behalf he is asserting dissenters’ rights) was not the beneficial owner on the date set forth in the dissenters’ notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action, unless the beneficial ownership of the shares devolved upon him by operation of law from a person who was the beneficial owner on the date of the first announcement.
(b) To the extent the corporation elects to withhold payment under subsection (a), after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the fair value and interest were calculated, and a statement of the dissenter’s right to demand additional payment under Section 33-13-280.
SECTION 33-13-280.
Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due and demand payment of his estimate (less any payment under Section 33-13-250) or reject the corporation’s offer under Section 33-13-270 and demand payment of the fair value of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or offered under Section 33-13-270 is less than the fair value of his shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to offer payment under Section 33-13-270 within sixty days after the date set for demanding payment; or
(3) corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment.
(b) A dissenter waives his right to demand additional payment under this section unless he notifies the corporation of his demand in writing under subsection (a) within thirty days after the corporation made or offered payment for his shares.
ARTICLE 3
Judicial Appraisal of Shares
SECTION 33-13-300.
Court action.
(a) If a demand for additional payment under Section 33-13-280 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the demand for additional payment and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of the county where the corporation’s principal office (or, if none in this State, its registered office) is located. If the corporation is a foreign corporation without a registered office in this State, it shall commence the proceeding in the county in this State where the principal office (or, if none in this State, the registered office) of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of this State) whose demands remain unsettled parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint persons as appraisers to receive evidence and recommend decisions on the question of fair value. The appraisers have the powers described in the order appointing them or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the corporation.
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SECTION 33-13-310.
Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section 33-13-300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if the court finds the corporation did not comply substantially with the requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under Section 33-13-300(a) of a corporation that has failed to commence an appraisal proceeding within the sixty-day period, the court shall assess the costs of the proceeding and the fees and expenses of dissenters’ counsel against the corporation and in favor of the dissenters.
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Annex C
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FIG Fairness Opinion Letter
September 25, 2017
Independence Bancshares, Inc.
500 East Washington Street
Greenville, SC 29601
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, of the proposed merger (the “
Merger
”) of Independence Bancshares, Inc. (“
IEBS
”) and First Reliance Bancshares, Inc. (“
FSRL
”) subject to the terms and conditions of the Agreement and Plan of Combination and Reorganization dated September 25, 2017 (the “
Agreement
”).
Pursuant to the Agreement, each share of IEBS common stock that is issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive $0.125 cash. Per the Agreement, and consistent with the redemption and liquidation rights for preferred shareholders set forth in the Preferred Stock Certificate of Designation filed with the State of South Carolina April 13, 2015, preferred shareholders of IEBS will have shares redeemed at $1,000 per preferred share. (Please see redemption and liquidation rights attached hereafter as Appendix B)
FIG Partners, LLC (“
FIG
”), as part of its investment banking business, is routinely engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bidding, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. As specialists in the securities of banking companies, we have experience and knowledge of, the valuation of banking institutions. This opinion has been reviewed by FIG’s compliance committee consistent with internal policy. FIG has not had a material relationship with IEBS for which we have received compensation during the prior two years. In 2015, FIG served as the sole placement agent for FSRL’s $5.0 million offering of subordinated notes. FIG received $98,000 as a success fee, and expense reimbursement of $13,449.67.
We were retained by IEBS to act as its financial advisor in connection with the Merger and in rendering this opinion. We will receive compensation from IEBS in connection with our services and IEBS has agreed to indemnify us for certain liabilities arising out of our engagement.
During the course of our engagement and for the purposes of the opinion set forth herein, we have:
(i)
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reviewed the Agreement and terms of the Merger;
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(ii)
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reviewed the audited financial statements for IEBS for the years 2016 and 2015;
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(iii)
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reviewed certain historical publicly available business and financial information concerning IEBS and FSRL including, among other things, quarterly reports filed by the parties with the FDIC and the Federal Reserve;
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(iv)
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discussed certain internal financial statements and other financial and operating data concerning IEBS with IEBS executive management;
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(v)
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reviewed recent trading activity and the market for FSRL and IEBS common stock;
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(vi)
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Discussed certain financial projections prepared by the management of IEBS,
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(vii)
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held discussions with members of the senior management of IEBS for the purpose of reviewing the future prospects of IEBS and FSRL, including financial forecasts related to the respective businesses, earnings, assets, liabilities and the amount and timing of cost savings (the “
Synergies
”) expected to be achieved as a result of the Merger;
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(viii)
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reviewed the terms of recent merger and acquisition transactions, to the extent publicly available, involving banks and bank holding companies that we considered relevant; and
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(ix)
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performed such other analyses and considered such other factors as we have deemed appropriate.
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We also took into account our assessment of general economic, market and financial conditions and our experience in other transactions as well as our knowledge of the banking industry and our general experience in securities valuation.
In rendering this opinion, we have assumed and relied on, without independent verification, the accuracy and completeness of the financial and other information and representations contained in the materials provided to us by IEBS. In that regard, we have assumed that the financial forecasts, including, without limitation, the Synergies and projections have been reasonably prepared on a basis reflecting the best currently-available information and judgments and estimates of IEBS and FSRL, and that such forecasts will be realized in the amounts and at the times contemplated thereby. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and have assumed that such allowances for IEBS and FSRL are in the aggregate adequate to cover such losses. We were not retained to and did not conduct a physical inspection of any of the properties or facilities of IEBS and FSRL. In addition, we have not reviewed individual credit files nor have we made an independent evaluation or appraisal of the assets and liabilities of IEBS and FSRL or any of their respective subsidiaries and we were not furnished with any such evaluations or appraisals.
We have assumed that the Merger will be consummated substantially in accordance with the terms set forth in the Agreement. We have further assumed that the Merger will be accounted for as a purchase under generally accepted accounting principles. We have assumed that the Merger is, and will be, in compliance with all laws and regulations that are applicable to IEBS and FSRL. In rendering this opinion, we have been advised by IEBS and FSRL and we have assumed that there are no factors that would impede any necessary regulatory or governmental approval of the Merger.
The opinion is based solely upon the information available to us and the economic, market and other circumstances, as they exist as of the date hereof. Events occurring and information that becomes available after the date hereof could materially affect the assumptions and analyses used in preparing this opinion. We have not undertaken to reaffirm or revise this opinion or otherwise comment upon any events occurring or information that becomes available after the date hereof, except as otherwise agreed in our engagement letter.
This letter is solely for the information of the Board of Directors of IEBS and is not to be used, circulated, quoted or otherwise referred to for any other purpose, nor is it to be filed with, included in or referred to in whole or in part in any proxy statement or any other document, except in each case in accordance with our prior written consent which shall not be unreasonably withheld; provided, however, that we hereby consent to the inclusion and reference to this letter in any proxy statement, offering circular or information statement to be delivered to the holders of IEBS and FSRL common stock in connection with the Merger if and only if this letter is quoted in full or attached as an exhibit to such document and this letter has not been withdrawn prior to the date of such document.
Aggregate Merger Consideration
Subject to the foregoing and based on our experience as investment bankers, our activities and assumptions as described above, and other factors we have deemed relevant, we believe aggregate consideration of $10.98 million is fair from a financial point of view.
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Allocation of Consideration between Preferred and Common Shareholders
The buyer, (FSRL) independent of IEBS influence or suggestion determined the allocation of consideration between preferred and common shareholders in a manner it deemed practical, and in accordance with the redemption price and liquidation rights set forth in the PSCOD. (Reference Appendix B for further detail)
Preferred Shareholder Consideration
1. Based on the redemption price set forth in the Preferred Stock Certificate of Designation filed with the State of South Carolina on April 13, 2015, preferred shareholders are entitled to full redemption of $1,000 per preferred share. (Reference Appendix B for further detail)
2. In the event of a liquidation, sale, etc. in which the proceeds equal or exceed the total dollar amount of preferred equity outstanding ($8.425 million as defined in section 5 of the PSCOD) common equity holders are entitled to consideration in excess of the amount of preferred equity outstanding. (Reference Appendix B for further detail)
Considering the redemption price, liquidation preference, and method of allocation described above, it is our opinion that the $8.425 million of consideration paid to preferred shareholders is fair from a financial point of view.
Common Shareholder Consideration
Given the preceding analysis of the fairness from a financial point of view of the aggregate merger consideration, the analysis of the fairness of the consideration paid to Preferred Shareholders from a financial point of view, the consideration paid to common shareholders as a multiple of tangible common equity, and the independent allocation of consideration by the buyer to preferred and common shareholders, it is our opinion that the $2.563 million paid to common shareholders is fair from a financial point of view.
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Sincerely,
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FIG PARTNERS, LLC
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Appendix B: Excerpt From Certificate of Designations of Preferred Stock Series A, filed with State of South Carolina April 13, 2015
Section 6. Redemption
Optional Redemption by the Corporation:
The Corporation, at the option of its board of directors, may redeem the shares of Designated Preferred Stock at a redemption price equal to the Liquidation Preference per share of Designated Preferred Stock (the “Redemption Price”) at any time, provided such redemption is conducted per this section 6 (b) and the holder has the option to elect conversion prior to such redemption. The Corporation may require the holder of shares of Designated Preferred Stock to effect the conversion of its shares of Designated Preferred Stock as provided for…
Section 5. Liquidation Rights
Liquidation
:
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation the holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, (i) any declared but unpaid dividends, and (ii) out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Corporation, subject to the rights of the holders of any class or series of securities ranking senior to the Designated Preferred Stock, the rights of the holders of any Parity Stock and the rights of the Corporation’s creditors, before any distribution of such assets or proceeds is made to or set aside for the holders of any Junior Stock as to such distribution, payment in full of an amount equal to $1,000.00 per share of Designated Preferred Stock (the “Liquidation Preference”). The holders of Designated Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
Partial Payment:
If in any distribution described in Section (a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the Liquidation Preference to all holders of Designated Preferred Stock and the corresponding amounts payable with respect to any Parity Stock as to such distribution to all holders of such Parity Stock, the holders of Designated Preferred Stock and the holders of such Parity Stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.
Residual Distributions:
If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any Parity Stock as to such distribution have been paid in full to the holders of such Parity Stock, the holders of other capital stock of the Corporation shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
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Annex D