The following is a description of the HBI common stock and certain provisions of HBIs Restated Articles of Incorporation, Bylaws and
applicable law. The following is only a summary and is qualified by applicable law and by the provisions of HBIs Restated Articles of Incorporation and Bylaws, copies of which have been filed with the SEC and are also available upon request
from HBI.
Under HBIs
Restated Articles of Incorporation, as amended, HBI has authority to issue up to 200,000,000 shares of common stock, par value $0.01 per share, and up to 5,500,000 shares of preferred stock, par value $0.01 per share. Each share of HBI common stock
has the same relative rights as, and is identical in all respects to, each other share of HBI common stock.
As of June 30, 2017,
there were 143,070,851 shares of HBI common stock issued and outstanding, and approximately 4,729,207 shares of common stock were reserved for issuance pursuant to HBIs stock option and performance incentive plan. HBI common stock is listed on
The NASDAQ Global Select Market under the symbol HOMB. The outstanding shares of HBI common stock are validly issued, fully paid and non-assessable.
As of June 30, 2017, no shares of HBI preferred stock are issued and outstanding.
For additional information concerning HBI common
stock, see Comparison of Rights of Holders of HBI and SGB Common Stock below.
The 5,500,000 authorized shares of HBI preferred stock, par value $0.01 per share, are typically referred to as blank check
preferred stock. This term means that these shares of preferred stock may be issued with such preferences, limitations, relative rights, and terms as determined by HBIs board of directors. As such, the board of directors can, without
shareholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted
change in control. As of the date of this joint proxy statement/prospectus, HBI had no designated or outstanding shares of preferred stock.
SGB is incorporated under the
laws of the State of Florida and the rights of SGB shareholders are governed by the laws of the State of Florida, SGBs Articles of Incorporation, as amended, and SGBs Bylaws. As a result of the merger, SGB shareholders who receive shares
of HBI common stock will become HBI shareholders. HBI is incorporated under the laws of the State of Arkansas and the rights of HBI shareholders are governed by the laws of the State of Arkansas, HBIs Restated Articles of Incorporation, as
amended, and HBIs Restated Bylaws. Thus, following the merger, the rights of SGB shareholders who become HBI shareholders in the merger will no longer be governed by SGBs Articles of Incorporation, as amended, and SGBs Bylaws, and
instead will be governed by HBIs Restated Articles of Incorporation, as amended, and Restated Bylaws.
Set forth below is a summary comparison of material differences between the rights of HBI shareholders under the HBI Restated Articles
of Incorporation, as amended, and Restated Bylaws (right column), and the rights of SGB shareholders under SGBs Articles of Incorporation, as amended, and its Bylaws, as amended (left column). The summary set forth below is not intended to
provide a comprehensive discussion of each companys governing documents. This summary is qualified in its entirety by reference to the full text of HBIs Restated Articles of Incorporation and amendments thereto, HBIs Restated
Bylaws, SGBs Articles of Incorporation and amendments thereto, and SGBs Bylaws.
The HBI special
meeting of shareholders will be held at HBIs principal executive offices located at 719 Harkrider Street, Suite 100, Conway, Arkansas, at 10:00 a.m. Central Time, on September 25, 2017. This joint proxy statement/prospectus and the enclosed
form of proxy will be mailed to the HBI shareholders entitled to the vote on or about [ ], 2017.
The Merger Agreement provides that HBI will issue, as a portion of the aggregate merger consideration, shares of its common stock with a total
value of approximately $699.7 million, based on the volume-weighted average closing price of HBI common stock for the 20 trading days ending three business days prior to the date the merger closes (the HBI Average Closing Price). The
number of shares of HBI common stock comprising the portion of the Per Share Merger Consideration to be paid in shares of HBI common stock will vary based on the HBI Average Closing Price. Under NASDAQ Listing Rule 5635, a company listed on NASDAQ
is required to obtain shareholder approval prior to the issuance of common stock or securities convertible into or exercisable for common stock, in connection with the acquisition of stock or assets of another company if the common stock has or will
have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock, or the number of shares of common stock to be issued is or will
be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities. If we complete the merger, the number of shares of HBI common stock issued may exceed 20% of the shares of HBI common
stock outstanding before such issuance. In addition, the Merger Agreement requires approval by HBIs shareholders of the Merger Agreement and the issuance of HBIs common stock for purposes of NASDAQ Listing Rule 5635. Accordingly, HBI is
seeking the approval of HBI shareholders of the Merger Agreement, including the issuance of shares of HBI common stock in connection with the merger.
If, at the HBI
special meeting, the number of shares of HBI common stock present or represented by proxy and voting in favor of the Share Issuance Proposal is insufficient to approve such proposal, HBI intends to move to adjourn the HBI special meeting in order to
solicit additional proxies for such proposal.
In this proposal, HBI is asking its shareholders to authorize the holder of any proxy
solicited by the HBI board of directors to vote in favor of granting discretionary authority to proxy holders to adjourn the HBI special meeting to another time and/or place for the purpose of soliciting additional proxies. If HBI shareholders
approve the HBI Adjournment Proposal, HBI could adjourn the HBI special meeting and any adjourned session of the HBI special meeting and use the additional time to solicit additional proxies.
HBI does not intend to call a vote on this proposal if the Share Issuance Proposal has been approved at the HBI special meeting.
The HBI board of directors has fixed August 16, 2017, as the record date for determining the holders of shares of HBI common stock entitled to
notice of and to vote at the special meeting. At the close of business on August 16, 2017, there were 142,851,132 shares of common stock issued and outstanding. Holders of record of HBI common stock on the record date are entitled to one vote per
share.
The representation (in person or by proxy) of holders of at least a majority of the shares entitled to vote at the HBI
special meeting constitutes a quorum for action at the HBI special meeting. All shares of HBI common stock present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining
the presence or absence of a quorum for all matters voted on at the HBI special meeting.
Approval of the Share Issuance Proposal requires the affirmative vote of at least a majority of the shares of HBI voting on the proposal,
provided that a quorum is present at the HBI special meeting. Therefore, assuming that a quorum is present, your failure to vote, an abstention or a broker non-vote will have no effect on the approval of the Share Issuance Proposal.
Approval of the HBI Adjournment Proposal requires the affirmative vote of at least a majority of the shares of HBI voting on the proposal,
whether or not a quorum is present at the HBI special meeting. Therefore, whether or not a quorum is present, your failure to vote, an abstention or a broker non-vote will have no effect on the approval of the HBI Adjournment Proposal.
For purposes of the HBI special meeting, an abstention occurs when an HBI shareholder attends the HBI special meeting, either in person or by
proxy, but abstains from voting.
All shares that have been properly voted and not revoked will be voted at the special meeting. If you sign and return your proxy card but do
not give voting instructions, the shares represented by that proxy will be voted as recommended by the HBI board of directors.
An HBI shareholder has the power to change its vote at any time before its shares of HBI
common stock are voted at the HBI special meeting by:
If you choose the first method, you must take
the described action no later than the beginning of the HBI special meeting. If you choose to send a completed proxy card bearing a later date than your original proxy card, the new proxy card must be received before the beginning of the HBI special
meeting. If you have instructed a bank, broker or other nominee to vote your shares of HBI common stock, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your vote.
Subject to space availability, all HBI shareholders as of the record date, or their duly appointed proxies, may attend the HBI special meeting.
Since seating is limited, admission to the HBI special meeting will be on a first-come, first-served basis. Registration and seating will begin at 9:30 a.m., Central Time.
If you hold your shares of HBI common stock in your name as a shareholder of record and you wish to attend the HBI special meeting, please
bring your proxy and valid picture identification to the HBI special meeting.
If your shares of HBI common stock are held in street
name in a stock brokerage account or by a bank or nominee and you wish to attend the HBI special meeting, you need to bring a copy of a bank or brokerage statement to the HBI special meeting reflecting your stock ownership as of the record
date, along with a legal proxy, executed in your favor, from the broker, bank or other nominee that is the holder of record of your shares. You should also bring valid picture identification.
HBI is soliciting
proxies for the HBI special meeting on behalf of the HBI board of directors. HBI will bear the cost of soliciting proxies from its shareholders. In addition to using the mails, HBI may solicit proxies by personal interview, telephone, and facsimile.
Banks, brokerage houses, other institutions, nominees, and
fiduciaries will be requested to forward their proxy soliciting material to their principals and obtain authorization for the execution of proxies. HBI does not expect to pay any compensation for
the solicitation of proxies. However, HBI will, upon request, pay the standard charges and expenses of banks, brokerage houses, other institutions, nominees, and fiduciaries for forwarding proxy materials to and obtaining proxies from their
principals.
As permitted by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to multiple shareholders of HBI
sharing an address unless HBI has previously received contrary instructions from one or more such shareholders. This is referred to as householding. Shareholders who hold shares in street name can request further information
on householding through their banks, brokers or other holders of record. On written or oral request to Corporate Secretary, 719 Harkrider Street, Suite 100, Conway, Arkansas 72032, Telephone No. (501) 339-2929, HBI will deliver promptly a
separate copy of this joint proxy statement/prospectus to a shareholder at a shared address to which a single copy of the document was delivered.
As discussed
throughout this joint proxy statement/prospectus, HBI is asking its shareholders to approve the Share Issuance Proposal. Holders of HBI common stock should read carefully this joint proxy statement/prospectus in its entirety, including the
appendices, for more detailed information concerning the Merger Agreement, the merger and the shares of HBI common stock to be issued in connection with the merger. In particular, holders of HBI common stock are directed to the Merger Agreement, a
copy of which is attached as
Appendix A
to this joint proxy statement/prospectus.
The HBI special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the HBI special meeting to approve the Share Issuance Proposal.
If, at the HBI special meeting, the
number of shares of HBI common stock present or represented and voting in favor of the Share Issuance Proposal is insufficient to approve the Share Issuance Proposal, HBI intends to move to adjourn the HBI special meeting in order to enable
HBIs board of directors to solicit additional proxies for approval of the Share Issuance Proposal. In that event, HBI will ask its shareholders to vote only upon the HBI Adjournment Proposal, and not the Share Issuance Proposal.
In this proposal, HBI is asking its shareholders to authorize the holder of any proxy solicited by HBIs board of directors to vote in
favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the HBI special meeting to another time and place for the purpose of soliciting additional proxies. If the HBI shareholders approve the HBI
Adjournment Proposal, HBI could adjourn the HBI special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from HBI shareholders who have previously voted.
The SGB special meeting will be held at Stonegate Bank, 400 North Federal Highway, Pompano Beach, FL 33062 at 2:00 p.m., Eastern Time, on
September 25, 2017. This joint proxy statement/prospectus and the enclosed form of proxy will be mailed to SGBs shareholders entitled to vote at the SGB special meeting on or about
[ ], 2017.
At the SGB special meeting, SGB shareholders will be asked to consider and vote on the following matters:
SGBs board of directors has determined that the merger is advisable and in the best interests of SGB and its shareholders and has
approved the merger agreement. SGBs board of directors recommends that you vote
FOR
the Merger Proposal,
FOR
the Compensation Proposal and
FOR
the SGB Adjournment Proposal. See The MergerRecommendation of
SGBs Board of Directors and Reasons for the Merger on page 47.
Only holders of record of common stock at the close of business on August 16, 2017, the record date for the SGB special meeting, will be
entitled to vote at the SGB special meeting.
At the close of business on the record date, SGB had approximately 15,319,888 shares of
common stock outstanding and entitled to vote. Holders of record of shares of common stock of SGB on the record date are entitled to one vote per share at the SGB special meeting on all matters to be considered at the SGB special meeting.
A quorum of shareholders is necessary to validly hold the SGB special meeting. A majority of the shares outstanding of SGB on the record date,
present in person or represented by proxy, including abstentions, will constitute a quorum to transact business at the SGB special meeting.
The inspector of elections appointed for the SGB special meeting will separately tabulate
affirmative and negative votes, abstentions and broker non-votes for each proposal.
If an SGB shareholder indicates on their proxy card or voting instruction card that they wish to abstain from voting, these shares are
considered present and entitled to vote at the meeting and will count toward determining whether or not a quorum is present. If an SGB shareholder does not vote by proxy or vote in person at the SGB special meeting, or if the shareholder marks the
abstain box on the proxy card or voting instruction card:
Under stock exchange rules, banks, brokers, and other nominees who hold shares of SGB common stock in street
name for a beneficial owner of those shares typically have the authority to vote in their discretion on routine proposals when they have not received instructions from beneficial owners. However, banks, brokers, and other nominees
are not allowed to exercise their voting discretion with respect to the approval of matters determined to be non-routine, without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker, bank, or
other nominee that are represented at the SGB special meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary
voting power on such proposal. If your broker, bank, or other nominee holds your shares of SGB common stock in street name, your broker, bank, or other nominee will vote your shares of SGB common stock only if you provide instructions on
how to vote by filling out the voting card sent to you by your broker, bank, or other nominee with this joint proxy statement/prospectus. Broker non-votes will be deemed present for SGB quorum purposes for all proposals to be voted on at the SGB
special meeting. SGB broker non-votes:
As of August 9, 2017, the directors and executive officers of SGB and their affiliates beneficially owned
approximately 1,128,578 shares of SGB common stock representing approximately 7.37% of the shares of SGB common stock outstanding on that date.
If you are a
shareholder of record of SGB, you may submit a proxy for the SGB special meeting by completing, signing, dating and returning the proxy card in the pre-addressed envelope provided if paper copies of the joint proxy statement/prospectus were provided
to you. All proxies that are not revoked will be voted in accordance with the instructions on the proxy card. Properly executed and returned proxies that give no instructions as to how they should be voted on a particular proposal will be voted
FOR
that proposal, unless the shareholder has timely delivered to SGB written notice regarding a shareholders dissenters rights as provided under the Florida Statutes Section 658.44. For more information on dissenters
rights, please see the heading entitled The MergerDissenters Rights on page 41.
If you are a shareholder of record of SGB, you may also vote in person at the SGB special
meeting.
If you hold SGB shares in broker street name, you may not vote in person at the SGB special meeting unless you obtain a signed
proxy from the record holder giving you the right to vote such shares.
An SGB shareholder may revoke a proxy at any time before it is voted. A proxy may be revoked by: (1) signing and returning a proxy card
with a later date; (2) delivering a written revocation letter to SGBs corporate secretary; (3) attending the SGB special meeting in person, notifying the corporate secretary, and voting by ballot at the special meeting; or
(4) voting by telephone or the Internet at a later time.
Any shareholder entitled to vote in person at the SGB special meeting may
vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying SGBs corporate secretary) of a shareholder at the SGB special meeting will not constitute revocation of a previously given proxy.
Written notices of revocation and other communications about revoking your proxy card should be addressed to:
If an SGB shareholder has instructed a broker, bank or nominee to vote his, her or its shares of common stock of SGB by executing a voting
instruction card, the shareholder must follow the directions received from the broker, bank or nominee to change his, her or its instructions.
Proxies are
being solicited on behalf of the board of directors of SGB for use at the SGB special meeting. SGB will bear the costs and expenses of the delivery of soliciting proxies from you. After the original mailing of the notice and access related to the
proxies and other soliciting materials, HBI, SGB and/or their respective agents may also solicit proxies by mail, telephone, facsimile, email or in person.
SGB has adopted a procedure approved by the SEC and FDIC known as householding. Under this procedure, SGB shareholders of record
who have the same address and last name may receive only one copy of this joint proxy statement/prospectus, unless one or more of these shareholders notifies our transfer agent that they wish to continue receiving individual copies. This procedure
will reduce SGBs printing costs and postage fees. If you wish to receive your own copy of this joint proxy statement/prospectus, you may contact our transfer agent, Broadridge Corporate Issuer Solutions, Inc., in writing, by telephone, or on
the Internet:
P.O. Box 1342
If you are eligible for householding, but you and other shareholders of record with whom you
share an address currently receive multiple copies of the joint proxy statement/prospectus, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of such joint proxy statement/prospectus for your
household, please contact our transfer agent as indicated above. Beneficial owners can request information about householding from their banks, brokers, or other nominees.
If you have any questions
concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus, or need help voting your shares of SGB common stock, please contact Investor Relations, Stonegate Bank, 400 North
Federal Highway, Pompano Beach, Florida 33062, (954) 315-5500.
As discussed throughout
this joint proxy statement/prospectus, SGB is asking its shareholders to approve the Merger Proposal. Holders of SGB common stock should read carefully this joint proxy statement/prospectus in its entirety, including the appendices, for more
detailed information concerning the merger agreement and the merger. In particular, holders of SGB common stock are directed to the merger agreement, a copy of which is attached as
Appendix A
to this joint proxy
statement/prospectus.
After careful consideration, the SGB board of directors determined that the merger is in the best interests of SGB
and its shareholders. Please see The MergerRecommendation of SGB Board of Directors and Reasons for the Merger included elsewhere in this joint proxy statement/prospectus for a more detailed discussion of the SGB board of
directors recommendation.
Pursuant to the Dodd-Frank Act and Rule 14a-21(c) of the Exchange Act, SGB is seeking non-binding, advisory approval from its shareholders of
the compensation of SGBs named executive officers that is based on or otherwise relates to the merger, as disclosed in The MergerGolden Parachute Compensation beginning on page 68. The proposal gives SGBs shareholders
the opportunity to express their views on the merger-related compensation of SGBs named executive officers. Accordingly, SGB is requesting its shareholders adopt the following resolution, on a non-binding, advisory basis:
RESOLVED, that the compensation that may be paid or become payable to SGBs named executive officers in connection with the merger,
and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in The MergerGolden Parachute Compensation, are hereby
APPROVED.
Approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is
advisory only and will not be binding on HBI or SGB. If the merger is completed, the merger-related compensation may be paid to SGBs named executive officers to the extent payable in accordance with the terms of the compensation agreements and
arrangements even if SGBs shareholders fail to approve the advisory vote regarding merger-related compensation.
The SGB special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further
solicitation of proxies if necessary to obtain additional votes in favor of the Merger Proposal.
If, at the SGB special meeting, the
number of shares of SGB common stock present or represented and voting in favor of the Merger Proposal is insufficient to approve such proposal, SGB intends to move to adjourn the SGB special meeting in order to solicit additional proxies for the
adoption of the merger agreement. In accordance with the Florida Statutes Section 607.0725, a vote to approve the proposal to adjourn the SGB special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient
votes at the time of the SGB special meeting to approve the Merger Proposal may be taken in the absence of a quorum.
In this proposal, SGB is asking its shareholders to authorize the holder of any proxy solicited
by the SGB board of directors on a discretionary basis to vote in favor of adjourning the SGB special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from SGB shareholders who
have previously voted.
HBI is a Conway, Arkansas headquartered bank holding company registered under the federal Bank Holding Company Act of 1956. HBIs common
stock is traded through The NASDAQ Global Select Market under the symbol HOMB. HBI is primarily engaged in providing a broad range of commercial and retail banking and related financial services to businesses, real estate developers and
investors, individuals and municipalities through its wholly owned community bank subsidiary Centennial Bank. Centennial Bank has locations in Arkansas, Florida, South Alabama and New York City.
Financial and other information relating to HBI is set forth in its Annual Report on Form 10-K for the year ended December 31, 2016, and
its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. Information regarding the names, ages, positions, and business backgrounds of the executive officers and directors of HBI, as well as additional information, including executive
compensation, beneficial ownership of HBI securities, and certain relationships and related person transactions, is set forth in or incorporated by reference in HBIs 10-K and in its proxy statement for its 2017 annual meeting of
shareholders. See Documents Incorporated by Reference.
None of HBIs directors or executive officers is a
party to, or participates in, any HBI plan, program or arrangement that provides such director or officer with any kind of compensation that is based on or otherwise relates to the completion of the merger.
SGB is a
Florida-chartered commercial bank headquartered in Pompano Beach, Florida, a community situated between West Palm Beach and Miami, Florida. SGB was incorporated on January 13, 2005 and commenced operations on March 7, 2005. As of June 30,
SGB had grown to approximately $3.1 billion in assets, including approximately $2.4 billion in net loans and approximately $2.6 billion in deposits.
SGB is a full-service commercial bank, providing a wide range of business and consumer financial services in its target marketplace, which is
comprised primarily of Broward, Charlotte, Collier, Hillsborough, Lee, MiamiDade, Palm Beach and Sarasota Counties in Florida. SGB has 24 banking offices.
As of June 30, 2017, SGB had a total of 315 employees, including 302 full-time employees. The employees are not represented by
a collective bargaining unit. SGB considers relations with its employees to be good.
SGBs deposits are insured by the FDIC up to applicable limits. As a bank incorporated under
the laws of the State of Florida, SGB is subject to the supervision, regulation and examination by the Florida Office of Financial Regulation and the FDIC. SGB is also a member of the Federal Home Loan Bank of Atlanta.
THE MERGER
2.1
The
Merger
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Stonegate
shall merge with and into Subsidiary Bank. Subsidiary Bank shall be the surviving entity in the Merger (hereinafter referred to for the period at and after the Effective Time as the
Surviving Corporation
). The Surviving
Corporation shall continue to exist as an Arkansas state bank under the name Centennial Bank. Upon consummation of the Merger, the separate legal existence of Stonegate shall terminate.
(b) Parent may at any time change the method of effecting the combination (including by providing for the merger of Stonegate
with a wholly-owned Subsidiary of Parent) if and to the extent requested by Parent, and Stonegate agrees to enter into such amendments to this Agreement as Parent may reasonably request in order to give effect to such restructuring;
provided
,
however
, that no such change or amendment shall (i) alter or change the amount or kind of the Merger Consideration or the Total Merger Consideration provided for in this Agreement or (ii) adversely affect the Tax treatment of the
Merger with respect to the Stonegate Shareholders.
2.2
Closing
. The closing of the Merger (the
Closing
) shall
take place at 10:00 a.m., Central time, at the corporate headquarters of Parent in Conway, Arkansas, on a date to be specified by the parties, which date shall be no later than five (5) Business Days after satisfaction or waiver of the
conditions set forth in
ARTICLE VI
(other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time, place or date, or any or all, are agreed to
in writing by the parties hereto. The date on which the Closing occurs is herein referred to as the
Closing Date
.
2.3
Effective Time
. Subject to the terms and conditions of this Agreement, on the Closing Date, the Surviving Corporation shall file articles of merger complying with the requirements of the FBCA (the
Florida Articles of
Merger
) with the Secretary of State of the State of Florida (the
Florida Secretary
) and articles of merger complying with the requirements of the ABC (the
Arkansas Articles of Merger
, and together with
the
Florida Articles of Merger
, the
Articles of Merger
) with the ASBD. The term
Effective Time
shall mean the close of business of Stonegate as determined by the Federal Reserve Bank of Atlanta on the
Closing Date, or such later date and time as may be specified in accordance with the FBCA and the ABC.
2.4
Effects of the Merger
.
From and after the Effective Time, the Merger shall have the effects set forth in the ABC and the FBCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and
franchises of Stonegate shall vest in the Surviving Corporation, and all debts, duties and liabilities of Stonegate shall become the debts, liabilities and duties of the Surviving Corporation.
2.5
Charter Documents of Surviving Corporation
. The Charter Documents of Subsidiary Bank, as in effect immediately prior to the
Effective Time, shall become and remain the Charter Documents of the Surviving Corporation until amended in accordance with the respective terms thereof and applicable laws.
2.6
Directors and Officers of the Surviving Corporation
. As of the Effective Time:
(a) The directors of the Surviving Corporation shall be the directors of Subsidiary Bank immediately prior to the Effective
Time, each of whom shall serve as the directors of the Surviving Corporation until their respective successors have been duly elected and qualified, or until their earlier death, resignation or removal from office.
(b) The officers of the Surviving Corporation shall be the officers of Subsidiary Bank immediately prior to the Effective Time
and the person(s) identified in
Section 5.8(c)
of the Stonegate Disclosure
A-10
Schedule shall be appointed at or prior to the Effective Time to serve as officer(s) of the Surviving Corporation, each of whom shall serve until their respective successors are duly appointed
and qualified or their earlier death, resignation or removal in accordance with the Charter Documents of the Surviving Corporation.
2.7
Conversion of Securities
.
(a)
Merger Consideration
. At the Effective Time, subject to the other provisions
of this Agreement, each share of the common stock of Stonegate, $5.00 par value (the
Stonegate Common Stock
), issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares and any Appraisal Shares)
shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and shall thereafter represent the right to receive (subject to
ARTICLE VII
), without interest, (i) that number of shares of
Parent Common Stock that equals the Exchange Ratio, and (ii) $3.27 in cash (the
Per Share Cash Consideration
). For purposes of this Agreement, the
Merger Consideration
means the right to receive the
consideration described in clauses (i) and (ii) of the preceding sentence pursuant to the Merger with respect to each issued and outstanding share of Stonegate Common Stock (excluding any Excluded Shares and any Appraisal Shares), together
with any cash in lieu of fractional shares as specified in
Section 2.8(d)
.
(b)
Cancellation of Shares
.
Shares of Stonegate Common Stock, when converted in accordance with
Section 2.7(a)
, shall cease to be outstanding and shall automatically be cancelled and cease to exist, and each holder of a Certificate or Book Entry Share shall cease
to have any rights with respect thereto, except the right to receive in respect of each share of Stonegate Common Stock previously represented thereby (i) the consideration set forth in
Section 2.7(a)
, (ii) any dividends or
other distributions in accordance with
Section 2.8(c)
, and (iii) any cash to be paid in lieu of any fractional shares of Parent Common Stock in accordance with
Section 2.8(d)
, in each case without interest, and in each
case to be issued or paid in consideration therefor upon the surrender of such Certificate or Book Entry Share in accordance with
Section
2.8
.
(c)
Treasury Stock; Excluded Shares
. All shares of Stonegate Common Stock held by Stonegate as treasury shares or
otherwise, or by Parent or by any wholly-owned Subsidiary of Parent or Stonegate, immediately prior to the Effective Time (other than (i) shares held in trust accounts, managed accounts and the like, or otherwise held in a fiduciary or agency
capacity, that are beneficially owned by third parties and (ii) shares held, directly or indirectly, by Parent, Stonegate or any wholly-owned Subsidiary of Parent or Stonegate in respect of a debt previously contracted) shall automatically be
cancelled and cease to exist as of the Effective Time and no consideration shall be delivered or deliverable therefor (all such shares, the
Excluded Shares
).
(d)
No Effect on Parent Common Stock
. Each share of Parent Common Stock outstanding immediately prior to the
Effective Time shall remain issued and outstanding and shall not be affected by the consummation of the Merger.
2.8
Exchange of
Stonegate Common Stock
.
(a)
Exchange Agent
. At or prior to the Closing, Parent shall deposit, or shall cause to
be deposited, with Computershare Trust Company, N.A. or such other exchange agent selected by Parent and reasonably acceptable to Stonegate (the
Exchange Agent
), for the benefit of the holders of shares of Stonegate Common Stock,
for exchange in accordance with this
ARTICLE II
, through the Exchange Agent, sufficient cash and Parent Common Stock to make all deliveries of cash and Parent Common Stock as required by this
ARTICLE II
, including the Merger
Consideration, pursuant to an exchange agent agreement between Parent and the Exchange Agent (the
Exchange Agent Agreement
) in a form reasonably acceptable to the parties hereto. Parent agrees to make available to the Exchange
Agent, from time to time as needed, cash sufficient to pay any dividends and other distributions pursuant to
Section 2.8(c)
and to make payments in lieu of fractional shares pursuant to
Section 2.8(d)
. Any cash and Parent
Common Stock deposited with the
A-11
Exchange Agent (including as payment for any dividends or other distributions in accordance with
Section 2.8(c)
and fractional shares in accordance with
Section 2.8(d)
)
shall hereinafter be referred to as the
Exchange Fund
. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be paid for shares of Stonegate Common Stock pursuant to this
Agreement out of the Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent, provided that no such investment or losses thereon shall affect the amount of Merger Consideration payable to the
holders of shares of Stonegate Common Stock. Any interest and other income resulting from such investments shall be paid to Parent. Except as contemplated by this Agreement and the Exchange Agent Agreement, the Exchange Fund shall not be used for
any other purpose.
(b)
Exchange Procedures
. Parent shall cause the Exchange Agent to mail, within five
(5) Business Days of the Effective Time, to each record holder, as of the Effective Time, of an outstanding Certificate or Book Entry Share that immediately prior to the Effective Time represented shares of Stonegate Common Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the shares of Stonegate Common Stock shall pass, only upon proper delivery of the corresponding certificates (the
Certificates
) representing such shares to the Exchange Agent or receipt by the Exchange Agent of an agents message with respect to non-certificated shares represented by book entry (
Book Entry
Shares
), and shall be in customary form as directed by Parent and reasonably acceptable to Stonegate), and (ii) instructions for use in effecting the surrender of the Certificates or Book Entry Shares in exchange for the Merger
Consideration payable in respect of the shares of Stonegate Common Stock represented thereby. Promptly after the Effective Time, upon surrender of Certificates or Book Entry Shares for cancellation to the Exchange Agent together with such letters of
transmittal, properly completed and duly executed, and such other documents as may be required pursuant to such instructions, the holders of such Certificates or Book Entry Shares shall be entitled to receive in exchange therefor, upon completion of
the calculations required by
Section
2.7
, (A) shares of Parent Common Stock representing, in the aggregate, the whole number of shares of Parent Common Stock that such holder has the right to receive pursuant to
Section
2.7
and (B) a check or wire of immediately available funds in an amount equal to the aggregate of (1) any dividends and other distributions pursuant to
Section 2.8(c),
plus
(2) an amount of cash equal to the
Per Share Cash Consideration multiplied by the number of shares of Stonegate Common Stock properly surrendered pursuant to such instructions,
plus
(3) any cash payable in lieu of any fractional shares of Parent Common Stock pursuant to
Section 2.8(d)
. No interest shall be paid or accrued on any Merger Consideration. In the event of a transfer of ownership of shares of Stonegate Common Stock which is not registered in the transfer records of Stonegate, the Merger
Consideration payable in respect of such shares of Stonegate Common Stock may be paid to a transferee if the Certificate representing such shares of Stonegate Common Stock is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other Taxes required by reason of the delivery of the Merger Consideration in any name other than that of the
registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Exchange Agent that such Taxes have been paid or are not payable.
(c)
Distributions with Respect to Unexchanged Stonegate Common Stock
. No dividends or other distributions declared or
made with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate or Book Entry Share with respect to the Parent Common Stock that such holder would be entitled to
receive upon surrender of such Certificate or Book Entry Share and no cash payment in lieu of fractional shares of Parent Common Stock shall be paid to any such holder until such holder shall surrender such Certificate or Book Entry Share in
accordance with this
Section 2.8
. Subject to applicable Law, following surrender of any such Certificate or Book Entry Share, there shall be paid to such holder of Parent Common Stock issuable in exchange therefor, without interest,
(i) promptly after the time of such surrender, the amount of any cash payable in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to
Section
2.8(d)
and the amount of dividends or
other distributions with a record date after the Effective Time and paid prior to such surrender with respect to such holders whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but
A-12
prior to such surrender and a payment date subsequent to such surrender payable with respect to such holders whole shares of Parent Common Stock.
(d)
Fractional Shares
. No certificates or scrip or Parent Common Stock representing fractional shares of Parent Common
Stock or book entry credit of the same shall be issued upon the surrender for exchange of Certificates or Book Entry Shares, no dividend or other distribution, stock split or interest shall relate to any such fractional share and such fractional
share shall not entitle the owner thereof to vote or to have any rights as a holder of any Parent Common Stock. Notwithstanding any other provision of this Agreement, each holder of shares of Stonegate Common Stock exchanged in the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates and Book Entry Shares delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount,
rounded to the nearest whole cent, equal to the product of (i) the Parent Share Average Closing Price, and (ii) the fraction of a share of Parent Common Stock that such holder would otherwise be entitled to receive pursuant to
Section
2.7
hereof (rounded to the nearest ten-thousandth when expressed in decimal form).
(e)
Termination of Exchange Fund
. Any portion of the Exchange Fund that remains undistributed to the holders of Stonegate Common Stock after one hundred eighty (180) days following the Effective Time shall be delivered to Parent upon demand
and, from and after such delivery to Parent, any former holders of Stonegate Common Stock (other than Appraisal Shares) who have not theretofore complied with this
ARTICLE II
shall thereafter look only to Parent for the Merger Consideration
payable in respect of such shares of Stonegate Common Stock, in each case, without any interest thereon. Any amounts remaining unclaimed by holders of shares of Stonegate Common Stock immediately prior to such time as such amounts would otherwise
escheat to or become the property of any Governmental Authority shall, to the extent permitted by Applicable Law, thereupon become the property of Parent free and clear of any Liens, claims or interest of any Person previously entitled thereto.
(f)
No Liability
. Neither Exchange Agent, Parent nor any of Parents Subsidiaries shall be liable to any holder of
shares of Stonegate Common Stock for any shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official or Governmental Authority in the reasonable belief that such
delivery was required pursuant to any abandoned property, escheat or similar law.
(g)
Lost Certificates
. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed in form and substance acceptable to Parent and, if required by Parent, the
posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration payable in respect of the shares of Stonegate Common Stock represented by such Certificate.
(h)
Withholding
. 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 Stonegate Common Stock such amounts as Parent or the Exchange Agent is required to deduct and withhold under the Code or any provision of state, local, or foreign Tax law, with respect to
the making of such payment. To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Stonegate Common Stock in respect
of whom such deduction and withholding was made by Parent or the Exchange Agent, as the case may be.
(i)
Book
Entry
. All shares of Parent Common Stock to be issued in the Merger shall be issued in book entry form, without physical certificates.
2.9
Certain Adjustments
. If, after the date of this Agreement and at or prior to the Effective Time, the outstanding shares of Parent
Common Stock or Stonegate Common Stock are changed into a different number of
A-13
shares or type of securities by reason of any reclassification, recapitalization, split-up, stock split, subdivision, combination or exchange of shares, or any dividend payable in stock or other
securities is declared thereon or rights issued in respect thereof with a record date within such period, or any similar event occurs, the Exchange Ratio will be adjusted accordingly to provide to the holders thereof the same economic effect as
contemplated by this Agreement prior to such adjustment event.
2.10
Transfer Books; No Further Ownership Rights in Stonegate Common
Stock
. At the Closing Date, the stock transfer books of Stonegate shall be closed and thereafter there shall be no further registration of transfers of shares of Stonegate Common Stock on the records of Stonegate, except for the cancellation of
such shares in connection with the Merger. From and after the Effective Time, the holders of Certificates or Book Entry Shares that evidenced ownership of shares of Stonegate Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares, except as otherwise provided for herein or by applicable Law. If, after the Effective Time, bona fide Certificates or Book Entry Shares are presented to Parent for any reason, they shall be
cancelled and exchanged as provided in this
ARTICLE II
.
2.11
Appraisal Rights
. Notwithstanding any other provision of this
Agreement to the contrary, shares of Stonegate Common Stock that are outstanding immediately prior to the Effective Time and with respect to which the shareholders thereof who are entitled to demand and have properly demanded the fair value of such
shares in accordance with Sections 607.1301 to 607.1333 of the FBCA and which shareholders have not voted in favor of the Merger and otherwise complied with the applicable provisions of the FBCA in all respects (collectively, the
Appraisal
Shares
) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of the fair value of such shares held by them in accordance with the provisions
of Sections 607.1301 to 607.1333 of the FBCA, except that all Appraisal Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights as dissenting shareholders under the FBCA
shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration pursuant to
Section
2.7
. Stonegate shall
give Parent (i) prompt notice of any written demands for payment of fair value of any shares of Stonegate Common Stock, attempted withdrawals of such demands and any other instruments served pursuant to the FBCA and received by Stonegate
relating to shareholders appraisal rights and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands under the FBCA consistent with the obligations of Stonegate thereunder. Stonegate shall not,
except with the prior written consent of Parent, (x) make any payment with respect to such demand, (y) offer to settle or settle any demand for payment of fair value or (z) waive any failure to timely deliver a written demand for
payment of fair value or timely take any other action to perfect payment of fair value rights in accordance with the FBCA.
2.12
Proxy
and Registration Statement
. Parent and Stonegate shall prepare the Registration Statement on Form S-4 or other applicable form, which Parent shall file with the SEC as promptly as reasonably practicable, but in no event more than thirty
(30) calendar days, following the date of this Agreement and will include the Proxy Statement/Prospectus. Each of Parent and Stonegate shall use reasonable best efforts to have the Registration Statement declared effective under the Securities
Act as promptly as reasonably practicable after such filing and to keep the Registration Statement effective as long as necessary to consummate the Merger and the other transactions contemplated hereby. Each of Stonegate and Parent will cause the
Proxy Statement/Prospectus to be filed with the SEC and the FDIC, as applicable, and mailed to Stonegate Shareholders and shareholders of Parent as soon as reasonably practicable after the Registration Statement is declared effective under the
Securities Act. Parent shall also take any action required to be taken under any applicable state securities laws in connection with the issuance of Parent Common Stock in the Merger, and Stonegate shall furnish all information concerning Stonegate
and the holders of Stonegate Common Stock, or holders of a beneficial interest therein, as may be reasonably requested in connection with any such action. Parent will advise Stonegate promptly after it receives oral or written notice of the time
when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of Parent Common Stock issuable in connection with the Merger for offering or
sale in any
A-14
jurisdiction, or any oral or written request by the SEC for amendment of the Proxy Statement/Prospectus or the Registration Statement or comments thereon and responses thereto or requests by the
SEC for additional information, and will promptly provide Stonegate with copies of any written communication from the SEC or any state securities commission. If at any time prior to the Effective Time any information relating to Parent or Stonegate,
or any of their respective affiliates, officers or directors, is discovered by Parent or Stonegate which should be set forth in an amendment or supplement to any of the Registration Statement or the Proxy Statement/Prospectus, so that any of such
documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such
information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to Stonegate Shareholders and
shareholders of Parent.
2.13
Stonegate Shareholders Meeting
.
(a) Stonegate shall take all action necessary in accordance with applicable laws and Stonegates current articles of
incorporation and bylaws to duly give notice of, convene and hold a meeting of its shareholders (the
Stonegate Shareholders Meeting
), to be held as promptly as practicable after the Registration Statement is declared
effective under the Securities Act, for the purpose of obtaining the approval by Stonegate Shareholders of this Agreement. The Board of Directors of Stonegate has resolved to recommend to Stonegate Shareholders that they approve this Agreement and
Stonegate shall, acting through its Board of Directors, (x) recommend that Stonegate Shareholders approve this Agreement (the
Stonegate Recommendation
), (y) include
the Stonegate
Recommendation in the Proxy
Statement/Prospectus, and (z) use all reasonable best efforts to solicit from Stonegate Shareholders proxies in favor of the approval of this Agreement and any other matters to be voted on at the Stonegate Shareholders Meeting related to
this Agreement, including by communicating to Stonegate Shareholders the recommendation of the Board of Directors of Stonegate that they approve this Agreement, and to take all other action necessary or advisable to secure the vote or consent of
Stonegate Shareholders required by Applicable Law to obtain such approvals, except to the extent Stonegates Board of Directors has withdrawn the Stonegate Recommendation in accordance with the terms of this Agreement. Stonegate agrees that it
has an unqualified obligation to submit this Agreement to Stonegate Shareholders at the Stonegate Shareholders Meeting, including after any withdrawal of the Stonegate Recommendation.
(b) If on the date of the Stonegate Shareholders Meeting, Stonegate has not received proxies representing a sufficient
number of shares of Stonegate Common Stock to obtain the Stonegate Shareholder Approval (as defined below), Stonegate shall adjourn the Stonegate Shareholders Meeting until such date as shall be mutually agreed upon by Stonegate and Parent,
which date shall not be less than five (5) calendar days nor more than ten (10) calendar days after the date of adjournment, and subject to the terms and conditions of this Agreement shall continue to use all reasonable best efforts,
together with its proxy solicitor, to assist in the solicitation of proxies from shareholders relating to the Stonegate Shareholder Approval; provided, however, Stonegate shall only be required to adjourn, delay or postpone the Stonegate
Shareholders Meeting as described above once. For purposes of this Agreement,
Stonegate Shareholder Approval
shall mean the affirmative vote of a majority of the votes entitled to vote and represented in person or by proxy
at the Stonegate Shareholders Meeting or such other number of affirmative votes as may be required by Stonegates governing documents and Applicable Law.
(c) Neither Stonegates Board of Directors nor any committee thereof shall (x) except as expressly permitted by this
Section
2.13
, withdraw, qualify or modify, or propose to withdraw, qualify or modify, in a manner adverse to Parent or any of Parents Subsidiaries, the Stonegate Recommendation (an
Adverse Stonegate Recommendation
Change
) or (y) approve or recommend, or propose to approve or recommend, any Acquisition Proposal. Notwithstanding the foregoing, Stonegates Board of Directors may submit this Agreement to its shareholders without
recommendation (although the resolutions adopting this Agreement as of the date hereof may not be rescinded or amended), in which event the Board of Directors of Stonegate
A-15
may communicate the basis for its lack of a recommendation to the shareholders in the Proxy Statement/Prospectus or an appropriate amendment or supplement thereto to the extent required by law,
if and only if:
(i) Stonegates Board of Directors determines in good faith, after consultation with its outside
legal counsel and independent financial advisor, in both cases, from firms of national stature, that it has received an unsolicited bona fide Acquisition Proposal (that did not result from a breach of
Section
5.9
) that is a Superior
Proposal and such Superior Proposal has not been withdrawn;
(ii) Stonegates Board of Directors determines in good
faith, after consultation with such outside legal counsel, that a failure to accept such Superior Proposal would result in Stonegates Board of Directors breaching its fiduciary duties to Stonegate and its Shareholders under Applicable Law;
(iii) Stonegates Board of Directors provides written notice (a
Notice of Stonegate Recommendation
Change
) to Parent of its receipt of the Superior Proposal and its intent to withdraw the Stonegate Recommendation on the fifth Business Day following delivery of such notice, which notice shall specify in reasonable detail the material
terms and conditions of the Superior Proposal (it being understood that any amendment (and each successive amendment) to any term of such Acquisition Proposal shall require a new Notice of Recommendation Change, except that, in each 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 each such new Notice of Recommendation Change);
(iv) after providing such Notice of Recommendation Change, Stonegate shall negotiate in good faith with Parent (if requested by
Parent) and provide Parent reasonable opportunity during the subsequent five (or three, as applicable) Business Day period(s) to make such adjustments in the terms and conditions of this Agreement as would enable Stonegates Board of Directors
to proceed withdrawing the Stonegate Recommendation; and
(v) Stonegates Board of Directors, following the final such
five (or three, as applicable) Business Day period, again determines in good faith, after consultation with such outside legal counsel and such independent financial advisor, that such Acquisition Proposal nonetheless continues to constitute a
Superior Proposal and that failure to take such action would violate their fiduciary duties to Stonegate and the Stonegate Shareholders under Applicable Law.
2.14
Stonegate Stock Options
. Prior to the Effective Time, Stonegate shall take actions necessary to provide that, immediately prior to
the Effective Time, (a) each Stonegate Stock Option, whether or not then exercisable, shall fully vest and immediately be cancelled and only entitle the holder thereof, to receive an amount in cash, without interest, equal to the product of
(i) the total number of Stonegate Common Shares subject to such Stonegate Stock Option multiplied by (ii) the excess, if any, of (A) the Per Share Merger Consideration over (B) the per share exercise price for the applicable
Stonegate Stock Option, less applicable Taxes required to be withheld with respect to such payment (such calculation, the
Per Share Equity Award Consideration
). The payment of the Per Share Equity Award Consideration shall be
made by Stonegate immediately prior to the Effective Time on the Closing Date provided Stonegate has received an executed stock option cancellation agreement from the respective stock option holder prior to the Effective Time. Stonegate shall use
reasonable best efforts to obtain such stock option cancellation agreements prior to the Effective Time. Any Stonegate Stock Option that has a per share exercise price that is greater than or equal to the Per Share Merger Consideration shall be
cancelled for no consideration. Nothing herein shall prevent any holder from exercising, before the Effective Time, any Stonegate Stock Option that is exercisable according to its terms, and any common stock issued upon such exercise shall be
converted at the Effective Time into a right to receive the Merger Consideration, subject to appraisal rights under Applicable Law. Any shares of Stonegate Common Stock issued upon such exercise between the date of the Agreement and the Effective
Time shall be converted at the Effective Time into a right to receive the Merger Consideration, subject to appraisal rights under Applicable Law.
A-16
2.15
Parent Shareholders Meeting
.
(a) Parent shall take all action necessary in accordance with applicable laws and Parents current articles of
incorporation and bylaws to duly give notice of, convene and hold a meeting of its shareholders (the
Parent Shareholders Meeting
), to be held as promptly as practicable after the Registration Statement is declared effective
under the Securities Act, for the purpose of obtaining the approval by Parent shareholders of this Agreement, approval of the issuance of Parent Common Stock in connection with the Merger for purposes of Nasdaq Listing Rule 5635 and any other
matters required to be approved by Parents shareholders in order to carry out the transactions contemplated by this Agreement (the
Requisite Parent Vote
). Parent shall, acting through its board of directors,
(i) recommend that the Parent shareholders approve this Agreement and approve the issuance of Parent Common Stock in connection with the Merger for purposes of Nasdaq Listing Rule 5635 (the
Parent Board Recommendation
),
(ii) include in the Proxy Statement/Prospectus the Parent Board Recommendation and (iii) use all reasonable best efforts to obtain from its shareholders the Parent Shareholder Approval with respect to the approval of the matters to be
voted on at the Parent Shareholders Meeting. For purposes of this Agreement,
Parent Shareholder Approval
shall mean the affirmative vote of a majority of all the votes entitled to be cast by holders of outstanding Parent
Common Stock.
(b) Nothing contained in this Agreement shall be deemed to relieve Parent of its obligation to submit this
Agreement to its shareholders to a vote. Neither Parents Board of Directors nor any committee thereof shall except as expressly permitted by this
Section
2.15
, withdraw, qualify or modify, or propose to withdraw, qualify or
modify, in a manner adverse to Stonegate or any of Stonegates Subsidiaries, the Parent Board Recommendation (an
Adverse Parent Recommendation Change
). Notwithstanding the foregoing, prior to receipt of the Requisite Parent
Vote, the Board of Directors of Parent, after consultation with its outside counsel and, with respect to financial matters, its financial advisor, determines in good faith that it would more likely than not result in a violation of its fiduciary
duties under applicable law to continue to make the Parent Board Recommendation to its shareholders, Parent and its Board of Directors may submit this Agreement and the transactions contemplated hereby to its shareholders without recommendation or
otherwise make an Adverse Parent Recommendation Change (although the resolutions adopting this Agreement as of the date hereof may not be rescinded or amended), in which event the Parent and its Board of Directors, may communicate the basis for its
Adverse Parent Recommendation Change to its shareholders in the Proxy Statement/Prospectus or an appropriate amendment or supplement thereto to the extent required by law;
provided
, that neither Parent nor its Board of Directors may take any
actions under this sentence unless (i) it gives the Stonegate at least five (5) Business Days prior written notice of its intention to take such action and a reasonable description of the event or circumstances giving rise to its
determination to take such action, (ii) during such notice period the Parent and its Board of Directors and its representatives negotiate in good faith with Stonegate and its representatives any amendment or modification to this Agreement
proposed by such other party and (iii) at the end of such notice period, the Board of Directors takes into account any amendment or modification to this Agreement proposed in writing by the other party prior to the expiration of such notice
period, and after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would nevertheless continue to be more likely than not to result in a violation of its
fiduciary duties under applicable law to continue to make the Parent Board Recommendation.
(c) If on the date of the
Parent Shareholders Meeting, Parent has not received proxies representing a sufficient number of shares of Parent Common Stock to obtain the Parent Shareholder Approval, Parent shall adjourn the Parent Shareholders Meeting until such
date as shall be mutually agreed upon by Stonegate and Parent, which date shall not be less than five (5) calendar days nor more than ten (10) calendar days after the date of adjournment, and subject to the terms and conditions of this
Agreement shall continue to use all reasonable best efforts, together with its proxy solicitor, to assist in the solicitation of proxies from shareholders relating to the Parent Shareholder Approval; provided, however, Parent shall only be required
to adjourn, delay or postpone the Parent Shareholders Meeting as described above once.
A-17
2.16
Closing Deliveries by Stonegate
. At the Closing, Stonegate shall deliver or cause to
be delivered to Parent:
(a) a certificate of the Secretary of Stonegate, dated as of the Closing Date, certifying to:
(i) the Charter Documents of Stonegate; (ii) resolutions of the board of directors of Stonegate approving the Merger and the execution, delivery and performance of this Agreement; (iii) incumbency and signatures of the officers of
Stonegate executing this Agreement and any other certificate or document delivered by Stonegate in connection with this Agreement; and (iv) action by Stonegate Shareholders holding the requisite voting power under its Charter Documents and
Applicable Law approving the Merger and the execution, delivery and performance of this Agreement;
(b) a certificate,
dated as of the Closing Date and signed by a duly authorized officer of Stonegate, certifying that each of the conditions set forth in
Sections 6.2(a)
and
6.2(b)
have been satisfied;
(c) a certificate that satisfies the requirements of Treasury Regulations Section 1.1445-2(c)(3), duly executed by an
authorized officer of Stonegate, confirming that Stonegate is not and has never been a United States real property holding corporation; and
(d) such other documents as Parent reasonably deems necessary or appropriate to consummate the transactions contemplated by
this Agreement.
2.17
Closing Deliveries by Parent
. At the Closing, Parent shall deliver or cause to be delivered to Stonegate:
(a) evidence reasonably satisfactory to Stonegate of the payment of the Merger Consideration to the Exchange Agent;
(b) a certificate of the Secretary of each of Parent and Subsidiary Bank, dated as of the Closing Date, certifying the:
(i) Charter Documents of Parent and Subsidiary Bank; (ii) resolutions of the board of directors of each of Parent and Subsidiary Bank approving the Merger and the execution, delivery and performance of this Agreement; (iii) incumbency
and signatures of the officers of Parent and Subsidiary Bank executing this Agreement and any other certificate or document delivered by Parent or Subsidiary Bank in connection with this Agreement; and (iv) receipt of the Requisite Parent Vote;
(c) a certificate, dated as of the Closing Date and signed by a duly authorized officer of Parent, that each of the
conditions set forth in
Sections 6.3(a)
and
6.3(b)
have been satisfied; and
(d) such other documents as
Stonegate reasonably deems necessary or appropriate to consummate the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STONEGATE
Except as disclosed in the disclosure schedule delivered by Stonegate to Parent concurrently herewith (the
Stonegate Disclosure
Schedule
); provided, that (a) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect,
(b) the mere inclusion of an item in the Stonegate Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by Stonegate that such item represents a material exception or fact, event or circumstance
or that such item is reasonably likely to result in a Material Adverse Effect on Stonegate and (c) any disclosures made with respect to a section of
Article III
shall be deemed to qualify (1) any other section of
Article III
specifically referenced or cross-referenced and (2) other sections of
Article III
to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross reference) from a reading of the disclosure that such
disclosure applies to such other sections, Stonegate hereby represents and warrants to Parent as follows:
A-18
3.1
Organization
.
(a) Stonegate is a Florida-chartered commercial bank (i) duly organized, validly existing and in good standing under the
laws of the State of Florida, (ii) with all requisite power and authority to own and operate its properties and to carry on its business as presently conducted, and (iii) duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature of its activities or the character of the properties it owns or leases make such qualification necessary, except in such cases where the lack of said authorization or qualification
has not had and would not reasonably be expected to have a Material Adverse Effect on Stonegate. True, complete and correct copies of the Charter Documents of Stonegate, as in effect as of the date of this Agreement, have previously been made
available to the Parent.
(b) Each Subsidiary of Stonegate that is set forth on
Section 3.1(c)
of the Stonegate
Disclosure Schedule is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable, (ii) with all requisite power and authority to own and operate its
properties and to carry on its business as presently conducted, and (iii) duly qualified and in good standing in each jurisdiction in which the nature of its activities or the character of the properties it owns or leases make such
qualification necessary, except in such cases where the lack of said authorization or qualification has not had and would not reasonably be expected to have a Material Adverse Effect on Stonegate. True, complete and correct copies of the Charter
Documents of each Subsidiary of Stonegate, as in effect as of the date of this Agreement, have previously been made available to the Parent.
(c)
Section 3.1(c)
of the Stonegate Disclosure Schedule sets forth a true and complete list of each Subsidiary of
Stonegate. Other than as set forth on
Section 3.1(c)
of the Stonegate Disclosure Schedule, there are no corporations, partnerships, limited liability companies, associations or other entities in which Stonegate owns, directly or
indirectly, any equity or other interest. All outstanding shares or ownership interests of Stonegates Subsidiaries are validly issued, fully paid and nonassessable and owned by Stonegate free and clear of any Liens other than Permitted Liens.
3.2
Authority; Binding Nature
.
(a) Stonegate has all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by Stonegate of this Agreement and the consummation by Stonegate of the transactions contemplated by this Agreement have been duly
and validly approved by the board of directors of Stonegate. Subject to the Stonegate Shareholders approval as contemplated by
Sections 2.13
and
6.2(c)
, no other corporate proceedings on the part of Stonegate are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Stonegate and constitutes (in each case assuming due authorization, execution and delivery by Parent and
Subsidiary Bank, as applicable) the legal, valid and binding obligations of Stonegate enforceable against Stonegate in accordance with its terms, except as such enforceability may be limited by applicable laws related to safety and soundness of
insured depository institutions as set forth in 12 U.S.C. §1818(b), the appointment of a conservator or receiver, bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting creditors rights and
remedies generally and general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(b) Stonegate has taken all reasonable actions by it in order to exempt this Agreement and the transactions contemplated hereby
from the requirements of any moratorium, control share, fair price, affiliate transaction, anti-greenmail, business combination or other antitakeover Laws of the State of
Florida to the extent such antitakeover Laws are applicable to the transactions contemplated by this Agreement. Stonegate has taken all action required to be taken by it in order to make this Agreement and the transactions contemplated hereby comply
with, and the transactions contemplated hereby do comply with, the requirements of any provisions of its Charter Documents concerning business combination, fair price, voting requirement, constituency
requirement or other related provisions.
A-19
3.3
No Conflicts
. The execution, delivery and performance of this Agreement by Stonegate
and the consummation of the transactions contemplated hereby by Stonegate and its Subsidiaries, including the Merger, do not and will not (a) conflict with, or result in a breach or violation of or default under, any terms or conditions of the
Charter Documents of Stonegate or any of its Subsidiaries, or (b) assuming that the consents and approvals referred to in
Section
3.4
hereof are duly obtained, (x) conflict with or violate in any material respect any
Applicable Law as to Stonegate or any of its Subsidiaries, (y) result in any material breach of, or constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, or
give to others any rights of termination, amendment, acceleration or cancellation pursuant to, any Stonegate Material Contract, or (z) result in the creation or imposition of any Lien on any of the assets of Stonegate or its Subsidiaries.
3.4
Consents and Approvals
. Other than (i) the Regulatory Approvals, (ii) the approval by Stonegate Shareholders of the
Merger and the execution, delivery and performance of this Agreement, and (iii) such other filings, authorizations, consents, notices or approvals as may be set forth on
Section
3.4
of the Stonegate Disclosure Schedule, no
consents, approvals, authorizations or other actions by, or filings with or notifications to, any Person or any Governmental Authority on the part of Stonegate or any of its Subsidiaries are required in connection with the execution, delivery and
performance by Stonegate of this Agreement and the consummation of the transactions contemplated hereby.
3.5
Regulatory Matters
.
Stonegate and each of its Subsidiaries has timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file since January 1, 2014 with, as
applicable, (i) the Federal Reserve Board; (ii) the FDIC; (iii) the OFR and any predecessor agency; (iv) any other applicable bank regulatory agencies (collectively,
Stonegate Regulatory Agencies
) and (v) any
other applicable Governmental Authority and have paid all applicable fees, premiums and assessments due and payable thereto. Each such report, registration and statement, including financial statements, exhibits and schedules thereto, complied, in
all material respects, with Applicable Law. Since January 1, 2014, neither Stonegate nor any of its Subsidiaries is subject to any cease-and-desist or other formal or informal order or enforcement action issued by, or is a party to any written
agreement, consent agreement, operating agreement or memorandum of understanding with, or is a party to any commitment letter, regulatory directive or similar undertaking with, or is subject to any capital directive by, or has been ordered to pay
any civil money penalty by or at the request of, any Stonegate Regulatory Agency or other Governmental Authority of any kind or has adopted any board resolutions at the request or suggestion of any Stonegate Regulatory Agency or other Governmental
Authority that currently restricts in any material respect the conduct of its business, imposes any material requirements or procedures, relates to its credit or risk management policies or activities pursuant to such credit or risk management
policies, including Anti-money Laundering and Bank Secrecy Act requirements or in any material manner relates to its capital adequacy, its ability to pay dividends or its management (each, a
Stonegate Regulatory Agreement
), nor
has Stonegate or any of its Subsidiaries been advised since January 1, 2014 by any Stonegate Regulatory Agency or other Governmental Authority that it is considering issuing, initiating, ordering or requesting any such Stonegate Regulatory
Agreement. Except as set forth on
Section
3.5
of the Stonegate Disclosure Schedule, there is no material unresolved written violation, criticism, comment or exception by any Stonegate Regulatory Agency or other Governmental Authority
relating to Stonegate or any of its Subsidiaries, and Stonegate is not aware of any reason why all required Regulatory Approvals would not be received on a timely basis without undue delay and without the imposition of any Materially Burdensome
Regulatory Condition as described in the proviso to
Section 5.3(a)(i)
. Except for normal examinations conducted by Governmental Authorities in the regular course of business, no Governmental Authority has initiated any investigation or
proceeding into the business or operations of Stonegate since January 1, 2014.
3.6
Capitalization
.
(a) The authorized capital stock of Stonegate consists only of (i) 20,000,000 shares of Stonegate Common Stock, $5.00 par
value, of which 15,301,388 are issued and outstanding as of the date of this
A-20
Agreement, and (ii) 4,000,000 shares of preferred stock, having no par value, of which no shares are issued and outstanding as of the date of this Agreement. The above issued and outstanding
shares of Stonegate Common Stock constitute all of the issued and outstanding capital stock of Stonegate as of the date of this Agreement, and have been duly authorized, validly issued and are fully paid and nonassessable. None of the shares of
Stonegate Common Stock have been issued or disposed of in violation of any preemptive rights of any Person. As of the date of this Agreement, 1,062,550 shares of Stonegate Common Stock were reserved for issuance upon the exercise of outstanding
Stonegate Stock Options and 1,231,039 shares of Stonegate Common Stock were available for future grants of equity awards under the Stonegate Stock Option Plans. Stonegate has furnished or otherwise made available to Parent a true, complete copy of
the Stonegate Stock Option Plans, and
Section 3.6(a)
of the Stonegate Disclosure Schedule sets forth a complete and correct list of all participants in the Stonegate Stock Option Plans as of the date hereof identifying the number of
shares of Stonegate Common Stock subject to awards of Stonegate Stock Options held by each participant therein, the exercise price or prices of such Stonegate Stock Options, and the date on which each award of Stonegate Stock Option was granted,
vests or becomes exercisable (as applicable), and expires (if applicable). Except as disclosed in
Section 3.6(a)
of the Stonegate Disclosure Schedule, as of the date of this Agreement, no trust preferred or subordinated debt securities
of Stonegate or any of its Subsidiaries are issued or outstanding.
(b) Except as disclosed in
Section 3.6(a)
of the Stonegate Disclosure Schedule, there are no outstanding (i) rights, plans, options, warrants, calls, conversion rights or any agreements, arrangements or commitments of any kind or character (either firm or conditional) obligating
Stonegate or any of its Affiliates to issue, deliver or sell, or cause to be delivered or sold, any capital stock of Stonegate or its Subsidiaries, or any securities exchangeable for or convertible into the capital stock of Stonegate or its
Subsidiaries, (ii) contractual obligations of Stonegate or any of its Affiliates, or rights of a Person, to repurchase, redeem or otherwise acquire any shares of capital stock of Stoneg
ate
or its Subsidiaries, or (iii) proxies,
voting agreements (except for the Voting and Support Agreements), voting trusts, preemptive rights, rights of first refusal, rights of first offer, rights of co-sale or tag-along rights, shareholder agreements or other rights, understandings or
arrangements regarding the voting or disposition of the shares of Stonegate Common Stock or capital stock of its Subsidiaries. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the holders of capital
stock may vote have been issued by Stonegate or any of its Subsidiaries and are outstanding.
(c) No Subsidiary of
Stonegate owns any capital stock of Stonegate except for shares held in a fiduciary capacity or in respect of a debt previously contracted.
3.7
Deposits
. The deposit accounts of Stonegate are insured by the FDIC to the fullest extent permitted by Applicable Law, and all
premiums and assessments required to be paid in connection therewith have been duly, timely and fully paid. No proceedings for the revocation or termination of such deposit insurance are pending or, to Stonegates Knowledge, threatened.
3.8
Reports and Filings
. Stonegate has filed (or furnished) all forms, reports, definitive proxy statements, schedules and documents
required to be filed (or furnished) with the FDIC by it under 12 C.F.R. 335 or Sections 13(a), 14 or 15(d) of the Exchange Act, as the case may be, from and after January 1, 2014 (collectively, the
Stonegate FDIC Filings
).
Each Stonegate FDIC Filing, as amended or supplemented if applicable, (A) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and (B) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment
or supplement thereto, 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 made therein, in the light of the circumstances under which they were
made, not misleading.
A-21
3.9
Financial Statements
.
(a) The financial statements of Stonegate and its Subsidiaries included (or incorporated by reference) in the Stonegate FDIC
Filings (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of Stonegate and its Subsidiaries, (ii) fairly present in all material respects the consolidated results
of operations, cash flows, changes in shareholders equity and consolidated financial position of Stonegate and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited
statements to recurring year-end audit adjustments normal in nature and amount), (iii) complied as to form, as of their respective dates of filing with the FDIC, in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto
(
Stonegates Financial Statements
). As of the date hereof, the books and records of Stonegate and its Subsidiaries have been maintained in all material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions. As of the date hereof, Crowe Horwath LLP has not resigned (or informed Stonegate that it intends to resign) or been dismissed as independent public accountants of Stonegate as a result of
or in connection with any disagreements with Stonegate on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(b) Except as would not reasonably be expected to be, individually or in the aggregate, material to Stonegate and its
Subsidiaries, taken as a whole, neither Stonegate nor any of its Subsidiaries has incurred any liability or obligation of any nature whatsoever (whether absolute, accrued, contingent, determined, determinable or otherwise and whether due or to
become due), except for (i) those liabilities or obligations that are reflected or reserved against on the consolidated balance sheet of Stonegate included in its Annual Report on Form 10-K for the fiscal year ended the Balance Sheet Date
(including any notes thereto), (ii) liabilities or obligations incurred in the ordinary course of business consistent in nature and amount with past practice since the Balance Sheet Date or (iii) liabilities or obligations incurred in
connection with this Agreement and the transactions contemplated hereby.
(c) The records, systems, controls, data and
information of Stonegate and its Subsidiaries are in all material respects recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive
ownership and direct control of Stonegate or its Subsidiaries or accountants (including all means of access thereto and therefrom). Stonegate (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating to Stonegate, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of Stonegate by others within those entities as appropriate to
allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
), and (y) has disclosed,
based on its most recent evaluation prior to the date hereof, to Stonegates outside auditors and the audit committee of Stonegates Board of Directors (i) any significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Stonegates ability to record, process, summarize and report financial information, and
(ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Stonegates internal controls over financial reporting. There is no reason to believe that Stonegates outside
auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without
qualification, when next due.
3.10
Ordinary Course; Lack of Material Adverse Change
. From the Balance Sheet Date, except as
otherwise specifically provided by this Agreement, Stonegate and its Subsidiaries have operated in all material respects in the ordinary course of business consistent with past practice, and there has not been (i) any Material Adverse Change in
Stonegate; (ii) any fact, effect, event, change occurrence or circumstance that would
A-22
reasonably be expected to have a Material Adverse Change in Stonegate or (iii) action taken by Stonegate or any of its Subsidiaries during the period from the Balance Sheet Date through the
date of this Agreement that would have required Parents consent if Stonegate had been subject to
Section
5.1
hereof at such time.
3.11
Reorganization
. Neither Stonegate nor any of its Subsidiaries has taken any action, nor are they aware of any fact or
circumstance, that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.12
Taxes
.
(a) (i) All federal and state Tax Returns and all other material Tax Returns that were or are required to be filed on or
before the Closing Date by Stonegate or its Subsidiaries (including, to Stonegates Knowledge, for purposes of all subsections of this Section 3.12, those entities acquired by or merged into Stonegate) have been or will be timely filed on
or before the Closing Date, and all such Tax Returns are or will be true, correct and complete in all material respects and were or will be prepared in substantial compliance with all Applicable Laws; (ii) all Taxes due and owing by Stonegate
or its Subsidiaries (whether or not shown on the Tax Returns referred to in clause (i)) have been or will be timely paid in full on or before the Closing Date; (iii) all deficiencies asserted in writing or assessments made in writing by the
relevant taxing authority in connection with any of the Tax Returns referred to in clause (i) have been or will be timely paid in full on or before the Closing Date; and (iv) no issues that have been raised in writing by the relevant
taxing authority in connection with any of the Tax Returns referred to in clause (i) are pending as of the date of this Agreement, or, if pending, have been specifically identified by Stonegate to Parent in writing and adequately reserved for
in Stonegates Financial Statements. Neither Stonegate nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return.
(b) No federal, state, local or non-U.S. tax audits or administrative or judicial Tax proceedings are pending or being
conducted with respect to Stonegate or any of its Subsidiaries. Neither Stonegate nor its Subsidiaries has received from any federal, state, local or non-U.S. taxing authority (including jurisdictions where Stonegate or its Subsidiaries have not
filed Tax Returns) any (i) written notice indicating an intent to open an audit or other review; (ii) request for information related to Tax matters; or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed,
asserted or assessed by any taxing authority against Stonegate or any of its Subsidiaries.
Section 3.12(b)
of the Stonegate Disclosure Schedule lists all federal and state Tax Returns filed by Stonegate and each of its Subsidiaries for
taxable periods ended on or after December 31, 2013, indicating those that have been audited and those that are currently the subject of audit, and all examination reports and statements of deficiencies related to federal and state income Tax
assessed against or agreed to by Stonegate or any of its Subsidiaries with respect to those taxable periods.
(c) There are
no Liens on Stonegates or any of its Subsidiaries assets that arose in connection with any failure (or alleged failure) to pay any Tax other than Liens for Taxes not yet due and payable or which the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate accruals or reserves have been established in accordance with GAAP in the Stonegate Financial Statements.
(d) Neither Stonegate nor any of its Subsidiaries has waived any statute of limitations in respect of income Taxes or agreed to
any extension of time with respect to an income Tax assessment or deficiency.
(e) Stonegate and its Subsidiaries have
withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.
(f) Neither Stonegate nor any of its Subsidiaries is (or has been) a party to any Tax allocation or sharing agreement (other
than such an agreement or arrangement exclusively between or among Stonegate and its Subsidiaries). Neither Stonegate nor any of its Subsidiaries (A) has been a member of an Affiliated Group filing a consolidated federal Tax Return (other than
a group the common parent of which was Stonegate); or (B) has any liability for Taxes of any Person (other than Stonegate or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or
non-U.S. law) as a transferee, successor, by contract or otherwise.
A-23
(g) There are no joint ventures, partnerships, limited liability companies, or
other arrangements or contracts to which Stonegate or any Subsidiary is a party and that could be treated as a partnership for federal income Tax purposes.
(h) Neither Stonegate nor any Subsidiary has, nor has it ever had, a permanent establishment in any foreign
country, as such term is defined in any applicable Tax treaty or convention between the United States and such foreign country, nor has it otherwise taken steps that have exposed, or will expose, it to the taxing jurisdiction of a foreign country.
(i) No claim has been made in the last five (5) years by a taxing authority in a jurisdiction where Stonegate or any
Subsidiary does not file Tax Returns that Stonegate (or such Subsidiary) is or may be subject to taxation by that jurisdiction.
(j) Neither Stonegate nor any Subsidiary has, in the last five (5) years, distributed stock of another corporation, or had
its stock distributed by another corporation, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or 361 of the Code.
(k) Neither Stonegate nor any Subsidiary is or has been a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) Neither Stonegate nor any Subsidiary participates in or cooperates with (or has at any time participated in or cooperated
with) an international boycott within the meaning of Section 999 of the Code.
(m) Neither Stonegate nor any
Subsidiary has engaged in any transaction that, as of the date hereof, is a listed transaction under Treasury Regulations Section 1.6011-4(b)(2). Stonegate and each Subsidiary have disclosed in their Tax Returns all information
required by the provisions of the Treasury Regulations issued under Section 6011 of the Code with respect to any reportable transaction as that term is defined in Section 6707A(c) of the Code.
(n) No gain recognition agreements have been entered into by either Stonegate or any Subsidiary, and, neither Stonegate nor any
of its Subsidiaries has obtained a private letter ruling or closing agreements from the Internal Revenue Service (or any comparable ruling from any other taxing authority).
(o) Neither Stonegate nor any Subsidiary is or has at any time been (A) a controlled foreign corporation as
defined by Section 957 of the Code; (B) a personal holding company as that term has been defined from time to time in Section 542 of the Code; (C) a passive foreign investment company nor has Stonegate or
any Subsidiary at any time held directly, indirectly, or constructively shares of any passive foreign investment company as that term has been defined from time to time in Section 1296 or 1297 of the Code.
(p) Stonegate and each Subsidiary is in material compliance with all the terms and conditions of any Tax exemption or other Tax
reduction agreement or order of a foreign or state government and the consummation of the transactions contemplated by this Agreement will not have any adverse effect on the continued validity and effectiveness of any such Tax exemption or other Tax
reduction agreement or order.
(q) Except as listed on
Section 3.12(q)
of the Stonegate Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in the payment of any amount that would not be deductible by reason
of Sections 280G (as determined without regard to Section 280G(b)(4) (or any corresponding provision of state, local or non-U.S. Tax law)), 162 (other than 162(a)), or 404 of the Code.
(r) Neither Stonegate nor any Subsidiary has been, nor will any of them be, required to include any item of income in, or
exclude any item of deduction from, taxable income for any Tax period (or portion thereof) ending after the Closing Date (i) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax Laws as a
result of transactions, events, or accounting methods employed prior to the transactions contemplated hereby, (ii) as a result of any installment sale or open
A-24
transaction disposition made on or prior to the Closing Date, (iii) as a result of any prepaid amount received on or prior to the Closing Date; (iv) as a result of an election under
Section 108(i) of the Code; or (v) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax
law).
(s) All transactions for taxable years for which the statute of limitations is still open (including but not limited
to sales of goods, loans, and provision of services) between (i) Stonegate or any Subsidiary and (ii) any other Person that is controlled directly or indirectly by Stonegate (within the meaning of Section 482 of the Code) were
effected on arms-length terms and for fair market value consideration.
(t) The unpaid Taxes of Stonegate and each
Subsidiary (a) did not, as of the Balance Sheet Date, exceed the reserve for Tax liability (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of
Stonegates Financial Statements (rather than in any notes thereto) and (b) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Stonegate and each
Subsidiary in filing its Tax Returns. Since the Balance Sheet Date, neither Stonegate nor any Subsidiary has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of
business consistent with past custom and practice.
(u) Stonegate operates at least one significant historic business line,
or owns at least a significant portion of its historic business assets, in each case within the meaning of Treasury Regulations Section 1.368-1(d).
(v) Stonegate has provided or otherwise made available to Parent all of Stonegates and its Subsidiaries books and
records with respect to Tax matters pertinent to Stonegate or its Subsidiaries relating to any Tax periods commencing on or before the Closing Date.
3.13
Title to Assets; Real Property
.
(a) Stonegate or one of its Subsidiaries has good and marketable title or a valid leasehold interest in, easement or right to
use all of its assets and properties, including those reflected in either the latest audited balance sheet or latest interim balance sheet included in the Stonegate FDIC Filings (except for assets sold or otherwise disposed of or leases that have
expired since the Balance Sheet Date in the ordinary course of business or been terminated as provided in
Section 5.1(xix)
of the Stonegate Disclosure Schedule), as being owned or leased, as applicable, free and clear of any and all
Liens other than Permitted Liens. All properties and assets of Stonegate and its Subsidiaries are in good operating condition and repair, ordinary wear and tear and commercially reasonable deferred maintenance excepted, and except for such failures
to be in good operating condition and repair which would not reasonably be expected to materially impair the use thereof in the operation of the business of Stonegate or any of its Subsidiaries.
(b)
Section 3.13(b)
of the Stonegate Disclosure Schedule contains a true and complete list of all real property
owned or leased by Stonegate as of the date of this Agreement, identifying the real property as leased or owned. Stonegate is in possession of all real property leased to it, as set forth in
Section 3.13(b)
of the Stonegate Disclosure
Schedule, and each such lease is valid without default thereunder by the lessee and has not been assigned or subleased by Stonegate unless so indicated in
Section 3.13(b)
of the Stonegate Disclosure Schedule. The real property listed in
Section 3.13(b)
of the Stonegate Disclosure Schedule is in material compliance with all applicable zoning laws and building codes and all applicable health and safety related requirements. There are no pending or, to Stonegates
Knowledge, threatened material condemnation proceedings against the real property listed in
Section 3.13(b)
of the Stonegate Disclosure Schedule.
(c) Neither Stonegate nor any of its Subsidiaries owns any real property, except (i) real property acquired through
foreclosure or deed in lieu of foreclosure and (ii) real property used for its headquarters or banking operations.
A-25
3.14
Litigation; Orders
.
(a) Except as set forth on
Section 3.14(a)
of the Stonegate Disclosure Schedule, there is no material Proceeding
pending or, to Stonegates Knowledge, threatened either (i) against Stonegate or any of its Subsidiaries, or to which any assets, interest, or right of any of them may be subject, or (ii) seeking to prevent, materially alter or
materially delay any of the transactions contemplated by this Agreement.
(b) There is no material Order either
(i) outstanding against Stonegate or any of its Subsidiaries, or to which any assets, interest, or right of any of them may be subject, or (ii) seeking to prevent, materially alter or materially delay any of the transactions contemplated
by this Agreement.
(c) To Stonegates Knowledge, no event has occurred or circumstance exists that would reasonably
be expected to give rise to or serve as a basis for the commencement of any material Proceeding against Stonegate or any of its Subsidiaries.
3.15
Compliance
.
(a) Stonegate and each of its Subsidiaries are in material compliance with all Applicable Laws and Orders, including without
limitation all Laws related to data protection or privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth
in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer
Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any other law relating to bank
secrecy, discriminatory lending, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the origination, sale and servicing of
mortgage and consumer loans. Stonegate and each of its Subsidiaries have all Permits of, and have made all required filings, applications and registrations with, all applicable Government Authorities necessary to permit it to carry on its business
in all material respects as presently conducted.
(b) Neither Stonegate nor any of its Subsidiaries is in default under or
in violation of any term or provision of (i) its Charter Documents or (ii) any material Permit which it holds. No event has occurred or circumstance exists that will (with or without notice or lapse of time) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation or termination of or materially and adversely modify any material Permit.
(c) Stonegate has implemented one or more formal codes addressing each of ethics, personal trading policies, conflicts of
interest policies, customer privacy policies, anti-money laundering policies, and other material policies as may be required by any Applicable Law for itself and its Subsidiaries, and a complete and correct copy of each such policy has been made
available to Parent. Such policies comply in all material respects with the requirements of any Laws applicable thereto.
3.16
Loans
.
(a) Each loan, revolving credit facility, letter of credit or other extension of credit (including
guarantees) or commitment to extend credit originated or acquired by Stonegate and its Subsidiaries (collectively,
Loans
) (i) complies in all material respects with Applicable Laws, (ii) has been made, entered into or
acquired by Stonegate or one of its Subsidiaries in accordance with customary board of director-approved loan policies, (iii) is evidenced by promissory notes or other evidences of indebtedness, which are true, genuine and correct in all
material respects, and which, together with all security agreements and guarantees, constitute a valid and legally binding obligation of the obligor named therein, and as applicable, Stonegate or one of its Subsidiaries and are enforceable in
accordance with their terms, (iv) is in full force and effect, and (v) to Stonegates Knowledge, is not subject to any offset, recoupment, adjustment or any other valid or cognizable claim or defense by the applicable borrower;
provided
that
the enforcement
A-26
of each of (iii) and (v) above may be limited by applicable laws related to safety and soundness of insured depository institutions as set forth in 12 U.S.C. §1818(b), the
appointment of a conservator or receiver, bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors rights or by general equity principles. None of the
rights or remedies under the documentation relating to the Loans has in any material respect been amended, modified, waived, subordinated or otherwise altered by Stonegate, except as evidenced by a written instrument which is a part of the file with
respect to such Loans made available to Parent and was entered into by Stonegate in good faith and in its ordinary course of business. For purposes of this
Section 3.16(a)
, the phrase enforceable in accordance with its terms
as it relates to a Loan does not mean that the borrower has the financial ability to repay a Loan or that any collateral is sufficient to result in payment of the Loan secured thereby.
(b) Stonegate has previously disclosed a complete and correct list of all Loans that, as of the Balance Sheet Date (i) are
contractually past due 90 days or more in the payment of principal and/or interest, (ii) are on nonaccrual status or (iii) are classified as Watch List, Special Mention, Substandard, Doubtful
or Loss, (or words of similar import) together with the principal amount on each such Loan and the identity of the obligor thereunder.
Section 3.16(b)
of the Stonegate Disclosure Schedule sets forth a complete list of other
real estate owned, acquired by foreclosure or by deed in-lieu thereof and owned by Stonegate or its Subsidiaries as of the Balance Sheet Date, including the book value thereof. True, correct and complete copies of the currently effective lending
policies and practices of Stonegate and each of its Subsidiaries have been made available to Parent.
(c) (i) Each
outstanding Loan (including Loans held for resale or previously sold to investors) has been solicited and originated and is administered and, where applicable, serviced, and the relevant files are being maintained, in accordance with the relevant
loan documents, in each case in all material respects, Stonegates underwriting and servicing standards (and, in the case of Loans held for resale or previously sold to investors, the underwriting standards, if any, of the applicable investors)
in all material respects and with Applicable Laws and applicable requirements of any government-sponsored enterprise program in all material respects, and (ii) Stonegate and its Subsidiaries have properly fulfilled in all material respects
their contractual responsibilities and duties with respect to any Loan in which they act as the lead lender or servicer and have complied in all material respects with their duties as required under applicable regulatory requirements.
(d) Except as set forth on
Section 3.16(d)
of the Stonegate Disclosure Schedule none of the agreements pursuant to
which Stonegate or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein, other than repurchase obligations arising upon breach of
representations and warranties, covenants and other obligations of Stonegate or its Subsidiaries, as applicable.
(e) As to
each Loan that is secured, whether in whole or in part, by a guaranty of the United States Small Business Administration or any other Governmental Authority, such guaranty is in full force and effect, and to Stonegates Knowledge, will remain
in full force and effect following the Closing Date, in each case, without any further action by Stonegate or any of its Subsidiaries subject to the fulfillment of their obligations under the Small Business Administration Agreement that arise after
the date hereof.
(f)
Section 3.16(f)
of the Stonegate Disclosure Schedule sets forth a complete and correct
list of all Loans by Stonegate and its Subsidiaries to any directors, executive officers and principal shareholders (as such terms are defined in Regulation O of the Federal Reserve Board (12 C.F.R. Part 215)) of Stonegate or any of its
Subsidiaries. There are no Loans to any employee, officer, director or other Affiliate of Stonegate on which the borrower is paying a rate other than that reflected in the note or the relevant credit agreement. All such Loans are and were made in
compliance in all material respects with all Applicable Laws. Each Loan disclosed on
Section 3.16(f)
of the Stonegate Disclosure Schedule has been made in the ordinary course of business, and on the same terms, including interest rate
and collateral, as those prevailing at the time for comparable arms-length transactions, did not involve more than the normal risk of collectability or present other unfavorable features.
A-27
3.17
CRA Compliance
. Stonegate is Well-Capitalized and most recent examination rating
under the Federal Community Reinvestment Act, as amended, and the regulations promulgated thereunder (
CRA
), was satisfactory or better. To Stonegates Knowledge, there is no fact or circumstance or set of facts or
circumstances which would be reasonably likely to cause Stonegate to receive any notice of non-compliance with such provisions of the CRA or cause Stonegates CRA rating to decrease below the satisfactory level.
3.18
Investment Portfolio
. All investment securities held by Stonegate or its Subsidiaries, as reflected in the financial statements
included in the Stonegate FDIC Filings, are in all material respects carried in accordance with GAAP and in a manner consistent with the applicable guidelines issued by the Stonegate Regulatory Agencies. Each of Stonegate and its Subsidiaries has
good, valid and marketable title to all securities held by it, except securities sold under repurchase agreements or held in any fiduciary or agency capacity, free and clear of any Lien, except as set forth in the financial statements included in
the Stonegate FDIC Filings and except to the extent any such securities are pledged in the ordinary course of business consistent with prudent banking practices to secure obligations of Stonegate or its Subsidiaries.
3.19
Interest Rate Risk Management Instruments
. All interest rate swaps, caps, floors, option agreements, futures and forward contracts
and other similar derivative transactions and risk management arrangements, whether entered into for the account of Stonegate, any of its Subsidiaries or for the account of a customer of Stonegate or one of its Subsidiaries, were entered into in the
ordinary course of business and in accordance with applicable rules, regulations and policies of any Regulatory Agency and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of
Stonegate or one of its Subsidiaries enforceable in accordance with their terms except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of
equitable remedies, and are in full force and effect. Stonegate and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued, and,
to Stonegates knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.
3.20
Intellectual Property
. Stonegate and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any
material Liens), all Intellectual Property necessary for the conduct of its business as currently conducted. To Stonegates Knowledge, the use of any Intellectual Property by Stonegate and its Subsidiaries does not infringe, misappropriate or
otherwise violate the rights of any person in any material respect and is in accordance in all material respects with any applicable license pursuant to which Stonegate or any Stonegate Subsidiary acquired the right to use any Intellectual Property,
and no person has asserted in writing to Stonegate that Stonegate or any of its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property rights of such person. To Stonegates Knowledge, no person is
challenging, infringing on or otherwise violating any right of Stonegate or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to Stonegate or its Subsidiaries. Neither Stonegate nor any Stonegate Subsidiary
has received any written notice of any pending claim with respect to any Intellectual Property owned by Stonegate or any Stonegate Subsidiary, and Stonegate and its Subsidiaries have taken commercially reasonable actions to avoid the abandonment,
cancellation or unenforceability of all Intellectual Property owned or licensed, respectively, by Stonegate and its Subsidiaries. For purposes of this Agreement,
Intellectual Property
means trademarks, service marks, brand names,
internet domain names, logos, symbols, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions,
continuations, continuations in part and renewal applications), all improvements thereto, and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and know-how, including processes, technologies,
protocols, formulae, prototypes and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not and whether in published or unpublished works,
in any jurisdiction; and registrations or applications for registration of
A-28
copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar intellectual property or proprietary rights.
3.21
Environmental Matters
.
(a) Except as set forth on
Section
3.21
of the Stonegate Disclosure Schedule, (i) no notice, notification,
demand, request for information, citation, summons or order has been received by Stonegate or any of its Subsidiaries, no complaint has been filed against Stonegate or any of its Subsidiaries, no penalty has been assessed against Stonegate or any of
its Subsidiaries, and no investigation, action, claim or suit is pending or, to Stonegates Knowledge, is threatened against Stonegate or any of its Subsidiaries by any Governmental Authority or other Person, in each case relating to or arising
out of any Environmental Law; (ii) Stonegate, each of its Subsidiaries and the Stonegate Real Property are in compliance in all material respects with all Environmental Laws and all Permits relating to Environmental Law matters;
(iii) neither Stonegate nor any of its Subsidiaries is conducting or paying for any response or corrective action under any Environmental Law at any location; (iv) neither Stonegate nor any of its Subsidiaries is party to any Order that
imposes any obligations under any Environmental Law; and (v) neither Stonegate nor any of its Subsidiaries have assumed by contract or by operation of law a claim or suit related to a violation of any Environmental Law or any obligation to
investigate and/or remediate Hazardous Substances.
(b) To Stonegates Knowledge, (i) there has been no release
of any Hazardous Substance by Stonegate or any of its Subsidiaries in any manner that has given or would reasonably be expected to give rise to any unpaid remedial obligation, corrective action requirement or liability under applicable Environmental
Laws, (ii) there are no underground storage tanks used for storage of Hazardous Substance which were or are located on or below the surfaces of properties owned or operated by Stonegate, and (iii) no part of the properties owned or
operated by Stonegate contains asbestos in friable condition.
(c) To Stonegates Knowledge, no Hazardous Substance
has been disposed of, arranged to be disposed of, released or transported in violation of any applicable Environmental Law, or in a manner that has given rise to, or that would reasonably be expected to give rise to, any liability under any
Environmental Law, from any current or former properties or facilities while owned or operated by Stonegate or any of its Subsidiaries, and Hazardous Substances are not otherwise present at or about any such properties or facilities in amounts or
conditions that has resulted in or would reasonably be expected to result in liability to Stonegate or any of its Subsidiaries under any Environmental Law.
(d) Stonegate has made available to Parent all assessments, reports, data, audits and other material information in possession
of Stonegate or to which it has reasonable access regarding the presence or release of Hazardous Substances or compliance with Environmental Laws related to properties it owns or operates.
3.22
Material Contracts
. Except for the Contracts set forth on the Exhibit Index included in Stonegates Form 10-K for
the year ended December 31, 2016 or the Stonegate FDIC Filings subsequently filed or on
Section
3.22
of the Stonegate Disclosure Schedule as of the date of this Agreement, neither Stonegate nor any of its Subsidiaries, nor any of
their respective assets, properties, businesses or operations is a party to, bound or affected by, or receives benefits under any Stonegate Material Contract. All Stonegate Material Contracts are valid and binding agreements of Stonegate or its
Subsidiaries, as applicable, and are in full force and effect and are enforceable in accordance with their terms except as such enforceability may be limited by laws related to safety and soundness of insured depository institutions as set forth in
12 U.S.C. §1818(b), the appointment of a conservator or receiver, bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws, rules or regulations affecting creditors rights and remedies generally and general
principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). Neither Stonegate nor its Subsidiaries is in material violation or breach of or material default under any Stonegate Material Contract. To
Stonegates Knowledge, no third party is in violation or breach of or default under any Stonegate Material Contract, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a
breach or default.
A-29
3.23
Employee Benefit Matters
.
(a)
Section 3.23(a)
of the Stonegate Disclosure Schedule sets forth a true and complete list of each Stonegate
Employee Benefit Plan. Only employees and directors and former employees and directors (and their eligible dependents) of Stonegate and its Subsidiaries participate in the Stonegate Employee Benefit Plans. Within five (5) Business Days of the
date of this Agreement, Stonegate shall provide a complete and correct list of the names of the participants in each of the Stonegate Employee Benefit Plans. Neither Stonegate nor any of its Subsidiaries has been notified that any Stonegate Employee
Benefit Plan is undergoing an audit or is subject to an investigation by any of the IRS, the United States Department of Labor (
DOL
) or other Governmental Authority.
(b) With respect to each Stonegate Employee Benefit Plan, complete and correct copies of the following documents have been made
available to Parent: (i) the most recent plan documents or written agreements thereof, and all amendments thereto and all related trust or other funding vehicles (including, without limitation, contracts with service providers and insurers)
with respect to each such Stonegate Employee Benefit Plan and, in the case of any Stonegate Employee Benefit Plan that is not in written form, a written description of all material aspects of such plan; (ii) the most recent summary plan
description, and all related summaries of material modifications thereto, if applicable; (iii) Forms 5500 (including schedules and attachments), financial statements and actuarial reports for the past three (3) years, if applicable;
(iv) the most recent IRS determination letter or opinion letter and any pending application with respect to each such Stonegate Employee Benefit Plan which is intended to qualify under Section 401(a) of the Code; and (v) all
correspondence to and from the IRS, DOL, or any other Governmental Agency within the past three (3) years relating to any Stonegate Employee Benefit Plan (other than the documentation provided under (iii) and (iv) above).
(c) Each Stonegate Employee Benefit Plan has been administered in all material respects in compliance with its terms and with
all Applicable Laws, including, but not limited to, ERISA, the Code, the Health Insurance Portability and Accountability Act and the Patient Protection and Affordable Care Act, and any regulations or rules promulgated thereunder; (ii) no
Proceedings are pending, or to Stonegates Knowledge, threatened; (iii) all premiums, contributions, or other payments required to have been made by Applicable Law or under the terms of any such Stonegate Employee Benefit Plan or any
Contract relating thereto have been made; (iv) all material reports, returns and similar documents required to be filed with any Governmental Authority or distributed to any plan participant have been duly filed or distributed; and (v) no
non-exempt prohibited transaction or reportable event has occurred within the meaning of the applicable provisions of ERISA or the Code.
(d) With respect to each Stonegate Employee Benefit Plan intended to qualify under Section 401(a) of the Code, the IRS has
issued a favorable determination letter or opinion letter or advisory letter upon which Stonegate is entitled to rely under IRS pronouncements, no such determination letter, opinion letter or advisory letter has been revoked nor, to Stonegates
Knowledge, has revocation been threatened, and no circumstance exists that would reasonably be expected to result in the loss of such qualification.
(e) No Stonegate Employee Benefit Plan is subject to the laws of any jurisdiction outside the United States.
(f) Except as set forth in
Section 3.23(f)
of the Stonegate Disclosure Schedule neither Stonegate nor any Stonegate
Employee Benefit Plan provides (or will provide) health or other welfare benefits to one or more former employees, officers, directors, or other individuals (including dependents of any of the foregoing) other than benefits that are required to be
provided pursuant to the applicable requirements of COBRA. Stonegate has at all times complied with COBRA in all material respects, and has maintained adequate records to evidence such compliance.
(g) No Stonegate Employee Benefit Plan is, and neither Stonegate nor any Affiliate maintains or contributes to, or has at any
time maintained or contributed to, or has any liability, whether actual or contingent, under a plan subject to Section 302 or Title IV of ERISA or to Section 412 of the Code. No Stonegate Employee Benefit Plan is or was at any time a
multiemployer plan, as defined in Section 3(37) of
A-30
ERISA, and neither Stonegate nor any Affiliate has ever contributed to, or had an obligation to contribute to, or incurred any liability with respect to, any such multiemployer plan. None of the
Stonegate Employee Benefit Plans are part of, or have at any time been part of, a multiple employer welfare arrangement, as that term is defined in ERISA Section 3(40). No Stonegate Employee Benefit Plan is or was at any time a multiple
employer plan, as described in Code Section 413(c) or ERISA Sections 4063 or 4064, and neither Stonegate nor any Affiliate has ever contributed to or had an obligation to contribute to any such plan.
(h)
Section 3.23(h)
of the Stonegate Disclosure Schedule sets forth a complete list of all severance and
termination benefits with respect to which Stonegate or any of its Subsidiaries has or will have any liability, under any Stonegate Employee Benefit Plan or other employment agreement, noncompetition or severance agreement, program, practice, or
arrangement; such schedule shall indicate whether such plan, agreement or arrangement will not be automatically terminated at Closing (in such case, a
Continuing Employment Agreement
) or whether such plan, agreement or arrangement
will be terminated at Closing (in such case, a
Terminated Employment Agreement
) and the amount of any required payments thereunder due upon Closing, upon termination of employment or both (each, an
Employment Payment
).
(i) Except as set forth on
Section 3.23(i)
of the Stonegate Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (whether alone or in conjunction with any other event) (i) require the funding (whether on a formal or informal basis) of the
benefits under any Stonegate Employee Benefit Plan; (ii) increase the amount of any compensation, equity award or other benefits otherwise payable by Stonegate or any of its Subsidiaries under any Stonegate Employee Benefit Plan; or
(iii) result in the acceleration of the time of payment or vesting of any compensation, equity award or other benefit under any Stonegate Employee Benefit Plan.
(j) No participants in any Stonegate Employee Benefit Plan participate in such plan pursuant to the terms of a collective
bargaining agreement.
(k) Except as set forth in
Schedule 3.23(k)
, the 401(k) Plan is not funded with and does not
allow for payments, investments, or distributions in any employer security of Stonegate or any Affiliate (including employer securities as defined in Section 407(d)(1) of ERISA), or employer real property as defined in Section 407(d)(2) of
ERISA.
(l) Except as set forth in
Section 3.23(l)
of the Stonegate Disclosure Schedule no reportable event
within the meaning of Section 4043 of ERISA, and no event described in Section 4062 or 4063 of ERISA, has occurred in connection with any Stonegate Employee Benefit Plan, and neither Stonegate nor to Stonegates Knowledge any
Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA.
(m) Except as set forth on
Section 3.23(m)
of the Stonegate Disclosure Schedule neither Stonegate nor any of its
Subsidiaries is a party to, or is otherwise obligated under, any plan, policy, agreement or arrangement that provides for the gross-up or reimbursement of Taxes imposed under Section 409A or 4999 of the Code (or any corresponding provisions of
state or local Law relating to Tax). Each Stonegate Employee Benefit Plan that is a nonqualified deferred compensation plan within in the meaning of Section 409A of the Code has been operated in material documentary and operational
compliance with Section 409A of the Code and the Treasury Regulations and other guidance promulgated thereunder.
3.24
Labor
Relations (Employment Matters)
.
(a) There is no labor strike, dispute, slowdown, stoppage or lockout actually pending
or, to Stonegates Knowledge, threatened against or affecting Stonegate or any of its Subsidiaries. Neither Stonegate nor any of its Subsidiaries is a party to any collective bargaining agreements or similar labor agreements and to
Stonegates knowledge there are no organizing efforts by any union or other group seeking to represent any employees of Stonegate or any of its Subsidiaries. Stonegate and each of its Subsidiaries is, and has at all relevant times been, in
compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions of employment, equal opportunity, nondiscrimination, immigration, labor, wages, hours of work and occupational safety
and health, and is not engaged in any
A-31
unfair labor practices defined in the National Labor Relations Act or other Applicable Law. Neither Stonegate nor any of its Subsidiaries has received any written notice that any Governmental
Authority responsible for the enforcement of labor or employment laws, rules or regulations intends to conduct an investigation with respect to or relating to Stonegate and its Subsidiaries and, to Stonegates Knowledge, no such investigation
is in progress.
(b) Since the Balance Sheet Date, Stonegate has not effectuated a mass layoff or plant
closing as defined in the WARN Act affecting any site of employment or facility of Stonegate or its Subsidiaries.
(c) Except as set forth on
Section 3.24(c)
of the Stonegate Disclosure Schedule, Stonegate is not a party to any
Contract with respect to the employment of any officer, director, employee or consultant that is not terminable at will and without any penalty or other severance or obligation.
(d) Except as set forth on
Section 3.24(d)
of the Stonegate Disclosure Schedule, to Stonegates Knowledge,
there are no non-solicitation, non-competition, non-disclosure, non-interference agreements between any current employees of Stonegate or any of its Subsidiaries and any third party.
(e) Stonegate and each of its Subsidiaries have made all required payments due to employees and to its respective unemployment
compensation reserve accounts with the appropriate federal, state, local, and foreign governments (and all agencies thereof) of the jurisdictions where either Stonegate or the respective Subsidiary is required to maintain such accounts.
3.25
Related Party Transactions
. Except as set forth on
Section
3.25
of the Stonegate Disclosure Schedule, there are no
transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between Stonegate or any of its Subsidiaries, on the one hand, and any
current or former director or executive officer (as defined in Rule 3b-7 under the Exchange Act) of Stonegate or any of its Subsidiaries or any person who beneficially owns (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) 5% or
more of the outstanding Stonegate Common Stock (or any of such persons immediate family members or affiliates) (other than Subsidiaries of Stonegate) on the other hand, except those of a type available to employees of Stonegate or its
Subsidiaries generally.
3.26
Insurance
. Except as would not reasonably be expected to have a Material Adverse Effect on Stonegate,
each of Stonegate and its Subsidiaries are insured against such risks and in such amounts as are adequate and as the management of Stonegate reasonably has determined to be prudent with respect to their businesses, properties and assets. All
insurance policies with respect to the business and assets of Stonegate are in full force and effect, all premiums due and payable thereon have been paid, Stonegate and its Affiliates have not received notice to the effect that any of them are in
default under any such insurance policy, and all claims have been filed in a timely fashion. To Stonegates Knowledge, there is no claim pending under any such policies with respect to Stonegate or any of its Subsidiaries as to which coverage
has been denied or disputed by the underwriters of such policies.
3.27
Brokers
. Except for Keefe, Bruyette & Woods, Inc.
and Hovde Group, LLC, no broker, finder or investment banker is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of
Stonegate.
3.28
Stonegate Information
. True and complete copies of all documents listed in the Stonegate Disclosure Schedule have
been made available or provided to Parent. Except for the minutes and actions related to the process leading to this Agreement and the transactions contemplated hereunder, which have not yet been prepared, approved, executed and/or placed in
Stonegates corporate minute books, the corporate minute books, the books of account, stock record books and other financial and corporate records of Stonegate and each of its Subsidiaries, all of which have been made available to Parent, are
complete and correct in all material respects.
3.29
Information Supplied
. None of the information supplied or to be supplied by
Stonegate for inclusion or incorporation by reference in (a) the Proxy Statement/Prospectus, on the date it (or any amendment
A-32
or supplement thereto) is first mailed to the Stonegate Shareholders or at the time of the Stonegate Shareholders Meeting, (b) the Registration Statement, when it or any amendment
thereto becomes effective under the Securities Act, or (c) the documents and financial statements of Stonegate incorporated by reference in the Proxy Statement/Prospectus, the Registration Statement or any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by Stonegate with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Parent or its Subsidiaries for inclusion in the
Proxy Statement/Prospectus or the Registration Statement.
3.30
Fairness Opinion
. The Board of Directors of Stonegate has received
the opinion of Hovde Group, LLC, dated the date of this Agreement, to the effect that, as of such date and based upon and subject to the factors and assumptions set forth therein, the Per Share Merger Consideration pursuant to this Agreement is
fair, from a financial point of view, to the Stonegate Shareholders.
3.31
No Other Representations or Warranties
.
(a) Except for the representations and warranties made by Stonegate in this Article III, neither Stonegate nor any other person
makes any express or implied representation or warranty with respect to Stonegate, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Stonegate hereby disclaims
any such other representations or warranties.
(b) Stonegate acknowledges and agrees that neither Parent nor any other
person has made or is making any express or implied representation or warranty other than those contained in Article IV.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as disclosed in the disclosure schedule delivered by Parent to Stonegate concurrently herewith (the
Parent Disclosure
Schedule
); provided, that (a) no such item is required to be set forth as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect,
(b) the mere inclusion of an item in the Parent Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by Parent that such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect on Parent and (c) any disclosures made with respect to a section of
Article IV
shall be deemed to qualify (1) any other section of
Article IV
specifically
referenced or cross-referenced and (2) other sections of
Article IV
to the extent it is reasonably apparent on its face (notwithstanding the absence of a specific cross reference) from a reading of the disclosure that such disclosure
applies to such other sections, Parent hereby represents and warrants to Stonegate as follows:
4.1
Organization
.
(a) Parent is an Arkansas corporation (i) duly organized, validly existing and in good standing under the Laws of the
State of Arkansas (ii) which is a bank holding company duly registered under the BHC Act, (iii) with all requisite power (corporate or otherwise) and authority to own and operate its properties and to carry on its business as presently
conducted. Parent is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its activities or the character of the properties it owns or leases make such qualification
necessary, except in such cases where the lack of said authorization or qualification has not had and would not reasonably be expected to have a Material Adverse Effect on Parent. True, complete and correct copies of the Charter Documents of Parent,
as in effect as of the date of this Agreement, have previously been made available to Stonegate.
(b) Each Subsidiary of
Parent is (i) duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation, as applicable, (ii) with all requisite power and
A-33
authority to own and operate its properties and to carry on its business as presently conducted, and (iii) duly qualified in good standing in each jurisdiction in which the nature of its
activities or the character of the properties it owns or leases make such qualification necessary, except in such cases where the lack of said authorization or qualification has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent.
4.2
Authority; Binding Nature
. Each of Parent and, to the extent applicable, its Subsidiaries has all requisite
power and authority to enter into this Agreement and to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Subsidiary Bank, and the
consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of each of Parent and, to the extent applicable, its Subsidiaries and no other corporate proceedings on the part of Parent or such
Subsidiaries are necessary to authorize the execution and delivery of this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Subsidiary Bank and constitutes (in each case assuming
due authorization, execution and delivery by Stonegate) the legal, valid and binding obligations of Parent and Subsidiary Bank enforceable against Parent and Subsidiary Bank, as applicable, in accordance with its terms, subject to the effect of any
applicable laws related to safety and soundness of insured depository institutions as set forth in 12 U.S.C. § 1818(b), the appointment of a conservator or receiver, bankruptcy, reorganization, insolvency, fraudulent transfer, moratorium,
restructuring or similar Laws affecting creditors rights and remedies generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.
4.3
No Conflicts
. The execution, delivery and performance of this Agreement by Parent and Subsidiary Bank, and the consummation of the
transactions contemplated hereby by Parent and its Subsidiaries, including the Merger, do not and will not (a) conflict with, or result in a breach of or default under, any terms or conditions of the Charter Documents of Parent or any of its
Subsidiaries, or (b) assuming that the consents and approvals referred to in
Section
4.4
hereof are duly obtained, (x) conflict with or violate in any material respect any Applicable Law as to Parent or any of its
Subsidiaries, (y) result in any material breach of, or constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, or give to others any rights of termination,
amendment, acceleration or cancellation pursuant to any Contract set forth on the Exhibit Index included in Parents Form 10-K for the year ended December 31, 2013 or the Parent SEC filings subsequently filed, or
(z) result in the creation or imposition of any Lien on any of the assets of Parent or any of its Subsidiaries.
4.4
Consents and
Approvals
. Other than (i) the Regulatory Approvals, (ii) the Requisite Parent Vote, and (iii) such other filings, authorizations, consents, notices or approvals as may be set forth on
Section
4.4
of the Parent
Disclosure Schedule, no consents, approvals, authorizations or other actions by, or filings with or notifications to, any Person or any Governmental Authority on the part of Parent or any of its Subsidiaries is required in connection with the
execution, delivery and performance of this Agreement by Parent and Subsidiary Bank and the consummation of the transactions contemplated hereby.
4.5
Regulatory Matters
. Parent and each of its Subsidiaries has timely filed all material reports, registrations and statements,
together with any amendments required to be made with respect thereto, that it was required to file since January 1, 2014 with, as applicable, (i) the Federal Reserve Board; (ii) the FDIC; (iii) the ASBD and any predecessor
agency; (iv) any other applicable bank regulatory agencies (collectively,
Parent Regulatory Agencies
and, together with Stonegate Regulatory Agencies, the
Regulatory Agencies
) and (v) any other
applicable Governmental Authority and has paid all applicable fees, premiums and assessments due and payable thereto. Each such report, registration and statement, including financial statements, exhibits and schedules thereto, complied, in all
material respects, with Applicable Law. Since January 1, 2014, neither Parent, Subsidiary Bank nor any of their Subsidiaries is subject to any cease-and-desist or other formal or informal order or enforcement action issued by, or is a party to
any written agreement, consent agreement, operating agreement or memorandum of understanding with, or is a party to any commitment letter, regulatory directive or similar
A-34
undertaking with, or is subject to any capital directive by, or has been ordered to pay any civil money penalty by or at the request of, any Parent Regulatory Agency or other Governmental
Authority of any kind, or has adopted any board resolutions at the request or suggestion of any Parent Regulatory Agency or other Governmental Authority that currently restricts in any material respect the conduct of its business, imposes any
material requirements or procedures, relates to its credit or risk management policies or activities pursuant to such credit or risk management policies, including Anti-money Laundering and Bank Secrecy Act requirements or in any material manner
relates to its capital adequacy, its ability to pay dividends or its management (each, a
Parent Regulatory Agreement
), nor has Parent, Subsidiary Bank or any of their Subsidiaries been advised since January 1, 2014 by any
Parent Regulatory Agency or other Governmental Authority that it is considering issuing, initiating, ordering or requesting any such Parent Regulatory Agreement. Except as set forth on
Section
4.5
of the Parent Disclosure Schedule,
there is no material unresolved written violation, criticism, comment or exception by any Parent Regulatory Agency or other Governmental Authority relating to Parent, Subsidiary Bank or any of their Subsidiaries, and Parent is not aware of any
reason why all required Regulatory Approvals would not be received on a timely basis without undue delay and without the imposition of any Materially Burdensome Regulatory Condition as described in the proviso to
Section 5.3(a)(i)
.
Except for normal examinations conducted by Governmental Authorities in the regular course of business, no Governmental Authority has initiated any investigation or proceeding into the business or operations of Parent or Subsidiary Bank since
January 1, 2014. Parent is not aware of any reason why it or any of its Subsidiaries would not receive all required Regulatory Approvals on a timely basis without undue delay and without the imposition of any Materially Burdensome Regulatory
Condition as described in the proviso to
Section 5.3(a)(i)
.
4.6
Capitalization
.
(a) As of the date of this Agreement (the Parent Capitalization Date) the authorized capital stock of Parent
consists of (i) 200,000,000 shares of Parent Common Stock, and (ii) 5,500,000 shares of preferred stock par value $0.01 per share. As of the Parent Capitalization Date, there are 143,441,824 shares of Parent Common Stock outstanding (which
number includes (i) 1,065,838 shares of Parent Common Stock subject to outstanding awards of restricted Parent Common Stock granted by Parent, (ii) no shares of Parent Common Stock held in treasury, and (iii) 2,288,120 shares of
Parent Common Stock subject to and reserved for issuance upon the exercise of outstanding stock options to purchase shares of Parent Common Stock granted by Parent), and no other shares of capital stock or other voting securities or equity interests
of Parent are issued, reserved for issuance or outstanding. The above shares constitute all of the issued and outstanding Parent Common Stock as of the Parent Capitalization Date. All of the issued and outstanding shares of Parent Common Stock and
shares of Parents preferred stock have been duly authorized, validly issued and are fully paid and nonassessable. None of such shares have been issued or disposed of in violation of any preemptive rights of any Person. The Parent Common Stock
to be issued in exchange for Stonegate Common Stock in the Merger, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and will not be subject to any preemptive rights.
As of the date hereof there are, and as of the Effective Time there will be, sufficient authorized and unissued Parent Common Stock to enable Parent to issue the Merger Consideration as contemplated in this Agreement.
(b) All of the issued and outstanding shares of capital stock of Subsidiary Bank are, on the date of this Agreement, and on the
Closing Date will be, held by Parent.
(c) Except as disclosed in
Section 4.6(c)
of the Parent Disclosure
Schedule, as of the Parent Capitalization Date, there are no outstanding rights, plans, options, warrants, calls, conversion rights or any agreements, arrangements or commitments of any kind or character (either firm or conditional) obligating
Parent or any of its Affiliates to issue, deliver or sell, or cause to be delivered or sold, any capital stock of Parent or its Subsidiaries, or any securities exchangeable for or convertible into the capital stock of Parent or its Subsidiaries. As
of the Parent Capitalization Date, no bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the holders of capital stock may vote have been issued by Parent and are outstanding.
A-35
4.7
Deposits
. The deposit accounts of Subsidiary Bank are insured by the FDIC to the
fullest extent permitted by Applicable Law, and all premiums and assessments required to be paid in connection therewith have been duly, timely and fully paid. No proceedings for the revocation or termination of such deposit insurance are pending
or, to Parents Knowledge, threatened.
4.8
Parent SEC Filings
. Parent has filed (or furnished) all registration statements,
prospectuses, forms, reports, definitive proxy statements, schedules and documents required to be filed (or furnished) with the SEC by it under Section 5 of the Securities Act or Sections 13(a), 14 or 15(d) of the Exchange Act, as the case may
be, from and after January 1, 2014 (collectively, the
Parent SEC Filings
). Each Parent SEC Filing, as amended or supplemented if applicable, (A) as of its date, or, if amended or supplemented, as of the date of the most
recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (B) did not, at the time it was filed (or became effective in the case of
registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, 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 made therein, in the light of the circumstances under which they were made, not misleading.
4.9
Financial Statements
.
(a) The financial statements of Parent and its Subsidiaries included (or incorporated by
reference) in the Parent SEC Filings (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of Parent and its Subsidiaries; (ii) fairly present in all material
respects the consolidated results of operations, cash flows, changes in shareholders equity and consolidated financial position of Parent and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth
(subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount); (iii) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in
such statements or in the notes thereto (the
Parents Financial Statements
). As of the date hereof, the books and records of Parent and its Subsidiaries have been maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements and reflect only actual transactions. As of the date hereof, BKD, LLP has not resigned (or informed Parent that indicated it intends to resign) or been dismissed as independent public
accountants of Parent as a result of or in connection with any disagreements with Parent on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(b) Except as would not reasonably be expected to be, individually or in the aggregate, material to Parent and its
Subsidiaries, taken as a whole, neither Parent nor any of its Subsidiaries has incurred any material liability or obligation of any nature whatsoever (whether absolute, accrued, contingent, determined, determinable or otherwise and whether due or to
become due), except for (i) those liabilities that are reflected or reserved against on the consolidated balance sheet of Parent included in its Annual Report on Form 10-K for the fiscal year ended the Balance Sheet Date (including any notes
thereto), (ii) liabilities incurred in the ordinary course of business consistent in nature and amount with past practice since the Balance Sheet Date or (iii) liabilities incurred in connection with this Agreement and the transactions
contemplated hereby.
(c) The records, systems, controls, data and information of Parent and its Subsidiaries are in all
material respects recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Parent or its
Subsidiaries or accountants (including all means of access thereto and therefrom). Parent (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to Parent, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of Parent by others
A-36
within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act, and (y) has disclosed, based on its most recent evaluation prior to the date hereof, to Parents outside auditors and the audit committee of Parents Board of Directors (i) any significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Parents ability to record, process, summarize and
report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Parents internal controls over financial reporting. There is no reason to believe that
Parents outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the
Sarbanes-Oxley Act, without qualification, when next due.
4.10
Ordinary Course; Lack of Material Adverse Change
. From the Balance
Sheet Date, except as reflected in the Parent SEC Filings or
Section
4.10
of the Parent Disclosure Schedule, or as contemplated by this Agreement, there has not been (i) any Material Adverse Change in Parent, (ii) any fact,
effect, event, change occurrence or circumstance that would reasonably be expected to have a Material Adverse Change in Parent or (iii) any action taken by Parent or any of its Subsidiaries during the period from the Balance Sheet Date through
the date of this Agreement that would have required Stonegates consent if Parent had been subject to
Section
5.2
at such time.
4.11
Reorganization
. Neither Parent nor any of its Subsidiaries has taken any action, nor are they aware of any fact or circumstance,
that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
4.12
Litigation; Orders
.
(a) There is no material Proceeding pending or, to Parents Knowledge, threatened either (i) against Parent or any of its
Subsidiaries, or to which any assets, interest, or right of any of them may be subject, or (ii) seeking to prevent, materially alter or delay any of the transactions contemplated by this Agreement.
(b) There is no material Order either (i) outstanding against Parent, Subsidiary Bank or any of their Subsidiaries, or to which any
assets, interest, or right of any of them may be subject, or (ii) seeking to prevent, materially alter or materially delay any of the transactions contemplated by this Agreement.
(c) To Parents Knowledge, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a
basis for the commencement of any material Proceeding against Parent, Subsidiary Bank or any of their Subsidiaries.
4.13
Compliance
.
(a) Parent and each of its Subsidiaries are in compliance in all material respects with all Applicable Laws and
Orders, including without limitation all Laws related to data protection or privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit
Reporting Act, the Truth in Lending Act and Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations
promulgated by the Consumer Financial Protection Bureau, the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products, the SAFE Mortgage Licensing Act of 2008, the Real Estate Settlement Procedures Act and Regulation X, and any
other law relating to bank secrecy, discriminatory lending, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the Federal Reserve Act, the Sarbanes-Oxley Act, and all agency requirements relating to the
origination, sale and servicing of mortgage and consumer loans. Parent and each of
A-37
its Subsidiaries have all Permits of, and have made all required filings, applications and registrations with, all applicable Government Authorities necessary to permit it to carry on its
business in all material respects as presently conducted.
(b) Neither Parent nor any of its Subsidiaries is in default under or in
violation of any term or provision of (i) its Charter Documents or (ii) any material Permit which it holds. No event has occurred or circumstance exists that will (with or without notice or lapse of time) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation or termination of or materially and adversely modify any material Permit.
(c) Parent
has implemented one or more formal codes addressing each of ethics, personal trading policies, conflicts of interest policies, customer privacy policies, anti-money laundering policies, and other material policies as may be required by any
Applicable Law for itself, Subsidiary Bank and their Subsidiaries, and a complete and correct copy of each such policy has been made available to Stonegate. Such policies comply in all material respects with the requirements of any Laws applicable
thereto.
4.14
CRA Compliance
. Subsidiary Bank is Well Capitalized and its most recent examination rating under the CRA, was
satisfactory or better. To Parents Knowledge, there is no fact or circumstance or set of facts or circumstances which would be reasonably likely to cause Parent or Subsidiary Bank to receive any notice of non-compliance with such
provisions of the CRA or cause Parent or Subsidiary Bank s CRA rating to decrease below the satisfactory level.
4.15
Material Contracts
. As of the date of this Agreement, neither Parent nor any Subsidiary of Parent is a party to any Contract or amendment thereto that would be required to be, and has not been, filed as an exhibit to Parent SEC Filings as of
the date of this Agreement. With respect to any Contract or amendment thereto required to be filed as an exhibit to a Parent SEC Filing: (i) the Contract is in full force and effect; (ii) neither Parent nor any Subsidiary of Parent is in
material violation or breach of or material default thereunder; and (iii) no other party to any such Contract is, to Parents Knowledge as of the date of this Agreement, in violation or breach of or default thereunder.
4.16
Brokers
. Except for RBC Capital Markets, LLC, no broker, finder or investment banker is entitled to any brokerage, finders
or other fee or commission in connection with this Agreement, or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or its Subsidiaries.
4.17
Information Supplied
. None of the information supplied or to be supplied by Parent or its Subsidiaries for inclusion or
incorporation by reference in (a) the Proxy Statement/Prospectus, on the date it (or any amendment or supplement thereto) is first mailed to the Stonegate Shareholders or at the time of the Stonegate Shareholders Meeting, (b) the
Registration Statement, when it or any amendment thereto becomes effective under the Securities Act, or (c) the documents and financial statements of Parent incorporated by reference in the Proxy Statement/Prospectus, the Registration Statement
or any amendment or supplement thereto, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading, except that no representation or warranty is made by Parent with respect to information supplied by Stonegate for inclusion in the Proxy Statement/Prospectus or the Registration Statement. The
Proxy Statement and Registration Statement will, when filed by Parent in final form with the SEC, comply as to form in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder.
4.18
Ownership of Stonegate Common Stock
. Neither Parent, nor any of its Subsidiaries, or to Parents Knowledge, any of its other
Affiliates or associates, owns beneficially or of record, directly or indirectly, or, except for the Voting and Support Agreements, is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing
of, shares of
Stonegate
Common Stock for its own account.
A-38
4.19
Related Party Transactions
. Except as set forth on
Section 4.19
of the Parent
Disclosure Schedule, there are no transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions or series of related transactions, between Parent, Subsidiary Bank or any
of their Subsidiaries, on the one hand, and any current or former director or executive officer (as defined in Rule 3b-7 under the Exchange Act) of Parent, Subsidiary Bank or any of their Subsidiaries or any person who beneficially owns
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act) 5% or more of the outstanding Parent Common Stock (or any of such persons immediate family members or affiliates) (other than Subsidiaries of Parent) on the other hand, except those of
a type available to employees of Parent, Subsidiary Bank or their Subsidiaries generally.
4.20
Parent Information
. True and
complete copies of all documents listed in the Parent Disclosure Schedule have been made available or provided to Stonegate. Except for the minutes and actions related to the process leading to this Agreement and the transactions contemplated
hereunder, which have not yet been prepared, approved, executed and/or placed in Parents corporate minute books, the corporate minute books, the books of account, stock record books and other financial and corporate records of Parent,
Subsidiary Bank and each of its Subsidiaries are complete and correct in all material respects.
4.21
Investment Portfolio
. All
investment securities held by Parent, Subsidiary Bank or their Subsidiaries, as reflected in the financial statements included in the Parent SEC Filings, are in all material respects carried in accordance with GAAP and in a manner consistent with
the applicable guidelines issued by the Parent Regulatory Agencies. Each of Parent, Subsidiary Bank and their Subsidiaries has good, valid and marketable title to all securities held by it, except securities sold under repurchase agreements or held
in any fiduciary or agency capacity, free and clear of any Lien, except as set forth in the financial statements included in the Parent SEC Filings and except to the extent any such securities are pledged in the ordinary course of business
consistent with prudent banking practices to secure obligations of Parent, Subsidiary Bank or their Subsidiaries.
4.22
Taxes
.
(a) (i) All federal and state Tax Returns and all other material Tax Returns that were or are required to be filed on or
before the Closing Date by Parent, Subsidiary Bank or their Subsidiaries (including, to Parents Knowledge, for purposes of all subsections of this Section 3.12, those entities acquired by or merged into Parent or Subsidiary Bank) have
been or will be timely filed on or before the Closing Date, and all such Tax Returns are or will be true, correct and complete in all material respects and were or will be prepared in substantial compliance with all Applicable Laws; (ii) all
Taxes due and owing by Parent, Subsidiary Bank or their Subsidiaries (whether or not shown on the Tax Returns referred to in clause (i)) have been or will be timely paid in full on or before the Closing Date; (iii) all deficiencies asserted in
writing or assessments made in writing by the relevant taxing authority in connection with any of the Tax Returns referred to in clause (i) have been or will be timely paid in full on or before the Closing Date; and (iv) no issues that
have been raised in writing by the relevant taxing authority in connection with any of the Tax Returns referred to in clause (i) are pending as of the date of this Agreement, or, if pending, have been specifically identified by Parent to
Stonegate in writing and adequately reserved for in Parents Financial Statements. Neither Parent, Subsidiary Bank nor any of their Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return.
(b) No federal, state, local or non-U.S. tax audits or administrative or judicial Tax proceedings are pending or being
conducted with respect to Parent, Subsidiary Bank or their Subsidiaries. Neither Parent, Subsidiary Bank nor any of their Subsidiaries has received from any federal, state, local or non-U.S. taxing authority (including jurisdictions where Parent,
Subsidiary Bank or their Subsidiaries have not filed Tax Returns) any (i) written notice indicating an intent to open an audit or other review; (ii) request for information related to Tax matters; or (iii) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted or assessed by any taxing authority against Parent, Subsidiary Bank or their Subsidiaries.
A-39
(c) There are no Liens on Parents, Subsidiary Banks or any of their
Subsidiaries assets that arose in connection with any failure (or alleged failure) to pay any Tax other than Liens for Taxes not yet due and payable or which the validity thereof is being contested in good faith by appropriate proceedings and
for which adequate accruals or reserves have been established in accordance with GAAP in the Parent Financial Statements.
(d) Neither Parent, Subsidiary Bank nor any of their Subsidiaries has waived any statute of limitations in respect of income
Taxes or agreed to any extension of time with respect to an income Tax assessment or deficiency.
(e) Parent, Subsidiary
Bank and their Subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.
(f) Neither Parent, Subsidiary Bank nor any of their Subsidiaries is (or has been) a party to any Tax allocation or sharing
agreement (other than such an agreement or arrangement exclusively between or among Parent, Subsidiary Bank and their Subsidiaries). Neither Parent, Subsidiary Bank nor any of their Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal Tax Return (other than a group the common parent of which was Parent); or (B) has any liability for Taxes of any Person (other than Parent, Subsidiary Bank or their Subsidiaries) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local, or non-U.S. law) as a transferee, successor, by contract or otherwise.
(g) There are no joint ventures, partnerships, limited liability companies, or other arrangements or contracts to which Parent,
Subsidiary Bank or their Subsidiaries is a party and that could be treated as a partnership for federal income Tax purposes.
(h) Neither Parent, Subsidiary Bank nor any of their Subsidiaries has, nor has it ever had, a permanent
establishment in any foreign country, as such term is defined in any applicable Tax treaty or convention between the United States and such foreign country, nor has it otherwise taken steps that have exposed, or will expose, it to the taxing
jurisdiction of a foreign country.
(i) No claim has been made in the last five (5) years by a taxing authority in a
jurisdiction where Parent, Subsidiary Bank or their Subsidiaries does not file Tax Returns that Parent (or such Subsidiary) is or may be subject to taxation by that jurisdiction.
(j) Neither Parent, Subsidiary Bank nor any of their Subsidiaries has, in the last five (5) years, distributed stock of
another corporation, or had its stock distributed by another corporation, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or 361 of the Code.
(k) Neither Parent, Subsidiary Bank nor any of their Subsidiaries is or has been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) Neither Parent, Subsidiary Bank nor any of their Subsidiaries participates in or cooperates with (or has at any time
participated in or cooperated with) an international boycott within the meaning of Section 999 of the Code.
(m)
Neither Parent, Subsidiary Bank nor any of their Subsidiaries has engaged in any transaction that, as of the date hereof, is a listed transaction under Treasury Regulations Section 1.6011-4(b)(2). Parent, Subsidiary Bank and each of
their Subsidiaries has disclosed in their Tax Returns all information required by the provisions of the Treasury Regulations issued under Section 6011 of the Code with respect to any reportable transaction as that term is defined in
Section 6707A(c) of the Code.
(n) No gain recognition agreements have been entered into by either Parent, Subsidiary
Bank or any of their Subsidiaries, and, neither Parent, Subsidiary Bank nor any of their Subsidiaries has obtained a private letter ruling or closing agreements from the Internal Revenue Service (or any comparable ruling from any other taxing
authority).
A-40
(o) Neither Parent, Subsidiary Bank nor any of their Subsidiaries is or has at
any time been (A) a controlled foreign corporation as defined by Section 957 of the Code; (B) a personal holding company as that term has been defined from time to time in Section 542 of the Code;
(C) a passive foreign investment company nor has Parent, Subsidiary Bank or any of their Subsidiaries at any time held directly, indirectly, or constructively shares of any passive foreign investment company as that term
has been defined from time to time in Section 1296 or 1297 of the Code.
(p) Parent, Subsidiary Bank and each of their
Subsidiaries is in material compliance with all the terms and conditions of any Tax exemption or other Tax reduction agreement or order of a foreign or state government and the consummation of the transactions contemplated by this Agreement will not
have any adverse effect on the continued validity and effectiveness of any such Tax exemption or other Tax reduction agreement or order.
(q) Neither Parent, Subsidiary Bank nor any of their Subsidiaries has been, nor will any of them be, required to include any
item of income in, or exclude any item of deduction from, taxable income for any Tax period (or portion thereof) ending after the Closing Date (i) pursuant to Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax Laws as a result of transactions, events, or accounting methods employed prior to the transactions contemplated hereby, (ii) as a result of any installment sale or open transaction disposition made on or prior to the Closing Date,
(iii) as a result of any prepaid amount received on or prior to the Closing Date; (iv) as a result of an election under Section 108(i) of the Code; or (v) intercompany transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax law).
(r) All transactions for taxable years for which the statute of limitations is still open (including but not limited to sales
of goods, loans, and provision of services) between (i) Parent, Subsidiary Bank or any of their Subsidiaries and (ii) any other Person that is controlled directly or indirectly by Parent or Subsidiary Bank (within the meaning of
Section 482 of the Code) were effected on arms-length terms and for fair market value consideration.
(s) The
unpaid Taxes of Parent, Subsidiary Bank and each of their Subsidiaries (a) did not, as of the Balance Sheet Date, exceed the reserve for Tax liability (other than any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of Parents Financial Statements (rather than in any notes thereto) and (b) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past
custom and practice of Parent, Subsidiary Bank and each of their Subsidiaries in filing its Tax Returns. Since the Balance Sheet Date, neither Parent, Subsidiary Bank nor any of their Subsidiaries has incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.
(t) Parent or Subsidiary Bank operates at least one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Treasury Regulations Section 1.368-1(d).
(u)
Parent and Subsidiary Bank have provided or otherwise made available to Stonegate all of Parents, Subsidiary Banks and each of their Subsidiaries books and records with respect to Tax matters pertinent to Parent, Subsidiary Bank
and each of their Subsidiaries relating to any Tax periods commencing on or before the Closing Date.
4.23
No Other Representations or
Warranties
.
(a) Except for the representations and warranties made by Parent in this Article IV, neither Parent,
Subsidiary Bank nor any other person makes any express or implied representation or warranty with respect to Parent, its Subsidiaries, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects,
and Parent hereby disclaims any such other representations or warranties.
A-41
(b) Parent acknowledges and agrees that neither Stonegate nor any other person
has made or is making any express or implied representation or warranty other than those contained in Article III.
ARTICLE V
COVENANTS
5.1
Conduct of
Business
. During the period from the date of this Agreement to the Closing Date, except (A) as otherwise expressly contemplated or permitted by this Agreement, (B) as set forth on
Section
5.1
of the Stonegate Disclosure
Schedule, (C) as required by any Governmental Authority or Applicable Law, or (D) with the written consent of Parent, Stonegate shall, and shall cause its Subsidiaries to, (x) maintain its existence under Applicable Law,
(y) conduct its business and operations in the ordinary and usual course of business and in a manner consistent with prior practice and in accordance with Applicable Law, and (z) use commercially reasonable efforts to keep available the
services of its current officers and employees and preserve the rights, franchises, goodwill and relations of its customers, clients and others with whom business relationships exist. Without limiting the foregoing, Stonegate covenants and agrees
that between the date of this Agreement and the Closing Date, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed) or as expressly contemplated or permitted by this Agreement, or required by
Applicable Law, or as set forth in
Section
5.1
of the Stonegate Disclosure Schedule, it shall not, and shall cause its Subsidiaries not to, directly or indirectly:
(i) amend the Charter Documents of Stonegate or its Subsidiaries or otherwise add, amend or modify in any respect the duties or
obligations of indemnification by Stonegate or such Subsidiary with respect to any of its respective directors, officers, employees, agents or other Persons;
(ii) adjust, split, combine or reclassify any shares of its capital stock or other equity interests or declare, set aside, make
or pay any dividend or other distribution (whether in cash, shares, equity interests or property or any combination thereof) in respect of its capital stock or equity interests (other than to a wholly-owned Subsidiary of Stonegate), or redeem,
repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any of its securities (except (A) regular quarterly cash dividends by Stonegate on Stonegate Common Stock in the ordinary course of business consistent with
past practice; provided however, beginning on the eight month anniversary of the date of this Agreement Stonegate shall be permitted to pay certain dividends as set forth on
Section
5.1(ii)
of the Stonegate Disclosure Schedule,
(B) dividends paid by any of the Subsidiaries of Stonegate to Stonegate or any of its wholly owned Subsidiaries, respectively, or (C) the acceptance of shares of Stonegate Common Stock as payment for the exercise price of Stonegate Stock
Options or for withholding taxes incurred in connection with the exercise of Stonegate Stock Options that are outstanding on the date hereof and in accordance with past practice and the terms of the applicable award agreements);
(iii) except as required by Stonegate Material Contracts, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a wholly-owned Subsidiary of Stonegate;
(iv) sell, lease, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets to any Person (except
for sales of properties or assets in the ordinary course of business consistent with past practice) or merge or consolidate with any Person;
(v) acquire direct or indirect control over any business or Person, whether by stock purchase, merger, consolidation or
otherwise; except, in connection with a foreclosure of collateral or conveyance of such collateral in lieu of foreclosure taken in connection with collection of a Loan in the ordinary course of business consistent with past practice and with respect
to Loans made to third parties who are not Affiliates of Stonegate;
(vi) other than in the ordinary course of business,
incur any indebtedness (excluding bank deposits) for borrowed money (other than indebtedness of Stonegate or any of its wholly-owned
A-42
Subsidiaries to Stonegate or any of its Subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or
other entity; provided that Stonegate may continue to purchase federal funds and borrow money from the Federal Home Loan Bank System, the Federal Reserve Bank of Atlanta or any other Governmental Authority in the ordinary course of business
consistent with past practice;
(vii) make any change to its accounting methods, principles or practices, except as
required by GAAP or Applicable Law;
(viii) except for any payments disclosed in
Section 5.8(a)
of the
Stonegate Disclosure Schedule, (A) increase the compensation, severance, benefits, change of control payments or any other amounts payable, or pay or award, or commit to pay or award, any bonuses or incentive compensation, to its present or
former officers, employees or directors, other than, in each case, nonmaterial increases in compensation or benefits for non-executive employees made in the ordinary course of business consistent with past practice, (B) establish, adopt, enter
into, amend or terminate any collective bargaining agreement or Stonegate Employee Benefit Plan, other than any amendments in the ordinary course of business consistent with past practice that do not materially increase the cost to Stonegate, in the
aggregate, of maintaining such Stonegate Employee Benefit Plan, or (C) take any action to accelerate any payment or benefit, or the funding of any payment or benefit, payable or to become payable to any such individual; provided, however, that
Stonegate may make payments that would otherwise be prohibited by subparagraph 5.1(viii)(A) during fiscal 2018 if the Effective Time has not occurred by December 31, 2017, and such payments are made in the ordinary course of business consistent
with past practice;
(ix) (A) grant any stock appreciation rights, options, restricted stock, restricted stock units,
awards based on the value of Stonegates capital stock or other equity-based compensation or grant to any Person any right to acquire any shares of its capital stock, or amend or modify (including by way of interpretation) any of the foregoing;
(B) issue or commit to issue any additional shares of capital stock of Stonegate, other than the issuance of shares of Stonegate Common Stock upon the exercise of any Stonegate Stock Options that are outstanding on the date hereof and in
accordance with the terms of the applicable award agreement; (C) issue, sell, lease, transfer, mortgage, encumber or otherwise dispose of any capital stock in any of Stonegates Subsidiaries; or (D) enter into any agreement,
understanding or arrangement with respect to the sale or voting of its capital stock; provided, however, that Stonegate may make grants to directors, officers and employees that would otherwise be prohibited by subparagraph 5.1(ix)(A) during fiscal
2018 if the Effective Time has not occurred by December 31, 2017, and such grants are made in the ordinary course of business consistent with past practice;
(x) (A) make or change any Tax election, (B) settle or compromise any Tax liability, claim, audit or assessment,
(C) fail to file any Tax Return when due (taking extensions into account) or fail to remit any Taxes due, whether or not shown on the Tax Return, (D) enter into any closing agreement, (E) agree to extend any statute of limitations
relating to Taxes; (F) file any amended Tax Return or (G) surrender, offset or reduce any right to claim a Tax refund;
(xi) fail to use commercially reasonable efforts to maintain existing insurance policies or comparable replacement policies to
the extent available for a reasonable cost;
(xii) enter into any new line of business or change in any material respect
its lending, investment, underwriting, risk and asset liability management, interest rate or fee pricing with respect to depository accounts, hedging and other material banking and operating policies or practices;
(xiii) except set forth in
Section 5.1(xiii)
of the Stonegate Disclosure Schedule, file any application to
establish, or to relocate or terminate the operations of, any banking office;
(xiv) make, or commit to make, any capital
expenditures in excess of $1 million in the aggregate, other than as disclosed in Stonegates capital expenditure budget set forth in
Section 5.1(xiv)
of the Stonegate Disclosure Schedule;
A-43
(xv) make, amend or renew any extension of credit, individually or in the
aggregate with other extensions of credit to the same relationship, outside of the ordinary course of business or inconsistent with past practice;
(xvi) make, renew, or amend any extension of credit to a borrower who has an existing credit that falls into the past due 90
days or more, nonaccrual or classified categories, other than Watch List, described in
Section 3.16(b) (i)(iii)
or would be subject to the Federal Reserve Boards Regulation O, other than as permitted by
Section 5.1(xxv)
;
(xvii) enter into, renew or amend any interest rate swaps, caps, floors and option
agreements and other interest rate risk management arrangements, whether entered into for its account or for the account of a customer of it, except in the ordinary course of business and consistent with past practice;
(xviii) (A) grant, extend, amend (except as required in the diligent prosecution of the Intellectual Property owned
(beneficially, and of record where applicable) by or developed for Stonegate, waive, or modify any material rights in or to, sell, assign, lease, transfer, license, let lapse, abandon, cancel, or otherwise dispose of, or extend or exercise any
option to sell, assign, lease, transfer, license, or otherwise dispose of, any Intellectual Property, or (B) fail to exercise a right of renewal or extension under any material agreement under which Stonegate is licensed or otherwise permitted
by a third party to use any Intellectual Property (other than shrink wrap or click through licenses), unless Stonegate obtains a substantially similar license or right to use such Intellectual Property on terms as favorable
as the terms under the existing agreement;
(xix) amend or extend any leases for real property other than as provided in
Section 5.1(xix)
of the Stonegate Disclosure Schedule;
(xx) except for transactions in the ordinary course of
business, terminate, amend, or waive any material provision of, any Stonegate Material Contract, or make any change in any instrument or agreement governing the terms of any of its securities, or material lease or contract, other than normal
renewals of contracts and leases without material adverse changes of terms with respect to Stonegate, or enter into any contract that would constitute a Stonegate Material Contract if it were in effect on the date of this Agreement;
(xxi) (A) settle any claim, action or proceeding other than claims, actions or proceedings in the ordinary course of
business consistent with past practice involving solely money damages not in excess of $1 million in the aggregate, or waive, compromise, assign, cancel or release any material rights or claims; or (B) agree or consent to the issuance of
any settlement agreement, injunction, decree, order or judgment restricting or otherwise affecting its business or operations;
(xxii) materially restructure or materially change its investment securities portfolio, through purchases, sales or otherwise,
or the manner in which the portfolio is classified or reported;
(xxiii) change in any material respect its credit policies
and collateral eligibility requirements and standards;
(xxiv) participate in any program sponsored or administered by any
Governmental Authority, which program is not part of the usual and customary banking business of Stonegate;
(xxv) engage
in (or modify in a manner adverse to Stonegate) any transactions with any director or officer of Stonegate or its Affiliates, other than deposit relationships and other transactions in the ordinary course of business consistent with past practice,
and extensions of credit which are on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with Persons unaffiliated with Stonegate and did not involve more than the
normal risk of collectability or present other unfavorable features;
(xxvi) adopt a plan of complete or partial
liquidation or dissolution;
A-44
(xxvii) take any action or knowingly fail to take any action, which action or
failure to act would reasonably be expected to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;
(xxviii) agree to take, make any commitments to take, or adopt any resolutions of the board of directors or shareholders in
support of, any of the actions prohibited by this
Section
5.1
;
(xxix) take or fail to take any action that
would reasonably be expected to cause the representations and warranties made in
ARTICLE III
to be inaccurate in any material respect at the time of the Closing or preclude Stonegate from making such representations and warranties at the time
of the Closing;
(xxx) take any action that is intended to or would reasonably be likely to result in any of the conditions
set forth in
ARTICLE VI
not being satisfied or prevent or materially delay the consummation of the transactions contemplated hereby; or
(xxxi) take any action that is intended to or would reasonably be expected to adversely affect or materially delay the ability
of Stonegate or its Subsidiaries to obtain any necessary approvals of any Governmental Authority required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement or to consummate the transactions
contemplated hereby.
5.2
Conduct of Business
. During the period from the date of this Agreement to the Closing Date, except
(A) as otherwise expressly contemplated or permitted by this Agreement, (B) as set forth on
Section
5.2
of the Parent Disclosure Schedule, (C) as required by any Governmental Authority or Applicable Law, or (D) with
the written consent of the Stonegate, Parent and Subsidiary Bank shall not, and shall cause their Subsidiaries not to, directly or indirectly:
(i) amend its Charter Documents in a manner that would materially and adversely affect the economic benefits of the Merger to
the holders of Stonegate Common Stock;
(ii) adopt a plan of complete or partial liquidation or dissolution;
(iii) agree to take, make any commitments to take, or adopt any resolutions of the board of directors or shareholders in
support of, any of the actions prohibited by this
Section
5.2
;
(iv) take or fail to take any action that
would reasonably be expected to cause the representations and warranties made in
ARTICLE IV
to be inaccurate in any material respect at the time of the Closing or preclude Parent from making such representations and warranties at the time of
the Closing;
(v) take any action that is intended to or would reasonably be likely to result in any of the conditions set
forth in
ARTICLE VI
not being satisfied or prevent or materially delay the consummation of the transactions contemplated hereby;
(vi) take any action or knowingly fail to take any action, which action or failure to act would reasonably be expected to
prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; or
(vii) take any action that is intended to or would reasonably be expected to adversely affect or materially delay the ability
of Parent or its Subsidiaries to obtain any necessary approvals of any Governmental Authority required for the transactions contemplated hereby, that would reasonably be expected to adversely affect or materially delay the ability of Parent or its
Subsidiaries to obtain the Regulatory Approvals, or to perform its covenants and agreements under this Agreement or to consummate the transactions contemplated hereby.
5.3
Approvals and Filings
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of Stonegate and Parent agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to
A-45
be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable to fulfill all conditions applicable to such party and its respective Subsidiaries
pursuant to this Agreement and to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) obtaining all Regulatory Approvals and all other approvals necessary,
proper or advisable actions or non-actions, waivers, consents, qualifications and approvals from Governmental Authorities and making all necessary, proper or advisable registrations, filings and notices and taking all steps as may be necessary to
obtain an approval, waiver or exemption from any Governmental Authority;
provided
that nothing contained herein shall be deemed to require Parent, or require or permit Stonegate, to take any action, or commit to take any action, or agree to
any condition or restriction, in connection with obtaining the permits, consents, approvals and authorizations of any Governmental Authority that would (A) reasonably be expected to result in Parent or Subsidiary Bank becoming subject to any
cease-and-desist order or other order, formal or informal enforcement action issued by, or written agreement, consent agreement, operating agreement, memorandum of understanding, commitment letter or similar undertaking with, or any request to adopt
any board resolutions by, any Governmental Authority, in each case solely resulting from or arising out of the conduct of Stonegates business, or (B) reasonably be expected to have a Material Adverse Effect on the Surviving Corporation
and its Subsidiaries, taken as a whole, after giving effect to the Merger, (including, for the avoidance of doubt, any determination by any Regulatory Agency or other Governmental Authority that the Merger may not be consummated as contemplated
herein or in a substantially similar manner immediately following the Effective Time or that any Stonegate Regulatory Agreement will not terminate and be of no further force and as of and following the consummation of the Merger) (any of the
foregoing matters in clauses (A) and (B), a
Materially Burdensome Regulatory Condition
); (ii) obtaining all necessary, proper or advisable consents, qualifications, approvals, waivers or exemptions from nongovernmental
Persons; and (iii) executing and delivering any additional documents or instruments necessary, proper or advisable to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.
(b) Without limiting the generality of the foregoing, as soon as practicable and in no event later than thirty
(30) calendar days after the date of this Agreement, Parent and Stonegate shall, and shall cause their respective Subsidiaries to, each prepare and file any applications, notices and filings required in order to obtain the Regulatory Approvals.
Parent and Stonegate shall each use, and shall each cause their applicable Subsidiaries to use, reasonable best efforts to obtain each such approval as promptly as reasonably practicable. The parties shall cooperate with each other in connection
therewith (including the furnishing of any information and any reasonable undertaking or commitments that may be required to obtain the Regulatory Approvals). Each party will provide the other with copies of any applications and all correspondence
relating thereto prior to filing, other than material filed in connection therewith under a claim of confidentiality.
(c)
Subject to Applicable Law (including Applicable Law relating to the exchange of information), the parties shall advise each other within twenty-four (24) hours of receiving any communication from any Governmental Authority in connection with
the Regulatory Approvals that causes such party to believe that there is a reasonable likelihood that the Regulatory Approvals or any other consent or approval required hereunder will not be obtained or that the receipt of any such approval will be
materially delayed.
(d) Upon the terms and subject to the conditions set forth in this Agreement, Stonegate agrees to use
its reasonable best efforts to obtain (i) estoppel certificates dated as of the Closing Date executed by each landlord of Stonegate and its Subsidiaries (other than those landlords who have executed consents as contemplated by
Section 3.
4 of the Stonegate Disclosure Schedule) in forms as may be reasonably acceptable to Parent and (ii) the written authorizations, consents, notices and approvals identified on
Section 3.4
of the Stonegate Disclosure Schedule.
5.4
Access; Integration of Data Processing; Confidentiality
.
(a) In order to facilitate the consummation of the transactions contemplated hereby and the integration of the business and
operations of Stonegate and its Subsidiaries, subject to
Section 5.4(c)
and Applicable
A-46
Laws relating to confidentiality and the exchange of information, Stonegate shall permit Parent and its Subsidiaries and their respective officers, employees, counsel, accountants and other
authorized representatives, access, throughout the period before the Closing Date, upon reasonable notice and at Parents sole expense:
(i) during customary business hours, to all books, papers and records relating to the assets, properties, operations,
obligations and liabilities of Stonegate and its Subsidiaries in which Parent may have a reasonable interest;
provided
,
however
, that Stonegate shall not be required to take any action that would provide access to or to disclose
information where such access or disclosure would result in the waiver by it of the privilege protecting communications between it and any of its counsel or where such access or disclosure would contravene any Applicable Law or Order or binding
agreement entered into prior to the date of this Agreement;
provided
,
further
, that the parties shall attempt to make appropriate substitute disclosure arrangements; and
(ii) during and, as reasonably required, outside of customary business hours, to telecommunications and electronic data
processing systems, facilities and personnel of Stonegate and its Subsidiaries for the purpose of performing conversion activities related to data processing integration.
Parent shall use commercially reasonable efforts to minimize any interference with Stonegates regular business operations of Stonegate
and its Subsidiaries during any such access.
(b) At the request of Parent, during the period from the date of this
Agreement to the Closing, Stonegate shall, and shall cause its Subsidiaries and its and their respective officers and employees to, and shall make all reasonable efforts to cause their respective telecommunications and data processing service
providers to (including by entering into customary confidentiality, non-disclosure and similar agreements with such service providers and/or Parent), cooperate and assist Parent in connection with preparation for an electronic and systematic
conversion of all applicable data regarding Stonegate and its Subsidiaries to Parent and its Subsidiaries systems of telecommunications and electronic data processing;
provided
,
however
, that no such conversion shall occur until
the Closing. Parent shall be responsible for reasonable and agreed upon costs incurred by Stonegate and its Subsidiaries, including all fees to third parties, in connection with any such efforts.
(c) Each of Parent and Stonegate acknowledges and agrees that the Confidentiality Agreement remains in full force and effect
and, in addition, covenants and agrees to keep confidential, in accordance with the provisions of the Confidentiality Agreement, information provided to them pursuant to this Agreement. If this Agreement is, for any reason, terminated prior to the
Closing Date, the Confidentiality Agreement and the provisions of this
Section 5.4(c)
shall nonetheless continue in full force and effect.
5.5
Notification
. Stonegate, on the one side, and Parent, on the other side, shall promptly (and in any event within three Business
Days after becoming aware of any such breach) notify the other party or parties in writing (a) if it believes that such party or parties have breached any representation, warranty, covenant or agreement contained in this Agreement or
(b) if it believes that any event shall have occurred that might reasonably be expected to result, individually or in the aggregate, in a failure of a condition set forth in
Section 6.2
or
Section 6.3
if continuing on the Closing
Date.
5.6
Public Announcements
. Stonegate and Parent shall consult with each other before issuing any press release or otherwise
making any public statements or filings with respect to this Agreement or any of the transactions contemplated hereby and shall not issue, and shall not permit any of their Subsidiaries to issue, any such press release or make any such public
statement without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed;
provided
,
however
, that a party may, without the prior written consent of the other party, issue such press
release or make such public statement or filing as may be required by Applicable Law or Order, or any listing agreement with a national stock exchange or automated quotation system;
provided
,
further
, however that such party shall have
first used reasonable best efforts to consult with the other party with respect to such release, statement or filing.
A-47
5.7
No Control of Stonegate.
Nothing contained in this Agreement shall give Parent or its
Subsidiaries, directly or indirectly, the right to control or direct the operations of Stonegate prior to the Closing Date.
5.8
Employee Benefit Matters
.
(a) As of the Closing Date, Parent shall, or shall cause its applicable Subsidiary to,
provide to each employee of Stonegate or its Subsidiaries who, as decided by Parent in its sole discretion, shall continue employment with the Surviving Corporation or any of its Subsidiaries following the Closing Date (a
Continuing
Employee
) (i) base hourly wages or salaries, as applicable, and (ii) employee benefit plans, programs, policies and arrangements that, are substantially comparable, in the aggregate, to the Stonegate Employee Benefit Plans
provided to each such Continuing Employee immediately prior to the Closing Date (but in no event greater than the base wages, salaries or employee benefits provided to Parents similarly situated employees within the same geographic market as
such employees of Stonegate). To the extent annual bonuses for employees of Stonegate and its Subsidiaries accrued under Stonegates 2017 bonus pool as disclosed in
Section 5.8(a)
of the Stonegate Disclosure Schedule are not paid by
Stonegate prior to the Closing Date, Parent shall, or shall cause its applicable Subsidiary to, pay such accrued bonuses promptly following the Closing Date.
(b) At the Effective Time and as a condition to making each Employment Payment, the parties to the Terminated Employment
Agreements shall execute and deliver an acknowledgment of the termination thereof which shall provide for the survival of any provision under such Terminated Employment Agreements related to any excise tax or tax gross-up payment, as contemplated by
Section 3.12(q) of the Stonegate Disclosure Schedules, not paid prior to the Effective Time. From and after the Effective Time, Parent shall honor and make all payments provided for, as required by the terms of, all Continuing Employment
Agreements with employees of Stonegate or any of its Subsidiaries in effect immediately prior to the Closing Date, subject to any limitations imposed under Applicable Law or by any regulatory authority. In addition, during the period commencing at
the Effective Time and ending six (6) months after conversion, Parent shall, or shall cause the Surviving Corporation to provide each Continuing Employee who is not a party to a Continuing Employment Agreement at the time of his or her
termination of employment whose employment is involuntarily terminated (other than under circumstances that constitute a termination for cause under Stonegates current form of employment agreement) with the severance payments, if
any, to which the Continuing Employee is entitled under the severance policy identified on
Section 3.23(a)
of the Stonegate Disclosure Schedule;
provided
that such severance benefit payments shall be conditioned on execution of a
release of claims in a form satisfactory to Parent.
(c) Prior to or at the Effective Time, Parent shall enter into
agreements with or offer employment to the employees listed on
Section 5.8(c)
of the Stonegate Disclosure Schedule, under the terms and conditions to be mutually agreed upon by Parent and Stonegate.
(d) Parent shall provide, or cause its applicable Subsidiary to provide, each employee of Stonegate or its Subsidiaries who, as
decided by Parent in its sole discretion, does not continue employment with the Surviving Corporation or its Subsidiaries following the Closing Date (a
Discontinued Employee
) with severance benefits under the existing severance
policies and practices of Stonegate Bank as identified in
Section 3.23(a)
of the Stonegate Disclosure Schedule or pursuant to the terms of any Terminated Employment Agreement in existence as of the date of such termination;
provided
that such severance benefit payments shall be conditioned on execution of a termination of agreement and release of claims in a form satisfactory to Parent. Parent shall identify all Discontinued Employees within 30 calendar days of
the date of this Agreement and shall cooperate with Stonegate to promptly communicate such anticipated employment status to each such Discontinued Employee. Parent and Stonegate shall discuss and mutually agree upon certain retention payments to be
made to certain employees following the date of this Agreement.
(e) With respect to any Parent Employee Benefit Plan in
which any Continuing Employee becomes eligible to participate on or after the Closing Date, Parent shall use commercially reasonable efforts to
A-48
(i) waive all preexisting conditions, actively at work requirements, exclusion and waiting periods with respect to participation and coverage requirements under any such Parent Employee
Benefit Plan to the extent they were inapplicable to, or were satisfied under, any Stonegate Employee Benefit Plan in which such Continuing Employee participated prior to the Closing Date; and (ii) ensure that each Continuing Employee receives
full credit (including eligibility to participate, vesting, vacation entitlement and severance benefits, but excluding benefit accrual under any defined benefit Parent Employee Benefit Plan or any such credit that would result in a duplication of
benefits) under each Parent Employee Benefit Plan in which such Continuing Employee becomes or may become a participant for service with the Surviving Corporation (or any predecessor to the Surviving Corporation and its Affiliates), solely to the
extent such service was credited under the Stonegate Employee Benefit Plans. As of the Closing Date, Parent shall, and shall cause its applicable Subsidiaries to, credit to Continuing Employees the amount of vacation time that such employees had
accrued under any vacation policy or arrangement listed on
Section 3.23(a)
of the Stonegate Disclosure Schedule as of the Closing Date. With respect to each Parent Employee Benefit Plan that is a health plan in which Continuing Employees
participate after Closing, Parent shall use commercially reasonable efforts to (A) cause to be waived any eligibility waiting period, any evidence of insurability requirement and the application of any pre-existing condition limitation under
such plan to the extent such requirements or limitations were inapplicable to, or were satisfied under, any Stonegate Employee Benefit Plan in which such Continuing Employee participated prior to the Closing Date; and (B) cause each Continuing
Employee to be given credit under such health plan with respect to the plan year in which the Closing Date occurs (
Closing Date Plan Year
) for amounts (such as deductibles and co-payments) paid under any similar Stonegate Employee
Benefit Plan by such Continuing Employee, with respect to the Closing Date Plan Year and for which verification is provided by the insurer or third party administrator of such Stonegate Employee Benefit Plan, as though such amounts had been paid in
accordance with the terms and conditions of any applicable Parent Employee Benefit Plan.
(f) Parent and Stonegate
acknowledge and agree that all provisions contained in this
Section 5.8
are included for the sole benefit of Parent and Stonegate and nothing contained herein shall (i) be construed as an amendment to any Stonegate Employee Benefit Plan
or Parent Employee Benefit Plan or the creation of any new employee benefit plan, (ii) create any third-party beneficiary or other rights in any other person, including any employee or former employee of any of Parent or Stonegate or their
respective Subsidiaries, or any dependent or beneficiary thereof or (iii) otherwise obligate Parent or any of its Affiliates to maintain any particular Stonegate Employee Benefit Plan, Parent Employee Benefit Plan or other employee benefit plan
or retain the employment of any particular employee following the Closing Date. Parent and Stonegate further acknowledge and agree that Stonegate and its Subsidiaries shall provide to Parent all employee books and records relating to Continuing
Employees no later than the Closing Date.
(g) Stonegate shall terminate the 401(k) Plan immediately prior to the Closing
by resolution adopted by the board of directors of Stonegate, on terms acceptable to Parent, and simultaneously amend the 401(k) Plan to the extent necessary to comply with all Applicable Laws to the extent not previously amended. Said termination
shall provide that all participants in the 401(k) Plan shall be fully vested in their account balances thereunder; and Stonegate shall notify the 401(k) Plan participants and beneficiaries of such termination prior to the Closing Date pursuant to
Applicable Law requirements. Parent will permit rollover of 401(k) plan assets by Continuing Employees in cash and with respect to loans, in kind, to a defined contribution retirement plan with a 401(k) feature of Parent or its Subsidiaries.
5.9
No Solicitation of Transaction by Stonegate
.
(a) From the date hereof until the Closing Date, or, if earlier, the date on which this Agreement is terminated in accordance
with
ARTICLE VIII
, Stonegate shall not, and shall cause all of its Subsidiaries and its and their respective Representatives to not, directly or indirectly, (i) take any action to solicit, initiate, seek, knowingly facilitate or
encourage any inquiries or expressions of interest or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding any
Acquisition Proposal or furnish, or
A-49
otherwise afford access, to any Person (other than Parent and its Subsidiaries) any nonpublic information or data with respect to Stonegate or any of its Subsidiaries or otherwise relating to an
Acquisition Proposal, (iii) approve, endorse or recommend any Acquisition Proposal (other than the Merger), (iv) enter into any agreement in principle, arrangement, understanding, contract or agreement relating to an Acquisition Proposal
(other than a confidentiality agreement which expressly permits Stonegate to comply with its obligations pursuant to this
Section 5.9
) (an
Acquisition Agreement
), or (v) propose or agree to do any of the foregoing.
Upon execution of this Agreement, Stonegate shall, and shall cause each of its Subsidiaries and all of its and their respective Representatives to, immediately cease any discussions, negotiations or communications with any party or parties with
respect to any Acquisition Proposal;
provided
,
however
, that nothing in this
Section 5.9
shall preclude Stonegate or its representatives from contacting any such party or parties solely for the purpose of complying with the
provisions of the first clause of this sentence or to enforce the provisions of any confidentiality agreement entered into with any Person with respect to a potential Acquisition Proposal.
(b) Notwithstanding
Section 5.9(a)
, Stonegate may take any of the actions described in clause (ii) of
Section 5.9(a)
if, but only if, (i) Stonegate has received a bona fide unsolicited written Acquisition Proposal, prior to Stonegate Shareholders Meeting, that did not result from a breach of this
Section
5.9
;
(ii) Stonegates Board of Directors determines (in accordance with this Agreement and after consultation with its outside legal counsel and independent financial advisor, in both cases, from firms of national stature) that such Acquisition
Proposal constitutes, or is reasonably likely to lead to, a Superior Proposal; (iii) Stonegate has provided Parent with at least three (3) calendar days prior notice of such determination; (iv) prior to furnishing or affording
access to any information or data with respect to Stonegate or any of its Subsidiaries or otherwise relating to an Acquisition Proposal, Stonegate receives from such Person a confidentiality agreement with terms no less favorable to Stonegate than
those contained in the Confidentiality Agreement; and (v) the failure of Stonegates Board of Directors to furnish such information or access or enter into discussions or negotiations would violate its fiduciary duties to Stonegate
Shareholders. Stonegate shall promptly provide to Parent any non-public information regarding Stonegate or its Subsidiaries provided to any other Person that was not previously provided to Parent, such additional information to be provided no later
than the date of provision of such information to such other party.
(c) Stonegate shall promptly (and in any event within
twenty-four (24) hours) notify Parent in writing if any proposals or offers (or modified offers or proposals) are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued
with, Stonegate or any of its Subsidiaries or any of their respective Representatives, in each case constituting or in connection with any Acquisition Proposal, and such notice shall indicate (a) the name of the Person initiating such
discussions or negotiations or making such proposal, (b) offer or information request and the material terms and conditions of any such proposals, offers or information requests (including the identity of the Person making or intending to make
such any such proposals, offers or information requests, and (c) a copy of any proposal, offer or information request, if in writing, and any related documentation or correspondence. Stonegate shall keep Parent fully informed, on a current
basis, of any material changes in the status and any material changes or modifications in the terms of any such discussion, proposal, offer or information request.
(d) Nothing contained in this Agreement shall prevent Stonegate or its Board of Directors from complying with Rule 14d-9 and
Rule 14e-2 under the Exchange Act with respect to an Acquisition Proposal in a manner consistent with Stonegates other obligations under this
Section 5.9
, it being agreed that such Rules will in no way eliminate or modify the effect
that any action pursuant to such Rules would otherwise have under this Agreement.
5.10
Indemnification; Directors
and Officers
Insurance
.
(a) From and after the Effective Time, Parent shall (i) indemnify
and hold harmless each individual who at the Effective Time is, or any time prior to the Effective Time was, a director, officer or employee of Stonegate or any of its Subsidiaries (the
Indemnitees
) in respect of all claims,
liabilities, losses, damages,
A-50
judgments, fines, penalties costs and expenses (including legal expenses) in connection with any claim, suit, action, proceeding or investigation, whenever asserted, based on or arising out the
fact that Indemnitee was an officer, director or employee of Stonegate or any Subsidiary for acts or omissions by Indemnitee in such capacity or taken at the request of Stonegate or any Subsidiary, at or any time prior to the Effective Time
(including any claim, suit, action, proceeding or investigation relating to the Transactions), to the fullest extent permitted by Applicable Law and (ii) assume all obligations of Stonegate and its Subsidiaries to Indemnitees in respect of
indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time as provided in Stonegates Charter Documents and the organizational documents of Stonegates Subsidiaries. In addition,
Parent, from and after the Effective Time, shall advance any expenses (including legal expenses) of any Indemnitee under this
Section
5.10
as incurred to the fullest extent permitted by Applicable Law, provided that the Indemnitee to
whom expenses are advanced provides an undertaking to repay advances if it shall be determined that such Indemnitee is not entitled to be indemnified pursuant to this
Section
5.10
.
(b) Parent shall maintain in effect for six years after the Effective Time, the current directors and officers
liability insurance policies maintained by Stonegate (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to such officers and directors so
long as substitution does not result in gaps or lapses in coverage) with respect to matters occurring prior to the Effective Time;
provided
that in no event shall Parent be required to expend annually in the aggregate an amount in excess of
$1,266,000 of the annual premium payment on Stonegates current policy in effect as of the date of this Agreement (the
Premium Cap
) and, in the event the cost of such coverage shall exceed that amount, Parent shall purchase
as much coverage as possible for such amount. In lieu of the foregoing, Parent may obtain at or prior to the Effective Time a prepaid tail policy providing coverage equivalent to that described in the preceding sentence for an aggregate
price of no more than the Premium Cap.
(c) The provisions of this
Section
5.10
are intended for the benefit
of, and shall be enforceable by, each Indemnitee, his or her heirs and his or her representatives and is in addition to, and not in substitution for, any other rights to indemnification or contribution that any Indemnitee may have under Stonegate
Charter Documents, by contract or otherwise. In the event Parent or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent or the purchaser of its assets and
properties shall assume the obligations set forth in this
Section
5.10
. This
Section
5.10
shall survive the Effective Time.
5.11
Efforts to Consummate; Further Assurances
.
(a) Parent and Stonegate agree to use, and to cause each of their Subsidiaries to use, reasonable best efforts to satisfy or
cause to be satisfied as soon as practicable their respective obligations hereunder and the conditions precedent to the Closing.
(b) Prior to the Closing Date, each of the parties hereto shall promptly advise the other party of any change or event that,
individually or in the aggregate, would reasonably be expected to cause or constitute a breach in any material respect of any of its representations, warranties or covenants contained herein.
5.12
Continuity of Business
. Parent will continue at least one significant historic business line of Stonegate, or use
at least a significant portion of Stonegates historic business assets in a business, in each case within the meaning of Treasury Regulations Section 1.368-1(d), except that Parent may transfer Stonegates historic business assets
(i) to a corporation that is a member of the Parents qualified group, within the meaning of Treasury Regulations Section 1.368-1(d)(4)(ii); or (ii) to a partnership if (A) one or more members of Buyers
qualified group have active and substantial management functions as a partner with respect to Stonegates historic business; or (B) members of Buyers qualified group in the aggregate own an interest in the
partnership representing a significant interest in Stonegates historic business, in each case within the meaning of Treasury Regulations Section 1.368-1(d)(4)(iii).
A-51
5.13
Tax Matters
.
(a) For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of
Section 368(a) of the Code, and this Agreement is intended to constitute a plan of reorganization within the meaning of Treasury Regulations Section 1.368-2(g). After the date of this Agreement (including, without limitation,
after the Effective Time) subject to the other terms and conditions in this Agreement, each party hereto shall take any action that is required to cause the Merger to qualify, and will not take any actions or cause any actions to be taken which
would reasonably be likely to prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the Code. All parties hereto shall report the Merger as a reorganization within the meaning of
Section 368(a) of the Code, unless otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code.
(b) The Chief Financial Officer of each of the Parent and Stonegate shall execute and deliver to Mitchell, Williams, Selig,
Gates & Woodyard, P.L.L.C. and Squire Patton Boggs (US) LLP certificates substantially in the form agreed to by the parties and such firms at such time or times as may reasonably be requested by such firm, including at the time the
Registration Statement is filed with the SEC and the Effective Time, in connection with each firms delivery of its tax opinion pursuant to
Section 6.2(e)
and
Section 6.3(e)
. Each of Parent and Stonegate shall use its
reasonable best efforts to cause such opinions to be delivered and not to take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any action which would cause to be untrue) any of the
certifications and representations included in the certificates described in this
Section 5.13(b)
.
5.14
Nasdaq
Listing
. Parent shall, as promptly as practicable, file all documents, take all actions reasonably necessary and otherwise use its reasonable best efforts to (i) list, prior to the Effective Time if such listing is required
to be made prior to the Effective Time under Nasdaq listing rules, the shares of Parent Common Stock to be issued to the holders of Stonegate Common Stock as part of the Merger Consideration in connection with the Merger, or (ii) make such
post-Closing filings with Nasdaq as may be required by the applicable rules thereof.
5.15
Litigations and Claims
.
(a) Parent shall promptly notify Stonegate in writing of any Proceeding, or of any claim, controversy or contingent
liability that might reasonably be expected to become the subject of a Proceeding, against Parent or its Subsidiaries, if such Proceeding or potential Proceeding is reasonably likely to result in a Material Adverse Change in Parent. Parent shall
promptly notify Stonegate in writing of any Proceeding, pending or, to Parents Knowledge, threatened against Parent or its Subsidiaries that (A) questions or would reasonably be expected to question the validity of this Agreement or the
other agreements contemplated hereby or any actions taken or to be taken by Parent or Subsidiary Bank with respect hereto, or (B) seeks to enjoin or otherwise restrain the transactions contemplated hereby.
(b) Stonegate shall promptly notify Parent in writing of any Proceeding, or of any claim, controversy or contingent liability
that might reasonably be expected to become the subject of a Proceeding, against Stonegate or any of its Subsidiaries, if such Proceeding or potential Proceeding is reasonably likely to result in a Material Adverse Change in Stonegate. Stonegate
shall promptly notify Parent in writing of any Proceeding, pending or, to Stonegates Knowledge, threatened against Stonegate or any of its Subsidiaries that (A) questions or would reasonably be expected to question the validity of this
Agreement or the other agreements contemplated hereby or thereby or any actions taken or to be taken by Parent or its Subsidiaries with respect hereto or thereto, or (B) seeks to enjoin or otherwise restrain the transactions contemplated hereby
or thereby. Stonegate shall give Parent the opportunity to participate at its own expense in the defense or settlement of any shareholder litigation against Stonegate and/or its directors or Affiliates relating to the transactions contemplated by
this Agreement, and no such settlement shall be agreed without Parents prior written consent (such consent not to be unreasonably withheld or delayed).
5.16
Cuba Operations
. Except as prohibited by Applicable Law or as directed by any Governmental Authority, Parent shall
continue, for a period of at least two (2) years following the Effective Time,
A-52
providing the same or more banking services to the Cuban Embassy that Stonegate provided to the Cuban Embassy over the twelve (12) month period preceding the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSE
6.1
Conditions to Each Party
s Obligations
. Each partys obligation to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, any or all of which may be waived in whole or in part by the party entitled to the benefit thereof:
(a)
No Orders
. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Applicable Law
or Order (whether temporary, preliminary or permanent) which has the effect of making illegal or preventing or prohibiting the consummation of the transactions contemplated by this Agreement.
(b)
Shareholder Approval
. The Requisite Parent Vote shall have been obtained and Stonegate Shareholder Approval of the
Merger and the execution, delivery and performance of this Agreement shall have been obtained.
(c)
Registration
Statement
. The Registration Statement shall have been effective under the Securities Act, no stop orders suspending the effectiveness of the Registration Statement shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be continuing, and all necessary approvals under state securities laws or the Securities Act relating to the issuance of the shares of Parent Common Stock issuable pursuant to the
Merger shall have been received.
6.2
Conditions to Obligations of Parent
. The obligations of Parent to consummate the transactions
contemplated hereby are also subject to the satisfaction, or waiver by Parent, at or prior to the Closing Date of the following conditions:
(a)
Accuracy of Representations and Warranties
. For purposes of this
Section 6.2(a)
, the accuracy of the
representations and warranties of Stonegate set forth in this Agreement shall be assessed (i) as of the date of this Agreement and (ii) as of the Closing with the same effect as though all such representations and warranties had been made
on and as of the Closing Date;
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 3.1, 3.2, 3.3(a), 3.6,
3.27
and
3.30
shall be true and correct in all respects, except for inaccuracies which are
de minimis
in amount and effect, and the representations and warranties set forth in Section 3.5 shall be true and correct in all
material respects. There shall not exist inaccuracies in the representations and warranties of Stonegate set forth in this Agreement (including the representations and warranties set forth in
Sections 3.1, 3.2, 3.3(a), 3.5, 3.6, 3.27
and
3.30
) such that the aggregate effect of such inaccuracies has, or is reasonably likely to have, a Material Adverse Change or Material Adverse Effect with respect to Stonegate;
provided
that
, for purposes of this sentence only,
those representations and warranties which are qualified as to materiality, Material Adverse Change or Material Adverse Effect or as to Stonegates Knowledge shall be deemed not to include such
qualifications.
(b)
Compliance with Covenants and Obligations
. Stonegate shall have performed and complied in all
material respects with all of its covenants and obligations required by this Agreement to be performed or complied with prior to or at the Closing Date.
(c)
Agreement with Executive
. Parent shall have received an executed employment agreement with the person listed in
Section 6.2(c)
of the Stonegate Disclosure Schedule and to whom employment was offered on terms as described in
Section 5.8(c)
of the Stonegate Disclosure Schedule.
(d)
Regulatory Approvals
. All Regulatory Approvals shall have been obtained and shall remain in full force and effect
and shall not contain or result in the imposition of any Materially Burdensome Regulatory
A-53
Condition as contemplated by
Section 5.3(a)
, and all statutory waiting periods in respect thereof shall have expired or been terminated.
(e)
Stonegate Closing Deliverables
. Stonegate shall have delivered to Parent, each of the certificates, instruments,
agreements, documents, assets and other items required to be delivered by it pursuant to
Section 2.16
at or prior to the Closing Date.
(f)
Tax Opinion
. Parent shall have received a written opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. dated as of the Closing Date and based on facts, representations and assumptions described in such opinions, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinions, Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. will be entitled to receive and rely upon customary certificates and representations of the Chief Financial Officer of each of each of Stonegate and Parent as
referenced in
Section 5.13(b)
.
6.3
Conditions to the Obligations of Stonegate
. The obligation of Stonegate to
consummate the transactions contemplated by this transaction is also subject to the satisfaction, or waiver by Stonegate, at or prior to the Closing Date of the following conditions:
(a)
Accuracy of Representations and Warranties
. For purposes of this
Section 6.3(a)
, the accuracy of the
representations and warranties of Parent set forth in this Agreement shall be assessed (i) as of the date of this Agreement and (ii) as of the Closing with the same effect as though all such representations and warranties had been made on
and as of the Closing Date;
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, 4.3(a) 4.6
and
4.16
shall be true and correct in all respects, except for inaccuracies which are
de minimis
in amount and effect, and the representations and warranties in
Section
4.5
shall be true and correct in all material respects.
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 4.1, 4.2, 4.3(a), 4.5, 4.6
and
4.16
) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a Material Adverse Change or Material Adverse Effect with respect to Parent;
provided
that
, for purposes of this sentence only, those representations and
warranties which are qualified as to materiality, Material Adverse Change or Material Adverse Effect or as to Parents Knowledge shall be deemed not to include such qualifications.
(b)
Compliance with Covenants and Obligations
. Parent shall have performed and complied in all material respects with
all of its covenants and obligations required by this Agreement to be performed or complied with prior to or at the Closing Date.
(c)
Regulatory Approvals
. All Regulatory Approvals shall have been obtained and shall remain in full force and effect
and shall not contain or result in the imposition of any Materially Burdensome Regulatory Condition as contemplated by
Section 5.3(a)
, and all statutory waiting periods in respect thereof shall have expired or been terminated.
(d)
Listing
. The shares of Parent Common Stock to be issued to the Stonegate Stockholders as part of the Merger
Consideration in the Merger shall have been approved for listing on Nasdaq.
(e)
Parent Closing Deliverables
. Parent
shall have delivered to Stonegate, each of the certificates, instruments, agreements, documents, assets and other items required to be delivered by it pursuant to
Section 2.17
at or prior to the Closing Date.
(f)
Tax Opinion
. Stonegate shall have received a written opinion of Squire Patton Boggs (US) LLP, dated as of the
Closing Date and based on facts, representations and assumptions described in such opinions, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinions, Squire
Patton Boggs (US) LLP will be entitled to receive and rely upon customary certificates and representations of the Chief Financial Officer of each of each of Stonegate and Parent as referenced in
Section 5.13(b)
.
A-54
ARTICLE VII
TERMINATION
7.1
Termination
. This Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written
consent of Stonegate and Parent;
(b) by either Stonegate, on the one hand, or Parent, on the other hand, if the Closing
Date shall not have occurred on or before the first anniversary of the date of this Agreement; provided, that the right to terminate this Agreement under this
Section 7.1(b)
shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing Date to occur on or prior to such date;
(c) by either Stonegate, on the one hand, or Parent, on the other hand, in the event of (i) a material breach by the other
party of any representation or warranty contained this Agreement, which breach cannot be or has not been cured within forty-five (45) days after the giving of written notice to the breaching party of such breach, and which breach or breaches
would result in a failure to satisfy any condition to Parents or
Stonegate
s obligations set forth in
Section 6.2
or
Section 6.3
, respectively, or (ii) a material breach by the other party of any of its
obligations contained in this Agreement, which breach cannot be or has not been cured within forty-five (45) days after the giving of written notice to the breaching party of such breach, and which breach or breaches would result in a failure
to satisfy any condition to Parents or Stonegates obligations set forth in
Section 6.2
or
Section 6.3
, respectively;
(d) by either Stonegate, on the one hand, or Parent, on the other hand, if (i) final action has been taken by a Regulatory
Agency whose approval is required in connection with this Agreement and the transactions contemplated hereby, which final action (x) has become final and nonappealable and (y) does not approve this Agreement or the transactions
contemplated hereby, or (ii) any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any law, or final nonappealable judgment which has the effect of making illegal the consummation of the transactions
contemplated by this Agreement;
(e) by Parent if (i) the Board of Directors of Stonegate (or any committee thereof)
shall have failed to make the Stonegate Recommendation or shall have made an Adverse Stonegate Recommendation Change (including by, in the case of a tender or exchange offer, failing to promptly recommend rejection of such offer), or
(ii) Stonegate shall have materially breached any of the provisions set forth in
Sections 2.13
and
5.9
;
(f) by Stonegate if (i) the Board of Directors of Parent (or any committee thereof) shall have failed to make the Parent
Board Recommendation or shall have made an Adverse Parent Recommendation Change, or (ii) Parent shall have materially breached any of the provisions set forth in
Section
2.15
;
(g) by Parent or Stonegate, if either (i) the Stonegate Shareholders fail to approve this Agreement at the Stonegate
Shareholders Meeting, or at any adjournment or postponement thereof or (ii) the Requisite Parent Vote is not obtained at the Parent Shareholders Meeting or at any adjournment or postponement thereof; provided, that the right to
terminate this Agreement under this
Section 7.1(g)
shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure to obtain such
approval;
(h) by Stonegate or Parent if the volume-weighted average per share closing price, rounded to the nearest
hundredth of a cent, of Parent Common Stock as reported on Nasdaq (based on regular way trading) for any twenty (20) consecutive trading days between June 30, 2017, and the trading day three business days prior to the Closing
Date is below $21.11; provided, however, that a partys right to terminate the Agreement under this
Section 7.1(h)
is exercisable only within ten (10) days of the date of any occasion on which such termination right arises; or
(i) By Parent if fifteen percent (15%) or more of the outstanding shares of Stonegate Common Stock are Appraisal
Shares.
A-55
7.2
Effect of Termination
.
(a) In the event of termination of this Agreement by a party pursuant to
Section
7.1
, written notice thereof
shall promptly be given to the other party(ies) hereto, and upon such notice this Agreement shall terminate. Except as provided under this
Section
7.2
or otherwise expressly in accordance with the terms of this Agreement, upon
termination of this Agreement pursuant to
Section
7.1
, this Agreement shall forthwith become void and of no further force and effect, there shall be no liability on the part of any party hereto to the other party(ies), and all rights
and obligations of any party hereto shall cease and the parties shall be released from any and all obligations hereunder; provided, that (i) the provisions of
Section 5.4(c)
shall survive any such termination; and (ii) nothing
herein shall relieve any party from liability for damages resulting from fraud or the willful breach of any of its representations, covenants or agreements set forth in this Agreement.
(b) Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated pursuant to
Section 7.1(e)
, then Stonegate shall, on the date of termination, pay to Parent the sum equal to $36,000,000 (the
Termination Fee
) by wire transfer of immediately available funds.
(c) Notwithstanding anything to the contrary in this Agreement, in the event that (i) an Acquisition Proposal with respect
to Stonegate shall have been communicated to or otherwise made known to the shareholders or senior management or Board of Directors of Stonegate, or any Person or group of Persons shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal with respect to Stonegate after the date of this Agreement, (ii) thereafter this Agreement is terminated (A) by Parent or Stonegate pursuant to
Section 7.1(b)
(if the Stonegate
Shareholder Approval has not theretofore been obtained), (B) by Parent pursuant to
Section 7.1(c)
or (C) by Parent or Stonegate pursuant to
Section 7.1(g)
as a result of the Stonegate Shareholders failure to approve
this Agreement at the Stonegate Shareholders Meeting and (iii) prior to the date that is twelve (12) months after the date of such termination Stonegate consummates a transaction of a type set forth in the definition of
Acquisition Proposal or enters into an Acquisition Agreement, then Stonegate shall on the earlier of the date such transaction is consummated or any such Acquisition Agreement is entered into, pay to Parent the Termination Fee by wire
transfer of immediately available funds.
ARTICLE VIII
MISCELLANEOUS
8.1
Notices
. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given (and duly received) if delivered personally, or sent by overnight courier (providing proof of delivery
and confirmation of receipt by telephonic notice to the applicable contact person) to the parties at the following addresses or at such other addresses for a party as shall be specified by like notice:
Home BancShares, Inc.
719 Harkrider, Suite 100
Conway, Arkansas 72032
Attention: C. Randall Sims
Telephone: (501) 328-4657
Email: rsims@my100bank.com
with a copy (which shall not constitute notice) to:
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
425 W. Capitol Avenue, Suite 1800
A-56
Little Rock, Arkansas 72201
Attention: C. Douglas Buford, Jr.
Telephone: (501) 688-8866
Email: dbuford@mwlaw.com
and
|
(b)
|
if to
Stonegate
, to:
|
Stonegate Bank
400 North Federal Highway
Pompano Beach, FL 33062
Attention: Dave Seleski
Telephone: (954) 315-5510
Email:
dseleski@stonegatebank.com
with a copy (which shall not constitute notice) to:
Squire Patton Boggs (US) LLP
221 E. Fourth Street, Suite 2900
Cincinnati, Ohio 45202
Attention: James J. Barresi
Telephone: (513) 361-1260
Email:
james.barresi@squirepb.com
8.2
Entire Agreement
. This Agreement (including the Disclosure Schedules hereto), together with the Voting and Support Agreements
and the other documents and agreements delivered at the Closing Date pursuant to the provisions hereof constitute the full and entire understanding and agreement of the parties hereto in respect of its subject matter, and supersedes all prior
agreements, understandings (oral and written) and negotiations between or among the parties with regard to such subject matter. The Disclosure Schedules and the Confidentiality Agreement constitute a part hereof as though set forth in full herein.
8.3
Amendments
. This Agreement (including the Disclosure Schedules attached hereto) may not be modified, amended,
supplemented, cancelled or discharged, except by a written instrument executed by all parties hereto.
8.4
Waivers
. No failure to
exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power
or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. Any waiver, permit, consent or
approval of any kind or character by any party of any breach or default under this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.
8.5
Binding Effect; Assignment;
No Third Party Beneficiaries
. The rights and obligations of this Agreement shall be binding on
and enforceable by the parties hereto and their respective successors and permitted assigns. Except as expressly provided herein, the rights and obligations of this Agreement may not be assigned by Stonegate or Parent without the express prior
written consent of the other party. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties hereto and their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in Section 5.10 and in the excise tax or tax gross up payment provisions of Section 5.8(b) of this Agreement.
A-57
8.6
Governing Law;
Jurisdiction
. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts made and performed entirely within such state, without giving effect to its principles of conflicts of laws; provided that the FBCA and the ABC, as applicable, shall govern
to the extent mandatorily applicable to Florida corporations and Arkansas banks, respectively. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal or state court of competent jurisdiction located in Hillsborough County, Florida. Each of the parties hereto submits to the
exclusive jurisdiction of such courts in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably
waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
8.7
Waiver of Jury Trial
. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.7
.
8.8
Cumulative
Remedies; Specific Performance
. All rights and remedies under this Agreement or otherwise afforded by Applicable Law to any party, shall be cumulative and not alternative. Without limiting the rights of a party hereto to pursue all other legal
and equitable rights available to such party for another partys failure to perform its obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their respective obligations
hereunder would be inadequate and that each party shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. Each of the parties hereby further waives any requirement under Applicable
Law to post security as a prerequisite to obtaining equitable relief.
8.9
Expenses
. Each party to this Agreement shall bear its
own expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, whether or not such transactions are consummated, including all fees and expenses of agents,
representatives, counsel and accountants.
8.10
Prevailing Party
. In the event that any litigation between the parties hereto
should arise as the result of any breach or alleged breach of this Agreement, the prevailing party in said litigation shall be entitled to recover its reasonable attorneys fees and costs, including attorneys fees and costs incurred in
litigating entitlement to attorneys fees and costs and in determining or quantifying the amount of recoverable attorneys fees and costs (through both trial and appellate levels) from the nonprevailing party.
8.11
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
A-58
8.12
Nonsurvival
. None of the representations, warranties, covenants and agreements set
forth in this Agreement other than this
Section
8.12
shall survive the Effective Time, except for those covenants and agreements contained in this Agreement that by their terms apply or are to be performed in whole or in part after the
Effective Time.
[Remainder of page was intentionally left blank; signature page follows]
A-59
IN WITNESS WHEREOF
, the parties have executed this Agreement and Plan of Merger on the
day and year first above written.
|
|
|
HOME BANCSHARES, INC.
an Arkansas corporation
|
|
|
By:
|
|
/s/ John W. Allison
|
|
|
John W. Allison
|
|
|
Chairman of the Board
|
|
|
|
CENTENNIAL BANK
an Arkansas state bank
|
|
|
By:
|
|
/s/ Tracy French
|
|
|
Tracy French
|
|
|
Chief Executive Officer
|
|
|
|
STONEGATE BANK
a Florida-chartered commercial bank
|
|
|
By:
|
|
/s/ Dave Seleski
|
|
|
Dave Seleski
|
|
|
President and Chief Executive Officer
|
A-60
Stonegates Schedule Index*
Section 1.1
Knowledge
Section 3.1(c)
Organization
Section 3.4
-
Consents and Approvals
Section 3.5
Regulatory Matters
Section 3.6(a)
Capitalization
Section 3.12(b)(q)
-
Taxes
Section 3.13(b)
Real Property
Section 3.14(a)
Litigation; Orders
Section 3.16(b)(d)(f)
Loans
Section 3.21
Environmental Matters
Section 3.22
Material Contracts
Section 3.23(a)(f)(h)(i)(k)(l)(m)
Employee Matters
Sections 3.24(c)(d)
Labor Relations (Employment Matters)
Section 3.25
Related Party Transactions
Section 5.1(ii)(xiii)(xiv)(xix)
Conduct of Business
Section 5.8(a)(c)
Employment Benefit Matters
Section 6.2(c)
Employment Agreement
*
|
The disclosure schedules listed above have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K. Home BancShares, Inc. hereby agrees to furnish supplementally a copy of any omitted disclosure schedule to
the SEC upon request.
|
A-61
Parents Schedule Index*
Section 1.1
Knowledge
Section
4.4
Consents and Approvals
Section 4.5
Regulatory Matters
Section 4.6(c)
Capitalization
Section 4.10
Ordinary Course; Lack of Material Adverse Change
Section 4.19
Related Party Transactions
Section 5.2
Conduct of Business
*
|
The disclosure schedules listed above have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K. Home BancShares, Inc. hereby agrees to furnish supplementally a copy of any omitted disclosure schedule to
the SEC upon request.
|
A-62
EXHIBIT A
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT
(this
Agreement
) is dated as of
, 2017, by and between the undersigned holder (Shareholder) of Common Stock, $5.00 par value per share, of Stonegate Bank, a Florida-chartered commercial bank
(Stonegate), and Home BancShares, Inc., an Arkansas corporation (HBI) and Centennial Bank, an Arkansas state bank (Centennial) (HBI and Centennial are collectively referred to herein as Purchaser). All
capitalized terms used but not defined herein shall have the meanings assigned to them in the Merger Agreement (defined below).
WHEREAS,
concurrently with the execution of this Agreement, HBI, Centennial and Stonegate are entering into an Agreement and Plan of Merger (as such agreement may be subsequently amended or modified, the Merger Agreement), pursuant to which
Stonegate will merge with and into Centennial, with Centennial as the surviving entity (the Merger), and in connection with the Merger, each outstanding share of Stonegate Common Stock will be converted into the right to receive the
Merger Consideration;
WHEREAS, Shareholder has voting power over the number of shares of Stonegate Common Stock as indicated on the
signature page of this Agreement under the heading Total Number of Shares of Stonegate Common Stock Subject to this Agreement (such shares, together with any additional shares of Stonegate Common Stock subsequently acquired by
Shareholder during the term of this Agreement, including through the exercise of any stock option or other equity award, warrant or similar instrument, being referred to collectively as the Shares);
WHEREAS, obtaining Stonegate Shareholder Approval of the Merger is a condition to the consummation of the transactions contemplated by the
Merger Agreement; and
WHEREAS, it is a material inducement to the willingness of Purchaser to enter into the Merger Agreement that
Shareholder execute and deliver this Agreement.
NOW, THEREFORE, in consideration of, and as a material inducement to, Purchaser entering
into the Merger Agreement and proceeding with the transactions contemplated thereby, and in consideration of the expenses incurred and to be incurred by Purchaser in connection therewith, Shareholder and Purchaser agree as follows:
Section 1.
Agreement to Vote Shares
. Shareholder agrees that, while this Agreement is in effect, at any meeting of shareholders of
Stonegate, however called, or at any adjournment thereof, or in any other circumstances in which Shareholder is entitled to vote, consent or give any other approval, except as otherwise agreed to in writing in advance by Purchaser, Shareholder
shall:
a) appear at each such meeting in person or by proxy; and
b) vote (or cause to be voted), in person or by proxy, all the Shares that are beneficially owned by Shareholder (other than those Shares held
indirectly by a spouse) or as to which Shareholder has, directly or indirectly, the sole right to vote or direct the voting, (i) in favor of adoption and approval of the Merger Agreement and the transactions contemplated thereby (including any
amendments or modifications of the terms thereof which are approved by the board of directors of Stonegate and adopted in accordance with the terms thereof unless the effect of such amendment or modification is to reduce the Purchase Price);
(ii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Stonegate contained in the Merger Agreement or of Shareholder contained in this Agreement;
(iii) against any Acquisition Proposal; and (iv) against any other action, agreement or transaction that is intended, or could reasonably be expected, to impede, interfere or be inconsistent with, delay, postpone, discourage or materially
and adversely affect consummation of the transactions contemplated by the Merger Agreement.
A-63
The Shares do not include shares over which the Shareholder exercises control in a fiduciary
capacity for any other person or entity that is not an Affiliate of the Shareholder, and no representation by Shareholder is made with respect thereto.
Section 2.
No Transfers
. While this Agreement is in effect, Shareholder agrees not to, directly or indirectly, sell, transfer,
pledge, assign or otherwise dispose of, or enter into any contract option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares, except with respect to the
following permitted transfers: (a) transfers by will or operation of law, in which case this Agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing, prior to such
transfer, to be bound by the terms of this Agreement, (c) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations,
provided
that as a condition to such
transfer, such transferee, shall be required to execute an agreement that is identical in form and substance to this Agreement, (d) the exercise of outstanding stock options in order to pay the exercise price of such stock options or satisfy
any withholding taxes triggered by such exercise, and (e) such transfers as Purchaser may otherwise permit in its sole discretion, and further provided that notwithstanding anything to the contrary in this Agreement, Shares that are pledged to
secure a credit facility as of the date of this Agreement may continue to be pledged to secure a credit facility. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.
Section 3.
Representations and Warranties of Shareholder
. Shareholder represents and warrants to and agrees with Purchaser as
follows:
a) Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this
Agreement.
b) This Agreement has been duly executed and delivered by Shareholder, and assuming the due authorization, execution and
delivery by Purchaser, constitutes the valid and legally binding obligation of Shareholder enforceable against Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights and to general equity principles.
c) The execution and
delivery of this Agreement by Shareholder does not, and the performance by Shareholder of his, her or its obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which
Shareholder is subject or, in the event that Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of Shareholder.
d) Shareholder has the authority to exercise voting power over the Shares (other than those Shares held indirectly by a spouse). The Shares do
not include shares over which Shareholder exercises control in a fiduciary capacity for any other person or entity that is not an Affiliate of Shareholder, and no representation by Shareholder is made with respect thereto. Shareholder has the right
to vote the Shares (other than those Shares held indirectly by a spouse), and none of the Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of the Shares, except as contemplated by this
Agreement.
Section 4.
Specific Performance; Remedies; Attorneys Fees
. The parties hereto acknowledge that money damages
are not an adequate remedy for breaches of this Agreement, that any breach of this Agreement would cause irreparable harm to the non-breaching party and that any party, in addition to any other rights and remedies which the parties may have
hereunder or at law or in equity, may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deem just and proper in order to enforce this Agreement or
prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief. Each party further agrees that it
A-64
will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with the other partys seeking or obtaining such equitable relief. All rights, powers
and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any such right, power or remedy by any party shall not
preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party. If any legal action or other proceeding relating to this Agreement or the transactions contemplated hereby or the enforcement of any provision of
this Agreement is brought by any party against the other party, the prevailing party in such action or proceeding shall be entitled to recover all reasonable expenses relating thereto (including reasonable attorneys fees and expenses, court
costs and expenses incident to arbitration, appellate and post-judgment proceedings) from the other party, in addition to any other relief to which such prevailing party may be entitled.
Section 5.
Term of Agreement; Termination
. The term of this Agreement shall commence on the date hereof and will terminate upon
the earliest of (a) the Effective Time, (b) the date of termination of the Merger Agreement in accordance with its terms, or (c) upon the written agreement of the parties hereto. Upon such termination, no party shall have any further
obligations or liabilities hereunder; provided, however, that such termination shall not relieve any party from liability for any breach of this Agreement that occurred prior to such termination.
Section 6.
Entire Agreement; Amendments
. This Agreement supersedes all prior agreements, written or oral, among the parties hereto
with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provision hereof by any such party, nor shall any such waiver be deemed a continuing waiver of
any provision hereof by such party.
Section 7.
Severability
. In the event that any one or more provisions of this Agreement
shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use
their reasonable best efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.
Section 8.
Capacity as Shareholder
. This Agreement shall apply to Shareholder solely in his or her capacity as a shareholder of
Stonegate and it shall not apply in any manner to Shareholder in his or her capacity as a director, officer or employee of Stonegate. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of
Shareholder to comply with his or her fiduciary duties as a director or officer of Stonegate, if applicable.
Section 9.
Governing
Law
. This Agreement shall be governed by, and interpreted in accordance with, the internal, substantive laws of the State of Arkansas, without regard for the law or principles of conflict of laws.
Section 10.
WAIVER OF JURY TRIAL
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.
A-65
Section 11.
Waiver of Appraisal Rights; Further Assurances
. Provided that the Merger
is consummated in compliance with the terms of the Merger Agreement, that the consideration offered pursuant to the Merger is not less than that specified in the Merger Agreement executed on or about the date hereof, and that this Agreement has not
been terminated in accordance with its terms, to the extent permitted by applicable law, Shareholder hereby waives any rights of appraisal or rights to dissent from the Merger or demand fair value for his or her Shares in connection with the Merger,
in each case, that Shareholder may have under applicable law. From time to time prior to the termination of this Agreement, at Purchasers request and without further consideration, Shareholder shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or desirable to effect the actions and consummate the transactions contemplated by this Agreement. Shareholder further agrees not to commence or participate in, and to take
all actions necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against HBI, Centennial, Stonegate, or any of their respective successors relating to the negotiation, execution or delivery of
this Agreement or the Merger Agreement or the consummation of the Merger.
Section 12.
Disclosure
. Shareholder hereby
authorizes Stonegate and Purchaser to publish and disclose in any announcement or disclosure required by the SEC and in the Proxy Statement-Prospectus such Shareholders identity and ownership of the Shares and the nature of Shareholders
obligations under this Agreement.
Section 13.
Counterparts
. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which together shall constitute one instrument.
Section 14.
Superior
Proposal
. Notwithstanding any of the provisions of this Agreement, the obligations of the Shareholder under this Agreement shall not be applicable in connection with an Acquisition Proposal that is a Superior Proposal,
provided
that
Stonegate has complied with the terms and conditions of Section 5.9 of the Merger Agreement.
[Signature Page Follows.]
A-66
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date
first written above.
|
|
|
SHAREHOLDER:
|
|
|
(
NOTE
: If Other than an Individual Shareholder, Print or Type Name of Individual Signing the Voting Agreement and
Representative Capacity)
|
|
Total Number of Shares of Stonegate Common
Stock Subject to this
Agreement:
|
|
|
HOME BANCSHARES, INC.
an Arkansas corporation
|
|
|
By:
|
|
|
|
|
C. Randall Sims
|
|
|
Chief Executive Officer
|
|
CENTENNIAL BANK
|
an Arkansas state bank
|
|
|
By:
|
|
|
|
|
Tracy French
|
|
|
Chief Executive Officer
|
A-67
APPENDIX B
OPINION OF RBC CAPITAL MARKETS, LLC
March 27, 2017
The Board of Directors
Home BancShares, Inc.
719 Harkrider Street, Suite 100
Conway, Arkansas 72032
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to Home BancShares, Inc., an Arkansas corporation (Parent), of
the Merger Consideration (as defined below) provided for under the terms of the proposed Agreement and Plan of Merger (the Agreement) by and among Parent, Centennial Bank, an Arkansas state bank (Parent Bank), and Stonegate
Bank, a Florida-chartered commercial bank (the Bank). Capitalized terms used herein shall have the meanings used in the Agreement unless otherwise defined herein.
The Agreement provides, among other things, that the Bank will merge with and into Parent Bank (the Merger) and, at the Effective Time, each share
of common stock, par value $5.00 per share, of Bank (Bank Common Stock) issued and outstanding immediately prior to the Effective Time (other than (A) Appraisal Shares and (B) other than any such shares beneficially owned by
third parties, shares held, directly or indirectly, by Parent, the Bank or any wholly-owned subsidiary of Parent or the Bank, which will be cancelled for no consideration) will be converted into the right to receive, without interest, consideration
(the Merger Consideration) comprised of (i) the amount of $3.27 per share in cash and (ii) a number of shares of common stock, par value $0.01 per share, of Parent (Parent Common Stock) determined by dividing $45.73
by the volume-weighted average closing price per share of Parent Common Stock over the twenty consecutive trading day period ending on the third business day prior to consummation of the Merger (Parent Average Closing Price) ; provided
however, that if such volume-weighted average closing price equals $35.19 or greater, the Parent Average Closing Price will be $35.19, and if such volume-weighted average closing price equals $22.52 or less, the Parent Average Closing Price will be
$22.52, in each case, subject to certain exceptions. The terms and conditions of the Merger are more fully set forth in the Agreement.
RBC Capital
Markets, LLC (RBCCM), as part of its investment banking services, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, corporate restructurings, underwritings, secondary
distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes.
We are acting as a financial
advisor to Parent in connection with the Merger and we will receive a fee for our services upon delivery of this opinion, which is not contingent upon the successful completion of the Merger. Parent has also agreed to indemnify us for certain
liabilities that may arise out of our engagement.
In the ordinary course of business, RBCCM and/or is affiliates may act as a market maker and broker in
the publicly traded securities of Parent and/or the Bank and receive customary compensation, and may also actively trade securities of Parent and/or the Bank for our own account and the accounts of our customers, and, accordingly, RBCCM and its
affiliates, may hold a long or short position in such securities.
RBCCM and/or its affiliates have provided investment banking services to Parent in the
past, for which they have received customary fees, including, since January 1, 2015, assisting Parent in connection with certain share repurchase transactions. Since January 1, 2015, RBCCM and/or its affiliates have not provided the Bank
with any investment banking and/or financial advisory services for which RBCCM or any of its affiliates have received
B-1
compensation; provided, however, that certain senior members of the RBCCM deal team have held discussions from time to time with senior management of the Bank with respect to possible strategic
transactions. In light of RBCCMs prior services to Parent and its financial advisory role for Parent in connection with the Merger, RBCCM anticipates that it may be selected by Parent to provide investment banking and financial advisory and/or
financing services that may be required by Parent in the future, regardless of whether the Merger is successfully completed, including acting as sole bookrunner for an anticipated subordinated debt offering.
For the purposes of rendering our opinion, we have undertaken such review and inquiries as we deemed necessary or appropriate under the circumstances,
including the following: (i) we reviewed the financial terms of a draft Agreement provided to us on March 24, 2017 (the Latest Draft Agreement); (ii) we reviewed and analyzed certain publicly available financial and other
data with respect to Parent and the Bank and certain other relevant historical operating data relating to Parent and the Bank made available to us from published sources and from the internal records of Parent; ((iii) we reviewed financial
projections and forecasts of Parent, the Bank and the combined post-Merger company, including certain pro forma adjustment assumptions relating to the Merger, all as prepared by Parents management (collectively, Forecasts);
(iv) we conducted discussions with members of the senior management of Parent with respect to the business prospects and financial outlook for Parent and the Bank as standalone entities, as well as for the combined post-Merger company;
(v) we reviewed Wall Street research estimates regarding the potential future performance of Parent and the Bank as standalone entities; (vi) we reviewed the reported prices and trading activity for Parent Common Stock and Bank Common
Stock; and (vii) we performed other studies and analyses as we deemed appropriate.
In arriving at our opinion, we performed the following analyses
in addition to the review, inquiries, and analyses referred to in the preceding paragraph: we performed a valuation analysis of each of Parent and the Bank as a standalone entity, using comparable company and discounted cash flow analyses with
respect to each of Parent and the Bank as well as precedent transaction analysis with respect to the Bank.
Several analytical methodologies have been
employed and no one method of analysis should be regarded as critical to the overall conclusion we have reached. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the
value of particular techniques. The overall conclusions we have reached are based on all the analysis and factors presented, taken as a whole, and also on application of our own experience and judgment. Such conclusions may involve significant
elements of subjective judgment and qualitative analysis. We therefore give no opinion as to the value or merit standing alone of any one or more parts of the analyses.
In rendering our opinion, we have assumed and relied upon the accuracy and completeness of all the information that was publicly available to us and all of
the financial, legal, tax, operating and other information provided to or discussed with us by Parent or the Bank (including, without limitation, the financial statements and related notes thereto of each of Parent and the Bank, respectively), and
have not assumed responsibility for independently verifying and have not independently verified such information. We have assumed that all Forecasts provided to us by Parent (including Forecasts with respect to certain cost synergies expected to be
realized from the Merger and certain pro forma adjustment assumptions relating to the Merger), were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of Parent as to the future
financial performance of Parent or the Bank (as the case may be) as standalone entities (or, in the case of the projected synergies and pro forma adjustments, as a combined company). We express no opinion as to such Forecasts or the assumptions upon
which they were based.
In rendering our opinion, we have not assumed any responsibility to perform, and have not performed, an independent evaluation or
appraisal of any of the assets or liabilities of Parent or the Bank, and we have not been furnished with any such valuations or appraisals. We have not assumed any obligation to conduct, and have not conducted, any physical inspection of the
property or facilities of Parent or the Bank. We are not experts in the evaluation of allowances for loan and lease losses and have not independently verified such allowances or reviewed or examined any individual loan or credit files. We assumed,
with your consent, that the aggregate
B-2
allowances for loan and lease losses set forth in the financial statements of Parent and the Bank are adequate to cover such losses. We have not investigated, and make no assumption regarding,
any litigation or other claims affecting Parent or the Bank.
We have assumed, in all respects material to our analysis that all conditions to the
consummation of the Merger will be satisfied without waiver thereof. We have further assumed that the executed version of the Agreement will not differ, in any respect material to our opinion, from the Latest Draft Agreement.
Our opinion speaks only as of the date hereof, is based on the conditions as they exist and information which we have been supplied as of the date hereof, and
is without regard to any market, economic, financial, legal, or other circumstances or event of any kind or nature which may exist or occur after such date. We have not undertaken to reaffirm or revise this opinion or otherwise comment upon events
occurring after the date hereof and do not have an obligation to update, revise or reaffirm this opinion. We are not expressing any opinion herein as to the prices at which Parent Common Stock or Bank Common Stock have traded or will trade following
the announcement of the Merger nor the prices at which Parent Common Stock will trade following the consummation of the Merger.
The opinion expressed
herein is provided for the information and assistance of the Board of Directors of Parent in connection with the Merger. We express no opinion and make no recommendation to any stockholder of Parent as to how such stockholder should vote with
respect to the Merger or any other proposal to be voted upon by them in connection with the Merger. All advice and opinions (written and oral) rendered by RBCCM are intended for the use and benefit of the Board of Directors of Parent. Such advice or
opinions may not be reproduced, summarized, excerpted from or referred to in any public document or given to any other person without the prior written consent of RBCCM. If required by applicable law, such opinion may be included in any disclosure
document filed by Parent with the Securities and Exchange Commission with respect to the Merger; provided however, that such opinion must be reproduced in full and that any description of or reference to RBCCM be in a form reasonably acceptable to
RBCCM and its counsel. RBCCM shall have no responsibility for the form or content of any such disclosure document, other than the opinion itself.
Our
opinion does not address the merits of the underlying decision by Parent to engage in the Merger or the relative merits of the Merger compared to any alternative business strategy or transaction in which Parent might engage.
Our opinion addresses solely the fairness of the Merger Consideration, from a financial point of view, to Parent. Our opinion does not in any way address
other terms or arrangements of the Merger or the Agreement, including, without limitation, the financial or other terms of any other agreement contemplated by, or to be entered into in connection with, the Agreement, nor does it address, and we
express no opinion with respect to, the solvency of Parent. Further, in rendering our opinion we express no opinion about the fairness of the amount or nature of the compensation (if any) to any of Parents officers, directors or employees, or
class of such persons, relative to the compensation to be paid to holders of Bank Common Stock.
Our opinion has been approved by RBCCMs Fairness
Opinion Committee.
Based on our experience as investment bankers and subject to the foregoing, including the various assumptions and limitations set
forth herein, it is our opinion that, as of the date hereof, the Merger Consideration is fair, from a financial point of view, to Parent.
Very truly yours,
/s/ RBC
CAPITAL MARKETS, LLC
B-3
APPENDIX C
OPINION OF HOVDE GROUP, LLC
March 26, 2017
Board of Directors
Stonegate Bank
400 North Federal Highway
Pompano Beach, FL 33062
Ladies and Gentlemen:
Hovde Group, LLC
(
we
or
Hovde
) understand that Home BancShares, Inc., an Arkansas corporation (
Parent
), Centennial Bank, an Arkansas state bank (
Subsidiary Bank
), and Stonegate Bank, a
Florida-chartered commercial bank (
Stonegate
) are about to enter into an Agreement and Plan of Merger dated March 27, 2017 (the
Agreement
). Pursuant to the Agreement, Stonegate will merge with and into
Subsidiary Bank, with Subsidiary Bank being the surviving entity (the
Merger
). Capitalized terms used herein that are not otherwise defined shall have the same meanings attributed to them in the Agreement.
Pursuant to the Agreement, at the Effective Time, subject to the other provisions of the Agreement, each share of the common stock of
Stonegate, $5.00 par value (the
Stonegate Common Stock
), issued and outstanding immediately prior to the Effective Time (excluding any Excluded Shares and any Appraisal Shares) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and shall thereafter represent the right to receive (subject to
ARTICLE VII
of the Agreement), without interest, (i) that number of shares of Parent Common Stock that equals the
Exchange Ratio, and (ii) $3.27 in cash (the
Per Share Cash Consideration
). For purposes of this Agreement, the
Merger Consideration
means the right to receive the consideration described in clauses
(i) and (ii) of the preceding sentence pursuant to the Merger with respect to each issued and outstanding share of Stonegate Common Stock (excluding any Excluded Shares and any Appraisal Shares), together with any cash in lieu of
fractional shares as specified in Section 2.8(d) of the Agreement.
As used in the Agreement,
Exchange Ratio
means
that number of shares of Parent Common Stock (rounded to the nearest ten-thousandth) obtained by dividing (x) the Per Share Stock Consideration by (y) the Parent Share Average Closing Price;
provided
that the Exchange Ratio shall be
subject to adjustment pursuant to Section 2.9 of the Agreement.
Per Share Stock Consideration
means an amount equal to the Per Share Merger Consideration minus the Per Share Cash Consideration (as defined in
Section 2.7(a)).
Per Share Merger Consideration
shall mean $49.00, assuming that the Stonegate Outstanding Shares do not exceed the sum of (a) 15,301,388 shares plus (b) any shares issued upon exercise of Stonegate
Stock Options after execution of the Agreement; provided, however, that the $49.00 shall be ratably reduced in the event that the Stonegate Outstanding Shares exceed the aforementioned sum.
Parent Share Average Closing Price
shall
mean the volume-weighted average closing price per share of Parent Common Stock as reported on Nasdaq (based on regular way trading) over the twenty (20) consecutive trading day period ending on the third business day prior to the
Closing Date, rounded to the nearest whole cent; provided, however, that if in the event this calculation equals $35.19 or greater, then the Parent Share Average Closing Price shall be $35.19; and, if it equals $22.52 or less, then the Parent Share
Average Closing Price shall be $22.52, both of which shall be proportionally adjusted in the event that outstanding shares of Parent Common Stock shall be changed into a different number of shares
C-1
Board of Directors
Stonegate Bank
Page
2
of 6
by reason of any stock dividend,
reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the Agreement Date and the Effective Time.
Total Merger Consideration
shall mean an amount equal to the Per Share Merger
Consideration multiplied by the Stonegate Outstanding Shares. We have assumed for purposes of the foregoing and our opinion that the Parent Share Average Closing Price as of the determination date will be not be less than $22.52, and that Stonegate
Outstanding Shares will not exceed the sum of (a) 15,301,388 shares plus (b) any shares issued upon exercise of Stonegate Stock Options after execution of the Agreement.
We note that prior to the Effective Time, Stonegate is required to take actions necessary to provide that, immediately prior to the Effective
Time, (a) each Stonegate Stock Option, whether or not then exercisable, shall fully vest and immediately be cancelled and only entitle the holder thereof, to receive an amount in cash, without interest, equal to the product of (i) the
total number of Stonegate Common Shares subject to such Stonegate Stock Option multiplied by (ii) the excess, if any, of (A) the sum of (I) the product of (x) the Exchange Ratio multiplied by (y) the volume-weighted average
closing price per share of Parent Common Stock as reported on Nasdaq (based on regular way trading) over the twenty (20) consecutive trading day period ending on the third business day prior to the Closing Date, rounded to the
nearest whole cent, and (II) the Per Share Cash Consideration (such sum, the
Per Share Equity Award Consideration
) over (B) the per share exercise price for the applicable Stonegate Stock Option, less applicable Taxes
required to be withheld with respect to such payment. We further note that any Stonegate Stock Option that has a per share exercise price that is greater than or equal to the Per Share Equity Award Consideration shall be cancelled for no
consideration. For purposes of our opinion and analysis, we have assumed that 1,062,550 Stonegate Stock Options that are in-the-money as of March 24, 2017 will be cancelled prior to the Effective Time in exchange for the right to receive the
Per Share Equity Award Consideration (which, based on the foregoing, net of the aggregate exercise prices, has a value of approximately $28,625,097).
Based on the foregoing, we have assumed that the Per Share Merger Consideration payable in connection with the Merger will be $49.00 per share
of Stonegate Common Stock, which based on 15,301,388 Stonegate Outstanding Shares as of March 24, 2017, equates to Total Merger Consideration of approximately $749,768,012 (comprised of Per Share Stock Consideration of $45.73 per share, or an
aggregate value of $699,732,473, and Per Share Cash Consideration of $3.27 per share, or aggregate cash consideration with a value of $50,035,539).
You have requested our opinion as to the fairness, from a financial point of view, of the Per Share Merger Consideration to the Stonegate
Shareholders. This opinion addresses only the fairness of the Per Share Merger Consideration to be paid in connection with the Merger, and we are not opining on any individual stock, cash, or other components of consideration payable in connection
with the Merger.
During the course of our engagement and for the purposes of the opinion set forth herein, we have:
|
(i)
|
reviewed a draft of the Agreement dated March 23, 2017, as provided to Hovde by Stonegate;
|
|
(ii)
|
reviewed certain historical annual reports of each of Stonegate, Parent, and the Subsidiary Bank, including audited annual reports for the year ending December 31, 2016;
|
|
(iii)
|
reviewed certain historical publicly available business and financial information concerning each of Stonegate, Parent, and the Subsidiary Bank;
|
|
(iv)
|
reviewed certain internal financial statements and other financial and operating data concerning of Stonegate;
|
|
(v)
|
reviewed financial projections prepared by certain members of senior management of Stonegate;
|
C-2
Board of Directors
Stonegate Bank
Page
3
of 6
|
(vi)
|
discussed with certain members of senior management of Stonegate, Parent, and the Subsidiary Bank, the business, financial condition, results of operations and future prospects of Stonegate, Parent, and the Subsidiary
Bank, including the pro-forma impact of pending and recently completed transactions prepared and provided to us by Stonegates and Parents senior management; the history and past and current operations of Stonegate, Parent, and the
Subsidiary Bank; Stonegates, Parents, and the Subsidiary Banks historical financial performance; and their assessment of the rationale for the Merger;
|
|
(vii)
|
reviewed certain FactSet consensus income and balance sheet estimates for Stonegate and Parent for 2017 and for 2018;
|
|
(viii)
|
analyzed the pro forma financial impact of the Merger on the combined companys earnings, tangible book value, financial ratios and other such metrics we deemed relevant;
|
|
(ix)
|
evaluated the contribution of assets, deposits, equity and earnings of Stonegate, Parent, and the Subsidiary Bank to the combined company;
|
|
(x)
|
reviewed the terms of recent merger, acquisition and control investment transactions, to the extent publicly available, involving financial institutions and financial institution holding companies that we considered
relevant;
|
|
(xi)
|
assessed general economic and market conditions;
|
|
(xii)
|
taken into consideration our experience in other similar transactions and securities valuations as well as our knowledge of the banking and financial services industry;
|
|
(xiii)
|
reviewed historical market prices and trading volumes of Stonegate Common Stock and Parent Common Stock;
|
|
(xiv)
|
reviewed certain publicly available financial and stock market data relating to selected public companies that we deemed relevant to our analysis; and
|
|
(xv)
|
performed such other analyses and considered such other factors as we have deemed appropriate.
|
We have assumed, without investigation, that there have been no material changes in the financial condition and results of operations of
Stonegate, Parent or Subsidiary Bank since the date of the latest financial information described above. We have further assumed, without independent verification, that the representations and financial and other information included in the
Agreement or otherwise provided to us by Stonegate, Parent, and the Subsidiary Bank are true and complete. Hovde has relied upon the management of Stonegate, Parent, and the Subsidiary Bank as to the reasonableness and achievability of the financial
forecasts and projections, provided to Hovde by Stonegate, Parent, and the Subsidiary Bank, and Hovde assumed such forecasts and projections have been reasonably prepared by Stonegate, Parent, and the Subsidiary Bank on a basis reflecting the best
currently available information and Stonegates, Parents and the Subsidiary Banks judgments and estimates. We have assumed that such forecasts and projections would be realized in the amounts and at the times contemplated thereby,
and we do not, in any respect, assume any responsibility for the accuracy or reasonableness thereof. We have been authorized by Stonegate to rely upon such forecasts, projections and other information and data, and we express no view as to any such
forecasts, projections or other information or data, or the bases or assumptions on which they were prepared.
In performing our review,
we have relied upon the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by Stonegate, Parent, and the Subsidiary Bank or their respective representatives
or that was otherwise reviewed by us, and we have
C-3
Board of Directors
Stonegate Bank
Page
4
of 6
assumed such accuracy and
completeness for purposes of rendering this opinion. We have further relied on the assurances of the respective managements of Stonegate, Parent, and the Subsidiary Bank that they are not aware of any facts or circumstances that would make any of
such information inaccurate or misleading. We have not been asked to, and have not undertaken, an independent verification of any of such information, and we do not assume any responsibility or liability for the accuracy or completeness thereof. We
have assumed that each party to the Agreement would advise us promptly if any information previously provided to us became inaccurate or was required to be updated during the period of our review.
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. We have assumed that such allowances for Stonegate, Parent and the Subsidiary Bank are, in the aggregate, adequate to cover such losses, and will be adequate on a pro forma basis for the combined entity. We were not requested to
make, and have not made, an independent evaluation, physical inspection or appraisal of the assets, properties, facilities, or liabilities (contingent or otherwise) of Stonegate, Parent or the Subsidiary Bank, the collateral securing any such assets
or liabilities, or the collectability of any such assets, and we were not furnished with any such evaluations or appraisals; nor did we review any loan or credit files of Stonegate, Parent or the Subsidiary Bank.
We have assumed that the Merger will be consummated substantially in accordance with the terms set forth in the Agreement, without any waiver
of material terms or conditions by Stonegate, Parent or the Subsidiary Bank or any other party to the Agreement and that the final Agreement will not differ materially from the draft we reviewed. We have assumed that the Merger will be consummated
in compliance with all applicable laws and regulations. Stonegate has advised us that they are not aware of any factors that would impede any necessary regulatory or governmental approval of the Merger. We have assumed that the necessary regulatory
and governmental approvals, as granted, will not be subject to any conditions that would be unduly burdensome on Stonegate, Parent or the Subsidiary Bank or would have a material adverse effect on the contemplated benefits of the Merger.
Our opinion does not consider, include or address: (i) the legal, tax, accounting, or regulatory consequences of the Merger on Stonegate,
or its shareholders; (ii) any advice or opinions provided by any other advisor to the Board or Stonegate; (iii) any other strategic alternatives that might be available to Stonegate; or (iv) whether Parent and Subsidiary Bank have
sufficient cash, available lines of credit or other sources of funds to enable it to pay the Per Share Merger Consideration.
Our opinion
does not constitute a recommendation to Stonegate as to whether or not Stonegate should enter into the Agreement or to any Stonegate Shareholders as to how such shareholders should vote at the Stonegate Shareholders Meeting called to consider
and vote upon the Merger. Our opinion does not address the underlying business decision to proceed with the Merger or the fairness of the amount or nature of the compensation, if any, to be received by any of the officers, directors or employees of
Stonegate relative to the amount of consideration to be paid with respect to the Merger. Our opinion should not be construed as implying that the Per Share Merger Consideration is necessarily the highest or best price that could be obtained in a
sale, merger, or combination transaction with a third party. We do not express any opinion as to the prices, trading range or volume at which Stonegate Common Stock or Parent Common Stock may trade following the announcement of the proposed Merger
or (as to Parent Common Stock) following the consummation of the Merger, or the prices at which shares of Parent Common Stock may be purchased or sold at any time. Other than as specifically set forth herein, we are not expressing any opinion with
respect to the terms and provisions of the Agreement or the enforceability of any such terms or provisions. Our opinion is not a solvency opinion and does not in any way address the solvency or financial condition of Stonegate.
C-4
Board of Directors
Stonegate Bank
Page
5
of 6
This opinion was
approved by Hovdes fairness opinion committee. This letter is directed solely to the Board of Directors of Stonegate and is not to be used for any other purpose or quoted or referred to, in whole or in part, in any registration statement,
prospectus, proxy statement, or any other document, except in each case in accordance with our prior written consent; provided, however, that we hereby consent to the inclusion and reference to this letter in any registration statement, proxy
statement or information statement to be delivered to the Stonegate Shareholders in connection with the Merger if, and only if, this letter is quoted in full or attached as an exhibit to such document, this letter has not been withdrawn prior to the
date of such document, and any description of or reference to Hovde or the analyses performed by Hovde or any summary of this opinion in such filing is in a form acceptable to Hovde and its counsel in the exercise of their reasonable judgment.
Our opinion is based solely upon the information available to us and described above, 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 update, revise, reaffirm or
withdraw this opinion or otherwise comment upon events occurring or information that becomes available after the date hereof.
In arriving
at this opinion, Hovde did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Hovde believes that its
analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying this opinion.
Hovde, as part of its investment banking business, regularly performs valuations of businesses and their securities in connection with mergers
and acquisitions and other corporate transactions. In addition to being retained to render this opinion letter, we were retained by Stonegate to act as their financial advisor in connection with the Merger.
We will receive compensation from Stonegate in connection with our services, which includes, without limitation, a fairness opinion fee that
is contingent upon the issuance of this opinion letter and a completion fee that is contingent upon the consummation of the Merger. Further, Stonegate has agreed to indemnify us and our affiliates for certain liabilities that may arise out of our
engagement. During the four years preceding the date of this opinion we provided investment banking services to, and received fees from, Community Bank of Broward, Florida Shores Bancorp, Inc., Regent Bancorp, Inc., and Insignia Bank in connection
with their sales to Stonegate Bank. During the four years preceding the date of this opinion we provided investment banking services to, and received fees from, each of Giant Holdings, Inc., Florida Business BancGroup, Inc., and Broward Financial
Holdings, Inc. in connection with each of their respective sales to Parent. During the four years preceding the date of this opinion we also provided investment banking services to Bank of Commerce, which was acquired by Parent in a 363 bankruptcy
transaction, and pursuant to such bankruptcy process, the fees of Bank of Commerce owed to Hovde in connection with such transaction were assumed and paid by Parent through the bankruptcy court process. Certain owners and/or employees of Hovde were
previously, beneficial owners of shares of the common stock of Giant Holdings, Inc., which was sold to Parent. Such persons interests in the consummation of such transaction, were the same as any other shareholder of Giant
Holdings, Inc., and the foregoing beneficial ownership has been disclosed to Stonegate. Hovde does not believe that any such prior holdings, or any consideration, including any shares of common stock of Parent, received by them in the ordinary
course as shareholders of Giant Holdings, Inc. in connection with its sale to Parent, is material in relation to the Merger. In the past, prior to the four years preceding the date of its opinion, Hovde provided financial advisory services to
Parent. In the two years preceding the date of its opinion, Hovde provided investment banking and financial advisory services to Stonegate, but did not receive any compensation. Hovde may in the future provide
C-5
Board of Directors
Stonegate Bank
Page
6
of 6
investment banking and financial
advisory services to Stonegate or Parent and receive compensation for such services. In the ordinary course of their broker-dealer businesses and further to certain sales and trading relationships, Hovde and its affiliates may from time to time
purchase securities from, and sell securities to, Stonegate and Parent or Subsidiary Bank or their affiliates, and as a market maker in securities, Hovde may from time to time have a long or short position in, and buy or sell, debt or equity
securities of Stonegate or Parent or Subsidiary Bank for its own accounts and for the accounts of customers. Our firm also issues periodic research reports regarding Stonegates and Parents business activities and prospects, and our firm
may provide securities brokerage services in the normal course to one or more subsidiaries or affiliates of Stonegate and the Parent. Except for the foregoing, during the past two years there have not been, and there are no mutual understandings
contemplating in the future, any material relationships between Hovde and Stonegate, Parent, or Subsidiary Bank.
Based upon and subject
to the foregoing, we are of the opinion, as of the date hereof, that the Per Share Merger Consideration to be paid in connection with the Merger is fair to the Stonegate Shareholders from a financial point of view.
Sincerely,
HOVDE GROUP, LLC
C-6
APPENDIX D
FLORIDA DISSENTERS RIGHTS STATUTE
Section 658.44 Approval by stockholders; rights of dissenters; preemptive rights.
(1) The office shall not issue a certificate of merger to a resulting state bank or trust company unless the plan of merger and merger agreement, as adopted
by a majority of the entire board of directors of each constituent bank or trust company, and as approved by each appropriate federal regulatory agency and by the office, has been approved:
(a) By the stockholders of each constituent national bank as provided by, and in accordance with the procedures required by, the laws of the United States
applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative vote or written consent of the holders of at least a majority of the
shares entitled to vote thereon of each constituent state bank or state trust company, unless any class of shares of any constituent state bank or state trust company is entitled to vote thereon as a class, in which event as to such constituent
state bank or state trust company the plan of merger and merger agreement shall be approved by the stockholders upon receiving the affirmative vote or written consent of the holders of a majority of the shares of each class of shares entitled to
vote thereon as a class and of the total shares entitled to vote thereon. Such vote of stockholders of a constituent state bank or state trust company shall be at an annual or special meeting of stockholders or by written consent of the stockholders
without a meeting as provided in s.
607.0704
.
Approval by the stockholders of a constituent bank or trust company of a plan of merger and
merger agreement shall constitute the adoption by the stockholders of the articles of incorporation of the resulting state bank or state trust company as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent action by, the stockholders of each constituent state bank or state trust company shall be
given to each stockholder of record, whether or not entitled to vote, and whether the meeting is an annual or a special meeting or whether the vote is to be by written consent pursuant to s.
607.0704
, and the notice shall state that the
purpose or one of the purposes of the meeting, or of the proposed action by the stockholders without a meeting, is to consider the proposed plan of merger and merger agreement. Except to the extent provided otherwise with respect to stockholders of
a resulting bank or trust company pursuant to subsection (7), the notice shall also state that dissenting stockholders, including stockholders not entitled to vote but dissenting under paragraph (c), will be entitled to payment in cash of the value
of only those shares held by the stockholders:
(a) Which at a meeting of the stockholders are voted against the approval of the plan of merger and merger
agreement;
(b) As to which, if the proposed action is to be by written consent of stockholders pursuant to s.
607.0704
, such written consent is not
given by the holder thereof; or
(c) With respect to which the holder thereof has given written notice to the constituent state bank or trust company, at
or prior to the meeting of the stockholders or on or prior to the date specified for action by the stockholders without a meeting pursuant to s.
607.0704
in the notice of such proposed action, that the stockholder dissents from the
plan of merger and merger agreement, and which shares are not voted for approval of the plan or written consent given pursuant to paragraph (a) or paragraph (b).
Hereinafter in this section, the term dissenting shares means and includes only those shares, which may be all or less than all the shares of any
class owned by a stockholder, described in paragraphs (a), (b), and (c).
D-1
(3) On or promptly after the effective date of the merger, the resulting state bank or trust company, or a bank
holding company which, as set out in the plan of merger or merger agreement, is offering shares rights, obligations, or other securities or property in exchange for shares of the constituent banks or trust companies, may fix an amount which it
considers to be not more than the fair market value of the shares of a constituent bank or trust company and which it will pay to the holders of dissenting shares of that constituent bank or trust company and, if it fixes such amount, shall offer to
pay such amount to the holders of all dissenting shares of that constituent bank or trust company. The amount payable pursuant to any such offer which is accepted by the holders of dissenting shares, and the amount payable to the holders of
dissenting shares pursuant to an appraisal, shall constitute a debt of the resulting state bank or state trust company.
(4) The owners of dissenting
shares who have accepted an offer made pursuant to subsection (3) shall be entitled to receive the amount so offered for such shares in cash upon surrendering the stock certificates representing such shares at any time within 30 days after the
effective date of the merger, and the owners of dissenting shares, the value of which is to be determined by appraisal, shall be entitled to receive the value of such shares in cash upon surrender of the stock certificates representing such shares
at any time within 30 days after the value of such shares has been determined by appraisal made on or after the effective date of the merger.
(5) The
fair value, as defined in s.
607.1301
(4), of dissenting shares of each constituent state bank or state trust company, the owners of which have not accepted an offer for such shares made pursuant to subsection (3), shall be determined
pursuant to ss.
607.1326
-
607.1331
except as the procedures for notice and demand are otherwise provided in this section as of the effective date of the merger.
(6) Upon the effective date of the merger, all the shares of stock of every class of each constituent bank or trust company, whether or not surrendered by the
holders thereof, shall be void and deemed to be canceled, and no voting or other rights of any kind shall pertain thereto or to the holders thereof except only such rights as may be expressly provided in the plan of merger and merger agreement or
expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the constituent banks and trust companies and expressly
provided in the plan of merger and merger agreement, subsections (3), (4), and (5) are not applicable to a resulting bank or trust company or to the shares or holders of shares of a resulting bank or trust company the cash, shares, rights,
obligations, or other securities or property of which, in whole or in part, is provided in the plan of merger or merger agreement to be exchanged for the shares of the other constituent banks or trust companies.
(8) The stock, rights, obligations, and other securities of a resulting bank or trust company may be issued as provided by the terms of the plan of merger and
merger agreement, free from any preemptive rights of the holders of any of the shares of stock or of any of the rights, obligations, or other securities of such resulting bank or trust company or of any of the constituent banks or trust companies.
(9) After approval of the plan of merger and merger agreement by the stockholders as provided in subsection (1), there shall be filed with the office,
within 30 days after the time limit in s.
658.43
(5), a fully executed counterpart of the plan of merger and merger agreement as so approved if it differs in any respect from any fully executed counterpart thereof theretofore filed with the
office, and copies of the resolutions approving the same by the stockholders of each constituent bank or trust company, certified by the president, or chief executive officer if other than the president, and the cashier or corporate secretary of
each constituent bank or trust company, respectively, with the corporate seal impressed thereon.
History.s. 4, ch. 28016, 1953; ss. 12, 35, ch.
69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 34, 151, 152, ch. 80-260; ss. 2, 3, ch. 81-318; s. 147, ch. 83-216; ss. 29, 51, ch. 84-216; s. 1, ch. 91-307; ss. 1, 127, ch. 92-303; s. 1789, ch. 2003-261; s. 15, ch. 2008-75.
Note.Former s. 661.05.
D-2