Security Capital Bancorp DEF 14A

Agreement of Combination

This Agreement of Combination (this “Agreement”) is made and entered into on by and between a North Carolina corporation (“FSFC”), and a North Carolina corporation (“OMNI”).

WITNESSETH:

WHEREAS, FSFC is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”); and

WHEREAS, OMNI is a registered savings and loan holding company under the Home Owners’ Loan Act, as amended (the “HOLA”); and

WHEREAS, pursuant to the terms and subject to the conditions of this Agreement, OMNI will merge with and into FSFC to create a bank and thrift holding company (the “Combination”); and

WHEREAS, the respective Boards of Directors of FSFC and OMNI have resolved that the transactions described herein are in the best interests of the parties and their respective shareholders and have approved this Agreement and authorized the execution hereof; and

WHEREAS, FSFC and OMNI desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with the transactions contemplated by this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and agreements herein contained, the parties hereby agree as follows:

ARTICLE I

THE COMBINATION AND RELATED TRANSACTIONS

1.1 Combination. Subject to the terms and conditions of this Agreement, at the date and time at which the Combination becomes effective as provided in Section 1.8 of this Agreement (the “Effective Time”), OMNI shall be merged with and into FSFC in accordance with the provisions of Article 11 of the North Carolina Business Corporation Act (the “NCBCA”) and with the effect provided in Section 55-11-06 of the NCBCA. The separate corporate existence of OMNI shall thereupon cease, and FSFC shall be the surviving corporation in the Combination (the “Surviving Corporation”).

1.2 Directors. The Restated Articles and Bylaws ... shall provide that the Surviving Corporation shall have twenty-two (22) directors, divided into two classes of seven (7) directors each and one class of eight (8) directors.

1.3 Chairman, Vice Chairmen and Committees of the Board of Directors.

(a) At the Effective Time, the Chairman of the Board of Directors of the Surviving Corporation shall be , and the two Vice Chairmen shall be and .

(b) The Board of Directors shall create a four-person Executive Committee ...

1.4 Officers. At the Effective Time, the Board of Directors shall appoint as Chief Executive Officer and as President and Chief Administrative Officer.

1.5 Name of Surviving Corporation. The name of the Surviving Corporation shall be or such other name as mutually agreed.

ARTICLE II

MANNER OF CONVERTING SHARES

2.1 Conversion of Shares. Each share of OMNI Common Stock shall be converted into shares of the Surviving Corporation Common Stock.

2.2 Conversion of Options. All rights with respect to OMNI Stock Options shall be converted into rights with respect to the Surviving Corporation Common Stock.

2.3 Anti-Dilution Provisions. Exchange Ratio adjustment as applicable.

2.4 Shares Held by FSFC or OMNI. Such shares shall be canceled.

2.5 Fractional Shares. Cash shall be paid in lieu of fractional shares.

2.6 Transfers. Stock transfer books shall be closed at the Effective Time.

2.7 Dissenting Shareholders. Dissenters’ rights shall be handled under the NCBCA.

ARTICLE III

EXCHANGE OF SHARES

3.1 Exchange Procedures. Transmittal materials shall be mailed promptly after the Effective Time.

3.2 Voting and Dividends. Former shareholders shall be entitled to vote and receive dividends as provided herein.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF OMNI

4.1 Organization, Standing, and Authority. OMNI represents and warrants as to its organization and authority.

4.2 Capital Stock. Authorized and outstanding capital stock details.

4.3 OMNI Subsidiaries. Subsidiaries are duly organized and owned.

4.4 Authorization of Combination and Related Transactions. Corporate approvals and regulatory compliance.

4.5 Financial Statements. Financial statements and reports have been delivered.

4.6 Books and Corporate Records. Corporate books and minute books maintained.

4.7 Absence of Undisclosed Liabilities. No undisclosed liabilities except as stated.

4.8 Tax Matters. Tax filings and liabilities compliant.

4.9 Allowance for Loan Losses. Adequacy of allowance for loan losses.

4.10 Properties. Title to material properties and assets.

4.11 Compliance with Laws. Regulatory compliance and agreements.

4.12 Employee Benefit Plans. Employee benefit plans and compliance.

4.13 Commitments and Contracts. Material contracts and lease obligations.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF FSFC

5.1 Organization, Standing, and Authority. FSFC represents and warrants as to its organization and authority.

5.2 Capital Stock. Authorized and outstanding capital stock details.

5.3 FSFC Subsidiaries. Subsidiaries are duly organized and owned.

5.4 Authorization of Combination and Related Transactions. Corporate approvals and regulatory compliance.

5.5 Financial Statements. Financial statements and reports have been delivered.

5.6 Books and Corporate Records. Corporate books and minute books maintained.

5.7 Absence of Undisclosed Liabilities. No undisclosed liabilities except as stated.

5.8 Tax Matters. Tax filings and liabilities compliant.

5.9 Allowance for Loan Losses. Adequacy of allowance for loan losses.

5.10 Properties. Title to material properties and assets.

5.11 Compliance with Laws. Regulatory compliance and agreements.

5.12 Employee Benefit Plans. Employee benefit plans and compliance.

5.13 Commitments and Contracts. Material contracts and lease obligations.

5.14 Material Contract Defaults. Default status under contracts.

5.15 Legal Proceedings. Pending or threatened proceedings.

5.16 Absence of Certain Changes or Events. No material adverse changes.

5.17 Reports. Required reports have been filed.

5.18 Statements True and Correct. Representations are true and correct.

5.19 Insurance. Adequate insurance coverage maintained.

5.20 Labor. Labor compliance and disputes.

5.21 Material Interests of Certain Persons. Conflicts and material interests disclosed.

5.22 Registration Obligations. No registration obligations survive except as disclosed.

5.23 Environmental Matters. Environmental compliance and hazardous materials.

5.24 Accounting; Tax; Regulatory Matters. No impediments to accounting or tax treatment.

5.25 Brokers and Finders. Brokerage and finder fees disclosed.

5.26 Capital Stock Issued in Combination. Shares issued in the combination are validly issued.

ARTICLE VI

CONDUCT PRIOR TO THE EFFECTIVE TIME

6.1 Conduct of Businesses Prior to the Effective Time. Businesses to be conducted in the ordinary course.

6.2 Forbearances. The parties agree to refrain from specified actions prior to the Effective Time.

6.3 Access and Information; Confidentiality. Access to information and confidentiality obligations.

6.4 Current Information. Prompt updates regarding material changes and proceedings.

6.5 Registration Statement; Regulatory Matters. Filing and regulatory cooperation.

6.6 Shareholders’ Approvals. Shareholder meetings for approvals.

6.7 Agreements of Affiliates. Affiliate letters and agreements.

6.8 Delivery of Monthly Financial Statements; Asset Review. Monthly financial reporting and asset review.

6.9 Accounting Treatment. Best efforts for pooling-of-interests accounting.

6.10 Press Releases. Consultation before public disclosures.

6.11 Miscellaneous Agreements and Consents. Best efforts to complete the transaction.

ARTICLE VII

ADDITIONAL AGREEMENTS

7.1 Indemnification and Insurance. Indemnification and D&O insurance provisions.

7.2 Employee Contracts and Vested Employee Benefits. Honor existing agreements and vested benefits.

7.3 Employee Benefits. Review, amend, or consolidate employee benefit plans.

7.4 Directors and Officers of Subsidiaries. Directors and officers continue and appointments are made.

7.5 Loan Policies. Review conservative loan policies and allowance standards.

ARTICLE VIII

CONDITIONS

8.1 Conditions to Each Party’s Obligation to Effect the Combination.

8.2 Conditions to Obligations of OMNI to Effect the Combination.

8.3 Conditions to Obligations of FSFC to Effect the Combination.

ARTICLE IX

TERMINATION

9.1 Termination. Agreement may be terminated under specified conditions.

9.2 Effect of Termination. Certain provisions survive termination.

9.3 Expenses. Each party bears its own costs, subject to exceptions.

9.4 Wrongful Termination. Remedies and fee provisions for wrongful termination.

ARTICLE X

GENERAL PROVISIONS

10.1 Non-Survival of Representations, Warranties and Covenants Following the Effective Time. Non-survival except as stated.

10.2 Entire Agreement. Entire agreement clause.

10.3 Amendments. Amendments in writing and by board approval.

10.4 Waivers. Waiver rights before or at the Effective Time.

10.5 No Assignment. No assignment without consent.

10.6 Notices. Notice addresses and transmission methods.

10.7 Severability. Severability of invalid provisions.

10.8 Governing Law. North Carolina law governs.

10.9 Counterparts. Agreement may be executed in counterparts.

10.10 Captions. Captions are for reference only.

IN WITNESS WHEREOF, the parties have executed this Agreement by their respective officers duly authorized.

APPENDIX A

PLAN OF MERGER

OMNI CAPITAL GROUP, INC. shall merge with and into FIRST SECURITY FINANCIAL CORPORATION.

Upon effectiveness of the merger, the surviving corporation shall be renamed .

Effectiveness of the Merger. The merger becomes effective upon filing of Articles of Merger with the Secretary of State of North Carolina.

Conversion and Exchange of Shares.

Exchange Ratio:

Dissenting shareholders and fractional share cash treatment as described in the plan.