27. SUBSEQUENT EVENT (unaudited)
On January 27, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VantageSouth Bancshares, Inc., a Delaware corporation (“VantageSouth”), and Piedmont Community Bank Holdings, Inc., a Delaware corporation and majority stockholder of VantageSouth (“Piedmont”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, VantageSouth and Piedmont will merge with and into the Company, with the Company continuing as the surviving corporation. The Merger Agreement also provides that, immediately following the effective time of the mergers, VantageSouth Bank, a North Carolina banking corporation and wholly owned subsidiary of VantageSouth, will merge with and into the Bank, with Yadkin Bank continuing as the surviving bank in the bank merger. The Merger Agreement was approved by each of the boards of directors of the Company, VantageSouth, and Piedmont.
Subject to the terms and conditions of the Merger Agreement, at the closing of the mergers, each outstanding share of VantageSouth common stock will be converted into the right to receive 0.3125 shares of voting common stock of the Company, subject to the payment of cash in lieu of fractional shares. Each outstanding share of Piedmont common stock will be converted into the right to receive, for each share, (i) 6.28597 shares of the Company’s common stock; (ii) a pro rata portion of cash in an amount estimated to be $4.0 million based on Piedmont's deferred tax asset of $4.8 million; (iii) a pro rata portion of cash in an amount equal to the aggregate amount of any cash held by Piedmont at the closing, and (iv) a right to receive a pro rata share of the “Contingent Shares” (as defined in the Merger Agreement). Under the terms of the Merger Agreement, the Company will assume the Piedmont Phantom Equity Plan, and approximately 8.5% of the Company’s voting common stock that would otherwise have been issued to Piedmont stockholders will be placed in a trust to fund the Piedmont Phantom Equity Plan.
Pursuant to the Merger Agreement, at the effective time of the mergers, seven current members of the Company's Board of Directors and seven current members of the VantageSouth Board of Directors will be appointed to the Board of Directors of the surviving company and surviving bank for a period of 24 months following the mergers. The surviving company will also adopt certain amendments to the Company's bylaws related to board composition of the surviving company as previously described and which will require that for 36 months after the effective time of the mergers that Joseph H. Towell serve as Executive Chairman and that Scott M. Custer serve as Chief Executive Officer and President. The Merger Agreement also provides that the following executives will enter into employment agreements with the surviving company and surviving bank prior to the effective time of the mergers: Joseph H. Towell as the Executive Chairman; Scott M. Custer as the Chief Executive Officer and President; Terry S. Earley as the Chief Financial Officer; Wm. Mark DeMarcus as the Chief Operating Officer; Steven M. Jones as the Chief Banking Officer; and Edwin W. Shuford as the Chief Credit Officer.
The Articles of Incorporation of the Company will be the Articles of Incorporation of the surviving company. In connection with the mergers, and in addition to asking its shareholders to approve the Merger Agreement, the Company will be seeking shareholder approval of an amendment to its Articles of Incorporation to increase the number of authorized shares of common stock from 33,333,333 to 75,000,000 shares.
The Merger Agreement contains customary representations and warranties from the Company, VantageSouth, and Piedmont, as applicable, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of each party's business during the interim period between the execution of the Merger Agreement and the closing; (2) each party’s obligations to facilitate its respective shareholders’ consideration of, and voting upon, the Merger Agreement and the mergers; (3) the recommendation by the board of directors of each party in favor of approval of the Merger Agreement and the mergers by its respective shareholders; and (4) the Company's and VantageSouth's non-solicitation obligations relating to alternative business combination transactions.
Completion of the mergers is subject to certain customary conditions, including, among others, (1) approval of the Merger Agreement by each of the parties' shareholders; (2) receipt of required regulatory approvals without the imposition of any condition that would have or be reasonably likely to have a material burdensome effect on the parties; (3) the absence of any law or order prohibiting the consummation of the mergers; (4) approval of the listing on the New York Stock Exchange of the Company’s common stock to be issued in the mergers; (5) the effectiveness of the registration statement on Form S-4 for the Company’s common stock to be issued in the mergers; (6) subject to certain exceptions, the accuracy of the representations and warranties of the other party; (7) performance in all material respects by each party of its obligations under the Merger Agreement; and (8) the receipt by each party from its counsel of a tax opinion that the mergers will be treated as a reorganization within Section 368(a) of the Internal Revenue Code. The Company will use its commercially reasonable efforts to list the Company’s common stock on the New York Stock Exchange prior to the closing of the mergers.
The Merger Agreement provides termination rights for the Company, VantageSouth and Piedmont, and further provides that upon termination of the Merger Agreement under certain circumstances, VantageSouth or the Company, as applicable, will be obligated to pay the other party a termination fee of $10 million.
