MATERIAL ADVERSE EFFECT, AND
ALL SUCH LICENSES, REGISTRATIONS AND QUALIFICATIONS ARE IN FULL FORCE AND EFFECT
IN ALL MATERIAL RESPECTS.
4.02 CAPITALIZATION.
(A)
THE AUTHORIZED CAPITAL STOCK OF CMTY CONSISTS OF (A) 20,000,000 SHARES OF
COMMON STOCK, PAR VALUE OF $5.00 ("CMTY COMMON STOCK"), OF WHICH 194,799 SHARES
ARE VALIDLY ISSUED AND HELD BY CMTY AS TREASURY STOCK AND 12,226,892 SHARES ARE
VALIDLY ISSUED AND OUTSTANDING, FULLY PAID AND NONASSESSABLE AND FREE OF
PREEMPTIVE RIGHTS, AND (B) 500,000 SHARES OF PREFERRED STOCK, WITHOUT PAR VALUE,
OF WHICH NONE ARE ISSUED.
CMTY HAS NOT ISSUED NOR IS CMTY BOUND BY ANY
SUBSCRIPTION, OPTION, WARRANT, CALL, COMMITMENT, AGREEMENT OR OTHER RIGHT OF ANY
CHARACTER RELATING TO THE PURCHASE, SALE, OR ISSUANCE OF, OR RIGHT TO RECEIVE
DIVIDENDS OR OTHER DISTRIBUTIONS ON, ANY SHARES OF CMTY COMMON STOCK OR ANY
OTHER SECURITY OF CMTY OR ANY SECURITIES REPRESENTING THE RIGHT TO VOTE,
PURCHASE OR OTHERWISE RECEIVE ANY SHARES OF CMTY COMMON STOCK OR ANY OTHER
SECURITY OF CMTY, EXCEPT (I) FOR OPTIONS TO ACQUIRE SHARES OF CMTY COMMON STOCK
ISSUED UNDER CMTY'S VARIOUS STOCK OPTION PLANS, (II) PURSUANT TO CMTY'S EMPLOYEE
STOCK PURCHASE PLAN AND DIVIDEND REINVESTMENT PLAN, (III) PURSUANT TO THE RIGHTS
AGREEMENT AND (IV) THIS AGREEMENT.
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(B)
CMTY OWNS, DIRECTLY OR INDIRECTLY, ALL OF THE CAPITAL STOCK OF COMMUNITY
BANKS AND THE CAPITAL STOCK AND MEMBERSHIP INTERESTS OF THE OTHER CMTY
SUBSIDIARIES, FREE AND CLEAR OF ANY LIENS, SECURITY INTERESTS, PLEDGES, CHARGES,
ENCUMBRANCES, AGREEMENTS AND RESTRICTIONS OF ANY KIND OR NATURE.
THERE ARE NO
SUBSCRIPTIONS, OPTIONS, WARRANTS, CALLS, COMMITMENTS, AGREEMENTS OR OTHER RIGHTS
OUTSTANDING WITH RESPECT TO THE CAPITAL STOCK OF COMMUNITY BANKS OR ANY OTHER
CMTY SUBSIDIARY.
EXCEPT FOR THE CMTY SUBSIDIARIES, CMTY DOES NOT POSSESS,
DIRECTLY OR INDIRECTLY, ANY MATERIAL EQUITY INTEREST IN ANY CORPORATION, EXCEPT
FOR EQUITY INTERESTS IN THE INVESTMENT PORTFOLIOS OF CMTY'S SUBSIDIARIES, EQUITY
INTERESTS HELD BY CMTY OR CMTY'S SUBSIDIARIES IN A FIDUCIARY CAPACITY, AND
EQUITY INTERESTS HELD IN CONNECTION WITH THE COMMERCIAL LOAN ACTIVITIES OF
COMMUNITY BANKS.
4.03 AUTHORITY; NO VIOLATION.
(A)
CMTY HAS FULL CORPORATE POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS
AGREEMENT AND TO CONSUMMATE THE CONTEMPLATED TRANSACTIONS.
THE EXECUTION AND
DELIVERY OF THIS AGREEMENT BY CMTY AND THE CONSUMMATION BY CMTY OF THE
CONTEMPLATED TRANSACTIONS (INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE
ADJUSTED PRFS OPTIONS) HAVE BEEN DULY AND VALIDLY APPROVED BY THE BOARD OF
DIRECTORS OF CMTY BY UNANIMOUS VOTE AND, EXCEPT FOR APPROVAL BY THE SHAREHOLDERS
OF CMTY AS REQUIRED BY NASDAQ AND THE BCL, NO OTHER CORPORATE PROCEEDINGS ON THE
PART OF CMTY ARE NECESSARY TO CONSUMMATE THE MERGER.
THIS AGREEMENT HAS BEEN
DULY AND VALIDLY EXECUTED AND DELIVERED BY CMTY AND, SUBJECT TO RECEIPT OF
APPROVAL OF THE SHAREHOLDERS OF CMTY AND THE REQUIRED APPROVALS OF REGULATORY
AUTHORITIES DESCRIBED IN SECTION 4.04 HEREOF, CONSTITUTES THE VALID AND BINDING
OBLIGATION OF CMTY, ENFORCEABLE AGAINST CMTY IN ACCORDANCE WITH ITS TERMS,
SUBJECT TO APPLICABLE BANKRUPTCY, INSOLVENCY AND SIMILAR LAWS AFFECTING
CREDITORS' RIGHTS GENERALLY AND SUBJECT, AS