================================================================================
AGREEMENT AND PLAN OF MERGER
By and Among
WASHINGTON TRUST BANCORP, INC.
("BUYER")
and
FIRST FINANCIAL CORP.
("SELLER")
Dated as of November 12, 2001
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I - THE MERGER.......................................................2
1.01 The Merger.......................................................2
1.02 Plan of Merger...................................................2
1.03 Effective Time...................................................2
1.04 Effects of the Merger............................................2
1.05 Conversion of Seller Common Stock................................2
1.06 Buyer Common Stock...............................................4
1.07 Articles of Incorporation........................................4
1.08 By-Laws..........................................................4
1.09 Directors and Officers of the Surviving Corporation..............4
1.10 Tax Consequences.................................................4
1.11 Voting Agreement.................................................5
ARTICLE II - EXCHANGE OF CERTIFICATES........................................5
2.01 Buyer to Make Merger Consideration Available.....................5
2.02 Exchange of Certificates.........................................5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER.......................7
3.01 Corporate Organization...........................................7
3.02 Capitalization...................................................8
3.03 Authority; No Violation..........................................9
3.04 Consent and Approvals...........................................10
3.05 Loan Portfolio; Reports.........................................11
3.06 Financial Statements............................................13
3.07 Undisclosed Liabilities.........................................14
3.08 Absence of Certain Changes or Events............................14
3.09 Legal Proceedings...............................................15
3.10 Taxes and Tax Returns...........................................15
3.11 Employee Benefit Programs.......................................17
3.12 Reports.........................................................19
3.13 Labor...........................................................20
3.14 Compliance with Applicable Law..................................20
3.15 Certain Contracts...............................................20
3.16 Agreements with Regulatory Agencies.............................21
3.17 Investment Securities...........................................21
3.18 Hedging Transactions............................................22
3.19 Intellectual Property...........................................22
3.20 Broker's Fees; Opinion..........................................22
3.21 Environmental Matters...........................................22
3.22 Properties......................................................23
3.23 Trust Business..................................................24
3.24 Insurance.......................................................24
3.25 Transactions with Certain Persons...............................25
3.26 State Takeover Laws.............................................25
i
3.27 Rule 16b-3......................................................25
3.28 No Dissenters' Rights...........................................26
3.29 Investment Company Act of 1940..................................26
3.30 Investment Management Activities................................26
3.31 Disclosure......................................................26
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER........................26
4.01 Corporate Organization..........................................26
4.02 Capitalization..................................................27
4.03 Authority; No Violation.........................................27
4.04 Consents and Approvals..........................................28
4.05 Financial Statements............................................29
4.06 Reports.........................................................30
4.07 Absence of Certain Changes or Events............................30
4.08 Tax Treatment of the Merger.....................................30
4.09 Availability of Funds...........................................30
4.10 Broker's Fees...................................................30
4.11 Disclosure......................................................30
4.12 Legal Proceedings...............................................31
4.13 Undisclosed Liabilities.........................................31
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS.......................32
5.01 Covenants of Seller.............................................32
5.02 No Solicitation.................................................35
5.03 Intentionally Omitted...........................................37
5.04 System Conversions..............................................37
5.05 Certain Changes and Adjustments.................................38
5.06 Branches........................................................38
5.07 ALCO Management.................................................38
5.08 Chief Executive Officer Compensation............................38
5.09 Covenants of the Buyer..........................................39
5.10 Control of Operations...........................................39
ARTICLE VI - ADDITIONAL AGREEMENTS..........................................39
6.01 Regulatory Matters..............................................39
6.02 Securities Laws Matters.........................................40
6.03 Stockholder Meeting.............................................41
6.04 Access to Information...........................................42
6.05 Reasonable Best Efforts and Cooperation.........................43
6.06 NASDAQ Listing..................................................44
6.07 Indemnification; Directors' and Officers' Insurance.............44
6.08 Financial and Other Statements..................................45
6.09 Additional Agreements...........................................45
6.10 Notice of Adverse Changes.......................................46
6.11 Current Information.............................................46
6.12 Compensation and Benefit Plans..................................47
6.13 Bank Merger.....................................................48
ii
6.14 Affiliate Agreements............................................48
6.15 No Inconsistent Actions.........................................49
6.16 Publicity.......................................................49
6.17 Section 16 Matters..............................................49
6.18 Reorganization Treatment........................................49
ARTICLE VII - CONDITIONS PRECEDENT..........................................50
7.01 Conditions to Each Party's Obligation to Effect the Merger......50
7.02 Conditions to Obligations of Buyer..............................51
7.03 Conditions to Obligations of Seller.............................51
ARTICLE VIII - TERMINATION AND AMENDMENT....................................52
8.01 Termination.....................................................52
8.02 Effect of Termination; Expenses.................................54
8.03 Amendment.......................................................55
8.04 Extension; Waiver...............................................56
ARTICLE IX - GENERAL PROVISIONS.............................................56
9.01 Closing.........................................................56
9.02 Nonsurvival of Representations, Warranties and Agreements.......56
9.03 Expenses........................................................56
9.04 Notices.........................................................56
9.05 Interpretation..................................................57
9.06 Counterparts....................................................57
9.07 Entire Agreement................................................57
9.08 Governing Law; Submission to Jurisdiction.......................58
9.09 Enforcement of Agreement........................................58
9.10 Severability....................................................58
9.11 Publicity.......................................................58
9.12 Assignment......................................................59
9.13 Exhibits; Disclosure Schedules..................................59
Exhibits
--------
Exhibit A Bank Merger Agreement
Exhibit B Voting Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Noncompetition Agreement
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 2001 (this
"Agreement"), by and among Washington Trust Bancorp, Inc., a Rhode Island
corporation (the "Buyer") and First Financial Corp., a Rhode Island corporation
("Seller").
WHEREAS, the Boards of Directors of the Buyer and Seller have each
determined that it is in the best interests of their respective stockholders and
other constituencies, as well as the communities they serve, to consummate, and
have approved, the business combination transactions provided for herein, in
which the Buyer will, subject to the terms and conditions set forth herein,
acquire the Seller;
WHEREAS, following the execution and delivery of this Agreement, The
Washington Trust Company of Westerly, a Rhode Island chartered commercial bank
and subsidiary of the Buyer (the "Buyer Bank" and also sometimes referred to
herein as the "Surviving Bank"), shall enter into an Agreement and Plan of
Merger (the "Bank Merger Agreement") with First Bank and Trust Company, a Rhode
Island chartered commercial bank and subsidiary of the Seller (the "Seller
Bank"), substantially in the form of Exhibit A hereto, providing for the merger
of the Seller Bank with and into the Buyer Bank (the "Bank Merger") under Title
19 of the General Laws of Rhode Island and the Rhode Island Business Corporation
Act ("RIBCA"), immediately prior to the consummation of the Merger (as defined
in Section 1.01);
WHEREAS, as a condition to the willingness of the Buyer to enter into this
Agreement, certain stockholders of the Seller (the "Principal Stockholders")
have entered into a Voting Agreement, dated as of the date hereof, with the
Buyer (the "Voting Agreement"), attached hereto as Exhibit B, pursuant to which
each Principal Stockholder has agreed, among other things, to vote such
Principal Stockholder's shares of capital stock of the Seller in favor of the
approval of this Agreement and the transactions contemplated hereby, upon the
terms and subject to the conditions set forth in the Voting Agreement; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the transactions contemplated hereby
and also to prescribe certain conditions hereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements, representations and warranties contained herein, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I - THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement,
and in accordance with the RIBCA, at the Effective Time (as defined in Section
1.03 hereof), the Seller will merge with and into the Buyer (the "Merger"). The
Buyer shall be the surviving corporation (sometimes referred to herein as the
"Surviving Corporation") in the Merger and shall continue its existence under
the laws of the State of Rhode Island. Upon consummation of the Merger, the
separate existence of the Seller shall cease.
1.02 Plan of Merger. This Agreement shall constitute a plan of merger for
purposes of Section 7-1.1-65 of the RIBCA.
1.03 Effective Time. The Merger shall become effective on the Closing Date
(as defined in Section 9.01 hereof) at the time (the "Effective Time") set forth
in the articles of merger with respect to the Merger (the "Articles of Merger")
to be filed with the Secretary of State of the State of Rhode Island (the
"Secretary") pursuant to Section 7-1.1-68 of the RIBCA.
1.04 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects provided herein and set forth in Section 7-1.1-69 of the
RIBCA. Without limiting the generality of the foregoing and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Seller shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, and duties of the Seller shall become
the debts, liabilities, obligations, restrictions, and duties of the Surviving
Corporation.
1.05 Conversion of Seller Common Stock.
(a) At the Effective Time, each share of common stock of the Seller,
par value $1.00 per share ("Seller Common Stock"), issued and outstanding
immediately prior to the Effective Time and all rights attached thereto (other
than shares of Seller Common Stock held (x) in the Seller's treasury or (y)
directly or indirectly by the Buyer or the Seller or any of their respective
Subsidiaries (as defined below) (except Trust Account Shares and DPC Shares (as
such terms are defined in Section 1.05(c) hereof))), shall, by virtue of this
Agreement and without any action on the part of the holder thereof, be converted
automatically into and represent the right to receive (i) an amount in cash
equal to $16.00, without any interest thereon (plus any cash in lieu of
fractional shares as described in Section 2.02, the "Cash Consideration") and
(ii) that number of fully paid and nonassessable shares of the common stock, par
value $0.625 per share, of the Buyer (together with the number of common share
purchase rights attached thereto pursuant to that certain Rights Agreement,
dated as of August 15, 1996, as amended (as such may be further amended,
supplemented, restated or replaced from time to time), between the Buyer and the
Buyer Bank, as Rights Agent, the "Buyer Common Stock") determined by dividing
$16.00 by the Average Buyer Common Stock Price (as defined below) rounded to the
nearest thousandth of a share and subject to adjustment as provided below (the
"Exchange Rate" and such amount, the "Stock Consideration"). The Exchange Rate
initially in effect shall be subject to adjustment as follows:
2
(w) if the Average Buyer Common Stock Price (as hereinafter
defined) is equal to or greater than $17.00 and less than or equal to
$19.00, there will be no adjustment to the Exchange Rate;
(x) if the Average Buyer Common Stock Price is less than
$17.00, the Exchange Rate shall be equal to 0.941;
(y) if the Average Buyer Common Stock Price is greater than
$19.00, the Exchange Rate shall be equal to 0.842; and
(z) in the event that the Buyer has exercised its option to
deliver additional shares of Buyer Common Stock pursuant to the last
paragraph of Section 8.01(j) hereof, the Exchange Rate shall be adjusted
as provided in Section 8.01(j).
The "Average Buyer Common Stock Price" shall mean the average closing sale
price per share of Buyer Common Stock, as reported on the Nasdaq National
Market, for the fifteen (15) consecutive trading days ending on and including
the date that the last Requisite Regulatory Approvals shall have been obtained
(the "Approval Date").
(b) All of the shares of Seller Common Stock converted into the
Merger Consideration pursuant to this Article I shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
certificate (each, a "Certificate" and collectively the "Certificates")
previously representing any such shares shall thereafter represent the right to
receive solely the whole number of shares of Buyer Common Stock and the amount
of cash into which the shares of Seller Common Stock have been converted
pursuant to this Section 1.05 and Section 2.02(f) hereof (the "Merger
Consideration"). Certificates previously representing shares of Seller Common
Stock shall be exchanged for certificates representing the Merger Consideration,
into which the shares of Seller Common Stock represented by such Certificates
have been converted pursuant to this Section 1.05 and Section 2.02(f) hereof
upon the surrender of such Certificates in accordance with Section 2.02 hereof,
without any interest thereon.
(c) At the Effective Time, all shares of Seller Common Stock that
are owned by the Seller as treasury stock and all shares of Seller Common Stock
that are owned directly or indirectly by the Buyer or the Seller or any of their
respective Subsidiaries (other than (i) shares of Seller Common Stock held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares of Seller Common Stock, whether held directly or
indirectly by the Buyer or the Seller, as the case may be, being referred to
herein as "Trust Account Shares") and (ii) shares of Seller Common Stock held by
the Buyer or the Seller or any of their respective Subsidiaries in respect of a
debt previously contracted (any such shares of Seller Common Stock, whether held
directly or indirectly by the Buyer or the Seller or any of their respective
Subsidiaries, being referred to herein as "DPC Shares") shall be canceled and
shall cease to exist and no stock of the Buyer, cash or other consideration
shall be delivered in exchange therefor.
(d) If prior to the Effective Time, the Buyer should split or
combine the Buyer Common Stock or other convertible securities, or pay a
dividend or other distribution in such Buyer Common Stock or other convertible
securities or shall effect any reclassification,
3
recapitalization, exchange of shares or readjustment with respect to the Buyer
Common Stock, then the Exchange Rate shall be appropriately adjusted to reflect
such split, combination, dividend, distribution, reclassification,
recapitalization, exchange of shares or readjustment.
(e) Notwithstanding anything in this Article I to the contrary, if,
on the Closing Date, Buyer and Seller reasonably conclude that the fair market
value of the aggregate Stock Consideration to be delivered to the stockholders
of Seller is likely to be less than 40% of the fair market value of the
aggregate Merger Consideration to be delivered to the stockholders of Seller and
all other conditions to the Closing set forth in Article VII have been satisfied
(or waived by the party entitled to waive such condition), then, to the minimum
extent necessary to achieve such 40% ratio, the Merger Consideration shall be
adjusted by increasing the total value of the Stock Consideration and decreasing
the total value of the Cash Consideration by equal amounts so that the Stock
Consideration shall constitute 40% of the value of the Merger Consideration
(determined as of the Closing Date).
1.06 Buyer Common Stock. At and after the Effective Time, each share of
Buyer Common Stock issued and outstanding immediately prior to the Effective
Time shall remain outstanding and represent one share of common stock of the
Surviving Corporation; provided, however, that all shares of Buyer Common Stock
that are owned by the Seller or the Seller Bank (other than Trust Account Shares
and DPC Shares) shall become treasury stock of Buyer.
1.07 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of the Buyer, as in effect at the Effective Time, shall continue
as the Articles of Incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law.
1.08 By-Laws. At and after the Effective Time, the By-laws of the Buyer as
they exist immediately prior to the Effective Time shall continue as the By-laws
of the Surviving Corporation until thereafter amended in accordance with
applicable law, the Articles of Incorporation of the Surviving Corporation and
such By-laws.
1.09 Directors and Officers of the Surviving Corporation. As of the
Effective Time, the number of directors of the Surviving Corporation shall be
fixed at seventeen (17). The directors of Buyer immediately prior to the
Effective Time shall continue as directors of the Surviving Corporation in the
class and for the term that such director is currently serving, in accordance
with the Articles of Incorporation and By-laws of the Surviving Corporation. In
addition, as of the Effective Time, Xxxxxxx X. Xxxxxxxx, Xx. shall be a director
of the Surviving Corporation for a term expiring in 2003, and otherwise to hold
office in accordance with the Articles of Incorporation and By-laws of the
Surviving Corporation. The officers of the Buyer immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
1.10 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
4
1.11 Voting Agreement. Concurrently with the execution of this Agreement,
the Buyer has entered into the Voting Agreement with the Principal Stockholders.
ARTICLE II - EXCHANGE OF CERTIFICATES
2.01 Buyer to Make Merger Consideration Available. At or prior to the
Effective Time, the Buyer shall deposit, or shall cause to be deposited, with a
bank or trust company selected by the Buyer (and reasonably acceptable to the
Seller) (the "Exchange Agent"), for the benefit of the holders of Certificates,
for exchange in accordance with this Article II, certificates representing the
aggregate number of shares of Buyer Common Stock and the aggregate amount of
cash which together represent the Merger Consideration (such cash and
certificates for shares of Buyer Common Stock, together with any dividends or
distributions with respect thereof, being hereinafter referred to as the
"Exchange Fund") to be issued or paid, respectively, pursuant to Section 1.05
and paid pursuant to Section 2.02(f) in exchange for outstanding shares of
Seller Common Stock.
2.02 Exchange of Certificates.
(a) As soon as practicable after the Effective Time, and in no event
later than five (5) business days thereafter, the Exchange Agent shall mail to
each holder of record of a Certificate or Certificates at the Effective Time a
form letter of transmittal (which shall be in such form and have such provisions
as the Buyer may reasonably specify and which shall specify that delivery shall
be effected, and risk of loss and title to the Certificate shall pass, only upon
delivery of the Certificate to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificate in exchange for the Merger
Consideration into which the shares of Seller Common Stock represented by such
Certificate or Certificates shall have been converted pursuant to this
Agreement.
(b) Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of Buyer Common Stock to
which such holder of Seller Common Stock shall have become entitled pursuant to
the provisions of Articles I and II hereof and (y) a check representing the
amount of cash and unpaid dividends and distributions on Buyer Common Stock, if
any, which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of Articles I and II hereof, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued to or for the benefit of holders of Certificates on such cash and
unpaid dividends and distributions on Buyer Common Stock, if any.
(c) No dividends or other distributions declared after the Effective
Time with respect to Buyer Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to the shares of Buyer Common Stock represented by such
Certificate. No holder of an
5
unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Buyer Common Stock into which his Seller
Common Stock shall have been converted.
(d) If any certificate representing shares of Buyer Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Buyer Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or required
for any other reason, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(e) After the Effective Time, there shall be no transfers on the
stock transfer books of the Seller of the shares of Seller Common Stock which
were issued and outstanding immediately prior to the Effective Time. From and
after the Effective Time, the holders of shares of Seller Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares except as otherwise provided herein or by
applicable law. If, after the Effective Time, Certificates representing such
shares are presented for transfer to the Exchange Agent, they shall be canceled
and exchanged for the Merger Consideration as provided in this Article II.
(f) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Buyer Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Buyer Common Stock shall be payable, on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of the
Seller. In lieu of the issuance of any such fractional share, the Buyer shall
pay to each former stockholder of the Seller who otherwise would be entitled to
receive a fractional share of Buyer Common Stock an amount in cash determined by
multiplying (i) the Average Buyer Common Stock Price by (ii) the fraction of a
share of Buyer Common Stock to which such holder would otherwise be entitled to
receive pursuant to Section 1.05 hereof.
(g) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any Buyer Common Stock) that remains unclaimed by the
stockholders of the Seller for six (6) months after the Effective Time shall be
paid to the Buyer. Any stockholders of the Seller who have not theretofore
complied with this Article II shall thereafter look only to the Buyer for
payment of the shares of Buyer Common Stock, cash and unpaid dividends and
distributions on Buyer Common Stock deliverable in respect of each share of
Seller Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case without any interest thereon. Notwithstanding the
foregoing, none of the Buyer, the Seller, the Exchange Agent nor any other
person shall be liable to any former holder of shares of Seller Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the event 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
6
destroyed and, if required by the Buyer, upon the posting by such person of a
bond in such amount as the Buyer may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate, the shares of
Buyer Common Stock and cash (including, if applicable, unpaid dividends and
distributions on Buyer Common Stock) deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Prior to the execution and delivery of this Agreement and as a material
inducement to the Buyer to enter into this Agreement, Seller has delivered to
Buyer a schedule (the "Seller Disclosure Schedule") setting forth, among other
things, facts, circumstances and events the disclosure of which is required by
its representations and warranties (and making specific reference to the Section
of this Agreement to which they relate), provided that the mere inclusion of a
fact, circumstance or event in the Seller Disclosure Schedule shall not be
deemed an admission by Seller that such item represents a material exception or
that such item is reasonably likely to result in a Material Adverse Effect (as
defined below) on Seller. The Seller Disclosure Schedule shall be arranged in
sections and paragraphs corresponding to the numbered and lettered sections and
paragraphs contained in this Article III and disclosures in any section or
paragraph of the Seller Disclosure Schedule shall qualify as disclosures with
respect to other sections and paragraphs in the Seller Disclosure Schedule only
to the extent that it is reasonably apparent from the reading of such disclosure
that it qualifies or applies to such other sections or paragraphs.
Except as set forth in the Seller Disclosure Schedule, the Seller
represents and warrants to the Buyer:
3.01 Corporate Organization.
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Rhode Island. The Seller has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Seller. The Seller is a
financial holding company registered with the Federal Reserve Board under the
Xxxxx-Xxxxx-Xxxxxx Act and the Bank Holding Company Act of 1956, as amended (the
"BHCA"). "Material Adverse Effect" as used in this Agreement means any change,
effect, event, occurrence or state of facts materially and adversely affecting
(a) the business, assets, condition (financial or otherwise), operations,
properties or results of operations of Buyer or Seller, as the context may
dictate, and its Subsidiaries taken as a whole, or (b) the ability of the
relevant party to perform its obligations under this Agreement; provided,
however, that any such change, effect, event, occurrence or state of facts
resulting from any (i) changes in the banking laws, rules or regulations or
generally accepted accounting principles or regulatory accounting requirements
or interpretations thereof of general applicability, (ii) changes in economic
conditions generally
7
affecting financial institutions, as a whole, including but not limited to,
changes in the general level of market interest rates, which does not affect the
relevant party in any manner or degree significantly different from the industry
as a whole, (iii) any announcement by either of the parties hereto with respect
to branch consolidations or employee terminations to be effected by Buyer or
Buyer Bank in connection with the Merger, and (iv) actions required to be taken
under this Agreement shall not be considered in determining if a Material
Adverse Effect has occurred. The Articles of Incorporation and By-laws or other
similar governing documents of the Seller, copies of which have previously been
delivered to the Buyer, are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
(b) The Seller Bank is a bank duly organized, validly existing and
in good standing under the laws of the State of Rhode Island. The deposit
accounts of the Seller Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") through the Bank Insurance Fund (the "BIF") to the fullest
extent permitted by law, and all premiums and assessments required in connection
therewith have been paid by the Seller Bank. The Seller Bank has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Seller. The Articles of
Association and By-laws or other similar governing documents of the Seller Bank,
copies of which have previously been delivered to the Buyer, are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(c) Except for the Seller Bank and except as set forth in Section
3.01(c) of the Seller Disclosure Schedule, Seller has no Subsidiaries or Equity
Investments. As used in this Agreement, "Subsidiary" when used with respect to a
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is or was consolidated with such party (or
with which such party is or was consolidated) for financial reporting purposes,
and "Equity Investments" has the meaning given to such term in the FDIC's rules
and regulations regarding activities and investments of insured state banks at
12 C.F.R. ss.362.2(g).
(d) Neither the Seller nor the Seller Bank is in violation of any
provision of its Articles of Incorporation or equivalent organizational
documents or its By-laws.
(e) The minute books of Seller and the Seller Bank contain true,
complete and accurate records of all meetings and other corporate actions held
or taken since January 1, 1998 of their respective stockholders and Boards of
Directors (including committees of their respective Boards of Directors).
3.02 Capitalization.
(a) The authorized capital stock of the Seller consists of 5,000,000
shares of Seller Common Stock. As of the date of this Agreement, there are
1,328,041 shares of Seller Common Stock issued, 1,213,741 shares outstanding and
114,300 shares of Seller Common Stock held in its treasury. All of the issued
and outstanding shares of Seller Common Stock have
8
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. The Seller does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments, rights agreements or
agreements of any character calling for the purchase or issuance of any shares
of Seller Common Stock or any other equity security of the Seller or any
securities representing the right to purchase or otherwise receive any shares of
Seller Common Stock or any other equity security of the Seller. Seller has not
adopted or implemented a shareholder rights plan or "poison pill" plan.
(b) The authorized capital stock of the Seller Bank consists of
75,000 shares of Common Stock, par value $10.00 per share ("Bank Common Stock").
As of the date hereof, (i) 75,000 shares of Bank Common Stock are issued and
outstanding, all of which are owned directly by the Seller, all of which are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership thereof
and free and clear of all liens, charges, encumbrances and security interests
whatsoever, and (ii) no shares of Bank Common Stock are held in the treasury of
the Seller Bank.
(c) Except as contemplated herein, there are no agreements or
understandings, with respect to the voting of any shares of Seller Common Stock
or which restrict the transfer of such shares to which the Seller is a party,
and there are no such agreements or understandings to which the Seller is not a
party with respect to the voting of any such shares or which restrict the
transfer of such shares.
(d) Seller Bank does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Bank Common
Stock or any other equity security of the Seller or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of the Seller. At the Effective Time, there will not be
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character by which the Seller or Seller Bank will be bound
calling for the purchase or issuance of any shares of the capital stock of the
Seller or Seller Bank.
(e) The Seller and Seller Bank are "adequately capitalized" as such
term is defined in the rules and regulations promulgated by the Federal Reserve
Board and the FDIC.
3.03 Authority; No Violation.
(a) The Seller has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the unanimous vote of the Board of Directors of the
Seller. The Board of Directors of the Seller has directed that this Agreement
and the transactions contemplated hereby, including the Merger, be submitted to
the stockholders of the Seller for approval at a meeting of such stockholders
and, except for the adoption of this Agreement by the Seller's stockholders, no
other corporate action and no other corporate proceedings on the part of the
Seller are necessary to authorize this Agreement or to consummate the Merger.
This Agreement has been duly and validly executed and delivered by the Seller
and
9
constitutes the valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, except that enforcement thereof may be
limited by the receivership, conservatorship and supervisory powers of bank
regulatory agencies generally.
(b) The Seller Bank has full power and authority to execute and
deliver the Bank Merger Agreement, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery of
the Bank Merger Agreement, the performance of its obligations thereunder and the
consummation of the transactions contemplated thereby have been duly and validly
approved by the unanimous action of the Board of Directors of the Seller Bank
and the Seller as the sole stockholder of the Seller Bank. No other corporate
action and no other corporate proceedings on the part of the Seller Bank are
necessary to authorize the Bank Merger Agreement or the performance of the
Seller Bank's obligations thereunder or to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
the Seller Bank, will be duly and validly executed and delivered by the Seller
Bank and will constitute a legal, valid and binding obligation of the Seller
Bank, enforceable against the Seller Bank in accordance with its terms, except
that enforcement thereof may be limited by the receivership, conservatorship and
supervisory powers of bank regulatory agencies generally.
(c) Neither the execution and delivery of this Agreement by the
Seller nor the consummation by the Seller of the transactions contemplated
hereby or thereby; nor the execution and delivery of the Bank Merger Agreement
by the Seller Bank, nor the consummation by the Seller Bank of the transactions
contemplated thereby; nor compliance by the Seller or the Seller Bank with any
of the terms or provisions hereof or thereof, will (i) assuming that the
consents and approvals referred to in Section 3.04 hereof are duly obtained,
violate any statute, law, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Seller or the Seller Bank or by
which any property or asset of the Seller or the Seller Bank is bound or
affected, or (ii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of the Seller or the Seller
Bank under any of the terms, conditions or provisions of (A) the Articles of
Incorporation or other charter document of like nature or By-laws of the Seller
or the Seller Bank, or (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Seller
is a party as issuer, guarantor or obligor, or by which they or any of their
respective properties or assets may be bound or affected, except, in the case of
clause (ii)(B) above, for such violations, conflicts, breaches or defaults which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect on the Seller.
3.04 Consent and Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, with the Federal Reserve Board, the FDIC and the Director of the
Department of Business Regulation of the State of Rhode Island (the "Director"),
and the consent to and approval of such applications and notices, (ii) the
filing with the Securities and Exchange Commission (the "SEC") of a registration
statement on Form S-4 (the "Registration Statement"), including a proxy
statement
10
(the "Proxy Statement") in definitive form relating to the meeting of the
Seller's stockholders (the "Stockholder Meeting") to be held to approve this
Agreement and the transactions contemplated hereby, which Proxy Statement shall
be part of and included in the prospectus (the "Prospectus") filed as a part of
the Registration Statement by the Buyer relating to the offering of Buyer Common
Stock pursuant to the terms of this Agreement, (iii) the approval of this
Agreement by the requisite vote of the stockholders of the Seller, (iv) the
filing with the Secretary of the Articles of Merger to effect the Merger
pursuant to the RIBCA and articles of merger to effect the Bank Merger, pursuant
to Title 19 of the General Laws of Rhode Island and the RIBCA, (v) such filings,
authorizations or approvals as may be set forth in Section 3.04 of the Seller
Disclosure Schedule, and (vi) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of shares of Buyer Common Stock pursuant to this
Agreement, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each, a "Governmental Entity") or with any third-party are
necessary in connection with the execution and delivery by the Seller of this
Agreement, the execution and delivery of the Bank Merger Agreement by the Seller
Bank, and the consummation of the Merger, the Bank Merger and the other
transactions contemplated hereby and thereby.
(b) The affirmative vote of holders of 70% of the outstanding shares
of Seller Common Stock is the only vote of the holders of any shares or series
of capital stock or other securities of the Seller necessary to approve this
Agreement and the Merger. The Seller does not believe that any fact or
circumstance exists relating to the Seller or the Seller Bank that is reasonably
likely to materially impede or delay receipt of any of the approvals of any
Governmental Entity referred to in Section 3.04(a) hereof or is reasonably
likely to result in the imposition of a Burdensome Condition (as defined
herein).
3.05 Loan Portfolio; Reports.
(a) Except as set forth in Section 3.05 of the Seller Disclosure
Schedule hereto, to the knowledge of the Seller, all of the loans having a
principal amount in excess of $100,000 reflected as assets on the Seller Bank's
balance sheet included in the financial statements for the fiscal year ended
December 31, 2000 accompanying the Call Report for the year ended December 31,
2000 filed by the Seller Bank with the FDIC or made or acquired by the Seller
Bank since December 31, 2000 (each a "Loan"), were validly and legally made in
all material respects, constitute valid and binding agreements of the borrower
enforceable in accordance with their terms ((i) subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights and
remedies of creditors generally, (ii) subject to general principles of equity,
and (iii) provided that certain remedies, waivers and other provisions of the
loan documents may not be enforceable, but such unenforceability will not render
the loan documents invalid as a whole or preclude (x) the judicial enforcement
of the obligation of the borrower to repay the principal thereon as provided in
the note or (y) the foreclosure of the mortgage), are saleable in the ordinary
course of the Seller Bank's business and no amount thereof is subject to any
material defenses which may be asserted against the Seller Bank. Neither the
Seller nor the Seller Bank has entered into any agreement which will result in a
future waiver or negation of any material rights or remedies presently available
against the borrower or guarantor, if any, on any such Loan. Except as set forth
in Section 3.05 of the Seller
11
Disclosure Schedule, each mortgage securing a Loan is evidenced by documentation
of the types customarily employed by the Seller Bank, which are consistent in
all material respects with federal and state banking practices and prudent
banking standards, and complete copies thereof have been maintained by the
Seller Bank in accordance with such standards and practices, is properly
perfected, represents a valid mortgage on properties described therein, and is
saleable in the ordinary course of the Seller Bank's business. Except with
respect to participation loans described in Section 3.05 of the Seller
Disclosure Schedule and loans guaranteed in part by the Small Business
Administration (to the extent of such guaranty), the Seller Bank owns and holds
the entire interest in all mortgages free and clear of all liens, claims,
equities, options, security interests, charges, encumbrances or restrictions of
any kind or nature, and no person has any interest therein.
(b) Except as disclosed in Section 3.05 of the Seller Disclosure
Schedule, all of the Loans presently held by the Seller Bank were solicited,
originated and exist in compliance in all material respects with all applicable
loan policies and procedures of the Seller Bank and comply in all material
respects with all applicable laws, rules and regulations, including, but not
limited to, applicable usury statutes, the Truth in Lending Act, the Equal
Credit Opportunity Act, the Real Estate Settlement Procedures Act, and other
applicable consumer protection statutes and the regulations thereunder.
(c) Except as disclosed in Section 3.05 of the Seller Disclosure
Schedule, all Loans purchased or originated by the Seller Bank and subsequently
sold have been sold without recourse to the Seller Bank and without any
liability under any yield maintenance or similar obligation.
(d) Except as set forth in Section 3.05 of the Seller Disclosure
Schedule, the Seller Bank is not a party to any written or oral loan agreement,
note or borrowing arrangement (including without limitation, leases, credit
enhancements, commitments and interest-bearing assets) under the terms of which
the obligor is, as of the date of this Agreement, over 30, 60 or 90 days
delinquent in payment of principal or interest or in material default of any
other provision. Section 3.05 of the Seller Disclosure Schedule sets forth as of
October 31, 2001 (x) all of the Loans held by the Seller Bank having a principal
amount in excess of $100,000 that prior to the date of this Agreement have been
classified by the Seller Bank or any bank examiner (whether regulatory or
internal) as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Watch List" or
words of similar import, together with the principal amount of and accrued and
unpaid interest on each such Loan and the identity of the borrower thereunder,
and (y) by category of Loan (i.e., commercial, consumer, etc.), all of the other
Loans presently held by the Seller Bank that are classified as such, together
with the aggregate principal amount of and accrued and unpaid interest on such
Loans by category.
(e) Except for normal examinations conducted by the Federal Reserve
Board, FDIC, the Director and any other federal or state banking commissions or
any other federal or state regulatory authority (collectively, "Regulatory
Agencies") and except as set forth in Section 3.05(e) of the Seller Disclosure
Schedule, in the regular course of the business of the Seller Bank, no
Regulatory Agency has initiated any proceeding or, to the knowledge of the
Seller, investigation into the business or operations of the Seller Bank since
December 31, 1997. There
12
is no unresolved material violation, criticism or exception by any Regulatory
Agency with respect to any written report or statement relating to any
examination of the Seller Bank by any Regulatory Agency.
3.06 Financial Statements.
(a) The Seller has made available to the Buyer copies of (a) the
consolidated balance sheets of the Seller and its Subsidiaries as of December 31
for the fiscal years 1999 and 2000, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the fiscal years 1998
through 2000, inclusive, as reported in the Seller's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 filed with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of Xxxxxx Xxxxxxxx LLP, independent public
accountants for the Seller, and (b) the unaudited consolidated balance sheet of
the Seller and its Subsidiaries as of September 30, 2001, the related unaudited
consolidated statements of income for the nine (9) months ended September 30,
2001 and September 30, 2000 and the related unaudited consolidated statements of
cash flows for the nine (9) months ended September 30, 2001 and September 30,
2000 and the related unaudited changes in stockholder's equity for the nine (9)
months ended September 30, 2001. The December 31, 2000 consolidated balance
sheet of the Seller (including the related notes, where applicable) and the
other financial statements referred to herein (including the related notes,
where applicable) fairly present, in all material respects, and the financial
statements to be included in any reports or statements (including reports on
Forms 10-Q and 10-K) to be filed by the Seller with the SEC after the date
hereof will fairly present, in all material respects, the consolidated financial
position and results of the consolidated operations and cash flows and changes
in stockholders' equity of the Seller and the Seller Bank for the respective
fiscal periods or as of the respective dates therein set forth; and each of such
statements (including the related notes, where applicable) has been and will be
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as otherwise set forth
in the notes thereto (subject, in the case of unaudited interim statements, to
normal year-end adjustments). Each of the consolidated financial statements of
the Seller and the Seller Bank, including, in each case, the notes thereto, made
available to the Buyer comply, and the financial statements to be filed with the
SEC by the Seller after the date hereof will comply, in all material, respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. Without limiting the generality of
the foregoing, the allowance for possible loan losses included in the
consolidated financial statements of the Seller for the period ended December
31, 2000 was determined in accordance with GAAP to be adequate to provide for
losses relating to or inherent in the loan and lease portfolios of the Seller
and the Seller Bank (including without limitation commitments to extend credit).
Such reserves for possible loan losses comply in all material respects with all
loan loss reserve guidelines utilized by the Seller, which guidelines have not
been objected to by any regulatory agency having jurisdiction with respect
thereto.
(b) The books and records of the Seller and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with GAAP
and applicable legal and regulatory requirements, reflect only actual
transactions and reflect all of their assets, liabilities and accruals.
13
3.07 Undisclosed Liabilities. As of the date hereof, Seller and the Seller
Bank have not incurred any liability or obligation of any nature whatsoever
(whether accrued, contingent, absolute or otherwise and whether due or to become
due) other than liabilities reflected on or reserved against in the consolidated
financial statements of Seller as of December 31, 2000, except for (i)
liabilities incurred since December 31, 2000 in the ordinary course of business
consistent with past practice that, either alone or when combined with all
similar liabilities, have not had, and could not reasonably be expected to have,
a Material Adverse Effect on Seller and, (ii) liabilities incurred for legal,
accounting, financial advisory fees and out-of-pocket expenses in connection
with the transactions contemplated by this Agreement.
3.08 Absence of Certain Changes or Events. Except as may be set forth in
Section 3.08 of the Seller Disclosure Schedule since December 31, 2000:
(i) there has not been any change, effect, event, occurrence
or state of facts that has had, or could reasonably be expected to have, a
Material Adverse Effect on the Seller;
(ii) the Seller and the Seller Bank have carried on their
respective businesses only in the ordinary and usual course consistent
with past practice;
(iii) Neither the Seller nor the Seller Bank has (i)
mortgaged, pledged, or subjected to any lien or lease any of its assets,
tangible or intangible, or permitted or suffered any such asset to be
subjected to any lien or lease, except in the ordinary course of business
consistent with past practice or (ii) acquired or disposed of any material
amount of its assets or properties, or entered into any contract for any
such acquisition or disposition, except acquisitions and dispositions in
the ordinary course of business consistent with past practice;
(iv) Neither the Seller nor the Seller Bank has declared,
paid, or set apart any sum or property for any dividend or other
distribution or paid or transferred any funds or property to the
stockholders of the Seller or, directly or indirectly, redeemed or
otherwise acquired any of its capital stock other than dividends declared
and paid as disclosed in the Seller SEC Filings and dividends declared and
paid by the Seller Bank to the Seller;
(v) neither the Seller nor the Seller Bank has increased the
wages, salaries, compensation, pensions, or other fringe benefits or
perquisites payable to any executive officer, employee or director from
the amount thereof in effect as of December 31, 2000 (which amounts have
been previously disclosed to the Buyer), granted any severance or
termination pay, entered into any contract to make or grant any severance
or termination pay, or paid any bonus other than year-end bonuses for
fiscal 2000, which amounts have been previously disclosed to Buyer, as
contemplated by Section 3.11(h) or, between the date hereof and the
Effective Time, as permitted by Section 5.01(xi) hereof;
14
(vi) neither the Seller nor the Seller Bank has forgiven or
canceled any indebtedness or contractual obligation other than in the
ordinary course of business consistent with past practice;
(vii) there has not been any change in any of the accounting
methods or practices or any material change in any of the loan policies or
procedures of the Seller or the Seller Bank (other than changes required
by applicable law or GAAP) or any change in the value at which assets are
carried on the consolidated or unconsolidated balance sheets of the Seller
other than changes that are reflected in their respective profit and loss
statements; and
(viii) there has not been any notice or indication of the
intention of any person or entity to terminate any agreement with the
Seller or the Seller Bank; or any notice or indication from any depositor,
customer or supplier of the Seller or the Seller Bank of any intention to
cease doing business with, change the price in any material respect or
other terms on which business is transacted with or reduce the business
transacted with the Seller or the Seller Bank in any material respect,
other than any of the foregoing that could not reasonably be expected to
have a Material Adverse Effect on Seller.
(ix) Seller has no knowledge of any fact or circumstance
relating to it that would prevent the transactions contemplated by this
Agreement from qualifying as a reorganization under Section 368(a) of the
Code.
3.09 Legal Proceedings. Except as set forth in Section 3.09 of the Seller
Disclosure Schedule, neither the Seller nor the Seller Bank is a party to any,
and there are no pending or, to the knowledge of the Seller, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against or affecting the Seller or
the Seller Bank or challenging the validity or propriety of the transactions
contemplated by this Agreement, and to the knowledge of the Seller there is no
reasonable basis for any other proceeding, claim, action or governmental or
regulatory investigation against the Seller or the Seller Bank, in all cases,
except for pending proceedings, which, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect on the Seller. There is
no injunction, order, judgment, decree, or regulatory restriction imposed upon
the Seller, the Seller Bank, or the assets of the Seller or the Seller Bank
which has had, or could reasonably be expected to have, a Material Adverse
Effect on the Seller.
3.10 Taxes and Tax Returns.
(i) Each of Seller and the Seller Bank has duly and timely
filed all Tax Returns required to have been filed by it on or prior to the
date hereof (all such Tax Returns being accurate and complete in all
material respects) and has duly paid or made provisions for the payment of
all Taxes which have been incurred or are due or claimed to be due from it
by any taxing authority on or prior to the date of this Agreement other
than (a) Taxes which are not yet delinquent or are being contested in good
faith and have not been finally determined and are listed in Section 3.10
of the Seller Disclosure Schedule, or (b) Tax Returns or Taxes as to which
the failure to file, pay or make
15
provision for will not, individually or in the aggregate, have a Material
Adverse Effect on Seller. There is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to Taxes
of Seller or the Seller Bank, and no claim has been made by any authority
in a jurisdiction where Seller or the Seller Bank does not file Tax
Returns that Seller or the Seller Bank is subject to taxation in such
jurisdiction. Neither Seller nor the Seller Bank has executed an extension
or waiver of any statute of limitations on the assessment or collection of
any material Tax that is currently in effect. Each of Seller and the
Seller Bank has withheld and paid all Taxes required to have been withheld
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party, and each of Seller
and the Seller Bank has timely complied with all applicable information
reporting requirements under Part III, Subchapter A or Chapter 61 of the
Code, and similar applicable state and local information reporting
requirements.
(ii) Section 3.10 of the Seller Disclosure Schedule lists all
federal, state, local and foreign income Tax Returns filed with respect to
any of the Seller and the Seller Bank for taxable periods ended on or
after December 31, 1996, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that are currently the subject of
audit. The Seller has made available to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the
Seller and the Seller Bank since December 31, 1996.
(iii) There are no material liens for Taxes (other than
current Taxes not yet due and payable) on any of the assets of Seller or
Seller Bank.
(iv) None of the Seller or the Seller Bank (a) is a party to
or bound by any Tax indemnification, Tax allocation or Tax sharing
agreement with any person or entity or has any current or potential
contractual obligation to indemnify any other person or entity with
respect to Taxes, (b) has been a member of a consolidated, combined or
affiliated group of corporations (other than a group the common parent of
which is the Seller) or (c) has any liability for the Taxes of any person
or entity (other than the Seller or any of its Subsidiaries) under
Treasury Regulations Section 1.1502-6 or similar provision of state, local
or foreign law, as a transferee or successor, by contract or otherwise.
(v) Except as set forth in Section 3.10 of the Seller
Disclosure Schedule, neither Seller nor the Seller Bank has made any
payment, is obligated to make any payment, or is a party to any agreement
that could obligate it to make any payment that will not be deductible
under Code Section 162(m) or Code Section 280G.
(vi) Neither Seller nor the Seller Bank has been a party to a
transaction described in Code Section 355(c)(1) (or which would have been
described in Code Section 355(c)(1) but for the application of Code
Section 355(e)) within two years immediately preceding the date hereof.
16
As used in this Agreement, the term "Tax" or "Taxes" means any and
all Federal, state, county, local or foreign income, excise, gross receipts, ad
valorem, profits, property, production, sales, use, payroll, employment,
severance, withholding, license, franchise and other taxes, charges, levies or
like assessments imposed on the Seller or its Subsidiaries, together with
interest, additions, or penalties with respect thereto and any interest in
respect of each addition and penalty. As used in this Agreement, the term "Tax
Return" means any return, declaration, claim for refund, information return, or
other document (including any related or supporting estimates, elections,
schedules, statements, or information) filed or required to be filed in
connection with the determination, assessment, or collection of any Tax or the
administration of any laws, regulations, or administrative requirements relating
to any Tax.
3.11 Employee Benefit Programs.
(a) Section 3.11 of the Seller Disclosure Schedule sets forth a list
of every Employee Program currently maintained by the Seller or an Affiliate.
(b) Each Employee Program currently maintained by the Seller or an
Affiliate which has been intended to qualify under Section 401(a) or 501(c)(9)
of the Code has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification under such section.
To the knowledge of the Seller, no event or omission has occurred which would
cause any Employee Program currently maintained by the Seller or an Affiliate to
lose its qualification or otherwise fail to satisfy the relevant requirements to
provide tax-favored benefits under the applicable Code Section (including
without limitation Code Sections 105, 125, 401(a) and 501(c)(9)). Each asset
held under any such Employee Program may be liquidated or terminated without the
imposition of any redemption fee, surrender charge or comparable liability. No
partial termination (within the meaning of Section 411(d)(3) of the Code) has
occurred with respect to any Employee Program currently maintained by the Seller
or an Affiliate.
(c) All of the Employee Programs currently maintained by the Seller
and its Affiliates comply and have been maintained in all material respects with
all applicable requirements of ERISA, the Code and other applicable laws. There
has occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to the Employee Programs currently
maintained by the Seller and its Affiliates which is likely to result in the
imposition of any penalties or taxes upon Seller or its Affiliates under Section
502(i) of ERISA or Section 4975 of the Code. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the knowledge
of Seller, threatened with respect to any such Employee Program. All payments
and/or contributions required to have been made (under the provisions of any
agreements or other governing documents or applicable law) with respect to the
Employee Programs currently maintained by the Seller or any Affiliate, for all
periods prior to the Closing Date, either have been made or have been accrued.
(d) Neither the Seller nor any Affiliate has incurred any material
liability under title IV of ERISA which has not been paid in full prior to the
Closing. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program currently maintained by the Seller
or any Affiliate and subject to Code Section 412 or
17
ERISA Section 302. With respect to any Employee Program currently maintained by
the Seller or any Affiliate and subject to Title IV of ERISA, there has been no
(i) "reportable event," within the meaning of ERISA Section 4043 or the
regulations thereunder, for which the notice requirement is not waived by the
regulations thereunder (other than as may arise from the transactions
contemplated by this Agreement), and (ii) event or condition which presents a
material risk of a plan termination (other than as may arise from the
transactions contemplated by this Agreement) or any other event that may cause
the Seller or any Affiliate to incur liability or have a lien imposed on its
assets under Title IV of ERISA. Except as described in Section 3.11 of the
Seller Disclosure Schedule, no Employee Program currently maintained by the
Seller or any Affiliate and subject to Title IV of ERISA (other than a
Multiemployer Plan) has any "unfunded benefit liabilities" within the meaning of
ERISA Section 4001(a)(18), as of the Closing Date. None of the Employee Programs
currently maintained by the Seller or any Affiliate provides health care or any
other life insurance benefits to any employees after their employment is
terminated (other than as required by part 6 of subtitle B of title I of ERISA
or applicable state insurance laws.
(e) With respect to each Employee Program currently maintained by
the Seller or an Affiliate, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Buyer: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Section 401(a) or 501(c)(9), and any applications
for determination or approval subsequently filed with the IRS; (iii) the most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the most recent actuarial valuation reports
completed with respect to such Employee Program; (v) the most recent summary
plan description for such Employee Program (or other descriptions of such
Employee Program provided to employees) and all modifications thereto; (vi) any
insurance policy (including any fiduciary liability insurance policy or fidelity
bond) related to such Employee Program; (vii) any registration statement or
other filing made pursuant to any federal or state securities law and (viii) all
correspondence to and from any state or federal agency within the past year with
respect to such Employee Program.
(f) Intentionally Omitted.
(g) For purposes of this Section 3.11:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA
Section 3(40)), plans to which more than one unaffiliated employer
contributes and employee benefit plans of the same character but which are
not subject to ERISA (such as foreign or excess benefit plans); (B) all
stock option plans, stock purchase plans, bonus or incentive award plans,
severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee
benefit plans, agreements, and arrangements (including any informal
arrangements) not described in (A) above, including without limitation,
any arrangement intended to comply with Code Section
18
120, 125, 127, 129 or 137; and (C) all plans or arrangements providing
compensation to employee and non-employee directors. In the case of an
Employee Program funded through a trust described in Code Section 401(a)
or an organization described in Code Section 501(c)(9), or any other
funding vehicle, each reference to such Employee Program shall include a
reference to such trust, organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program.
(iii) An entity is an "Affiliate" of the Seller if it would
have ever been considered a single employer with the Seller under ERISA
Section 4001(b) or part of the same "controlled group" as the Seller for
purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension or welfare
benefit plan to which more than one unaffiliated employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements.
(h) For the purposes of determining the benefits to which the Chief
Executive Officer of Seller will be entitled following the termination of his
employment pursuant to the Seller's Supplemental Executive Retirement Plan
effective as of January 1, 1995 (the "SERP") following the termination of his
employment, the payment of the Special Bonus (as defined in Section 5.08 hereof)
and any payments made pursuant to the Noncompetition Agreement will not be taken
into account in any manner and such benefits thereunder will be determined as if
such payments had never been made. Following the termination of his employment
at the Effective Time, the Chief Executive Officer of the Seller will be
entitled to the non-cash benefits set forth on Section 3.11(h) of the Seller
Disclosure Schedule but will not be entitled to the payment of any cash
"severance" or "parachute" amount pursuant to the Second Amended and Restated
Employment Agreement dated as of February 8, 1999 (the "Employment Agreement")
by and between the Seller and such Chief Executive Officer or otherwise. The
Seller has taken all necessary actions to effectuate this Section 3.11(h),
including without limitation, amending the SERP and the Employment Agreement.
3.12 Reports. Since January 1, 1998, the Seller and the Seller Bank have
timely filed, and subsequent to the date hereof will timely file, all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were and are required to be filed with (a) the SEC
(the " Seller SEC Reports"), including, but not limited to, Forms 10-K, Forms
10-Q, Forms 8-K, proxy statements and all other communications mailed by the
Seller to its stockholders since January 1, 1998, (b) the Federal Reserve Board,
(c) the FDIC, and (d) the Director and any applicable Federal or state
securities or banking authorities (except, in the case of state securities
authorities, no such representation is made as to filings which are not
material) (all such reports and statements referenced in this Section 3.12 are
collectively referred to herein as the "Seller Reports") and has paid all fees
and assessments due and payable in connection with any of the foregoing. As of
their respective applicable dates, the Seller Reports complied and, with respect
to filings made after the date of this Agreement, will at the date of filing
comply, in all material respects with all of the statutes, rules and regulations
19
enforced or promulgated by the regulatory authority with which they were filed
and did not contain and, with respect to filings made after the date of this
Agreement, will not at the date of filing contain, any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Seller has made available to the
Buyer true and complete copies of all amendments and modifications that have not
been filed by the Seller with the SEC to all agreements, documents and other
instruments that previously had been filed by the Seller with the SEC and are
currently in effect.
3.13 Labor. No work stoppage involving the Seller or the Seller Bank is
pending or, to the knowledge of the Seller threatened. Neither the Seller nor
the Seller Bank is involved in, or, to the knowledge of the Seller threatened
with or affected by, any dispute, arbitration, lawsuit or administrative
proceeding relating to labor or employment matters which, if adversely
determined, could reasonably be expected to result in a Material Adverse Effect
with respect to Seller. No employees of the Seller or the Seller Bank are
represented by any labor union, and, to the knowledge of the Seller, no labor
union is attempting to organize employees of the Seller or the Seller Bank.
3.14 Compliance with Applicable Law.
(a) Except as set forth in Section 3.14 of the Seller Disclosure
Schedule, each of the Seller and the Seller Bank holds, and has at all times
held, all material licenses, franchises, permits and authorizations necessary
for the lawful conduct of its business under and pursuant to all, and has
complied with and is not in violation or default under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity relating to the Seller or the Seller Bank, and the Seller has no notice
of, any violation of any of the above, except in all cases, for such licenses,
franchises, permits and authorizations and failures to comply with, violations
or defaults which could not reasonably be expected to result in a Material
Adverse Effect with respect to the Seller. Without limiting the generality of
the foregoing, the Seller and the Seller Bank are in compliance in all material
respects with the applicable provisions of the Community Reinvestment Act of
1977, as amended, and the regulations promulgated thereunder, and the Seller has
no knowledge or notice of any fact or circumstance or set of facts or
circumstances which would cause the Seller or the Seller Bank to fail to be in
satisfactory compliance with such provisions.
(b) Except as set forth in Section 3.14 of the Seller Disclosure
Schedule, to the Seller's knowledge, the Seller Bank will not be required, based
upon current FDIC interpretations, to divest any assets currently held by it or
discontinue any activity currently conducted as a result of the Federal Deposit
Insurance Corporation Improvement Act of 1991, any regulations promulgated
thereunder, or otherwise.
3.15 Certain Contracts.
(a) Except as set forth in Section 3.15 of the Seller Disclosure
Schedule and except for documents listed as exhibits to the Seller SEC Filings,
neither the Seller nor the Seller Bank is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or oral): (i) with
respect to the employment of any director, officer, employee
20
or consultant, (ii) which, upon the consummation of the transactions
contemplated by this Agreement will (either alone or upon the occurrence of any
additional act or event) result in any payment (whether of severance pay or
otherwise) becoming due from the Buyer, the Buyer Bank, the Seller, the Seller
Bank, the Surviving Corporation, the Surviving Bank or any of their respective
Subsidiaries to any officer or employee thereof, (iii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC), (iv)
which is a consulting agreement (including data processing, software programming
and licensing contracts) not terminable on 120 days or less notice involving the
payment of more than $50,000 per annum, (v) which materially restricts the
conduct of any line of business by the Seller or the Seller Bank, (vi) with or
to a labor union or guild (including any collective bargaining agreement), or
(vii) (including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan) any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. The Seller has previously
delivered to the Buyer true and correct copies of all employment, consulting and
deferred compensation agreements which are in writing and to which the Seller or
the Seller Bank is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.15(a), whether or not set
forth in Section 3.15 of the Seller Disclosure Schedule, is referred to herein
as a "Seller Contract."
(b) Except as set forth in Section 3.15 of the Seller Disclosure
Schedule, (i) each Seller Contract is valid and binding and in full force and
effect, (ii) the Seller and the Seller Bank has in all material respects
performed all obligations required to be performed by it to date under each such
Seller Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a material default on
the part of the Seller or the Seller Bank under any such Seller Contract.
3.16 Agreements with Regulatory Agencies. Except as set forth in Section
3.16 of the Seller Disclosure Schedule, neither the Seller nor the Seller Bank
is, or was within the last three years, subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or a party to any commitment letter or similar
understanding to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolution at the request of (each, whether or not set forth in Section 3.16 of
the Seller Disclosure Schedule, a "Regulatory Agreement"), with any Regulatory
Agency or other Governmental Entity that restricts its investment or other
activities or the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
the Seller or the Seller Bank been advised by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any Regulatory
Agreement. Neither the Seller nor the Seller Bank is a party to any agreement or
arrangement entered into in connection with the consummation of a federally
assisted acquisition of a depository institution pursuant to which the Seller or
the Seller Bank is entitled to receive financial assistance or indemnification
from any Regulatory Agency or other Governmental Entity.
3.17 Investment Securities. Except for pledges to secure public and trust
deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered
21
into in arms' length transactions pursuant to customary commercial terms and
conditions and other pledges required by law, none of the investments reflected
in the consolidated balance sheet of the Seller for the period ended September
30, 2001, and none of the investments made by the Seller or the Seller Bank
since September 30, 2001, is subject to any restriction (contractual, statutory
or otherwise) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
3.18 Hedging Transactions. Neither the Seller nor the Seller Bank has
engaged in transactions in or involving forwards, futures, options on futures,
swaps, structured notes or other hedging instruments except with respect to SBA
loans made in the ordinary course of business.
3.19 Intellectual Property. The Seller and the Seller Bank own or possess
valid and binding licenses and other rights to use all material patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses, each without payment, and neither the Seller nor the Seller Bank has
received any notice of conflict with respect thereto that asserts the rights of
others. The Seller and the Seller Bank have performed in all material respects
all the obligations required to be performed by them and are not in default in
any material respect under any contract, agreement, arrangement or commitment
relating to any of the foregoing.
3.20 Broker's Fees; Opinion. Neither the Seller nor the Seller Bank, nor
any of their respective officers, directors, employees, affiliates or agents has
employed any financial advisor, broker or finder or incurred any liability for
any broker's fee, commission or finder's fee in connection with any of the
transactions contemplated by this Agreement other than fees payable to Sandler
X'Xxxxx & Partners, L.P. to serve as its financial advisor and in connection
with the Seller receiving the opinion of Sandler X'Xxxxx & Partners, L.P. to the
effect that, as of the date of this Agreement, the consideration to be received
by the stockholders of the Seller pursuant to the Merger is fair, from a
financial point of view, to such stockholders, and such opinion has not been
amended or rescinded as of the date of this Agreement. The Seller will be
responsible for the payment of all such fees. The fee payable to Sandler X'Xxxxx
& Partners, L.P. in connection with the transactions contemplated by this
Agreement is as described in an engagement letter between the Seller and Sandler
X'Xxxxx & Partners, L.P., a true and complete copy of which has heretofore been
furnished to the Buyer.
3.21 Environmental Matters.
(a) Except as set forth in Section 3.21 of the Seller Disclosure
Schedule hereto, or except as could not reasonably by expected to have a
Material Adverse Effect with respect to Seller, (i) no Hazardous Material (as
defined below) has been or is threatened to be spilled, released, or disposed of
at any site presently owned, operated, leased, or used by the Seller or the
Seller Bank or, to Seller's knowledge, has been spilled, released, or disposed
of at any site formerly owned, operated, leased, or used by the Seller or the
Seller Bank; (ii) no Hazardous Material has been transported from any site
presently owned, operated, leased, or used by the Seller or the Seller Bank or,
to Seller's knowledge, any site formerly owned, operated, leased, or used by the
Seller or the Seller Bank, for treatment, storage or disposal at any other
place; (iii) neither the Seller nor the Seller Bank presently owns, operates,
leases, or uses, or, to Seller's knowledge, previously owned, operated, leased,
or used any site on which underground storage tanks are or were located; and
(iv) no lien has ever been imposed by any
22
governmental agency on any property or facility owned, operated, leased, or used
by the Seller or the Seller Bank in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Section 3.21 of the Seller Disclosure
Schedule hereto, or except as could not reasonably be expected to have a
Material Adverse Effect with respect to Seller, (i) neither the Seller nor the
Seller Bank has any liability under, nor has the Seller or the Seller Bank ever
violated, any Environmental Law (as defined below); (ii) the Seller and the
Seller Bank, any property owned, operated, leased, or used by any of them, and
any facilities and operations thereon are presently in compliance in all
respects with all applicable Environmental Laws; (iii) neither the Seller nor
the Seller Bank has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither the
Seller nor the Seller Bank has any reason to believe that any of the items
enumerated in clause (iii) of this paragraph will be forthcoming.
(c) Except as set forth in Section 3.21 of the Seller Disclosure
Schedule hereto, or except as could not reasonably be expected to have a
Material Adverse Effect with respect to Seller, no site currently owned,
operated, leased, or used by the Seller or the Seller Bank contains any asbestos
or asbestos-containing material, any polychlorinated biphenyls (PCBs) or
equipment containing PCBs, or any urea formaldehyde foam insulation.
(d) The Seller has made available to the Buyer copies of all
documents, records, and information available to the Seller concerning any
environmental or health and safety matter relevant to the Seller or any sites
currently owned, operated, leased or used by the Seller or the Seller Bank,
whether generated by the Seller or the Seller Bank, or others, including,
without limitation, environmental audits, site assessments, documentation
regarding off-site disposal of Hazardous Materials, and reports, correspondence,
permits, licenses, approvals, consents, and other authorizations related to
environmental or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 3.21, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, or contaminant,
as defined or regulated under any Environmental Law, or any other substance
which may pose a threat to the environment or to human health or safety and (ii)
"Environmental Law" shall mean any environmental or health and safety-related
law, regulation, rule, ordinance, or by-law at the foreign, national, state, or
local level, whether existing as of the date hereof, previously enforced, or
subsequently enacted.
3.22 Properties.
(a) Section 3.22 of the Seller Disclosure Schedule contains a true,
complete and correct list of all real properties, including properties acquired
by foreclosure or deed in lieu thereof, owned or leased to the Seller or the
Seller Bank. Except as set forth in Section 3.22 of the Seller Disclosure
Schedule, the Seller or the Seller Bank has good and marketable title to all the
real property and all other property owned by it and included in the
consolidated balance
23
sheet of the Seller for the period ended December 31, 2000, other than property
disposed of in the ordinary course of business after December 31, 2000, and owns
such property subject to no encumbrances, liens, mortgages, security interests
or pledges, except (i) liens for current taxes and assessments not yet due and
payable, (ii) such encumbrances, liens, mortgages, security interests and
pledges that will not interfere with the use of the property as currently used
or contemplated to be used by the Seller or the Seller Bank, or the conduct of
the business of the Seller or the Seller Bank, and (iii) liens reflected in the
consolidated balance sheet of the Seller for the period ended September 30,
2001.
(b) Neither the Seller nor the Seller Bank has received any notice
of violation of any applicable zoning or environmental regulation, ordinance or
other law, order, regulation or requirement relating to its operations or its
properties and to the knowledge of the Seller, there is no such violation which
could reasonably be expected to have a Material Adverse Effect on the Seller.
Except as set forth in Section 3.22 to the Seller Disclosure Schedule, all
buildings and structures used by the Seller conform in all material respects
with all applicable ordinances, codes and regulations, or are not required to
conform due to grandfathering clauses contained in such ordinances, codes or
regulations.
(c) Section 3.22 to the Seller Disclosure Schedule contains a true,
complete and correct list of all leases pursuant to which the Seller or the
Seller Bank leases any real or personal property, either as lessee or as lessor
(the "Leases"). Each of the Leases is valid and binding on the Seller or the
Seller Bank, as applicable, and, to the knowledge of the Seller, valid and
binding on and enforceable against all other respective parties to such leases
in accordance with their respective terms (subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of
creditors generally and general principles of equity). There are not under such
Leases any existing material breaches, defaults, events of default by the Seller
or the Seller Bank, or events which with notice and/or lapse of time would
constitute such a breach, default or event of default by the Seller or the
Seller Bank, nor has the Seller or the Seller Bank received notice of, or made a
claim with respect to, any material breach or default by any other party to such
Leases. The Seller and the Seller Bank enjoy quiet and peaceful possession of
all such leased properties occupied by it as lessee.
(d) All of the real properties, leasehold improvements and items of
equipment and other material personal property owned, leased, or licensed by the
Seller or the Seller Bank, or in which any of those parties hold an interest,
are, in the knowledge of the Seller and the Seller Bank, in good maintenance,
repair, and operating condition, ordinary wear and tear excepted, are adequate
for the purposes for which they are now being or are anticipated to be used, and
are free from any material defects.
3.23 Trust Business. Neither Seller nor the Seller Bank conduct any trust
business.
3.24 Insurance. All of the policies relating to insurance maintained by
the Seller or the Seller Bank with respect to its property and the conduct of
its business (or any comparable policies entered into as a replacement therefor)
are in full force and effect and neither the Seller nor the Seller Bank has
received any notice of cancellation with respect thereto. Section 3.24 of the
Seller Disclosure Schedule contains a true, complete and correct list of all
insurance policies and bonds maintained by the Seller and the Seller Bank,
including the name of the insurer, the
24
policy number, the type of policy and any applicable deductibles. The Seller has
previously made available to the Buyer true, complete and correct copies of all
such insurance policies and bonds. The Seller and the Seller Bank are adequately
insured with respect to its property and the conduct of its business in such
amounts and against such risks as are substantially similar in kind and amount
to that customarily carried by parties similarly situated who own properties and
engage in businesses substantially similar to that of the Seller and the Seller
Bank (including without limitation liability insurance and blanket bond
insurance). All premiums due on such policies and bonds have been paid and to
the Seller's knowledge, none of the parties is in violation in any material
respect of any provision of such policy or bond. All material claims under any
policy or bond have been duly and timely filed. Except as set forth in Section
3.24 of the Seller Disclosure Schedule hereto, none of the parties has received
any notice of cancellation of any policy or bond maintained by it. All life
insurance policies on the lives of any of the current and former officers of the
Seller and the Seller Bank which are maintained by the Seller or the Seller Bank
or which are otherwise included as assets on the consolidated books of the
Seller (i) are, or will at the Effective Time be, owned by the Seller and/or the
Seller Bank, as applicable, free and clear of any claims thereon by the officers
or members of their families, except with respect to death benefits thereunder,
as to which the Seller agrees (and agrees to cause the Seller Bank to refrain
from such action) that there will not be an amendment prior to the Effective
Time without the consent of the Buyer and (ii) are accounted for properly as
assets on the consolidated books of the Seller in accordance with GAAP in all
material respects.
3.25 Transactions with Certain Persons. Except as disclosed in the SEC
Filings, neither the Seller nor the Seller Bank has outstanding any loan,
deposit or other relationship or other transaction with any officer, director or
greater-than-5% stockholder of the Seller or any affiliates (as defined in Rule
144(a)(1) of the Securities Act) of any such officer, director or stockholder
(individually, an "Interested Person"), other than deposit or loan transactions
in the ordinary course of business on terms substantially the same as those
prevailing at the time for comparable transactions with other, unaffiliated
persons, and which did not and do not involve more than the normal risk of
collectibility or otherwise present other terms less favorable to the Seller
than would otherwise be obtained with unrelated persons. Section 3.25 of the
Seller Disclosure Schedule hereto contains a list of all outstanding loans by
the Seller or the Seller Bank to an Interested Person which, individually, have
current outstanding balances of $50,000 or more (including in the outstanding
balance all amounts which the Seller or the Seller Bank is obligated to advance
but not including loans secured by cash collateral).
3.26 State Takeover Laws. The transactions contemplated by this Agreement
are not subject to any applicable state takeover laws or business combination
statutes in effect on the date hereof.
3.27 Rule 16b-3. The Seller has taken all necessary action, including
(without limitation) causing its Board of Directors to adopt resolutions
authorizing and approving the Merger, this Agreement and the other transactions
contemplated by this Agreement or the Bank Merger Agreement to exempt such
transactions under Rule 16b-3 of the Exchange Act from the provisions of Section
16(b) of the Exchange Act.
25
3.28 No Dissenters' Rights. No dissenters' or appraisal rights shall be
available with respect to the Merger or the other transactions contemplated by
this Agreement or the Bank Merger Agreement.
3.29 Investment Company Act of 1940. Neither the Seller nor the Seller
Bank is required to be registered as an investment company under the Investment
Company Act of 1940, as amended.
3.30 Investment Management Activities. Neither the Seller nor the Seller
Bank is required to be registered as an investment adviser, a broker, dealer, a
commodity trading adviser, a commodity pool operator, a futures commission
merchant, an introducing broker, a registered representative or associated
person, a counseling officer, an insurance agent, a sales person or in any
similar capacity with the SEC, The Commodity Futures Trading Commission, the
National Futures Association, the securities commission of any state or any
self-regulatory body.
3.31 Disclosure. No representation or warranty of Seller contained in this
Agreement, and no statement contained in any certificate, list or other writing
furnished to the Buyer pursuant to the provisions hereof contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances in
which they are made, not misleading.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER
Prior to the execution and delivery of this Agreement and as a material
inducement to the Seller to enter into this Agreement, Buyer has delivered to
Seller a schedule (the "Buyer Disclosure Schedule") setting forth, among other
things, facts, circumstances and events the disclosure of which is required by
its representations and warranties (and making specific reference to the Section
of this Agreement to which they relate) provided that the mere inclusion of a
fact, circumstance or event in the Buyer Disclosure Schedule shall not be deemed
an admission by Buyer that such item represents a material exception or that
such item is reasonably likely to result in a Material Adverse Effect on Buyer.
The Buyer Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article IV and disclosures in any section or paragraph of the Buyer
Disclosure Schedule shall qualify as disclosures with respect to other sections
and paragraphs in the Buyer Disclosure Schedule only to the extent that it is
reasonably apparent from the reading of such disclosure that it qualifies or
applies to such other sections or paragraphs.
Except as set forth in the Buyer Disclosure Schedule, the Buyer represents
and warrants to the Seller:
4.01 Corporate Organization.
(a) The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Rhode Island. The Buyer has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets
26
owned or leased by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Buyer. The Buyer is a bank holding company registered with the Federal
Reserve Board under the BHCA. The Articles of Incorporation and By-laws or other
similar governing documents of the Buyer, copies of which have previously been
delivered to the Seller, are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
(b) The Buyer Bank is a trust company duly organized, validly
existing and in good standing under the laws of the State of Rhode Island. The
deposit accounts of the Buyer Bank are insured by the FDIC through the BIF to
the fullest extent permitted by law, and all premiums and assessments required
in connection therewith have been paid by the Buyer Bank. The Buyer Bank has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified, either individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. The Agreement to Form and By-laws or other similar governing documents
of the Buyer Bank, copies of which have previously been delivered to the Seller,
are true, complete and correct copies of such documents as in effect as of the
date of this Agreement.
(c) Neither the Buyer nor the Buyer Bank is in violation of any
provision of its Articles of Incorporation or equivalent organizational
documents or its By-laws.
4.02 Capitalization. The authorized capital stock of the Buyer consists of
30,000,000 shares of Buyer Common Stock. As of the date of this Agreement, there
are (i) 12,053,512 shares of Buyer Common Stock issued and outstanding, (ii) no
shares of Buyer Common Stock held in the Buyer's treasury and (iii) 1,012,500
shares of Buyer Common Stock reserved for issuance upon exercise of outstanding
stock options or otherwise. The shares of Buyer Common Stock to be issued in
exchange for shares of Seller Common Stock upon consummation of the Merger will
have been duly authorized and when issued in accordance with the terms of this
Agreement, will be validly issued and fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership thereof
and will be identical in all respects to the shares of Buyer Common Stock that
are issued and outstanding immediately prior to the Merger and will, when issued
be registered under the Securities Act and registered or exempt from
registration under applicable blue sky laws. The Buyer and the Buyer Bank are
"adequately capitalized" as such term is defined in the rules and regulations
promulgated by the Federal Reserve Board and the FDIC.
4.03 Authority; No Violation.
(a) The Buyer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Buyer and the consummation
by the Buyer of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of the Buyer. No other corporate
action and no other corporate proceedings on the part of the
27
Buyer are necessary to authorize this Agreement or to consummate the Merger.
This Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
(b) The Buyer Bank has full corporate power and authority to execute
and deliver the Bank Merger Agreement, to perform its obligations thereunder and
to consummate the transactions contemplated thereby. The execution and delivery
of the Bank Merger Agreement, the performance of its obligations thereunder and
the consummation of the transactions contemplated thereby have been duly and
validly approved by the unanimous action of the Board of Directors of the Buyer
Bank and the Buyer as the sole stockholder of the Buyer Bank. No other corporate
action and no other corporate proceedings on the part of the Buyer Bank are
necessary to authorize the Bank Merger Agreement or the performance of the Buyer
Bank's obligations thereunder or to consummate the transactions contemplated
thereby. The Bank Merger Agreement, upon execution and delivery by the Buyer
Bank, will be duly and validly executed and delivered by the Buyer Bank and will
constitute a legal, valid and binding obligation of the Buyer Bank, enforceable
against the Buyer Bank in accordance with its terms. Buyer shall cause the Bank
Merger Agreement to be approved by the stockholders of the Buyer Bank prior to
the Effective Time.
(c) Neither the execution and delivery of this Agreement by the
Buyer nor the consummation by the Buyer of the transactions contemplated hereby
or thereby; nor the execution and delivery of the Bank Merger Agreement by the
Buyer Bank, nor the consummation by the Buyer Bank of the transactions
contemplated thereby; nor compliance by the Buyer or the Buyer Bank with any of
the terms or provisions hereof or thereof, will (i) assuming that the consents
and approvals referred to in Section 4.04 hereof are duly obtained, violate any
statute, law, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to the Buyer or any of its Subsidiaries or by which any
property or asset of the Buyer or any of its Subsidiaries is bound or affected,
or (ii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of the Buyer or any of its Subsidiaries under
any of the terms, conditions or provisions of (A) the Articles of Incorporation
or other charter document of like nature or By-laws of the Buyer or any of its
Subsidiaries, or (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Buyer
is a party as issuer, guarantor or obligor, or by which they or any of their
respective properties or assets may be bound or affected, except, in the case of
clause (ii)(B) above, for such violations, conflicts, breaches or defaults which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect on the Buyer.
4.04 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with (i) the Federal Reserve Board, (ii) the FDIC and
(iii) the Director, and the consent to and approval of such applications and
notices, (b) the filing with the SEC of the Registration Statement, (c) the
approval of this Agreement by the requisite vote of the stockholders of the
Seller and the approval of the Bank Merger Agreement by the requisite vote of
the stockholders of the Seller Bank and the Buyer Bank, (d) the filing of the
Articles of
28
Merger with the Secretary to effect the Merger pursuant to the RIBCA and
articles of merger to effect the Bank Merger, pursuant to Title 19 of the
General Laws of Rhode Island and the RIBCA, (e) such filings and approvals as
are required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of shares of Buyer Common Stock
pursuant to this Agreement, and (f) such filings, authorizations or approvals as
may be set forth in Section 4.04 of the Buyer Disclosure Schedule, no consents
or approvals of or filings or registrations with any Governmental Entity or with
any third-party are necessary in connection with the execution and delivery by
the Buyer of this Agreement, the execution and delivery of the Bank Merger
Agreement by the Buyer Bank, and the consummation of the Merger, the Bank Merger
and the other transactions contemplated hereby and thereby, except where the
failure to obtain such consents or approvals, or to make such filings or
registrations, would not prevent the Buyer from performing its obligations under
this Agreement. The Buyer does not believe that any fact or circumstance exists
relating to Buyer or its Subsidiaries that is reasonably likely to materially
impede or delay receipt of any Governmental Approval described in this Section
4.04 or is reasonably likely to result in the imposition of a Burdensome
Condition (as defined herein).
4.05 Financial Statements. The Buyer has previously made available to the
Seller copies of the consolidated balance sheets of the Buyer and its
Subsidiaries as of December 31 for the fiscal years 1999 and 2000 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the fiscal years 1998 through 2000, inclusive, as reported in
the Buyer's Annual Report on Form 10-K for the fiscal year ended December 31,
2000 filed with the SEC under the Exchange Act, in each case accompanied by the
audit report of KPMG LLP, independent public accountants for the Buyer. The
December 31, 2000 consolidated balance sheet of the Buyer (including the related
notes, where applicable) fairly presents, and the financial statements to be
included in any reports or statements (including reports on Form 10-Q and 10-K)
to be filed by the Buyer with the SEC after the date hereof will fairly present,
the consolidated financial position and results of operations and cash flows and
changes in stockholders' equity of the Buyer and its Subsidiaries for the
respective fiscal periods or as of the respective dates herein set forth, and
the other financial statements referred to in this Section 4.05 (including the
related notes, where applicable) fairly present in all material respects
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and changes in shareholders' equity and consolidated financial
position of the Buyer and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto. The Buyer has previously made available to the Seller copies of
the consolidated balance sheet of the Buyer and its Subsidiaries as of September
30, 2001 and the related consolidated statement of operations prepared by the
Buyer, in each case unaudited and without footnotes, and such financial
statements fairly present in all material respects the consolidated financial
position of the Buyer and its Subsidiaries as of December 31, 2000 and the
results of consolidated operations for the year then ended. Each of the
consolidated financial statements of the Buyer and its Subsidiaries, including,
in each case, the notes thereto, made available to the Seller comply, and the
financial statements to be filed with the SEC by the Buyer after the date hereof
will comply in all material respects, with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto.
29
4.06 Reports. Since January 1, 1998, the Buyer and its Subsidiaries have
timely filed, and subsequent to the date hereof will timely file, all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were and are required to be filed with (a) the SEC
(the "Buyer SEC Reports"), including, but not limited to, Forms 10-K, Forms
10-Q, Forms 8-K, proxy statements and all other communications mailed by the
Buyer to its stockholders since January 1, 1998 (and copies of all such reports,
registrations statements and communications have been or will be made available
by the Buyer to the Seller), (b) the Federal Reserve Board, (c) the FDIC, and
(d) any applicable state securities or banking authorities (except, in the case
of state securities authorities, no such representation is made as to filings
which are not material) (all such reports and statements are collectively
referred to herein as the "Buyer Reports") and has paid all fees and assessments
due and payable in connection with any of the foregoing. As of their respective
applicable dates, the Buyer Reports complied and, with respect to filings made
after the date of this Agreement, will at the date of filing comply, in all
material respects with all of the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed and did not
contain and, with respect to filings made after the date of this Agreement, will
not at the date of filing contain, any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.07 Absence of Certain Changes or Events. Except as may be set forth in
Section 4.07 of the Buyer Disclosure Schedule and except as disclosed in the
Buyer's filings with the SEC, since December 31 2000, (i) Buyer and the Buyer
Bank have conducted their respective businesses only in the ordinary and usual
course of such businesses consistent with their past practices, (ii) there has
not been any event or occurrence that has had, or is reasonably expected to
have, a Material Adverse Effect on Buyer, and (iii) there has been no change in
any accounting principles, practices or methods of Buyer or the Buyer Bank other
than as required by GAAP.
4.08 Tax Treatment of the Merger. Buyer has no knowledge of any fact or
circumstance relating to it that would prevent the transactions contemplated by
this Agreement from qualifying as a reorganization under Section 368(a) of the
Code.
4.09 Availability of Funds. Buyer has and will have available to it at the
Effective Time, sources of capital sufficient to pay the aggregate Cash
Consideration and to pay any other amounts payable pursuant to this Agreement
and to effect the transactions contemplated hereby.
4.10 Broker's Fees. Neither the Buyer nor any of the Buyer's Subsidiaries,
nor any of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fee, commission or finder's
fee in connection with any of the transactions contemplated by this Agreement
other than fees paid to Xxxxx, Xxxxxxxx & Xxxxx, which shall be paid by the
Buyer.
4.11 Disclosure. No representation or warranty of Buyer contained in this
Agreement and no statement contained in any certificate, list or other writing
furnished to the Seller pursuant to the provisions hereof contains any untrue
statement of a material fact or omits to state a
30
material fact necessary in order to make the statements herein or therein, in
light of the circumstances in which they are made, not misleading.
4.12 Legal Proceedings. Except as set forth in Section 4.12 of the Buyer
Disclosure Schedule, neither the Buyer nor the Buyer Bank is a party to any, and
there are no pending or, to the knowledge of the Buyer, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against or affecting the Buyer or the
Buyer Bank or challenging the validity or propriety of the transactions
contemplated by this Agreement, and to the knowledge of the Buyer there is no
reasonable basis for any other proceeding, claim, action or governmental or
regulatory investigation against the Buyer or the Buyer Bank in all cases,
except for pending or threatened proceedings, which, if adversely determined,
could not reasonably be expected to have a Material Adverse Effect on the Buyer.
There is no injunction, order, judgment, decree, or regulatory restriction
imposed upon the Buyer, the Buyer Bank, or the assets of the Buyer or the Buyer
Bank, which has had, or could reasonably be expected to have, a Material Adverse
Effect on the Buyer.
4.13 Undisclosed Liabilities. As of the date hereof, the Buyer and the
Buyer Bank have not incurred any liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) other than liabilities reflected on or reserved against in the
consolidated financial statements of the Buyer as of December 31, 2000, except
for (i) liabilities incurred since December 31, 2000 in the ordinary course of
business consistent with past practice that, either alone or when combined with
all similar liabilities, have not had, and could not reasonably be expected to
have, a Material Adverse Effect on the Buyer, (ii) liabilities incurred for
legal, accounting, financial advisory fees and out-of-pocket expenses in
connection with the transactions contemplated by this Agreement and, (iii) as
disclosed in Section 4.13 to the Buyer's Disclosure Schedule.
31
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Covenants of Seller. Except as expressly contemplated or permitted by
this Agreement or the Bank Merger Agreement, or with the prior written consent
of the Buyer, during the period from the date of this Agreement to the earlier
of the Effective Time or the termination of this Agreement in accordance with
the terms hereof, the Seller and the Seller Bank shall carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and without limiting the foregoing, to continue
to operate in the same geographic markets serving the same market segments and
without material increase in the rate of growth of the Seller Bank's loan
portfolio. The Seller will use all commercially reasonable efforts to (a)
preserve intact its business organization and that of the Seller Bank, (b) keep
available to itself and the Surviving Bank the present services of the
employees, (c) preserve for itself and the Surviving Bank the goodwill of the
customers of the Seller and the Seller Bank and others with whom business
relationships exist, and (d) take no action which could be reasonably likely to
materially adversely affect or materially delay the ability of the Seller to
obtain any necessary approvals of any Governmental Entity required for the
transactions contemplated by this Agreement or the Bank Merger Agreement or to
perform its covenants and agreements under this Agreement or the Bank Merger
Agreement. Without limiting the generality of the foregoing, and except as set
forth on Section 5.01 of the Seller Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by the Buyer, the
Seller shall not, and shall not permit the Seller Bank to:
(i) declare or pay any dividends on, or make other
distributions in respect of, any shares of its capital stock, except for
regular quarterly cash dividends (in accordance with Seller's customary
payment schedules) to Seller's stockholders at a rate not in excess of
$0.15 per share of Seller Common Stock, and except for dividends from the
Seller Bank to the Seller;
(ii) (a) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (b) directly or indirectly repurchase, redeem or
otherwise acquire (except for the acquisition of Trust Account Shares and
DPC Shares, as such terms are defined in Section 1.05(c) hereof) any
shares of the capital stock of the Seller or the Seller Bank, or any
securities or obligations convertible into or exchangeable for any shares
of the capital stock of the Seller or the Seller Bank;
(iii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing;
(iv) amend its Articles of Incorporation, By-laws or other
similar governing documents;
(v) authorize or commit to any single capital expenditure
which is in excess of $25,000 or capital expenditures which are, in the
aggregate, in excess of $75,000 for the Seller and the Seller Bank taken
as a whole, except for contractual
32
commitments entered into prior to the date of this Agreement as heretofore
disclosed in Section 5.01(e) of the Seller Disclosure Schedule;
(vi) enter into any new line of business;
(vii) acquire or agree to acquire, by merging or consolidating
with, or by purchasing an equity interest in or a portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets which would be material, either individually
or in the aggregate, to the Seller;
(viii) change its methods, policies or procedures of
accounting in effect at December 31, 2000, except as required by changes
in GAAP or regulatory accounting principles as concurred to by the
Seller's independent auditors;
(ix) make any material tax election or settle or compromise
any material Federal, state, local or foreign tax liability;
(x) pay, discharge or satisfy any claim, liability or
obligation, other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the balance sheet for the
fiscal year ended December 31, 2000, or subsequently incurred in the
ordinary course of business and consistent with past practice;
(xi) (i) except as contemplated by this Agreement, as required
by applicable law or required under existing contractual arrangements
(which obligations are set forth in Section 3.15(a)(ii) of the Seller
Disclosure Schedule), (x) adopt, amend, renew or terminate any plan or any
agreement, arrangement, plan or policy between the Seller or the Seller
Bank and one or more of its current or former directors, officers or
employees, or (y) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any bonus or benefit
not required by any plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares); provided, however, that the Seller may, in
consultation with the Buyer, grant salary increases to its employees at
the regular review date of such employees in the ordinary course of
business consistent with past practice, in an aggregate amount for all
employees not to exceed four and a quarter percent (4.25%) of the
aggregate current annualized base salaries or wages of such employees or
constitute more than a ten percent (10%) increase with respect to any one
such employee; provided, further, that the Seller may, in consultation
with the Buyer, pay bonuses (other than to Seller's Chief Executive
Officer, who shall be covered by the next proviso) relating to 2001
performance in the ordinary course of business consistent with past
practice in an aggregate amount not to exceed $50,000 and provided further
that the Seller may, (A) prior to December 31, 2001, pay its Chief
Executive Officer the amounts contemplated by Section 5.08 hereof and (B)
grant a salary increase of up to five percent (5%) to its Chief Executive
Officer, effective January 1, 2002, as contemplated by Section 4 of his
Employment Agreement with Seller, dated February 8, 1999; (ii) hire any
new employees
33
without the prior written consent of the Buyer (which consent shall not be
unreasonably withheld or delayed), unless such new employee is hired to
replace an employee whose employment with the Seller or the Seller Bank
has terminated and such new employee is hired at a level of compensation
that is no more than 10% higher than the departed employee or (iii) enter
into, modify or renew any employment, severance or other agreement with
any director, officer or employee of the Seller or the Seller Bank, or
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
providing for any benefit to any director, officer or employee;
(xii) except in the ordinary course of its business consistent
with past practice, sell, transfer, lease, mortgage, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or
otherwise dispose of, any of its assets, properties or other rights or
agreements or purchase or sell any loans in bulk;
(xiii) except in the ordinary course of business consistent
with past practice and for borrowings from the Federal Home Loan Bank
Board, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make
any loan or advance;
(xiv) file any application to open, relocate or terminate the
operations of any banking offices of it or of any the Seller Bank or
materially expand the business currently conducted by it;
(xv) commit any act or omission which constitutes a material
breach or default by the Seller or the Seller Bank under any Regulatory
Agreement or under any material contract or material license to which the
Seller or the Seller Bank is a party or by which any of them or their
respective properties is bound;
(xvi) make any new or additional equity investment or
commitment to make such an investment in real estate or in any real estate
development project, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings
in the ordinary course of business consistent with past practice;
(xvii) settle any claim, action or proceeding, except in the
ordinary course of business consistent with past practice;
(xviii) cancel or release indebtedness of any third-party;
(xix) sell any securities in its investment portfolio, except
in the ordinary course of business, or engage in transactions in or
involving forwards, futures, options on futures, swaps or similar hedging
instruments or otherwise restructure or change its investment portfolio or
its gap position or the manner in which the portfolio is classified or
reported;
34
(xx) except as required by law or regulation, change its loan
policies or procedures in effect at December 31, 2000 in any material
respect;
(xxi) foreclose upon or take a deed or title to any commercial
real estate without first conducting a Phase I environmental assessment of
the property or foreclose upon any commercial real estate if such
environmental assessment indicates the presence of a Hazardous Material in
amounts which, if such foreclosure were to occur, could reasonably be
expected to result in a Material Adverse Effect on the Seller or the
Seller Bank;
(xxii) enter into or renew, amend or terminate, or give notice
of a proposed renewal, amendment or termination or make any commitment
with respect to, (i) any contract, agreement or lease for office space,
operations space or branch space to which the Seller or the Seller Bank is
a party or by which the Seller or the Seller Bank or their respective
properties is bound; (ii) any lease, contract or agreement other than in
the ordinary course of business consistent with past practices; or (iii)
any lease, contract, agreement or commitment involving an aggregate
payment by or to the Seller or the Seller Bank of more than $25,000 or
having a term of one year or more from the time of execution;
(xxiii) make any loan other than loans of less than $1,000,000
to any single borrower (or group of related borrowers) which are made in
accordance with the Seller Bank's loan and credit policies and the Seller
Bank's customary terms, conditions and standards, and in accordance with
applicable law (Buyer's consent to loans in excess of $1,000,000 not to be
unreasonably withheld or delayed);
(xxiv) waive any material right, whether in equity or at law,
that it has with respect to any loan, except in the ordinary course of
business consistent with prudent banking practices; or
(xxv) take any action or fail to take any action permitted by
this Agreement that is intended or which reasonably could be expected to
result in any of its representations and warranties set forth in this
Agreement being untrue in any material respect, or in any of the
conditions to the Merger or the other transactions contemplated in this
Agreement not being satisfied in any material respect, or in a material
violation of any provision of this Agreement; or
(xxvi) agree to do any of the foregoing.
5.02 No Solicitation.
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VIII hereof, the
Seller and the Seller Bank shall not, and shall not authorize or permit any of
their respective directors, officers, employees, representatives, agents,
affiliates and advisors (including, without limitation, investment bankers,
attorneys and accountants) or other persons controlled by the Seller to,
directly or indirectly solicit, initiate, encourage or facilitate (including by
way of furnishing nonpublic information or assistance) any inquiries relating
to, or the making of any proposal or other action (including
35
without limitation any proposal or offer to its stockholders) which relates to,
or may reasonably be expected to lead to, a Competing Transaction (as defined
below); or participate in any discussions or negotiations regarding, or furnish
to any other person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, or facilitate, any effort or attempt
by any other person to make or seek to make such a proposal or other action; or
otherwise facilitate any effort or attempt to make or implement a Competing
Transaction; or, subject to Section 6.03, approve, endorse or recommend any
Competing Transaction; or enter into any letter of intent (whether or not
binding), agreement or other contract or commitment contemplating or otherwise
relating to a Competing Transaction; provided, however, that nothing in this
Section 5.02 shall prohibit the Seller from furnishing nonpublic information
regarding the Seller the Seller Bank to, entering into a confidentiality
agreement with or entering into discussions with, any person or group in
response to a Superior Proposal (as defined below) submitted by such person or
group (if not withdrawn) if (a) neither the Seller nor any representative of the
Seller the Seller Bank shall have violated any of the restrictions set forth in
this Section 5.02, (b) the Board of Directors of the Seller concludes, in good
faith, after consultation with its outside legal counsel, that such action is
required in order for the Board of Directors of the Seller to discharge its
fiduciary duties to the Seller's stockholders under applicable law, (c) (i) at
least three (3) business days prior to furnishing any such nonpublic information
to, or entering into discussions or negotiations with, such person or group,
Seller gives Buyer written notice of the identity of such person or group and of
Seller's intention to furnish nonpublic information to, or enter into
discussions or negotiations with, such person or group and (ii) Seller receives
from such person or group an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such person or group by or on behalf of Seller,
which agreement is at least as favorable in all material respects to Seller as
the letter agreement entered into as of March 27, 2001 by and between the Buyer
and the Seller (the "Confidentiality Agreement"), and (d) contemporaneously with
furnishing any such nonpublic information to such person or group, Seller
furnishes such nonpublic information to Buyer (to the extent such nonpublic
information has not been previously furnished by Seller to Buyer). Nothing
contained in this Section 5.02 shall be deemed to prohibit the Seller from, to
the extent applicable, taking or disclosing to its stockholders any position
necessary in order to comply with the filing and disclosure requirements of
Section 14(d)(9) and 14e-2 of the Exchange Act and the related rules and
regulations of the SEC, including Item 1012(a) of Regulation M-A.
(b) The Seller shall immediately cease and cause to be terminated
any and all existing activities, discussions or negotiations previously
conducted with any parties other than the Buyer, which relate to, or could
reasonably be expected to lead to, a Competing Transaction, including without
limitation all discussions with parties who submitted, or contemplated
submitting, proposals for business combinations with Seller. The Seller will
take all actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first sentence of Section 5.02(a) of the obligations
undertaken in this Section 5.02. The Seller agrees not to (and will cause the
Seller Bank not to) release any third-party from, or waive any provision of, any
confidentiality or standstill agreement to which the Seller or the Seller Bank
is a party.
(c) The Seller will notify the Buyer promptly (but in any event
within 24 hours) if any inquiries or proposals are received by, any information
is requested from, or any
36
negotiations or discussions are sought to be initiated or continued with the
Seller, which could reasonably be expected to lead to a Competing Transaction,
and the Seller will inform the Buyer in writing as soon as practicable
thereafter (but in any event within 24 hours) of all of the relevant details
with respect to the foregoing (including the identity of the parties, price and
other material terms and conditions thereof). The Seller shall use its
reasonable best efforts to keep Buyer informed in all material respects of the
status and details (including material amendments or proposed amendments) of any
such inquiry, proposal, request, negotiations or discussions.
(d) As used in this Agreement, "Competing Transaction" shall mean
any transaction or series of related transactions (other than the transactions
expressly provided for in this Agreement) involving: (i) a tender offer or
exchange offer for 15% or more of the outstanding equity securities of Seller or
the Seller Bank, (ii) a merger, consolidation, share exchange or other business
combination involving the Seller or the Seller Bank, (iii) any sale, lease,
exchange, pledge, transfer or other disposition of 15% or more of the assets of
the Seller or the Seller Bank, (iv) any liquidation or dissolution of Seller or
Seller Bank, (v) any transaction or series of related transactions resulting in
any person having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
having been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the then outstanding shares of capital
stock of the Seller, or (vi) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(e) As used in this Agreement, "Superior Proposal" shall mean an
unsolicited, bona fide written offer made by a third-party to consummate a
Competing Transaction (i) for which financing, to the extent required to
consummate such proposed transaction, is then fully and unconditionally
committed in writing, or, in the reasonable judgment of the Board of Directors,
reasonably capable of being fully financed, and (ii) which the Board of
Directors of Seller determines, in its reasonable judgment (based on advice of a
financial advisor of a nationally recognized reputation) is reasonably likely to
be completed if such proposal is accepted, taking into account all legal,
financial, regulatory and other aspects of the Superior Proposal (including the
party making the Superior Proposal), and would, if consummated, be more
favorable to all of the Seller's stockholders from a financial point of view
than the transaction contemplated by this Agreement.
5.03 Intentionally Omitted.
5.04 System Conversions. From and after the date hereof, the Buyer and the
Seller shall meet on a regular basis to discuss and plan for the conversion of
the Seller Bank's data processing and related electronic informational systems
to those used by the Buyer and its Subsidiaries which planning shall include,
but not be limited to, discussion of the possible termination by the Seller Bank
of third-party service provider arrangements effective at the Effective Time or
at a date thereafter, non-renewal of personal property leases and software
licenses used by the Seller Bank in connection with its systems operations and
outsourcing, as appropriate of proprietary or self-provided system services; it
being understood that the Seller shall not be obligated to take (or cause the
Seller Bank to take) any such action and, unless the Seller otherwise agrees, no
conversion shall in fact take place prior to the Effective Time. In the
37
event that the Seller, at the request of the Buyer, determines to take, and so
takes, any action relative to third parties to facilitate the conversion that
results in the imposition of any termination fees, expenses or charges, the
Buyer shall indemnify the Seller and the Seller Bank on terms reasonably
satisfactory to the Seller for any such fees, charges and expenses, and the
costs of reversing the conversion process, if for any reason the Effective Time
does not occur in accordance with the terms of this Agreement.
5.05 Certain Changes and Adjustments. Prior to the Closing, the Buyer and
the Seller shall consult and cooperate with each other concerning the Seller
Bank's loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) to reflect the Buyer's
plans with respect to the conduct of the Surviving Bank's business; provided,
however, that the Seller and the Seller Bank shall not be obligated to take any
action pursuant to this Section 5.05 (x) which is inconsistent with GAAP or any
law or regulation applicable to the Seller or the Seller Bank and (y) unless and
until the Buyer acknowledges, and the Seller is satisfied, that all conditions
to consummate the Merger have been satisfied and that the Buyer intends to
consummate the Merger in accordance with the terms of this Agreement. No action
taken by the Seller pursuant to this Section 5.05 or the consequences resulting
therefrom shall be deemed to be a breach of any representation, warranty,
agreement or covenant herein or constitute a Material Adverse Effect. If for any
reason the Merger is not consummated in accordance with the terms of this
Agreement, the Buyer will indemnify the Seller for any fees, charges or
expenses, and the costs of reversing the action taken in connection with the
changes and adjustments made at the request of the Buyer.
5.06 Branches. Prior to the Effective Time, the Buyer and the Seller shall
consult and cooperate with each other concerning alignment of the Buyer Bank's
and the Seller Bank's branches following the Effective Time, and the Seller
will, if requested by the Buyer, cooperate with the Buyer to cause the Seller
Bank to prepare and file applications for branch closings with all appropriate
Regulatory Agencies after all of the Requisite Regulatory Approvals (as defined
in Section 7.01(b)) have been obtained (without regard to any applicable waiting
periods). If for any reason the Merger is not consummated in accordance with the
terms of this Agreement, the Buyer will reimburse the Seller for any fees or
expenses incurred in connection with the preparation and filing of such
applications at the request of the Buyer.
5.07 ALCO Management. The Seller agrees that during the period from the
date of this Agreement through the Effective Time, the Seller will not change or
amend its existing policies for managing, and reducing the negative impact of a
change in interest rates on the Seller Bank's interest sensitive assets and
liabilities (including its fixed-rate mortgage portfolio and its investment
portfolio), other than such changes or amendments which could not reasonably be
expected to have a Material Adverse Effect on the Seller.
5.08 Chief Executive Officer Compensation. The Seller will, prior to
December 31, 2001, pay its chief executive officer (x) his regular annual bonus
in an amount equal to $150,000 and (y) a one-time bonus separate from his
regular annual bonus in an amount equal to $2,100,000 (the "Special Bonus"),
which bonus shall not be contingent on the consummation of the transactions
contemplated hereby.
38
5.09 Covenants of the Buyer. Except as expressly contemplated or permitted
by this Agreement or the Bank Merger Agreement, or with the prior consent of the
Seller, during the period from the date of this Agreement and continuing until
the earlier of the Effective Time or the termination of this Agreement in
accordance with the terms hereof, Buyer shall, and shall cause each of its
Subsidiaries to, (i) not to take any action or fail to take any action permitted
by this Agreement that is intended or which reasonably could be expected to
result in any of its representations and warranties set forth in this Agreement
being untrue in any material respect, or in any of the conditions to the Merger
or other transactions contemplated in this Agreement as set forth in Article VII
not being satisfied in any material respect, or in a material violation of any
provision of this Agreement, (ii) use commercially reasonable efforts to conduct
its business in the regular, ordinary and usual course consistent with past
practice, (iii) use commercially reasonable efforts to maintain and preserve
intact its business organization, and retain the services of its officers and
key employees and (iv) take no action which could be reasonably likely to
materially adversely affect or materially delay the ability of the Buyer to
obtain any necessary approvals of any Governmental Entity required for the
transactions contemplated by this Agreement or the Bank Merger Agreement or to
perform its covenants and agreements under this Agreement or the Bank Merger
Agreement. During the period from the date of this Agreement and continuing
until the Effective Time, the Buyer shall provide the Seller with a copy of all
the Buyer Reports.
5.10 Control of Operations. Nothing contained in this Agreement shall give
Buyer, directly or indirectly, the right to control or direct the operations of
Seller or the Seller Bank prior to the Effective Time. Prior to the Effective
Time, Seller shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its and the Seller Bank's
operations.
ARTICLE VI - ADDITIONAL AGREEMENTS
6.01 Regulatory Matters.
(a) The parties hereto shall cooperate with each other and use
commercially reasonable efforts to promptly prepare and file as soon as
practicable after the date hereof all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties, Regulatory Agencies and Governmental Entities which are necessary or
advisable for such party to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger and the Bank Merger). The
Seller and the Buyer shall have the right to review in advance all such
applications, notices, petitions, and filings, and each will consult with the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to the Buyer, the Buyer Bank, the
Seller or the Seller Bank, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with or written materials
submitted to, any third-party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
39
apprised of the status of matters relating to the completion of the transactions
contemplated hereby.
(b) The Seller and the Buyer shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any statement, filing, notice or application
made by or on behalf of the Seller, the Buyer or any of their respective
Subsidiaries to any Governmental Entity in connection with the Merger, the Bank
Merger and the other transactions contemplated by this Agreement.
(c) The Seller and the Buyer shall promptly furnish each other with
copies of written communications received by the Seller or the Buyer, as the
case may be, or any of their respective Subsidiaries, "affiliates" or
"associates" (as such terms are defined in Rule 12b-2 under the Exchange Act as
in effect on the date of this Agreement) from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
(d) The Seller and the Buyer shall negotiate in good faith for a
period not to exceed thirty (30) days an alternative transaction structure if,
after pursuing in good faith all necessary regulatory approvals, the parties
determine in good faith that the required regulatory approvals will not be
obtained to complete the Merger or the Bank Merger. If an agreement on an
alternative transaction structure cannot be reached after thirty (30) days of
good faith negotiations, this Section 6.01(d) shall expire. In no event shall
the parties have any obligation under this Section 6.01(d) to negotiate after
July 31, 2002.
6.02 Securities Laws Matters.
(a) Buyer agrees to prepare a Registration Statement on Form S-4 or
other applicable form to be filed by Buyer with the SEC in connection with the
issuance of Buyer Common Stock in the Merger (including the Proxy Statement and
Prospectus and other proxy solicitation materials of the Seller constituting a
part thereof. Seller shall prepare and furnish such information relating to it
and its directors, officers and stockholders as may be reasonably required in
connection with the above-referenced documents, and the Seller, and its legal,
financial and accounting advisors, shall have the right to review in advance
such Registration Statement prior to its filing. Seller agrees to cooperate with
Buyer and Buyer's counsel and accountants in requesting and obtaining
appropriate opinions, consents and letters from its financial advisor and
independent auditor in connection with the Registration Statement and the Proxy
Statement. Buyer agrees to use commercially reasonable efforts to file, or cause
to be filed, the Registration Statement and the Proxy Statement with the SEC as
promptly as reasonably practicable after the date hereof. Each of the Buyer and
the Seller agrees to use commercially reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as reasonably practicable after the filing thereof. Buyer also agrees
to use commercially reasonable efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. After the Registration Statement is declared
effective under the Securities Act, Seller shall promptly mail, at its expense,
the Proxy Statement to its stockholders.
40
(b) Each of the Buyer and the Seller agrees that none of the
information supplied or to be supplied by it for inclusion or incorporation by
reference in (i) the Registration Statement shall, at the time the Registration
Statement and each amendment or supplement thereto, if any, becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) the Proxy Statement and any
amendment or supplement thereto shall, at the date(s) of mailing to stockholders
and at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. Each of the Buyer
and the Seller further agrees that if such party shall become aware prior to the
Effective Date of any information furnished by such party that would cause any
of the statements in the Registration Statement or the Proxy Statement to be
false or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or misleading,
to promptly inform the other parties thereof and to take the necessary steps to
correct the Registration Statement or the Proxy Statement.
(c) Buyer agrees to advise the Seller, promptly after Buyer receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Buyer Common Stock for offering or
sale in any jurisdiction, of the initiation or, to the extent Buyer is aware
thereof, threat of any proceeding for any such purpose, or of any request by the
SEC for the amendment or supplement of the Registration Statement or for
additional information.
(d) Letter from Seller's Accountants. It shall be a condition to the
mailing of the Proxy Statement/Prospectus that the Buyer shall have received
from Seller's independent accountants a "comfort" letter from such accountants,
dated a date within two (2) business days before the date on which the
Registration Statement shall become effective, addressed to Buyer, in form and
substance reasonably satisfactory to Buyer, of the kind contemplated by the
Statement of Auditing Standards with respect to Letters to Underwriters
promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), concerning the procedures undertaken by the Seller's
independent accountants with respect to the financial statements and information
of the Seller and the Seller Bank contained in the Registration Statement and
the other matters contemplated by the AICPA Statement and otherwise customary in
scope and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement. Prior
to the Effective Time, Seller shall cause to be delivered to Buyer a second
"comfort" letter, dated as of the second business day prior to the Closing Date
updating the matters covered in the first such "comfort" letter.
6.03 Stockholder Meeting. In order to consummate the Merger, the Seller
shall take all steps necessary to duly call, give notice of, convene and hold
its Stockholder Meeting as soon as practicable following the clearance of the
Registration Statement and the Proxy Statement by the SEC for the purpose of
voting upon the approval of this Agreement and the transactions contemplated
hereby. Subject to this Section 6.03, the Board of Directors of Seller shall
unanimously recommend that its stockholders vote in favor of and adopt and
approve this Agreement and the transactions contemplated hereby at the
Stockholder Meeting and the
41
Prospectus/Proxy Statement shall include a statement to this effect. The Seller
and the Buyer shall coordinate and cooperate with respect to the foregoing
matters. After making such recommendation to its stockholders, the Board of
Directors of Seller (or any committee thereof) shall not withdraw, modify or
amend such recommendation (or propose to do so) in any respect adverse to the
Buyer unless (i) a Superior Proposal (as defined in Section 5.02) is made to
Seller and is not withdrawn, and (ii) Seller shall have concluded in good faith,
after consultation with its outside counsel, that, in light of such Superior
Proposal, the withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of Seller to discharge its
fiduciary duties to the Seller's stockholders under applicable law; provided,
however, that prior to any withdrawal, modification or amendment of such
recommendation by the Board of Directors of Seller, the Seller shall have given
Buyer at least four (4) business days notice thereof and the opportunity to meet
with Seller and its counsel. Subject to Section 8.01(i) hereof, Seller's
obligation to call, give notice of, convene and hold the Stockholder Meeting in
accordance with this Section 6.03 shall not be limited to or otherwise affected
by the commencement, disclosure, announcement or submission to Seller of a
proposal for a Competing Transaction or by the withdrawal, amendment or
modification of its recommendation in connection with a Superior Proposal.
6.04 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, the Buyer shall afford the Seller, and its
officers, employees, counsel, accountants and other authorized representatives,
access, during normal business hours to such information regarding the Buyer and
its Subsidiaries as shall be reasonably requested by Seller to fulfill its
obligations pursuant to this Agreement. The Buyer shall furnish promptly to the
Seller a copy of each application, report, schedule, correspondence and other
document filed by the Buyer with, or received by the Buyer from, any
Governmental Entity in connection with the transactions contemplated hereunder,
and the Buyer agrees to notify the Seller by telephone within 48 hours of
receipt of any adverse oral communication from any Governmental Entity regarding
the outcome of any regulatory applications required in connection with the
Merger.
(b) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, the Seller shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Buyer, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Seller shall, and shall
cause its Subsidiaries to, make available to the Buyer (i) a copy of each
report, schedule, registration statement and other document filed or received by
it (or any of its Subsidiaries), during such period pursuant to the requirements
of Federal securities laws or Federal or state banking laws (other than reports
or documents which the Seller is not permitted to disclose under applicable
law), (ii) copies of all periodic reports to senior management, including
without limitation, reports on non-performing loans and other asset quality
matters and all materials furnished to the Board of Directors of the Seller or
the Seller Bank relating to asset quality generally, and (iii) all other
information concerning its business, properties, assets and personnel as the
Buyer may reasonably request.
42
(c) No party shall be required to provide access to or to disclose
information where such access or disclosure would jeopardize the attorney-client
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(d) All information (the "Confidential Information") furnished by
one party (the "Providing Party") to the other party (the "Receiving Party") or
its directors, officers, employees, agents, and advisors (the "Representatives")
shall be treated as the sole property of the Providing Party and, if this
Agreement terminates, the Receiving Party shall, upon request of the Providing
Party, return to the Providing Party or destroy all such written Confidential
Information. The Receiving Party shall, and shall use commercially reasonable
efforts to cause its Representatives to, keep confidential all such Confidential
Information, and shall not directly or indirectly use such information for any
competitive or commercial purpose. Confidential Information shall not include
information which (i) was already in the possession of the Receiving Party prior
to receipt from the Providing Party, provided that such information is not known
by the Receiving Party or its Representatives to be subject to another
confidentiality agreement with or other obligation of secrecy to the Providing
Party; (ii) becomes generally available to the public other than as a result of
a disclosure by the Receiving Party; (iii) becomes available to the Receiving
Party on a non-confidential basis from a source other than the Providing Party
or its Representatives, provided that such source is not known by the Receiving
Party to be bound by a confidentiality agreement with or other obligation of
secrecy to the Providing Party; (iv) has been approved for release by written
authorization of the Providing Party; or (v) has been publicly disclosed
pursuant to a requirement of a government agency or of law.
(e) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
6.05 Reasonable Best Efforts and Cooperation. Each of the Buyer and the
Seller shall, and shall cause its Subsidiaries to, use its reasonable best
efforts (a) to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may be imposed on
such party or its Subsidiaries with respect to the Merger and, subject to the
conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third-party which is
required to be obtained by the Buyer or the Seller or any of their respective
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement and Seller shall use commercially reasonable
efforts to obtain prior to Closing landlord's estoppels in forms satisfactory to
the Buyer in connection with the real estate Leases relating to the Seller
Bank's branches in Cranston, Rhode Island and the Wal-Mart superstore in North
Kingston, Rhode Island; provided, however, that (i) in no event shall Seller be
required to pay any money to any such landlord to obtain any such estoppel and
(ii) the Buyer shall not be obligated to take any action pursuant to the
foregoing if the taking of such action or such compliance or the obtaining of
such consent, authorization, order, approval or exemption is likely, in the
reasonable opinion of its Board of Directors, to result in the imposition of a
43
Burdensome Condition (as hereinafter defined) on the Surviving Corporation or
any of its Subsidiaries (including without limitation the Surviving Bank).
6.06 NASDAQ Listing. The Buyer shall use its reasonable best efforts to
cause the shares of Buyer Common Stock to be issued in the Merger to be approved
for listing on the NASDAQ National Market System subject to official notice of
issuance, prior to the Effective Time.
6.07 Indemnification; Directors' and Officers' Insurance.
(a) The Buyer shall maintain in effect for six years from the
Effective Time, the current directors' and officers' liability insurance policy
maintained by the Seller (provided that the Buyer may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not less favorable than those in effect on the date hereof) with respect to
matters occurring prior to the Effective Time; provided, however, that in no
event shall the Buyer be required to expend more than $35,000 (the "Insurance
Amount") to maintain or procure such insurance coverage pursuant to this Section
6.07 and further provided that if Buyer is unable to maintain or obtain the
insurance called for by this Section 6.07, Buyer shall use commercially
reasonable efforts to obtain as much comparable insurance as is available for
the Insurance Amount. In connection with the foregoing, the Seller agrees to
provide such insurer or substitute insurer with such representations as such
insurer may request with respect to the reporting of any prior claims.
(b) For a period of ten years from the Effective Time, the Buyer
shall indemnify the directors and officers of the Seller and the Seller Bank to
the same extent that such persons are entitled to indemnification by the Seller
or the Seller Bank as of the date of this Agreement. The indemnification by the
Buyer provided for hereunder shall not be amended, repealed or otherwise
modified for a period of ten years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who were directors
or officers of the Seller or the Seller Bank as of the date of this Agreement,
unless such modification shall be required by law. In the event that any claim
is asserted or made by such director or officer within such ten year period, the
right to indemnification in respect of such claim shall continue until the
disposition of such claim. The provisions of this Section 6.07(b) are
specifically for the benefit of those directors and officers entitled to
indemnification by the Seller as of the date of this Agreement.
(c) In the event Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
Buyer assume the obligations set forth in this Section 6.07.
(d) The provisions of this Section 6.07 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
44
6.08 Financial and Other Statements. Notwithstanding anything to the
contrary in Section 6.04, during the term of this Agreement, the Seller shall
provide to the Buyer the following documents and information:
(i) As soon as reasonably available, but in no event more than
three (3) days after filing, the Seller will deliver to the Buyer the
Seller's Quarterly Call Report as filed with the Federal Reserve and the
Seller Bank's Quarterly Call Report as filed with the FDIC for any quarter
after the date hereof and prior to the Effective Time. As soon as
reasonably available, but in no event more than three (3) days after
filing, the Seller will deliver to the Buyer the Seller's Annual Call
Report as filed with the Federal Reserve and the Seller Bank's Annual Call
Report as filed with the Federal Reserve or the FDIC. The Seller will also
deliver to the Buyer, contemporaneously with its being filed with the
FDIC, a copy of all Current Call Reports.
(ii) As soon as reasonably available, but in no event more
than three (3) days after filing with the SEC all reports that are
required to be filed by the Seller under the Exchange Act.
(iii) Promptly upon receipt thereof, the Seller will furnish
to the Buyer copies of all internal control reports submitted to the
Seller or the Subsidiaries by independent accountants in connection with
each annual, interim or special audit of the books of the Seller or any of
the Seller's Subsidiaries made by such accountants.
(iv) As soon as practicable, the Seller will furnish to the
Buyer copies of all such financial statements and reports as it or any
Subsidiary shall send to its stockholders, the FDIC or any other
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential and except as legally prohibited
thereby.
(v) Promptly upon receipt thereof the Seller will (and will
cause its Subsidiaries to) furnish to the Buyer copies of each examination
report of any federal or state regulatory or examination authority with
respect to the condition or activities of the Seller or any of the
Subsidiaries, except to the extent prohibited by law. With respect to any
examination report the disclosure of which is prohibited by law, the
Seller will use all reasonable efforts to obtain authority to deliver to
the Buyer copies of such examination report or provide appropriate
substitute disclosure arrangements.
(vi) With reasonable promptness, the Seller will furnish to
the Buyer such additional financial data as the Buyer may reasonably
request.
6.09 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, or to vest the Surviving Corporation or the Surviving Bank, as
applicable, with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be requested by the
Buyer.
45
6.10 Notice of Adverse Changes.
(a) Each party shall promptly notify the other party in writing, and
keep the other party fully informed, of (i) any inability or perceived inability
by the notifying party to perform or comply with the terms or conditions of this
Agreement, or (ii) any change or event having a Material Adverse Effect on it or
which it believes could or could be reasonably expected to cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein, or in any of the conditions to the Merger set forth in Article VII not
being satisfied, or in a violation of any provision of this Agreement.
(b) From time to time prior to the Effective Time, each party will
promptly supplement or amend the respective Disclosure Schedule delivered in
connection with the execution of this Agreement to reflect any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or which is
necessary to correct any information in such Disclosure Schedule which has been
rendered inaccurate thereby. No supplement or amendment to such Disclosure
Schedule shall have any effect for the purposes of determining satisfaction of
the conditions set forth in Sections 7.02(a) or 7.03(a) hereof, as the case may
be, or the compliance by the Buyer or the Seller, as the case may be, with the
respective covenants set forth in Sections 5.01 through 5.10 hereof.
6.11 Current Information.
(a) During the period from the date of this Agreement to the
Effective Time, the Seller will cause one or more of its designated
representatives (i) to confer on a regular and frequent basis (not less than
monthly) with representatives of the Buyer to report on (x) the general status
of the ongoing operations of the Seller and the Seller Bank, (y) the status of,
and the action proposed to be taken with respect to, those Loans held by the
Seller or the Seller Bank which, either individually or in combination with one
or more other Loans to the same borrower thereunder, have an original principal
amount of $100,000 or more and are non-performing assets, (z) the status of, and
the action proposed to be taken with respect to, foreclosed property and other
real estate owned, and (ii) to cooperate and communicate fully with respect to
the manner in which the business of the Buyer Bank and the Seller Bank will be
combined after the Effective Time, the type and mix of products and services,
personnel matters, branch alignment, the granting of credit, and problem loan
management, reserve adequacy and accounting. During the period from the date of
this Agreement to the Effective Time, the Buyer will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of the Seller and to report on the status of
efforts to secure the regulatory approvals required under this Agreement, as
well as the general status of the ongoing operations of the Buyer and the Buyer
Bank. In order to facilitate the foregoing, the Buyer and the Seller shall
promptly establish a liaison committee which will be chaired by the chief
executive officers of the Buyer and the Seller and which will meet on a regular
basis to discuss these matters and may establish sub-committees from
time-to-time to pursue various issues.
(b) The Seller will promptly notify the Buyer of any material change
in the normal course of business or in the operation of the properties of the
Seller or any of its Subsidiaries and of any governmental complaints,
investigations or hearings (or communications
46
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving the Seller or the Seller Bank, and will keep
the Buyer reasonably informed of such events. The Buyer will promptly notify the
Seller of any material change in the normal course of business or in the
operation of the properties of the Buyer or any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving the Buyer or any of its Subsidiaries, and
will keep the Seller fully informed of such events.
6.12 Compensation and Benefit Plans.
(a) All persons who are employees of Seller or the Seller Bank
immediately prior to the Effective Time and whose employment is not specifically
terminated at or prior to the Effective Time (a "Continuing Employee") shall, at
the Effective Time, become employees of Buyer or the Buyer Bank, as appropriate;
provided, however, that in no event shall any of the continuing Employees be
officers of Buyer or Buyer Bank, or have or exercise any power or duty conferred
upon such an officer, unless and until duly elected or appointed to such
position in accordance with the By-laws of Buyer or Buyer Bank, as appropriate.
All of the Continuing Employees shall be employed at the will of the Buyer or
the Buyer Bank and no contractual right to employment shall inure to such
employees because of this Agreement.
(b) As soon as administratively practicable after the Effective
Time, Buyer shall take all reasonable action so that Continuing Employees shall
be entitled to participate in each employee benefit plan, program or arrangement
of Buyer of general applicability (the "Buyer Benefits Plans") to the same
extent as similarly-situated employees of Buyer and its Subsidiaries, it being
understood that until such time as Continuing Employees are enrolled in a
specific Buyer Benefit Plan, the Continuing Employees shall continue to
participate in the Employee Program of the same character, which shall be
maintained by the Buyer until such time as the Continued Employees shall be
enrolled in such Buyer Benefit Plan. Buyer shall cause each Buyer Benefits Plan
in which Continuing Employees are eligible to participate to recognize, for all
purposes (but not for accrual of pension benefits or eligibility for early
retirement under Buyer's defined benefit pension plan) under the Buyer Benefit
Plans, the service of such Continuing Employees with Seller and the Seller Bank
to the same extent as such service was credited for such purpose by the Seller.
Except as otherwise provided herein, nothing herein shall limit the ability of
Buyer to amend or terminate any of the Employee Programs in accordance with
their terms at any time. As soon as administratively practicable after the
Effective Time and consistent with the first sentence of this Section 6.12(b),
Buyer shall make available employer-provided health and other employee welfare
benefit plans to each Continuing Employee on the same basis as it provides such
coverage to Buyer employees except that any pre-existing condition, eligibility
waiting period or other limitations or exclusions otherwise applicable under
such plans to new employees shall not apply to a Continuing Employee or their
covered dependents who were covered under a similar Employee Program on the
Effective Date of the Merger. Buyer shall cause its health plan to provide full
credit under such plans for any deductibles, co-payments and out-of-pocket
expenses incurred by the Continuing Employees and their covered dependents
during the portion of the calendar year period to their participation in such
plans of Buyer.
47
(c) Buyer agrees to honor in accordance with their terms all
benefits vested as of the Effective Time under the Employee Programs and all
vested benefits or other vested amounts earned or accrued through such time
under contracts, arrangements commitments or understandings described in the
Seller Disclosure Schedule, including benefits and amounts which vest or are
otherwise accrued as a result of the consummation of the transactions
contemplated by this Agreement.
(d) Effective at the Effective Time, Buyer shall have appointed
Xxxxxxx X. Xxxxxxxx, Xx. to the Board of Directors of Buyer in accordance with
Section 1.09 hereof.
(e) Buyer will provide to any employee of Seller or the Seller Bank
whose employment is involuntarily terminated for reasons other than cause (which
shall mean gross negligence, dereliction of performance of such employee's
duties, dishonesty or commission of a crime) within six months after the Closing
Date, and who is not otherwise covered by a specific termination, severance or
change in control agreement, with a severance plan benefit equal to two weeks of
base pay for each year of service with the Seller or Seller Bank provided, that
with respect to those employees of Seller or the Seller Bank set forth in
Section 6.12 of the Seller Disclosure Schedule, the Buyer shall provide such
severance plan benefit set forth in such Section 6.12 of the Seller Disclosure
Schedule to such employees.
(f) Seller or Seller Bank shall take action to terminate the Seller
401(k) plan not later than immediately prior to the Effective Date. Subject to
receipt of a favorable determination letter from the IRS regarding the
termination of the Seller 401(k) plan, distributions shall be made to
participants as provided in the Seller 401(k) plan and such participants may
make direct rollovers to the Buyer 401(k) plan pursuant to the provisions of
such plan.
(g) Notwithstanding anything to the contrary contained herein, prior
to the Effective Xxxx Xxxxxx may or may cause Seller Bank to amend or consent to
the amendment of the Financial Institution Retirement Fund as expressly required
by applicable law and for adjustments to applicable limits affected by the
Economic Growth and Tax Relief Reconciliation Act of 2001.
6.13 Bank Merger. At the effective time of the Bank Merger, the Agreement
to Form and By-Laws of the Buyer Bank, as in effect immediately prior thereto,
shall be the Agreement to Form and By-Laws of the Surviving Bank until
thereafter amended as provided by law and such Agreement to Form and By-Laws.
The directors and officers of the Buyer Bank immediately prior to the effective
time of the Bank Merger shall be the directors and officers of the Surviving
Bank, each to hold office in accordance with the Agreement to Form and By-Laws
of the Surviving Bank and until their respective successors are duly elected or
appointed and qualified; provided, that, effective at the Effective Time,
Xxxxxxx X. Xxxxxxxx, Xx. shall become a member of the Board of Directors of the
Buyer Bank.
6.14 Affiliate Agreements. Seller shall use its reasonable best efforts to
cause each person who may be deemed, as of the date of the Stockholder Meeting,
to be an "affiliate" of the Seller (each, a "Merger Affiliate"), as that term is
used in Rule 145 under the Securities Act, to execute and deliver to the Buyer
on or before the date of mailing of the Registration Statement
48
an agreement to comply with Rule 145 under the Securities Act, in the form
attached hereto as Exhibit C (the "Affiliate Agreement"). Buyer shall be
entitled to place legends as specified in such Affiliate Agreement on the
certificates evidencing any shares of Buyer Common Stock to be received by such
Merger Affiliates pursuant to the terms of this Agreement and to issue
appropriate stop transfer instructions to the transfer agent for such shares,
consistent with the terms of such Affiliate Agreements.
6.15 No Inconsistent Actions. Prior to the Effective Time, no party will:
(i) enter into any transaction or make any agreement or commitment and will use
its reasonable best efforts not to permit any event to occur, which could
reasonably be expected to result in (x) a denial of the regulatory approvals
referred to in Sections 3.04 and 4.04 or (y) the imposition of any Burdensome
Condition (as hereinafter defined); or (ii) adopt by plan or arrangement, or
take or cause to be taken any action, that would adversely affect holders of
Seller Common Stock in a disproportionate manner after the Effective Time.
6.16 Publicity. The initial press release announcing this Agreement shall
be a joint press release subject to the consent of both parties, which consent
shall not be unreasonably withheld or delayed, and thereafter Buyer and Seller
shall consult with each other prior to issuing any press releases or otherwise
making public statements with respect to the Merger and any other transaction
contemplated hereby and in making any filings with any Governmental Entity or
with any national securities exchange or national market system with respect
thereto; provided, however, that nothing in this Section 6.16 shall be deemed to
prohibit any party from making any disclosure which its counsel deems necessary
in order to satisfy such party's disclosure obligations imposed by law or the
rules of a national securities exchange or national market system.
6.17 Section 16 Matters. Prior to the Effective Time, Buyer and Seller
shall take all such steps as may be required to cause any dispositions of Seller
Common Stock or acquisitions of Buyer Common Stock resulting from the
transactions contemplated by this Agreement by each individual who is subject to
the reporting requirements of Section 16(a) of the Exchange Act as a director
and/or executive officer of Seller to be exempt under Rule 16b-3 promulgated
under the Exchange Act. Seller agrees to promptly furnish Buyer with all
requisite information necessary for Buyer to take the actions contemplated by
this Section 6.17.
6.18 Reorganization Treatment. Each of Buyer and Seller shall use all
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code. Neither Buyer
nor Seller shall file any Tax Return or take any position inconsistent with the
treatment of the Merger as a reorganization within the meaning of Section 368(a)
of the Code. Each of Buyer and Seller (i) shall comply with the record-keeping
and information reporting requirements set forth in Treasury Regulations
ss.1.368-3, and (ii) shall cause its officer's certificate referred to in
Section 7.01(f) to be executed and delivered.
49
ARTICLE VII - CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative vote
of the stockholders of the Seller to the extent required by Rhode Island law and
the Articles of Incorporation of the Seller.
(b) Regulatory Approvals. All necessary approvals, authorizations
and consents of all Governmental Entities required to consummate the
transactions contemplated hereby (including the Merger and the Bank Merger)
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired or been
terminated (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals").
(c) NASDAQ Listing. The shares of Buyer Common Stock which shall be
issued upon consummation of the Merger shall have been authorized for listing on
the National Market System, subject to official notice of issuance.
(d) Securities Laws Matters. The Registration Statement shall have
been declared effective by the SEC; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the SEC
and no proceeding for that purpose shall have been initiated by the SEC and not
concluded or withdrawn, and the Buyer shall have received all necessary state
securities laws and "blue sky" permits and other authorizations required in
connection with the issuance of Buyer Common Stock in the Merger.
(e) No Injunctions or Restraints; Illegality. No order, injunction
or decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger, the Bank Merger, or any of the other transactions contemplated by this
Agreement shall be in effect and no proceeding initiated by any Governmental
Entity seeking an injunction shall be pending. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger, the Bank Merger, or any of the other transactions
contemplated by this Agreement.
(f) Tax Opinion Relating to the Merger. Buyer and Seller shall have
received an opinion from Xxxxxxx Procter LLP, and Xxxxxxx Xxxx LLP,
respectively, dated as of the Closing Date, substantially to the effect that, on
the basis of the facts, representations and assumptions set forth in such
opinions which are consistent with the state of facts existing at the Closing
Date, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinions, such counsel may require and rely upon representations and
covenants including those contained in certificates from the officers of the
Buyer and the Seller and others, reasonably satisfactory in form and substance
to the parties hereto and such counsel.
50
7.02 Conditions to Obligations of Buyer. The obligation of the Buyer to
effect the Merger is also subject to the satisfaction or waiver by the Buyer at
or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Seller set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties expressly speak as of an earlier
specified date) as of the Effective Time as though made on and as of the
Effective Time; (other than those representations and warranties that are
qualified as to materiality, Material Adverse Effect or similar language, which
shall be true and correct in all respects as of the Effective Time) and the
Buyer shall have received a certificate signed on behalf of the Seller by its
Chief Executive Officer and Chief Financial Officer to the foregoing effect.
(b) Performance of Obligations of Seller. The Seller shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Buyer shall
have received a certificate signed on behalf of the Seller by its Chief
Executive Officer and Chief Financial Officer to such effect.
(c) No Burdensome Condition. None of the Requisite Regulatory
Approvals shall impose any term, condition or restriction upon the Buyer, the
Buyer Bank, the Surviving Corporation, the Surviving Bank or any of their
respective Subsidiaries that the Buyer reasonably determines would so materially
adversely effect the economic or business benefits to the Buyer of the
transactions contemplated by this Agreement, taken as a whole, as to render
inadvisable the consummation of the Merger (a "Burdensome Condition"); provided,
however, that, in the event that this Agreement is terminated pursuant to
Section 8.02(c) following the imposition of a Burdensome Condition, which shall
not be removed prior to the date set forth in such Section (as such date may be
extended pursuant to such Section), Buyer will make a cash payment to the Seller
equal to the sum of $500,000 plus the Seller's Expenses (as defined in Section
8.02(b)) by or before the fifth business day immediately following such
termination, which payment shall be the exclusive remedy available to the Seller
in the event of such a termination (it being understood that, notwithstanding
the foregoing, no party shall be relieved or released from any liabilities or
damages arising out of its gross negligence or willful breach of any provisions
of this Agreement in accordance with Section 8.02(d)).
(d) Consents Under Agreements. The consent, approval or waiver of
each person (other than the Governmental Entities referred to in Sections 3.04
and 4.04) referred to on Section 7.02(d) of the Seller Disclosure Schedule shall
have been obtained.
(e) Noncompetition Agreement. The Chief Executive Officer of Seller
shall have executed and delivered a noncompetition agreement in the form
attached as Exhibit D hereto (the "Noncompetition Agreement").
7.03 Conditions to Obligations of Seller. The obligation of the Seller to
effect the Merger is also subject to the satisfaction or waiver by Bank at or
prior to the Effective Time of the following conditions:
51
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties expressly speak as of an earlier specified
date) as of the Effective Time as though made on and as of the Effective Time
(other than those representations and warranties that are qualified as to
materiality, Material Adverse Effect or similar language, which shall be true
and correct in all respects as of the Effective Time) and the Seller shall have
received a certificate signed on behalf of the Buyer by its Chief Executive
Officer and Chief Financial Officer to the foregoing effect.
(b) Performance of Obligations of Buyer. The Buyer shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Seller shall
have received a certificate signed on behalf of the Buyer by its Chief Executive
Officer and Chief Financial Officer to such effect.
(c) Noncompetition Agreement. Buyer shall have executed and
delivered the Noncompetition Agreement.
ARTICLE VIII - TERMINATION AND AMENDMENT
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Seller:
(a) by mutual consent of the Buyer and the Seller in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either the Buyer or the Seller upon written notice to the
other party (i) 90 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 90-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity; provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 8.01(b)(i)
if such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein, or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
Merger (which order the parties shall have used their best efforts to lift);
(c) by either the Buyer or the Seller if the Merger shall not have
been consummated on or before June 30, 2002, unless the failure of the Closing
to occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein; provided, however, that the right to terminate this
Agreement under this Section 8.01(c) shall not be available to any party if the
principal reason for the Closing not having occurred by June 30, 2002 is the
failure of the Buyer to have obtained all Requisite Regulatory Approvals
notwithstanding the good faith effort of the
52
Buyer to obtain such approvals and the Buyer is seeking in good faith to
promptly eliminate all regulatory impediments to the Closing, in which event
such June 30, 2002 date shall be extended to July 31, 2002;
(d) by the Buyer or the Seller if at the Stockholder Meeting held
pursuant to Section 6.03 hereof or at any postponement or adjournment thereof
the requisite approval of the stockholders of the Seller required for the
consummation of the Merger shall not have been obtained for any reason;
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.01(d) if such failure to obtain the
requisite stockholder approval shall be as a result of the material breach by
such party of any of its covenants and agreements of such party set forth
herein;
(e) by either the Buyer or the Seller (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within twenty (20) days
following written notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing;
(f) by either the Buyer or the Seller (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the covenants or agreements set forth in this Agreement (other than
Sections 5.02 and 6.03) on the part of the other party, which breach shall not
have been cured within twenty (20) days following receipt by the breaching party
of written notice of such breach from the other party hereto;
(g) by the Buyer (provided that the Buyer is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the covenants or
agreements set forth in Section 5.02 or 6.03 of this Agreement on the part of
the Seller;
(h) by the Buyer, if the Board of Directors of the Seller does not
publicly recommend in the Proxy Statement that the Seller stockholders vote in
favor of and approve and adopt this Agreement, or if, after making such
recommendation, the Board of Directors of the Seller shall have withdrawn,
modified or amended such recommendation in any respect adverse to the Buyer
(regardless whether such action constitutes a breach under Section 6.03); or if
the Board of Directors of Seller have approved or recommended a Superior
Proposal or proposed or resolved to do any of the foregoing; or
(i) by the Seller, if the Board of Directors of Seller approves,
recommends or causes Seller to enter into any agreement with respect to any
Superior Proposals following a withdrawal, amendment or modification, in
accordance with Section 6.03 hereof, of its recommendation of the transactions
contemplated hereby; or
(j) by the Seller, by the action of its Board of Directors, if (x)
the Average Buyer Common Stock Price is less than 80% of $18.00 (the "Initial
Buyer Common Stock Price") and (y) (A) the number obtained by dividing the
Average Buyer Common Stock Price by
53
the Initial Buyer Common Stock Price (the "Buyer Ratio") shall be less than 80%
of (B) the number obtained by dividing the Final Index Price by the Initial
Index Price (the "Index Ratio").
The "Final Index Price" shall mean the average closing value of the share
price of the Nasdaq Bank Index (as defined below) as of the close of trading for
the fifteen (15) consecutive trading days ending on and including the Approval
Date. The "Initial Index Price" shall mean the average closing value of the
Nasdaq Bank Index as of the close of trading for the fifteen (15) consecutive
trading days ending on and including the date of this Agreement.
If Seller elects to exercise its termination right pursuant to this
Section 8.01(j), it shall give written notice to Buyer within five (5) days
after the Approval Date, such termination to be effective on the fifteenth (15)
day following the Approval Date (the "Effective Termination Date"); provided
that such notice of election to terminate may be withdrawn at any time prior to
the Effective Termination Date. During the five (5) day period commencing with
its receipt of such Notice, Buyer shall have the option to increase the
consideration to be received by holders of Seller Common Stock hereunder by
modifying the Exchange Rate initially in effect so that the Exchange Rate then
in effect shall instead equal the product obtained by multiplying the Exchange
Rate initially in effect by a fraction, the numerator of which is equal to 80%
of the Initial Buyer Common Stock Price and the denominator of which is equal to
the Average Buyer Common Stock Price. If Buyer so elects, it shall give, within
such five (5) day period, written notice to Seller of such election and the
revised Exchange Rate (the "Buyer Election Notice") whereupon no termination
shall be deemed to have occurred pursuant to Section 8.01(j) and this Agreement
shall remain in full force and effect in accordance with its terms (except as
the Exchange Rate shall have been so modified).
8.02 Effect of Termination; Expenses.
(a) In the event of termination of this Agreement by either the
Buyer or the Seller as provided in Section 8.01, this Agreement shall forthwith
become void and have no effect except (i) the last sentence of Section 5.04, the
last sentence of Section 5.05, the last sentence of Section 5.06 and Sections
6.04(d), 7.02(c), 8.02, 8.04, 9.03, 9.04, 9.09 and 9.10 shall survive any
termination of this Agreement and (ii) subject to Section 8.02(c) and (d)
hereof, no party shall be relieved or released from any liabilities or damages
arising out of its gross negligence or willful breach of any provision of this
Agreement.
(b) If this Agreement is terminated as a result of any breach of a
representation or warranty or the breach of a covenant pursuant to Section
8.01(e) or 8.01(f) which is caused by the willful conduct or gross negligence of
a party hereto, said party shall be liable to the other party for all
out-of-pocket costs and expenses, including, without limitation, the reasonable
fees and expenses of external lawyers, accountants and investment bankers,
incurred by such other party in connection with the entering into of this
Agreement and the carrying out of any and all acts contemplated hereunder
("Expenses").
(c) As a condition of the Buyer's willingness, and in order to
induce the Buyer to enter into this Agreement and to reimburse the Buyer for
incurring the costs and expenses related to entering into this Agreement and
consummating the transactions contemplated by this Agreement, the Seller will
make a cash payment to the Buyer of
54
$1,800,000 (the "Termination Fee") if (i) the Buyer has terminated this
Agreement pursuant to Section 8.01(g) or 8.01(h) or the Seller has terminated
this Agreement pursuant to Section 8.01(i); or (ii) (x) the Buyer has terminated
this Agreement pursuant to Section 8.01(d) or as a result of any breach of a
representation or warranty or the breach of a covenant pursuant to Section
8.01(e) or 8.01(f) which is caused by the willful conduct or gross negligence of
Seller, (y) at the time of such termination any person other than the Buyer or
any of its Subsidiaries shall have made a bona fide proposal to the Seller or
its stockholders to engage in a Competing Transaction, which, in the case of a
termination pursuant to Section 8.01(d), was or became the subject of public
disclosure and (z) within twelve (12) months of any such termination, either (A)
the Seller shall have entered into an agreement to engage in a Competing
Transaction with any person other than the Buyer or any of its Subsidiaries or
(B) the Board of Directors of the Seller shall have authorized or approved a
Competing Transaction or recommended that stockholders of the Seller approve or
accept any Competing Transaction with any person other than the Buyer or any of
its Subsidiaries.
(d) The parties acknowledge and agree that the provisions of this
Section 8.02 are included herein in order to induce the parties to enter into
this Agreement and to reimburse the non-breaching party for incurring the costs
and expenses related to entering into this Agreement and consummating the
transactions contemplated hereby. The parties hereto agree that the rights of
Buyer to payment under this Section 8.02 shall be the exclusive remedy available
to the Buyer in the event of a termination of this Agreement in those
circumstances in which a Termination Fee is payable under Section 8.02(c).
Notwithstanding anything to the contrary contained herein, no party shall be
relieved or released from any liabilities or damages arising out of its gross
negligence or willful breach of any provisions of this Agreement; provided,
however, that the Buyer's right to payment under this Section 8.02 shall be its
exclusive remedy if it has terminated this Agreement as a result of any breach
of representation or warranty or the breach of a covenant pursuant to Section
8.01(e) or 8.01(f) which is caused by the willful conduct or gross negligence of
Seller and Buyer accepts payment of the Termination Fee payable pursuant to
Section 8.02(c)(ii) (it being understood that Buyer will no longer be entitled
to such Termination Fee if, following such a termination, it obtains a final
nonappealable judgment as a result of the exercise of any of its other rights
and remedies). Any payment required under this Section 8.02 will be payable by
the Seller to the Buyer, or by the Buyer to the Seller, as the case may be (by
wire transfer of immediately available funds to an account designated by the
Buyer or the Seller, as the case may be) within five (5) business days after
demand by the Buyer or the Seller. In the event that the Buyer or Seller, as the
case may be, shall fail to pay the Expenses or the amount due under Section
8.02(c) when due, such amounts shall be deemed to include (i) interest on such
unpaid amounts, commencing on the date such amount or amounts become due, at a
rate per annum equal to the rate of interest publicly announced by Buyer or
Seller, as the case may be, from time to time, as such bank's Prime Rate, plus
2%, and (ii) any and all costs and expenses (including, without limitation,
legal fees) incurred by Buyer or Seller, as the case may be, in enforcing their
rights under this Section 8.02.
8.03 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Seller. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
55
8.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX - GENERAL PROVISIONS
9.01 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the date
which is five (5) days after the last required approval for the Merger and the
other transactions contemplated hereby has been received and the last of all
required waiting periods under such approvals has expired (the "Closing Date"),
at the offices of Xxxxxxx Procter LLP, Exchange Place, Boston, Massachusetts,
unless another time, date or place is agreed to in writing by the parties
hereto; provided, however, that the Buyer and the Seller shall use their
commercially reasonable efforts to cause the Closing to occur on or before
February 28, 2002; provided, further that, if Seller has exercised its
termination right pursuant to Section 8.01(j), neither party may require that
the other party consummate the Merger until the earlier of the Effective
Termination Date and the second day following delivery of the Buyer Election
Notice.
9.02 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained in Sections
2.02, 6.07, 6.09, 6.12, 6.18, and 9.02.
9.03 Expenses. Except as provided by Section 8.02(b) hereof, whether or
not the Merger is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expense, provided, however, that nothing contained herein shall
limit either party's rights under Section 8.02 hereof, including without
limitation, the right to recover any liabilities or damages arising out of the
other party's willful breach of any provision of this Agreement.
9.04 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
56
(a) if to the Buyer, to:
Washington Trust Bancorp, Inc.
00 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Chief Executive Officer
and Xxxx X. Xxxxxxx, President
with copies to:
Xxxxxxx Procter LLP
Exchange Place
Boston, MA 02109-2881
Attn: Xxxx X. Xxx, P.C.
and Xxxx X. Xxxxxxxx, Esq.
(b) if to the Seller, to
First Financial Corp.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Xx., President
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
and Xxxxxxx X. Xxxxxxxx, Esq.
9.05 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to be the date set forth in the recitals to this Agreement.
9.06 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.07 Entire Agreement. This Agreement, the Confidentiality Agreement and
the other agreements entered into in connection with the transactions
contemplated by this Agreement (including the documents and the instruments
referred to herein) (a) constitutes the entire
57
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as otherwise expressly provided herein, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
9.08 Governing Law; Submission to Jurisdiction. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this agreement, or the transactions contemplated hereby shall be
governed by and construed in accordance with the laws of the State of Rhode
Island without regard to its rules of conflict of laws. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the sole and
exclusive jurisdiction of the courts of the State of Rhode Island and of the
United States of America located in the State of Rhode Island (the "Rhode Island
Courts") for any litigation among the parties hereto arising out of or relating
to this Agreement, or the negotiation, validity or performance of this Agreement
or the Merger, waives any objection to the laying of venue of any such
litigation in the Rhode Island Courts and agrees not to plead or claim in any
Rhode Island Court that such litigation brought therein has been brought in any
inconvenient forum or that there are indispensable parties to such litigation
that are not subject to the jurisdiction of the Rhode Island Courts. Each of the
parties hereto agrees, (a) to the extent such party is not otherwise subject to
service of process in the State of Rhode Island, to appoint and maintain an
agent in the State of Rhode Island as such party's agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the State of Rhode Island.
9.09 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any provisions contained in this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is found to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as to be unenforceable.
9.11 Publicity. Except as otherwise required by law, so long as this
Agreement is in effect, neither the Buyer nor the Seller shall, or shall permit
any of its Subsidiaries to, issue or cause the publication of any press release
or other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of the other party, which consent shall not be unreasonably
withheld.
58
9.12 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
9.13 Exhibits; Disclosure Schedules. All Exhibits referred to herein and
in the respective Disclosure Schedules are intended to be and hereby are
specifically made a part of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
59
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
WASHINGTON TRUST BANCORP, INC.
/s/ Xxxx X. Xxxxxx
-----------------------------------
By: Xxxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
Attest:
/s/ Xxxxx X. Xxxxxxx
------------------------------------
By: Xxxxx X. Xxxxxxx
Title: Executive Vice President, Treasurer
and Chief Executive Officer
FIRST FINANCIAL CORP.
/s/ Xxxxxxx X. Xxxxxxxx, Xx.
-----------------------------------
By: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Chairman, President and Chief
Executive Officer
Attest:
/s/ Xxxxxxx X. Xxxxx
------------------------------------
By: Xxxxxxx X. Xxxxx
Title: Secretary
S-1
Agreement and Plan of Merger
