EXHIBIT 2.1
AGREEMENT AND
PLAN OF REORGANIZATION
BY AND BETWEEN
WESTERN SIERRA BANCORP
AND
MID VALLEY BANK
DATED MAY 17, 2002
TABLE OF CONTENTS
AGREEMENT AND PLAN OF REORGANIZATION
PAGE
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ARTICLE I - THE MERGER AND RELATED TRANSACTIONS................................................. 2
1.1 Creation of New MVB Bank......................................................... 2
1.2 Merger........................................................................... 2
(a) Merger of New MVB and MVB................................................ 2
(b) Effect on New MVB Shares................................................. 2
(c) Effect on MVB Shares..................................................... 2
(d) Effect on WSB Shares..................................................... 3
(e) Alternative Method....................................................... 3
1.3 Dissenting Shares of MVB Stock................................................... 3
1.4 Fractional Shares................................................................ 4
1.5 Delivery of Certificates and Cash................................................ 4
(a) Transfer Agent........................................................... 4
(b) Exchange Procedures...................................................... 4
(c) Transfers................................................................ 5
(d) Termination of Exchange Fund............................................. 5
(e) Lost, Stolen or Destroyed MVB Stock Certificates......................... 5
1.6 MVB Stock Options................................................................ 5
1.7 Effect of the Merger............................................................. 5
1.8 Name of Merged Bank.............................................................. 6
1.9 Charter, Articles and Bylaws of Merged Bank...................................... 6
1.10 Directors and Officers of Merged Bank............................................ 6
1.11 Articles of Incorporation, Bylaws and Directors of WSB........................... 6
1.12 Director's Agreement............................................................. 6
1.13 Affiliate's Letter............................................................... 7
1.14 Cooperation; Best Efforts........................................................ 7
1.15 Director and Officer Liability Insurance......................................... 7
ARTICLE II - THE CLOSING........................................................................ 8
2.1 Closing Date..................................................................... 8
2.2 Execution of Merger Agreement.................................................... 8
2.3 Documents to be Delivered........................................................ 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF MVB............................................. 9
3.1 Organization, Standing and Power................................................. 9
3.2 Capitalization................................................................... 9
3.3 Subsidiaries..................................................................... 9
3.4 Authority........................................................................ 9
3.5 Branches......................................................................... 10
3.6 Financial Statements............................................................. 10
3.7 Undisclosed Liabilities.......................................................... 10
3.8 Title to Assets.................................................................. 11
3.9 Real Estate...................................................................... 11
3.10 Environmental Liabilities........................................................ 12
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3.11 Loans and Investments............................................................ 12
3.12 Extensions of Credit............................................................. 12
3.13 Deposits......................................................................... 13
3.14 Litigation and Governmental Proceedings.......................................... 13
3.15 Contracts and Agreements......................................................... 13
3.16 Performance of Obligations....................................................... 14
3.17 Insurance........................................................................ 14
3.18 Taxes............................................................................ 15
3.19 Absence of Certain Changes....................................................... 15
3.20 Brokers' and Finders' Fees....................................................... 16
3.21 Employees........................................................................ 16
3.22 Regulatory Reports............................................................... 16
3.23 MVB Employee Benefit Plans and Employment and Labor Contracts.................... 17
3.24 Stock Option Plans............................................................... 19
3.25 Absence of Certain Practices..................................................... 19
3.26 No Violation of Law.............................................................. 19
3.27 Certain Interests................................................................ 19
3.28 Minute Books..................................................................... 20
3.29 Accounting Records; Data Processing.............................................. 20
3.30 Operating Losses................................................................. 20
3.31 CRA Standing..................................................................... 20
3.32 Accuracy and Currentness of Information Furnished................................ 20
3.33 Effective Date of Representations, Warranties, Covenants
and Agreements........................................................... 20
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF WSB.............................................. 21
4.1 Organization, Standing and Power................................................. 21
4.2 Capitalization................................................................... 21
4.3 Subsidiaries..................................................................... 21
4.4 Authority........................................................................ 21
4.5 Financial Statements............................................................. 22
4.6 Undisclosed Liabilities.......................................................... 22
4.7 Title to Assets.................................................................. 23
4.8 Environmental Liabilities........................................................ 23
4.9 Investments...................................................................... 23
4.10 Extensions of Credit............................................................. 23
4.11 Litigation and Governmental Proceedings.......................................... 24
4.12 Performance of Obligations....................................................... 24
4.13 Insurance........................................................................ 24
4.14 Absence of Certain Changes....................................................... 25
4.15 Brokers' and Finders' Fees....................................................... 25
4.16 Employees........................................................................ 25
4.17 Regulatory Reports............................................................... 25
4.18 WSB Employee Benefit Plans and Employment and Labor Contracts.................... 26
4.19 Absence of Certain Practices..................................................... 28
4.20 No Violation of Law.............................................................. 28
4.21 Certain Interests................................................................ 28
4.22 Minute Books..................................................................... 29
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4.23 Accounting Records; Data Processing.............................................. 29
4.24 Operating Losses................................................................. 29
4.25 CRA Standing..................................................................... 29
4.26 Accuracy and Currentness of Information Furnished................................ 29
4.27 Effective Date of Representations, Warranties, Covenants and Agreements.......... 29
ARTICLE V - COVENANTS OF MVB PRIOR TO CLOSING................................................... 30
5.1 Business Records and Information................................................. 30
5.2 Limitations Upon MVB Prior to Closing............................................ 30
5.3 Affirmative Conduct of MVB Prior to Closing...................................... 33
5.4 Indemnification.................................................................. 35
5.5 Execute Merger Agreement......................................................... 35
5.6 Discussion With Third Parties.................................................... 35
(a) Strategic Transactions................................................... 35
(b) Qualifying Proposal...................................................... 35
(c) Disclosure and Trading................................................... 36
5.7 Reserved......................................................................... 36
5.8 MVB Proxy Materials.............................................................. 36
5.9 Termination of MVB Stock Option Plan and MVB Stock Options....................... 37
5.10 Transaction Expenses............................................................. 37
ARTICLE VI - COVENANTS OF WSB PRIOR TO CLOSING.................................................. 37
6.1 Business Records and Information................................................. 37
6.2 Limitations Upon WSB Prior to Closing............................................ 38
6.3 Affirmative Conduct of WSB Prior to Closing...................................... 38
6.4 Indemnification.................................................................. 39
6.5 Execute Merger Agreement......................................................... 39
6.6 Discussion With Third Parties.................................................... 40
(a) Strategic Transactions................................................... 40
(b) Qualifying Proposal...................................................... 40
(c) WSB Acquisition Transaction.............................................. 41
(d) Disclosure and Trading................................................... 41
6.7 Preparation of WSB Registration Statement and the MVB
Proxy Materials.......................................................... 42
6.8 WSB Registration Statement....................................................... 42
6.9 Covenant Regarding Board of Directors of Merged Bank............................. 42
6.10 Covenant Regarding Board of Directors of WSB..................................... 42
6.11 Covenant Regarding Substitute Stock Options...................................... 43
ARTICLE VII - MEETING OF SHAREHOLDERS AND FEDERAL SECURITIES LAWS............................... 43
7.1 Shareholders' Meeting............................................................ 43
7.2 Federal Securities Laws.......................................................... 43
ARTICLE VIII - CONDITIONS PRECEDENT TO OBLIGATIONS OF MVB....................................... 44
8.1 Continued Accuracy of Representations and Warranties............................. 44
8.2 Performance of Obligations....................................................... 44
8.3 Absence of Material Changes...................................................... 44
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8.4 Officers' Certificate............................................................ 44
8.5 Fairness Opinion................................................................. 44
8.6 Appointment of WSB Directors..................................................... 45
8.7 Appointment of New MVB Directors and Officers.................................... 45
8.8 Closing Documents................................................................ 45
ARTICLE IX - CONDITIONS PRECEDENT TO OBLIGATIONS OF WSB......................................... 45
9.1 Continued Accuracy of Representations and Warranties............................. 45
9.2 Performance of Obligations....................................................... 45
9.3 Absence of Material Changes...................................................... 45
9.4 Affiliate's Letters.............................................................. 46
9.5 Officers' Certificate............................................................ 46
9.6 Director's Agreements............................................................ 46
9.7 Closing Documents................................................................ 46
ARTICLE X - CONDITIONS PRECEDENT TO THE MERGER.................................................. 46
10.1 Permits and Approvals............................................................ 46
10.2 Tax Ruling or Opinion............................................................ 47
10.3 Absence of Litigation............................................................ 48
10.4 Shareholder Approvals............................................................ 48
(a) Approval of Merger....................................................... 48
(b) Other Actions............................................................ 48
ARTICLE XI - TERMINATION........................................................................ 48
11.1 Termination of This Agreement.................................................... 48
11.2 Immaterial Breach................................................................ 50
11.3 Effect of Termination............................................................ 50
11.4 Termination Fee and Liquidated Damages........................................... 50
(a) Termination Fee.......................................................... 50
(b) Liquidated Damages....................................................... 50
(c) Cancellation Fee......................................................... 50
(d) Exclusive Remedy......................................................... 51
ARTICLE XII - GENERAL PROVISIONS................................................................ 51
12.1 Expenses......................................................................... 51
12.2 Notices.......................................................................... 51
12.3 Successors and Assigns........................................................... 52
12.4 Third Party Beneficiaries........................................................ 52
12.5 Counterparts..................................................................... 52
12.6 Governing Law.................................................................... 52
12.7 Captions......................................................................... 52
12.8 Exhibits and Schedules........................................................... 53
12.9 Representations and Warranties................................................... 53
12.10 Waiver and Modification.......................................................... 53
12.11 Attorneys' Fees.................................................................. 53
12.12 Knowledge........................................................................ 53
12.13 Entire Agreement................................................................. 53
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12.14 Consents......................................................................... 53
12.15 Severability..................................................................... 53
12.16 Press Release.................................................................... 53
12.17 Arbitration...................................................................... 54
LIST OF EXHIBITS
EXHIBITS
--------
Merger Agreement......................................................................... Exhibit A
Director's Agreement .................................................................... Exhibit B
Affiliate's Letter....................................................................... Exhibit C
Closing Schedule......................................................................... Exhibit D
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of May 17, 2002, by and between Western Sierra Bancorp, a
California corporation ("WSB"),4080 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxxxx Xxxx,
Xxxxxxxxxx 00000, and Mid Valley Bank, a California banking corporation ("MVB"),
000 Xxxx Xxxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxxxx 00000, pursuant to which MVB
will become a separate, wholly-owned subsidiary of WSB, with reference to the
following:
R E C I T A L S
WHEREAS, MVB is a California banking corporation and a member of the
Federal Reserve System with its principal office in the City of Red Bluff,
State of California, and WSB is a California corporation with its
principal office in the City of Cameron Park, State of California;
WHEREAS, Lake Community Bank ("LCB") is a California banking
corporation with its principal office in the City of Lakeport, State of
California, Western Sierra National Bank ("WSNB") is a national banking
association with its principal office in the City of Cameron Park, State
of California, and Central California Bank ("CCB") is a California banking
corporation with its principal office in the City of Sonora, State of
California, and are wholly-owned subsidiaries of WSB;
WHEREAS, MVB and WSB desire to enter into this Agreement which
contemplates the acquisition of MVB by WSB, pursuant to which MVB will
become a separate, wholly-owned subsidiary of WSB;
WHEREAS, this Agreement provides for the completion of the
acquisition of MVB by WSB through the merger (the "Merger") of MVB with a
newly formed California banking corporation which shall be a wholly-owned
subsidiary of WSB ("New MVB Bank") under the applicable laws of the State
of California and in accordance with the separate agreement of merger (the
"Merger Agreement") to be entered into by and between New MVB Bank and MVB
substantially in the form of Exhibit "A" hereto;
WHEREAS, to consummate the Merger the parties hereto will have to
take various steps and actions in furtherance of the transaction
contemplated by this Agreement (collectively, with the Merger, the
"Transactions"); and
WHEREAS, the Boards of Directors of WSB and MVB have determined that
this Agreement and the Transactions are in the best interests of their
respective shareholders and have approved this Agreement and authorized
its execution;
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NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained herein, and intending
to be legally bound, the parties hereto agree as follows:
A G R E E M E N T
ARTICLE I
THE MERGER AND RELATED TRANSACTIONS
1.1 CREATION OF NEW MVB BANK. As soon as practicable, WSB shall: (i)
organize New MVB Bank ("New MVB") pursuant to Section 350 et seq. of the
California Financial Code as a new California banking corporation, wholly-owned
by WSB; (ii) cause New MVB to file an application for deposit insurance with the
Federal Deposit Insurance Corporation (the "FDIC"); and (iii) cause New MVB to
file an application with the Federal Reserve Bank of San Francisco (the "Reserve
Bank" or "FRB") for membership in the Federal Reserve System and for stock in
the Reserve Bank. The Articles of Incorporation and Bylaws of New MVB shall be
identical to MVB's Articles of Incorporation and Bylaws except for the corporate
name.
1.2 MERGER. The Merger shall become effective (the "Effective Time of the
Merger") on the date that the Merger Agreement is filed with the Commissioner of
the California Department of Financial Institutions (the "Commissioner"), after
having been filed with the California Secretary of State and previously approved
by the Commissioner as provided in Section 2.2 hereof. At the Effective Time of
the Merger, and pursuant to the terms of this Agreement and the Merger
Agreement, the following transactions will be deemed to have occurred
simultaneously:
(a) MERGER OF NEW MVB AND MVB. New MVB and MVB will merge, and the
separate corporate existence of MVB shall cease. New MVB as the
corporation surviving the Merger is sometimes referred to herein as the
"Merged Bank."
(b) EFFECT ON NEW MVB SHARES. Each share of the common stock of New
MVB (the "New MVB Stock") issued and outstanding immediately prior to the
Effective Time of the Merger, on and after the Effective Time of the
Merger, pursuant to the Merger Agreement and without any further action on
the part of WSB or New MVB, shall be converted into one share of common
stock of the Merged Bank (the "Merged Bank Stock"). Each outstanding stock
certificate which prior to the Effective Time of the Merger represented
shares of New MVB Stock automatically and for all purposes shall be deemed
to represent the number of shares of Merged Bank Stock into which the
shares of New MVB Stock represented by such certificate have been
converted as provided in this Section 1.2(b); provided, however, at the
request of WSB, the Merged Bank shall exchange WSB's certificate or
certificates formerly representing shares of New MVB Stock for a
certificate or certificates of Merged Bank Stock.
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(c) EFFECT ON MVB SHARES. Each share of the common stock, no par
value, of MVB (the "MVB Stock") issued and outstanding immediately prior
to the Effective Time of the Merger, except for Dissenting MVB Shares (as
defined in Section 1.3 hereof), on and after the Effective Time of the
Merger, pursuant to the Merger Agreement and without any further action on
the part of MVB or the holders of MVB Stock, automatically shall be
canceled and cease to be an issued and outstanding share of MVB Stock, and
shall be converted into the right to elect to receive newly issued shares
of common stock, no par value, of WSB ("WSB Stock"), valued at the WSB
Stock Market Value (as that term is defined below), cash, or a combination
thereof equal to the MVB Per Share Consideration. For purposes of this
Agreement, "MVB Per Share Consideration" shall be determined by dividing:
(x) the sum of (a) cash in the amount of $8,400,000 plus (b) 615,000
multiplied by the WSB Stock Market Value; by (y) the total number of
shares of MVB Stock issued and outstanding immediately prior to the
Effective Time of the Merger. The total aggregate number of shares of WSB
Stock payable in the Merger shall be 615,000 shares; provided, however,
that: (i) in the event that the WSB Average Price (as that term is defined
below) exceeds $23.41, the total number of shares of WSB Stock payable in
the Merger shall be equal to $14,397,150 divided by the WSB Average Price;
and (ii) in the event that the WSB Average Price is less than $17.00 the
total number of shares of WSB Stock payable in the Merger shall be equal
to $10,455,000 divided by the WSB Average Price. For purposes of this
Agreement, "WSB Stock Market Value" shall be determined by taking the
lesser of: (i) the average of the closing prices of the WSB Stock on the
Nasdaq National Market for the 20 trading days immediately preceding the
fifth business day prior to the Closing Date (the "WSB Average Price"); or
(ii) $23.41; but in any case, the WSB Stock Market Value shall not be less
than $17.00.
Holders of MVB Stock shall be entitled to elect whether to receive WSB
Stock, cash, or any combination thereof in accordance with the procedures
established in Section 1.5(b) hereof. Certificates formerly evidencing
shares of MVB Stock shall be surrendered for payment and exchange to the
Transfer Agent (as defined in Section 1.5 hereof) in accordance with
Section 1.5.
(d) EFFECT ON WSB SHARES. Each share of WSB Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall,
on and after the Effective Time of the Merger, remain issued and
outstanding and shall automatically and for all purposes be deemed to
represent one share of common stock of WSB.
(e) ALTERNATIVE METHOD. Anything herein to the contrary
notwithstanding, upon written notice to MVB, WSB may at any time prior to
the Effective Time of the Merger change the method of effecting the
acquisition of MVB (including, without limitation, the provisions of this
Article I) if and to the extent it deems such change to be necessary,
appropriate or desirable; provided, however, that no such change shall:
(i) alter or change the amount or kind of consideration to be issued to
holders of MVB Stock as provided for in this Agreement; (ii) cause the
transaction to be treated as anything other than a tax-free reorganization
to WSB, MVB and, except to the extent cash is received, the holders of MVB
Stock; or (iii) materially impede or delay the receipt of any approvals
referred to in Section 10.1 or the consummation of the Transactions
contemplated by this Agreement.
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1.3 DISSENTING SHARES OF MVB STOCK. Subject to the limitations of
California Corporations Code Section 1300(b), any shareholder of MVB who shall
have lawfully dissented from the Transactions in accordance with the applicable
statutes of the State of California, and who shall have timely demanded payment
of the value of such shareholder's MVB Stock and submitted such shares for
endorsement as provided in California Corporations Code Section 1300(b)
("Dissenting MVB Shares"), shall thereafter have only such rights as are
provided a dissenting shareholder in accordance with said statutes and shall
have no other rights under this Agreement or as shareholders of WSB.
1.4 FRACTIONAL SHARES. No fractional shares of WSB Stock shall be issued
in the Merger. In lieu thereof, each holder of MVB Stock who would otherwise be
entitled to receive fractional shares of WSB Stock shall receive an amount in
cash equal to the WSB Average Price multiplied by the fraction of a share of WSB
Stock to which such holder would otherwise be entitled.
1.5 DELIVERY OF CERTIFICATES AND CASH.
(a) TRANSFER AGENT. Prior to the Effective Time of the Merger, WSB
shall deliver or cause to be delivered to Computershare Investor Services,
LLC, its transfer agent (the "Transfer Agent"): (i) $8,400,000; and (ii) a
sufficient number of certificates representing the shares of WSB Stock to
be issued to MVB's shareholders. Delivery to the holders of MVB Stock of
the certificates for WSB Stock and cash to which they are entitled will
subsequently be made by the Transfer Agent against delivery of share
certificates formerly evidencing MVB Stock (duly executed and in proper
form for transfer) to the Transfer Agent in accordance with this Section
1.5 and the terms and conditions of an agreement to be entered into by and
between WSB and the Transfer Agent (the "Transfer Agent Agreement"). A
copy of the Transfer Agent Agreement will be provided to MVB and its
counsel for approval prior to consummation of the Merger, which approval
shall not be unreasonably withheld.
(b) EXCHANGE PROCEDURES. As soon as practicable, but not more than
10 days after the Effective Time of the Merger, the Transfer Agent will
send a notice and transmittal form to each holder of a certificate
previously representing shares of MVB Stock advising such holders of the
applicable terms of the conversion effected by the Merger and the
procedure for surrendering to the Transfer Agent such certificate for
payment and conversion. Each holder of such certificates, upon surrender
of the same to the Transfer Agent in accordance with such transmittal
form, shall be entitled to elect to receive the consideration provided for
in Section 1.2(c) hereof. Those holders of such certificates who surrender
their certificates to the Transfer Agent in accordance with such
transmittal form within 30 days after the date the transmittal forms are
first mailed to such holders shall have the opportunity to elect payment
of the MVB Per Share Consideration in the form of WSB Stock, cash, or any
combination thereof for each share of MVB Stock represented by such
surrendered certificates. In the event that such holders of MVB Stock have
requested more shares of WSB Stock or more cash than available pursuant to
Section 1.2(c) hereof, the Transfer Agent shall adjust all such requests,
on a pro rata basis, such that the aggregate number of shares of WSB Stock
issued shall not exceed the number of shares available and the aggregate
amount of cash issued shall not exceed the amount of cash available
pursuant to Section 1.2(c) hereof. Those holders of such certificates who
surrender their certificates to the Transfer Agent
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in accordance with such transmittal form after 30 days from the Effective
Time of the Merger shall not be entitled to elect the form of payment of
the MVB Per Share Consideration but instead shall be paid WSB Stock, cash,
or any combination thereof, on a pro rata basis out of the then remaining
shares of WSB Stock and cash available pursuant to Section 1.2(c) hereof.
If the consideration for shares of MVB Stock provided for in Section
1.2(c) is to be delivered to any person other than the registered holder
of said shares surrendered for exchange, the amount of any stock transfer
tax or similar taxes (whether imposed on the registered holder or such
person) payable on account of the transfer to such person shall be paid to
the Transfer Agent by such person, or the Transfer Agent may refuse to
make such exchange unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted. The certificates so surrendered
shall forthwith be canceled. No interest will be paid or accrued on any
amount payable upon due surrender of the certificates.
(c) TRANSFERS. After the Effective Time of the Merger, there shall
be no transfers on the stock transfer books of MVB of the MVB Stock that
was outstanding immediately prior to the Effective Time of the Merger.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the cash delivered
to the Transfer Agent (including the proceeds of any investments thereof)
that remains unclaimed by the holders of MVB Stock for six months after
the Effective Time of the Merger shall be returned to WSB. Any holders of
MVB Stock who have not theretofore complied with this Section 1.5 shall
thereafter look only to WSB for exchange of their MVB Stock upon due
surrender of their certificates (or affidavits of loss in lieu thereof),
without any interest thereon. Notwithstanding the foregoing, none of WSB,
MVB, the Transfer Agent or any other person shall be liable to any former
holder of MVB Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(e) LOST, STOLEN OR DESTROYED MVB STOCK CERTIFICATES. 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 destroyed and, if required by WSB, the posting by such
person of a bond in customary amount as indemnity against any claim that
may be made against it with respect to such certificate, the Transfer
Agent shall exchange such lost, stolen or destroyed certificate, upon due
surrender thereof, in accordance with the provisions of this Section 1.5.
1.6 MVB STOCK OPTIONS. WSB shall issue substitute stock options, effective
at the Effective Time of the Merger, to each optionee then holding an
outstanding stock option pursuant to MVB's 1990 Stock Option Plan (the "1990
Plan"). The substitute stock options shall be issued in accordance with the
following formula. First, the substitute stock option exercise price for each
separate stock option shall be determined by multiplying the WSB Average Price
by the ratio of the original option price divided by the MVB Per Share
Consideration, rounded down to the nearest whole cent. Second, the number of
shares of WSB Stock covered by the substitute stock option shall be equal to the
aggregate exercise price for the original stock option (the total number of
shares of MVB Stock covered by the option, multiplied by the original option
exercise price) divided by the substitute stock option exercise price, rounded
up to the
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nearest whole share of WSB Stock. Third, the substitute stock option shall be
issued for the same remaining term and the same vesting schedule, including
those increments already vested, with the number of shares adjusted in
accordance with the foregoing.
1.7 EFFECT OF THE MERGER. By virtue of the Merger and at the Effective
Time of the Merger, all of the rights, privileges, powers and franchises and all
property and assets of every kind and description of New MVB and MVB shall be
vested in and be held and enjoyed by the Merged Bank, without further act or
deed, and all the estates and interests of every kind of New MVB and MVB,
including all debts due to either of them, shall be as effectively the property
of the Merged Bank as they were the property of New MVB and MVB, and the title
to any real estate vested by deed or otherwise in either New MVB or MVB shall
not revert or be in any way impaired by reason of the Merger; and all rights of
creditors and liens upon any property of New MVB and MVB shall be preserved
unimpaired, and all debts, liabilities and duties of New MVB and MVB shall be
debts, liabilities and duties of the Merged Bank and may be enforced against it
to the same extent as if such debts, liabilities and duties had been incurred or
contracted by it, and none of such debts, liabilities or duties shall be
expanded, increased, broadened or enlarged by reason of the Merger.
1.8 NAME OF MERGED BANK. Prior to the Effective Time of the Merger, New
MVB shall file a Certificate of Amendment of its Articles of Incorporation
changing its corporate name to "Mid Valley Bank" with the Commissioner and
thereafter shall file the Certificate of Amendment with the California Secretary
of State as of the Closing Date. Immediately thereafter, a certified copy of the
Certificate of Amendment shall be submitted to the Commissioner.
1.9 CHARTER, ARTICLES AND BYLAWS OF MERGED BANK. The Charter, Insurance of
Accounts, Federal Reserve System Membership, Articles of Incorporation and
Bylaws of New MVB as in effect immediately prior to the Effective Time of the
Merger shall be the Charter, Insurance of Accounts, Federal Reserve System
Membership, Articles of Incorporation and Bylaws of the Merged Bank, except as
provided in Section 1.8 hereof.
1.10 DIRECTORS AND OFFICERS OF MERGED BANK. The directors of New MVB
immediately prior to the Effective Time of the Merger shall be the directors of
the Merged Bank until their successors have been chosen and qualified in
accordance with the Articles of Incorporation and the Bylaws of the Merged Bank;
provided, however, that prior to the Effective Time of the Merger New MVB shall:
(i) appoint eight directors from MVB's existing Board of Directors to the Board
of Directors of New MVB effective as of the Closing Date; and (ii) cause all
incumbent directors of New MVB, except for Xxxxxxx Xxxxxx and Xxxx X. Xxxx, to
resign from the Board of Directors of New MVB effective as of the Closing Date.
The officers of New MVB immediately prior to the Effective Time of the Merger
shall be the officers of the Merged Bank until their successors have been chosen
and qualified in accordance with the Articles of Incorporation and the Bylaws of
the Merged Bank; provided, however, that prior to the Effective Time of the
Merger New MVB shall: (i) cause all incumbent officers of New MVB to resign as
officers of New MVB effective as of the Closing Date; and (ii) appoint all
incumbent officers of MVB as officers of New MVB effective as of the Closing
Date.
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1.11 ARTICLES OF INCORPORATION, BYLAWS AND DIRECTORS OF WSB. At the
Closing, WSB's Articles of Incorporation and Bylaws as in effect immediately
prior to the Closing shall remain the Articles of Incorporation and Bylaws of
WSB. At the Effective Time of the Merger, the Board of Directors of WSB shall
appoint Xxxx Xxxxxxxxx to the Board of Directors of WSB.
1.12 DIRECTOR'S AGREEMENT. Concurrently with the execution of this
Agreement, MVB shall cause its directors to enter into an agreement in the form
of Exhibit "B" hereto, pursuant to which each director shall agree to vote or
cause to be voted all shares of his or her MVB Stock with respect to which such
director has voting power on the date hereof or hereafter acquired to approve
the Transactions contemplated hereby and all requisite matters related thereto.
Concurrently with the execution of this Agreement, MVB shall cause each of its
directors to enter into an Amendment No. 1 to the Director Fee Continuation
Agreement and an Amendment No. 1 to the Agreement for Consulting Services.
1.13 AFFILIATE'S LETTER. Concurrently with the execution of this
Agreement, MVB shall use its best efforts to cause each of its "affiliates" for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), to sign an Affiliates' Letter substantially in the form of
Exhibit "C" hereto. At the Closing, MVB shall use its best efforts to cause any
affiliates who had not previously signed an Affiliates' Letter to do so. Each
share of WSB Stock issued in respect of MVB Stock pursuant to the Merger to each
of MVB's affiliates shall bear the restrictive legend specified in Exhibit "C."
1.14 COOPERATION; BEST EFFORTS. Each of the parties, consistent with the
fiduciary duties of the directors of each party, will use its best efforts to
consummate the Transactions contemplated by this Agreement and cooperate in any
action necessary or advisable to facilitate such consummation including, without
limitation, making all filings required in order to obtain any necessary
consents or to comply with any law and providing any information required in
connection therewith.
1.15 DIRECTOR AND OFFICER LIABILITY INSURANCE. WSB, from and after the
Effective Time of the Merger, will directly or indirectly cause the persons who
served as directors or officers of MVB on or before the Effective Time of the
Merger to be covered by WSB's existing directors' and officers' liability
insurance policy (provided that WSB may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) or so-called tail coverage obtained in connection
with MVB's directors' and officers' liability insurance policies in effect as of
the Effective Time of the Merger; provided that WSB shall not be obligated to
make annual premium payments for such insurance to the extent such premiums
exceed 150% of the premiums paid as of the date hereof by MVB for such
insurance. Subject to the preceding sentence, such insurance coverage shall
commence on the Effective Time of the Merger and will be provided for a period
of no less than three (3) years after the Effective Time of the Merger. From the
date hereof through the Effective Time of the Merger and subject to the
foregoing, MVB shall use its best efforts to arrange for tail coverage related
to its then current policies of directors' and officers' liability insurance
and, following the Effective Time of the Merger, WSB shall exercise those rights
which it may have in order to commence such coverage. In connection with any
active, pending claim which may arise after the date hereof through the
Effective Time of the Merger under an existing MVB directors' and officers'
liability insurance policy, WSB will take no action that would have the effect
of waiving any such claim and will not omit to take any action that is necessary
to preserve such claim.
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In the event WSB or any of its successors or assigns (A) consolidates with
or merges into any third person, group or entity and shall not be the continuing
or surviving corporation or entity of such consolidation or merger, or (B)
transfers or conveys all or substantially all of its properties and assets to
any third person, group or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
WSB assume the obligations set forth in this Section 1.15. The provisions of
this Section 1.15 are intended to be for the benefit of, and shall be
enforceable by, each of MVB's directors and officers as of the Effective Time of
the Merger and his or her heirs and representatives.
ARTICLE II
THE CLOSING
2.1 CLOSING DATE. The consummation of the Transactions contemplated by
this Agreement (the "Closing"), unless another date or place is agreed in
writing by the parties hereto, shall take place at the main office of WSB in
Cameron Park at a time and on a date mutually agreeable to MVB and WSB within
fifteen days after the last of the following shall have occurred: (i) the
receipt of all approvals and consents specified in Article X hereof; (ii) the
expiration of the applicable waiting period under the Bank Merger Act and the
Bank Holding Company Act of 1956, as amended (the "BHCA"); and (iii) all
conditions specified in Articles VIII, IX and X hereof shall have been satisfied
(the "Closing Date"); provided, however, that if the parties cannot agree on the
Closing Date, the Closing Date shall be the last business day in such fifteen
day period.
2.2 EXECUTION OF MERGER AGREEMENT. Prior to the Closing Date and as soon
as practicable after the organization of New MVB, the approval of this Agreement
and the Transactions contemplated hereby by the shareholder of New MVB and the
shareholders of MVB, and the satisfaction of the conditions precedent to the
consummation of the Merger, the Merger Agreement in the form attached as Exhibit
"A" (as amended, if necessary, to conform to the requirements of law or a
governmental authority or agency having authority over the Merger, which
requirements are not materially in contravention of any of the substantive terms
hereof) shall be executed by MVB and New MVB. As soon as possible thereafter,
the Merger Agreement, along with the requisite Officers' Certificates, shall be
submitted to the Commissioner for approval and endorsement pursuant to Section
4887(a) of the California Financial Code and, thereafter, shall be filed with
the California Secretary of State. Prior to the close of business on the Closing
Date, an executed copy of the Merger Agreement with the approval of the
Commissioner endorsed therein and certified by the California Secretary of State
shall be filed with the Commissioner as provided in Section 4887(b) of the
California Financial Code effective as of the close of business on the Closing
Date. The Merger shall become effective in accordance with the provisions of
Section 1.2 of this Agreement.
2.3 DOCUMENTS TO BE DELIVERED. The parties shall deliver, or cause to be
delivered, the documents called for by the Closing Schedule attached hereto as
Exhibit "D," along with such other documents or certificates as may be
necessary, in the reasonable opinion of counsel for each of the parties, to
effectuate the Transactions called for hereunder. In the event that counsel for
any of the parties believes that documents necessary for the Closing have not
been set forth on the Closing Schedule, counsel shall advise the other party in
writing, no less than five business days prior to the Closing Date, setting
forth a
8
brief description of the additional documents desired and such documents shall
also be provided at the Closing. If, at any time after the Effective Time of the
Merger, the Merged Bank or WSB or their successors or assigns shall determine
that any further conveyance, assignment or other documents or any further action
is necessary or desirable to further effectuate the Transactions set forth
herein or contemplated hereby, the officers and directors of the parties hereto
shall execute and deliver, or cause to be executed and delivered, all such
documents as may be reasonably required to effectuate such Transactions, whether
at the Closing or thereafter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MVB
MVB hereby represents and warrants to WSB as follows:
3.1 ORGANIZATION, STANDING AND POWER. MVB is a California state banking
corporation, duly organized, validly existing and in good standing under the
laws of the State of California, and is authorized by the Commissioner to
conduct a commercial banking business. MVB is a member bank of the Federal
Reserve System. MVB has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently conducted. Neither the scope of the business of MVB nor the location
of any of its properties requires that it be licensed or qualified to do
business in any jurisdiction other than the State of California. Attached hereto
as Schedule 3.1 are true and correct copies of its Articles of Incorporation and
Bylaws, as amended to the date hereof.
3.2 CAPITALIZATION. The authorized capitalization of MVB consists of
2,000,000 shares of common stock, no par value, of which 1,188,524 shares are
issued and outstanding as of the date of this Agreement. As of the date of this
Agreement, the MVB Stock was held by approximately 440 shareholders of record
and the MVB Stock was not registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). All of the outstanding shares of the MVB Stock
are validly issued, fully paid and nonassessable. Except as contemplated herein
and except for outstanding stock options covering 36,786 shares of MVB Stock
granted under the 1990 Plan and no shares of MVB Stock granted under the MVB
2001 Stock Option Plan (the "2001 Plan"), there are presently, and on the
Closing Date there will be, no outstanding options, warrants or other rights in
or with respect to the unissued shares of MVB Stock or any securities
convertible into such MVB Stock, and MVB is not obligated to issue any
additional shares of its MVB Stock or any other security convertible into its
MVB Stock.
3.3 SUBSIDIARIES. Except as set forth on Schedule 3.3, MVB does not own,
directly or indirectly (except as pledged pursuant to loans which are not in
default or for shares held by MVB as the result of any foreclosure by MVB on any
loan, which shares do not exceed 4.9% of the outstanding common stock of any
such company), any outstanding stock or other voting interests in any
corporation, partnership, joint venture or other entity. Each such entity is
duly organized, validly existing and in good standing under the laws of the
jurisdiction.
3.4 AUTHORITY. The execution and delivery by MVB of this Agreement and the
Merger Agreement and the consummation of the Transactions contemplated hereby
and thereby, have been duly
9
and validly authorized by all necessary corporate action on the part of MVB. The
Agreement is, and the Merger Agreement will be, binding and enforceable
obligations of MVB, except as enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally or federally insured banks, or by general equitable
principles, or by 12 U.S.C. 1818(b)(6)(D). Neither the execution and delivery by
MVB of this Agreement or the Merger Agreement, nor the consummation of the
Transactions contemplated herein or therein, nor compliance by MVB with any of
the provisions hereof or thereof will: (i) conflict with, or result in a breach
of, any provision of its Articles of Incorporation or Bylaws; or (ii) except as
set forth in Schedule 3.4, constitute a material breach of, or result in a
material default, or give rise to any rights of termination, cancellation or
acceleration, or give rise to any right by any other person or entity to acquire
any security interest in any assets under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which MVB or any of its
properties or assets are subject. No consent or approval of, notice to or filing
with any governmental authority having jurisdiction over any aspect of the
business or assets of MVB, and no consent or approval of or notice to any other
person or entity, is required in connection with the execution and delivery by
MVB of this Agreement or the Merger Agreement or the consummation by MVB of the
Transactions contemplated hereby or thereby, except: (i) approval of this
Agreement and the Merger Agreement by the shareholders of MVB; (b) such
approvals of this Agreement, the Merger Agreement, and the Transactions
contemplated herein as may be required by the Federal Reserve Board (the "FRB")
pursuant to the Bank Merger Act and the BHCA, and the Commissioner pursuant to
Section 700 et seq. and Section 4880 et seq. of the California Financial Code;
and (iii) as set forth on Schedule 3.4.
3.5 BRANCHES. Except for its main office located at 000 Xxxx Xxxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000, its branch offices located at 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000, 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxx 00000, 0000
Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000, and 0000 Xxxxxxxx, Xxxxx 0,
Xxxxx, Xxxxxxxxxx 00000, and two administrative offices located at 000 Xxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 and 000 Xxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, MVB does not operate or conduct business out of any other location and
has not applied for or received permission to open any other branch or to
operate out of any other location.
3.6 FINANCIAL STATEMENTS. Except as disclosed in the notes relating
thereto, or otherwise on Schedule 3.6, the audited financial statements of MVB
as of and for the periods ended December 31, 2000 and 2001, as well as the
unaudited financial statements of MVB as of and for the periods ended March 31,
2001 and 2002, attached hereto as Schedule 3.6 (all of these statements are
collectively referred to herein as the "MVB Financial Statements"): (i) fairly
and accurately present the financial condition of MVB as of the dates thereof
and the results of operations and its cash flows for the periods therein set
forth; (ii) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved; and (iii) are
based on the books and records of MVB. MVB's reserves for possible loan losses
as disclosed in the MVB Financial Statements dated March 31, 2002 were adequate
as of such date to absorb reasonably anticipated losses in the loan portfolio of
MVB in view of the size and character of such portfolio, then current economic
conditions, and other pertinent factors; and no facts have subsequently come to
the attention of management of MVB which would cause management to restate as of
such date in any material way the level of such reserves for possible loan
losses. The MVB Financial Statements have properly accrued for all known and
reasonably anticipated liabilities and contingencies,
10
including any liabilities providing for severance and other compensation
resulting from a change in control pursuant to employment agreements. With
respect to other real estate owned by MVB, the value attributed thereto for
purposes of preparing the MVB Financial Statements does not exceed the aggregate
fair market value of such real estate as of the date of acquisition of such real
estate or as subsequently reduced, all in accordance with generally accepted
accounting principles. With regard to investments owned by MVB, the value
attributed thereto for purposes of preparing the MVB Financial Statements is in
accordance with generally accepted accounting principles.
3.7 UNDISCLOSED LIABILITIES. Except for the disclosures contained in
Schedule 3.7, MVB does not have any liabilities or obligations, either accrued
or contingent, which are material to MVB and which have not been reflected or
disclosed in the MVB Financial Statements. MVB does not know of any basis for
the assertion against it of any liability, obligation or claim (including,
without limitation, that of any regulatory authority) that is reasonably likely
to result in or cause any material adverse change in the business or financial
condition of MVB, which is not fairly reflected in the MVB Financial Statements
or otherwise disclosed in Schedule 3.7 hereto.
3.8 TITLE TO ASSETS. Except for liens for current taxes not yet due and
payable and except as disclosed in the MVB Financial Statements or in Schedule
3.8 hereto, MVB has good, valid and marketable title to all material properties
and assets, other than real property and securities pledged to secure public
deposits or retail repurchase agreements, owned or stated to be owned by MVB and
reflected on the MVB Financial Statements, or acquired after December 31, 2001
(except properties sold or otherwise transferred in the ordinary course of
business since December 31, 2001), free and clear of all mortgages, liens,
encumbrances, pledges or charges of any kind or nature.
3.9 REAL ESTATE. Except for the information disclosed in Schedule 3.9
hereto, there is no other real property, including leaseholds (copies of all
leases to which MVB is a party are attached to Schedule 3.9 hereto) and "other
real estate owned," owned by MVB. Schedule 3.9 contains, among other things, an
accurate summary of all material commitments which MVB has to improve real
estate owned or leased by it. MVB has good and marketable title to all the real
property, and valid leasehold interests in the leaseholds, described in Schedule
3.9, free and clear of all mortgages, covenants, conditions, restrictions,
easements, liens, security interests, charges, claims and encumbrances, except
for: (i) rights of lessors, co-lessees or sublessees in such matters which are
reflected in the leases; (ii) current taxes not yet due and payable; (iii) as
described in any title policies (included in Schedule 3.9); (iv) such
imperfections of title and encumbrances, if any, as do not materially detract
from the value of or materially interfere with the present use of such property;
or (v) except as described in Schedule 3.9 hereto. Copies of title policies for
properties described in Schedule 3.9 as owned by MVB have been delivered or made
available to WSB. The activities of MVB with respect to its real property owned
and their leaseholds for use in connection with their operations are in all
material respects permitted and authorized by applicable zoning laws, ordinances
and regulations and all laws and regulations of any governmental department or
agency relative to environmental matters affecting such property, except as
otherwise disclosed in Schedule 3.9. MVB enjoys quiet and peaceful possession of
all such property. All tangible properties of MVB that are material to the
business, financial condition, results of operations or prospects of MVB are in
a good state of maintenance and repair, except for ordinary wear and tear, and
are adequate for the conduct of the business of MVB as presently conducted.
Except as set forth in Schedule 3.9: (i) the execution of this
11
Agreement and the Merger Agreement, the performance of the obligations of MVB
hereunder and thereunder and the consummation of the Transactions contemplated
hereby and thereby do not conflict in any material way with and will not result
in a material breach or material default under any lease, agreement or contract
described in Schedule 3.9, or give any other party thereto a right to terminate
or modify any term thereof; (ii) each lease and agreement under which MVB is a
lessee or holds or operates any property (real, personal or mixed) owned by any
third party is in full force and effect and is a valid and legally binding
obligation of MVB, subject to applicable bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights generally and equitable principles of
general applicability; (iii) MVB and each other party to any such lease or
agreement have performed in all material respects all the obligations required
to be performed by them to date under such lease or agreement and are not in
default in any material respect under any such lease or agreement and there is
no pending or, to the best of MVB's knowledge, threatened proceeding that would
interfere with the quiet enjoyment of such leasehold or such material property
by MVB; (iv) to the best of MVB's knowledge, no underground storage tanks or
surface impoundments are on or in the real property; and (v) to the best of
MVB's knowledge, no asbestos is contained or located on any of the real
property.
3.10 ENVIRONMENTAL LIABILITIES. To the best of MVB's knowledge, except as
set forth on Schedule 3.10, no properties of MVB or properties in which MVB
holds a collateral or contingent interest or purchase option, are the subject of
any pending or threatened investigation, claim or proceeding relating to the
use, storage or disposal on such property of or contamination of such property
by any toxic or hazardous waste material or substance. To the best of MVB's
knowledge, MVB does not own, possess or have a collateral or contingent interest
or purchase option in any properties or other assets which contain or have
located within or thereon any hazardous or toxic waste material or its use
thereon conforms in all material respects with all federal, state and local
laws, rules, regulations or other provisions regulating the discharge of
materials into the environment. As to any real property now owned or leased by
MVB and held as security for a loan or in which MVB otherwise has an interest,
to the best of MVB's knowledge, MVB has not controlled, directed or participated
in the operation or management of any such real property or any facilities or
enterprise conducted thereon, such that it has become an owner or operator of
such real property under applicable environmental laws.
3.11 INVESTMENTS. Except as disclosed in Schedule 3.11 hereto: (i) all
investments of MVB are legal, valid and permitted under federal and state laws
and regulations applicable at the time of their origination or assumption.
Except for investments that have matured or been sold, Schedule 3.11 sets forth
all of the investments reflected in the balance sheets of MVB dated December 31,
2001 and March 31, 2002. Except as set forth in Schedule 3.11, none of such
investments is subject to any restriction, contractual, statutory or other, that
would materially impair the ability of MVB to dispose freely of any such
investment at any time, except restrictions on the public distribution or
transfer of such investments under the Securities Act or state securities laws.
Except as set forth in Schedule 3.11, as of December 31, 2001 and March 31,
2002, MVB had no holdings of positions in forwards, futures, options, swaps,
interest rate caps, collars and floors, or any other similar instruments
("Derivative Instruments"). Except as set forth in Schedule 3.11, since January
1, 2001, MVB has not engaged in any transactions in or involving Derivative
Instruments except as agent on the order and for the account of others. Schedule
3.11 sets forth for each Derivative Instrument held by MVB since January 1,
2001, the present book value and market value, if
12
applicable, the open exposure of MVB, if any, and whether any counterparties to
any contract or agreement with respect to any such instrument is in default with
respect to such contract or agreement.
3.12 EXTENSIONS OF CREDIT. Except as disclosed in Schedule 3.12 hereto:
(i) all the loans of MVB are legal, valid and permitted under federal and state
laws and regulations applicable at the time of their origination or assumption;
and (ii) MVB is not subject to any liability or claim for violation of any state
or federal law or regulation concerning extensions of credit, including, without
limitation, those relating to discriminatory lending practices and
truth-in-lending. Schedule 3.12 sets forth a description of: (a) by type and
classification, if any, all loans, leases or other extensions of credit by MVB
on nonaccrual; (b) by type and classification, if any, all loans, leases, or
other extensions of credit or other real estate owned that have been classified
by the Commissioner, FRB, external or internal auditors, directors, management
or other examiners as "Watch List," "Specially Mentioned," "Substandard,"
"Doubtful," "Loss" or any comparable classification; and (c) all loans, leases
or other extensions of credit of MVB as to which any payment of principal,
interest or other amount is 90 days or more past due. With respect to loan
delinquencies, Schedule 3.12 contains the monthly loan delinquency report dated
on or about March 31, 2002, in the form customarily prepared for and delivered
to the Board of Directors of MVB.
3.13 DEPOSITS. Except as set forth on Schedule 3.13, there are no deposit
accounts outstanding at MVB with an outstanding balance as of March 31, 2002, in
excess of $100,000.
3.14 LITIGATION AND GOVERNMENTAL PROCEEDINGS. Except as otherwise
expressly disclosed in Schedule 3.14, MVB: (i) is not engaged in, or, to the
best of MVB's knowledge, threatened with, any legal action or other proceeding
before any court or administrative agency which might be material to its
business or in which the amount claimed against it is $25,000 or more; (ii) is
not in material default of any of its duties or obligations under, or with
respect to, any judgment, order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or other
instrumentality having jurisdiction over MVB or its business; (iii) has not been
served with written notice of and is not, to the best knowledge of MVB, under
investigation with respect to, any material violation of any provision of
federal, state or local laws, rules, or regulations; and (iv) is not subject to
any order, letter agreement or written direction of any governmental agency with
respect to its financial or operating ratios, or with respect to any other
standards or tests imposed by state and federal laws and regulations, including,
without limitation, those relating to net worth, liquidity and the maintenance
of reserves, nor, to the best of MVB's knowledge, has any such order, letter
agreement or written direction been proposed to MVB. Schedule 3.14 contains a
list identifying any claims pending on behalf of MVB against the Small Business
Administration (the "SBA"), any other governmental agencies, or any third
parties for reimbursement for loan defaults, indicating the date of the claim,
the name of the borrower, and the amount of the claim.
3.15 CONTRACTS AND AGREEMENTS. Except as provided by this Agreement and
except as set forth in Schedule 3.15, MVB is not a party to any material
contract, agreement, commitment or offer which may become a binding obligation
if accepted by another person or entity, whether written or oral (collectively
referred to herein as an "Understanding") which individually, or with all other
similar Understandings relating to the same or similar subject matter, falls
within any of the following classifications:
13
(a) Any loan commitment, agreement, pledge, conditional sale
contract, security agreement, lease (excluding leases of real property
listed in Schedule 3.9), guarantee, subordination agreement or other
similar or related type of Understanding (but not including any deposit
agreements as to which MVB is the debtor), involving the expenditure of
$25,000 or more as to which MVB is a debtor, pledgor, lessee or obligor;
(b) Any Understanding for the employment of any officer or employee
which is not terminable by MVB without liability, except as may be
provided by law, on not more than 30 days' notice;
(c) Any Understanding with any labor organization;
(d) Any Understanding which obligates MVB for a period in excess of
one year to purchase, sell or provide services, materials, supplies,
merchandise, facilities or equipment;
(e) Any Understanding for the sale of any of its assets in excess of
$25,000 in amount, or for the grant of any preferential right to purchase
any of its assets, properties or rights in excess of $25,000 in amount, or
which requires the consent of any third party to the transfer and
assignment of any of its assets, properties or rights in excess of $25,000
in amount, other than in the ordinary course of business;
(f) Any Understanding for the borrowing of any money by MVB or for a
line of credit to MVB, except borrowings from the Federal Reserve Bank of
San Francisco, Union Bank of California, or the Federal Home Loan Bank of
San Francisco in the ordinary course of business;
(g) Any Understanding for any one capital expenditure or series of
related capital expenditures in excess of $10,000;
(h) Any Understanding to make, renew or extend the term of a loan to
any affiliate (as that term is defined for purposes of Rule 144 under the
Securities Act) or group of persons related to any affiliate, which,
including any undisbursed or unfunded amount, when aggregated with all
outstanding indebtedness of such affiliate or group of related persons to
MVB, would exceed $250,000;
(i) Any Understanding of any kind (other than contracts relating to
demand, savings or time deposits) with any director or officer of MVB or
with any affiliate or member of the immediate family (defined to include a
person's spouse, parents, in laws, descendants or siblings) of any such
director, officer or affiliate;
(j) Any Understanding for the sale of loans with recourse; or
(k) Any Understanding not otherwise disclosed pursuant to this
Section 3.15 which is material to the financial condition, results of
operations, assets or business of MVB.
14
True and correct copies of all contracts, including amendments thereto,
setting forth the foregoing Understandings, are attached as a part of Schedule
3.15.
3.16 PERFORMANCE OF OBLIGATIONS. Except as disclosed in Schedule 3.16, MVB
has performed in all material respects all of the material obligations required
to be performed by it to date and MVB is not in default in any material respect
under any agreement, contract or lease to which it is a party or subject or is
otherwise bound and which is material to the financial condition of MVB; and no
party with whom MVB has an agreement which is of material importance to the
business of MVB is in material default thereunder.
3.17 INSURANCE. Except as set forth in Schedule 3.17, MVB has in full
force and effect policies of insurance, including, without limitation, a
banker's blanket bond, with respect to its assets and business and against such
casualties and contingencies and of such amounts, types and forms as are
appropriate for its business, operations, properties and assets and as are usual
and customary in the banking industry. Set forth in Schedule 3.17 hereto is a
schedule of all policies of insurance (other than title insurance) carried and
owned by MVB; showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums and the expiration dates. There
has been delivered to or made available to WSB a copy of each such policy of
insurance. Since commencing business, MVB has continually maintained a fidelity
bond insuring it against acts of dishonesty by its employees in such amounts as
are disclosed in Schedule 3.17. Except as disclosed in Schedule 3.17, no claims
have been made under such bond. MVB is not aware of any facts which would form
the basis of a claim under any such bond; nor does MVB have any reason to
believe that any insurance coverage will not be renewed by the existing carrier
on substantially the same terms as existing coverage.
3.18 TAXES. Except as set forth in Schedule 3.18 hereto, MVB has timely
filed all federal, state and local tax returns required to be filed by it or on
its behalf. Except as set forth in Schedule 3.18, all taxes shown by such
returns to be due and payable have been paid or are reflected as a liability on
the MVB Financial Statements. None of the federal, state and local tax returns
of MVB have been audited by the Internal Revenue Service or other governmental
authorities having jurisdiction over the examination of such returns except for
the years or periods indicated in Schedule 3.18. All material deficiencies
(including interest and penalties, if any, thereon), if any, imposed as a result
of such examinations have been either paid, or have been accrued as a liability
on the MVB Financial Statements, or are being contested in good faith and are
disclosed in Schedule 3.18. No material tax deficiency has been or to the
knowledge of MVB is proposed to be assessed against MVB by any federal, state or
local authority or agency. MVB has not agreed to any extension of time for the
assessment of any taxes of whatsoever kind or nature payable by it, nor has MVB
waived or been requested to waive any applicable statute of limitations with
relation to the payment of any federal, state or local taxes. The accruals for
taxes reflected on the MVB Financial Statements are adequate for all unpaid
federal, state or local taxes (including interest and penalties, if any,
thereon) due, or which became due for any period commencing prior to December
31, 2001.
3.19 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.19 or
as permitted by this Agreement, since December 31, 2001, the business of MVB has
been conducted diligently and only in the ordinary course, in the same manner as
heretofore conducted and there has not been:
15
(a) Any change (other than changes affecting financial institutions
generally, including changes in interest rates, laws or regulations) in
the financial condition of MVB which has been materially adverse;
(b) Any declaration, setting aside, or the payment of any dividend
or other distribution with respect to MVB Stock or the issuance of any
additional shares of, or options to purchase, MVB Stock or any other
security of MVB;
(c) Any damage, destruction or loss (whether or not covered by
insurance) which individually or taken as a whole materially adversely
affects the property, business or prospects of MVB;
(d) Any change in accounting methods or practices of MVB other than
required by generally accepted accounting principles;
(e) Any revaluation by MVB of any of MVB's assets except as may be
applicable to available-for-sale securities;
(f) Any increase in the salary schedule or compensation rate, or the
declaration, payment or commitment or obligation of any kind for the
payment by MVB of a bonus or other additional salary or compensation,
other than in accordance with past practice;
(g) Any sale, assignment or transfer of any material assets of MVB
except in the ordinary course of business;
(h) Any waiver or release of any material right or claim of MVB,
except in the ordinary course of business; or
(i) Any agreement to take any action specified in Sections 3.19(a)
through (h) hereof.
3.20 BROKERS' AND FINDERS' FEES. Neither MVB nor any of its officers or
employees have paid or agreed to pay, or have done any act which would give rise
to the payment of, any fee, commission or consideration to any agent, broker,
finder or other person on account of services rendered as a broker or finder in
connection with this Agreement or the Transactions contemplated herein, or which
has resulted in, or may give rise to, any obligation on the part of MVB or WSB
therefor, except that MVB has engaged The Xxxxxxx Group to act as its financial
adviser and to render an opinion regarding the fairness of the consideration in
the form of WSB Stock and cash or a combination thereof in the Merger, from a
financial point of view, to MVB shareholders. MVB has provided WSB with a true
and accurate copy of its agreement with The Xxxxxxx Group. MVB agrees to
indemnify and hold WSB harmless from and against any and all claims,
liabilities, or obligations with respect to any other brokers' or finders' fees,
commissions, or expenses asserted by any other person on the basis of any act or
statement alleged to have been made by MVB or its affiliates.
16
3.21 EMPLOYEES. Except as disclosed in Schedule 3.21, there are no
material controversies pending or, to the best of MVB's knowledge, threatened
between MVB and any of its employees. Except as disclosed in the MVB Financial
Statements, all material sums due for employee compensation and benefits have
been duly and adequately paid or accrued on the books of MVB.
3.22 REGULATORY REPORTS. Except as disclosed in Schedule 3.22, since
January 1, 2001, MVB has filed all reports, returns, registrations and
statements, together with any amendments required to be made with respect
thereto (such reports, filings and amendments referred to hereinafter as "MVB
Filings"), that were required to be filed with: (i) the Commissioner; (ii) FRB;
and (iii) any other applicable regulatory agency, except where the failure to
file such reports, returns, registrations and statements has not had and is not
reasonably expected to have a material adverse effect on the business,
properties, financial condition, results of operations or prospects of MVB.
Except as otherwise set forth in Schedule 3.22, no administrative actions have
been taken or orders issued in connection with such MVB Filings and as of their
respective dates, each of such MVB Filings: (i) complied in all material
respects with all rules and regulations promulgated by the regulatory agency
with which it was filed (or was amended so as to be so promptly following
discovery of any such noncompliance); and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statement contained in any of such MVB Filings that was intended to present the
financial position of MVB fairly presented the financial position of MVB and was
prepared in accordance with generally accepted accounting principles or banking
regulations consistently applied, except as stated therein, during the periods
involved. MVB has furnished WSB with true and correct copies of all MVB Filings
filed by MVB since January 1, 2001.
3.23 MVB EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AND LABOR CONTRACTS.
(a) Except as disclosed in Schedule 3.23, there are no director
and/or employee benefit plans or any collective bargaining agreements,
labor contracts and employment agreements in which MVB participates, or by
which it is bound, including, without limitation: (i) any profit sharing,
deferred compensation, bonus, stock option, stock purchase, pension, ESOP,
retainer consulting, retirement, welfare or incentive plan or agreement
whether legally binding or not; (ii) any written employment agreement and
any other employment agreement whether written or oral; (iii) any other
"employee benefit plan" [within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1975 ("ERISA")] (collectively,
the "MVB Employment Agreements"); or (iv) any salary continuation or
change in control agreements. Except as disclosed in Schedule 3.23: (i)
there are no negotiations, demands or proposals that are pending or, to
the best knowledge of MVB, threatened that concern matters now covered, or
that would be covered, by any employment agreements or employee benefit
plans other than amendments to plans qualified under Section 401 of the
Internal Revenue Code (the "Code") that are required by the Tax Reform Act
of 1986 and later legislation; (ii) MVB is in material compliance with the
requirements prescribed by any and all rules and regulations currently in
effect including but not limited to ERISA and the Code applicable to all
such employee benefit plans; (iii) MVB is in compliance in all material
respects with all other rules and regulations applicable to employee
benefit plans and employment agreements; (iv) MVB has performed all of its
obligations under all such employee benefit plans
17
and employment agreements; and (v) there are no actions, suits or claims
pending or, to the best knowledge of MVB, threatened against any such
employee benefit plans, the assets of such plans, or with respect to any
MVB Employment Agreements, and, to the best knowledge of MVB, no facts
exist which are reasonably likely to give rise to any actions, suits or
claims (other than routine claims for benefits) against such plans or the
assets of such plans or MVB on account of any such employment agreements,
whether written or oral.
(b) Except as disclosed in Schedule 3.23, the "employee pension
benefit plans" (within the meaning of Section 312 of ERISA) described on
Schedule 3.23 have been duly authorized by the Board of Directors of MVB.
Except as set forth in Schedule 3.23, each such plan and associated trust
is qualified in form and operation under Section 401(a) and exempt from
tax under Section 501(a) of the Code, respectively, and, to the best
knowledge of MVB, no event has occurred that will or is reasonably likely
to give rise to disqualification of any such plan or loss of the exemption
from tax of any such trust under said sections. To the best knowledge of
MVB, no event has occurred that will or is reasonably likely to subject
any such plans to tax under Section 511 of the Code. None of such plans
has engaged in a merger or consolidation with any other plan or
transferred assets or liabilities from any other plan. To the best
knowledge of MVB, no prohibited transaction (within the meaning of Section
409 or 502(i) of ERISA or Section 4975 of the Code) or party-in-interest
transaction (within the meaning of Section 406 of ERISA) has occurred with
respect to any of such plans. To the best knowledge of MVB, no employee of
MVB has engaged in any transactions which could subject MVB to indemnify
such person against liability. To the best knowledge of MVB, all costs of
plans have been provided for on the basis of consistent methods in
accordance with sound actuarial assumptions and practices. To the best
knowledge of MVB, no employee benefit plan has incurred any "accumulated
funding deficiency" (as defined in ERISA), whether or not waived, taking
into account contributions made within the period described in Section
412(c)(10) of the Code; nor, to the best knowledge of MVB, are there any
unfunded amounts under any employee benefit plan; nor, to the best
knowledge of MVB, has MVB failed to make any contributions or pay any
amount due and owing as required by law or the terms of any employee
benefit plan or employment agreement. Subject to amendments that are
required by the Tax Reform Act of 1986 as amended and later legislation,
since the last valuation date for each employee pension benefit plan,
there has been no amendment or change to such plan that to the best
knowledge of MVB, would increase the amount of benefits thereunder.
(c) MVB does not sponsor or participate in, and has not sponsored or
participated in, any employee benefit pension plan to which Section 4021
of ERISA applies that would create a liability under Title IV of ERISA.
(d) There have been no acts or omissions by MVB that have given rise
to or, to the best knowledge of MVB, may give rise to fines, penalties,
taxes, or related charges under Sections 502(c) or (i) or 4071 of ERISA or
Chapter 43 of the Code.
(e) Except as disclosed in Section 3.23(h), MVB does not maintain
any employee benefit plan or employment agreement pursuant to which any
benefit plan or other payment will be required to be made by MVB or
pursuant to which any other benefit will accrue or vest in any
18
director, officer or employee of MVB, in either case as a result of the
consummation of the Transactions contemplated by the Agreement.
(f) To the best knowledge of MVB, no "reportable event," as defined
in ERISA, has occurred with respect to any of the employee benefit plans.
(g) To the best knowledge of MVB, all amendments required to bring
each of the employee benefit plans into conformity with all of the
provisions of ERISA and the Code and all other applicable laws, rules and
regulations have been made.
(h) Except for the persons named in Schedule 3.23, no director,
officer or employee of MVB is entitled to receive any benefit or any
payment of any amount under any existing employment agreement, severance
plan or other benefit plan as a result of the consummation of any
Transaction contemplated in this Agreement, and with respect to each such
person, MVB has included in Schedule 3.23 the nature of such benefit or
the amount of such payment, the event triggering the benefit or payment,
and the date of, and parties to, such employment agreement, severance plan
or other benefit plan. MVB has furnished WSB with true and correct copies
of all documents with respect to the plans and agreements referred to in
Schedule 3.23 delivered as of the date of this Agreement, including all
amendments and supplements thereto, and all related summary plan
descriptions. For each of the employee pension benefit plans of MVB
referred to in Schedule 3.23 delivered as of the date of this Agreement,
if any, or except as noted therein, MVB has furnished WSB with true and
accurate copies of: (i) the Form 5500 which was filed in each of the three
most recent plan years, including without limitation, all schedules
thereto and all financial statements with attached opinions of independent
accountants; (ii) the most recent determination letter from the Internal
Revenue Service; (iii) the statement of assets and liabilities as of the
most recent valuation date; and (iv) the statement of changes in fund
balance and in financial position or the statement of changes in net
assets available for benefits under each of said plans for the most
recently ended plan year. To the best knowledge of MVB, the documents
referred to in subdivisions (iii) and (iv) fairly present the financial
condition of each of said plans as of and at such dates and the results of
operations of each of said plans, all in accordance with generally
accepted accounting principles applied on a consistent basis.
3.24 STOCK OPTION PLANS. Schedule 3.24 sets forth a true and correct copy
of the 1990 Plan and the 2001 Plan and a schedule showing the names, dates of
grant, vesting schedules, termination dates, and option prices for each option
outstanding as of the date of this Agreement. The 1990 Plan and 2001 Plan have
been duly approved by the Board of Directors and shareholders of MVB. Schedule
3.24 sets forth copies of the Orders of Exemption or Permits issued by the
Commissioner with respect to the establishment of the 1990 Plan and the 2001
Plan. Each stock option has been approved by the Board of Directors of MVB, and,
upon exercise of the options in accordance with their terms, the shares of MVB
Stock issued have been and will be validly issued, fully paid and nonassessable.
3.25 ABSENCE OF CERTAIN PRACTICES. Except as disclosed on Schedule 3.25,
neither MVB, nor to the best knowledge of MVB any officer, director, employee or
agent of MVB, directly or indirectly, within the past three years, gave or made
or agreed to give or make any illegal commission, payment,
19
gratuity, gift, political contribution or similar benefit to any customer,
supplier, governmental employee or other person in order to obtain business for
or further the business of MVB.
3.26 NO VIOLATION OF LAW. MVB is in substantial compliance with all
material laws relating to its business or employment practices or the ownership
of its properties, and is in substantial compliance with each material law,
ordinance, order, decree or regulation of any governmental entity applicable to
the conduct thereof or the ownership of the properties related thereto, except
in each case for violations which either individually or in the aggregate do not
and will not have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of MVB.
3.27 CERTAIN INTERESTS. Except as disclosed on Schedule 3.27, except in
arm's-length transactions pursuant to normal commercial terms and conditions:
(i) no officer or director of MVB has any material interest in any property,
real or personal, tangible or intangible, used in or pertaining to the business
of MVB except for the normal rights of a shareholder of MVB; (ii) no such person
is indebted to MVB except for normal business expense advances or lending
transactions in the ordinary course of business on the same terms, including
interest rates and collateral on loans as those prevailing at the same time for
comparable transactions with others; and (iii) MVB is not indebted to any such
person except for amounts due under normal salary or reimbursement of ordinary
business expenses. Except as disclosed on Schedule 3.23, the consummation of the
Transactions contemplated hereby will not (either alone, or upon the occurrence
of any act or event, or with the lapse of time, or both) result in any payment
(severance or other) becoming due from MVB to any employee of MVB.
3.28 MINUTE BOOKS. The minute books of MVB accurately reflect all material
actions duly taken by the shareholders, Board of Directors and committees of MVB
and contain true and complete copies of MVB's Articles of Incorporation and
Bylaws and all amendments thereto.
3.29 ACCOUNTING RECORDS; DATA PROCESSING. MVB has records that, in all
material respects, fairly reflect its transactions, and accounting controls
sufficient to ensure that such transactions are in all material respects: (i)
executed in accordance with management's general or specific authorization; and
(ii) recorded in conformity with generally accepted accounting principles.
Except as set forth in Schedule 3.29, the procedures and equipment, including,
without limitation, the data processing equipment, data transmission equipment,
and related peripheral equipment and software, used by MVB in the operation of
its business (including any disaster recovery facility) to generate and retrieve
such records are adequate in relation to the size and complexity of the business
of MVB.
3.30 OPERATING LOSSES. Except as disclosed on Schedule 3.30, there is no
individual Operating Loss (as defined below) in excess of $10,000 that has
occurred at MVB during the period after December 31, 2001. Except as disclosed
on Schedule 3.30, since December 31, 2001, no event has occurred, and no action
has been taken or omitted to be taken by any employee of MVB that has resulted
in the incurrence by MVB of an Operating Loss or that might reasonably be
expected to result in the incurrence by MVB of an Operating Loss after December
31, 2001, which, net of any insurance proceeds payable in respect thereof,
exceeds, or would exceed $10,000 by itself or $25,000 when aggregated with all
other Operating Losses during such period. For purposes of this Agreement,
"Operating Loss" means any loss resulting from cash shortages, lost or misposted
items, disputed clerical and accounting errors,
20
forged checks, payment of checks over stop payment orders, counterfeit money,
wire transfers made in error, theft, robberies, employee dishonesty,
defalcations, check kiting, fraudulent use of credit cards or electronic teller
machines, civil money penalties, fines, litigation, claims, arbitration awards
or other similar acts or occurrences.
3.31 CRA STANDING. MVB's compliance under the Community Reinvestment Act
(the "CRA") should not constitute grounds for either the denial by any
regulatory agency of any application to consummate the Transactions contemplated
by this Agreement or the imposition of a materially burdensome condition in
connection with the approval of any such application. MVB has not been advised
of any concerns regarding compliance with the CRA by any regulatory agency or
any other person.
3.32 ACCURACY AND CURRENTNESS OF INFORMATION FURNISHED. The
representations and warranties made by MVB hereby and in the schedules hereto
contain no statements of fact which are untrue or misleading, or omit to state
any material fact which is necessary under the circumstances to prevent the
statements contained herein or in such schedules from being misleading. MVB
hereby covenants that it shall, as of the Effective Time of the Merger, amend
and/or supplement the schedules prepared and delivered pursuant to this Article
III to ensure that the information set forth in such schedules accurately
reflects the then-current status of MVB.
3.33 EFFECTIVE DATE OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Each representation, warranty, covenant and agreement of MVB set
forth in this Agreement shall be deemed to be made on and as of the date hereof
and, as subsequently amended and/or supplemented as provided in Section 3.32, as
of the Effective Time of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WSB
WSB hereby represents and warrants to MVB as follows:
4.1 ORGANIZATION, STANDING AND POWER. WSB is a California corporation,
duly organized, validly existing and in good standing under the laws of the
State of California and WSB has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
presently conducted. Neither the scope of the business of WSB nor the location
of any of its properties requires that it be licensed to do business in any
jurisdiction other than the State of California.
4.2 CAPITALIZATION. The authorized capitalization of WSB consists of
10,000,000 shares of Preferred Stock, no par value, of which no shares are
issued and outstanding, and 10,000,000 shares of Common Stock, no par value, of
which 3,783,007 shares are issued and outstanding as of the date of this
Agreement. As of the date of this Agreement, WSB Stock was held by approximately
2,500 shareholders of record and the WSB Stock was registered under the Exchange
Act. All of the outstanding shares of
21
the WSB Stock are, and when issued in exchange for the MVB Stock will be,
validly issued, fully paid and nonassessable.
4.3 SUBSIDIARIES. Except for LCB, WSNB, CCB and Sentinel Associates, Inc.
(collectively, the "WSB Subsidiaries"), WSB does not own, directly or indirectly
(except as pledged pursuant to loans which are not in default or for shares held
by the WSB Subsidiaries as the result of any foreclosure by the WSB Subsidiaries
on any loan, which shares do not exceed 4.9% of the outstanding common stock of
any such company), any outstanding stock or other voting interests in any
corporation, partnership, joint venture or other entity. LCB is a California
state banking corporation, duly organized, validly existing and in good standing
under the laws of the State of California. WSNB is national banking association,
duly authorized, validly existing and in good standing under the laws of the
United States. CCB is a California state banking corporation, duly organized,
validly existing and in good standing under the laws of the State of California.
Sentinel Associates, Inc. is a California corporation, duly organized, validly
existing and in good standing under the laws of the State of California. LCB,
WSNB and CCB are "insured banks" as defined in Section 3(h) of the FDI Act; and
the WSB Subsidiaries have all requisite corporate power and authority to own,
lease and operate their properties and assets and carry on their businesses as
presently conducted. Neither the scope of the business of the WSB Subsidiaries
nor the location of any of their properties require that they be licensed or
qualified to do business in any jurisdiction other than the State of California.
The shares of the WSB Subsidiaries' common stock held by WSB are free and clear
of all security interests, encumbrances, restrictions, claims or other defects
in title.
4.4 AUTHORITY. The execution and delivery by WSB of this Agreement and the
consummation of the Transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of WSB. The Agreement
is, and the Merger Agreement will be, binding and enforceable obligations of WSB
and New MVB, respectively, except as enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally or California corporations, or by general equitable
principles, or by 12 U.S.C. Section 1818(b)(6)(D). Neither the execution and
delivery by WSB of this Agreement, nor the consummation of the Transactions
contemplated herein, nor compliance by WSB with any of the provisions hereof
will: (i) conflict with, or result in a breach of, any provision of its Articles
of Incorporation or Bylaws; or (ii) except as set forth in Schedule 4.4,
constitute a material breach of, or result in a material default, or give rise
to any rights of termination, cancellation or acceleration, or give rise to any
right by any other person or entity to acquire any security interest in any
assets under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, franchise, license, permit, agreement or other instrument
or obligation to which WSB and the WSB Subsidiaries or any of their properties
or assets are subject. No consent or approval of, notice to, or filing with any
governmental authority having jurisdiction over any aspect of the business or
assets of WSB and the WSB Subsidiaries, and no consent or approval of, or notice
to any other person or entity, is required in connection with the execution and
delivery by WSB of this Agreement or by New MVB of the Merger Agreement or the
consummation by WSB of the Transactions contemplated hereby or thereby, except:
(i) approval of this Agreement and the Merger Agreement by the sole shareholder
of New MVB; (ii) such approvals of this Agreement, the Merger Agreement, and the
Transactions contemplated herein and therein as may be required by the FRB
pursuant to the BHCA and the Bank Merger Act and the Commissioner pursuant to
Section 700 et seq. and Section 4880 et seq. of the California Financial Code;
and (iii) as set forth on Schedule 4.4.
22
4.5 FINANCIAL STATEMENTS. Except as disclosed in the notes relating
thereto, or otherwise on Schedule 4.5, the audited consolidated financial
statements of WSB as of and for the periods ended December 31, 2000 and 2001, as
well as the unaudited consolidated financial statements of WSB as of and for the
periods ended March 31, 2001 and 2002, attached hereto as Schedule 4.5 (all of
these statements are collectively referred to herein as the "WSB Financial
Statements"): (i) fairly and accurately present the financial condition of WSB
as of the dates thereof and the results of operations and its cash flows for the
periods therein set forth; (ii) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved; and (iii) are based on the books and records of WSB. WSB's reserves
for possible loan losses as disclosed in the WSB Financial Statements dated
March 31, 2002 were adequate as of such dates to absorb reasonably anticipated
losses in the loan portfolio of WSB in view of the size and character of such
portfolio, then current economic conditions, and other pertinent factors; and no
facts have subsequently come to the attention of management of WSB which would
cause management to restate as of such date in any material way the level of
such reserves for possible loan losses. With respect to other real estate owned
by WSB, the value attributed thereto for purposes of preparing the WSB Financial
Statements does not exceed the aggregate fair market value of such real estate
as of the date of acquisition of such real estate or as subsequently reduced,
all in accordance with generally accepted accounting principles. With regard to
investments owned by WSB, the value attributed thereto for purposes of preparing
the WSB Financial Statements is in accordance with generally accepted accounting
principles.
4.6 UNDISCLOSED LIABILITIES. Except for the disclosures contained in
Schedule 4.6, neither WSB nor the WSB Subsidiaries have any liabilities or
obligations, either accrued or contingent, which are material to WSB and which
have not been reflected or disclosed in the WSB Financial Statements. Neither
WSB nor the WSB Subsidiaries know of any basis for the assertion against them of
any liability, obligation or claim (including, without limitation, that of any
regulatory authority) that is reasonably likely to result in or cause any
material adverse change in the business or financial condition of WSB which is
not fairly reflected in the WSB Financial Statements or otherwise disclosed in
Schedule 4.6 hereto.
4.7 TITLE TO ASSETS. Except for liens for current taxes not yet due and
payable and except as disclosed in the WSB Financial Statements or in Schedule
4.7 hereto, WSB and the WSB Subsidiaries have good, valid and marketable title
to all material properties and assets, other than real property and securities
pledged to secure public deposits or retail repurchase agreements, owned or
stated to be owned by WSB or any of the WSB Subsidiaries and reflected on the
WSB Financial Statements, or acquired after December 31, 2001 (except properties
sold or otherwise transferred in the ordinary course of business since December
31, 2001), free and clear of all mortgages, liens, encumbrances, pledges or
charges of any kind or nature.
4.8 ENVIRONMENTAL LIABILITIES. To the best of WSB's knowledge, except as
set forth on Schedule 4.8, no properties of WSB or the WSB Subsidiaries or
properties in which WSB or the WSB Subsidiaries hold a collateral or contingent
interest or purchase option, are the subject of any pending or threatened
investigation, claim or proceeding relating to the use, storage or disposal on
such property of or contamination of such property by any toxic or hazardous
waste material or substance. To the best of WSB's knowledge, WSB or the WSB
Subsidiaries do not own, possess or have a collateral or contingent interest or
purchase option in any properties or other assets which contain or have located
within or thereon
23
any hazardous or toxic waste material or its use thereon conforms in all
material respects with all federal, state and local laws, rules, regulations or
other provisions regulating the discharge of materials into the environment. As
to any real property now owned or leased by WSB or the WSB Subsidiaries and held
as security for a loan or in which WSB or the WSB Subsidiaries otherwise have an
interest, to the best of WSB's knowledge, WSB or the WSB Subsidiaries have not
controlled, directed or participated in the operation or management of any such
real property or any facilities or enterprise conducted thereon, such that or
they have become an owner or operator of such real property under applicable
environmental laws.
4.9 INVESTMENTS. Except as disclosed in Schedule 4.9 hereto: (i) all
investments of WSB and the WSB Subsidiaries are legal, valid and permitted under
federal and state laws and regulations applicable at the time of their
origination or assumption. Except as set forth in Schedule 4.9, none of such
investments is subject to any restriction, contractual, statutory or other, that
would materially impair the ability of WSB and the WSB Subsidiaries to dispose
freely of any such investment at any time, except restrictions on the public
distribution or transfer of such investments under the Securities Act or state
securities laws. Except as set forth in Schedule 4.9, as of December 31, 2001
and March 31, 2002, neither WSB nor the WSB Subsidiaries had holdings of
positions in Derivative Instruments. Except as set forth in Schedule 4.9, since
January 1, 2001, neither WSB nor the WSB Subsidiaries have engaged in any
transactions in or involving Derivative Instruments except as agent on the order
and for the account of others. Schedule 4.9 sets forth for each Derivative
Instrument held by WSB or the WSB Subsidiaries since January 1, 2001, the
present book value and market value, if applicable, the open exposure of the WSB
Subsidiaries, if any, and whether any counterparties to any contract or
agreement with respect to any such instrument is in default with respect to such
contract or agreement.
4.10 EXTENSIONS OF CREDIT. Except as disclosed in Schedule 4.10 hereto:
(i) all the loans of WSB and the WSB Subsidiaries are legal, valid and permitted
under federal and state laws and regulations applicable at the time of their
origination or assumption; and (ii) WSB and the WSB Subsidiaries are not subject
to any liability or claim for violation of any state or federal law or
regulation concerning extensions of credit, including, without limitation, those
relating to discriminatory lending practices and truth-in-lending. Schedule 4.10
sets forth a description of: (a) by type and classification, if any, all loans,
leases or other extensions of credit by WSB and the WSB Subsidiaries on
nonaccrual; (b) by type and classification, if any, all loans, leases, or other
extensions of credit or other real estate owned that have been classified by the
Commissioner, the OCC, FRB, FDIC, external or internal auditors, directors,
management or other examiners as "Watch List," "Specially Mentioned,"
"Substandard," "Doubtful," "Loss" or any comparable classification; and (c) all
loans, leases or other extensions of credit of WSB and the WSB Subsidiaries as
to which any payment of principal, interest or other amount is 90 days or more
past due. With respect to loan delinquencies, Schedule 4.10 contains the monthly
loan delinquency report dated on or about March 31, 2002, in the form
customarily prepared for and delivered to the Board of Directors of WSB.
4.11 LITIGATION AND GOVERNMENTAL PROCEEDINGS. Except as otherwise
expressly disclosed in Schedule 4.11, neither WSB nor the WSB Subsidiaries: (i)
are engaged in, or, to the best of WSB's knowledge, threatened with, any legal
action or other proceeding before any court or administrative agency which might
be material to its business or in which the amount claimed against it is
$100,000 or more; (ii) are in material default of any of its duties or
obligations under, or with respect to, any judgment, order, writ,
24
injunction or decree of any court or governmental department, commission, board,
bureau, agency or other instrumentality having jurisdiction over WSB or its
business; (iii) have been served with written notice of and is not, to the best
knowledge of WSB, under investigation with respect to, any material violation of
any provision of federal, state or local laws, rules, or regulations; or (iv)
are subject to any order, letter agreement or written direction of any
governmental agency with respect to its financial or operating ratios, or with
respect to any other standards or tests imposed by state and federal laws and
regulations, including, without limitation, those relating to net worth,
liquidity and the maintenance of reserves, nor, to the best of WSB's knowledge,
has any such order, letter agreement or written direction been proposed to WSB
or any of the WSB Subsidiaries. Schedule 4.11 contains a list identifying any
claims pending on behalf of WSB or any of the WSB Subsidiaries against the Small
Business Administration (the "SBA"), any other governmental agencies, or any
third parties for reimbursement for loan defaults, indicating the date of the
claim, the name of the borrower, and the amount of the claim.
4.12 PERFORMANCE OF OBLIGATIONS. Except as disclosed in Schedule 4.12, WSB
and the WSB Subsidiaries have performed in all material respects all of the
material obligations required to be performed by them to date and WSB or the WSB
Subsidiaries are not in default in any material respect under any agreement,
contract or lease to which they are a party or subject or are otherwise bound
and which is material to the financial condition of WSB and the WSB
Subsidiaries; and no party with whom WSB or the WSB Subsidiaries have an
agreement which is of material importance to the business of WSB is in material
default thereunder.
4.13 INSURANCE. Except as set forth in Schedule 4.13, WSB and the WSB
Subsidiaries have in full force and effect policies of insurance, including,
without limitation, a banker's blanket bond, with respect to its assets and
business and against such casualties and contingencies and of such amounts,
types and forms as are appropriate for its business, operations, properties and
assets and as are usual and customary in the banking industry. Set forth in
Schedule 4.13 hereto is a schedule of all policies of insurance (other than
title insurance) carried and owned by WSB and the WSB Subsidiaries; showing the
name of the insurance company, the nature of the coverage, the policy limit, the
annual premiums and the expiration dates. Since commencing business, WSB and the
WSB Subsidiaries have continually maintained a fidelity bond insuring them
against acts of dishonesty by their respective employees in such amounts as are
disclosed in Schedule 4.13.
4.14 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.14 or
as permitted by this Agreement, since December 31, 2001, the business of WSB and
the WSB Subsidiaries have been conducted diligently and only in the ordinary
course, in the same manner as heretofore conducted and there has not been:
(a) Any change (other than changes affecting financial institutions
generally, including changes in interest rates, laws or regulations) in
the financial condition of WSB and the WSB Subsidiaries which has been
materially adverse;
(b) Any damage, destruction or loss (whether or not covered by
insurance) which individually or taken as a whole materially adversely
affects the property, business or prospects of WSB or the WSB
Subsidiaries;
25
(c) Any change in accounting methods or practices of WSB or the WSB
Subsidiaries other than required by generally accepted accounting
principles;
(d) Any revaluation by WSB of any of WSB's or any WSB Subsidiary's
assets except as may be applicable to available-for-sale securities;
(e) Any sale, assignment or transfer of any material assets of WSB
or any WSB Subsidiary except in the ordinary course of business;
(f) Any waiver or release of any material right or claim of WSB or
any WSB Subsidiary, except in the ordinary course of business; or
(g) Any agreement to take any action specified in Sections 4.14 (a)
through (f) hereof.
4.15 BROKERS' AND FINDERS' FEES. Neither WSB, nor any WSB Subsidiary, nor
any of their officers or employees have paid or agreed to pay, or have done any
act which would give rise to the payment of, any fee, commission or
consideration to any agent, broker, finder or other person on account of
services rendered as a broker or finder in connection with this Agreement or the
Transactions, or which has resulted in, or may give rise to, any obligation on
the part of WSB, any WSB Subsidiary or MVB therefor. WSB agrees to indemnify and
hold MVB harmless from and against any and all claims, liabilities, or
obligations with respect to any brokers' or finders' fees, commissions, or
expenses asserted by any person on the basis of any act or statement alleged to
have been made by WSB or its affiliates.
4.16 EMPLOYEES. Except as disclosed in Schedule 4.16, there are no
material controversies pending or, to the best of WSB's knowledge, threatened
between WSB, the WSB Subsidiaries and any of their employees. Except as
disclosed in the consolidated WSB Financial Statements, all material sums due
for employee compensation and benefits have been duly and adequately paid or
accrued on the books of WSB.
4.17 REGULATORY REPORTS. Except as disclosed in Schedule 4.17, since
January 1, 0000, XXX and the WSB Subsidiaries have filed all reports, returns,
registrations and statements, together with any amendments required to be made
with respect thereto (such reports, filings and amendments referred to
hereinafter as "WSB Filings"), that were required to be filed with: (i) the
Commissioner; (ii) the FDIC; (iii) the FRB; (iv) the Securities and Exchange
Commission (the "SEC"); (v) the Office of the Comptroller of the Currency (the
"OCC"); and (vi) any other applicable regulatory agency, except where the
failure to file such reports, returns, registrations and statements has not had
and is not reasonably expected to have a material adverse effect on the
business, properties, financial condition, results of operations or prospects of
WSB. Except as otherwise set forth in Schedule 4.17, no administrative actions
have been taken or orders issued in connection with such WSB Filings and as of
their respective dates, each of such WSB Filings: (i) complied in all material
respects with all rules and regulations promulgated by the regulatory agency
with which it was filed (or was amended so as to be so promptly following
discovery of any such noncompliance); and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statement contained in any of such WSB Filings
26
that was intended to present the financial position of each WSB Subsidiary or
WSB fairly presented the financial position of the WSB Subsidiary or WSB and was
prepared in accordance with generally accepted accounting principles or banking
regulations and/or securities rules and regulations, as applicable, consistently
applied, except as stated therein, during the periods involved. WSB has
furnished MVB with true and correct copies of all WSB Filings filed by the WSB
Subsidiaries or WSB since January 1, 2001.
4.18 WSB EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AND LABOR CONTRACTS.
(a) Except as disclosed in Schedule 4.18 there are no employee
benefit plans or any collective bargaining agreements, labor contracts and
employment agreements in which WSB or the WSB Subsidiaries participate, or
by which they are bound, including, without limitation: (i) any profit
sharing, deferred compensation, bonus, stock option, stock purchase,
pension, ESOP, retainer consulting, retirement, welfare or incentive plan
or agreement whether legally binding or not; (ii) any written employment
agreement and any other employment agreement whether written or oral; or
(iii) any other "employee benefit plan" [within the meaning of Section
3(3) of "ERISA"] (collectively, the "WSB Employment Agreements"). Except
as set forth in Schedule 4.18: (i) there are no negotiations, demands or
proposals that are pending or, to the best of WSB's knowledge, threatened
that concern matters now covered, or that would be covered, by any
employment agreements or employee benefit plans other than amendments to
plans qualified under Section 401 of the Code that are required by the Tax
Reform Act of 1986 and later legislation; (ii) WSB and the WSB
Subsidiaries are in material compliance with the requirements prescribed
by any and all rules and regulations currently in effect including but not
limited to ERISA and the Code applicable to all such employee benefit
plans; (iii) WSB and the WSB Subsidiaries are in compliance in all
material respects with all other rules and regulations applicable to
employee benefit plans and employment agreements; (iv) WSB and the WSB
Subsidiaries have performed all of their obligations under all such
employee benefit plans and employment agreements; and (v) there are no
actions, suits or claims pending or, to the best of WSB's knowledge,
threatened against any such employee benefit plans, the assets of such
plans, or with respect to any employment agreements, and, to the best
knowledge of WSB, no facts exist which could give rise to any actions,
suits or claims (other than routine claims for benefits) against such
plans or the assets of such plans or WSB or any WSB Subsidiary on account
of any such employment agreements, whether written or oral.
(b) Except as disclosed in Schedule 4.18, the "employee pension
benefit plans" (within the meaning of Section 312 of ERISA) described in
Schedule 4.18 of WSB and the WSB Subsidiaries have been duly authorized by
the Board of Directors of WSB or of the applicable WSB Subsidiary. Except
as disclosed in Schedule 4.18, each such plan and associated trust is
qualified in form and operation under Section 401(a) and exempt from tax
under Section 501(a) of the Code, respectively, and, to the best knowledge
of WSB, no event has occurred that will or is reasonably likely to give
rise to disqualification of any such plan or loss of the exemption from
tax of any such trust under said sections. To the best knowledge of WSB,
no event has occurred that will or is reasonably likely to subject any
such plans to tax under Section 511 of the Code. None of such plans has
engaged in a merger or consolidation with any other plan or transferred
27
assets or liabilities from any other plan. To the best knowledge of WSB,
no prohibited transaction (within the meaning of Section 409 or 502(i) of
ERISA or Section 4975 of the Code) or party-in-interest transaction
(within the meaning of Section 406 of ERISA) has occurred with respect to
any of such plans. To the best knowledge of WSB, no employee of WSB or any
WSB Subsidiary has engaged in any transactions which could subject WSB or
any WSB Subsidiary to indemnify such person against liability. All costs
of plans have been provided for on the basis of consistent methods in
accordance with sound actuarial assumptions and practices. To the best
knowledge of WSB, no employee benefit plan has incurred any "accumulated
funding deficiency" (as defined in ERISA), whether or not waived, taking
into account contributions made within the period described in Section
412(c)(10) of the Code; nor, to the best knowledge of WSB, are there any
unfunded amounts under any employee benefit plan; nor, to the best
knowledge of WSB, has WSB or any WSB Subsidiary failed to make any
contributions or pay any amount due and owing as required by law or the
terms of any employee benefit plan or employment agreement. Subject to
amendments that are required by the Tax Reform Act of 1986 as amended and
later legislation, since the last valuation date for each employee pension
benefit plan, there has been no amendment or change to such plan that, to
the best knowledge of WSB, would increase the amount of benefits
thereunder.
(c) WSB and WSB Subsidiaries do not sponsor or participate in, and
have not sponsored or participated in, any employee benefit pension plan
to which Section 4021 of ERISA applies that would create a liability under
Title IV of ERISA.
(d) WSB and the WSB Subsidiaries do not sponsor or participate in,
and have not sponsored or participated in, any employee benefit pension
plan that is a "multi-employer plan" (within the meaning of Section 3(37)
of ERISA) that would subject WSB or the WSB Subsidiaries to any liability
with respect to any such plan.
(e) All group health plans of WSB and the WSB Subsidiaries
(including any plans of affiliates of WSB or the WSB Subsidiaries that
must be taken into account under Section 162(i) or (k) of the Code as in
effect immediately prior to the Technical and Miscellaneous Revenue Act of
1988 and Section 4980B of the Code) have been operated in compliance with
the group health plan continuation coverage requirements of Section 4980B
of the Code to the extent such requirements are applicable.
(f) There have been no acts or omissions by WSB or the WSB
Subsidiaries that have given rise to or, to the best knowledge of WSB or
the WSB Subsidiaries, may give rise to fines, penalties, taxes, or related
charges under Sections 502(c) or (i) or 4071 of ERISA or Chapter 43 of the
Code.
(g) Except as disclosed in Section 4.18(j), WSB and the WSB
Subsidiaries do not maintain any employee benefit plan or employment
agreement pursuant to which any benefit plan or other payment will be
required to be made by WSB or the WSB Subsidiaries or pursuant to which
any other benefit will accrue or vest in any director, officer or employee
of WSB or any
28
WSB Subsidiary, in either case as a result of the consummation of the
Transactions contemplated by the Agreement.
(h) To the best knowledge of WSB, no "reportable event," as defined
in ERISA, has occurred with respect to any of the employee benefit plans.
(i) To the best knowledge of WSB, all amendments required to bring
each of the employee benefit plans into conformity with all of the
provisions of ERISA and the Code and all other applicable laws, rules and
regulations have been made.
(j) Except for the persons named in Schedule 4.18, no director,
officer or employee of WSB or of any WSB Subsidiary is entitled to receive
any benefit or any payment of any amount under any existing employment
agreement, severance plan or other benefit plan as a result of the
consummation of any Transaction contemplated in this Agreement, and with
respect to each such person, WSB has included in Schedule 4.18 the nature
of such benefit or the amount of such payment, the event triggering the
benefit or payment, and the date of, and parties to, such employment
agreement, severance plan or other benefit plan.
4.19 ABSENCE OF CERTAIN PRACTICES. Except as disclosed in Schedule 4.19,
to the best knowledge of WSB, neither WSB nor the WSB Subsidiaries, nor any
officer, director, employee or agent of WSB or of the WSB Subsidiaries has,
directly or indirectly, within the past three years, given or made or agreed to
give or make any illegal commission, payment, gratuity, gift, political
contribution or similar benefit to any customer, supplier, governmental employee
or other person in order to obtain business for or further the business of WSB
or of the WSB Subsidiaries.
4.20 NO VIOLATION OF LAW. WSB and the WSB Subsidiaries are in substantial
compliance with all material laws relating to their business or employment
practices or the ownership of their properties, and are in substantial
compliance with each material law, ordinance, order, decree or regulation of any
governmental entity applicable to the conduct thereof or the ownership of the
properties related thereto, except in each case for violations which either
individually or in the aggregate do not and will not have a material adverse
effect on the business, properties, financial condition, results of operations
or prospects of WSB and the WSB Subsidiaries.
4.21 CERTAIN INTERESTS. Except as disclosed in Schedule 4.21, except in
arm's-length transactions pursuant to normal commercial terms and conditions:
(i) no officer or director of WSB or any WSB Subsidiary has any material
interest in any property, real or personal, tangible or intangible, used in or
pertaining to the business of WSB or any of the WSB Subsidiaries except for the
normal rights of a shareholder of WSB; (ii) no such person is indebted to WSB or
to any WSB Subsidiary except for normal business expense advances or lending
transactions in the ordinary course of business on the same terms, including
interest rates and collateral on loans as those prevailing at the same time for
comparable transactions with others; and (iii) WSB and the WSB Subsidiaries are
not indebted to any such person except for amounts due under normal salary or
reimbursement of ordinary business expenses. Except as disclosed in Schedule
4.21, the consummation of the Transactions contemplated hereby will not (either
alone, or upon the occurrence of any act or event, or with the lapse of time, or
both) result in any payment
29
(severance or other) becoming due from WSB or from the WSB Subsidiaries to any
employee of WSB or the WSB Subsidiaries.
4.22 MINUTE BOOKS. The minute books of WSB and the WSB Subsidiaries
accurately reflect all material actions duly taken by the shareholders, Boards
of Directors and committees of WSB or of the WSB Subsidiaries, as applicable,
and contain true and complete copies of Articles of Incorporation and Bylaws and
all amendments thereto of WSB and the WSB Subsidiaries.
4.23 ACCOUNTING RECORDS; DATA PROCESSING. WSB and the WSB Subsidiaries
have records that, in all material respects, fairly reflect their transactions
and accounting controls sufficient to ensure that such transactions are in all
material respects: (i) executed in accordance with management's general or
specific authorization; and (ii) recorded in conformity with generally accepted
accounting principles.
4.24 OPERATING LOSSES. Except as disclosed in Schedule 4.24, there is no
individual Operating Loss (as defined below) in excess of $50,000 that has
occurred at WSB or at any of the WSB Subsidiaries during the period after
December 31, 2001. Except as disclosed on Schedule 4.24, since December 31,
2001, no event has occurred, and no action has been taken or omitted to be taken
by any employee of WSB or any WSB Subsidiary that has resulted in the incurrence
by WSB or by any of the WSB Subsidiaries of an Operating Loss or that might
reasonably be expected to result in the incurrence by WSB or by any WSB
Subsidiary of an Operating Loss after December 31, 2001, which, net of any
insurance proceeds payable in respect thereof, exceeds, or would exceed $50,000
by itself or $100,000 when aggregated with all other Operating Losses during
such period.
4.25 CRA STANDING. The WSB Subsidiaries' compliance under the CRA should
not constitute grounds for either the denial by any regulatory agency of any
application to consummate the Transactions contemplated by this Agreement or the
imposition of a materially burdensome condition in connection with the approval
of any such application. The WSB Subsidiaries have not been advised of any
concerns regarding compliance with the CRA by any regulatory agency or any other
person.
4.26 ACCURACY AND CURRENTNESS OF INFORMATION FURNISHED. The
representations and warranties made by WSB hereby and in the schedules hereto
contain no statements of fact which are untrue or misleading, or omit to state
any material fact which is necessary under the circumstances to prevent the
statements contained herein or in such schedules from being misleading. WSB
hereby covenants that it shall, as of the Effective Time of the Merger, amend
and/or supplement the schedules prepared and delivered pursuant to this Article
IV to ensure that the information set forth in such schedules accurately
reflects the then-current status of WSB and the WSB Subsidiaries.
4.27 EFFECTIVE DATE OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Each representation, warranty, covenant and agreement of WSB set
forth in this Agreement shall be deemed to be made on and as of the date hereof
and, as subsequently amended and/or supplemented as provided in Section 4.26, as
of the Effective Time of the Merger.
30
ARTICLE V
COVENANTS OF MVB PRIOR TO CLOSING
MVB hereby covenants and agrees with WSB as follows:
5.1 BUSINESS RECORDS AND INFORMATION. During the period commencing on the
date hereof, and ending on the Closing Date, MVB will afford WSB, its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of its business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
WSB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, operations, assets
and properties of MVB and the conditions thereof, and to update such examination
at such reasonable intervals as WSB shall deem appropriate. Such examination
shall be conducted in cooperation with the officers of MVB in such a manner as
to minimize, to the extent possible consistent with the conducting of a
comprehensive examination, any disruption of or interference with the normal
business operations of MVB. No such examination or WSB's examination prior to
the date of this Agreement, however, shall constitute a waiver or relinquishment
on the part of WSB of its right to rely upon the representations, warranties or
covenants made by MVB herein or pursuant hereto. MVB will permit an authorized
representative or representatives of WSB, designated as such from time to time
by WSB's President (the "WSB Representative") access during normal business
hours to all of its business, operations, properties, books, files and records
for the additional purpose of rendering any approvals required of WSB by MVB
pursuant to Section 5.2. In addition, MVB shall provide WSB and the WSB
Representative with three days' notice of all regular meetings of its Board of
Directors and notice, at the same time notice is given to members, of any
committee meeting, and the earliest possible notice of all special meetings of
its Board of Directors. MVB will permit the WSB Representative to attend and
observe all Board and committee meetings (except during confidential discussions
regarding the Merger), and MVB shall indemnify and hold harmless WSB, New MVB
and the WSB Representative in connection with actions taken by MVB: (i) pursuant
to any approvals obtained pursuant to Section 5.2; or (ii) during any Board or
committee meetings attended and observed by the WSB Representative. MVB will
hold in strict confidence all documents and information concerning WSB or the
WSB Subsidiaries obtained pursuant to the disclosure Schedules of Article IV
hereof or pursuant to Section 6.1 and will not use such documents or information
for its own benefit (except to the extent that such documents or information are
a matter of public record or require disclosure in any application necessary to
obtain regulatory approval of the Transactions contemplated by this Agreement)
and, if the Transactions contemplated herein are not consummated, such
confidence shall be maintained and all such documents and any documents provided
pursuant to Section 6.3(c) shall be returned to WSB, without any copies being
retained by MVB and MVB shall destroy any document, memoranda, notes and other
writings whatsoever prepared by MVB or any of its agents relating to or
containing the confidential information promptly upon notice by WSB. Upon
request by WSB, such destruction shall be certified in writing to WSB by an
authorized officer of MVB supervising such destruction.
5.2 LIMITATIONS UPON MVB PRIOR TO CLOSING. Except as required by this
Agreement, between the date hereof and the Closing Date, without the prior
written consent of WSB, which shall not be unreasonably withheld and which shall
be deemed granted if within five days (three days in the case of
31
Section 5.2(d)) after receipt of written request refusal of such written consent
is not received from WSB by MVB, MVB shall not do any of the following:
(a) Create or take action to incur any liabilities in excess of
$10,000 or having a term in excess of one year, other than liabilities
incurred in the usual and ordinary course of business or in connection
with the creation or performance of this Agreement;
(b) Except in the usual and ordinary course of business, create or
incur or suffer to exist any mortgage, lien, pledge, security interest,
charge, encumbrance or restriction of any kind against or in respect of
any property or right of MVB securing an obligation in excess of $10,000
or having a term in excess of one year, and except for a pledge of
security interests given in connection with the acceptance of repurchase
agreements or government deposits;
(c) Make or become a party to any contract or commitment in excess
of $10,000 or having a term in excess of one year, or renew, extend, amend
or modify any contract or commitment in excess of $10,000, except in the
usual and ordinary course of business or except in connection with the
Transactions contemplated in this Agreement or the Merger Agreement;
(d) Make any loan, loan commitment, or renewal or extension thereof
("Loan") to any person or entity, which, individually or when aggregated
with all other outstanding Loans made by MVB to such person or entity,
exceeds $250,000 if the Loan is unsecured or is secured but is an
exception to MVB's Loan Policy, or exceeds $500,000 if the Loan is secured
and in conformity to MVB's Loan Policy, or make any Loan to any of its
directors or executive officers;
(e) Purchase any loan participation interest in excess of $250,000;
(f) File a notice of default on any delinquent real estate secured
loan with a principal balance of $250,000 or more;
(g) Make any capital expenditures in excess of $10,000, except for
ordinary and necessary repairs and replacements;
(h) Sell or otherwise dispose of any of its assets or properties in
excess of $10,000 in value, except in the usual and ordinary course of its
business, or charge off any of its assets or properties in excess of
$10,000 in value;
(i) Declare or pay any dividend (cash, in kind, or stock) or make
any other distribution upon, or purchase or redeem, any shares of MVB
Stock;
(j) Except as contemplated herein, issue or sell or obligate itself
to issue or sell any shares of MVB Stock or any other securities
including, without limitation, any capital notes, or any warrants, rights
or options to acquire any shares of MVB Stock or other securities
otherwise than pursuant to this Agreement; except pursuant to the exercise
of the stock options set forth in Schedule 3.24;
32
(k) Acquire capital stock of any corporation or any interest in any
person except in the usual and ordinary course of its business;
(l) Amend its Articles of Incorporation or Bylaws, except for such
amendments as contemplated by this Agreement;
(m) Grant any salary increase over 5% or enter into or amend, except
as may be required by applicable law, any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, group
insurance or other benefit plan or any employment agreement or consulting
agreement or amend its Personnel Policy where the individual or aggregate
cost to MVB is increased, except as approved by WSB, which approval shall
not be unreasonably withheld;
(n) Pay any obligation or liability, absolute or contingent, in
excess of $25,000 except liabilities shown on the MVB Financial
Statements, or except in the usual and ordinary course of business or in
connection with the Transactions contemplated herein;
(o) Institute, settle or agree to settle any claim, action or
proceeding involving an expenditure by MVB or waiver of its claims in
excess of $25,000 before any court or governmental agency, except in the
usual and ordinary course of its business;
(p) Invest in any real estate except upon the foreclosure of loans
in the ordinary course of business, or acceptance of a deed in lieu of
foreclosure, in the ordinary course of business;
(q) Except in the usual and ordinary course of its business, enter
into any continuing contract or series of related contracts in excess of
$10,000 for the purchase of materials, supplies, equipment or services
which cannot be terminated without cause and without payment of any amount
as a penalty, bonus, premium or other compensation for such termination;
(r) Except as contemplated in Section 5.8 hereof, enter into or
amend any contract or agreement (other than loans or bank accounts) with
any officer, director or any affiliate of such person on terms that are
less favorable to MVB than could be obtained from an unrelated third party
on an arm's-length basis;
(s) File any applications for additional branches or to relocate
operations from any existing location, except as contemplated herein;
(t) Change any of MVB's basic policies and practices with respect to
liquidity management and cash flow planning, marketing, deposit
origination, lending, budgeting, profit and tax planning, personnel
practices, accounting or any other material aspect of its business or
operations, except such change as may be required in the opinion of MVB's
management to respond to economic or market conditions or as may be
required by the rules of the AICPA or FASB, by applicable law, or by bank
regulatory authorities;
33
(u) Introduce any material new products or services, or commence any
material new marketing campaigns or any material new sales compensation or
incentive programs or arrangements, except as approved by WSB, which
approval shall not be unreasonably withheld;
(v) Knowingly default in any material respect under any
Understanding to which MVB is a party, and which, individually or together
with other Understandings with respect to which a default by MVB exists,
would materially adversely affect the business, properties, financial
condition, results of operations or prospects of MVB;
(w) Conduct its business in a manner that would violate its Articles
of Incorporation or Bylaws or would materially violate or be in material
conflict with any law, ordinance, rule or regulation of any applicable
federal or state authority; provided, however, that no exception to this
Section 5.2(w) shall constitute a waiver of any rights of WSB under any
other provision of this Agreement; or
(x) Take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time of the Merger, or in any of the conditions to
the Merger set forth in Articles IX or X not being satisfied, or in a
material violation of any provision of this Agreement, except, in every
case, as may be required by applicable law.
5.3 AFFIRMATIVE CONDUCT OF MVB PRIOR TO CLOSING. Between the date hereof
and the Closing Date, MVB shall:
(a) Use its best efforts to obtain as expeditiously as possible and
cooperate with others to expeditiously bring about the satisfaction of the
conditions and approvals specified in Articles VII, VIII, IX and X hereof
and advise WSB promptly in writing of any matter which would make the
representations and warranties set forth in Article III hereof not true
and correct in all material respects at the Closing;
(b) Use and devote its best efforts consistent with this Agreement
to maintain and preserve intact its present business organization and to
maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with it;
(c) Carefully prepare or review and make available to WSB prior to
filing, all federal, state and local tax returns and reports to government
authorities regarding MVB required to be filed by it between the date
hereof and the Closing;
(d) Furnish WSB with such financial and other information with
respect to MVB and its properties, business and operations as in the
reasonable opinion of WSB, counsel for WSB and counsel for MVB shall be
necessary in order to prepare applications for and obtain the permits,
approvals, nondisapprovals, consents and authorizations referred to in
Article X hereof; such information will not contain any untrue statement
of a material fact or omit to state any material fact
34
required to be stated therein or necessary in order to make the
information contained therein not misleading;
(e) Provide WSB and the WSB Representative with MVB's monthly Board
package and all committee meeting packages at the time provided to MVB's
directors (excluding any confidential information regarding the
Transactions contemplated hereby);
(f) Provide WSB all monthly new loan reports, all monthly past due
loan reports, all listings of any new loans placed on non-accrual, all
monthly watchlist reports, and all listings of loans greater than $50,000
that have been downgraded within two days of when such reports are
prepared;
(g) Provide WSB with three days' notice and, subject to any
limitation or prohibition of any so-called "right to privacy" law, a copy
of the applicable credit report prior to making any Loan to any person or
entity which, individually or when aggregated with all other outstanding
Loans made by MVB to such person or entity, exceeds $250,000;
(h) Provide WSB with five days' notice prior to purchasing or
selling any loan participation interest;
(i) Provide WSB with five days' notice prior to initiating any
action to foreclose on real estate or personal property collateral and
provide WSB with monthly status reports on all foreclosed properties;
(j) Provide WSB with qualified appraisals on all newly acquired
foreclosed properties and on all existing foreclosed properties where
appraisals are or become more than 12 months old;
(k) Maintain insurance coverage at least equal to that now in effect
on all of its properties and on all properties for which it is
responsible, and carry not less than the same coverage for fidelity,
directors and officers, public liability, personal injury and property
damage that is presently in effect;
(l) Duly observe and conform to lawful requirements applicable to
its business in all material respects;
(m) Maintain its books of account and records in the regular manner
consistent with past practices and, where applicable, in all material
respects in accordance with generally accepted accounting principles and
applicable statutory and regulatory requirements applied on a consistent
basis;
(n) Notify WSB by telephone, confirmed promptly in writing, of any
breach or violation on MVB's part of any covenant contained herein, or of
the occurrence of an event which would cause any warranties or
representations made by MVB herein to be or become false or misleading, or
if MVB becomes a party or is threatened with becoming a party to any legal
or
35
equitable proceeding or governmental investigation, or upon the occurrence
of any event which would result in a material change in the circumstances
of MVB described in the representations and warranties contained herein;
and
(o) Increase its reserve for possible loan losses to a level deemed
adequate in the mutual opinion of MVB and WSB as of the month end
immediately preceding the Closing; provided, however, that if MVB and WSB
cannot agree upon the required level of loan loss reserves, the public
accounting firm of Xxxxx-Xxxxx, LLP shall determine the required level of
reserves.
5.4 INDEMNIFICATION. MVB hereby agrees to indemnify and hold harmless WSB
against, and with respect to, any liability, damages, losses, expenses or costs
arising from or by virtue of any misstatement or omission to state any fact
which is required to be disclosed by MVB for purposes of the inclusion of such
information in any regulatory filing made on behalf of the parties hereto for
the purpose of effecting the terms of this Agreement and consummating the
Transactions contemplated herein and for any material breach of any
representation, warranty, covenant or agreement of MVB under this Agreement.
5.5 EXECUTE MERGER AGREEMENT. As soon as possible after receipt of
shareholder and regulatory approvals, MVB shall execute the Merger Agreement.
5.6 DISCUSSION WITH THIRD PARTIES.
(a) STRATEGIC TRANSACTIONS. MVB: (i) shall not, and shall instruct
and cause each of its directors, officers, employees, agents,
representatives and advisors ("Representatives") not to, solicit or
encourage, directly or indirectly, inquires or proposals with respect to
any MVB Strategic Transaction Proposal (as hereinafter defined); and (ii)
except as expressly permitted by Section 5.6(b), shall not, and shall
instruct and cause each of its Representatives not to, furnish any non-
public information relating to or participate in any negotiations,
discussions or other activities concerning, any MVB Strategic Transaction
Proposal with any party other than WSB. MVB shall notify WSB promptly
after any MVB Strategic Transaction Proposal is received by, or any
negotiations or discussions regarding a MVB Strategic Transaction Proposal
are sought to be initiated, directly or indirectly, with MVB or any of its
Representatives, and shall disclose to WSB the identity of the third party
making or seeking to make such MVB Strategic Transaction Proposal, the
terms and conditions thereof and such other information as WSB reasonably
may request; provided, however, that if MVB receives a MVB Strategic
Transaction Proposal and the foregoing disclosure of such MVB Strategic
Transaction Proposal to WSB would violate a confidentiality agreement by
which MVB is bound, MVB: (i) shall make the foregoing disclosure only to
the maximum extent permissible under such confidentiality agreement; (ii)
shall return such MVB Strategic Transaction Proposal to the initiating
party without substantive response; and (iii) to the extent such
disclosure has not been made under clause (i) of this sentence, shall
notify WSB that a MVB Strategic Transaction Proposal has been received and
that the same has been returned to the initiating party without
substantive response. For purposes of this Section 5.6, a "MVB Strategic
Transaction Proposal" means any proposal regarding an acquisition or
purchase of all or
36
a significant (i.e., more than 5%) portion of the assets of or a
significant equity interest in, MVB or any merger or other business
combination involving MVB or any recapitalization involving MVB resulting
in an extraordinary dividend or distribution to MVB's shareholders or a
self-tender for or redemption of some or all of the outstanding shares of
MVB Stock.
(b) QUALIFYING PROPOSAL. Notwithstanding Section 5.6(a), following
receipt of a MVB Qualifying Strategic Transaction Proposal (as hereinafter
defined), neither MVB nor any of its Representatives shall be prohibited
from: (i) engaging in discussions or negotiations with a third party which
has made a proposal that satisfies the requirements of a MVB Qualifying
Strategic Transaction Proposal and thereafter providing to such third
party information previously provided or made available to WSB, provided
the third party shall have entered into a confidentiality agreement; (ii)
taking and disclosing to MVB's shareholders a position contemplated by
Rule 14e-2(a) under the Exchange Act, or otherwise making disclosure of
the MVB Qualifying Strategic Transaction Proposal to MVB's shareholders;
or (iii) subject to the terms of Section 11.1(d), terminating this
Agreement. For purposes of this Section 5.6, a "MVB Qualifying Strategic
Transaction Proposal" shall mean a bona fide written MVB Strategic
Transaction Proposal with respect to which MVB's Board of Directors shall
have determined, after consultation with MVB's counsel, that the action by
MVB contemplated under either clause (i), (ii) or (iii), as applicable, of
the immediately preceding sentence is required under the fiduciary duties
owed by the Board of Directors to the holders of MVB Stock, which
determination has been made acting in good faith and on the basis of a
written opinion from a financial advisor retained by MVB to the effect
that the financial terms of such MVB Strategic Transaction Proposal are,
from MVB's shareholders' perspective, superior to the Merger.
(c) DISCLOSURE AND TRADING. Upon receipt of the disclosure by WSB of
a WSB Strategic Transaction Proposal (as that term is defined in Section
6.6(a) hereof) involving WSB or any subsidiary thereof or a WSB
Acquisition Transaction (as that term is defined in Section 6.6(c)
hereof), MVB, its executive officers and directors shall, and each hereby
agrees to, maintain the confidentiality of all non-public information
regarding the WSB Strategic Transaction Proposal involving WSB or any
subsidiary thereof or the WSB Acquisition Transaction to the same extent
as required of WSB and/or any subsidiary thereof under the terms of any
confidentiality agreement to which WSB and/or any subsidiary is a party or
is bound and to refrain from trading in WSB Stock, MVB Stock and the
securities of the party or parties to the WSB Strategic Transaction
Proposal or the WSB Acquisition Transaction until the earlier of: (i) full
public disclosure of such non-public information has been made and trading
in the subject securities would not be a violation of applicable
securities laws; or (ii) the WSB Strategic Transaction Proposal or the WSB
Acquisition Transaction has been terminated or has expired by its terms
and disclosure of such non-public information is permitted under the terms
of any agreement regarding the transaction and trading in the subject
securities would not be a violation of applicable securities laws.
5.7 RESERVED.
5.8 MVB PROXY MATERIALS. The proxy statement, notice of meeting, form of
proxy and/or any other materials or documents (collectively, the "MVB Proxy
Materials") to be used in connection with
37
the MVB shareholders' meeting (the "MVB Meeting") required pursuant to Section
7.1 hereof, with respect to all information set forth therein relating to MVB,
the Agreement, the Merger Agreement and the Transactions, at the time of mailing
to shareholders and at the time of the MVB Meeting, shall:
(a) Comply in all material respects with the provisions of all
applicable laws and regulations; and
(b) Except with respect to any information regarding WSB or the WSB
Subsidiaries supplied to MVB by WSB for inclusion in the MVB Proxy
Materials, not contain any statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with
respect to any material fact or not omit to state any material fact
necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with
respect to the solicitation of a proxy for the MVB Meeting or subject
matter that has become false or misleading.
5.9 TERMINATION OF MVB STOCK OPTION PLANS AND MVB STOCK OPTIONS. Prior to
the Effective Time of the Merger and subject to WSB's compliance with Section
6.11 hereof, MVB shall take all steps necessary and appropriate to terminate the
1990 Plan and the 2001 Plan and all stock options granted thereunder, which have
not been exercised prior to the Effective Time of the Merger; provided, however,
that such terminations shall not be effective until the Effective Time of the
Merger.
5.10 TRANSACTION EXPENSES. MVB shall exercise its commercially reasonable
efforts to ensure that at least three days prior to the Effective Time of the
Merger, all attorneys, accountants, and other advisors and agents for MVB
(collectively, "Advisors") shall have submitted to MVB (with a copy to WSB)
estimates of their fees and expenses for all services rendered or to be rendered
in any respect in connection with the Transactions contemplated hereby to the
extent not already paid, and, based on such estimates, MVB shall have prepared
and submitted to WSB a summary of all of MVB's fees and expenses for the
Transactions as determined pursuant to Section 12.1 hereof. At the Effective
Time of the Merger: (i) such Advisors shall have submitted their final bills for
all fees and expenses to MVB for services rendered, a copy of which MVB shall
have caused to be delivered to WSB, and based on such summary, MVB shall have
prepared and submitted to WSB a final calculation of all of MVB's fees and
expenses for the Transactions; (ii) MVB shall have accrued or paid the amount of
such fees and expenses as calculated above, after WSB has been given an
opportunity to review all such bills and the calculation of all of MVB's fees
and expenses; and (iii) the amount of all of MVB's fees and expenses for the
Transactions shall be reasonable and shall in no event exceed $250,000 in the
aggregate, of which the expenses of the Xxxxxxx Companies for legal, consulting,
fairness opinion and all other services shall not exceed $175,000. WSB shall not
be liable for any of MVB's fees and expenses for the Transactions.
ARTICLE VI
COVENANTS OF WSB PRIOR TO CLOSING
WSB hereby covenants and agrees with MVB as follows:
38
6.1 BUSINESS RECORDS AND INFORMATION. During the period commencing on the
date hereof, and ending on the Closing Date, WSB will afford MVB, its
representatives, counsel, accountants, agents and employees reasonable access
during normal business hours to all of its business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
MVB and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, business, operations, assets
and properties of WSB and the WSB Subsidiaries and the conditions thereof, and
to update such examination at such intervals as MVB shall deem appropriate. Such
examination shall be conducted in cooperation with the officers of WSB or the
WSB Subsidiaries in such a manner as to minimize, to the extent possible
consistent with the conducting of a comprehensive examination, any disruption of
or interference with the normal business operations of WSB or the WSB
Subsidiaries. No such examination or MVB's examination prior to the date of this
Agreement, however, shall constitute a waiver or relinquishment on the part of
MVB of its right to rely upon the representations, warranties or covenants made
by WSB herein or pursuant hereto. WSB shall use its best efforts to have the WSB
Representative or another authorized representative available during MVB's
normal business hours to render approvals required pursuant to Section 5.2. WSB
will hold in strict confidence all documents and information concerning MVB
obtained pursuant to the disclosure Schedules of Article III hereof or pursuant
to Section 5.1 and will not use such documents or information for its own
benefit (except to the extent that such documents or information are a matter of
public record or require disclosure in any application necessary to obtain
regulatory approval of the Transactions contemplated by this Agreement) and, if
the Transactions contemplated herein are not consummated, such confidence shall
be maintained and all such documents and any documents provided pursuant to
Section 5.3(d) shall be returned to MVB, without any copies being retained by
WSB and WSB shall destroy any document, memoranda, notes and other writings
whatsoever prepared by WSB or any of its agents relating to or containing the
confidential information promptly upon notice by MVB. Upon request by MVB, such
destruction shall be certified in writing to MVB by an authorized officer of WSB
supervising such destruction.
6.2 LIMITATIONS UPON WSB PRIOR TO CLOSING. Except as required by this
Agreement, between the date hereof and the Closing Date, without the prior
written consent of MVB, which shall not be unreasonably withheld and which shall
be deemed granted if within five days after receipt of written request refusal
of such written consent is not received from MVB by WSB, WSB and, as applicable,
the WSB Subsidiaries, shall not do any of the following:
(a) Declare or pay a stock dividend of WSB Stock in excess of 5% (it
being recognized and understood that WSB may declare and pay a stock
dividend of up to 5%, which dividend will not affect the number of shares
of WSB Stock issuable pursuant to this Agreement);
(b) Repurchase more than 10% of the outstanding shares of WSB Stock
(it being recognized and understood that WSB may continue its practice of
limited stock repurchases, which repurchases will not affect the number of
shares WSB Stock issuable pursuant to this Agreement);
(c) Knowingly default in any material respect under any
Understanding to which WSB or a WSB Subsidiary is a party, and which,
individually or together with other Understandings with respect to which a
default by WSB or a WSB Subsidiary exists, would materially adversely
affect
39
the business, properties, prospects, financial condition, results of
operations or prospects of WSB and the WSB Subsidiaries; or
(d) Conduct their businesses in a manner that would violate their
respective Articles of Incorporation, Articles of Association or Bylaws or
would materially violate or be in material conflict with any law,
ordinance, rule or regulation of any applicable federal or state
authority; provided, however, that no exception to this Section 6.2(d)
shall constitute a waiver of any rights of MVB under any other provision
of this Agreement.
6.3 AFFIRMATIVE CONDUCT OF WSB PRIOR TO CLOSING. Between the date hereof
and the Closing Date, WSB shall:
(a) Use its best efforts to obtain as expeditiously as possible and
cooperate with others to expeditiously bring about the satisfaction of the
conditions and approvals specified in Articles VII, VIII, IX and X hereof,
including the organization of New MVB and approval of New MVB's sole
shareholder, and advise MVB promptly in writing of any matter which would
make the representations and warranties set forth in Article IV hereof not
true and correct in all material respects at the Closing;
(b) Use and devote its best efforts consistent with this Agreement
to maintain and preserve intact its present business organization and to
maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with it;
(c) Furnish MVB with such financial and other information with
respect to WSB and its properties, business and operations as in the
reasonable opinion of MVB, counsel for MVB and counsel for WSB shall be
necessary in order to prepare applications for and obtain the permits,
approvals, nondisapprovals, consents and authorizations referred to in
Article X hereof; such information will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the information contained
therein not misleading;
(d) Maintain its and the WSB Subsidiaries' insurance coverage at
least equal to that now in effect on all of their properties and on all
properties for which they are responsible, and carry the same coverage for
fidelity, directors and officers, public liability, personal injury and
property damage that is presently in effect;
(e) Duly observe and conform to lawful requirements applicable to
its and the WSB Subsidiaries' business in all material respects;
(f) Maintain its and the WSB Subsidiaries' books of account and
records in the regular manner in accordance with generally accepted
accounting principles, with all applicable statutory and regulatory
requirements applied on a consistent basis; and
40
(g) Notify MVB by telephone, confirmed promptly in writing, of any
breach or violation on WSB's part of any covenant contained herein, or of
the occurrence of an event which would cause any warranties or
representations made by WSB herein to be or become false or misleading, or
if WSB becomes a party or is threatened with becoming a party to any legal
or equitable proceeding or governmental investigation, or upon the
occurrence of any event which would result in a change in the
circumstances of WSB described in the representations and warranties
contained herein.
6.4 INDEMNIFICATION. WSB hereby agrees to indemnify and hold harmless MVB
against, and with respect to, any liability, damages, losses, expenses or costs
arising from or by virtue of any misstatement or omission to state any fact
which is required to be disclosed by WSB for purposes of the inclusion of such
information in any regulatory filing made on behalf of the parties hereto for
the purpose of effecting the terms of this Agreement and consummating the
Transactions contemplated herein and for any material breach of any
representation, warranty, covenant or agreement of WSB under this Agreement.
6.5 EXECUTE MERGER AGREEMENT. As soon as possible after receipt of
shareholder and regulatory approvals, WSB shall cause New MVB to execute the
Merger Agreement.
6.6 DISCUSSION WITH THIRD PARTIES.
(a) STRATEGIC TRANSACTIONS. Except as provided in Section 6.6(c),
WSB and the WSB Subsidiaries: (i) shall not, and shall instruct and cause
each of their Representatives not to, solicit or encourage, directly or
indirectly, inquires or proposals with respect to any WSB Strategic
Transaction Proposal (as hereinafter defined); and (ii) except as
expressly permitted by Section 6.6(b), shall not, and shall instruct and
cause each of their Representatives not to, furnish any non-public
information relating to or participate in any negotiations, discussions or
other activities concerning, any WSB Strategic Transaction Proposal with
any party other than MVB. WSB and the WSB Subsidiaries shall notify MVB
promptly after any WSB Strategic Transaction Proposal is received by, or
any negotiations or discussions regarding a WSB Strategic Transaction
Proposal are sought to be initiated with, directly or indirectly, WSB or
the WSB Subsidiaries or any of their Representatives, and shall disclose
to MVB the identity of the third party making or seeking to make such WSB
Strategic Transaction Proposal, the terms and conditions thereof and such
other information as MVB reasonably may request; provided, however, that
if WSB or any of the WSB Subsidiaries receives a WSB Strategic Transaction
Proposal and the foregoing disclosure of such WSB Strategic Transaction
Proposal to MVB would violate a confidentiality agreement by which WSB or
the WSB Subsidiaries are bound, WSB: (i) shall make the foregoing
disclosure only to the maximum extent permissible under such
confidentiality agreement: (ii) shall return such WSB Strategic
Transaction Proposal to the initiating party without substantive response:
and (iii) to the extent such disclosure has not been made under clause (i)
of this sentence, shall notify MVB that a WSB Strategic Transaction
Proposal has been received and that the same has been returned to the
initiating party without substantive response. For purposes of this
Section 6.6, a "WSB Strategic Transaction Proposal" means any proposal
regarding an acquisition or purchase of all or a significant (i.e., more
than 5%) portion of the assets of or a significant equity interest in, WSB
or
41
any of the WSB Subsidiaries, or any merger or other business combination
involving WSB or any of the WSB Subsidiaries, or any recapitalization
involving WSB or any of the WSB Subsidiaries resulting in an extraordinary
dividend or distribution to WSB's shareholders or a self-tender for or
redemption of more than 10% of the outstanding shares of WSB Stock.
(b) QUALIFYING PROPOSAL. Notwithstanding Section 6.6(a), following
receipt of a WSB Qualifying Strategic Transaction Proposal (as hereinafter
defined), neither WSB, any of the WSB Subsidiaries, nor any of their
Representatives shall be prohibited from: (i) engaging in discussions or
negotiations with a third party which has made a proposal that satisfies
the requirements of a WSB Qualifying Strategic Transaction Proposal and
thereafter providing to such third party information previously provided
or made available to MVB, provided the third party shall have entered into
a confidentiality agreement; (ii) taking and disclosing to WSB's
shareholders a position contemplated by Rule 14e-2(a) under the Exchange
Act, or otherwise making disclosure of the WSB Qualifying Strategic
Transaction Proposal to WSB's shareholders; or (iii) subject to the terms
of Section 11.1(e) terminating this Agreement. For purposes of this
Section 6.6, a "WSB Qualifying Strategic Transaction Proposal" shall mean
a bona fide written WSB Strategic Transaction Proposal with respect to
which WSB's Board of Directors shall have determined, after consultation
with WSB's counsel, that the action by WSB contemplated under either
clause (i), (ii) or (iii), as applicable, of the immediately preceding
sentence is required under the fiduciary duties owed by the Board of
Directors to the holders of WSB Stock, which determination has been made
acting in good faith and on the basis of a written opinion from a
financial advisor retained by WSB to the effect that the financial terms
of such WSB Strategic Transaction Proposal are, from WSB's shareholders'
perspective, superior to the Merger.
(c) WSB ACQUISITION TRANSACTION. Notwithstanding Sections 6.6(a) or
(b) hereof, WSB or any of the WSB Subsidiaries shall be permitted to and
may cause their Representatives to solicit, encourage, discuss, negotiate,
enter into agreements, and carry out and complete transactions regarding a
WSB Acquisition Transaction (as hereinafter defined), provided, however,
that should WSB enter into or modify any agreement, or complete without
any agreement, any WSB Acquisition Transaction which has a material
adverse effect upon WSB or the Transactions contemplated by this Agreement
and the Merger Agreement without written approval of MVB, then such action
shall constitute a breach under this Agreement giving rise to a right of
termination by MVB in accordance with Section 11.1(e) of this Agreement.
For purposes of this Agreement, "WSB Acquisition Transaction" shall mean:
(i) a merger or consolidation or any similar transaction where WSB or any
of its subsidiaries will be the surviving or resulting corporation or
where the holders of WSB Stock or any of WSB's subsidiaries immediately
prior to the completion of the transaction will own 50% or more of the
surviving or resulting corporation immediately after the completion of the
transaction; (ii) a purchase, lease or other acquisition of all or
substantially all of the assets of or assumption of all or substantially
all the deposits of another corporation, partnership or limited liability
company which business is permissible under the BHCA, and Regulation Y
promulgated pursuant thereto; or (iii) the purchase or other acquisition
of securities representing 10% or more of the voting power of another
corporation, partnership or limited liability company which business is
permissible under the BHCA and Regulation Y promulgated pursuant thereto.
WSB shall promptly notify MVB of any WSB Acquisition Transaction and shall
disclose to MVB
42
the identity of the party or parties to the transaction, and the terms and
conditions thereof. To the extent WSB makes a disclosure of any non-public
information to MVB, its executive officers and/or directors, then MVB and
its executive officers and directors shall, and each hereby agrees to,
maintain the confidentiality of all non-public information regarding the
WSB Acquisition Transaction so disclosed and to refrain from trading in
WSB Stock, MVB Stock and the securities of the party or parties to the WSB
Acquisition Transaction so disclosed in accordance with the provisions of
Section 5.6(c) hereof.
(d) DISCLOSURE AND TRADING. Upon receipt of the disclosure by MVB of
a MVB Strategic Transaction Proposal involving MVB, WSB, its executive
officers and directors shall, and each hereby agrees to, maintain the
confidentiality of all non-public information regarding the MVB Strategic
Transaction Proposal involving MVB to the same extent as required of MVB
under the terms of any confidentiality agreement to which MVB is a party
or is bound and to refrain from trading in WSB Stock, MVB Stock and the
securities of the party or parties to the MVB Strategic Transaction
Proposal until the earlier of: (i) full public disclosure of such
non-public information has been made and trading in the subject securities
would not be a violation of applicable securities laws; or (ii) the MVB
Strategic Transaction Proposal has been terminated or has expired by its
terms and disclosure of such non-public information is permitted under the
terms of any agreement regarding the transaction and trading in the
subject securities would not be a violation of applicable securities laws.
6.7 PREPARATION OF WSB REGISTRATION STATEMENT AND THE MVB PROXY MATERIALS.
WSB shall promptly prepare and file with the SEC a Registration Statement on
Form S-4 (the "WSB Registration Statement"), in which the MVB Proxy Materials
will be included. Each of WSB and MVB shall use its best efforts to have the WSB
Registration Statement and any amendments or supplements thereto declared
effective under the Securities Act as promptly as practicable after such filing.
WSB shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of WSB Common
Stock in the Merger, and MVB shall furnish all information concerning MVB and
the holders of MVB Common Stock as may be reasonably requested in connection
with any such action.
6.8 WSB REGISTRATION STATEMENT. The WSB Registration Statement, with
respect to all information set forth therein relating to WSB, the Agreement, the
Merger Agreement and the Transactions, at the time of mailing to MVB's
shareholders and at the time of the MVB Meeting, shall:
(a) Comply in all material respects with the provisions of all
applicable laws and regulations; and
(b) Except with respect to any information regarding MVB supplied to
WSB by MVB for inclusion in the MVB Proxy Materials, not contain any
statement which, at the time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact or
not omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the
43
solicitation of a proxy for the same meeting or subject matter that has
become false or misleading.
6.9 COVENANT REGARDING BOARD OF DIRECTORS OF MERGED BANK. At the Closing,
WSB shall cause New MVB to deliver to MVB: (i) the written resignations as
directors of New MVB of all incumbent directors, except for Xxxxxxx Xxxxxx and
Xxxx X. Xxxx, and a copy of resolutions duly adopted by its Board of Directors,
which copy shall be certified by its Corporate Secretary, providing for the
appointment of eight directors of MVB to the Board of Directors of New MVB
effective as of the Closing Date; and (ii) the written resignations as officers
of New MVB of all incumbent officers and a copy of resolutions duly adopted by
its Board of Directors, which copy shall be certified by its Corporate
Secretary, providing for the appointment of all officers of MVB as officers of
New MVB effective as of the Closing Date. For a period of two years from the
Effective Time of the Merger, WSB shall: (i) cause to be elected to the Board of
Directors of the Merged Bank, all incumbent directors of Merged Bank as of the
day after the Closing Date who so choose to be elected; and (ii) not increase
the total number of directors of the Merged Bank as of the day after the Closing
Date by more than five.
6.10 COVENANT REGARDING BOARD OF DIRECTORS OF WSB. WSB, through its Board
of Directors, shall nominate, recommend the election of, and include as nominees
for election along with other WSB director nominees in any management proxy
statement or other document which solicits WSB shareholder votes or consents to
elect WSB directors and otherwise use its best efforts to cause to be elected to
its Board of Directors for at least two years after the Effective Time of the
Merger one member of MVB's Board of Directors designated pursuant to Section
1.11 hereof.
6.11 COVENANT REGARDING SUBSTITUTE STOCK OPTIONS. WSB shall take all steps
necessary and appropriate to issue substitute stock options, effective at the
Effective Time of the Merger, to each optionee then holding a valid outstanding
stock option granted pursuant to the 1990 Plan in accordance with and pursuant
to the terms of Section 1.6 hereof.
ARTICLE VII
MEETING OF SHAREHOLDERS AND FEDERAL SECURITIES LAWS
MVB hereby covenants and agrees with WSB as follows:
7.1 SHAREHOLDERS' MEETING. MVB will, promptly after execution of this
Agreement, cause the MVB Meeting to be duly called and held upon requisite
notice and shall obtain shareholder approval:
(a) Authorizing and approving this Agreement and the Transactions
contemplated herein; and
(b) For such other business as its Board of Directors deems
advisable and proper in connection therewith.
44
MVB, through its Board of Directors, will, subject to the exercise of its
fiduciary duties, recommend that its shareholders approve the Transactions
contemplated hereby, and will use its best efforts to obtain the affirmative
votes of the holders of the largest possible percentage of its outstanding
shares of common stock.
7.2 FEDERAL SECURITIES LAWS. In obtaining the consent of its shareholders
to the matters described in Section 7.1 hereof, MVB and its officers, directors,
controlling shareholders, and representatives, will, in all respects, comply
with Sections 10 and 14 of the Exchange Act, the rules and regulations of the
SEC promulgated thereunder, the rules and regulations of the Commissioner, and
the securities laws of all states in which shareholders of MVB reside, if
required. Without in any way limiting the generality of the forgoing, MVB agrees
that the MVB Proxy Materials:
(a) Will be filed with, and not be used before the same are cleared
for use by the SEC and the Commissioner and MVB will cooperate with WSB in
connection with WSB's filings, if any, of applications for approvals and
the issuance of permits and orders for the distribution of WSB Stock to
MVB shareholders by the securities administrators of all states in which
MVB shareholders reside;
(b) Will contain all of the material information required by the
Exchange Act and the rules and regulations of the SEC and Commissioner
thereunder; and
(c) Will not 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, except that neither party
warrants the accuracy or completeness of any information contained therein
which is furnished to it by the other relating to the business, assets,
properties, financial condition or management of the other or any
corporation or person affiliated therewith.
WSB and MVB will use their respective best efforts to obtain clearance by
all appropriate regulatory authorities for the use of the MVB Proxy Materials.
WSB and MVB will consult and cooperate with the other in the preparation of the
WSB Registration Statement and the MVB Proxy Materials for the MVB Meeting.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MVB
All obligations of MVB to consummate the Transactions contemplated herein
are subject to the satisfaction, on or before the Closing Date, of the following
conditions precedent, unless compliance with or the occurrence of any one or
more of such conditions precedent is waived in writing by MVB:
8.1 CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of WSB contained in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
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8.2 PERFORMANCE OF OBLIGATIONS. WSB shall have performed and satisfied in
all material respects all of the covenants, agreements, obligations and
conditions required by this Agreement to be performed and satisfied by WSB at or
prior to the Closing Date.
8.3 ABSENCE OF MATERIAL CHANGES. Between the date of this Agreement and
the Closing Date there shall have been: (i) no damage, destruction, whether or
not covered by insurance (except damage, destruction or loss for which, prior to
the Closing Date, WSB has been compensated by insurance in such measure as to
fully cover the replacement or repair of all damage, destruction or loss) or
Operating Loss, materially and adversely affecting the business or prospects of
WSB; (ii) no material adverse change in the business, properties, financial
condition, results of operations or prospects of WSB; and (iii) an absence of
the institution of litigation involving WSB or any of its assets (including the
WSB Subsidiaries) which, if determined adverse to WSB or the WSB Subsidiaries,
would have a material adverse effect upon WSB taken as a whole, unless MVB shall
have received an opinion satisfactory to it of counsel handling such matter
stating that such action or proceeding will not, in all likelihood, have a
material adverse effect upon WSB.
8.4 OFFICERS' CERTIFICATE. There shall have been delivered to MVB at the
Closing a certificate executed by the President and Chief Executive Officer, by
the Corporate Secretary, and by the Chief Financial Officer of WSB certifying,
to the best of their knowledge, compliance by WSB with all of the provisions of
Sections 8.1, 8.2, 8.3, 8.6 and 8.7 of this Agreement.
8.5 FAIRNESS OPINION. The Board of Directors of MVB shall have received an
opinion of The Xxxxxxx Group, dated as of the date of this Agreement and updated
as of a date within two weeks prior to the mailing date of the MVB Proxy
Materials to the effect that the consideration in the form of WSB Stock and cash
or a combination thereof in the Merger is fair, from a financial point of view,
to MVB and its shareholders and such opinion shall not have been withdrawn prior
to the Closing Date.
8.6 APPOINTMENT OF WSB DIRECTOR. WSB shall have delivered to MVB at the
Closing a copy of resolutions duly adopted by its Board of Directors, which copy
shall be certified by its Corporate Secretary, providing for the appointment of
Xxxx Xxxxxxxxx to the WSB Board of Directors, as required by Section 1.11
hereof, effective as of the Closing Date.
8.7 APPOINTMENT OF NEW MVB DIRECTORS AND OFFICERS. New MVB shall have
delivered to MVB at the Closing: (i) the written resignations as directors of
New MVB of all incumbent directors, except for Xxxxxxx Xxxxxx and Xxxx X. Xxxx;
(ii) the written resignations as officers of New MVB of all incumbent officers;
(iii) a copy of resolutions duly adopted by its Board of Directors, which copy
shall be certified by its Corporate Secretary, providing for the appointment of
eight directors of MVB to the Board of Directors of New MVB effective as of the
Closing Date; and (iv) a copy of resolutions duly adopted by its Board of
Directors, which copy shall be certified by its Corporate Secretary, providing
for the appointment of all officers of MVB as officers of New MVB effective as
of the Closing Date.
8.8 CLOSING DOCUMENTS. WSB shall have delivered to MVB the Closing
documents required pursuant to the Closing Schedule, Exhibit "D," and Section
2.3 of this Agreement.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF WSB
All obligations of WSB to consummate the Transactions contemplated herein
are subject to the satisfaction, on or before the Closing Date, of the following
conditions precedent, unless compliance with or the occurrence of any one or
more of such conditions precedent is waived in writing by WSB:
9.1 CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of MVB contained in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
9.2 PERFORMANCE OF OBLIGATIONS. MVB shall have performed and satisfied in
all material respects all of the covenants, agreements, obligations and
conditions required by this Agreement to be performed and satisfied by MVB at or
prior to the Closing Date.
9.3 ABSENCE OF MATERIAL CHANGES. Between the date of this Agreement and
the Closing Date there shall have been: (i) no damage, destruction, whether or
not covered by insurance (except damage, destruction or loss for which, prior to
the Closing Date, MVB has been compensated by insurance in such measure as to
fully cover the replacement or repair of all damage, destruction or loss) or
Operating Loss, materially and adversely affecting the business or prospects of
MVB; (ii) no material adverse change in the business, properties, financial
condition, results of operations or prospects of MVB; and (iii) an absence of
the institution of litigation involving MVB or any of its assets which, if
determined adverse to MVB, would have a material adverse effect upon MVB, unless
WSB shall have received an opinion satisfactory to it of counsel handling such
matter stating that such action or proceeding will not, in all likelihood, have
a material adverse effect upon MVB.
9.4 AFFILIATE'S LETTERS. MVB shall have delivered to WSB Affiliate's
Letters, substantially in the form of Exhibit "C" hereto, signed by each of its
affiliates, in accordance with Section 1.13 hereof.
9.5 OFFICERS' CERTIFICATE. There shall have been delivered to WSB at the
Closing a certificate executed by the President and Chief Executive Officer, by
the Corporate Secretary, and by the Chief Financial Officer of MVB certifying,
to the best of their knowledge, compliance by MVB with all of the provisions of
Sections 9.1, 9.2, 9.3, 9.4 and 9.6 of this Agreement.
9.6 DIRECTOR'S AGREEMENTS. MVB shall have delivered to WSB, Director's
Agreements, substantially in the form of Exhibit "B" hereto, signed by each of
its directors, in accordance with Section 1.12 hereof.
9.7 CLOSING DOCUMENTS. MVB shall have delivered to WSB the Closing
documents required pursuant to the Closing Schedule, Exhibit "D," and Section
2.3 of this Agreement.
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ARTICLE X
CONDITIONS PRECEDENT TO THE MERGER
The obligations of WSB and MVB to proceed with the Merger and the
Transactions provided for herein are subject to the fulfillment, at or prior to
the Effective Time of Merger, of the following conditions:
10.1 PERMITS AND APPROVALS. Appropriate permits or approvals from the
Commissioner, the FRB, the FDIC, and any other governmental agencies having
jurisdiction which are necessary to carry out the Transactions contemplated in
this Agreement, shall have been received without the imposition of any
conditions or requirements which, in the reasonable opinion of the affected
party, are materially burdensome or undesirable, and the United States
Department of Justice shall not have taken any adverse action within the period
allowed under 12 U.S.C. Section 1828(c)(6). Said permits and approvals shall be
on terms and conditions acceptable to WSB and MVB and shall include, but shall
not be limited to, the following:
(a) Issuance of a charter for New MVB by the Commissioner, approval
for federal deposit insurance by the FDIC, and approval for membership in
the Federal Reserve by the Reserve Bank;
(b) Prior written approval from the FRB for WSB to acquire control
of MVB pursuant to the BHCA;
(c) Prior written approval from the Commissioner for: (i) WSB to
acquire control of MVB pursuant to Financial Code Sections 700 et seq. and
(ii) New MVB to merge with MVB pursuant to Financial Code Sections 4880 et
seq.;
(d) Prior written approval from the Reserve Bank pursuant to 12
U.S.C. 1828(c)(2)(B);
(e) The declaration as effective by the SEC of the WSB Registration
Statement with respect to the shares of WSB Stock to be issued upon
consummation of the Merger;
(f) Prior written approval of and the issuance of any required
permits or orders related to any application or notification filing
required with any state securities administrator or the confirmation of an
exemption from a notification filing in connection with the distribution
of WSB Stock to MVB shareholders; and
(g) Any and all other actions required by the shareholders of MVB
and New MVB to authorize or effect the Transactions called for herein
shall have been duly and validly taken.
10.2 TAX RULING OR OPINION. Receipt by the parties of the opinion of
Xxxxx-Xxxxx, LLP to the effect that:
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(a) The Merger constitutes a "reorganization" within the meaning of
IRC Section 368(a)(1)(A) by reason of the application of IRC Section
368(a)(2)(D);
(b) WSB, MVB and New MVB are each a "party" to a reorganization
within the meaning of IRC Section 368(b);
(c) Neither WSB, New MVB nor MVB will recognize federal taxable gain
or loss as a result of the Merger;
(d) The federal income tax basis and holding periods of the assets
exchanged between the parties to the Merger will be the same as the
federal income tax basis and holding periods of those assets prior to the
Merger;
(e) To the extent that MVB stockholders exchange MVB Stock in the
Merger solely for WSB Stock, (i) no gain or loss will be recognized on the
exchange, (ii) the federal income tax basis of the shares of WSB Stock
received by former holders of MVB Stock will equal the federal income tax
basis of such stockholders' shares of MVB Stock (reduced by any amount
allocable to fractional share interests for which cash is received)
exchanged, and (iii) the holding period for the shares of WSB Stock
received will include the holding period for the shares of MVB Stock
exchanged, provided that the MVB Stock exchanged was held as a "capital
asset" as such term is defined in IRC Section 1221;
(f) To the extent that holders of MVB Stock exchange MVB Stock in
the Merger solely for cash, (i) gain or loss will be recognized equal to
the difference between the amount of cash received and the federal income
tax basis in their shares of MVB Stock exchanged, and (ii) the nature of
the gain or loss recognized will be capital gain or loss if the shares of
MVB Stock exchanged were held as a capital asset;
(g) To the extent that holders of MVB Stock receive a combination of
cash and WSB Stock (other than cash in lieu of fractional shares), (i)
loss, if any, will not be recognized, (ii) gain, if any, will be
recognized in an amount equal to the lesser of (1) the difference between
the fair market value of all consideration received in the exchange (WSB
Stock plus cash) and the basis in the MVB Stock surrendered or (2) the
amount of cash received in the exchange; (iii) the federal income tax
basis of the WSB Stock received by holders of MVB Stock in the Merger will
be equal to the total federal income tax basis of the MVB Stock exchanged,
decreased by the amount of cash (other than cash received in lieu of
fractional share interests) received in the exchange, and increased by the
amount of gain recognized in the exchange, if any, and (iv) the holding
period of the WSB Stock received in the Merger will include the holding
period for which holders of MVB Stock held their MVB Stock provided, that
such MVB Stock was held as a capital asset; and
(h) To the extent that cash is received by holders of MVB Stock in
lieu of fractional share interests in WSB Stock, the cash will be treated
as being received by the holders of MVB Stock as a distribution in
redemption of such stockholders' fractional share interests, subject to
the provisions and limitations of IRC Section 302.
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10.3 ABSENCE OF LITIGATION. On the Closing Date and at the Effective Time
of the Merger:
(a) There shall be no action pending before any court of competent
jurisdiction in which any injunction is sought by any governmental
authority against the Transactions contemplated hereby, unless WSB shall
have received an opinion satisfactory to it of counsel handling such
matter for WSB or MVB stating that such action or proceeding will not, in
all likelihood, result in a restraint or prohibition; and
(b) There shall be in effect no order, writ, injunction or decree of
any court or governmental authority prohibiting the consummation of any of
the Transactions contemplated hereby.
10.4 SHAREHOLDER APPROVALS.
(a) APPROVAL OF MERGER. This Agreement shall have been approved by
the holders of at least a majority of the issued and outstanding shares of
MVB Stock entitled to vote, and by at least a majority of the issued and
outstanding shares of New MVB Stock entitled to vote.
(b) OTHER ACTIONS. Any and all other actions required by the
shareholders of MVB and New MVB to authorize or effect the Transactions
called for herein shall have been duly and validly taken.
ARTICLE XI
TERMINATION
11.1 TERMINATION OF THIS AGREEMENT. This Agreement shall terminate and be
of no further force and effect as between the parties hereto, except as to
liability for a material breach of any representation, warranty or covenant
occurring or arising prior to the date of termination, upon the occurrence of
any of the following:
(a) Immediately upon the expiration of 30 days from the date that
WSB has given notice to MVB of breach or default by MVB in the performance
of any covenant, agreement, representation, warranty, duty or obligation
hereunder, including, but not limited to, the occurrence of any material
changes as set forth in Section 9.3 hereof; provided, however, that no
such termination shall be effective if, within said 30-day period, MVB
shall have substantially corrected and cured the grounds for the
termination as set forth in said notice of termination;
(b) Immediately upon the expiration of 30 days from the date that
MVB has given notice to WSB of breach or default by WSB in the performance
of any covenant, agreement, representation, warranty, duty or obligation
hereunder, including, but not limited to, the occurrence of any material
changes as set forth in Section 8.3 hereof; provided, however, that no
such termination shall be effective if, within said 30-day period WSB
shall have substantially corrected and cured the grounds for the
termination as set forth in said notice of termination;
50
(c) Upon the expiration of 30 days after the Commissioner, the FDIC,
the FRB or any other applicable regulatory agency denies or refuses in
writing to grant the approvals, nondisapprovals, consents, or
authorizations required to be obtained in order to consummate the
Transactions contemplated by this Agreement, unless within said 30-day
period the parties hereto agree to appeal or resubmit the application to
the regulatory authority which has denied or refused to grant such
approval, nondisapproval, consent, authorization or ruling, as the case
may be;
(d) Immediately after: (i) WSB is notified by MVB or WSB otherwise
becomes aware that, pursuant to Section 5.6, MVB has received a MVB
Qualifying Strategic Transaction Proposal; and (ii) payment by MVB to WSB
of the Termination Fee pursuant to Section 11.4(a) hereof;
(e) Immediately after: (i) MVB is notified by WSB or MVB otherwise
becomes aware that, pursuant to Section 6.6, WSB has received a WSB
Qualifying Strategic Transaction Proposal that is not a WSB Acquisition
Transaction; and (ii) WSB has provided MVB with evidence showing that WSB
has used its best efforts by taking all reasonable measures necessary to
provide for the inclusion of MVB in the WSB Qualifying Strategic
Transaction; and (iii) payment by WSB of the Termination Fee pursuant to
Section 11.4(a) hereof; provided, however, in the event WSB has received a
WSB Qualifying Strategic Transaction Proposal that is not a WSB
Acquisition Transaction and that does not require WSB to abandon the
Merger as a condition to the consummation of the transaction contemplated
by the WSB Qualifying Strategic Transaction Proposal, then this Agreement
will not be terminated and WSB shall not be obligated to pay MVB the
Termination Fee pursuant to Section 11.4(a) hereof; or (iv) WSB is
notified by MVB that WSB has breached this Agreement as set forth in
Section 6.6(c) and payment by WSB of the Termination Fee pursuant to
Section 11.4(a) hereof;
(f) By notice by WSB to MVB or by MVB to WSB, if the Closing has not
occurred on or before December 31, 2002, but subject to the expiration of
any statutory waiting periods following receipt of any required regulatory
approvals received prior to December 31, 2002, unless said date shall be
extended by the mutual agreement of the parties hereto and unless such
failure results primarily from any material breach pursuant to Sections
11.1(a) or (b) or by virtue of the events described in Sections 11.1(c),
(d) or (e);
(g) In the event the WSB Average Price is less than $14.00; or
(h) Upon the mutual agreement of the parties hereto.
11.2 IMMATERIAL BREACH. Notwithstanding anything to the contrary contained
herein, no party hereto shall have the right to terminate this Agreement on
account of its own breach or due to any immaterial breach by any other party
hereto of any covenant, agreement, representation, warranty, duty or obligation
hereunder.
11.3 EFFECT OF TERMINATION. If this Agreement shall be terminated as
provided herein, each party shall redeliver all documents, work papers and other
material of the other party relating to the
51
Transactions contemplated herein to the party furnishing the same, except that
the foregoing shall not apply to any documents, work papers, material or
information which is a matter of public knowledge. No termination of this
Agreement under this Article XI for any reason or in any manner, except as
permitted by Sections 11.1(f), (g) and (h), shall release, or be construed as so
releasing, any party hereto from any liability or damage to any other party
hereto arising out of, in connection with or otherwise relating to, directly or
indirectly, said party's material and bad faith breach, default or failure in
performance of any of its covenants, agreements, duties or obligations arising
hereunder, or any breaches of any representation or warranty contained herein;
provided, however, neither party shall be liable to the other for termination
pursuant to Section 11.1(c) for the failure of the Commissioner, the FRB, or any
other applicable regulatory agency to grant the approvals, nondisapprovals,
consents, or authorizations required if the failure is not the result of a
material breach by that party of a representation, warranty or covenant set
forth in this Agreement. If, however, such termination shall result from an
election to terminate by WSB pursuant to Section 11.1(a), then MVB shall pay to
WSB, as reasonable and full liquidated damages and reasonable compensation for
the loss sustained thereby and not as a penalty or forfeiture, the Liquidated
Damages as set forth in Section 11.4(b). If, however, such termination shall
result from an election to terminate by MVB pursuant to Section 11.1(b), then
WSB shall pay to MVB, as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby and not as a penalty for forfeiture,
the Liquidated Damages as set forth in Section 11.4(b). If, however, such
termination shall result from an election to terminate by WSB or MVB pursuant to
Section 11.1(d), then MVB shall pay to WSB the Termination Fee pursuant to
Section 11.4(a). If, however, such termination shall result from an election to
terminate by MVB or WSB pursuant to Section 11.1(e), then WSB shall pay to MVB
the Termination Fee pursuant to Section 11.4(a).
11.4 TERMINATION FEE AND LIQUIDATED DAMAGES.
(a) TERMINATION FEE. The Termination Fee shall be the amount of
$1,750,000 (the "Termination Fee") in the event this Agreement is
terminated pursuant to Section 11.1(d) or Section 11.1(e).
(b) LIQUIDATED DAMAGES. As reasonable and full liquidated damages
and reasonable compensation for the loss sustained and not as a penalty or
forfeiture in the event that this Agreement is terminated pursuant to
Section 11.1(a) or Section 11.1(b), the liquidated damages shall be the
amount of $400,000 (the "Liquidated Damages").
(c) CANCELLATION FEE. WSB shall pay MVB, as reasonable and full
liquidated damages and reasonable compensation for the loss sustained and
not as a penalty or forfeiture, a cancellation fee in the amount of
$1,000,000 (the "Cancellation Fee") in the event: (i) the Agreement is
terminated pursuant to Section 11.1(c) hereof, or the Closing is delayed
beyond February 28, 2003, as a result of WSB proceeding with an
acquisition of another banking institution; and (ii) WSB proceeded with
the acquisition without MVB's prior written approval.
(d) EXCLUSIVE REMEDY. Except in the event the responsible party
fails to pay the Termination Fee, the Liquidated Damages, or the
Cancellation Fee, as applicable, within ten business days after receipt of
an invoice therefor, which period shall be extended by an additional
52
reasonable time if the responsible party has reasonably disputed the
existence or amount of such obligations, timely receipt of such payment
shall constitute an exclusive remedy, and following such receipt and
acceptance, the receiving party shall be barred from recovering damages
for any breach of any term of this Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 EXPENSES. WSB and MVB agree that WSB and MVB shall each bear their
own expenses incurred in connection with the negotiation, preparation, and
performance of this Agreement, including legal and accounting fees, printing
costs, filing fees, and other necessary expenses regardless of whether the
Merger or any of the Transactions contemplated under this Agreement are
consummated. By way of example, the parties agree that: (A) WSB shall bear the
expense of: (i) the preparation and delivery of the tax opinion; (ii) the
preparation of the WSB Registration Statement (except the MVB Proxy Materials),
including filing fees and fees related to conversion of the WSB Registration
Statement into electronic format for filing with the SEC; (iii) filing fees and
related costs of regulatory applications including approvals and permits or
orders of state securities administrators; (iv) organization expenses, filing
and other fees related to New MVB; (v) payments to any MVB dissenters who
perfect dissenters' rights in connection with the Transactions; and (vi) any
notifications and press releases to WSB shareholders including printing
expenses; and (B) MVB shall bear the expenses of: (i) the preparation and
delivery of the MVB Proxy Materials, including any conversion costs from
electronic filing format to facilitate printing and all printing and mailing
expenses; (ii) the fairness opinion from The Xxxxxxx Group; (iii) any
notifications and press releases to MVB shareholders, including printing and
mailing expenses; and (iv) all fees and expenses of MVB's legal, accounting and
other advisors.
12.2 NOTICES. All notices, demands or other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered in
person, or if sent by Federal Express, overnight delivery United States mail, or
other overnight delivery service, or sent by facsimile transmission (with
confirmation) addressed as follows:
(i) If to WSB, to:
Western Sierra Bancorp
0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxx, President and CEO
Fax: (000) 000-0000
With a copy to:
Horgan, Rosen, Beckham & Coren, L.L.P.
00000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: S. Xxxx Xxxxx, Esq.
Fax: (000) 000-0000
53
(ii) If to MVB, to:
Mid Valley Bank
000 Xxxx Xxxxxx, Xxxxx X
X.X. Xxx 000
Red Bluff, California 96080
Attention: Xx. Xxxx X. Xxxxxxxxx, President and CEO
Fax: (000) 000-0000
With a copy to:
Xxxx Xxxxxx Xxxxxxx & Associates
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
Section 12.2. Any notice, demand or other communications given pursuant to the
provisions of this Section 12.2 shall be deemed to have been given on the date
actually delivered or the business day following the date sent by overnight
delivery, as the case may be.
12.3 SUCCESSORS AND ASSIGNS. All terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors and assigns; provided, however, that except
as otherwise contemplated hereby, this Agreement and all rights, privileges,
duties and obligations of the parties hereto may not be assigned or delegated by
any party hereto without the prior written consent of the other parties to this
Agreement.
12.4 THIRD PARTY BENEFICIARIES. MVB and WSB intend that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person other than MVB or WSB.
12.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
12.6 GOVERNING LAW. This Agreement is made and entered into in the State
of California and the internal laws (without regard to the conflict of law
provisions thereof) of that state shall govern the validity and interpretation
hereof and the performance of the parties hereto of their respective duties and
obligations hereunder, except as required by applicable provisions of Title 12
of the United States Code.
12.7 CAPTIONS. The captions contained in this Agreement and the Exhibits
and Schedules hereto are for convenience of reference only and do not form a
part of or affect the interpretation of this Agreement.
12.8 EXHIBITS AND SCHEDULES. The Exhibits and confidential disclosure
Schedules attached hereto are an integral part of this Agreement and each
Exhibit and confidential disclosure Schedule shall be applicable as if set forth
in full in the text hereof only with respect to the sections of this Agreement
to
54
which it is cross-referenced. In the event there is any absolute unconditional
representation contained in this Agreement, said representation shall be
modified by any contrary information set forth on a confidential disclosure
Schedule which expressly cross-references to the section where the absolute or
unconditional representation is contained.
12.9 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the parties hereto contained in this Agreement or any Exhibit or Schedule hereto
shall terminate after the Effective Time of the Merger and shall be of no
further force and effect. Nothing in this Article XII shall be construed as
limiting the applicable statute of limitations in the event the Transactions are
not consummated.
12.10 WAIVER AND MODIFICATION. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such term, provision or condition of this Agreement. This Agreement may
be modified or amended only by an instrument of equal formality signed by the
parties or their duly authorized agents.
12.11 ATTORNEYS' FEES. In the event any of the parties to this Agreement
brings an action or suit against any other party by reason of any breach of any
covenant, agreement, representation, warranty or other provision hereof, the
substantially prevailing party in whose favor final judgment is entered shall be
entitled to have and recover of and from the other party all reasonable costs
and expenses incurred or sustained by such prevailing party in connection with
such suit or action, including, without limitation, legal fees and court costs.
12.12 KNOWLEDGE. In all representations and warranties concerning the best
knowledge of MVB, WSB or the WSB Subsidiaries, wherever included herein, there
shall be imputed to MVB, WSB or WSB Subsidiaries the actual knowledge after due
inquiry and notice of their respective current directors, executive officers and
officers holding the titles or positions of Chief Financial Officer or Senior
Accounting Officer, Chief or Senior Credit Officer, or Loan Officer or positions
with substantially equivalent responsibilities.
12.13 ENTIRE AGREEMENT. The making, execution and delivery of this
Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement embodies the entire understanding of the parties and there are no
further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof, unless expressly
referred to by reference herein.
12.14 CONSENTS. Any and all consents required to be obtained from any of
the parties hereto under this Agreement shall not be unreasonably withheld and
shall be deemed given unless the requesting party receives written notice to the
contrary from the party to whom such request is made within ten business days
after request therefor.
12.15 SEVERABILITY. If any portion of this Agreement shall be deemed by a
court of competent jurisdiction to be unenforceable, the remaining terms hereof
shall provide for the consummation of the Transactions contemplated herein in
substantially the same manner as originally set forth at the date this Agreement
was executed.
12.16 PRESS RELEASE. No press release or other public disclosure of
matters related to this Agreement of any of the Transactions contemplated hereby
shall be made by WSB, New MVB, or MVB
55
unless the other parties shall have provided their prior consent to the form and
substance thereof; provided, however, that nothing herein shall be deemed to
prohibit any party hereto from making any disclosure which its counsel deems
necessary or advisable in order to fulfill such party's disclosure obligations
imposed by law.
12.17 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, and which arises after the effective date
of this Agreement, shall be settled by arbitration to take place in Sacramento,
California, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MID VALLEY BANK WESTERN SIERRA BANCORP
By: /s/ XXXX X. XXXXXXXXX By: /s/ XXXX X. XXXX
----------------------------- -----------------------------
Xxxx X. Xxxxxxxxx Xxxx X. Xxxx
Its: President and Chief Executive Officer Its: President and Chief Executive Officer
By: /s/ XXXXX X. XXXXX By: /s/ XXXXXX X. XXXX
----------------------------- -----------------------------
Xxxxx X. Xxxxx Xxxxxx X. Xxxx
Its: Corporate Secretary Its: Corporate Secretary
56
