EXHIBIT 2
Letter of Intent
[Redwood Financial, Inc. Letterhead]
November 1, 1996
PERSONAL AND CONFIDENTIAL
Board of Directors
Olivia Bancorporation, Inc.
P.O. Box 10
Olivia, Minnesota 56277
Board of Directors
American State Bank of Olivia
000 X. XxXxx Xxxxxx
Xxxxxx, Xxxxxxxxx 00000
Gentlemen:
This letter is to express the intention of Redwood Financial, Inc.
("Redwood") to extend an offer to purchase 100% of the issued and outstanding
common stock (the "Shares") of Olivia Bancorporation, Inc. ("Olivia"), which in
turn owns 97.6% of the outstanding common stock of American State Bank of
Olivia, Olivia, Minnesota (the "Bank"), and 100% of the issued and outstanding
common stock of the Bank, on the terms and conditions hereinafter set forth.
Collectively, Xxxxxx and the Bank will be considered the "Sellers" for purposes
of this letter. It is understood by the parties hereto that this is a letter of
intent intended, subject to the satisfactory completion of the steps described
herein, to lead to a mutually agreeable definitive merger agreement to be
executed by all parties concerned. The terms and conditions of the sale and
purchase of the stock of Xxxxxx and the Bank will include, among other things:
1. Structure of Transaction. The structure of the transaction will
be set forth in the definitive merger agreement and will
encompass the acquisition of 100% of the outstanding stock of
Xxxxxx as well as 100% of the outstanding stock of the Bank. The
transaction will be structured in such a manner so as to qualify
as a tax free reorganization.
2. Consideration. The total consideration for the Shares shall be
equal to $4,375,000 in cash, including, by operation of the
transaction, the assumption of approximately $829,000 of debt
incurred by Xxxxxx in connection with its acquisition of the
Bank. The total purchase price shall be paid in cash or other
immediately available funds at closing.
3. No Payment of Dividend. It is our understanding that the net
after tax earnings of Xxxxxx and the Bank for 1996 and 1997 will
not be dividended to their respective stockholders; provided,
however, that Xxxxxx xxx dividend to its shareholders prior to
the closing all assets currently held by Xxxxxx other than Bank
stock, and provided further that Bank may pay a dividend to
Xxxxxx provided that the dividend proceeds received by Xxxxxx are
paid to its bank stock lender and do not exceed the amount
necessary to make the then due regular installment payment on the
loan.
4. Employees. Redwood will attempt to retain qualified employees of
the Bank. To the extent a Bank employee's duties are duplicative
of an employee's duties at Redwood's present financial
institution subsidiary, the Bank employee will be treated fairly
and Redwood will attempt to secure an appropriate position for
the Bank employee given his or her qualifications.
5. Representations. The Sellers agree to provide Redwood with the
usual and ordinary warranties and representations regarding
Xxxxxx and the Bank, which representations and warranties shall
terminate at the closing of the transaction. The Sellers shall
provide Redwood with the usual and ordinary covenants regarding
the operations of Xxxxxx and the Bank prior to closing. In
addition, from the date hereof to and including the closing date,
Xxxxxx and the Bank shall conduct their respective affairs in the
ordinary course of business consistent with their past practices.
6. Due Diligence Exam. Within 30 days of the execution of this
letter of intent, Redwood, or its representatives, will conduct a
due diligence examination of the books and records of Xxxxxx and
the Bank. If, as a result of said examination, Xxxxxxx is not
satisfied with the financial condition of Xxxxxx and/or the Bank,
then Redwood shall have the option of terminating this letter of
intent or revising the consideration offered. Redwood shall
coordinate with Sellers to conduct its due diligence at such a
time and in such a manner as to not interfere with the operations
of the Bank.
7. Merger Agreement. Within 45 days of the execution of this letter
of intent, Xxxxxxx's counsel shall prepare and the parties shall
execute a merger agreement reflecting the terms hereof and such
other terms, covenants, conditions, representations and
warranties as are customarily contained in such merger
agreements. If a merger agreement has not been executed within
such 45 day period and such date is not extended by mutual
agreement of the parties hereto, then this letter of intent shall
terminate and the parties shall have no further obligation with
respect to the transactions contemplated herein.
8. No Negotiations. Until such time as a merger agreement is
executed by the parties hereto or this letter of intent is
terminated, whichever occurs first, Sellers
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agree not to enter into any discussions or negotiations with any
third parties regarding the sale of Xxxxxx and/or the Bank or any
of their assets. It is the understanding of the parties hereto
that such merger agreement would contain provisions restricting
discussions and negotiations with third parties regarding the
sale of Olivia, the Bank or any of their assets, as well as a
provision for a termination fee in the event of such an
acquisition by a third party.
9. Regulatory Approval. Promptly after execution of the merger
agreement, Redwood will prepare and file applications with the
proper banking regulatory agencies for approval of the
transaction, and Redwood and Sellers shall cooperate to the end
that the same shall be expeditiously processed by such regulatory
agencies. It is the understanding of the parties hereto that the
receipt of regulatory approvals without the imposition of any
conditions which would not be satisfactory to Redwood shall be a
condition to the consummation of the merger.
10. Xxxxxxx Money. Upon execution of a definitive merger agreement,
Redwood shall place xxxxxxx money in the sum of $200,000
("Xxxxxxx Money") into an escrow fund. In the event that Xxxxxxx
is unable to consummate the proposed transaction due to its fault
on or before a date six months from the date of the definitive
merger agreement, Sellers shall be entitled to retain the Xxxxxxx
Money; however, if the transaction does not close within such
time frame because of an event outside the control of Redwood,
Sellers shall be entitled to retain $50,000 of the Xxxxxxx Money
and the remainder plus accrued interest thereon shall be returned
to Redwood. If the transaction does not close within such time
frame because of a violation of the definitive merger agreement
by the Sellers or any other reason attributable to the Sellers,
then the Xxxxxxx Money plus accrued interest thereon shall be
returned to Redwood. Upon closing, the Xxxxxxx Money plus accrued
interest shall be applied towards the aforementioned total
consideration.
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By executing this letter of intent and returning it to Redwood on or
before November 1, 1996, the Sellers are expressing their intention to proceed
with the sale of Xxxxxx to Redwood pursuant to the terms and conditions
described herein and agree to act in good faith to obtain all corporate and
shareholder actions as may be necessary to complete the contemplated
transaction. Sellers are advised that Xxxxxxx shall prepare a public
announcement containing the terms of this letter of intent and such announcement
shall be released upon the signing of this letter of intent. Although each of
the parties hereto represents that they intend in good faith to carry out the
transaction described in this letter of intent, no binding legal agreement will
arise until the merger agreement has been prepared and executed by the parties
hereto.
Very truly yours,
REDWOOD FINANCIAL, INC.
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Chairman of the Board of Directors
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WE HAVE READ THE FOREGOING AND UNDERSTAND AND AGREE WITH THE TERMS AND
CONDITIONS SET FORTH HEREIN, DATED THIS 4TH DAY OF NOVEMBER, 1996.
OLIVIA BANCORPORATION, INC. AMERICAN STATE BANK OF OLIVIA
By:/s/ Xxxxxx X. Xxxxx By:/s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxxx
Title: Title: President
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