AGREEMENT AND PLAN OF MERGER BY AND AMONG COMMUNITY BANK SYSTEM, INC., VB MERGER SUB INC. AND KINDERHOOK BANK CORP. Dated as of January 21, 2019
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VB MERGER SUB INC.
AND
KINDERHOOK BANK CORP.
Dated as of January 21, 2019
TABLE OF CONTENTS
| Page | ||
| Article 1 | ||
| Transactions and Terms of Merger | ||
| Section 1.1 | Merger | 2 |
| Section 1.2 | Bank Merger | 2 |
| Section 1.3 | Closing | 2 |
| Section 1.4 | Effective Time | 2 |
| Section 1.5 | Effects of the Merger | 2 |
| Section 1.6 | Name and Organizational Documents of Surviving Corporation; Directors and Officers | 3 |
| Section 1.7 | Structure Change | 3 |
| Article 2 | ||
| Treatment of Securities | ||
| Section 2.1 | Treatment of Kinderhook Stock | 3 |
| Section 2.2 | Payment for Securities; Surrender of Kinderhook Certificates | 5 |
| Section 2.3 | Dissenters’ Rights | 7 |
| Section 2.4 | Treatment of Kinderhook Equity Awards | 8 |
| Section 2.5 | Withholding | 8 |
| Section 2.6 | Kinderhook Warrants | 9 |
| Article 3 | ||
| Representations and Warranties | ||
| Section 3.1 | Disclosure Letters | 9 |
| Section 3.2 | Representations and Warranties of Kinderhook | 9 |
| Section 3.3 | Representations and Warranties of Community and Merger Sub | 32 |
| Article 4 | ||
| Covenants and Additional Agreements of the Parties | ||
| Section 4.1 | Conduct of Business Prior to Effective Time | 38 |
| Section 4.2 | Forbearances | 38 |
| Section 4.3 | Litigation | 42 |
| Section 4.4 | State Filings | 42 |
| Section 4.5 | Preparation of the Proxy Statement; Kinderhook Shareholder Approval | 42 |
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| Section 4.6 | Reasonable Best Efforts | 44 |
| Section 4.7 | Applications and Consents | 45 |
| Section 4.8 | Notification of Certain Matters | 46 |
| Section 4.9 | Investigation and Confidentiality | 46 |
| Section 4.10 | Press Releases; Publicity | 47 |
| Section 4.11 | Acquisition Proposals | 47 |
| Section 4.12 | Takeover Laws | 49 |
| Section 4.13 | Employee Matters | 49 |
| Section 4.14 | Certain Policies | 51 |
| Section 4.15 | Indemnification | 52 |
| Section 4.16 | Kinderhook Debt | 53 |
| Section 4.17 | Systems Integration; Operating Functions | 53 |
| Section 4.18 | Merger Sub Compliance | 54 |
| Article 5 | ||
| Conditions Precedent to Obligations to Consummate | ||
| Section 5.1 | Conditions to Obligations of Each Party | 54 |
| Section 5.2 | Conditions to Obligations of Community and Merger Sub | 54 |
| Section 5.3 | Conditions to Obligations of Kinderhook | 55 |
| Article 6 | ||
| Termination | ||
| Section 6.1 | Termination | 56 |
| Section 6.2 | Termination Fee | 58 |
| Section 6.3 | Effect of Termination | 58 |
| Article 7 | ||
| Miscellaneous | ||
| Section 7.1 | Definitions | 59 |
| Section 7.2 | Non-Survival of Representations and Covenants | 67 |
| Section 7.3 | Expenses | 67 |
| Section 7.4 | Entire Agreement | 68 |
| Section 7.5 | Amendments | 68 |
| Section 7.6 | Waivers | 68 |
| Section 7.7 | Assignment | 68 |
| Section 7.8 | Notices | 69 |
| Section 7.9 | Governing Law; Jurisdiction | 69 |
| Section 7.10 | Counterparts | 70 |
| Section 7.11 | Captions | 70 |
| Section 7.12 | Interpretations | 70 |
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| Section 7.13 | Severability | 70 |
| Section 7.14 | Waiver of Jury Trial | 71 |
| Section 7.15 | Specific Performance | 71 |
EXHIBITS
| Exhibit A | Form of Bank Merger Agreement |
| Exhibit B | Shareholder Support Agreement Signatories |
| Exhibit C | Form of Shareholder Support Agreement |
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of January 21, 2019, by and among Community Bank System, Inc., a Delaware corporation (“Community”), VB Merger Sub Inc., a New York corporation (“Merger Sub”), and Kinderhook Bank Corp., a New York corporation (“Kinderhook”).
WHEREAS, the Boards of Directors of Community, Merger Sub and Kinderhook have approved this Agreement and the transactions described herein in accordance with the General Corporation Law of the State of Delaware and the Business Corporation Law of the State of New York (the “NYBCL”) and have declared the same advisable and in the best interests of Community, Merger Sub and Kinderhook, respectively, and their respective stockholders;
WHEREAS, this Agreement provides for the acquisition of Kinderhook by Community pursuant to the merger of Merger Sub with and into Kinderhook (the “Merger”) with Kinderhook surviving the Merger as a wholly-owned Subsidiary of Community. Following the Merger, Kinderhook Bank shall merge with and into Community Bank (the “Bank Merger”) with Community Bank surviving the Bank Merger, pursuant to the terms of the Plan of Merger and Merger Agreement between Community Bank and Kinderhook Bank attached hereto as Exhibit A (the “Bank Merger Agreement”); and
NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
Article 1
Transactions and Terms of Merger
Section 1.1 Merger. Subject to the terms and conditions of this Agreement and in accordance with the NYBCL, at the Effective Time (as defined in Section 1.4 herein), Merger Sub shall be merged with and into Kinderhook. Kinderhook shall be the surviving corporation (the “Surviving Corporation”) resulting from the Merger and the separate corporate existence of Merger Sub shall thereupon cease. Kinderhook shall continue to be governed by the Laws of the State of New York, and the separate corporate existence of Kinderhook with all of its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger.
Section 1.2 Bank Merger. Prior to the Effective Time, Community and Kinderhook shall cause the Boards of Directors of Community Bank and Kinderhook Bank, respectively, to execute the Bank Merger Agreement. Subject to the terms and conditions of this Agreement and the Bank Merger Agreement, Kinderhook Bank shall be merged with and into Community Bank in accordance with the provisions of 12 U.S.C. Sections 215a and 1828(c). Community Bank shall be the surviving bank resulting from the Bank Merger and the separate existence of Kinderhook Bank shall thereupon cease. Community Bank shall continue to be governed by the Laws of the United States, and the separate existence of Community Bank with all of its rights, privileges, immunities, powers and franchises shall continue unaffected by the Bank Merger. Subject to the satisfaction of the conditions to closing set forth in the Bank Merger Agreement, the Bank Merger shall occur following the Merger unless otherwise determined by Community in its sole discretion.
Section 1.3 Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) shall take place at 10:00 a.m., New York City time, at the offices of Cadwalader, Xxxxxxxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or by the electronic transmission of signature pages, as soon as practicable and in any event no later than thirty (30) days after the satisfaction or waiver (subject to applicable Law) of the latest to occur of the conditions set forth in Article 5 hereof (other than those conditions that by their nature can only be satisfied at the Closing, but subject to the satisfaction or waiver thereof), unless another date, time or place is agreed to in writing by Community and Kinderhook (the date on which the Closing occurs, the “Closing Date”).
Section 1.4 Effective Time. The Merger shall become effective as set forth in the certificate of merger (the “Certificate of Merger”) to be filed with the Secretary of State of the State of New York (the “New York Secretary”) on the Closing Date. The term “Effective Time” shall be the date and time when the Merger becomes effective, as set forth in the Certificate of Merger.
Section 1.5 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in the applicable provisions of the NYBCL.
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Section 1.6 Name and Organizational Documents of Surviving Corporation; Directors and Officers. (a) At the Effective Time, the certificate of incorporation of Kinderhook shall be amended and restated so that the certificate of incorporation of Merger Sub immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation (except that the name of Kinderhook shall be substituted for the name of Merger Sub) until thereafter amended in accordance with their terms and as provided by applicable Law. The Parties shall take all actions necessary so that the bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms and as provided by applicable Law.
(b) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time. The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time, until the earlier of their resignation or removal or otherwise ceasing to be an officer or until their respective successors are duly elected and qualified, as the case may be.
Section 1.7 Structure Change. Community may at any time change the method of effecting the Merger and the Bank Merger if and to the extent requested by Community, and Kinderhook agrees to enter into such amendments to this Agreement as Community may reasonably request in order to give effect to such restructuring; provided, however, that no such change or amendment shall (a) alter or change the amount or kind of the Merger Consideration provided for in this Agreement, (b) adversely affect the Tax treatment of the Merger with respect to Kinderhook’s shareholders or (c) be reasonably likely to cause the Closing to be prevented or materially delayed or the receipt of the Requisite Regulatory Approvals to be prevented or materially delayed.
Article 2
Section 2.1 Treatment of Kinderhook Stock. (a) Treatment of Kinderhook Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Parties or holders of any securities of Kinderhook, subject to Section 2.1(e) and any applicable withholding Tax, each share of Kinderhook Common Stock issued and outstanding immediately prior to the Effective Time (other than Kinderhook Common Shares to be cancelled in accordance with Section 2.1(d) and other than any Proposed Dissenting Shares) shall be automatically converted into the right to receive $62.00 in cash (the “Merger Consideration”), without interest. From and after the Effective Time, all such Kinderhook Common Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each applicable holder of such Kinderhook Common Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor, without interest, upon the surrender of such Kinderhook Common Shares in accordance with Section 2.2(b) or in accordance with Section 2.4, as applicable.
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(b) Treatment of Kinderhook Series A Convertible Preferred Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Parties or holders of any securities of Kinderhook, subject to Section 2.1(e) and any applicable withholding Tax, each share of Kinderhook Series A Convertible Preferred Stock, par value $25.00 per share (the “Series A Convertible Preferred Stock”), issued and outstanding immediately prior to the Effective Time (other than any such shares to be cancelled in accordance with Section 2.1(d)) shall be automatically converted into the right to receive an amount in cash equal to the greater of (i) the Applicable Redemption Price per Share with respect to the Series A Convertible Preferred Stock or (ii) the Liquidation Preference Amount with respect to the Series A Convertible Preferred Stock, in each case as defined in the Certificate of Incorporation of Kinderhook, as amended (the “Kinderhook Charter”) and determined in accordance with the Kinderhook Charter, without interest (the “Series A Consideration”). From and after the Effective Time, each share of Series A Convertible Preferred Stock shall no longer be outstanding and shall be automatically cancelled and shall cease to exist, and each applicable holder of such Series A Convertible Preferred Stock shall cease to have any rights with respect thereto, except the right to receive the Series A Consideration therefor, without interest, upon surrender of such Series A Convertible Preferred Stock in accordance with Section 2.2(b). Kinderhook and Community will cooperate in providing all notices and communications to the holders of the Series A Convertible Preferred Stock required pursuant to the terms of the Kinderhook Charter.
(c) Treatment of Kinderhook Series C Convertible Preferred Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Parties or holders of any securities of Kinderhook, subject to Section 2.1(e) and any applicable withholding Tax, each share of Kinderhook Series C Convertible Preferred Stock, par value $25.00 per share (the “Series C Convertible Preferred Stock”), issued and outstanding immediately prior to the Effective Time (other than any such shares to be cancelled in accordance with Section 2.1(d)) shall be automatically converted into the right to receive an amount in cash equal to the greater of (i) the Applicable Redemption Price per Share with respect to the Series C Convertible Preferred Stock or (ii) the Liquidation Preference Amount with respect to the Series C Convertible Preferred Stock, in each case as defined in the Kinderhook Charter and determined in accordance with the Kinderhook Charter, without interest (the “Series C Consideration”). From and after the Effective Time, each share of Series C Convertible Preferred Stock shall no longer be outstanding and shall be automatically cancelled and shall cease to exist, and each applicable holder of such Series C Convertible Preferred Stock shall cease to have any rights with respect thereto, except the right to receive the Series C Consideration therefor, without interest, upon surrender of such Series C Convertible Preferred Stock in accordance with Section 2.2(b). Kinderhook and Community will cooperate in providing all notices and communications to the holders of the Series C Convertible Preferred Stock required pursuant to the terms of the Kinderhook Charter.
(d) Cancellation of Kinderhook Stock. At the Effective Time, all Kinderhook Common Shares and Kinderhook Preferred Shares owned by any of the Parties or by any of their respective Subsidiaries (other than any such shares owned in a fiduciary capacity or as a result of debts previously contracted) shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(e) Adjustment to Merger Consideration. The Merger Consideration, Series A Consideration or Series C Consideration, as applicable, shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Kinderhook Common Stock, Series A Convertible Preferred Stock or Series C Convertible Preferred Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to the number of shares of Kinderhook Common Stock, Series A Convertible Preferred Stock or Series C Convertible Preferred Stock outstanding after the date hereof and prior to the Effective Time.
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(f) Community Common Stock. At and after the Effective Time, each share of Community Common Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of Community Common Stock and shall not be affected by the Merger.
(g) Merger Sub. At and after the Effective Time, each share of common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.001 per share, of the Surviving Corporation.
Section 2.2 Payment for Securities; Surrender of Kinderhook Certificates.
(a) Paying Agent. Prior to the Effective Time, Community shall designate a registered transfer agent or bank or trust company reasonably acceptable to Kinderhook to act as the paying agent in connection with the Merger (the “Paying Agent”). The Paying Agent shall also act as the agent for Kinderhook’s shareholders (other than with respect to Kinderhook Restricted Shares) for the purpose of receiving and holding their Kinderhook Certificates and Book-Entry Shares and shall obtain no rights or interests in the shares represented thereby. At least one Business Day prior to the Effective Time, Community shall deposit, or cause to be deposited, with the Paying Agent, cash in immediately available funds in an amount sufficient to pay the aggregate Merger Consideration, Series A Consideration and Series C Consideration (such cash amount, the “Exchange Fund”), in each case, for the sole benefit of the holders of shares of Kinderhook Common Stock and Kinderhook Preferred Stock. In the event the Exchange Fund shall be insufficient to pay the aggregate Merger Consideration, Series A Consideration and Series C Consideration, Community shall promptly deposit additional funds with the Paying Agent in an amount which is equal to the deficiency in the amount required to make such payment. Community shall cause the Paying Agent to make, and the Paying Agent shall make, delivery of the Merger Consideration, the Series A Consideration and the Series C Consideration out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any purpose that is not expressly provided for in this Agreement. The Exchange Fund shall be invested by the Paying Agent as reasonably directed by Community; provided, however, that no such investment or loss thereon shall affect the amounts payable to holders of Kinderhook Certificates or Book-Entry Shares pursuant to this Article 2. Any interest and other income resulting from such investments shall be paid to Community on the earlier of (A) one (1) year after the Effective Time or (B) the full payment of the Exchange Fund.
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(b) Procedures for Surrender. Promptly after the Effective Time, Community shall cause the Paying Agent to mail (and make available for collection by hand) to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Kinderhook Common Shares or Kinderhook Preferred Shares (the “Kinderhook Certificates”) or non certificated Kinderhook Common Shares or Kinderhook Preferred Shares represented by book-entry (“Book-Entry Shares”) and whose Kinderhook Common Shares or Kinderhook Preferred Shares were converted pursuant to Section 2.1 into the right to receive the Merger Consideration (other than with respect to Kinderhook Restricted Shares), the Series A Consideration or the Series C Consideration, as applicable, (i) a letter of transmittal, which shall specify that delivery shall be effected, and risk of loss and title to the Kinderhook Certificates shall pass, only upon delivery of the Kinderhook Certificates (or affidavits of loss in lieu thereof) to the Paying Agent and shall be in such form and have such other provisions as Community may reasonably specify and (ii) instructions for effecting the surrender of the Kinderhook Certificates (or affidavits of loss in lieu thereof) or Book Entry Shares in exchange for payment of the Merger Consideration, the Series A Consideration or the Series C Consideration, as applicable, into which such Kinderhook Shares have been converted pursuant to Section 2.1. Upon surrender of a Kinderhook Certificate (or an affidavit of loss in lieu thereof) or Book-Entry Share for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Community, together with such letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Kinderhook Certificate or Book-Entry Share shall be entitled to receive in exchange therefor, in the case of Kinderhook Common Shares, the applicable Merger Consideration pursuant to the provisions of this Article 2 for each Kinderhook Common Share formerly represented by such Kinderhook Certificate or Book-Entry Share, and in the case of Kinderhook Preferred Shares, the Series A Consideration or the Series C Consideration, as applicable, for each Kinderhook Preferred Share formerly represented by such Kinderhook Certificate or Book-Entry Share, in each case, to be mailed (or made available for collection by hand if so elected by the surrendering holder) within five (5) Business Days following the Paying Agent’s receipt of such Kinderhook Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, and the Kinderhook Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share so surrendered shall be forthwith cancelled. The Paying Agent shall accept such Kinderhook Certificates (or affidavits of loss in lieu thereof) or Book-Entry Shares upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If payment of the Merger Consideration, the Series A Consideration or the Series C Consideration, as applicable, is to be made to a Person other than the Person in whose name the surrendered Kinderhook Certificate is registered, it shall be a condition precedent of payment that (A) the Kinderhook Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and (B) the Person requesting such payment shall have paid any transfer and other similar Taxes required by reason of the payment of the Merger Consideration, the Series A Consideration or the Series C Consideration, as applicable, to a Person other than the registered holder of the Kinderhook Certificate surrendered or shall have established to the satisfaction of Community that such Tax either has been paid or is not required to be paid. Payment of the applicable Merger Consideration, Series A Consideration or Series C Consideration with respect to Book-Entry Shares shall only be made to the Person in whose name such Book-Entry Shares are registered. Until surrendered as contemplated by this Section 2.2, each Kinderhook Certificate and Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive the applicable Merger Consideration, Series A Consideration or Series C Consideration, as applicable, as contemplated by this Article 2.
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(c) Transfer Books; No Further Ownership Rights in Kinderhook Shares. At the Effective Time, the stock transfer books of Kinderhook shall be closed and thereafter there shall be no further registration of transfers of Kinderhook Shares on the records of Kinderhook. From and after the Effective Time, the holders of Kinderhook Certificates or Book-Entry Shares (including, for the avoidance of doubt, Kinderhook Restricted Shares) outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Kinderhook Shares except as otherwise provided for herein or by applicable Law. If, after the Effective Time, Kinderhook Certificates or Book-Entry Shares (including, for the avoidance of doubt, Kinderhook Restricted Shares) are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Agreement.
(d) Termination of Exchange Fund; No Liability. At any time following twelve (12) months after the Effective Time, Community shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) remaining in the Exchange Fund that have not been disbursed, or for which disbursement is pending subject only to the Paying Agent’s routine administrative procedures, to holders of Kinderhook Certificates or Book-Entry Shares, and thereafter such holders shall be entitled to look only to Community (subject to abandoned property, escheat or other similar Laws) as general creditors thereof with respect to the applicable Merger Consideration, Series A Consideration or Series C Consideration, as applicable, payable upon due surrender of their Kinderhook Certificates or Book-Entry Shares and compliance with the procedures in Section 2.2(b), without any interest thereon. Notwithstanding the foregoing, neither Community nor the Paying Agent shall be liable to any holder of a Kinderhook Certificate or Book-Entry Share for any Merger Consideration, Series A Consideration or Series C Consideration or other amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.
(e) Lost, Stolen or Destroyed Kinderhook Certificates. In the event that any Kinderhook Certificates shall have been lost, stolen or destroyed, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Kinderhook Certificates, upon the making of an affidavit of that fact by the holder thereof and the payment by such holder of any fees and expenses required by the Paying Agent, the applicable Merger Consideration, Series A Consideration or Series C Consideration, as applicable, payable in respect thereof pursuant to Section 2.1 hereof.
Section 2.3 Dissenters’ Rights. (a) Notwithstanding anything in this Agreement to the contrary, Kinderhook Common Shares issued and outstanding immediately prior to the Effective Time and held by a holder of record who did not vote in favor of the adoption of this Agreement (or consent thereto in writing) and is entitled to demand and properly demands appraisal of such Kinderhook Common Shares (“Dissenting Shares”) pursuant to, and who complies in all respects with, Sections 623 and 910 of the NYBCL (the “Appraisal Rights”) shall not be converted into the right to receive the Merger Consideration payable pursuant to Section 2.1, but instead at the Effective Time shall be converted into the right to receive payment of the fair value of such Kinderhook Common Shares in accordance with the Appraisal Rights (it being understood and acknowledged that at the Effective Time, such Dissenting Shares shall no longer be outstanding, shall automatically be cancelled and shall cease to exist, and such holder shall cease to have any rights with respect thereto other than the right to receive the appraised value of such Dissenting Shares to the extent afforded by the Appraisal Rights); provided, however, that if any such holder (including any holder of Proposed Dissenting Shares) shall fail to perfect or otherwise shall waive, withdraw or lose the right to payment of the fair value of such Dissenting Shares under the Appraisal Rights, then the right of such holder to be paid the fair value of such holder’s Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, without interest or duplication, the Merger Consideration. “Proposed Dissenting Shares” means shares of Kinderhook Common Stock whose holders provide demands for appraisal to Kinderhook prior to the Kinderhook Shareholder Meeting, or at such meeting but before the vote, and do not vote in favor of the adoption of this Agreement, in each case in accordance with the Appraisal Rights.
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(b) Kinderhook shall give prompt notice to Community of any demands received by Kinderhook for appraisal of any Kinderhook Common Shares, of any withdrawals of such demands and of any other instruments served pursuant to the NYBCL and received by Kinderhook relating to Appraisal Rights, and Community shall have the opportunity to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, Kinderhook shall not, without the prior written consent of Community, make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demand, or agree to do any of the foregoing.
Section 2.4 Treatment of Kinderhook Equity Awards. (a) As of immediately prior to the Effective Time, each share of Kinderhook Common Stock subject to vesting or forfeiture restrictions and granted under any Kinderhook Benefit Plan that is outstanding immediately prior to the Effective Time (a “Kinderhook Restricted Share”), whether or not then vested, shall, automatically and without any action on behalf of the holder thereof, vest in full and the restrictions thereon shall lapse, and such Kinderhook Restricted Share shall be canceled and converted into a right of the former holder of such Kinderhook Restricted Share to receive an amount in cash, without interest, equal to the Merger Consideration plus all dividends, if any, accrued but unpaid as of the Effective Time with respect to such Kinderhook Restricted Share.
(b) Prior to the Effective Time, Kinderhook or its Board of Directors or a committee thereof, as applicable, shall pass resolutions and take any actions as are necessary to effectuate the provisions of this Section 2.4.
(c) Subject to Section 2.5, promptly following the Effective Time, any amounts due to the former holders of Kinderhook Restricted Shares pursuant to this Section 2.4 shall be paid through the payroll system of the Surviving Corporation or one of its Affiliates.
Section 2.5 Withholding. Community shall be entitled to deduct and withhold, or cause the Paying Agent or the Surviving Corporation or any of its Subsidiaries to deduct and withhold, from the consideration otherwise payable to a holder of Kinderhook Common Stock, Kinderhook Preferred Stock or Kinderhook Restricted Shares pursuant to this Agreement, any amounts as are required to be withheld or deducted with respect to such consideration under the Code, or any applicable provisions of state, local or foreign Tax Law. To the extent that amounts are so withheld and timely remitted to the appropriate Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Kinderhook Common Stock, Kinderhook Preferred Stock or Kinderhook Restricted Shares in respect of which such deduction and withholding was made.
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Section 2.6 Kinderhook Warrants. (a) As of the Effective Time, each outstanding Kinderhook Warrant shall become exercisable, upon payment of the applicable exercise price thereof, solely for an amount in cash per share of Kinderhook Common Stock underlying such Kinderhook Warrant equal to the Merger Consideration.
(b) Community and Kinderhook will cooperate in providing all notices and communications to the holders of Kinderhook Warrants.
Article 3
Representations and Warranties
Section 3.1 Disclosure Letters. Concurrently with the execution and delivery of this Agreement, Kinderhook has delivered to Community and Merger Sub and Community and Merger Sub have delivered to Kinderhook a letter that will be treated confidentially (the “Kinderhook Disclosure Letter” and the “Community Disclosure Letter,” respectively) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of Kinderhook’s, on the one hand, or Community’s and Merger Sub’s, on the other hand, respective representations or warranties contained in this Article 3 or to one or more of its covenants contained in Article 4; provided, that (a) no such item is required to be set forth in the Kinderhook Disclosure Letter or the Community Disclosure Letter as an exception to any representation or warranty of Kinderhook or Community and Merger Sub, respectively, if its absence would not result in the related representation or warranty being deemed untrue or incorrect, and (b) the mere inclusion of an item in the Kinderhook Disclosure Letter or the Community Disclosure Letter as an exception to a representation or warranty shall not be deemed an admission by Kinderhook or Community and Merger Sub, respectively, that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect on Kinderhook or Community, respectively. Any disclosures made with respect to a subsection of Section 3.2 or Section 3.3 shall be deemed to qualify any other subsections of Section 3.2 or Section 3.3, respectively, specifically referenced or cross-referenced or that contains sufficient detail to enable a reasonable Person to recognize the relevance of such disclosure to such other subsections.
(a) Organization, Standing, and Power. Each Subsidiary of Kinderhook is listed in Section 3.2(a) of the Kinderhook Disclosure Letter. Kinderhook and each of its Subsidiaries (i) are duly organized, validly existing, and (as to corporations) are in good standing under the Laws of the jurisdiction of their respective organization, (ii) have the requisite corporate power and authority to own, lease, and operate their properties and assets and to carry on their businesses as now conducted, and (iii) are duly qualified or licensed to do business and in good standing in the States of the United States and foreign jurisdictions where the character of their assets or the nature or conduct of their business requires them to be so qualified or licensed, except in the case of this clause (iii) where the failure to be so qualified or licensed, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Kinderhook. Kinderhook is registered with the Federal Reserve Board as a bank holding company within the meaning of the BHC Act and meets the applicable requirements to be treated as a financial holding company under the BHC Act. Kinderhook Bank is a national banking association with its main office located in the State of New York. Kinderhook Bank is an “insured depository institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder, its deposits are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by Law, and all insurance premiums and assessments required to be paid in connection therewith have been paid when due. No action for the revocation or termination of such deposit insurance is pending or, to the Knowledge of Kinderhook, threatened. Kinderhook Bank is a member in good standing of the Federal Home Loan Bank of New York.
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(ii) Kinderhook’s Board of Directors has: (A) by the unanimous vote of the entire Board of Directors, duly approved and declared advisable this Agreement and the Merger and the other transactions contemplated hereby, including the Bank Merger Agreement and the Bank Merger; (B) determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of Kinderhook and the holders of Kinderhook Common Stock; (C) resolved to recommend that the holders of Kinderhook Common Stock adopt this Agreement (such recommendation being the “Kinderhook Directors’ Recommendation”); and (D) directed that this Agreement be submitted to the holders of Kinderhook Common Stock for their adoption.
(iii) Kinderhook Bank’s Board of Directors has, by the unanimous vote of the entire Board of Directors, duly approved and declared advisable the Bank Merger Agreement, the Bank Merger and the other transactions contemplated hereby and thereby.
(iv) The Kinderhook Shareholder Approval is the only vote of the holders of any class or series of Kinderhook’s capital stock or other securities required by applicable Law in connection with the consummation of the Merger. No vote of the holders of any class or series of Kinderhook’s capital stock or other securities is required in connection with the consummation of any of the transactions contemplated hereby to be consummated by Kinderhook other than the Merger.
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(v) Neither the execution and delivery of this Agreement or the Bank Merger Agreement by Kinderhook or Kinderhook Bank, as applicable, nor the consummation by either of them of the transactions contemplated hereby or thereby, nor compliance by either of them with any of the provisions hereof or thereof, will (A) violate, conflict with or result in a breach of any provision of the Organizational Documents of Kinderhook or any of its Subsidiaries, (B) except as set forth in Section 3.2(b)(v) of the Kinderhook Disclosure Letter, violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien (other than Permitted Liens) upon any of the respective properties or assets of Kinderhook or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, Contract, Permit or other instrument or obligation to which Kinderhook or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound, or (C) subject to receipt of the Requisite Regulatory Approvals and the expiration of any waiting period required by Law as described in clause (vi) below, violate any Law or Order applicable to Kinderhook or its Subsidiaries or any of their respective material assets.
(vi) Except for (A) the filing of applications, filings and notices, as applicable, with the Federal Reserve Board under the BHC Act and approval of such applications, filings and notices, (B) the filing of applications, filings and notices, as applicable, with the OCC in connection with the Bank Merger, including under the Bank Merger Act, and approval of such applications, notices and filings, (C) the filing of any required applications, notices or filings with any state banking authorities listed on Section 3.2(b)(vi)(C) of the Kinderhook Disclosure Letter or Section 3.3(b)(iv)(C) of the Community Disclosure Letter and approval of such applications, notices or filings, (D) the filing of the Certificate of Merger with the New York Secretary pursuant to the NYBCL and (E) as otherwise set forth in Section 3.2(b)(vi)(E) of the Kinderhook Disclosure Letter, no Order of, or Consent of, to or with, any Governmental Authority or other third party is necessary in connection with the execution, delivery or performance of this Agreement or the Bank Merger Agreement by Kinderhook or Kinderhook Bank, as applicable, or the consummation by Kinderhook or Kinderhook Bank, as applicable, of the Merger, the Bank Merger and the other transactions contemplated by this Agreement and the Bank Merger Agreement.
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(ii) An accurate copy of each final SEC Report filed with or furnished by Kinderhook or any of its Subsidiaries to the SEC since December 31, 2015 pursuant to the Securities Act or the Exchange Act (the “Kinderhook Reports”) is publicly available. No Kinderhook Report, as of the date thereof (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of the relevant meetings, respectively), contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information filed or furnished as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all of the Kinderhook Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. As of the date of this Agreement, there are no outstanding comments from or unresolved issues raised by the SEC with respect to any of the Kinderhook Reports.
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(iii) Kinderhook has delivered, or caused to be delivered, to Community, or provided Community access to, true and complete copies of the Kinderhook Financial Statements. The Kinderhook Financial Statements (A) have been prepared from, and are in accordance with, the books and records of Kinderhook and its Subsidiaries, (B) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position (as applicable) of Kinderhook and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to year-end audit adjustments normal in nature and amount), (C) comply in all material respects with applicable accounting requirements and with applicable Law with respect thereto and (D) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Kinderhook and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Xxxxx Xxxxxx & Xxxxx, LLC has not resigned (or informed Kinderhook that it intends to resign) or been dismissed as independent public accountants of Kinderhook as a result of or in connection with any disagreements with Kinderhook on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(iv) Neither Kinderhook nor any of its Subsidiaries has any Liability (whether absolute, accrued, contingent or otherwise and whether due or to become due) required by GAAP to be included on a consolidated balance sheet of Kinderhook, except for those liabilities that are reflected or reserved against on the consolidated balance sheet of Kinderhook as of September 30, 2018 included in the Kinderhook Financial Statements (including any notes thereto), and for liabilities incurred in (A) the ordinary course of business consistent with past practice since September 30, 2018 that are not, individually or in the aggregate, material to Kinderhook and its Subsidiaries, taken as a whole, or (B) in connection with this Agreement and the transactions contemplated hereby.
(v) The records, systems, controls, data and information of Kinderhook and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Kinderhook or its Subsidiaries or accountants (including all means of access thereto and therefrom). Kinderhook has disclosed, based on its most recent evaluation prior to the date of this Agreement, to Kinderhook’s outside auditors and the audit committee of Kinderhook’s Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect Kinderhook’s ability to record, process, summarize and report financial information and (B) any fraud or allegation of fraud, whether or not material, that involves management or other employees who have a significant role in Kinderhook’s internal controls over financial reporting. Kinderhook has made available to Community prior to the date of this Agreement any such disclosures made by management to Kinderhook’s auditors and audit committee.
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(vi) Since December 31, 2015, (A) neither Kinderhook nor any of its Subsidiaries, nor, to the Knowledge of Kinderhook, any director, officer, auditor, accountant or Representative of Kinderhook or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Kinderhook or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Kinderhook or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney representing Kinderhook or any of its Subsidiaries, whether or not employed by Kinderhook or any of its Subsidiaries, has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation by Kinderhook or any of its officers, directors, employees or agents to the Board of Directors of Kinderhook or any committee thereof or to the Knowledge of Kinderhook, to any director or officer of Kinderhook.
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(ii) Neither Kinderhook nor any of its Subsidiaries has received any notice of assessment or proposed assessment in connection with any Tax, and there is no threatened or pending dispute, action, suit, proceeding, claim, investigation, audit, examination, or other Litigation regarding any Tax of Kinderhook, any of its Subsidiaries or the assets of Kinderhook or any of its Subsidiaries. No officer or employee responsible for Tax matters of Kinderhook or any of its Subsidiaries expects any Taxing Authority to assess any additional Tax for any period for which a Tax Return has been filed. There are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment of any Tax or deficiency against Kinderhook or any of its Subsidiaries, and neither Kinderhook nor any of its Subsidiaries has waived or extended the applicable statute of limitations for the assessment or collection of any Tax or agreed to a Tax assessment or deficiency. The relevant statute of limitations is closed with respect to the federal and material state and local income and franchise Tax Returns of Kinderhook and its Subsidiaries for all Taxable Periods through 2014.
(iii) Except as disclosed in Section 3.2(f) of the Kinderhook Disclosure Letter neither Kinderhook nor any of its Subsidiaries is a party to a Tax allocation, sharing, indemnification or similar agreement or any agreement pursuant to which it has any obligation to any Person with respect to Taxes, and neither Kinderhook nor any of its Subsidiaries has been a member of an affiliated group filing a consolidated federal, state or local income Tax Return or any combined, affiliated or unitary group for any Tax purpose (other than the group of which it is currently a member), and neither Kinderhook nor any of its Subsidiaries has any Tax liability under Treasury Regulation Section 1.1502-6 or any similar provision of Law, or as a transferee or successor, by Contract or otherwise. None of Kinderhook and its Subsidiaries have any deferred gain or loss arising out of any deferred intercompany transaction, as described in Treasury Regulation Section 1.1502-13, or, in the case of any of its Subsidiaries, have an excess loss account in its stock, as described in Treasury Regulation Section 1.1502-19.
(iv) Kinderhook and its Subsidiaries have withheld and paid over to the appropriate Taxing Authority all amounts of Taxes required to have been withheld and paid over by them, and have complied in all respects with all information reporting and backup withholding requirements under all applicable federal, state, local and foreign Laws in connection with amounts paid or owing to any Person, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections 1441, 1442 and 3406 of the Code or similar provisions under state, local or foreign Law.
(v) Neither Kinderhook nor any of its Subsidiaries has been a party to any distribution occurring during the five (5)-year period ending on the date hereof in which the parties to such distribution treated the distribution as one to which Section 355 of the Code applied. No Liens for Taxes exist with respect to any assets of Kinderhook or any of its Subsidiaries, except for statutory Liens for Taxes not yet due and payable.
(vi) Neither Kinderhook nor any of its Subsidiaries is a “controlled foreign corporation” within the meaning of the Section 957(a) of the Code. Kinderhook and each of its Subsidiaries have complied with all of the income inclusion and Tax reporting provisions of the U.S. anti-deferral Tax regimes, including the controlled foreign corporation, passive foreign investment company and foreign personal holding company regimes.
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(vii) Neither Kinderhook nor any of its Subsidiaries is or has ever been a United States real property holding corporation within the meaning of Section 897(c) of the Code or any comparable provision of state Tax Law. Neither Kinderhook nor any of its Subsidiaries has been or will be required to include any item in income or exclude any item of deduction from taxable income for any Tax period (or portion thereof) ending after the Closing Date: (A) pursuant to Section 481 of the Code or any comparable provision under state, local or foreign Tax Law; (B) as a result of any “closing agreement” as described in Section 7121 of the Code or any comparable provision under state, local, or foreign Tax Law, executed on or prior to the Closing Date; (C) with respect to any intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code or any comparable provision under state, local, or foreign Tax Law; (D) with respect to any installment sale or open transaction disposition made on or prior to the Closing Date; or (E) with respect to any prepaid amount received on or prior to the Closing Date.
(viii) The current net operating losses of Kinderhook and each of its Subsidiaries are described in Section 3.2(f)(viii) of the Kinderhook Disclosure Letter and none of such net operating losses are capital losses or, except as disclosed in Section 3.2(f)(viii) of the Kinderhook Disclosure Letter, subject to any limitation on their use under the provisions of Sections 382 or 269 of the Code or any other provisions of the Code or the Treasury Regulations or any comparable provision of state or local Tax Law dealing with the utilization of net operating losses, other than any such limitations as may arise as a result of the consummation of the transactions contemplated by this Agreement.
(ix) Kinderhook and each of its Subsidiaries have disclosed on their Tax Returns any position taken for which substantial authority (within the meaning of Section 6662(d)(2)(B)(i) of the Code or comparable provision of state or local Tax Law) did not exist at the time the Tax Return was filed. Neither Kinderhook nor any of its Subsidiaries has participated in any reportable transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1) or any comparable provision of state or local Tax Law, or a transaction substantially similar to a reportable transaction. Neither Kinderhook nor any of its Subsidiaries is a party to any joint venture, partnership, or other arrangement or Contract which could be treated as a partnership for U.S. federal income Tax purposes.
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(x) Kinderhook has never elected to qualify as a real estate investment trust within the meaning of Sections 856 through 860 of the Code (a “REIT”). Any Subsidiary of Kinderhook that has elected to qualify as a REIT for U.S. federal income tax purposes (i) has so elected for all applicable taxable years commencing with the taxable year ended December 31, 2007 through December 31, 2018; (ii) has been subject to taxation as a REIT and has satisfied the requirements to qualify as a REIT for each year referenced in clause (i) above; (iii) has operated since January 1, 2019 until the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iv) intends to continue to operate in such a manner as to qualify as a REIT for its taxable year that will include the Merger; and (iv) has not taken or omitted to take any action that could reasonably be expected to result in a successful challenge by the IRS or any other Governmental Authority to its qualification as a REIT, and no such challenge is pending or threatened. Neither Kinderhook nor any of its Subsidiaries (i) holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code, Treasury Regulation Section 1.337(d)-7 or any other temporary or final regulations issued under Section 337(d) of the Code, or (ii) has engaged at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of the Code. Section 3.2(f) of the Kinderhook Disclosure Letter contains a true and complete list of each Subsidiary of Kinderhook that is a REIT, each entity that is treated as a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code, and each entity that has elected to be treated as a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code.
(ii) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Kinderhook, Kinderhook and each of its Subsidiaries and their respective Facilities and properties are, and have been, in compliance with all Environmental Laws, and there are no past or present events, conditions, circumstances, activities or plans related to the properties or Facilities that did or would violate or prevent compliance or continued compliance with any of the Environmental Laws.
(iii) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Kinderhook, during the period of (A) Kinderhook’s or any of its Subsidiaries’ ownership or operation (including but not limited to ownership or operation, directly or indirectly, in a fiduciary capacity) of their respective properties and Facilities, or (B) Kinderhook’s or any of its Subsidiaries’ participation in the management (including but not limited to such participation, directly or indirectly, in a fiduciary capacity) of their respective properties and Facilities, there have been no releases, discharges, spillages or disposals of Hazardous Material on, under, adjacent to or affecting (or potentially affecting) such properties or Facilities.
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(ii) Kinderhook and each of its Subsidiaries are, and at all times since December 31, 2015 have been, in compliance in all material respects with all Laws applicable to their businesses, operations, properties or assets, including the Federal Reserve Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, the Bank Secrecy Act, the Truth in Lending Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Xxxx-Xxxxx Xxxx Street Reform and Consumer Protection Act, the Fair Credit Reporting Act and all other applicable fair lending Laws and other Laws relating to discriminatory business, financing, leasing, collection or other practices, and all agency requirements relating to the origination, sale and servicing of mortgage loans and consumer loans.
(iii) Neither Kinderhook nor any of its Subsidiaries has received any notification or communication from any Governmental Authority (A) asserting that Kinderhook or any of its Subsidiaries is in Default under any of the Permits, Laws or Orders which such Governmental Authority enforces, or (B) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, any Permits.
(iv) Neither Kinderhook nor any of its Subsidiaries is subject to any cease-and-desist or other order or formal enforcement action issued by, or is a party to any formal written agreement, consent agreement or public memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since December 31, 2015, a recipient of any public supervisory letter from any Regulatory Authority or other Governmental Authority that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business.
(v) Neither Kinderhook nor any of its Subsidiaries (nor to Kinderhook’s Knowledge any of their respective directors, executives, Representatives, agents or employees) (A) has used or is using any corporate funds for any illegal contribution, gift, entertainment or other unlawful expense relating to political activity, (B) has used or is using any corporate funds for any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (C) has violated or is violating any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption Laws (collectively, the “Anti-Corruption Laws”) or (D) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment. Kinderhook and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurances regarding compliance by Kinderhook and its Subsidiaries with all applicable Anti-Corruption Laws.
(vi) Kinderhook and its Subsidiaries are and since December 31, 2013 have been conducting operations at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of all money laundering Laws administered or enforced by any Governmental Authority in jurisdictions where Kinderhook and its Subsidiaries conduct business (collectively, the “Anti-Money Laundering Laws”). Kinderhook and its Subsidiaries have established and maintain a system of internal controls designed to ensure compliance by Kinderhook and its Subsidiaries with applicable financial recordkeeping and reporting requirements of the Anti-Money Laundering Laws.
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(vii) Except as required by the Bank Secrecy Act, to Kinderhook’s Knowledge, no employee of Kinderhook or any of its Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law by Kinderhook or any of its Subsidiaries or any employee thereof acting in its capacity as such. Neither Kinderhook nor any of its Subsidiaries nor any officer, employee, contractor, subcontractor or agent of Kinderhook or any such Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against any employee of Kinderhook or any of its Subsidiaries in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. Section 1514A(a).
(viii) Neither Kinderhook nor any of its Subsidiaries nor to the Knowledge of Kinderhook, any director, officer, agent, employee or any other Person acting on behalf of Kinderhook or any of its Subsidiaries, is currently the subject or the target of any sanctions administered or enforced by any Governmental Authority (collectively, “Sanctions”), nor is Kinderhook or any of its Subsidiaries located, organized or resident in a country or territory that is the subject or the target of Sanctions (each, a “Sanctioned Country”). For the past five (5) years, Kinderhook and its Subsidiaries have not knowingly engaged in, are not now knowingly engaged in and will not engage in, any dealings or transactions with any Person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country. Kinderhook and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurances regarding compliance by Kinderhook and its Subsidiaries with all applicable Sanctions.
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(ii) There is no unfair labor practice charge or other material Litigation regarding Service Providers against Kinderhook or any of its Subsidiaries pending, or to the Knowledge of Kinderhook, threatened, before any court, arbitrator or Governmental Authority (including the National Labor Relations Board). Neither Kinderhook nor any of its Subsidiaries has failed to comply with any collective bargaining agreement or any other similar agreement with any labor organization, group or association and there are no grievances pending, or to the Knowledge of Kinderhook, threatened, under any such agreement.
(iii) Kinderhook and its Subsidiaries are and have been since December 31, 2015 in compliance in all material respects with, and to the Knowledge of Kinderhook are not under investigation with respect to, applicable Laws with respect to employment and employee matters, including employment practices, employee benefits, labor relations, terms and conditions of employment, Tax withholding, discrimination, equal employment, fair employment practices, immigration, employee classification, human rights, pay equity, workers’ compensation, employee safety and health, facility closings and layoffs (including the Worker Adjustment and Retraining Notification Act of 1988 (together with any other similar Laws, “WARN”)) and wages and hours. During the ninety (90) day period prior to the date hereof, neither Kinderhook nor any of its Subsidiaries has effectuated or announced or has plans to effectuate or announce (A) a “plant closing,” (B) a “mass layoff” or (C) any other transaction, layoff, reduction in force or employment terminations sufficient in number to trigger application of WARN. No Service Providers provide services to Kinderhook or any of its Subsidiaries outside of the United States.
(iv) No Service Provider is in any material respect in violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, noncompetition agreement, restrictive covenant or other obligation relating to the (i) right of any such Service Provider to be employed by, or provide services to, Kinderhook and its Subsidiaries or (ii) knowledge or use of trade secrets or proprietary information. Except as disclosed in Section 3.2(i)(iv) of the Kinderhook Disclosure Letter, no Service Provider at or above the level of Vice President has given written notice or, to the Knowledge of Kinderhook, other notice of his or her intention to terminate his or her employment.
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(ii) Since December 31, 2015, all Kinderhook Benefit Plans have been administered in all material respects in compliance with their terms and with the applicable provisions of ERISA, the Code, the Patient Protection and Affordable Care Act (as amended) and all other applicable Laws and no events have occurred with respect to any Kinderhook Benefit Plan that could reasonably result in payment or assessment by or against Kinderhook or any of its Subsidiaries of any penalties, Taxes, or other claims for relief under ERISA or the Code. There are no pending or, to the Knowledge of Kinderhook, threatened Litigation, governmental audits or investigations or other proceedings or participant claims (other than claims for benefits in the ordinary course of business) with respect to or against any Kinderhook Benefit Plan or its assets. No prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) or any breach of a fiduciary duty has occurred with respect to any Kinderhook Benefit Plan that has caused or would reasonably be expected to cause Kinderhook or any of its Subsidiaries to incur any Liability under ERISA or the Code. Each Kinderhook Benefit Plan that is a “non-qualified deferred compensation plan” (as defined for purposes of Section 409A of the Code) is in documentary compliance with, and has been operated and administered in compliance with, Section 409A of the Code and the applicable guidance issued thereunder. There is no Contract, plan or arrangement covering any Service Provider that, individually or collectively, would entitle any Service Provider to any Tax gross-up or similar payment from Kinderhook or any of its Subsidiaries in respect of any Taxes that may become payable under Section 409A or Section 4999 of the Code. All contributions and amounts due and payable under any Kinderhook Benefit Plan have been timely paid and accrued on the Kinderhook Financial Statements in accordance with GAAP.
(iii) Each Kinderhook Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter, or has pending or has time remaining in which to file, an application for such determination from the IRS, and, to the Knowledge of Kinderhook, there are no facts or circumstances that would reasonably be expected to cause any such determination letter to be revoked or not be reissued. Each trust created under any such Kinderhook Benefit Plan is, and has been since its establishment, exempt from Tax under Section 501(a) of the Code and, to the Knowledge of Kinderhook, there are no facts or circumstances that would reasonably be expected to result in the revocation of such exemption.
(iv) Neither Kinderhook nor any of its ERISA Affiliates has engaged in any transaction described in Section 4069 of the Code nor has incurred or reasonably expects to incur, any Liability arising in connection with the termination of a Title IV Plan. Neither Kinderhook nor any of its ERISA Affiliates (nor any predecessor thereto) sponsors, maintains, administers or contributes to or has any obligation to contribute to (or has ever sponsored, maintained, administered or contributed to or had any obligation to contribute to), or has any Liability (contingent or otherwise) with respect to, any Benefit Plan that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA, any “multiemployer plan,” as such term is defined in Section 3(37) of ERISA, a “multiple employer plan,” within the meaning of Section 210 of ERISA or “multiple employer welfare arrangement,” as such term is defined in Section 3(40) of ERISA.
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(v) Neither Kinderhook nor any of its ERISA Affiliates has any current or projected obligations or Liability for post-employment or post-retirement health, medical, or life insurance benefits under any Kinderhook Benefit Plan, other than with respect to benefit coverage mandated by Section 4980B of the Code (and at the sole cost of the applicable Service Provider). There are no loans or other types of indebtedness outstanding between Kinderhook and any of its Subsidiaries, as creditor, and any Service Provider, as debtor (or vice versa, other than outstanding obligations with respect to employee compensation or payments or contributions under any Kinderhook Benefit Plan that are accrued but not yet paid).
(vi) The consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event) (A) entitle any Service Provider to severance pay, any other payment or forgiveness of indebtedness, (B) increase or enhance any benefits or accelerate the time of payment or vesting or trigger any payment of funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other obligation pursuant to, any Kinderhook Benefit Plan or any other agreement or arrangement with any Service Provider, (C) result in any violation of, or default under, or limit the right of Kinderhook or its Subsidiaries, or, after the Effective Time, Community or any of its Subsidiaries, to amend, modify or terminate any Kinderhook Benefit Plan or (D) result in an amount paid or payable (whether in cash, property, in-kind benefits, the acceleration of vesting or payment or otherwise) that is an “excess parachute payment” within the meaning of Section 280G of the Code.
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(ii) All interest rate swaps, caps, floors, collars, option agreements, futures, and forward contracts, and other similar risk management arrangements, Contracts or agreements, whether entered into for Kinderhook’s own account or for the account of one or more of its Subsidiaries or their respective customers, were entered into (A) in the ordinary course of business consistent with past practice and in accordance with prudent business practices and all applicable Laws and (B) with counterparties believed to be financially responsible, and each of them is enforceable in accordance with its terms (except in all cases as such enforceability may be limited by (1) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and other Laws now or hereafter in effect relating to or affecting the enforcement of creditors’ rights generally and (2) general equitable principles and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought), and is in full force and effect. Neither Kinderhook nor any of its Subsidiaries, nor to the Knowledge of Kinderhook, any other party thereto, is in Default of any of its obligations under any such agreement or arrangement.
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(ii) Section 3.2(m)(ii) of the Kinderhook Disclosure Letter lists all patents and patent applications, all registered and unregistered trademarks and applications therefor, trade names and service marks, registered copyrights and applications therefor, domain names, web sites and mask works owned by or exclusively licensed to Kinderhook or its Subsidiaries included in its Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Kinderhook, no royalties or other continuing payment obligations are due in respect of any third-party patents, trademarks or copyrights, including software.
(iii) All patents, registered trademarks, service marks and copyrights held by Kinderhook and its Subsidiaries are valid and subsisting. Since December 31, 2015, neither Kinderhook nor any of its Subsidiaries (A) has been sued in any Litigation which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary right of any third party or (B) has brought any Litigation for infringement of its Intellectual Property or breach of any license or other Contract involving its Intellectual Property against any third party.
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(ii) True and complete lists of all Loans as of December 31, 2018 and on a monthly basis thereafter, and of the investment portfolios of Kinderhook and each of its Subsidiaries as of such date, are disclosed in Section 3.2(n)(ii) of the Kinderhook Disclosure Letter. Except as specifically set forth in Section 3.2(n)(ii) of the Kinderhook Disclosure Letter, neither Kinderhook nor any of its Subsidiaries is a party to any Loan that, as of the most recent month-end prior to the date of this Agreement, (A) was delinquent by more than thirty (30) days in the payment of principal and/or interest, (B) to the Knowledge of Kinderhook, was otherwise in material default for more than thirty (30) days, (C) was on non accrual status or classified as “substandard,” “doubtful,” “loss,” “other assets specially mentioned,” “special mention,” “criticized,” “classified,” “watch list” or any comparable classification, (D) was an obligation of any director, executive officer or five percent (5%) shareholder of Kinderhook or any of its Subsidiaries who is subject to Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any Person controlling, controlled by or under common control with any of the foregoing, (E) was in violation of any Law, (F) has had its respective terms to maturity accelerated or with respect to which Kinderhook or any Subsidiary of Kinderhook has notified the borrower of its intention to accelerate the Loan or declare a default, (G) has been terminated or amended by Kinderhook or any Subsidiary of Kinderhook during the past twelve (12) months by reason of a default or adverse developments in the condition of the borrower or other events or circumstances affecting the credit of the borrower, (H) has a borrower, customer or other party to such Loan which has notified Kinderhook or any Subsidiary of Kinderhook during the past twelve (12) months of, or has asserted against Kinderhook, orally or in writing, any “lender liability” or similar claim, (I) has, during the past two (2) years, had its interest rate terms reduced and/or the maturity dates extended subsequent to the agreement under which the Loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, (J) in connection therewith, has a specific reserve allocation, or (K) was classified by Kinderhook as “other real estate owned,” including all other assets currently held that were acquired through foreclosure or in lieu of foreclosure (such Loans described in clauses (A) through (K), “Delinquent Loans”).
(iii) Each outstanding Loan (including Loans held for resale to investors) in which Kinderhook or any of its Subsidiaries is the creditor was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant loan or other similar files are being maintained, in all material respects, in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Kinderhook and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable federal, state and local Laws.
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(iv) None of the agreements pursuant to which Kinderhook or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan, and neither Kinderhook nor any of its Subsidiaries has received written notice of any pending claim for it to repurchase Loans or interests therein.
(v) Neither Kinderhook nor any of its Subsidiaries is now nor has it ever been since December 31, 2015, subject to any material fine, suspension, settlement or other Contract or other administrative agreement or sanction by, or any reduction in any loan purchase commitment from, any Governmental Authority or Regulatory Authority relating to the origination, sale or servicing of mortgage or consumer Loans.
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(ii) Kinderhook and its Subsidiaries’ collection and use of such PIFI, the transfer of such PIFI to Community or any of its Subsidiaries, and the use of such PIFI by Community or any of its Subsidiaries complies in all material respects with all applicable privacy policies, the Fair Credit Reporting Act, the Xxxxx-Xxxxx-Xxxxxx Act and all other applicable state, federal and foreign privacy Laws, and any contract or industry standard relating to privacy.
(ii) The Technology Systems (for a period of eighteen (18) months prior to the Effective Time) have not suffered unplanned disruption causing a Material Adverse Effect on Kinderhook. Except for ongoing payments due under Contracts with third parties, the Technology Systems are free from any Liens (other than Permitted Liens). Access to business-critical parts of the Technology Systems is not shared with any third party.
(iii) Kinderhook has furnished to Community a true and correct copy of Kinderhook’s disaster recovery and business continuity arrangements.
(iv) Neither Kinderhook nor any of its Subsidiaries has received notice of or is aware of any material circumstances, including the execution of this Agreement or the Bank Merger Agreement or the consummation of the transactions contemplated hereby or thereby, that would enable any third party to terminate any of Kinderhook’s or any of its Subsidiaries’ agreements or arrangements relating to the Technology Systems (including maintenance and support).
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(u) State Takeover Laws. Kinderhook has taken all action required to be taken by it in order to exempt this Agreement and the transactions contemplated hereby from, and this Agreement and the transactions contemplated hereby are exempt from, the requirements of any “moratorium,” “control share,” “fair price,” “affiliate transaction,” “anti-greenmail,” “business combination” or other anti-takeover Law of any jurisdiction (collectively, “Takeover Laws”). Kinderhook has taken all action required to be taken by it in order to make this Agreement and the transactions contemplated hereby comply with, and this Agreement and the transactions contemplated hereby do comply with, the requirements of any provisions of its Organizational Documents concerning “business combination,” “fair price,” “voting requirement,” “constituency requirement” or other related provisions.
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(ii) Each of Kinderhook and its Subsidiaries has good title in all material respects to all securities and commodities owned by it (except those sold under repurchase agreements), free and clear of any Lien, except as set forth in the financial statements included in the Kinderhook Reports or to the extent such securities or commodities are pledged in the ordinary course of business consistent with past practice to secure obligations of Kinderhook or its Subsidiaries. Such securities and commodities are valued on the books of Kinderhook in accordance with GAAP in all material respects.
(iii) Kinderhook and its Subsidiaries and their respective businesses employ investment, securities, commodities, risk management and other policies, practices and procedures that Kinderhook believes are prudent and reasonable in the context of such businesses and Kinderhook and its Subsidiaries have, since December 31, 2015, been in compliance in all material respects with such policies, practices and procedures. Prior to the date of this Agreement, Kinderhook has made available to Community the material terms of such policies, practices and procedures.
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(ii) Each of Community’s and Merger Sub’s Boards of Directors has duly approved and declared advisable this Agreement and the Merger and the other transactions contemplated hereby, including the Bank Merger Agreement and the Bank Merger. Community Bank’s Board of Directors has duly approved and declared advisable the Bank Merger Agreement, the Bank Merger and the other transactions contemplated hereby and thereby.
(iii) Neither the execution and delivery of this Agreement or the Bank Merger Agreement by Community, Merger Sub or Community Bank, as applicable, nor the consummation by any of them of the transactions contemplated hereby, nor compliance by them with any of the provisions hereof, will (A) violate, conflict with or result in a breach of any provision of the Organizational Documents of Community, Merger Sub or Community Bank, (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien (other than Permitted Liens) upon any of the respective properties or assets of Community or any of its Subsidiaries (including Merger Sub) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, Contract, Permit or other instrument or obligation to which Community or any of its Subsidiaries (including Merger Sub) is a party, or by which they or any of their respective properties or assets may be bound, or (C) subject to receipt of the Requisite Regulatory Approvals and the expiration of any waiting period required by Law as described in clause (iv) below, violate any Law or Order applicable to Community, Merger Sub or Community Bank or any of their respective material assets, except, in the case of clauses (B) and (C), as individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on the ability of Community or Merger Sub to perform their respective obligations under this Agreement or to timely consummate the Merger.
(iv) Except for (A) the filing of applications, filings and notices, as applicable, with the Federal Reserve Board under the BHC Act and approval of such applications, filings and notices, (B) the filing of applications, filings and notices, as applicable, with the OCC in connection with the Bank Merger, including under the Bank Merger Act, and approval of such applications, notices and filings, (C) the filing of any required applications, notices or filings with any state banking authorities listed on Section 3.3(b)(iv)(C) of the Community Disclosure Letter or Section 3.2(b)(vi)(C) of the Kinderhook Disclosure Letter and approval of such applications, notices or filings, (D) the filing of the Certificate of Merger with the New York Secretary pursuant to the NYBCL and (E) as otherwise set forth in Section 3.3(b)(iv)(E) of the Community Disclosure Letter, no Order of, or Consent of, to or with any Governmental Authority or other third party is necessary in connection with the execution, delivery or performance of this Agreement or the Bank Merger Agreement by Community, Merger Sub or Community Bank, as applicable, or the consummation by Community, Merger Sub or Community Bank, as applicable, of the Merger, the Bank Merger and the other transactions contemplated by this Agreement and the Bank Merger Agreement.
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(iii) Neither Community nor any of its Subsidiaries has received any notification or communication from any Governmental Authority (A) asserting that Community or any of its Subsidiaries is in Default under any of the Permits, Laws or Orders which such Governmental Authority enforces, or (B) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, any Permits.
(iv) Neither Community nor any of its Subsidiaries is subject to any cease-and-desist or other order or formal enforcement action issued by, or is a party to any formal written agreement, consent agreement or public memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since December 31, 2015, a recipient of any public supervisory letter from any Regulatory Authority or other Governmental Authority that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy.
(v) Neither Community nor any of its Subsidiaries (nor to Community’s Knowledge any of their respective directors, executives, Representatives, agents or employees) (A) has used or is using any corporate funds for any illegal contribution, gift, entertainment or other unlawful expense relating to political activity, (B) has used or is using any corporate funds for any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (C) has violated or is violating any Anti-Corruption Laws or (D) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment. Community and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurances regarding compliance by Community and its Subsidiaries with all applicable Anti-Corruption Laws.
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(vi) Community and its Subsidiaries are and since December 31, 2013 have been conducting operations at all times in compliance in all material respects with the Anti-Money Laundering Laws. Community and its Subsidiaries have established and maintain a system of internal controls designed to ensure compliance by Community and its Subsidiaries with applicable financial recordkeeping and reporting requirements of the Anti-Money Laundering Laws.
(vii) Except as required by the Bank Secrecy Act, to Community’s Knowledge, no employee of Community or any of its Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law by Community or any of its Subsidiaries or any employee thereof acting in its capacity as such. Neither Community nor any of its Subsidiaries nor any officer, employee, contractor, subcontractor or agent of Community or any such Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against any employee of Community or any of its Subsidiaries in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. Section 1514A(a).
(viii) Neither Community nor any of its Subsidiaries nor to the Knowledge of Community, any director, officer, agent, employee or any other Person acting on behalf of Community or any of its Subsidiaries, is currently the subject or the target of Sanctions, nor is Community or any of its Subsidiaries located, organized or resident in a Sanctioned Country. For the past five (5) years, Community and its Subsidiaries have not knowingly engaged in, are not now knowingly engaged in and will not engage in, any dealings or transactions with any Person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country. Community and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurances regarding compliance by Community and its Subsidiaries with all applicable Sanctions.
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(ii) There is no material unfair labor practice charge or other material Litigation regarding Service Providers against Community or any of its Subsidiaries pending, or to the Knowledge of Community, threatened, before any court, arbitrator or Governmental Authority (including the National Labor Relations Board). Neither Community nor any of its Subsidiaries has failed to comply with any collective bargaining agreement or any other similar agreement with any labor organization, group or association and there are no grievances pending, or to the Knowledge of Community, threatened, under any such agreement.
(iii) Community and its Subsidiaries are in compliance in all material respects with, and to the Knowledge of Community are not under investigation with respect to, applicable Laws with respect to employment and employee matters, including employment practices, employee benefits, labor relations, terms and conditions of employment, Tax withholding, discrimination, equal employment, fair employment practices, immigration, employee classification, human rights, pay equity, workers’ compensation, employee safety and health, facility closings and layoffs (including the Worker Adjustment and Retraining Notification Act of 1988.
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Article 4
Covenants and Additional Agreements of the Parties
(a) amend or propose to amend its Organizational Documents or any resolution or agreement concerning indemnification of its directors or officers;
(b) (i) adjust, split, combine, subdivide or reclassify any capital stock, (ii) make, declare, set aside or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock, other than (A) dividends paid by any of the Subsidiaries of Kinderhook to Kinderhook or any of its wholly-owned Subsidiaries, (B) regular quarterly cash dividends by Kinderhook at a rate not in excess of $0.25 per share of Kinderhook Common Stock with record and payment dates consistent with the comparable quarters in the prior year, except that with the consent of Community, not to be unreasonably withheld, conditioned or delayed, Kinderhook may adjust the declaration, record and/or payable dates with regard to Kinderhook’s last dividend prior to the Effective Time so that the amount of the final dividend prior to the Effective Time on Kinderhook Common Stock shall be adjusted to reflect the normal dividend rate of $0.25 per share multiplied by the number of days that have elapsed in that calendar quarter prior to Closing, divided by ninety (90), (C) dividends payable on the Kinderhook Preferred Stock in accordance with the terms of the Kinderhook Charter, and (D) dividends payable on the trust preferred securities issued by Kinderhook and listed on Section 4.16 of the Kinderhook Disclosure Letter in accordance with the terms of the applicable governing documents, (iii) grant or issue any Rights, (iv) issue or otherwise permit to become outstanding, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of its capital stock or Rights, other than issuances of Kinderhook Common Stock upon the exercise of Kinderhook Warrants in existence on the date hereof pursuant to their terms or upon the conversion of shares of Kinderhook Preferred Stock outstanding on the date hereof in accordance with the terms of the Kinderhook Charter, or (v) make any material change in any instrument or Contract governing the terms of any of its securities;
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(c) other than in the ordinary course of business consistent with past practice (including by way of foreclosure or acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts previously contracted in good faith), make any material investment (either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets) in any other Person other than a wholly-owned Subsidiary of Kinderhook;
(d) charge off (except as may otherwise be required by Law or by Regulatory Authorities or by GAAP) or sell (except in the ordinary course of business consistent with past practices) any of its portfolio of Loans;
(e) terminate or allow to be terminated any of the policies of insurance it maintains on its business or property, cancel any material indebtedness owing to it or any claims that it may have possessed, or waive any right of substantial value or discharge or satisfy any material noncurrent Liability;
(f) enter into any material new line of business;
(g) except in the ordinary course of business consistent with past practice: (i) lend any money or pledge any of its credit in connection with any aspect of its business whether as a guarantor, surety, issuer of a letter of credit or otherwise; (ii) mortgage or otherwise subject to any Lien, encumbrance or other Liability any of its assets; (iii) except for property held as other real estate owned, sell, assign or transfer any of its assets in excess of $25,000 in the aggregate for Kinderhook and its Subsidiaries; or (iv) incur any material Liability, commitment, indebtedness or obligation (of any kind whatsoever, whether absolute or contingent), or cancel, release or assign any indebtedness of any Person or any claims against any Person, except pursuant to Contracts in force as of the date of this Agreement and disclosed in Section 3.2(k) of the Kinderhook Disclosure Letter or transfer, agree to transfer or grant, or agree to grant, a license to, any of its material Intellectual Property;
(h) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money (other than short-term indebtedness incurred to refinance short-term indebtedness (it being understood that for purposes of this Section 4.2(h), “short-term” shall mean maturities of six (6) months or less)); or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any Person;
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(i) other than purchases of investment securities in the ordinary course of business consistent with past practice, materially restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;
(j) except in the ordinary course of business, terminate, materially amend or modify or waive any material provision of, any material Contract other than any contract that terminates by its terms or normal renewals of Contracts without material adverse changes of terms, or enter into any material Contract;
(k) other than as required under applicable Law or by Kinderhook Benefit Plans as in effect at the date of this Agreement or as otherwise listed in Section 3.2(j)(i) of the Kinderhook Disclosure Letter, (i) adopt, enter into, establish, terminate, renew or amend any Benefit Plan (or communicate any intention to take any such action), (ii) change the compensation or benefits of any director, officer or other Service Provider with an annual base salary or wages that is reasonably anticipated to exceed $100,000 or, other than in the ordinary course of business consistent with past practice, of any other Service Provider, (iii) adopt, enter into or amend any collective bargaining agreement or any other similar agreement with any labor organization, group or association, (iv) adopt, enter into, establish, amend or grant any employment, severance, change in control, termination, deferred compensation, pension or retirement arrangement, (v) grant or pay any equity awards or other incentive compensation, or pay any bonus or incentive compensation under a pre-existing Kinderhook Benefit Plan in excess of the amount earned based on actual performance, (vi) accelerate any rights or benefits under any Kinderhook Benefit Plan, including accelerating the vesting of, or the lapsing of restrictions with respect to, any Kinderhook Restricted Shares or otherwise amend the terms of any outstanding SAR Rights, equity awards or equity-based awards, (vii) pay any severance in excess of what is legally required, (viii) take any action to fund or secure the payment of any amounts under any Kinderhook Benefit Plan, or change any assumptions used to calculate funding or contribution obligations under any Kinderhook Benefit Plan, other than as required by GAAP, or (ix) hire or terminate (other than for cause) any director, officer, or any other Service Provider with annual base salary or wages that is reasonably anticipated to exceed $100,000;
(l) commence, settle or agree to settle any Litigation, except in the ordinary course of business consistent with past practice that (i) involves only the payment of money damages not in excess of $25,000 individually or $50,000 in the aggregate, (ii) does not involve the imposition of any equitable relief on, or the admission of wrongdoing by, Kinderhook or the applicable Subsidiary thereof and (iii) would not create precedent for claims that are reasonably likely to be material to Kinderhook or any of its Subsidiaries, or, after the Closing, Community or any of its Subsidiaries;
(m) materially revalue any of its assets or change any method of accounting or accounting practice used by it, other than changes required by GAAP or any Regulatory Authority;
(n) (i) file any Tax Return except in the ordinary course of business consistent with past practice or amend any Tax Return; (ii) settle or compromise any Tax Liability; (iii) make, change or revoke any Tax election or change any method of Tax accounting, except as required by applicable Law; (iv) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar provision of state, local or foreign Law); (v) surrender any claim for a refund of Taxes; or (vi) consent to any extension or waiver of the limitations period applicable to any claim or assessment with respect of Taxes;
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(o) change its fiscal or Tax year;
(p) knowingly take, or knowingly omit to take, any action that is reasonably likely to result in any of the conditions to the Merger set forth in Article 5 not being satisfied; provided, that nothing in this Section 4.2(p) shall preclude Kinderhook from exercising its rights under Section 4.5 or 4.11;
(q) merge or consolidate itself or its Subsidiaries with any other Person, or restructure, reorganize or completely or partially liquidate or dissolve (or adopt or enter into a plan to effect any of the foregoing) itself or any of its Subsidiaries (other than mergers or consolidations solely involving its Subsidiaries);
(r) acquire assets outside of the ordinary course of business consistent with past practice from any other Person with a value or purchase price in the aggregate in excess of $25,000;
(s) enter into any Contract that would have been required to be disclosed in Section 3.2(k) of the Kinderhook Disclosure Letter had it been entered into prior to the execution of this Agreement;
(t) make any material changes in the mix, rates, terms or maturities of Kinderhook Bank’s deposits or other Liabilities, except in a manner and pursuant to policies consistent with past practice and competitive factors in the market place; open any new branch or deposit taking facility; or close, relocate or materially renovate any existing branch or facility;
(u) make any material changes in its policies and practices with respect to (i) underwriting, pricing, originating, acquiring, selling, servicing or buying or selling rights to service, Loans or (ii) investment, risk and asset liability management or hedging practices and policies, in each case except as may be required by such policies and practices or by any applicable laws, regulations, guidelines or policies imposed by any Governmental Authority;
(v) make any Loans, or enter into any commitments to make Loans, which vary other than in immaterial respects from its written Loan policies, a true and correct copy of which policies has been provided to Community; provided, that this covenant shall not prohibit Kinderhook Bank from extending or renewing Loans in the ordinary course of business consistent with past lending practices or in connection with the workout or renegotiation of Loans currently in its Loan portfolio;
(w) renew or enter into any non compete, exclusivity, non solicitation or similar agreement that would restrict or limit, in any material respect, the operations of Kinderhook or any of its Subsidiaries or, after the Effective Time, Community or any of its Subsidiaries;
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(x) waive any material benefits of, or agree to modify in any adverse respect, or fail to enforce, or consent to any matter with respect to which its consent is required under, any confidentiality, standstill or similar agreement to which Kinderhook or any of its Subsidiaries is a party;
(y) engage in (or modify in a manner adverse to Kinderhook or its Subsidiaries) any transactions (except for any ordinary course banking relationships permitted under applicable Law) with any Affiliate or any director or officer thereof (or any Affiliate or immediate family member of any such Person or any Affiliate of such Person’s immediate family members);
(z) except in the ordinary course of business consistent with past practice, enter into any new lease of real property or amend the terms of any existing lease of real property;
(aa) incur or commit to incur any capital expenditure or authorization or commitment with respect to them that, in the aggregate is in excess of $50,000, except as disclosed in the annual business plan or budget previously disclosed to Community; or
(bb) agree or commit to take any of the actions prohibited by this Section 4.2.
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(b) Kinderhook shall call and give notice of a meeting of its shareholders (the “Kinderhook Shareholder Meeting”) to be held as soon as reasonably practicable, and in any event within forty-five (45) days after the mailing of the Proxy Statement, for the purpose of obtaining the Kinderhook Shareholder Approval and, if so desired and mutually agreed, upon other matters of the type customarily brought before an annual or special meeting of shareholders to adopt a merger agreement, and Kinderhook shall use its reasonable best efforts to cause such meeting to occur as soon as reasonably practicable. The Board of Directors of Kinderhook shall use its reasonable best efforts to obtain from the shareholders of Kinderhook the Kinderhook Shareholder Approval, including by communicating to its shareholders the Kinderhook Directors’ Recommendation (and including such recommendation in the Proxy Statement), and Kinderhook shall engage a proxy solicitor reasonably acceptable to Community to assist in the solicitation of proxies from shareholders relating to the Kinderhook Shareholder Approval, provided, however, that, prior to the Kinderhook Shareholder Meeting and subject to Sections 6.1 and 6.2, so long as Kinderhook has complied with its obligations under Section 4.11, if the Board of Directors of Kinderhook, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisor, determines in good faith that, because of (x) the receipt of an Acquisition Proposal that constitutes a Superior Proposal or (y) the occurrence of an Intervening Event, failure to take such action would result in a violation of its fiduciary duties under applicable Law, the Board of Directors of Kinderhook may submit this Agreement to Kinderhook’s shareholders without recommendation (although the resolutions approving this Agreement as of the date hereof may not be rescinded or amended), in which event the Board of Directors of Kinderhook may communicate the basis for its lack of a recommendation to Kinderhook’s shareholders in the Proxy Statement or an appropriate amendment or supplement thereto to the extent required by Law; provided, further, that the Board of Directors of Kinderhook may not take any actions under the foregoing proviso unless (i) it gives Community at least five (5) Business Days’ prior written notice of its intention to take such action and a reasonably detailed description of the Acquisition Proposal or Intervening Event giving rise to its determination to take such action (including, in the case of an Acquisition Proposal, the latest material terms and conditions and the identity of the third party in any such Acquisition Proposal (including an unredacted copy of all proposed agreements and other documents with respect to such Acquisition Proposal) or any amendment or modification thereof), (ii) during such five (5) Business Day notice period, Kinderhook shall, and shall cause its financial and legal advisors to, negotiate with Community in good faith (to the extent Community seeks to negotiate) regarding any revisions to the terms of the transactions contemplated by this Agreement proposed by Community, and (iii) at the end of such notice period, the Board of Directors of Kinderhook takes into account in good faith any amendment or modification to this Agreement proposed by Community and after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisor, determines in good faith that it would nevertheless result in a violation of its fiduciary duties under applicable Law to continue to recommend this Agreement. Any material amendment to any Acquisition Proposal or material development with respect to any Intervening Event will be deemed to be a new Acquisition Proposal or Intervening Event, as the case may be, for purposes of this Section 4.5(b) and will require a new notice period as referred to in this Section 4.5(b).
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(c) Kinderhook shall adjourn or postpone the Kinderhook Shareholder Meeting if, as of the time for which such meeting is originally scheduled there are insufficient shares of Kinderhook Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting Kinderhook has not received proxies representing a sufficient number of shares necessary to obtain the Kinderhook Shareholder Approval, and, subject to the terms and conditions of this Agreement, Kinderhook shall continue to use all reasonable best efforts, together with its proxy solicitor, to solicit proxies from the Kinderhook Shareholders in favor of the Kinderhook Shareholder Approval. Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in accordance with its terms, the Kinderhook Shareholder Meeting shall be convened and this Agreement shall be submitted to the shareholders of Kinderhook at the Kinderhook Shareholder Meeting, for the purpose of voting on the adoption of this Agreement and the other matters contemplated hereby, and nothing contained herein shall be deemed to relieve Kinderhook of such obligation.
(b) Following the Effective Time, the Parties shall take all actions necessary to consummate the Bank Merger.
(c) The Parties shall consult with respect to the character, amount and timing of restructuring charges to be taken by each of them in connection with the transactions contemplated hereby and shall take such charges in accordance with GAAP, as such Parties mutually agree upon.
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(b) Community and Kinderhook shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable Laws relating to the exchange of information, all the information relating to Kinderhook or Community, as the case may be, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Authority in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the Parties shall act reasonably and as promptly as practicable. To the extent not prohibited by applicable Law, the Parties agree that they will consult with each other with respect to the obtaining of all Permits, Consents, approvals and authorizations of all third parties and Governmental Authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each Party will keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby. Each Party shall consult with the other in advance of any meeting or conference with any Governmental Authority in connection with the transactions contemplated by this Agreement and, to the extent permitted by such Governmental Authority, Kinderhook shall give Community and/or its counsel the opportunity to attend and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the foregoing, each of Community and Kinderhook shall use its reasonable best efforts to avoid the entry of, or to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other Order, whether temporary, preliminary or permanent, that would restrain, prevent or delay the Closing.
(d) Community and Kinderhook shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of Community, Kinderhook or any of their respective Subsidiaries to any Governmental Authority in connection with the Merger, the Bank Merger and the other transactions contemplated by this Agreement.
(e) To the extent permitted by applicable Law, Community and Kinderhook shall promptly advise each other upon receiving any communication from any Governmental Authority whose Consent is required for consummation of the transactions contemplated by this Agreement that causes such Party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such Consent will be materially delayed.
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(f) As used in this Agreement, the “Requisite Regulatory Approvals” shall mean all regulatory authorizations, Consents, Orders or approvals from, to or with (x) the Federal Reserve Board, the OCC, the FDIC, the New York State Department of Financial Services, any Federal Home Loan Bank or any Federal Reserve Bank that are necessary to consummate the transactions contemplated by this Agreement, including the Merger and the Bank Merger, and (y) any other approvals set forth in Sections 3.2(b)(vi) and 3.3(b)(iv) that are necessary to consummate the transactions contemplated by this Agreement, including the Merger and the Bank Merger, except in the case of this clause (y) for any such authorizations, Consents, Orders or approvals the failure of which to be obtained or made would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Kinderhook or Community, as the case may be.
(g) Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall require Community or its Subsidiaries (including Merger Sub) to take, or agree to take, any actions, or to accept any restriction, requirement or condition imposed by any Regulatory Authority, that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Community or Kinderhook, or materially reduce the benefits or materially increase the burdens of the transactions contemplated hereby to such a degree that Community or another similarly situated reasonable financial institution would not have entered into this Agreement had such actions, conditions, restrictions or requirements been known at the date hereof (a “Materially Burdensome Regulatory Condition”).
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(b) Each Party shall, and shall cause its directors, officers, employees and Representatives to, maintain the confidentiality of all confidential information furnished to it by the other Party concerning its and its Subsidiaries’ businesses, operations and financial positions to the extent required by, and in accordance with, the Confidentiality Agreement.
(c) Kinderhook shall provide Community, no later than fifteen (15) days after the end of each month, a written update on each of its Delinquent Loans and such other information with respect to Kinderhook’s and its Subsidiaries’ Loan portfolio as is reasonably requested by Community.
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(b) Kinderhook shall promptly, and in any event within forty-eight (48) hours of receipt, advise Community in writing in the event Kinderhook or any of its directors, employees, officers or Representatives receives (i) any Acquisition Proposal or indication by any Person that it is considering making an Acquisition Proposal, (ii) any request for information, discussion or negotiation that is reasonably likely to lead to or that contemplates an Acquisition Proposal or (iii) any inquiry, proposal or offer that is reasonably likely to lead to an Acquisition Proposal, in each case together with the terms and conditions of such Acquisition Proposal, request, inquiry, proposal or offer, and shall furnish Community with a copy of such Acquisition Proposal (or, where such Acquisition Proposal is not in writing, with a description of the material terms and conditions thereof). Kinderhook shall keep Community informed (orally and in writing) in all material respects on a timely basis of the status and details (including, within forty-eight (48) hours after the occurrence of any amendment, modification, development, discussion or negotiation) of any such Acquisition Proposal, request, inquiry, proposal or offer, including furnishing copies of any written inquiries, correspondence and draft documentation, and written summaries of any material oral inquiries or discussions. Without limiting any of the foregoing, Kinderhook shall promptly (and in any event within forty-eight (48) hours) notify Community orally and in writing if it determines to begin providing information or to engage in discussions or negotiations concerning an Acquisition Proposal and shall in no event begin providing such information or engaging in such discussions or negotiations prior to providing such notice.
(c) Neither the Board of Directors of Kinderhook nor any committee thereof shall (i) except as expressly permitted by Section 4.5(a), (A) withdraw (or modify or qualify in any manner adverse to Community) the approval, recommendation or declaration of advisability by the Board of Directors of Kinderhook or any such committee of this Agreement, the Merger, or any of the other transactions contemplated hereby, (B) adopt, approve, recommend, endorse or otherwise declare advisable the adoption of any Acquisition Proposal, (C) resolve, agree or propose to take any such actions or (D) submit this Agreement to its shareholders without recommendation (each such action set forth in this clause (i) being referred to herein as an “Adverse Recommendation Change”) or (ii) (A) cause or permit Kinderhook or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other Contract constituting or relating to, or which is intended to or is reasonably likely to lead to, any Acquisition Proposal or (B) resolve, agree or propose to take any such actions.
(d) Kinderhook agrees that any breach by its directors, officers, employees, Affiliates or Representatives of this Section 4.11 shall be deemed a breach by Kinderhook.
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(e) Nothing contained in this Agreement shall prevent Kinderhook or its Board of Directors from complying with Rules 14d-9 and 14e-2 under the Exchange Act or Item 1012(a) of Regulation M-A with respect to an Acquisition Proposal or from making any legally required disclosure to Kinderhook’s shareholders; provided, that such rules will in no way eliminate or modify the effect that any action pursuant to such rules would otherwise have under this Agreement.
(b) Except as would result in a duplication of benefits, the Continuing Employees shall be given, subject to applicable Law, credit for past service with Kinderhook and its Subsidiaries to the extent credited by Kinderhook and its Subsidiaries prior to the Effective Time for purposes of determining eligibility for employee benefits under all employee health and welfare programs maintained by Community or its Subsidiaries in which such Continuing Employees participate following the Effective Time and for purposes of determining length of vacation, sick time and paid time off under Community’s applicable plan or policy (but not for purposes of eligibility for, vesting under, or accrual with respect to any defined benefit pension plan, retiree health or welfare plan or equity award or other long-term incentive compensation plans). In addition, under the welfare plans of Community and its Subsidiaries in which Continuing Employees participate, Community shall use its commercially reasonable efforts to (i) waive, or cause to be waived, for each participating Continuing Employee, any limitations on benefits relating to pre-existing conditions to the same extent such limitations are waived under any comparable plan of Kinderhook or its Subsidiaries prior to the Effective Time and (ii) recognize for purposes of annual deductible and out-of-pocket limits under its medical and dental plans, deductible and out-of-pocket expenses paid by each participating Continuing Employee in the calendar year in which the Effective Time occurs.
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(c) Prior to the Effective Time, Kinderhook shall take, and shall cause its Subsidiaries to take, all actions that may be requested by Community in writing with respect to (i) causing one or more Kinderhook Benefit Plans to terminate as of or following the date immediately preceding the Effective Time or for benefit accruals and entitlements to cease as of or following the date immediately preceding the Effective Time, (ii) causing the continuation on and after the Effective Time of any Contract, arrangement or insurance policy relating to any Kinderhook Benefit Plan for such period as may be requested by Community, or (iii) cooperating with Community to facilitate the merger of any Kinderhook Benefit Plan into any Benefit Plan of Community or its Subsidiaries as of or following the Effective Time. All resolutions, notices, or other documents issued, adopted or executed in connection with the implementation of this Section 4.13(c) shall be subject to Community’s reasonable prior review and approval, which shall not be unreasonably withheld, conditioned or delayed.
(d) Community shall honor, each in accordance with its terms, the employment agreements and severance arrangements with Continuing Employees in effect as of the date of this Agreement to the extent such agreements are set forth on Section 3.2(j)(i) of the Kinderhook Disclosure Letter, except to the extent that any such agreements or arrangements are superseded or terminated as of or following the Effective Time.
(e) In the event of any termination of any Kinderhook Benefit Plan providing employer-provided health coverage or consolidation of any such plan with any Benefit Plan of Community or any of its Subsidiaries providing employer-provided health coverage within twelve (12) months after the Effective Time, (i) Community shall, or shall cause its Subsidiaries to, use commercially reasonable efforts to make available to Continuing Employees and their dependents employer-provided health coverage on the same basis as it provides such coverage to similarly situated employees of Community and its Subsidiaries and (ii) former employees of Kinderhook or any of its Subsidiaries and their qualified beneficiaries will have the right to continued coverage under a group health plan of Community to the extent required by The Consolidated Omnibus Budget Reconciliation Act of 1985.
(f) Severance and Retention Payments.
(i) Community will provide any employee who is employed by Kinderhook or Kinderhook Bank immediately prior to the Effective Time and who is not otherwise covered by an individual severance or change in control agreement and whose employment is terminated by Community or Community Bank without Cause (as defined in Section 4.13(f)(i) of the Kinderhook Disclosure Letter) at or within six (6) months following the Effective Time with severance payments equal to one (1) week of base salary for each full year of service with Kinderhook or Kinderhook Bank, with a minimum benefit of four (4) weeks of base salary and a maximum benefit of twenty-six (26) weeks of base salary, in all cases subject to such employee’s execution of a release of claims in a form reasonably acceptable to Community and paid without duplication of any other severance or termination benefit for which such employee is eligible.
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(ii) Community shall implement a stay bonus pool for stay bonus awards to select employees of Kinderhook and Kinderhook Bank on the terms set forth in Section 4.13(f)(ii) of the Kinderhook Disclosure Letter.
(g) The provisions of this Section 4.13 are solely for the benefit of the parties hereto, and no Service Provider or any other Person shall be regarded for any purpose as a third party beneficiary of this Agreement. Nothing herein, expressed or implied, shall be construed as an amendment to any Benefit Plan for any purpose or confer upon any Continuing Employee or any other Person any right to employment or continued employment with any of the parties hereto or any of their Subsidiaries or Affiliates for any period. Nothing in this Section 4.13 shall be construed to limit the right of Community or any of its Subsidiaries (including, following the Effective Time, Kinderhook and its Subsidiaries) to amend or terminate any Kinderhook Benefit Plan or other employee benefit plan, to the extent such amendment or termination is permitted by the terms of the applicable plan, nor shall anything in this Section 4.13 be construed to require Community or any of its Subsidiaries to retain the employment of any particular Continuing Employee for any fixed period of time following the Effective Time.
(a) Kinderhook shall, consistent with GAAP and applicable Law and on a basis mutually satisfactory to it and Community, modify and change its accounting, investment, loan, litigation and real estate valuation policies and practices (including loan classifications, content and size of investment portfolio, and levels of reserves and accruals) so as to be applied, in all material respects, on a basis that is consistent with that of Community;
(b) Kinderhook and Community shall review the adequacy of reserves for loan losses currently established by Kinderhook and, if deemed warranted by both parties under GAAP, Kinderhook shall make mutually acceptable changes to such reserves; and
(c) Kinderhook shall consult with Community with respect to determining the amount and timing of recognizing, for financial accounting and income Tax reporting purposes, Kinderhook’s expenses incurred in connection with the Merger, the Bank Merger and the transactions contemplated by this Agreement, and, subject to GAAP and applicable Law, Kinderhook shall recognize its costs and expenses in connection with the transactions contemplated hereby at such time or times as are reasonably requested by Community.
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(b) Subject to applicable Law, for a period of six (6) years after the Effective Time, the Surviving Corporation shall, and Community shall cause the Surviving Corporation to, cause to be maintained in effect the current policies of directors’ and officers’ liability insurance maintained by Kinderhook (provided, that the Surviving Corporation may substitute therefor policies with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the insured) with respect to claims against the present and former officers and directors of Kinderhook or any of its Subsidiaries arising from facts or events which occurred at or before the Effective Time (including the transactions contemplated by this Agreement); provided, that the Surviving Corporation shall not be obligated to expend, on an annual basis, an amount in excess of two hundred percent (200%) of the current annual premium paid as of the date hereof by Kinderhook for such insurance (the “Premium Cap”), and if such premiums for such insurance would at any time exceed the Premium Cap, then the Surviving Corporation shall cause to be maintained policies of insurance which, in its good faith determination, provide the maximum coverage available at an annual premium equal to the Premium Cap. In lieu of the foregoing, Kinderhook, in consultation with Community, may (and at the request of Community, Kinderhook shall use its reasonable best efforts to) obtain at or prior to the Effective Time a six (6) year “tail” policy providing equivalent coverage to that described in the preceding sentence if and to the extent that the same may be obtained for an amount that, in the aggregate, does not exceed the Premium Cap. If Kinderhook purchases such a “tail policy,” the Surviving Corporation shall maintain such “tail” policy in full force and effect and continue to honor its obligations thereunder for such six (6) year period.
(c) Subject to applicable Law, the obligations of the Parties under this Section 4.15 shall not be terminated or modified after the Effective Time in a manner so as to adversely affect any Indemnified Party or any other Person entitled to the benefit of this Section 4.15 without the prior written consent of the affected Indemnified Party or affected Person.
(d) Subject to applicable Law, the provisions of this Section 4.15 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and Representatives.
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(b) Prior to the Effective Time, Kinderhook shall, and shall cause its Subsidiaries to, take all such actions reasonably requested by Community or any of its Subsidiaries with respect to the debt, guarantees, securities and other agreements described in Section 4.16(a) above (i) to the extent required by the terms thereof or under applicable Law to be taken prior to the Effective Time, including, without limitation, the giving of any notices that may be required in connection with the Merger or the Bank Merger, and the delivery of any supplemental indentures, legal opinions, officers’ certificates or other documents or instruments required in connection with the Merger, the Bank Merger and the respective consummation thereof or (ii) in order to facilitate Community’s compliance with the foregoing Section 4.16(a).
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Article 5
Conditions Precedent to Obligations to Consummate
(a) Shareholder Approval. Kinderhook shall have obtained the Kinderhook Shareholder Approval.
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Article 6
(a) By mutual written consent of Kinderhook and Community;
(b) By either Community or Kinderhook (provided, that the terminating Party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties (or any such representation or warranty shall cease to be true) set forth in this Agreement on the part of Kinderhook, in the case of a termination by Community, or Community and Merger Sub, in the case of a termination by Kinderhook, which breach or failure to be true, either individually or in the aggregate with all the other breaches by such Party (or failures of representations or warranties to be true), would constitute, if occurring or continuing on the Closing Date, the failure of a condition set forth in Section 5.2, in the case of a termination by Community, or Section 5.3, in the case of a termination by Kinderhook, and which is not cured within thirty (30) days following written notice to Kinderhook, in the case of a termination by Community, or Community, in the case of a termination by Kinderhook, or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the Expiration Date);
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(c) By either Community or Kinderhook in the event that the Kinderhook Shareholder Approval has not been obtained by reason of the failure to obtain the required vote at the Kinderhook Shareholder Meeting; provided that Kinderhook may not terminate this Agreement under this Section 6.1(c) if it has not complied in all material respects with its obligations under Section 4.5 (including by complying with any adjournment or postponement obligations under Section 4.5);
(d) By either Community or Kinderhook in the event that a court of competent jurisdiction or other Governmental Authority shall have issued any Order restraining, enjoining or otherwise prohibiting the Merger or the Bank Merger and such Order shall have become final and nonappealable;
(e) By either Community or Kinderhook in the event that the Merger has not been consummated by 5:00 p.m., New York City time, on the first (1st) anniversary of the date of this Agreement (the “Expiration Date”), provided that the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 6.1(e);
(f) By Community in the event that Community or any of its Affiliates receives written notice from or is otherwise advised by a Governmental Authority that it will not grant (or intends to rescind or revoke if previously approved) any Requisite Regulatory Approval or receives written notice from or is otherwise advised by a Governmental Authority that it will not grant such Requisite Regulatory Approval without imposing a Materially Burdensome Regulatory Condition; or
(g) By Community in the event that (i) the Kinderhook Board of Directors or any committee thereof effects an Adverse Recommendation Change, (ii) Kinderhook has failed to substantially comply with its obligations under Section 4.5 or 4.11, (iii) a tender offer or exchange offer for twenty-five percent (25%) or more of the outstanding shares of Kinderhook Common Stock is commenced and Kinderhook shall not have sent to its shareholders, within ten (10) Business Days after the commencement of such tender or exchange offer, a statement that the Board of Directors of Kinderhook recommends rejection of such tender or exchange offer, or (iv) an Acquisition Proposal (other than a tender or exchange offer covered by clause (iii) of this Section 6.1(g)) with respect to Kinderhook is publicly announced and, upon Community’s request, Kinderhook fails to issue a press release announcing its opposition to such Acquisition Proposal and reaffirming the Kinderhook Directors’ Recommendation within three (3) Business Days after such request.
The Party desiring to terminate this Agreement pursuant to clause (b), (c), (d), (e), (f) or (g) of this Section 6.1 shall give written notice of such termination to the other Party in accordance with Section 7.8, specifying the provision or provisions hereof pursuant to which such termination is effected.
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(b) In the event that Community terminates this Agreement pursuant to Section 6.1(g), Kinderhook shall pay to Community, by wire transfer of immediately available funds, the Termination Fee within two (2) Business Days after the date this Agreement is terminated.
(c) Kinderhook hereby acknowledges that the agreements contained in this Section 6.2 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, Community would not enter into this Agreement. In the event that Kinderhook fails to pay if and when due any amount payable under this Section 6.2, then (i) Kinderhook shall reimburse Community for all costs and expenses (including disbursements and reasonable fees of counsel) incurred in connection with the collection of such overdue amount, and (ii) Kinderhook shall pay to Community interest on such overdue amount (for the period commencing as of the date such overdue amount was originally required to be paid and ending on the date such overdue amount is actually paid in full) at a rate per annum equal to the “prime rate” (as published in the “Money Rates” column in The Wall Street Journal or, if not published therein, in another national financial publication selected by Community) in effect on the date such overdue amount was originally required to be paid.
(d) Assuming Kinderhook is not in willful breach of its obligations under this Agreement, including Section 4.5 and 4.11, then the payment of the Termination Fee shall fully discharge Kinderhook from and be the sole and exclusive remedy of Community and Merger Sub with respect to any and all losses that may be suffered by Community or its Affiliates (including Merger Sub) based upon, resulting from or arising out of the circumstances giving rise to such termination of this Agreement under Section 6.2(a) or 6.2(b). In no event shall Kinderhook be required to pay the Termination Fee on more than one occasion.
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Article 7
“Acquisition Proposal” shall mean, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry relating to, or any third party indication of interest in, (i) any acquisition or purchase, direct or indirect, of twenty-five percent (25%) or more of the consolidated assets of Kinderhook and its Subsidiaries or twenty-five percent (25%) or more of any class of equity or voting securities of Kinderhook or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than twenty-five percent (25%) of the consolidated assets of Kinderhook, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in a third party beneficially owning twenty-five percent (25%) or more of any class of equity or voting securities of Kinderhook or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than twenty-five percent (25%) of the consolidated assets of Kinderhook, (iii) any merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving Kinderhook or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than twenty-five percent (25%) of the consolidated assets of Kinderhook, or (iv) any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the Merger or the Bank Merger or that could reasonably be expected to dilute materially the benefits to Community of the transactions contemplated hereby.
“Affiliate” of a Person shall mean any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person. For purposes of this definition, “control” (and its derivatives) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of equity, voting or other interests, as trustee or executor, by Contract or otherwise.
“Benefit Plan” shall mean any “employee benefit plan” (as that term is defined in Section 3(3) of ERISA), including any plan that is a “multiemployer plan” as defined in Section 3(37) of ERISA, and any other employee benefit plan, policy, or agreement, whether or not covered by ERISA, and any pension, retirement, profit-sharing, deferred compensation, equity compensation, employment, stock purchase, gross-up, retention, incentive compensation, collective bargaining agreement, employee stock ownership, severance, change in control, vacation, bonus, or deferred compensation plan, policy, or arrangement, any medical, vision, dental, or other written health plan, any life insurance plan, fringe benefit plan, and any other employee program or agreement, whether formal or informal or written or oral.
“BHC Act” shall mean the Bank Holding Company Act of 1956, as amended, and rules and regulations thereunder.
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“Business Day” shall mean any day that the NYSE is normally open for trading for a full day and that is not a Saturday, a Sunday or a day on which banks in New York, New York are authorized or required to close for regular banking business.
“Code” shall mean the Internal Revenue Code of 1986, as amended, any successor statute thereto, and the rules and regulations thereunder.
“Community Common Stock” or “Community Shares” shall mean the $1.00 par value per share common stock of Community.
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement, dated August 13, 2018, by and between Community and Kinderhook.
“Consent” shall mean any filing, notice, registration, consent, approval, authorization, clearance, exemption, waiver, or similar affirmation with, to or by any Person pursuant to any Contract, Law, Order, or Permit.
“Contract” shall mean any written or oral agreement, arrangement, commitment, contract, indenture, instrument, lease, understanding, note, bond, license, mortgage, deed of trust or undertaking of any kind or character to which any Person is a party or that is binding on any Person or its capital stock, assets, or business.
“Default” shall mean (i) any breach or violation of or default under any Contract, Law, Order, or Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of or default under any Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice or both would give rise to a right to terminate or revoke, change the current terms of, or renegotiate, or to accelerate, increase, or impose any Liability under, any Contract, Law, Order, or Permit.
“Environmental Laws” shall mean all Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface, or subsurface strata) and which are administered, interpreted, or enforced by the United States Environmental Protection Agency and state and local agencies with jurisdiction over, and including common Law in respect of, pollution or protection of the environment, including the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, and other Laws relating to emissions, discharges, releases, or threatened releases of any Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of any Hazardous Material, including all requirements for Permits, licenses and other authorizations that may be required.
“ERISA Affiliate” of any Person means any entity that is, or at any relevant time was, treated as a single employer with such Person under Section 414 of the Code.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
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“Facilities” shall mean all buildings and improvements on the property of any Person.
“FDIC” shall mean the Federal Deposit Insurance Corporation.
“Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve System (including any Federal Reserve Bank).
“FINRA” shall mean the Financial Industry Regulatory Authority.
“GAAP” shall mean accounting principles generally accepted in the United States of America, consistently applied during the periods involved.
“Governmental Authority” shall mean each Regulatory Authority and any other domestic or foreign court, arbitrator or arbitration panel, administrative agency, commission or other governmental authority or instrumentality (including the staff thereof), or any industry self-regulatory authority (including the staff thereof).
“Hazardous Material” shall mean (i) any hazardous substance, hazardous material, hazardous waste, regulated substance, or toxic substance (as those terms are defined by any applicable Environmental Laws), and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum products that are or become regulated under any applicable local, state, or federal Law (and specifically shall include asbestos requiring abatement, removal, or encapsulation pursuant to the requirements of governmental authorities and any polychlorinated biphenyls).
“Intellectual Property” shall mean (i) any patents, copyrights, trademarks, service marks, maskworks or similar rights throughout the world, and applications or registrations for any of the foregoing, (ii) any proprietary interest, whether registered or unregistered, in know-how, copyrights, trade secrets, database rights, data in databases, website content, inventions, invention disclosures or applications, software (including source and object code), operating and manufacturing procedures, designs, specifications and the like, (iii) any proprietary interest in any similar intangible asset of a technical, scientific or creative nature, including slogans, logos and the like and (iv) any proprietary interest in or to any documents or other tangible media containing any of the foregoing.
“Intervening Event” shall mean any material event or development or material change in circumstances with respect to Kinderhook and its Subsidiaries, taken as a whole, that (i) arises or occurs after the date of this Agreement and was neither known by nor reasonably foreseeable to the Kinderhook Board of Directors as of or prior to the date hereof and (ii) does not relate to (A) any Acquisition Proposal, (B) any Requisite Regulatory Approval or (C) any of the matters identified in clauses (A) – (E) of the definition of “Material Adverse Effect.”
“Kinderhook Benefit Plan” shall mean any Benefit Plan that is entered into, maintained by, sponsored in whole or in part by, or contributed to by Kinderhook or any Subsidiary or ERISA Affiliate thereof, or under which Kinderhook or any Subsidiary or ERISA Affiliate thereof could reasonably be expected to have any obligation or Liability, whether actual or contingent, with respect to any Service Provider.
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“Kinderhook Common Stock” or “Kinderhook Common Shares” shall mean the $0.83 par value per share common stock of Kinderhook.
“Kinderhook Financial Statements” shall mean (i) the audited consolidated balance sheets (included related notes and schedules) of Kinderhook as of December 31, 2017, 2016 and 2015 and the consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows (including related notes and schedules, if any) of Kinderhook for each of the three (3) years ended December 31, 2017, 2016 and 2015, and (ii) the unaudited interim consolidated balance sheets of Kinderhook as of the end of each calendar quarter following December 31, 2017, and the consolidated statements of income for the periods then ended.
“Kinderhook Preferred Stock” or “Kinderhook Preferred Shares” shall mean the Series A Convertible Preferred Stock and the Series C Convertible Preferred Stock.
“Kinderhook Shares” shall mean the Kinderhook Common Shares and the Kinderhook Preferred Shares.
“Kinderhook Shareholders” shall mean the holders of Kinderhook Common Shares.
“Kinderhook Shareholder Approval” shall mean the adoption of this Agreement by the holders of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of Kinderhook Common Stock.
“Kinderhook Warrant” shall mean the warrants originally issued pursuant to that certain organizer warrant agreement on December 2, 2005 by Patriot Federal Bank, to purchase shares of common stock, par value $1.00 per share, of Patriot Federal Bank at a price per share of $10.00, as amended on October 17, 2017 and evidenced by replacement certificates to purchase Kinderhook Common Stock at a price per share of $33.34 expiring on May 31, 2023.
“Knowledge” shall mean (i) with respect to Kinderhook, the knowledge of the individuals listed in Section 7.1 of the Kinderhook Disclosure Letter, after reasonable inquiry, and (ii) with respect to Community, the knowledge of the individuals listed in Section 7.1 of the Community Disclosure Letter, after reasonable inquiry.
“Law” shall mean any code, law (including any rule of common law), ordinance, regulation, rule, or statute applicable to a Person or its assets, Liabilities, or business, including those promulgated, interpreted, or enforced by any Governmental Authority.
“Liability” shall mean any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost, or expense (including costs of investigation, collection, and defense), claim, deficiency, or guaranty of any type, whether accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
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“Lien” shall mean any mortgage, pledge, claim, reservation, restriction (other than a restriction on transfers arising under the Securities Laws), security interest, lien, or encumbrance of any nature whatsoever of, on, or with respect to any property or property interest, other than Liens for property Taxes not yet due and payable.
“Litigation” shall mean any action, arbitration, cause of action, claim, complaint, criminal prosecution, demand letter, governmental or other examination or investigation, hearing, inquiry, administrative or other proceeding, or notice (written or oral) by any Person alleging potential Liability, but shall not include claims of entitlement under any Benefit Plans that are made or received in the ordinary course of business.
“Material Adverse Effect” on Kinderhook or Community, as the case may be, shall mean a material adverse effect on (i) the condition (financial or otherwise), property, business, assets (tangible or intangible), liabilities or results of operations of such Party and its Subsidiaries taken as a whole or (ii) the ability of such Party and its Subsidiaries to perform their obligations under this Agreement or to timely consummate the Merger, the Bank Merger or the other transactions contemplated by this Agreement; provided, however, that “Material Adverse Effect” shall not be deemed to include for purposes of (i) above, (A) changes after the date of this Agreement in GAAP or regulatory accounting requirements generally applicable to banks and their holding companies, (B) changes after the date of this Agreement in Laws or interpretations of Laws by Governmental Authorities of general applicability to banks and their holding companies, (C) changes after the date of this Agreement in general economic or market conditions in the United States or any state or territory thereof, in each case generally affecting banks and their holding companies, (D) changes after the date of this Agreement in market interest rates or (E) any failure to meet internal projections or forecasts or estimates of revenues or earnings for any period, or any decline in the trading price of such Party’s common stock (it being understood that the circumstances giving rise to such failure or decline that are not otherwise excluded from the definition of Material Adverse Effect may be taken into account in determining whether there has been a Material Adverse Effect), except with respect to clauses (A), (B), (C) and (D) above to the extent that the effects of such changes are disproportionately adverse to the condition (financial or otherwise), property, business, assets (tangible or intangible), liabilities or results of operations of such Party and its Subsidiaries taken as a whole, as compared to other banks and their holding companies.
“New York Superintendent” shall mean the Superintendent of the Department of Financial Services of the State of New York.
“NYSE” shall mean the New York Stock Exchange.
“OCC” shall mean the Office of the Comptroller of the Currency.
“Order” shall mean any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local, or foreign or other court, arbitrator, mediator, tribunal, administrative agency, or other Governmental Authority.
“Organizational Documents” shall mean the articles of incorporation, certificate of incorporation, charter, bylaws or other similar governing instruments, in each case as amended as of the date specified, of any Person.
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“Party” shall mean Community, Merger Sub or Kinderhook and “Parties” shall mean Community, Merger Sub and Kinderhook.
“Permit” shall mean any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, or permit from Governmental Authorities that are required for the operation of the businesses of a Person or its Subsidiaries.
“Person” shall mean any natural person or any legal, commercial, or governmental entity, including a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, or person acting in a representative capacity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
“Proxy Statement” shall mean the proxy statement relating to the Kinderhook Shareholder Meeting (including any amendments or supplements thereto).
“Regulatory Authorities” shall mean, collectively, the Federal Trade Commission, the United States Department of Justice, the Federal Reserve Board (including any Federal Reserve Bank), the OCC, the FDIC, the Consumer Financial Protection Bureau, the Internal Revenue Service, the New York Superintendent, any state attorney general, all federal and state regulatory agencies having jurisdiction over the Parties and their respective Subsidiaries, FINRA, and the SEC (including, in each case, the staff thereof).
“Representative” shall mean any investment banker, financial advisor, attorney, accountant, consultant, agent or other representative of a Person.
“Rights” shall mean, with respect to any Person, securities, or obligations convertible into or exercisable or exchangeable for, or giving any other Person any right to subscribe for or acquire, or any options, calls, restricted stock, deferred stock awards, stock units, phantom awards, dividend equivalents, or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such Person, whether vested or unvested or exercisable or unexercisable, and shall include Kinderhook Warrants.
“SEC” shall mean the United States Securities and Exchange Commission or any successor thereto.
“SEC Reports” shall mean all forms, proxy statements, registration statements, reports, schedules, and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with the SEC.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Securities Laws” shall mean the Securities Act, the Exchange Act, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Trust Indenture Act of 1939, each as amended, state securities and “Blue Sky” Laws, including in each case the rules and regulations thereunder.
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“Service Provider” shall mean any current or former director, officer, employee or individual independent contractor or consultant of Kinderhook or any of its Subsidiaries.
“Subsidiary” or “Subsidiaries” shall have the meaning assigned in Rule 1-02(x) of Regulation S-X of the SEC.
“Superior Proposal” means any bona fide, unsolicited, written Acquisition Proposal for at least a majority of the outstanding shares of Kinderhook Common Stock on terms that the Board of Directors of Kinderhook concludes in good faith to be more favorable from a financial point of view to Kinderhook’s shareholders than the Merger and the other transactions contemplated by this Agreement (including the terms, if any, proposed by Community to amend or modify the terms of the transactions contemplated by this Agreement), (i) after receiving the written advice of its financial advisor (which shall be a nationally recognized investment banking firm), (ii) after taking into account the likelihood of consummation of such transaction on the terms set forth therein (as compared to, and with due regard for, the terms herein) and (iii) after taking into account all legal (with the written advice of outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal (including any expense reimbursement and break-up fee provisions and conditions to closing) and any other relevant factors permitted under applicable Law.
“Tax” or “Taxes” shall mean all federal, state, local, and foreign taxes, charges, fees, levies, imposts, duties, or other like assessments, including assessments for unclaimed property, as well as income, gross receipts, excise, employment, sales, use, transfer, intangible, recording, license, payroll, franchise, severance, documentary, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, or any amount in respect of unclaimed property or escheat, imposed by or required to be paid or withheld by the United States or any state, local, or foreign government or subdivision or agency thereof, whether disputed or not, including any related interest, penalties, and additions imposed thereon or with respect thereto, and including any Liability for Taxes of another Person pursuant to a contract, as a transferee or successor, under Treasury Regulation Section 1.1502-6 or analogous provision of state, local or foreign Law or otherwise.
“Tax Return” shall mean any report, return, information return, or other information provided or required to be provided to a Taxing Authority in connection with Taxes, including any return of an Affiliated or combined or unitary group that includes a Party or its Subsidiaries and including without limitation any estimated Tax return.
“Taxable Period” shall mean any period prescribed by any Taxing Authority.
“Taxing Authority” shall mean any federal, state, local, municipal, foreign, or other Governmental Authority, instrumentality, commission, board or body having jurisdiction over the Parties to impose or collect any Tax.
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“Technology Systems” shall mean the electronic data processing, information, record keeping, communications, telecommunications, hardware, third-party software, networks, peripherals, portfolio trading and computer systems, including any outsourced systems and processes, and Intellectual Property used by Kinderhook.
(b) The terms set forth below shall have the meanings ascribed thereto in the referenced sections:
| Adverse Recommendation Change | Section 4.11(c) |
| Agreement | Preamble |
| Anti-Corruption Laws | Section 3.2(h)(v) |
| Anti-Money Laundering Laws | Section 3.2(h)(vi) |
| Appraisal Rights | Section 2.3(a) |
| Bank Merger | Recitals |
| Bank Merger Agreement | Recitals |
| Book-Entry Shares | Section 2.2(b) |
| Certificate of Merger | Section 1.4 |
| Closing | Section 1.3 |
| Closing Date | Section 1.3 |
| Continuing Employees | Section 4.13(a) |
| Community | Preamble |
| Community Bank | Recitals |
| Community Disclosure Letter | Section 3.1 |
| CRA | Section 3.2(p) |
| Delinquent Loans | Section 3.2(n)(ii) |
| Dissenting Shares | Section 2.3(a) |
| Effective Time | Section 1.4 |
| Exchange Fund | Section 2.2(a) |
| Expiration Date | Section 6.1(e) |
| Indemnified Party | Section 4.15(a) |
| IRS | Section 3.2(j)(i) |
| Kinderhook | Preamble |
| Kinderhook Bank | Recitals |
| Kinderhook Certificates | Section 2.2(b) |
| Kinderhook Charter | Section 2.1(b) |
| Kinderhook Directors’ Recommendation | Section 3.2(b)(ii) |
| Kinderhook Disclosure Letter | Section 3.1 |
| Kinderhook Owned Properties | Section 3.2(w) |
| Kinderhook Real Property | Section 3.2(w) |
| Kinderhook Reports | Section 3.2(d)(ii) |
| Kinderhook Restricted Share | Section 2.4(a) |
| Kinderhook Shareholder Meeting | Section 4.5(b) |
| Loans | Section 3.2(n)(i) |
| Materially Burdensome Regulatory Condition | Section 4.7(g) |
| Merger | Recitals |
| Merger Consideration | Section 2.1(a) |
| Merger Sub | Preamble |
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| NYBCL | Recitals |
| New York Secretary | Section 1.4 |
| Paying Agent | Section 2.2(a) |
| Permitted Liens | Section 3.2(w) |
| PIFI | Section 3.2(q)(i) |
| Premium Cap | Section 4.15(b) |
| Proposed Dissenting Shares | Section 2.3(a) |
| REIT | Section 3.2(f)(x) |
| Requisite Regulatory Approvals | Section 4.7(f) |
| Sanctions | Section 3.2(h)(viii) |
| Sanctioned Country | Section 3.2(h)(viii) |
| SAR Rights | Section 3.2(c) |
| Series A Consideration | Section 2.1(b) |
| Series A Convertible Preferred Stock | Section 2.1(b) |
| Series C Consideration | Section 2.1(c) |
| Series C Convertible Preferred Stock | Section 2.1(c) |
| Shareholder Support Agreement | Recitals |
| Surviving Corporation | Section 1.1 |
| Takeover Laws | Section 3.2(u) |
| Termination Fee | Section 6.2(a) |
| WARN | Section 3.2(i)(iii) |
(c) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes,” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” The words “hereby,” “herein,” “hereof” or “hereunder,” and similar terms are to be deemed to refer to this Agreement as a whole and not to any specific section.
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(b) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement.
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To Community or Merger Sub:
0000 Xxxxxxxxxx Xxxxxxx
XxXxxx, Xxx Xxxx 00000
Email: Xxx.Xxxxxx@xxxxxxxxxxxxxxx.xxx
Attention: General Counsel
Copy to Counsel (which shall not constitute notice):
Cadwalader, Xxxxxxxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Email: Xxxxxx.Xxxx@xxx.xxx
Attention: Xxxxxx X. Xxxx
To Kinderhook:
Kinderhook Bank Corp.
0 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Email: xxxxxx@xxxx.xxx
Attention: Xxxx Xxxxx, CPA
Copy to Counsel (which shall not constitute notice):
Cranmore, XxxxXxxxxx & Xxxxxx
00 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Email: xxxxxxxxx@xxxxxxxxxx.xxx
Attention: X.X. Xxxxxxxx
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(b) Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if under applicable Law, exclusive jurisdiction over such matters is vested in the Federal courts, any Federal court located in the State of Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Court of Chancery or, to the extent required by Law, in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such court, and (iv) waives, to the fullest extent permitted by Law, (x) any claim that such Party is not personally subject to the jurisdiction of any such court, (y) any claim that such Party and such Party’s property is immune from any legal process issued by any such court and (z) the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each Party irrevocably consents to service of process in the manner provided for notices in Section 7.8 Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.
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[Remainder of Page Intentionally Left Blank]
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| COMMUNITY BANK SYSTEM, INC. |
| By: | /s/ Xxxx X. Xxxxxxxx |
| Name: | Xxxx X. Xxxxxxxx | |
| Title: | President and Chief Executive Officer |
| VB MERGER SUB INC. |
| By: | /s/ Xxxx X. Xxxxxxxx |
| Name: | Xxxx X. Xxxxxxxx | |
| Title: | President |
| KINDERHOOK BANK CORP. |
| By: | /s/ Xxxx Xxxxx |
| Name: | Xxxx Xxxxx, CPA | |
| Title: | President and Chief Executive Officer |