EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of
December 13, 2006
between
XXXXX SPRING BANCORP, INC.
and
CN BANCORP, INC.
Article 1 Definitions.....................................................................................2
1.1 Definitions...................................................................................2
1.2 Other Definitional and Interpretative Provisions..............................................7
Article II The Merger; Certain Related Matters.............................................................8
2.1 The Merger; Closing...........................................................................8
Article III Conversion of the Company Shares; Cash Election; Exchange of Certificates.......................9
3.1 Conversion of the Company Shares..............................................................9
3.2 Elections.....................................................................................9
3.3 Proration of Election Price...................................................................9
3.4 Election Procedures; Exchange Agent..........................................................11
3.5 Exchange Procedures; Surrender and Payment...................................................12
3.6 Dissenters' Shares...........................................................................13
3.7 Stock Options................................................................................13
3.8 Adjustments..................................................................................14
3.9 Fractional Shares............................................................................14
3.10 Withholding Rights...........................................................................14
3.11 Lost Certificates............................................................................14
Article IV The Surviving Corporation......................................................................15
4.1 Certificate of Incorporation.................................................................15
4.2 Bylaws.......................................................................................15
4.3 Directors and Officers.......................................................................15
Article V Representations and Warranties of the Company..................................................15
5.1 Corporate Existence and Power................................................................15
5.2 Corporate Authorization......................................................................15
5.3 Governmental Authorization...................................................................16
5.4 Consents and Approvals.......................................................................17
5.5 Non-contravention............................................................................17
5.6 Capitalization...............................................................................18
5.7 Subsidiaries.................................................................................18
5.8 SEC Documents; Xxxxxxxx-Xxxxx Act and Regulatory Statements..................................19
5.9 Financial Statements.........................................................................21
5.10 Proxy Statement; Registration Statement......................................................21
5.11 Absence of Certain Changes...................................................................21
5.12 No Undisclosed Material Liabilities..........................................................23
5.13 Compliance with Laws and Court Orders........................................................23
5.14 Litigation...................................................................................23
5.15 Material Contracts...........................................................................24
5.16 Finders' Fees................................................................................24
5.17 Opinion of Financial Advisor.................................................................25
5.18 Taxes........................................................................................25
5.19 Employee Plans and Employees.................................................................26
5.20 Environmental Matters........................................................................29
5.21 Tax Treatment................................................................................30
5.22 Derivative Instruments.......................................................................30
5.23 Insurance....................................................................................31
5.24 Capital; Management; CRA Rating..............................................................31
5.25 Properties...................................................................................31
5.26 Private Equity Portfolio.....................................................................31
5.27 Affiliate Transactions.......................................................................32
5.28 Antitakeover Statutes; Rights Plans..........................................................32
5.29 Regulatory Matters...........................................................................32
5.30 Certain Loan Matters.........................................................................32
5.31 Intellectual Property........................................................................33
Article VI Representations and Warranties of Parent.......................................................34
6.1 Corporate Existence and Power................................................................34
6.2 Corporate Authorization......................................................................35
6.3 Governmental Authorization...................................................................35
6.4 Consents and Approvals.......................................................................35
6.5 Non-contravention............................................................................36
6.6 Capitalization...............................................................................36
6.7 Subsidiaries.................................................................................37
6.8 SEC Filings and the Xxxxxxxx-Xxxxx Act.......................................................37
6.9 Financial Statements.........................................................................39
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6.10 Proxy Statement; Registration Statement......................................................39
6.11 Absence of Certain Changes...................................................................39
6.12 No Undisclosed Material Liabilities..........................................................40
6.13 Compliance with Laws and Court Orders........................................................40
6.14 Litigation...................................................................................40
6.15 Finders' Fees................................................................................41
6.16 Tax Treatment................................................................................41
6.17 Regulatory Matters...........................................................................41
6.18 Financing....................................................................................41
6.19 Recent Purchases of Parent Stock.............................................................41
Article VII Covenants of the Company.......................................................................42
7.1 Conduct of the Company.......................................................................42
7.2 Stockholder Meeting; Proxy Material..........................................................44
7.3 No Solicitation; Other Offers................................................................44
7.4 Tax Matters..................................................................................46
7.5 Termination of Company DRIP..................................................................46
7.6 Proxy Solicitor..............................................................................46
Article VIII Covenants of Parent............................................................................46
8.1 Conduct of Parent............................................................................46
8.2 Director and Officer Liability...............................................................47
8.3 Registration Statement.......................................................................47
8.4 Stock Exchange Listing.......................................................................47
8.5 Appointment of Advisory Board................................................................48
8.6 Company Brand................................................................................48
Article IX Covenants of Parent and the Company............................................................48
9.1 Best Efforts.................................................................................48
9.2 Certain Filings..............................................................................48
9.3 Public Announcements.........................................................................49
9.4 Further Assurances...........................................................................49
9.5 Access to Information........................................................................49
9.6 Notices of Certain Events....................................................................50
9.7 Confidentiality..............................................................................50
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9.8 Tax-free Reorganization......................................................................50
9.9 Affiliates...................................................................................51
9.10 Employees....................................................................................51
9.11 Bank Merger Agreement........................................................................52
9.12 Company Options..............................................................................52
9.13 Prohibited Purchases or Sales................................................................52
Article X Conditions to the Merger.......................................................................53
10.1 Conditions to Obligations of Each Party......................................................53
10.2 Conditions to the Obligations of Parent......................................................54
10.3 Conditions to the Obligations of the Company.................................................56
Article XI Termination....................................................................................56
11.1 Termination..................................................................................56
11.2 Effect of Termination........................................................................59
Article XII Miscellaneous..................................................................................59
12.1 Notices......................................................................................59
12.2 Survival of Representations and Warranties...................................................60
12.3 Amendments and Waivers.......................................................................60
12.4 Expenses.....................................................................................60
12.5 Binding Effect; Benefit; Assignment..........................................................61
12.6 Schedules and Exhibits.......................................................................62
12.7 Governing Law................................................................................62
12.8 Jurisdiction.................................................................................62
12.9 WAIVER OF JURY TRIAL.........................................................................62
12.10 Counterparts; Effectiveness..................................................................62
12.11 Entire Agreement.............................................................................62
12.12 Severability.................................................................................62
12.13 Specific Performance.........................................................................63
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SCHEDULES:
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBITS:
Exhibit A -- Form of Voting Agreement
Exhibit B -- Form of Company Rule 145 Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of December
13, 2006 between XXXXX SPRING BANCORP, INC., a Maryland corporation ("PARENT")
and CN BANCORP, INC., a Maryland corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of the Company and Parent
deem it advisable and in the best interests of their respective stockholders and
corporations to consummate the business combination transaction provided for
herein in which the Company will merge with and into Parent (the "MERGER"), with
Parent as the surviving corporation in the Merger, on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, the respective Boards of Directors of
the Company and Parent have approved this Agreement and the Merger contemplated
hereby;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Xxxxx Spring Bank, a Maryland chartered commercial bank and a
wholly-owned subsidiary of Parent ("PARENT BANK") and County National Bank, a
national banking association and a wholly-owned subsidiary of the Company
("COMPANY BANK"), have entered into an Agreement and Plan of Merger (the "BANK
MERGER AGREEMENT"), pursuant to which Company Bank shall merge with and into
Parent Bank (the "BANK MERGER") with the Parent Bank as the surviving bank in
the Bank Merger, and the Bank Merger shall be consummated concurrently with the
consummation of the Merger;
WHEREAS, concurrently with the execution of this Agreement, as a
condition of the willingness of Parent to enter into this Agreement, certain
stockholders of the Company have entered into a Voting Agreement (the "VOTING
AGREEMENT") substantially in the form attached hereto as Exhibit A providing
for, among other things, the agreement of such stockholders to vote Company
Shares (as defined herein) in favor of the Merger and the approval and adoption
of this Agreement; and
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"ACQUISITION PROPOSAL" means, other than the transactions contemplated
by this Agreement, any offer, proposal or inquiry relating to, or any Third
Party indication of interest in, (A) any acquisition or purchase, direct or
indirect, of 20% or more of the consolidated assets of the Company and its
Subsidiaries or over 20% of any class of equity or voting securities of the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the consolidated assets of the Company,
(B) any tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in such Third Party beneficially owning 20% or more of
any class of equity or voting securities of the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute 20% or
more of the consolidated assets of the Company, (C) a merger, consolidation,
share exchange, business combination, sale of all or substantially all the
assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute 20% or more of the
consolidated assets of the Company or (D) any other transaction to which the
Company or the Company Bank is a party, 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 Parent of the transactions contemplated hereby.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"BANK MERGER ACT" means Section 18(c) of the Federal Deposit Insurance
Act, codified at 12 U.S.C. 1828(c).
"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on
which commercial banks in the State of Maryland are authorized or required by
law to close.
"COMPANY BALANCE SHEET" means the consolidated balance sheets of the
Company as of December 31, 2005 and the footnotes thereto.
"COMPANY BALANCE SHEET DATE" means December 31, 2005.
"COMPANY DRIP" means the Company's Dividend Reinvestment and Stock
Purchase Plan.
"COMPANY DSPP" means the Company's Director Stock Purchase Plan.
"COMPANY ESPP" means the Company's Employee Stock Purchase Plan.
"COMPANY OPTION" means each option or right to acquire Company Shares
granted under the Company's Equity Plans.
"COMPANY OPTION PLAN" means the Company's Stock Option Plan.
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"COMPANY EQUITY PLANS" means, collectively, the Company Option Plan,
the Company DRIP, the Company ESPP and the Company DSPP.
"COMPANY 10-K" means the Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 2005.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
as of September 18, 2006 between Parent and the Company.
"EMPLOYEE PLAN" means all bonus, pension, profit sharing, deferred
compensation, stock options, stock appreciation rights, stock purchase or other
equity or incentive compensation, retirement, hospitalization, health benefits,
medical or dental reimbursement, severance pay, vacation pay, disability, death
benefits, insurance, fringe benefits, cafeteria plans, and all other similar
plans, programs or arrangements providing benefits to any employee and/or
non-employee director (including without limitation all "employee welfare
benefit plans" within the meaning of Section 3(1) of ERISA, and all "employee
pension benefit plans" within the meaning of Section 3(2) of ERISA). In the case
of an Employee Plan funded through a trust described in Code Section 401(a), or
any other funding vehicle, each reference to such Employee Plan funded through a
trust described in Code Section 401(a), or any other funding vehicle, shall
include a reference to such trust, organization or other vehicle.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including common law), treaty, judicial decision, regulation, rule, judgment,
order, decree, injunction, permit or governmental restriction or requirement or
any agreement with any governmental authority or other third party, regarding
human health and safety, the environment or pollutants, contaminants, wastes or
chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company or any Subsidiary as
currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"FDIA" means the Federal Deposit Insurance Act.
"FDIC" means the Federal Deposit Insurance Corporation.
"HAZARDOUS SUBSTANCE" has the meaning given to such term in 42 U.S.C.
ss.9601(14); provided, however, that such term shall also include any form of
petroleum or natural gas.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
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"INSIDER" has the meaning set forth in 12 C.F.R. ss.215.1(h).
"KNOWLEDGE" of any Person that is not an individual means the knowledge of such
Person's Officers after reasonable inquiry.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MARYLAND LAW" means the Maryland Code.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on (i) the condition (financial or otherwise), business, assets
or results of operations of such Person and its Subsidiaries, taken as a whole,
or (ii) the ability of such Person to perform its obligations under or to
consummate the transactions contemplated by this Agreement; provided, however,
that none of the following shall be taken into account in determining whether
there has been or will be, a Material Adverse Effect: (a) changes in tax,
banking and similar laws or interpretations thereof by courts or governmental
authorities, but only to the extent the effect on such Person and its
Subsidiaries, taken as a whole, is not materially worse than the effect on
similarly situated banks and their holding companies, (b) changes in GAAP or
regulatory accounting requirements applicable to banks and their holding
companies generally, but only to the extent the effect on such Person and its
Subsidiaries, taken as a whole, is not materially worse than the effect on
similarly situated banks and their holding companies, (c) changes in economic
conditions affecting financial institutions generally, including changes in
market interest rates or the projected future interest rate environment, but
only to the extent the effect on such Person and its Subsidiaries, taken as a
whole, is not materially worse than the effect on similarly situated banks and
their holding companies, (d) actions and omissions of Parent or the Company
taken with the prior written consent of the other party hereto in contemplation
of the transactions contemplated hereby, (e) direct effects of compliance with
this Agreement on operating performance of any Person, including expenses
incurred in connection with the transactions contemplated hereby, (f) the effect
of any change, or prospective change, in loan valuation, accrual or reserve
policy which is undertaken by the Company or the Company Bank with the consent
of Parent prior to the Effective Time to conform to those of Parent or Parent
Bank, or the impact of changes in the fair market valuation policies of the
Company's and the Company Bank's loans as of the Effective Time made with the
consent of Parent, where the facts on which such adjusted valuation are based
relate to events occurring prior to the date hereof, or (g) changes in national
or international political or social conditions including the engagement by the
United States in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or the occurrence of any military or terrorist attack
upon or within the United States, but only to the extent the effect on such
Person and its Subsidiaries, taken as a whole, is not materially worse than the
effect on similarly situated banks and their holding companies.
4
"MULTIEMPLOYER PLAN" means an employee pension or welfare benefit plan
to which more than one unaffiliated employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
"1933 ACT" means the Securities Act of 1933.
"1934 ACT" means the Securities Exchange Act of 1934.
"OCC" means the Office of the Comptroller of the Currency.
"OFFICER" of any Person means any executive officer of such Person
within the meaning of Rule 3b-7 of the 1934 Act.
"PARENT BALANCE SHEET" means the consolidated balance sheets of Parent
as of December 31, 2005 and the footnotes thereto.
"PARENT BALANCE SHEET DATE" means December 31, 2005.
"PARENT BANKING SUBSIDIARY" means Parent Bank.
"PARENT 10-K" means Parent's annual report on Form 10-K for the fiscal
year ended December 31, 2005.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"REGULATION O AFFILIATE" means an "Affiliate" as defined in 12 C.F.R.
ss. 215.2(a).
"REGULATORY AUTHORITIES" means, collectively, the SEC, the Federal
Trade Commission, the United States Department of Justice, the Board, the FDIC,
the OCC, the Commissioner of Financial Regulation of the State of Maryland and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
parties hereto and their Subsidiaries.
"XXXXXXXX-XXXXX ACT" means the Xxxxxxxx-Xxxxx Act of 2002. "SEC" means
the Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.
5
"THIRD PARTY" means any Person as defined in Section 13(d) of the 1934
Act, other than Parent or any of its Affiliates.
"TRANSACTION DOCUMENTS" means this Agreement, the Bank Merger Agreement
and the Voting Agreement.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Agreement Preamble
Average Closing Price 11.1(d)
Bank Merger Recitals
Bank Merger Agreement Recitals
BHC Act 5.1
Board 5.3
Cash Electing Company Share 3.1(b)
Cash Election 3.2
Cash Election Consideration 3.1(b)
Cash Election Price 3.1(b)
Cash Proration Factor 3.3(b)
Certificates 3.4(a)
Closing 2.1(c)
Closing Date 2.1(c)
Code Recitals
Company Preamble
Company Bank Recitals
Company Disclosure Schedule Article 5
Company Employees 9.10(a)
Company Intellectual Property Rights 5.31(c)
Company Proxy Statement 5.10(a)
Company Regulatory Statements 5.8(h)
Company SEC Documents 5.8(a)
Company Securities 5.6(b)
Company Shares 5.6(a)
Company Stockholder Meeting 7.2
Company Subsidiary Securities 5.7(b)
CRA 5.24
Decision Period 11.1(d)
Determination Date 11.1(d)
Dissenters' Shares 3.6
Effective Time 2.1(a)
Election Date 3.2
Election Deadline 3.4(c)
Election Form 3.4(a)
End Date 11.1(b)
Exchange Agent 3.4(b)
Exchange Fund 3.4(b)
Exchange Ratio 3.1(b)
GAAP 5.9
6
Governmental Entity 5.3
Imputed Exchange Ratio 11.1(d)
Indemnified Person 8.2(a)
Index Price 11.1(d)
Index Ratio 11.1(d)
Material Contracts 5.15
Maximum Cash Election Number 3.3(a)
MSDAT 2.1
Merger Recitals
Merger Consideration 3.1(b)
Minimum Cash Election Number 3.3(a)
Non-Electing Company Shares 3.3(d)
Parent Preamble
Parent Bank Recitals
Parent Disclosure Schedule Article 6
Parent Ratio 11.1(d)
Parent Regulatory Statements 6.8(h)
Parent SEC Documents 6.8(a)
Parent Stock 3.1(b)
Payment Event 12.4(b)
Registration Statement 6.10(b)
Required Filings and Approvals 5.3
Starting Price 11.1(d)
Stock Election Consideration 3.1(b)
Stock Proration Factor 3.3(d)
Superior Proposal 7.3(c)
Surviving Corporation 2.1(a)
Tax 5.18(h)
Taxing Authority 5.18(h)
Tax Return 5.18(h)
Tax Sharing Agreements 5.18(h)
Third-Party Intellectual Property Rights 5.31(b)
368 Reorganization 5.21
Top Up Amount 11.1(d)
Uncertificated Shares 3.4(b)
Voting Agreement Recitals
Watch List 5.30(b)
1.2 Other Definitional and Interpretative Provisions. Unless specified
otherwise, in this Agreement the obligations of any party consisting of more
than one person are joint and several. The words "hereof", "herein" and
"hereunder" and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof. References to Articles,
Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of this Agreement unless otherwise specified. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Exhibit or Schedule but not otherwise defined therein, shall
have the meaning as defined in this Agreement. Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular. The use of the neuter gender in this Agreement shall be deemed to
include the masculine and feminine genders wherever necessary or appropriate,
7
the use of the masculine gender in this Agreement shall be deemed to include the
neuter and feminine genders wherever necessary or appropriate and the use of the
feminine gender in this Agreement shall be deemed to include the neuter and
masculine genders wherever necessary or appropriate. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation", whether or not they are
in fact followed by those words or words of like import. "Writing", "written"
and comparable terms refer to printing, typing and other means of reproducing
words (including electronic media) in a visible form. References to any
agreement or contract are to that agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
References to any Person include the successors and permitted assigns of that
Person. References from or through any date mean, unless otherwise specified,
from and including or through and including, respectively. References to "law",
"laws" or to a particular statute or law shall be deemed also to include any and
all related rules, regulations, ordinances, directives, treaties and judicial or
administrative decisions, judgments, decrees or injunctions of any U.S. or
non-U.S. federal, state, local or foreign governmental authority.
ARTICLE II
THE MERGER; CERTAIN RELATED MATTERS
2.1 The Merger; Closing. (a) As soon as practicable, and in any event
not more than five Business Days after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Parent shall
file articles of merger with the Maryland State Department of Assessments and
Taxation (the "MSDAT") and make all other filings or recordings required by
Maryland Law in connection with the Merger. The Merger shall become effective
(the "EFFECTIVE TIME") at the time the Certificate of Merger is issued by the
MSDAT (or at such later time as may be specified in the Certificate of Merger)
in accordance with Maryland Law. Upon and following the Merger, the separate
existence of the Company shall cease, and Parent shall be the Surviving
Corporation (the "SURVIVING CORPORATION") in the Merger and shall continue its
corporate existence under the laws of the State of Maryland. The name of the
Surviving Corporation shall continue to be "Xxxxx Spring Bancorp, Inc."
(b) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, powers, privileges and franchises and
be subject to all of the obligations, liabilities, restrictions and disabilities
of the Company and Parent, all as provided under Maryland Law.
(c) The closing of the Merger (the "CLOSING") shall take place
at such time and place as Parent and the Company shall agree, on the date when
the Effective Time is to occur (the "CLOSING DATE").
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ARTICLE III
CONVERSION OF THE COMPANY SHARES; CASH ELECTION;
EXCHANGE OF CERTIFICATES
3.1 Conversion of the Company Shares. At the Effective Time by virtue
of the Merger and without any action on the part of any holder of shares of
capital stock of the Company or Parent:
(a) each issued Company Share owned by the Company or any
Subsidiary of the Company immediately prior to the Effective Time (other than
shares held for the account of clients, customers or other Persons) or owned by
Parent or any of its Subsidiaries immediately prior to the Effective Time (other
than shares held for the account of clients, customers or other Persons) shall
be canceled, and no payment shall be made with respect thereto;
(b) each Company Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section 3.1(a) or Section
3.6 or as adjusted pursuant to Section 11.1(d)(iii), be converted into the
following (collectively, the "MERGER CONSIDERATION"):
(i) for each such Company Share with respect to which an
election to receive cash has been effectively made and not revoked or deemed
converted into the right to receive the Stock Election Price pursuant to Section
3.3(b), or is deemed made pursuant to Section 3.3(d), as the case may be (each,
a "CASH ELECTING COMPANY SHARE"), the right to receive an amount equal to $25.00
(the "CASH ELECTION PRICE") in cash without interest (the "CASH ELECTION
CONSIDERATION"); and
(ii) for each other such Company Share, the right to
receive 0.6657 of a share (the "EXCHANGE RATIO") of common stock, par value
$1.00 per share ("PARENT STOCK"), of the Parent (the "STOCK ELECTION
CONSIDERATION") as may be adjusted pursuant to Section 11.1(d)(iii).
3.2 Elections. Each Person (other than the Company and Parent) who, at
the close of business on the date of the Company Stockholder Meeting (as defined
in Section 7.2) or on such other date as the Parent and the Company publicly
announce as the Election Date (such date, the "ELECTION DATE"), is a record
holder of Company Shares will be entitled, with respect to any or all of such
Company Shares, to make an election (a "CASH ELECTION") on or prior to such date
to receive the Cash Election Consideration on the basis hereinafter set forth.
No such Person shall be entitled to make a Cash Election with respect to
Dissenters' Shares; provided, however, that stockholders who shall have failed
to perfect or who effectively shall have withdrawn or otherwise lost their
rights to appraisal of such shares under Maryland Law shall thereupon be deemed
to have made a Cash Election with respect to such Company Shares pursuant to
Section 3.6.
3.3 Proration of Election Price. (a) Subject to adjustment pursuant to
Section 11.1(d)(iii), the number of Company Shares to be converted into the
right to receive the Cash Election Consideration at the Effective Time shall not
be less than the number of Company Shares which is equal to (i) 40% of the
Company Shares outstanding at the Effective Time (excluding any Company Shares
to be canceled pursuant to Section 3.1(a)) minus (ii) the number of Dissenters'
Shares at the Effective Time (such difference, the "MINIMUM CASH ELECTION
NUMBER") and shall not exceed the number of Company Shares which is equal to (i)
50% of the Company Shares outstanding at the Effective Time (excluding any
Company Shares to be canceled pursuant to Section 3.1(a)) minus (ii) the number
of Dissenters' Shares at the Effective Time (such difference, the "MAXIMUM CASH
ELECTION NUMBER").
9
(b) If the number of Cash Electing Company Shares exceeds the
Maximum Cash Election Number, then such Cash Electing Company Shares shall be
treated in the following manner:
(i) A cash proration factor (the "CASH PRORATION FACTOR")
shall be determined by dividing (x) the Maximum Cash Election Number by (y) the
total number of Cash Electing Company Shares.
(ii) A number of Cash Electing Company Shares covered by
each stockholder's Cash Election equal to the product of (x) the Cash Proration
Factor and (y) the total number of Cash Electing Company Shares covered by such
Cash Election shall be converted into the right to receive the Cash Election
Consideration.
(iii) Each Cash Electing Company Share, other than those
Company Shares converted into the right to receive the Cash Election Price in
accordance with Section 3.3(b)(ii), shall be converted into the right to receive
the Stock Election Consideration as if such Company Shares were not Cash
Electing Company Shares.
(c) If the number of Cash Electing Company Shares is greater
than or equal to the Minimum Cash Election Number and less than or equal to the
Maximum Cash Election Number, then each Cash Electing Company Share shall be
converted into the right to receive the Cash Election Price and each other
Company Share (other than Company Shares to be canceled pursuant to Section
3.1(a) and other than Dissenters' Shares) shall be converted into the right to
receive the Stock Election Consideration.
(d) If the number of Cash Electing Company Shares is less than
the Minimum Cash Election Number, then:
(i) Each Cash Electing Company Share shall be converted
into the right to receive the Cash Election Price.
(ii) The Company Shares as to which a Cash Election is not
in effect, excluding Company Shares to be cancelled pursuant to Section 3.1(a),
(the "NON-ELECTING COMPANY SHARES") shall be treated in the following manner:
(A) A stock proration factor (the "STOCK PRORATION
FACTOR") shall be determined by dividing (x) the difference between the Minimum
Cash Election Number and the number of Cash Electing Company Shares, by (y) the
total number of Non-Electing Company Shares.
(B) A number of Non-Electing Company Shares of each
stockholder equal to the product of (x) the Stock Proration Factor and (y) the
total number of Non-Electing Company Shares of such stockholder shall be
converted into the right to receive the Cash Election Price (and a Cash Election
shall be deemed to have been made with respect to such Company Shares).
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(C) Each Non-Electing Company Share of each
stockholder as to which a Cash Election is not deemed made pursuant to Section
3.3(d)(ii)(B) shall be converted into the right to receive the Stock Election
Consideration.
3.4 Election Procedures; Exchange Agent. (a) Prior to the date of the
Company Stockholder Meeting, Parent and the Company shall prepare a form (an
"ELECTION FORM") pursuant to which a holder of record of Company Shares may make
a Cash Election with respect to each Company Share owned by such holder. The
Company shall cause an Election Form and a letter of transmittal and
instructions (which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) for use in exchanging certificates representing Company
Shares (the "CERTIFICATES") for the Merger Consideration to be included with the
Company Proxy Statement (as defined in Section 5.9(a)) and mailed to each holder
of record of Company Shares as of the record date for such meeting.
(b) Prior to the date of the Company Stockholder Meeting,
Parent shall appoint an agent independent of and unaffiliated with Parent or the
Company (the "EXCHANGE AGENT") for the purpose of (i) receiving Election Forms
and determining, in accordance with this Article 3, the form of Merger
Consideration to be received by each holder of Company Shares, and (ii)
exchanging for the Merger Consideration (A) Certificates or (B) uncertificated
Company Shares (the "UNCERTIFICATED SHARES"). At or prior to the Effective Time,
Parent shall deposit, or cause to be deposited, with the Exchange Agent, for the
benefit of the holders of the Certificates and the Uncertificated Shares, for
exchange in accordance with this Article 3, (i) subject to Section 3.4(c),
certificates representing the shares of Parent Stock that constitute the stock
portion of the Merger Consideration and (ii) an amount of cash necessary to
satisfy the cash portion of the Merger Consideration (the "EXCHANGE FUND"). At
the Effective Time or promptly thereafter, Parent shall send, or shall cause the
Exchange Agent to send, to each holder of record of Company Shares which have
not previously been delivered to the Exchange Agent pursuant to Section 3.5(a)
at the Effective Time, a letter of transmittal and instructions (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) for
use in such exchange.
(c) A Cash Election shall be effective only if the Exchange
Agent shall have received no later than 5:00 p.m. eastern time on the date of
the Company Stockholder Meeting (the "ELECTION DEADLINE") (i) an Election Form
covering the Company Shares to which such Cash Election applies, executed and
completed in accordance with the instructions set forth in such Election Form
and (ii) Certificates, in such form and with such endorsements, stock powers and
signature guarantees as may be required by such Election Form or the letter of
transmittal. Any Company Share with respect to which the Exchange Agent has not
received an effective Cash Election meeting the requirements of this Section
3.4(c) by the Election Deadline shall be deemed to be a Non-Electing Company
Share. A Cash Election may be revoked or changed only by delivering to the
Exchange Agent, prior to the Election Deadline, a written notice of revocation
or, in the case of a change, a properly completed revised Election Form that
identifies the Company Shares to which such revised Election Form applies.
Delivery to the Exchange Agent prior to the Election Deadline of a revised
Election Form with respect to any Company Shares shall result in the revocation
of all prior Election Forms with respect to all such Company Shares. Any
termination of this Agreement in accordance with Article 11 shall result in the
revocation of all Election Forms delivered to the Exchange Agent on or prior to
the date of such termination.
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(d) The Company and Parent shall have the right to make rules,
not inconsistent with the terms of this Agreement, governing the validity and
effectiveness of Election Forms and letters of transmittal.
3.5 Exchange Procedures; Surrender and Payment. (a) Each holder of
Company Shares that have been converted into the right to receive the Merger
Consideration shall be entitled to receive, upon (i) surrender to the Exchange
Agent of a Certificate, together with a properly completed letter of
transmittal, or (ii) receipt of an "agent's message" by the Exchange Agent (or
such other evidence, if any, of transfer as the Exchange Agent may reasonably
request) in the case of a book-entry transfer of Uncertificated Shares, the
Merger Consideration in respect of the Company Shares represented by a
Certificate or Uncertificated Share. Until so surrendered or transferred, as the
case may be, each such Certificate or Uncertificated Share shall represent after
the Effective Time for all purposes only the right to receive such Merger
Consideration.
(b) If any portion of the Merger Consideration is to be paid
to a Person other than the Person in whose name the surrendered Certificate or
the transferred Uncertificated Share is registered, it shall be a condition to
such payment that (i) either such Certificate shall be properly endorsed or
shall otherwise be in proper form for transfer or such Uncertificated Share
shall be properly transferred and (ii) the Person requesting such payment shall
pay to the Exchange Agent any transfer or other taxes required as a result of
such payment to a Person other than the registered holder of such Certificate or
Uncertificated Share or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) After the Effective Time, there shall be no further
registration of transfers of Company Shares. If, after the Effective Time,
Certificates or Uncertificated Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this Article
3.
(d) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 3.4(b) that remains unclaimed by the
holders of Company Shares six months after the Effective Time shall be returned
to Parent, upon demand, and any such holder who has not exchanged Company Shares
for the Merger Consideration in accordance with this Section 3.5 prior to that
time shall thereafter look only to Parent for payment of the Merger
Consideration, and any dividends and distributions with respect thereto, in
respect of such shares without any interest thereon. Notwithstanding the
foregoing, Parent shall not be liable to any holder of Company Shares for any
amounts paid to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) No dividends or other distributions with respect to
securities of Parent constituting part of the Merger Consideration, and no cash
payment in lieu of fractional shares as provided in Section 3.9, shall be paid
to the holder of any Certificates not surrendered or of any Uncertificated
Shares not transferred until such Certificates or Uncertificated Shares are
surrendered or transferred, as the case may be, as provided in this Section.
Following such surrender or transfer, there shall be paid, without interest, to
the Person in whose name the securities of Parent have been registered, (i) at
the time of such surrender or transfer, the amount of any cash payable in lieu
of fractional shares to which such Person is entitled pursuant to Section 3.9
and the amount of all dividends or other distributions with a record date after
the Effective Time previously paid or payable on the date of such surrender with
respect to such securities, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
and prior to surrender or transfer and with a payment date subsequent to
surrender or transfer payable with respect to such securities.
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3.6 Dissenters' Shares. Notwithstanding any other provision of this
Agreement to the contrary, Company Shares that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall not have
voted in favor of the Merger or consented thereto in writing and who shall have
properly demanded appraisal for such shares in accordance with Maryland Law
(collectively, the "DISSENTERS' SHARES") shall not be converted into or
represent the right to receive the Merger Consideration, and such stockholders
instead shall be entitled to receive payment of the appraised value of such
shares held by them in accordance with the provisions of Maryland Law; provided
that all Dissenters' Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or otherwise lost their rights
to appraisal of such shares under Maryland Law shall thereupon be deemed to have
been converted into and to have become exchangeable, as of the Effective Time,
for the right to receive, without any interest thereon, the Cash Election Price
upon surrender in the manner provided in Section 3.5 of the Certificates that,
immediately prior to the Effective Time, evidenced such shares, subject to
proration in accordance with the provisions of Section 3.3 hereof in the event
that such failure to perfect, withdrawal or other loss of appraisal rights
occurs prior to the Effective Time. The Company shall give Parent (i) prompt
notice of any written objections to the Merger and any written demands for the
payment of the fair value of any shares, withdrawals of such demands and any
other instruments received by the Company relating to appraisal rights under
Maryland Law with respect to the Company Shares and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not voluntarily make any payment with respect to any demands
for payment of the fair value of the Company Shares and shall not, except with
the prior written consent of Parent, settle or offer to settle any such demands.
3.7 Stock Options. Subject to the last sentence of this Section 3.7,
each Company Option issued and outstanding at the Effective Time under the
Company Option Plan shall be converted into an option to purchase a number of
shares of Parent Stock in accordance with (a) the terms and conditions of the
Company Option Plan pursuant to which such Company Option was issued, (b) the
agreement evidencing the grant of such Company Option and (c) any other
agreement between the Company and such optionee regarding such Company Option;
provided, however, that from and after the Effective Time, each such Company
Option shall be exercisable solely for Parent Stock; the number of shares of
Parent Stock which may be acquired pursuant to such Company Option shall be the
number of Company Shares subject to such Company Option multiplied by the
Exchange Ratio, rounded down to the nearest whole share; and the exercise price
per share shall be equal to the exercise price per Company Share divided by the
Exchange Ratio, rounded down to the nearest cent. It is intended that the
foregoing assumption and adjustment shall be effected in a manner consistent
with the requirements of Section 424 of the Code, as to each Company Option
which is an incentive stock option. Notwithstanding the foregoing, the Parent in
its sole and complete discretion may offer to cancel any Company Option in
exchange for a cash payment at Closing in an amount equal to the Cash Election
Price minus the per share exercise price for such Company Option, subject to any
required withholding of taxes.
13
3.8 Adjustments. If, during the period between the date of this
Agreement and the Effective Time, (i) any change in the outstanding shares of
capital stock of the Company or Parent shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, in each case whether by merger or otherwise or (ii) any
stock dividend thereon with a record date during such period shall occur, the
Merger Consideration, and any other amounts payable pursuant to this Agreement
and, if applicable, the Cash Election Price, Exchange Ratio and their
determination shall be appropriately adjusted.
3.9 Fractional Shares. No fractional shares of Parent Stock shall be
issued in the Merger. All fractional shares of Parent Stock that a holder of
Company Shares would otherwise be entitled to receive as a result of the Merger
shall be aggregated and if a fractional share results from such aggregation,
such holder shall be entitled to receive, in lieu thereof, an amount in cash
without interest determined by multiplying the closing sale price of a share of
Parent Stock on the NASDAQ Global Select Market, as reported in the New York
City edition of The Wall Street Journal, on the trading day immediately
preceding the Effective Time by the fraction of a share of Parent Stock to which
such holder would otherwise have been entitled.
3.10 Withholding Rights. Each of the Exchange Agent, Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this Article 3 such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax law. If
the Exchange Agent, Surviving Corporation or Parent, as the case may be, so
withholds amounts, such amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Shares in respect of
which the Exchange Agent, Surviving Corporation or Parent, as the case may be,
made such deduction and withholding.
3.11 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Company Share
represented by such Certificate, as contemplated by this Section 3.11.
ARTICLE IV
THE SURVIVING CORPORATION
4.1 Certificate of Incorporation. The articles of incorporation of
Parent in effect at the Effective Time shall be the articles of incorporation of
the Surviving Corporation until amended in accordance with applicable law.
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4.2 Bylaws. The bylaws of Parent in effect at the Effective Time shall
be the bylaws of the Surviving Corporation until amended in accordance with
applicable law.
4.3 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Parent at the Effective Time shall be the
directors of the Surviving Corporation and (ii) the officers of Parent at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Parent on or prior to the date hereof (the "COMPANY DISCLOSURE SCHEDULE"), the
Company represents and warrants to Parent that:
5.1 Corporate Existence and Power. The Company is duly incorporated,
validly existing and in good standing under the laws of the State of Maryland
and has all corporate powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for those licenses, authorizations, permits, consents and
approvals the absence of which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company is duly registered as a bank holding company under the U.S. Bank Holding
Company Act of 1956, as amended (the "BHC ACT"). The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. The Company has heretofore delivered to Parent true and complete copies
of the articles of incorporation and bylaws of the Company as currently in
effect.
5.2 Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the required approval of the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action on the part of the Company. The affirmative vote of
the holders of at least 80% of the outstanding Company Shares is the only vote
of the holders of any of the Company's capital stock necessary in connection
with the consummation of the Merger. This Agreement (assuming due authorization
and delivery by Parent) constitutes a valid and binding obligation of the
Company, and will be enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, receivership or similar laws affecting
the enforcement of creditors' rights generally 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 such proceeding may be brought.
(b) The execution, delivery and performance of the Bank Merger
Agreement and the consummation of the transactions contemplated thereby have
been duly and validly approved by the Board of Directors of the Company Bank.
The Board of Directors of the Company Bank has declared the transactions
contemplated by the Bank Merger Agreement to be advisable and fair to and in the
best interests of the Company Bank's sole stockholder and has directed that the
Bank Merger Agreement and the transactions contemplated thereby be submitted to
the Company as the Company Bank's sole stockholder for approval and, except for
the approval of the Bank Merger Agreement by the Company as the Company Bank's
sole stockholder, no other corporate proceedings on the part of the Company Bank
are necessary to approve the Bank Merger Agreement and to consummate the
transactions contemplated thereby. The Bank Merger Agreement (assuming due
authorization and delivery by Parent Bank) constitutes a valid and binding
obligation of the Company Bank, and will be enforceable against the Company Bank
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, receivership or
similar laws affecting the enforcement of creditors' rights generally 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
such proceeding may be brought.
15
(c) At a meeting duly called and held, the Company's Board of
Directors has (i) unanimously determined that this Agreement and the
transactions contemplated hereby are advisable and fair to and in the best
interests of the Company's stockholders, (ii) unanimously approved and adopted
this Agreement and the transactions contemplated hereby, including the Merger
and (iii) unanimously resolved (subject to Section 7.3(b)) to recommend approval
of the Merger and adoption of the Merger Agreement by the Company's
stockholders.
5.3 Governmental Authorization. The execution, delivery and performance
by the Company of this Agreement, by the Company Bank of the Bank Merger
Agreement, the consummation by the Company of the transactions contemplated
hereby and the consummation by the Company Bank of the transactions contemplated
by the Bank Merger Agreement, require no action by or in respect of, or filing
with, any governmental body, agency, official or authority, domestic, foreign or
supranational, including the Board of Governors of the Federal Reserve System
(the "BOARD"), the FDIC, the OCC and the banking authorities of the State of
Maryland (any of the foregoing, a "GOVERNMENTAL ENTITY") other than (i) (A) the
filing of articles of merger with respect to the Merger with the MSDAT, (B) the
filing with and approval of the Bank Merger Agreement, and the issuance of a
Certificate of Merger, by the Commissioner of Financial Regulation of Maryland
and the filing of the Bank Merger Agreement and such Certificate of Merger with
the MSDAT, (C) the filing with the Commissioner of Financial Regulation of
Maryland of an application under Title 3, Subtitle 7 of the Financial Regulation
of the Maryland Code (including a copy of the applications filed with the
Federal Reserve Bank of Richmond under the Bank Merger Act with respect to the
Bank Merger), and the approval of the Merger and the Bank Merger by the
Commissioner of Financial Regulation of Maryland, and (D) the filing of
appropriate documents with the relevant authorities of other states in which the
Company and the Company Bank are qualified to do business, (ii) compliance with
any applicable requirements of the HSR Act, (iii) compliance with any applicable
requirements of the 1933 Act, the 1934 Act, and any other applicable state or
federal securities laws, (iv) the applications and notices required by, the
filing with and approval of the Board under Section 3 of the BHC Act, with
respect to the Merger, (v) the applications and notices required by, the filing
with and approval of the Federal Reserve under the Bank Merger Act, and (vi) any
other filings and approvals required by the banking authorities of the State of
Maryland or any other state or the District of Columbia with respect to the
Merger or the Bank Merger (the filings and approvals set forth in clauses (i)
through (vi), the "REQUIRED FILINGS AND APPROVALS"), and any other actions or
filings the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
16
5.4 Consents and Approvals. Except for (i) the approval of the
stockholders of the Company of this Agreement and the Merger in the manner
described in Section 5.2(a) hereof, (ii) the approval of the Company in its
capacity as the sole stockholder of the Company Bank of the Bank Merger
Agreement and the Bank Merger, (iii) the Required Filings and Approvals and (iv)
as set forth in Section 5.4 of the Company Disclosure Schedule, no material
consents or approvals of any Person are necessary in connection with the
execution, delivery and performance by the Company of this Agreement, the
consummation of the Merger and the consummation of the other transactions
contemplated hereby, or the execution, delivery and performance by the Company
Bank of the Bank Merger Agreement, the consummation of the Bank Merger and the
consummation of the other transactions contemplated thereby.
5.5 Non-contravention. (a) The execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby and the execution, delivery and performance by the Company
Bank of the Bank Merger Agreement and the consummation of the transactions
contemplated thereby, do not and will not (i) contravene, conflict with, or
result in any violation or breach of any provision of the articles of
incorporation or bylaws or other governing documents of the Company or any of
its Subsidiaries, (ii) assuming compliance with the matters referred to in
Sections 5.3 and 5.4, contravene, conflict with or result in a violation or
breach of any provision of any applicable law, (iii) assuming compliance with
the matters referred to in Sections 5.3 and 5.4, require any consent or other
action by any Person under, constitute a default, or an event that, with or
without notice or lapse of time or both, would constitute a default, under, or
cause or permit the termination, cancellation, acceleration or other change of
any right or obligation or the loss of any benefit to which the Company or any
of its Subsidiaries is entitled under any provision of any agreement or other
instrument binding upon the Company or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Company and
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except for such contraventions,
conflicts and violations referred to in clause (ii) and for such failures to
obtain any such consent or other action, defaults, terminations, cancellations,
accelerations, changes, losses or Liens referred to in clauses (iii) and (iv)
that in the case of clause (ii), (iii) and (iv) would not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(b) As of the date hereof, the Company knows of no reason why
the tax opinion referred to in Section 10.1(g) should not be obtained on a
timely basis.
5.6 Capitalization. (a) The authorized capital stock of the Company
consists of 5,000,000 shares of common stock, par value $10.00 per share
("COMPANY SHARES"), and 5,000,000 shares of preferred stock, par value $0.01 per
share. As of the date hereof, there are (i) 1,728,011 Company Shares outstanding
and (ii) Company Options to purchase an aggregate of 97,500 Company Shares
outstanding (all of which are exercisable). All outstanding shares of capital
stock of the Company have been, and all shares that may be issued pursuant to
the Company Equity Plans will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and nonassessable. No
Subsidiary of the Company owns any shares of capital stock of the Company. All
outstanding Company Shares and Company Options were issued in compliance with
all applicable federal and state securities laws and were not issued in
violation of any preemptive right or similar right or any right of first refusal
or similar right. In connection with each offering of Company Shares or Company
Options, no documents or other information provided to the offerees by or on
behalf of the Company contained any untrue statement of a material fact or
failed to state a material fact required to be stated therein or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
17
(b) Except as set forth in this Section 5.6, there are no
outstanding (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (iii) options or other
rights to acquire from the Company, or other obligations of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
clauses (i), (ii), and (iii) being referred to collectively as the "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any of the Company
Securities.
(c) The Company has taken all actions necessary to suspend,
effective as of the date hereof, the issuance of any Company Shares or any
rights to acquire Company Shares under the Company DRIP, as required by the
terms of the Company DRIP and any applicable laws.
5.7 Subsidiaries. (a) (i) Company Bank is a duly organized national
banking association and is validly existing and in good standing under the laws
of the United States of America, has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted and (ii) each other Subsidiary of the Company is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except, in each of
clauses (i) and (ii), for those licenses, authorizations, permits, consents and
approvals the absence of which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Company Bank is an "insured bank" as defined in Section 3(h) of the FDIA. Each
Subsidiary of the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. All Subsidiaries of the
Company and their respective jurisdictions of incorporation are identified in
Section 5.7(a) of the Company Disclosure Schedule.
(b) Except as set forth in Section 5.7(b) of the Company
Disclosure Schedule, all of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of the Company, is owned
by the Company, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting securities
or ownership interests). There are no outstanding (i) securities of the Company
or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary of the Company or (ii) options or other rights to acquire from the
Company or any of its Subsidiaries, or other obligation of the Company or any of
its Subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any
Subsidiary of the Company (the items in clauses (i) and (ii) being referred to
collectively as the "COMPANY SUBSIDIARY SECURITIES"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Subsidiary Securities.
18
(c) Other than Company Bank, the Company does not own or
control any shares of any class of capital stock of any "depository institution"
as defined in Section 3 of the FDIA.
5.8 SEC Documents; Xxxxxxxx-Xxxxx Act and Regulatory Statements. (a)
The Company has made available to Parent (i) the Company's annual reports on
Form 10-KSB for its fiscal years ended December 31, 2003, 2004 and 2005 and (ii)
all of its other reports, statements, schedules and registration statements
filed with the SEC since December 31, 2003 (the documents referred to in this
Section 5.8(a) and the amendments thereto, collectively, the "COMPANY SEC
DOCUMENTS").
(b) As of its filing date, each Company SEC Document complied
as to form in all material respects with the applicable requirements of the 1933
Act, the 1934 Act and all other statutes, rules and regulations adopted,
enforced or promulgated by the SEC or applicable regulatory body, as the case
may be.
(c) As of its filing date (or, if amended or superseded by a
filing prior to the date hereof, on the date of such filing), each Company SEC
Document filed pursuant to the 1934 Act did not, contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each Company SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed pursuant to the 1933
Act, as of the date such registration statement or amendment became effective,
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(e) The Company has established and maintains disclosure
controls and procedures (as defined in Rule 15d-15 under the Exchange Act). Such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries, is
made known to the Company's principal executive officer and its principal
financial officer by others within those entities, particularly during the
periods in which the periodic reports required under the 1934 Act are being
prepared. Such disclosure controls and procedures are effective in timely
alerting the Company's principal executive officer and principal financial
officer to material information required to be included in the Company's
periodic reports required under the 1934 Act.
19
(f) The Company is not deemed an accelerated filer as defined
in Rule 12b-2 of the 1934 Act.
(g) Except as set forth in Section 5.8(g) of the Company
Disclosure Schedule, there are no outstanding loans or other extensions of
credit made by the Company or any of its Subsidiaries to any Officer or director
or Insider of the Company or Insider of any Regulation O Affiliate. The Company
has not since the enactment of the Xxxxxxxx-Xxxxx Act, taken any action
prohibited by Section 402 of the Xxxxxxxx-Xxxxx Act. All outstanding extensions
of credit, if any, were, at the time they were made, and continue to be,
permitted and in compliance with the provisions of Regulation O, 12 C.F.R. Part
215.
(h) Since January 1, 2001, the Company and the Company Bank
have timely filed all required annual and quarterly statements, reports and
other documents (including exhibits and all other information incorporated
therein) required to be filed with Regulatory Authorities (collectively, the
"COMPANY REGULATORY STATEMENTS"). The Company Regulatory Statements, including
the method for determining the Company's and the Company Bank's provision for
loan and lease losses, are and have been prepared in conformity with regulatory
accounting practices, applicable law and supervisory policy, consistently
applied, for the periods covered thereby and (as may have been amended and
restated or supplemented by Company Regulatory Statements filed subsequently but
prior to the date hereof), fairly present in all material respects the statutory
financial position of the Company and the Company Bank, as at the respective
dates thereof and the results of operations of the Company and the Company Bank
for the respective periods then ended. The Company Regulatory Statements
complied in all material respects with any requirement of law when filed and no
material deficiency has been asserted with respect to any Company Regulatory
Statement by the Board, the OCC, the FDIC or any other Governmental Entity. The
annual statutory balance sheets and income statements included in the Company
Regulatory Statements have been audited, and the Company and the Company Bank
have made available to Parent true and complete copies of all audit opinions
related thereto. Neither the Company's nor the Company Bank's independent public
accountants nor any employee of the Company or the Company Bank has alleged that
any Company Regulatory Statement contains any misstatement or other defect
which, if true, would cause the representations and warranties contained in this
Section 5.8(h) to be untrue.
5.9 Financial Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company included
in the Company SEC Documents fairly present, in all material respects, in
conformity with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
5.10 Proxy Statement; Registration Statement. (a) The proxy statement
of the Company to be filed as part of the Registration Statement with the SEC in
connection with the Merger (the "COMPANY PROXY STATEMENT") and any amendments or
supplements thereto will, when filed, comply as to form in all material respects
with the applicable requirements of the 1934 Act. At the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to stockholders
of the Company, and at the time such stockholders vote on adoption of this
Agreement and at the Effective Time, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties contained in this
Section 5.10(a) will not apply to statements or omissions included in the
Company Proxy Statement based upon information furnished to the Company in
writing by Parent specifically for use therein.
20
(b) None of the information provided by the Company for
inclusion in the Registration Statement (as defined in Section 6.9(b)) or any
amendment or supplement thereto, at the time the Registration Statement or any
amendment or supplement thereto becomes effective and at the Effective Time,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
5.11 Absence of Certain Changes. Since the Company Balance Sheet Date,
the business of the Company and its Subsidiaries has been conducted in the
ordinary course consistent with past practices and, except as disclosed in
Section 5.11 of the Company Disclosure Schedule or in the Company SEC Documents,
there has not been:
(a) any event, occurrence, development or state of
circumstances or facts that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the Company or
any of its Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of its
Subsidiaries;
(c) any amendment of any material term of any outstanding
security of the Company or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or
any of its Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(e) any creation or other incurrence by the Company or any of
its Subsidiaries of any Lien on any material asset other than in the ordinary
course of business consistent with past practices;
(f) any making of any material loan, advance or capital
contributions to or investment in any Person other than (x) loans in the
ordinary course of the Company Bank's lending business consistent with past
practices and (y) loans, advances or capital contributions to or investments in
its wholly-owned Subsidiaries in the ordinary course of business consistent with
past practices;
21
(g) any material damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Company or any of its Subsidiaries;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its Subsidiaries relating to
its assets or business (including the acquisition or disposition of any assets)
or any relinquishment by the Company or any of its Subsidiaries of any contract
or other right, in either case, material to the Company and its Subsidiaries,
taken as a whole, other than transactions and commitments in the ordinary course
of business consistent with past practices and those contemplated by this
Agreement;
(i) any change in any material method of accounting or
accounting principles or practice by the Company or any of its Subsidiaries,
except for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (or
amendment to any existing arrangement with) any director, officer or employee of
the Company or any of its Subsidiaries, (ii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements,
(iii) entry into any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any of its Subsidiaries, (iv)
establishment, adoption or amendment (except as required by applicable law) of
any collective bargaining, bonus, profit-sharing, thrift, pension, retirement,
deferred compensation, compensation, stock option, restricted stock or other
benefit plan or arrangement covering any director, officer or employee of the
Company or any of its Subsidiaries or (v) increase in compensation, bonus or
other benefits payable to any director, officer or employee of the Company or
any of its Subsidiaries, other than, in the case of clause (v), increases
granted to employees (other than officers) in the ordinary course of business
consistent with past practice;
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any of its Subsidiaries,
which employees were not subject to a collective bargaining agreement at the
Company Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees; or
(l) any material Tax election made (other than elections
consistent with the Company's and its Subsidiaries' past practice) or changed,
any annual tax accounting period changed, any material method of Tax accounting
adopted or changed, any material amended Tax Returns or claims for material Tax
refunds filed, any material closing agreement entered into, any material Tax
claim, audit or assessment settled, or any right to claim a material Tax refund,
offset or other reduction in Tax liability surrendered.
5.12 No Undisclosed Material Liabilities. Except as set forth in
Section 5.12 of the Company Disclosure Schedule, there are no liabilities or
obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability or obligation, other than:
22
(a) liabilities or obligations disclosed and provided for in
the Company Balance Sheet or in the notes thereto or in the Company SEC
Documents filed prior to the date hereof, and
(b) liabilities or obligations incurred in the ordinary course
of business consistent with past practices that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
5.13 Compliance with Laws and Court Orders. Except as set forth in
Section 5.13 of the Company Disclosure Schedule, the Company and each of its
Subsidiaries is and, since January 1, 2003, has been in compliance with, and, to
the Knowledge of the Company, is not under investigation with respect to and has
not been threatened to be charged with or given notice of any violation of, any
applicable law (including the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, all other
applicable fair lending laws and other laws relating to discriminatory business
practices, the applicable provisions of the Xxxxxxxx-Xxxxx Act (which provisions
do not include Section 404), the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorist (USA PATRIOT) Act
of 2001 and the Bank Secrecy Act), except for failures to comply or violations
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
5.14 Litigation. Except as set forth in the Company SEC Documents filed
prior to the date hereof and except as set forth in Section 5.14 of the Company
Disclosure Schedule, there is no action, suit, investigation or proceeding (or
any basis therefor) pending against, or, to the Knowledge of the Company,
threatened against or affecting, the Company, any of its Subsidiaries, any
present or former officer, director or employee of the Company or any of its
Subsidiaries or any Person for whom the Company or any Subsidiary may be liable
or any of their respective properties before any court or arbitrator or before
or by any governmental body, agency or official, domestic, foreign or
supranational, that (i) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or the Bank Merger or any of the other
transactions contemplated hereby or by the Bank Merger Agreement or (ii) if
determined or resolved adversely in accordance with the plaintiff's demands,
would (A) involve damages in excess of $100,000, (B) could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or (iii) as of the date hereof, involve the imposition of permanent
injunctive relief.
5.15 Material Contracts.
(a) Except for those agreements and other documents listed as
exhibits to the Company SEC Documents filed prior to the date hereof, neither
the Company nor any of its Subsidiaries is a party to, bound by or subject to
any agreement, contract, arrangement, commitment or understanding (whether
written or oral) (i) that is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K or (ii) that restricts the conduct of
business or any line of business of the Company or any of its Subsidiaries (or,
after the consummation of the Merger, Parent or any of its Subsidiaries).
Neither the Company nor any of its Subsidiaries is in breach of or default under
any material contract, agreement, commitment, understanding, arrangement, lease,
insurance policy or other instrument to which the Company or such Subsidiary is
a party, by which the Company's or such Subsidiary's respective assets,
business, or operations may be bound or affected, or under which the Company's
or such Subsidiary's respective assets, business, or operations receives
benefits (collectively "MATERIAL CONTRACTS"), and there has not occurred any
event that, with the lapse of time or the giving of notice or both, would
constitute such a breach or default, except for such breaches and defaults as
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. No other party to any
of the Company's or its Subsidiaries' Material Contracts is, to the Company's
Knowledge, in default in respect of any such Material Contract, the effect of
which would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
23
(b) Each of the Company's and its Subsidiaries' Material
Contracts is valid and binding and in full force and effect and, to the
Company's Knowledge, enforceable against the other party or parties thereto in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles). Section 5.15(b) of the Company Disclosure
Schedule contains a true, correct and complete list of all the Company's and its
Subsidiaries' Material Contracts. The Company has previously made available to
Parent true and correct copies of each Material Contract set forth in Section
5.15(b) of the Company Disclosure Schedule.
5.16 Finders' Fees. Except for Sandler X'Xxxxx & Partners, L.P., a copy
of whose engagement agreement has been provided to Parent, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of the Company or any of its Subsidiaries
who might be entitled to any fee or commission from the Company or any of its
Affiliates in connection with the transactions contemplated by this Agreement.
5.17 Opinion of Financial Advisor. The Company has received the opinion
of Sandler X'Xxxxx & Partners, L.P., financial advisor to the Company, to the
effect that, as of the date of this Agreement, the Merger Consideration is fair
to the Company's stockholders from a financial point of view.
5.18 Taxes.
(a) All income tax and other material Tax Returns required by
applicable law to be filed with any Taxing Authority by, or on behalf of, the
Company or any of its Subsidiaries have been filed when due (taking into account
valid extensions) under all applicable laws, and all such Tax Returns are, or
shall be at the time of filing, true and complete in all material respects.
(b) The Company and each of its Subsidiaries has paid (or has
had paid on its behalf) or has withheld and remitted to the appropriate Taxing
Authority all material Taxes due and payable, or, where payment is not yet due,
has established (or has had established on its behalf and for its sole benefit
and recourse) in accordance with GAAP an adequate accrual for all Taxes through
the end of the last period for which the Company and its Subsidiaries ordinarily
record items on their respective books.
(c) The income and franchise Tax Returns of the Company and
its Subsidiaries through the Tax year ended December 31, 2000 have been examined
and closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired.
24
(d) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the Company's Knowledge, threatened against or
with respect to the Company or its Subsidiaries in respect of any Tax or Tax
Return.
(e) During the five-year period ending on the date hereof,
neither the Company nor any of its Subsidiaries was a distributing corporation
or a controlled corporation in a transaction intended to be governed by Section
355 of the Code.
(f) Except as set forth in Section 5.18(f) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns an
interest in real property in any jurisdiction in which a Tax is imposed, or the
value of the interest is reassessed, on the transfer of an interest in real
property and which treats the transfer of an interest in an entity that owns an
interest in real property as a transfer of the interest in real property.
(g) Section 5.18(g) of the Company Disclosure Schedule
contains a list of all jurisdictions (whether foreign or domestic) in which the
Company or any of its Subsidiaries currently files Tax Returns.
(h) "TAX" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including withholding on amounts
paid to or by any Person), together with any interest, penalty, addition to tax
or additional amount imposed by any governmental authority (a "TAXING
AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee, (ii) in the
case of the Company or any of its Subsidiaries, liability for the payment of any
amount of the type described in clause (i) as a result of being or having been
before the Effective Time a member of an affiliated, consolidated, combined or
unitary group, or a party to any agreement or arrangement, as a result of which
liability of the Company or any of its Subsidiaries to a Taxing Authority is
determined or taken into account with reference to the activities of any other
Person, and (iii) liability of the Company or any of its Subsidiaries for the
payment of any amount as a result of being party to any Tax Sharing Agreement or
with respect to the payment of any amount imposed on any Person of the type
described in (i) or (ii) as a result of any existing express or implied
agreement or arrangement (including an indemnification agreement or
arrangement). "TAX RETURN" means any report, return, document, declaration or
other information or filing required to be supplied to any Taxing Authority with
respect to Taxes, including information returns, any documents with respect to
or accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information. "TAX SHARING AGREEMENTS" means all
existing agreements or arrangements (whether or not written) binding the Company
or any of its Subsidiaries that provide for the allocation, apportionment,
sharing or assignment of any Tax liability or benefit, or the transfer or
assignment of income, revenues, receipts, or gains for the purpose of
determining any Person's Tax liability (excluding any indemnification agreement
or arrangement pertaining to the sale or lease of assets or subsidiaries).
25
5.19 Employee Plans and Employees.
(a) Section 5.19(a) of the Company Disclosure Schedule sets
forth a list of every Employee Plan that has been maintained by the Company or
any ERISA Affiliate at any time during the six (6) year period ending on the
Closing Date.
(b) Each Employee Plan that has ever been maintained by the
Company or any ERISA Affiliate, which has been intended to qualify under Section
401(a) of the Code, has received a favorable determination or approval letter
from the IRS regarding its qualification under such Section and has, in fact,
been qualified under Section 401(a) of the Code from the effective date of such
Employee Plan through and including the Closing Date (or, if earlier, the date
that all of such Employee Plan's assets were distributed). No event or omission
has occurred which would cause any Employee Plan that has ever been maintained
by the Company or any ERISA Affiliate to lose its qualification or otherwise
fail to satisfy the relevant requirements to provide tax-favored benefits under
the applicable Code Section (including, without limitation, Code Sections 105,
125, 401(a) and 501(c)(9)).
(c) Each Employee Plan that has been maintained by the Company
or any ERISA Affiliate at any time during the six (6) year period ending on the
Closing Date has been maintained in material compliance with all applicable
Laws, regulations or any other requirements. With respect to each Employee Plan
that has been maintained by the Company or any ERISA Affiliate during the six
(6) year period ending on the Closing Date, there has been no (i) to the
Knowledge of the Company or Company Bank, "prohibited transaction", as defined
in Section 406 of ERISA or Code Section 4975, or (ii) nondeductible
contributions. No claim, demand, litigation or governmental administrative
proceeding (or investigation, audit or inquiry) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the Knowledge
of the Company, threatened with respect to any such Employee Plan. No partial
termination (within the meaning of Section 411(d)(3) of the Code) has occurred
with respect to any such Employee Plan.
(d) All payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Plans maintained by the Company or
any ERISA Affiliate at any time during the six (6) year period ending on the
Closing Date, for all periods prior to the Closing Date, have been timely made
or, if not yet required to be paid or contributed, have been properly accrued
(and all such unpaid but accrued amounts are described in Section 5.19(d) of the
Company Disclosure Schedule).
(e) Neither the Company nor any ERISA Affiliate (i) has ever
maintained any Employee Plan which has been subject to title IV of ERISA or Code
Section 412 or ERISA Section 302, (ii) has ever maintained any Multiemployer
Plan, or (iii) has ever provided health care or any other non-pension benefits
to any employees after their employment is terminated (other than as required by
part 6 of subtitle I of ERISA) or has ever promised to provide such
post-termination benefits.
(f) With respect to each Employee Plan maintained by the
Company or any ERISA Affiliate at any time during the six (6) year period ending
on the Closing Date, complete and correct copies of the following documents (if
applicable to such Employee Plan) have previously been delivered or made
available to Parent: (i) all documents embodying or governing such Employee
Plan, and any funding medium for the Employee Plan (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Plan under Code Section 401(a), and any applications for determination
or approval subsequently filed with the IRS; (iii) the six (6) most recently
filed IRS Forms 5500, with all applicable schedules and accountants' opinions
attached thereto; (iv) the six (6) most recent actuarial valuation reports
completed with respect to such Employee Plan; (v) the summary plan description
for each Employee Plan (or other descriptions of such Employee Plan provided to
employees) and all modifications thereto; (vi) any insurance policy (including
any fiduciary liability insurance policy or fidelity bond) related to such
Employee Plan; (vii) any registration statement or other filing made pursuant to
any federal or state securities law; and (viii) all correspondence to and from
any state or federal agency within the last six (6) years with respect to such
Employee Plan.
26
(g) Each Employee Plan currently maintained by the Company or
any ERISA Affiliate may be amended, terminated or otherwise modified by the
Company and/or the ERISA Affiliate that maintains such Employee Plan to the
greatest extent permitted by applicable law, including the elimination of any
and all future benefit accruals under any Employee Plan, and no employee
communication or provision of any Employee Plan document has failed to
effectively reserve the right of the Company or the ERISA Affiliate to so amend,
terminate or otherwise modify such Employee Plan. Each asset held under any
Employee Plan currently maintained by the Company or any ERISA Affiliate may be
liquidated or terminated without the imposition of any market value adjustment,
redemption fee, surrender charge or comparable liability.
(h) No oral or written representation or communication with
respect to any term or provision of any Employee Plan has been made by the
Company to any current or former employee of the Company which is not in all
material respects in accordance with the written or otherwise preexisting terms
and provisions of such Employee Plan.
(i) For purposes of this Agreement, an entity "maintains" an
Employee Plan if such entity sponsors, contributes to, or provides benefits
under or through such Employee Plan, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under or through such
Employee Plan, or if such Employee Plan provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents or beneficiaries).
(j) The Company has taken all actions necessary to suspend,
effective as of the date hereof, the issuance of any and all Company Shares,
Company Options or other equity awards under the Company ESPP and the Company
DSPP, in each case as required by their respective terms and any applicable
laws.
(k) As of the date of this Agreement, the Company and the
Company Bank employ 42 full time employees and 4 part-time employees, the names,
job titles and rates of compensation (including wages, salaries and bonuses,
including anticipated or contingent bonuses, and deferred compensation) are
listed in Section 5.19(k) of the Company Disclosure Schedule, and the Company
and Company Bank generally enjoy good employer-employee relationships with their
respective employees. The names of the officers and directors of the Company and
Company Bank are listed in Section 5.19(k) of the Company Disclosure Schedule.
27
(l) Each of the Company and Company Bank is not currently, nor
has either of them at any time in the prior six (6) years been, delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses or other compensation for any services performed for the
Company or Company Bank or amounts required to be reimbursed to such employees
or consultants.
(m) No collective bargaining agreement is in effect or is
currently being negotiated by the Company or Company Bank and neither the
Company nor Company Bank is bound by any collective bargaining agreement, nor is
any labor union or similar organization organizing, or, to the Knowledge of the
Company, intending to organize, any of the Company's employees or Company Bank's
employees.
(n) To the Knowledge of the Company, none of the Company's or
Company Bank's employment practices are currently being audited or investigated
by any federal or state agency or other Governmental Entity and no facts or
circumstances exist which could reasonably be expected to result in any such
audit or investigation. There are no charges, claims or demands from any current
employees or former employees of the Company or Company Bank regarding their
employment or former employment, including, without limitation, claims or
charges of employment discrimination, sexual harassment or unfair labor
practices, nor are there any strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations existing, pending or, to the
Knowledge of the Company, threatened against or involving the Company or Company
Bank.
(o) Neither the Company nor Company Bank has ever implemented
any "plant closing" or "mass layoff" of employees as those terms are defined in
the Worker Adjustment Retraining and Notification Act of 1988, as amended, or
any similar state or local law or regulation, and no layoffs that would
implicate such laws or regulations are currently contemplated by the Company or
Company Bank.
(p) To the Knowledge of the Company, no current or former
employee or consultant of the Company or Company Bank is in violation of any
term of any employment contract, confidentiality or other proprietary
information disclosure agreement or any other contract relating to the right of
any such person to be employed by, or otherwise perform services for, the
Company or Company Bank and no facts or circumstances exist which could
reasonably be expected to result in any such violation.
(q) Each of the Company and Company Bank have complied in all
material respects with all applicable laws, regulations and requirements
respecting employment and employment practices, terms and conditions of
employment, wages and hours and other laws, regulations and requirements related
to employment.
(r) None of the execution and delivery of this Agreement by
the Company, the performance by the Company of its obligations hereunder, the
consummation of the transactions contemplated hereby, nor the execution and
delivery of the Bank Merger Agreement by Company Bank, the performance by
Company Bank of its obligations thereunder, nor the consummation of the
transactions contemplated thereby will (i) entitle any current or former
employee, director or consultant of the Company or Company Bank to severance
pay, unemployment compensation or any payment contingent upon a change in
control or ownership of the Company or Company Bank, (ii) increase or enhance
any benefits payable under any Employee Plan, or (iii) accelerate the time of
payment or vesting, or increase the amount, of any compensation due to any such
person.
28
(s) All "deferred compensation" as that term is defined under
Section 409A of the Code (and any regulations or other guidance issued by the
IRS with respect to Section 409A of the Code), which is provided under any
agreement (written or oral) entered into by the Company or Company Bank on or
before the Closing Date is grandfathered from, and not subject to, Section 409A
of the Code.
5.20 Environmental Matters. Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company:
(a) No notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed, and no investigation, action, claim, suit, proceeding
or review (or any basis therefor) is pending or, to the Knowledge of the Company
or any Subsidiary, is threatened by any Governmental Entity or other Person, in
each case, with respect to any matters relating to the Company or any Subsidiary
and relating to or arising out of any Environmental Law.
(b) The Company and its Subsidiaries are and have been in
compliance with all applicable Environmental Laws and all Environmental Permits.
(c) There are no liabilities of or relating to the Company or
any of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise arising under or relating to any
Environmental Law and, to the Knowledge of the Company, there are no facts,
conditions, situations or set of circumstances that could reasonably be expected
to result in or be the basis for any such liability.
(d) There has been no environmental investigation, study,
audit, test, review or other analysis conducted of which the Company or any
Subsidiary has Knowledge in relation to the current or prior business of the
Company or any of its Subsidiaries or any property or facility now or previously
owned, leased or operated by the Company or any of its Subsidiaries that has not
been delivered to Parent at least five Business Days prior to the date hereof.
(e) Neither the Company nor any of its Subsidiaries is or will
be subject to any transaction-triggered requirement arising under any
Environmental Law in connection with the execution and delivery of this
Agreement and the Bank Merger Agreement or the consummation of the transactions
contemplated hereby or thereby.
(f) Neither the Company nor any of its Subsidiaries has
assumed, directly or indirectly, any liability of any other Person under any
Environmental Law.
(g) There are no Hazardous Substances in, on, under, emanating
from, or migrating onto any portion of any property or structure currently or,
to the Knowledge of the Company or Company Bank, formerly owned, leased, or
occupied by the Company or any of its Subsidiaries.
29
(h) There is no toxic mold present in any structure owned,
leased, or occupied by the Company or any of its subsidiaries.
(i) Neither the Company nor any of its Subsidiaries owns,
operates or stores any underground storage tanks regulated under applicable
Environmental Laws.
(j) For purposes of this Section 5.20, the terms "Company" and
"Subsidiaries" shall include any entity that is, in whole or in part, a
predecessor of the Company or any of its Subsidiaries and for which, by
contract, agreement or otherwise, the Company or any of its Subsidiaries is the
successor to any liabilities of such predecessor that might arise or have arisen
under any Environmental Law.
5.21 Tax Treatment. Neither the Company nor any of its Affiliates has
taken or agreed to take any action, or is aware of any fact or circumstance,
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code (a "368 REORGANIZATION").
5.22 Derivative Instruments. Neither the Company nor any of its
Subsidiaries is party to any interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management
arrangements, whether entered into for the account of the Company, or for the
account of one or more of its Subsidiaries or their customers.
5.23 Insurance. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as its management
reasonably has determined to be prudent in accordance with industry practices.
All of the insurance policies, binders, or bonds maintained by the Company or
its Subsidiaries are in full force and effect; the Company and its Subsidiaries
are not in default thereunder, except for such defaults as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
5.24 Capital; Management; CRA Rating. The Company Bank (i) is
"well-capitalized" as that term is defined at 12 C.F.R. ss. 225.2(r)(2)(i), (ii)
is "well-managed" as that term is defined at 12 C.F.R. ss. 225.2(s)(1) and (iii)
has at least a "satisfactory" rating under the U.S. Community Reinvestment Act
(the "CRA").
5.25 Properties. Except as set forth in Section 5.25 of the Company
Disclosure Schedule and except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, each
of the Company and its Subsidiaries has good and marketable title or a valid and
enforceable leasehold, as applicable, free and clear of all Liens, to all of the
properties and assets, real and personal, tangible or intangible, which are
reflected on the Company Balance Sheet as of the Company Balance Sheet Date or
acquired after such date, except (i) Liens for taxes not yet due and payable or
contested in good faith by appropriate proceedings, provided taxes are paid as
and when required under applicable Law notwithstanding any such contest, (ii)
such imperfections of title, easements and encumbrances, if any, as do not
materially impair the use of the respective property as such property is used on
the date hereof, and, with respect to all fee-owned property, do not materially
impair the fair market value of such property, (iii) for dispositions of or
encumbrances on such properties or assets in the ordinary course of business,
(iv) mechanics', materialmen's, workmen's, repairmen's, warehousemen's,
carrier's and other similar Liens and encumbrances arising in the ordinary
course of business, (v) Liens securing obligations that are reflected in such
consolidated balance sheet, and changes in such obligations in the ordinary
course of business since the Company Balance Sheet Date or (vi) the lessor's
interest in any such property that is leased. All material leases pursuant to
which the Company or any of its Subsidiaries, as lessee, leases real or personal
property are valid and enforceable in accordance with their respective terms and
are bona fide, arm's length leases, at rents that constituted market rents as of
the respective dates such leases were entered into. Section 5.25 of the Company
Disclosure Schedule sets forth a true, correct and complete list of all real
properties owned or leased by the Company or any of its Subsidiaries. The
Company has made available to Parent copies of all documents creating or
evidencing fee or leasehold interests of the Company and its Subsidiaries,
including all modifications or amendments thereto.
30
5.26 Private Equity Portfolio. The Company has furnished or made
available to Parent true and complete information concerning its investments, or
investments made by entities managed by it, in private equity, venture capital
or similar types of investments. All such investments are owned by the Company,
directly or indirectly, free and clear of all Liens and there have been no
adverse events or developments with respect to any such investment since the
Company Balance Sheet Date, except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
5.27 Affiliate Transactions. Except as set forth in Section 5.27 of the
Company Disclosure Schedule, the Company Bank is not a party to any agreement,
arrangement or understanding (whether oral or written), directly or indirectly
(including, without limitation, any purchase, sale, lease, investment, loan,
service or management agreement or other transaction), with any "affiliate," as
such term is defined in Section 23A of the Federal Reserve Act. All of the
Company's agreements, arrangements or understandings with "affiliates" comply
with Sections 23A and 23B of the Federal Reserve Act.
5.28 Antitakeover Statutes; Rights Plans. (a) The Company has taken all
action necessary to exempt the Merger, the Bank Merger and the Transaction
Documents and the transactions contemplated hereby and thereby from Sections
3-601 through 3-604 and Sections 3-701 through 3-709 of the Maryland General
Corporation Law, and, accordingly, neither such Sections nor any other
antitakeover or similar statute or regulation applies or purports to apply to
any such transactions. No other "control share acquisition," "fair price,"
"moratorium" or other antitakeover laws enacted under U.S. state or federal laws
apply to the Merger, the Bank Merger, the Transaction Documents or any of the
transactions contemplated thereby.
(b) No stockholder rights plan is, or at the Effective Time
will be, applicable to the Merger, the Bank Merger or the Transaction Documents
or any of the transactions contemplated thereby.
5.29 Regulatory Matters.
(a) Neither the Company nor any of its Subsidiaries is a party
or subject to any order, decree, written agreement, memorandum of understanding
or similar arrangement with, or a commitment letter, supervisory letter or
similar submission or application to, or extraordinary supervisory letter from,
any Governmental Entity, in each case that is material to the Company and its
Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has been
advised by any Governmental Entity that such Governmental Entity is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, written agreement, memorandum of
understanding, commitment letter, supervisory letter or similar arrangement,
submission or application, in each case that is material to the Company and its
Subsidiaries.
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5.30 Certain Loan Matters.
(a) Except as set forth in Section 5.30(a) of the Company
Disclosure Schedule, as of December 31, 2005, the Company Bank is not a party to
any written or oral: (i) loan agreement, note or borrowing arrangement, other
than credit card loans and other loans the unpaid balance of which does not
exceed $100,000 per loan, under the terms of which the obligor is sixty (60)
days delinquent in payment of principal or interest or in default of any other
material provisions as of the date hereof; (ii) loan agreement, note or
borrowing arrangement which has been classified or which could reasonably be
expected to be classified by a bank examiner (whether regulatory or internal) as
"substandard," "doubtful," "loss," "other loans especially mentioned," "other
assets especially mentioned" or any comparable classifications by such Persons.
(b) Section 5.30(b) of the Company Disclosure Schedule
contains the "watch list of loans" ("WATCH LIST") of the Company Bank as of
December 31, 2005 and September 30, 2006. To the Knowledge of the Company and
the Company Bank, there is no loan agreement, note or borrowing arrangement
which should be included on the Watch List in accordance with the Company Bank's
past practices, but which has not been included on the Watch List.
(c) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, the
Company Bank has kept complete and accurate books and records in connection with
its loan agreements, notes or borrowing arrangements, and there are no oral
modifications or amendments related to its loan agreements, notes or borrowing
arrangements that are not reflected in the Company Bank's records, no defenses
as to the enforcement of any loan agreement, note or borrowing arrangement have
been asserted, and there have been no acts or omissions which would give rise to
any claim or right of rescission, set-off, counterclaim or defense.
(d) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, each
loan agreement, note or borrowing arrangement is (i) represented by evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected and (iii) is the legal, valid and binding obligations of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(e) The Company Bank has maintained the allowance for loan
losses at a level which it believes is adequate to absorb reasonably anticipated
losses in the loan, in accordance with GAAP and regulatory requirements.
32
(f) Except as set forth on Section 5.30(f) of the Company
Disclosure Schedule, as of December 31, 2005, neither the Company nor any of its
Subsidiaries other than the Company Bank is a party to any written or oral loan
or other extension of credit.
5.31 Intellectual Property.
(a) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, the
Company and/or each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how, computer software programs or applications, and proprietary
information or materials that are used in the business of the Company and its
Subsidiaries as currently conducted, and, to the Knowledge of the Company, all
patents and registered trademarks, trade names, service marks and copyrights
owned by the Company and/or its Subsidiaries are valid and subsisting.
(b) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which the Company
is authorized to use any third-party patents, trademarks, service marks, and
copyrights ("THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS").
(c) No claims with respect to (A) the patents, registered and
material unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor owned by the Company or any of its
Subsidiaries (the "COMPANY INTELLECTUAL PROPERTY RIGHTS"), (B) any material
trade secret owned by the Company or any of its Subsidiaries, or (C) to the
Knowledge of the Company, Third-Party Intellectual Property Rights licensed to
the Company or any of its Subsidiaries, are currently pending or are threatened
in writing by any Person.
(d) To the Knowledge of the Company, there are no valid
grounds for any bona fide claims (A) to the effect that the sale or licensing of
any product as now sold or licensed by the Company or any of its Subsidiaries,
infringes on any copyright, patent, trademark, service xxxx or trade secret of
any other Person, (B) against the use by the Company or any of its Subsidiaries
of any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the business of
the Company or any of its Subsidiaries as currently conducted, (C) challenging
the ownership or validity of any Company Intellectual Property Rights or other
material trade secret owned by the Company, or (D) challenging the license or
right to use any Third-Party Intellectual Rights by the Company or any of its
Subsidiaries.
(e) To the Knowledge of the Company, there is no unauthorized
use, infringement or misappropriation of any of the Company Intellectual
Property Rights by any Person, including any employee or former employee of the
Company or any of its Subsidiaries
33
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the disclosure schedule delivered by Parent to
the Company on or prior to the date hereof (the "PARENT DISCLOSURE SCHEDULE"),
Parent represents and warrants to the Company that:
6.1 Corporate Existence and Power. Parent is duly incorporated as a
corporation, validly existing and in good standing under the laws of the State
of Maryland and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not have, individually or in
the aggregate, a Material Adverse Effect on Parent. Parent is duly registered as
a bank holding company under the BHC Act. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Parent
has heretofore made available to the Company true and complete copies of the
certificate of incorporation and bylaws of Parent as currently in effect.
6.2 Corporate Authorization.
(a) The execution, delivery and performance by Parent of this
Agreement and the consummation by Parent of the transactions contemplated hereby
are within the corporate powers of Parent and have been duly and validly
approved by the Board of Directors of Parent, and no other corporate action on
the part of Parent is necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement (assuming due authorization and
delivery by Parent) constitutes a valid and binding obligation of Parent, and
will be enforceable against Parent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership or similar laws affecting the
enforcement of creditors' rights generally 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 such proceeding may be brought.
(b) The execution, delivery and performance of the Bank Merger
Agreement and the consummation of the transactions contemplated thereby have
been duly and validly approved by the Board of Directors of Parent Bank. The
Board of Directors of Parent Bank have declared the transactions contemplated by
the Bank Merger Agreement to be advisable and have directed that the Bank Merger
Agreement and the transactions contemplated thereby be submitted to Parent as
Parent Bank's sole stockholder for approval and, except for the approval of the
Bank Merger Agreement by Parent as Parent Bank's sole stockholder, no other
corporate proceedings on the part of Parent Bank are necessary to approve the
Bank Merger Agreement and to consummate the transactions contemplated thereby.
The Bank Merger Agreement (assuming due authorization and delivery by the
Company Bank) constitutes a valid and binding obligation of Parent Bank, and
will be enforceable against Parent Bank in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership or similar laws affecting the
enforcement of creditors' rights generally 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 such proceeding may be brought.
34
6.3 Governmental Authorization. The execution, delivery and performance
by Parent of this Agreement, by the Parent Bank of the Bank Merger Agreement,
the consummation by Parent of the transactions contemplated hereby and the
consummation by the Parent Bank of the transactions contemplated by the Bank
Merger Agreement, require no action by or in respect of, or filing with any
Governmental Entity other than the Required Filings and Approvals, and any other
actions or filings the absence of which would not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
6.4 Consents and Approvals. Except for (i) the approval of Parent in
its capacity as the sole stockholder of Parent Bank of the Bank Merger Agreement
and the Bank Merger, (ii) the Required Filings and Approvals and (iii) as set
forth in Section 6.4 of the Parent Disclosure Schedule, no material consents or
approvals of any Person are necessary in connection with the execution, delivery
and performance by Parent of this Agreement, the consummation of the Merger and
the consummation of the other transactions contemplated hereby, or the
execution, delivery and performance by Parent Bank of the Bank Merger Agreement,
the consummation of the Bank Merger and the consummation of the other
transactions contemplated thereby.
6.5 Non-contravention. (a) The execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby and the execution, delivery and performance by Parent Bank
of the Bank Merger Agreement and the consummation of the transactions
contemplated thereby, do not and will not (i) contravene, conflict with, or
result in any violation or breach of any provision of the certificate of
incorporation or bylaws of Parent or Parent Bank, (ii) assuming compliance with
the matters referred to in Sections 6.3 and 6.4 contravene, conflict with or
result in a violation or breach of any provision of any law, (iii) assuming
compliance with the matters referred to in Sections 6.3 and 6.4, require any
consent or other action by any Person under, constitute a default, or an event
that, with or without notice or lapse of time or both, could become a default,
under, or cause or permit the termination, cancellation, acceleration or other
change of any right or obligation or the loss of any benefit to which Parent or
any of its Subsidiaries is entitled under any provision of any agreement or
other instrument binding upon Parent or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Parent and
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Parent or any of its Subsidiaries, except for such contraventions,
conflicts and violations referred to in clause (ii) and for such failures to
obtain any such consent or other action, defaults, terminations, cancellations,
accelerations, changes, losses or Liens referred to in clauses (iii) and (iv)
that would not be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent.
(b) As of the date hereof, Parent knows of no reason why the
tax opinion referred to in Section 10.1(g) should not be obtained on a timely
basis.
6.6 Capitalization. (a) The authorized capital stock of Parent consists
of 50,000,000 authorized shares of Parent Stock par value $1.00 per share, of
which 14,819,743 shares are issued and outstanding as of the date hereof.
Authorized but unissued Parent Stock may be redesignated or reclassified as
preferred stock. As of the date hereof, no shares of preferred stock are issued
and outstanding. As of the date hereof, Parent's equity compensation plans
authorize the issuance of up to an aggregate of 2,460,986 shares of Parent Stock
(of which options or other rights to purchase an aggregate of 773,421 shares of
Parent Stock are exercisable). All outstanding shares of capital stock of Parent
have been duly authorized and validly issued and are fully paid and
nonassessable. All outstanding shares of Parent Stock and all outstanding rights
to acquire shares of Parent Stock were issued in compliance with all applicable
federal and state securities laws and were not issued in violation of any
preemptive right or similar right or any right of first refusal or similar
right.
35
(b) As of the date of this Agreement, except as set forth in
this Section 6.6 and except as disclosed in the Parent SEC Documents, there are
no outstanding (i) shares of capital stock or voting securities of Parent, (ii)
securities of Parent convertible into or exchangeable for shares of capital
stock or voting securities of Parent or (iii) options or other rights to acquire
from Parent or other obligation of Parent to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent. As of the date of this Agreement, there are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clause (i),
(ii) or (iii) above.
(c) The shares of Parent Stock to be issued as part of the
Merger Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable and the issuance thereof is not subject to
any preemptive or other similar right.
6.7 Subsidiaries. (a) Each Subsidiary of Parent is an entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all corporate or other powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Each Subsidiary of Parent is duly qualified to do business as a foreign entity
and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified would
not have, individually or in the aggregate, a Material Adverse Effect on Parent.
All material Subsidiaries of Parent and their respective jurisdictions of
incorporation are identified in the Parent 10-K (by incorporation by reference
or otherwise).
(b) Except as set forth on Section 6.7(b) of the Parent
Disclosure Schedule, all of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of Parent, is owned by
Parent, directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests). There are no outstanding (i) securities of Parent or any
of its Subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in any of its Subsidiaries or
(ii) options or other rights to acquire from Parent or any of its Subsidiaries,
or other obligation of Parent or any of its Subsidiaries to issue, any capital
stock or other voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or ownership interests in, any Subsidiary of Parent. There are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clauses (i) or
(ii) above.
36
6.8 SEC Filings and the Xxxxxxxx-Xxxxx Act. (a) Parent has made
available to the Company (i) its annual reports on Form 10-K for its fiscal
years ended December 31, 2003, 2004 and 2005 and (ii) all of its other reports,
statements, schedules and registration statements filed with the SEC since
December 31, 2003 (the documents referred to in this Section 6.8(a),
collectively, the "PARENT SEC DOCUMENTS").
(b) As of its filing date, each Parent SEC Document complied,
as to form in all material respects with the applicable requirements of the 1933
Act and 1934 Act, as the case may be.
(c) As of its filing date, each Parent SEC Document filed
pursuant to the 1934 Act did not, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Each Parent SEC Document that is a registration statement,
as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of
the date such registration statement or amendment became effective, did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(e) Parent has established and maintains disclosure controls
and procedures (as defined in Rule 13a-15 under the 1934 Act). Such disclosure
controls and procedures are designed to ensure that material information
relating to Parent, including its consolidated Subsidiaries, is made known to
Parent's principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the 1934 Act are being prepared. Such disclosure
controls and procedures are effective in timely alerting Parent's principal
executive officer and principal financial officer to material information
required to be included in Parent's periodic reports required under the 1934
Act.
(f) Parent and its Subsidiaries have established and
maintained a system of internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the 1934 Act). Such internal control over
financial reporting is sufficient to provide reasonable assurance regarding the
reliability of Parent's financial reporting and the preparation of Parent
financial statements for external purposes in accordance with GAAP. Parent has
disclosed, based on its most recent evaluation of its internal control over
financial reporting prior to the date hereof, to Parent's auditors and audit
committee (x) all significant deficiencies and material weaknesses in the design
or operation of its internal control over financial reporting which are
reasonably likely to adversely affect Parent's ability to record, process,
summarize and report financial information and (y) any fraud, whether or not
material, that involves management or other employees who have a significant
role in Parent's internal control over financial reporting. Parent has made
available to the Company a summary of any such disclosure made by management to
the Company's auditors and audit committee since January 1, 2005.
(g) Parent has not since the enactment of the Xxxxxxxx-Xxxxx
Act, taken any action prohibited by Section 402 of the Xxxxxxxx-Xxxxx Act. All
outstanding extensions of credit, if any, were at the time they were made and
continue to be permitted and in compliance with the provisions of Regulation O,
12 C.F.R. Part 215.
37
(h) Since January 1, 2003, Parent and each of the Parent
Banking Subsidiaries has timely filed all required annual and quarterly
statements and other documents (including exhibits and all other information
incorporated therein) required to be filed with Regulatory Authorities
(collectively, the "PARENT REGULATORY STATEMENTS"). The Parent Regulatory
Statements, including the method for determining Parent's and the Parent Banking
Subsidiaries' provision for loan and lease losses, are and have been prepared in
conformity with regulatory accounting practices, applicable law and supervisory
policy, consistently applied, for the periods covered thereby and (as may have
been amended and restated or supplemented by Parent Regulatory Statements filed
subsequently but prior to the date hereof), fairly present in all material
respects the statutory financial position of Parent and the Parent Banking
Subsidiaries, as at the respective dates thereof and the results of operations
of Parent and the Parent Banking Subsidiaries for the respective periods then
ended. The Parent Regulatory Statements complied in all material respects with
any requirement of Law when filed and no material deficiency has been asserted
with respect to any Parent Regulatory Statements by the FDIC or any other
Governmental Entity. The annual statutory balance sheets and income statements
included in the Parent Regulatory Statements have been audited, and Parent has
made available to the Company true and complete copies of all audit opinions
related thereto. Neither Parent's nor the Parent Banking Subsidiaries'
independent public accountants nor any employee of the Parent or the Parent
Banking Subsidiaries has alleged that any of the Parent Regulatory Statements
contains any misstatement or other defect which, if true, would cause the
representations and warranties contained in this Section 6.8(h) to be untrue.
6.9 Financial Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Parent included in
the Parent SEC Documents fairly present, in all material respects, in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Parent and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
6.10 Proxy Statement; Registration Statement. (a) None of the
information provided by Parent for inclusion in the Company Proxy Statement or
any amendment or supplement thereto, at the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to stockholders of the
Company and at the time the stockholders of the Company vote on adoption of this
Agreement and at the Effective Time, will contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) The Registration Statement of Parent to be filed with the
SEC with respect to the offering of Parent Stock in connection with the Merger
(the "REGISTRATION STATEMENT") and any amendments or supplements thereto, when
filed, will comply as to form in all material respects with the requirements of
the 1933 Act. At the time the Registration Statement or any amendment or
supplement thereto becomes effective and at the Effective Time, the Registration
Statement, as amended or supplemented, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
representations and warranties contained in this Section 6.9 will not apply to
statements or omissions in the Registration Statement or any amendment or
supplement thereto based upon information furnished to Parent by the Company
specifically for use therein.
38
6.11 Absence of Certain Changes. Since the Parent Balance Sheet Date,
the business of Parent and its Subsidiaries has been conducted in the ordinary
course consistent with past practice and, except as disclosed to the Company and
as disclosed in the Parent SEC Documents filed prior to the date hereof, there
has not been:
(a) any event, occurrence, development or state of
circumstances or facts that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of Parent
other than Parent's normal quarterly dividend, as such dividend may be increased
in the ordinary course, or any repurchase, redemption or other acquisition by
Parent or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, Parent or any of its
Subsidiaries; and
(c) any change in any material method of accounting or
accounting practice by Parent or any of its Subsidiaries, except for any such
change required by reason of a concurrent change in GAAP or Regulation S-X under
the 1934 Act.
6.12 No Undisclosed Material Liabilities. There are no liabilities or
obligations of Parent or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations disclosed and provided for in
the Parent Balance Sheet or in the notes thereto or in the Parent SEC Documents
filed prior to the date hereof; and
(b) liabilities or obligations incurred in the ordinary course
of business consistent with past practices that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
6.13 Compliance with Laws and Court Orders. Parent and each of its
Subsidiaries is and, since January 1, 2003, has been in compliance with, and to
the Knowledge of Parent is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law (including the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, all other
applicable fair lending laws and other laws relating to discriminatory business
practices, the Xxxxxxxx-Xxxxx Act (including Section 404 thereof), the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorist (USA PATRIOT) Act of 2001 and the Bank Secrecy Act),
except for violations that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
39
6.14 Litigation. Except as set forth in the Parent SEC Documents filed
prior to the date hereof, there is no action, suit, investigation or proceeding
(or any basis therefor) pending against, or, to the Knowledge of Parent,
threatened against or affecting, Parent, any of its Subsidiaries, any present or
former officer, director or employee of Parent or any of its Subsidiaries or any
other Person for whom Parent or any Subsidiary may be liable or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official, domestic, foreign or supranational, that, if determined or
resolved adversely in accordance with the plaintiff's demands, could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
6.15 Finders' Fees. Except for Xxxxxx X. Xxxxx & Co. Incorporated,
whose fees will be paid by Parent, there is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Parent who might be entitled to any fee or commission from the Company
or any of its Affiliates upon consummation of the transactions contemplated by
this Agreement.
6.16 Tax Treatment. Neither Parent nor any of its Affiliates has taken
or agreed to take any action, or is aware of any fact or circumstance, that
would prevent the Merger from qualifying as a 368 Reorganization.
6.17 Regulatory Matters.
(a) Neither Parent nor any of the Parent Banking Subsidiaries
is a party or subject to any order, decree, written agreement, memorandum of
understanding or similar arrangement with, or a commitment letter, supervisory
letter or similar submission or application to, or extraordinary supervisory
letter from, any Governmental Entity, in each case that is material to Parent.
(b) Neither Parent nor any of the Parent Banking Subsidiaries
has been advised by any Governmental Entity that such Governmental Entity is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, written agreement, memorandum of
understanding, commitment letter, supervisory letter or similar arrangement or
submission or application, in each case that is material to Parent.
6.18 Financing. Parent has available on hand, or will have at Closing,
sufficient cash and cash equivalents to pay the aggregate cash portion of the
Merger Consideration pursuant to Article 3 of this Agreement. Parent has
reserved a sufficient number of shares of Parent Stock in order to fulfill its
obligations hereunder.
6.19 Recent Purchases of Parent Stock. Neither Parent nor any of its
Subsidiaries has purchased or sold on the NASDAQ Global Select Market, or
submitted a bid to purchase or an offer to sell on the NASDAQ Global Select
Market, directly or indirectly, any shares of Parent Stock or any options,
warrants, rights or other securities convertible into or exchangeable for shares
of Parent Stock during the 10 consecutive trading days immediately preceding the
date hereof, other than purchases or sales of Parent Stock (i) held by Parent or
any Subsidiary of Parent in trust, managed, custodial or nominee accounts and
the like, or held by mutual funds; (ii) acquired in respect of debts previously
contracted, (iii) to fund Parent's obligations under its dividend reinvestment
plan in accordance with past practice or (iv) to satisfy Parent's tax
withholding obligations with respect to grants of restricted stock to employees.
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ARTICLE VII
COVENANTS OF THE COMPANY
The Company agrees that:
7.1 Conduct of the Company. From the date hereof until the Effective
Time, except as expressly contemplated or permitted by this Agreement or with
the prior written consent of Parent, the Company and its Subsidiaries shall
conduct their business in the ordinary course consistent with past practice and
shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time:
(a) the Company shall not adopt or propose any change to its
articles of incorporation or bylaws;
(b) the Company shall not (i) split, combine, subdivide, or
reclassify its outstanding Company Shares; (ii) declare, set aside or pay any
dividend of cash, stock or property in respect of the Company Shares other than
(1) regular quarterly dividends not to exceed the amount paid per share on the
Company Shares for the fiscal quarter ended September 30, 2006 and (2) a special
year end dividend in an amount per share not to exceed the amount paid per share
on the Company Shares for the fiscal quarter ended September 30, 2006; or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for any shares of its
capital stock or permit any of its Subsidiaries to do so, other than pursuant to
the tender of Company Shares in payment of all or any portion of the exercise
price of Company Options in accordance with the provisions of the Company Option
Plan;
(c) the Company shall not, and shall not permit any of its
Subsidiaries to, issue, sell, pledge or otherwise encumber any shares of its
capital stock, or any securities convertible into or exchangeable or exercisable
for, shares of its capital stock, except in connection with the issuance of
Company Shares upon the exercise of Company Options outstanding on the date
hereof;
(d) the Company shall not, and shall not permit any of its
Subsidiaries to, merge or consolidate with any other Person or acquire a
material amount of stock or assets of any other Person;
(e) the Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease, license or otherwise dispose of any material
subsidiary or any material amount of assets, securities or property except (i)
pursuant to existing contracts or commitments made available to Parent prior to
the date hereof and (ii) in the ordinary course consistent with past practice;
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(f) the Company shall not, and shall not permit any of its
Subsidiaries to, take any action that would make any representation and warranty
of the Company hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time;
(g) the Company shall not (i) grant any severance or
termination pay to (or amend any such existing arrangement with) any director,
officer or employee of the Company, other than severance payments in accordance
with Section 9.10(a) hereof, (ii) enter into any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company, (iii) amend or
otherwise increase any benefits payable under any severance or termination pay
policies or employment or change of control agreements, (iv) permit any
director, officer or employee who is not already a party to an agreement or a
participant in a plan providing benefits upon or following a change in control
to become a party to any such agreement or a participant in any such plan, or
(v) amend the terms of any employee or director stock options or other stock
based awards, or (vi) increase (or amend the terms of) any other employee
benefit plan, program or arrangement of any type for directors, officers or
employees of the Company;
(h) the Company shall not, and shall not permit any of its
Subsidiaries to, enter into a new line of business;
(i) the Company shall not, and shall not permit Company Bank
to, originate, purchase, extend or grant any loan other than in accordance with
the Company's or Company Bank's lending policies in effect as of the date
hereof, consistent with past practice; provided, however, that (A) each of the
Company and Company Bank shall provide to Parent and Parent Bank a copy of the
books and records of the Company's and Company Bank's Loan Committee with
respect to any loan to any party with an aggregate loan relationship of
$1,000,000 or more, (B) the Company and Company Bank shall provide Parent and
Parent Bank with a copy of all minutes of all meetings of the Company's and
Company Bank's Loan Committee and (C) Parent and Parent Bank shall be entitled
to have an observer present at all meetings of the Company's and Company Bank's
Loan Committee;
(j) the Company shall not, and shall not permit any of its
Subsidiaries to, offer to any third party the sale of any loan participation
unless the Company or such Subsidiary shall have first offered Parent the right
to participate in such sale and Parent shall not have accepted such
participation within five days of such offer;
(k) the Company shall not, and shall not permit any of its
Subsidiaries to, make any capital expenditures, other than those contained in
the Company's annual budget, in an amount in excess of $100,000;
(l) except as expressly permitted by this Agreement and as set
forth in Section 7.1(l) of the Company Disclosure Schedule, the Company shall
not, and shall not permit any of its Subsidiaries to, pay any bonuses to any
employee, officer, director or other Person or authorize any severance pay or
other benefit for any employee, officer, director or other Person;
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(m) the Company shall not, and shall not permit any of its
Subsidiaries to, enter into any new, or amend in any respect any existing
employment, consulting, non-competition or independent contractor agreement with
any Person or alter the terms of any existing incentive bonus or commission
plan, provided, however, that nothing contained herein shall prohibit the
Company or Company Bank from hiring personnel at or below an annual compensation
rate of $100,000 to satisfy its staffing needs in the ordinary course of
business;
(n) the Company shall not, and shall not permit any of its
Subsidiaries to, adopt any new or amend in any material respect any existing
Employee Plan or grant any general increase in compensation to its employees as
a class or to its officers or employees except for ordinary salary increases
which may not exceed (i) with respect any individual employee, six percent (6%)
of such employee's annual base salary for the prior calendar year, and (ii) in
the aggregate, not more than five percent (5%) of the total annual base salary
paid to the employees of the Company and its Subsidiaries during 2006;
(o) the Company shall not, and shall not permit any of its
Subsidiaries to, grant any increase in fees or other compensation or in other
benefits to any directors; and
(p) the Company shall not, and shall not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
7.2 Stockholder Meeting; Proxy Material. The Company shall cause a
meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. Subject to Section
7.3(b), the Board of Directors of the Company shall recommend approval and
adoption of this Agreement and the Merger by the Company's stockholders. In
connection with such meeting, the Company shall (i) promptly provide Parent with
the information relating to the Company and Company Bank that is required to be
included in the Registration Statement (including, without limitation all
financial information relating to the Company), use its reasonable best efforts
to cause the Company's independent registered public accounting firm to provide
any consents necessary for the filing of the Registration Statement, and mail to
its stockholders as promptly as practicable after the effectiveness of the
Registration Statement the Company Proxy Statement (which shall be filed as part
of the Registration Statement and will include Parent's prospectus) and all
other proxy materials for the Company Stockholder Meeting, (ii) use its best
efforts to obtain the necessary approvals by its stockholders of this Agreement,
the Merger and the transactions contemplated hereby, subject to Section 7.3(b)
and (iii) otherwise comply with all legal requirements applicable to the Company
Stockholder Meeting. Unless this Agreement has been terminated in accordance
with the terms of Article 11, this Agreement and the Merger shall be submitted
to the Company's stockholders at the Company Stockholder Meeting whether or not
the Board of Directors of the Company determines at any time that this Agreement
or the Merger is no longer advisable and recommends that the stockholders of the
Company reject it.
7.3 No Solicitation; Other Offers. (a) Neither the Company nor any of
its Subsidiaries shall, nor shall the Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, employees,
investment bankers, attorneys, accountants, consultants or other agents or
advisors to, directly or indirectly, (i) solicit, initiate or take any action to
facilitate or encourage the submission of any Acquisition Proposal, (ii) enter
into or participate in any discussions or negotiations with, furnish any
information relating to the Company or any of its Subsidiaries or afford access
to the business, properties, assets, books or records of the Company or any of
its Subsidiaries to, otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by any Third Party that is
seeking to make, or has made, an Acquisition Proposal, (iii) grant any waiver or
release under any standstill or similar agreement with respect to any class of
equity securities of the Company or any of its Subsidiaries or (iv) enter into
any agreement with respect to an Acquisition Proposal.
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(b) Notwithstanding the foregoing, the Board of Directors of
the Company, directly or indirectly through advisors, agents or other
intermediaries, may (i) engage in negotiations or discussions with any Third
Party that, subject to the Company's compliance with Section 7.3(a), has made an
unsolicited Acquisition Proposal that the Board of Directors of the Company
reasonably believes will lead to a Superior Proposal, (ii) furnish to such Third
Party nonpublic information relating to the Company or any of its Subsidiaries
pursuant to a confidentiality agreement (a copy of which shall be provided for
informational purposes only to Parent) with terms no less favorable to the
Company than those contained in the Confidentiality Agreement and/or (iii)
following receipt of such Acquisition Proposal, fail to make, withdraw, or
modify in a manner adverse to Parent its recommendation to its stockholders
referred to in Section 7.2 hereof; but in each case referred to in the foregoing
clauses (i) through (iii) only if the Board of Directors of the Company
determines in good faith by a majority vote, after consultation with outside
legal counsel to the Company, that taking such action is in the best interests
of the Company and its stockholders and that such action is necessary to comply
with its fiduciary duties under Maryland Law.
(c) The Board of Directors of the Company shall not take any
of the actions referred to in clauses (i) through (iii) of the preceding
subsection unless the Company shall have delivered to Parent a prior written
notice advising Parent that it intends to take such action, and the Company
shall continue to advise Parent after taking such action. In addition, the
Company shall notify Parent promptly (but in no event later than 24 hours) after
receipt by the Company (or any of its advisors) of any Acquisition Proposal, any
indication that a Third Party is considering making an Acquisition Proposal or
of any request for information relating to the Company or any of its
Subsidiaries or for access to the business, properties, assets, books or records
of the Company or any of its Subsidiaries by any Third Party that may be
considering making, or has made, an Acquisition Proposal. The Company shall
provide such notice orally and in writing and shall identify the Third Party
making, and the terms and conditions of, any such Acquisition Proposal,
indication or request. The Company shall keep Parent fully informed, on a
current basis, of the status and details of any such Acquisition Proposal,
indication or request. The Company shall, and shall cause its Subsidiaries and
the advisors, employees and other agents of the Company and any of its
Subsidiaries to, cease immediately and cause to be terminated any and all
existing activities, discussions or negotiations, if any, with any Third Party
conducted prior to the date hereof with respect to any Acquisition Proposal and
shall use its reasonable best efforts to cause any such Party (or its agents or
advisors) in possession of confidential information about the Company that was
furnished by or on behalf of the Company to return or destroy all such
information.
"SUPERIOR PROPOSAL" means any bona fide, unsolicited written Acquisition
Proposal on terms that the Board of Directors of the Company determines in good
faith by a majority vote, after considering the advice of a financial advisor of
nationally recognized reputation and taking into account all the terms and
conditions of the Acquisition Proposal, including any break-up fees, expense
reimbursement provisions and conditions to consummation, are more favorable and
provide greater value to all the Company's stockholders than as provided
hereunder and for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Board of Directors of
the Company.
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7.4 Tax Matters. (a) Neither the Company nor any of its Subsidiaries
shall make (other than consistent with the Company's and its Subsidiaries' past
practice) or change any material Tax election, change any annual tax accounting
period, adopt or change any material method of tax accounting, file any material
amended Tax Returns or claims for material Tax refunds, enter into any material
closing agreement, surrender any material Tax claim, audit or assessment,
surrender any right to claim a material Tax refund, offset or other reduction in
Tax liability surrendered, consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment or take or omit to take any
other action, if any such action or omission would have the effect of materially
increasing the Tax liability or reducing any Tax asset of the Company or any of
its Subsidiaries.
(b) To the extent required by GAAP, the Company and each of
its Subsidiaries shall establish or cause to be established in accordance with
GAAP on or before the Effective Time an adequate accrual for all material Taxes
of the Company or its Subsidiaries due with respect to any period or portion
thereof ending prior to or as of the Effective Time.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred by the Company in connection with and due before the
Merger (including any real property transfer tax and any similar Tax) shall be
paid by the Company when due, and the Company shall, at its own expense, file
all necessary Tax returns and other documentation due before the Merger with
respect to all such Taxes and fees, and, if required by applicable law, the
Company shall, and shall cause its Affiliates to, join in the execution of any
such Tax returns and other documentation.
7.5 Termination of Company DRIP. The Company shall take all actions
necessary to terminate the Company DRIP, the Company ESPP and the Company DSPP,
in each case effective as of the Effective Time and in accordance with their
respective terms and all applicable laws.
7.6 Proxy Solicitor. If requested by Parent, the Company shall retain a
proxy solicitor reasonably acceptable to Parent for the purpose of soliciting
proxies on behalf of the Company's board of directors to obtain the requisite
vote at the Company Stockholder Meeting. The expenses of such proxy solicitor
shall be paid solely by the Company.
ARTICLE VIII
COVENANTS OF PARENT
Parent agrees that:
8.1 Conduct of Parent. From the date hereof until the Effective Time,
Parent and its Subsidiaries shall conduct their business in the ordinary course
consistent with past practice and shall use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, Parent shall not, and shall not permit any of
its Subsidiaries to, take any action that would make any representation and
warranty of Parent hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time.
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8.2 Director and Officer Liability.
(a) For six years after the Effective Time, Surviving
Corporation shall indemnify and hold harmless the present and former officers
and directors of the Company (each an "INDEMNIFIED PERSON"), and advance
expenses in connection with any proceeding, in respect of acts or omissions
occurring at or prior to the Effective Time to the fullest extent permitted by
Maryland Law or any other applicable laws or provided under the Company's
articles of incorporation and bylaws in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law.
(b) For six years after the Effective Time, Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring at or prior to the Effective Time
covering each such Indemnified Person currently covered by the Company's
officers' and directors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided that, in satisfying its obligation under this Section
8.2(b), Parent shall not be obligated to pay premiums in excess of 300% of the
amount per annum the Company paid in its last full fiscal year, which amount the
Company has disclosed to Parent prior to the date hereof.
(c) If Parent or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
shall assume the obligations set forth in this Section 8.2.
(d) The rights of each Indemnified Person under this Section
8.2 shall be in addition to any rights such Person may have under the articles
of incorporation or bylaws of the Company or any of its Subsidiaries, or under
Maryland Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries. These rights
shall survive consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Person.
8.3 Registration Statement. Parent shall, subject to the Company's
timely delivery to Parent of the information relating to the Company and Company
Bank in accordance with Section 7.2 hereof, promptly prepare and file with the
SEC under the 1933 Act the Registration Statement and shall use its best efforts
to cause the Registration Statement to be declared effective by the SEC as
promptly as practicable. Parent shall promptly take any action required to be
taken under foreign or state securities or Blue Sky laws in connection with the
issuance of Parent Stock in the Merger.
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8.4 Stock Exchange Listing. Parent shall use its best efforts to cause
the shares of Parent Stock to be issued in connection with the Merger to be
approved for quotation on the NASDAQ Global Select Market, subject to official
notice of issuance.
8.5 Appointment of Advisory Board. Subject to Parent's Board of
Directors Governance Policy, Parent shall, effective as of the Effective Time,
cause Parent Bank to offer each individual who is currently serving as a
director of the Company and/or Company Bank membership on an existing advisory
board of Parent Bank or, if Parent shall in its discretion determine, on a newly
created separate advisory board. If such individuals accept such offers to serve
on such advisory board, each such individual shall be compensated at the rate of
$600 per meeting for one year after the Closing Date and shall advise Parent
with respect to deposit and lending activities in the Company's former market
area and with respect to the maintenance and development of customer
relationships and the integration of Company Bank into Parent Bank.
8.6 Company Brand. Subject to any restrictions imposed by applicable
laws or regulatory requirements, Parent shall cause Parent Bank to develop
signage or other appropriate means to communicate the Company's brand as a
division of Parent Bank for a period of at least one year after the Closing
Date.
ARTICLE IX
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
9.1 Best Efforts. Subject to the terms and conditions of this
Agreement, the Company and Parent shall use their best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable law to consummate the transactions
contemplated by this Agreement and the Bank Merger Agreement, including (i)
preparing and filing as promptly as practicable, and in any event within 60 days
of the date hereof, with any Governmental Entity or other third party all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtaining and maintaining all approvals, consents, registrations, permits,
authorizations and other confirmations required to be obtained from any
Governmental Entity or other third party that are necessary, proper or advisable
to consummate the transactions contemplated by this Agreement and the Bank
Merger Agreement (including the Required Filings and Approvals).
9.2 Certain Filings. (a) The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Company Proxy
Statement and the Registration Statement, (ii) in determining whether any action
by or in respect of, or filing with, any Governmental Entity is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and the Bank Merger Agreement and
(iii) in taking such actions or making any such filings, furnishing information
required in connection therewith or with the Company Proxy Statement or the
Registration Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
(b) The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Registration Statement and the other
applications for regulatory approval to be filed by Parent or Parent Bank
(subject to applicable laws relating to the exchange of information by the
parties and the preservation of any applicable attorney-client privilege), and
Parent and its counsel shall be given a reasonable opportunity to review and
comment on the Company Proxy Statement, in each case each time before either
such document (or any amendment thereto) is filed with the SEC or other
regulatory authority and reasonable and good faith consideration shall be given
to any comments made by such party and its counsel. Each of Parent and the
Company shall provide the other party and its counsel with (i) any comments or
other communications, whether written or oral, that such party or its counsel
may receive from time to time from the SEC or its staff with respect to the
Company Proxy Statement or the Registration Statement, as applicable, and from
the applicable regulatory authorities with respect to other Required Filings and
Approvals, promptly after receipt of those comments or other communications and
(ii) a reasonable opportunity to participate in the response to those comments
and to provide comments on that response (to which reasonable and good faith
consideration shall be given), including by participating in any discussions or
meetings with the SEC or any Regulatory Authority.
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9.3 Public Announcements. Parent and the Company shall mutually agree
as to the form of press release to be issued with respect to the announcement of
this Agreement and the Bank Merger Agreement and the transactions contemplated
hereby and thereby. Parent and the Company shall consult with each other before
issuing any other press release, making any other public statement or scheduling
any press conference or conference call with investors or analysts with respect
to this Agreement, the Bank Merger Agreement or the transactions contemplated
hereby and thereby and, except as may be required by applicable law or any
listing agreement with or rule of any national securities exchange or
association, shall not issue any such press release, make any such other public
statement or schedule any such press conference or conference call before such
consultation.
9.4 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company or Parent, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or Parent, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
9.5 Access to Information. From the date hereof until the Effective
Time and subject to applicable law and the Confidentiality Agreement, the
Company and Parent shall (i) give to the other party, its counsel, financial
advisors, auditors and other authorized representatives reasonable access to the
offices, properties, books and records of such party, (ii) furnish to the other
party, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and (iii) instruct its employees, counsel,
financial advisors, auditors and other authorized representatives to cooperate
with the other party in its investigation. Any investigation pursuant to this
Section shall be conducted in such manner as not to interfere unreasonably with
the conduct of the business of the other party. No information or Knowledge
obtained in any investigation pursuant to this Section shall affect or be deemed
to modify any representation or warranty made by any party hereunder.
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9.6 Notices of Certain Events. Each of the Company and Parent shall
promptly notify the other of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or the Bank Merger Agreement;
(b) any notice or other communication from any Governmental
Entity or Regulatory Authority in connection with the transactions contemplated
by this Agreement or the Bank Merger Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge, threatened against, relating to or involving or
otherwise affecting the Company or any of its Subsidiaries or Parent and any of
its Subsidiaries, as the case may be, that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Sections
5.12, 5.13, 5.17, 5.18, 5.19, 5.20, 5.28, 6.12, 6.13, or 6.16 as the case may
be, or that relate to the consummation of the transactions contemplated by this
Agreement or the Bank Merger Agreement.
9.7 Confidentiality. Prior to the Effective Time and after any
termination of this Agreement, each of Parent and the Company shall hold, and
shall use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other party furnished to it or its Affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a non-confidential
basis by such party, (ii) in the public domain through no fault of such party or
(iii) later lawfully acquired by such party from sources other than the other
party; provided that each of Parent and the Company may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such party informs such Persons of the
confidential nature of such information and directs them to treat it
confidentially. Each of Parent and the Company shall satisfy its obligation to
hold any such information in confidence if it exercises the same care with
respect to such information as it would take to preserve the confidentiality of
its own similar information. If this Agreement is terminated, each of Parent and
the Company shall, and shall use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
destroy or deliver to the other party, upon request, all documents and other
materials, and all copies thereof, that it or its Affiliates obtained, or that
were obtained on their behalf, from the other party in connection with this
Agreement and that are subject to such confidence.
9.8 Tax-free Reorganization. Prior to the Effective Time, each of
Parent and the Company shall use its best efforts to cause the Merger to qualify
as a 368 Reorganization, and shall not take any action reasonably likely to
cause the Merger not so to qualify. Parent shall not take any action after the
Effective Time that could cause the Merger not to qualify as a 368
Reorganization.
9.9 Affiliates. Within 30 days following the date of this Agreement,
the Company shall deliver to Parent a letter identifying all known Persons who
may be deemed affiliates of the Company under Rule 145 of the 1933 Act. The
Company shall use its reasonable best efforts to obtain a written agreement from
each Person who may be so deemed as soon as practicable and, in any event, at
least 30 days prior to the Effective Time, substantially in the form of Exhibit
B hereto.
49
9.10 Employees.
(a) Following the Effective Time, all employees of the Company
and its Subsidiaries (the "COMPANY EMPLOYEES") shall be eligible to participate
in employee benefit plans of Parent or its Subsidiaries in which similarly
situated employees of Parent or its Subsidiaries participate, to the same extent
that similarly situated employees of Parent or its Subsidiaries participate;
provided, however, that Parent may instead continue the Employee Benefit Plans
for the benefit of such employees or provide such employees with participation
in the employee benefit plans of Parent or its Subsidiaries on a basis that is
no less favorable to such employees than those Employee Benefit Plans in which
they participated immediately prior to the Effective Time (it being understood
that inclusion of Company Employees in Parent's employee benefit plans may occur
at different times with respect to different plans).
(b) Following the Effective Time, the Company Employees, other
than those covered by the special severance or change in control arrangements
set forth in Section 9.10(d) of the Parent Disclosure Schedule, upon executing
an appropriate release in the form reasonably determined by Parent, shall be
eligible to receive upon involuntary termination, for other than cause (which
shall mean commission of a crime, other than a minor traffic offense,
incompetence, or failure to follow supervisor's lawful instructions) or
voluntary termination following a decision by Parent to transfer the Company
Employee to a division of Parent or Parent Bank other than the Company Bank
Division described in Section 8.6, if such termination occurs within one year
after the Effective Time, severance benefits at the rate of two weeks cash base
salary (or hourly rate based upon the average weekly hours worked during the two
months immediately preceding termination of employment) per year of service with
the Company Bank or Parent Bank; provided, however, that no payment will be made
for any accrued vacation pay, and the minimum severance payment to any such
Company Employee who is so terminated shall be four weeks cash base salary.
(c) With respect to each Parent plan for which length of
service is taken into account for any purpose, service with the Company or any
of its Subsidiaries shall be treated as service with Parent for purposes of
determining eligibility to participate, vesting, and entitlement to benefits,
including for severance benefits and vacation entitlement (but not for accrual
of defined benefit pension benefits); provided, however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any pre-existing condition limitations. Each Parent plan shall
waive pre-existing condition limitations to the same extent waived or to the
extent that they do not apply under the applicable Company plan. Company
Employees shall be given credit for amounts paid under a corresponding benefit
plan during the same period for purposes of applying deductibles, copayments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the Parent plan
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(d) Parent agrees that it shall pay the severance and change
in control payments set forth in Section 9.10(d) of the Parent Disclosure
Schedule.
(e) Subject to applicable law and the provisions of the
applicable plans, at the Closing, or as soon as practicable thereafter, the
Company's 401(k) plan shall be merged with and into Parent's Cash and Deferred
Profit Sharing Plan, and, if it is not feasible to merge the Company's 401(k)
plan with and into the Company's Cash and Deferred Profit Sharing Plan because
of applicable law, regulation or the terms of either of such plans, the Company
401(k) plan shall promptly be terminated, and the participants' account balances
under the Company 401(k) plan distributed, in accordance with law and such plan.
9.11 Bank Merger Agreement.
(a) Immediately after the execution and delivery of the Bank
Merger Agreement, (i) Parent shall approve the Bank Merger Agreement as the sole
stockholder of Parent Bank and (ii) the Company shall approve the Bank Merger
Agreement as the sole stockholder of the Company Bank.
(b) The Company and Parent may revise the sequence of events
or other procedural matters relating to the consummation of the Merger and the
Bank Merger in such manner as they may reasonably determine will best facilitate
consummation of the Merger and the Bank Merger; provided, that any action taken
pursuant to this Section shall not (i) alter or change the kind or amount of
consideration to be issued to the holders of the Company Shares as provided for
in this Agreement, (ii) adversely affect the tax consequences of the Merger to
the holders of the Company Shares or (iii) otherwise cause any closing condition
not to be capable of being fulfilled (unless duly waived by the party entitled
to the benefits thereof).
9.12 Company Options. As soon as reasonably practicable after the
Effective Time, Parent shall deliver to holders of Company Options which have
been converted into options to acquire Parent Stock in accordance with the
provisions of Section 3.7 hereof, a notice setting forth a statement of the
modified terms thereof. As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8, or on such other form as may be
appropriate, with respect to the shares of Parent Stock subject to such options,
and shall use its reasonable efforts to maintain the effectiveness of such
registration statement or statements for so long as such options remain
outstanding.
9.13 Prohibited Purchases or Sales. Neither Parent, the Company nor any
Company Subsidiary shall purchase or sell on the NASDAQ Global Select Market, or
submit a bid to purchase or an offer to sell on the NASDAQ Global Market,
directly or indirectly, any shares of Parent Stock or any options, warrants,
rights or other securities convertible into or exchangeable for shares of Parent
Stock during the 10 consecutive trading days immediately preceding the
Determination Date; provided that the foregoing restriction shall not be
applicable to (i) purchases or sales of Parent Stock held by Parent or any
Subsidiary of Parent in trust, managed, custodial or nominee accounts and the
like, or held by mutual funds, (ii) shares acquired in respect of debts
previously contracted, (iii) purchases of Parent Stock to fund Parent's
obligations under its dividend reinvestment plan in accordance with past
practice or (iv) purchases or sales of Parent Stock to satisfy Parent's tax
withholding obligations with respect to grants of restricted stock to employees.
51
ARTICLE X
CONDITIONS TO THE MERGER
10.1 Conditions to Obligations of Each Party. The obligations of the
Company and Parent to consummate the Merger are subject to the satisfaction of
the following conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the stockholders of the Company in accordance with Maryland Law;
(b) no applicable law and no judgment, injunction, order or
decree shall prohibit the consummation of the Merger and no action or proceeding
by any Governmental Entity or by any other Person, domestic, foreign or
supranational, before any court or governmental authority or agency shall be
pending that challenges, seeks to make illegal, or otherwise directly or
indirectly to restrain or prohibit the Merger or the Bank Merger;
(c) any applicable waiting period under the HSR Act, the BHC
Act, the Bank Merger Act or any Maryland state law relating to the Merger shall
have expired or been terminated;
(d) the Registration Statement shall have been declared
effective and no stop order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC;
(e) the shares of Parent Stock to be issued in the Merger
shall have been approved for listing on the NASDAQ Global Select Market, subject
to official notice of issuance;
(f) all actions or approvals by or in respect of, or filings
with, any Governmental Entity and any Regulatory Authority required to permit
the consummation of the Merger, including the Required Filings and Approvals,
shall have been taken, obtained or made; and
(g) Parent and the Company shall have received an opinion from
RSM McGladrey, Inc. that:
(i) The Merger will qualify as a "reorganization" under
Section 368(a) of the Code;
(ii) No gain or loss will be recognized by Parent or the
Company by reason of the Merger;
(iii) No gain or loss will be recognized by any Company
shareholder (except in connection with the receipt of cash in lieu of a
fractional share of Parent Stock or upon exercise of dissenters' rights) upon
the exchange of Company Shares for Parent Stock in the Merger;
(iv) The basis of the Parent Stock received by a Company
shareholder who exchanges Company Shares for Parent Stock will be the same as
the basis of the Company Shares surrendered in exchange therefor (subject to
adjustments required as a result of receipt of cash in lieu of a fractional
share of Parent Stock);
52
(v) The holding period of the Parent Stock received by a
Company shareholder receiving Parent Stock will include the period during which
the Company Shares surrendered in exchange therefor were held (provided that
such Company Shares held by a Company shareholder was held as a capital asset at
the Effective Time); and
(vi) Cash received by a Company shareholder in lieu of a
fractional share interest of Parent Stock will be treated as having been
received as a distribution in redemption of a fractional share interest of
Parent Stock which he, she or it would otherwise be entitled to receive, subject
to the provisions and limitations of Section 302 of the Code.
In rendering such opinion, RSM McGladrey, Inc. shall be entitled to rely upon
customary representations of officers of Parent and the Company.
10.2 Conditions to the Obligations of Parent. The obligations of Parent to
consummate the Merger are subject to the satisfaction of the following further
conditions:
(a) (i) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, (ii) the representations and warranties of the
Company contained in this Agreement and in any certificate or other writing
delivered by the Company pursuant hereto (x) that are qualified by materiality
or Material Adverse Effect shall be true at and as of the Effective Time as if
made at and as of such time (except to the extent such representations and
warranties speak as of an earlier time, in which case such representations and
warranties shall be true as of such earlier time), and (y) that are not
qualified by materiality or Material Adverse Effect shall be true in all
material respects at and as of the Effective Time as if made at and as of such
time (except to the extent such representations and warranties speak as of an
earlier time, in which case such representations and warranties shall be true as
of such earlier time) and (iii) Parent shall have received a certificate signed
by an executive officer of the Company to the foregoing effect;
(b) there shall not have been instituted or pending any action
or proceeding (or any investigation or other inquiry that might result in such
action or proceeding) by any Governmental Entity or by any other Person,
domestic, foreign or supranational, before any court or governmental authority
or agency, domestic, foreign or supranational, (i) challenging or seeking to
make illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit the consummation of the Merger or the Bank Merger, seeking
to obtain material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Merger or the Bank Merger, (ii) seeking to
restrain or prohibit Parent's (x) ability to exercise full rights of ownership
of any shares of the Parent Bank or any of its Subsidiaries or Affiliates
following the Effective Time or the effective time of the Bank Merger on all
matters properly presented to the Parent Bank's stockholders, or (y) operation
(or that of its respective Subsidiaries or Affiliates) of all or any material
portion of the business or assets of the Company and its Subsidiaries, taken as
a whole, or of Parent and its Subsidiaries, taken as a whole, (iii) seeking to
compel Parent or any of its Subsidiaries or Affiliates to dispose of or hold
separate all or any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken
as a whole, or (iv) that otherwise, in the reasonable judgment of Parent, is
likely to have a Material Adverse Effect on the Company or Parent;
53
(c) there shall not have been any action taken, or any
statute, rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the Merger or the Bank
Merger, by any court, Governmental Entity or Regulatory Authority other than the
application of the waiting period provisions of the HSR Act, the BHC Act or the
Bank Merger Act to the Merger or the Bank Merger, that, in the reasonable
judgment of Parent, is likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (b) above;
(d) the Company shall have delivered to Parent a certification
dated not more than 30 days prior to the Effective Time and signed by the
Company to the effect that the Company is not, nor has it been within five years
of the date of the certification, a "United States real property holding
corporation" as defined in Section 897 of the Code;
(e) after the date hereof, there shall have been no
enforcement action under Section 8 of the FDIA, memorandum of understanding,
written agreement, supervisory letter, or any other action or determination of
any governmental agency or department relating to the status or conduct of the
Company or any of its Subsidiaries that, in the reasonable good faith opinion of
the Board of Directors of Parent, adversely affects in any material manner the
anticipated economic benefits to Parent of the transactions contemplated hereby;
(f) no Required Filing or Approval shall have imposed a
condition or restriction on any approval that would have or would reasonably be
expected to have, after the Effective Time, a Material Adverse Effect on the
Parent or the Parent Bank and its respective Subsidiaries, taken as a whole;
(g) no event, occurrence, revelation, development or state of
circumstances or facts that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on the Company shall
have occurred and be continuing as of the Effective Time;
(h) the Company shall have delivered documentation reasonably
satisfactory to Bancorp and its counsel that the Company DRIP, the Company ESPP
and the Company DSPP will be terminated at the Effective Time in accordance with
their respective terms and all applicable laws;
(i) Dissenters' Shares shall constitute not more than 6.5%
of the outstanding Company Shares; and
(j) Parent shall have received documentation reasonably
satisfactory to Parent and its counsel that any and all change of control
agreements and employment agreements between the Company, Company Bank or any
other Company Subsidiary, on the one hand, and any officer or employee of the
Company, Company Bank or any other Company Subsidiary, on the other hand, will
be terminated effective as of the effective time.
54
10.3 Conditions to the Obligations of the Company. The obligations of
the Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) (i) the Parent shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, (ii) the representations and warranties of Parent
contained in this Agreement and in any certificate or other writing delivered by
Parent pursuant hereto (x) that are qualified by materiality or Material Adverse
Effect shall be true at and as of the Effective Time as if made at and as of
such time (except to the extent such representations and warranties speak as of
an earlier time, in which case such representations and warranties shall be true
as of such earlier time), and (y) that are not qualified by materiality or
Material Adverse Effect shall be true in all material respects at and as of the
Effective Time as if made at and as of such time (except to the extent such
representations and warranties speak as of an earlier time, in which case such
representations and warranties shall be true as of such earlier time) and (iii)
the Company shall have received a certificate signed by an executive officer of
Parent to the foregoing effect.
(b) Fairness Opinion. Sandler X'Xxxxx & Partners, L.P. shall
have delivered an opinion, substantially in the form referenced in Section 5.16
hereof, to the effect that as of the date of the mailing of the Company Proxy
Statement and based upon and subject to the matters set forth therein, the
Merger Consideration, is fair to the Company shareholders from a financial point
of view.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before the
date that is nine months after the date of this Agreement (the "END DATE");
provided that the right to terminate this Agreement pursuant to this Section
11.1(b)(i) shall not be available to any party whose breach of any provision of
this Agreement results in the failure of the Merger to be consummated by such
time;
(ii) (A) there shall be any law that makes consummation of
the Merger illegal or otherwise prohibited or (B) any judgment, injunction,
order or decree of any court or governmental body having competent jurisdiction
enjoining the Company or Parent from consummating the Merger is entered and such
judgment, injunction, judgment or order shall have become final and
nonappealable; or
(iii) this Agreement and the Merger shall not have been
approved and adopted in accordance with Maryland Law by the Company's
stockholders at the Company Stockholder Meeting (or any adjournment thereof);
(c) by Parent if:
(i) as permitted by Section 7.3(b)(iii), the Board of
Directors of the Company shall have failed to make or withdrawn, or modified in
a manner adverse to Parent, its approval or recommendation of this Agreement or
the Merger;
(ii) the Company shall have entered into, or publicly
announced its intention to enter into, a definitive agreement or an agreement in
principle with respect to a Superior Proposal; or
(iii) (A) a breach of any representation or warranty or
failure to perform any covenant or agreement on the part of the Company set
forth in this Agreement shall have occurred that would cause the condition set
forth in Section 10.2(a) not to be satisfied, and such condition is incapable of
being satisfied by the End Date or (B) the Company shall have willfully and
materially breached its obligations under Sections 7.2 and 7.3; or
55
(d) by the Company, if:
(i) the Board of Directors of the Company authorizes the
Company, subject to complying with the terms of this Agreement, to enter into a
written agreement concerning a Superior Proposal; provided that the Company
shall have paid any amounts due pursuant to Section 12.4(b) in accordance with
the terms, and at the times, specified therein, and provided, further, that, in
the case of any termination by the Company, (A) the Company notifies Parent, in
writing and at least 72 hours prior to such termination, promptly of its
intention to terminate this Agreement and to enter into a binding written
agreement concerning an Acquisition Proposal that constitutes a Superior
Proposal, attaching the most current version of such agreement (or a description
of all material terms and conditions thereof), and (B) Parent does not make,
within 72 hours of receipt of such written notification, an offer that is at
least as favorable to the stockholders of the Company as such Superior Proposal,
it being understood that the Company shall not enter into any such binding
agreement during such 72-hour period;
(ii) a breach of any representation or warranty or failure
to perform any covenant or agreement on the part of the Parent set forth in this
Agreement shall have occurred that would cause the condition set forth in
Section 10.3(a) not to be satisfied, and such condition is incapable of being
satisfied by the End Date; or
(iii) during the three-day period following the
Determination Date:
(1) the Average Closing Price shall be less than the
product of 0.80 and the Starting Price; and
(2) (a) the number obtained by dividing the Average
Closing Price by the Starting Price (such number being referred to herein as the
"PARENT RATIO") shall be less than (b) the number obtained by dividing the Index
Price on the Determination Date by the Index Price on the date of this Agreement
and subtracting 0.20 from such quotient (such number being referred to herein as
56
the "INDEX RATIO"), subject to the following provisions of this Section
11.1(d)(iii). If the Company elects to exercise its termination right pursuant
to the immediately preceding sentence, it shall give prompt written notice of
such election to Parent. During the five Business Day period (the "DECISION
PERIOD") commencing with its receipt of such notice, Parent may elect to pay, as
additional Merger Consideration in accordance with Article 3, to each holder of
Company Shares that, after the application of Section 3.3, are converted into
the right to receive Parent Stock as provided in Article 3, additional shares of
Parent Stock and/or cash in an amount per each such Company Share equal to the
Top-Up Amount. The Top-Up Amount shall be paid (A) in shares of Parent Stock
valued for this purpose at the Average Closing Price and (B) to the extent any
Top-Up Amount is not paid pursuant to clause (A) above, such remaining Top-Up
Amount shall be paid in cash; provided further that the portion of the Top-Up
Amount paid in cash shall not be an amount that would cause either (x) the sum
of the aggregate of all Top-Up Amounts payable in cash plus all Cash Election
Consideration to exceed 57% of the total Merger Consideration (the value of
which shall be determined as of the date on which Parent gives notice of its
election to include a Top-Up Amount under this Section 11.1(d)(iii)) or (y) the
failure of the condition set forth in Section 10.1(g) hereof. All payments of
Top-Up Amounts, if any, shall be made as payments of additional Merger
Consideration as provided in accordance with Article 3 but shall not, for the
avoidance of doubt, be subject to Section 3.3.
The "TOP-UP AMOUNT" shall be the number obtained by multiplying (A) the Average
Closing Price by (B) the excess of the Imputed Exchange Ratio over the Exchange
Ratio.
The "IMPUTED EXCHANGE RATIO" shall equal the lesser of:
(x) the number obtained by dividing (A) the product of the Starting Price
multiplied by the Exchange Ratio multiplied by 0.80 by (B) the Average Closing
Price; and
(y) the number obtained by dividing (A) the product of the Index Ratio and the
Exchange Ratio by (B) the Parent Ratio.
If Parent makes such election within the Decision Period, it shall give prompt
written notice to the Company of such election and the Top-Up Amount, whereupon
the Company shall have no right to terminate the Agreement pursuant to this
Section 11.1(d)(iii) and this Agreement shall remain in full force and effect in
accordance with its terms.
If, during the period between the date of this Agreement and the Determination
Date, any change in the outstanding shares of capital stock of Parent shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, or any stock dividend
thereon with a record date during such period, the "Starting Price" shall be
appropriately adjusted to account for such change for the purposes of this
Section 11.1(d)(iii).
For purposes of this Section 11.1(d)(iii), the following terms shall have the
meanings indicated below:
"AVERAGE CLOSING PRICE" means the average of the last reported sale prices per
share of Parent Stock as reported on the NASDAQ Global Select Market (as
reported in The Wall Street Journal or, if not reported therein, in another
authoritative source mutually agreed upon by Parent and the Company) for the 10
consecutive trading days immediately preceding the Determination Date.
"DETERMINATION DATE" means the date which is the seventh calendar day
immediately prior to the Closing Date, or if such calendar day is not a trading
day, the trading day immediately preceding such calendar day.
"INDEX PRICE" means, on a given date, the closing price of the NASDAQ Bank
Index.
"STARTING PRICE" means $37.56.
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The party desiring to terminate this Agreement pursuant to this Section
11.1 (other than pursuant to Section 11.1(a)) shall give notice of such
termination to the other party.
11.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 11.1, this Agreement shall become void and of no effect
without liability of any party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other party hereto;
provided that, if such termination shall result from the willful (i) failure of
either party to fulfill a condition to the performance of the obligations of the
other party, (ii) failure of either party to perform a covenant hereof, or (iii)
material breach of a representation or warranty by a party, such party shall be
fully liable for any and all liabilities and damages incurred or suffered by the
other party as a result of such failure, including, without limitation, the fees
and expenses incurred by such other party in connection with this Agreement and
the transactions contemplated hereby. The provisions of this Section 11.2 and
Sections 9.7, 12.4, 12.7, 12.8 and 12.9 shall survive any termination hereof
pursuant to Section 11.1.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given:
if to Parent, to:
Xxxxx Spring Bancorp, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Hunter X. Xxxxxx, President and CEO
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxx LLP
0000 Xxx Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
Facsimile No.: (000) 000-0000
if to the Company, to:
CN Bancorp, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: [Xxx X. Xxxxx, President and CEO]
Facsimile No.: (000) 000-0000
58
with a copy (which shall not constitute notice) to:
Xxxxxxx & Baris, L.L.P.
0000 Xxxxxxxxx Xxxx, Xxxxx X-00
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esquire
Facsimile No.: (000) 000-0000
or to such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m. on a Business
Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed to have been received on the next succeeding
Business Day in the place of receipt.
12.2 Survival of Representations and Warranties. The representations,
warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time, except
for the agreements set forth in Article III and Sections 8.2, 8.5, 9.4, 9.10(a),
9.10(b), 9.10(c), 9.10(d) and 9.12.
12.3 Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived prior to the Effective Time if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party
to this Agreement or, in the case of a waiver, by each party against whom the
waiver is to be effective; provided that, after the adoption of this Agreement
and the Merger by the stockholders of the Company and without their further
approval, no such amendment or waiver shall reduce the amount or change the kind
of consideration to be received in exchange for the Company Shares.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.4 Expenses. (a) Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
(b) If a Payment Event (as hereinafter defined) occurs, the
Company shall pay Parent (by wire transfer of immediately available funds), if,
pursuant to (i) below, simultaneously with the occurrence of such Payment Event
or, if pursuant to (ii) below, within two Business Days following such Payment
Event, a fee of $1,764,000.
"PAYMENT EVENT" means (i) the termination of this Agreement pursuant to Sections
11.1(c)(i), 11.1(c)(ii), 11.1(c)(iii)(B) or 11.1(d)(i); or (ii) the termination
of this Agreement pursuant to Section 11.1(b)(i) or 11.1(b)(iii)but, in the case
of this clause (ii) only if (x) prior to such termination, an Acquisition
Proposal shall have been publicly proposed (other than by Parent or any of its
Affiliates) or a Third Party has publicly announced its intention to make an
59
Acquisition Proposal or such Acquisition Proposal or intention has otherwise
become widely known to the Company's stockholders and (y) within nine months
following the date of such termination: (A) the Company merges with or into, or
is acquired, directly or indirectly, by merger or otherwise by, a Third Party;
(B) a Third Party, directly or indirectly, acquires more than 50% of the total
assets of the Company and its Subsidiaries, taken as a whole; (C) a Third Party,
directly or indirectly, acquires more than 50% of the outstanding Company
Shares; or (D) the Company adopts or implements a plan of liquidation,
recapitalization or share repurchase relating to more than 50% of the
outstanding Company Shares or an extraordinary dividend relating to more than
50% of such outstanding shares or 50% of the assets of the Company and its
Subsidiaries, taken as a whole (or, in any of clauses (A) through (D), the
Company or any of its Subsidiaries shall have entered into a definitive
agreement providing for such action); provided, however, that if the Company
shall not have rejected, or recommended against, such Acquisition Proposal, or
shall have failed to reconfirm at the request of Parent, its recommendation of
the Merger, prior to a termination described in this clause (ii), then all of
the provisions of this clause (ii)(y) shall apply for a period of 12 months
following the date of such termination.
(c) The Company acknowledges that the agreements contained in
this Section 12.4 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent would not enter into this
Agreement. Accordingly, if the Company fails promptly to pay any amount due to
Parent pursuant to this Section 12.4, it shall also pay any costs and expenses
incurred by Parent in connection with a legal action to enforce this Agreement
that results in a judgment against the Company for such amount.
12.5 Binding Effect; Benefit; Assignment. (a) The provisions of this
Agreement shall be binding upon and, except as provided in Section 8.2, shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Except as provided in Section 8.2 and Section 8.5, no provision of this
Agreement is intended to confer any rights, benefits, remedies, obligations or
liabilities hereunder upon any Person other than the parties hereto and their
respective successors and assigns.
(b) No party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the consent of each other
party hereto, except that Parent may transfer or assign, in whole or from time
to time in part, to one or more of their Affiliates, the right to enter into the
transactions contemplated by this Agreement, provided that no such transfer or
assignment may change the form or amount of consideration to be received by
holders of Company Shares, or shall change the intended tax consequences to
holders of Company Shares who receive Parent Stock in connection with the Merger
and provided further, that any such transfer or assignment shall not relieve
Parent of its obligations hereunder.
12.6 Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement. The parties acknowledge and agree that the inclusion of an item in a
Disclosure Schedule as an exception to a representation shall not be deemed an
admission by a party that such item was required to be disclosed therein.
12.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland, without regard to the
conflicts of law rules of such state.
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12.8 Jurisdiction. The parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby shall be brought in any federal court located in the State of Maryland or
any Maryland state court, and each of the parties hereby irrevocably consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 12.1 shall be deemed effective service of process on such party.
12.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
12.10 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by all of the other parties hereto. Until and unless
each party has received a counterpart hereof signed by the other party hereto,
this Agreement shall have no effect and no party shall have any right or
obligation hereunder (whether by virtue of any other oral or written agreement
or other communication).
12.11 Entire Agreement. This Agreement and the Transaction Documents
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
this Agreement.
12.12 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
12.13 Specific Performance. The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement or to enforce
specifically the performance of the terms and provisions hereof in any federal
court located in the State of Maryland or any Maryland state court, in addition
to any other remedy to which they are entitled at law or in equity.
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[Remainder of Page Intentionally Blank, Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first written above.
XXXXX SPRING BANCORP, INC.
By: /s/ Hunter X. Xxxxxx
--------------------------------------------------
Name: Hunter X. Xxxxxx
Title: President and Chief Executive Officer
CN BANCORP, INC.
By: /s/ Xxx X. Xxxxx
--------------------------------------------------
Name: Xxx X. Xxxxx
Title: President and Chief Executive Officer
Pursuant to Regulation S-K Item 601(b)(2), the schedules and Exhibit B
to the Merger Agreement have been omitted and will be furnished supplementally
to the Commission upon request.
[Signature Page to Merger Agreement]
