SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 1995
SDN BANCORP, INC.
(Exact name of registrant as specified in its charter)
(Delaware) (2-76555) (95-3683748)
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(State of other (Commission File Number) (I.R.S. Employer Identification
jurisdiction of Number)
incorporation)
135 Saxony Road, Encinitas, CA 92024-0905
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (610) 436-6888
Item 5. OTHER EVENTS
On October 26, 1995 SDN Bancorp, Inc. a Delaware corporation ("Bancorp")
and Liberty National Bank ("Liberty") signed an Agreement and Plan of Merger
(the "Agreement") under which Bancorp will acquire Liberty through a cash merger
(the "Merger"). Also party to the transaction is Dartmouth Capital Group, L.P.,
a Delaware limited partnership ("the Partnership") and Bancorp's largest
shareholder, which is expected to fund the transaction.
Under the terms of the Agreement, all of the outstanding shares of
Liberty's common stock (excepting only shares as to which dissenters rights have
been exercised and, with limited exceptions, shares beneficially owned by the
parties to the Agreement), will be converted into cash at the greater of $14.80
per share or 130% of Liberty's book value (subject to certain adjustments) per
share at the monthend preceeding the closing, calculated on a fully diluted
basis, in each case subject to possible small upward adjustments depending upon
the timing of the closing. The Agreement further provides that, prior to the
closing, Liberty will have canceled all outstanding options to acquire its
common stock, in each case in return for a payment to the holder of the option
equal to the spread between the exercise price of the option and the price per
share to be paid by Bancorp.
The Agreement outlines certain covenants by both parties prior to the
close of the transaction, including, but not limited to, an agreement by Liberty
not to solicit additional proposals to acquire Liberty and with limited
exceptions, not to respond to any such proposal from a third party.
The consummation of the Merger is subject to certain standard
conditions, including, but not limited to, the approval of the Agreement by the
holders of not less than two-thirds of Liberty's common stock and the receipt of
all required regulatory approvals. All of the Directors of Liberty have entered
into a Voting Agreement in which they have agreed to vote all of their
respective shares of common stock in favor of the Merger and against any
comparable transaction with a third party.
Either party may terminate the Agreement by written notice after noon
(Pacific time) on June 30, 1996 if the transaction has failed to close for
reasons other than a breach of any representation, warranty, covenant or
agreement by the terminating party.
Generally, each party to the Agreement is responsible for its own
expenses. However, Liberty is obligated to pay the expenses of the Partnership,
subject to a cap, if Liberty is unable to obtain shareholder approval or if the
Partnership terminates the Agreement due to certain conditions to the
obligations of the Partnership having not been satisfied.
Liberty is also obligated to pay the Partnership a termination fee, plus
expenses (subject to a cap), if Liberty or the Partnership terminates the
Agreement under certain circumstances including, without limitation and as a
condition to Liberty's termination of the Agreement, Liberty's pursuit of a
"Qualifying Strategic Transaction Proposal" as defined in the Agreement.
Further, the Partnership is also obligated to pay Liberty a termination fee,
plus expenses (subject to a cap), if Liberty terminates the Agreement because
the Partnership has breached any representation or warranty or failed to
perform, including the failure to provide funding for the transaction. In such
case, Bancorp has guaranteed the payment of the obligations of the Partnership.
The Agreement is attached hereto as an exhibit and is incorporated
herein by reference in its entirety. The foregoing summary of the Agreement
does not purport to be complete and is qualified in its entirety by reference
to the Agreement.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements NA
b) Pro Forma Financials NA
c) Exhibits:
2. Agreement and Plan of Merger dated October 26, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized
SDN Bancorp, Inc
Date: November 17, 1995 Robert P. Keller /s/
--------------------------------
Robert P. Keller
President and
Chief Executive Officer
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 26, 1995, is by and
among Liberty National Bank, a national banking association organized under the
laws of the United States of America (the "Bank"), Dartmouth Capital Group,
L.P., a Delaware limited partnership (the "Partnership"), and, with respect
solely to Sections 5.10 and 8.4.2, SDN Bancorp, Inc, a Delaware corporation
("SDN").
WHEREAS, the Partnership, acting indirectly through Merger Bank (as
hereinafter defined), desires to acquire all of the capital stock of the Bank by
means of a statutory consolidation of the Bank and Merger Bank on the terms and
for the consideration provided herein;
WHEREAS, the Partnership intends to cause Merger Bank to ratify and join
in this Agreement between the date hereof and the Closing;
WHEREAS, the Partnership has conditioned its and Merger Bank's acquisition
of the Bank on the Bank taking certain actions, and refraining from certain
other actions, prior to the closing of the Merger, each as provided herein;
WHEREAS, as an inducement to the Bank's entering into this Agreement, and
in consideration of benefits to be realized by SDN upon the Partnership's and
Merger Bank's consummation of the Merger, SDN has agreed to guaranty certain
obligations of the Partnership contained herein, and
WHEREAS, the Board of Directors of the Bank deems it desirable and in the
best interests of the Bank's shareholders for the Bank to be acquired by the
Partnership for the consideration and on the other terms provided herein,
including by taking the actions required hereunder and by refraining from the
other actions prohibited hereunder;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and other agreements set forth herein,
and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
Definitions and Rules of Construction
1.1 Definitions. Capitalized terms contained in this Agreement and not
defined in the preamble or the recitals above shall have the meanings set forth
in this Section 1.1:
"Adjusted Shareholders' Equity" means the Bank's shareholders' equity
account as of the Closing Statement Date as reflected on the Closing Statement,
adjusted to reflect the items specified in the definition of "Closing
Statement".
"Agreement" means this Agreement and Plan of Merger, including all
Disclosure Schedules and Exhibits hereto, as the same may be hereafter amended.
"Bank Benefit Plan" means any employee benefit plan (including any
"employee benefit plan" as defined in Section 3(3) of ERISA) maintained or
contributed to by the Bank.
"Bank Regulators" means Federal or state Governmental Entities charged
with the supervision or regulation of banks or bank holding companies or engaged
in the insurance of bank deposits.
"Board of Directors" means, except where another entity is expressly
referenced, the Board of Directors of the Bank, as elected and qualified from
time to time.
"Borrower Group Obligations" means all loans from the Bank and other
obligations to the Bank of the applicable borrower, of all guarantors of such
borrower, and of all affiliates and associates of such borrower and guarantors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or Friday
that banks in Los Angeles, California are not required or permitted by Law to be
closed.
"Classified Asset" means (a) any loan or lease asset that is classified on
the books and records of the Bank as "Substandard", "Doubtful" or "Loss", and
(b) any property classified on the books and records of the Bank as OREO.
"Closing" means the closing of the Merger, to be held on the Closing Date
at a location fixed pursuant to Section 9.1.
"Closing Date" shall mean the date as of which the Closing of the Merger
occurs, as the same may be fixed pursuant to Section 9.1.
"Closing Statement" means a balance sheet for the Bank as of the Closing
Statement Date, to be prepared by Arthur Anderson LLP (or such other firm as the
Bank and the Partnership may jointly select), which balance sheet (a) (i) shall
be audited if the Closing Statement Date is December 31, 1995, the expense of
which audit shall be borne by the Bank, and (ii) shall be reviewed if the
Closing Statement Date is any other date, unless the Partnership elects to
require an audit in which event the expense of such audit shall be borne by the
Partnership, and (b) shall be in accordance with GAAP, except that the following
adjustments shall be made: (i) all of the Bank's Expenses theretofore incurred
and an estimate of the Bank's Expenses to be incurred thereafter through the
Closing shall be treated as expenses incurred as of or prior to the Closing
Statement Date and shall not be capitalized; (ii) bonuses that will become due
to Philip Inglee and Curt Christianssen (in the respective amounts of
approximately $88,000 and $25,000) shall be accrued as liabilities as of the
Closing Statement Date; (iii) any proceeds received by the Bank from any
exercise of Options on or after August 18, 1995 shall be excluded from (or if
previously recognized, shall be debited from) shareholder's equity; (iv) 50% of
the deferred tax asset relating to California net operating loss carryforwards
shall be deducted from shareholders' equity; (v) any expenses in excess of
$10,000 in the aggregate that the Bank has not accrued for in accordance with
GAAP shall be accrued as liabilities as of the Closing Statement Date; (vi)
excepting only expenditures associated with the leasehold improvements described
in Part A of Exhibit 1.1, any expenditures made in connection with repairs and
renovations to the Bank's headquarters premises as contemplated by that certain
Settlement Agreement dated as of August 29, 1995 that have been capitalized
shall be deducted from shareholders equity; (vii) net unrealized gains and
losses on securities held as available for sale shall be deemed to be a gain of
$35,000; (viii) there shall be excluded from shareholders' equity any of the
following that is realized after the Most Recent Balance Sheet Date: (w) any
gain or loss from the sale of any security; (x) any gain from the sale of any
loan that was on the Bank's books as of Most Recent Balance Sheet Date,
excepting only (A) the loan described in Part B of Exhibit 1.1 and (B) SBA Loans
under which both the first disbursement was made on or after January 1, 1995 and
the final disbursement was made after August 31, 1995; (y) any gain from the
sale of any asset outside the ordinary course of business; or (z) any gain or
increase in equity attributable to any non-recurring or extraordinary item other
than (A) the receipt of refunded Bank Insurance Fund premiums from the Federal
Deposit Insurance Corporation, (B) proceeds of OREO sales, and (C) recoveries on
charged-off assets; and (ix) the Bank's accrued tax liability and/or deferred
tax asset shall be adjusted to reflect the effect, if any, of each of the
foregoing clauses (i) through (viii); provided, however, that any adjustment to
the tax asset relating to California net operating loss carryforwards shall be
effected prior to the application of clause (iv).
"Closing Statement Date" means the last day of the last full calendar
month next preceding the Closing Date.
"Common Stock" means the common stock of the Bank, par value $3.33 per
share.
"Credit Score" means the score given by the Bank to the applicable loan as
of the applicable time in accordance with the Bank's credit rating system in
effect as of the Most Recent Balance Sheet Date.
"Criticized Asset" means any Classified Asset and any other loan or lease
asset of the Bank classified on the books and records of the Bank as "Other
Loans Especially Mentioned", "Special Mention", "Classified", "Criticized",
"Credit Risk Assets", "Concerned Loans" or by words of similar import.
"Disclosure Schedules" means the several Schedules referenced in Article
III and Article IV.
"Dissenting Shares" means all shares of Common Stock whose holders have
perfected dissenters' rights under 12 U.S.C. Section 215(b) and demanded
appraisal of such shares in the manner provided under such statute.
"Effective Time" means the time as of which the Merger is deemed to have
become effective, as agreed upon by the Parties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means a banking institution or corporate trust company
reasonably satisfactory to the Bank that Merger Bank shall appoint to act as
exchange agent hereunder.
"Excluded Shares" means shares of Common Stock owned as of the Effective
Time by the Bank, the Partnership or Merger Bank, in each case other than shares
owned in a fiduciary capacity or as a result of debts previously contracted.
"Expenses" means all legal, accounting, consulting and other fees and
expenses incurred by the applicable Party in connection with the Merger,
including expenses incurred in connection with the preparation of this Agreement
and all negotiations, due diligence and other activities conducted prior hereto,
and including all broker's, finder's and similar fees and expenses.
"Fixed Payment Amount" shall have the meaning given that term in Section
2.4.1.
"Formula Payment Amount" shall have the meaning given that term in Section
2.4.1.
"GAAP" means Generally Accepted Accounting Principles as in effect in the
United States, consistently applied.
"Governmental Entity" means any administrative agency, commission, court
or other governmental authority or instrumentality, domestic or foreign,
including any government-sponsored corporation having regulatory authority under
law.
"Hazardous Material" means any pollutant, contaminant, waste or hazardous
or toxic substance regulated by Law as such, and petroleum or petroleum
products.
"IRS" means the United States Internal Revenue Service.
"Law" means any statute, law, ordinance, rule or regulation of any
Governmental Entity that is applicable to the referenced Person.
"Letter of Intent" means that certain letter dated as of August 18, 1995
from the Partnership and addressed to the Bank, accepted and agreed to by the
Bank as of the same date, describing certain anticipated terms of the Merger.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the business, properties, assets, liabilities, prospects,
results of operations or financial condition of such Person (including such an
effect caused indirectly through any of its Subsidiaries), or on the ability of
such Person to consummate the Merger on the terms hereof; provided, however,
that a Material Adverse Effect does not include a change with respect to, or
effect on, such Person resulting from a change in Law, GAAP, RAP, or a change
with respect to, or effect on, such Person resulting from any other matter
affecting financial institutions or their holding companies generally.
"Merger" means the consolidation of the Bank with Merger Bank as more
particularly described in Section 2.1.
"Merger Bank" means a depositary institution that is a direct or indirect
subsidiary of SDN and that is controlled (directly or indirectly) by, the
Partnership, which institution the Partnership and SDN will cause to ratify and
join in this Agreement.
"Merger Consideration" means the dollar amount determined in accordance
with Section 2.4.
"Month-End Closing Adjustment" means a dollar amount, to be included in
the calculation of the Formula Payment Amount only if the Closing Date falls on
the sixteenth or any later day of a calendar month, equal to (a) the sum of the
aggregate Merger Consideration otherwise payable pursuant to Section 2.4 plus
the Option Cancellation Payments payable pursuant to Section 2.6, multiplied by
(b) the Treasury Yield, multiplied by (c) the number of days from and including
such sixteenth day to and including the date of the Closing Date, divided by (d)
three hundred sixty-five (365).
"Most Recent Financial Statements" means the Bank's unaudited balance
sheet at the Most Recent Balance Sheet Date, and the related statements of
income and shareholders' equity for the eight month period ended at the Most
Recent Balance Sheet Date.
"Most Recent Balance Sheet Date" means September 30, 1995.
"OCC" means the Office of the Comptroller of the Currency.
"Option" means an option to purchase shares of Common Stock that has been
granted under either of the Stock Option Plans, without regard to whether such
option has yet vested or otherwise become exercisable as of the applicable date
but excluding options that have expired or been exercised as of the applicable
date.
"Optionholder" means each Person who is the holder of an Option as of
immediately prior to the Effective Time.
"Option Cancellation Payment" shall have the meaning given that term in
Section 2.6.
"Ordinary Course Operating Covenant" means the covenants of the Bank
contained in any of the following Sections or subsections: Section 5.5, Section
5.6, subsection 5.7(a), subsection 5.7(b), Section 5.9.4, Section 5.9.7, Section
5.9.9, subsection 5.9.10(b), subsection 5.9.10(d), Section 5.9.11, Section
5.9.12 or Section 5.9.13.
"OREO" means real property (i) acquired by the Bank, in the ordinary
course of the Bank's banking business, through purchase at a foreclosure sale
conducted on a lien in favor of the Bank (or a comparable sale by a trustee
under a deed of trust) or by acceptance of a deed in lieu of foreclosure or (ii)
any asset of the Bank classified as "in-substance foreclosure" on the books and
records of the Bank.
"Parties" means, collectively, the Bank, the Partnership, SDN and,
following its acceptance and ratification of this Agreement, Merger Bank.
"Person" means any natural person, corporation, limited liability company,
general or limited partnership, limited liability partnership, joint venture,
joint stock company, trust, unincorporated organization, association, sole
proprietorship, governmental body, or agency or political subdivision of any
government.
"Proxy Statement" means the proxy statement by which the Bank will solicit
proxys from the Shareholders for the approval of the Merger, including any
amendment or supplement thereto.
"Qualifying Strategic Transaction Proposal" shall have the meaning given
that term in Section 5.1.2.
"RAP" means Regulatory Accounting Principles, as interpreted by the OCC.
"Recommendation of Approval" means an unqualified recommendation by the
Board of Directors to the Shareholders that such Shareholders adopt this Merger
Agreement and approve the Merger.
"Regulatory Agreement" means any regulatory agreement, memorandum of
understanding or similar agreement with, any cease and desist or similar order
or directive entered or issued by, commitment letter or similar undertaking to,
any extraordinary supervisory letter from, or any board of directors resolutions
adopted at the request of, any Bank Regulator.
"Representatives" means each of the applicable Person's directors,
officers, employees, agents, representatives and advisors.
"Resultant Bank" means the national banking association resulting from the
consolidation of the Bank and Merger Bank in accordance with Section 2.1, which
Resultant Bank shall have the same charter number as the Bank.
"SBA Loans" means loans guaranteed by the U.S. Small Business
Administration.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Filings" mean all reports, schedules, registration statements
and definitive proxy statements filed pursuant to the Exchange Act by the Bank
with the OCC or the SEC since January 1, 1992, as such documents have been
amended since the time of their filing.
"Stock Option Plans" means, collectively, the Liberty National Bank 1992
Stock Option Plan and the Amended and Restated Liberty National Bank Combined
1985 Incentive Stock Option Plan and Non-Qualified Stock Option Plan.
"Strategic Transaction" means any acquisition or purchase of all or a
significant (i.e., more than 5%) portion of the assets of, or a significant
equity interest in, the Bank or any merger or other business combination
involving the Bank or any recapitalization involving the Bank resulting in an
extraordinary dividend or distribution to the Bank's shareholders or a self-
tender for or the redemption of some or all of the Common Stock.
"Strategic Transaction Proposal" means any proposal regarding a Strategic
Transaction.
"Tax" means, except where the context otherwise requires, all Federal,
state, local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
"Treasury Yield" means the yield of a One Year U.S. Treasury Note of
constant maturity as of the third Business Day next preceding the Closing Date.
"Violation" means a conflict with, violation of, default under, creation
of a right of termination under, cancellation of, acceleration of any obligation
under, loss of a material benefit under, or creation of any lien, pledge,
security interest, charge or other encumbrance on assets under, the referenced
Law, organic document, agreement or other instrument, in each case with or
without notice or lapse of time, or both.
1.2 Rules of Construction. The following rules of construction shall
apply to the interpretation of this Agreement:
1.2.1 Any reference to any event, change or effect being "material"
with respect to any Person means an event, change or effect which is material in
relation to the condition (financial or otherwise), properties, assets,
liabilities, businesses or operations of such entity and its Subsidiaries taken
as a whole.
1.2.2 Whenever used in this Agreement, the word "including" shall be
non-exclusive and shall mean "including without limitation."
1.2.3 All references to Sections and Articles shall, unless another
agreement is expressly referenced, mean the applicable sections or articles of
this Agreement. All references to Schedules shall mean the applicable
Disclosure Schedule.
1.2.4 The section titles and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
1.2.5 the terms "herein", "hereunder", and terms of similar import
refer to this Agreement as a whole and not to the specific Section or Article in
which they are used.
ARTICLE II
The Merger
2.1 The Consolidation and Resultant Bank. The Bank and Merger Bank
shall be the constituent corporations to the Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time, the Merger shall be
effected by means of a consolidation (hereinafter sometimes referred to as the
"Merger") of the Bank and Merger Bank in accordance with 12 U.S.C. 215, and in
accordance with subsection (e) thereof, the corporate existence of each of the
Bank and Merger Bank shall be merged into and continued in the Resultant Bank
and the Resultant Bank shall be deemed to be the same corporation as each
constituent bank in the consolidation. The name of the Resultant Bank shall be
"Liberty National Bank" or such other name as the Partnership shall specify
prior to the Closing.
2.2 Corporate Documents, Directors and Officers. The charter number of
the Resultant Bank shall be the charter number of the Bank, and from and after
the Effective Time and thereafter until amended as provided by law, the Articles
of Association of the Resultant Bank shall be the Articles of Association of the
Bank as in effect immediately prior to the Effective Time. From and after the
Effective Time and thereafter until amended as provided by law, the By-laws of
the Resultant Bank shall be the By-laws of Merger Bank as in effect immediately
prior to the Effective Time. The directors of the Resultant Bank initially
shall be comprised of Robert P. Keller, a person to be designated by the
Partnership prior to the Closing, and all of the directors of the Bank
immediately prior to the Effective Time, and each such director shall serve
until his or her successor has been duly elected and qualified or until his or
her earlier death, resignation or removal in accordance with the terms of the
Resultant Bank's Articles of Association and By-laws. The officers of the
Resultant Bank initially shall be comprised of Robert P. Keller, who shall serve
as Chairman and Chief Executive Officer, and such other persons as the
Partnership shall designate prior to the Closing after consultation with the
directors and executive officers of the Bank, and each such officer of the
Resultant Bank shall serve until his or her respective successors has been duly
elected or appointed and qualified or until his or her earlier death,
resignation or removal in accordance with the terms of the Resultant Bank's
Articles of Association and By-laws.
2.3 Treatment of Common Stock.
2.3.1 Conversion of Common Stock. At the Effective Time, each share
of Common Stock issued and outstanding immediately prior to the Effective Time,
excluding Dissenting Shares and Excluded Shares, shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive, in cash, the Merger Consideration. All shares of Common Stock
converted into the right to receive the Merger Consideration pursuant to the
preceding sentence shall, as of the Effective Time, no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent only the
right to receive the Merger Consideration into which the shares of Common Stock
represented by such certificate have been converted. As of the Effective Time,
all Excluded Shares shall cease to exist and the certificates for such shares
shall, as promptly as practicable thereafter, be cancelled and no payments shall
be made in consideration therefor.
2.3.2 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Dissenting Shares shall not be converted into the right to
receive, or be exchangeable for, the Merger Consideration provided for in
Section 2.3.1 hereof, but, instead, the holders thereof shall be entitled to
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of 12 U.S.C. Section 215(b). The Bank shall (a) give the Partnership
prompt written notice of the receipt of any notice from a shareholder of such
shareholder's intent to demand payment for his, her or its shares, (b) not
settle or offer to settle any such demands without the prior written consent of
the Partnership, and (c) not, without the prior written consent of the
Partnership, waive any failure to vote against the Merger or timely deliver a
written objection to the Merger and a demand for appraisal of such shares,
all in accordance with 12 U.S.C. Section 215(b).
2.4 Merger Consideration.
2.4.1 Calculation of Merger Consideration. The consideration (the
"Merger Consideration") into which each share of Common Stock shall be converted
in the Merger shall equal the greater of the Formula Payment Amount or the Fixed
Payment Amount. As used herein, the Formula Payment Amount shall mean the
quotient of:
(a) the sum of (i) the product of 1.30 multiplied by the
Adjusted Shareholders' Equity as reflected on the Closing
Statement, plus (ii) the aggregate exercise price of all
Options cancelled by the Bank pursuant to Section 2.6, plus
(iii) the amount of any proceeds of Options exercised on or
after August 18, 1995, plus (iv) the Month-End Closing
Adjustment, if applicable, divided by
(b) the sum of the total number of shares of Common
Stock outstanding as of the Effective Time plus the total
number of shares of Common Stock subject to Options cancelled
by the Bank pursuant to Section 2.6.
As used herein, the Fixed Payment Amount shall equal $14.80, unless
(a) the Closing Date shall fall on or after April 1, 1996, and
(b) all approvals of Governmental Entities required in
connection with the execution and delivery of this Agreement
by the Partnership or Merger Bank or the consummation of the
Merger by the Partnership or Merger Bank have been received on
or before March 22, 1996; provided, however, that this clause
(b) shall not apply in the event that the Partnership has
failed to perform its obligations under Section 5.11,
in which event the Fixed Payment Amount shall equal the sum of $14.80 plus the
product of $14.80 multiplied by (i) the Treasury Yield, multiplied by (ii) the
number of days from and including April 1, 1996 to and including the date of the
Closing Date, divided by (iii) three hundred sixty-five (365).
2.4.2 Payment to Exchange Agent. Subject to the terms and
conditions hereof, immediately prior to the Closing, the Partnership shall
deliver or cause to be delivered to the Exchange Agent such amount of cash as is
sufficient to pay the aggregate consideration which holders of Common Stock are
entitled to receive pursuant to Section 2.3.1.
2.5 Exchange of Certificates; Cancellation of Options.
2.5.1 Common Stock Exchange Procedures. After the Effective Time,
each holder of a certificate or certificates theretofore representing shares of
issued and outstanding Common Stock (other than the Dissenting Shares and
Excluded Shares) shall, upon the surrender of such certificates to the Exchange
Agent, be entitled to receive in exchange therefor the amount of cash into which
Common Stock theretofore represented by the certificate or certificates so
surrendered shall have been converted as provided in Section 2.3.1, without
interest and subject to any required withholding of taxes. The holder of a
certificate that prior to the Merger represented issued and outstanding shares
of Common Stock shall have no rights, after the Effective Time, with respect to
such shares except to surrender the certificate in exchange for cash without
interest thereon or, if applicable, to perfect the rights of appraisal as a
holder of Dissenting Shares that such holder may have pursuant to the applicable
provisions of 12 U.S.C. Section 215(b). As soon as practicable after the
Effective Time, the Resultant Bank will send, or will cause the Exchange Agent
to send, to each holder of Common Stock at the Effective Time a letter of
transmittal for use in such exchange.
2.5.2 Certain Taxes. If any payment for shares of Common Stock is
to be made in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of such payment that
the certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to the Exchange Agent, in
advance, any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the certificate surrendered, or
required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
2.5.3 Lost, Stolen or Destroyed Certificates. In the event any
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by the Resultant Bank, the posting by such
person of a bond in such amount as the Resultant Bank 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 cash deliverable in respect thereof pursuant to Section 2.5.1.
2.5.4 Unclaimed Monies. Any portion of the cash paid to the
Exchange Agent by or on behalf of the Partnership (together with any investment
income earned thereon) that remains unclaimed by the shareholders of the Bank
pursuant to the provisions of Section 2.5.1 six months after the Closing Date
shall be returned to the Resultant Bank, upon demand, and any shareholder of the
Bank who has not exchanged his, her or its shares of Common Stock for the Merger
Consideration in accordance with Section 2.5.1 prior to that time shall
thereafter look solely to the Resultant Bank for payment in respect of such
shares or such Option, as applicable. Notwithstanding the foregoing, neither
the Partnership nor the Resultant Bank shall be liable to any shareholder of the
Bank for any amount paid to a public official pursuant to applicable abandoned
property laws.
2.6 Treatment of Options. Immediately prior to the Effective Time, each
holder of a then-outstanding Option shall be entitled (whether or not such
Option is then vested or exercisable) to receive, in cancellation of such
option, a cash payment (an "Option Cancellation Payment") from the Bank in an
amount equal to the excess of the Merger Consideration over the per-share
exercise price of such Option, multiplied by the number of shares of Common
Stock covered by such Option, subject to any required withholding of taxes.
Nothing in this Section 2.6 shall be construed as preventing a holder from
exercising his or her Option prior to the Effective Time. Such Option
Cancellation Payments shall be paid by the Bank immediately prior to the
Effective Time. The Bank shall take appropriate steps to obtain from each of
the several Optionholders a cancellation agreement, in form and substance
acceptable to the Partnership, cancelling each outstanding Option in
consideration of the applicable Option Cancellation Payment.
2.7 Closing of Transfer Books. At the Effective Time, the transfer
books for Common Stock shall be closed, and no transfer of shares of Common
Stock shall thereafter be made on such books. If, after the Effective Time,
certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
2.8 Conversion of Merger Bank Common Stock. At the Effective Time, the
authorized capital stock of the Resultant Bank shall consist of the authorized
capital stock of Merger Bank. The shares of common stock of Merger Bank issued
and outstanding immediately prior to the Effective Time shall, at the Effective
Time, be converted into a like number of shares of common stock of the Resultant
Bank, which shall thereafter constitute all of the issued and outstanding shares
of common stock of the Resultant Bank.
ARTICLE III
Representations and Warranties of the Bank
Except where a different date is expressly specified, the Bank makes the
representations and warranties set forth below as of the date of this Agreement:
3.1 Organization, Standing and Power. The Bank is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States of America. The deposit accounts of the Bank are insured
by the Federal Deposit Insurance Corporation through the Bank Insurance Fund,
and all premiums and assessments required in connection therewith have been paid
by the Bank as the same have become due. The Bank has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties make such qualification necessary.
Copies of the Articles of Association and By-Laws of the Bank, including all
amendments thereto as of the date of this Agreement, have been delivered to the
Partnership and are complete and correct. The minute books of the Bank
accurately reflect in all material respects all corporate actions held or taken
by the Bank's shareholders and Board of Directors, including all committees of
such Board of Directors.
3.2 Capital Structure.
3.2.1 Capital Stock of the Bank. The authorized capital stock of
the Bank consists of 1,750,000 shares of Common Stock, $3.33 1/3 par value.
As of the date hereof, 978,160 shares of Common Stock are issued and
outstanding, and no shares of Common Stock are held in treasury by the Bank.
As of the date hereof, 121,743 shares of Common Stock are reserved for issuance
upon the exercise of outstanding stock options previously issued pursuant to the
Stock Option Plans, and except as enumerated above, no shares of common stock
are reserved for future issuance. All outstanding shares of Common Stock have
been validly issued and are fully paid and nonassessable (except as provided in
12 U.S.C. Section 55) and are not subject to preemptive rights. All of the
issued and outstanding shares of Common Stock have been offered, issued and sold
by the Bank in compliance with applicable federal and state securities laws and
regulations and in compliance with any preemptive right held by any Person.
There are no dividends which have accrued or been declared but are unpaid on the
Common Stock. The Bank has no contractual obligation to register any shares of
Common Stock under the Securities Act. The Bank has delivered to the
Partnership a true and correct list of all holders of Common Stock as of
September 30, 1995.
3.2.2 Other Securities. Excepting Options granted under the Stock
Option Plans enabling the holders thereof to purchase an aggregate of 121,743
shares of Common Stock, there are no options, warrants, calls, rights,
commitments or agreements of any character to which the Bank is a party or by
which the Bank is bound obligating it to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
securities of the Bank or obligating the Bank to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement. The aggregate
exercise price of all Options outstanding as of the date hereof is
$1,154,655.05. Schedule 3.2.2 hereto sets forth, with regard to each Option
outstanding as of the date hereof, the name of the holder, the number of shares
of Common Stock the holder is entitled to purchase, the exercise price, the date
of grant and the term of the Option. There are no outstanding contractual
obligations of the Bank to repurchase, redeem or otherwise acquire any shares of
capital stock of the Bank. There are no bonds, debentures, notes or other
instruments evidencing indebtedness of the Bank issued or outstanding that
entitle the holders thereof to vote on any matters on which shareholders may
vote.
3.3 Interests in Other Entities. The Bank does not hold more than 1% of
the outstanding equity securities of any corporation or other entity, and is not
a member of any partnership, joint venture or similar entity or collectivity, or
a party to any partnership agreement or joint venture agreement, however named.
The Bank does not hold any "Acquisition, Development and Construction" ("ADC")
loans, as that term is used under GAAP.
3.4 Authority and Related Matters. Subject only to the approvals of the
holders of the Common Stock as specified in the immediately following sentence,
the Bank (a) has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby (including the
Merger), and (b) has duly authorized the execution and delivery of this
Agreement and the consummation of such transactions (including the Merger) by
all necessary corporate action on the part of the Bank (including the unanimous
approval by its Board of Directors). The only vote of the holders of any class
or series of the Bank's securities necessary to approve this Agreement or the
consummation of the Merger is the affirmative vote of the holders of two-thirds
of the outstanding shares of Common Stock entitled to vote thereon approving the
Merger, and the Board of Directors has directed the officers of the Bank to
submit the Merger and this Agreement to the Bank's shareholders for approval at
a meeting of such shareholders. No other corporate proceedings on the part of
the Bank not heretofore taken are necessary to approve this Agreement or to
consummate the Merger. This Agreement has been duly executed and delivered by
the Bank and (assuming due authorization, execution and delivery by the
Partnership) constitutes the valid and binding obligation of the Bank,
enforceable in accordance with its terms subject only to laws regarding
bankruptcy, insolvency, reorganization moratorium or otherwise affecting
creditors' rights generally, and to the application of general principles of
equity (whether considered in a proceeding in law or at equity).
3.5 Agreements with Certain Persons Regarding Merger. Each of the
Persons who was a director of the Bank as of August 18, 1995 has executed and
delivered to the Bank, and the Bank has executed and delivered to the
Partnership, a valid and binding agreement in the form of Exhibit 3.5 (a "Voting
Agreement"), whereby such Person has irrevocably agreed to vote all shares of
Common Stock directly or beneficially owned by such Person (including shares
held as community property) or over which such Person has voting control, in
favor of the Merger.
3.6 Conflicts. The execution and delivery of this Agreement does not,
and the consummation of the Merger will not, result in any Violation of any
provision of the Articles of Association or By-laws of the Bank. Subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings included among the Bank's Governmental
Approvals, the execution and delivery of this Agreement does not, and the
consummation of the Merger will not, result in any Violation of any Law, any
loan or credit agreement, note, mortgage, indenture, lease, employee benefit
plan or other agreement, obligation, instrument, permit, concession, franchise
or license, or any judgment, order or decree, applicable to the Bank or its
properties or assets which Violation would have a Material Adverse Effect on the
Bank.
3.7 Consents. Except as disclosed on Schedule 3.7 (collectively, the
"Bank's Governmental Approvals"), no consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required in connection with the Bank's execution and delivery of this Agreement
or its consummation of the Merger, as to which the failure to obtain the same
would have a Material Adverse Effect on the Bank or materially interfere with
the Bank's ability to consummate the Merger.
3.8 Securities Filings and Financial Statements.
3.8.1 The Bank has provided to the Partnership a true and complete
copy of each Securities Filing (excluding filings on Forms 10-QSB or 8-KSB prior
to January 1, 1994) filed by the Bank with the OCC since December 31, 1991,
which (together with such excluded Forms 10-QSB and 8-KSB) are all the documents
other than preliminary material that the Bank was required to file pursuant to
the Exchange Act since such date. As of their respective dates, the Securities
Filings complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the OCC thereunder applicable to such Securities Filings, and
none of the Securities Filings contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.8.2 The financial statements included in the Securities Filings
comply as to form in all material respects with applicable accounting
requirements and with the rules and regulations of the OCC with respect thereto,
have been prepared in accordance with GAAP (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-QSB) and fairly present the financial position of the Bank (consolidated with
any subsidiaries then in existence) as of the dates thereof and the results of
its (their) operations and cash flows for the periods then ended. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the Securities Filings have been so filed.
3.8.3 The Bank has delivered to the Partnership a copy of the Most
Recent Financial Statements. The Most Recent Financial Statements are, and the
Closing Statement, when delivered, will be, complete and correct in all material
respects and have been prepared from the books and records of the Bank. The
Most Recent Financial Statements present fairly, and the Closing Statement when
delivered will present fairly, the financial condition of the Bank and its
results of operations as at and for the respective periods then ended. The Most
Recent Financial Statements have been prepared in accordance with GAAP,
excepting only by the absence of footnotes and other presentation items and
subject to normal year-end adjustments. The Closing Statement, when delivered,
will have been prepared in accordance with GAAP (including normal year-end
adjustments whether or not the Closing Statement Date is December 31, 1995),
excepting only (a) if the same has not been audited, by the absence of footnotes
and other presentation items, and (b) by the non-GAAP treatment of certain items
as specified in the definition of "Closing Statement". The books and records of
the Bank have been, and are being, maintained in all material respects in
accordance with GAAP and reflect only actual transactions.
3.9 Regulatory Filings and Agreements. Except as disclosed on Schedule
3.9, the Bank has timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since December 31, 1992 with any Bank
Regulator, and all other material reports and statements required to be filed by
it since December 31, 1992, including any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States (including
those of the Board of Governors of the Federal Reserve, the Federal Deposit
Insurance Corporation and the OCC), and has paid all fees and assessments due
and payable in connection therewith. Except for normal examinations conducted
by a Bank Regulator in the regular course of the business of the Bank, and
except as disclosed on Schedule 3.9, no Bank Regulator has initiated any
proceeding or investigation or, to the best knowledge of the Bank, has
threatened to initiate any proceeding or investigation, into the business or
operations of the Bank since December 31, 1992. Except as disclosed on Schedule
3.9, the Bank is not a party to or subject to any Regulatory Agreement with or
from any Bank Regulator that restricts the conduct of the Bank's business or in
any manner relates to its capital adequacy, credit policies, loan origination
practices or management nor, to the knowledge of the Bank, is any Bank Regulator
contemplating issuing or requesting (or considering the appropriateness of
issuing or requesting) any such Regulatory Agreement. Except as disclosed on
Schedule 3.9, there is no material unresolved violation, criticism, or exception
by any Bank Regulator with respect to any report or statement relating to any
examination of the Bank.
3.10 Undisclosed Liabilities. Except as and to the extent reflected in
the Most Recent Financial Statements or on Schedule 3.10, the Bank does not have
any liabilities, commitments or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, including,
without limitation, liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the Most Recent Balance Sheet Date and which would be
required under GAAP to be shown in such balance sheet or referenced in notes
thereto if such notes existed, other than (a) obligations (including guarantees
and letters of credit) not required by GAAP to be reflected, reserved against or
disclosed in the Most Recent Financial Statements, all of which are set forth on
Schedule 3.10 and none of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect and (b) those incurred
in the ordinary course of business consistent with past practice since the Most
Recent Balance Sheet Date.
3.11 Criticized Assets, Reserves and Certain Other Assets. As of the
date specified on Schedule 3.11-a (which date is not earlier than three (3)
Business Days prior to the date hereof), the only assets of the Bank that were
(a) Criticized Assets on the Bank's books and records, or (b) over 90 days
delinquent in payment of principal or interest or materially in default of any
other provision of the operative documents, whether or not the same are
Criticized Assets, are those listed on Schedule 3.11-a hereto (which schedule
sets forth the identity of the borrower, the original principal amount, the
current book balance, the amount of any reserve (or portion of the general
reserve) allocated thereto, and the loan classification). The loan and other
asset classification procedures utilized by the Bank are in accordance with RAP
and prudent banking practice, and are consistently applied. As of June 30, 1995
and as of the Most Recent Balance Sheet Date, the Bank's specific allowance for
loan losses with regard to Classified Assets was $2,464,293 and $2,245,616,
respectively. Schedule 3.11-b hereto sets forth all loans of the Bank (whether
or not they are Classified Assets or are otherwise in default) to any director,
executive officer or ten percent shareholder of the Bank, or to the knowledge of
the Bank, any corporation or enterprise controlling, controlled by or under
common control with any of the foregoing.
3.12 Investment Securities; Derivatives. Schedule 3.12 describes all of
the investment securities, mortgage backed securities and securities held for
sale of the Bank as of the date hereof, including descriptions of such
securities, CUSIP numbers, pool face values (where applicable), book values,
market values, coupon rates, paydown speeds, book yields, durations, weighted
average life and weighted average coupons, in each case as of October 20, 1995
(or as of the date of acquisition, if later acquired). Since December 31, 1993,
the Bank has not engaged in any transaction in or involving forwards, futures,
options on futures, swaps or other derivative instruments except as agent on the
order and for the account of others. None of the counterparties to any contract
or agreement with respect to any such instrument is in default with respect to
such contract or agreement and no such contract or agreement, were it to be a
loan held by the Bank, would be a Criticized Asset. The financial position of
the Bank under or with respect to each such instrument has been reflected in the
books and records of the Bank in accordance with GAAP, and no open exposure of
the Bank with respect to any such instrument (or with respect to multiple
instruments with respect to any single counterparty) exceeds $100,000.
3.13 Absence of Certain Changes or Events. Except as disclosed on
Schedule 3.13, since December 31, 1994, there has been no material adverse
change in the business, property, assets (including loan portfolios), \
liabilities (whether absolute, contingent or otherwise) prospects, operations,
liquidity, income or condition (financial or otherwise) of the Bank (other than
as a result of changes in banking laws or regulations of general applicability
or interpretation thereof). Except as disclosed on Schedule 3.13, since
December 31, 1994, the Bank (a) has carried on its business in the ordinary and
usual course consistent with its past practices, and (b) has not increased the
wages, salaries, compensation, pension, or other fringe benefits or perquisites
payable to any executive officer, employee, or director, granted any severance
or termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus, in each case except for normal increases in
the ordinary course of business consistent with past practice or except as
required by applicable law.
3.14 Compliance with Applicable Laws. The business of the Bank is, and
at all times since December 31, 1991 has been, conducted in compliance with all
Laws (including those relating to equal credit, fair lending, fair housing and
community reinvestment), except where a failure to so comply would not have a
Material Adverse Effect on the Bank. The Bank holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities that
are material to the operation of the business of the Bank (the "Permits"). The
Bank is in compliance with the terms of each of the Permits, except where the
failure so to comply would not have a Material Adverse Effect on the Bank.
Except as disclosed on Schedules 3.9, no investigation by any Governmental
Entity with respect to the Bank is pending or, to the Bank's knowledge,
contemplated.
3.15 Litigation and Other Disputes. Except as disclosed on Schedule
3.15, there is no suit, action, or proceeding pending or, to the knowledge of
the Bank, threatened, against or affecting the Bank or any of its assets, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Bank the obligations under which have not
heretofore been fully performed. Except as disclosed on Schedule 3.15, since
December 31, 1992, the Bank has not been a defendant, either directly or as
defendant-in-counterclaim or cross-claim, in any litigation in which any "lender
liability" cause of action was asserted against the Bank.
3.16 Administration of Fiduciary Accounts. The Bank has properly
administered in all material respects all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither the
Banknor any of its directors, officers or employees has committed any breach of
trust with respect to any such fiduciary account which has had or could
reasonably be expected to have a Material Adverse Effect on the Bank, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account.
3.17 Taxes. The Bank has filed all tax returns it has been required to
file and the Bank has paid or has set up an adequate reserve for the payment of
all Taxes required to be paid as shown on such returns, and the Most Recent
Financial Statements reflect an adequate reserve for all Taxes payable by the
Bank accrued through the date of such financial statements. No deficiencies for
any Taxes have been proposed, asserted or assessed against the Bank that are not
adequately reserved for. The Federal income tax returns of the Bank have been
examined by and settled with the IRS, or the statute of limitations with respect
to each such year has expired (and no waiver extending the statute of
limitations has been requested or granted), for all years through 1991. The
Federal income tax returns of the Bank for the years 1992 through 1994 are
currently open to IRS examination but, except as disclosed on Schedule 3.17, no
audit is pending for any of such years and, to the Bank's knowledge, no
challenge or deficiency is contemplated by the IRS with regard to any of such
years. The Bank has not (a) filed any consent to the application of Section
341(f) of the I.R.C., (b) filed any election under Section 338(g) or 338(h)(10)
of the I.R.C. or caused or permitted any deemed election under Section 338(e) of
the I.R.C., (c) applied for any revenue ruling, private letter ruling or other
ruling relating to Taxes, (d) entered into any closing agreement with any
Governmental Entity relating to Taxes, or (e) been, at any time, a member of any
affiliated group filing any consolidated tax return.
3.18 Certain Agreements. Except as disclosed on Schedule 3.18, the Bank
is not party to (nor are any of its assets bound by) any oral or written
contract, lease or other agreement of any name or nature in effect as of the
date hereof or as of the Effective Time (a) that would be required to be filed
as an exhibit to an annual report on Form 10-K filed with the OCC (assuming the
Bank were a reporting company under the Exchange Act, whether or not it is so
registered), (b) the benefits of which (to either party) will accrue or be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of the Merger (either alone or upon the occurrence of any additional
acts or events) or the value of any of the benefits of which will be calculated
on the basis of the Merger or any portion or aspect thereof (including any so-
called retention or similar bonuses), (c) relating to employment, salary
continuation, severance, consulting (including data processing, software
programming and licensing contracts), collective bargaining or otherwise
relating to the provision of personal services or payment therefor, (d) which,
upon the consummation of the Merger, will result in any payment (whether of
severance pay or otherwise) becoming due from the Partnership or the Resultant
Bank to any officer or employee of the Resultant Bank or formerly of the Bank,
(e) relating to non-competition or secrecy, (f) that materially restricts the
conduct of any line of business by the Bank, or (g) that was entered into in
connection with the consummation of a federally assisted acquisition of a
depository institution pursuant to which the Bank is entitled to receive
financial assistance or indemnification from any Governmental Entity. The Bank
in not in Violation of any contract, lease or other agreement described by any
of the foregoing clauses(a) through (g), and to its knowledge, no other party to
any such contract, lease or other agreement has committed any Violation of the
same. The Bank has previously delivered to the Partnership true and correct
copies of all employment, consulting and deferred compensation agreements that
are in writing and to which the Bank is a party. Except as disclosed on
Schedule 3.18, the Bank is not, a party to, and since December 31, 1992 has not
been, a party to (nor are any of its assets bound by) any oral or written
contract, lease or other agreement of any name or nature with a Person who was,
as of, or within one year prior to, the date of such agreement a director,
officer or holder of 3% or more of the Common Stock.
3.19 Employees and Employee Benefit Plans.
3.19.1 Except as disclosed on Schedule 3.19.1, no employee of the
Bank or consultant retained by the Bank shall have the right to receive from the
Resultant Bank or the Bank any severance payment or other payment in the nature
thereof (including so-called salary continuation payments) in the event his or
her employment is terminated by the Resultant Bank at or after the Effective
Time, whether such right arises as a matter of contract, past policy or
understanding, by operation of law, or otherwise.
3.19.2 With respect to each Bank Benefit Plan, the Bank has made
available to the Partnership a true and correct copy of (i) such Bank Benefit
Plan, (ii) the most recent annual report (Form 5500) filed with IRS, (iii) each
trust agreement relating to such Bank Benefit Plan, (iv) the most recent summary
plan description for each Bank Benefit Plan for which a summary plan description
is required, (v) the most recent actuarial report or valuation in the case of
Bank Benefit Plans subject to Title IV of ERISA, and (vi) the most recent
determination letter issued by the IRS in the case of Bank Benefit Plans
qualified under Section 401(a) of the Code.
3.19.3 With respect to the Bank Benefit Plans, individually and in
the aggregate, no event has occurred and, to the knowledge of the Bank, there
exists no condition or set of circumstances, in connection with which the Bank
could be subject to any liability that could have a Material Adverse Effect on
the Bank (except liability for benefits claims and funding obligations payable
in the ordinary course) under ERISA, the Code or any other applicable Law.
3.19.4 There are no material disputes, employee grievances, or
disciplinary actions pending or, to the knowledge of the Bank, threatened by or
between any of the Bank's employees and the Bank. The Bank has complied in all
respects with all Laws relating to the employment of labor and has no liability
for any arrears of wages or employment-related taxes, or penalties for failure
to comply with any such Law, or for any severance or termination payments of any
type. No election or proceeding relating to the Bank's labor relations is
pending or, to the Bank's knowledge, contemplated. The Bank has had no union
activity or any material labor trouble (including any strike, work stoppage,
slow-down, or similar disturbance) of any kind, nature or description at any
time. True and correct copies of all personnel policies and manuals of the Bank
have been provided to the Partnership.
3.20 Properties. Except as disclosed on Schedule 3.20-a, the Bank does
not hold title to or a beneficial interest in any real property other than OREO.
The only real properties leased or otherwise occupied by or in the possession of
the Bank (excluding OREO and property occupied only as lender in possession, in
each case provided that the Bank is conducting no business in such property, and
excluding the owned properties disclosed on Schedule 3.20-a), are those
properties identified on Schedule 3.20-b. Except for assets disposed of in the
ordinary course of business consistent with past practice since the Most Recent
Balance Sheet Date, the Bank has good and valid title to all of the tangible
personal property and assets which are used in the operation of its business and
which it owns or purports to own, including all assets reflected as owned by the
Bank in the Most Recent Financial Statements and/or in the Closing Statement,
and has good and valid title to all of the leasehold interests in all leases of
real or personal property which it leases or purports to lease, including all
assets reflected as leased by the Bank in the Most Recent Financial Statements
and/or in the Closing Statement, in each case free and clear of any liens,
encumbrances or other imperfections of title other than such liens, encumbrances
orimperfections as (a) are reflected, reserved against or otherwise disclosed in
the Most Recent Financial Statements, (b) arise out of Taxes not yet due or
payable, or (c) relate to immaterial properties or assets or otherwise could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Bank enjoys peaceful and undisturbed possession of the
applicable leased asset under all leases of real or personal property under
which it is operating or to which it is a party. All of such leases are valid,
subsisting and in full force and effect and there are no existing defaults or
events which, with the passage of time or the giving of notice, or both, would
constitute defaults by the Bank or, to the knowledge of the Bank, by any other
party thereto, except for such defaults, if any, which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
All items of real or personal property owned or used by the Bank and material to
its business have been properly maintained and, to the Bank's knowledge, are in
good operating order and repair.
3.21 Environmental. The Bank and all real property (including OREO) in
the possession of the Bank are, and at all times while in the possession of the
Bank each such property has been, in compliance with all applicable Laws
relating to pollution or protection of human health or the environment
(including Laws relating to emissions, discharges, releases or threatened
releases of Hazardous Material or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material), except for Violations that, either individually
or in the aggregate, have not had and cannot reasonably be expected to have a
Material Adverse Effect on the Bank. There has not occurred any release of
Hazardous Material on, under or affecting any real property during the period of
the Bank's ownership, possession or operation of such property (including its
participation in the management of any business located on such property) or, to
the Bank's knowledge, during any prior period. Neither the Bank nor any
property now or heretofore in its possession is or has ever been a defendant in
or the subject of any suit, claim, action, proceeding, investigation or notice
before any Governmental Entity or other forum relating to an alleged Violation
(including by any predecessor) of any environmental Law, rule or regulation or
relating to the release or threatened release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned, leased or
operated by the Bank.
3.22 Intellectual Property. The Bank owns, or possesses valid and
binding licenses and other rights to use without payment, all material
trademarks, trade names, servicemarks, copyrights, trade secrets and patents
used in its businesses, and the Bank has not received any challenge of the same
by any Person or any notice of alleged conflict between the same and the rights
of any other Person. The Bank has, in all material respects, performed all of
its obligations under, and is not in material Violation of, any contract,
agreement, arrangement or commitment relating to any of the foregoing.
3.23 Brokers. The Bank has not employed any broker, finder or similar
Person in connection with the Merger. The Bank has not incurred and will not
incur any broker's, finder's or similar fees, commissions or expenses payable by
the Bank in connection with the Merger excepting only (to the extent they may be
characterized as such fees) those payments described on Part B of Schedule 3.18,
which will (regardless of characterization) be reflected as an expense of the
Bank on the Closing Statement.
3.24 Disclosure of All Material Matters. No statement of fact set forth
in (a) this Agreement (including all information in the Disclosure Schedules and
Exhibits hereto), (b) the Bank's Form 10-KSB filed with the OCC for the period
ended December 31, 1994, (c) the Bank's Forms 10-QSB filed with the OCC for the
periods ended March 31, 1995 and June 30, 1995, (d) the Most Recent Financial
Statements, or (e) each of the Bank's Forms 10-QSB and 10-KSB filed with the OCC
between the date hereof and the Closing Date (when the same are filed),
including in each case the financial statements included therein, is or will be
false or misleading in any material respect; nor does or will this Agreement
(including all information in the Disclosure Schedules and Exhibits hereto,
taken as a whole) or the above-referenced Form 10-KSB or Forms 10-QSB omit to
state a material fact necessary in order to make the statements made or
information disclosed, in the light of the circumstances under which they were
made or disclosed, not misleading.
ARTICLE IV
Representations and Warranties of the Partnership and Merger Bank
On behalf of itself and, in the case of representations and warranties
made by the Merger Bank, on behalf of the Merger Bank, the Partnership makes the
following representations and warranties as of the date hereof:
4.1 Organization, Standing and Power. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. Dartmouth Capital Group, Inc. is a business
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is the sole general partner of the Partnership.
The Partnership has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties make such
qualification necessary. At the time of its execution of this Agreement and as
of the Closing, Merger Bank will be a depositary institution duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, will have all requisite power and authority to own, lease and
operate its properties and to carry on its business as then being conducted, and
will be duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties make such qualification necessary.
4.2 Authority and Related Matters. The Partnership has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger have been duly authorized by all necessary
action on the part of the Partnership (including approval by the Board of
Directors of its general partner). This Agreement has been duly executed and
delivered by the Partnership and (assuming due authorization, execution and
delivery by the Bank) constitutes the valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms
subject only to laws regarding bankruptcy, insolvency, reorganization moratorium
or otherwise affecting creditors' rights generally, and to the application of
general principles of equity (whether considered in a proceeding in law or at
equity). At the time of its execution of this Agreement and as of the Closing,
Merger Bank will have all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. At the time
of Merger Bank's execution and delivery of this Agreement and as of the Closing,
such execution and delivery and the consummation of the Merger shall have been
duly authorized by all necessary action on the part of Merger Bank (including
approval by its Board of Directors). When executed and delivered by Merger Bank
and as of the Closing, this Agreement will (assuming due authorization,
execution and delivery by the Bank) constitute the valid and binding obligation
of Merger Bank, enforceable against Merger Bank in accordance with its terms
subject only to laws regarding bankruptcy, insolvency, reorganization moratorium
or otherwise affecting creditors' rights generally, and to the application of
general principles of equity (whether considered in a proceeding in law or at
equity).
4.3 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the Merger will conflict with or result in any Violation
of any provision of the Agreement of Limited Partnership of the Partnership or
the Articles of Association (or similar charter) or By-laws of Merger Bank.
Subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in Section 4.4, neither the
execution and delivery of this Agreement nor the consummation of the Merger will
result in any Violation of any Law, any loan or credit agreement, note,
mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license, or any
judgment, order or decree, applicable to the Partnership or Merger Bank or their
respective properties or assets which Violation would have a Material Adverse
Effect on the Partnership or Merger Bank.
4.4 Consents. Except as disclosed on Schedule 4.4 (collectively, the
"Partnership Governmental Approvals"), no consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required in connection with the execution and delivery of this
Agreement by the Partnership or Merger Bank or the consummation of the Merger by
the Partnership or Merger Bank, as to which the failure to obtain the same would
have a Material Adverse Effect on the Partnership or Merger Bank or materially
interfere with the Partnership's or Merger Bank's ability to consummate the
Merger.
4.5 Brokers. Neither the Partnership nor Merger Bank has employed any
broker, finder or similar Person in connection with the Merger other than
Carpenter & Company, or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses in connection with the Merger other than
those of Carpenter & Company, which fees shall be borne entirely by the
Partnership and Merger Bank.
4.6 Financial Capacity. The Partnership has received valid and binding
subscription agreements for investments in the Partnership, payable on or before
the Closing Date, that, in the aggregate, will provide the Partnership with not
less than $14,500,000 to deliver (or cause to be delivered) at the Closing all
amounts required to be delivered to the Exchange Agent pursuant to Section
2.4.2. The Partnership has delivered to the Bank a true and correct copy of the
form of subscription agreement, and each such subscription agreement has been
executed by a Person that, to the Partnership's knowledge after reasonable
investigation, has the financial capacity to perform thereunder. The
Partnership has further delivered to the Bank true and correct copies of the
Partnership's Certificate of Limited Partnership and its general partner's
Certificate of Incorporation, each as on file with the Delaware Secretary of
State as of the date hereof. As of the Closing, Merger Bank, either directly or
through payments on its behalf by the Partnership or by another affiliated
person, shall have the financial capacity to perform its obligations hereunder.
The obligations of the Partnership and Merger Bank hereunder are not conditioned
upon their obtaining financing.
ARTICLE V
Additional Agreements
5.1 Discussions with Third Parties.
5.1.1 The Bank (a) shall not, and shall instruct and cause each of
its Representatives not to, solicit or encourage, directly or indirectly,
inquiries or proposals with respect to any Strategic Transaction Proposal, and,
(b) except as expressly permitted by Section 5.1.2, shall not, and shall
instruct and cause each of its Representatives not to, furnish any non-public
information relating to or participate in any negotiations, discussions or other
activities concerning, any Strategic Transaction with any party other than the
Partnership and Merger Bank. The Bank shall notify the Partnership promptly
after any Strategic Transaction Proposal is received by, or any negotiations or
discussions regarding a Strategic Transaction Proposal are sought to be
initiated with, directly or indirectly, the Bank or any of its Representatives,
and shall disclose to the Partnership the identity of the third party making or
seeking to make such Strategic Transaction Proposal, the terms and conditions
thereof and such other information as the Partnership reasonably may request;
provided, however,that if the Bank receives a Strategic Transaction Proposal and
the foregoing disclosure of such Proposal to the Partnership would violate a
confidentiality agreement by which the Bank is bound, the Bank (a) shall make
the foregoing disclosure only to the maximum extent permissible under such
confidentiality agreement, (b) shall return such Strategic Transaction Proposal
to the initiating party without substantive response, and (c) to the extent such
disclosure has not been made under clause (a), shall notify the Partnership that
a Strategic Transaction Proposal has been received and that the same has been
returned to the initiating party without substantive response.
5.1.2 Notwithstanding Section 5.1.1, following receipt of a
Qualifying Strategic Transaction Proposal, neither the Bank nor any of its
Representatives shall be prohibited from (a) engaging in discussions or
negotiations with a third party which has made a proposal that satisfies the
requirements of a Qualifying Strategic Transaction Proposal and thereafter
providing to such third party information previously provided or made available
to the Partnership, provided the third party shall have entered into a
confidentiality agreement substantially similar to the confidentiality
provisions of Appendix C to the Letter of Intent, (b) taking and disclosing to
the Bank's shareholders a position contemplated by Rule 14e-2(a) under the
Exchange Act, or otherwise making disclosure of the Qualifying Strategic
Transaction Proposal to the Bank's shareholders, or (c) subject to the terms of
Section 8.2 and Section 8.3, terminating this Agreement. A "Qualifying
Strategic Transaction Proposal" shall mean a bona fide written Strategic
Transaction Proposal with respect to which the Board of Directors shall have
determined, after consultation with the Bank's counsel, that the action by the
Bank contemplated under either clause (a), (b) or (c), as applicable, of the
immediately preceding sentence is required under the fiduciary duties owed by
the Board of Directors to the holders of the Common Stock, which determination
has been made acting in good faith and on the basis of a written opinion from a
financial advisor retained by the Bank to the effect that the financial terms of
such Strategic Transaction Proposal are, from the Bank's shareholders'
perspective, financially superior to the Merger.
5.2 Proxy Statement; Shareholder Meeting.
5.2.1 The Bank shall use all reasonable efforts to prepare and
distribute the Proxy Statement to its shareholders as promptly as practicable,
and to duly call, give notice of, convene and hold a meeting of its shareholders
to be held as soon as is reasonably practicable thereafter for the purpose of
voting upon the approval of the Merger. Except as expressly provided in Section
5.2.2, the Proxy Statement shall include a Recommendation of Approval by the
Board of Directors. The Bank shall use all reasonable efforts to prepare and
file the preliminary Proxy Statement with the OCC no later than thirty (30)
Business Days after the date of this Agreement. The Bank shall deliver to the
Partnership and afford the Partnership an opportunity to comment on drafts of
the Proxy Statement prior to the distribution of the definitive Proxy Statement
to shareholders. None of the information included, directly or indirectly by
incorporation by reference, in the Proxy Statement will, at the date of mailing
to the Bank's shareholders or at the time of the meeting of shareholders to be
held in connection with the Merger, 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, in light of the circumstances
under which they were made, not misleading; provided, however, that the Bank
makes no representations regarding any information supplied to the Bank by the
Partnership. Regardless of whether the Bank is required to file the Proxy
Statement with the OCC, the Proxy Statement will comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder as if the Common Stock was then registered
under Section 12 of the Exchange Act. The Partnership shall cooperate in all
reasonable respects with the Bank in the preparation of the Proxy Statement, and
no statement of fact relating to the Partnership or the Merger Bank that is made
by the Partnership in writing to the Bank for inclusion in the Proxy Statement,
and that is in fact so included, will be false or misleading in any material
respect or will omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made or
disclosed, not misleading.
5.2.2 In the event that the Bank has received a Strategic
Transaction Proposal and the Board of Directors has determined, in accordance
with Section 5.1.2, that such Strategic Transaction Proposal constitutes a
Qualifying Strategic Transaction Proposal, then the Board of Directors shall
not be prohibited from failing to include a Recommendation of Approval in the
Proxy Statement, from retracting or qualifying its Recommendation of Approval if
previously given, or from postponing or adjourning the meeting of shareholders
called for the purpose of approving the Merger.
5.3 Access. The Bank shall make available to the Partnership all
information regarding the Bank that the Partnership reasonably may request and
shall authorize all reasonable visits to the Bank's premises with such staff,
consultants and experts as the Partnership reasonably may request. The
Partnership agrees to coordinate closely all such activities with the Bank's
President or Chief Financial Officer and to conduct any such inquiries with
appropriate discretion and sensitivity to the Bank's relationships with its
employees, customers and suppliers. The Partnership acknowledges that certain
of the information made available to it may be confidential, proprietary or
otherwise nonpublic, and the Parties agree that, notwithstanding Section 5(a) of
the Letter of Intent, the confidentiality provisions of Paragraph 4(a) and
Appendix C of the Letter of Intent shall survive the execution of this Agreement
and shall continue to govern the provision and disclosure of all "Confidential
Information", as therein defined.
5.4 Cooperation. The Parties shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the Merger. The Parties agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the Merger and each Party will keep the other apprised
of the status of matters relating to completion of the Merger. Each Party
shall, upon request, furnish each other Party with all information concerning
itself as may be reasonably necessary or advisable in connection with any filing
or application made by or on behalf of such Party to any Governmental Entity in
connection with the Merger. Each Party shall promptly advise each other Party
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the Merger which causes such Party to
believe that there is a reasonable likelihood that any required Governmental
Approval will not be obtained or that the receipt of any such Governmental
Approval will be materially delayed.
5.5 Advice of Changes. Each Party shall promptly advise each other
Party of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Closing Date, each Party will promptly supplement
or amend the Disclosure Schedules delivered in connection with the execution of
this Agreement to reflect any matter which, if existing, occurring or known at
the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedules or which is necessary to correct any
information in such Disclosure Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Disclosure Schedules shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Article VI or the compliance by any Party with any other provision of this
Agreement.
5.6 Current Information. During the period from the date of this
Agreement to the Closing Date, the Bank will cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than bi-
weekly) with representatives of the Partnership and to report the general status
of the ongoing operations of the Bank. The Bank will promptly notify the
Partnership of any material change in the normal course of business or in the
operation of the properties of the Bank and of any governmental complaint,
investigation or hearing (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving the Bank, and will keep the Partnership fully informed of such events.
The Bank will keep the Partnership fully informed of the status of, and the
action proposed to be taken with respect to, Classified Assets that,
individually or in combination with one or more other loans to the same borrower
thereunder, have an aggregate carry value of $100,000 or more. The Bank will
provide to the Partnership copies of the minutes (or consents in lieu of
meeting) of its loan committee, its Board of Directors and all committees
thereof promptly following each such meeting; provided, however, that the Bank
may omit therefrom any portion of such minutes that it determines, with the
concurrence of its counsel, relates to (a) the Parties' compliance or non-
compliance with the terms of this Agreement, or (b) any Strategic Transaction
Proposal other than the Merger.
5.7 Conduct of Business by the Bank. The Bank shall (a) conduct its
business in the usual, regular and ordinary course of business consistent with
the past practice (except as required by applicable Law or as required by this
Agreement), (b) use all reasonable efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees and (c) take no action
which would adversely affect or delay the ability of the Bank, the Partnership
or Merger Bank to obtain any necessary approvals of any Governmental Entity
required for the Merger or to perform its covenants and agreements under this
Agreement.
5.8 Interim and Annual Financial Statements. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter ending after the date of this Agreement and prior to the Closing Date
(excepting the quarter ending December 31, 1995), the Bank will deliver to the
Partnership its Quarterly Reports on Form 10-QSB as filed with the OCC under the
Exchange Act, and as soon as reasonably available, but in no event later than
March 31, 1996 (provided that the Closing has not yet occurred and the Agreement
has not theretofore been terminated), the Bank will deliver to the Partnership
its Annual Report on Form 10-KSB for the period ending December 31, 1995, as
filed with the OCC under the Exchange Act. The Bank will deliver to the
Partnership monthly financial statements in the form delivered to the members of
the Board of Directors no later than the time at which such financial statements
are delivered to such Directors, but in no event later than the twenty-second
calendar day of the month immediately following the month to which such
financial statements relate.
5.9 Negative Covenants of the Bank. Without the Partnership's prior
written consent (which consent, in the case of Sections 5.9.9 through 5.9.14,
shall not be unreasonably withheld or delayed), the Bank shall not:
5.9.1 declare or make any payment or distribution with respect to
the capital stock of the Bank, whether by way of payment of interest or
principal, redemption, dividend or otherwise;
5.9.2 (a) excepting only the issuance of shares of Common Stock upon
the exercise of one or more currently outstanding Options in accordance with the
present terms of such Option, create, authorize, issue, sell or deliver any of
its capital stock, bonds or other of its securities (whether authorized and
unissued or held in treasury) or any instrument convertible into any of them;
(b) grant or otherwise issue any options, warrants or other rights with respect
thereto; (c) amend the terms of any currently outstanding option (including any
Option), warrant or other right with regard to the Bank's securities; or (d)
split up, combine or reclassify any of its outstanding stock;
5.9.3 acquire, by merging or consolidating with, by purchasing a
substantial equity interest in or a substantial portion of the assets of or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof; provided, however, that in the
case of any purchase at a foreclosure sale conducted by the Bank in the ordinary
course of business, the Partnership shall not unreasonably withhold its consent
and shall be deemed to have granted its consent if it does not grant or refuse
its consent or reasonably request additional information regarding such proposed
foreclosure within five Business Days of the Partnership's receipt of the Bank's
request for consent;
5.9.4 excepting those matters identified on Exhibit 5.9.4, (a)
create, renew, amend or terminate, or give notice of a proposed renewal,
amendment or termination of, any material contract, agreement or lease for
goods, services or office space to which the Bank is a party or by which the
Bank or any of its properties is bound, excepting only contracts, agreements and
leases under which the aggregate annual payments by either party do not exceed
$10,000, (b) make any single capital expenditure exceeding $10,000 or any
capital expenditures exceeding $50,000 in the aggregate, or (c) relocate or
terminate, or file any application to relocate or terminate, the operations of
any of its banking offices (including loan production offices);
5.9.5 enter into any new line of business;
5.9.6 change its methods of accounting in effect at December 31,
1994, except as required by changes in GAAP or RAP as concurred with by the
Bank's independent auditors;
5.9.7 commit any act or omission which constitutes a Violation of
any Regulatory Agreement or any material contract or license to which the Bank
is a party or by which it or any of its properties is bound;
5.9.8 make any equity investment in any real estate or real estate
development project, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings in the ordinary
course of business consistent with prudent banking practices;
5.9.9 sell, lease, assign, transfer or otherwise dispose of any
property or asset, except for (a) investment portfolio transactions in the
ordinary course of business and substantially consistent with past practice; (b)
sales, in the ordinary course of business, of SBA Loans (or portions of such
loans) under which both the first disbursement was made on or after January 1,
1995 and the final disbursement was made after August 31, 1995; and (c) sales of
assets having a gross book value not in excess of $25,000 individually or
$100,000 in the aggregate;
5.9.10 (a) enter into any agreement with any labor union or
association representing any employee, (b) institute, amend or terminate any
Employee Benefit Plan, (c) pay any pension or retirement allowance to any Person
not required by an existing plan or agreement or, (d) except as set forth on
Schedule 3.13, increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any officer or employee other than customary annual (or less
frequent) increases in the wages or salaries of non-officer employees consistent
with past practice, which on an annualized basis does not increase the salary or
wage of any employee by more than 4% and which in the aggregate do not increase
personnel costs for all non-officer employees by more than 2% over the levels in
effect as of December 31, 1994, or increase any other direct or indirect
compensation or employee benefit for or to any of its officers, directors or
employees;
5.9.11 excepting the loans identified on Exhibit 5.9.11, make, amend
or compromise any loan or advance (whether in cash or other property) to any
officer, to any director, or to any holder of record or beneficial owner of 5%
or more of the Common Stock, except advances made (a) to employees in the usual,
regular and ordinary course of business consistent with the past practice or
(b) after reasonable notice to the Partnership, pursuant to a legally binding
loan commitment made prior to the date of the Letter of Intent;
5.9.12 make, amend or renew, or enter into any commitment to make,
amend or renew, any loan if, as a result of the disbursement of the proceeds of
such loan, the total Borrower Group Obligations (including accrued and unpaid
interest) of the borrower to the Bank would exceed $250,000, except that if the
Partnership does not grant or refuse its consent or reasonably request
additional information regarding such proposed loan within three Business Days
of the Partnership's receipt of the Bank's request for consent, then the
Partnership shall be deemed to have granted its consent; provided, however, that
obligations of the borrower to the Bank under an SBA Loan shall be deemed to
include only the book balance of the portion of such SBA Loan not previously
sold and not anticipated to be sold by the Bank (including, to the extent not
sold or anticipated to be sold, accrued and unpaid interest); and provided,
further, that this Section 5.9.12 shall not apply to:
(a) any new loan, or any amendment of an existing loan that is not
more than 15 days delinquent as to the payment of interest or principal
and the remaining maturity of which is not less than 12 months as of the
date of such amendment, in either case that
(i) is fully secured with a ratio of loan to
collateral value of not more than 0.8:1, and
(ii) is to a borrower none of whose existing Borrower
Group Obligations then has a Credit Score of 4 or 5, and
(iii) in combination with all other such new loans
constituting Borrower Group Obligations made since the date of
this Agreement, (x) in the case of borrowers all of whose
Borrower Group Obligations then have Credit Scores of 1 or 2,
does not increase such borrower's total Borrower Group
Obligations by more than the greater of 20% of its aggregate
Borrower Group Obligations as of the Most Recent Balance Sheet
Date or $50,000, or (y) in the case of borrowers any of whose
Borrower Group Obligations then has a Credit Score of 3, does
not increase such borrower's total Borrower Group Obligations
by more than the greater of 10% of its aggregate Borrower
Group Obligations as of the Most Recent Balance Sheet Date or
$40,000, and
(iv) in the case of amendments, does not extend the
maturity of any loan on the books of the Bank as of the Most
Recent Balance Sheet Date; or
(b) any renewal of an existing loan that is neither (i) a
Criticized Asset as of the date of such renewal, nor (ii) more than 15
days delinquent as to the payment of interest or principal as of the date
of such renewal;
5.9.13 except in the usual, regular and ordinary course of business
consistent with the past practice, incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity (other
than short-term indebtedness incurred to refinance short-term indebtedness), it
being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, the creation of deposit
liabilities, purchases of federal funds, sales of certificates of deposit and
entering into repurchase agreements, provided that the maturity of such
indebtedness does not exceed (a) 36 months in the case of retail certificates of
deposit in amounts of $100,000 or less, and (b) 12 months in the case of all
other such indebtedness;
5.9.14 restructure or materially change its investment securities
portfolio through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported, it being understood and agreed that
investment portfolio transactions in the ordinary course of business and
substantially consistent with past practice shall be deemed to constitute a
material change in the Bank's investment portfolio only if the number and/or
nature of such transactions causes a material change in the makeup of the
portfolio taken as a whole; or
5.9.15 enter into any agreement or commitment to do any of the
foregoing.
5.10 Agreement Regarding Merger Bank. Subject to all necessary approvals
of Bank Regulators, the Partnership and SDN jointly and severally agree (a) to
designate Merger Bank, (b) if necessary, to cause Merger Bank to be organized,
and (c) to cause Merger Bank to execute, ratify and join in this Agreement and
to take all necessary action to complete the transactions contemplated hereby,
subject to the terms and conditions hereof.
5.11 Agreement to Prosecute Regulatory Filings. The Partnership shall
prepare and file all applications necessary to obtain the Partnership
Governmental Approvals not later than ten (10) Business Days after the Bank
mails the Proxy Statement to its Shareholders. The Partnership shall thereafter
use all reasonable efforts to prosecute such applications and to obtain the
Partnership Governmental Approvals.
5.12 Agreement Regarding Funding of Transaction. In the event that the
proceeds of the subscription agreements referenced in Section 4.6 shall prove to
be insufficient to provide the Partnership adequate funds to perform its
obligations hereunder (whether because of an increase in the aggregate amount of
the Merger Consideration above the amount anticipated, a failure to collect the
full amount of such subscriptions, or otherwise), the Partnership shall use all
reasonable efforts to obtain additional or alternate sources of financing;
provided, however, that nothing herein shall condition the obligations of the
Partnership or Merger Bank on their ability to obtain such financing.
ARTICLE VI
Conditions to Closing
6.1 Conditions to Obligations of Both Parties. The obligations of the
Partnership and the Bank to consummate the Merger are subject to the
satisfaction of each of the following conditions:
6.1.1 Approval by the Bank's Shareholders. The Merger shall have
been approved by the affirmative vote of the holders of two-thirds of all shares
of Common Stock entitled to vote thereon.
6.1.2 Regulatory Approvals. All necessary approvals of any
Governmental Entity required for Merger Bank and the Bank to consummate the
Merger (including the Bank Governmental Approvals and the Partnership
Governmental Approvals) shall have been obtained and shall remain in full force
and effect; all statutory or other required waiting periods in respect thereof
shall have expired; and no approval of any Governmental Entity shall have
imposed any condition or requirement which, in the reasonable opinion of the
Partnership, would so materially adversely affect the economic or business
benefits of the Merger to the Partnership and Merger Bank so as to render
inadvisable the consummation thereof.
6.1.3 No Pending or Threatened Claims. There shall be no claim,
action, suit, investigation or other proceeding pending or overtly threatened
before any court or other Governmental Entity that presents a substantial risk
of the restraint or prohibition of the Merger or the obtaining of material
damages from the Bank, the Partnership, Merger Bank or their respective officers
or directors in connection therewith; and no such restraint or prohibition shall
be effective as of the Closing, whether or not the action in which the same was
entered shall remain pending.
6.2 Conditions to the Obligations of the Partnership and Merger Bank.
The obligations of Merger Bank to consummate the Merger, and of the Partnership
to cause Merger Bank to consummate the Merger, are subject to the satisfaction
of, or the Partnership's written waiver of, each of the following conditions:
6.2.1 Accuracy of Representations and Warranties; Compliance with
Covenants. The Bank's representations and warranties contained in this
Agreement were true and correct as of the dates when made. The Bank shall have
performed, satisfied and complied with, in all material respects, each of the
agreements and covenants contained in Articles II and V and elsewhere in this
Agreement.
6.2.2 Bringdown of Representations and Warranties. The Bank's
representations and warranties contained in this Agreement remain true and
correct as of the Closing as though made at and as of the Closing, excepting
only representations and warranties which speak (other than in the preamble to
Article III) expressly as of an earlier specified date.
6.2.3 Securities Outstanding. There shall be no shares of Common
Stock or other Bank securities issued and outstanding as of the Effective Time
other than (a) the 978,160 shares issued and outstanding as of the date hereof,
and (b) any shares issued upon the exercise of Options subsequent to the date
hereof, which exercise has been in accordance with the terms of the applicable
Option as in effect on the date hereof.
6.2.4 Cancellation of Options. All Options outstanding as of the
date hereof shall have been cancelled prior to the Effective Time. The number
of Options for which the Bank shall have paid (or shall be liable to pay)
consideration to so cancel (whether or not equal to the Option Cancellation
Payment) shall have related to not more than an aggregate of 125,602 shares of
Common Stock less the number of shares (if any) issued as described in clause
(b) of Section 6.2.3, and the Bank shall not have paid (or become liable to pay)
more than the applicable Option Cancellation Payment for the cancellation of any
such Option. As of the Effective Time, there shall be outstanding or in force
and effect no Option or other option, warrant, call, right or agreement that
obligates the Bank to issue, deliver or sell, or cause to be issued, delivered
or sold, any share of capital stock or other securities of the Bank, or that
obligates the Bank to grant, extend or enter into any such option, warrant,
call, right or agreement.
6.2.5 Dissenting Shares. The aggregate number of shares of Common
Stock affirmatively voted against the Merger or owned by Persons who have given
notice of dissent from the Merger shall not constitute more than more than 10.0%
of all shares of Common Stock outstanding immediately prior to the Effective
Time.
6.2.6 Securities Law Compliance. Any necessary securities law
filings shall have been made.
6.2.7 Third Party Consents. The consent, approval or waiver of each
Person (other than the Governmental Entities referred to in Section 6.1.2) whose
consent, approval or waiver shall be required in order to permit the
consummation of the Merger or the preservation of the contractual rights of the
Bank or with respect to its business shall have been obtained except where the
failure to obtain such consent, approval or waiver would not materially
adversely affect the economic or business benefits to the Partnership and the
Merger Bank of the Merger contemplated by this Agreement so as to render
inadvisable the consummation of the Merger in the reasonable judgment of the
Partnership.
6.2.8 Receipt of Legal Opinion. The Partnership shall have received
a legal opinion from Horgan, Rosen, Beckham & Coren, counsel for the Bank,
addressed to the Partnership and the Merger Bank and dated the Closing Date, in
form and substance reasonably satisfactory to the Partnership, opining to the
matters set forth on Exhibit 6.2.8, subject to customary assumptions and
qualifications.
6.2.9 Receipt of Auditors' Opinion. The Partnership shall have
received a letter from Arthur Anderson LLP (or such other firm as the
Partnership and the Bank may mutually choose) in connection with each of (a) its
audit of the Bank's accounts as of December 31, 1995 and (b) its audit of the
Closing Balance Sheet (if the same is audited), addressed to the Partnership and
the Merger Bank and in form and substance reasonably satisfactory to the
Partnership and customary in transactions such as the Merger, indicating that
such firm has reviewed the books, records and internal accounting statements and
accounting procedures of the Bank and based upon that review and such firm's
knowledge of the internal controls of the Bank, it has found no material
weakness in the Bank's internal control procedures.
6.2.10 Certificates and Documents. The Bank shall have delivered to
the Partnership and the Merger Bank a certificate, executed by the President and
Chief Financial Officer of the Bank and dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Section 6.1 (with regard to
the Bank only) and Section 6.2, including a certification that each
representation or warranty contained in Article III is true and correct as of
the Closing Date, excepting only representations and warranties which speak
expressly as of an earlier specified date.
6.2.11 Documents and Instruments in Satisfactory Form. All corporate
and other proceedings in connection with this Agreement and with the Merger and
all documents and instruments incident to the Merger shall be reasonably
satisfactory in substance and form to the Partnership and its counsel, and the
Partnership and its counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
6.3 Conditions to the Obligations of the Bank. The obligation of the
Bank to consummate the Merger are subject to the satisfaction of, or the Bank's
written waiver of, each of the following conditions:
6.3.1 Accuracy of Representations and Warranties; Compliance with
Covenants. The Partnership's and Merger Bank's representations and warranties
contained in this Agreement were true and correct as of the dates when made.
The Partnership and Merger Bank shall have performed, satisfied and complied
with, in all material respects, each of the agreements and covenants contained
in Articles II and V and elsewhere in this Agreement.
6.3.2 Bringdown of Representations and Warranties. The
Partnership's and Merger Bank's representations and warranties contained in this
Agreement remain true and correct as of the Closing as though made at and as of
the Closing, excepting only representations and warranties which speak (other
than in the preamble to Article IV) expressly as of an earlier specified date.
6.3.3 Receipt of Legal Opinion. The Bank shall have received a
legal opinion from Nutter, McClennen & Fish, counsel for the Partnership and
Merger Bank, addressed to the Bank and dated the Closing Date, in form and
substance reasonably satisfactory to the Bank, opining to the matters set forth
on Exhibit 6.3.3, subject to customary assumptions and qualifications.
6.3.4 Receipt of Partnership Closing Certificate. The Bank shall
have received from the Partnership a certificate, executed by the President and
Treasurer of the Partnership and dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in Section 6.1 (with regard to the
Partnership only) and Section 6.3, including a certification that each
representation or warranty with respect to the Partnership that is contained in
Article IV is true and correct as of the Closing Date, excepting only
representations and warranties which speak expressly as of an earlier specified
date.
6.3.5 Receipt of Merger Bank Closing Certificate. The Bank shall
have received from Merger Bank a certificate, executed by the President and
Chief Financial Officer of Merger Bank and dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 6.1 (with
regard to Merger Bank only) and Section 6.3, including a certification that each
representation or warranty with respect to Merger Bank that is contained in
Article IV is true and correct as of the Closing Date, excepting only
representations and warranties which speak expressly as of an earlier specified
date.
6.3.6 Documents and Instruments in Satisfactory Form. All corporate
and other proceedings in connection with this Agreement and with the Merger and
all documents and instruments incident to the Merger shall be reasonably
satisfactory in substance and form to the Bank and its counsel, and the Bank and
its counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
6.3.7 Receipt of Purchase Price. The Exchange Agent shall have
received funds adequate to pay the aggregate of all amounts required to be paid
to holders of Common Stock pursuant to Section 2.3.1.
ARTICLE VII
Termination
7.1 Means of Termination. This Agreement may be terminated, and the
Merger abandoned, prior to the Closing as follows:
7.1.1 By Mutual Agreement. The Bank and the Partnership may
terminate this Agreement by mutual written consent at any time.
7.1.2 Regulatory Impediment. Either the Partnership or the Bank may
unilaterally terminate this Agreement at any time prior to the Closing if (a) a
Bank Regulator shall have made a final determination denying an application of
any Party the granting of which is essential to the consummation of the Merger,
or (b) the occurrence of the Closing would violate any final order, decree or
judgment of any court having competent jurisdiction.
7.1.3 By the Partnership. The Partnership may unilaterally
terminate this Agreement:
(a) if the Bank has breached any representation or warranty
contained in this Agreement, or has failed to perform, satisfy or comply
with, in any material respect, any of its agreements and covenants
contained in this Agreement, such termination to take effect ten (10)
Business Days following notice from the Partnership identifying such
breach if such breach has not been cured prior to the expiration of such
period unless such breach shall consist of the Board of Directors' failure
to give its Recommendation of Approval or its withdrawl of its
Recommendation of Approval if previously given, in which cases such
termination shall take effect immediately upon notice from the
Partnership;
(b) if any of the conditions to the obligations of the Partnership
and Merger Bank contained in Section 6.2 has not been satisfied as of the
Closing Date;
(c) if the Board of Directors fails to give its Recommendation of
Approval to the Bank's shareholders, or withdraws its Recommendation of
Approval prior to the affirmative vote of the Bank's shareholders,
whether or not such failure or withdrawl is permitted under Section 5.2.2;
(d) if the Bank's shareholders have not approved the Merger on or
before January 31, 1996; or
(e) at any time after 12:00 noon (Pacific time) on June 30, 1996,
if the Closing shall not have occurred prior to such date and time, unless
such failure results primarily from the Partnership or Merger Bank
breaching any representation, warranty, covenant or agreement of such
Party contained in this Agreement.
7.1.4 By the Bank. The Bank may unilaterally terminate this
Agreement:
(a) if the Partnership has breached any representation or warranty
contained in this Agreement, or has failed to perform, satisfy or comply
with, in any material respect, any of its agreements and covenants
contained in this Agreement, such termination to take effect ten (10)
Business Days following notice from the Bank identifying such breach if
such breach has not been cured prior to the expiration of such period;
(b) if the Bank receives a Qualifying Strategic Transaction
Proposal, such termination to take effect upon the later of (i) notice
from the Bank to the Partnership and (ii) payment of the Partnership's
and Merger Bank's Expenses pursuant to Section 8.2 and the Termination Fee
pursuant to Section 8.3;
(c) if at the shareholder meeting called for the purpose of voting
on the Merger, the Bank's shareholders fail to approve the Merger,
provided that the Board of Directors has given and not withdrawn its
Recommendation of Approval, such termination to take effect upon the later
of (i) notice from the Bank to the Partnership and (ii) payment of the
Partnership's and Merger Bank's Expenses pursuant to Section 8.2; or
(d) if any of the conditions to the obligations of the Bank
contained in Section 6.3 has not been satisfied as of the Closing Date;
(e) after 12:00 noon (Pacific time) on June 30, 1996, if the
Closing shall not have occurred prior to such date and time, unless the
failure results primarily from the Bank itself breaching any
representation, warranty, covenant or agreement of such Party contained in
this Agreement.
7.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 7.1, all rights and obligations of the Parties hereunder
shall terminate without liability of any Party to any other Party (except for
any liability of any Party then in breach); provided, however, that the
provisions of this Section 7.2 and Article VIII shall remain in full force and
effect.
ARTICLE VIII
Allocation of Expenses; Termination Fee; Liquidated Damages
8.1 Expenses - General. Except as expressly provided in this Article
VIII, the Partnership and Merger Bank shall collectively be responsible for
their own Expenses and the Bank shall be responsible for its own Expenses.
8.2 Payment of Expenses upon Termination. If this Agreement is
terminated by the Partnership pursuant to subsection 7.1.3(a), subsection
7.1.3(b), subsection 7.1.3(c), or subsection 7.1.3(d), or is terminated by the
Bank pursuant to subsection 7.1.4(b) or subsection 7.1.4(c), the Bank agrees to
reimburse the Partnership for all of the Partnership's and Merger Bank's
Expenses; provided, however, that the Bank's liability for such Expenses shall
not exceed $150,000 if the Bank reimburses such amount within ten (10) Business
Days after its receipt from the Partnership of an invoice therefor, which period
shall be extended by an additional reasonable time if the Bank has reasonably
disputed the existence or amount of such obligation. The Partnership's and
Merger Bank's timely recovery of their Expenses pursuant to this Section 8.2
accompanied by, if applicable, the Termination Fee, shall constitute an
exclusive remedy, and following the Partnership's and Merger Bank's receipt and
acceptance of the same the Partnership and Merger Bank shall be barred from
recovering damages for any breach of any term of this Agreement.
8.3 Termination Fee and Liquidated Damages Payable by the Bank.
8.3.1 The Bank agrees to pay to the Partnership a Termination Fee in
the amount of $500,000 (the "Termination Fee") in the event that:
(a) this Agreement is terminated (i) by the Partnership pursuant
to subsection 7.1.3(a) on account of a breach of a covenant or agreement
by the Bank other than an Ordinary Course Operating Covenant, (ii) by the
Partnership pursuant to subsection 7.1.3(c), or (iii) by the Bank pursuant
to subsection 7.1.4(b); or
(b) (i) the shareholders of the Bank fail to approve the Merger,
and (ii) the Bank consummates a Strategic Transaction pursuant to a
definitive agreement entered into within one year following the
termination of this Agreement.
8.3.2 The Bank agrees to pay to the Partnership the sum of $200,000
(the "Bank Liquidated Damage Payment") in the event that this Agreement is
terminated by the Partnership pursuant to subsection 7.1.3(a) on account of (a)
a breach of a representation or warranty by the Bank, or (b) a breach of an
Ordinary Course Operating Covenant by the Bank.
8.3.3 Except in the event that the Bank fails to pay the Termination
Fee or the Bank Liquidated Damage Payment, as applicable, together with the
Partnership's Expenses to the extent required under Section 8.2, within ten (10)
Business Days after the Bank's receipt from the Partnership of an invoice
therefor, which period shall be extended by an additional reasonable time if the
Bank has reasonably disputed the existence or amount of such obligations, the
Partnership's timely receipt of such payments and reimbursements shall
constitute an exclusive remedy, and following such receipt and acceptance, the
Partnership and Merger Bank shall be barred from recovering damages for any
breach of any term of this Agreement.
8.4 Liquidated Damages Payable by Partnership.
8.4.1 Payment by the Partnership. In the event that the Bank
terminates this Agreement pursuant to subsection 7.1.4(a), including on the
basis of the Partnership's failure to provide funds (or cause funds to be
provided) to the Exchange Agent pursuant to Section 2.4.2, the Partnership
agrees to pay to the Bank the sum of (a) $200,000, plus (b) all of the Bank's
Expenses, not to exceed $75,000, as liquidated damages, and if the Partnership
pays (or causes to be paid) such amount to the Bank within ten (10) Business
Days of the Partnership's receipt from the Bank of an invoice therefor, which
period shall be extended by an additional reasonable time if the Partnership has
reasonably disputed the existence or amount of such obligations, the Bank's
receipt of such payment shall constitute an exclusive remedy, and following such
receipt and acceptance, the Bank shall be barred from recovering damages for any
breach of any term of this Agreement.
8.4.2 Guaranty by SDN. SDN hereby guaranties to the Bank the
payment of the obligations of the Partnership pursuant to Section 8.4.1. SDN
hereby acknowledges the Bank's reliance on the foregoing guaranty, waives
separate demand for payment, and waives all suretyship defenses it may
otherwise have in connection with such guaranty, including defenses arising from
any amendment of this Agreement and any full or partial waiver hereafter granted
by the Bank. SDN further acknowledges and represents to the Bank that it is
deriving substantial benefit from the Partnership's and, when executed by Merger
Bank, Merger Bank's undertakings under this Agreement, and will derive
substantial benefit from the consummation of the Merger, and that it has granted
the foregoing guaranty in consideration of such benefits.
ARTICLE IX
Miscellaneous
9.1 Closing. The Closing Date shall be the later of (a) that date (or
the next subsequent Tuesday, Wednesday or Thursday that is a Business Day) that
is five Business Days following the receipt of the final Governmental Approval,
or (b) April 15, 1996, unless the Partnership shall designate an earlier date;
provided, however, that in no event shall the Closing Date be earlier than
January 2, 1996. Subject to the fulfillment or waiver of the conditions
precedent set forth in Article VI, the Closing of the Merger shall take place at
the offices of Horgan, Rosen, Beckham & Coren in Los Angeles, California, at
10:00 a.m. (local time) on the Closing Date. Except as otherwise provided
herein, all proceedings to be taken and all documents to be executed at the
Closing shall be deemed to have been taken, delivered and executed
simultaneously as of the Effective Time, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed.
9.2 Publicity. Promptly following the execution and delivery of this
Agreement, the Bank and the Partnership shall issue a joint press release in the
form of Exhibit 9.2 hereto. The Bank and the Partnership shall not, and shall
instruct their Representatives not to, issue or cause the publication of any
press release or other public announcement with respect to, or otherwise make
any public statement concerning, this Agreement or the Merger without the
consent of the other Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, in the event that the Bank determines, based upon
the advice of counsel, that a press release, disclosure in a public filing, or
other public disclosure of, or reference to, this Agreement, the Merger or the
Partnership is required by law, the Bank shall first notify the Partnership of
the potential disclosure, afford the Partnership a reasonable opportunity to
review and comment on the proposed disclosure, and obtain the Partnership's
approval of such disclosure, which approval shall not be withheld or delayed in
any manner that is unreasonable under the circumstances.
9.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by electronic facsimile transmission
(with confirmation) or on the next business day after dispatch by an overnight
courier of national reputation to the respective Parties as follows:
If to the Partnership or Merger Bank, to it or them at:
Dartmouth Capital Group, L.P.
129 Shore Road
Gilford, NH 03246
Attention: Robert P. Keller
with a copy to:
Robert P. Keller
c/o SDN Bancorp, Inc.
135 Saxony Road
Encinitas, CA 92023-0926
fax: (619) 436-2882
Nutter, McClennen & Fish
One International Place
Boston, Massachusetts 02110-2699
Attention: Michael K. Krebs, Esquire
Hugh A. O'Reilly, Esquire
fax: (617) 973-9748
If to the Bank, to it at:
Liberty National Bank
One Pacific Plaza
7777 Center Avenue
Huntington Beach, CA 92647
Attention: Philip S. Inglee, President & CEO
fax: 714-891-8884
with a copy to:
S. Alan Rosen, Esq.
Horgan, Rosen, Beckham & Coren
21700 Oxnard Street, Suite 1400
Warner Center, CA 91365
fax: (818) 340-6190
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.4 Entire Agreement. This Agreement constitutes the entire agreement
among the Parties and, excepting only the confidentiality provisions of
Paragraph 4(a) and Appendix C of the Letter of Intent, supersedes all prior
agreements, understandings, negotiations and discussions, both written and oral,
among the Parties with respect to the subject matter hereof.
9.5 Alternative Structure. Notwithstanding anything to the contrary
contained herein, subject to the final sentence of this Section 9.5, the
Partnership may, at its sole option, elect to merge the Bank with and into
Merger Bank such that Merger Bank is the Resultant Bank, on the same terms and
conditions contained herein (except for such conversion); provided, however,
that the Partnership may not make such an election if it would result in the
failure of one of the conditions set forth in Section 6.1 or 6.3. In the event
that the Partnership makes an election pursuant to this Section 9.5, the Bank
shall take all actions reasonably requested by the Partnership, including
without limitation (a) obtaining any requisite corporate or stockholder
approvals and (b) amending this Agreement to the extent necessary to effectuate
such election; provided, however, that if the Partnership makes such election
after the Bank's shareholders have approved this agreement, the Bank shall not
have any further obligation to seek further shareholder approval unless the
Partnership first agrees to reimburse the Bank for any expenses incurred in
connection therewith.
9.6 Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements contained herein or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except those covenants and agreements that by their express terms apply in
whole or in part to periods after the Effective Time.
9.7 Benefits; Binding Effect; Assignment and Designation. This
Agreement shall be for the benefit of and binding upon the Parties, their
respective successors and, where applicable, assigns. No Party may assign this
Agreement or any of its rights, interests or obligations hereunder without the
prior written consent of the other Party; provided, however, that (a) the
Partnership shall designate the entity that shall be the Merger Bank, and (b)
the Partnership may assign its rights hereunder to any entity (including SDN
Bancorp) controlled as of the time of assignment by the Partnership.
Notwithstanding such designation of Merger Bank by the Partnership or any other
assignment or delegation of any Party's rights, interests or obligations, each
Party shall nonetheless remain responsible for the performance of all of its
obligations provided hereunder.
9.8 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly so provided.
9.9 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the Parties and their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
9.10 Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses, Sections or Articles contained in this Agreement
shall not affect the enforceability of the remaining portions of the Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or
sections, or subsection or subsections, had not been inserted; provided,
however, that if any provision is declared to be unenforceable because it is
determined to be overbroad, then, to the extent possible, such provision shall
be modified to the minimum extent necessary to render such provision
enforceable.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the several Parties in separate counterparts, each of which
shall be deemed to be one and the same instrument.
9.12 Remedies Cumulative. Except where a remedy is expressly stated to
be exclusive (including, where applicable, the Expense reimbursement provided
under Section 8.2, the Termination Fee provided under Section 8.3 and the
liquidated damages provided under Section 8.4), no remedy made available by any
of the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity.
9.13 Applicable Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE UNITED STATES AND THE INTERNAL LAW OF THE STATE OF
CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF) AND ALL
QUESTIONS CONCERNING THE VALIDITY AND CONSTRUCTION THEREOF SHALL BE DETERMINED
IN ACCORDANCE WITH THE LAWS OF SAID STATE. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN
THE STATE OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF AND ON
BEHALF OF SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
9.14 Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
[The rest of this page is intentionally left blank.]
IN WITNESS WHEREOF, the Parties have each executed and delivered this
Agreement as of the day and year first above written.
DARTMOUTH CAPITAL GROUP, L.P.
By: DARTMOUTH CAPITAL GROUP, INC.
Its General Partner
ATTEST:
Michael K. Krebs /s/ By: Robert P. Keller /s/
- -------------------------- --------------------------
Michael K. Krebs, Secretary Robert P. Keller, President
SDN BANCORP, INC.
ATTEST:
Michael K. Krebs By: Robert P. Keller /s/
- --------------------------- --------------------------
Michael K. Krebs, Secretary Robert P. Keller, President
LIBERTY NATIONAL BANK
By: Richard M. Wilbur /s/
--------------------------
ATTEST: Richard M. Wilbur, Chairman
Marilyn Bergland /s/ By: Philip S. Inglee /s/
- -------------------------- ----------------------------
Marilyn Bergland, Secretary Philip S. Inglee, President &
Chief Executive Officer
ACCEPTANCE AND RATIFICATION
BY MERGER BANK
The undersigned ("Merger Bank") has caused this Agreement to be executed
and delivered by its officers thereunto duly authorized, under seal, on
______________, 19__, and thereby ratifies, joins in and becomes a Party to this
Agreement.
_______________________________
Name of Merger Bank
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
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