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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) July 3, 1996
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Essex Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-10506 54-1721085
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
Reflections II, Suite 200
200 Golden Oak Court
Virginia Beach, Virginia 23452
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (804) 486-8700
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______________________________________________________________________________
(Former name or former address, if changed since last report.)
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ESSEX BANCORP, INC.
Item 5--Other Events
The Registrant issued a press release dated July 3, 1996 announcing that
its thrift subsidiary, Essex Savings Bank, F.S.B. (the "Bank"), had signed an
agreement to sell its Norfolk, Portsmouth, Hampton, Newport News, and Grafton
retail bank branches (the "Branches") to CENIT Bank, FSB, a federal savings
bank headquartered in Norfolk, Virginia. The sale of the Branches, which
aggregated approximately $70 million in deposits as of June 30, 1996, is
anticipated to close in the third quarter of 1996 and is dependent upon
regulatory approval. This sale, in addition to the separate completed sale of
the Bank's Charlotte, North Carolina branch in March 1996 and the upcoming
sale to Centura Bank, Inc. of its Raleigh, Greensboro, and Wilmington, North
Carolina branches (for which all regulatory approvals have been received),
brings the total deposits sold and anticipated to be sold by the Bank during
1996 to approximately $171 million. As a result of the decision to sell the
Branches, the Registrant plans to write down the net asset value of the
Branches, including goodwill, to their estimated net realizable value through
a second quarter charge to earnings of approximately $6 million.
In addition to the sale of the Branches, the Registrant announced an
increase during the second quarter of 1996 in the specific loss allowance on
the Bank's problem credit secured by a low-income apartment complex in
Richmond, Virginia. Management anticipates that a charge to earnings of
approximately $800 thousand, before any additions to general loan loss
reserves, will be required to increase the loan loss allowance to an adequate
level. Management is of the opinion that after the branch sales and the
additional loss provisions, the Bank will be well-capitalized from a
regulatory capital standpoint.
The disclosures contained within the press release are deemed
significant to stockholders. Therefore, these disclosures are incorporated
by reference to the press release, which is included herein as Exhibit 99.1.
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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.
Essex Bancorp, Inc.
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Registrant
Dated: July 12, 1996 By: /s/ Mary-Jo Rawson
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Vice President and Chief
Accounting Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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10.1 Branch Purchase and Deposit Assumption Agreement dated
July 2, 1996 between Essex Savings Bank, F.S.B. and CENIT
BANK, F.S.B., including Exhibits A, B and C
99.1 Essex Bancorp, Inc. press release dated July 3, 1996
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EXHIBIT 10.1
BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT
THIS BRANCH PURCHASE AND DEPOSIT ASSUMPTION AGREEMENT (the "Agreement")
is entered into as of the 2nd day of July, 1996, between Essex Savings Bank,
F.S.B., a federally-chartered stock savings bank (the "Seller"), and CENIT
BANK, F.S.B., a federally-chartered stock savings bank (the "Purchaser").
WHEREAS, the Seller wishes to sell the deposits and certain assets of
the branch offices operated by the Seller and listed on EXHIBIT A (each a
"Branch," and collectively, the "Tidewater Branches").
WHEREAS, the Purchaser wishes to purchase the deposits and certain
assets of the Tidewater Branches.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
agreements, covenants, representations, warranties and conditions contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller and the Purchaser
agree as follows:
ARTICLE 1.
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
1.01 EFFECTIVE DATE. Except as otherwise provided herein, the closing date
(hereinafter referred to as the "Effective Date") shall be: (i) the later of
September 30, 1996 or the last business day of the month next ending at least
ten (10) calendar days following the date on which all regulatory approvals
for this transaction, required by law and this Agreement, have been obtained
and all waiting periods required by statute have expired so that this sale
may be legally consummated in accordance with the terms of this Agreement; or
(ii) such other date thereafter as may be mutually agreed to by the parties,
which agreement shall not be unreasonably withheld.
1.02 TRANSFER OF ASSETS AND CONSIDERATION THEREFOR.
(a) Subject to the terms and conditions of this Agreement, the Seller
will sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser will purchase from Seller, on the Effective Date:
(i) all of the Seller's right, title and interest in and to the real
property described on EXHIBIT B hereto (the "Branch Property");
and
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(ii) all of the Seller's right, title and interest in and to all of
the furniture, fixtures and equipment used in the operation of
the Hampton and Newport News Branches, except as provided in
Section 1.11 (the "Fixed Assets"). A schedule of the Fixed
Assets will be furnished by the Seller to the Purchaser
within ten (10) business days following the date of execution
of this Agreement; and
(iii) all of the Seller's right, title and interest in and to
certain deposit related loans of the Tidewater Branches (the
"Deposit Loans"), consisting of loans secured by deposit
instruments, including but not limited to, savings accounts
and certificates, on the books of the Tidewater Branches as
of the close of business on the Effective Date. A schedule
of the Deposit Loans as of May 31, 1996 will be furnished by
the Seller to the Purchaser contemporaneously with the
execution of this Agreement; and
(iv) all of the Seller's right, title and interest in and to the
net amount of proration items, as described in Section 1.10,
paid by the Seller on or prior to the Effective Date but
relating to periods after the Effective Date, deposits (other
than those related to the real property leases attached as
EXHIBIT C (the "Branch Leases")) held by others with respect
to the Tidewater Branches, and cash on hand in the Tidewater
Branches.
The purchase price for the Deposit Loans shall be equal to the unpaid
principal balance of the Deposit Loans, plus accrued and unpaid interest, as
of the close of business on the Effective Date. On the Effective Date, the
purchase price for the Deposit Loans shall be calculated based on the unpaid
principal balance of the Deposit Loans, plus accrued and unpaid interest, as
of 12:01 a.m. of the first day of the month in which the Effective Date
occurs (the "Measurement Date"). The purchase price for the Deposit Loans
shall be paid by offsetting the purchase price against the deposit
liabilities assumed pursuant to Section 1.02(d).
(b) The Seller may elect to exclude the Grafton Branch from the
Tidewater Branches by delivering notice of such exclusion to Purchaser on or
before July 16, 1996. Upon delivery of such notice, the Purchaser shall have
no obligation under this Agreement regarding the Grafton Branch.
(c) The Seller acknowledges the Purchaser's intent to relocate the
Norfolk and Portsmouth Branches to existing branches operated by the
Purchaser and to close the Grafton Branch. If the Seller does not elect to
exclude the Grafton Branch from the Tidewater Branches as provided in Section
102(b) above, the Seller will promptly provide all notices required by 12
U.S.C. 1831r-1 regarding the closure of the Grafton Branch. The regulatory
applications to be submitted to the OTS in connection with the transactions
contemplated by
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this Agreement shall provide notice of the short distance relocations of the
Norfolk and Portsmouth Branches.
(d) On the Effective Date, subject to the terms and conditions of this
Agreement, and in consideration for the aforesaid sale, assignment, transfer,
conveyance and delivery:
(i) the Purchaser will pay to the Seller pursuant to Section
1.05(c), by offset against the deposit liabilities assumed
pursuant to subsection (iii) below, the "Fair Market Value"
(as defined below) of the Branch Property, calculated as
provided in Section 1.07; and
(ii) the Purchaser will pay to the Seller pursuant to Section
1.05(c), by offset against the deposit liabilities assumed
pursuant to subsection (iii) below, the book value of the
Fixed Assets, calculated by reference to the Seller's books
as of the calendar month next ending on or prior to the
Measurement Date; and
(iii) the Purchaser will assume and agree to pay, perform and
discharge all deposit liabilities of the Seller, including
accrued interest, now existing or hereafter arising and
existing as of the close of business on the Effective Date,
attributed on the records of the Seller to the Tidewater
Branches (the "Assumed Deposits").
1.03 PAYMENT OF PREMIUM. On the Effective Date, subject to the terms and
conditions of this Agreement, the Purchaser also shall pay to the Seller a
premium (the "Premium") for the Assumed Deposits in the amount of three
percent (3%) of the aggregate balance of Qualifying Deposits. For the
purposes of this Agreement, "Qualifying Deposits" shall consist of all
Assumed Deposits, other than:
(a) deposit accounts having a balance, as of the close of business on
the Effective Date, in excess of Ninety-Five Thousand Dollars ($95,000)
("Jumbo Accounts"), except for Jumbo Accounts the holders of which have one
or more other deposit relationships (other than solely other Jumbo Accounts)
with the Seller or the Purchaser involving aggregate deposit balances of at
least $750, and
(b) the Assumed Deposits associated with the Grafton Branch.
1.04 PURCHASE OF LOANS. All Deposit Loans (and any notes, other evidences
of indebtedness or security instruments associated therewith) transferred to
the Purchaser on the Effective Date pursuant to Section 1.02 shall be
transferred without recourse except as provided in this Agreement and without
any representations or warranties as to the collectability of any such
Deposit Loans or the creditworthiness of any such obligors.
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1.05 OBLIGATIONS OF THE SELLER ON THE EFFECTIVE DATE. On the Effective Date,
the Seller will:
(a) deliver to the Purchaser such of the assets purchased as shall be
capable of physical delivery;
(b) execute, acknowledge (if appropriate) and deliver to the Purchaser
Deeds and a Bill of Sale in the forms attached as EXHIBITS D and E hereto,
and, at the Seller's expense, all such other deeds, endorsements, assignments
or other instruments of conveyance, assignment and transfer as shall be
reasonably necessary or advisable to consummate the sale and transfer to the
Purchaser of the Branch Property and the Fixed Assets;
(c) deliver to the Purchaser cash or immediately available funds equal
to the Assumed Deposits, measured as of 12:01 a.m. on the Measurement Date,
less the sum of:
(i) the unpaid principal balance, plus accrued and unpaid interest,
of the Deposit Loans to be purchased by the Purchaser
pursuant to Section 1.02(a)(iii), measured as of 12:01 a.m.
on the Measurement Date,
(ii) to the extent not accounted for in the calculation of the
Assumed Deposits, all amounts owed by deposit customers as a
result of writing a check or similar instrument and creating
an overdraft on an account,
(iii) the payment for the Branch Property and Fixed Assets set
forth in Sections 1.02(d)(i) and 1.02(d)(ii),
(iv) the net amount of proration items, as described in Section
1.10, paid by or obligated to be paid by the Seller on or
prior to the Effective Date but relating to periods after the
Effective Date,
(v) the total amount of all unpaid rent and other payments
related to the Branch Leases and related to periods after the
Effective Date and until the scheduled expiration or
termination of the Branch Leases, reduced by the amounts, if
any, by which the landlords under the Branch Leases may have
agreed to reduce the remaining obligations of the Seller as
tenant under the Branch Leases,
(vi) the amount of all deposits (other than those related to the
Branch Leases) held by others with respect to the Tidewater
Branches,
(vii) cash and cash equivalents on hand in the Tidewater Branches,
and
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(viii) the Premium, based on the amount of Qualifying Deposits as
of 12:01 a.m. on the Measurement Date.
(d) assign, transfer and deliver to the Purchaser such of the records
pertaining to the Assumed Deposits and the Deposit Loans and any other
records reasonably requested by the Purchaser as exist and are in the
Seller's possession or control, as detailed in Section 1.08(g).
The Purchaser agrees that it will preserve and safely keep, for as long as
may be required by applicable law, all of the signature cards, orders,
contracts, forms, taxpayer identification number certifications, and records
hereinabove referred to for the joint benefit of itself and the Seller, and
that it will permit the Seller and its representatives to inspect, and make
extracts from or copies of, any such records, at any reasonable time, and at
the expense of the Seller, as shall be reasonably necessary to the Seller for
purposes of its records. The Seller agrees that it will preserve and safely
keep, for as long as may be required by applicable law, all of the files,
books of accounts and records as exist and are in Seller's possession (and
not delivered to the Purchaser as provided above) pertaining to the past
history of the accounts transferred hereunder, including deposit slips,
cancelled checks or withdrawal orders, for the joint benefit of itself and
the Purchaser, and that it will permit the Purchaser and its representatives
to inspect, and make extracts from or copies of, any such files, books of
accounts or records, at any reasonable time and at the expense of the
Purchaser, as shall be reasonably necessary to the Purchaser for purposes of
its records.
1.06 ASSUMPTION AGREEMENT. To evidence the assumption by the Purchaser of
the liabilities and obligations of the Seller assumed pursuant to this
Agreement, the Purchaser and the Seller will execute, acknowledge and
deliver, on the Effective Date, an Assumption Agreement in the form attached
as EXHIBIT F hereto. The Seller acknowledges that the Purchaser does not
assume and shall have no liability for any debts, liabilities or obligations
of the Seller of any kind whatsoever except as specifically set forth in this
Agreement and the Assumption Agreement.
1.07 FAIR MARKET VALUE OF BRANCH PROPERTY. The Branch Property includes the
land and improvements associated with the Hampton and Newport News Tidewater
Branches. The Seller and Purchaser hereby designate Richard Burroughs of
Harvey Lindsay Commercial Real Estate (the "Broker") to determine the fair
market value (the "Fair Market Value") of the Branch Property, which will be
rendered in the form of a broker's price opinion. The Broker's determination
of Fair Market Value shall be reported to the Seller and the Purchaser within
thirty (30) days of the date of this Agreement, will be based upon such
factors as the Broker deems appropriate, and shall be binding upon the
parties. All costs associated with the Broker's determination of Fair Market
Value will be shared equally by the Purchaser and the Seller.
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1.08 CERTAIN TRANSITIONAL MATTERS.
(a) On or before the Effective Date, the Seller and the Purchaser shall
cooperate and take all actions as are necessary to arrange for the direct
routing to the Purchaser through the check clearing system of the banking
industry, effective immediately following the Effective Date, all checks,
drafts and withdrawal orders on forms provided by the Seller and carrying its
imprint (including name and transit routing number) drawn against amounts
transferred to the Purchaser. Such items will be presented to the Seller's
item processor ("BISYS") with other items drawn on the Seller's transit
routing number. Upon presentation to BISYS the following process will be
employed:
(i) A copy of the report noting all checks, drafts, withdrawal
orders and ACH items presented for payment will be sent via
facsimile to the Purchaser.
(ii) A copy of the report noting ACH and other credit items, with
all pertinent information, will be sent via facsimile to the
Purchaser.
(iii) Based on the total debits and total credits reported, the
Purchaser will take those steps necessary to make wire
transfer payment for the net amount due to the Seller at an
account to be provided by the Seller.
(iv) The items presented for payment and/or credit will be
consolidated into a cash letter. Said cash letter will be
available for pick up by the Purchaser at BISYS by 4 p.m. the
day following the day of presentment or at a mutually agreed
upon location and time.
All checks, drafts and withdrawal orders drawn against balances transferred
will be consolidated into a cash letter by BISYS for pick up by the Purchaser
as specified in Section 1.08(a)(iv) above.
Within ten days after the Effective Date, checks, drafts and
withdrawal orders with the Purchaser's transit routing number should be
provided to the holders of all transferred accounts with checks, drafts or
withdrawal orders carrying the Seller's transit routing number. After ninety
(90) days, or such other period as may be mutually agreed upon by the Seller
and the Purchaser, all checks, drafts, and withdrawal orders on forms
provided by the Seller and carrying its imprint will be returned to the payee
unpaid and will not be available for pick up by the Purchaser.
All items clearing through Automated Clearing House ("ACH") will be
processed and settled by Federal Reserve Bank ("FRB") through the Seller's
transit routing number. After presentment of the ACH item, all items
settling against accounts transferred to
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the Purchaser will be provided to the Purchaser on a daily ACH clearing
report to allow posting of the item to the transferred account. Immediately
after the Effective Date, the Purchaser shall use its reasonable best efforts
to provide notification of changes to the FRB to request the change of the
transit routing number to the Purchaser's number on all ACH items settling to
a transferred account. After ninety (90) days, or such other period as may
be mutually agreed upon by the Seller and the Purchaser, the ACH item will be
returned to the originator and the daily ACH report will not be available to
the Purchaser.
The Purchaser agrees to pay the Seller for all checks, drafts and
withdrawal orders drawn against funds transferred to the Purchaser and ACH
debit items presented to the Seller drawn against transferred accounts less
ACH credit items payable to transferred accounts each day by wire transfer.
If ACH credit items exceed debit items, the Seller agrees to make payment to
the Purchaser each day via wire transfer.
(b) After the Effective Date, the Purchaser agrees to pay in accordance
with law, up to the collected amount on deposit to the extent of the amount
transferred to the Purchaser on the Effective Date (and any other funds
available by reason of any agreement between the depositor and the
Purchaser), all properly drawn and presented checks, drafts and withdrawal
orders presented to the Purchaser by mail, over its counters or through the
check clearing system of the banking industry, by depositors of the accounts
assumed, whether drawn on the checks, withdrawal or draft forms provided by
the Seller, or by the Purchaser, subject to the Purchaser's rules and
regulations regarding deposit accounts.
(c) If any of such depositors, instead of accepting the obligation of
the Purchaser to pay the Assumed Deposits, shall demand payment from the
Seller for all or any part of the Assumed Deposits, the Seller shall not be
liable or responsible for making such payment. Instead, the Seller may, at
its discretion, assume custody of the check or other item presented for
payment on an account which has been transferred with the Tidewater Branches,
and shall immediately forward such items to the Purchaser in the manner
provided in subsection (a) above. The Seller shall not, at any time, be
liable or responsible for making payment on such items by reason of its
obtaining custody of them for transmittal to the Purchaser.
(d) The Purchaser agrees, no later than noon of the second business day
after demand by the Seller, to pay the Seller an amount equivalent to the
amount of any uncollected item included in a depositor's balance as of the
close of business on the Effective Date which is returned on or within
thirty (30) days after the Effective Date as uncollected within the time
contemplated by applicable clearinghouse rules and applicable federal
regulations and that is not charged directly to the depositor's account with
the Purchaser. Provided the Purchaser has not honored checks written on
uncollected funds, the extent to which the Purchaser shall be required to
make such payment for an item shall be limited to the amount on deposit with
the Purchaser at the time the Seller makes the demand aforesaid. Uncollected
funds will be defined by the Seller's availability schedules pursuant to
Regulation CC.
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(e) If the balance due on any Deposit Loan has been reduced by the
Seller as the result of a payment by check received on or prior to the
Effective Date, which item is returned within thirty (30) days after the
Effective Date as uncollected within the time contemplated by applicable
clearinghouse rules, the asset value represented by the Deposit Loan shall be
correspondingly increased and an amount in cash equal to such increase shall
be paid by the Purchaser to the Seller after the Effective Date upon demand.
(f) Not later than the last business day of the month following the
month in which the Effective Date occurs (the "Settlement Date"), the Seller
and the Purchaser shall reconcile the amount of cash or immediately available
funds paid by the Seller to the Purchaser on the Effective Date pursuant to
Section 1.05(c) by recalculating the amount payable pursuant to Section
105(c) by substituting measurements of Deposit Loans, Assumed Deposits and
Qualifying Deposits, plus accrued interest, as of the close of business on
the Effective Date for the measurements as of the Measurement Date that were
utilized on the Effective Date, and by making such adjustments to the amounts
of proration items utilized for the purposes of Section 1.05(c)(iv) as shall
be necessary to reflect bills and invoices received after the Effective Date.
On the Settlement Date, the Seller shall make an additional payment to the
Purchaser, or the Purchaser shall refund to the Seller, as the case may be,
in cash or immediately available funds, the amount necessary (i) to adjust
the amount originally paid by the Seller on the Effective Date to the amount
that would have been paid if measurements as of the close of business on the
Effective Date had been utilized on the Effective Date, (ii) to reflect such
adjustment to the proration items, (iii) to pay to the Purchaser any payments
on any of the Deposit Loans received by the Seller after the Effective Date,
(iv) to adjust for the parties' respective shares of the costs associated
with the Broker's determination of Fair Market Value, (v) to adjust for the
parties' costs associated with the regulatory applications prepared and filed
as contemplated by Sections 5.02 and 10.06, and (vi) to adjust for any unpaid
overtime expenses payable by the Purchaser pursuant to Section 4(d).
(g) The Seller will provide the following records pertaining to the
Assumed Deposits as are contained in the BISYS system at no charge (except as
otherwise provided below) to the Purchaser:
- At least thirty (30) days prior to the Effective Date, the
Seller will provide a copy of tapes and layouts containing
customer information files for the Assumed Deposits. Prior to
the Effective Date, the Seller will provide, subject to
reimbursement by the Purchaser of the Seller's out-of-pocket
costs associated with additional tapes subsequent to the first
"clean" tape, additional tapes and layouts within five (5)
business days (subject to the ability of BISYS to provide the
information within five (5) business days) after receipt of a
written request.
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- At least thirty (30) days prior to the Effective Date, a printed
copy of all information contained in the customer information file
(customer name, tax I.D., address(es), account relationships,
etc.) and all customer financial data reasonably required by the
Purchaser and an unlabeled, standard display format (EBCIDIC)
and a comma delineated or other word processing format, fixed
record length, machine readable tape copy with blocks not
exceeding 5,000 bytes.
- On or immediately preceding the business day next following the
Effective Date, a printed copy of information contained in the
customer information file (customer name, tax I.D., address(es),
account relationships, etc.) and all customer financial data
reasonably required by the Purchaser as of the close of business
on the Effective Date and an unlabeled, standard display format
(EBCIDIC), fixed record length, machine readable "clean" tape
copy with blocks not exceeding 5,000 bytes.
The Seller will also provide reasonable assistance to the Purchaser
prior to and for a period of forty-five (45) days after the Effective Date in
the deconversion of the deposit records relating to the Tidewater Branches
from the BISYS system presently used by the Seller, and will assist the
Purchaser, at Purchaser's request and expense, in extending the contract of
the Seller with BISYS for the Purchaser's account and in providing any
special deconversion assistance to the Purchaser; provided that unless the
Purchaser has requested such an extension, any termination or similar fee and
all reasonable expenses incurred by the Seller associated with such
deconversion shall be borne by the Seller. In the event such an extension is
requested, all expenses incurred must be approved by the Purchaser and billed
directly to the Purchaser by BISYS. During any such conversion prior to the
Effective Date, the Seller will permit the Purchaser to have employees and/or
agents in the Seller's premises to monitor and assist with the conversion,
provided that such monitoring and assistance does not unreasonably interfere
with the Seller's operations.
(h) On or before the Effective Date, the Seller will cancel all
automatic teller machine (ATM) cards issued by it to customers of the
Tidewater Branches. At least thirty (30) days prior to the Effective Date,
the Seller will furnish to the Purchaser a printed copy of the Seller's
complete ATM cardholder information, including PIN numbers (to the extent
such information is available to the Seller).
(i) The Seller will forward by wire to the Purchaser all incoming wires
received after the Effective Date relating to accounts assumed by the
Purchaser.
(j) The Seller will render a final statement as of the Effective Date
to each depositor of an account assumed under this Agreement.
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1.09 INDEMNIFICATION.
(a) The Seller shall indemnify, hold harmless and defend the Purchaser,
its directors, officers, employees, representatives and agents (collectively,
the "Purchaser Indemnified Parties") from and against all claims, losses,
liabilities, demands, obligations, costs and expenses, including reasonable
legal fees and expenses, real estate, personal property, sales and use,
social security and unemployment taxes, all accounts payable and operating
expenses including salaries and utility charges (collectively, "Claims"),
which the Purchaser Indemnified Parties may receive, suffer or incur relating
to matters that arise from ownership and operation of the Tidewater Branches
on or before the Effective Date. The Seller agrees further to defend,
indemnify and hold harmless the Purchaser Indemnified Parties against all
Claims resulting from any material breach of this Agreement by the Seller, or
from any breach of any representation or warranty made by the Seller in the
Agreement or in any certificate delivered to the Purchaser hereunder. The
Purchaser will give the Seller written notice of a threatened or pending
claim within thirty (30) calendar days (except in the case where the
Purchaser's first notice is its receipt of the complaint, in which case such
time for giving notice shall be fifteen (15) calendar days) of its learning
about such claim, together with a statement of facts known to it regarding
such claim. The Seller will then have forty-five (45) calendar days from the
date it received such notice to investigate the claim and determine whether
it will elect to assume the defense of the matter involving such claim. If
it does so elect, the Seller will be given the Purchaser Indemnified Parties'
full cooperation and assistance in maintaining said defense. The Seller
shall not be liable for any amounts in settlement of a claim or action as
described above if such settlement is effected without the Seller's written
consent, which consent shall not be unreasonably withheld. It is understood
that the obligations of the Seller under this paragraph shall survive the
Effective Date.
In addition to and without limitation of any other provision of
this Agreement, the Seller agrees that the foregoing obligations shall extend
to all Claims arising out of, relating to or resulting from any violation of,
non-compliance with, or liability under any Environmental Law (as hereinafter
defined) occurring, relating to or arising from conditions, circumstances,
events or practices occurring at the Branch Property, or the release,
emission, discharge, handling, generation, treatment, storage or disposal of
hazardous materials at the Branch Property, on or after the time the Seller
acquired the Branch Property and prior to the Effective Date.
(b) The Purchaser shall indemnify, hold harmless and defend the Seller,
its directors, officers, employees, representatives and agents (collectively,
the "Seller Indemnified Parties") from and against all Claims which the
Seller Indemnified Parties may receive, suffer or incur relating to matters
that arise from ownership and operation of the Tidewater Branches after the
Effective Date. The Purchaser agrees further to defend, indemnify, and hold
harmless the Seller Indemnified Parties from and against all Claims resulting
from any material breach of this Agreement by the Purchaser, or from any
breach of any representation or warranty made by the Purchaser in this
Agreement or in any certificate delivered to the
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Seller hereunder. The Seller will give the Purchaser written notice of a
claim within thirty (30) calendar days (except in the case where the
Seller's first notice is its receipt of a complaint, in which such time for
giving notice shall be fifteen (15) calendar days) of its learning about such
claim, together with a statement of facts known to it regarding such claim.
The Purchaser will then have forty-five (45) calendar days from the date it
receives such notice to investigate the claim to determine whether it will
elect to assume the defense of the matter involving such claim. If it does
so elect, the Purchaser will be given the Seller Indemnified Parties' full
cooperation and assistance in maintaining such defense. The Purchaser shall
not be liable for any amounts in settlement of a claim or action as described
above if such settlement is effected without the Purchaser's written consent,
which consent shall not be unreasonably withheld. It is understood that the
obligations of the Purchaser under this paragraph shall survive the Effective
Date.
1.10 PRORATA ADJUSTMENT OF EXPENSES; SERVICE CONTRACTS.
(a) All rent and other payments related to the Branch Leases, real
estate taxes, personal property taxes, intangibles taxes, utility payments,
service contracts assumed by the Purchaser as provided in subsection 1.10(b)
below, deposit premiums (except to the extent provided in Section 5.08),
insurance and similar expenses relating to the Tidewater Branches, the
Assumed Deposits and/or the Branch Property shall be prorated between the
parties as of the close of business on the Effective Date.
(b) The Purchaser may elect, at its option, to assume and discharge,
and the Seller shall transfer and assign to the Purchaser upon the
Purchaser's request, certain service contracts and other contractual
obligations and undertakings of the Seller incurred by the Seller in the
ordinary course of business in connection with the operation and maintenance
of the Tidewater Branches. The Seller has provided to the Purchaser
information regarding such service contracts and other contractual
obligations. Unless the Purchaser elects to assume any such obligations by
notice to the Seller within thirty (30) days after the date of this
Agreement, the Seller shall arrange for the termination of all such service
contracts and other contractual obligations and undertakings at or before the
close of business on the Effective Date, and shall have sole responsibility
for all costs of termination in connection therewith. The Seller shall retain
all liability under service contracts and other contractual obligations not
assumed by the Purchaser.
1.11 ESSEX SIGNAGE AND OTHER RETAINED PROPERTY. The Seller shall be
entitled to remove from the premises of the Tidewater Branches, not later
than five (5) business days following the Effective Date, at its expense, and
at reasonable times, upon reasonable notice and without damage or unnecessary
disruption, (a) all signage displaying the "Essex" name and/or trademarks or
service marks utilized by the Seller in the conduct of its business, and (b)
all software and dedicated lines associated with Seller's internal data
processing and internal communications systems (collectively, including the
signage, the "Excluded Assets"). The
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Purchaser agrees to allow the Seller to retain the Excluded Assets, which
will be identified on the Fixed Assets schedule to be furnished by the Seller
pursuant to Section 1.02(a)(ii).
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
2.01 CORPORATE ORGANIZATION AND POWERS. The Seller is a federally chartered
capital stock savings bank duly organized, validly existing and in good
standing under the laws of the United States of America and the rules and
regulations of the Office of Thrift Supervision ("OTS"). The Seller has the
corporate power and authority to own its properties, to effect this
transaction and carry on its business as presently conducted. The Seller's
deposits are, subject only to monetary limits established by law and
regulation, insured by the Savings Association Insurance Fund ("SAIF").
2.02 BRANCH PROPERTY AND FIXED ASSETS.
(a) The Branch Property is subject to no mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge of any
nature whatsoever (other than for taxes not yet due and payable) not
reflected in the title insurance commitments attached as EXHIBIT G.
(b) The Seller has, and at the Effective Date will have, good and
marketable title to the Fixed Assets, and in each case subject to no
mortgage, pledge, lien, security interest, conditional sale agreement,
encumbrance or charge of any nature whatsoever.
(c) Except for the Excluded Assets, the Fixed Assets are all of the
physical assets owned by the Seller and used by it to conduct the business of
the Tidewater Branches as of the date hereof; the banking equipment, fixtures
and furniture comprising the assets being sold is in good operating
condition and repair, giving consideration to its age and use and subject to
ordinary wear and tear. The Purchaser, however, acknowledges and agrees that
all such property is being sold "as is" and without any warranties, express
or implied, other than those specified in this paragraph.
(d) No notice of any violation of zoning laws, building, fire, or other
regulating laws, statutes, ordinances and regulations relating to the
Tidewater Branches has been received by the Seller and the Seller has no
knowledge of any such violation.
2.03 DEPOSIT LOANS. The Seller owns, as of the Effective Date, all Deposit
Loans, free from liens and encumbrances, and has no actual knowledge of any
defense to payment of any maker
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of any Deposit Loan. The outstanding principal and interest balances of the
Deposit Loans do not exceed the balances of the deposit accounts with which
they are associated.
2.04 NO VIOLATION. Neither the execution and delivery of this Agreement,
nor the consummation of this sale or the Seller's performance hereunder, will
violate or conflict with: (i) the Charter or Bylaws of the Seller; (ii) any
provision of any agreement or any other restriction of any kind to which the
Seller is a party or by which the Seller is bound; or (iii) any statute,
law, decree, regulation or order of any governmental authority, once the
governmental consents referred to in this Agreement are obtained; or will
result in a default under, or cause the acceleration of the maturity of, any
obligation or loan to which the Seller is a party.
2.05 CORPORATE AUTHORITY. The execution and delivery of this Agreement, the
consummation of this sale and the Seller's performance hereunder, have been
duly authorized by the Board of Directors of the Seller. No further
corporate authorization on the part of the Seller is necessary to consummate
the transaction.
2.06 NO LITIGATION. There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before any court, public board or body
pending, or to the knowledge of the Seller threatened, against the Seller,
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the Tidewater Branches, the Branch Property, the assets or
liabilities being transferred or assumed pursuant to this Agreement, the
Seller's ability to perform this Agreement or the transactions contemplated
hereby.
2.07 TAXES. The Seller has filed all required tax returns and reports
(including payroll withholding, sales, use, transfer, excise and property
taxes) to the taxing authority of each jurisdiction to which its operations
at the Tidewater Branches are subject. Seller has collected and paid over to
the taxing authority of each jurisdiction to which its operations at the
Tidewater Branches are subject all taxes (including tax penalties and
interest) that are due and payable for periods on or prior to the Effective
Date and for which the Purchaser could have transferee liability or in
respect of which any of the assets being transferred to the Purchaser in
connection with this Agreement could be subjected to a lien therefor. No
taxing authority has assessed any claim against the Seller for the assessment
of any such tax liability (including additions to tax penalties and
interest), withholding or other governmental charges.
2.08 ENVIRONMENTAL MATTERS. Except as previously disclosed to the
Purchaser, neither the Seller nor to the Seller's knowledge any other
occupant or user of the Branch Property or any part thereof or any other
person or entity has taken any action or received any written report that
would result in or indicate, and the Seller has no knowledge of, any
condition such that the Branch Property, including without limitation, the
improvements thereon and the groundwater and soil thereunder, (i) contains
or is contaminated by, any Hazardous Material (as defined below), (ii)
contains (or has previously contained) any underground storage tanks,
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(iii) contains any asbestos, (iv) has been used for the generation,
treatment, release, installation, storage or disposal of any Hazardous
Material, or for manufacturing, mining, landfilling, dumping or drycleaning
purposes, (v) has been the subject of any activities representing a violation
or alleged violation of any Environmental Law (as defined below) or requiring
corrective action regarding elimination or control of any Hazardous Material,
(vi) has had any release of any Hazardous Material from, on, in or upon it,
or faces any risk of contamination by any Hazardous Material from any nearby
property, (vii) has been the subject of an environmental audit or assessment,
or remedial action for any environmental problem or (viii) has transported
any Hazardous Material from the Branch Property in violation of any
Environmental Law or other code, ordinance, statute, rule, regulation,
permit, approval or other legal requirement. As used herein, "Hazardous
Material" means any substance or material meeting any one or more of the
following criteria: (i) it is or contains a substance designated as a
hazardous waste, hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law; (ii) it is toxic,
reactive, corrosive, ignitable, infectious or otherwise hazardous; or (iii)
it is or contains, without limiting the foregoing, petroleum hydrocarbons.
As used herein, "Environmental Law" shall mean any federal, state or local
law (including common law), statute, ordinance, rule, regulation, permit,
directive, license, approval, guidance, interpretation, order, or other legal
requirement relating to the protection of human health, industrial hygiene or
the environment, including, but not limited to, CERCLA, RCRA and the
Superfund Amendments and Reauthorization Act of 1986.
2.09 INSURANCE. The Fixed Assets are covered by effective insurance in
amounts at least equal to their respective fair market values and insurance
against such losses as are generally insured against by comparable
businesses. In addition, the Tidewater Branches are insured against
casualties and such other events as included in extended coverage fire and
casualty policies. All amounts due and payable under such insurance policies
are fully paid, and all such insurance policies are in full force and effect.
2.10 BROKERED DEPOSITS. The Assumed Deposits do not include any "brokered
deposits" within the meaning of 12 C.F.R. Section 337.6 (as in effect on
January 1, 1996).
2.11 COMPLIANCE WITH LAWS. The Tidewater Branches, the Branch Property, and
the Seller's operation of the Tidewater Branches are in compliance in all
material respects with all applicable laws, statutes and governmental
regulations that relate to the Seller or its operation of the Tidewater
Branches.
2.12 EMPLOYMENT CONTRACTS. The Seller has no employment contracts with any
employees who are employed by Seller in connection with the Tidewater
Branches. Except as provided in Section 5.04 below, no liability or
obligation to any of Seller's employees will be transferred to the Purchaser
pursuant to this Agreement or the transactions contemplated hereunder.
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2.13 FINDERS OR BROKERS. The Seller has not in any manner whatsoever paid
or agreed to pay any fee or commission to any agent, broker, finder or other
person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transactions covered and contemplated
hereby. All negotiations relating to this Agreement have been conducted by
the Seller directly and without the intervention of any person in such manner
as to give rise to any valid claim against any party hereto for any brokerage
commission or finder's fee or other like payment.
2.14 INFORMATION. The financial and other information regarding the
Tidewater Branches provided by the Seller to the Purchaser and attached to or
listed in EXHIBIT H was accurate and correct in all material respects as of
the dates reflected therein.
2.15 LIMITATION OF WARRANTIES. Except as may be expressly represented or
warranted in this Agreement by the Seller, the Seller makes no
representations or warranties whatsoever with regard to any assets being
transferred to the Purchaser, or liability or obligation being assumed by the
Purchaser.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Seller the following:
3.01 CORPORATE ORGANIZATION. The Purchaser is a financial institution duly
organized, validly existing and in good standing under the laws of the
jurisdiction under which it was established. The Purchaser has the corporate
power and authority to own or lease its properties, to effect the
transactions contemplated hereby and to carry on its business as presently
being conducted. The Purchaser's deposits are insured, subject only to
monetary limits established by law or regulation, by the Savings Association
Insurance Fund.
3.02 NO VIOLATION. Neither the execution and delivery of this Agreement,
nor the consummation of this sale or the Purchaser's performance hereunder,
will violate or conflict with: (i) the Charter or the Bylaws of the
Purchaser; (ii) any provision of any agreement or any other restriction of
any kind to which the Purchaser is a party to or by which the Purchaser is
bound; or (iii) any statute, law, decree, regulation or order of any
governmental authority, once the governmental consents referred to in this
Agreement are obtained, or will result in a default under, or cause the
acceleration of the maturity of, any obligation or loan to which the
Purchaser is a party.
3.03 CORPORATE AUTHORITY. The execution and delivery of this Agreement, and
the consummation of this sale and the Purchaser's performance hereunder, have
been duly authorized by the Board of Directors of the Purchaser. No further
corporate authorization on the part of the Purchaser is necessary to
consummate this transaction.
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3.04 NO LITIGATION. There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before any court, public board or body
pending, or to the knowledge of the Purchaser threatened, against the
Purchaser, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the Purchaser's ability to perform this
Agreement or the transactions contemplated hereby.
3.05 FINDERS OR BROKERS. The Purchaser has not in any manner whatsoever
paid or agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transactions covered and contemplated
hereby. All negotiations relating to this Agreement have been conducted by
the Purchaser directly and without the intervention of any person in such
manner as to give rise to any valid claim against any party hereto for any
brokerage commission or finder's fee or other like payment.
ARTICLE 4.
CONDUCT OF BUSINESS PENDING THE EFFECTIVE DATE
Pending the Effective Date, and except as otherwise consented to by the
Purchaser or provided for by this Agreement:
(a) The Seller will carry on the business of the Tidewater Branches
diligently and substantially in the same manner as on the date of this
Agreement.
(b) The Seller will use reasonable efforts to preserve its business
operations as conducted at the Tidewater Branches intact. The Seller further
agrees to use reasonable efforts to preserve for the Purchaser the goodwill
of its customers and others having relations with the business normally
conducted at the Tidewater Branches, and to cooperate with and assist the
Purchaser in assuring the orderly transition of such business from the Seller
to the Purchaser. Nothing in this paragraph shall be construed as requiring
the Seller to engage in any activities or efforts outside of the ordinary
course of business as presently conducted.
(c) The Seller will not (i) accept any new Jumbo Accounts at the
Tidewater Branches unless the deposit rates paid with respect to such
accounts are equal to or less than the deposit rates for accounts offered by
the Seller that are not Jumbo Accounts or (ii) originate or renew any
National Market Certificates of Deposit at the Tidewater Branches.
The Seller will use its reasonable best efforts to maintain deposit
rates at levels not in excess of the highest rates for identical maturities
offered by Life Savings Bank, F.S.B. or Virginia Beach Federal Savings Bank
(the "Compared Institutions") at the times at which the Seller establishes
its rates from time to time, and with respect to deposit maturities not
offered by the Compared Institutions, will use its reasonable best efforts to
maintain deposit rates not in excess of the highest rates, on an interpolated
basis, offered by the Compared
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Institutions at the time at which the Seller establishes its rates from time
to time, for their next longer and shorter maturities.
(d) The Purchaser shall have reasonable access to the Seller's
employees before the Effective Date for training and other purposes. If the
Seller's employees work overtime to accomplish these purposes, Purchaser will
pay the Seller's actual overtime payroll expense. Payment will be made to
the Seller by the purchaser within five (5) business days after the
Purchaser's receipt of written documentation of overtime paid.
ARTICLE 5.
OBLIGATIONS OF THE PARTIES PRIOR TO AND AFTER EFFECTIVE DATE
5.01 FULL ACCESS. The Seller shall afford to the officers, employees and
authorized representatives of the Purchaser access to the properties, books
and records pertaining to the Tidewater Branches, upon reasonable notice by
the Purchaser to the Seller and at reasonable times, in order that the
Purchaser may have full opportunity to make such investigations as it shall
desire, of the affairs of the Seller relating to the Tidewater Branches. The
Purchaser shall be entitled to inspect from time to time the condition of
the Tidewater Branches and of the Fixed Assets being transferred to the
Purchaser in accordance with this Agreement, and the officers of the Seller
will furnish the Purchaser with such additional financial and operating data
and other information as to its business and properties at the Tidewater
Branches as the Purchaser shall from time to time reasonably request and as
shall be available, including, without limitation, information required for
inclusion in all governmental applications necessary to effect the
transactions contemplated by this Agreement. Nothing in this Section 5.01
shall be deemed to require the Seller to breach any obligation of
confidentiality.
5.02 REGULATORY APPLICATIONS. Each party shall prepare and file, with the
cooperation of the other, as soon as practicable, but no event later than 30
days following the date of this Agreement, such applications, as required by
law, to the appropriate Federal and/or State regulatory authorities for
approval for the Seller and the Purchaser, respectively, to effect the
transactions contemplated by this Agreement, and the parties hereto shall, if
required by applicable statute or regulation, publish appropriate notice of
the sale. The parties agree to use their good faith reasonable efforts to
file such applications jointly if possible and to obtain such approval in a
diligent manner and on a priority basis. To the extent that such
applications may be filed jointly, the Purchaser shall pay the regulatory
application fees and publication costs related thereto. Each party shall
otherwise pay its own regulatory application fees, publication costs, if any,
and legal expenses.
5.03 FURTHER ASSURANCES. Both parties hereby agree to execute and deliver
such instruments and take such other actions as the other party may
reasonably require in order to carry out the intent of this Agreement, and
the Seller agrees to give such bills of sale, acknowledgments and other
instruments of conveyance and transfer as, in the reasonable judgment of the
Purchaser,
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shall be necessary and appropriate to vest in the Purchaser legal and
equitable title to the assets of the Seller being sold hereunder, free and
clear of all liens and encumbrances. The Purchaser shall be responsible for
the costs of examining title, surveys, recording of documents, etc.
5.04 RETENTION OF EMPLOYEES. The Purchaser agrees that it will offer
employment to any or all employees of the Seller at the Tidewater Branches
who are still so employed by the Seller as of the close of business on the
Effective Date, initially at a salary comparable to that provided by the
Seller to such employees, and on other terms and conditions comparable to
those provided either by the Seller to such employees or by the Purchaser to
similar employees. Each employee will have the right to carry over to its
employment by the Purchaser all accrued but unused vacation time and sick
leave. A schedule of each employee's accrued but unused vacation time and
sick leave as of May 31, 1996 is attached as EXHIBIT I. Each employee has
the option of accepting the offer of employment by the Purchaser, and the
Seller will use reasonable efforts to encourage the employees to accept the
Purchaser's offer. Employment by the Purchaser will commence as of the close
of business on the Effective Date, and the Seller will terminate the
employment of each employee (and their participation in employee benefit
plans of the Seller) as of the close of business on the Effective Date. The
Purchaser agrees that if any employee accepting employment with the Purchaser
is discharged by the Purchaser within ninety (90) days of the Effective Date,
such employee will receive severance benefits no less generous than those
that employee would have received had he/she remained in the employ of the
Seller and been terminated under the same circumstances. However, the
Purchaser shall have the right to dismiss any former employee of the Seller
for "cause" at any time, whether the actions or inactions constituting cause
occurred under the Seller's or the Purchaser's employment, and any employee
dismissed for such cause shall have no right to receive severance benefits.
Notwithstanding any other provision in this Agreement, any employee of the
Seller who becomes an employee of the Purchaser, like other of the
Purchaser's employees, shall be an employee at will. "Cause," as used in
this paragraph, shall include but not be limited to, fraud, embezzlement,
dishonesty, insubordination, failure to comply with instructions, or other
action or omission which the employer believes does or may materially or
adversely affect its business or operations.
5.05 CONFIDENTIALITY. From and after the Effective Date, the Seller will
keep confidential and will not furnish to any other person the names of the
deposit and other customers of the Tidewater Branches other than as may be
required under applicable law or in connection with the defense of any claim.
5.06 RISK OF LOSS. Until the close of business on the Effective Date, the
risk of loss of all assets to be transferred to the Purchaser pursuant to
this Agreement shall be upon the Seller.
5.07 BEST EFFORTS. The Purchaser and the Seller each agree to use their
reasonable best efforts to ensure the occurrence of the Effective Date not
later than September 30, 1996.
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5.08 SAIF ASSESSMENT. The Seller and the Purchaser acknowledge that the
United States Congress is presently considering a number of measures designed
to recapitalize the SAIF, including the imposition of a one-time special
assessment on institutions the deposits of which are insured by the SAIF (a
"Special Assessment"). The Seller agrees that it will remain liable for, and
will indemnify the Purchaser for the payment of, any Special Assessment or
portion of any Special Assessment that is based upon the deposits of the
Branches at any time prior to or as of the Effective Date, regardless of the
date when such Special Assessment is imposed. However, the Seller shall not
be liable for the amount of any Special Assessment to the extent that it is
based upon deposit balances in excess of the following: (i) the Assumed
Deposits or (ii) if higher, the actual amount of deposits associated with the
Branches (excluding the Grafton Branch, if applicable) as of a date prior to
the Effective Date.
5.09 SELLER'S COVENANT NOT TO COMPETE. The Seller agrees that (subject to
the occurrence on the Effective Date of the transactions contemplated by this
Agreement) it will not: (i) solicit the deposit relationships of customers
owning the Assumed Deposits with current actual knowledge that the person
solicited was such a customer; (ii) for a period of one (1) year after the
Effective Date, open a branch within a two (2) mile radius of any Tidewater
Branch (except by acquiring (through merger or otherwise) one or more
branches of another financial institution); or (iii) for a period of one (1)
year after the Effective Date, solicit the Purchaser's employees in the
Branches to work for the Seller.
5.10 REPORTING. The Purchaser shall report in accordance with federal
statutes and regulations on Forms 1099 the amount of interest on the Assumed
Deposits actually paid in 1996 by the Seller and the Purchaser. The Seller
agrees to provide the Purchaser with all information necessary to enable the
Purchaser to comply with all tax reporting obligations for 1996 related to
the Assumed Deposits (including Individual Retirement Accounts) and Deposit
Loans, and the Purchaser agrees to comply with such obligations.
5.11 PURCHASER'S COVENANT. The Purchaser agrees that for a period of one
(1) year after the Effective Date (subject to the occurrence on the Effective
Date of the transactions contemplated by this Agreement), it will not solicit
any of the Seller's employees to work for the Purchaser.
ARTICLE 6.
CONDITIONS TO PURCHASER'S OBLIGATIONS
Each and every obligation of the Purchaser under the Agreement to be
performed on or before the Effective Date shall be subject to the
satisfaction, on or before the Effective Date, of the following conditions:
(a) The representations and warranties made by the Seller in this
Agreement shall be true in all material respects at and as of the Effective
Date as though such representations
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and warranties were made at and as of such time, except for any changes
permitted by the terms hereof or consented to by the Purchaser.
(b) The Seller shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by it prior to or on the Effective Date.
(c) From the date of this Agreement through the close of business on
the Effective Date, there shall have been no material adverse change, not
cured, in the business or material conditions (financial or otherwise)
affecting the Tidewater Branches or the assets to be acquired by the
Purchaser, except for any changes permitted or contemplated by the terms
hereof, or consented to by the Purchaser. For the purposes of this
subsection, a material adverse change shall be deemed to include the
discovery by the Purchaser of a material environmental condition of the type
described in Section 2.08.
(d) As of the close of business on the Effective Date, no action, suit
or proceeding shall be pending or threatened: (i) against the Seller which
might materially and adversely affect the business, properties and assets of
the Tidewater Branches or the other assets to be acquired by the Purchaser;
or (ii) against either party pertaining to this transaction.
(e) The Seller shall have made delivery to the Purchaser of the items
described in Sections 1.05(a), 1.05(b) and 1.05(d).
(f) The Seller shall have delivered to the Purchaser all appropriate
tax affidavits, IRS "B" and "C" notices regarding taxpayer identification
numbers and withholding, and schedules listing the deposit customers of the
Tidewater Branches, the Fixed Assets and the Deposit Loans, each as of the
Measurement Date or such later date on or prior to the Effective Date as is
practicable under the circumstances.
(g) The Seller and the Purchaser each shall have received from the
appropriate regulatory authorities approval to effect the transactions
contemplated by this Agreement, including, as to the Purchaser, approval to
operate the Tidewater Branches, which approval is not subject to any
conditions that cannot be satisfied with reasonable effort within a
reasonable time.
(h) The Seller shall have delivered to the Purchaser a certificate
executed by its President, dated the Effective Date, certifying that the
representations and warranties made by the Seller in this Agreement are true
in all material respects at and as of the Effective Date as though such
representations and warranties were made at and as of such time, except for
any changes permitted by the terms hereof or consented to by the Purchaser.
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ARTICLE 7.
CONDITIONS TO THE SELLER'S OBLIGATIONS
Each and every obligation of the Seller under this Agreement to be performed
on or before the Effective Date shall be subject to the satisfaction, on or
before the Effective Date, of the following conditions:
(a) The representations and warranties made by the Purchaser in this
Agreement shall be true in all material respects at and as of the Effective
Date as though such representations and warranties were made at and as of
such time, except for any changes permitted by the terms hereof or consented
to by the Seller.
(b) The Purchaser shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by it prior to or on the Effective Date.
(c) The Seller and the Purchaser each shall have received from the
appropriate regulatory authorities approval to effect the transactions
contemplated by this Agreement, which approval is not subject to any
conditions that cannot be satisfied with reasonable effort within a
reasonable time.
(d) The Purchaser shall have delivered to the Seller a certificate
executed by its President, dated the Effective Date, certifying that the
representations and warranties made by the Purchaser in this Agreement are
true in all material respects at and as of the Effective Date as though such
representations and warranties were made at and as of such time, except for
any changes permitted by the terms hereof or consented to by the Seller.
ARTICLE 8.
CONDITIONS TO THE SELLER'S AND THE PURCHASER'S OBLIGATIONS
Each and every obligation of the parties under this Agreement to be performed
on or before the Effective Date shall be subject to the satisfaction, on or
before the Effective Date, of the following conditions: approval by the
appropriate regulatory authorities shall have been obtained and, as
applicable, termination or relocation of branch operations conducted by the
Seller at the Tidewater Branches' locations and the Seller's consummation of
this sale shall not have been objected to by the appropriate regulatory
authority.
ARTICLE 9.
TERMINATION
9.01 METHODS OF TERMINATION. This Agreement may be terminated at any time,
but not later than the Effective Date:
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(a) By mutual agreement of the Purchaser and the Seller; or
(b) By the Purchaser if any of the conditions provided for in Article 6
of this Agreement shall not have been met or waived in writing by the
Purchaser at the earlier of the time established for the Effective Date and
December 31, 1996 after the Purchaser's written notice to the Seller and the
Seller's failure to cure within a reasonable period of time; or
(c) By the Seller if any of the conditions provided for in Article 7 of
this Agreement shall not have been met or waived in writing by the Seller at
the earlier of the time established for the Effective Date and December 31,
1996 after the Seller's written notice to the Purchaser and the Purchaser's
failure to cure within a reasonable period of time; or
(d) By either party if any of the conditions provided for in Article 8
shall not have been met at the earlier of the time established for the
Effective Date and December 31, 1996.
9.02 PROCEDURE UPON TERMINATION. In the event of termination pursuant to
Section 9.01 hereof, written notice thereof shall be given to the other
party, and this Agreement shall terminate immediately upon receipt of such
notice, unless an extension is consented to by the party or parties having
the right to terminate. If this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, work papers and other
materials of the other party relating to this transaction, whether so
obtained before or after the execution hereof, to the party furnishing the
same; and
(b) All information received by either party hereto with respect to the
business of the other party (other than information which is a matter of
public knowledge or which has heretofore been or is hereafter published in
any publication for public distribution or filed as public information with
any governmental authority) shall not at any time be used for business
advantage by such party or disclosed by such party to third persons to the
detriment of the party furnishing such information or if otherwise prohibited
by state or federal law.
(c) Nothing contained in this Article 9 shall be deemed to excuse
either party for a breach of any of its obligations or agreements undertaken
or made in this Agreement.
9.03 PAYMENT OF EXPENSES. If this Agreement is terminated as provided
herein:
(a) then if this Agreement has been terminated because of the
Purchaser's failure to perform and comply in all material respects with its
obligations under this Agreement, then the Purchaser shall be liable for the
reasonable expenses of the Seller incurred in connection with the
transactions contemplated by this Agreement.
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(b) then if this Agreement has been terminated because of the Seller's
failure to perform and comply in all material respects with its obligations
under this Agreement, then the Seller shall be liable for the reasonable
expenses of the Purchaser incurred in connection with the transactions
contemplated by this Agreement.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.01 AMENDMENT AND MODIFICATION. The parties hereto, by mutual consent of
their respective duly authorized officers, may amend, modify and supplement
this Agreement in such manner as may be agreed upon by them in writing.
10.02 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned,
prior to the Effective Date, by either of the parties hereto without the
prior written consent of the other.
10.03 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.04 HEADINGS. The headings of the Sections and Articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
10.05 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties hereto contained herein shall
survive for a period of eighteen (18) months after the Effective Date, unless
stated otherwise herein.
10.06 PAYMENT OF EXPENSES. Each party herein shall pay for its own expenses
incurred in connection with the transactions contemplated by this Agreement
except as stated otherwise herein. Except as otherwise provided herein, any
expenses, fees and costs necessary for any approvals of the appropriate
Federal and/or State regulatory authorities or for any notice to depositors
of the assumption of deposit liabilities provided for in this Agreement shall
be paid by the Purchaser.
10.07 GOVERNING LAW. This Agreement shall be deemed to have been made and
executed in the Commonwealth of Virginia, and shall be governed by the laws
of the Commonwealth of Virginia.
10.08 CUSTOMER NOTICES. The Seller shall permit the Purchaser access to
names and addresses of depositors, including Individual Retirement Account
("IRA") customers, of the Tidewater
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Branches at least 30 days prior to the Effective Date for purposes of
preparing for publication and direct mailings, and the Seller will cooperate
with the Purchaser to enable the Purchaser to notify such depositors of the
impending transfer of their accounts, which notice will be subject to the
Seller's approval, which shall not be unreasonably withheld. In addition,
the Seller will give all legally required notices to its customers at the
Tidewater Branches. With respect to the transfer of any IRA accounts at the
Tidewater Branches, the Seller shall comply with all laws and regulations
relating to the prior notification of the transfer of IRA accounts.
10.09 ADDRESSES FOR NOTICE, ETC. All notices, requests, demands and other
communications provided for hereunder and under the related documents shall
be in writing (including telegraphic and facsimile communications) and mailed
(by registered or certified mail) or telegraphed or delivered in person or by
facsimile to the applicable party at the addresses indicated below.
If to the Seller: Mr. Gene D. Ross
Chief Executive Officer
Essex Savings Bank, F.S.B.
200 Golden Oak Court, Suite 200
Virginia Beach, VA 23452
With a copy to: James J. Wheaton, Esquire
Willcox & Savage, P.C.
1800 NationsBank Center
Norfolk, VA 23510
If to the Purchaser: Mr. Michael S. Ives
President and Chief Executive Officer
CENIT Bank, FSB
225 West Olney Road
Norfolk, VA 23510
With a copy to: Hugh B. Wellons, Esquire
Mays & Valentine
1111 East Main Street, 23rd Floor
Richmond, VA 23219
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with
the terms of this Section.
10.10 NO THIRD PARTY BENEFICIARIES. It is the intention of the parties that
nothing in this Agreement shall be deemed to create any right with respect to
any person or entity not a party to this Agreement.
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10.11 CONFIDENTIALITY. The Seller and the Purchaser agree that they will
not, without the consent of the other, issue any press releases or make any
public disclosure regarding the transactions contemplated by this Agreement,
except as otherwise required by law. The Seller and the Purchaser agree that
the terms of this Agreement are confidential, and shall not be disclosed to
any other party, except as otherwise required by law or with the consent of
the other. The Seller and the Purchaser acknowledge that it is contemplated
that the Purchaser will issue a press release, subject to the Seller's review
and consent, in connection with the execution of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and their corporate seals to
be affixed as of the date first written above.
ESSEX SAVINGS BANK, F.S.B.
By: /s/Gene D. Ross
------------------------------------------
Gene D. Ross
Chief Executive Officer
CENIT BANK, FSB
By: /s/Michael S. Ives
-------------------------------------------
Michael S. Ives
President and Chief Executive Officer
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EXHIBIT A
TIDEWATER BRANCHES
1. Hampton Branch
550 Settlers Landing Road
Hampton, VA 23669
2. Newport News Branch
13307 Warwick Boulevard
Newport News, VA 23602
3. Portsmouth Branch
3511 High Street
Portsmouth, VA 23707
4. Norfolk Branch
1901 Granby Street
Norfolk, VA 23517
5. Grafton Branch
4428 George Washington Memorial Highway
Grafton, VA 23692
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EXHIBIT B
BRANCH PROPERTY
1. Hampton Branch
550 Settlers Landing Road
Hampton, VA 23669
2. Newport News Branch
13307 Warwick Boulevard
Newport News, VA 23602
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EXHIBIT C
BRANCH LEASES
1. Norfolk Branch
1901 Granby Street
Norfolk, VA 23517
5. Grafton Branch
4428 George Washington Memorial Highway
Grafton, VA 23692
Copies of Leases are attached.
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EXHIBIT 99.1
ESSEX BANCORP, INC. ANNOUNCES
AGREEMENT TO SELL BRANCHES
AND OTHER SIGNIFICANT MATTERS
TO: BUSINESS EDITORS CONTACT: INVESTOR RELATIONS
FOR IMMEDIATE RELEASE (804) 431-5612
VIRGINIA BEACH, VIRGINIA, July 3, 1996. Essex Bancorp, Inc. (AMEX: ESX)
("Bancorp") today announced that its thrift subsidiary, Essex Savings Bank,
F.S.B. (the "Bank"), had signed an agreement to sell its Norfolk, Portsmouth,
Hampton, Newport News, and Grafton retail bank branches (the "Branches") to
CENIT Bank, FSB ("CENIT"), a federal savings bank headquartered in Norfolk,
Virginia. The sale of the Branches, which aggregated approximately $70
million in deposits as of June 30, 1996, is anticipated to close in the third
quarter of 1996 and is dependent upon regulatory approval. This sale, in
addition to the separate completed sale of the Bank's Charlotte, North
Carolina branch in March 1996 and the upcoming sale to Centura Bank, Inc. of
its Raleigh, Greensboro, and Wilmington, North Carolina branches (for which
all regulatory approvals have been received), brings the total deposits sold
and anticipated to be sold by the Bank during 1996 to approximately $171
million. The remaining retail branches of the Bank will include locations in
Elizabeth City,
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North Carolina, and Emporia, Suffolk, and Richmond, Virginia, with
approximately $117 million in deposits at June 30, 1996. After all
anticipated sales are completed, the remaining Bank franchise will exceed its
regulatory capital requirements by a greater margin, positioning it to pursue
profitable expansion. The agreement with CENIT gives the Bank a limited
opportunity to find a separate buyer for the Grafton branch, if the Bank can
obtain favorable terms for such a sale.
In September 1995, Bancorp and the Bank merged (the "Home Acquisition") with
Home Bancorp, Inc. and Home Savings Bank, FSB (collectively "Home"), which
resulted in the successful culmination of Bancorp's efforts to raise capital
for the Bank in excess of regulatory capital requirements in order to prevent
its imminent seizure by the Resolution Trust Corporation.
The board of directors of Bancorp formed a special committee of the board,
the Strategic Evaluation Committee (the "Committee"), in December 1995 to
review strategic alternatives to enhance shareholder value. At the time of
the Home Acquisition, management believed that the addition of Home's retail
banking branches would create profitability and enhance franchise value.
However, as previously reported, the combined operations of Bancorp and Home
are not profitable and the Home retail banking branches require additional
capital in order to be successful full-service facilities. Because the
Bank's capital is not sufficient to allow for a major expansion plan or
retrofitting strategy for underperforming branches, in early 1996, the
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Committee began assessing the viability of branch sales, as well as a
concurrent comprehensive plan for general and administrative expense
reductions, as a means to increase regulatory capital ratios and ultimately
achieve improved profitability and franchise value. The need to accelerate
measures to achieve profitability is heightened by the dilution of common
stockholders' equity resulting from dividends on preferred stock issued in
connection with the Home Acquisition. The dividends accumulate, on an annual
basis, at approximately $1.4 million. The Committee retained an independent
consultant to critically review Bancorp's business plan, which incorporated
branch sales assumptions, and to suggest viable strategic options that may
lead to enhanced shareholder value. The consultant's report, received in May
1996, validated the Committee's conclusions regarding the need for immediate
branch sales in addition to those already negotiated for several of the
Bank's North Carolina branches. Bancorp then proceeded to contact and
negotiate with prospective acquirors.
As a result of the decision to sell the Branches, Bancorp plans to write down
the net asset value of the Branches, including goodwill, to their estimated
net realizable value through a second quarter charge to earnings of
approximately $6 million. This write off will have no impact on the Bank's
regulatory capital adequacy because goodwill is already deducted from capital
in ratio calculations. Prospectively, the operations of Bancorp are expected
to improve significantly through the write off of goodwill, the sale of
unprofitable branches, and the reduction in operating expenses.
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In addition, Bancorp has tax net operating loss ("NOL") carryforwards
approximating $19.9 million that begin expiring in 2006. The branch sales
and related restructuring should facilitate Bancorp's ability to potentially
realize the benefit of the NOL carryforwards. In addition, these NOL
carryforwards offer a unique opportunity for Bancorp to pursue expansion or
investment opportunities that could enhance shareholders' value.
In addition to the sale of the Branches, Bancorp announced an increase during
the second quarter of 1996 in the specific loss allowance on the Bank's
problem credit secured by a low-income apartment complex in Richmond,
Virginia. This credit originated in February 1990 and has been modified
several times since then in efforts to facilitate a renovation and sale of
the apartment complex. Management concluded that the sale of the apartment
complex will not occur in the foreseeable future despite ongoing efforts to
rehabilitate the project. The reassessment of this credit has coincided with
the completion of an examination of Bancorp and the Bank by the Office of
Thrift Supervision. Management anticipates that a charge to earnings of
approximately $800 thousand, before any additions to general reserves, will
be required to increase the allowance to an adequate level. Management is of
the opinion that after the branch sales and the additional loss provisions,
the Bank will be well-capitalized from a regulatory capital standpoint.
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