Exhibit 10.13
PURCHASE AND ASSUMPTION AGREEMENT
THIS AGREEMENT by and among Hawkeye State Bank, a financial institution
chartered under the laws of the State of Iowa, having its principal place of
business in Iowa City, Iowa ("Seller"), Russell Gerdin (solely with respect to
Section 7.4), the sole owner of Seller, and West Des Moines State Bank, a
financial institution chartered under the laws of the State of Iowa, having its
principal place of business in West Des Moines, Iowa (the "Buyer").
WITNESSETH:
WHEREAS, Seller wishes to transfer, upon the terms and conditions set forth
herein, its assets and its deposit and certain other liabilities; and
WHEREAS, Buyer wishes to buy such assets and assume such liabilities upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, Seller and Buyer agree as follows:
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES
Section 1.1. Transfer of Assets.
(a) As of the Effective Date (as defined in Section 2.1 below) and upon the
terms and conditions set forth herein, Seller will sell, assign, transfer,
convey and deliver to Buyer, and Buyer will purchase from Seller, all of
the following assets identified in this Agreement and the Exhibits hereto
(the "Purchased Assets"), and not otherwise excluded from sale pursuant to
the provisions of Section 1.1 (b) below:
(1) All real estate as set forth on Exhibit 1.1(a)(1), and any
improvements thereon (the "Real Property");
(2) Except as provided in Section 1.1(b), the furniture, fixtures,
leasehold improvements and other tangible personal property (the
"Personal Property") set forth on Exhibit 1.1(a)(2) hereto;
(3) All equipment leases for equipment located at the offices of the
Seller (the "Equipment Leases");
(4) All safe deposit contracts and leases for the safe deposit boxes as of
the Effective Date (the "Safe Deposit Leases");
(5) All loans transferred pursuant to Section 1.4 and accrued interest
thereon;
(6) All coin and currency and cash items in the possession of Seller on
the Effective Date (the "Coin and Currency");
(7) The name "Hawkeye State Bank";
(8) Prepaid FDIC premiums;
(9) All "other real estate owned";
(10) All charged-off assets, partially charged-off assets and other
non-ledger assets, except for those that were written off or written
down since January 1, 2002, including rights to recoveries therefrom;
and
(11) All investment securities and accrued interest thereon.
(b) Excluded from the assets, properties and rights being transferred, conveyed
and assigned to Buyer under this Agreement are the assets listed on Exhibit
1.1(b) hereto (the "Excluded Assets"). Seller shall coordinate with the
Buyer the removal of the Excluded Assets from its offices on or prior to
the Effective Date.
Section 1.2. Purchase Price.
(a) The total purchase price for the Purchased Assets shall be the sum of:
(1) The book value of the Purchased Assets as of the close of business on
the last business day preceding the Effective Date (the "Valuation
Date");
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(2) Minus the sum of Nine Hundred Thirty Thousand Five Hundred Dollars
($930,500); provided, however, that said amount shall be reduced by
the following:
(A) The amount of any charge-offs (complete or partial) recorded by
Seller between the date of this Agreement and the Effective Date
with respect to those loans listed on Exhibit 1.2(a)(2), but not
in excess of the "total allocated reserve amount" as to any such
loan;
(B) The "total allocated reserve amount" as to any loan listed on
Exhibit 1.2(a)(2) that is paid off completely between the date of
this Agreement and the Effective Date; and
(C) As to any loan listed on Exhibit 1.2(a)(2) that is partially paid
down between the date of this Agreement and the Effective Date, a
pro-rata portion of the "total allocated reserve amount" as to
such loan; and
(3) Plus the sum of Fifteen Million Fifty Thousand Dollars ($15,050,000);
provided, however, that said amount shall be reduced by the amount, if
any, determined pursuant to Section 1.2(d) hereof.
The total purchase price shall be allocated in accordance with Section
1.8(b) hereof.
(b) At the Closing, Buyer shall assume and thereafter pay and perform the
following duties, liabilities and obligations of Seller, determined as of
the Valuation Date:
(1) All Deposit Liabilities (as defined in Section 1.3(a) hereof);
(2) All liabilities for Federal Home Loan Bank advances and borrowings,
and accrued and unpaid interest thereon;
(3) All liabilities for securities sold under repurchase agreements, and
accrued and unpaid interest thereon;
(4) All unfunded loan commitments and lines of credit related to the Loans
(as defined in Section 1.4(a) hereof);
(5) All Treasury Tax and Loan Accounts;
(6) All Equipment Leases;
(7) All Safe Deposit Leases;
(8) All Contracts (as defined in Section 1.3(g) hereof);
(9) All accrued real estate taxes prorated to the Valuation Date; and
(10) All income collected but not earned with respect to the Safe Deposit
Leases pursuant to Section 1.5(c) hereof.
(c) If the total purchase price for the Purchased Assets determined pursuant to
Section 1.2(a) hereof exceeds the total book value of the liabilities
assumed by Buyer pursuant to Section 1.2(b) hereof, Buyer shall pay to
Seller in immediately available funds at Closing an amount equal to such
excess; if the total purchase price for the Purchased Assets determined
pursuant to Section 1.2(a) hereof is less than the total book value of the
liabilities assumed by Buyer pursuant to Section 1.2(b) hereof, Seller
shall pay to Buyer in immediately available funds at Closing an amount
equal to such deficiency.
(d) If the average balance for the last full calendar month immediately
preceding the Effective Date for total assets is less than $123,000,000 or
for total deposits is less than $78,000,000, the purchase price will be
reduced by the greater of: (1) The amount by which $123,000,000 exceeds the
average assets; or (2) The amount by which $78,000,000 exceeds the average
deposits, multiplied by four percent (4%) multiplied by sixty-five
one-hundredths (.65) multiplied by ten (10). Notwithstanding anything to
the contrary contained in this Agreement, Seller and Russell Gerdin shall
have the opportunity to cure and remedy any potential shortfall in average
assets or average deposits by establishing or agreeing to establish such
business relationship with Buyer, including, without limitation, additional
deposit relationships, as may be reasonably consented to by Buyer in its
sole discretion, which consent shall not be unreasonably withheld.
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(e) A sample closing statement that reflects the computations pursuant to this
Section 1.2 is attached hereto as Exhibit 1.2(e). The "Closing Statement"
to be delivered at the Closing on the Effective Date pursuant to Section
2.2 shall follow the format of said exhibit.
Section 1.3. Liabilities.
(a) "Deposit Liabilities" shall mean all of Seller's duties, obligations,
liabilities (including accrued interest) relating to the deposit accounts,
including, without limitation, all demand, time, savings and individual
retirement accounts as of the Effective Date, with the exception of those
specifically not assumed by Buyer pursuant to Section 1.3(b).
(b) Except for those liabilities and obligations specifically assumed by Buyer
under Section 1.2(b) above, Buyer is not assuming any liabilities or
obligations. Liabilities not assumed include, but are not limited to, the
following:
(1) Any liabilities and obligations attributable to the actions of the
former President of Seller which actions were not in compliance with
applicable policies of Seller or state and federal regulatory
standards.
(2) Any litigation arising out of events which occurred prior to the
Effective Date.
(3) Any accrued expenses, including compensation and payroll taxes.
(c) Buyer agrees to pay in accordance with law and customary banking practices
all properly drawn and presented checks, drafts and withdrawal orders
presented to Buyer by mail, over-the-counter 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 Seller
or by Buyer, and in all other respects to discharge, in the usual course of
the banking business, the duties and obligations of Seller with respect to
the balances due and owing to the depositors whose accounts are assumed by
Buyer.
(d) Buyer may, in the sole discretion of Buyer, (i) assign new account numbers
to depositors of assumed accounts, if needed, (ii) notify such depositors,
on or before the Effective Date, in a form and on a date mutually
acceptable to Seller and Buyer, of Buyer's assumption of Deposit
Liabilities, and (iii) furnish such depositors with checks on the forms of
Buyer and with instructions to utilize Buyer's checks and destroy unused
check, draft and withdrawal order forms of Seller. In addition, Seller will
notify its affected customers by letter of the pending assignment of
Seller's deposit accounts to Buyer, which notice shall be at Seller's cost
and expense and shall be in a form mutually agreeable to Seller and Buyer.
(e) On or after the Effective Date, Buyer will assume and discharge Seller's
duties and obligations in accordance with the terms and conditions and
laws, rules and regulations that apply to the certificates, accounts and
other Deposit Liabilities assumed under this Agreement.
(f) On or after the Effective Date, Buyer will maintain and safeguard in
accordance with applicable law and sound banking practices all account
documents, deposit contracts, signature cards, deposit slips, canceled
items and other records related to the Deposit Liabilities assumed under
this Agreement, subject to Seller's right of access to such records as
provided in this Agreement.
(g) Buyer shall assume all of the rights, liabilities and obligations of Seller
under the contracts (the "Contracts") set forth on Exhibit 1 .3(g).
(h) Buyer shall be responsible for all federal and state income tax
informational reporting in connection with form 1099 and backup withholding
relating solely to those liabilities assumed pursuant to Section 1.2(b) of
this Agreement for all payments for the calendar year ending December 31,
2003; provided, however, Buyer shall not assume any liabilities relating to
or arising from Seller's acts or omissions with respect thereto prior to
the Closing.
Section 1.4. Loans Transferred.
(a) Seller will transfer to Buyer on the Effective Date, subject to the terms
and conditions of this Agreement, all of Seller's right, title and interest
(including collateral relating thereto) in loans maintained, serviced and
listed in Seller's general ledger (severally referred to as "Loan" and
collectively the "Loans").
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(b) Buyer will become the beneficiary of credit life insurance written on
direct consumer installment loans. Contemporaneously with the Closing,
Seller shall notify the appropriate insurance companies of the transfer of
Loans from Seller to Buyer and that Buyer shall become the beneficiary of
any insurance policies relating to the Loans and, as such, be entitled to
all rights and privileges under such policies following the Effective Date,
including, without limitation, any refunds paid after the Effective Date on
such policies.
(c) In connection with the transfer of any Loans requiring notice to the
borrower, Buyer and Seller agree to comply with all notice and reporting
requirements of the loan documents or of any law or regulation.
(d) On or after the Effective Date, Buyer will be responsible for maintaining
and safeguarding all loan files, documents and records related to the Loans
in accordance with applicable law and sound banking practices.
(e) On the Effective Date immediately after the Closing, Seller shall purchase
from Buyer a 100% loan participation in those Loans listed on Exhibit
1.4(e) hereto. Buyer shall continue to service such loans at no charge to
Seller. Buyer shall consult with Seller and obtain Seller's consent before
making any significant decisions or taking any significant actions as to
such loans. The purchase price shall be the unpaid principal balance plus
all unpaid accrued interest receivable, payable in cash on the Effective
Date.
(f) For 24 months following the Effective Date, Buyer shall have the absolute
unrestricted right to "put" to Seller (require Seller to purchase from
Buyer) at any time or times any of the notes (only those in existence at
the date of this Agreement) comprising those Loans listed on Exhibit 1.4(f)
hereto. Such "put" may be in the form of either (at Buyer's option):
(1) Seller purchasing the note and Seller servicing the note; or
(2) Seller purchasing a 100% participation in the note and Buyer servicing
the note at no charge to Seller (in the event of the latter, Buyer
shall consult with Seller and obtain Seller's consent before making
any significant decisions or taking any significant actions as to such
notes. The purchase price shall be the unpaid principal balance plus
all unpaid accrued interest receivable. The purchase price shall be
payable in cash within 5 business days of Seller's receipt of the
"put" demand by Buyer. All related collateral and loan documentation
shall thereupon be transferred and assigned to Seller. Notwithstanding
anything to the contrary contained in this Agreement, Buyer shall not
have the right to "put" any note as to which it has either (i) made
further advances of funds to the borrower (other than advances
approved by Seller in writing on or prior to the Effective Date), or
(ii) released collateral.
(g) Seller shall indemnify Buyer for Actual Losses (as defined in this Section
1.4(g)) incurred by Buyer with respect to All Other Loans (as defined in
this Section 1.4(g)) as and to the extent provided herein. "Actual Losses"
shall mean the actual charge-offs of principal charged to the allowance for
loan and lease losses of Buyer pursuant to final disposition of a loan,
liquidation of all related collateral and enforcement of guaranties.
"Actual Losses" shall not include any charge-off or impairment of the
collectability of a loan that results solely from internal ratings or
regulatory agency classification and shall not include interest. "All Other
Loans" shall mean all Loans transferred to Buyer except for (i) those loans
listed on Exhibit 1.4(e); and (ii) those loans listed on Exhibit 1.4(f).
Seller shall indemnify Buyer for Actual Losses incurred by Buyer with
respect to All Other Loans during the 12 month period immediately following
the Effective Date but only to the following extent:
(1) With respect to the first $1 million of Actual Losses, Seller shall
have no indemnification obligation under this Section 1.4(g);
(2) With respect to Actual Losses in excess of $1 million but less than $4
million, Seller shall indemnify Buyer for fifty percent (50%) of such
Actual Losses, so that Seller's maximum potential obligation pursuant
to this Section 1.4(g) shall not exceed $1.5 million.
Buyer shall provide a detailed written report of the Actual Losses to
Seller on a quarterly basis as of mutually agreeable reporting dates
approximately 3, 6, 9 and 12 months after the Effective Date, which
reports shall be provided within thirty (30) days after each such
reporting date. Seller shall pay the required reimbursement, if any,
to Buyer within thirty (30) days after receiving such report. If final
disposition of any of the All Other Loans shall have been commenced
within the 12 month period immediately following the Effective Date,
any Actual Losses with respect to such loan shall qualify for
indemnification even though not finalized until after the expiration
of such 12 month period.
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Section 1.5. Safe Deposit Business.
(a) On or after the Effective Date, Buyer will assume and discharge Seller's
obligations with respect to the safe deposit box business in accordance
with the terms and conditions of contracts or rental agreements related to
such business, and Buyer will maintain all facilities reasonably necessary
for the use of such safe deposit boxes by persons entitled to use the same.
(b) On and after the Effective Date, Buyer shall maintain and safeguard the
records related to such safe deposit box business, and Buyer shall be
responsible for granting access to and protecting the contents of safe
deposit boxes.
(c) Safe deposit box rental payments (not including late payment fees)
collected by Seller on or before the Effective Date shall be prorated as of
the Effective Date.
Section 1.6. Employee Matters.
(a) Buyer shall exercise its best efforts to hire all employees employed by
Seller at the Effective Date (the "Employees"), in their then current
functional positions with remuneration not less than current levels and
benefits generally equivalent to the current levels provided to employees
of Buyer. As of the Effective Date, the Employees and their dependents, if
any, previously covered under Seller's health insurance plan shall be
covered under Buyer's health insurance plan without being subject to any
preexisting condition limitations or exclusions provided such Employees
have been employed by Seller for 30 days prior to the Effective Date,
except those excluded under Seller's health insurance plan.
(b) Seller will use its best efforts to maintain the Employees as employees of
Seller until the Effective Date. Seller shall be responsible for paying all
compensation, federal, state and local income tax withholding, social
security taxes and any other payroll taxes applicable to the employment of
Employees by Seller prior to the Effective Date. Seller agrees that, for a
period of 12 months after the Effective Date, it will not employ (i) any
Employee who remains employed by Buyer or (ii) any person known to Seller
to have been employed by Buyer and whose employment by Buyer has been
terminated, either by the employee or by Buyer.
(c) Buyer agrees to carry over all unused and available vacation time, sick
leave, personal time, or other paid time off, provided that Seller shall
reimburse Buyer for such accrued amounts at the time of Closing.
(d) With respect to each employee hired by Buyer at the time of closing. Buyer
shall honor such employee's years of service with Seller for the purposes
of all programs and benefits of Buyer, including seniority, vacation,
severance, retirement plan eligibility and vesting and welfare plan
eligibility.
(e) Except as and to the extent set forth in Sections 1.6(c) and (d) hereof, no
Employee is a third party beneficiary of this Agreement.
Section 1.7. Records and Data Processing.
(a) On and after the Effective Date, Buyer shall become responsible for
maintaining the files, documents and records referred to in this Agreement.
Buyer will preserve and safekeep them as required by applicable law and
sound banking practices for the joint benefit of Seller and Buyer. After
the Effective Date, Buyer will permit Seller and its representatives, for
reasonable cause, at reasonable times and upon reasonable notice and at
Seller's expense, to examine, inspect, copy and reproduce any such files,
documents or records as Seller deems reasonably necessary, as long as such
inspection is in compliance with all applicable laws and regulations.
(b) On or after the Effective Date, Seller will permit Buyer and its
representatives, for reasonable cause, at reasonable times and upon
reasonable notice and at Buyer's expense, to examine, inspect, copy and
reproduce files, documents or records retained by Seller regarding the
assets and liabilities transferred under this Agreement as Buyer deems
reasonably necessary.
Section 1.8. Taxes and Fees Proration of Certain Expenses: Allocation Form 8594.
(a) Buyer shall not be responsible for any income tax liability of Seller
arising from the business or operations of the Seller on or before the
Effective Date, and Seller shall not be responsible for any tax liabilities
of Buyer arising from the business or operations after the Effective Date.
Utility payments, telephone charges, real property taxes, personal property
taxes, rent, deposit insurance premiums, service or maintenance contracts,
other ordinary operating expenses and other expenses related to the
liabilities assumed or assets purchased hereunder shall be prorated between
the parties as of the Effective Date. To the extent any such item has been
prepaid by Seller for a period extending beyond the Effective Date, there
shall be a proportionate monetary adjustment in favor of Seller.
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(b) Seller and Buyer shall allocate the total consideration paid pursuant to
this Agreement, including the deposit base intangible asset and other
identifiable intangible assets acquired by Buyer pursuant to this
Agreement, in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended. Accordingly, within 120 days after the Closing, Buyer
shall provide Seller copies of the Form 8594 and any required exhibits
thereto (the "Asset Acquisition Statement") setting forth the allocation of
the total consideration. Within 20 days after receipt of the Asset
Acquisition Statement (or any proposed revision thereof required to report
any updated information), Seller shall propose any changes to Buyer or
shall indicate its concurrence with the Asset Acquisition Statement which
concurrence shall not be unreasonably withheld. Seller and Buyer shall
endeavor in good faith to resolve any differences within 20 days after
Buyer's receipt of Seller's notice of any proposed changes. The parties
agree to file the Asset Acquisition Statement with their respective federal
tax returns in accordance with the instructions to Form 8594.
Section 1.9. Real Property.
(a) Seller shall deliver to Buyer as soon as reasonably possible after the
execution of this Agreement copies of all title information in possession
of or available to Seller, including but not limited to abstracts,
attorney's opinions on title, surveys, covenants, deeds, environmental
studies and easements relating to the Real Property.
(b) Buyer shall notify Seller in writing within 30 days after the date of
receipt of updated abstracts of title to the Real Property of any
mortgages, pledges, material liens, encumbrances, restrictions,
reservations, tenancies, encroachments, overlaps or other title exceptions
or zoning or similar land use violations relating to the Real Property to
which Buyer reasonably objects (the "Title Defects"). Buyer agrees that
Title Defects shall not include real property taxes not yet due and payable
and easements, restrictions, encroachments, other title exceptions and
rights of way which do not materially interfere with the use of the Real
Property. Seller shall correct any such Title Defect to Buyer's reasonable
satisfaction, but such correction need not be completed prior to the
Closing.
(c) Buyer shall have the right to update title matters at Closing for any
change which may have arisen after the date of Buyer's original title
search. If such update indicates any new Title Defects, Seller shall cure
any such Title Defect to Buyer's reasonable satisfaction, but such cure
need not be completed prior to the Closing.
(d) Buyer shall have the right to conduct such investigation of environmental
matters with respect to the Real Property as it may reasonably require and
shall report the results of any such investigation to Seller no later than
45 days after the date of this Agreement. If Buyer fails to timely conduct
such investigation or if such investigation does not identify the presence
of any hazardous substance above state or federal action levels, Buyer
shall accept the Real Property in its "as is" condition and shall release
Seller from any claims or damages relating to the environmental condition
or status of the Real Property. In the event the investigation is timely
undertaken and identifies any purported violations of state or federal
environmental laws or regulations, Seller shall, at Seller's expense,
undertake the necessary environmental activities that shall be required by
the appropriate governmental agency with respect to such environmental
matters provided Seller shall have:
(1) The right to contest any agency determination as to required
environmental activities;
(2) The right to access the Real Property to the extent necessary to
enable Seller to undertake the necessary environmental activities; and
(3) The right to impose reasonable restrictive covenants and/or
environmental easements on the property, such as a prohibition against
drilling a drinking water well on the property, so long as such
covenants or easements will not have a material adverse effect on the
use of the property for commercial purposes.
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ARTICLE II
CLOSING AND EFFECTIVE DATE
Section 2.1. Dates.
The purchase of assets and assumption of liabilities provided for in this
Agreement shall occur at a closing (the "Closing") to be held at 100 Court
Avenue, Suite 600, Des Moines, Iowa 50309 at 10:00 a.m. local time within 10
days following the date of all approvals by regulatory agencies and after all
statutory waiting periods have expired, but in no event before July 1, 2003, or
at such other place, time or date on which the parties shall mutually agree. The
effective date of the consummation of the transactions contemplated by this
Agreement (the "Effective Date") shall be 8:00 a.m. local time on the business
day on which the Closing occurs.
Section 2.2. Closing.
(a) All actions taken and documents delivered at the Closing shall be deemed to
have been taken and executed simultaneously, and no action shall be deemed
taken nor any document delivered until all have been taken and delivered.
(b) At the Closing, subject to all the terms and conditions of this Agreement,
Seller shall deliver to Buyer, or, in the case of subsections (b)(5), (6),
(7), (8) and (9), make reasonably available to Buyer at the main office of
Seller:
(1) A warranty deed transferring good and merchantable title to the Real
Property to Buyer;
(2) A bill of sale, in substantially the form attached hereto as Exhibit
2.2(b)(2) (the "Bill of Sale"), transferring to Buyer all of Seller's
interest in the Personal Property and in the Loans;
(3) An Assignment and Assumption Agreement, in substantially the form
attached hereto as Exhibit 2.2(b)(3) (the "Assignment and Assumption
Agreement"), assigning Seller's interest in the Equipment Leases, the
Safe Deposit Leases, the Contracts and the Deposit Liabilities;
(4) Consents from third persons that are required to effect the
assignments set forth in the Assignment and Assumption Agreement,
including, but not limited to, the lessors under the Equipment Leases
(to the extent required by such leases);
(5) Seller's keys to the safe deposit boxes and Seller's records related
to the safe deposit box business;
(6) Seller's files and records relating to and evidencing the Loans;
(7) Seller's records related to the Deposit Liabilities assumed by the
Buyer;
(8) The Coin and Currency;
(9) Such other assets to be purchased as shall be capable of physical
delivery;
(10) A certificate of a proper officer of Seller, dated the Effective Date,
certifying to fulfillment of all conditions which are the obligation
of Seller and that all of the representations and warranties of Seller
set forth in this Agreement remain true and correct in all material
respects on the Effective Date;
(11) Certified copies of (A) a resolution of the Board of Directors of
Seller approving the sale contemplated hereby, and (B) a resolution of
the shareholders of Seller approving the sale contemplated hereby;
(12) Such certificates and other documents as Buyer and its counsel may
reasonably require to evidence the receipt by Seller of all necessary
corporate and regulatory authorizations and approvals for the
consummation of the transactions provided for in this Agreement;
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(13) Such other documents, instruments and agreements necessary to transfer
and assign to Buyer all Loans, including, without limitation, all
promissory notes duly endorsed and assignments of mortgages, security
agreements, financing statements, guarantees and other collateral
documents in form and content reasonably satisfactory to Buyer; and
(14) A Closing Statement, substantially in the form attached hereto as
Exhibit 1.2(e) (the "Closing Statement"); and
(15) Immediately available funds in the net amount shown as owing to Buyer
by Seller on the Closing Statement, if any.
(c) At the Closing, subject to all the terms and conditions of this Agreement,
Buyer shall deliver to Seller:
(1) The Assignment and Assumption Agreement;
(2) A certificate and receipt acknowledging the delivery and receipt of
possession of the property and records referred to in this Agreement;
(3) Immediately available funds in the net amount shown as owing to Seller
by Buyer on the Closing Statement, if any;
(4) A certificate of a proper officer of the Buyer, dated the Effective
Date, certifying to the fulfillment of all conditions which are the
obligations of Buyer and that all of the representations and
warranties of Buyer set forth in this Agreement remain true and
correct in all material respects on the Effective Date;
(5) A certified copy of a resolution of the Board of Directors of Buyer
approving the purchase contemplated hereby;
(6) Such certificates and other documents as Seller and its counsel may
reasonably require to evidence the receipt by Buyer of all necessary
corporate and regulatory authorizations and approvals for the
consummation of the transactions provided for in this Agreement; and
(7) The Closing Statement.
(d) All agreements and certificates described in this Section 2.2 shall be in
form and substance reasonably satisfactory to the parties' respective legal
counsel.
ARTICLE III
INDEMNIFICATION
Section 3.1. Seller's Indemnification of Buyer.
Seller shall indemnify, hold harmless and defend Buyer from and against any and
all claims, losses, liabilities, demands and obligations, including reasonable
attorney's fees and expenses, relating to or arising from (i) a breach by Seller
of any covenant, promise, agreement, representation or warranty contained
herein; (ii) real estate taxes, intangibles and franchise taxes, sales and use
taxes, social security and unemployment taxes, all accounts payable and
operating expenses (including salaries, rents and utility charges) incurred by
Seller prior to the Effective Date and which are claimed or demanded on or after
the Effective Date but not reflected on the Closing Statement; or (iii) any
material misrepresentation or omission made by the former president of Seller
pertaining to the Loans.
Section 3.2. Buyer's Indemnification of Seller.
Buyer shall indemnify, hold harmless and defend Seller from and against any and
all claims, losses, liabilities, demands and obligations, including reasonable
attorney's fees and expenses, relating to or arising from (i) a breach by Buyer
of any covenant, promise, agreement, representation or warranty contained herein
or (ii) real estate taxes, intangibles and franchise taxes, sales and use taxes,
social security and unemployment taxes, all accounts payable and operating
expenses (including salaries, rents and utility charges) incurred after the
Effective Date and which involve the assets transferred or the liabilities
assumed pursuant to this Agreement.
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Section 3.3. Claims for Indemnity.
(a) A claim for indemnity under Sections 3.1 or 3.2 of this Agreement may be
made by the claiming party at any time prior to 24 months after the
Effective Date by the giving of written notice thereof to the other party.
Such written notice shall set forth in reasonable detail the basis upon
which claim for indemnity is made. In the event that any such claim is made
within the prescribed 24 month period, the indemnity relating to such claim
shall survive until such claim is resolved. Claims not made within such 24
month period shall cease and no indemnity shall be made therefor.
(b) In the event that any person or entity not a party to this Agreement shall
make any demand or claim or file or threaten to file any lawsuit, which
demand, claim or lawsuit may result in any liability, damage or loss to one
party hereto of the kind for which such party is entitled to
indemnification pursuant to Section 3.1 or 3.2 hereof, then, after written
notice is provided by the indemnified party to the indemnifying party of
such demand, claim or lawsuit, the indemnifying party shall have the
option, at its cost and expense, to retain counsel for the indemnified
party to defend any such demand, claim or lawsuit and to conduct the
defense of such demand, claim or lawsuit as it may in its discretion deem
proper. In the event that the indemnifying party shall fail to respond
within five days after receipt of such notice of any such demand, claim or
lawsuit, then the indemnified party shall retain counsel and conduct the
defense of such demand, claim or lawsuit as it may in its discretion deem
proper, at the cost and expense of the indemnifying party. In effecting the
settlement of any such demand, claim or lawsuit, an indemnified party shall
act in good faith, shall consult with the indemnifying party and shall
enter into only such settlement as the indemnifying party shall approve
(the indemnifying party's approval will be implied if it does not respond
within ten days of its receipt of the notice of such settlement offer).
Section 3.4. Limitations of Indemnification.
Notwithstanding anything to the contrary contained in this Article III, no
indemnification shall be required to be made by either party until the aggregate
amount of all such claims by a party exceeds $20,000. Once such aggregate amount
exceeds $20,000, such party shall thereupon be entitled to indemnification for
all amounts in excess of such $20,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows, which representations
and warranties shall survive the Effective Date for a period of 24 months:
Section 4.1. Authorization.
This Agreement and all other agreements and instruments contemplated by this
Agreement to which Seller is or will be a party or signatory have been duly
authorized, executed, and delivered by Seller and constitute or will constitute
the legal, valid, and binding agreement of Seller, enforceable in accordance
with their respective terms, subject to the receipt of all necessary regulatory
approvals and except as enforcement may be limited by bankruptcy, insolvency or
other laws of general applicability relating to creditors' rights, or by general
equitable principles.
Section 4.2. No Adverse Effect.
There is no litigation, action, claim, proceeding, or governmental investigation
or examination pending or threatened against Seller which may have an adverse
effect upon the transactions contemplated by this Agreement, Seller's ability to
perform Seller's obligations hereunder, or upon the financial condition or
assets and properties of Seller.
Section 4.3. Disclosures.
No representation or warranty by Seller in this Agreement or in any certificate,
schedule, exhibit, letter, financial document, or other instrument furnished or
to be furnished to Buyer or any of Buyer's representatives pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
at the time of furnishing any untrue statement of a material fact, or omits or
will omit to state at the time of furnishing a material fact necessary in order
to make the statements contained therein not misleading. There is no information
of a material nature concerning the Seller which has not heretofore been
disclosed to Buyer in writing, which information could have a material adverse
effect upon the transactions contemplated by this Agreement or upon the assets,
properties, or business and other operation and conduct of Seller.
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Section 4.4. Corporate Organization and Licenses.
Seller is an Iowa chartered bank, duly organized, validly existing and in good
standing under the laws of the State of Iowa. Seller has all requisite power and
authority to own, lease and operate its properties and carry on its business as
now being conducted and has all licenses, permits, and governmental
authorizations and approvals necessary therefor, including, without limitation,
insurance of its deposits by the Federal Deposit Insurance Corporation all of
which are in full force and effect, and shall continue in full force and effect
through the Effective Date. Seller has obtained all licenses, permits, and
governmental approvals and orders required by applicable law or governmental
regulations necessary or appropriate in the conduct of Seller's business.
Section 4.5. Title.
Seller has good and marketable title to its assets (including other real
estate), free and clear of all liens, claims, easements, restrictions,
reservations, leases, mortgages, security interests, contracts of sale, options,
and other encumbrances, restrictions, or adverse claims of any type or nature
whatsoever, including, without limitation, claims or encumbrances of any
regulatory agency, except for encumbrances set forth in Exhibit 4.5 hereto.
Section 4.6. Conduct of Business.
The business of Seller has been conducted in the ordinary course of business,
and all books, records, and accounts of Seller are true, accurate, and complete
in all material respects and have been maintained in accordance with practices
generally used by banks chartered and/or organized under the laws of the State
of Iowa and located in Iowa. Seller has no material obligations, commitments,
indebtedness, or liabilities, contingent or otherwise, which are not disclosed
in the books, records, and accounts of Seller.
Section 4.7. Subsidiaries.
Seller has no subsidiaries.
Section 4.8. Regulatory Compliance.
Regarding Seller's regulatory compliance examinations, Seller has no material
violations, and will have no material violations of state or federal law or
regulation from the date hereof to the Effective Date.
Section 4.9. Loans.
The notes, evidences of indebtedness and agreements for the payment of money,
which are assets of Seller, and its related security documents, are each legal,
valid and binding obligations of the maker or obligor thereof, enforceable
against such maker or obligor in accordance with their terms.
Section 4.10. Reports.
Seller has timely filed all reports, registrations, and statements, together
with any amendments required to be made with respect thereto, required by law or
regulation with the appropriate regulatory authorities, and will file all such
reports as may be required from the date of this Agreement through the Effective
Date. As of their respective dates, such reports complied or will comply in all
material respects with all the reporting and disclosure rules and regulations of
such regulatory authorities. None of such reports contained or will contain any
untrue statement of a material fact or will omit to state a 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.
Section 4.11. Information Returns.
Seller has timely filed all of the required information returns or statements
with the appropriate governmental authorities (federal, state, and local),
including, without limitation, the information returns or statements required
under the Internal Revenue Code of 1986, as amended. The information returns or
statements are complete and correct in all material respects, and there are no
material penalties or other liabilities due from Seller, or assessable against
Seller, with respect to such returns or statements. Seller has complied with all
applicable federal, state, and local laws, rules, and regulations, including,
without limitation, the requirements of section 3406 of the Internal Revenue
Code of 1986, as amended, regarding the withholding of tax on payments made by
Seller. Seller has no material outstanding liability or unassessed potential
liability to any governmental agency for amounts which it was required to
withhold under applicable federal, state, and local laws, rules, and
regulations.
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Section 4.12. Contracts.
All contracts, leases, subleases, or other agreements and arrangements to which
Seller is a party are valid, binding, and in full force and effect, will not be
materially adversely affected by the transactions contemplated by this
Agreement, and there is not under any of such agreements any material existing
default or any event which, with the lapse of time or notice by a third party,
or both, could result in such a default, nor has Seller waived any of its rights
or options or exercised any of its options thereunder. A list of all contracts,
leases, subleases, or other agreements and arrangements to which Seller is a
party and which have terms of at least twelve (12) months is attached hereto as
Exhibit 4.12.
Section 4.13. Condition of Real and Personal Property.
All items of real property and personal property, including without limitation
computer hardware and software, used by Seller are in good operating condition
and repair (with the exception of ordinary wear and tear), are suitable for the
purposes for which they are presently utilized, and substantially comply with
all laws, ordinances, regulations, and other governmental requirements now in
effect.
Section 4.14. No Violation.
The execution, delivery, and performance of this Agreement by Seller, and the
consummation of the transactions contemplated by this Agreement, will not
constitute a breach, violation, default, create a lien, or give rise to any
right of termination, cancellation, prepayment, or acceleration under the
Articles of Incorporation or Bylaws, if any, of Seller, or under any law, rule,
or regulation, or any judgment, decree, order, governmental permit or license,
or any note, mortgage, indenture, deed of trust, license, lease, agreement, or
other instrument or obligation to which Seller is a party or by which Seller or
any of its properties or assets may be bound or affected. No consents,
approvals, or authorizations of, or declarations, filings, or registrations with
any other person, including any government authority, are required to be
obtained or made by Seller in connection with the execution, delivery, and
performance by Seller of this Agreement, or the consummation by Seller of the
transactions contemplated hereby, except for the required regulatory approvals
referred to in this Agreement. Notwithstanding anything contained in this
Section 4.14 to the contrary, the assumption by Buyer of the Federal Home Loan
Bank borrowings of Seller will require the prior consent of the Federal Home
Loan Bank.
Section 4.15. Performance of Obligations.
Seller has, in all respects, performed all material obligations required to be
performed by it to date, is not in default under, and no event has occurred
which, with the lapse of time or notice by a third party, or both, could result
in a default by Seller under any outstanding indenture, mortgage, contract,
lease, or other agreement to which Seller is a party or by which Seller is
bound, except for any default or event which would not result in and would not
have consequences which result in a material adverse change in its present or
prospective financial condition, business, or operations. Excluding the loan
portfolio, none of the presently unperformed contracts, agreements,
understandings, or leases by which Seller is currently bound will result in a
loss thereunder that will materially and adversely affect its present or
prospective financial condition, operations, or business. Seller is not subject
to any charter or any other corporate restriction, or any judgment, order, writ,
injunction, decree, rule, regulation, code, or ordinance which has not been
disclosed in writing to Buyer and which materially and adversely affects, or
might be expected to materially and adversely affect, Seller's present or
prospective financial condition, business, or operation.
Section 4.16. Deposits.
Seller has no liability to pay deposits other than as shown on its books.
Section 4.17. Mechanic's Liens.
As of the Closing, there will be no unpaid charges, debts, liabilities, claims,
or obligations arising from the construction, ownership, and/or operation of the
premises of Seller, or other real estate owned by Seller, which could give rise
to any mechanic's or materialmen's or other statutory or constitutional liens
against any such real estate or any part thereof.
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Section 4.18. Director and Officer Insurance and Surety Bond.
Seller has no known material contingent liability not covered by insurance with
respect to rights of indemnification from Seller for the benefit of any
director, officer, employee, or agent, or the heirs, executors, administrators,
successors or assigns thereof. Seller is not aware of any facts which may or
could result in such a claim for indemnification from Seller.
Section 4.19. Loan Participations.
Seller has not issued or sold any loan participations which might expose Seller
to direct or indirect recourse liability to the participant, pursuant to any
written or verbal agreements or understandings with such participant.
Section 4.20. Government Loan Guarantees.
Seller is in material compliance with all disclosures and reporting requirements
relating to loans guaranteed by the Farm Service Agency and the United States
Small Business Administration and there are no deficiencies that would result in
the cancellation of such government guarantees; provided, however, that this
representation shall not apply to any deficiency attributable to the acts of
Buyer.
Section 4.21. Financial Statements.
Seller will deliver to Buyer the audited financial statements of Seller for the
year ended December 31, 2002. All such reports and documents, and all financial
information and statements set forth or made therein, or otherwise a part
thereof, have been prepared in accordance with all applicable laws and
regulatory requirements and (except as modified thereby), with generally
accepted accounting principles consistently applied, fairly present the
financial condition and results of operations of Seller as of the dates and for
the periods indicated, and are true, accurate, and complete in all material
respects.
Section 4.22. No Material Change.
Except as disclosed on Exhibit 4.22, since the date of the reports and/or
documents of Seller referenced in Section 4.21 immediately above, Seller has not
(i) suffered any extraordinary losses in an amount material to the operations of
the business of Seller, or waived or released any rights or claims of value
material to the operations of the business of Seller, or allowed any such rights
to lapse; (ii) made or become obligated to make capital expenditures, or entered
into commitments therefor, with respect to the business of Seller; (iii)
experienced or suffered any material adverse change in its business, operations,
or assets (whether or not covered by insurance), or condition, financial or
otherwise, or results of operations, materially adverse to the business of
Seller; (iv) entered into any transaction, except in the ordinary course of the
business of Seller; (v) received any notice of claim asserted against Seller
which could have a material adverse effect on the operations of the business of
Seller; (vi) incurred or agreed to incur any material obligations outside the
ordinary course of the business of Seller; or (vii) paid any debt, obligation,
or liability, other than current liabilities incurred in the ordinary course of
the business of Seller. For purposes of this Section 4.22, the term "material"
means $20,000 or more.
Section 4.23. Operation of Business.
The Seller shall not permit any material adverse change in the quality,
composition, or maturity of its assets, deposits, or other liabilities, or in
its business prior to the Effective Date; provided, however, that the following
factors shall not be considered in determining what shall constitute a material
adverse change in the quality or composition of assets, liabilities, or business
of Seller: (i) changes in rates of return or yield received on various assets of
the Seller which changes are caused by general money market fluctuations; and
(ii) changes in interest rates paid by the Seller with respect to its source of
borrowed funds, including deposits, repurchase agreements, and federal funds
purchased, which changes are caused by general money market fluctuations.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows, which representations
and warranties shall be deemed to have been made again on and as of the
Effective Date and shall survive the Effective Date for a period of 24 months:
Section 5.1. Corporate Organization.
Buyer is a bank corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa. Buyer has the corporate power and
authority to own the properties being acquired, to assume the liabilities being
transferred and to effect the transactions contemplated herein.
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Section 5.2. No Violation.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will violate or conflict with (i) the
Articles of Incorporation or Bylaws, if any, of the Buyer, (ii) any material
provision of any material agreement or any other material restriction of any
kind to which Buyer is a party or by which Buyer is bound, (iii) any material
statute, law, decree, regulation or order of any governmental authority, or (iv)
any material provision which will result in a default under, or cause the
acceleration of the maturity of, any material obligation or loan to which Buyer
is a party.
Section 5.3. Corporate Authority.
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated herein, have been duly authorized by the Board of
Directors of Buyer. No further corporate authorization on the part of the Buyer
is necessary to consummate the transactions contemplated hereunder.
Section 5.4. Enforceable Agreement.
This Agreement and all other agreements and instruments contemplated by this
Agreement to which Buyer is or will be a party or signatory have been duly
authorized, executed and delivered by Buyer and constitute or will constitute
the legal, valid and binding agreement of Buyer enforceable in accordance with
their respective terms, subject to the receipt of all necessary regulatory
approvals and except as enforcement may be limited by bankruptcy, insolvency or
other laws of general applicability relating to creditors' rights, or by general
equitable principles.
Section 5.5. No Adverse Effect.
There is no litigation, action, claim, proceeding, or governmental investigation
or examination pending or threatened against Buyer which may have an adverse
effect upon the transactions contemplated by this Agreement, Buyer's ability to
perform Buyer's obligations hereunder, or upon the financial condition or assets
and properties of Buyer.
Section 5.6. Disclosure.
No representation or warranty by Buyer in this Agreement or in any certificate,
schedule, exhibit, letter, financial document, or other instrument furnished or
to be furnished to Seller or any of Seller's representatives pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain at the time of furnishing any untrue statement of a material fact, or
omits or will omit to state at the time of furnishing a material fact necessary
in order to make the statements contained therein not misleading. There is no
information of a material nature concerning the Buyer which has not heretofore
been disclosed to Seller in writing, which information could have a material
adverse effect upon the transactions contemplated by this Agreement or upon the
assets, properties, or business and other operation and conduct of Buyer.
ARTICLE VI
OBLIGATIONS OF PARTIES PRIOR TO AND AFTER
EFFECTIVE DATE
Section 6.1. Conduct of Business of Seller.
Except as expressly provided in this Agreement, during the period from the date
of this Agreement and through the Effective Date, Seller shall conduct its
business and operations in the usual and ordinary course and in a safe and
prudent manner. To the extent consistent with such business, Seller shall use
all reasonable efforts to preserve intact its banking organization, to keep
available the services of its officers and employees, and to preserve its
relationships with customers, suppliers, and others having business dealings
with it to the end that the goodwill and continuing business of Seller shall not
be materially and adversely affected at the Effective Date. During said period,
Seller agrees to do or refrain from doing (as applicable) the following, or any
thereof, unless the prior written consent of the Buyer shall have been received:
(a) Seller shall not sell, transfer, or lease any of its properties or subject
any of such properties or assets to a mortgage, pledge, security interest,
or lien, except encumbrances of the character heretofore incurred in the
ordinary and usual course of business. The reference to "properties" and
assets" in this paragraph does not include Other Real Estate which is
covered by Section 6.1(t).
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(b) Seller shall not make any expenditures of a capital nature in excess of
$5,000, other than those for which it is committed on the date of this
Agreement.
(c) Except for Loans, Seller shall not enter into any contracts or commitments
with a term in excess of twelve (12) months.
(d) Seller shall not use any of its assets or properties, except for proper
banking purposes.
(e) Seller shall not modify, amend, cancel, or terminate any existing
agreement, except in the ordinary and usual course of business.
(f) Seller shall not acquire control over any other corporation, firm, or
organization, or create any new subsidiaries, except in connection with
foreclosures in the ordinary and usual course of business, or participate
in any partnership, joint venture, or other business arrangement.
(g) Seller shall not increase benefits or compensation of officers or employees
or approve or implement bonuses or promotions except normal merit, length
of service and promotional increases in the ordinary course of business and
consistent with prior practices and with the prior approval of Buyer, and
at the Effective Date there shall be no contracts of employment with Seller
which are not terminable at will, no agreements to pay deferred
compensation or fringe benefits to current or former employees (or members
of their families), and all accrued benefits under all pension plans shall
be fully funded.
(h) Seller shall maintain all of its existing insurance policies and bonds in
full force and effect.
(i) Seller shall refrain from applying for any new bank office.
(j) Seller shall promptly file all tax returns for which filing deadlines occur
prior to the Effective Date and shall appropriately accrue and pay, when
due, all applicable federal, state, and local taxes and assessments which
have been assessed or are payable prior to the Effective Date, including,
but not limited to, ad valorem, sales, use, excise, franchise, income, real
property and personal property taxes.
(k) Seller shall continue to pay all interest on deposits as such interest
becomes due and payable in the ordinary course of business through the
Effective Date.
(l) Seller shall continue to accrue interest receivable and reflect collection
of same in the ordinary course of business through the Effective Date.
(m) All debts of Seller with respect to the business conducted shall be paid in
full as they fall due. A list of all payees who were paid by the Seller
more than $1,000 during the month shall be provided to Buyer on a monthly
basis within ten (10) days after the end of the month. The list shall
include the name of the payee, the amount of the payment and a brief
description of the purpose of the payment.
(n) Seller shall not loan funds, issue letters of credit, accept any deposits,
or enter into any commitments for such loans, letters of credit, or
deposits except in the ordinary course of business and upon substantially
the same terms, including interest rates, maturities, collateral security,
and other applicable terms as those prevailing at the time for comparable
transactions. Seller shall not capitalize any interest on any existing
loans or modify any terms of existing loans or commitments for loans.
Seller shall not make any of the following loans or commitments without the
prior approval of Buyer:
(1) Any loan (except real estate loans) in excess of $50,000 to a new
customer;
(2) Any loan (except real estate loans) in excess of $100,000 to an
existing customer;
(3) Any construction loan; or
(4) Any real estate loan in excess of $100,000 if the loan is to be kept
by Seller and not sold in the secondary market.
Buyer shall notify Seller within three business days after receipt of
the necessary information from Seller.
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(o) Seller shall not merge or consolidate with any other entity or enter into
any agreement therefor or for the sale of assets or acquire or agree to
acquire any stock, business, properties, or assets of any other person,
firm, association, corporation, bank, or other business organization.
(p) Seller shall not cancel, without payment in full, any notes, loans, or
other obligations receivable from any stockholder, officer or director of
Seller, or from any corporation, partnership, or other entity in which any
stockholder, officer or director of Seller has any direct or indirect
interest.
(q) Seller shall not, as defendant or obligor, settle any dispute which
involves the payment of money or acceptance of liabilities in excess of
$20,000.
(r) Seller shall not permit any material adverse change in the quality,
composition, or maturity of its assets, deposits or other liabilities, or
in its business; provided, however, that the following factors shall not be
considered in determining what shall constitute a materially adverse change
in the quality or composition of assets, liabilities, or business of
Seller: (i) changes in rates of return or yield received on various assets,
which changes are caused by general money market fluctuations; and (ii)
changes in interest rates paid by Seller with respect to its source of
borrowed funds, including deposits, repurchase agreements, and federal
funds purchased, which changes are caused by general money market
fluctuations.
(s) Seller shall not purchase any investment securities with maturities in
excess of 2 years or sell any investment securities prior to maturity
thereof; however, any proposed purchase or sale of such securities may be
consented to orally by Buyer.
(t) Seller shall not sell "other real estate owned" other than in compliance
with banking regulations and any proposed sale must be consented to by
Buyer.
(u) Seller shall not take any action or refrain from taking any action that
would have the effect of delaying scheduled examinations by regulators.
(v) Seller shall not amend its Articles of Incorporation or Bylaws (if any),
liquidate or dissolve.
(w) Seller shall not take any action or refrain from taking any action that
would cause or have the effect of causing any of the representations and
warranties of Seller contained herein to not be true and correct on and as
of the Effective Date.
(x) Seller shall not accept brokered deposits.
(y) Seller shall not incur any indebtedness with a maturity greater than 12
months for wholesale repurchase agreements or FHLB borrowings.
Section 6.2. Access and Information.
Upon reasonable notice, Seller shall afford to Buyer and its representatives
such access during normal business hours throughout the period prior to the
Effective Date to the books, records, properties, personnel and to such other
information as Buyer may reasonably request. Buyer will not, and will cause its
representatives not to, use any information obtained pursuant to this paragraph
for any purpose unrelated to the consummation of the transactions contemplated
by this Agreement. Within five (5) days after the end of each month, Seller
shall provide Buyer with reports of condition and income for Seller, and during
the last thirty (30) days prior to Closing, Seller shall provide Buyer with
reports of condition and income on a weekly basis, and during the last five (5)
business days prior to Closing, on a daily basis.
Section 6.3. Meetings of Board of Directors.
To the extent permitted by appropriate regulatory authorities, Seller shall
authorize a representative of Buyer to attend (as a nonvoting observer) all
meetings of the Board of Directors and committees thereof of Seller (except
meetings of the Board of Directors in executive session relating to the
transaction contemplated by this Agreement) conducted prior to the Effective
Date, and give Buyer reasonable advance notice of the date, time and place of
any such regularly scheduled meetings and special meetings of the entire Board
of Directors of Seller. All information gained by representatives of Buyer by
attendance at such meetings shall be held in strict confidence.
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Section 6.4. Applications for Approval to Effect Purchase of Assets and
Assumption of Liabilities.
Within 30 days following the execution of this Agreement, Buyer shall prepare
and file applications required by law with the appropriate regulatory
authorities for approval to purchase and assume the aforesaid assets and
liabilities, to establish a branch in Iowa City, Iowa, and to effect in all
other respects the transactions contemplated herein. Buyer shall process such
application in a diligent manner and on a priority basis, shall provide Seller
with a copy of such application three days prior to filing (except for any
confidential portions thereof) to allow Seller an opportunity to review and
comment on such applications, shall provide Seller with copies of all materials,
notices, orders, opinions, correspondence and other documents with respect to
such regulatory filings, and shall use its best efforts to obtain all necessary
regulatory approvals. Buyer shall promptly notify Seller upon receipt by Buyer
of notification that any application provided for hereunder will likely be
denied. Seller shall provide such assistance and information to Buyer as shall
be reasonably necessary for Buyer to comply with the requirements of the
applicable regulatory authorities.
Section 6.5. Further Actions.
The parties hereto shall execute and deliver such instruments and take such
other actions as the other party may reasonably require to carry out the intent
of this Agreement.
Section 6.6. Breaches with Third Parties.
Nothing in this Agreement shall constitute an agreement to assign, or the
assignment of, any material claim, contract, license, lease, commitment, sales
order or purchase order or any material claim of right or any benefit arising
thereunder or resulting therefrom, if an assignment or attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or materially affect the rights of Buyer or Seller thereunder; and any
transfer or assignment to the Buyer or Seller of any material property or
property rights or any contract or agreement which shall require the consent or
approval of any third party, shall be made subject to such consent or approval
being obtained.
Section 6.7. Insurance.
On or after the Effective Date, Seller will discontinue its insurance coverage
maintained in connection with the assets transferred and the activities
conducted thereon. Buyer shall be responsible for all insurance protection for
such assets and the activities conducted thereon immediately following the
Effective Date. Pending the Closing, risk of loss shall be the responsibility of
the Seller.
Section 6.8. Public Announcements.
Except as is necessary to obtain the regulatory approvals contemplated by this
Agreement, Seller and Buyer agree that, from the date hereof, neither shall make
any public announcement or public comment regarding this Agreement or the
transactions contemplated herein without first consulting with the other party
hereto and reaching an agreement upon the substance and timing of such
announcement or comment. Seller acknowledges that the transaction is a material
transaction to the Buyer so as to result in the necessity of an immediate public
announcement by it. Further, Seller and Buyer acknowledge the sensitivity of
this transaction to the Employees and no announcement or communication with the
Employees shall be made without the prior approval of the Seller.
Section 6.9. Further Negotiations.
Each party recognizes and acknowledges that between the date of this Agreement
and the Effective Date, each will expend a great deal of time and expense in
proceeding in good faith to close the transaction. Accordingly, neither Buyer or
Seller will conduct, initiate or continue any discussions or negotiations or
enter into any understanding, arrangement or agreement with any other party or
entity in connection with the matters set forth herein prior to the Effective
Date.
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ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to complete the transactions contemplated in this
Agreement are conditioned upon fulfillment, on or before the Effective Date, of
each of the following conditions:
Section 7.1. Obligations Performed.
Seller shall deliver or make available to Buyer those items required by Section
2.2 hereof except for the certificate required by Section 2.2(b)(10) hereof.
Section 7.2. No Adverse Litigation.
On the Effective Date, no action, suit or proceeding shall be pending or
threatened against Seller which is reasonably likely to (i) materially and
adversely affect the business, properties and assets of Seller, or (iii)
materially and adversely affect the transactions contemplated herein.
Section 7.3. Regulatory Approval.
Buyer and Seller shall have received all necessary regulatory approvals of the
transactions provided in this Agreement, all notices and waiting periods
required by law to pass shall have passed, no proceeding to enjoin, restrain,
prohibit or invalidate such transactions shall have been instituted or
threatened, and any conditions of any regulatory approval shall have been met.
Section 7.4. Guaranty by Russell Gerdin.
Russell Gerdin hereby guarantees the complete and prompt performance by the
Seller of its obligations under this Agreement. Russell Gerdin agrees as
follows:
(a) Russell Gerdin guarantees the Seller's prompt and complete performance,
satisfaction and observance of all of the Seller's liabilities,
responsibilities and the obligations pursuant to this Agreement.
(b) This guaranty shall continue until all the terms of this Agreement have
been performed or otherwise discharged by the Seller, and Russell Gerdin
shall not be released of his obligations hereunder so long as any claim of
the Buyer against the Seller arising out of this Agreement is not settled
or discharged in full. This guaranty extends to any successor or assignee
of the Buyer.
(c) If the Seller fails to perform, satisfy, or observe any liability,
responsibility, obligation, term or condition of this Agreement, Russell
Gerdin will promptly and fully do so in the Seller's place, and shall be
fully responsible and liable to the same extent as the Seller for the
Seller's failure to perform or satisfy its liabilities, responsibilities,
obligations, terms or conditions pursuant to this Agreement, and the
Seller's breach of any representation, warranty, covenant, or agreement
contained herein or therein.
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to complete the transactions contemplated in
this Agreement are conditioned upon fulfillment, on or before the Effective
Date, of each of the following conditions:
Section 8.1. Representations and Warranties True.
The representations and warranties made by Buyer in this Agreement shall be true
and correct in all material respects on 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 Seller.
Section 8.2. Obligations Performed.
Buyer shall (i) deliver or make available to Seller those items required by
Section 2.2 hereof and (ii) perform and comply 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.
17
Section 8.3. No Adverse Litigation.
On the Effective Date, no action, suit or proceeding shall be pending or
threatened against Buyer which is reasonably likely to materially and adversely
affect the transactions contemplated herein.
Section 8.4. Regulatory Approval.
Buyer and Seller shall have received all necessary regulatory approvals of the
transactions provided in this Agreement, all notices and waiting periods
required by law to pass shall have passed, no proceeding to enjoin, restrain,
prohibit or invalidate such transactions shall have been instituted or
threatened, and any conditions of any regulatory approval shall have been met.
ARTICLE IX
TERMINATION
Section 9.1. Methods of Termination.
This Agreement may be terminated only in any of the following ways:
(1) At any time on or prior to the Effective Date by the mutual consent in
writing of Buyer and Seller;
(2) On the Effective Date by Buyer in writing if the obligations set forth in
Article VII of this Agreement shall not have been met by Seller or waived
in writing by Buyer;
(3) On the Effective Date by Seller in writing if the conditions set forth in
Article VIII of this Agreement shall not have been met by Buyer or waived
in writing by Seller; or
(4) By Seller in writing at any time after any applicable regulatory authority
has denied approval of any application of Buyer for approval of the
transactions contemplated herein.
Section 9.2. Procedure Upon Termination.
In the event of termination pursuant to Section 9.1 hereof, and except as
otherwise stated therein, 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 in writing by the party having the
right to terminate. If this Agreement is terminated as provided herein:
(a) Each party will return all documents, work papers and other materials of
the other party, including photocopies or other duplications thereof,
relating to this transaction, whether 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 other
party (other than information which is a matter of public knowledge or
which has heretofore been published in any publication for public
distribution or filed as public information with any government authority)
shall not at any time be used for any business purpose by such party or
disclosed by any such party to third parties.
Section 9.3. Damages and Payment of Expenses.
Should any transactions contemplated herein not be consummated because of a
party's breach of this Agreement, in addition to such damages as may be
recoverable in law or equity, the other party shall be entitled to recover from
the breaching party upon demand, itemization and documentation, its reasonable
outside legal, accounting, consulting and other out-of-pocket expenses.
ARTICLE X
COVENANT NOT TO COMPETE
For a period of three (3) years after the Effective Date, Seller and Russell
Gerdin shall not, directly or indirectly:
(a) operate, purchase, own, or maintain or have a direct or indirect interest
in any banking, insurance or investment business within the city limits of
Iowa City, Iowa or within a radius of thirty (30)miles of Iowa City, Iowa;
(b) solicit the loan and deposit business of any person who is a customer of
Seller or Buyer other than through general advertising that does not
specifically target former customers; and
(c) hire, retain or attempt to hire or retain any current employee or
independent contractor of Buyer or in any way interfere with the
relationship between Buyer and any of its employees or independent
contractors.
18
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Amendment and Modification.
The parties hereto, by mutual consent of their duly authorized officers, may
amend, modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
Section 11.2. Waiver or Extension.
Except with respect to required approvals of the applicable governmental
authorities, either party, by written instrument signed by a duly authorized
officer, may extend the time for the performance of any of the obligations or
other acts of the other party and may waive (i) any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (ii) compliance with any of the undertakings, obligations,
covenants or other acts contained herein.
Section 11.3. Assignment.
This Agreement and all of the provisions hereof shall be binding upon, and shall
inure to the benefit of, the parties hereto and their permitted assigns, but
neither this Agreement nor any rights, interests or obligations hereunder shall
be assigned by either of the parties without the prior written consent of the
other.
Section 11.4. Confidentiality.
Seller and Buyer covenant and agree that all information received by either of
them with respect to the business of the other (other than information which is
a matter of public knowledge or which has heretofore been published in any
publication for public distribution or which has heretofore, or which is
hereafter, filed as public information with any governmental authority) shall
not at any time be used for any business purpose or disclosed by such party to
third persons. This covenant and agreement shall survive the consummation of the
transactions contemplated herein.
Section 11.5. Addresses for Notices, Etc.
All notices, requests, demands, consents and other communications provided for
hereunder and under the related documents shall be in writing and mailed (by
registered or certified mail, return receipt requested), telegraphed, telexed,
telecopied or personally delivered (with receipt thereof acknowledged) to the
applicable party at the address indicated below:
If to Seller: Russell Gerdin
2700 Heartland Drive
Iowa City, Iowa 52240
Telephone: 319-545-2371
Facsimile: 319-545-2791
If to Buyer: West Des Moines State Bank
Attention: David R. Milligan, CEO
1601 - 22nd Street
West Des Moines, Iowa 50266
Telephone: (515) 222-2300
Facsimile: (515) 225-8032
Section 11.6. 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 document.
Section 11.7. Headings.
The headings of the Sections and Articles of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement.
Section 11.8. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Iowa.
19
Section 11.9. Entire Agreement.
This Agreement, the exhibits and attachments hereto represent the entire
agreement between the parties hereto respecting the matters addressed herein and
all prior or contemporaneous written or oral proposals, agreements in principle,
representations, warranties and understandings between the parties are
superseded hereby and merged herein.
Section 11.10. Expenses.
Except as otherwise provided in this Agreement, all legal, accounting and other
costs and expenses incurred in connection with the execution, delivery and
performance of this Agreement and of the transactions contemplated hereby shall
be borne and paid by the party incurring such costs and expenses, and neither
party shall be obligated for any cost or expense incurred by the other party.
Section 11.11. Severability.
If any provision of this Agreement is invalid or unenforceable, the balance of
this Agreement shall remain in effect.
Section 11.12. Parties in Interest.
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any person (other than the parties hereto,
their successors and permitted assigns) any rights or remedies under or by
reason of this Agreement, or any term, provision, condition, undertaking,
warranty, representation, indemnity, covenant or agreement contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.
SELLER
ATTEST: HAWKEYE STATE BANK
By: /s/ Kenneth R. Garetson Jr. By: /s/ Russell Gerdin
--------------------------------
Its:______________________ Russell Gerdin, Chairman
BUYER
ATTEST: WEST DES MOINES STATE BANK
By: /s/ Douglas R. Gulling By: /s/ David R. Milligan
---------------------- --------------------------------
Its: CFO David R. Milligan, Chairman and
CEO
/s/ Margaret Nims /s/ Russell Gerdin
- --------------------------- --------------------------------
Witness Russell Gerdin, Individually
20
EXHIBIT 1.1(b)
EXCLUDED ASSETS
The following assets listed on this Exhibit 1.1(b) are excluded from those
assets that are being transferred to Buyer and are instead to be retained by
Seller:
o All "cash and due from banks" except for "Coin and Currency".
o All federal funds sold and accrued interest thereon.
o All charged-off assets, partially charge-off assets and other non-ledger
assets that were written off or written down since January 1, 2002,
including rights to recoveries therefrom.
o All contingent claims against directors, officers and employees of Seller.
o All claims made with Seller's bonding company or other insurance company
with respect to the alleged misconduct of Seller's former president or
other employees.
o All prepaid expenses and resulting refunds.
21
EXHIBIT 1.2(a)(2)
Loans With Allocated Reserves
Total
Allocated
Reserve
Borrower's Name Total Substandard Doubtful Loss Amount
- --------------------------------------------------------------------------------
[List]
22
EXHIBIT 1.2(a)(2)
COMPUTATION OF PURCHASE PRICE REDUCTION PER SECTION 1.2(a)(2)
(Amounts in Thousands)
Total
Allocated
Reserve
Borrower's Name Total Substandard Doubtful Loss Amount
- --------------------------------------------------------------------------------
[List]
Total 339.6
Total ALLL (1,270.1)
---------
Purchase price reduction per Section 1.2(a)(2) (930.5)
=========
23
EHIBIT 1.2(e)
Sample Closing Statement
As if Valuation Data Were December 31, 2002
(All at Book Value)
Preliminary
Purchased Assets Estimate
- --------------------------------------------------------------------------------
Real Estate $ 488,479
Furniture, Fixtures and Equipment 150,010
Equipment Leases (prepaid) (estimate) 15,674
Loans 117,274,815
Accrued Interest Receivable on Loans 937,365
Less Allowance for Loan and Lease Losses:
Agreed Amount Per 1.2(a)(2) (930,500)
Less Reductions Per 1.2(a)(2):
(A) Charge-offs --
(B) Payoffs --
(C) Paydowns --
Coin and Currency 835,581
Prepaid FDIC Premiums (Estimate) 10,000
Other Real Estate Owned 125,109
Investment Securities 34,921,122
Accrued Interest Receivable on Securities 501,534
Premium:
Agreed Amount 15,050,000
Less adjustment Per 1.2(d) --
------------
Total Purchase Price of Purchased Assets $169,379,189
============
24
EXHIBIT 1.2(e), Continued
Liabilities Assumed:
Deposit Liabilities:
Deposits $95,667,783
Accrued Interest Payable on Deposits 195,717
-----------
Total Deposit Liabilities 95,863,500
FHLB Borrowings 41,615,703
Accrued Interest Payable on FHLB Borrowings --
Securities Sold Under Repurchase Agreements 1,412,969
Accrued Interest Payable on Repo's --
Treasury Tax and Loan Accounts 2,116
Accrued Real Estate Taxes Payable 46,769
Unearned Income on Safe Deposit Leases --
Unearned Income on Standbay Letter of Credit Fees --
------------
Total Liabilities Assumed 138,941,057
------------
Net Cashed Owed by (to) Buyer $ 30,438,132
============
25
Exhibit 1.3(g)
Contracts
Service and maintenance contracts as follows:
[List]
26
EXHIBIT 1.4(e)
LOANS THAT SELLER WILL PURCHASE
100% PARTICIPATION IN AT CLOSING
Borrower's Name Note Nos.
- --------------------------------------------------------------------------------
[List]
19
27
EXHIBIT 1.4(f)
LOANS SUBJECT TO "PUT" RIGHTS
Borrower's Name Note Nos.
- --------------------------------------------------------------------------------
[List]
28
EXHIBIT 2.2(b)(3)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into this _____ day of
__________, 2003, by and between Hawkeye State Bank ("Seller") and West Des
Moines State Bank ("Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer have entered into a Purchase and Assumption Agreement
dated as of __________, 2003, (the "Agreement"), which provides for the
assignment by Seller of all of its right and interest in and to certain assets,
and the assumption by Buyer of certain liabilities and obligations, all as set
forth in the Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, receipt of which is hereby acknowledged by Seller and
Buyer, Seller hereby assigns, transfers and sets over to Buyer all of Seller's
rights and interest to, and Buyer does hereby assume Seller's liabilities and
obligations in connection with the following:
(a) All Deposit Liabilities (as defined in Section 1.3(a) of the Agreement);
(b) All liabilities for Federal Home Loan Bank advances and borrowings, and
accrued and unpaid interest thereon;
(c) All liabilities for securities sold under repurchase agreements, and
accrued and unpaid interest thereon;
(d) All unfunded loan commitments and lines of credit related to the Loans (as
defined in Section 1.4(a) of the Agreement);
(e) All Treasury Tax and Loan Accounts;
(f) All Equipment Leases;
(g) All Safe Deposit Leases;
(h) All Contracts (as defined in Section 1.3(g) of the Agreement);
(i) All accrued real estate taxes prorated to the Valuation Date (as defined in
the Agreement); and
(j) All income collected but not earned with respect to the Safe Deposit Leases
pursuant to Section 1.5(c) of the Agreement.
This Assignment and Assumption Agreement shall be binding upon, and shall inure
to the benefit of Seller, Buyer and each of their successors and assigns and
shall be subject to the terms and conditions of the Agreement. In the event of a
conflict between any of the terms and provisions hereof and the Agreement, the
Agreement shall be deemed to control. Capitalized terms used herein shall have
the meaning ascribed thereto in the Agreement.
This Assignment and Assumption Agreement, and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Iowa.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed by their duly authorized officers, all as of
the day and year first above written.
ATTEST: HAWKEYE STATE BANK
By: By:
---------------------------------- -------------------------
Its: Its:
-------------------------------- ------------------------
ATTEST: WEST DES MOINES STATE BANK
By: By:
---------------------------------- -------------------------
Its: Its:
-------------------------------- ------------------------
29
EXHIBIT 2.2(b)(2)
BILL OF SALE
THIS BILL OF SALE is dated this ________ day of _________________, 2003, by
Hawkeye State Bank ("Seller").
WHEREAS, Seller and West Des Moines State Bank ("Buyer") have entered into a
Purchase and Assumption Agreement dated as of ______________, 2003 (the
"Agreement)", which provides for the sale by SEller to Buyer of certain personal
property, loans and other assets, all as set forth in the Agreement.
NOW, THEREFORE, Seller, for good and valuable consideration, receipt of which is
hereby acknowledged, does hereby grant, bargain, sell, assign, set over, convey
and transfer to Buyer all of its right, title and interest in and to the
following assets (the "Assets"):
(a) All furniture, fixtures, leasehold improvements and other tangible personal
property set forth in Exhibit 1.1(a)(2) of the Agreement, except for those
items listed in Exhibit 1.1(b) of the Agreement.
(b) All of the Loans and accrued interest thereon (including collateral
relating thereto) described in Section 1.4 of the Agreement;
(c) All of the Equipment Leases;
(d) All keys and records to the safe deposit boxes and all Safe Deposit Leases
and contracts;
(e) All of Seller's files and records related to the Loans and Equipment
Leases, Deposit Liabilities and other liabilities (as such terms are
defined or described in the Agreement);
(f) All charged-off assets, partially charged-off assets and other non-ledger
assets, except for those that were written off or written down since
January 1, 2002, including rights to recoveries therefrom;
(g) Prepaid FDIC premiums;
(h) All investment securities and accrued interest thereon;
(i) All coin and currency and cash items in the possession of Seller on the
Effective Date (the "Coin and Currency"); and
(j) The name "Hawkeye State Bank".
Seller, for itself and its successors and assigns, does hereby covenant anda
agree to and with Buyer and its successors and assigned that it (i) is seized
of, and has the right to convey to Buyer, such title to the Assets as is
provided in the Agreement, (ii) shall, from time to time, at the request of
Buyer, execute, acknowledge and deliver to Buyer any and all further
instruments, documents, endorsements, assignments, information, materials and
other papers that may be reasonably required to transfer the Assets to Buyer, to
enable Buyer to bill, collect, service and administer the Loans and to give full
force and effect to the full intent and purpose of this Bill of Sale.
Capitalized terms used herein shall have the meanings ascribed thereto in the
Agreement.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be duly executed by
its duly authorized officers, all as of the day and year first above written.
ATTEST HAWKEYE STATE BANK
By: By:
----------------------------------- ----------------------------
Its: Its:
---------------------------------- --------------------------
30
EXHIBIT 4.5
ENCUMBRANCES PERMITTED
Securities pledged to secure FHLB borrowings:
[List]
Securities pledged to secure Treasury Tax and Loan account:
[List]
Securities pledged to secure repurchase agreements:
[List]
Securities pledged to secure public funds deposits:
[List]
31