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): January 16, 2002
Pocahontas Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-23969 71-0806097
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
Registrant's telephone number, including area code: (870) 802-5900
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events.
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On January 16, 2001, First Community Bank ("FCB"), the subsidiary of
Pocahontas Bancorp, Inc. (the "Registrant"), entered into a Stock Purchase
Agreement with Spring Rivers Bancshares, Inc. ("Spring Rivers") and its Arkansas
bank subsidiary, Peoples Bank of Imboden ("Peoples Bank"). The agreement
provides, among other things, for the acquisition by FCB of all of the issued
and outstanding shares of common stock of Peoples Bank, to be followed by the
merger of Peoples Bank with and into FCB, with FCB as the surviving financial
institution. Pursuant to the agreement, FCB will pay Spring Rivers cash
consideration of approximately $8.0 million. The final purchase price will be
calculated near the closing of the transaction and will be equal to the sum of
(i) 5% of Peoples Bank's local deposits, and (ii) Peoples Bank's tangible book
value on such date. The parties have identified certain assets that will be
retained by Spring Rivers or its affiliates and not transferred to FCB as part
of the transaction. Any assets so retained by Spring Rivers or its affiliates
will reduce the purchase price by the carrying value of such assets.
The agreement is filed herewith as Exhibit 2 and is incorporated herein
by this reference.
The respective Boards of Directors of Peoples Bank and FCB have
unanimously approved the agreement. Due diligence has been completed.
Consummation of the transaction is subject to certain conditions, including the
receipt of all required regulatory approvals. The transaction is structured as a
tax-free reorganization. It is expected that the transaction will be completed
prior to July 31, 2002.
A press release announcing the signing of the definitive Stock Purchase
Agreement is attached hereto as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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The following Exhibits are filed as part of this report:
Exhibit 2 Stock Purchase Agreement, dated as of January 16, 2002,
by and among First Community Bank and Spring Rivers
Bancshares, Inc. and Peoples Bank of Imboden.
Exhibit 99 Press release dated January 16, 2002.
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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.
POCAHONTAS BANCORP, INC.
DATE: January 23, 2002 By /s/ Dwayne Powell
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Dwayne Powell
President and Chief Executive Officer
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EXHIBIT 2
STOCK PURCHASE AGREEMENT
BY AND AMONG
FIRST COMMUNITY BANK
AND
SPRING RIVERS BANCSHARES, INC.
AND
PEOPLES BANK OF IMBODEN
DATED AS OF
January 16, 2002
TABLE OF CONTENTS
PAGE
ARTICLE I - THE ACQUISITION.............................................. 1
1.1 The Acquisition and Purchase Price..................... 1
1.2 Excluded Liabilities................................... 2
1.3 Time, Date and Location of Closing..................... 2
1.4 Closing Deliveries.............................................. 3
1.5 Bank Merger .............................................. 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF BUYER..................... 3
2.1 Organization........................................... 3
2.2 Authorization.......................................... 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY
AND SHAREHOLDER............................................ 4
3.1 Organization........................................... 4
3.2 Authorization; No Violation............................ 4
3.3 Capitalization; Title.................................. 5
3.4 Financial Statements................................... 5
3.5 Compliance With Laws................................... 6
3.6 Litigation............................................. 6
3.7 Intellectual Property.................................. 6
3.8 Tax Matters............................................ 6
3.9 Insurance.............................................. 7
3.10 Banking Matters........................................ 7
3.11 Employee Benefit Plans................................. 9
3.12 Environmental, Health and Safety Matters............... 12
3.13 Contracts.............................................. 13
3.14 Absence of Certain Changes and Events.................. 15
3.15 Reserved .............................................. 16
3.16 Undisclosed Liabilities................................ 17
3.17 Assets ................................................ 17
3.18 Certain Business Relationships......................... 17
3.19 Employees....................................................... 17
3.20 Brokers' and Finders' Fees...................................... 17
3.21 Real Property................................................... 18
ARTICLE IV - PRE-CLOSING COVENANTS....................................... 19
4.1 Covenants .............................................. 19
4.2 Transfer of Retained Assets..................................... 22
4.3 Allowance for Loan Losses....................................... 22
ARTICLE V - POST-CLOSING COVENANTS....................................... 22
ARTICLE VI - CONDITIONS .............................................. 23
6.1 Conditions to the Obligations of Buyer.......................... 23
6.2 Conditions to the Obligations of Subsidiary and Shareholder..... 24
ARTICLE VII - TERMINATION .............................................. 24
7.1 Termination..................................................... 24
7.2 Effect of Termination; Survival................................. 25
ARTICLE VIII - INDEMNIFICATION........................................... 25
8.1 Remedies for Breaches of this Agreement......................... 25
ARTICLE IX - TAX MATTERS .............................................. 26
9.1 Tax Matters..................................................... 26
ARTICLE X - GENERAL PROVISIONS........................................... 30
10.1 Notices ....................................................... 30
10.2 Applicable Law.................................................. 31
10.3 Assignability; Binding Effect................................... 31
10.4 Entire Agreement................................................ 31
10.5 Extension; Waiver............................................... 31
10.6 Amendment....................................................... 32
10.7 Remedies Cumulative............................................. 32
10.8 Counterparts.................................................... 32
10.9 Severability.................................................... 32
10.10 No Strict Construction.......................................... 32
10.11 Interpretation.................................................. 32
10.12 Expenses ....................................................... 33
10.13 Specific Performance............................................ 33
DEFINED TERMS LIST
Accountants............................................ 27
Acquisition............................................ 1
Agreement.............................................. 1
Allocation Statement................................... 27
Bank Merger............................................ 22
ii
Bank Regulatory Authority.............................. 7
BHC.................................................... 1
Buyer.................................................. 1
Buyer's Parent......................................... 1
Calculation Date....................................... 1
CERCLA................................................. 13
Closing................................................ 2
Closing Date........................................... 3
Code................................................... 9
Control Group.......................................... 10
Employees.............................................. 20
Encumbrances........................................... 5
Environmental, Health and Safety Requirements.......... 12
ERISA.................................................. 9
FDIC................................................... 5
HOLA................................................... 1
Hold-back Amount....................................... 2
Intellectual Property.................................. 6
Loans ................................................ 8
Local Deposits......................................... 2
Multiemployer Plan..................................... 10
PBGC................................................... 10
Plan................................................... 9
Purchase Price......................................... 1
Qualified Plan......................................... 9
RAP.................................................... 5
Regulatory Approvals................................... 3
Regulatory Authority................................... 3
Retained Assets........................................ 22
Section 338(h)(10) Election............................ 26
Shareholder............................................ 1
Shareholder's Group.................................... 6
Shareholder's Management............................... 32
Shares................................................. 1
Subsidiary............................................. 1
Subsidiary Statements.................................. 5
Subsidiary's Management................................ 32
SWDA................................................... 13
Taxes.................................................. 6
Title IV Plan.......................................... 10
To the best knowledge of Shareholder and Subsidiary.... 32
iii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") made and entered into
as of January 16, 2002, by and among First Community Bank, a federal savings
bank ("Buyer"), Peoples Bank of Imboden, an Arkansas state-chartered banking
corporation ("Subsidiary") and Spring Rivers Bancshares, Inc., an Arkansas
corporation and the sole shareholder of Subsidiary ("Shareholder").
RECITALS
1. Buyer is a wholly-owned subsidiary of Pocahontas Bancorp,
Inc., a Delaware corporation ("Buyer's Parent");
2. Shareholder is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHC") and Buyer's Parent is a
registered savings and loan holding company under the Home Owners' Loan Act, as
amended (the "HOLA");
3. Shareholder owns all of the issued and outstanding shares of
common stock, $25.00 par value per share, of Subsidiary (collectively, the
"Shares"); and
4. Buyer desires to purchase from Shareholder and Shareholder
desires to sell to Buyer the Shares for cash as provided herein (the
"Acquisition").
In consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained, and for other
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
THE ACQUISITION
1.1 ACQUISITION AND PURCHASE PRICE.
(a) Subject to the terms and conditions of this Agreement, Buyer
will purchase from Shareholder, and Shareholder will sell to Buyer, the Shares,
for the Purchase Price (as defined in Section 1.1(b)). At the Closing (as
defined in Section 1.3(a)), and except as required by Section 1.1(d), Buyer will
deliver the Purchase Price to Shareholder by wire transfer of immediately
available funds to an account designated by Shareholder.
(b) PURCHASE PRICE. The purchase price shall be an amount in
cash computed as the sum of the following (the "Purchase Price"):
(i) an amount equal to five percent (5%) of the aggregate
balance, calculated from Subsidiary's general ledger as of the month
end immediately preceding the Closing Date or as of such other date
agreed to by Buyer and Shareholder (the "Calculation Date"), of
Subsidiary's passbook accounts, statement savings accounts, checking
accounts, certificates of deposit (but excluding brokered certificates
of deposit, as
hereinafter defined), money market accounts, NOW accounts and IRA
accounts (the "Local Deposits"). For the purposes hereof, the term
"brokered certificates of deposit" means a certificate of deposit that
is obtained by Subsidiary, directly or indirectly, from or through the
mediation or assistance of a deposit broker as that term is defined by
12 C.F.R. ss. 337.6(a)(5).
(ii) (A) the book value of Subsidiary's tangible assets,
including the aggregate unpaid principal balance, together with all
accrued and unpaid interest thereon, of Subsidiary's Loans (as
hereinafter defined), calculated from Subsidiary's general ledger as of
the Calculation Date, less (B) Subsidiary's total liabilities on the
Calculation Date, determined in accordance with RAP (as hereinafter
defined).
(c) CALCULATION OF PURCHASE PRICE. Within three (3) business days of
the Calculation Date, Shareholder shall present to Buyer its calculation of the
Purchase Price together with excerpts from Subsidiary's general ledger showing
the Local Deposits and the tangible assets and total liabilities upon which such
calculation is based.
(d) PURCHASE PRICE HOLD-BACK. Buyer shall retain 3% of the Purchase
Price at the Closing (the "Hold-back Amount"), which amount shall be paid to
Shareholder as provided herein. Within sixty (60) days following the Closing
Date, Buyer shall deliver to Shareholder by wire transfer of immediately
available funds the Hold-back Amount, which amount shall be reduced (i) if, and
to the extent, the calculation by Shareholder of the Purchase Price was higher
than warranted due to the inclusion of deposit accounts in Local Deposits that
should have been excluded pursuant to the terms of Section 1.1(b), and (ii) if,
and to the extent, Shareholder fails to include in Retained Assets (as
hereinafter defined) one or more of Subsidiary's Loans which should have been
included on Schedule 4.2. The retention by Buyer of all or a portion of the
Hold-back Amount shall not be Buyer's exclusive remedy for a breach of this
Agreement by Shareholder or Subsidiary. If the reduction of the Hold-back Amount
by Buyer is due to Shareholder's unwarranted exclusion from Retained Assets of
one or more Loans which should have been included on Schedule 4.2, Buyer shall,
at its option, either (i) include in Buyer's delivery of the Hold-back Amount
the book value as of the Calculation Date of such Loans and retain title to such
Loans, or (ii) exclude from Buyer's delivery of the Hold-back Amount the book
value as of the Calculation Date of such Loans and, in consideration therefor,
transfer such Loans to Shareholder, which transfer (A) shall be accompanied by
the amount of any reserves specifically allocated by Subsidiary as of the
Calculation Date with respect to such Loans, and (B) shall be made without
recourse or warranty of any kind.
1.2 EXCLUDED LIABILITIES. Buyer expressly will not assume any
liability of Shareholder other than any liability relating to Subsidiary
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against Shareholder
giving rise to any such liability).
1.3 TIME, DATE AND LOCATION OF CLOSING.
(a) CLOSING; CLOSING DATE. The closing of the transactions
contemplated by this Agreement (the "Closing") will be held at a time and on a
date mutually agreeable to the
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parties hereto (the "Closing Date"). In the absence of such agreement, the
Closing will be held within ten (10) business days after the receipt of all
consents and approvals (together, the "Regulatory Approvals"), and the
expiration of all statutory waiting periods in respect thereof, of any federal,
state, local, foreign or other court, governmental authority, administrative or
other agency, commission, organization, or other regulatory authority (each, a
"Regulatory Authority") as legally required to consummate the transactions
contemplated hereby.
(b) CLOSING LOCATION. The Closing will take place at the offices of
Buyer at 1700 East Highland Drive, Jonesboro, Arkansas, or such other place as
the parties hereto may mutually agree prior to the Closing Date.
1.4 CLOSING DELIVERIES. At the Closing, (a) Subsidiary and Shareholder
will deliver to Buyer the certificates referred to in Section 6.1(d); (b) Buyer
will deliver to Subsidiary and Shareholder the certificates referred to in
Section 6.2(d); (c) Shareholder will deliver to Buyer stock certificates
evidencing all of the Shares, endorsed in blank or accompanied by duly executed
assignment documents; and (d) Buyer will deliver to the Shareholder the Purchase
Price, net of the Hold-back Amount.
1.5 BANK MERGER. The parties hereto acknowledge that immediately after
the consummation of the Acquisition on the Closing Date, Subsidiary will be
merged with and into Buyer, with Buyer as the surviving financial institution.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Subsidiary and Shareholder as
follows:
2.1 ORGANIZATION. Buyer is a federal savings bank duly organized,
validly existing and in good standing under the laws of the United States.
2.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement have been duly authorized by the board of directors of Buyer in
accordance with the charter and bylaws of Buyer and governing law. This
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors generally and to general principles of equity. Buyer has the corporate
power to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby, and such execution, delivery and performance
do not violate any provisions of the charter or bylaws of Buyer or any agreement
to which Buyer is a party or by which Buyer is otherwise bound or any applicable
banking law to which Buyer is subject. Except for the Regulatory Approvals, no
consent of any Regulatory Authority or other person is required to be obtained
by Buyer in order to permit consummation of the transactions contemplated
hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY AND SHAREHOLDER
Except as may be disclosed to Buyer in a written disclosure schedule
being delivered to Buyer by Shareholder in conjunction with or prior to the
execution and delivery of this Agreement, which disclosure schedule shall
specifically reference the representation and warranty to which it relates in
this Article III, Subsidiary and Shareholder hereby jointly and severally
represent and warrant to Buyer as follows:
3.1 ORGANIZATION.
(a) Subsidiary is an Arkansas state-chartered banking corporation
duly organized, validly existing and in good standing under the laws of the
State of Arkansas. Subsidiary is authorized to transact the business of banking
under the laws of the State of Arkansas and is duly authorized and has full
power to own its properties and carry on its business as now being conducted.
Subsidiary has delivered to Buyer correct and complete copies of the charter and
bylaws of Subsidiary as amended to date. The minute books (containing the
records of meetings of Shareholder, the board of directors, and any committees
of the board of directors), the stock certificate books, and the stock record
books of Subsidiary are correct and complete in all material respects.
Subsidiary is not in default under or in violation of any provision of its
charter or bylaws.
(b) Shareholder is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Arkansas. Shareholder is
duly authorized and has full power to conduct its businesses and is in good
standing under the laws of each jurisdiction where such qualification is
required. Shareholder has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. Shareholder has
delivered to Buyer correct and complete copies of the articles of incorporation
and bylaws of Shareholder as amended to date. Shareholder is not in default
under or in violation of any provision of its articles of incorporation or
bylaws. Shareholder is duly registered as a bank holding company under the BHC.
3.2 AUTHORIZATION; NO VIOLATION. The execution, delivery and
performance of this Agreement have been duly authorized by the boards of
directors of each of Subsidiary and Shareholder in accordance with their
respective chartering instruments, bylaws and governing law. This Agreement
constitutes the legal, valid and binding obligation of each of Subsidiary and
Shareholder, enforceable against each of Subsidiary and Shareholder in
accordance with its terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors generally and to
general principles of equity. Subsidiary and Shareholder have the corporate
power to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby, and such execution, delivery and performance
do not violate any provisions of their respective chartering instruments, bylaws
or any agreement to which Subsidiary or Shareholder is a party or by which
Subsidiary or Shareholder is otherwise bound or any applicable law to which
Subsidiary or Shareholder is subject. Except for the Regulatory Approvals, no
consent of any Regulatory Authority or other person is required to be
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obtained by Subsidiary or Shareholder in order to permit consummation of the
transactions contemplated hereby.
3.3 CAPITALIZATION; TITLE.
(a) As of the date hereof, the authorized capital stock of
Subsidiary consists of 10,600 shares of common stock, $25.00 par value per
share, of which 6,600 shares are issued and outstanding and no shares are held
in treasury. Subsidiary has no shares of preferred stock outstanding. All of the
issued and outstanding shares of Subsidiary common stock have been duly
authorized and validly issued, fully paid and non-assessable. None of the
outstanding shares of common stock are subject to any preemptive rights of
Shareholder or any prior shareholder of Subsidiary.
(b) Except for the common stock referred to in Section 3.3(a), there
are no shares of capital stock or other equity securities of Subsidiary
authorized or outstanding and no authorized or outstanding options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Subsidiary. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Subsidiary. Subsidiary neither controls directly
or indirectly nor has any direct or indirect equity participation in any
corporation, partnership, trust or other business association.
(c) Shareholder holds of record and beneficially the Shares free and
clear of any restrictions on transfer, any liens, pledges, charges, and security
interests (collectively, "Encumbrances"), options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands, except for that certain
lien granted to The Capital Bank pursuant to the terms of that certain Stock
Pledge Agreement, dated as of August 23, 1999. Upon delivery of the Shares to
Buyer at Closing, Buyer will be vested with full right, title and interest in
and to the Shares, free and clear of all Encumbrances. Shareholder is not a
party to any option, warrant, purchase right, or other contract or commitment
that could require Shareholder to sell, transfer, or otherwise dispose of any
capital stock of Subsidiary (other than this Agreement). Shareholder is not a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of Subsidiary.
3.4 FINANCIAL STATEMENTS. Set forth in DISCLOSURE SCHEDULE 3.4 are
Subsidiary's unaudited Consolidated Reports of Condition and Income filed by
Subsidiary with the Federal Deposit Insurance Corporation ("FDIC") as of and for
the twelve (12) months ended December 31, 2000 and the nine (9) months ended
September 30, 2001 (together, the "Subsidiary Statements"). The Subsidiary
Statements have been prepared in accordance with those accounting principles
mandated by the Federal Financial Institutions Examination Council ("FFIEC")
(hereinafter referred to as "RAP"), in each case for the period covered thereby,
and present fairly the financial condition as of such dates and the results of
operations for such periods, and are consistent with the books and records of
Subsidiary, which books and records are correct and complete in all material
respects; provided, that the Subsidiary Statements for the
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nine-month period ended September 30, 2001, are subject to normal year-end
adjustments and the Subsidiary Statements do not contain any or all footnotes
required by generally accepted accounting principles.
3.5 COMPLIANCE WITH LAWS. Shareholder and Subsidiary are in compliance
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of all
Regulatory Authorities and other persons with jurisdiction over the activities
of Shareholder or Subsidiary, except where the failure to be in compliance would
have no material adverse impact on Subsidiary, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
3.6 LITIGATION. There is no legal, judicial, administrative or similar
suit, action, investigation or proceeding pending or, to the best of the
knowledge of Subsidiary and Shareholder, threatened against or affecting
Subsidiary or Shareholder with respect to Shareholder or Subsidiary or any of
their respective officers, directors, employees or agents thereof, in their
capacities as such, which could have a material adverse effect on Subsidiary, or
on any of the respective officers, directors, employees or agents thereof, in
their capacities as such, or which would materially affect the ability of
Subsidiary or Shareholder to consummate the transactions contemplated hereby or
which is seeking to enjoin consummation of the transactions contemplated hereby
or to obtain other relief in connection with this Agreement or the transactions
contemplated hereby, nor is there any judgment, decree, injunction, rule or
order of any Regulatory Authority or other person with jurisdiction over
Subsidiary or Shareholder or any of their respective officers, directors,
employees or agents, in their capacities as such, having, or which, insofar as
reasonably can be foreseen in the future, would have such material adverse
effect.
3.7 INTELLECTUAL PROPERTY. Subsidiary owns or has the right to use
pursuant to license, sublicense, agreement, or permission all trademarks,
service marks, trade dress, logos, trade names, and corporate names, including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, all other proprietary rights, and all copies
and tangible embodiments thereof in whatever form or medium (individually or
collectively, as applicable, the "Intellectual Property") necessary for the
operation of the business of Subsidiary as presently conducted.
3.8 TAX MATTERS. Shareholder and its subsidiaries (together,
"Shareholder's Group") have filed all Tax (as defined below) returns that they
are required to file. All such Tax returns were correct and complete in all
material respects. For the purposes hereof, Tax returns means all returns,
reports, forms, or other information required to be filed with any taxing
authority with respect to any Tax. All federal, state, local, or foreign income,
gross receipts, license, payroll, employment related (including employee
withholding or employer payroll tax or FICA or FUTA), excise, franchise,
profits, disability, real property, personal property sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not (collectively, "Taxes") owed by Shareholder's
Group have been paid or adequately provided for. None of Shareholder's Group
currently is the beneficiary of any extension of time within which
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to file any Tax return. No claim has ever been asserted against Shareholder or
Subsidiary by a Regulatory Authority in a jurisdiction where any of
Shareholder's Group does not file Tax returns that it is or may be subject to
taxation by that jurisdiction. There are no Encumbrances on any of the assets of
Subsidiary that arose in connection with any failure, or alleged failure, to pay
any Tax. Shareholder's Group has withheld and paid, or adequately provided for,
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder,
or other person. Shareholder does not expect any Regulatory Authority to assess
any additional Taxes for any period for which Tax returns have been filed. There
is no dispute or claim concerning any Tax liability of any of Shareholder's
Group either (i) claimed or raised by a Regulatory Authority in writing or (ii)
as to which Shareholder's Management (as defined in Section 10.11) has actual
knowledge after due investigation and inquiry. Shareholder has delivered or made
available to Buyer correct and complete copies of all federal, state or other
income Tax returns, examination reports, and statements of deficiencies assessed
against or agreed to by any of Shareholder's Group for the past three (3) years.
None of Shareholder's Group has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. Except as set forth in DISCLOSURE SCHEDULE 3.8, none of
Shareholder's Group is a party to any Tax allocation or sharing agreement.
Subsidiary has no liability for the Taxes of any person under applicable law, as
a transferee or successor, by contract, or otherwise. The unpaid Taxes of
Shareholder's Group relating to or in connection with Subsidiary did not, as of
the most recent month, exceed the reserve for Tax liability and do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Shareholder's Group in filing
its Tax returns.
3.9 INSURANCE. DISCLOSURE SCHEDULE 3.9 sets forth each insurance policy
to which Subsidiary or Shareholder is a party relating to Subsidiary and with
respect to each such policy: (a) to the knowledge of Subsidiary and Shareholder,
the policy is legal, valid, binding, enforceable, and in full force and effect;
(b) neither Subsidiary nor Shareholder nor, to the knowledge of Subsidiary or
Shareholder, any other party to the policy, is in breach or default, including
with respect to the payment of premiums or the giving of notices, and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; and (c) to the knowledge of Subsidiary and Shareholder, no party to
the policy has repudiated any provision thereof. Subsidiary has been covered
during the past three (3) years by insurance in scope and amount customary and
reasonable for the business in which it has engaged during the aforementioned
period.
3.10 BANKING MATTERS.
(a) REPORTS. Each of Subsidiary and Shareholder on behalf of
Subsidiary has timely filed all reports, notices, registrations and
applications, together with any amendments required to be made with respect
thereto, that Subsidiary or Shareholder was required to file during the three
(3) years preceding the date hereof with Regulatory Authorities charged with
supervision or regulation of financial institutions or engaged in the insurance
of deposits (each, a "Bank Regulatory Authority") with respect to Subsidiary and
all other reports, notices and applications required to be filed thereby during
the three (3) years preceding the date hereof,
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including, without limitation, any report, notice, registration or application
required to be filed pursuant to the laws, rules or regulations of the United
States, any state, or any Bank Regulatory Authority, and have paid all fees and
assessments due and payable in connection therewith. No Bank Regulatory
Authority or other person has initiated any proceeding or investigation into the
business or operations of Subsidiary or Shareholder with respect to Subsidiary
during the three (3) years preceding the date hereof. There is no unresolved
written violation, written criticism, or written exception by any Regulatory
Authority or other person with respect to any report or statement relating to
any examinations of Subsidiary or Shareholder with respect to Subsidiary.
(b) AGREEMENTS WITH REGULATORY AUTHORITIES. Neither Subsidiary nor
Shareholder with respect to Subsidiary is subject to any cease-and-desist or
other order issued by, or is it a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is it subject to any order or directive by,
or has been a recipient of any supervisory letter from, or has adopted any board
resolutions at the request of, any Bank Regulatory Authority or other person
with jurisdiction over the activities of Subsidiary or Shareholder with respect
to Subsidiary, that restricts the conduct of the business of Subsidiary or
Shareholder with respect to Subsidiary or that relates to the capital adequacy,
compliance with laws, credit policies, management or business of Subsidiary or
Shareholder with respect to Subsidiary, nor has Subsidiary or Shareholder with
respect to Subsidiary been advised by any Bank Regulatory Authority or other
person with jurisdiction over the activities of Subsidiary or Shareholder with
respect to Subsidiary that it is considering issuing or requesting the
foregoing.
(c) INVESTMENT SECURITIES. Each of Subsidiary and Shareholder with
respect to Subsidiary has good and marketable title to all securities held by it
(except securities sold under repurchase agreements or held in any fiduciary or
agency capacity), free and clear of any Encumbrance, except to the extent such
securities are pledged in the ordinary course of business consistent with
prudent banking practices to secure obligations thereof. Such securities are
valued on the books of Subsidiary and Shareholder with respect to Subsidiary in
accordance with RAP.
(d) LOAN PORTFOLIO.
(i) Except as set forth in DISCLOSURE SCHEDULE 3.10(d),
Subsidiary is not a party to any written or oral (A) loan agreement,
note or borrowing arrangement (including, without limitation, leases,
credit enhancements and guarantees) (collectively, "Loans"), under the
terms of which the obligor is, as of the date of this Agreement, over
ninety (90) days delinquent in payment of principal or interest or in
default of any other material provision, or (B) Loan with any director
or executive officer of Shareholder, or affiliate of the foregoing.
DISCLOSURE SCHEDULE 3.10(d) sets forth all of the Loans of Subsidiary
that as of the date of this Agreement are classified by any Bank
Regulatory Authority as Special Mention, Substandard, Doubtful or Loss,
or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan as of December 31, 2001,
and the identity of the borrower thereunder, and each asset of
Subsidiary that as of the date of this Agreement is classified as Other
Real Estate Owned and the book value thereof as of the date of this
Agreement.
8
(ii) Each Loan (A) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and what they purport
to be, (B) to the extent secured, has been secured by valid
Encumbrances which have been perfected, and (C) is the legal, valid and
binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors generally and to general principles of equity.
(e) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses set
forth in the Subsidiary Statements as of nine (9) months ended September 30,
2001 is adequate in all material respects under the requirements of generally
accepted accounting principles to provide for possible or specific losses, net
of recoveries relating to Subsidiary's loans as of September 30, 2001 and
contains an additional amount for unanticipated future losses at a level
considered adequate by the management of each of Shareholder and Subsidiary and
the applicable Bank Regulatory Authorities as of their most recent
determination. In the reasonable judgment of Subsidiary's Management, the
aggregate loan balances of Subsidiary at such date in excess of such allowance
are fully collectible in accordance with their terms.
(f) DERIVATIVE TRANSACTIONS. Neither Subsidiary nor
Shareholder with respect to Subsidiary has engaged in transactions in or
involving, and does not own or hold and has no exposure to, any forwards,
futures, options on futures, swaps or other similar derivative instruments.
(g) OTHER ACTIVITIES. Except as set forth in DISCLOSURE
SCHEDULE 3.10(g), Subsidiary does not engage in any insurance activities.
3.11 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS.
(i) Plan. Plan includes each bonus, deferred compensation,
pension, retirement, profit sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, change in control, retention,
restricted stock, stock option, employment, termination, severance,
compensation, medical, health, life, disability or similar plan,
agreement, policy, practice or arrangement (including without
limitation each employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
other than a Multiemployer Plan (as defined in Section 3.11(a)(iv)),
(A) which currently is or has at any time been maintained for employees
of Subsidiary or (B) to which Subsidiary makes or made, or at any time
was required to make, contributions.
(ii) Qualified Plan. Qualified Plan means any Plan which is
an employee pension benefit plan as defined in Section 3(2) of ERISA
and which is intended to meet the qualification requirements of the
Internal Revenue Code of 1986, as amended (the "Code").
9
(iii) Title IV Plan. Title IV Plan means any Plan that is a
defined benefit plan (as defined in Section 3(35) of ERISA) and is
subject to Title IV of ERISA.
(iv) Multiemployer Plan. Multiemployer Plan means any
employee benefit plan that is a multiemployer plan within the meaning
of Section 3(37) of ERISA and to which Shareholder or any Control Group
member has or had any obligation to contribute.
(v) Control Group. Control Group means a controlled group of
corporations of which Subsidiary is a member within the meaning of
Section 414(b) of the Code, any group of corporations or entities under
common control with Subsidiary within the meaning of Section 414(c) of
the Code or any affiliated service group of which Subsidiary is a
member within the meaning of Section 414(m) of the Code.
(b) PLANS LISTED. All Plans and Multiemployer Plans are set forth
in DISCLOSURE SCHEDULE 3.11(b).
(c) OPERATION OF PLANS.
(i) Each Plan has been administered in compliance with its
terms and with all filing, reporting disclosure and other requirements
of all applicable statutes (including but not limited to ERISA and the
Code), regulations and interpretations thereunder, except where the
failure to do so would not, individually or in the aggregate, result in
any material adverse effect on Subsidiary.
(ii) All written communications with respect to each Plan
currently and in the past reflect and have, in all material respects,
reflected the documents and operations of the Plan and no person has or
had any liability by reason of any such communication.
(iii) No reportable event (as defined in Section 4043 of ERISA
and regulations issued thereunder) has occurred with respect to any
Title IV Plan.
(iv) Neither Subsidiary nor any other member of the Control
Group, nor any of their respective employees or directors, nor any
fiduciary, has engaged in any transaction, including the execution and
delivery of this Agreement and other agreements, instruments and
documents for which execution and delivery by Subsidiary is
contemplated herein, in violation of Section 406(a) or (b) of ERISA or
which is a prohibited transaction (as defined in Section 4975(c)(1) of
the Code) for which no exemption exists under Section 408(b) of ERISA
or Section 4975(d) of the Code or for which no administrative exemption
has been granted under Section 408(a) of ERISA.
(v) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred, or is expected to be incurred, by
Subsidiary or any other member of the Control Group with respect to any
Title IV Plan. PBGC has not instituted any proceedings, and there
exists no event or condition which would constitute grounds for
10
institution of proceedings by PBGC, to terminate any Title IV Plan
under Section 4042 of ERISA.
(vi) Each Qualified Plan (together with its related funding
instrument) is qualified and Tax exempt under Sections 401 and 501 of
the Code and is the subject of a favorable Internal Revenue Service
determination with respect to such qualification and exemption.
(vii) No matter is pending relating to any Plan before any
Bank Regulatory Authority.
(viii) Every fiduciary and official of each Plan is bonded to
the extent required by Section 412 of ERISA and no civil or criminal
action with respect to any Plan, pursuant to any federal or state law,
has been brought, is pending or to the best knowledge of Shareholder's
Management or Subsidiary's Management, is threatened, against
Subsidiary, any Control Group member, any officer, director or employee
thereof.
(ix) Neither Subsidiary nor any Qualified Plan fiduciary has
any liability to any Qualified Plan participant or beneficiary under
any provisions of ERISA by reason of any action or failure to act in
connection with any Qualified Plan, including, but not limited to, any
liability by reason of any payment of, or failure to pay, benefits or
any other amounts or by reason of any credit or failure to give credit
for any benefits or rights.
(d) PLAN DOCUMENTS AND RECORDS. Complete and correct copies of all
current and prior documents for the three (3) year period specified herein,
including all amendments thereto, with respect to each Qualified Plan, have been
made available or delivered to Buyer. These documents include, but are not
limited to, the following: Qualified Plan documents, trust agreements, insurance
contracts, annuity contracts, summary plan descriptions, filings with Regulatory
Authorities, investment manager and investment adviser contracts, and actuarial
reports, audit reports, financial statements, premium reports to PBGC ("Form
PBGC1") and annual reports ("Form 5500") for the most recent three (3) plan
years ending prior to the Closing Date.
(e) FINANCES.
(i) In so far as they relate to Subsidiary, all
contributions payable to each Qualified Plan for all benefits earned
and other liabilities accrued through September 30, 2001, determined in
accordance with the terms and conditions of such Plan, ERISA and the
Code, have been paid or otherwise provided for, and to the extent
unpaid are reflected in the balance sheet of Subsidiary as of September
30, 2001, included in the Subsidiary Statements.
(ii) Set forth in DISCLOSURE SCHEDULE 3.11(e) is (A) the
amount of the liability for minimum contributions for the last three
(3) plan years to any Qualified Plan, (B) the approximate amount of the
minimum contribution to any Qualified Plan for the
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plan year during which the Closing Date is to occur, and (C) the annual
cost of providing coverage under any Plan that is a welfare plan as
defined in Section 3(1) of ERISA to all former employees of Subsidiary
or any other member of the Control Group and all dependents of a former
employee.
(f) TITLE IV PLANS AND MULTIEMPLOYER PLANS. None of Subsidiary, any
Control Group member, or Shareholder with respect to Subsidiary either currently
maintains or contributes, or has ever maintained or contributed to, any Title IV
Plan or any Multiemployer Plan.
(g) Except as set forth in DISCLOSURE SCHEDULE 3.11(g), there are no
Plans, arrangements or agreements to which Subsidiary is a party or by which it
is bound and under which, as a result of any particular transaction or
transactions (including but not limited to the transactions contemplated by this
Agreement), any director, officer, employee or other agent of the Subsidiary, or
any other party claiming through such a person, will or may acquire rights with
respect to any Plan or become entitled to a distribution or payment with respect
to any Plan at a date earlier than if such transaction had not occurred (except
in accordance with Section 401(k)(10) of the Code), or otherwise receive or
become vested in rights and benefits with respect to any Plan or any other
arrangement or agreement. Without limitation of the foregoing, except as set
forth in DISCLOSURE SCHEDULE 3.11(g), Subsidiary is not a party to any Plan
covering, or any agreement with, any director, officer, employee or agent of
Subsidiary pursuant to which any such person will be entitled to any payment by
Subsidiary upon termination of employment or service on the board of directors
of Subsidiary following a change in control of Subsidiary.
3.12 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
(a) Subsidiary and its predecessors and subsidiaries (if any) have
complied and is in compliance with all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, concerning public health and safety, worker health and safety,
and pollution or protection of the environment, each as amended and as now or
hereinafter in effect (collectively, "Environmental, Health and Safety
Requirements"), except for any such non-compliance which, individually or in the
aggregate, has not had a material adverse effect on Subsidiary.
(b) Subsidiary and each of its subsidiaries (if any) have obtained
and complied with, and is in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental, Health and Safety
Requirements for the occupation of the facilities and the operation of the
business of Subsidiary.
(c) Neither Subsidiary nor Shareholder has received any written or,
to the best knowledge of Shareholder's Management or Subsidiary's Management,
oral notice, report or other written communication regarding any actual or
alleged violation of Environmental, Health and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
12
obligations, relating to Subsidiary, its business or its facilities arising
under Environmental, Health and Safety Requirements.
(d) To the best knowledge of Shareholder's Management or
Subsidiary's Management, none of the following exists at any property or
facility owned or operated by Subsidiary or Shareholder relating to Subsidiary:
(i) underground storage tanks, (ii) asbestos-containing material in any form or
condition, (iii)materials or equipment containing polychlorinated biphenyls, or
(iv) landfills, surface impoundments, or disposal areas.
(e) With respect to Subsidiary, none of Subsidiary, Shareholder, or,
to the best knowledge of Shareholder's Management or Subsidiary's Management,
their respective predecessors or affiliates has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or owned or
operated any property or facility, and no such property or facility is
contaminated by any such substance, in a manner that has given or would give
rise to liabilities, including any liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health and Safety
Requirements.
(f) Neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site investigation or
cleanup, or notification to or consent of Regulatory Authorities pursuant to any
of the transaction-triggered or responsible property transfer Environmental,
Health and Safety Requirements.
(g) With respect to Subsidiary, neither Subsidiary nor Shareholder,
has, either expressly or by operation of law, assumed or undertaken any
liability, including without limitation any obligation for corrective or
remedial action, of any other person relating to Environmental, Health and
Safety Requirements.
(h) With respect to Subsidiary, no facts, events or conditions
relating to the past or present facilities, properties or operations of
Subsidiary or Shareholder will prevent, hinder or limit continued compliance
with Environmental, Health and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health and Safety Requirements, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health and Safety Requirements, including without limitation any
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
3.13 CONTRACTS. DISCLOSURE SCHEDULE 3.13 lists the following contracts
and other agreements to which Subsidiary or Shareholder is a party and which
relate to Subsidiary:
(a) any agreement for the lease of personal property to or
from any person providing for lease payments in excess of $5,000 per annum;
13
(b) any agreement for the purchase or sale of supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result in
a material loss, or involve consideration in excess of $5,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $5,000 or under which it has imposed an Encumbrance on
any of its assets, other than agreements related to deposit liabilities incurred
in the ordinary course;
(e) any agreement concerning confidentiality or noncompetition;
(f) with respect to Subsidiary, any agreement with Shareholder and
any affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(h) any collective bargaining agreement;
(i) other than oral "at-will" employment agreements or arrangements,
any agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $5,000;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the ordinary
course of business;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of Subsidiary;
or
(l) any other agreement, the performance of which involves
consideration in excess of $5,000.
Subsidiary and Shareholder have delivered to Buyer a correct and
complete copy of each written agreement listed in DISCLOSURE SCHEDULE 3.13, each
as amended, and a written summary setting forth the terms and conditions of each
oral agreement referred to in DISCLOSURE SCHEDULE 3.13. With respect to each
such agreement: (i) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (ii) the consummation of the transactions contemplated
hereby shall not cause the agreement to not be legal, valid, binding,
enforceable, and in full force and effect on identical terms; (iii) neither
Subsidiary nor Shareholder, or, to the knowledge of Shareholder's Management or
Subsidiary's Management, any other party, is in breach or default, and no event
has occurred which with notice or lapse of
14
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (iv) neither Subsidiary nor
Shareholder, or, to the knowledge of Shareholder's Management or Subsidiary's
Management, any other party, has repudiated any provision of the agreement.
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
DISCLOSURE SCHEDULE 3.14, since September 30, 2001:
(a) Subsidiary has not sold, leased, transferred, or assigned any
of its assets, other than for a fair consideration in the ordinary course of
business;
(b) other than oral "at-will" employment agreements or arrangements,
neither Subsidiary nor Shareholder has entered into any agreement, contract,
lease, or license with respect to Subsidiary either involving more than $5,000
or outside the ordinary course of business;
(c) other than oral "at-will" employment agreements or arrangements,
no party, including Shareholder, has accelerated, terminated, modified, or
cancelled any agreement, contract, lease or license with respect to Subsidiary
involving more than $5,000 to which Subsidiary or Shareholder is a party or by
which any of them is bound;
(d) Subsidiary has not imposed any Encumbrance upon any of its
assets;
(e) Subsidiary has not made any capital expenditure involving
more than $5,000 or outside the ordinary course of business;
(f) Subsidiary has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other person, either
involving more than $5,000 except for loans to or acquisitions of securities or
other assets made in the ordinary course of Subsidiary's business;
(g) Subsidiary has not issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness for borrowed money
or capitalized lease obligation involving more than $5,000, other than
agreements related to deposit liabilities incurred in the ordinary course;
(h) Subsidiary has not delayed or postponed the payment of
accounts payable and other liabilities outside the ordinary course of
business;
(i) Subsidiary has not cancelled, compromised, waived, or
released any right or claim either involving more than $5,000 or outside the
ordinary course of business;
(j) neither Subsidiary nor Shareholder has granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
15
(k) there have been no changes made or authorized in the charter or
bylaws of Subsidiary;
(1) Subsidiary has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of its capital
stock;
(m) Subsidiary has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(n) Subsidiary has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property except for customary
wear and tear;
(o) Subsidiary has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;
(p) with respect to Subsidiary, neither Subsidiary nor Shareholder
has entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement other than entering into and/or modifying oral "at-will" employment
agreements or arrangements;
(q) Subsidiary has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(r) with respect to Subsidiary, neither Subsidiary nor Shareholder
has adopted, amended, modified, or terminated any Plan, including, without
limitation, any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of the Subsidiary's directors,
officers, and employees;
(s) Subsidiary has not made any other change in employment
terms for any of its directors, officers, and employees outside the ordinary
course of business;
(t) Subsidiary has not made or pledged to make any charitable or
other capital contribution outside the ordinary course of business;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary course of
business involving Subsidiary; and
(v) neither Subsidiary nor Shareholder (as applicable) has committed
to do any of the foregoing.
3.15 [Reserved]
3.16 UNDISCLOSED LIABILITIES. Subsidiary has no liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint,
16
claim, or demand against any of them giving rise to any liability), except for
liabilities in the Subsidiary Statements for the interim period from September
30, 2001 to the date hereof that had not heretofore been paid or discharged or
incurred by Subsidiary in or as a result of the normal and ordinary course of
its business since September 30, 2001.
3.17 ASSETS.
(a) TITLE TO ASSETS. Subsidiary has good and marketable title to, or
a valid leasehold interest in, all properties and assets of Subsidiary shown on
the Subsidiary Statements for the period ended September 30, 2001 or acquired
after the date thereof, free and clear of all Encumbrances, except for
properties and assets disposed of in the ordinary course of business since
September 30, 2001, and for the liens of Taxes not yet payable or minor
imperfections of title which do not, in the aggregate, materially affect the
value or use of such real or personal property to or by Subsidiary.
(b) TANGIBLE ASSETS. Subsidiary owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of the
business of Subsidiary as presently conducted. To the best knowledge of
Shareholder and Subsidiary on the date hereof and as of the Closing Date, each
such tangible asset is free from defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used.
3.18 CERTAIN BUSINESS RELATIONSHIPS. None of Shareholder and its
affiliates has been involved in any business arrangement or relationship with
Subsidiary within the past twelve (12) months, which constitutes a transaction
under either Section 23A or 23B of the Federal Reserve Act, as amended, and none
of Shareholder and its affiliates owns any asset that is used in the business of
Subsidiary.
3.19 EMPLOYEES. Subsidiary's Management (as defined in Section 10.11)
has no actual knowledge after due investigation and inquiry of any executive,
key employee, or group of employees having any plans to terminate employment
with Subsidiary. With respect to Subsidiary, neither Subsidiary nor Shareholder
is a party to or bound by any collective bargaining agreement, nor has any of
them experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. With respect to Subsidiary, neither
Subsidiary nor Shareholder has committed any unfair labor practice. Subsidiary's
Management has no actual knowledge after due investigation and inquiry of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Subsidiary.
3.20 BROKERS' AND FINDERS' FEES. Except as set forth in DISCLOSURE
SCHEDULE 3.20, neither Subsidiary nor Shareholder has incurred any liability for
brokerage commissions, finders' fees, or like compensation with respect to the
transactions contemplated hereby.
17
3.21 REAL PROPERTY.
(a) DISCLOSURE SCHEDULE 3.21 lists and describes all real property
that Subsidiary or Shareholder with respect to Subsidiary owns. With respect to
each such parcel of owned real property:
(i) the identified owner has good and marketable title to
the parcel of real property, free and clear of any Encumbrance,
easement, covenant, or other restriction, except for installments of
general real estate Taxes and special assessments not yet due and
payable and recorded easements, covenants, and other restrictions that
do not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no pending or, to the best knowledge of
Shareholder and Subsidiary on the date hereof and as of the Closing
Date, threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters affecting adversely
the current use, occupancy, or value thereof;
(iii) all facilities have received all approvals of Regulatory
Authorities and other persons (including licenses and permits) required
in connection with the ownership or operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations;
(iv) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion thereof
or interest therein; and
(v) there are no parties (other than Subsidiary or
Shareholder with respect to Subsidiary) in possession of the parcel of
real property, other than tenants under any leases disclosed in
DISCLOSURE SCHEDULE 3.21 who are in possession of space to which they
are entitled;
(b) DISCLOSURE SCHEDULE 3.21 lists and describes all real property
leased or subleased by Subsidiary or Shareholder with respect to Subsidiary.
Subsidiary and Shareholder have delivered or made available to Buyer correct and
complete copies of the leases and subleases listed in DISCLOSURE SCHEDULE 3.21.
With respect to each such lease and sublease:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
without the need to obtain the consent of the landlord or any other
party to such lease or sublease;
18
(iii) neither Subsidiary, Shareholder, or, to the best
knowledge of Shareholder's Management or Subsidiary's Management, any
other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time or both, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) neither Subsidiary nor Shareholder has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or sublease hold; and
(v) all facilities leased or subleased thereunder have
received all approvals (including licenses and permits) of Regulatory
Authorities required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules,
and regulations.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 COVENANTS. The parties hereto agree as follows with respect to
the period between the date of this Agreement and the Closing Date.
(a) GENERAL. Each of the parties hereto will use its best efforts to
take all action and to do all things necessary or advisable in order to
consummate the transactions contemplated hereby.
(b) OPERATION OF BUSINESS. Shareholder will neither cause nor permit
Subsidiary to and Subsidiary will not engage in any practice, take any action,
or enter into any transaction outside the ordinary course of business of
Subsidiary, except as contemplated herein. Without limiting the generality of
the foregoing, Shareholder will neither cause nor permit Subsidiary to and
Subsidiary will not (i) pay in excess of market interest rates on Subsidiary's
passbook accounts, statement savings accounts, certificates of deposit or money
market accounts, or (ii) engage in any practice, take any action, or enter into
any transaction of the type described in Section 3.14; provided, the parties
hereby acknowledge that Shareholder after notice to Buyer, may cause Subsidiary
to declare and pay cash dividends during the period following the date of this
Agreement and ending on the day prior to the Calculation Date, the amount of
which dividends, in the aggregate, will not exceed $250,000, and no prior
approval or other consent by Buyer shall be required for the payment of such
cash dividends. For purposes of this covenant, any DISCLOSURE SCHEDULE relating
to Section 3.14 will be disregarded.
(c) PRESERVATION OF BUSINESS. Shareholder will cause Subsidiary to,
and Subsidiary will use its best efforts to, keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(d) FULL ACCESS. Shareholder will permit and will cause Subsidiary
to, and Subsidiary will permit representatives of Buyer to have full access to,
all premises, properties,
19
personnel, books, records, including Tax records, contracts, and documents of or
pertaining to Subsidiary or to Shareholder with respect to Subsidiary.
(e) NOTICE OF DEVELOPMENTS. Each party hereto will give prompt
written notice to the other of any fact, circumstance or condition that causes
or constitutes a breach of any representation and warranty of that party given
on the date of this Agreement if any party becomes aware of the occurrence after
the date of this Agreement of any fact, circumstance or condition that would
cause or constitute a breach of any such representation and warranty had such
representation and warranty been made as of the time of occurrence or discovery
of such fact, circumstance or condition.
(f) DISPOSITION OF THE SHARES. Shareholder will not sell,
transfer, pledge or otherwise dispose of any of the Shares without the prior
written consent of Buyer.
(g) EXCLUSIVITY. Neither Subsidiary nor Shareholder may (i) solicit,
initiate, or encourage the submission of any proposal or offer from any person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of Subsidiary, including any acquisition
structured as a merger, consolidation, or share exchange or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. Subsidiary and
Shareholder will notify Buyer immediately if any person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
(h) EMPLOYEE MATTERS. Subsidiary or Shareholder will notify in
writing all employees of Subsidiary (collectively, the "Employees") about the
transactions contemplated hereby. To the extent required by law or by its own
policies and practices, Subsidiary or Shareholder will pay all payroll,
unemployment and other Taxes, vacation and sick pay, severance benefits, and
other charges, claims or obligations arising out Subsidiary's employment of the
Employees prior to the Closing Date, whether arising before, on or after the
Closing Date, and Buyer will not be liable for any such charges, claims or
obligations.
(i) TRANSFER OF DATA. Subsidiary and Shareholder acknowledge that
Buyer will convert all of the account data relating to Subsidiary. Subsidiary
and Shareholder will cooperate and work with Buyer to complete the tasks
required to facilitate the conversion of such account data. Such tasks include,
but are not limited to, providing Buyer with reports and other items as are
necessary to complete the conversion process and related testing procedures.
Within thirty (30) days after the date hereof and again on the Closing Date,
Subsidiary and Shareholder will provide Buyer, at Buyer's expense, with reports
and related documentation and account information for Subsidiary in a format
acceptable to Buyer. Shareholder agrees to reasonably cooperate in resolving any
conversion related issues arising from the conversion following the Closing
Date.
(j) REQUIRED APPROVALS. As soon as practicable after the execution
of this Agreement, Buyer will prepare and submit for filing any and all
applications, filings, and registrations with, and notifications to, all
Regulatory Authorities and other persons required for the transactions described
in this Agreement to be consummated. Shareholder and Subsidiary
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will furnish Buyer with all information concerning Shareholder or Subsidiary as
may be necessary or advisable in connection with such applications, filings and
registrations. Buyer will furnish Subsidiary with copies of all such
applications, filings and registrations prior to the filing thereof with any
Regulatory Authorities and provide Subsidiary a reasonable opportunity to
provide changes. Thereafter, Buyer will file such supplements, amendments, and
additional information in connection therewith as may be reasonably necessary
for the transactions contemplated hereby to be consummated. Buyer will deliver
to Subsidiary, after the filing thereof, copies of each and all of such
applications, filings, registrations, and notifications for which Buyer is
responsible (except for any portions thereof containing confidential information
relating to Buyer and so marked as confidential), and any supplement, amendment,
or item of additional information in connection therewith (except for any
portions thereof containing confidential information relating to Buyer and so
marked as confidential). Each party will also deliver promptly to the other a
copy of each material notice, order, opinion, and other item of correspondence
received by such party from such Regulatory Authorities and other persons
(except for any portions thereof containing confidential information relating to
the principally responsible party and so marked as confidential) and will advise
the other party, at the other party's request, of developments and progress with
respect to such matters.
(k) FINANCIAL STATEMENTS; REPORTS. Shareholder and Subsidiary will
deliver to Buyer not later than thirty (30) days after the end of any fiscal
year and fiscal quarter, Subsidiary's unaudited financial statements for the
fiscal period then ended prepared in conformity with RAP, and all other reports
filed by Subsidiary or Shareholder relating to Subsidiary with all Bank
Regulatory Authorities within three (3) business days of the filing of any such
report.
(l) PRESS RELEASES. At all times prior to the Closing Date, each
party hereto will mutually agree with the other party prior to the issuance of
any press release or other information to any person for general circulation
with respect to this Agreement or the transactions contemplated hereby, but
nothing contained herein shall prohibit Buyer or its affiliates from making any
public disclosure that its counsel deems necessary.
(m) EMPLOYEE BENEFITS MATTERS. Employees of Subsidiary employed by
Buyer immediately after the Closing Date will be eligible for participation in
employee benefit plans available to other similarly situated employees of Buyer.
Service of any such Employee completed with Subsidiary prior to the Closing Date
will be credited for purposes of eligibility and vesting in the plans of Buyer,
but not for purposes of benefit accrual. If such Employees are covered by
medical and dental plans of Buyer after the Closing Date, Buyer will waive, and
will cause the relevant insurance carriers and other persons to waive, all
restrictions and limitations for any medical condition existing as of the
Closing Date affecting any such Employee or their eligible dependants for the
purpose of any such plans; but only to the extent that such condition would be
covered by the relevant Subsidiary or Shareholder, as applicable, medical or
dental plan immediately before Closing. Each such Employee's coverage under a
group health plan of Buyer will credit such Employee towards the deductibles and
out of pocket limits imposed under the group medical, dental and vision plans of
the Buyer, for the year during which the Closing Date occurs, with any
deductibles already incurred during such year under the relevant group medical,
dental or vision plan of Subsidiary or Shareholder, as applicable.
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(n) BANK MERGER. Subsidiary will enter into an agreement with Buyer
for, and take all of the actions necessary and desirable to cause, the merger of
Subsidiary with and into Buyer, with Buyer as the surviving financial
institution (the "Bank Merger") to be effective on the Closing Date, immediately
after the consummation of the Acquisition. The agreement pursuant to which the
Bank Merger will be effected will provide, in addition to customary terms and
conditions for such a bank merger between related parties, that the obligations
of Subsidiary are conditioned on the immediate prior consummation on the same
date as the Acquisition pursuant to this Agreement. The transactions
contemplated hereby include both the Acquisition and the Bank Merger.
4.2 TRANSFER OF RETAINED ASSETS. Prior to the Calculation Date,
Subsidiary and Shareholder will each use all commercially reasonable efforts to
sell for cash or cause the sale for cash of the Retained Assets from Subsidiary
to Shareholder or to another affiliate of Shareholder. Each of the Retained
Assets shall be sold for cash at such asset's book value as reflected on the
then current general ledger of Subsidiary. For purposes of the preceding
sentence, "book value" shall mean the unpaid principal balance of such Loans,
plus accrued interest. Such transfer shall be accompanied by the amount of any
reserve specifically allocated by Subsidiary with respect to such Loan. In the
event the transfer of the Retained Assets to Shareholder or to another affiliate
of Shareholder is not completed prior to the Calculation Date, Buyer shall sell
for cash the Retained Assets to Shareholder or an affiliate of Shareholder (at
Shareholder's election) for the book value thereof immediately following the
Closing, and such sales shall be effected on the Closing Date. All sales made
pursuant to this Section 4.2, whether prior to or on the Calculation Date, shall
be made without recourse or warranty of any kind. For the purposes hereof, the
term "Retained Assets" shall mean such of Subsidiary's Other Real Estate Owned
and such of Subsidiary's Loans as are specified on DISCLOSURE SCHEDULE 4.2
(which Disclosure Schedule shall be updated by Subsidiary on the Calculation
Date), together with Subsidiary's full title and interest in such Other Real
Estate Owned and in any collateral securing such Loans.
4.3 ALLOWANCE FOR LOAN LOSSES. Subsidiary shall not make any
additional allowances for loan losses after the Calculation Date. Immediately
prior to the calculation of the Purchase Price on the Calculation Date,
Subsidiary shall increase its provision for loan losses to the extent necessary
to ensure that Subsidiary's allowance for loan losses following the sale of the
Retained Assets specified in Section 4.2 is at least 0.85% of Subsidiary's
Loans; provided, however, no increase in the provision for loan losses that
results in such allowance exceeding 0.85% of Subsidiary's Loans will cause a
decrease in the calculation of the Purchase Price on the Calculation Date.
ARTICLE V
POST-CLOSING COVENANTS
5.1 The parties hereto agree as follows with respect to the period
following the Closing Date.
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(a) GENERAL. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each party
hereto will take such further action, including the execution and delivery of
such further instruments and documents as any other party hereto reasonably may
request, all at the sole cost and expense of the requesting party.
(b) TRANSITION. Neither Subsidiary nor Shareholder will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of Subsidiary
from maintaining the same business relationships with Subsidiary or Buyer after
the Closing as it maintained with Subsidiary or Shareholder with respect to
Subsidiary prior to the Closing. Subsidiary and Shareholder will refer all
customer inquiries relating to the business of Subsidiary to Buyer from and
after the Closing.
(c) BANK MERGER. Subsidiary will take all of the actions
necessary and desirable to cause the Bank Merger to be effective on the Closing
Date, immediately after the consummation of the Acquisition.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of
Buyer to consummate the transactions contemplated by this Agreement are
subject to satisfaction of the following conditions:
(a) All of the representations and warranties made by Subsidiary and
Shareholder in this Agreement and in any documents or certificates provided by
Subsidiary or Shareholder to Buyer in connection with the transactions
contemplated hereby will have been true and correct in all material respects as
of the date of this Agreement and on the Closing Date as though made on and as
of the Closing Date.
(b) Subsidiary and Shareholder will have performed and complied in
all material respects with all their agreements and covenants hereunder through
the Closing Date.
(c) No action, suit, or proceeding will be pending or threatened
against Buyer, Shareholder or Subsidiary before any Regulatory Authority or
other person wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (i) prevent consummation of any of the transactions contemplated
by this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely the
right of the Buyer to own the Shares and to control Subsidiary, or (iv) affect
adversely the right of Subsidiary to own its assets and to operate its
businesses and no such injunction, judgment, order, decree, ruling, or charge
will be in effect.
(d) Buyer will have received certificates signed by the President
and Chief Executive Officer of each of Subsidiary and Shareholder, dated the
Closing Date, certifying that the conditions set forth in Section 6.1 (a),
Section 6.1(b) and Section 6.1(c) have been satisfied in all respects.
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(e) The parties hereto will have received all Regulatory Approvals
and any applicable statutory waiting periods in respect thereto shall have
expired.
(f) Between the date of this Agreement and the Closing Date, the
business of Subsidiary will have been conducted in the ordinary course
consistent in all respects with prudent banking practices, and there will not
have occurred any material adverse change or any condition, event, circumstance,
fact or occurrence that may reasonably be expected to result in a material
adverse change in the business, properties, financial condition, loan portfolio,
operations or prospects of Subsidiary.
6.2 CONDITIONS TO THE OBLIGATIONS OF SUBSIDIARY AND SHAREHOLDER.
The obligations of each of Subsidiary and Shareholder to consummate the
transactions contemplated hereby are subject to satisfaction of the following
conditions:
(a) All of the representations and warranties made by Buyer in this
Agreement and in any documents or certificates provided by Buyer to Subsidiary
and Shareholder in connection with the transactions contemplated hereby will
have been true and correct in all material respects as of the date of this
Agreement and on the Closing Date as though made on and as of the Closing Date.
(b) Buyer will have performed and complied in all material respects
with all its agreements and covenants hereunder through the Closing Date.
(c) No action, suit, or proceeding will be pending or threatened
against Shareholder or Subsidiary before any Regulatory Authority or other
person wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions contemplated by
this Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation.
(d) Subsidiary and Shareholder will have received a certificate
signed by the President and Chief Executive Officer of Buyer, dated the Closing
Date, certifying that the conditions set forth in Section 6.2(a), Section 6.2(b)
and Section 6.2(c) have been satisfied in all respects.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date, as follows:
(a) By mutual written consent of Buyer, Subsidiary and Shareholder;
(b) By any party hereto if there will have been a final judicial or
regulatory determination (as to which all periods for appeal will have expired
and no appeal will be pending) that any material provision of this Agreement is
illegal, invalid or unenforceable
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(unless the enforcement thereof is waived by the affected party) or denying any
Regulatory Approval upon which any party's obligations hereunder is conditioned;
(c) By Buyer by giving written notice to Subsidiary and Shareholder
if Subsidiary or Shareholder has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Buyer has notified
them of the breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach or if the Closing will not have
occurred on or before August 31, 2002 by reason of the failure to satisfy any
condition hereunder, unless the failure results primarily from Buyer breaching
any representation, warranty, or covenant contained in this Agreement; or
(d) By Subsidiary or Shareholder by giving written notice to the
Buyer if Buyer has breached any representation, warranty, or covenant contained
in this Agreement in any material respect, Subsidiary or Shareholder has
notified Buyer of the breach, and the breach has continued without cure for a
period of (30) days after the notice of breach or if the Closing will not have
occurred on or before August 31, 2002 by reason of the failure to satisfy any
condition hereunder unless the failure results primarily from Subsidiary or
Shareholder breaching any representation, warranty, or covenant contained in
this Agreement.
7.2 EFFECT OF TERMINATION; SURVIVAL. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement will forthwith become
null and void and no further force and effect except that the agreement
contained in Section 10.12 hereof will survive the termination hereof and except
that no party shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties of the parties hereto contained in this Agreement
will survive the Closing, except that the following representations and
warranties will survive the Closing for a period of one year: Section 3.3,
Section 3.4, Section 3.5, Section 3.6, Section 3.8, Section 3.10, Section 3.11,
Section 3.12, Section 3.16 and Section 3.20.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) If Subsidiary or Shareholder breaches any of their
respective representations, warranties, or covenants contained herein
and set forth in Section 8.1(a) above and if Buyer makes a written
claim for indemnification against Shareholder within the applicable
survival period, then, subject to Section 8.1(b)(iii), Shareholder
agrees to indemnify the Buyer from and against the entirety of any loss
the Buyer may suffer through and after the date of the claim for
indemnification resulting from, arising out of, or caused by such
breach; provided, in no event shall Shareholder's obligations pursuant
to this Section 8.1(b)(i) be greater than the Purchase Price.
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(ii) Shareholder agrees to indemnify Buyer from and against
the entirety of any loss Buyer may suffer resulting from, arising out
of, or caused by any liability of Shareholder's Group for any Taxes of
Shareholder with respect to any Tax year or portion thereof ending on
or before the Closing Date or for any Tax year beginning before and
ending after the Closing Date to the extent allocable and to the extent
such Taxes are not reflected in the reserve for Tax liability
maintained by Subsidiary and reflected on the Subsidiary's internal
unaudited financial statements as of the Closing Date.
(iii) Notwithstanding anything contained in this Section
8.1(b) to the contrary, Shareholder shall have no liability for
indemnification hereunder unless and to the extent that the aggregate
amount of loss suffered by the Buyer for which a claim or claims for
indemnification have been asserted exceed $70,000 (the "Indemnity
Threshold"); provided, that the Indemnity Threshold shall not apply in
the event the liability for indemnification arises out of or in
connection with a breach by Shareholder of its covenant contained in
Section 4.2 to include in DISCLOSURE SCHEDULE 4.2 all of the Loans
properly includable on such Schedule.
(c) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any party hereto may have.
ARTICLE IX
TAX MATTERS
9.1. (a) TAX MATTERS. The following provisions will govern the
allocation of responsibility between Buyer and Shareholder for certain Tax
matters following the Closing Date:
(i) Shareholder will (A) join Buyer in making the election
permitted to be made under Section 338(h)(10) of the Code and any
corresponding or similar provisions of state or local law
(collectively, the "Section 338(h)(10) Election"), (B) cooperate with
Buyer to take all actions necessary to effect and preserve timely such
Section 338(h)(10) Election in accordance with Treasury Regulation
Section 1.338(h)(10)-1 (and, any comparable provisions of state and
local law and any successor provisions thereto) and (C) take no
position, inconsistent with treating the purchase and sale of the
Shares as a Section 338(h)(10) Election. Shareholder will assist Buyer
in the preparation of Form 8023 and any accompanying schedules required
under Section 338(h)(10) of the Code and any corresponding or similar
provisions of state or local law; provided, that Buyer shall be solely
responsible for, and shall pay all costs and expenses, including
professional fees, in connection with the preparation and filing of the
forms, returns, schedules and other documents necessary for making the
Section 338(h)(10) Election. Subject to the provisions of Section
9.1(a)(iii), Shareholder agrees that Buyer may make any determination
or election required or permitted to be made in connection with the
Section 338(h)(10) Election. Shareholder will execute Form 8023 and any
accompanying schedules and such other documents or forms at the Closing
or at such other time as
26
Buyer may request or as required by the Code
in order to effectuate the Section 338(h)(10) Election. Buyer and
Shareholder will file all Tax returns in a manner consistent with the
Section 338(h)(10) Election, Form 8023 and any accompanying schedules
and such other documents and forms as are requested by Buyer to
effectuate the Section 338(h)(10) Election.
(ii) Shareholder will pay any Tax attributable to the making
of the Section 338(h)(10) Election and will indemnify Buyer and
Subsidiary for any loss arising out of the failure to pay such Tax.
Shareholder will also pay any state, local or foreign Tax and indemnify
Buyer and Subsidiary against any loss arising out of any failure to pay
such Tax attributable to the Section 338(h)(10) Election or to an
election or deemed election under state, local or foreign law similar
to the election under Section 338(g) of the Code which results from the
making of the Section 338(h)(10) Election. Shareholder will indemnify
and hold harmless Buyer and Subsidiary in respect of losses resulting
from the Section 338(h) (10) Election being finally determined or
agreed by the parties hereto to be invalid or unavailable due to
Subsidiary not being a member of the selling consolidated group before
the purchase and sale of the Shares, as that term is defined in Section
338(h)(10)(B) of the Code.
(iii) Prior to the Closing, Buyer and Shareholder will agree
upon the allocation of the Purchase Price among the assets of
Subsidiary for purposes of preparing a properly completed Form 8023 and
any comparable form required under state or local law and will set
forth such allocation on a statement attached hereto (the "Allocation
Statement"). If Buyer and Shareholder are unable to agree upon such
allocation for purposes of the Allocation Statement within thirty (30)
days, then the issues in dispute will be submitted to Erwin & Co.,
Little Rock, Arkansas, certified public accountants (the
"Accountants"), for resolution. If issues in dispute are submitted to
the Accountants for resolution, (A) each such party will furnish to the
Accountants such workpapers and other documents and information
relating to the disputed issues as the Accountants may request and are
available to that party (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants any
material relating to the such allocation or the Allocation Statement
and to discuss such allocation or the Allocation Statement with the
Accountants; (B) such allocation and the Allocation Statement will be
determined and set forth in a notice delivered to both parties by the
Accountants and will be binding and conclusive on such parties; and (C)
Buyer and Shareholder will each bear 50% of the fees of the Accountants
in connection with the foregoing. Buyer and Shareholder will report the
Tax consequences of the transactions contemplated by this Agreement in
a manner consistent with the Allocation Statement and will not take any
position inconsistent therewith.
Notwithstanding any other provision of this Agreement,
Shareholder and Subsidiary shall not be in breach of the
representations and warranties contained in Section 3.4, 3.8 and 3.16
as a result of any increased Tax liability caused by the 338(h)(10)
Election.
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(b) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Shareholder
will prepare or cause to be prepared and file or cause to be filed all Tax
returns for all periods ending on or prior to the Closing Date which are filed
after the Closing Date other than income Tax returns with respect to periods for
which a consolidated income Tax return of Shareholder's Group will include the
operations of Subsidiary. Shareholder will permit Buyer to review and comment on
each such Tax return described in the preceding sentence prior to filing.
Shareholder will reimburse Buyer for Taxes of Subsidiary with respect to such
periods within fifteen (15) days after payment by Buyer or Subsidiary of such
Taxes, to the extent such Taxes are not reflected in the reserve for Tax
liability shown on the Subsidiary's internal unaudited financial statements as
of the Closing Date.
(c) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
Buyer will prepare or cause to be prepared and file or cause to be filed any Tax
returns of Subsidiary for Tax periods which begin before the Closing Date and
end after the Closing Date. Shareholder will pay to Buyer within fifteen (15)
days after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
taxable period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax liability shown on Subsidiary's internal
unaudited financial statements as of the Closing Date. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date will (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire taxable period, and
(y) in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date will be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations will be made in a manner consistent
with prior practice of Shareholder Group.
(d) COOPERATION ON TAX MATTERS.
(i) The parties hereto will cooperate fully, as and to the
extent reasonably requested by any other party, in connection with the
filing of Tax returns pursuant to this Section and any audit,
litigation or other proceeding with respect to all Taxes. Such
cooperation will include the retention and (upon any other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. Subsidiary and Shareholder agree (A) to retain all books and
records with respect to Tax matters pertinent to Subsidiary relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any
Regulatory Authority, and (B) to give
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the other parties reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if any other
party so requests, Subsidiary or Shareholder, as the case may be, will
allow the other party to take possession of such books and records.
(ii) Buyer and Shareholder further agree, upon request, to
use their best efforts to obtain any certificate or other document from
any Regulatory Authority or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) Buyer and Shareholder further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
(e) TAX SHARING AGREEMENTS.
(i) All Tax sharing agreements or similar agreements with
respect to or involving Subsidiary will be terminated as of the Closing
Date and, after the Closing Date, Subsidiary will not be bound thereby
or have any liability thereunder, except as provided in this Section
9.1(e).
(ii) Payments between Shareholder and Subsidiary with respect
to Tax periods ended on or before December 31, 2001 shall be made prior
to the Calculation Date.
(iii) With respect to the Tax settlement for the period
beginning on January 1, 2002 and ending on the Closing Date, the
necessary information shall be provided by Subsidiary to Shareholder as
soon as practicable after the Closing Date but in no event later than
60 days following the Closing Date. For purposes of calculating the
final payment due under any Tax sharing agreement to Shareholder or to
Subsidiary (a "Final Settlement Payment"), all such Tax settlements
shall be computed at the applicable statutory rate in effect for each
period, giving effect to any estimated payments made by Subsidiary
related to each period. Each Final Settlement Payment shall be made in
accordance with the provisions of this Section 9.1(e).
(iv) With respect to each Final Settlement Payment and with
the information described in Section 9.1(e)(iii), and within 30 days of
receipt of such information, Shareholder shall provide Buyer its
calculation, performed in a manner consistent with Section 9.1(e)(iii),
of the amount of the Final Settlement Payment. If any Final Settlement
Payment is to be made by Subsidiary to Shareholder, Buyer shall cause
Subsidiary to transfer the amount of any such Final Settlement Payment
to Shareholder within 15 days of receipt of Shareholder's delivery of
such calculation. If any Final Settlement Payment is to be made to
Subsidiary, Shareholder shall pay to Buyer or Subsidiary, as Buyer may
direct, any such Final Settlement Payment within 15 days of receipt of
Shareholder's calculation thereof.
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(v) If either party hereto disagrees with the calculation of
any Final Settlement Payment, that party shall deliver notice of
disagreement to the other party hereto. If a notice of disagreement
shall be delivered, the parties hereto shall, during the 15 days
following such delivery, use their best efforts to reach agreement on
the disputed items or amounts. If, during such period, the parties are
unable to reach such agreement, they shall promptly thereafter cause an
independent accounting firm reasonably satisfactory to Shareholder and
Buyer (who shall not have any material relationship with Shareholder or
Buyer), promptly to review the disputed items or amounts for the
purpose of calculating the Final Settlement Payment. Such independent
accounting firm shall deliver to Shareholder and Buyer, as promptly as
practicable, a report setting forth such calculation or calculations.
Such report shall be final, conclusive and binding upon the parties
hereto. Any required payments resulting herefrom shall be made within
15 days of receipt of such report. The cost of such review and report
shall be borne equally by Shareholder and Buyer.
(f) CERTAIN TAXES. All Taxes and related fees (including any
penalties and interest) incurred in connection with this Agreement will be paid
by Shareholder when due, and, except as otherwise provided by Section 9.1,
Shareholder will, at its own expense, file all necessary Tax returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, Buyer
will, and will cause its affiliates to, join in the execution of any such Tax
returns and other documentation.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, demands and other communications
hereunder will be in writing and will be deemed duly given to any party hereto
(a) upon delivery to the address of the party or parties as specified below if
delivered in person or by courier or if sent by certified or registered mail
(return receipt requested), (b) upon dispatch if transmitted by facsimile and
such transmission is confirmed successfully by the transmitting machine, in each
case addressed as follows:
(a) IF TO BUYER: First Community Bank
1700 East Highland Drive
Jonesboro, Arkansas, 72403
Attn.: Dwayne Powell, President and
Chief Executive Officer
Telephone: (870) 802-5934
Facsimile: (870) 802-5945
WITH A COPY TO: Luse Lehman Gorman Pomerenk &
Schick, P.C.
5335 Wisconsin Ave, NW
Washington, DC 20015
Attn.: Robert B. Pomerenk, Esq.
Eric Luse, Esq.
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Telephone: (202) 274-2000
Facsimile: (202) 362-2902
(b) IF TO SUBSIDIARY: Peoples Bank of Imboden
Highway 63
Imboden, Arkansas 72434
Attn.: Preston L. Clark, President and
Chief Executive Officer
Telephone: (870) 869-2291
Facsimile: (870) 869-2179
(c) IF TO SHAREHOLDER: Spring Rivers Bancshares, Inc.
P.O. Box 490
300 West Emerson
Paragould, Arkansas 72460
Attn.: Charles Luter, President and
Chief Executive Officer
Telephone: (870) 236-7623
Facsimile: (870) 236-7492
WITH A COPY TO: McAfee & Taft
10th Floor
2 Leadership Square
Oklahoma City, Oklahoma 73102
Attn.: Bruce Crum, Esq.
Telephone: (405) 552-2247
Facsimile: (405) 228-7447
or to such other address as any party hereto may designate any written notice in
the aforesaid manner.
10.2 APPLICABLE LAW. This Agreement will be construed and interpreted
according to the laws of the State of Arkansas without regard to conflicts of
laws principles thereof, except to the extent that the federal laws of the
United States apply.
10.3 ASSIGNABILITY; BINDING EFFECT. This Agreement may be assigned by
Buyer to any affiliate thereof, but not by Subsidiary or Shareholder; provided,
no such assignment shall relieve Buyer from its obligations hereunder. This
Agreement will inure to the benefit of and be binding upon the respective
successors and any permitted assigns of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement and other documents delivered or
to be delivered pursuant to this Agreement contain or will contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersede all previous oral and written agreements among the parties
relating thereto.
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10.5 EXTENSION; WAIVER. At any time, the parties hereto may extend
the time for the performance of any of the obligations or other acts of any
other party, waive any inaccuracies in the representations and warranties
contained in this Agreement and waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party
hereto to any such extension or waiver will be valid only if set forth in an
instrument signed on behalf of such party. The waiver by any party hereto of a
breach of any provision hereunder will not operate to be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.6 AMENDMENT. This Agreement may be amended, modified, or
supplemented only by the prior written agreement of the parties hereto.
10.7 REMEDIES CUMULATIVE. All remedies of the parties provided herein
will, to the extent permitted by law, be deemed cumulative and not exclusive of
any thereof or of any other remedies available to the parties, by judicial
proceeding or otherwise, to enforce the performance or observance of the
agreements contained herein, and every remedy given herein or by law to any
party hereto may be exercised from time to time, and as often as will be deemed
expedient, by such party.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same Agreement.
10.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
10.10 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
10.11 INTERPRETATION. The table of contents and headings contained in
this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement. To the best knowledge of
Shareholder and Subsidiary refers to the actual knowledge of Charles Luter, the
President and Chief Executive Officer of Shareholder ("Shareholder's
Management"), and Preston L. Clark, the President and Chief Executive Officer of
Subsidiary ("Subsidiary's Management") after due investigation and inquiry
regarding the matter in question. No provision of this Agreement will be
construed to require either party hereto to take any action that would violate
any applicable law, rule or regulation.
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10.12 EXPENSES.
(a) Each of the parties hereto will bear its own costs and expenses
(including fees and expenses of its own financial consultants, accountants and
legal counsel) incurred in connection with this Agreement and the transactions
contemplated hereby. Shareholder agrees that Subsidiary has neither borne nor
will bear any of the Shareholder's costs and expenses (including any of its
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
(b) In the event of any termination of this Agreement by a party
pursuant to Section 7.1(c) or (d), as the case may be, based on a breach of a
representation or warranty, or the breach of a covenant by the other party
hereto, the breaching party shall pay to the non-breaching party all
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting, and investment banking fees and expenses, incurred by the
non-breaching party in connection with entering into this Agreement and carrying
out of any and all acts contemplated hereunder; provided, however, that this
clause shall not be construed to relieve or release a breaching party from any
additional liabilities or damages arising out of its willful breach of any
provision of this Agreement.
10.13 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
and agrees that the other parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terns or otherwise are breached. Accordingly, each of the parties
agrees that the other parties will be entitled to an injunction to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
FIRST COMMUNITY BANK
Attest:
/s/ James Edington By: /s/ Dwayne Powell
- ------------------------ -------------------------------------
Its: President and Chief Executive Officer
PEOPLES BANK OF IMBODEN
Attest:
/s/ Karen Berry By: /s/ Charles F. Luter
- ------------------------ -------------------------------------
Its: President and Chief Executive Officer
SPRING RIVERS BANCSHARES, INC.
Attest:
/s/ Karen Berry By: /s/ Charles F. Luter
- ------------------------ -------------------------------------
Its: President and Chief Executive Officer
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EXHIBIT 99
Pocahontas Bancorp, Inc.
1700 East Highland Drive
Jonesboro, Arkansas 72403
FOR IMMEDIATE RELEASE
CONTACTS:
Dwayne Powell Charles F. Luter
President and Chief Executive Officer President and Chief Executive Officer
Pocahontas Bancorp, Inc. Spring Rivers Bancshares, Inc.
TEL: (870) 802-5934 TEL: (870) 236-7623
POCAHONTAS BANCORP, INC. SUBSIDIARY TO ACQUIRE PEOPLES BANK OF IMBODEN IN A
MERGER VALUED AT APPROXIMATELY $8.0 MILLION
Jonesboro and Imboden, Arkansas. January 16, 2002. Pocahontas Bancorp,
Inc. (Nasdaq NMS: PFSL) ("Pocahontas Bancorp"), the holding company for First
Community Bank ("FCB"), announced today that FCB has entered into a definitive
agreement under which FCB would acquire Peoples Bank of Imboden, an Arkansas
bank subsidiary of Spring Rivers Bancshares, Inc., in a cash merger valued at
approximately $8.0 million. The Board of Directors of each institution has
unanimously approved the transaction. Due diligence has been completed.
Dwayne Powell, President and Chief Executive Officer of Pocahontas
Bancorp and FCB, stated, "We are very pleased to announce the acquisition of
Peoples Bank and the expansion of the FCB franchise in the Lawrence County,
Arkansas market area." Upon completion of the transaction and the completion of
the acquisition of North Arkansas Bancshares, Inc. and its unit, Newport Federal
Savings Bank, which was announced in November 2001, Pocahontas Bancorp will have
approximately $585 million in assets and will have a total of 25 branch offices
in Northeast Arkansas.
Charles Luter, President and Chief Executive Officer of Spring Rivers
Bancshares, stated, "We are pleased to have reached this agreement with the
Pocahontas Bancorp organization. The customers of Peoples Bank will benefit from
this new relationship with a bank that shares our commitment to community
banking." Peoples Bank of Paragould, Spring Rivers Bancshares' other bank
subsidiary, is not involved in the transaction and will continue to be operated
as a subsidiary of Spring Rivers Bancshares.
Preston L. Clark, President and Chief Executive Officer of Peoples
Bank, will serve as an executive with FCB following the merger, and will remain
in Imboden. Customers of Peoples Bank should anticipate no change in the type
and style of community banking services they have become accustomed to, and
should benefit from an expanded menu of banking services.
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The transaction, which is expected to be completed in the second
calendar quarter of 2002, is subject to approval by applicable regulatory
authorities.
Pocahontas Bancorp estimates that the cost savings opportunities from
the transaction equal 10% of Peoples Bank's annualized operating expenses, or
approximately $145,000 pre-tax. The transaction is expected to be immediately
accretive to Pocahontas Bancorp's earnings per share. In addressing the
financial aspects of the transaction, Mr. Powell continued, "The acquisition of
Peoples Bank strengthens our market presence in Lawrence County and will provide
for enhanced growth opportunities there that we expect to add to earnings going
forward. In addition, the acquisition continues the transformation of FCB to a
more commercial bank-like balance sheet and operations."
The deal price represents 157.4% of Peoples Bank's tangible book value
at September 30, 2001 and 11.2 times Peoples Bank's annualized earnings for the
nine months ended September 30, 2001.
Pocahontas Bancorp is the holding company for First Community Bank, a
federal savings bank. First Community Bank is headquartered in Jonesboro,
Arkansas, and operates 20 full-service banking offices in Northeast Arkansas. At
September 30, 2001, Pocahontas Bancorp had total assets of $483.6 million, total
deposits of $384.5 million and stockholders' equity of $44.6 million.
Peoples Bank is headquartered in Imboden, Arkansas, and operates four
full-service banking offices. At September 30, 2001, Peoples Bank had total
assets of $64.2 million, total deposits of $58.7 million and stockholders'
equity of $5.1 million.
This news release contains certain forward-looking statements. These
statements include statements regarding the anticipated closing date of the
transaction, anticipated cost savings, and anticipated future results.
Forward-looking statements can be identified by the fact that they include words
like "believe," "expect," "anticipate," "estimate," and "intend" or future or
conditional verbs such as "will," "would," "should," "could," or "may." Certain
factors that could cause actual results to differ materially from expected
include delays in completing the merger, difficulties in achieving cost savings
from the merger or in achieving such cost savings within the expected time
frame, difficulties in integrating FCB and Peoples Bank, increased competitive
pressures, changes in the interest rate environment, changes in general economic
conditions, legislative and regulatory changes that adversely affect the
businesses in which FCB and Peoples Bank are engaged, changes in the securities
markets, and other factors.
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