AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

FIRST STATE BANCORPORATION,

MSUB, INC.

AND

FRONT RANGE CAPITAL CORPORATION,

HERITAGE BANK

DATED AS OF OCTOBER 4, 2006

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of October 4, 2006, by and among First State Bancorporation, a New Mexico corporation (the “Buyer”), MSUB, Inc., a Colorado corporation and wholly owned subsidiary of the Buyer (“Merger Sub”), Front Range Capital Corporation, a Colorado corporation (the “Company”), and Heritage Bank, a Colorado state chartered bank and a wholly owned subsidiary of the Company (the “Bank”).

WHEREAS, the Boards of Directors of the Buyer, Merger Sub and the Company have determined that it is in the best interests of their respective companies and their stockholders to consummate the business combination transaction provided for herein in which Merger Sub will, subject to the terms and conditions set forth herein, merge (the “Merger”), with and into the Company with the Company surviving the Merger;

WHEREAS, as soon as practicable after the consummation of the Merger, it is anticipated that the Surviving Corporation (as defined below) in the Merger will merge with and into the Buyer with the Buyer surviving the merger (the “Holdco Merger”);

WHEREAS, as soon as practicable after the execution and delivery of this Agreement, First Community Bank, a New Mexico state chartered bank and a wholly owned subsidiary of the Buyer (the “Buyer Bank”), and the Bank will enter into a Subsidiary Agreement and Plan of Merger in substantially the form set forth on Exhibit A hereto (the “Bank Merger Agreement”) providing for the merger (the “Subsidiary Merger”) of the Bank with and into the Buyer Bank, with the Buyer Bank surviving the Subsidiary Merger, and it is intended that the Subsidiary Merger be consummated immediately following the consummation of the Holdco Merger;

WHEREAS, concurrently with the execution and delivery of this Agreement, holders of an aggregate of 515,370 shares of Voting Common Stock and 1,666 shares of Voting Preferred Stock are entering into a Support Agreement (the “Support Agreement”) with the Buyer; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Defined Terms . For all purposes of this Agreement (as defined below), the following terms shall have the respective meanings set forth in this Section 1.1 (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined):

“Acceptable Confidentiality Agreement” has the meaning set forth in Section 6.4(e).

“Acquisition Proposal” has the meaning set forth in Section 6.4(e).

“Acquisition Agreement” has the meaning set forth in Section 6.4(a).

“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with, such Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other ownership interest, by contract or otherwise.

“Affiliated Group” means an affiliated group, as that term is defined by Section 1504(a) of the Code and the Treasury Regulations promulgated thereunder, any similar group defined under state, local or foreign law, or any group of which the Company (or any predecessor of the Company) is or was a member for purposes of filing Consolidated or Combined Tax Returns.

“Agreement” means this Agreement and Plan of Merger, including the Schedules and Exhibits attached hereto and made a part hereof, as the same may be amended from time to time in accordance with the provisions hereof.

“Bank” has the meaning set forth in the Recitals hereto.

“Bank Merger Act” means the Bank Merger Act of 1960, as amended, and any successor to such statute.

“Bank Merger Agreement” has the meaning set forth in the Recitals hereto.

 

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“BHC Act” means the Bank Holding Company Act of 1956, as amended, and any successor to such statute.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New Mexico are authorized or obligated by Law or executive order to close.

“Buyer” has the meaning set forth in the Recitals hereto.

“Buyer Bank” has the meaning set forth in the Recitals hereto.

“Buyer Common Stock” means common stock, no par value per share, of the Buyer.

“Buyer Disclosure Schedule” means the disclosure schedule being delivered to the Company by the Buyer prior to the execution and delivery of this Agreement.

“Buyer Plans” has the meaning set forth in Section 6.8(a).

“CBC” has the meaning set forth in Section 2.1.

“CBCA” has the meaning set forth in Section 2.1.

“Certificate” has the meaning set forth in Section 2.4(d).

“Closing” has the meaning set forth in Section 2.10.

“Closing Date” has the meaning set forth in Section 2.10.

“Code” means Internal Revenue Code of 1986, as amended.

“Colorado Statement of Merger” has the meaning set forth in Section 2.2.

“Common Stock” means the Voting Common Stock and the Non-Voting Common Stock.

“Company” has the meaning set forth in the Recitals hereto.

“Company Adverse Recommendation Change” has the meaning set forth in Section 6.4(b).

“Company Assets” has the meaning set forth in Section 3.16(a).

 

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“Company Balance Sheet” has the meaning set forth in Section 3.6(a).

“Company Capital Stock” means the Voting Common Stock, the Non-Voting Common Stock, the Voting Preferred Stock, the Non-Voting 1988 Preferred Stock, and the Non-Voting 2000 Preferred Stock.

“Company Contract” has the meaning set forth in Section 3.14(a).

“Company Disclosure Schedule” means the disclosure schedule being delivered to the Buyer by the Company prior to the execution and delivery of this Agreement.

“Company Notice” has the meaning set forth in Section 6.4(b).

“Company Stockholder Approval” has the meaning set forth in Section 3.3(a).

“Consolidated or Combined Tax Returns” means any and all Tax Returns that include or included the Company (or any predecessor or successor of the Company) that is or was required to be filed by any Person including any Tax Returns filed on a consolidated, combined, unitary or aggregate group basis of which the Company (or any predecessor or successor of the Company) is or has been a member.

“Determination Letter” means with respect to any of the Plans intended to be “qualified” within the meaning of Section 401(a) of the Code, the determination letter if it is an individually designed plan (including a volume submitter plan that is not identical to an approved volume submitter plan), the favorable opinion letter if it is a master or prototype plan (standardized or nonstandardized) or an advisory letter and certification if it is identical to an approved volume submitter plan.

“Director of Financial Institutions Division” means the Director of Financial Institutions Division of the Licensing and Regulation Department of the State of New Mexico.

“Dissenting Share” has the meaning set forth in Section 2.5.

“Dissenting Stockholder” has the meaning set forth in Section 2.5.

“Effective Time” has the meaning set forth in Section 2.2.

“Encumbrances” means any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.

 

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“Environmental Law” means all Laws (including common law), past, current or future, relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata, and natural resources), including (i) those related to emissions, discharges, exposures, Releases or threatened Releases of Hazardous Materials, or otherwise relating to any environmental aspect of the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials and (ii) environmental provisions of Laws, past, current or future, other than Environmental Laws.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any trade or business that together with the Company or any of its Subsidiaries would be deemed a “single employer” within the meaning of Section 414 of the Code.

“FDIC” means the Federal Deposit Insurance Corporation and any successor thereto.

“Federal Reserve Board” has the meaning set forth in Section 3.4.

“Fund” has the meaning set forth in Section 2.6(a).

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Entity” has the meaning set forth in Section 3.4.

“Hazardous Material” means any pollutant, contaminant, substance, material, or waste defined as “hazardous” or “toxic” under applicable Environmental Laws, including toxic substances, hazardous substances, petroleum and petroleum products, polychlorinated biphenyls, asbestos or asbestos-containing materials, lead or lead-based paints or materials, and radon.

“Heritage Place” means the property located at 604 Interlocken Boulevard, Broomfield, Colorado.

“Holdco Merger” has the meaning set forth in the Recitals hereto.

“Indemnified Parties” has the meaning set forth in Section 6.10(a).

 

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“Injunction” has the meaning set forth in Section 7.1(b).

“Insurance Amount” has the meaning set forth in Section 6.10(b).

“Insurance Policies” has the meaning set forth in Section 3.18.

“Intellectual Property” has the meaning set forth in Section 3.22.

“Judgment” means any judgment, injunction, order, writ, ruling or award of any Governmental Entity of competent jurisdiction.

“Knowledge of the Company” or “Known to the Company” shall mean actual knowledge after due inquiry of the Persons listed on Section 1.1 of the Company Disclosure Schedule.

“Knowledge of the Buyer” or “Known to the Buyer” shall mean actual knowledge after due inquiry of the Persons listed on Section 1.1 of the Buyer Disclosure Schedule.

“Law” means all laws (including common law), statutes, treaties, codes, ordinances, rules, regulations, orders and judgments of any Governmental Entity, foreign or domestic.

“Leases” means all lease and sublease agreements and similar agreements with respect to personal property entered into by either the Company or the Bank, as lessor, including all collateral security therefor such as guarantees and all insurance policies or proceeds.

“Lien” means any charge, deed of trust, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance.

“Loan Commitments” means the collective reference to each commitment or obligation to extend credit to any Person (including pursuant to a letter of credit or bankers’ acceptance) or to participate therein, whether or not such commitment, obligation or participation has been accepted or utilized by such Person.

“Loan Documents” means the agreements, instruments, certificates, or other documents at any time evidencing or otherwise relating to, governing, or executed in connection with, or as security for, a Loan or Loan Commitment, including notes, bonds, loan agreements, letter of credit applications, letters of credit, lease financing contracts, bankers’ acceptances, drafts, guarantees, deeds of trust, mortgages, assignments, security agreements, pledges, subordination or priority agreements, lien priority agreements, undertakings, security instruments, financing statements, certificates,

 

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documents, legal opinions, participation and assignment agreements and inter-creditor agreements, and all amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.

“Loan Property” has the meaning set forth in Section 3.17(d).

“Loan Request Documents” has the meaning set forth in Section 5.1(b)(vi).

“Loans” means loans, advances, notes, borrowing arrangements or other extensions of credit including Leases, credit enhancements, commitments, guarantees, interest-bearing assets, interests in loan participations and assignments, customer liabilities on letters of credit, bankers’ acceptances and participations in letters of credit (including in all cases loans made to pay interest accruing on loans, whether or not due or payable (sometimes referred to as capitalized interest)) and all amendments, modifications, renewals, extensions, refinancings and refundings of or for any of the foregoing.

“Material Adverse Effect” means a material adverse effect on (i) in the case of the Company, (x) the assets, properties, liabilities, business, results of operations or condition (financial or other) of the Company and its Subsidiaries taken as a whole; provided , however , that for the purpose of this clause (i)(x) in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect the cause of which is (1) any change in banking, savings association and similar Laws of general applicability or interpretations thereof by courts or Governmental Entities, (2) any change in GAAP or regulatory accounting requirements applicable to banks, savings associations, or their holding companies generally, (3) the announcement of this Agreement or any action or omission of the Company or any Subsidiary thereof required or permitted to be taken by it under this Agreement, and (4) any changes in general economic conditions affecting banks, savings associations, or their holding companies generally, except to the extent the Company is materially and disproportionately affected thereby or (y) the ability of the Company to perform its obligations hereunder and to consummate the transactions contemplated hereby or (ii) in the case of the Buyer, the ability of the Buyer to perform its obligations hereunder and to consummate the transactions contemplated hereby, including the Buyer’s ability to obtain all financing necessary to pay the Merger Consideration.

“Merger” has the meaning set forth in the Recitals hereto.

“Merger Consideration” has the meaning set forth in Section 2.4(b).

“Merger Sub” has the meaning set forth in the Recitals hereto.

 

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“Merger Sub Common Stock” means the common stock, par value $1.00 per share, of Merger Sub.

“NASDAQ” means the NASDAQ Stock Market.

“NMBA” means the New Mexico Banking Act.

“NMBCA” means the New Mexico Business Corporation Act.

“Non-Voting Common Stock” means the Class B non-voting common stock, par value $0.001 per share, of the Company.

“Non-Voting 1988 Preferred Stock” means the 1988 Series A 8% noncumulative, convertible, non-voting preferred stock, par value $0.001 per share, of the Company.

“Non-Voting 2000 Preferred Stock” means the 2000 Series B cumulative cash dividends, non-voting preferred stock, par value $0.001 per share, of the Company.

“Non-Voting 2000 Preferred Stock Merger Consideration” has the meaning set forth in Section 2.4(b).

“Participation Facility” has the meaning set forth in Section 3.17(d).

“Payee” has the meaning set forth in Section 2.6(e).

“Paying Agent” has the meaning set forth in Section 2.6(a).

“Pension Plan” means an employee pension benefit plan, fund or program within the meaning of Section 3(2) of ERISA.

“Permitted Liens” means (i) Encumbrances reflected or reserved on the Company’s Balance Sheet, (ii) statutory Liens for Taxes not yet due and payable, (iii) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carrier’s and other similar liens and encumbrances arising in the ordinary course of business, which in the aggregate, are not material, and (iv) such encumbrances and imperfections of title as do not materially detract from the value of the properties or assets and do not materially interfere with the present or proposed use of such properties or assets.

“Person” means any individual, partnership, limited partnership, limited liability partnership, limited liability company, foreign limited liability company, trust, estate, corporation, custodian, trustee, executor, administrator, nominee, personal representative, Governmental Entity or any other entity.

 

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“Plan Sponsor” means a plan sponsor within the meaning of Section 3(16)(B) of ERISA.

“Plans” means each deferred compensation plan, incentive compensation plan, equity compensation plan, Welfare Plan, Pension Plan, employment, termination or severance agreement, and each other employee benefit plan, fund, program, agreement or arrangement, whether written or oral, with respect to which the Company, any of its Subsidiaries or any ERISA Affiliate is a Plan Sponsor, to which the Company, any of its Subsidiaries or any ERISA Affiliate otherwise contributes or is required to contribute, or to which the Company, any of its Subsidiaries or any ERISA Affiliate otherwise maintains or participates in, for the benefit of any employee or former employee of the Company or any of its Subsidiaries.

“Preferred Stock” means the Voting Preferred Stock, the Non-Voting 1988 Preferred Stock, and the Non-Voting 2000 Preferred Stock.

“Regulatory Agencies” has the meaning set forth in Section 3.5.

“Regulatory Agreement” means any agreement, consent agreement or memorandum of understanding with, any commitment letter or similar undertaking to, any order or directive by, any extraordinary supervisory letter from, or any board resolutions adopted at the request of (whether or not set forth in Section 3.15 of the Company Disclosure Schedule or Section 4.5 of the Buyer Disclosure Schedule), any Regulatory Agency or other Governmental Entity.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment.

“Representative” means, with respect to any Person, any officer, director, employee, agent, advisor or other representative of such Person.

“Requisite Regulatory Approvals” has the meaning set forth in Section 7.1(a).

“SEC” means the U.S. Securities and Exchange Commission.

“Securities” has the meaning set forth in Section 6.3(b).

“Securities Act” means the Securities Act of 1933, as amended.

“Special Meeting” has the meaning set forth in Section 6.5.

 

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“SRO” has the meaning set forth in Section 3.5.

“State Regulator” has the meaning set forth in Section 3.5.

“Subsidiary” means, when used with respect to any Person, any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, which is controlled by such Person, directly or indirectly, or is consolidated with such Person for financial reporting purposes.

“Subsidiary Merger” has the meaning set forth in the Recitals hereto.

“Superior Proposal” has the meaning set forth in Section 6.4(e).

“Support Agreement” has the meaning set forth in the Recitals hereto.

“Surviving Corporation” has the meaning set forth in Section 2.1.

“Tax” or “Taxes” shall mean all taxes, charges, levies, penalties or other assessments imposed by any United States federal, state, local or foreign taxing authority, including, but not limited to income, gross receipts, excise, property, ad valorem, value added, alternative minimum, stamp, occupation, use, compensating, service, license, intangible, net worth, sales, transfer, franchise, payroll, employment, withholding, social security or other taxes, including any interest, penalties or additions attributable thereto.

“Tax Records” means all Tax Returns and tax related workpapers relating to the Company or any of its Subsidiaries or any of their respective assets.

“Tax Return” shall mean any return, report, information return or other document (including any related or supporting information) with respect to Taxes, including but not limited to information returns and any documents with respect to or accompanying payments of estimated Taxes or requests for the extension of time in which to file any such return, report, information, return or other document.

“Termination Fee” has the meaning set forth in Section 9.1(b).

“Third Party Acquisition Event” means (i) entering into a definitive agreement for an Acquisition Proposal or (ii) the consummation of an Acquisition Proposal involving the purchase of at least 50% of the equity securities of the Company or 50% (based on fair market value) of the consolidated assets of the Company and its Subsidiaries, taken as a whole.

“Transferred Employee” has the meaning set forth in Section 6.8(a).

 

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“Treasury Regulations” means the regulations promulgated under the Code.

“Trustee” means Wilmington Trust Company.

“2.4(a) Merger Consideration” has the meaning set forth in Section 2.4(a).

“Unexcused Financing Failure” means any failure of the condition set forth in Section 7.2(g) to be satisfied, other than a failure that results from the occurrence after the date of this Agreement of any of the following: (i) a material adverse change in the financial markets in the United States or the international financial markets, any outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war, or any major act of terrorism involving the United States, or any other substantial national or international calamity, emergency or crisis involving a prospective change in national or international political, financial or economic conditions, (ii) a suspension or limitation of trading generally on the New York Stock Exchange or The Nasdaq Stock Market, or the fixing of minimum or maximum prices for trading, or the requirement of maximum ranges for prices, in each case by any such exchange, or by order of the Securities and Exchange Commission, the NASD or any other governmental authority or (iii) the declaration of a banking moratorium by either federal or New York authorities.

“USA Patriot Act” has the meaning set forth in Section 3.13(a).

“Voting Common Stock” means the Class A voting common stock, par value $0.001 per share, of the Company.

“Voting Preferred Stock” means the 1987 Series A 8% noncumulative, convertible, voting preferred stock, par value $0.001 per share, of the Company.

“Welfare Plan” means an employee welfare benefit plan, fund or program within the meaning of Section 3(1) of ERISA.

1.2 Interpretation . When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The phrases “the date of this Agreement”, “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to October 4, 2006. The symbol “$” and the terms “dollar” and “dollars” all refer to the lawful currency of the United States of America denominated in dollars.

 

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ARTICLE II

THE MERGER

2.1 The Merger . Subject to the terms and conditions of this Agreement, in accordance with the applicable provisions of the Colorado Business Corporation Act (the “CBCA”), the Colorado Banking Code (the “CBC”) and the BHC Act, at the Effective Time, Merger Sub shall merge with and into the Company. The Company shall be the surviving company (hereinafter sometimes called the “Surviving Corporation”) in the Merger, and shall continue its existence as a corporation under the laws of the State of Colorado. Upon consummation of the Merger, the separate existence of Merger Sub shall terminate. Without limiting the generality of the foregoing, upon the Merger, all the rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all obligations, duties, debts and liabilities of the Company and Merger Sub shall be the obligations, duties, debts and liabilities of the Surviving Corporation.

2.2 Effective Time . Upon the terms and subject to the conditions of this Agreement, on the Closing Date (or such other date as the Buyer and the Company shall agree), Merger Sub and the Company shall file with the Secretary of State of the State of Colorado the statement of merger and any other appropriate documents (all of such documents the “Colorado Statement of Merger”) executed and acknowledged in accordance with the relevant provisions of the CBCA. The Merger shall become effective on the date on which the Colorado Statement of Merger has been duly filed with the Secretary of State for the State of Colorado or such other time as is agreed upon by the parties and specified in the Colorado Statement of Merger, and such time is hereinafter referred to as the “Effective Time”.

2.3 Effects of the Merger . At and after the Effective Time, the Merger shall have the effects set forth in the CBCA.

2.4 Effects on Company Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Buyer, Merger Sub, the Company or the holders of any of the securities described in this Section 2.4:

(a) Each share of Common Stock, the Voting Preferred Stock and the Non-Voting 1988 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares canceled pursuant to Section 2.4(c) and Dissenting Shares, if any) shall be canceled and, by virtue of the Merger and without any action on the part of the holder thereof, shall be converted automatically into the right to receive an

 

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amount in cash equal to $35.904 (rounded to the nearest full cent) payable, less any required withholding taxes and without interest, to the holder of such share of Common Stock, Voting Preferred Stock or Non-Voting 1988 Preferred Stock upon surrender of the certificate that formerly evidenced such share of Common Stock, Voting Preferred Stock or Non-Voting 1988 Preferred Stock in the manner provided in Section 2.6 (the “2.4(a) Merger Consideration”);

(b) Each share of Non-Voting 2000 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares canceled pursuant to Section 2.4(c) and Dissenting Shares, if any) shall be canceled and, by virtue of the Merger and without any action on the part of the holder thereof, shall be converted automatically into the right to receive an amount in cash equal to $1,000 payable, less any required withholding taxes and without interest, to the holder of such share of Non-Voting 2000 Preferred Stock upon surrender of the certificate that formerly evidenced such share of Non-Voting 2000 Preferred Stock in the manner provided in Section 2.6 (the “Non-Voting 2000 Preferred Stock Merger Consideration” and together with the 2.4(a) Merger Consideration the “Merger Consideration”);

(c) Each share of Company Capital Stock issued and outstanding immediately prior to the Effective Time that is owned by the Bank, the Buyer or Merger Sub and each share of Company Capital Stock that is owned by the Company as treasury stock shall be canceled and retired and cease to exist and no payment or distribution shall be made with respect thereto;

(d) At the Effective Time, all shares of the Company Capital Stock converted pursuant to Sections 2.4(a) and 2.4(b) shall no longer be outstanding and shall automatically be canceled and retired and cease to exist, and each holder of a certificate (“Certificate”) representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with Sections 2.4(a) and 2.4(b), as applicable; and

(e) Each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation.

2.5 Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, any share of Company Capital Stock that is issued and outstanding immediately prior to the Effective Time and which is held by a stockholder who is entitled to exercise, and who has made a demand for, dissenters’ rights in accordance with Article 113 of the CBCA (such share being a “Dissenting Share,” and such stockholder being a “Dissenting Stockholder”) shall not be converted into the right to receive the Merger Consideration, but rather shall be converted into the right to receive such

 

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consideration as may be determined to be due with respect to such Dissenting Share pursuant to the CBCA. If any Dissenting Stockholder fails to perfect such stockholder’s dissenters’ rights under the CBCA or effectively withdraws or otherwise loses such rights with respect to any Dissenting Shares, then as of the later of the Effective Time or the date of loss of such rights, such Dissenting Shares shall automatically be converted into the right to receive the Merger Consideration, without interest thereon, upon surrender of the Certificate representing such Dissenting Shares. The Company shall give the Buyer (a) prompt notice of any demand for payment of the fair value of any shares of Company Capital Stock or any attempted withdrawal of any such demand for payment and any other instrument served pursuant to the CBCA and received by the Company relating to any stockholder’s dissenters’ rights; and (b) the opportunity to participate in all negotiations and proceedings with respect to any such demands for payment under the CBCA. The Company shall not make any payment with respect to, or settle or make an offer to settle, any such demand for payment at any time prior to the Effective Time, unless the Company shall have first obtained the Buyer’s consent.

2.6 Surrender of Shares of Company Capital Stock; Stock Transfer Books .

(a) Prior to the Effective Time, the Buyer shall designate a bank or trust company, reasonably acceptable to the Company, to act as agent (the “Paying Agent”) for the holders of Company Capital Stock to receive the funds necessary to make the payments pursuant to Section 2.4 upon surrender of the Certificates. The Buyer shall, at or prior to the Effective Time, deposit, or cause to be deposited, with the Paying Agent the aggregate Merger Consideration to be paid in respect of the shares of Company Capital Stock (the “Fund”). The Fund shall be invested by the Paying Agent as directed by the Buyer. Any net profit resulting from, or interest or income produced by, such investments, shall be payable to the Buyer. The Buyer shall replace any monies lost through any investment made pursuant to this Section 2.6(a). The Paying Agent shall make the payments provided in Section 2.4.

(b) No later than five (5) Business Days after the Effective Time, the Buyer shall cause to be mailed to each person who was, at the Effective Time, a holder of record of shares of Company Capital Stock entitled to receive the Merger Consideration pursuant to Section 2.4 a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive, in exchange therefor, the Merger Consideration for

 

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each share of Company Capital Stock formerly evidenced by such Certificate, and such Certificate shall then be canceled. Until so surrendered, each such Certificate shall, at and after the Effective Time, represent for all purposes only the right to receive Merger Consideration. No interest shall accrue or be paid to any beneficial owner of Company Capital Stock or any holder of any Certificate with respect to the Merger Consideration payable upon the surrender of any Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed in blank or to the Paying Agent or otherwise be in proper form for transfer, in the sole discretion of the Paying Agent, and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Buyer that such taxes either have been paid or are not applicable. If any Certificate shall have been lost, stolen or destroyed, upon making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Buyer, the posting by such person of a bond, in such reasonable amount as the Buyer may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration such holder is entitled to receive pursuant to Section 2.4.

(c) At any time following the date that is six months after the Effective Time, the Buyer shall be entitled to require the Paying Agent to deliver to it any portion of the Fund that had been made available to the Paying Agent and not disbursed to the Company stockholders (including all interest and other income received by the Paying Agent in respect of all amounts held in the Fund or other funds made available to it), and thereafter each such holder shall be entitled to look only to the Buyer (subject to abandoned property, escheat and other similar Laws), and only as general creditors thereof, with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by such holder. If any Certificates representing shares of Company Capital Stock shall not have been surrendered immediately prior to such date on which the Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity, any such Merger Consideration in respect of such Certificate shall become the property of the Buyer, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of the Surviving Corporation, the Buyer or the Paying Agent shall be liable to any holder of Company Capital Stock for any Merger Consideration delivered in respect of such share of Company Capital Stock to a public official pursuant to any abandoned property, escheat or other similar Law.

 

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(d) At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Capital Stock on the records of the Company. From and after the Effective Time, except for the Buyer, the holders of Company Capital Stock holding shares of such stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Capital Stock except as otherwise provided herein or by applicable Law, and the Merger Consideration paid pursuant to this Article II upon the surrender or exchange of Certificates shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Capital Stock theretofore represented by such Certificates.

(e) The Buyer and the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the Merger Consideration and any other amount otherwise payable pursuant to this Agreement to any holder of Company Capital Stock (a “Payee”) such amounts that the Buyer or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code, the rules and regulations promulgated thereunder or any provision of state, local or foreign tax Law. Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to Payee.

2.7 Articles of Incorporation . At the Effective Time, the articles of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated to be substantially the same as the articles of incorporation attached hereto as Exhibit B , until the same shall thereafter be altered, amended or repealed in accordance with applicable Law or such amended and restated articles of incorporation.

2.8 By-Laws . At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated to be substantially the same as the bylaws attached hereto as Exhibit C , until the same shall thereafter be altered, amended or repealed in accordance with applicable Law, the articles of incorporation of the Surviving Corporation or such amended and restated bylaws.

2.9 Directors and Officers . The directors and officers of the Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.

2.10 Closing . Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) will take place at 10:00 a.m., local time, on the third Business Day following the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII (other than those conditions which

 

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relate to actions to be taken at the Closing, but subject to the satisfaction or waiver of those conditions) (the “Closing Date”), at the offices of the Buyer in Albuquerque, New Mexico, unless another time, date or place is agreed to in writing by the parties hereto.

2.11 Reservation of Right to Revise Transaction . Notwithstanding anything to the contrary contained in this Agreement, the Buyer may at any time change the method of effecting the acquisition; provided , however , that no such change shall (a) alter or change the amount or kind of the Merger Consideration, (b) delay or jeopardize consummation of the Merger or (c) have materially adverse Tax effects on the Buyer, the Company or the holders of Company Capital Stock.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY AND THE BANK

Except as set forth in the Company Disclosure Schedule (each section of which qualifies the correspondingly numbered representation, warranty or covenant to the extent specified therein and such other representations, warranties or covenants to the extent a matter in such section is disclosed in such a way as to make its relevance to such other representation, warranty or covenant reasonably apparent), the Company and the Bank hereby jointly and severally represent and warrant to the Buyer that:

3.1 Organization .

(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Colorado. The Company is duly registered as a bank holding company under the BHC Act. The Company has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company. The copies of the articles of incorporation, bylaws or similar governing documents of the Company, which have previously been made available to the Buyer, are true, complete and correct copies of such documents as in effect as of the date of this Agreement.

(b) The Bank is a state chartered bank duly organized, validly existing and in good standing under the Laws of the State of Colorado. The Bank has the corporate power and authority to own or lease all of its properties and assets and to carry

 

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on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company. The copies of the articles of incorporation, bylaws or similar governing documents of the Bank, copies of which have previously been made available to the Buyer, are true, complete and correct copies of such documents as in effect as of the date of this Agreement.

(c) The minute books of the Company and each of its Subsidiaries contain true and correct records of all meetings and other corporate actions held or taken since December 31, 2002 of their respective stockholders and Boards of Directors (including committees of their respective Boards of Directors).

(d) Neither the Company nor any of its Subsidiaries is in violation of any provision of its respective articles of incorporation, bylaws or similar governing documents.

3.2 Capitalization .

(a) The authorized capital stock of the Company consists of (i) 200,000,000 shares of Common Stock and (ii) 100,000,000 shares of Preferred Stock. There are (i) 1,857,394 shares of Voting Common Stock issued and outstanding, (ii) 38,105 shares of Non-Voting Common Stock issued and outstanding, (iii) 5,000 shares of Voting Preferred Stock issued and outstanding, (iv) 5,500 shares of Non-Voting 1988 Preferred Stock issued and outstanding, (v) 3,567 shares of Non-Voting 2000 Preferred Stock issued and outstanding, and (vi) no shares of Common Stock or Preferred Stock are reserved for issuance upon exercise of outstanding stock options or otherwise, except for shares of Common Stock reserved for conversion of the Non-Voting 1988 Preferred Stock and the Voting Preferred Stock. All of the issued and outstanding shares of Company Capital Stock have been duly authorized and validly issued and are fully paid, non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The Company is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of the Company or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of the Company. Without limiting the generality of the foregoing, except as described in Section 3.2(a) of the Company Disclosure Schedule, there is no outstanding option, warrant, convertible or exchangeable security, right, subscription, call, unsatisfied preemptive right or other agreement or right of any kind to purchase or otherwise acquire (including by exchange or conversion) any of the

 

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Company’s capital stock and no oral or written agreement, contract, arrangement, understanding, plan or instrument of any kind to which the Company is subject with respect to the issuance, voting or sale of issued or unissued shares of the Company’s capital stock.

(b) Section 3.2(b) of the Company Disclosure Schedule sets forth a description and the amount of outstanding trust preferred securities to which the Company or any of its Subsidiaries is a party. No actions or consents are required with respect to any of the trust preferred securities listed on Section 3.2(b) of the Company Disclosure Schedule in connection with the consummation of the transactions provided for in this Agreement, except as described in Section 6.11.

(c) Section 3.2(c) of the Company Disclosure Schedule sets forth a true and correct list of all of the Subsidiaries of the Company. Except as set forth in Section 3.2(c) of the Company Disclosure Schedule, the Company owns, directly or indirectly, all of the issued and outstanding shares of the capital stock (or all of the other equity ownership interests) of each Subsidiary, free and clear of all Liens and security interests of any kind or nature whatsoever, and all of such shares are duly authorized and validly issued and are fully paid, non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any equity security or any security representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. Without limiting the generality of the foregoing, there is no outstanding option, warrant, convertible or exchangeable security, right, subscription, call, unsatisfied preemptive right or other agreement or right of any kind to purchase or otherwise acquire (including by exchange or conversion) any of such Subsidiary’s capital stock and no oral or written agreement, contract, arrangement, understanding, plan or instrument of any kind to which any of the Company or any of its Subsidiaries is subject with respect to the issuance, voting or sale of issued or unissued shares of such Subsidiary’s capital stock.

(d) The Bank has no Subsidiaries.

3.3 Authority; No Violation .

(a) The Company has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, subject, with respect to the Merger, to the adoption of this Agreement and the Merger by holders of the Voting Common Stock and the Voting Preferred Stock. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of

 

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the Company and no other corporate proceedings on the part of the Company are necessary to approve this Agreement and to consummate the transactions contemplated hereby (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the outstanding shares of Voting Common Stock and Voting Preferred Stock entitled to vote thereon in accordance with the CBCA, the articles of incorporation of the Company and the bylaws of the Company (the “Company Stockholder Approval”)). This Agreement has been duly and validly executed and delivered by the Company and (assuming due authorization, execution and delivery by the Buyer and Merger Sub) this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally.

(b) The Bank has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of the Bank and no other corporate proceedings on the part of the Bank are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Bank and (assuming due authorization, execution and delivery by the Buyer and Merger Sub) this Agreement constitutes a valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally.

(c) Neither the execution and delivery of this Agreement by the Company or the Bank, nor the consummation by the Company or the Bank of the transactions contemplated hereby, nor compliance by the Company or the Bank with any of the terms or provisions hereof, will (i) violate any provision of the articles of incorporation, bylaws or similar governing documents of the Company or any of its Subsidiaries, or (ii) assuming that the consents and approvals referred to in Section 3.4 hereof are duly obtained, (A) violate any Law (any directive, policy or guideline of any Governmental Entity which has jurisdiction over the Company or any of its Subsidiaries) or Judgment applicable to the Company or any of its Subsidiaries, or any of their respective properties or assets, or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Encumbrance upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms,

 

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conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except as disclosed in Section 3.3(c) of the Company Disclosure Schedule or, in the case of clause (B), for such violations, conflicts, defaults, terminations, accelerations and Encumbrances which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

3.4 Consents and Approvals . Except for (a) the filing of applications and notices, as applicable, with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) under the BHC Act and approval of such applications and notices, (b) the Company Stockholder Approval, (c) the filing of applications with the Director of the Financial Institutions Division of the State of New Mexico and the State of Colorado Division of Banking and approval of such applications, (d) the filing of the Colorado Statement of Merger with the Secretary of State of the State of Colorado pursuant to the CBCA, (e) the filing of this Agreement together with copies of the resolutions of the Company and Merger Sub approving this Agreement, a certificate of the appropriate officers of the Company that the Company’s stockholders voted to approve this Agreement in accordance with applicable Law with the Director of Financial Institutions Division pursuant to the NMBA and the Public Regulation Commission of the State of New Mexico, (f) such filings, authorizations or approvals as may be set forth in Section 3.4 of the Company Disclosure Schedule and (g) consents, approvals, filings or registrations the failure of which to be obtained or made will not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a “Governmental Entity”) or with any third party are necessary in connection with (i) the execution and delivery by the Company or the Bank of this Agreement or (ii) the consummation by the Company or the Bank of the Merger and the other transactions contemplated hereby.

3.5 Reports . The Company and its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they are required to file since December 31, 2000 with (a) the Federal Reserve Board, (b) the FDIC, (c) any state banking commissions or any other state regulatory authority (each a “State Regulator”) and (d) any self-regulatory organization (“SRO”) (collectively, the “Regulatory Agencies”), and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of the Company or any of its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the Knowledge of Company, investigation into the business or operations of the Company or any of its Subsidiaries since December 31, 2000. Except

 

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as set forth in Section 3.5 of the Company Disclosure Schedule, there is no unresolved material violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its Subsidiaries.

3.6 Financial Statements .

(a) The Company has previously made available to the Buyer copies of the consolidated statements of financial condition of the Company as of December 31 for the fiscal years 2004 and 2005, and the related consolidated statements of operations and comprehensive income, stockholder’s equity for the fiscal years then ended, accompanied by the audit report of Fortner, Bayens, Levkulich and Co., P.C., independent public accountants with respect to the Company, and the unaudited consolidated statements of financial condition of the Company as of June 30, 2006. The June 30, 2006, consolidated statement of financial condition of the Company (including the related notes, where applicable) (the “Company Balance Sheet”) fairly presents the consolidated financial position of the Company and its Subsidiaries, and, as of the date thereof, the other financial statements referred to in this Section 3.6 (including the related notes, where applicable) fairly present the consolidated financial position and the results of the consolidated operations of the Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) comply in all material respects with applicable accounting requirements with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved, except as indicated in the notes thereto.

(b) Except (i) to the extent reflected or reserved against in the Company Balance Sheet, (ii) as set forth in Section 3.6(b) of the Company Disclosure Schedules or (iii) for liabilities and obligations that (A) are incurred after the date of such balance sheet in the ordinary course of business consistent with past practice and (B) individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect on the Company, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise (including liabilities as guarantor, successor or otherwise with respect to obligations of others) and whether due or to become due.

(c) The books and records of the Company and its Subsidiaries are maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect all transactions in a lawful manner. All assets and liabilities of the Company and its Subsidiaries and all transactions thereof have been recorded in all material respects on the books and records of the Company and its Subsidiaries, in accordance with GAAP and accurately present in all material respects the transactions described therein.

 

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(d) The deposit accounts of the Bank are insured by the FDIC through the Bank Insurance Fund to the fullest extent permitted by the Federal Deposit Insurance Act, and all premiums and assessments required to be paid in connection therewith have been paid by the Bank.

3.7 Broker’s Fees . Neither the Company nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement and no payment is due from the Company for such services, except that the Company has engaged and will pay a fee or commission to St. Charles Capital, LLC. The Company has delivered to the Buyer a true and complete copy of each agreement between the Company or any of its Subsidiaries and St. Charles Capital, LLC.

3.8 Absence of Certain Changes or Events .

(a) Except as set forth in Section 3.8(a) of the Company Disclosure Schedule, since December 31, 2005, there has been no change, development, event or circumstance or combination of changes, developments, events or circumstances which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company.

(b) Since December 31, 2005, the Company and its Subsidiaries have carried on their businesses in the ordinary course consistent with past practices.

(c) Except as set forth in Section 3.8(c) of the Company Disclosure Schedule, since June 30, 2006, neither the Company nor any of its Subsidiaries has (i) except for normal increases in the ordinary course of business consistent with past practices, and except as required by Law, increased the compensation, pension, or other fringe benefits or perquisites payable to any officer, employee or director of the Company or any of its Subsidiaries from the amount thereof in effect as of June 30, 2006 (which amounts have been previously disclosed to the Buyer), granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus or (ii) except as contemplated by this Agreement, taken any of the actions set forth in Section 5.1(b) hereof nor has any matter, event or circumstance described in Section 5.1(b) otherwise occurred or arisen.

(d) Except as set forth in Section 3.8(d) of the Company Disclosure Schedule, since June 30, 2006, the Company has not declared or paid any dividends on any shares of its capital stock.

 

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3.9 Legal Proceedings .

(a) Neither the Company nor any of its Subsidiaries is a party to any, and there are no pending or, to the Knowledge of the Company, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against the Company or any of its Subsidiaries, other than collection matters against borrowers of the Bank in the ordinary course of business.

(b) There is no Judgment or regulatory restriction imposed upon Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries.

3.10 Taxes .

(a) All Tax Returns required to be filed by the Company or any of its Subsidiaries that are due on or after December 31, 2000, have been filed with the appropriate taxing authorities when due and in accordance with applicable Law, and all such Tax Returns are true, correct and complete in all material respects.

(b) All material Taxes owed by the Company or any of its Subsidiaries and all material Taxes owed by any Person for which the Company or any of its Subsidiaries could be held responsible (whether or not shown on any Tax Return or any Consolidated or Combined Tax Return) have been duly and timely paid or payment has been provided therefor.

(c) No claim has ever been made by an authority in any jurisdiction that the Company or any of its Subsidiaries was required to file any Tax Return that was not filed.

(d) The Company has prior to the date hereof provided to the Buyer copies of all Forms 1120, U.S. Corporation Income Tax Returns of the Company for all periods ending on or after December 31, 2000.

(e) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection or assessment of, Taxes due for any taxable period with respect to any Tax for which the Company or any of its Subsidiaries may be subject or liable.

(f) There are no pending, or to the Knowledge of the Company, threatened, audits, assessments, collections, investigations or other proceedings by any Governmental Entity with respect to Taxes against the Company or any of its Subsidiaries.

 

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(g) There are no Liens for Taxes upon the assets or properties of the Company or any of its Subsidiaries, except for statutory Liens for current Taxes not yet due.

(h) Except as set forth in Section 3.10(h) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any agreement relating to the sharing or allocation of Taxes or indemnification agreement with respect to Taxes or similar contract or arrangement.

(i) Neither the Company nor any of its Subsidiaries has entered into any closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign tax law) or any other agreement with similar Tax purposes.

(j) Neither the Company nor any of its Subsidiaries has liability for Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or similar provisions of state, local or foreign law), as a transferee or successor, by contract or otherwise.

(k) Since the date of the Company Balance Sheet, neither the Company nor any of its Subsidiaries has incurred any liability for Taxes other than in the ordinary course of business.

(l) No power of attorney is currently in force with respect to any matter currently before any Governmental Entity relating to Taxes of the Company or any of its Subsidiaries.

(m) To the Knowledge of the Company, the Company and its Subsidiaries have withheld and paid all Taxes required to have been withheld and paid or provided payment for all taxes in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(n) Since January 1, 2003, the Company and its Subsidiaries have withheld and paid all Taxes required to have been withheld and paid or provided payment for all taxes in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(o) Except as set forth in Section 3.10(o) of the Company Disclosure Schedule, the Company is not a party to, or otherwise obligated under, any agreement, plan or arrangement covering any person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by the Buyer,

 

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the Company or any of their respective affiliates by reason of Section 280G of the Code or that would be subject to Section 4999 of the Code.

3.11 Employee Benefit Plans .

(a) Section 3.11(a) of the Company Disclosure Schedule contains a true, complete and correct list of each Plan.

(b) With respect to each Plan listed in Section 3.11(a) of the Company Disclosure Schedule, the Company has heretofore delivered or made available to the Buyer true and complete copies of the Plan and any amendments thereto (or if the Plan is not a written Plan, a description thereof) and a copy of the most recently available Determination Letter, if applicable.

(c) No liability under Title IV, Section 302 of ERISA or Sections 412 and 4971 of the Code has been incurred by the Company, any of its Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company, any of its Subsidiaries or any ERISA Affiliate of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation (which premiums have been paid when due).

(d) None of the Plans are subject to Section 412 of the Code or Title IV of ERISA.

(e) None of the Plans are a “multiemployer pension plan,” as defined in Section 3(37) of ERISA, or a plan described in Section 4063(a) of ERISA.

(f) To the Knowledge of the Company, each Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code, except for instances, individually or in the aggregate, which have not or would not reasonably be expected to have a Material Adverse Effect on the Company.

(g) To the Knowledge of the Company, with respect to each of the Plans that is intended to be “qualified” within the meaning of Section 401(a) of the Code, nothing has occurred that would reasonably be expected to result in any of these Plans ceasing to be so qualified and the trusts maintained thereunder to be exempt from taxation under Section 501(a) of the Code.

(h) Except as set forth in Section 3.11(h) of the Company Disclosure Schedule, no Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for employees or former employees of the Company or any of its Subsidiaries for periods extending beyond their retirement or other termination

 

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of service, other than (i) coverage mandated by applicable law, (ii) death benefits under any Pension Plan, or (iii) benefits the full cost of which is borne by the current or former employee (or his beneficiary).

(i) Except as set forth in Section 3.11(i) of the Company Disclosure Schedule, neither the negotiation or execution of this Agreement, nor the consummation of the transactions contemplated by this Agreement will, either alone or in combination with another event, (i) entitle any current or former employee or officer of the Company or any of its Subsidiaries or any ERISA Affiliate to severance pay, unemployment compensation or any other payment or additional rights, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer.

(j) There are no pending or, to the Knowledge of the Company, threatened or anticipated claims by or on behalf of any Plan, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits or claims which, individually or in the aggregate, would not be reasonably expected to have a Material Adverse Effect on the Company).

3.12 Company Information . The information relating to the Company or any of its Subsidiaries that is provided to the Buyer by the Company or its representatives for inclusion in any document filed with any Governmental Entity in connection herewith or for inclusion or incorporation by reference in any document provided to an investor or potential investor in connection with the financing required to consummate the transactions contemplated hereby will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

3.13 Compliance with Applicable Law .

The Company and each of its Subsidiaries:

(a) to the Knowledge of the Company are, and have been, in compliance, in the conduct of its business, with all Laws applicable thereto or to the employees conducting such businesses, including the Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), the trade sanctions administered and enforced by the Department of Treasury’s Office of Foreign Assets Controls, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, all other applicable fair lending laws and other laws relating to discrimination, except for such noncompliance which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company. The Company and the Bank each have a Community Reinvestment Act rating of “satisfactory or better”;

 

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(b) to the Knowledge of the Company, have all material permits, licenses, franchises, certificates, orders, and approvals of, and have made all filings, applications, and registrations with, Governmental Entities that are required in order to permit the Company and its Subsidiaries to carry on their business as currently conducted; and

(c) except as set forth in Section 3.13(c) of the Company Disclosure Schedule, have received no notification or communication from any Governmental Entity (i) asserting that either the Company or any of its Subsidiaries is not in compliance with any Law, (ii) threatening to revoke any permit, license, franchise, certificate of authority or other governmental authorization, or (iii) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance.

3.14 Certain Contracts .

(a) Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral):

(i) with respect to the employment or retention of any director, officer, employee or consultant;

(ii) which, upon the consummation of the transactions contemplated by this Agreement, will (either alone or upon the occurrence of any additional acts or events) result in any payment or benefits (whether of severance pay or otherwise) becoming due, or the acceleration or vesting of any rights to any payment or benefits, from the Buyer, the Company, the Bank, the Surviving Corporation or any of their respective Subsidiaries to any officer, director, consultant or employee thereof;

(iii) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed in whole or in part after the date of this Agreement;

(iv) which is a consulting agreement (including data processing, software programming and licensing contracts) not terminable on 90 days or less notice involving the payment of more than $25,000 per annum, in the case of any such agreement with an individual, or $50,000 per annum, in the case of any other such agreement;

 

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(v) which materially restricts the conduct of any line of business by the Company or any of its Subsidiaries;

(vi) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;

(vii) which relates to indebtedness owed by the Company or any of its Subsidiaries, or the guarantee thereof (other than contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements and trade payables incurred in the ordinary course of business consistent with past practice);

(viii) involving intellectual property or relating to the provision of data processing, network communication or other technical services to or by the Company or any of its Subsidiaries, other than agreements entered into in the ordinary course of business;

(ix) with respect to any mortgage, pledge, indenture or security agreement or similar arrangement constituting an Encumbrance upon the assets or properties of the Company or any of its Subsidiaries;

(x) for the sale or purchase of personal property having a value individually, with respect to all sales or purchases thereunder, in excess of $25,000, other than in the ordinary course of business; or

(xi) for the sale or purchase of fixed assets or real estate having a value individually, with respect to all sales or purchases thereunder, in excess of $25,000.

Each contract, arrangement, commitment or understanding of the type described in this Section 3.14(a), whether or not set forth in Section 3.14(a) of the Company Disclosure Schedule, is referred to herein as a “Company Contract”. The Company has previously made available to the Buyer true, complete and correct copies of each Company Contract.

(b) Except as set forth in Section 3.14(b) of the Company Disclosure Schedule, (i) each Company Contract is valid and binding, in full force and effect and enforceable in accordance with its respective terms, subject to general

 

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principles of equity and to bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally, (ii) the Company or its Subsidiary has performed in all material respects all obligations required to be performed by them to date under each Company Contract and (iii) no event or condition exists or has occurred which violates, conflicts with, results in a breach of any provision of or the loss of any benefit under, constitutes a default (or an event which, with notice or lapse of time, or both, would constitute a default) on the part of any party under, results in the termination of or a right of termination or cancellation on the part of any party under, accelerates the performance required on the part of any party by, or results in the creation of any Encumbrance (other than Permitted Liens) upon any of the assets of the Company or any of its Subsidiaries under any of the terms, conditions or provisions of any Company Contract, except, in each case, where such failure to be valid and binding or in full force and effect, failure to be enforceable, failure to perform or such violation, conflict, breach or default, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

3.15 Agreements with Regulatory Agencies . Except as set forth in Section 3.15 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by any Regulatory Agency or other Governmental Entity, or is a party to any written Regulatory Agreement that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has any of the Company or any of its Subsidiaries been advised in writing by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. As of the date of this Agreement, neither the Company nor any of its Subsidiaries is aware of any fact or circumstance which is reasonably likely to prevent the Buyer or any of its Subsidiaries from obtaining the governmental approvals and consents required in connection with the consummation of the transactions contemplated hereby.

3.16 Property .

(a) Each of the Company and its Subsidiaries has good and marketable title free and clear of all Encumbrances to all of the properties and assets, real and personal, tangible or intangible, which are reflected on the Company Balance Sheet or acquired after such date (collectively, the “Company Assets”), except for (i) dispositions of such properties or assets in the ordinary course of business or, after the date hereof, permitted by this Agreement, and (ii) Permitted Liens.

(b) Each of the Company and its Subsidiaries owns or leases all properties and assets, real and personal, tangible or intangible, required to conduct its business in the ordinary course, consistent with past practice.

 

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(c) With respect to each lease pursuant to which the Company or any of its Subsidiaries, as lessee, leases real or personal property, (i) such lease is valid and binding, in full force and effect and enforceable in accordance with its respective terms subject to general principles of equity and to bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally, (ii) the Company or its Subsidiary, as applicable, has performed in all material respects all obligations required to be performed by it to date under such lease, and (iii) no event or condition exists or has occurred which violates in any material respect, conflicts with in any material respect, results in a breach in any material respect of any provision of or the loss of any material benefit under, constitutes a material default (or an event which, with notice or lapse of time, or both, would constitute a default) on the part of any party.

3.17 Environmental Matters .

(a) To the Knowledge of the Company, each of the Company and any of its Subsidiaries is and has been in compliance in all material respects with all applicable Environmental Laws.

(b) To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has received any written claim, notice of violation or citation concerning any violation or alleged violation of any applicable Environmental Law or any alleged liability involving the presence of any Hazardous Material pursuant to any Environmental Law.

(c) There are no writs, injunctions, decrees, orders or judgments outstanding, or any actions, suits, proceedings or investigations pending or, to the Knowledge of the Company, threatened in writing, before any Governmental Entity or other forum in which Company, any of its Subsidiaries, any Participation Facility or, to the Knowledge of the Company, any Loan Property, has been or, with respect to threatened proceedings, may be, named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Laws, or (ii) relating to the Release, threatened Release or exposure to any Hazardous Material whether or not occurring at or on a site owned, leased or operated by the Company or any of its Subsidiaries, any Participation Facility or any Loan Property.

(d) The following definitions apply for purposes of this Section 3.17: (i) “ Loan Property ” means any property in which the Company or any of its Subsidiaries holds a security interest, and, where required by the context, said term means the owner or operator of such property; and (ii) “ Participation Facility ” means any facility in which the Company or any of its Subsidiaries participates in the management and, where required by the context, said term means the owner or operator of such property.

 

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3.18 Insurance . Section 3.18 of the Company Disclosure Schedule sets forth a true, complete and correct list of the names, types, insurance policy numbers, insurance carriers, principal amounts of coverage and deductible amounts for all insurance policies maintained by the Company or any of its Subsidiaries (the “Insurance Policies”). Each of the Insurance Policies is in full force and effect, all premiums with respect thereto covering all periods up to and including the date of this Agreement have been paid, such premiums covering all periods from the date hereof up to and including the Closing Date shall have been paid on or before the Closing Date, to the extent then due and payable. Each of the Insurance Policies is valid and enforceable in accordance with its respective terms, subject to general principles of equity and to bankruptcy, insolvency and similar Laws affecting creditors’ rights and remedies generally. Neither the Company nor any of its Subsidiaries has been refused any insurance with respect to its business, nor has any coverage been limited or terminated by any insurance carrier to which any of the foregoing has applied for such insurance or with which any of the foregoing has carried insurance during the last three (3) years.

3.19 Employee Matters . Except as set forth in Section 3.19 of the Company Disclosure Schedule, in the past three years (a) the Company and its Subsidiaries are and have been in material compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment, health and safety, and wages and hours; (b) neither the Company nor any of its Subsidiaries has received written notice of any charge or complaint against the Company or any of its Subsidiaries pending before the Equal Employment Opportunity Commission, the National Labor Relations Board, or any other government agency or court or other tribunal regarding an unlawful employment practice; (c) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement and there is no labor strike, slowdown, dispute or work stoppage actually pending or threatened against or affecting the Company or any of its Subsidiaries; (d) neither the Company nor any of its Subsidiaries has received written notice that any representation petition respecting the employees of the Company or any of its Subsidiaries has been filed with the National Labor Relations Board; and (e) there are no union claims to represent any of the Company’s or the any of its Subsidiary’s employees and to the Company’s Knowledge, there has been no labor union prior to the date hereof organizing any employees of the Company or any of its Subsidiaries into one or more collective bargaining units.

3.20 Investment Securities . Section 3.20 of the Company Disclosure Schedule sets forth (a) the book and estimated fair value as of June 30, 2006 of the investment securities, mortgage-backed securities and securities held or available for sale of the Company or any of its Subsidiaries and (b) an investment securities report as of such date which includes security descriptions, CUSIP numbers, pool face values, book values and coupon rates. None of such securities are denominated in currencies other than U.S. dollars.

 

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3.21 Loans .

(a) Except as set forth in Section 3.21(a) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries, as a lender, is a party to any written or oral (i) non-U.S. dollar denominated Loan, with or to any obligor, (ii) Loan with any director or executive officer of the Company or any of its Subsidiaries, or any Person controlling, controlled by or under common control with the Company or any of its Subsidiaries, other than residential mortgage loans and consumer credit in accordance with applicable bank regulatory Laws and all