AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated
as of October 11, 2006 (the “Signing Date”), is
entered into by and among MACATAWA BANK CORPORATION , a
Michigan corporation, of 10753 Macatawa Drive, Holland, Michigan
49424 (“Macatawa”), BENJ. A. SMITH & ASSOCIATES,
LTD. (d/b/a Smith & Associates Investment Management
Services), a Michigan corporation, of 106 East 8th Street, Holland,
Michigan 49423 (“Company”), and BENJ. A. SMITH,
III , a Michigan resident
(“Shareholder”).
RECITALS:
WHEREAS,
the respective Boards of Directors of Macatawa and Company have
approved this Agreement, and deem it advisable and in the best
interests of their respective stockholders to consummate the merger
of Company with and into Macatawa on the terms and conditions set
forth in this Agreement (the “Merger”), whereby all of
the issued and outstanding shares of capital stock of Company (the
“Company Stock”) shall be converted into the right for
Shareholder to receive the Merger Consideration (as defined below)
as set forth in this Agreement;
WHEREAS,
Shareholder, as the sole stockholder of Company, has approved the
Merger and the transactions contemplated hereby; and
WHEREAS,
Macatawa, Company and Shareholder desire to make those
representations, warranties, covenants and agreements specified
herein in connection with this Agreement.
NOW,
THEREFORE, in consideration of and reliance upon the foregoing and
the representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, Macatawa, Company and Shareholder agree as
follows:
ARTICLE I
THE MERGER
1.1
The Merger .
Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Michigan Business
Corporation Act, at the Effective Time (as defined below), Company
shall be merged with and into Macatawa and the separate corporate
existence of Company shall thereupon cease. Macatawa shall be the
surviving corporation in the Merger (sometimes hereinafter referred
to as “Surviving Corporation”) and the separate
corporate existence of Macatawa with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the
Merger.
1.2
Closing .
Unless otherwise mutually agreed in writing between
Macatawa and Company, the closing for the Merger (the
“Closing”) shall take place at the offices of Varnum,
Riddering, Schmidt & Howlett LLP, 333 Bridge Street, N.W. Grand
Rapids, Michigan 49501, (a) provided the conditions set forth in
Article VI of this Agreement (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement, on December 31, 2006 at
10:00 a.m., or (b) on such later date and at such time as is
mutually agreeable, not later than the second business day
following the day on which the last to be satisfied or waived of
the conditions set forth in Article VI of this Agreement (other
than those conditions that by their nature are to be satisfied at
the Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived in accordance with this
Agreement (the “Closing Date”).
1.3
Actions at
Closing .
(a) At
the Closing, Macatawa shall deliver to Company (i) a Certificate of
Merger incorporating the terms and conditions of this Agreement
(the “Certificate of Merger”); (ii) copies of
resolutions of the Board of Directors of Macatawa authorizing
Macatawa to consummate the transactions contemplated by this
Agreement; and (iii) any and all other agreements, instruments and
other documents reasonably required by Company.
(b)
At the Closing, Company shall deliver to Macatawa (i) the
Certificate of Merger; (ii) copies of resolutions of the Board of
Directors of Company and of Shareholder authorizing Company to
consummate the transactions contemplated by this Agreement; and
(iii) any and all other agreements, instruments and other documents
reasonably required by Macatawa.
1.4
Effective Time .
As soon as practicable following the Closing, the
Certificate of Merger shall be delivered to the Department of Labor
and Economic Growth of the State of Michigan (the “Filing
Office”). The Merger shall become effective upon the filing
of the Certificate of Merger with the Filing Office or at such
other later date or time as the parties shall agree as specified in
the Certificate of Merger (the time the merger becomes effective
being the “Effective Time”).
1.5
Effect of the Merger
. At the Effective Time, Surviving Corporation
shall possess all of the rights, privileges, immunities, powers and
franchises, both public and private, and shall be subject to all
restrictions, disabilities and duties, of Company. The rights,
privileges, powers and franchises of Company and all property
(real, personal, and mixed), and all debts due to Company of
whatever account, shall be vested in Surviving Corporation. All
property, rights, privileges, powers and franchises, and all and
every other interest belonging to or due to Company shall
thereafter be considered to be transferred to and shall be the
property of Surviving Corporation, without further act or
deed.
1.6
Assets and
Liabilities . The assets and liabilities of
Company at the Effective Time shall be carried on the books of
Surviving Corporation in the amounts at which they are carried at
that time on the books of Company.
1.7
Articles of
Incorporation; Bylaws; Directors; Officers .
The Restated Articles of Incorporation, as amended, of
Macatawa shall be the Articles of Incorporation of Surviving
Corporation, without amendment. The Bylaws of Macatawa shall be the
Bylaws of Surviving Corporation, without amendment. The directors
and officers of Macatawa shall continue to be the directors and
officers of Surviving Corporation, until duly changed in accordance
with the Bylaws of Surviving Corporation.
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1.8
Further Assurances
. If at any time after the Effective Time Surviving
Corporation needs any bills of sale, assignments or assurances or
any other acts or things necessary, desirable or proper (a) to
perfect or confirm, of record or otherwise, in Surviving
Corporation its right, title or interest in any of the rights,
privileges, powers, franchises, properties or assets of Company, or
(b) otherwise to carry out the purposes of this Agreement,
Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the
name and on behalf of Company, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of
Company, all such other acts and things as may be necessary,
desirable or proper to perfect or confirm Surviving
Corporation’s right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of
Company and otherwise to carry out the purposes of this
Agreement.
1.9
Excluded Assets
. Prior to the Closing Date, Company may distribute
the assets listed on Section 1.9 of the Disclosure Schedule
(the “Excluded Assets”) to Shareholder. Macatawa
acknowledges and agrees that the Excluded Assets may be distributed
by Company to Shareholder and that they will no longer be assets of
Company, and that the distribution of the Excluded Assets qualifies
any relevant representation or warranty in Article III of this
Agreement.
1.10
Excluded Liabilities
. At the Closing, Shareholder shall cause any and
all remaining indebtedness, liabilities, costs, obligations,
expenses, fees, responsibilities and any similar items, of any kind
(collectively, the “Liabilities”) of Company (the
“Excluded Liabilities”) to be assigned to and assumed
by Shareholder or an entity designated by Shareholder. The number
of shares to be issued by Macatawa to Shareholder pursuant to
Section 2.1(b)(i) of this Agreement shall be reduced by the number
of shares, rounded to the nearest whole number, resulting from the
division of (a) the amount of all Liabilities of Company existing
as of the Effective Time, if any, that are assumed by or continue
to be Liabilities of the Surviving Corporation by operation of law
or the terms of this Agreement, by (b) the September 2006 Average
Closing Price ($23.0035).
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK
2.1
Effect on Capital
Stock .
(a)
Macatawa . At the Effective Time, by virtue of the Merger,
and without any action by Macatawa, Company, Shareholder or
Surviving Corporation, each share of the outstanding capital stock
of Macatawa shall remain in effect as the issued and outstanding
capital stock of Surviving Corporation.
(b)
Company . At the Effective Time, by virtue of the Merger,
and without any action by Macatawa, Company, Shareholder or
Surviving Corporation, the Company Stock shall be cancelled and
converted into the right for Shareholder to receive the following
merger consideration (collectively, the “Merger
Consideration”):
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(i)
Subject to the adjustment provided in Section 1.10 of this
Agreement, one hundred thirty-six thousand nine hundred thirty-six
(136,936) shares of unregistered common stock of Macatawa, which
represents the number, rounded to the nearest whole number, of
shares of common stock of Macatawa resulting from the division of
Three Million One Hundred Fifty Thousand Dollars ($3,150,000) by
Twenty-three and 35/10,000 Dollars ($23.0035), which represents the
average closing price per share, rounded to the fourth decimal
place, of the registered common stock of Macatawa as reported on
The Nasdaq Global Market (the “NASDAQ”) for the days on
which the NASDAQ was open for at least one-half (1/2) of its normal
business hours during the month of September, 2006 (the
“September 2006 Average Closing Price”), to be issued
by Macatawa within thirty (30) days after the Closing;
(ii)
If the gross investment adviser income of Macatawa from (A) the
transferred investment advisor account balances of clients of
Company who are a party to an Investment Adviser Contract (as
defined below) as of the Closing Date, (B) principal additions to
such transferred investment advisor account balances generated by
Shareholder, and (C) balances of new investment adviser accounts
generated by Shareholder (collectively, the “Earn Out Account
Balances”), for the year ended December 31, 2007 (the
“2007 Investment Adviser Income”) is greater than or
equal to One Million Six Hundred Thousand Dollars ($1,600,000),
then thirteen thousand forty-one (13,041) shares of unregistered
common stock of Macatawa,which represents the number, rounded to
the nearest whole number, of shares of common stock of Macatawa
resulting from the division of Three Hundred Thousand Dollars
($300,000) by the September 2006 Average Closing Price, will be
issued by Macatawa to Mr. Smith by March 31, 2008; and
(iii)
If the gross investment adviser income of Macatawa from the Earn
Out Account Balances for the year ended December 31, 2008 (the
“2008 Investment Adviser Income”) is greater than or
equal to One Million Seven Hundred Thousand Dollars ($1,700,000),
then thirteen thousand forty-one (13,041) shares of unregistered
common stock of Macatawa,which represents the number, rounded to
the nearest whole number, of shares of common stock of Macatawa
resulting from the division of Three Hundred Thousand Dollars
($300,000) by the September 2006 Average Closing Price, will be
issued by Macatawa to Mr. Smith by March 31, 2009.
Earn Out Account Balances will
not include any revenue received by Macatawa for services rendered
to Smith & Associates Florida Fund LLC or the banks in which it
invests and will not include revenue from services provided to the
Smith & Associates Financial Fund, LLC.
Shareholder acknowledges and
agrees that all shares of unregistered common stock of Macatawa
issued to him pursuant to this Section 2.1 (collectively, the
“Macatawa Shares”) are restricted, subject to Rule 144
of the Securities Act of 1933, have not been registered under the
Securities Act, and will bear a legend evidencing such
restrictions.
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2.2
Determination of Earn
Out Amounts . Not later than thirty (30) days
following December 31, 2007 and December 31, 2008, Macatawa shall
determine the amounts of the 2007 Investment Adviser Income and the
2008 Investment Adviser Income, respectively, and deliver its
determination to Shareholder. Shareholder shall have thirty (30)
days from his receipt of a determination to notify Macatawa of any
dispute with such determination and the basis therefore (the
“Earn Out Dispute Notice”). If Macatawa has not
received an Earn Out Dispute Notice within the thirty (30) day time
period, Shareholder shall be deemed to have accepted the
determination of Macatawa. If, on the other hand, Macatawa has
received an Earn Out Dispute Notice within the required thirty (30)
day period, then Macatawa and Shareholder shall mutually agree upon
an independent accounting firm to resolve the dispute to determine
the 2007 Investment Adviser Income or the 2008 Investment Adviser
Income, as applicable. The cost of the independent accounting firm
shall be borne by the party (either Macatawa or Shareholder) whose
determination of the 2007 Investment Adviser Income or the 2008
Investment Adviser Income, as applicable, was furthest from the
determination of the independent accounting firm, or equally by
Macatawa and Shareholder in the event the determination by the
independent accounting firm is equidistant between the
determinations of the parties.
2.3
Noncompetition
Agreement . Upon the execution of this
Agreement, Macatawa shall execute and deliver to Company and
Shareholder shall execute and deliver a six (6) year Noncompetition
Agreement, in the form attached hereto as Exhibit A
.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Except
as set forth in the disclosure schedule delivered by Company and
Shareholder to Macatawa on the date hereof (the “Disclosure
Schedule”), Shareholder represents and warrants to Macatawa,
as of the Signing Date and as of the Closing Date, as an inducement
for Macatawa to enter into this Agreement, which representations
and warranties shall survive the Merger, as follows:
3.1
Organization .
Company is a corporation duly organized and validly
existing under the laws of the state of Michigan, with full power
and authority to carry on its business as now conducted and to own
and operate its assets, properties and business. Company is duly
qualified and in good standing as a foreign corporation, and is
authorized to do business, in the jurisdictions set forth in
Section 3.1 of the Disclosure Schedule, and such
jurisdictions are the only jurisdictions in which such
qualification or authorization is required as a result of the
business of Company, and there has not been any claim by any other
jurisdiction to the effect that Company is required to qualify or
otherwise be authorized to do business therein.
3.2
Corporate Documents
. A copy of Company’s Articles of
Incorporation, as amended (certified by the Secretary of State of
Michigan) and Bylaws (certified by Company’s Secretary), both
as in effect on the date hereof, are attached to Section 3.2
of the Disclosure Schedule, and such copies are complete and
correct, and since the respective dates of such certifications
there has not been any amendment to such documents. Company is not
(and has not in the past been) in breach of its Articles of
Incorporation or Bylaws. All of the minute books of Company have
been delivered to Macatawa, and such books contain complete and
accurate records of all meetings of Company’s shareholders,
board of directors and any committees thereof, and accurately
reflect all transactions referred to in such minutes and all
material business conducted at such meetings.
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3.3
Capitalization .
The total authorized capital stock of Company consists
of five hundred (500) shares of common stock, of which one hundred
twenty-five (125) shares are issued and outstanding. The Company
Stock constitutes all of the issued and outstanding shares of
Company’s common stock and is owned by Shareholder, free and
clear of any and all Liens (as defined below). Company has no other
securities of any kind outstanding. Without limitation to the
foregoing, there are not outstanding any options, warrants or other
rights to acquire any securities of Company. Company has no plan,
agreement or other obligation to issue any stock options, warrants
or other rights to purchase or acquire any securities of Company.
The Common Stock is duly authorized, validly issued, fully paid and
nonassessable, and was issued in compliance with all applicable
federal and state laws. For purposes of this Agreement the term
“Lien” shall mean any lien (statutory or otherwise),
security interest, charge, restriction, mortgage, easement, deed of
trust, loan, priority, pledge, charge, conditional sale, title
retention agreement, financing lease, other encumbrance of any kind
or any other similar right, or any agreement to give any of the
foregoing.
3.4
Subsidiaries .
Company does not own or control, directly or
indirectly, any securities of or interest in any other corporation,
limited liability company, partnership, association or other
entity. Company is not a participant in any joint venture or
partnership.
3.5
Enforceable
Agreement . The execution, delivery and
performance of this Agreement by Company and Shareholder each have
been duly authorized by all necessary actions and proceedings, and
Company and Shareholder each have full power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Agreement constitutes the
valid and binding obligation of Company and Shareholder, and is
enforceable against Company and Shareholder in accordance with its
terms.
3.6
No Breach .
Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(a) violate any provision of the Articles of Incorporation, as
amended, or Bylaws or other organizational documents of Company;
(b) violate, conflict with, or result in a breach or default under
or termination of (or otherwise give any other contracting party
the right to terminate) any Contract (as defined below) to which
Company or Shareholder is a party or by which Company or any of its
properties or assets may be bound; (c) result in the creation of
any Lien upon the properties or assets of Company; or (d) violate
any applicable law, rule, regulation, ruling, order, judgment,
injunction, award, decree, ordinance or requirement of any
governmental entity or agency which is binding upon Shareholder or
upon Company or its business or assets (“Laws”). No
consents, approvals, waivers or other actions by any third parties,
including, without limitation, any governmental entity or agency,
are necessary in connection with the execution of this Agreement or
the consummation of the transactions contemplated by this
Agreement.
3.7
Contracts .
Section 3.7 of the Disclosure Schedule is a
complete and accurate list of all Contracts to which Company is a
party. Other than its 401(k) plan and its health insurance plan,
the Company is not a party to (in its own name or as successor in
interest to any predecessor) or bound by any written or oral: (a)
Employment, management, consulting, independent contractor or
similar Contract; (b) bonus, pension, profit-sharing, retirement,
stock purchase, phantom stock, hospitalization, insurance or
deferred compensation Contract or other Contract providing for
employee benefits; (c) Contract with respect to the lease of
property, whether real, personal or mixed, whether as lessor or
lessee; (d) Contract for the future purchase or disposition of
material, assets, equipment or services; (e) Contract evidencing or
relating to any indebtedness or creating any Lien on any assets or
properties of Company; (f) Contract with respect to any Proprietary
Right (as defined below); (g) Contract not to compete in any line
of business or in any geographic area or otherwise restricting
Company’s ability to complete or engage in any type of
business or other activity; (h) Contract relating to the
acquisition of any business or assets or relating to the sale or
disposition of any business or any assets ; and (i) Any other
material Contract or any Contract not made in the ordinary course
of Company’s business or not consistent with Company’s
past practices.
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True,
correct and complete copies of all agreements, contracts, plans,
leases, licenses, mortgages, options, arrangements, instruments and
commitments (“Contracts”) listed in Section 3.7
of the Disclosure Schedule have been delivered to Macatawa. All
Contracts to which Company is a party are valid and binding
agreements of Company and the other parties thereto and are in full
force and effect. Neither Company nor any other party thereto is in
default or breach under any terms of any such Contract and no act
or omission on the part of Company (or, to Shareholder’s
Knowledge, on the part of any other party thereto) has occurred
which, with the notice or lapse of time, or both, would constitute
a default or breach under the terms of any such
Contract.
3.8
Financial Statements
.
(a)
Company has delivered to Macatawa its financial statements for the
years ended December 31, 2004 and 2005, and interim financial
statements for the period beginning January 1, 2006 and ended
August 31, 2006, including all related notes and schedules thereto
(“Financial Statements”). The Financial Statements in
all material respects (i) are complete, accurate and not
misleading, (ii) accurately and fairly present the financial
position, results of operation and chang
