EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 25,
2004
BETWEEN
FIRST NATIONAL LINCOLN CORPORATION
AND
FNB BANKSHARES
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AGREEMENT AND PLAN OF MERGER, dated as of
August 25, 2004 (this "Agreement"),
between FIRST NATIONAL LINCOLN CORPORATION
("Parent") and FNB BANKSHARES (the
"Company").
RECITALS
A. The Company. The Company is a Maine
corporation, having its
principal place of business in Bar Harbor,
Maine
B. Parent. Parent is a Maine
corporation, having its principal place
of business in Damariscotta, Maine.
C. Intention of the
Parties.
It is the intention of the parties to
this Agreement that the Merger provided for
herein be treated as a
"reorganization" under Section 368(a) of
the Internal Revenue Code of 1986, as
amended (the "Code").
D. Board Action.
The
respective Boards of Directors of each of
Parent and the Company have determined that
it is in the best interests of
their respective companies and their
shareholders to consummate the Merger
provided for herein.
E. Shareholder
Agreements. As a
material inducement to Parent to enter
into this Agreement, and simultaneously
with, the execution of this Agreement,
each director who is also an officer of the
Company, namely Messrs. McKim,
Rosborough and Parady, is entering into an
agreement, in the form of Annex A
hereto (collectively, the "Shareholder
Agreements") pursuant to which he has
agreed, among other things, to vote his
shares of Company Stock (as defined
herein) in favor of this Agreement.
NOW, THEREFORE,
in consideration of the premises and of the mutual
covenants, representations, warranties and
agreements contained herein the
parties agree as follows:
Page 1
ARTICLE I
CERTAIN DEFINITIONS
1.01.
Certain
Definitions. The following terms
are used in this
Agreement with the meanings set forth
below:
"Acquisition
Proposal" has the meaning set forth in Section 6.08.
"Acquisition
Agreement" has the meaning set forth in Section 8.01(g).
"Additional
Director" has the meaning set forth in Section 6.15.
"Agreement"
means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.
"Articles of
Merger" has the meaning set forth in Section 2.02(a).
"Average Share
Price" has the meaning set forth in Section 3.01(b)(2).
"Bank Insurance
Fund" means the Bank Insurance Fund maintained by the
FDIC.
"Bank Merger
Agreement" has the meaning set forth in Section 6.13.
"Bank Merger"
has the meaning set forth in Section 6.13.
"Bank Secrecy
Act" means the Bank Secrecy Act of 1970, as amended.
"Benefit Plans"
has the meaning set forth in Section 5.03(m)(i).
"Business Day"
means Monday through Friday of each week, except a legal
holiday recognized as such by the U.S.
Government or any day on which banking
institutions in the State of Maine
are authorized or
obligated to close.
"Certificate"
means any certificate which immediately prior to the
Effective Time represented shares of
Company Common Stock.
"Closing" and
"Closing Date" have the meanings set forth in Section
2.02(b).
"Code" has the
meaning set forth in the recitals to this Agreement.
"Community
Reinvestment Act" means the Community Reinvestment Act of 1977,
as amended.
"Company" has
the meaning set forth in the preamble to this Agreement.
"Company
Affiliates" has the meaning set forth in Section 6.07.
"Company
Articles" means the Articles of Incorporation of the Company,
as
amended.
"Company Bank"
means First National Bank of Bar Harbor, a national banking
association.
"Company Board"
means the Board of Directors of the Company.
"Company Bylaws"
means the Bylaws of the Company, as amended.
"Company Common
Stock" means the common stock of the Company.
"Company ESOP" means the Company's Employee Stock Ownership Plan,
as
amended.
"Company 401(k)
Plan" means the First National Bank of Bar Harbor 401(k)
Savings Plan.
"Company Group"
means any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the
limitations contained in Section
1504(b) of the Code) that includes the
Company and its Subsidiaries or any
predecessor of or any successor to the
Company (or to another such predecessor
or successor).
"Company
Intellectual Property" has the meaning set forth in Section
5.03(u).
"Company Loan
Property" has the meaning set forth in Section 5.03(o)(i).
"Company
Meeting" has the meaning set forth in Section 6.02.
"Company Preferred Stock means the Serial Preferred Stock of
the
Company.
"Company Stock"
means, collectively, the Company Common Stock and the
Company Preferred Stock.
"Company
Options" means the options to acquire Company Common Stock.
"Company
Regulatory Authorities" has the meaning set forth in Section
5.03(i).
Page 2
"Company Stock
Option Plan" means the Company's Stock Option Plan dated
July 31, 2001.
"Derivatives
Contract" has the meaning set forth in Section 5.03(r).
"Disclosure
Schedule" has the meaning set forth in Section 5.01.
"Dissenting
Shares" has the meaning set forth in Section 3.05.
"D&O Insurance" has the meaning set forth in Section 6.11
(c).
"D&O Tail Coverage" has the meaning set forth in Section
6.11(c).
"ECA
Agreements" has the meaning set forth in Section 6.12(b).
"Effective Date"
has the meaning set forth in Section 2.02(a).
"Effective Time"
has the meaning set forth in Section 2.02(a).
"Employees" has
the meaning set forth in Section 5.03(m).
"Environmental
Laws" has the meaning set forth in Section 5.03(o).
"Equal Credit
Opportunity Act" means the Equal Credit Opportunity Act, as
amended.
"Equity
Investment" means (i) an Equity Security; and (ii) an ownership
interest in any company or other entity,
any membership interest that includes
a voting right in any company or other
entity, any interest in real estate; and
any investment or transaction which in
substance falls into any of these
categories even though it may be structured
as some other form of investment or
transaction.
"Equity
Security" means any stock (other than adjustable-rate preferred
stock, money market (auction rate)
preferred stock or other instrument
determined by the OCC to have the character
of debt securities), certificate of
interest or participation in any
profit-sharing agreement, collateral-trust
certificate, preorganization certificate or
subscription, transferable share,
investment contract, or voting-trust
certificate; any security convertible into
such a security; any security carrying any
warrant or right to subscribe to or
purchase any such security; and any
certificate of interest or participation
in, temporary or interim certificate for,
or receipt for any of the foregoing.
"ERISA" means
the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA
Affiliate" has the meaning set forth in Section 5.03(m)(iii).
"Exchange Act"
means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent"
has the meaning set forth in Section 3.02(a).
"Exchange Ratio"
has the meaning set forth in Section 3.01(b)(1), subject
to adjustment pursuant to Section 3.06.
"Fair Housing
Act" means the Fair Housing Act, as amended.
"FDIC" means the
Federal Deposit Insurance Corporation.
"Federal Reserve
Act" means the Federal Reserve Act, as amended.
"Federal Reserve
Board" means the Board of Governors of the Federal
Reserve System.
"GAAP" means
accounting principles generally accepted in the United States
of America.
"Governmental
Authority" means any federal, state or local court,
administrative agency or commission or
other governmental authority or
instrumentality.
"Hazardous
Substance" has the meaning set forth in Section 5.03(o).
"Indemnified
Parties" and "Indemnifying Party" have the meanings set forth
in Section 6.11(a).
"Insurance
Policies" has the meaning set forth in Section 5.03(x).
"IRS" means the
Internal Revenue Service.
"Leases" has the
meaning set forth in Section 5.03(t)
"Liens" means
any charge, mortgage, pledge, security interest,
restriction, claim, lien or
encumbrance.
"Loans" has the
meaning set forth in Section 4.01(r).
Page 3
"Maine
Superintendent" means the Superintendent of the Bureau of
Banking
of the State of Maine.
"Material
Adverse Effect" means, with respect to Parent or the Company
any
effect that (i) is material and adverse to
the financial position, results of
operations or business of Parent and its
Subsidiaries taken as a whole or the
Company and its Subsidiaries taken as a
whole, as the case may be, or (ii)
would materially impair the ability of any
of Parent and its Subsidiaries or
the Company and its Subsidiaries to perform
their respective obligations under
this Agreement or the Bank Merger Agreement
or otherwise materially impede the
consummation of the Transactions; provided,
however, that Material Adverse
Effect shall not be deemed to include the
impact of (a) changes in banking,
corporate or tax laws or regulations of
general applicability or
interpretations thereof by Governmental
Authorities, (b) changes in GAAP or
regulatory accounting requirements
applicable to banks or bank holding
companies generally, (c) changes in
interest rates or general economic
conditions affecting banks and their
holding companies generally, (d) any
modifications or changes to valuation
policies and practices, or expenses
incurred, in connection with the
Transactions or restructuring charges taken in
connection with the Transactions, in each
case in accordance with GAAP, and (e)
with respect to the Company, the effects of
any action or omission taken with
the prior consent of Parent or as otherwise
contemplated by the Agreement.
"Material
Contracts" has the meaning set forth in Section 5.03(k)(i).
"MBCA" means the
Maine Business Corporation Act, as amended.
"Merger" has the
meaning set forth in Section 2.01(a).
"Merger
Consideration" means the number of whole shares of Parent
Common
Stock, plus cash in lieu of any fractional
share interest, into which shares of
Company Common Stock shall be converted
pursuant to the provisions of Article
III.
"Nasdaq" means
The Nasdaq Stock Market, Inc.'s NASDAQ National Market or
such national securities exchange on which
the Parent Common Stock may be
listed.
"National Labor
Relations Act" means the National Labor Relations Act, as
amended.
"OCC" means the
Office of the Comptroller of the Currency.
"Option Cash-Out
Amount" means, for each Company Option a cash amount
equal to the difference between (x) the
exercise price applicable to such
Company Option and (y) $42.00; provided,
however, that if the Average Share
Price is less than $17.00, "(y)" shall
equal the product of the Exchange Ratio
and the Average Share Price.
"OREO" means
other real estate owned.
"Parent" has the
meaning set forth in the preamble to this Agreement.
"Parent
Articles" means the Articles of Incorporation of Parent, as
amended.
"Parent Bank" means The First National Bank
of Damariscotta and any successor
thereto.
"Parent Benefits
Plans" has the meaning set forth in Section 6.12(a).
"Parent Board"
means the Board of Directors of Parent.
"Parent Bylaws"
means the Bylaws of Parent, as amended.
"Parent Common
Stock" means the common stock of Parent.
"Parent
Regulatory Authorities" has the meaning set forth in Section
5.04(k).
"Pension Plan"
has the meaning set forth in Section 5.03(m)(ii).
"Person" means
any individual, bank, corporation, partnership,
association, joint-stock company, business
trust, limited liability company or
unincorporated organization.
Page 4
"Previously
Disclosed" by a party shall mean information set forth in a
section of its Disclosure Schedule
corresponding to the section of this
Agreement where such term is used.
"Proxy
Statement" has the meaning set forth in Section 6.03(a).
"Registration
Statement" has the meaning set forth in Section 6.03(a).
"Rights" means,
with respect to any Person, warrants, options, rights,
convertible securities and other
arrangements or commitments which obligate the
Person to issue or dispose of any of its
capital stock or other ownership
interests.
"Rollover
Option" means the Company Options described in Exhibit 3.08
that
are to be converted into options for Parent
Common Stock pursuant to Section
3.08.
"SEC" means the
Securities and Exchange Commission.
"SEC Documents"
has the meaning set forth in Section 5.04(g).
"Securities Act"
means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Shareholder
Agreements" has the meaning set forth in the recitals to this
Agreement.
"Subsidiary" and
"Significant Subsidiary" have the meanings ascribed to
those terms in Rule 1-02 of Regulation S-X
of the SEC.
"Superior
Proposal" has the meaning set forth in Section 6.08.
"Surviving
Corporation" has the meaning set forth in Section 2.01(a).
"Tax" and
"Taxes" mean all federal, state, local or foreign income, gross
income, gains, gross receipts, sales, use,
ad valorem, goods and services,
capital, production, transfer, franchise,
windfall profits, license,
withholding, payroll, employment,
disability, employer health, excise,
estimated, severance, stamp, occupation,
property, environmental, custom
duties, unemployment or other taxes of any
kind whatsoever, together with any
interest, additions or penalties thereto
and any interest in respect of such
interest and penalties.
"Tax Returns"
means any return, declaration or other report (including
elections, declarations, schedules,
estimates and information returns) with
respect to any Taxes.
"Termination Fee" has the meaning set forth in Section 8.02(b).
"Transactions"
means the Merger and the Bank Merger and any other
transaction contemplated by this
Agreement.
Page 5
ARTICLE II
THE MERGER
2.01.
The
Merger.
(a) The Merger.
Subject to
the terms and conditions of this
Agreement, at the Effective Time, the
Company shall merge with and into Parent
in accordance with the applicable
provisions of the MBCA (the "Merger"), and
the separate corporate existence of the
Company shall cease and Parent shall
survive and continue to exist as a
corporation incorporated under the MBCA
(Parent, as the surviving corporation in
the Merger, sometimes being referred
to herein as the "Surviving
Corporation").
(b) Name. The name of the
Surviving Corporation shall be "First
National Lincoln Corporation."
(c) Articles and Bylaws.
The
Articles of Incorporation and Bylaws of
Parent immediately after the Merger shall
be the Parent Articles and the Parent
Bylaws as in effect immediately prior to
the Merger.
(d) Directors and Officers
of the Surviving Corporation. The
directors and officers of Parent
immediately after the Merger shall be the
directors and officers of Parent
immediately prior to the Merger, and the
individuals appointed as directors as
provided in Section 6.15, until such time
as their successors shall be duly elected
and qualified.
(e) Authorized Capital
Stock. The
authorized capital stock of the
Surviving Corporation upon consummation of
the Merger shall be as set forth in
the Parent Articles immediately prior to
the Merger.
(f) Effect of the Merger.
At the
Effective Time, the effect of the
Merger shall be as provided in Section 1106
of the MBCA. Without limiting the
generality of the foregoing, and subject
thereto, at the Effective Time, all
the property, rights, privileges, powers
and franchises of the Company shall
vest in the Surviving Corporation, and all
debts, liabilities, obligations,
restrictions, disabilities and duties of
the Company shall become the debts,
liabilities, obligations, restrictions,
disabilities and duties of the
Surviving Corporation.
(g) Additional Actions.
If, at any
time after the Effective Time,
the Surviving Corporation shall consider
that any further assignments or
assurances in law or any other acts are
necessary or desirable to (i) vest,
perfect or confirm, of record or otherwise,
in the Surviving Corporation its
right, title or interest in, to or under
any of the rights, properties or
assets of the Company acquired or to be
acquired by the Surviving Corporation
as a result of, or in connection with, the
Merger, or (ii) otherwise carry out
the purposes of this Agreement, the
Company, and its proper officers and
directors, shall be deemed to have granted
to the Surviving Corporation an
irrevocable power of attorney to execute
and deliver all such proper deeds,
assignments and assurances in law and to do
all acts necessary or proper to
vest, perfect or confirm title to and
possession of such rights, properties or
assets in the Surviving Corporation and
otherwise to carry out the purposes of
this Agreement, and the proper officers and
directors of the Surviving
Corporation are fully authorized in the
name of the Surviving Corporation or
otherwise to take any and all such
action.
2.02
Effective
Date and Effective Time; Closing.
(a) Subject to the satisfaction or
waiver of the conditions set forth in
Article VII (other than those conditions
that by their nature are to be
satisfied at the consummation of the
Merger, but subject to the fulfillment or
waiver of those conditions), the parties
shall cause Articles of Merger
relating to the Merger (the "Articles of
Merger") to be filed with the
Secretary of State of the State of Maine
pursuant to the MBCA on (i) a date
selected by Parent after such satisfaction
or waiver which is no later than the
later of (A) five Business Days after such
satisfaction or waiver or (B) the
Page 6
first month end following such satisfaction
or waiver, or (ii) such other date
to which the parties may mutually agree in
writing. The Merger provided for
herein shall become effective upon such
filings or on such date as may be
specified therein. The date of such filings
or such later effective date is
herein called the "Effective Date." The
"Effective Time" of the Merger shall be
the time of such filings or as set forth in
such filings.
(b) A closing (the "Closing") shall
take place immediately prior to the
Effective Time at 10:00 a.m., local time,
at the offices of Pierce Atwood LLP
in Portland, Maine, or at such other place,
at such other time, or on such
other date as the parties may mutually
agree upon (such date, the "Closing
Date"). At the Closing, there shall be
delivered to Parent and the Company the
opinions, certificates and other documents
required to be delivered under
Article VII hereof.
Page 7
ARTICLE III
CONSIDERATION; ELECTION AND EXCHANGE
PROCEDURES
3.01.
Conversion
of Shares.
At the Effective Time, by virtue of the
Merger and without any action on the part
of a holder of shares of Company
Common Stock:
(a) Each share of Parent Common Stock
that is issued and outstanding
immediately prior to the Effective Time
shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) (1) Subject to Sections 3.04, 3.05
and 3.06, each share of Company
Common Stock issued and outstanding
immediately prior to the Effective Time
shall be converted into, and shall be
canceled in exchange for, the right to
receive, the number of shares of Parent
Common Stock which is equal to the
quotient (the "Exchange Ratio") determined
by dividing (x) $42.00 by (y) the
Average Share Price of the Parent Common
Stock ; provided, however, that the
Exchange Ratio shall be not more than 2.47
and not less than 1.91.
(2) For purposes of this Agreement,
the "Average Share Price" of the
Parent Common Stock shall mean the sum of
the average of the high and low sales
price of a share of Parent Common Stock,
for each trading day for which a high
and low sales price is reported on Nasdaq
(as reported by an authoritative
source), during the 30 day period ending
with the fifth Business Day
immediately preceding the Effective Date,
divided by the number of trading days
for which a high and low price is so
reported during such period.
3.02.
Exchange
Procedures.
(a) Parent shall designate an exchange
agent to act as agent (the
"Exchange Agent") for purposes of
conducting the exchange procedure described
in Section 3.01. At the Effective Time, for the
benefit of the holders of
Certificates, Parent shall deliver to the
Exchange Agent one or more
certificates evidencing the aggregate
number of shares of Parent Common Stock
issuable. The Exchange Agent shall not be
entitled to vote or exercise any
rights of ownership with respect to the
shares of Parent Common Stock held by
it from time to time hereunder, except that
it shall receive and hold all
dividends or other distributions paid or
distributed with respect to such
shares for the account of the persons
entitled thereto.
(b) Each holder of an outstanding
Certificate or Certificates who has
surrendered such Certificate or
Certificates to the Exchange Agent will, upon
acceptance thereof by the Exchange Agent,
be entitled to a certificate or
certificates representing the number of
whole shares of Parent Common Stock and
cash in respect of any fractional shares as
provided in Section 3.04, into
which the aggregate number of shares of
Company Common Stock previously
represented by such Certificate or
Certificates surrendered shall have been
converted pursuant to this Agreement and
any other distribution theretofore
paid with respect to Parent Common Stock
issuable in the Merger, in each case
without interest. The Exchange Agent shall
accept such Certificates upon
compliance with such reasonable terms and
conditions as the Exchange Agent may
impose to effect an orderly exchange
thereof in accordance with normal exchange
practices. Each outstanding Certificate
which prior to the Effective Time
represented Company Common Stock and which
is not surrendered to the Exchange
Agent in accordance with the procedures
provided for herein shall, except as
otherwise herein provided, until duly
surrendered to the Exchange Agent be
deemed to evidence ownership of the number
of shares of Parent Common Stock
into which such Company Common Stock shall
have been converted or the right to
receive cash in respect of any fractional
shares as provided in Section 3.04.
After the Effective Time, there shall be no
further transfer on the records of
the Company of Certificates representing
shares of Company Common Stock and if
such Certificates are presented to the
Company for transfer, they shall be
cancelled against delivery of certificates
for Parent Common Stock or cash as
Page 8
herein above provided. No dividends which
have been declared will be remitted
to any person entitled to receive shares of
Parent Common Stock under Section
3.01 until such person surrenders the
Certificate or Certificates representing
Company Common Stock, at which time such
dividends shall be remitted to such
person, without interest.
(c) The Exchange Agent and Parent, as
the case may be, shall not be
obligated to deliver a certificate or
certificates representing shares of
Parent Common Stock to which a holder of
Company Common Stock would otherwise
be entitled as a result of the Merger or
cash in respect of any fractional
shares as provided in Section 3.04 until
such holder surrenders the Certificate
or Certificates representing the shares of
Company Common Stock for exchange as
provided in this Section 3.02, or, in
default thereof, an appropriate affidavit
of loss and indemnity agreement and/or a
bond in an amount as may be reasonably
required in each case by Parent. If any
certificates evidencing shares of
Parent Common Stock are to be issued in a
name other than that in which the
Certificate evidencing Company Common Stock
surrendered in exchange therefor is
registered, it shall be a condition of the
issuance thereof that the
Certificate so surrendered shall be
properly endorsed or accompanied by an
executed form of assignment separate from
the Certificate and otherwise in
proper form for transfer and that the
person requesting such exchange pay to
the Exchange Agent any transfer or other
tax required by reason of the issuance
of a certificate for shares of Parent
Common Stock in any name other than that
of the registered holder of the Certificate
surrendered or otherwise establish
to the satisfaction of the Exchange Agent
that such tax has been paid or is not
payable.
(d) Any portion of the shares of
Parent Common Stock and cash delivered
to the Exchange Agent by Parent pursuant to
Section 3.02(a) that remains
unclaimed by the shareholders of the
Company for six months after the Effective
Time (as well as any proceeds from any
investment thereof) shall be delivered
by the Exchange Agent to Parent. Any
shareholders of Company who have not
theretofore complied with Section 3.02(b)
shall thereafter look only to Parent
for the consideration deliverable in
respect of each share
of Company Common
Stock such shareholder holds as determined
pursuant to this Agreement without
any interest thereon. Neither the Exchange Agent nor any
party to this
Agreement shall be liable to any holder of
stock represented by any Certificate
for any consideration paid to a public
official pursuant to applicable
abandoned property, escheat or similar
laws. Parent and the Exchange Agent
shall be entitled to rely upon the stock
transfer books of the Company to
establish the identity of those persons
entitled to receive the consideration
specified in this Agreement, which books
shall be conclusive with respect
thereto. In the event of a dispute with
respect to ownership of stock
represented by any Certificate, Parent and
the Exchange Agent shall be entitled
to deposit any consideration represented
thereby in escrow with an independent
third party and thereafter be relieved with
respect to any claims thereto.
(e) Notwithstanding anything in this
Agreement to the contrary,
Certificates surrendered for exchange by
any Company Affiliate shall not be
exchanged for certificates representing
shares of Parent Common Stock to which
such Company Affiliate may be entitled
pursuant to the terms of this Agreement
until Parent has received a written
agreement from such person as specified in
Section 6.07.
3.03.
Rights as
Shareholders; Stock Transfers. At the Effective
Time, holders of Company Stock shall cease
to be, and shall have no rights as,
shareholders of the Company other than to
receive the consideration provided
under this Article III. After the Effective
Time, there shall be no transfers
on the stock transfer books of the Company
or the Surviving Corporation of
shares of Company Stock.
Page 9
3.04.
No
Fractional Shares. Notwithstanding any
other provision of
this Agreement, neither certificates nor
scrip for fractional shares of Parent
Common Stock shall be issued in the Merger.
Each holder of Company Common Stock
who otherwise would have been entitled to a
fraction of a share of Parent
Common Stock (after taking into account all
Certificates delivered by such
holder) shall receive in lieu thereof cash
(without interest) in an amount
determined by multiplying the fractional
share interest to which such holder
would otherwise be entitled by the Average
Share Price, rounded to the nearest
whole cent. No such holder shall be
entitled to dividends, voting rights or any
other rights in respect of any fractional
share.
3.05.
Dissenting
Shares.
Notwithstanding Section 3.02 above, each
outstanding share of Company Common Stock
the holder of which has perfected
his, her or its right to dissent under the
MBCA and has not effectively
withdrawn or lost such right as of the
Effective Time (the "Dissenting Shares")
shall not be converted into or represent a
right to receive shares of Parent
Common Stock hereunder, and the holder
thereof shall be entitled only to such
rights as are granted by the MBCA. The
Company shall give Parent prompt notice
upon receipt by the Company of any such
written demands for payment of the fair
value of such shares of Company Common
Stock and of withdrawals of such demands
and any other instruments provided pursuant
to the MBCA. If any holder of
Dissenting Shares shall fail to perfect or
shall have effectively withdrawn or
lost the right to dissent at or prior to
the Effective Time, the Dissenting
Shares held by such holder shall be
converted into a right to receive Parent
Common Stock and cash in respect of any
fractional shares as provided in
Section 3.04 in accordance with the
applicable provisions of this Agreement.
If any holder of Dissenting Shares shall
have effectively withdrawn or lost the
right to dissent (through failure to
perfect or otherwise) after the Effective
Time, the Dissenting Shares held by such
holder shall be converted into the
right to receive Parent Common Stock and
cash in respect of any fractional
shares in accordance with the applicable
provisions of this Agreement as Parent
or the Exchange Agent shall determine. Any
payments made in respect of
Dissenting Shares shall be made by the
Surviving Corporation.
3.06.
Anti-Dilution Provisions. If, between the date
hereof and the
Effective Time, the shares of Parent Common
Stock shall be changed into a
different number or class of shares by
reason of any reclassification,
recapitalization, split-up, combination,
exchange of shares or readjustment, or
a stock dividend thereon shall be declared
with a record date within said
period, the Exchange Ratio shall be
adjusted accordingly.
3.07.
Withholding Rights. Parent (through the
Exchange Agent, if
applicable) shall be entitled to deduct and
withhold from any amounts otherwise
payable pursuant to this Agreement to any
holder of shares of Company Common
Stock or Company Options such amounts as
Parent is required under the Code or
any state, local or foreign tax law or
regulation thereunder to deduct and
withhold with respect to the making of such
payment. Any amounts so withheld
shall be treated for all purposes of this
Agreement as having been paid to the
holder of Company Common Stock or Company
Options in respect of which such
deduction and withholding was made by
Parent.
3.08.
Company
Options.
(a) At the Effective Time, each
Company Option (other than a Rollover
Option) which is then outstanding, whether
or not exercisable, shall become
fully vested and exercisable, and shall
cease to represent a right to acquire
shares of Company Common Stock.
All such Company
Options (other than Rollover
Options) shall, at the Effective Time, be
converted automatically into the
right to receive the Option Cash-Out
Amount. Each Rollover
Option shall be
converted automatically into an option to
purchase shares of Parent Common
Stock, and Parent shall assume each such
Rollover Option, in accordance with
Page 10
the terms of the Company Stock Option Plan
and stock option or other agreement
by which it is evidenced, except that from
and after the Effective Time, (i)
Parent and the Options Committee of its
Board of Directors shall be substituted
for the Company and its Board of Directors
(which administers the Company Stock
Option Plan), (ii) each Rollover Option
assumed by Parent may be exercised
solely for shares of Parent Common Stock,
(iii) the number of shares of Parent
Common Stock subject to such Rollover
Option shall be equal to the number of
shares of Company Common Stock subject to
such Rollover Option immediately
prior to the Effective Time multiplied by
the Exchange Ratio, provided that any
fractional shares of Parent Common Stock
resulting from such multiplication
shall be rounded down to the nearest share,
and (iv) the per share exercise
price under each such Rollover Option shall
be adjusted by dividing the per
share exercise price under each such
Rollover Option by the Exchange Ratio,
provided that such exercise price shall be
rounded up to the nearest cent.
Parent and the Company agree to take all
necessary steps to effect the
foregoing provisions of this Section
3.08(a) and Section 3.07.
(b) Within five Business Days after
the Effective Time, Parent shall file
a registration statement on Form S-8 (or
any successor or other appropriate
forms), with respect to the shares of
Parent Common Stock subject to the
options referred to in paragraph (a) of
this Section 3.08 and shall use its
reasonable efforts to maintain the current
status of the prospectus or
prospectuses contained therein for so long
as such options remain outstanding.
Page 11
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01.
Forbearances of the Company. From the date hereof
until the
Effective Time, except as expressly
contemplated or permitted by this Agreement
or as Previously Disclosed, without the
prior written consent of Parent, the
Company will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course.
Conduct
its business other than in the ordinary
and usual course consistent with past
practice or fail to use reasonable best
efforts to preserve its business
organization, keep available the present
services of its employees and preserve for
itself and Parent the goodwill of
the customers of the Company and its
Subsidiaries and others with whom business
relations exist.
(b) Capital Stock.
Issue,
sell or otherwise permit to become
outstanding, or authorize the creation of,
any additional shares of stock or
permit any additional shares of stock to
become subject to grants of stock
options, other than upon the exercise of
Company Options outstanding on the
date hereof under the Company Stock Option
Plan.
(c) Dividends; Etc.
(a) Make,
declare, pay or set aside for payment
any dividend on or in respect of, or
declare or make any distribution on any
shares of Company Stock, other than (A)
subject to Section 6.14 hereof, regular
semi-annual cash dividends at a rate not in
excess of $.33 per share on the
Company Common Stock, after taking into
account any dividend under clause (B),
(B) to the extent necessary to effect the
purposes of Section 6.14 and subject
to the provision of prior written notice
to, and consultation with, the Parent,
quarterly cash dividends, at the same
annualized rate as the regular dividends
paid by the Company, on the same record
date provided by Parent with respect to
dividends payable to Parent shareholders,
and (C) dividends from wholly-owned
Subsidiaries to the Company, or another
wholly-owned Subsidiary of the Company,
or (b) directly or indirectly adjust,
split, combine, redeem, reclassify,
purchase or otherwise acquire, any shares
of its capital stock. Parent shall
give the Company advance notice of the
determination of any record date with
respect to the payment of any dividend on
Parent Common Stock.
(d) Compensation;
Employment Agreements; Etc. Enter into or amend
or
renew any employment, consulting, severance
or similar agreements or
arrangements with any director, officer or
employee of the Company or its
Subsidiaries or grant any salary or wage
increase or increase any employee
benefit (including incentive or bonus
payments), except (i)
normal individual
increases in compensation to employees in
the ordinary course of business
consistent with past practice, provided
that no such increase with respect to
any individual employee shall result in an
annualized adjustment of more than
4% of such employee's compensation and
provided that any such increases to all
employees since June 30, 2004 shall not
exceed 3.5% in the aggregate, (ii)
other changes that are required by
applicable law, (iii) to satisfy contractual
obligations existing as of the date hereof
and set forth in Schedule 4.01(d) of
the Company's Disclosure Schedule, (iv)
grants or awards to
newly-hired
employees consistent with past practice,
(v) discretionary bonuses in the
ordinary course of business and consistent
with past practice to employees of
the Company or the Company Bank for
services rendered during the period from
January 1, 2004 to the Effective Time of up
to $200,000 in the aggregate for
all employees, provided that in the case of
any individual recipient any such
bonus, either alone or in combination with
the payment of other amounts payable
to the recipient in the event his or her
employment is terminated following the
Merger, would not be nondeductible by the
Company or the Company Bank (or their
successors) under Section 280G of the Code
and subject to the excise tax
imposed under Section 4999 of the Code, and
(vi) any increase in the premium
costs of an existing insured employee
benefit. Notwithstanding anything to the
Page 12
contrary set forth in this Agreement, prior
to the Closing Date, the Company
and its Subsidiaries shall be permitted to
make cash contributions to the
Company 401(k) Plan for the 2004 calendar
year as long as the total amount of
such cash contributions do not exceed the
amount derived by application of the
calendar 2003 formula based on calendar
2004 compensation levels.
(e) Hiring. Hire any person as an
employee of the Company or any of
its Subsidiaries or promote any employee,
except (i) to satisfy contractual
obligations existing as of the date hereof
and set forth on Schedule 4.01(e) of
the Company's Disclosure Schedule and (ii)
persons hired or promoted to fill
any vacancies arising after the date hereof
and whose employment is terminable
at the will of the Company or a Subsidiary
of the Company, as applicable, and
(iii) any person to be hired or promoted
who would have a base salary,
including any guaranteed bonus or any
similar bonus, considered on an annual
basis of less than $50,000.
(f) Benefit Plans.
Enter
into, establish, adopt or amend (except (i)
as may be required by applicable law,
subject to the provision of prior written
notice to, and consultation with, the
Parent, (ii) to satisfy contractual
obligations existing as of the date hereof
and set forth on Schedule 4.01(f) of
the Company's Disclosure Schedule, or (iii)
with respect to the Company's
401(k) Plan, as, and to the extent
necessary, to allow the Company to make the
contribution to the Company's 401(k) Plan
that is contemplated by the last
sentence of Section 4.01(d)) any pension,
retirement, stock option, stock
purchase, savings, profit sharing, deferred
compensation, consulting, bonus,
group insurance or other employee benefit,
incentive or welfare contract, plan
or arrangement, or any trust agreement (or
similar arrangement) related
thereto, in respect of any current or
former director, officer or employee of
the Company or its Subsidiaries or take any
action to accelerate the vesting or
exercisability of stock options, restricted
stock or other compensation or
benefits payable thereunder, except that
the Company shall accelerate the
vesting of Company Options in a manner
consistent with Section 3.08(a). The
Company shall take such action as may be
reasonably requested by Parent to
terminate one or more of the Benefits Plans
effective as of the Effective Time.
(g) Dispositions.
Sell,
transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its
assets, deposits, business or properties
except in the ordinary course of business
consistent with past practice and in
a transaction that, together with all other
such transactions, is not material
to the Company and its Subsidiaries taken
as a whole.
(h) Acquisitions.
Acquire
(other than by way of foreclosures or
acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of
debts previously contracted in good faith,
in each case in the ordinary and
usual course of business consistent with
past practice) all or any portion of
the assets, business, deposits or
properties of any other entity.
(i) Capital Expenditures.
Make any
capital expenditures other than
capital expenditures in the ordinary course
of business consistent with past
practice in amounts not exceeding $50,000
individually or $250,000 in the
aggregate.
(j) Governing Documents.
Amend the
Company Articles or Company
Bylaws or the articles of incorporation or
bylaws (or equivalent documents) of
any Subsidiary of the Company.
(k) Accounting Methods.
Implement
or adopt any change in its
accounting principles, practices or
methods, other than as may be required by
changes in laws or regulations or GAAP.
(l) Contracts.
Except in
the ordinary course of business consistent
with past practice or as otherwise
permitted under this Section 4.01, enter
into or terminate any Material Contract or
amend or modify in any material
respect any of its existing Material
Contracts.
Page 13
(m) Claims. Enter into any
settlement or similar agreement with
respect to any action, suit, proceeding,
order or investigation to which the
Company or any of its Subsidiaries is or
becomes a party after the date of this
Agreement, which settlement, agreement or
action involves payment by the
Company and its Subsidiaries of an amount
which exceeds $50,000 and/or would
impose any material restriction on the
business of the Company or create
precedent for claims that are reasonably
likely to be material to the Company
and its Subsidiaries taken as a whole.
(n) Banking Operations. Enter into any new
material line of
business; change its material lending,
investment, underwriting, risk and asset
liability management and other material
banking and operating policies, except
as required by applicable law, regulation
or policies imposed by any
Governmental Authority; or file any
application or make any contract with
respect to branching or site location or
branching or site relocation.
(o) Derivatives Contracts.
Enter into
any Derivatives Contract,
except in the ordinary course of business
consistent with past practice.
(p) Indebtedness.
Incur any
indebtedness for borrowed money (other
than deposits, federal funds purchased,
cash management accounts, borrowings
from the Federal Reserve Bank of Boston and
securities sold under agreements to
repurchase, in each case in the ordinary
course of business consistent with
past practice) or assume, guarantee,
endorse or otherwise as an accommodation
become responsible for the obligations of
any other Person, other than in the
ordinary course of business consistent with
past practice.
(q) Investment Securities.
Acquire
(other than by way of
foreclosures or acquisitions in a bona fide
fiduciary capacity or in
satisfaction of debts previously contracted
in good faith, in each case in the
ordinary course of business consistent with
past practice) (i) any debt
security or Equity Investment of a type or
in an amount that is not permissible
for a national bank or (ii) any other debt
security other than in the ordinary
course of business consistent with past
practice; or restructure or materially
change its investment securities portfolio,
through purchases, sales or
otherwise, or the manner in which such
portfolio or any securities therein are
classified under GAAP or reported for
regulatory purposes.
(r) Loans. Make, renew or
otherwise modify any loan, loan
commitment, letter of credit or other
extension of credit (collectively,
"Loans") other than in the ordinary course
of business consistent with past
practice.
(s) Investments in Real
Estate.
Make any investment or commitment to
invest in real estate or in any real estate
development project (other than by
way of foreclosure or acquisitions in a
bona fide fiduciary capacity or in
satisfaction of a debt previously
contracted in good faith, in each case in the
ordinary course of business consistent with
past practice).
(t) Transactions with
Affiliates. Except pursuant to
agreements or
arrangements in effect on the date hereof,
pay, loan or advance any amount to,
or sell, transfer or lease any properties
or assets (real, personal or mixed,
tangible or intangible) to, or enter into
any agreement or arrangement with,
any of its officers or directors or any of
their immediate family members or
any affiliates or associates (as such terms
are defined under the Exchange Act)
of any of its officers or directors other
than compensation in the ordinary
course of business consistent with past
practice.
(u)
Taxes. Except as may be
required by applicable laws or
regulations, make or change any material
Tax election, file any material
amended Tax Return, enter into any material
closing agreement, settle or
compromise any material liability with
respect to Taxes, or consent to any
extension or waiver of the limitation
period applicable to any material Tax
claim or assessment. For purposes of this
subparagraph (u), "material" shall
mean affecting or relating to $50,000 or
more of Taxes.
Page 14
(u) Compliance with
Agreements. Knowingly commit any
act or omission
which constitutes a material breach or
default by the Company or any of its
Subsidiaries under any agreement with any
Governmental Authority or under any
Material Contract, lease or other agreement
or material license to which any of
them is a party or by which any of them or
their respective properties is
bound.
(v) Environmental
Assessments. Foreclose on or take a
deed or title
to any commercial real estate without first
conducting a Phase I environmental
assessment of the property or foreclose on
any commercial real estate if such
environmental assessment indicates the
presence of a Hazardous Substance in
amounts which, if such foreclosure were to
occur, would be material.
(w) Adverse Actions.
(i) Take
any action that would, or is reasonably
likely to, prevent or impede the Merger
from qualifying as a reorganization
within the meaning of Section 368(a) of the
Code, or (ii) take any action that
is intended or is reasonably likely to
result in (x) any of its representations
and warranties set forth in this Agreement
being or becoming untrue in any
material respect at any time at or prior to
the Effective Time, (y) any of the
conditions to the Merger set forth in
Article VII not being satisfied or (z) a
material violation of any provision of this
Agreement or the Bank Merger
Agreement, except, in each case, as may be
required by applicable law or
regulation.
(x) Commitments.
Enter into
any contract with respect to, or
otherwise agree or commit to do, any of the
foregoing.
4.02.
Forbearances of Parent. From the date hereof
until the
Effective Time, except as expressly
contemplated or permitted by this
Agreement, without the prior written
consent of the Company, Parent will not,
and will cause each of its Subsidiaries not
to:
(a) Adverse Actions.
(i) Take
any action that would, or is
reasonably likely to, prevent or impede the
Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code or (ii) take
any action that is intended or is
reasonably likely to result in (x) any of its
representations and warranties set forth in
this Agreement being or becoming
untrue in any material respect at any time
at or prior to the Effective Time,
(y) any of the conditions to the Merger set
forth in Article VII not being
satisfied or (z) a material violation of
any provision of this Agreement or the
Bank Merger Agreement, except, in each
case, as may be required by applicable
law or regulation.
(b) Commitments.
Enter into
any contract with respect to, or
otherwise agree or commit to do, any of the
foregoing.
(c) Suspension
of Stock Buy-back Program. Purchase or acquire, for its
own account, any shares of Parent Common
Stock, except for non-market
repurchases of Parent Common Stock from
employees of Parent.
Page 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01.
Disclosure
Schedules.
On or prior to the date hereof, Parent
has delivered to the Company a schedule and
the Company has delivered to Parent
a schedule (respectively, its "Disclosure
Schedule") setting forth, among other
things, items the disclosure of which is
necessary or appropriate either in
response to an express disclosure
requirement contained in a provision hereof
or as an exception to one or more
representations or warranties contained in
Section 5.03 or 5.04 or to one or more of
its covenants contained in Article
IV; provided, however, that (a) no such
item is required to be set forth in a
Disclosure Schedule as an exception to a
representation or warranty if its
absence would not be reasonably likely to
result in the related representation
or warranty being deemed untrue or
incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of
an item in a Disclosure Schedule as
an exception to a representation or
warranty shall not be deemed an admission
by a party that such item represents a
material exception or fact, event or
circumstance or that, absent such inclusion
in the Disclosure Schedule, such
item is or would be reasonably likely to
result in a Material Adverse Effect.
5.02.
Standard.
No
representation or warranty of the Company or
Parent contained in Sections 5.03 or 5.04,
respectively, shall be deemed untrue
or incorrect, and no party hereto shall be
deemed to have breached a
representation or warranty, as a
consequence of the existence of any fact,
event or circumstance unless such fact,
circumstance or event, individually or
taken together with all other facts, events
or circumstances inconsistent with
any representation or warranty contained in
Section 5.03 or 5.04, has had or is
reasonably likely to have a Material
Adverse Effect on the party making such
representation or warranty.
5.03.
Representations and Warranties of the Company. Subject to
Sections 5.01 and 5.02 and except as
Previously Disclosed, the Company hereby
represents and warrants to Parent:
(a) Organization, Standing
and Authority. The Company is
duly
organized, validly existing and in good
standing under the laws of the State of
Maine. The Company is duly qualified to do
business and is in good standing in
each jurisdiction where its ownership or
leasing of property or assets or the
conduct of its business requires it to be
so qualified. The Company has in
effect all federal, state, local and
foreign governmental authorizations
necessary for it to own or lease its
properties and assets and to carry on its
business as now conducted. The Company
Articles and Company Bylaws, copies of
which have been delivered to Parent, are
true, complete and correct copies of
such documents as in effect on the date of
this Agreement.
(b) Company Capital Stock.
The
authorized capital stock of the
Company consists solely of 2,000,000 shares
of Company Common Stock, of which
1,047,722 shares are outstanding as of the
date hereof, and 100,000 shares of
Serial Preferred Stock, of which none are
outstanding as of the date hereof.
The outstanding shares of Company Common
Stock have been duly authorized and
validly issued and are fully paid and
non-assessable, and none of the
outstanding shares of Company Common Stock
have been issued in violation of the
preemptive rights of any Person. Section
5.03(b) of the Company's Disclosure
Schedule sets forth for each Company Stock
Option, the name of the grantee, the
date of the grant, the type of grant, the
status of the option grant as
qualified or non-qualified under Section
422 of the Code, the number of shares
of Company Common Stock subject to each
option, the number of shares of Company
Common Stock subject to options that are
currently exercisable and the exercise
price per share. Except as set forth in the
preceding sentence, there are no
shares of Company Stock reserved for
issuance, the Company does not have any
Page 16
Rights issued or outstanding with respect
to Company Stock, and the Company
does not have any commitment to authorize,
issue or sell any Company Stock.
(c) Subsidiaries.
(i) (A) The Company has
Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction
of organization of each such
Subsidiary, (B) the Company owns, directly
or indirectly, all the issued and
outstanding equity securities of each of
its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are
or may become required to be issued
(other than to the Company) by reason of
any Right or otherwise, (D) there are
no contracts, commitments, understandings
or arrangements by which any of its
Subsidiaries is or may be bound to sell or
otherwise transfer any of its equity
securities (other than to the Company or
any of its wholly-owned Subsidiaries),
(E) there are no contracts, commitments,
understandings, or arrangements
relating to the Company's rights to vote or
to dispose of such securities and
(F) all the equity securities of the
Company's Subsidiaries held by the Company
or its Subsidiaries are fully paid and
nonassessable and are owned by the
Company or its Subsidiaries free and clear
of any Liens.
(ii)
Except for securities
and other interests held in a fiduciary
capacity and beneficially owned by third
parties or taken in consideration of
debts previously contracted, the Company
does not own beneficially, directly or
indirectly, any equity securities or
similar interests of any Person or any
interest in a partnership or joint venture
of any kind other than its
Subsidiaries and stock in the Federal
Reserve Bank of Boston and the Federal
Home Loan Bank of Boston.
(iii) Each of the
Company's Subsidiaries has been duly organized and is
validly existing in good standing under the
laws of the jurisdiction of its
organization and is duly qualified to do
business and in good standing in the
jurisdictions where its ownership or
leasing of property or the conduct of its
business requires it to be so qualified.
The articles of incorporation, bylaws
and similar governing documents of each
Subsidiary of the Company, copies of
which have been delivered to Parent, are
true, complete and correct copies of
such documents as in effect as of the date
of this Agreement.
(iv)
The Company Bank is
the only Subsidiary of the Company that is an
insured depository institution. The deposit
accounts of the Company Bank are
insured by the Bank Insurance Fund in the
manner and to the maximum extent
provided by applicable law, and the Company
Bank has paid all deposit insurance
premiums and assessments required by
applicable laws and regulations.
(d) Corporate Power;
Minute Books. Each of the Company
and its
Subsidiaries has the corporate power and
authority to carry on its business as
it is now being conducted and to own all
its properties and assets; and the
Company has the corporate power and
authority to execute, deliver and perform
its obligations under this Agreement and to
consummate the Transactions,
subject to receipt of all necessary
approvals of Governmental Authorities and
the approval of the Company's shareholders
of this Agreement. The minute books
of the Company and each of its Subsidiaries
contain true, complete and accurate
records of all meetings and other corporate
actions held or taken since
December 31, 1999 of their respective
shareholders and boards of directors
(including committees of their respective
boards of directors).
(e)
Corporate
Authority.
Subject to the approval of this Agreement
by the holders of 67% of the outstanding
Company Common Stock, this Agreement
and the Transactions have been authorized
and adopted by all necessary
corporate action of the Company and the
Company Board on or prior to the date
hereof. The Company Board has directed that
this Agreement be submitted to the
Company's shareholders for approval at a
meeting of such shareholders and,
except for the approval and adoption of
this Agreement by the affirmative vote
of the holders of a 67% of the outstanding
shares of Company Common Stock, no
other vote of the shareholders of the
Company is required by law, the Company
Page 17
Articles, the Company Bylaws or otherwise
to approve this Agreement and the
Transactions. The Company has duly executed
and delivered this Agreement and,
assuming due authorization, execution and
delivery by Parent, this Agreement is
a valid and legally binding obligation of
the Company, enforceable in
accordance with its terms (except as
enforceability may be limited by
applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
transfer and similar laws of general
applicability relating to or affecting
creditors' rights or by general equity
principles).
(f) Regulatory Approvals;
No Defaults.
(i) No consents or
approvals of, or waivers by, or filings or
registrations with, any Governmental
Authority or with any third party are
required to be made or obtained by the
Company or any of its Subsidiaries in
connection with the execution, delivery or
performance by the Company or the
Company Bank of this Agreement and the Bank
Merger Agreement, as applicable, or
to consummate the Transactions, except for
(A) filings of applications or
notices with, and approvals or waivers by,
the Federal Reserve Board, the OCC,
and the Maine Superintendent, as required,
(B) filings with the SEC and state
securities authorities, as applicable, in
connection with the submission of
this Agreement for the approval of the
holders of Company Common Stock and the
issuance of Parent Common Stock in the
Merger, (C) the filing of Articles of
Merger with the Secretary of State of the
State of Maine pursuant to the MBCA,
(D) the approval of this Agreement by the
holders of 67% of the outstanding
shares of Company Common Stock and (E) such
corporate approvals and such
consents or approvals of, or waivers by, or
filings or registrations with,
certain of the foregoing federal and state
banking agencies in connection with
the Bank Merger. As of the date hereof, the
Company is not aware of any reason
why the approvals set forth above and
referred to in Section 7.01(b) will not
be received in a timely manner and without
the imposition of a condition,
restriction or requirement of the type
described in Section 7.01(b).
(ii)
Subject to receipt, or
the making, of the consents, approvals,
waivers and filings referred to in the
preceding paragraph and the expiration
of related waiting periods, the execution,
delivery and performance of this
Agreement and the Bank Merger Agreement by
the Company and the Company Bank, as
applicable, and the consummation of the
Transactions do not and will not (A)
constitute a breach or violation of, or a
default under, or give rise to any
Lien, any acceleration of remedies or any
right of termination under, any law,
rule or regulation or any judgment, decree,
order, governmental permit or
license, or agreement, indenture or
instrument of the Company or any of its
Subsidiaries or to which the Company or any
of its Subsidiaries or any of their
respective properties is subject or bound,
(B) constitute a breach or violation
of, or a default under, the articles of
incorporation or bylaws (or similar
governing documents) of the Company or any
of its Subsidiaries or (C) require
any consent or approval under any such law,
rule, regulation, judgment, decree,
order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Reports;
Undisclosed Liabilities. (i) The Company
has previously made available to Parent
copies of (i) the
consolidated balance
sheet of the Company and its Subsidiary as
of December 31, 2003, December 31,
2002 and December 31, 2001, and the related
consolidated statements of income,
changes in shareholders' equity and cash
flows for the fiscal years ended
December 31, 2003, 2002 and 2001, in each
case accompanied by the audit report
of Berry, Dunn, McNeil and Parker LLC,
independent accountants with respect to
the Company, and (ii) the unaudited
consolidated balance sheet of the Company
and its Subsidiary as of June 30, 2004 and
the related unaudited consolidated
statements of income, cash flows and
changes in shareholders' equity for the
three month and six month periods then
ended. The December 31, 2003
consolidated balance sheet of the Company
(including the related notes and
schedules thereto) fairly presents the
consolidated financial position of the
Page 18
Company and its Subsidiary as of its date,
and the other financial statements
referred to in this Section 5.03(g)
(including any related notes and schedules
thereto, where applicable) fairly present
(subject, in the case of unaudited
statements, to recurring audit adjustments
normal in nature and amount and the
absence of notes), the results of
consolidated operations and consolidated
financial position of the Company and its
Subsidiary for the respective fiscal
periods or as of the respective dates
therein set forth; each of such
statements (including any related notes and
schedules thereto, where
applicable) has been prepared in accordance
with GAAP consistently applied
during the periods involved, except in each
case as may be noted therein. The
books and records of the Company and its
Subsidiaries have been, and are being,
maintained in accordance with GAAP and any
other applicable legal and
accounting requirements and reflect only
actual transactions.
(ii)
Since December 31,
2003, neither the Company nor any of its
Subsidiaries has incurred any liability
other than in the ordinary course of
business consistent with past practice
(excluding the incurrence of expenses
related to this Agreement and the
transactions contemplated hereby).
(iii)
Since December 31,
2003, (A) the Company and its Subsidiaries have
conducted their respective businesses in
the ordinary and usual course
consistent with past practice (excluding
the incurrence of expenses related to
this Agreement and the transactions
contemplated hereby) and (B) no event has
occurred or circumstance arisen that,
individually or taken together with all
other facts, circumstances and events
(described in any paragraph of this
Section 5.03 or otherwise), is reasonably
likely to have a Material Adverse
Effect with respect to the Company.
(iv)
No agreement pursuant
to which any loans or other assets have been
or shall be sold by the Company or its
Subsidiaries entitled the buyer of such
loans or other assets, unless there is
material breach of a representation or
covenant by the Company or its
Subsidiaries, to cause the Company or its
Subsidiaries to repurchase such loan or
other asset or the buyer to pursue any
other form of recourse against the Company
or its Subsidiaries. Except for
regular semi-annual cash dividends on the
Company Common Stock and a stock
dividend of two shares of Company Common
Stock per share of Company Common
Stock paid April 2, 2004, since December
31, 2003, no cash, stock or other
dividend or any other distribution with
respect to the stock of the Company or
any of its Subsidiaries have been declared,
set aside or paid. No shares of the
stock of the Company have been purchased,
redeemed or otherwise acquired,
directly or indirectly, by the Company
since December 31, 2003, and no
agreements have been made to do the
foregoing.
(h) Litigation.
No
litigation, claim or other proceeding before any
court or governmental agency is pending
against the Company or any of its
Subsidiaries and, to the Company's
knowledge, no such litigation, claim or
other proceeding has been threatened and
there are no facts which could
reasonably give rise to such litigation,
claim or other proceeding.
(i) Regulatory Matters.
(i) The Company and each
of its Subsidiaries have timely filed all
reports, registrations and statements,
together with any amendments required to
be made with respect thereto, that they
were required to file since December
31, 1999 with any Governmental Authority,
and have paid all fees and
assessments due and payable in connection
therewith. Except for normal
examinations conducted by any Governmental
Authority in the regular course of
the business of the Company and its
Subsidiaries, no Governmental Authority has
initiated any proceeding, or to the
knowledge of the Company, investigation
into the business or operations of the
Company or any of its Subsidiaries since
December 31, 1999. Each of the Company and the
Company Bank is "well
capitalized" and "well managed" as those
terms are defined in applicable laws
and regulations, and the Company Bank has a
Community Reinvestment Act rating
of "satisfactory" or better.
Page 19
(ii) Neither the Company nor any of its
Subsidiaries nor any of their
respective properties is a party to or is
subject to any order, decree,
agreement, memorandum of understanding or
similar arrangement with, or a
commitment letter or similar submission to,
or extraordinary supervisory letter
from, any federal or state governmental
agency or authority charged with the
supervision or regulation of financial
institutions or issuers of securities or
engaged in the insurance of deposits or the
supervision or regulation of it
(collectively, the "Company Regulatory
Authorities"). The Company and its
Subsidiaries have paid all assessments made
or imposed by any Company
Regulatory Authority.
(iii)
Neither the Company
nor any of its Subsidiaries has been advised
by, or has any knowledge of facts which
could give rise to an advisory notice
by, any Company Regulatory Authority that
such Company Regulatory Authority is
contemplating issuing or requesting (or is
considering the appropriateness of
issuing or requesting) any such order,
decree, agreement, memorandum of
understanding, commitment letter,
supervisory letter or similar submission.
(j) Compliance With Laws.
Each of
the Company and its Subsidiaries:
(i) is in compliance with all applicable
federal, state, local and
foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or
decrees applicable thereto or to the
employees conducting such businesses,
including, without limitation, the Equal
Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment
Act, the Home Mortgage Disclosure Act,
the Bank Secrecy Act, Truth in Lending and
Bank Privacy laws, the Uniting and
Strengthening America by Providing
Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 and all other applicable fair
lending laws and
other laws relating to discriminatory
business practices;
(ii)
has all permits,
licenses, authorizations, orders and approvals of,
and has made all filings, applications and
registrations with, all Governmental
Authorities that are required in order to
permit them to own or lease their
properties and to conduct their businesses
as presently conducted; all such
permits, licenses, certificates of
authority, orders and approvals are in full
force and effect and, to the Company's
knowledge, no suspension or cancellation
of any of them is threatened; and
(iii)
has received, since
December 31, 2001, no notification or
communication from any Governmental
Authority (A) asserting that the Company or
any of its Subsidiaries is not in
compliance with any of the statutes,
regulations or ordinances which such
Governmental Authority enforces or (B)
threatening to revoke any license,
franchise, permit or governmental
authorization (nor, to the Company's
knowledge, do any grounds for any of the
foregoing exist).
(k) Material Contracts;
Defaults.
(i) Neither the Company
nor any of its Subsidiaries is a party to,
bound by or subject to any agreement,
contract, arrangement, commitment or
understanding (whether written or oral) (i)
with respect to the employment of
any directors, officers, employees or
consultants, (ii) which would entitle any
present or former director, officer,
employee or agent of the Company or its
Subsidiaries to indemnification from the
Company or its Subsidiaries (other
than indemnity provisions of their
respective bylaws), (iii) which would be a
material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC
if the Company or its Subsidiary, as the
case may be, were subject to the
Exchange Act) to be performed after the
date of this Agreement, (iv) which is a
consulting agreement (including data
processing, software programming and
licensing contracts) not terminable on 60
days or less notice and involving the
payment of more than $50,000 per annum, or
(v) which restricts the conduct of
any business by the Company or any of its
Subsidiaries (collectively, "Material
Contracts"). The Company has Previously
Disclosed and made available to Parent
true and correct copies of each such
document.
Page 20
(ii)
Neither the Company
nor any of its Subsidiaries is in default under
any contract, agreement, commitment,
arrangement, lease, insurance policy or
other instrument to which it is a party, by
which its respective assets,
business, or operations may be bound or
affected, or under which it or its
respective assets, business, or operations
receives benefits, and there has not
occurred any event that, with the lapse of
time or the giving of notice or
both, would constitute such a default. No
power of attorney or similar
authorization given directly or indirectly
by the Company or any of its
Subsidiaries is currently outstanding.
(l) No Brokers.
No action
has been taken by the Company or any of
its Subsidiaries that would give rise to
any valid claim against any party
hereto for a brokerage commission, finder's
fee or other like payment with
respect to the Transactions, excluding a
Previously Disclosed fee to be paid to
RBC Capital Markets Corporation, a member
company of RBC Financial Group.
(m) Employee Benefit
Plans.
(i) All benefit and
compensation plans, contracts, policies or
arrangements covering current or former
employees of the Company and its
Subsidiaries (the "Employees") and current
or former directors of the Company
including, but not limited to, "employee
benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred
compensation, stock option, stock purchase,
stock appreciation rights, stock based,
incentive and bonus plans (the
"Benefits Plans"), are Previously Disclosed
in the Disclosure Schedule. True
and complete copies of all Benefit Plans
including, but not limited to, any
trust instruments and insurance contracts
forming a part of any Benefit Plans
and all amendments thereto have been
provided or made available to Parent, and
where no such documents exist with respect
to a Benefit Plan, a written summary
of such Benefit Plan has been provided to
or made available to Parent.
(ii)
All Benefits Plans
other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, covering
Employees, to the extent subject to
ERISA, are, and have been administered, in
substantial compliance with ERISA,
and, if applicable, the Code, including the
filing requirements thereof. Each
Benefit Plan which is an "employee pension
benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan")
and which is intended to be qualified
under Section 401(a) of the Code, has
received a favorable determination letter
from the IRS (or with respect to a master
or prototype plan, has an opinion
letter from the IRS to the effect that such
plan so qualifies).
The Pension
Plans have been administered in accordance
with the written terms of the plan
documents and the Company is not aware of
any circumstances likely to result
in revocation of any such favorable
determination letter (or withdrawal of such
opinion letter) or the loss of the
qualification of such Pension Plan under
Section 401(a) of the Code. There is no
pending or, to the
Company's
knowledge, threatened litigation relating
to the Benefits Plans. Neither the
Company nor any of its Subsidiaries has
engaged in a transaction with respect
to any Benefit Plan or Pension Plan that,
assuming the taxable period of such
transaction expired as of the date hereof,
could subject the Company or any of
its Subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code
or Section 502(i) of ERISA .
(iii)
No liability under
Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company
or any of its Subsidiaries with
respect to any ongoing, frozen or
terminated "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by
any of them, or the single-employer plan of
any entity which is considered one
employer with the Company under Section
4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). Neither the
Company nor any of its Subsidiaries is
obligated to contribute to any
multiemployer plan, and neither has incurred, or
expects to incur, any withdrawal liability
with respect to a multiemployer plan
under Subtitle E of Title IV of ERISA
(regardless of whether based on
Page 21
contributions of an ERISA Affiliate). No
notice of a "reportable event," within
the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement
has not been waived, has been required to
be filed for any Pension Plan or by
any ERISA Affiliate within the 12-month
period ending on the date hereof or
will be required to be filed in connection
with the transactions contemplated
by this Agreement.
(iv)
All contributions
required to be made under the terms of any Benefit
Plan have been timely made or have been
reflected on the financial statements
of the Company provided to Parent to the
extent required by the terms of any
such Benefit Plan and to the extent
required by GAAP.
Neither any Pension Plan
nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding
deficiency" (whether or not waived) within
the meaning of Section 412 of the
Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding
waiver. Neither the Company nor any of its
Subsidiaries has provided, or is
required to provide, security to any
Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(v) Neither the Company nor any of its
Subsidiaries has any obligations
for retiree health or retiree life benefits
under any Benefit Plan, other than
coverage as may be required under Section
4980B of the Code or Part 6 of Title
I of ERISA, or under the continuation of
coverage provisions of the laws of any
state or locality. Except as Previously
Disclosed, the Company or any of its
Subsidiaries may amend or terminate any
such Benefit Plan under which such
obligations for retiree health or retiree
life exist at any time without
incurring any liability thereunder.
(vi)
Except as provided in
Section 3.08(a) with respect to the
acceleration of Company Options and except
as provided in Section 6.12(f) with
respect to the Company ESOP, none of the
execution of this Agreement,
shareholder approval of this Agreement or
consummation of the transactions
contemplated by this Agreement will (A)
entitle any employees of the Company or
any of its Subsidiaries to severance pay or
any increase in severance pay upon
any termination of employment after the
date hereof, (B) accelerate the time of
payment or vesting or trigger any payment
or funding (through a grantor trust
or otherwise) of compensation or benefits
under, increase the amount payable or
trigger any other material obligation
pursuant to, any of the Benefit Plans,
(C) result in any breach or violation of,
or a default under, any of the
Benefit Plans or (D) result in any payment
that would be a "parachute payment"
to a "disqualified individual" as those
terms are defined in Section 280G of
the Code, without regard to whether such
payment is reasonable compensation for
personal services performed or to be
performed in the future.
(vii) Each
of the "group health plans" (as defined in 45 C.F.R.
s. 160.103) sponsored by the Company or any
Subsidiary has been timely amended
as required to comply with the Health
Insurance Portability and Accountability
Act of 1996 ("HIPAA") and the rules and
regulations promulgated thereunder and
all such plans have been administered in
conformity with HIPAA and applicable
rules and regulations promulgated
thereunder. All
policies, forms, notices,
plan amendments, and agreements adopted or
entered into by the Company or such
Subsidiary with respect to its group health
plans have been Previously
Disclosed. Neither the Company nor any
Subsidiary is aware of, or has receive
notice of, an impermissible use or
disclosure of "protected health information"
(as defined in 45 C.F.
